Aokautere Land Holdings Limited v Turvey

[2022] NZHC 2338

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-109

[2022] NZHC 2338

BETWEEN

AOKAUTERE LAND HOLDINGS LIMITED

Plaintiff

AND

DARYN TURVEY

First Defendant

JOHN HOWARD FISK and RICHARD JOHN NACEY

Second Defendants

On the papers:

Counsel:

J K Mahuta-Coyle for Plaintiff D Turvey in person

No appearance for Second Defendants

Judgment:

13 September 2022

JUDGMENT OF CHURCHMAN J

Introduction

[1]    The issue in this case arises from a dispute regarding the transfer of a mortgage between a first ranked mortgage holder and a second ranked mortgage holder. The first defendant is Mr Daryn Turvey, and the plaintiff is Aokautere Land Holdings Limited (Aokautere). The liquidators of Vey Group Limited (which is also in receivership) are the second defendants (“Vey”).

[2]    Mr Turvey and Aokautere are the first and second ranked mortgage holders, respectively, in relation to a property at 72 Webb Street, Wellington (the property).

AOKAUTERE LAND HOLDINGS LIMITED v TURVEY [2022] NZHC 2338 [13 September 2022]

The parties agree that Aokautere is entitled to request a transfer of mortgage from  Mr Turvey. Aokautere has paid to Mr Turvey the balance of the substantive loan.

[3]    However, the parties disagree on what other costs are required to be paid by the plaintiff to the defendant, to complete the transfer of mortgage, pursuant to         s 103(b) of the Property Law Act (the Act). Mr Turvey alleges that Aokautere is required to pay certain legal costs incurred by him, prior to the obligation for the transfer of the mortgage becoming unconditional. Aokautere disagrees.

[4]    The parties have invited the Court to make a ruling on this issue on the papers, before making the declarations sought by Aokautere in its statement of claim. Submissions have been filed by counsel for Aokautere. Mr Turvey is self-represented, and has filed an affidavit which includes submissions. No submissions have been filed by the second defendants.

Background

[5]    Vey is the registered proprietor of the property, which contains residential apartments. Aokautere appointed its own receiver, who has accounted for all proceeds received in relation to the property since his appointment.

[6]    On 20 October 2005, Vey granted a mortgage over the property to the Bank of New Zealand, in order to secure lending. These finance arrangements were renewed on 23 June 2016. The defendant, Mr Turvey, was a guarantor of the 2016 loan.

[7]    In December 2020, Vey granted a second mortgage over the property to Aokautere as a security for further lending provided to Vey by Aokautere.

[8]    After Vey was placed in receivership in June 2020, and liquidation in December 2020, BNZ assigned their loan to Mr Turvey. This occurred on or around 4 September 2020, making Mr Turvey the first ranked mortgage holder over the property. At this time the balance of the loan had reduced to $75,544.13.

[9]    Then, in late 2020, Aokautere’s solicitors issued a request pursuant to s 102 of the Act, for transfer of the first mortgage. Following this, there were various

disagreements between the parties as to the balance of the loan remaining, and the extent of other associated debts owed by Vey to Mr Turvey.

[10]   On 25 February 2021, Aokautere paid the full amount it assessed as outstanding under the loan assigned to Mr Turvey, then being $60,455.10, and confirmed that it would meet the defendant’s reasonable legal costs in order to enable the mortgage transfer, on receipt of suitable evidence. The transfer has still not occurred.

[11]   Aokautere eventually commenced these proceedings on 4 March 2022, seeking a declaration that having repaid the balance of the BNZ loan assigned to Mr Turvey, they are entitled to have the first mortgage transferred to them. Aokautere also sought an interim order, which was granted by consent by Gwyn J on 7 March 2022, restraining the defendant from:1

(a)appointing any receiver of and for the property; and

(b)exercising any mortgagee power of sale or otherwise attempting to deal with, alienate or transfer the property.

[12]   Mr Turvey initially opposed the proceedings, but has not filed a statement of defence, and confirmed at a telephone conference heard by Mallon J on 29 April 2022 that the only remaining issue as between the parties is the payment of his reasonable legal costs as mortgagee.2

[13]   On 1 August, the parties filed a joint memorandum setting out the nature of Mr Turvey’s claim for costs, and seeking directions by consent. The costs Mr Turvey asserts are secured by his position as first mortgagee, and which must be paid before his obligation to transfer the mortgage pursuant to s 103 of the Act becomes unconditional are:

1      Aokautere Land Holdings Ltd v Turvey [2022] NZHC 375 at [14]–[15].

2Aokautere Land Holdings Ltd v Turvey HC Wellington CIV 2022-485-109, 29 April 2022 (Minute of Mallon J) at [14].

Invoice #1	Legal costs incurred by BNZ (which Mr Turvey paid) – Minter Ellison invoice dated 31 August 2020	$1,790.38
Invoice #2	Legal costs incurred by the defendant from Paino & Robinson, Barristers and Solicitors – invoice dated 14 December 2020	$1,244.40
Invoice #3	Invoice from Jonathan Orpin-Dowell, Barrister for professional advice – invoice dated 14 December 2020	$1,079.16
Invoice #4	Legal costs from Grove Darlow, Barristers & Solicitors – costs incurred in responding to the plaintiff’s earlier requests to transfer	$884.70
Total		$4,998.64

The loan documentation

[14]   The loan documentation put in evidence by Mr Turvey is between BNZ and Vey. This documentation includes the mortgage memorandum, which was signed on 8 October 2002. Also included in Mr Turvey’s affidavit is a letter from BNZ to Vey dated 16 November 2009, setting out the terms of an additional facility, which provides that:

All costs and expenses associated with the establishment and maintenance of these facilities shall be for the account of the Borrower. Such costs shall include, but shall not be restricted to, Legal Fees, Stamp Duties (if any), Withholding Tax, Goods and Services Tax and any reasonable out of pocket expenses incurred by the Bank.

[15]As to discharge, Clause 31 of the memorandum provides:

Discharge of mortgage upon payment

The Mortgagor shall be entitled to a discharge of this mortgage only upon payment of all the secured moneys and the reasonable costs of the Bank of and incidental to such discharge.

[16]Clause 9.2 adds that:

Mortgage remains in full force until final discharge [–] This mortgage shall remain in full force and extend to cover any sum of money which may become owing by the Mortgagor to the Bank until a final discharge has been provided to the Mortgagor by the Bank.

[17]The term “secured money” is defined in the memorandum as:

…all moneys now or in the future owing or remaining unpaid to the Bank from the Mortgagor (directly or indirectly) whether made available solely to the Mortgagor or jointly with any other person and whether in respect of:

…

(h) all other costs, charges and expenses, including all legal costs (both  party and party and solicitor and client), which the Bank shall pay or incur in connection with the Mortgagor, any account of the Mortgagor, the mortgaged property or this mortgage…

[18]   The relevant subclause relating to assignment is contained in BNZ’s Master Facility Agreement, and states:

17.9 Assignment: You may not assign or transfer all or any of your rights, benefits or obligations under a facility document. We may at any time assign or transfer all or any of our rights, benefits and obligations under a facility document to any person. In the event of any assignment or transfer references to us in the relevant facility document and all or any securities provided in respect of that facility document shall be deemed to be references to the relevant assignee or transferee provided that references to our prevailing interest rates in clauses relating to the calculation of interest shall continue to be references to our prevailing rates and not those of the relevant assignee or transferee and provided further that if we do not assign or transfer all of our rights, benefits and obligations under the relevant facility document references to us in that facility document in relation to any rights, benefits and obligations not so assigned or transferred shall continue to be references to us and not to the relevant assignee or transferee.

[19]   Subclause 18.6 also defines costs as “[including] costs, charges and expenses, including in connection with legal and other advisers on a full indemnity basis.”

The invoices

Invoice #1

[20]   Invoice #1 is addressed to Tony Wildig. It is from Minter Ellison Rudd Watts, and is for the sum of $1,790.38. It was issued on 31 August 2022. The fees are listed under the heading of ‘Vey Group – Subrogation’. No further detail is included as to the nature of professional services performed.

Invoice #2

[21]   Invoice #2 is addressed to Mr Turvey. It is from Paino & Robinson Barristers & Solicitors, and is for the sum of $1,224.40. It was issued on 9 October 2020 The services rendered are listed under a heading reading “Transfer of [Mortgage] from Bank of New Zealand”.

Invoice #3

[22]   Invoice #3 is addressed to Mr Turvey. It is from Jonathan Orpin-Dowell, a barrister, and is for the sum of $1,079.16. It was issued on 14 December 2020. It describes the fee as being for three activities, which are:

(a)email correspondence with Daryn Turvey in relation to second [mortgagor’s] attempt to buy-out first mortgage;

(b)meeting with Tim Allen to discuss attempt to buy-out first mortgage and telephone call with Daryn Turvey; and

(c)telephone   and   email   correspondence    with   liquidators’ counsel regarding caveat proceedings; and all incidental attendances.

Invoice #4

[23]   Invoice #4 is addressed to Mr Turvey. It is from Grove Darlow & Partners, and is for the sum of $884.70. It was issued on 16 December 2020. The fees are listed under the heading of ‘Vey Group Limited’. No further detail is included as to the nature of professional services performed.

Positions of the parties

Aokautere

[24]   Aokautere confirms that it would pay $2,500 of costs or more, on receipt of suitable evidence, incurred by Mr Turvey in the transfer of the mortgage to them. They say that Mr Turvey has used the previous assignment of the mortgage from BNZ as evidence of what reasonable costs would be for the transfer of a mortgage, but is yet

to provide any invoice or estimate from his solicitors in relation to transferring the mortgage to Aokautere. Aokautere asserts that Mr Turvey has declined to provide further detail in relation to each of the four invoices noted above, and so that the issue for the Court is to assess the available documentation to determine whether each invoice falls within the definition of “secured moneys”.

[25]   As to Invoice #1, Aokautere asserts  that  this  is  a  cost  incurred  prior  to Mr Turvey becoming the mortgagee – it was instead incurred when Mr Turvey acted so as to acquire the mortgage. They submit that the right under the mortgage to recover costs “in connection with” the mortgage does not arise until a person actually becomes the mortgagee. They submit that “It would take extraordinarily specific language to make a mortgagor liable for [an assignee’s] costs incurred prior to becoming mortgagee”.

[26]   As to Invoice #2 and Invoice #4, Aokautere submits that neither invoice discloses any detail as to the work undertaken for the fees charged. They submit that the onus is on Mr Turvey to establish that the fees charged are secured moneys, and that he has not been able to establish a suitable factual foundation for that proposition.

[27]   As to Invoice #3, Aokautere submits that two out of the three activities described might be “in connection with” the mortgage, specifically:

(a)email correspondence with Daryn Turvey in relation to second [mortgagor’s] attempt to buy-out first mortgage; and

(b)meeting with Tim Allen to discuss attempt to buy-out first mortgage and telephone call with Daryn Turvey.

[28]   However, they submit that the third activity has no bearing on Aokautere and that there is no indication as to what the advice recorded in the first two activities was about. They assert that they should not be required to indemnify Mr Turvey for the cost of advice on how to dispute their rights as mortgagor. In the alternative, they submit that they should only be required to pay two-thirds of the cost of Invoice #3. That would mean that they are required to pay only $712.24 including GST, being

two-thirds of Invoice #3, plus any costs incurred in the actual transfer of the mortgage to them.3

[29]   Aokautere seeks the following declarations under s 3 of the Declaratory Judgments Act 1908:

(a)that the obligations owed to Mr Turvey by Vey and secured by Mortgage  6642248.3  are  limited  to  the  BNZ  loan  assigned  to  Mr Turvey and exclude any other prior advances, claims or debts by Mr Turvey that he alleges are owed to him, subject only to:

(i)the balance of the assigned BNZ loan, which is now $0;

(ii)Mr Turvey’s costs incurred in connection with the first mortgage, which are limited to $712.24 including GST, plus any suitably narrated invoice by his solicitor that charges a reasonable fee for the solicitor’s attendances in dealing with the transfer of the mortgage to Aokautere;

(b)that Mr Turvey has an obligation under ss 102–103 of the Property Law Act 2007 to transfer Mortgage 6642248.3 having already received:

(i)a request to transfer that mortgage;

(ii)payment of the balance of the BNZ loan; and

(iii)confirmation that Aokautere will meet the Mr Turvey’s relevant legal costs in attending to the mortgage’s conveyance at the time of the transfer.

[30]They also seek:

3      By my calculation, two-thirds of $1,079.16 is actually $719.44.

(a)an order that unless, within five working days, Mr Turvey co-operates (by doing all things necessary) in the execution of conveyancing documents for the transfer of the mortgage to Aokautere, the Registrar of the High Court at Wellington shall be appointed as the Court’s agent and shall be authorised to execute any documents for and on behalf of Mr Turvey  necessary  to  give  effect  to   the   transfer   of   Mortgage 6642248.3 to Aokautere; and

(b)an order that Mr Turvey pay the costs of, and incidental to, the proceeding.

Mr Turvey

[31]   Mr Turvey alleges in his affidavit that all four invoices are payable to him before the transfer of mortgage can be completed, and that the loan documentation provides for this. His affidavit does not provide any detail as to why the four invoices should be considered as falling within the definition of secured moneys, required to be paid prior to the discharge of the mortgage.

Analysis

[32]   Section 102 of the Act describes who can make a request for the transfer of a mortgage:

102Request to mortgagee to transfer mortgage

(1)The current mortgagor or any other person who is entitled to redeem the mortgaged property may, at any time (except a time when the mortgagee is in possession of the property), request the mortgagee to transfer the mortgage to a nominated person (except the current mortgagor).

(2)A mortgagee under a subsequent mortgage or the holder of any other subsequent encumbrance may make a request under subsection (1) despite any intermediate interest.

[33]   Section 103 adds to this, providing the threshold that must be met prior to the transfer being compellable:

103Mortgagee must transfer mortgage after receiving request

The mortgagee must, after  receiving  a  request  made  under  section 102, transfer the mortgage to the nominated person on—

(a)payment to the mortgagee of all amounts that would have been payable if the discharge of the mortgage had been sought under sections 97 to 101; and

(b)the performance of all other obligations secured by the mortgage.

[34]   Section 102 provides that a person who is entitled to redeem a mortgaged property may request the mortgagee to transfer the mortgage to any nominated person. Section 103 means that the mortgagee must perform that transfer if it is paid the amount that would otherwise have been required to discharge the mortgage.4

[35]   Therefore, the issue in the present case is whether the costs contained in the four invoices would have otherwise been required to be paid, for the mortgage to have been discharged. The mortgage in question is between Mr Turvey personally as mortgagee, and Vey as mortgagor, BNZ having assigned the mortgage to Mr Turvey. The total amount in dispute at $4,998.64. Nor is it in dispute, that owing to the assignment of the mortgage to Mr Turvey, any reference to BNZ and/or ‘the Bank’ in the loan documentation must be taken to refer to Mr Turvey.

[36]   The loan documentation in essence provides that the borrower is required to cover the Bank’s reasonable legal costs and expenses associated with the “establishment and maintenance” of the loan, or “in connection with the Mortgagor…the mortgaged property or [the] mortgage”. The sum of money represented by those costs and expenses, is included within the total sum of money that must be paid to the Bank, in order to effect discharge of the mortgage, including the legal costs of any discharge.

[37]I now assess each of the invoices in turn against the loan documentation.

4      Stark Trustees Ltd v Alliance Diversified Holdings NZ Ltd Partnership [2020] NZHC 3087 at [21].

Invoice #1

[38]   Invoice #1 clearly relates to legal services provided so as to enable Mr Turvey’s acquisition of the mortgage – thereby arising prior to his current rights as mortgagee. The heading referring to ‘Subrogation’ is evidence of this – even though the invoice is not addressed to Mr Turvey. An assignment does not relate to the establishment or maintenance of a mortgage, it is a transfer of the rights pursuant to an existing mortgage. While legal costs relating to an assignment of a mortgage are properly described as being in connection with the mortgage, those legal costs arose prior to the acquisition of the rights of mortgagee by Mr Turvey. Accordingly, the costs contained in Invoice #1 do not fall within the category of costs which Aokautere are required to pay in order to secure the transfer of the mortgage.

Invoice #2

[39]   Invoice #2 does not fall within the category of costs which Aokautere are required to pay for similar reasons as Invoice #1. The description of services provided by Paino & Robinson illustrates that  those  services  were provided in relation to  Mr Turvey’s acquisition of the mortgage, being the services required to enable that. They are therefore costs that arose prior to his acquisition of rights as mortgagee and cannot be ‘secured moneys’.

Invoice #3

[40]   In respect of #3, counsel for Aokautere appropriately conceded that the first two activities described can be considered to be in connection with the mortgage, given that they relate to legal advice obtained to assess their attempts to have the mortgage transferred. The date of the invoice, 14 December 2020, also illustrates that that legal advice was obtained by Mr Turvey in his capacity as mortgagee. Those costs are costs which Aokautere are required to pay in order to secure the transfer of the mortgage – given that they are legal costs incurred by the mortgagee, in connection with the mortgage. I do not accept Aokautere’s submission that they should not be required to indemnify Mr Turvey as mortgagee for the cost of advice on how to dispute their rights. The contents of that advice are not within their knowledge – and the

requirement is merely that the costs must be incurred by the mortgagee that are associated with or in connection with the mortgage. Those costs meet that test.

[41]   The third activity described in Invoice #3 relates to other proceedings which Mr Turvey and/or Vey are or have been involved with. Legal services described as “telephone and email correspondence with liquidators’ counsel regarding caveat proceedings; and all incidental attendances”, do not appear to relate to the mortgage proceedings in any respect. Those costs do not fall within the category of costs which Aokautere are required to pay in order to secure the transfer of the mortgage.

[42]   The invoice does not break down the exact costs relative to the three activities described. However, counsel for Aokautere have identified a principled approach, being that Aokautere should pay two-thirds of that Invoice #3, representing that two out of the three activities that relate to the mortgage. That is appropriate.

Invoice #4

[43]   Invoice #4 contains no detail as to the services provided, other than that they related to ‘Vey Group Limited’. On the basis of that evidence, it is impossible to conclude that Invoice #4 represents a cost that was incurred by Mr Turvey in connection with the mortgage. As submitted by Aokautere, Mr Turvey is involved in a number of other proceedings relating to Vey, some of which are unrelated to the mortgage proceeding. The obligation is on Mr Turvey to provide the evidence connecting the costs claimed in Invoice #4 to the mortgage. He has not done that. Therefore, there is no basis for finding that they relate to the transfer of the mortgage.

Result

[44]   The only costs which Aokautere are required to pay to secure the transfer of the mortgage are:

(a)two-thirds of Invoice #3, being $719.44 (inclusive of GST); and

(b)as accepted by counsel for Aokautere, the reasonable legal costs incurred by Mr Turvey so as to enable the transfer of the mortgage to Aokautere.

[45]   Upon the payment of those costs, the obligations that would otherwise be required to performed to result in discharge will have been completed, and Mr Turvey will be obligated to transfer the mortgage to Aokautere.

[46]   As the parties appear to be agreed that following the payment of the described sums Mr Turvey will be obligated to transfer the mortgage to Aokautere, I do not think it is necessary to make the orders sought by Aokautere. If the necessary calculations and payments have not been made within 14 days of the date of this minute, the parties may file updating memoranda seeking further directions or if necessary, timetabling towards hearing.

[47]   Mr Turvey is entitled to be heard on costs. If the parties are unable to agree on costs.  Aokautere are  to file  a costs  memorandum within 10 working days, with  Mr Turvey having a further five working days to respond. Costs will then be determined on the papers.

Churchman J

Solicitors:

Dewhirst Law, Whanganui for Plaintiff cc:     D Turvey