ASB Bank Limited v Thompson - [2015] NZHC 1802

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2015-419-73 [2015] NZHC 1802

BETWEEN
ASB BANK LIMITED

Plaintiff

AND

JUDY KIM IDA THOMPSON AND JEANETTE ANN CROWE (as Trustees of the Fallowfield Trust)

Defendants

Hearing: 14 July 2015

Appearances:

Mr Powell for Plaintiff
Mr McKenna for defendants

Judgment:

3 August 2015

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on
03.08.15 at 11 a.m., pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

ASB BANK LIMITED v THOMPSON AND ANOR (as Trustees of the Fallowfield Trust) [2015] NZHC 1802 [3
August 2015]

[1] On or about 10 July 2012, ASB, as lender, entered into a facility agreement with the the Fallowfield Trust, as borrower, the trustees of which are the defendants, Judy Thompson and Jeanette Crowe. The facility agreement established the following term loans:

a) a term loan for $250,000; and b) a term loan for $329,500

[2] The borrowings were to be secured over a property at Matamata which the defendants owned.

[3] The defendants have fallen into arrears with their obligations under the facilities. ASB now brings this proceeding to obtain possession of the property over which it was granted security. It also seeks judgment for all amounts owed under the lending facilities.

Background

[4] The plaintiff summarised the factual position as follows. The summary is not disputed by the defendants.

[5] The defendants’ obligations to ASB are secured by a first ranking mortgage (the Mortgage) over the defendants’ property at 97 Taihoa North Road, Matamata (Certificate of Title SA 70D/748) (the Property).

[6] ASB served notices on the defendants under the Property Law Act on 19

March 2014. Since the expiry of those notices, ASB has taken steps to sell the property under its power of sale. ASB asserts that it has been unable to sell the property as a result of the conduct of the defendants. As a result, ASB decided to exercise its power under the mortgage to obtain possession of the property. The defendants have declined to leave the property.

[7] The defendants responded with a Notice of Opposition alleging that:

a) the property is subject to a binding lease agreement that ASB

consented to; and

b)to grant vacant possession to ASB would be unduly oppressive to the defendants in the circumstances.

[8] The defendants have advised that they do not now rely on the second ground of opposition.

[9] I would add to the above statement of background that the second-named defendant is the mother of the first. I would also add that the Fallowfield Trust had entered into a lease agreement for the property with Amber Mountain Bengals Limited, a company owned by the first named defendant, commencing on 1 March
2013. The first named defendant also states that previous lease agreements had been signed with LSM Consultants Limited, a company which was also owned by the first named defendant. After this company was placed into liquidation, Amber Mountain Bengals Limited took over…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 1802
Decision Date: 3 August 2015

CaseChat Overview and Summary

ASB Bank Limited commenced proceedings against Judy Kim Ida Thompson and Jeanette Ann Crowe, as trustees of the Fallowfield Trust, seeking possession of a property at Matamata secured by a mortgage and judgment for amounts owed under a facility agreement. The trustees opposed the claim, arguing that ASB had consented to a lease of the property and that granting possession would be unduly oppressive. The High Court of New Zealand considered whether ASB had consented to the lease, which would prevent them from taking possession, and whether the trustees had a substantial defence. The Court found that the trustees had not provided sufficient evidence of ASB's consent and that their claim of oppression was not relevant to the issues before the Court. The Court held that ASB was entitled to possession of the property and granted judgment for the amounts owed plus interest. The Court also ordered the trustees to vacate the property by 9 September 2015 and pay ASB's costs and disbursements.

The Court of Appeal considered the issue of whether a mortgagee takes their interest subject to a lease when the mortgagor enters into a lease without the mortgagee's consent. The Court held that a mortgagee who is aware of a third party's interest and passively stands by, making no objection, has not consented to the lease. The Court also held that the onus lies on the tenant to show that the mortgagee must recognise their right of occupation, and mere knowledge by the mortgagee of the existence of the lease is not enough. The Court found that the trustees had not provided sufficient evidence of ASB's consent to the lease and that their claim of oppression was not relevant to the issues before the Court. The Court held that ASB was entitled to possession of the property and granted judgment for the amounts owed plus interest. The Court also ordered the trustees to vacate the property by 9 September 2015 and pay ASB's costs and disbursements.

Orders