Gibbston Downs Wines v Perpetual Trust
Securities
Gibbston Downs Wines Limited and RFD Finance No 2 Limited v Perpetual Trust Limited and Ors - CIV2010-409-001716 - Chisholm J - 28 May 2012
Unsuccessful application for declaration that plaintiffs’ security interest over collateral of Anthem Holdings Ltd (In Rec) had priority over security interest of 1st defendant - subordination of security interests under s70 Personal Property Securities Act 1999 - plaintiffs held security interest under general security agreement (GSA) between Anthem and Propertyfinance Securities Ltd (PFS) which was registered in May 2005 with expiry date for registration of 31 Mar 2010 - 1st defendant’s interest was registered by original interest holder (Capital + Merchant Finance Ltd (C+M)) in Apr 2006 - in Nov 2006 PFS and C+M entered into subordination agreement giving priority to C+M’s interest - no express provision in subordination agreement or parties’ communications as to duration of subordination - following registration of financing change statement confirming subordination “subordination details” on register included expiry date of 31 Mar 2010 based on expiry date of plaintiffs’ original registration - both security interests perfected by registration of financing statements in terms of s41(1)(b)(i) - plaintiffs’ interest initially had priority over 1st defendant’s interest due to prior registration - issue concerned nature and effect of subordination agreement in particular its duration - whether subordination agreement was to continue only to 31 Mar 2010 or was to continue until 1st defendant’s security interest was satisfied or otherwise released - further issue concerned relevant date for determining priority of respective security interests - whether date of receivership on 28 Aug 2008 was relevant date - discussion of s70(1) and s70(2), s159 and s153 and cl19, Schedule 1, Personal Property Securities Regulations 2001 - HELD: absence of discussion about expiry dates reflected inherent agreement that 1st defendant’s interest would have priority until its advance was repaid or security interest otherwise satisfied - no discussion necessary - while advance was only for one year, commercial reality was that it might not be repaid on due date or it might be rolled over - no reason to limit duration of priority which would have been understood by PFS - C+M wanted priority over Anthem collateral and PFS agreed without qualification - decision of solicitors to register change statements relating to subordination was not term of agreement and did not undo or alter agreement already reached between two finance companies - implications of registration for third parties did not arise here - C+M entitled to rely on s70 even if it had noticed expiry date on register - s70 specifically defined effect of agreement to subordinate between the parties and those for whose benefit the agreement was intended - as between parties agreement remained operative until C+M security interest was satisfied or otherwise discharged - priority arrangement did not expire on 31 Mar 2010 and declarations sought by plaintiffs could not be issued - same conclusion would have been reached on particular facts on basis competing priorities fell to be determined when receivers were appointed which occurred at point in time when 1st defendant’s security interest had priority over plaintiffs’ interest - Act did not specify time at which dispute as to priorities was to be determined - Sperry Inc v Canadian Imperial Bank of Commerce and Thorne Riddell Inc relevant - priority issue to be resolved at time when respective interests came into conflict - logical and in accord with principle to resolve priority issue in this case as at time competing interests came into conflict - whether or not that coincided with appointment of receivers would depend on all circumstances particularly the provisions in relevant general security agreement - here receivers were appointed by 1st defendant because Anthem was in default under GSA which immediately indicated financial trouble, appointment of receivers constituted default under GSA and plaintiffs were then immediately entitled to call up the balance of monies secured under the GSA and enter into possession of collateral - under those circumstances appointment of receivers undoubtedly gave rise to conflict about which security interest should prevail because there was clearly insufficient collateral to satisfy both claims - subordination agreement still in force when receivers were appointed - 1st defendant’s interest prevailed - applications for directions dismissed - 1st defendant entitled to costs on 2B scale together with disbursements.
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