In King v PFL Finance Limited & Anor  NZCA 517, the Kings, a husband and wife team of farmers, arranged finance from PFL Finance Limited but the loan went into default. PFL served PLA notices but failed to serve the Kings as guarantors. A receiver was appointed to the farming operation, who determined to cease trading the day after his appointment.
The Kings claimed (among other things) that the failure to serve them with PLA notices had caused them prejudice. They also claimed that the receiver had breached his duty under section 18(3) of the Receiverships Act 1993 to exercise his powers with reasonable regard to the interest of the Kings, and that PFL was liable for the receiver's breach.
The Court of Appeal agreed with the High Court that, to show that the failure to serve the PLA notices on the Kings resulted in a liability for PFL, the Kings would have to establish that they had the ability to remedy the default, that they were deprived of the remedial opportunity and that they had suffered loss as a result. The Court found against the Kings on this point.
On the issue of the receiver's liability, the Court found that the receiver did not act unlawfully in closing down the farm operation the day after his appointment. The Court of Appeal noted that section 18 of the Receiverships Act 1993 codifies a receiver’s duties and the wording of the section is such that the receiver’s primary duty is to act in the best interests of the appointing creditor. To the extent consistent with that primary duty, the receiver must exercise his or her powers with reasonable regard to the interests of sureties. Only in this sense is a balancing of competing interests required. If the course desired by a surety is inconsistent with the best interests of the creditor, the receiver is not bound to adopt it. If it may be consistent with those interests, he must have regard to it, although even then he may, acting reasonably, still reject it.
See Court decision here.