The High Court recently determined the extent to which a secured creditor must comply strictly with the formalities set out in a security instrument when executing a Deed of Appointment of a receiver. The Court ruled that strict compliance is required and that, in this case, this had not occurred.


The borrower, Mr McPhillips, had granted a mortgage to ACC Bank (ACC) over certain assets permitting it to appoint a receiver over those assets in the event of a default.  An event of default had occurred and ACC appointed a receiver over the assets of Mr McPhillips as secured in the mortgage. Mr McPhillips challenged the appointment of the receiver, on the grounds that ACC had not complied with the “exact terms” set out in the mortgage when executing the Deed of Appointment.

The mortgage provided for the appointment of a receiver by ACC “by writing under its hand”. The receivers were appointed by ACC under seal. The Court re-iterated the common law position that a receiver must be appointed in accordance with the terms of the security instrument and that a receiver who is not appointed in accordance with those terms is not validly appointed. ACC submitted that the requirement to appoint the receiver “by writing under its hand” should be satisfied by the affixing of the common seal where the affixing of the common seal includes a signature of authorised signatories.

The Court did not accept this submission and pointed out that ACC had authorised six different people to witness the affixing of the seal but had only authorised three specific people to sign documents which are required to be “by writing under its hand”. In this case, the Deeds of Appointment were not signed by one of these three individuals. The Court concluded that the exact terms of the debenture had not been complied with and the appointments of the receivers were therefore invalid.

It remains to be seen what impact this decision will have on cases where the same individuals are authorised to execute documents “under hand” and “under seal”. However, the Court noted that it would be “unwise to conclude as a general principle” that a deed executed under seal and signed as part of the process must be regarded as incorporating the requirement of “by writing under its hand”.