Legal Research
Cases
Fatupaito v Harris

Fatupaito v Harris

Case [2018] NZCA 497 14 November 2018

Contract Formation

Breach of Contract

Unconscionable Conduct

Type to search within this case.

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA612/2017
[2018] NZCA 497

BETWEEN	VIVIAN JUDITH FATUPAITO AND ANDREW JOHN HAWKES Appellants
AND	KEITH VINCENT HARRIS AND IAIN ANDREW NELLIES First Respondents THE BANKHOUSE TRUST LIMITED Second Respondent

Hearing:	20–21 June 2018
Court:	Winkelmann, Simon France and Wylie JJ
Counsel:	M J Tingey for Appellants D M Hughes and H L Quinlan for First Respondents
Judgment:	14 November 2018 at 10 am

JUDGMENT OF THE COURT

AThe application to adduce further evidence is declined.
BThe appeal is allowed.
CThe appellants are entitled to declarations as follows:
(a) The appointment of the first respondents as receivers was invalid.
(b) The first respondents are not entitled to recover from the assets of CIT Holdings Ltd their costs and expenses incurred in purportedly conducting the receivership pursuant to the terms of the General Security Deed or under the provisions of the Receiverships Act 1993.
D The first respondents must pay the appellants one set of costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Winkelmann J)

On this appeal we address whether a creditor’s appointment of receivers, made in bad faith, is invalid, and what constitutes bad faith for these purposes.
The appellants, Ms Vivian Fatupaito and Mr Andrew Hawkes, are the liquidators of CIT Holdings Ltd (CIT). CIT and the second respondent, The Bankhouse Trust Ltd (Bankhouse) are party to a General Security Deed (GSD) securing repayment to Bankhouse of debt owed by CIT. Amongst other things, the GSD charged various properties owned by CIT. Mr Gregory Olliver is the sole director of both Bankhouse and CIT. Bankhouse exercised a right under that GSD to appoint the first respondents, Mr Keith Harris and Mr Iain Nellies, as receivers of CIT. It is the liquidators’ case that Bankhouse did this for a purpose unrelated to obtaining repayment of the debt; that Bankhouse appointed the first respondents to ensure that the charged properties were sold, on very particular terms, to an entity owned by Mr Olliver. By controlling the sale in this way, Mr Olliver could retain control of the properties to his advantage, whilst also obtaining claims CIT had against his former wife, with whom he was in an acrimonious relationship property dispute.
The liquidators say that the appointment of the first respondents was invalid because the power conferred by the GSD to appoint receivers is to be exercised for the purpose of securing repayment of the debt. The predominant purpose for the appointment in this case was collateral to that and so was in bad faith and was invalid. This follows, the liquidators say, from the application of well-established equitable principle. It follows also from s 25(1) of the Personal Property Securities Act 1999 (PPSA), which requires the good faith exercise of all rights under security agreements governed by that Act. The liquidators say the invalid appointment added cost and delay to the liquidation.
These arguments…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Fatupaito v Harris

Details

AGLC: Fatupaito v Harris [2018] NZCA 497
Case: [2018] NZCA 497
Decision Date: 14 November 2018 at 10 am

CaseChat Overview and Summary

This appeal concerns the validity of the appointment of receivers by a secured creditor, and whether the purpose for which they were appointed can render the appointment invalid. The appellants are the liquidators of CIT Holdings Ltd, and the first respondents are the receivers appointed by the second respondent, The Bankhouse Trust Ltd. The liquidators argued that the receivers were not validly appointed because Bankhouse appointed them in bad faith. The purpose of the appointment was to give control of CIT's assets to Mr Olliver, the sole director of Bankhouse and CIT, in order to enable him to pursue his personal dispute with his former wife, rather than to obtain repayment of the debt owed to Bankhouse by CIT. The Court of Appeal allowed the appeal. The appointment was invalid because Bankhouse appointed the receivers in bad faith for a purpose collateral to its legitimate interest in preserving its security and obtaining repayment of its debt. The first respondents are not entitled to recover their costs and expenses from the assets of CIT. The liquidators are entitled to one set of costs for a standard appeal on a band A basis and usual disbursements.

Orders