29 October 2020

Guarantee: Carters v. Cancian

Danny Cancian, director of failed Tauranga builder Bella Vista Homes Ltd, was ordered to pay Carters $1.078 million on his guarantee of building materials supplied to Bella Vista.

Construction defects at Bella Vista’s Tauranga subdivision led to Tauranga Council paying $14.2 million compensation.  Bella Vista is in liquidation.  Bella Vista creditor Carters sued Mr Cancian on his guarantee. He denied liability; Carters mispresented terms of the guarantee and pressured him into signing, he said.

The High Court was told of meetings in 2016 between Mr Cancian and Carters.  Bella Vista was looking to transfer its business from Placemakers.  It asked Carters for a $700,000 credit line. Carters offered a $50,000 credit limit to ‘open the account’ and contributed $10,000 towards IT support marrying Bella Vista’s accounting system with Carters information system.  Bella Vista’s current account debt with Carters blew out dramatically from $46,700 to $1.078 million in the five months prior to liquidation.  When sued, Mr Cancian claimed he was only liable as guarantor for the first $50,000. He was never told Bella Vista’s credit limit had been increased to $800,000 soon after the account was opened, he said.

Justice Wylie dismissed as unreliable Mr Cancian’s evidence as to what was said at the introductory 2016 meetings.  Mr Cancian was not a naïve businessman, Justice Wylie said.  He was no stranger to personal guarantees; he knew the effect of what he was signing. Guarantee terms allowed Carters to change Bella Vista’s credit limit at any time without notice.  This included increases in credit limit.

Carters v. Cancian – High Court (29.10.20)

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