Tegel Foods Limited v Coastal Cuisine NZ Limited (CIV 2012-404-5019  NZHC 899). Tegel Foods Limited (Tegel) sought summary judgment against Mr and Mrs Arnesen (A), the second and third defendants, as guarantors of the obligations to Tegel owed by Coastal Cuisine (Coastal) for the supply of chicken products.
As a general rule, a creditor is entitled to exercise their securities in such manner and order as they choose. Accordingly a creditor may pursue a guarantor directly and independently of any other remedies that might be available. A, in reliance on the equitable doctrine of marshalling, argued that Tegel ought to first pursue recovery by enforcement of its security over certain assets of Coastal before claiming against A, as guarantor. The High Court held that marshalling as between a secured creditor and a guarantor only applies in a situation where the guarantor also holds securities for the debtor's obligations. Tegel held a single security interest over the accounts receivable of Coastal and A had no claim to that asset at all. As such, there was no place for the application of the marshalling doctrine. Furthermore, the wording of both guarantees granted by A was such as to specifically exclude the application of the doctrine of marshalling.