Marac Finance Ltd v Greer - [2012] NZCA 45

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA220/2011
[2012] NZCA 45

BETWEEN MARAC FINANCE LIMITED
First Appellant

AND KERRYN DOWNEY AND ALAN ISAAC
Second Appellants

AND MURRAY JOHN GREER
First Respondent

AND EQUITABLE PROPERTY HOLDINGS LIMITED
Second Respondent

Hearing: 1 December 2011

Court: O'Regan P, Chambers and Stevens JJ

Counsel: M J Tingey and N F D Moffitt for Appellants
R B Stewart QC and M D Arthur for Respondents

Judgment: 1 March 2012 at 2.30 pm

JUDGMENT OF THE COURT

AThe application by the respondents for leave to file further evidence is granted.
BThe appeal is dismissed.
CThe appellants must pay the respondents’ costs for a complex appeal on a band A basis and usual disbursements. We certify for second counsel.

____________________________________________________________________

REASONS OF THE COURT

(Given by Stevens J)

Table of Contents

Para No

A question of priorities [1]
Some more facts [5]

The Equitable security interest  [5]
The Marac loan  [9]
Appointment of receivers  [13]
Equitable’s s 119 notice  [17]

First issue – effect of s 23 of the PPSA [20]

The statutory framework [20]
The High Court judgment [26]

First issue – our evaluation [31]
Second issue – if the PPSA does not apply [54]

The parties’ positions [54]
The cases – more detail [58]

Second issue – our analysis [80]

Entitlement under the assignments [81]
Entitlement under the mortgages [86]

Quantum [95]
Result and costs [96]

A question of priorities

Petherick Properties Ltd (in rec and in liq) (Petherick) owned two commercial properties in central Wellington: Morrison Kent House and Randstad House. The second respondent, Equitable Property Holdings Ltd (Equitable), held registered mortgages over both Morrison Kent House and Randstad House from December 2003. In July 2007, the first appellant, Marac Finance Ltd (Marac), entered into a loan facility with Petherick, which was secured by a general security deed (GSD). Shortly thereafter Marac perfected its security interest by registering a financing statement over all present and after-acquired personal property of Petherick on the Personal Property Securities Register (PPSR) established under the Personal Property Securities Act 1999 (PPSA). Equitable did likewise in March 2009 by registering financing statements in respect of all present and after-acquired property of Petherick.
After Petherick defaulted on its loan obligations in July 2009, Marac appointed (on 13 October) the second appellants, Messrs Downey and Isaac, as receivers and managers under the terms of its GSD. The managers began collecting rentals from the tenants of the Morrison Kent and Randstad properties. Within 10 days, Equitable appointed the first respondent, Mr Greer, as receiver of rental income that Petherick received as lessor of the two properties. Mr Isaac agreed to hand over to Mr Greer all the rental payments that he had collected since Mr Greer’s appointment. Marac later claimed that, as first ranking security holder over Petherick’s personal property (including rental), it should have received the rent obtained by Mr Greer. However, Associate Judge Doogue in the Auckland High Court…

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.

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Details

Case: [2012] NZCA 45
Decision Date: 1 March 2012

CaseChat Overview and Summary

The Court of Appeal considered an appeal by Marac Finance Ltd against a decision of the High Court declining Marac's application for summary judgment. The central issue was which of two secured creditors, Marac or Equitable Property Holdings Ltd, had priority over rental payments collected from two properties leased by Petherick Properties Ltd. Marac held a security interest over Petherick's personal property, while Equitable held first ranking mortgages over the two properties. The Court of Appeal agreed with the High Court that the Personal Property Securities Act (PPSA) did not apply to the rental payments, meaning that the priority dispute was to be resolved under the Land Transfer Act (LTA). The Court found that, under the LTA, Equitable's mortgage gave it priority over the rental payments, regardless of whether Equitable took possession of the properties. The Court held that it was not necessary for Equitable to enter into possession of the properties for it to have the better right to the rental payments. The appeal was therefore dismissed, and Marac was ordered to pay the respondents' costs.

Orders