ASB Bank Limited v Malcolm HC Auckland CIV-2010-404-007182
[2011] NZHC 871
•19 July 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-007182
BETWEEN ASB BANK LIMITED Plaintiff
AND RUSSELL PETER MALCOLM Defendant
Hearing: 15 July 2011
Counsel: N F D Moffatt for Plaintiff
Defendant appears In Person
Judgment: 19 July 2011
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
This judgment was delivered by me at 4.00 pm on 19 July 2011 pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Bell Gully, PO Box 4199, Auckland 1140 (N Moffatt – [email protected]) Defendant – Mr R P Malcolm, 36 Jeffs Rd, RD4, Albany, North Shore City 0794
ASB BANK LIMITED V RUSSELL PETER MALCOLM HC AK CIV-2010-404-007182 19 July 2011
[1] Summary judgment was entered against the defendant on 24 March 2011. On 15 April 2011 he filed two applications, the first to set aside the judgment and the second to stay enforcement of the judgment. Although not stated, the second is necessarily in the alternative to the first. The sole specific ground given for setting aside the judgment is that it is proper that such an order be made. This ground is repeated on the application for a stay, where there is an additional ground that a miscarriage of justice has occurred. Both applications refer to an affidavit of the defendant for further grounds. Two affidavits were sworn by Mr Malcolm that day, a further affidavit was sworn on 3 May and two further affidavits were sworn on
17 May. All were served on the plaintiff. It opposes both applications and relies on affidavits by Mr R Chung dated 3 May and 27 May respectively.
[2] The defendant did not appear at the hearing at which summary judgment was entered against him. Jurisdiction to set aside a judgment in that circumstance is given by r.12.14. This provides:
12.14 Setting aside judgment
A judgment given against a party who does not appear at the hearing of an application for judgment under Rule 12.2 or 12.3 may be set aside or varied by the Court on any terms it thinks just if it appears to the Court that there has been or may have been a miscarriage of justice.
[3] Guidance on the application of this rule may be drawn from two cases. First, in Russell v Cox,[1] the Court of Appeal noted that the discretion vested in the Court is unfettered, but there are three considerations which might commonly be regarded as being of dominant importance. These are whether the defendant had a substantial ground of a defence, whether the delay is reasonably explained, and whether the plaintiff will suffer irreparable injury if the judgment is set aside.
[1] Russell v Cox [1983] NZLR 654
[4] Secondly, in Equiticorp Finance Group Ltd v Cheah,[2] Somers J in the Privy
[2] Equiticorp Finance Group Ltd v Cheah [1989] 3 NZLR 1
Council said:
In the case of a summary judgment regularly obtained it will normally be necessary for the defendant seeking to set aside judgment to adduce material
which leads the Court to the conclusion that the plaintiff has not satisfied the
Court that there is a defence to the claim.
[5] The defendant has represented himself throughout this proceeding. Neither of the applications he has now brought sets out with the precision required by r.7.19 the grounds upon which the respective orders are sought. In addition the defendant filed more affidavits than are permitted without leave. However, counsel for the defendant did not raise any procedural objections and in the circumstances of this case it is appropriate to allow the applications to proceed.
Application to set aside summary judgment
[6] The Bank’s application for summary judgment sought judgment for sums outstanding under three advances made to the defendant between 2003 and 2008. In September 2009 the defendant’s deduction account, as it was called, was overdrawn by the sum of $58,496. On 14 September 2009 the Bank made demand on the defendant to repay $266,358.88 then outstanding on one of the three advances, the Orbit Home Loan. This demand was not met. On 7 October the Bank served the defendant with a notice under s 119 of the Property Law Act in respect of properties mortgaged to the Bank. It cited default in the same sum as in the demand and advised that if default was not remedied by 16 November the Bank’s power of sale of the properties secured to the Bank would become exercisable and all amounts secured under the mortgages would become payable. This would have included all sums advanced under the other two facilities, some $750,000 plus interest.
[7] The default specified in the notice under s 119 was not remedied by the stated date. The Bank then moved to exercise the power of sale and sell the mortgaged properties.
[8] The Bank conducted a selling campaign in the early part of 2010 against spirited opposition by the defendant. He had commenced a process with the local authority to subdivide one of the properties with a view to maximising its value and therefore increasing its return when sold, a move thought by him to be both in his interests and those of the Bank. Further reference will be made to this when outlining his reasons for opposing the entry of judgment. Early in the sale process
the Bank withdrew it. Later in 2010 the Bank decided to recommence enforcement actions against the defendant. On 1 November 2010 it issued an application for summary judgment seeking both judgment for the full indebtedness of the defendant to the Bank, and an order for possession of the properties mortgaged to the Bank.
[9] This was called on 9 December 2010 and the defendant appeared personally. He informed the Court that he would be defending the application and Associate Judge Christiansen directed that a notice of opposition and supporting affidavit was to be filed and served by 21 January 2011. A half day hearing was set down for
28 March 2011.
[10] The defendant did not file a notice of opposition or any evidence so the file was placed before the Civil List Judge, Lang J, on 18 March 2011. He issued a Minute that day in which he noted non-compliance by the defendant with the timetabling directions made by the Judge on 9 December, and vacated the half day fixture on 28 March. He adjourned the summary judgment application “for mention in the Summary Judgment List on 24 March 2011 at 2.15 pm”.
[11] The defendant did not appear on that day and judgment was entered by default. These applications followed.
[12] At the time the Bank decided to demand repayment of the Orbit Home Loan in September 2009 the defendant was on the verge of filing his subdivision application with the local council. Evidently there was to be a change to the District Plan in October. It was, he said, imperative that the application be filed before that occurred because once the District Plan change came into effect consent for the subdivision proposed would be considerably more difficult to obtain. At the time it called up the Orbit Home Loan the Bank froze that account, and an account in which there was a sum of money in credit. It was the funds in this account which the defendant intended to use to pay the costs of the subdivision application. The freezing of the account left him without funds to file it, and it was not until later in October that he raised the requisite fee of $2,800 and lodged the application with the Council. By then the plan change had come into effect. For reasons not fully explained, and not necessarily relevant to this case in any event, the subdivision
consent has not yet been granted. I was informed by the defendant, however, that significant progress has been made and he is of the view that it will be granted shortly.
[13] The result of the Bank’s actions was to place the defendant under considerable pressure. This adversely affected his health. Over the next few months he found himself unable to attend to his own affairs. He experienced days when he could not act on anything at all. He produced a medical certificate dated 12 April
2011 referring to an appointment on 27 January 2011 at which he had indicated a number of symptoms of feeling depressed, lacking energy, being in a flat or low mood and similar tendencies. The certifying person was described as a registered comprehensive nurse who reported that he or she gained the impression that the defendant “was severely depressed with associated anxious feelings. He had typical symptoms of severe burnout that decreased his ability to function as he usually could.”
[14] That was the defendant’s position at around the time he was supposed to be responding to the summary judgment application, and was put forward as an explanation of why he did not do so. The defendant also said that when he received the Minute from Lang J advising that the case was to be listed for mention at an earlier date than the intended fixture, it did not occur to him that a mention would involve the entry of summary judgment. He assumed that the Court would set another date and he would still have an opportunity to not only file papers in opposition but also to argue his case. In the meantime he had applied unsuccessfully for legal aid, being unable to fund his own litigation as any funds he may have been able to use for legal fees were frozen by the Bank. Nonetheless the Legal Aid Authority took them into account along with other assets in declining his application. He was therefore unrepresented and formed these views as a layman, and in the state of mind that I have described.
[15] I find that his failure to respond to this proceeding as he should have done was understandable and excusable. Had it fallen to the Court to determine whether he should have had an extension of time to respond, that application could well have been favourably considered. However, no explanation of the position was given to
the Judge, who entered judgment when no appearance was made. It is equally understandable that judgment was entered. The Court was faced with a defendant who had been served with the proceedings, indicated he intended to file a defence, had breached timetable orders, had not filed a defence, and did not attend when the matter was called.
[16] Accordingly, in terms of Russell v Cox, the delay on the part of the defendant is reasonably explained. I next examine whether the defendant has a substantial ground of defence.
[17] I have indicated that the defendant has filed five affidavits. Much of the material within those affidavits is repetitive. From those documents, however, and from submissions made by the defendant at the hearing, I have been able to derive what I believe are the key elements of the defendant’s opposition to the Bank having judgment.
[18] I preface this by noting that all the Bank is trying to do is to recover sums of money which have indisputably been advanced to the defendant, together with interest at the rates contractually agreed in the loan documents, and expenses. The Bank’s wish to recover its funds was precipitated by the defendant having significantly overdrawn one of the accounts, which led the Bank to call up the entire advance thus overdrawn in accordance with its rights under its loan documents. At cl.2.2 of the Orbit Home Loan agreement it is provided that “the loan is repayable by you on demand by us (which demand may be made by us at any time at our absolute discretion).”
[19] Against that background the defendant’s first complaint, that the Orbit Home Loan should not have been called up in full, can be seen to be without foundation. He had agreed under the loan contract that it could be. Under cl.2.2 it was not even necessary for there to have been a default. Accordingly there could be no defence to an application for summary judgment for that advance on the ground that it should not have been called up.
[20] The defendant’s next complaint was that it was unnecessary for the Bank to have frozen the account in which he had funds in credit, as its security was more than sufficient for its advances, and the freezing of this account left him without money with which to pay filing fees on his resource consent application, very much to his detriment, for reasons I have set out.
[21] However, the loan agreements all provide:
We may at any time without notice set off amounts (regardless of the type or nature of the amount or obligations) we owe you against any money owing under this agreement and may debit any account (including a term deposit) to effect such set off. This right will not limit or affect any other right we have against you.
[22] Plainly the Bank was contractually entitled to freeze the account, as a first step in an intended set-off. Whether it was desirable or wise to do so was debated by the defendant but the Bank made a decision it was entitled to make under the agreements the defendant had entered.
[23] The resource consent application has had a long processing span but I do not think it can be said that this was necessarily a result of the application being filed after the plan change, at least on the evidence before me. Even if that is the case, and accepting that to be so for present purposes, there can be no claim against the Bank for acting as it was entitled to do, even if that was the consequence.
[24] Next, the defendant maintained that when the Bank’s concern about the overdrawn account was first drawn to his attention he had a meeting with two representatives of the Bank who assured him that the Bank was not about to take precipitant action and call up the mortgages, let alone sell the properties secured to the Bank. Instead a constructive discussion took place. However, although there is little evidence precisely on this issue, it seems that when the position came into the hands of others higher up in the Bank’s credit enforcement area, a harder line was taken as I have set out. The defendant maintains this was contrary to the agreement he had reached, and was contrary to the Bank’s promotion of itself, its services and its ways of handling customers.
[25] On the evidence before me I am not satisfied that there was any form of binding agreement on the part of the Bank not to act as it did, nor any binding representation to the defendant in circumstances from which it would be unjust to allow the Bank to resile.
[26] In any event, the history of the accounts and the relationship between the defendant and the plaintiff since late 2009 indicates that the Bank has at various times given the defendant substantial periods of time in which to attempt to refinance or to sell the secured properties himself, either course being with a view to repaying the Bank’s advances.
[27] The next issue raised by the defendant was that in February 2010 he presented the Bank with a contract for sale of one of the secured properties in Pinchgut Road. The defendant maintained that this was an unconditional contract of sale with settlement to take place in 10 days, and the Bank would have received the entire proceeds. He maintained that no response was received from the credit controller in charge of this matter, Mr Chung. That does not accord, however, with the evidence from Mr Chung, nor with contemporaneous documents. A few days after the agreement was submitted to the Bank a Ms McGaw of McGaw Mortgage Solutions who had arranged the sale (and who was, in fact, one of the intending purchasers) emailed Mr Chung at the Bank and told him that this agreement could not go ahead. She said that she would come back to him with an unconditional contract without certain clauses in it. Two months later on 23 April Mr Chung wrote to the defendant advising that the Bank had not received any communication from him regarding his attempt to refinance from other sources, or the sale of 150
Pinchgut Road which had been the subject of the previous agreement. He was asked to advise the Bank of his position by 30 April and told that if an acceptable response was not received the Bank would recommence marketing the property for sale. No response was received. The defendant maintained that another offer was put to the Bank for approval but the document produced was signed only by the vendor, not the purchaser. On 26 April 2010 McGaw Mortgage Solutions wrote to Mr Chung advising they had been unsuccessful “in obtaining required information from Russell” to enable their offer to proceed. The firm inquired about the current
situation with the mortgagee sale for the defendant, indicating that “we are still keen to purchase the property”. There was no evidence of another offer being made.
[28] I find there is no foundation for the defendant’s submission that a sale of this property did not proceed because the Bank would not consent. Further, whilst s 97(2) of the Property Law Act 2007 provides that a mortgagee must discharge a mortgage over a property on payment of all amounts owing and the performance of all other obligations secured by a mortgage, the Bank was not obliged as a matter of law to discharge the mortgage unless full repayment of the entire indebtedness was tendered. The possible sale contract would not have realised sufficient funds for that to occur.
[29] The defendant made a number of other specific criticisms of the Bank’s conduct in relation to enforcement of its securities and its attempt to recover its advances. It is not necessary to refer to every criticism that was made. They included accusations that when the Bank was attempting to sell the properties in early 2010 they were taking steps to do so below market value, and that the Bank’s activities were contrary to the way they promoted themselves to the public as a bank that would only enforce securities as an absolute last resort.
[30] I am satisfied that even taking all the issues raised by the defendant as a whole and weighing them against the Bank, they do not amount to a defence to the Bank’s claim. Nor would they found a counterclaim against the Bank which might result in damages which could be set off against the sums owing. Even if that were the case, and I stress that the case for the defendant falls well short of so establishing, it would in any event founder on the clause which appears in each of the loan agreements providing that each payment by the borrower to the Bank under each agreement is to be made free and clear on any deduction or withholding for or on account of tax or on any other account whether by way of set off, counterclaim, charge or otherwise. This clause would operate to prevent any counterclaim or set off having any effect against the Bank’s claim. There are a number of cases in which clauses of this nature have been recognised and enforced by the courts.
[31] I am satisfied therefore that the defendant does not have a substantial ground of defence to the Bank’s claim. Accordingly the application to set aside the summary judgment is dismissed.
Application for a stay
[32] The defendant did not advance argument specifically on this application. I infer that the same grounds are put forward in support of this application as were advanced in support of the application to set aside the summary judgment.
[33] Rule 17.29 provides that a party liable on a judgment may apply to the Court for a stay of enforcement on the ground that a substantial miscarriage of justice would be likely to result if the judgment were enforced. In that event the Court may give relief on just terms.
[34] It is not a substantial miscarriage of justice for a party, here the defendant, who has had the use of another party’s money to be required to repay it: Marac Finance v Twilight Trustee Ltd.[3]
[3] Marac Finance v Twilight Trustee Ltd HC Auckland CIV-2008-404-7291, 25 February 2009 Venning J
[35] I understand the present position to be that the Bank and the defendant are still negotiating terms on which the defendant can complete his subdivision. It appears this may result in more funds being available than might otherwise be the case. This could benefit both the plaintiff and the defendant. It is not a matter upon which I am called upon to adjudicate. Rather, I am asked to simply stay the judgment against enforcement, without even a term for that stay being specified, nor grounds spelt out which are specifically directed to whether I might or might not find that there could be a substantial miscarriage of justice.
[36] On the material before me I am unable to infer that would be likely to result were the judgment to be enforced. In reaching this conclusion I have taken into account all the matters raised by the defendant, and the amount of time that has passed since the Orbit Home Loan contract was first breached, the advances were
called up, and the date of issue of the Property Law Act notice. The period is
approaching two years. Steps to obtain consent to subdivide one of the secured properties have been underway for some time but there is no finite date before me by which that might be concluded. Nor have there been any recent contracts for sale of the properties, once divided. Any attempt on my part to speculate on what might happen over the next few months in this respect would be futile and baseless, and I am not prepared to do so.
[37] It is clear that the Bank is still prepared to determine its course taking into account the defendant’s circumstances and his attempts to maximise the return for his properties by the processes he has underway. Grounds for this Court to intervene in that process by directing a stay of any enforcement procedure are not made out.
[38] The application is dismissed.
Costs
[39] The Bank sought costs on an indemnity basis pursuant to terms in the loan agreements.
[40] In every case costs are in the discretion of the Judge. In this case I have determined that I should not enforce contractually-based costs against the applicant. The Bank is entitled to costs, the applications having failed. However, I have noted earlier the defendant’s reasons for not having attended at court on the day judgment was entered, and expressed my view on them, in the context of a litigant in person. In my view the justice of this case is served by the Bank having costs against the
defendant on a 2B basis together with any disbursements, as fixed by the Registrar.
J G Matthews
Associate Judge
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