ASB Bank Ltd v Lambert

[2013] NZHC 2135

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2013-419-761 [2013] NZHC 2135

BETWEEN  ASB BANK LIMITED Applicant

ANDELIZABETH MARY LAMBERT in her personal capacity and as trustee of the ELIZABETH MARY LAMBERT TRUST Respondent

Hearing:                   20 August 2013

Counsel:                  B J Upton and L M L Lim for Applicant

Respondent in Person

Judgment:                22 August 2013

JUDGMENT OF RONALD YOUNG J

Introduction

[1]      This  is  an  application  by  the  ASB  that  a  caveat  be  removed  and  that Mrs Lambert personally and as trustee of the Elizabeth Mary Lambert Trust (EML Trust) be restrained from lodging any further caveats against a property at Wood Bay Road,  Titirangi.     ASB’s  application  for  an  injunction  also  seeks  to  prevent Mrs Lambert from interfering with a proposed mortgagee sale by the ASB with respect to the property and attempting to transfer title to the property to herself.

[2]      The ASB are the holder of a first registered mortgage over the property at

37 Wood Bay Road,  Titirangi.     The  registered  proprietors  of  the  property  are Matthew Jenkins, Maya Ishida and SWL Trustee Limited.  The mortgage was first registered  on  13 February 2009.    There  are  two  loan  advances  covered  by  the

mortgage, one for $492,000 and the other for $300,000, and the priority amount is

ASB v LAMBERT [2013] NZHC 2135 [22 August 2013]

$922,500.  I refer to Mrs Lambert as the “purchaser” and “caveator” acknowledging

she is the trustee of the EML Trust.

[3]      Mortgage payments are in arrears and the ASB Bank wish to exercise its power of sale under the mortgage.   On 31 May 2013 EML Trust lodged a caveat against the title at Wood Bay Road, Titirangi.  EML Trust claims that they have a caveatable interest in the property arising from a sale and purchase agreement of

28 March 2013.   In that agreement Mr Jenkins and Ms Ishida (not SWL Trustee

Limited) purport to sell the Wood Bay Road property to Mrs Lambert.  The price is

$1,400,020.   The settlement date is 2063, 50 years hence and the deposit payable

$20.

The orders sought

[4]      The ASB seeks an order that the caveat be removed pursuant to s 143 of the

Land Transfer Act 1952. There are two primary grounds. They are:

(a)      that the agreement for sale and purchase to Mrs Lambert as purchaser is invalid.   First, because not all of the registered proprietors have entered into the agreement, and secondly, because the Lambert agreement for sale and purchase is a sham entered into for the purpose of interfering with ASB’s right to sell; and

(b)whatever  Mrs Lambert’s  interest  in  the  Titirangi  property  is  it  is subject to ASB’s indefeasibility rights under the mortgage to exercise its power of sale.

[5]      In support of the orders for injunction the applicant says that Mrs Lambert is well known to financiers and the courts as an habitual caveator without proper cause. There have been a significant number of judgments of this Court involving broadly similar circumstances  where Mrs Lambert’s  caveats  have been  ordered  to  lapse. Mrs Lambert   continues   to   caveat   properties   without   lawful   reason   causing significant cost to mortgagees. This justifies the injunctive relief the ASB says.

Possible resolution

[6]      During the course of hearing submissions from Mrs Lambert she advised the Court  she  was  in  a  position,  through  the  EML  Trust,  to  repay  the  mortgage. Mrs Lambert is bankrupt.  I questioned Mrs Lambert as to the source of the funds from which she could repay the mortgage.   Obviously if they were her personal funds then they would belong to the Official Assignee given s 101 of the Insolvency Act 2006.

[7]      Mrs Lambert, however, assured me that the funds belonged to the EML Trust and that they were available to redeem the mortgage on behalf of Mr Jenkins and Ms Ishida.  All that was required she said was an electronic transfer from an account controlled by her to the trust bank account operated by Simpson Grierson, solicitors for the ASB Bank.  At one of the breaks in the hearing I advised counsel for the applicant that they should provide details of the trust bank account to Mrs Lambert. They did so.

[8]      At Mrs Lambert’s request, therefore, I agreed that I would not release my judgment on this application until after midday, 21 August 2013 to give Mrs Lambert the opportunity to make the electronic transfer of funds.   The basis on which the delay was agreed was on Mrs Lambert’s personal undertaking that she would not attempt to caveat the title subsequently, nor would she present a transfer for registration, nor would she arrange for or encourage in anyway any other person to do so.  Mrs Lambert agreed to provide to the Court before midday, 21 August 2013, a  copy  of  the  electronic  transfer  of  the  funds  to  the  solicitors  for ASB  Bank (Simpson Grierson).  The solicitors for ASB Bank agreed to provide confirmation or otherwise of the receipt of the funds.

[9]      As it turned out, Mrs Lambert did not pay the redemption figure for the mortgage to the ASB Bank by midday, 21 August 2013 or indeed any sum.  This was not surprising.  Mrs Lambert did not appear to have access to any funds herself or through any trust, nor could she identify the source of the funds to redeem the mortgage.

Caveat removal

[10]     I now turn, therefore, to the application to remove the caveat.   The ASB’s mortgage was registered many years before the agreement for sale and purchase was entered into by Mr Jenkins, Ms Ishida and Mrs Lambert.  They had the right to sell and purchase the property in Titirangi.  But Mr Jenkins and Ms Ishida’s right to sell was subject to the ASB’s rights as mortgagee.  ASB’s rights (including the right of sale upon default) could not be displaced by the sale unless the ASB agreed to do so or by their actions they were deemed to have consented to the transfer.  There was no such consent, nor actions which could be seen as consent.  Mr Jenkins and Ms Ishida could give no more than they had to Mrs Lambert, a title encumbered by a mortgage

which given its registration date ensured ASB’s prior rights.[1]

[1] See, for example, National Mutual finance (1988) Ltd v Berryman HC Wellington 451/91, McGechan J.

[11]     Save for the sham and the claim that not all owners signing the agreement for sale and purchase points[2]  (which I will deal with later and which seek an earlier cancellation of the caveat), the ASB are entitled to an order that, when they tender a transfer  of  the  property  arising  from  the  exercise  of  their  power  of  sale, Mrs Lambert’s caveat will lapse.   Even if Mrs Lambert has a caveatable right by virtue of having sufficient interest as a claimed purchaser of the property under a sale

and purchase agreement, that “right” has no priority and is entitled to no protection as against the ASB’s prior mortgage.  Whether she has purchased the property or not does  not  affect ASB’s  rights  as  mortgagee.    The  mortgagee’s  rights  cannot  be displaced by a subsequent agreement for sale and purchase without the mortgagee’s consent or without conduct which in equity could be recognised as resulting in a deferral of priority.  No such consent or qualifying conduct is identified in this case.

[2] See at [4].

[12]     In summary, the interests of EML Trust as purported purchaser of the land is subject to the mortgagee’s power of sale and the interest under the agreement for sale and purchase is extinguished on sale by the mortgagee.  Once the mortgagee presents a  transfer  pursuant  to  the  power  of  sale  under  the  mortgage,  then  any  caveat

protecting Mrs Lambert’s interest as a purchaser will be removed by the Court.[3]

[3] Land Transfer Act 1952, s 105.

[13]     The ASB are entitled to proceed with their mortgagee sale.  They are entitled to have an order removing the caveat from EML Trust registered against the title, when any transfer is presented for registration consequent upon the power of sale by ASB.

A sham agreement?

[14]     But in this case ASB seek more than such an order.  They seek a finding that the agreement for sale and purchase is either invalid or a sham.  Were either claim correct, then there would not be a valid sale and purchase agreement.  Mrs Lambert would, therefore, have no interest in the land and so no caveatable interest.  In that situation  the  applicant  says  the  Court  should  make  an  order  for  the  immediate removal of the caveat.

[15]     In Snook v London and West Riding Investments Ltd the Court identified what proof was required to establish a sham.  It said:[4]

Acts done or documents executed by the parties to the sham which are intended by them to gift to third parties or to the Court, the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.

[4] Snook v London and West Riding Investments Ltd [1967] 2 QB 786 (CA).

[16]     Counsel for ASB suggested that finding the agreement for sale and purchase a sham may give rise to a conclusion that the agreement for sale and purchase was an illegal contract and, therefore, pursuant to s 6 of the Legal Contracts Act declare the agreement sale and purchase as having no effect.

[17]     It  seems  to  me,  however,  that  finding  that  this  agreement  for  sale  and purchase is a sham has a more fundamental and direct effect.   If I find that the agreement and sale and purchase is a sham then I would have concluded in this case that the parties to the agreement for sale and purchase did not ever intend to give Mrs Lambert an interest in the land.  An interest in land is prerequisite for a caveat. And so the finding that the agreement is a sham in this case would mean an order that caveat be discharged is properly and immediately made.   Mrs Lambert would

have no caveatable interest.  Such a conclusion is fact dependent.

[18]     When Mr Jenkins and Ms Ishida and Mrs Lambert signed the agreement for sale and purchase, did they intend that the land in fact be sold to Mrs Lambert?  Or was this simply an arrangement entered into as a way of attempting to avoid a mortgagee sale and the other potential consequences of such a sale where the land would be returned to the previous owners when the “danger” passed?

[19]     As to the terms of the agreement, the sale price was $1,400,020.  There are a number of unusual features to the agreement.  First, the deposit is $20, obviously an extremely low figure.  Secondly, the balance of the purchase price is to be paid on

28 March 2063.  50 years hence.  No interest is payable on the outstanding sum in the meantime by Mrs Lambert.  No attempt is made to revalue the property at 2063. In the agreement the EML Trust grants a 70 year lease to Mr Jenkins and Ms Ishida including all the chattels on the property.  The rental is $20 a week.

[20]     There  were  two  other  relevant  provisions.     The  agreement  provides Mrs Lambert will resell the property to Mr Jenkins and Ms Ishida at a later date if they  so  require,  and  the  vendors  agree  that  they  will  grant  a  mortgage  to Mrs Lambert.  The purpose of this later provision is unclear.  No details of the resale or mortgage are provided.  It is not clear when or how or for what price there may be a resale.

[21]     The terms of the mortgage are not identified.   However, Mrs Lambert says that “the purchase price is vendor finance by mortgage which allows the purchaser to validly create a mortgage back security.  This security can be assigned to the ASB to redeem the mortgage”.

[22]     It is difficult to understand what this all means.   However, if the sale is vendor financed then that finance (and the mortgage) will not be provided until settlement, when Mrs Lambert has to pay the $1.4 million.  That is not until 2063. Until then there will be no mortgage to assigned and in Mrs Lambert’s scheme no security created and no redemption of the mortgage.   In any event, the ASB is entitled to refuse to accept anything other than money to redeem its mortgage.

[23]     The agreement is dated 28 March 2013.  At para 17 of Mr Jenkins affidavit filed  in  opposition  to  the  application  to  discharge  the  caveat,  affirmed  on

14 August 2013, he said:

On 28 March 2013 I and the other trustee both voluntarily signed a sale and purchase agreement to sell the property to Elizabeth Mary Lambert Trust. As well as protecting the family home, the sale sought to raise credit by giving a mortgage to the purchaser so that she could give back a security with it and offer that security for redemption of the mortgage given to ASB.

[24]     It is not clear how giving a mortgage to Mrs Lambert would create credit.

[25]     I am satisfied that this agreement for sale and purchase is a sham and that neither of the parties ever intended that the property would be sold by Mr Jenkins and Ms Ishida to the EML Trust.   I am satisfied that the agreement for sale and purchase was entered into in an attempt to avoid a mortgagee sale of the property at

37  Wood  Bay  Road,  Titirangi  but  that  none  of  the  parties  ever  intended  that

Mr Jenkins and Ms Ishida would sell their interest in the house to Mrs Lambert.

[26]     The signs of a sham are in the agreement itself.  The agreement requires the purchaser to make no payment for 50 years and only then is there settlement of the sale.  The vendors receive no interest for the 50 year delayed settlement.  There is no revaluation on settlement.  The vendors can continue to live in the property at a rent which must be a tiny percentage of market rent.  The vendors are entitled to ask that the property be transferred back to them at any time (without detail as to price or any other conditions) and for some unidentified reason grant Mrs Lambert a mortgage.

[27]     Mr Jenkins’ observation that the arrangement was an attempt to protect the family home is revealing.  It illustrates that the purpose of this transaction was to try and protect the house from a mortgagee sale in the vein hope that Mrs Lambert could convince the Court that by “selling” the property the mortgagee sale sought by ASB would somehow be stopped.  While such a motive can result in a “true sale” it raises suspicion as to the intention of the parties.

[28]     The agreement allows Mr Jenkins and Ms Ishida to continue to occupy the house in exactly the same way as if they “owned” the property with a right to have it sold back to them at any time they choose.   And the purchaser need not pay the

purchase price for 50 years.  There is no commercial sense to the transaction.  The tenor of the agreement is to maintain all Mr Jenkins’ and Ms Ishida’s interest in the property but to appear to remove them as “owners”.   As I have said when the “danger” of a forced sale passes to return the property to them as the rightful owners. I  am  satisfied  Mr Jenkins,  Ms Ishida  and  Mrs Lambert  did  not  intend  that  the property at Titirangi be sold to Mrs Lambert.

[29]     For these reasons I am satisfied the transaction is a sham.   What then is the consequence of such a finding? As I have said it does not seem to me that it is necessary to invoke their Illegal Contacts Act.  The real issue is what a finding that the agreement in this case is a sham means?

[30]     In  this  case  I  have  found  that  the  purported  agreement  was  one  never intended by the parties to buy and sell the house and land at Titirangi.  Neither the vendors nor the purchasers in fact intended to transfer any interest in the land at Titirangi.  They intended ownership of the land to remain as it was.  They hoped the agreement would delay or prevent the mortgagee sale.

[31]     I am satisfied, therefore, that Mrs Lambert has never had any interest in the land sufficient to caveat the title.  I am satisfied, therefore, that the ASB are entitled to a declaration that the agreement for sale and purchase of 28 March 2013 was a sham and an order removing caveat no. 9417310.1 from Certificate of Title reference NA 862/194 North Auckland Registry immediately.

Did all owners sign the agreement for sale and purchase?

[32]     The ASB’s case is that SWL Trust Ltd as part owner of the land did not sign the agreement for sale and purchase.  Thus, the ASB says, the agreement was invalid and of no effect.  All owners were obliged to sign the contract before it bound the parties.

[33]     The respondent says that at the time the agreement for sale and purchase was signed the SWL Trust was not an owner of the land.  And so its signature was not required on the agreement.  It is not possible to resolve this factual dispute.  Given my other findings, I set this ground of challenge by the applicant aside.

Injunctive relief sought

[34]     In addition to the orders with respect to the caveat, the ASB seeks injunctive relief.  The injunctive relief is aimed at both Mrs Lambert in her personal capacity and Mrs Lambert as trustee of the EML Trust.  The orders sought are to permanently restrain Mrs Lambert in her personal capacity and as trustee or by her servants, agents or otherwise howsoever from:

(a)       lodging or attempting to lodge any caveats against the title of the property at 37 Wood Bay Road, Titirangi (property);

(b)instructing,  directing  or  causing  any  person  or  entity  to  lodge  or attempt to lodge any caveats against the title to the property;

(c)       taking any steps to interfere with, impede or delay the sale of the property; and

(d)seeking to affect a transfer of the title to the property or register any other transfer dealings on the title of the property.

[35]     The ASB refers to Mrs Lambert’s record as a constant caveator in similar circumstances.  The ASB identified at least ten previous cases where Mrs Lambert has become involved in a mortgagee sale process with respect to land that she had originally  had  no  interest.    In  each  case  she  has  attempted,  unsuccessfully,  to maintain caveats registered by her.  There are, to my knowledge, other cases where orders  have  been  made,  sometimes  ex  parte,  discharging  caveats  registered  by Mrs Lambert in similar circumstances.

[36]     Essentially each of her claims are the same.  They are all essentially based on some claim that Mrs Lambert or those she acts for who are subject to mortgagee sales process are entitled to create caveatable interests designed to somehow delay or prevent the mortgagee sale process.

[37]     A sale of any property by the mortgagee will likely create strong feelings of anger and disappointment amongst those who are subject to that process.   This is

particularly so where the property being sold are family homes or family farms.  But having read a number of cases in which Mrs Lambert has been involved, it is clear Mrs Lambert is doing these mortgagors no favour at all.   She is holding out hope where there is none and where it is clear that the mortgagor needs to make the best arrangement they can by co-operating with the mortgagee.

[38]     Mrs Lambert is now bankrupt arising from costs orders made against her in similar proceedings.  But her bankruptcy has not stopped her pursuing her disruptive tactics.  She continues to cost mortgagees thousands of dollars in legal and other fees for no purpose. Much of the material she presents to the courts is incomprehensible.

[39]     Beyond the agreement for sale and purchase in this case, Mrs Lambert could not suggest or identify any other interest that she had in the land.  It became clear during the course of her submissions that she believed she has a number of other strategies which she can use to disrupt the mortgagee sale process.  She is not at all dissuaded by previous judgments of this Court where she has been a litigant.  She is certain she is right and the courts are wrong.  She is certain those mortgagors that she has “helped” owe no money to the mortgagees.   She believes it is her right and obligation to continue to “help” these mortgagors.

[40]     When the ASB wrote to Mrs Lambert pointing out the inadequacies of her caveat she responded  by “offering to  assign  up  to  $900,000  of any security in consideration for a discharge of their clients mortgage”.

[41]     Given ASB already had a first mortgage securing up to $922,500 against the property it is difficult to follow Mrs Lambert’s offer.

[42]     In this case Mr Jenkins and Ms Ishida have made it clear they will not pay the mortgage.  In those circumstances the ASB Bank is entitled to have the money it has loaned Mr Jenkins and Ms Ishida back.  The only way the bank is going to get its money back is by a sale of the property unimpeded by Mrs Lambert.

[43]     Mrs Lambert submitted that the injunctive orders sought would compromise her property rights under the New Zealand Bill of Rights Act 1990.  I have already

found that the sale agreement is a sham and that, therefore, Mrs Lambert has no interest in the property.  And so no “right” under the New Zealand Bill of Rights Act could be affected even if that Act protected property rights.

[44]     Even if I had not declared the agreement for sale and purchase a sham, Mrs Lambert’s  rights  with  respect  to  the  vendors  under  that  agreement  are  not affected by any order I make discharging her caveat.  They are affected by the fact that the sale of the property to her is subject to ASB’s prior rights as mortgagee.

[45]     Given Mrs Lambert’s attitude and approach there is every reason to believe she will continue to try to disrupt this mortgagee sale process.  She has a record of doing so and a firm belief she is right to do so.

[46]     I am prepared, therefore, to make injunctive orders sought.  Mrs Lambert will not have the right to lodge or attempt to lodge caveats against the title, or to instruct or direct anyone else to lodge caveats, or to take steps to interfere or impede or delay the sale of the property, or to seek to affect a transfer title to the property.  However, these orders will be subject to Mrs Lambert’s right to apply to this Court for leave to lodge a caveat or present a transfer or to delay any mortgagee sale with respect to the property at Wood Bay Road, Titirangi.

[47]     In other words, if Mrs Lambert believes she has a lawful reason to lodge a caveat against the title or to do any of the other things she has prohibited to do by the injunction with respect to the Titirangi property, then she may apply to the Court for an order permitting her to do this.  This will protect Mrs Lambert’s “rights” but will ensure that she is only able to exercise those rights if the Court approves her doing so.  The necessity for that restriction arises directly from her conduct with regard to this litigation and her past conduct of registering unmeritorious caveats.

[48]     In summary, therefore, I make the following orders:

(a)       that caveat no. 9417310.1 be removed immediately;

(b)that if for any reason order (a) does not come into force, then caveat no.  9417310  will  lapse  upon  the  presentation  of  a  transfer  of CT NA 862/194 North Auckland Registry by the ASB Bank in the exercise of its mortgagee sale powers;

(c)       there will be the following injunctive orders;

(d)Mrs Lambert personally or as trustee or by her servants, agents or otherwise are permanently restrained from:

(i)lodging or attempting to lodge any caveats against the title of the property at 37 Wood Bay Road, Titirangi (property);

(ii)instructing, directing or causing any person or entity to lodge or attempt to lodge any caveats against the title to the property;

(iii)taking any steps to interfere with, impede or delay the sale of the property; and

(iv)seeking  to  affect  a  transfer  of  the  title  to  the  property  or register any other transfer dealings on the title of the property.

Costs

[49]     The ASB Bank seeks solicitor/client costs against both the EML Trust and Mrs Lambert.  Mrs Lambert is bankrupt.  The ASB say they seek costs against her during her bankruptcy.  If granted this will entitle them to pursue the costs order after her bankruptcy.  They say that indemnity costs are appropriate.  Assuming they will succeed in their various applications, they have advised Mrs Lambert that her claim to  a  caveat  could  not  possibly  succeed.    The ASB  have  set  out  in  detail  that Mrs Lambert has been told by this Court repeatedly that she cannot successfully attack mortgagee sales in the way she has in this case.

[50]     I agree with ASB’s submissions.  Mrs Lambert has had ample warning that this caveat has no chance of resisting challenge.  She has continued to file caveats and resist their removal without justification.  In the circumstances I make an order for indemnity costs in favour of ASB jointly and severally against Mrs Lambert personally and  as  trustee  of  the  EML Trust.    Quantum  to  be  identified  by the

applicants and approved by me.

Ronald Young J

Solicitors:

Simpson Grierson, Auckland