Hughes v Fea - [2013] NZHC 2863

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2013-425-261 [2013] NZHC 2863

BETWEEN JOHN STANLEY HUGHES and IRMA AINSLIE HUGHES Appellants

ANDDUNCAN VARNHAM FEA and PETER HEENAN
Respondents

Hearing: 22 October 2013

Appearances: C S Withnall QC and J G Lucas for appellants
J N P Young and E L R Higbee for respondents

Judgment: 30 October 2013

JUDGMENT OF LANG J

[on appeal against decision on preliminary question]

This judgment was delivered by me on 30 October 2013 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

JOHN STANLEY HUGHES and IRMA AINSLIE HUGHES v DUNCAN VARNHAM FEA and PETER HEENAN [2013] NZHC 2863 [30 October 2013]

[1] Mr and Mrs Hughes, the appellants in this proceeding, trade in partnership as Blue Mountain Gardens. In 2005, they entered into a deed of lease with a company called Global Bulbs Limited (“Global Bulbs”) in which they agreed to lease or bail a large quantity of bulbs to Global Bulbs for a period of five years.

[2] Global Bulbs subsequently went into liquidation, and then into receivership. The respondents are the receivers of the company. They took the view that Mr and Mrs Hughes lost any interest they held in the bulbs when they failed to register their interest under the provisions of the Personal Property Securities Act 1999 (“the Act”). The receivers therefore sold the bulbs, and retained the proceeds of sale on the basis that they formed part of the assets of the company.

[3] Mr and Mrs Hughes issued proceedings in the District Court in which they sought damages from the receivers in respect of the losses they have suffered as a result of the receivers selling the bulbs. In a judgment delivered on 30 May 2013, Judge Callaghan found in favour of the receivers in respect of an argument on a preliminary issue.1 Mr and Mrs Hughes now appeal to this Court against the Judge’s decision.

Procedural background

[4] The substantive trial of the proceeding was originally scheduled to commence in the District Court on 30 January 2013. Three days had been allocated for the trial.

[5] On 12 December 2012, however, Judge Moran vacated the fixture on the basis that there was an unacceptable risk that the trial might not be ready to proceed on the allocated date. In a minute issued on 12 December, the Judge said:

There is a legal argument that might put paid to these proceedings. Estimate half a day. If time is available during the three days from 30 January 2013 the parties would like that argument to be heard.

[6] For some reason the legal argument did not proceed on 30 January as anticipated. Rather, it took place before Judge Callahan on 15 April 2013. The

hearing must have related to the determination of a separate question as provided for by r 3.73 of the District Courts Rules 2009. Unfortunately, however, the issue the Judge was required to determine was never formulated prior…

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 Hughes v Fea

Details

AGLC: Hughes v Fea [2013] NZHC 2863
Case: [2013] NZHC 2863
Decision Date: 30 October 2013

CaseChat Overview and Summary

In the High Court of New Zealand, the case of Hughes v Fea involves Mr and Mrs Hughes, trading as Blue Mountain Gardens, appealing a decision by the District Court that their claim for damages against the receivers of Global Bulbs Limited was precluded by the Personal Property Securities Act 1999 (PPSA). The receivers sold a large quantity of bulbs leased to Global Bulbs, arguing that the lease constituted a security interest that needed to be registered under the PPSA, and that the failure to do so resulted in the Hughes' losing their interest in the bulbs.

The legal issue before the High Court was whether the lease agreement between Blue Mountain Gardens and Global Bulbs constituted a "security interest" under section 17 of the PPSA. Specifically, the Court had to interpret Clause 6 of the lease to determine if it created a security interest in favour of the Hughes. The clause allowed Global Bulbs to sell the bulbs in the ordinary course of business but required it to replace them, with any excess bulbs becoming its property. The Court had to assess if this arrangement gave the Hughes an interest in personal property that secured an obligation.

The High Court found that the lease did not create a security interest in the original bulbs or the replacement bulbs. The Court held that the lease did, however, create a security interest in the proceeds of sale if Global Bulbs failed to replace the bulbs it sold. This interest secured Global Bulbs' obligation to replace bulbs sold in the ordinary course of business. The Court allowed the appeal, set aside the District Court's decision, and determined the preliminary question as stated.

Costs were to lie where they fell, with an invitation for counsel to file brief memoranda if they disagreed with this allocation.

Orders