With his Marlborough Sounds contracting business underwater and bankruptcy threatening, Gary Mann was encouraged after a neighbour bought up secured debt when the mortgagee threatened sale of his family home. His neighbour later bid to buy the property himself, over Mr Mann’s objections.
Secured creditors need not have ‘purity of purpose’ gaining a collateral advantage in a forced sale, Justice Cooke said. Neighbour David Wilson followed the letter of the law. The High Court did not stop continuation of a forced sale of the family home.
The High Court was told Mr Mann’s company Silo Solutions New Zealand Ltd supplied large silos for bulk storage of crops and cement. It was in financial difficulty after a dispute with cement manufacturer LaFarge Holcim Ltd over installation of a cement silo in Wellington. Mr Mann alleges payment was $380,000 short. This put financial pressure on Silo Solutions. The Mann family home at Waikawa, on leasehold land near Picton, was owned by Silo. With mortgage payments in arrears, mortgagee Isso Holdings Ltd was threatening a forced sale. Other creditors were threatening Mr Mann with bankruptcy. Neighbour Dave Wilson offered to assist; he paid Silo the $242,3000 it was owed and he took an assignment of Isso’s mortgage. At law, Mr Wilson then stood in Isso’s shoes. Within months, Mr Wilson exercised Silo’s rights to appoint a receiver selling up the Waikawa property. The receiver called for tenders. Seven offers were received. Mr Wilson’s was highest at $370,000.
Mr Mann alleged his neighbour’s actions as secured creditor were in breach of the Personal Property Securities Act; failing to act in good faith and in accordance with reasonable standards of commercial practice. His neighbour took unfair advantage of information learnt through his personal connection, Mr Mann alleged. Each had a different perspective, Justice Cooke said. Mr Mann felt deceived; Mr Wilson felt he was saving Mr Mann from bankruptcy. The sale achieved a market price through use of a receiver acting as an independent third party, Justice Cooke said.
The High Court was told the receiver is negotiating with Mr Wilson, seeking to increase the sale price by about $20,000 to cover rates and leasehold rentals owing on the Waikawa property. The court signalled that Mr Mann was not going to leave quietly. The receiver was looking at an eviction order from the Tenancy Tribunal.
Mann v. Scutter – High Court (17.04.20)
20.069