King v PFL Finance Ltd - [2015] NZCA 517

IN THE COURT OF APPEAL OF NEW ZEALAND

CA74/2014
[2015] NZCA 517

BETWEEN

THOMAS FREDERICK MAZLIN KING AND JUDITH RUTH KING
Appellants

AND

PFL FINANCE LIMITED
First Respondent

CRAIG BEECROFT
Second Respondent

Hearing:	14 October 2015
Court:	Harrison, Wild and Kós JJ
Counsel:	D G Chesterman and S R Carey for Appellants K M Quinn and S M Thompson for Respondents
Judgment:	5 November 2015 at 11.30 am

JUDGMENT OF THE COURT

A The appeal is dismissed.
B No order as to costs is made.

COrder made under s 45(5) of the Legal Services Act 2011 that had the appellants not been legally aided, they would have been liable for costs on a standard appeal on a band A basis, together with disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós J)

A farm falls into receivership. The landowner had been served with the Property Law Act default notice, but the guarantors had not. The guarantors say they were unaware of the notice until a few days before the receiver entered the property, and that they suffered loss thereby. Essentially because they could otherwise have averted sale of the property. Peters J disbelieved this evidence.
The guarantors also say the receiver breached his duty under s 18(3) of the Receiverships Act 1993 by not pausing two to three weeks before ceasing trading. And that the loan agreement and receivership were oppressive. The Judge rejected those claims also.
The guarantors now appeal.

Background

The King family had farmed in the Kaituna Valley, near Havelock, since 1873. This century, however, it branched out. Disastrously. An initial foray into grape-growing in the Seddon Valley was successful. But in 2010 the Kings came to grief on a dairy conversion project near Ashburton.
In 2008 a company controlled by the Kings had purchased land at Wakanui, near Ashburton, to convert to dairying. It borrowed $21 million from the ASB Bank Ltd. The loan was secured against the land in Wakanui and Havelock.
The Wakanui venture did not succeed. The ASB appointed receivers in October 2010. Property Law Act notices were served in respect of both the Wakanui and Havelock land. In February 2011 the Kings sought an injunction to prevent sale of the Wakanui land. The application was dismissed by Chisholm J in March 2011.[1] He found there was no sound basis to be confident refinancing could occur. The Wakanui land was sold.
[1]King v ASB Bank Ltd HC Christchurch CIV-2011-409-304, 30 March 2011.
The Kings still owed the ASB $10 million following that sale. The ASB now proposed to sell the Havelock land.
The Kings retained a mortgage broker, a Mr Brough, to assist them refinance the ASB debt. This effort was doubly successful. First, negotiations between Mr Brough, Mr King and the ASB resulted in the ASB accepting $3 million in settlement of the $10 million due to it. Secondly, while Mr Brough was unable to secure funding from a trading bank, he did manage to arrange a one-year interim financing facility…

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 King v PFL Finance Ltd

Details

AGLC: King v PFL Finance Ltd [2015] NZCA 517
Case: [2015] NZCA 517
Decision Date: 5 November 2015 at 11.30 am

CaseChat Overview and Summary

The appeal in King v PFL Finance Ltd was dismissed by the Court of Appeal of New Zealand. The appellants, Thomas Frederick Mazlin King and Judith Ruth King, who were guarantors for a loan provided by PFL Finance Limited (PFL) to Havelock Farms Ltd, challenged the decision of the High Court which dismissed their claims against PFL and Craig Beecroft, the receiver appointed by PFL. The appellants argued that they suffered loss due to PFL's failure to serve them with a Property Law Act (PLA) notice, that the receiver breached his duty under s 18(3) of the Receiverships Act 1993 by not pausing two to three weeks before ceasing trading, and that PFL acted oppressively. The Court of Appeal found that the appellants' claims were without merit.

The Court of Appeal first addressed the issue of whether the failure to serve the PLA notice on the appellants caused them loss. The Court found that the appellants had failed to prove that they had the ability to remedy the default on the loan, and that they were not deprived of the opportunity to remedy the default by the failure to serve the PLA notice on them. The Court accepted the Judge's findings on knowledge and concluded that even if the appellants had the ability to remedy the default, they were not deprived of the opportunity to remedy the default by the failure to serve the PLA notice on them.

Next, the Court of Appeal considered whether the cessation of farming by the receiver breached his duty under s 18(3) of the Receiverships Act 1993. The Court found that the receiver's primary duty was to act in the best interests of the appointing creditor and that the appellants had not demonstrated a realistic prospect of refinancing within the first three weeks of receivership, on the balance of probabilities. The Court concluded that any deferral of action by the receiver would not have altered the inevitability of the Havelock land, together with livestock, plant and equipment, being sold, and the farming operation being brought to an end.

The Court of Appeal also addressed the issue of whether PFL acted oppressively, but found that the circumstances did "not come close" to establishing a case of oppression. Finally, the Court concluded that since no breach of receiver's duty occurred, and no loss could have arisen from any such breach, the issue of whether PFL was liable for any breach of receiver's duty need not be addressed further.

In conclusion, the Court of Appeal dismissed the appeal and found that it lacked merit, as did the underlying claim. The appeal is dismissed, and no order as to costs is made. However, an order is made under s 45(5) of the Legal Services Act 2011 that had the appellants not been legally aided, they would have been liable for costs on a standard appeal on a band A basis, together with disbursements.

Orders