Capital One Securities v Soda Kids Holdings [2014] VSC 168

In this case the security documents and enforcement pleadings were sloppily drafted.

The court found that that the debts were not secured by the mortgage because they were not ‘secured money’ as defined in the Memoranda forming part of the mortgage, owing to the lenders having mistakenly annexed the MCP for consumer not business loans. There was no credit contract as required by the MCP. The court said:

I do not consider that the three corporate defendants were “debtors” under a credit contract, because when the definition of “credit contract” is applied, it cannot be said that the lender provided credit to which the Consumer Credit Code applied.

The lender’s alternate claim that the monies paid to the daughter was made with intent to defraud only failed because the lender incorrectly pleaded the previous corporate entity, not the new entity which had in fact received the monies on the sale of the business. The court found that if the correct entity had been pleaded, the court would have inferred a lack of good faith because the daughter provided no explanation of why her parents were using her bank account to pay debtors. The claim that the daughter received the money with knowledge of the lender’s equitable interest and was liable for knowing receipt failed for the same reason and also because the lender failed to establish knowledge that the payment was in breach of trust or fiduciary duty.

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