HARVESTPRO LOGGING LTD V CORDYLINE HOLDINGS LTD HC AK CIV 2006-404-3107 [2006] NZHC 1163 (3 October 2006)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                               CIV 2006-404-3107



              BETWEEN                     HARVESTPRO LOGGING LTD
                                          Plaintiff

       
      AND                         CORDYLINE HOLDINGS LTD
                                          Defendant


Hearing:      18 September
2006

Appearances: S.M Hunter for plaintiff
             S. Mills for defendant

Judgment:     3 October 2006 at 11 a.m.


     
       JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE




              This judgment was delivered by me on
              03.10. 2006 at
11 am, pursuant to
              Rule 540(4) of the High Court Rules.


                Registrar/Deputy Registrar
             
       Date...............




HARVESTPRO LOGGING LTD V CORDYLINE HOLDINGS LTD HC AK CIV 2006-404-3107 3 October
2006

Background

[1]    In this proceeding the plaintiff sues the defendant for damages for
conversion. The plaintiff alleges that the defendant
converted to its own use four
logging trucks and trailers. The background facts are as follows.


[2]    On 19 December 2004 the
defendant signed a document which described
itself as an agreement for sale and purchase pursuant to which it sold to a company
called
ForestOne four logging trucks and trailers together with ancillary equipment
("the vehicles") on 19 November 2004. There was argument
before me as to exactly
how the agreement should be categorised. The defendant said that it was a lease
agreement, and the plaintiff
that it was an agreement for sale and purchase. I will
return to that topic further on in this judgment. The total payment that the
purchaser,
ForestOne, was required to make under the agreement was $1,436,307. ForestOne
took possession of the vehicles on 19 November
2004. The agreement contained a
condition that it was subject to the approval of Speir's Finance Group.


[3]    On 15 December 2004
the defendant's solicitors confirmed that the
agreement was unconditional. Only two relatively modest payments were made
under the
agreement before ForestOne defaulted. On 31 January 2005 that company
ceased trading.


[4]    Unbeknown to the defendant, the plaintiff
held a general security agreement
(the "GSA") over the property of ForestOne. The plaintiff was later to assert that the
GSA extended
to the vehicles which the defendant had sold to ForestOne.


[5]    On 31 January 2005, the same day that ForestOne ceased trading,
the plaintiff
gave notice that it was going to take possession of ForestOne's assets. It is not
disputed that a notice to that effect
was served. The notice was headed "Notice of
Intention to Take Possession of Collateral Under Section 109 of the Personal
Property
Securities Act 1999". The notice was addressed to ForestOne. It stated the
following:

       TAKE NOTICE THAT:

       1.     
HARVESTPRO LOGGING LIMITED (the secured party) with
               priority over all other secured parties has taken possession of
the
               property belonging to you including that set out in the attached
               schedule (the collateral). All
property belonging to you is subject to
               the security interest that was created or provided for in the security
  
            agreement (the security agreement) dated 4 March 2003.

       2.      As at the date of this notice, the total amount
of arrears due under
               the security agreement is $2,342,355 plus the secured party's
               expenses of enforcing
the security agreement and further interest on
               the arrears.

[6]    The schedule that was attached to the notice was
one-and-a-half A4 pages in
length and referred to various items of logging equipment, trucks, de-barkers,
welders, and other miscellaneous
equipment. It did not, however, expressly identify
the four trucks and trailers with associated mounted cranes that were the subject
of
the agreement dated 19 November 2004.


[7]    There was some dispute at the hearing before me as to the sequence of events
surrounding what happened to the
vehicles after ForestOne ceased to trade. I will
refer to this dispute below.


[8]    Subsequently the defendant purported to sell
the vehicles for $980,000 plus
GST and ownership has long since been transferred to the new owners.


[9]    ForestOne initially
granted the general security agreement over its present
property and after-acquired property in favour of the ANZ bank. By deed entered
into 18 August 2004 ANZ assigned its rights under the security agreement to the
plaintiff. The assignment deed recites that, as at
18 August 2004 ForestOne owed it
$1,599,205. Under the agreement for assignment of the GSA, the plaintiff was
obliged to pay $130,000
to ANZ.


[10]   I accept, because the parties agreed that this was so, that the defendant did
not know of the existence of the general
security agreement over ForestOne's assets,
and did not know about the assignment of that agreement. I also conclude that the
defendant
could have found out about both if it had searched the Personal Property
Securities Register. I accept the evidence of Mr Stevenson
that the first occasion on

which the defendant had actual knowledge of the plaintiff's asserted right to a
general security over
ForestOne's assets was when the plaintiff served the defendant
with these proceedings in or about June of 2006.


[11]   In its proceedings,
the plaintiff claims that on or about 4 March 2003
ForestOne granted a general security agreement to ANZ. It pleads that the general
security agreement ("GSA") created a security interest as defined in s 17 of the
Personal Property Securities Act 1999 ("PPSA") in
favour of ANZ and all present
and after-acquired personal property of ForestOne. The plaintiff also pleads that the
ANZ registered
financing statements in relation to the GSA which stated that it
applied to all present and after-acquired personal property of ForestOne.
Those
statements were registered on 13 January 1999, 20 September 2001, and 31 January
2003. The statement of claim also alleges
the assignment from ANZ of the rights
and interests under the GSA on 18 August 2004. The plaintiff further alleges that on
or about
15 December 2004 property in the vehicles passed to ForestOne and the
assets therefore became subject to the GSA from that date.
As well, the plaintiff
alleges that on or about 31 January 2005 the plaintiff exercised its rights under the
GSA and took possession
of the assets but that in or about February 2005 (but in any
event after 31 January 2005), the defendant unlawfully seized the assets
contrary to
the plaintiff's rights under the GSA and subsequently disposed of them.                  The
plaintiff pleads that it
suffered loss in the sum of $1,225,000 being the value of the
assets as a result of the "defendant's conversion".


[12]   The defendant
in its notice of opposition says:


       The Defendant has a defence to the claim of the Plaintiff on the grounds that:

     
 a)    At no time did property and title in the assets pass to ForestOne Limited
            and the assets did not therefore become
subject to the General Security
            Agreement held by the Plaintiff; and/or

       b)    The Agreement between the Defendant
and ForestOne in respect of the
            assets was cancelled and the Defendant is entitled to apply for relief
            under
Section 9 of the Contractual Remedies Act 1979.

       c)   As appearing in the affidavits of John Robert Stevenson and Karen
 
          Linda Stevenson filed in support of this Notice of Opposition.

[13]   Against that background I turn to consider the
issues in the case.



Summary Judgment Principles

[14]   The principles which apply to an application for summary judgment have
been clearly established through decisions of the Court of Appeal such as Pemberton
v Chappell  [1987] 1 NZLR 1; Grant v New Zealand Motor Corporation Ltd  (1989) 1
NZLR 8 and Westpac Banking Corporation v MM Kembla New Zealand Limited
 [2001] 2 NZLR 298.


[15]   In his judgment in Pemberton v Chappell at page 3, Somers J said:

       If a defence is not evident on the plaintiff's
pleading I am of opinion that if
       the defendant wishes to resist summary judgment he must file an affidavit
       raising
an issue of fact or law and give reasonable particulars of the matters
       which he claims ought to be put in issue. In this way
a fair and just balance
       will be struck between a plaintiff's right to have his case proceed to judgment
       without tendentious
delay and a defendant's right to put forward a real
       defence.

       At the end of the day r 136 requires that the plaintiff
"satisfies the Court that
       a defendant has no defence". In this context the words "no defence" have
       reference to the
absence of any real question to be tried. That notion has
       been expressed in a variety of ways, as for example, no bona fide
defence,
       no reasonable ground of defence, no fairly arguable defence. See eg
       Wallingford v Mutual Society  (1880) 5 App Cas 685, 693; Fancourt v
       Mercantile Credits Ltd [1983] HCA 25;  (1983) 154 CLR 87, 99; Orme v De Boyette  [1981] 1
       NZLR 576. On this the plaintiff is to satisfy the Court; he has the persuasive
       burden. Satisfaction here indicates that the Court is
confident, sure,
       convinced, is persuaded to the point of belief, is left without any real doubt
       or uncertainty.



Was the agreement of 19 November 2004 an agreement to sell and buy
equipment or an agreement to lease?

[16]   As I have said, it
is the plaintiff's case that the four truck and trailers and
associated equipment became subject to the general security agreement
granted by
ForestOne because when ForestOne purchased those items they became part of its
"present and after-acquired property" within
the meaning of the GSA.


[17]   The defendant's position is that ForestOne did not acquire property in the
vehicles. The defendant
says that what happened was that the defendant leased those

items of equipment to ForestOne only. The defendant said that it was
entitled to
reclaim possession of the vehicles because it never ceased to be the owner.


[18]   In my view the agreement entered
into between the parties was an agreement
for sale and purchase which contained a leasing provision to cover the period which
would
elapse between when ForestOne took possession of the property and when the
agreement became unconditional. That conclusion is based
upon the identification
of the agreement as a "sale and purchase agreement" and the consequent
identification of the defendant as
the vendor and ForestOne as the purchaser. The
"background" section of the agreement records:

       A.   The vendor is the owner
of the property set out in Schedule A [schedule
            A particularises the vehicles]

       B.   The vendor agrees to sell
to the Purchaser the property set out in
            Schedule A

       C.   The parties to record [sic] the terms of their agreement
for sale and
            purchase.

[19]   In the operative part of the document the following provisions appear:


       a)   
 In clause 1 the vendor agrees to sell the vehicles to the purchaser;


       b)     In clause 2 ForestOne which is identified as
the purchaser agrees to
              pay the vendor the instalments set out in the agreement;


       c)     In clause 3 ForestOne
is again identified as "the purchaser";


       d)     In paragraph 4 "the purchase price" is expressed to be $1,225,000 plus
 
            GST which is to be paid "to the vendor" in accordance with Schedule
              B;


       e)     In paragraph 7,
it is stated that "this sale and purchase of the Property
              is subject only to the approval of Speir's Finance Group
as required
              by the vendor".

       f)      in clause 8 the vendor agrees to lease the property until the agreement
               becomes unconditional.


[20]   The agreement contained a provision, as I have noted, that it was subject to
the approval
of Speir's Financial Group.          That was the only condition in the
agreement. The schedule attached to the agreement set out
the payment instalments.
The second payment is referred to as a "lease charge". The balance of the payments
is either on account
of interest or principal. Interest totals $48,485 and principal
$1,225,000. The total payments including the lease payment, interest,
principal, and
GST came to $1,436,307.


[21]   Mr Stevenson gave evidence, that notwithstanding the actual terms in which
their
agreement was cast, it was that it was his intention and that of ForestOne to
lease the vehicles and not to sell them.


[22]   I
agree with Mr Hunter's submission on this aspect of the case:

       20. Paragraphs 15 to 28 of Mr Stevenson's affidavit describe
what he says
       were the prior negotiations of the parties leading to their entry into the Sale
       and Purchase Agreement.
Mr Stevenson's evidence is not directed at the
       "factual matrix" but rather describes the parties' negotiations and his own
       subjective intentions. Such evidence is plainly inadmissible.

       "The law excludes from the admissible background the previous negotiations
       of the parties and their declarations
of subjective intent."

       Investors Compensation Scheme Ltd v West Bromwich Building Society
       [1997] UKHL 28;  [1998] 1 WLR 896, [page], per Lord Hoffman.

       21. Mr Stevenson's evidence is that the parties discussed a lease agreement
       with six monthly
lease payments [J. Stevenson, paragraph 22]. Whatever
       the parties discussed, this is certainly not the agreement they entered
into.

[23]   My conclusion is that ForestOne acquired the property. The defendant did
not continue as owner of the property after
the date when the agreement became
unconditional. From that date it was in effect an unpaid unsecured vendor under the
agreement
for sale and purchase.

Allegation that contract cancelled

[24]    I understand that the defendant asserts that even if the arrangements
between
defendant and ForestOne should properly be construed as a contractual relationship
by means of which property in the vehicles
could theoretically pass to ForestOne, the
contract was cancelled before that could occur. The result, it is argued, is that the
defendant never relinquished property in the vehicles.


[25]    Mr Stevenson's evidence on this point is that he received a call
on
Wednesday, 2 February 2005 from Malcolm Burns who was employed by ForestOne
who advised him that ForestOne had terminated the
agreement. He then invited the
defendant to come and uplift the plant from ForestOne's yard in Wyndham.


[26]    Mr Hunter met the
plaintiff's argument this point by saying that ForestOne
had not unilaterally cancelled the agreement for sale and purchase. He said
that
under the Contractual Remedies Act 1979 a party could cancel the contract only if
the other party is in default. I understood
Mr Hunter to say that there was no
evidence of default on the part of the defendant. In such circumstances ForestOne
had no right
to cancel.


[27]    I agree with that submission. As well, s 8 of the Contractual Remedies Act
states that:

        (3) Subject
to this Act, when a contract is cancelled the following provisions
            shall apply: ...

               (b) So far as the
contract has been performed at the time of the
                   cancellation, no party shall, by reason only of the cancellation,
be
                   divested of any property transferred or money paid pursuant to the
                   contract.

[28]    Because
of that section, even if there had been a valid cancellation it would
not have divested ForestOne of property in the equipment. As
well, it would not
seem that any order could be made under s 9 of the Act to revest the equipment in
the defendant because of the
provisions of s 9(5) of the Act which prohibits the
making of an order vesting property where it would defeat the rights of another

person not being a party to the contract. The plaintiff would qualify as such "another
person" in the context of this case.



The alleged conversion

Elements of tort

[29]     The essential features of the tort of conversion are described in The Law of
Torts
in New Zealand 4th ed, Todd, p 467 citing Kuwait Airways Corporation v Iraqi
Airways Company (Nos 4 and 5) [2002] UKHL 19;  [2002] 2 AC 883,1084 as the following three: first,
the defendant's conduct is inconsistent with the rights of the owner or other person
entitled
to possession; second, the conduct is deliberate; and third, the conduct is so
extensive an encroachment on the rights of the owner
or other person as to exclude
him or her from use and possession of the goods. The reference to conversion being
an intentional wrong
requires that the defendant must intend to do the act which
constitutes the denial of the plaintiff's rights. (See The Law of Torts
in New Zealand
ibid).


Actual Possession

[30]     Mr Hempel, was the chief financial officer of ForestOne. The plaintiff now
employs
him. He gave evidence for the plaintiff. Mr Hempel said that after the
plaintiff had given its notice asserting its rights under
the GSA:

         16.     Three of the four truck and trailer units and one crane were secured
                 in ForestOne's yard
in Wyndham, Southland. The fourth truck and
                 trailer unit and one crane were secured in a yard at 80 Ingram Road,
                 Ramarama. This process was completed by Wednesday, 2 February
                 2005.

[31]     Mr Hempel gave evidence
that the defendant directed a repossession agent to
seize the truck and trailer unit that was secured at Ramarama. He said that the
defendant:

         ... also repossessed the other three truck and trailer units and a crane from
         ForestOne's yard in Wyndham.
I believe that this occurred on Friday, 4
         February 2005.

[32]   As I have already said Mr Stevenson in his affidavit referred
to a telephone
call between himself and Mr Burns of ForestOne on 2 February 2005.


[33]   Mr Stevenson said that after the call
from Malcolm Burns:

       46.     We immediately made arrangements to repossess the trucks. Three
               of the truck and
trailer units were at ForestOne's headquarters at
               Wyndham and we arranged for these to be uplifted and returned to
               our premises. The remaining truck was in the North Island, and as
               detailed in Mr Hempel's affidavit,
we made arrangements for this to
               be repossessed on or about 10 February 2005.

[34]   There was significant dispute
at the hearing as to what, if anything, the
affidavits proved. I believe, that the affidavits can reasonably be read in a way that
reveals that there is no conflict between what each deponent says.


[35]   Mr Hempel says that the plaintiff secured three of the
four truck and trailer
units at ForestOne's yard at Wyndham, and the other at a yard at 80 Ingram Road,
Ramarama, and that this process
was completed by Wednesday 2 February 2005.


[36]   Mr Stevenson's affidavit detailing that three of the truck and trailer units
were uplifted from ForestOne's yard in Wyndham, Southland, suggests that they
were removed from there and retained until they were
sold. There is no suggestion
that the defendant had other than unbroken possession of the vehicles until they were
sold. The defendant
also uplifted the fourth truck from the yard in Ramarama.


[37]   Mr Mills was critical of the affidavit sworn by Mr Hempel on 2
June 2006
about the circumstances in which the truck and trailer units were allegedly seized by
the plaintiff from ForestOne.


[38]
  However, having looked again at paragraphs 15 to 18 of that affidavit I
believe that it is tolerably clear that what Mr Hempel
is saying is that the plaintiff
secured three of the vehicles at ForestOne's yard in Wyndham, Southland.
ForestOne had ceased trading
at the end of January 2005. Mr Hempel said this
process of securing the vehicles at Wyndham was completed by 2 February 2005, as
was the task of securing a fourth truck and trailer unit which was in the North Island.
Then he says that he later learnt that a
repossession agent acting on instructions from

the defendant seized the truck and trailer unit that had been secured at Ramarama
and also "repossessed" the three other truck and trailer units from ForestOne's yard
in Wyndham with the latter occurring on Friday 4 February 2005. The reference to
"repossession"
is consistent with the fact that there had been a change of possession
prior to the defendant taking possession of the truck and
trailers.


[39]   My conclusion is that the affidavits can be fairly and reasonably read, and
should be read, as establishing that
the plaintiff took possession of the vehicles first
and then subsequently the defendant took possession of the vehicles, retaining
possession until the vehicles were sold.



Entitlement to immediate possession

[40]   The plaintiff alleges that ForestOne was
in default under the terms of its
general security agreement enabling the plaintiff to take the possession of the assets
and sell
them pursuant to s 109 of the PPSA.


[41]    As I understand the argument for the defendant, it is that there is no proof
that ForestOne
was indebted to the plaintiff at the time of the alleged conversion. If
there was no proved indebtedness, it follows that there can
have been no entitlement
on the part of the plaintiff to take possession and, as a consequence, no cause of
action in conversion
is available to the plaintiff.


[42]   Mr Hempel said that on 31 January 2005 the plaintiff gave the notice that it
was taking possession
of the assets pursuant to the GSA. The notice I have already
quoted from. The notice stated that the arrears due under the security
agreement
dated 4 March 2003 were $2,342,355.


[43]   In my view the verification provided by the plaintiff of its statement of
claim,
together with the fact that the plaintiff served a notice under s 109 of the Act that
over $2.3 million was owing, are all
enough to establish, in the absence of evidence
to the contrary, that ForestOne was in fact in arrears under its agreement with the
plaintiff. Beyond that, matters of quantum would not seem to be the concern of the
defendant ­ a point that I will return to below.

[44]   On this issue of fact, the Court has to maintain a balance between the
defendant's rights to have his day in Court and to
have his proper defences explored
and the appropriate robust and realistic approach called for by the particular facts of
the case:
See Australian Guarantee Corporation (NZ) Ltd v McBeth  [1992] 3 NZLR
54, 59. In striking a fair balance, it is also pertinent to note that the defendant has
not raised the issue of there being no debt
owing to the plaintiff by ForestOne in its
notice of opposition or in any affidavit that it has filed.


[45]   I take the view that
there is nothing in the point urged by Mr Mills under this
head. The plaintiff has established that ForestOne owed money to the plaintiff,
that
it was in arrears and that it was the case when it took possession of the vehicles.
This is not a case where proof that a debt
is owed is a live question. That could
occur, where for example, the amounts were not great and there was a possibility that
the
plaintiff's accounts were in error; or where the defendant has cross-claims of
uncertain quantum which could equal or exceed the
amount owed to the plaintiff.


[46]    I therefore consider that Mr Hunter is correct when he says that the plaintiff
had an immediate
right to control the truck and trailer units. Mr Hunter says that the
plaintiff can satisfy this requirement by invoking s 109 of
the Act.


[47]   Section 109 says:

       109     Secured party may take possession of and sell collateral

       (1)     A secured
party with priority over all other secured parties may take
       possession of and sell collateral when--

               (a) The
debtor is in default under the security agreement; or

               (b) The collateral is at risk.

       (2)     In subsection
(1), collateral is at risk if the secured party has
       reasonable grounds to believe that the collateral has been or will be
       destroyed, damaged, endangered, disassembled, removed, concealed, sold,
       or otherwise disposed of contrary to the provisions
of the security
       agreement.

[48]   The defendant was in default at the time the vehicles were seized by the
defendant. The
default consisted of either or both of being in arrears under the
advances from the plaintiff and ceasing to carry on business. The
right to take

possession was sanctioned by s 109 of the Act. I accept therefore that the plaintiff
had an immediate right to possession
of the motor vehicles.


[49]   I understood Mr Mills to submit that a right to possession was not sufficient
on its own: there had
also to be a taking of possession. I have to disagree. The right
to sue in conversion at common law is available to a person who
is entitled at the
time of the conversion to the immediate possession of the goods: Winkworth v
Christie Manson & Woods Ltd  [1980] Ch 496.          For the reasons I have given, the
plaintiff was entitled to immediate possession from the point when ForestOne was in
default.
The defendant's actions interfered with that right to possession. Therefore,
even if I am wrong in my conclusion that the vehicles
were in the plaintiff's actual
possession when the defendant seized them, the defendant had a right to immediate
possession of them
at that point. By that stage, ForestOne had ceased trading and
was therefore in default. On either view, the central constituent
element required to
prove conversion is made out.



Miscellaneous points

Proof of amount owing ­ no evidence of amounts that plaintiff
obtained from
realisation of other assets

[50]   In my judgment, the exact quantum of what ForestOne owed to the plaintiff
is not
a matter which needs to be proved. All that needs to be proved is that
ForestOne owed some amount to the plaintiff under the GSA
and was in arrears in
making payment of that amount so that the power to seize assets under the GSA had
accrued.   As Mr Hunter pointed
out, if the plaintiff had been able to enforce its
security by selling the vehicles, then any excess left over after meeting its
debt and
incidental expenses would have to be distributed to other creditors whether under the
Act or pursuant to the insolvency
regime which would apply to ForestOne, now that
it is in liquidation. Even if one makes the hypothetical assumption that there would
have been a surplus left over had the plaintiff been able to sell the vehicles, that is
not something that would give rise to any
reduction of the damages payable to the
plaintiff by the defendant.

[51]    Mr Mills took a number of other miscellaneous points
which need to be dealt
with. One of these was that no information had been provided which indicated what
amounts, if any, had been
realised by the plaintiff on the sale of other assets over
which ForestOne may have given it security. In part this is a repetition
of the
defendant's complaint concerning whether or not the defendant was actually
indebted to the plaintiff so entitling the plaintiff
to enforce its security ­ a point that I
have already dealt with. Beyond that, there does not seem to be any obligation to
inform
the defendant about the outcome in money terms of the steps taken by the
plaintiff to dispose of the equipment. There is a statutory
right under s 117 for
certain parties to participate in a distribution of the surplus but the defendant does
not seem to come within
any of the categories in s 117(1)(a)-(c).


Plaintiff's delay in informing defendant of claim

[52]    The submissions made by Mr
Mills first of all are that the plaintiff did not at
the time it served its s 109 notice or at the date of the act of conversion
relied upon,
assert to the defendant that it had rights to the assets. I think the answer to that is
that it did not need to. The
important issue is whether or not the plaintiff had the
right to possession under its security.


[53]    Mr Mills made reference
to what he described as 18 months' silence on the
part of the plaintiff before it issued proceedings against the defendant. In fact,
the
proceedings having been issued in June of this year, a period of about 16 months
elapsed but nothing depends upon that difference.
        Mr Mills said that the fact that
the plaintiff said nothing to the defendant might have been because Mr Hempel for
the plaintiff
had known about an earlier general security agreement over the same
truck and trailers. In order to understand that point it is necessary
to say something
more about the background.


[54]    The defendant originally purchased the vehicles in 2002. Initially they were
leased to a company called Rural Haulage in which the defendant had a
shareholding. When Rural Haulage went into receivership, the
defendant took back
possession of the vehicles. It is agreed between the parties that the leasing
arrangement between the defendant
and Rural Haulage was evidenced by a

registered security interest. The defendant speculates that Mr. Hempel "would have
been aware of the continued security interest
registered over the assets in relation to
the Rural Haulage indebtedness".


[55]   I have difficulty understanding what significance
this point assumes in the
case. But in case it is a matter of relevance, I set out my assessment of the point.
First, there is in
fact no evidence that Mr. Hempel was influenced by considerations
relating to the registration of the defendant's earlier general
security agreement.


[56]   Then, in case the defendant regards its prior general security agreement as
being of intrinsic significance,
some further points can be noted.            The lease
arrangement must have come to an end at some point prior to the sale of the
vehicles
to ForestOne. It is unlikely that the defendant would have been in a position to give
possession of the vehicles to ForestOne
had the leasing agreement over them with
Rural Haulage still been in effect.


[57]   The defendant's real complaint seems to be
that the lengthy period that
elapsed from when ForestOne went out of business and the vehicles were seized
until the point where
proceedings were taken somehow defeats the plaintiff's claim.


[58]   Mr. Mills accepted that there were no limitation difficulties
with the
plaintiff's claim. But he submitted that the affect of the delay on the part of the
plaintiff in bringing proceedings to
enforce its rights resulted in the GSA not being
effective as against the defendant. I understand that his argument is that the plaintiff
breached the good faith requirement in s 25 of the Act. It was Mr. Mills' submission
that the plaintiff's conduct amounted to some
type of estoppel. It is not necessary to
examine this argument in detail. That is because the authority that Mr. Mills referred
me
to makes it clear that any such argument must fail in this case. The authority in
question was Canadian Imperial Bank of Commerce
v AK Construction (1988) Ltd
and AK Construction Ltd  171 ALR 326 ­ a decision of the Alberta Court of Queens
Bench given by Veit J. In that case it was held that mere knowledge of a prior
unperfected
security interest that will be defeated by the registration of the
competing security was not sufficient.

          The required
action is action that could constitute a waiver or support an
          estoppel argument or actively mislead or hinder the perfection
of the prior
          interest.

[59]      In this case, there were no circumstances which the defendant could point to
which might
constitute an estoppel. Mr Mills said an estoppel arose from the silence
of the plaintiff during the period 9 February 2005 until
June 2006.


[60]      Normally an estoppel cannot be spelt out from silence on the part of the
alleged representor. I see nothing
in the present circumstances justifying a departure
from that approach. There was no communication between the parties. That means
that the plaintiff never gave the defendant reason to believe it would not enforce its
rights.


[61]      Nor do I agree that there
was any duty for the plaintiff to tell the defendant
what it intended to do. The function of the PSSA register is to enable parties
in the
position of the defendant to find out if there are any extant charges over property.
The register provides certainty.    
    It would be contrary to the objectives of the
legislation to conclude that before a security holder can enforce its rights, it
must
seek out affected persons and tell that of its intentions with the consequence that a
delay in telling another party of the
existence of registered rights could overcome the
security holder's right.


[62]      I am not aware of any other circumstance that
could reasonably be seen as
raising an issue in the proceedings of whether the plaintiff acted contrary to the Act's
requirements
of good faith.


Quantum and other issues

[63]      The only other matter that seemed to be in issue, initially at least, was that
of
quantum. However, the parties advised during the course of the hearing that they
were agreed that the quantum of value of the
truck and trailer units as at February
2005 was $980,000.


[64]      Finally, Mr Mills submitted that the defendant was entitled
to discovery and
to the right to cross-examine on the affidavits. I do not accept that submission. This

is not a case where the
Court is persuaded that there is a possible defence but the
circumstances are such that discovery is required to clarify that issue.
This case is
one which principally depends upon consideration of written agreements. The closest
that the defendant approached to
making out a reasonably arguable defence
concerned the issues of the sequence in which the parties seized the vehicles. But, as
I
have concluded, a careful reading of the affidavits persuades me that there is no
substantial inconsistency between the accounts
of the two main deponents, Mr.
Hempel and Mr. Stevenson.        Even if there had been, a disturbance of actual
possession is not
a critical component that the plaintiff must prove. An immediate
entitlement to possess is enough.       That entitlement has been
established with
reasonable clarity.


[65]   I do not regard this as a case where there is an outline defence available to the
defendant
which warrants further investigation. Discovery and cross-examination
would be speculative exercises for the purpose of enabling
the defendant to cast
about for some defence that has not at the present stage occurred to it.


Conclusion

[66]   I have some sympathy
for the defendants. Mr. Mills who came into the
matter at the eleventh hour outlined to me the reasons why he had been briefed late.
Those reasons had to do with possible inadequacies in the legal advice that the
defendant had been previously given. That was the
reason, I was told, why there had
been a late change of solicitors and a need to brief counsel. I make no further
comment on those
matters. The last word may not have been heard on that subject.
But despite Mr. Mills' well-constructed submissions for the defendant, my
conclusion in the present proceeding is that
the defendant does not have a reasonably
arguable defence.


[67]   In my view it is appropriate to enter judgment on the plaintiff's
application
and I do so in the sum of $980,000. It also seems to me to be appropriate for interest
to be awarded under s 87 of the
Judicature Act 1908. No submissions were made to
me on what the rate of interest should be. The maximum prescribed rate is 7.5%.
The basic principle is that the plaintiff should be compensated for being out of its

money (see McGechan Commentary J 87.2). There
is no evidence as to the financial
circumstances of the plaintiff for what it might have used the money for. It may
have been prevented
from retiring debt and therefore attracted interest charges as a
result of the failure to obtain the proceeds of sale of the vehicles.
Alternatively, had
it got its money back by selling the vehicles, it may have been able to invest it
elsewhere. I think a relatively
conservative approach is required, and I direct that
interest is to be paid at the rate of 6%. Interest is to be payable from 1 March
2005
down to the date of judgment.


[68]   I invite the parties to come to an agreement on the matter of costs. If they are
not
able to, they should file memoranda within 14 days.




_____________
J.P. Doogue
Associate Judge