In Primary Wool Co-Operative v Stevens, the High Court considered, among other things, whether there was an arguable case that the receivers of Bruce Woollen Mill Limited (BWM) had breached their duties to a surety and whether this meant (in the summary judgment context) the surety could escape liability to the secured creditor.
While trading, BWM had obtained advances from the Co-Operative. The Co-Operative's lending had been secured by a GSA over BWM's property and a guarantee given by BWM's director, Mr Stevens. After BWM was placed into receivership by a family trust associated with Mr Stevens, there was a shortfall in recovery and the Co-Operative sought summary judgment against Mr Stevens in the amount of $200,000.
In denying the Co-Operative summary judgment, the Court found the receivers had sold the assets of BWM together (to the Co-Operative) when there was evidence that selling the assets individually may have resulted in there being no shortfall. That conduct was an arguable breach of their duties under s 19 of the Receiverships Act 1993 and under the apparent influence of the Co-Operative. In the Court's view, the receivers had also arguably breached their duties by failing to spend a modest sum to ascertain the value of the assets if sold individually. In light of evidence of the Co-Operative's connivance with the receiver's breach, the Court found Mr Stevens had an arguable defence to its claim.
See Court decision here.