McKay v Johnson - [2015] NZHC 242

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2511 [2015] NZHC 242

BETWEEN
A J McKAY AND J J BOSLEY

Applicants

AND

C A JOHNSON First Respondent

G M SMITH Second Respondent

Hearing: 23 February 2015

Counsel:

R B Stewart QC for Applicants
G Bogiatto and D Hayes for Respondents

Judgment:

23 February 2015

ORAL JUDGMENT OF FOGARTY J

Solicitors: Simpson Grierson, Auckland

McKAY v JOHNSON [2015] NZHC 242 [23 February 2015]

[1] This is an application for directions by receivers. At the heart of the issue between the applicants and the respondents, who are also receivers, is a contest between Westpac, as the successor to Trust Bank, and the BNZ over priority of security interests over two companies, HB Garments and HAD Garments.

[2] The Westpac argument is that there was a general security agreement executed on 22 August 1995 whereby HB Garments granted Trust Bank at the time a general security over all of its assets. That was at that time a debenture deed. Over the lapse of time, Westpac is no longer able to find and produce that deed. The missing deed is the origin of the dispute ultimately between receivers acting in the interests of Westpac and the respondent receivers acting in the interests of the BNZ.

[3] The contest is sought to be resolved by Westpac on two bases, firstly, that although they cannot produce the original debenture deed, they can prove on the balance of probabilities that it was executed, starting particularly with the personal guarantees executed at the same time which refer to the deed. And, secondly, with the registration of the interest at the same time.

[4] I have read through that argument, collected in the applicant’s synopsis of submissions. I have considered myself justified in assuming that the applicant’s synopsis of submissions has reliably collected the relevant information which appears in the sworn affidavits, though I have not considered it necessary to go back to the affidavits. One of the reasons why I have felt confident in approaching it this way is that the respondents, although they do not consent to the orders, do not oppose. I am satisfied that there was the original deed in 1995 and that created a priority, certainly in favour of Westpac, the successor of Trust Bank, over HB Garments, particularly because of the evidence of the guarantee at the time, which refer to it and the subsequent registration,

[5] There is a separate security over HAD Garments in favour of Westpac but there is no challenge to that security by the respondents.

[6] Accordingly, for these reasons, I grant the orders sought in the notice of originating application dated 23 September 2014 in paras (a), (b), (c) and (d). As to (e), there will be an enquiry as between the applicants and the first and second respondents as to whether there is an obligation by them and/or BNZ to pay to the applicant receivers and/or Westpac funds recovered by them on the assumption that…

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 McKay v Johnson

Details

AGLC: McKay v Johnson [2015] NZHC 242
Case: [2015] NZHC 242
Decision Date: 23 February 2015

CaseChat Overview and Summary

In McKay v Johnson, the applicants, McKay and Bosley, sought directions from the High Court regarding priority of security interests over two companies, HB Garments and HAD Garments. The dispute centred on the validity of a security agreement executed on 22 August 1995, which was allegedly lost by Westpac, the successor to Trust Bank. The respondents, Johnson and Smith, who were also receivers, contested Westpac's claim to priority. The key legal issues before the court were whether Westpac could prove the existence of the lost security agreement on the balance of probabilities and whether the registration of the interest at the same time supported their claim.

The court considered the arguments presented by both parties and the evidence provided in the sworn affidavits. The court found that Westpac had sufficiently demonstrated the existence of the 1995 security agreement, primarily through the personal guarantees executed at the same time, which referred to the deed, and the subsequent registration. Consequently, the court granted the orders sought in the notice of originating application dated 23 September 2014 in paragraphs (a), (b), (c), and (d). As for paragraph (e), the court ordered an inquiry into whether there was an obligation for the respondents or the BNZ to pay the applicant receivers and/or Westpac any funds recovered under the assumption that they had priority. The court also reserved the issues of costs and whether the respondents needed to refund any monies recovered in error.

In summary, the court ruled in favour of Westpac, confirming the existence of the 1995 security agreement and granting the requested directions. The court further ordered an inquiry into potential refunds and reserved the issues of costs, leaving these matters to be resolved by the parties.

Orders