CAPITAL+MERCHANT FINANCE LTD AND ANOR V FORTRESS CREDIT CORPORATION AND ORS HC AK CIV 2007-404-007298

CAPITAL+MERCHANT FINANCE LTD AND ANOR V FORTRESS CREDIT CORPORATION AND ORS HC AK CIV 2007-404-007298

Although both the Borrower and Lender advanced arguable constructions of the financing documents (notably as to whether the limitation covenant breach triggered immediate default and whether the Put Option was exercisable), the balance of convenience and overall justice favored the lender: CMF had not paid the...

Source-derived case information.

Citation
openlaw-764929d3_8656_48d0_8a1b_dbb8da77184a.pdf
Parties
First Plaintiff: Capital+Merchant Finance Ltd; Second Plaintiff: Capital+Merchant Investments Ltd; First Defendant: Fortress Credit Corporation (Australia) II Pty Ltd (ACN 114 624 958); Second Defendant: Capital+Merchant Investments Ltd; Third Defendant: Grant Thornton; Interested Party: Perpetual Trust Ltd
Court
High Court
Jurisdiction
New Zealand
Judgment Date
29 November 2007
Procedural Posture
Injunction Application (challenge to Receivership) / Decision on Interlocutory and Final Application
Outcome
Application for injunctive relief dismissed; interim orders (including suppression) discharged
Legal Topics
Receivership, Event of Default, Prior Charge Covenant, Put Option/loan Asset Acquisition Facility, Interim Injunction, Balance of Convenience
Corporate Law Insolvency Security Interests Trusts and Trustees Equity/remedies Receivership Event of Default Prior Charge Covenant +3 more

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Parties

Capital+Merchant Finance Ltd

First Plaintiff

Capital+Merchant Investments Ltd

Second Plaintiff

Fortress Credit Corporation (Australia) II Pty Ltd (ACN 114 624 958)

First Defendant

Capital+Merchant Investments Ltd

Second Defendant

Grant Thornton

Third Defendant

Perpetual Trust Ltd

Interested Party

Procedural Posture

Injunction Application (challenge to Receivership) / Decision on Interlocutory and Final Application

Legal Issues

  1. 1 Whether Fortress validly declared an event of default under the Prior Charge Facility (cl 13.1(a) v cl 13.1(b))
  2. 2 Whether Fortress/CMI validly exercised the Put Option under the CMI Facility to require repurchase of loans by CMF
  3. 3 Whether there is a serious question to be tried and whether the balance of convenience and overall justice require injunctive relief

Ratio Decidendi

Although both the Borrower and Lender advanced arguable constructions of the financing documents (notably as to whether the limitation covenant breach triggered immediate default and whether the Put Option was exercisable), the balance of convenience and overall justice favored the lender: CMF had not paid the outstanding $565,624 and had not paid disputed sums into court, CMF's forecast recoveries were implausible and insolvency was likely, therefore injunctive relief restraining Fortress and the receivers was refused, interim orders were discharged and costs awarded to Fortress.

Court Disposition

Application for injunctive relief dismissed; interim orders (including suppression) discharged

Orders

  • CMF's application for injunctive relief against Fortress, the receivers and other parties is dismissed
  • All interim orders made on 23 November 2007 (including suppression orders) are discharged