The applicant lender sought declaratory relief confirming the validity and priority of its security interests under a general security agreement granted by the respondent corporations, including over precious metals and a cause of action assigned to a third party.
The assignee opposed the declaration, arguing that a security agreement should not permit a creditor to control litigation brought by the debtor against the creditor itself.
The court accepted that causes of action may fall within the definition of collateral under a general security agreement but emphasized that control of the litigation would be exercised by the court‑appointed receiver rather than the secured creditor.
In those circumstances, the court found no unfairness or absurdity in including the assigned cause of action within the secured collateral.
Declaratory relief was granted confirming that the cause of action formed part of the collateral subject to the security.
