Advanced Securities Limited v Burke HC Tauranga CIV 2007-470-000143
[2008] NZHC 2621
•13 October 2008
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV 2007-470-000143
BETWEEN ADVANCED SECURITIES LIMITED Plaintiff
ANDJULIAN PAUL BURKE AND GILLIAN ELIZABETH BURKE
Defendants
Hearing: 7 October 2008 (Heard at Rotorua)
Appearances: T M Braun for Plaintiff
J P Burke and G E Burke Defendants in person
Judgment: 13 October 2008 at 3 pm
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This judgment was delivered by me on 13 October 2008 at 3pm, pursuant to
Rule 540(4) of the High Court Rules.
Registrar/Deputy Registrar
Date………………..
Solicitors:
Harkness Henry, Private Bag 3077, Hamilton
Copy to:
JP Burke and GE Burke, 1911 State Highway 29, Lower Kaimai, Tauranga
ADVANCED SECURITIES LIMITED V BURKE HC TAU CIV 2007-470-000143 13 October 2008
Background
[1] I gave an interim judgment in this matter on 18 July 2007. I invited the plaintiff to prepare a draft form of judgment that should be referred to the Burkes for any submissions that they might care to make. I had hoped that the parties would be able to agree on the form of the judgment but unfortunately they have not.
[2] In summary, the plaintiff as the first mortgagee of the land near Tauranga owned by the defendants Mr and Mrs Burke (whom I shall call ‘the Burkes’), took proceedings by way of summary judgment to recover an amount of approximately
$1,300,000, representing the principal amount of a loan which was secured by the first mortgage (sum $1,075,000), plus interest and cost making up the additional sum. The defendants opposed the plaintiff’s application. They claimed that the plaintiff had been guilty of oppressive and unconscionable behaviour relating to the loan. At the hearing before me they raised arguments about whether the loan contract was a Consumer Credit Contract within the meaning of the Credit Contracts and Consumer Finance Act 2003 (“CCFA”). Without conceding that there was any such defence available to the Burkes, the plaintiff conceded that the Burkes could have an argument that the contract should be re-opened under s 120 of the CCFA, but submitted that the Burkes’ position in regard to pursuing those arguments would not be prejudiced if judgment were to be entered in favour of the plaintiff reflecting the position as at the end of May 2006. The significance of that date was that it was the date when the principal amount of the loan was due for repayment. The outcome of arguments about re-opening the contract and the like could only affect interest and other charges that accrued after May 2006. As well, in terms of the plaintiff’s concession, those arguments could not affect the issue of the interest payable up to the end of May 2006. It was the plaintiff’s contention that arguments concerning interest and the like could be dealt with at a later date.
[3] The next relevant development was that in August of 2007 I heard further submissions from the parties concerning the form of judgment. And at the conclusion of that hearing I settled the form of the judgment. It provided that judgment be entered against the Burkes in the sum of $1,088,317.55 plus disbursements, which brought the overall judgment sum up $1,090,057.55.
Importantly for the purposes of the latest hearing that has recently concluded, the judgment went on to provide:
It is further ordered that the Defendants within seven days of this order being sealed and served on them vacate and deliver up possession of the property contained and described in Certificate of Title identifier 59B/642 (South Auckland Registry) and now contained in Lot 4 Deposited Plan 360598 (246475), Lot 5 deposited plan 360598 (246476) and balance Lot 1 deposited plan 360598 (246472) with additional land amalgamated.
[4] The key words in the draft judgment which contained the seeds of further dispute were the concluding ones:
…and balance Lot 1 deposited plan 360598 (246472) with additional land amalgamated.
[5] Following sealing of the judgment, the Burkes appealed to the Court of Appeal. The Court of Appeal allowed the Burkes’ appeal to a limited extent. As the headnote to the judgment states the effect of the appeal judgment was as follows:
B. The appeal is allowed to the extent that the words ‘and balance Lot 1
Deposited Plan 360598 (246472) with additional land amalgamated’
are deleted from the sealed order for possession.
C. The respondent is granted leave to apply to the High Court for an order varying the possession order to incorporate such defined area of Lot 1 as it can establish it has the right to re-enter under its mortgage.
[6] In his judgment for the Court of Appeal, Heath J set out the background to the appeal and the factual matters which gave rise to the Court of Appeal accepting that the appeal ought to be allowed in part. In paragraph [28] of the Court’s judgment Heath J said:
[28] The additional land to which the claim referred had been amalgamated into lot 1 as a result of steps taken under s 242 of the Resource Management Act 1991. ASL agrees that it never intended to take security over that additional land even though it is now comprised and described in a title over which ASL has registered a mortgage.
[7] It is necessary to provide some additional detail about the amalgamated land. The land that the Burkes owned was initially held by them in one title as ‘Lot 1’. They embarked upon a subdivision of the land. As a result of the sub-division three titles issued. They were the (new) Lot 1, Lot 2 and Lot 4. As a result of certain
arrangements that the Burkes had come to with their neighbours, the new Lot 1 included not only land derived from the original Lot 1 but also an additional area that was transferred to the Burkes by the neighbour. This additional land was amalgamated into the title which ultimately issued as the new Lot 1.
[8] The plaintiff’s mortgage was originally registered over original Lot 1 which, as I have said, comprised the entirety of the Burkes’ land. Following the re- arrangement of the titles that I have just described the plaintiff’s mortgage continued to charge all of the land originally comprised in Lot 1 but now also charged the new Lot 1, including the additional land that the neighbour had conveyed to the Burkes. The Burkes, of course, had never agreed to this additional land being charged and indeed the plaintiff has not sought a charge over that land. The plaintiff does, however, seek an order for possession of so much of the land comprised in the new Lot 1 as was included in the original Lot 1.
[9] As I have noted, when the order for possession that I made was sealed, it inadvertently extended to the additional land that the neighbour had conveyed to the Burkes. The Court of Appeal judgment effectively set the High Court judgment aside because it purported to grant possession over the original land and the newly amalgamated land. Importantly though, the Court of Appeal judgment did not question the entitlement of the plaintiff to obtain, as mortgagee of the land, an order of possession. The Court of Appeal, though, recognised that an order in the existing terms was unsustainable because it extended to the additional land which had been amalgamated into Lot 1.
[10] Since this problem has been identified, the plaintiff has invited me to reconsider the matter in accordance with the direction of the Court of Appeal and to settle a fresh form of order which, in the plaintiff’s contention, avoids the problems inherent in the original order.
[11] At an earlier stage of the proceedings I expressed concern that unless there was clarity and precision as to what area of land the Court was being asked to give possession over, doubts would arise as to how the plaintiffs might execute their entitlement under the judgment and, reciprocally, doubts could arise on the part of
the Burkes as to what they were required to do in order to conform with the Court’s order.
[12] To achieve this result, the proposed draft order that the plaintiff now tenders to the Court has annexed to it a plan which marks off that part of Lot 1 which represents the land that was originally charged by the Burkes when they granted a mortgage over the old Lot 1.
Issues
[13] I understand that the Burkes raise three issues for consideration by the Court. I say “understand” because while they mentioned the first matter I am about to discuss in argument, I may not have correctly understood its significance. I am, though, reasonably clear about the significance that they attached to the second two.
[14] The first point was whether the Court could deal with the present application without first dealing with some claims that they, the Burkes, made in respect of the interest that the plaintiff charged them with.
[15] The second issue was whether the plaintiff’s rights under its mortgage survived the cancellation of the title against which it was registered and its replacement by a new title which includes additional amalgamated additional land not formerly the subject of the mortgage.
[16] The third issue was whether the plaintiff could exercise its admitted power to claim possession in circumstances where the title against which the mortgage was registered comprised land that was subject to the charge contained in the mortgage as well as land which was not so charged.
The relevance of the Burkes’ defence concerning interest charges under the mortgage
[17] The approach that I took at the original hearing was that any issues that the
Burkes wished to raise under the CCCFA had relevance only from May 2006. The
interim judgment did not impinge on the period after May 2006. In any event, the Court of Appeal approved the approach that was taken at the first hearing before me and confined its comments to the issue of whether it was feasible to include in an order for possession land which was only part of a composite area of land comprised in a title.
[18] My first judgment, in effect, determined that the Burkes were in default under the mortgage and that the plaintiff was entitled to possession. The parties cannot now go back on those determinations. The only issue to be determined is the scope of the Court’s order for possession.
[19] It is not now open to the Burkes to argue that no order for possession should be made at all, or that the making of any order for possession should be deferred to permit them to re-open the issue of the charges made against them on one or more of the grounds in the CCFA.
[20] In any case, the Court of Appeal judgment of 12 March 2008 has already determined these issues against Mr and Mrs Burke. That is clear from the following passages of the judgment:
[54] The totality of that evidence, in our view, rebuts the s 13 presumption. Accordingly, the initial disclosure provisions of the Act cannot apply to prevent ASL from obtaining judgment for the outstanding loan.
[54] Having reached that conclusion, it is unnecessary for us to consider the effect of other disclosure provisions, in this case ss 17 and 99 of the Act.
Do the plaintiff’s rights under the mortgage survive the amalgamation?
[21] This issue too has been covered by the Court of Appeal. The Court of Appeal did not dissent from the proposition that the charge against the original land title survived the cancellation of that title and the issue of new titles. But in any event, such evidence as was adduced before me at the hearing on 7 October 2008 confirms that the plaintiff’s rights remain intact notwithstanding the cancellation and re-issue of titles.
[22] Helpful evidence has been given by Mr P C McLennan, a Hamilton property consultant with considerable experience in title matters. His evidence makes it quite clear that the plaintiff’s mortgage continues to extend to the land that it always charged, notwithstanding the amalgamation of that land into a new composite title which included the land transferred from the neighbours. As Mr McLennan put it:
This means that 246472 is subject, as to the part transferred from the [neighbours] to mortgage B407131.3 in favour of the Bank of New Zealand, and the other part to mortgage 6664226.4 in favour of Advanced Securities Limited.
[23] To similar effect is the evidence of Mr D G Barker a land transfer consultant, again with considerable experience of the title system having been employed as an Assistant Land Registrar for some years. His evidence makes it clear that the plaintiff’s mortgage continues to have effect over the original land notwithstanding the fact that additional land has been amalgamated into that title and that the mortgage over that amalgamated land (the land transferred from the neighbour) which is held by the Bank of New Zealand continues to have effect over the land so transferred. He also concludes that the plan which has been prepared by the surveyor retained by the plaintiff adequately depicts the area of land now contained in the new Lot 1 over which ASL’s mortgage does not extend.
[24] Mr McLennan notes that any further subdivision of Lot 1 would require the consent of the local authority. I pause to observe that what Mr McLennan says in that regard may well govern the situation if the point is ever reached at which the plaintiff attempts to exercise its power of sale over Lot 1. In order to satisfy its obligation to provide good title of the part of Lot 1 which lies within its power to sell, the plaintiff will probably have to obtain the consent of the local authority to a further subdivision of Lot 1 as a pre-condition to issue of separate titles for the two component areas of land that make up that Lot.
[25] Importantly though, the point has not yet been reached where a separate title needs to be supplied. The plaintiff at this stage seeks only to exercise the power given to it by clause 19 of the memorandum of mortgage which the parties entered into which provides as follows:
19. Rights and powers relating to land
(a) Powers: at any time after default, the mortgagee may do any or of the following:
(i) Enter into possession: enter into possession of the land; (ii) Sell: sell the land or any part of it;
…
[26] It is only the first of these powers that the plaintiff is presently attempting to exercise.
Third issue
[27] There is no problem in principle with the plaintiff attempting to take possession of part only of a title. The Court of Appeal judgment does not rule out possession being taken on that basis. The Court of Appeal, in paragraph 65 said:
We reserve leave to ASL to apply to the High Court to incorporate such part of Lot 1 over which it can assert a basis to exercise its right to re-enter as mortgagee. In all other respects, the appeal is dismissed.
[28] In my view provided the form of judgment defines with sufficient and clarity exactly what area the plaintiff can take possession of (or “re-enter as mortgagee” – as the Court of Appeal put it) then it ought to be able to exercise its right to enter into possession and to obtain a Court order in support of so doing. The cadastral survey which is annexed to the judgment achieves that result.
Conclusion
[29] The only issue that was reserved for further determination by the Court of Appeal in regard to the plaintiff’s application for possession was settling the form of judgment in such a form, if possible, that overcomes the complication feature of additional land being amalgamated into Lot 1. I can see no legal or practical reasons why a judgment for possession of the land should not issue in the form submitted by the plaintiff. The judgment with annexed plan makes clear what the effective extent and limits of the judgment are. Mr Burke did not contend that the survey plan was
other than accurate when it came to depicting the land that had been the subject of the plaintiff’s mortgage throughout. Both the consultants who had given evidence are of the opinion that the mortgage to the plaintiff remains in force over that parcel of land. I can see no reason why judgment in the form which the plaintiff has submitted should not be approved.
[30] Mr Burke submitted at the hearing on 7 October 2008 that the Court ought now to make orders expediting the resolution of remaining disputes. I am not clear about what disputes are yet to be dealt with in this litigation. Obviously, fixing any additional sum to which the plaintiff claims to be entitled may be an issue.
[31] In order to clarify the issues, I direct the Registrar to arrange a case management conference at which these matters can be further discussed.
Costs
[32] The parties should attempt to agree on the matter of costs relating to the various steps that have been necessary in order to settle the terms of the judgment. If they cannot, they should file and serve brief memoranda (not exceeding three pages)
within 10 working days.
JP Doogue
Associate Judge
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