SINTEL-COM LIMITED (IN LIQUIDATION) V TELECOM NEW ZEALAND LIMITED HC AK CIV 2004-404-1677

SINTEL-COM LIMITED (IN LIQUIDATION) V TELECOM NEW ZEALAND LIMITED HC AK CIV 2004-404-1677

The court held that an assignment by way of mortgage of choses in action does not, by itself, bar the assignor (or its liquidators) from suing to recover those choses provided the assignee's interests are protected; the debenture covenant did not prevent Sintel's liquidators pursuing the claims because the proposed litigation would not prejudice the security holder and, even if consent were required, Telecom could not withhold consent for an improper collateral purpose; accordingly the strike out application failed and Sintel may pursue the causes of action subject to protecting the debenture holder's entitlement to be paid from any recoveries.

Citation
openlaw-a389d233_1d58_4202_8e53_532895bc8cd0.pdf
Parties
Plaintiff/respondent: Sintel-Com Limited (In Liquidation); Defendant/applicant: Telecom New Zealand Limited
Court
High Court
Jurisdiction
New Zealand
Judgment Date
6 April 2006
Procedural Posture
Civil (commercial) / Application to Strike Out Causes of Action (interlocutory)
Outcome
Strike out application declined; plaintiff (Sintel) may pursue causes of action against Telecom subject to protecting debenture holder's interests
Legal Topics
Debenture, Assignment of Choses in Action, Equity of Redemption, Powers of Liquidator, Companies Act 1993 S 305, Choses in Action, Mortgage by Way of Assignment
Company Law Insolvency Contract Law Equity Property Law Security Interests Debenture Assignment of Choses in Action +5 more

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Parties

Sintel-Com Limited (In Liquidation)

Plaintiff/respondent

Telecom New Zealand Limited

Defendant/applicant

Procedural Posture

Civil (commercial) / Application to Strike Out Causes of Action (interlocutory)

Legal Issues

  1. 1 Whether claims against Telecom are choses in action included within ANZ debenture security
  2. 2 Whether assignment by way of mortgage prevents the assignor/liquidator from suing to recover assigned choses in action
  3. 3 Whether the debenture or its covenants require the debenture holder's consent before Sintel/liquidators may pursue the claims

Ratio Decidendi

The court held that an assignment by way of mortgage of choses in action does not, by itself, bar the assignor (or its liquidators) from suing to recover those choses provided the assignee's interests are protected; the debenture covenant did not prevent Sintel's liquidators pursuing the claims because the proposed litigation would not prejudice the security holder and, even if consent were required, Telecom could not withhold consent for an improper collateral purpose; accordingly the strike out application failed and Sintel may pursue the causes of action subject to protecting the debenture holder's entitlement to be paid from any recoveries.

Court Disposition

Strike out application declined; plaintiff (Sintel) may pursue causes of action against Telecom subject to protecting debenture holder's interests

Orders

  • Strike out application dismissed
  • Plaintiff entitled to pursue all causes of action against Telecom subject to protection of the debenture holder's entitlement from recoveries