With short-term loans taken out by interests associated with Peter Simunovich to prop up his ailing fishing operations in Australia, his supposed $450,000 repayment guarantee proved unenforceable after he gained control of collateral securities.
The High Court was told of a series of short term loans taken out in 2019 by Simunovich-owned Seafish Tasmania Pty Ltd; cash needed to refinance existing debt and pay quota licence fees.
Seafish was at risk of Australian authorities confiscating its quota allocation; a fishing quota valued by Seafish at $23 million.
Litigation followed failure to repay two six month loans falling due late 2019; loans arranged through Auckland-based Federal Capital Ltd, controlled by Mel Stewart.
Legal issues centred on a May 2019 security sharing agreement, a tri-partite agreement between Federal Capital, Mr Simunovich and existing Seafish financier FE Investments Ltd. FE held mortgage security over Seafish quota.
Mr Stewart held controlling interests in both Federal Capital and FE Investments.
The High Court was told Mr Stewart was under the impression that the sharing agreement would enable Federal Capital to extend Mr Simunovich’s obligation as guarantor of FE Investments existing loans to include the new Federal Capital funding.
Not so, ruled the High Court.
Property Law Act rules state there is no liability as guarantor unless the guarantee is in writing, signed by the guarantor.
Mr Simunovich did sign as named guarantor on Federal Capital loan documents, but there was no operative clause in these documents imposing a guarantee.
Federal Capital argued in the High Court that it could enforce existing FE Investments guarantees as permitted by the tri-partite security sharing agreement signed by Mr Simunovich as guarantor.
The legal complication was that interests associated with Mr Simunovich bought out FE Investments’ debt in February 2020 at a time when FE threatened to call in its loan and sell off Seafish’s quota. The deal was structured as cash in return for an assignment of FE Investments’ rights.
Mr Simunovich now wore two of the three hats in their tri-partite agreement; personally as guarantor of FE Investment’s loans and separately as owner of these same loans.
Justice Harvey ruled the tri-partite agreement gave Mr Stewart’s Federal Capital the right only to share in the proceeds of any enforcement by FE Investment; it could not force FE Investment to enforce its rights against Mr Simunovich.
Mr Stewart and Mr Simunovich go back a long way. In the early 2000s Simunovich money helped fund Mr Stewart’s investment in FE Investment, the High Court was told.
Federal Capital Ltd v. Simunovich – High Court (2.02.26)
26.070