ANZ Bank New Zealand Limited v Joe
[2016] NZHC 2925
•5 December 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-7551 [2016] NZHC 2925
BETWEEN ANZ BANK NEW ZEALAND LIMITED
Plaintiff
AND
MARTIN JOE First defendant
GINA JOE Second defendant
Hearing: 18 October 2016 Appearances:
A Y L Ronald for the plaintiff
No apperance for the defendantsJudgment:
5 December 2016
JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] The plaintiff (the Bank) applies for summary judgment against the defendants for the total sum of $998,012.29 plus interest and costs. The Bank’s claim arises out of a number of loans made by Origin Mortgage Management Services Limited (Origin) to a trust known as the CCJ Family Trust (the Trust), and to a company called Courtney Properties Ltd (the Company). The defendants, Mr and Mrs Joe, are the directors of the Company, and (with a company called Taurus Trustee Services Limited, they are the trustees of the Trust.) For convenience, I will refer to the trustees of the Trust as “the Trust”.
[2] Mr and Mrs Joe guaranteed all obligations of the Trust and the Company to
Origin, by written guarantee dated 5 April 2005.
[3] Origin was a special purpose vehicle operating for the Bank for the purposes of lending funds on the security of mortgages over land and buildings. Origin would
ANZ BANK NEW ZEALAND LIMITED v JOE [2016] NZHC 2925 [5 December 2016]
enter into all loan documentation, and hold legal title to all mortgages, collateral securities, and related rights on the Bank’s behalf as bare trustee. The Bank was the sole beneficiary of the Origin trust.
[4] In 2009, Origin assigned its rights in the loans to the Company and the Trust, and its rights in the relevant securities and the guarantee given by Mr and Mrs Joe, to the Bank. The process adopted was that Origin customers would be sent a form of consent to the transfer and assignment of their loans and security to the Bank. Once that consent was given, the mortgages on the certificates of title would be transferred to the Bank’s name. However, Origin was not necessarily required to obtain consent due to Origin’s General Terms and Conditions which allow Origin to “assign or otherwise deal with the mortgage in any way it considers fit…”. If the customer’s consent was not received within a certain period, in practice Origin would send a notice informing customers of the transfer and assignment.
[5] In this case, the Bank has been unable to locate a completed form of consent to transfer and assignment signed by the Company or the Trust, but there is no dispute that the relevant loans and securities were validly assigned. Transfers of the relevant mortgages from Origin to the Bank were duly registered on the titles to all of the properties over which the Company and/or the Trust had given security, and both the Company and the Trust continued to make payments to the Bank (not Origin) following the 2009 transfers and assignments.
[6] The Company and the Trust both defaulted on their obligations under the Origin loan agreements, and the Bank served notices on the Trust, the Company and Mr and Mrs Joe, under ss 119 and 122 of the Property Law Act 2007 (the Act), on
22 June 2010. The ss 119 notices called upon the Company and the Trust to remedy the defaults specified therein by 28 July 2010, failing which the Bank would be entitled to exercise the powers of sale contained in the relevant mortgages.
[7] The Trust and the Company failed to remedy the defaults, and the Bank subsequently proceeded to sell all of the properties over which it held mortgages. The sales left a shortfall of $998,012.29 owing to the Bank. On 21 May 2013 the
Bank sent a letter to Mr and Mrs Joe demanding repayment of the shortfall. No payment was made by them, and none has since been made.
[8] The Bank commenced the present proceeding in October 2013. It applied for summary judgment on its claim.
[9] There were a number of deficiencies with the statement of claim and/or the supporting affidavit filed by the Bank in October 2013. First, the documents and the statement of claim did not sufficiently make clear the relationship between Origin and the Bank, and made no mention of the assignment of the loans and securities from Origin to the Bank in 2009. Secondly, the statement of claim referred only to a single advance for $792,000, made by the Bank to the Trust on 1 June 2006. And although the statement of claim referred to proceeds from the sales of the various mortgaged properties realising a total sum in excess of $1.6 million, there was still said to be a shortfall (for which Mr and Mrs Joe were liable under their guarantee) of
$998,012.29.
[10] Mr and Mrs Joe did not take any step to oppose the Bank’s application for
summary judgment. However Associate Judge Bell issued a minute on
11 December 2013 in which he raised the deficiencies with the Bank’s documents to which I have referred. His Honour also raised a possible concern over the absence from the statement of claim of any pleading of an acceleration power in the loan agreements (his Honour noted that the copy of the loan agreement then produced by the Bank did not contain any acceleration provision, and that “the Origin General Terms and Conditions of Loan April 2005 version”, which were incorporated by reference in the loan agreement documents, and may have contained such a provision, were not produced in evidence).
[11] Associate Judge Bell adjourned the application to allow the Bank to file a further affidavit or affidavit addressing the matters he had identified. His Honour indicated that if the Bank put in further evidence showing that there was an acceleration provision, it would be necessary to identify whether it was one that operated by default or one which simply gave the opportunity for the lender to exercise the power to call up the unpaid balance. If it was the latter, the
Associate Judge indicated that he would wish to receive submissions from counsel as to whether the power could be exercised before the time for complying with a notice under s 119 had expired unremedied.
[12] The matter came before me on 17 February 2014, when I issued a minute directing the Bank to file a memorandum responding to the issues raised by Associate Judge Bell. By memorandum dated 10 March 2014 counsel for the Bank advised that the Bank would file an amended statement of claim which would plead an acceleration clause which was contained in the Origin General Terms and Conditions. However counsel foresaw that arguments over the effect of acceleration
clauses in other cases1 could affect the interpretation of the acceleration clause in the
Bank’s documents in this case. The other cases had been adjourned for the filing of further evidence and submissions. A further adjournment was sought until the acceleration clause issue in those other cases had been determined by Associate Judge Bell.
[13] In the event, it was not until 28 July 2015 that an authoritative decision was given by the Court of Appeal dealing with the point with which the Bank had been concerned in this case. The Court of Appeal decision was Koroniadis v Bank of New Zealand,2 a case in which Mr Koroniadis argued that the Bank failed to comply with the contractual terms of its loan facility master agreement. He argued that the Bank had not taken proper steps to accelerate the principal of the term loan, which would
not otherwise have been payable until January 2018.
[14] The Court of Appeal held in Koroniadis that there is no reason in principle why a notice issued under s 119, to comply with s 120 of the Act, cannot also satisfy the requirement for a demand to call-up the principal under the term loan, provided it has that effect. The Court of Appeal held on the facts of the case that the notices under s 119 were themselves sufficient to call up the balance owing on the loan —
no subsequent call-up notice was necessary.
1 For example, ANZ Bank New Zealand Ltd v Boyce and others [2014] NZHC 3185.
2 Koroniadis v Bank of New Zealand [2015] NZCA 337.
[15] The Bank filed an amended statement of claim in this proceeding on 8 March
2016. The amended statement of claim was accompanied by a further affidavit sworn by Mr Barrett, a remedial risk manager employed by the Bank, and an affidavit by Ms Lowery-Drumm, a solicitor employed by the Bank. Ms Lowery- Drumm’s affidavit explained the transfer and assignment of the loan documents from Origin to the Bank in 2009. Mr Barrett’s March 2016 affidavit provided copies of documents relevant to the various advances made by the Bank to the Company and the Trust, the guarantee given by Mr and Mrs Joe, the various securities provided by the Company and Trust, the defaults, the subsequent issue of notices under the Act, the sales of the various properties over which the Company and the Trust had given mortgages and the demand for outstanding amounts. Mr Barrett confirmed in his affidavit that the shortfall figure was the same as that claimed by the Bank in its October 2013 statement of claim, namely $998,012.29.
[16] The Bank’s amended statement of claim properly set out details of all of the loans made by Origin to the Trust and the Company (four loans to the Trust, totalling
$1,020,000, and four loans to the Company, totalling $1,120,000). The Trust also operated a current account with the Bank from 30 April 2010. The Company operated three current accounts with the Bank. The Bank’s amended statement of claim and the further affidavits of Mr Barrett and Mr Lowery-Drumm answered the matters raised by Associate Judge Bell in December 2013 over the relationship between Origin and the Bank, and the number of loans on which the Bank’s claims are based. Mr Barrett also included with his affidavit copies of Origin’s General Terms and Conditions for 2004 and 2005, which included acceleration provisions.
[17] The amended statement of claim and the further affidavits filed by the Bank in March 2016 were duly served on Mr and Mrs Joe.
[18] The summary judgment application came before Associate Judge Christiansen on 20 September 2016. The Associate Judge noted that the summary judgment application had been filed originally in 2013, and that the Bank still wished to rely on its 2013 application. His Honour considered that it would be unlikely that Mr and Mrs Joe would be caused any prejudice if the Bank were allowed to proceed on the basis of its amended statement of claim, but he directed
that the Bank should file a new summary judgment application. His Honour granted leave under r 12.4 to serve the (second) application for summary judgment after the amended statement of claim had been served on Mr and Mrs Joe.
[19] The Bank has since attended to service of a second notice of interlocutory application for summary judgment, asking for summary judgment on the basis of the March 2016 amended statement of claim. An amended notice of proceeding was also served on Mr and Mrs Joe.
[20] It is clear from Mr Barrett’s March 2016 affidavit that the Bank had the necessary power to call up the loan and require payment of the entire balance owing under the various loan agreements, in event of default by the borrowers. Mr Barrett produced a copy of Origin’s General Terms and Conditions (June 2004 edition, which would have been in force when certain loan agreements were entered into on 5
April 2005). These terms and conditions provided that, at any time after a default occurred, Origin could “call up the loan and require payment of the entire balance owing under this loan agreement”. Mr Barrett also produced a copy of the 8 April
2005 edition of Origin’s General Terms and Conditions (which would have applied to the loans made by Origin after 5 April 2005). They contained the same acceleration provision.
[21] Similarly, the relevant memoranda of mortgage provided that, if default occurred, the secured monies would become due and payable by the party giving the mortgage in accordance with the provisions in any agreement relating to their payment (mortgage memorandum 2005/4180, clause 17). Origin’s earlier mortgage memorandum (1995/4004) provided that where the mortgagor made a default in payment of the monies secured by the mortgage or any part thereof, the mortgagee may:
(a) Call-up and compel payment of all or any part of the monies hereby secured, notwithstanding that the time or times otherwise appointed for payment thereof may not have arrived.
[22] The notices issued by the Bank under s 119 of the Act clearly stated (as a consequence of failure to remedy the identified defaults) that all amounts secured by the mortgages would become payable.
[23] I am satisfied from Mr Barrett’s affidavit that there were acceleration clauses in each of the relevant loans which entitled the Bank (as assignee from Origin) to call up the entire balances owing in the event of the Company and/or the Trust failing to remedy any defaults within the times specified in notices issued under s 119 of the Act. On the authority of Koroniadis v Bank of New Zealand, the call-up notices could be given in the s 119 notices themselves, and I am satisfied that the s 119 notices were in this case sufficient to render the Company and the Trust liable for the full amounts advanced, and all outstanding interest thereon, when they failed to remedy the defaults specified in the s 119 notices. The Company and the Trust have failed to pay those amounts or any part thereof, and Mr and Mrs Joe have failed to pay anything in response to the demand which was subsequently served on them as guarantors.
[24] I am accordingly satisfied that each of the matters raised by Associate Judge Bell in his December 2013 minute have been addressed satisfactorily by the Bank. There being no other matters which might disentitle the Bank to judgment, there will be summary judgment in the Bank’s favour for the amount of $998,012.29 claimed in the amended statement of claim. The Bank is also entitled to interest at the contractual rates claimed through to the date of judgment, and costs.
[25] When the case was called before me on 18 October 2016 I did have some concerns over the extensive amendments made by the Bank to its original statement of claim, particularly in circumstances where the Bank had initially sought to rely on its 2013 notice of application for summary judgment (which had been served on Mr and Mrs Joe in 2013). While the court has jurisdiction to permit amendments to pleadings in the course of a summary judgment application,3 the extensive nature of the amendments in this case did raise a question as to whether the Bank was in reality making a new and different case, going beyond the scope of amendments
which might normally be allowed in the course of the hearing of a summary judgment application. On reflection, however, this is not a case where the Bank has
sought to proceed with an original application for summary judgment on the basis of
3 See for example Cegami Investments Limited v AMP Financial Corporation (NZ) Ltd [1990]
2NZLR 308 (CA).
an amended pleading — when Associate Judge Christiansen gave leave to the Bank to file a second application for summary judgment under r 12.4, the Bank was effectively abandoning its first application. And I agree with the Associate Judge that, in circumstances where Mr and Mrs Joe had taken no step in the proceeding, there was no prejudice to them in granting leave to the Bank to file a second application for summary judgment based on the amended statement of claim.
Result
[26] Judgment is entered for the Bank as follows:
(a) against Mr and Mrs Joe, jointly and severally, in the sum of
$998,012.29;
(b)for interest calculated from 21 May 2013 to 18 October 2016, in the sum of $221,460.30; and
(c) for interest, at the contractual rate on the Trust 92 loan (being the only loan then outstanding) from 18 October 2016 to the date of this judgment. The Bank is to file a further memorandum setting out the calculation of that amount of interest, within ten working days of the date of this judgment;
(d)the Bank is entitled to costs on a solicitor/client basis. The Bank is to file a further memorandum setting out its calculation of costs on that basis to the date of judgment.
[27] The Bank asks for an order for post-judgment interest under r 11.27 of the High Court Rules, at the rate specified by s 87 of the Judicature Act 1908. There is no need for any such order, as the judgment will automatically attract interest at that
rate.
Solicitors:
Bell Gully, Wellington for the plaintiff
Associate Judge Smith
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