Forest Marsh v Pleash [2011] FCA 134

A debt factoring company took a mortgage over land as security for amounts it advanced to the merchant. The facility went into default and a receiver (appointed by the debt factorer moved to sell mortgaged land). The sale was called off when an amount was paid to the debt factorer which the borrower claimed was sufficient to discharge the debt. However the receiver did not retire because the debt factorer claimed the debt had not been discharged due to a contingent liability.

The contingent liability was said to arise because a creditor of the merchant had paid invoices to the debt factorer which it now claimed were erroneous and was seeking to claw back that money. If the creditor of the merchant was successful the debt under mortgage would increase.

The receiver was sued by the merchant on the allegation that he had breached his duties under the Corporations Act and general law by not retiring. The court noted a receiver has a duty both to the mortgagee to pay over the amount secured and the mortgagor to pay over the surplus assets and terminate the receivership as soon as the interests of the mortgagee have been satisfied.

However the court found that the disputed claim by the other creditor needed to be resolved before the debt finally owed to the mortgagee could be determined. The court held that the receiver was not compelled to retire simply because monies had been paid to secure that result.

The court held no breach and dismissed the application.

Click here to read the full judgment

Scroll to Top