In McCollum v Thompson, the Court of Appeal partly quashed the orders of the High Court (previously reported in our March 2016 insolvency update).
The Court of Appeal held that the receivers had converted the 47 heifers for a two-month period only, until a demand for additional security under the General Security Agreement (GSA) was made. In reaching this decision, the Court relied on a clause of the GSA that allowed the security holder to make a demand for additional security if it had a reasonable opinion that the fair market value of the livestock had declined.
This finding had a severe effect on the respondents' counterclaim for consequential loss, as the claim for lost milk profits from the 47 heifers relied on the finding that the heifers had been wrongfully taken by the receivers. However, the Court of Appeal did uphold the High Court's decision that the receivers had breached their duties by selling the livestock at an undervalue.
As a consequence, the net difference moved to $105,752 in the appellants' favour, rather than $212,084 in the respondents' favour under the High Court judgment.
The Court of Appeal remitted the case to the High Court to ruminate on final costs relating to the quantum of consequential loss for the two months the heifers were converted and for the wrongful seizure of other livestock.
See the Court of Appeal's decision here.