ASB Bank Ltd v Robertson

[2012] NZHC 1587

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-0910 [2012] NZHC 1587

BETWEEN  ASB BANK LIMITED Plaintiff

ANDROSS ARTHUR ROBERTSON First Defendant

ANDCANDACE ANN ROBERTSON Second Defendant

Hearing:         5 July 2012

Appearances: N Moffatt for Plaintiff

First and Second Defendants in Person

In attendance:  MB Lawes

Judgment:      5 July 2012

ORAL JUDGMENT OF TOOGOOD J

N Moffatt, Bell Bully, Auckland:  [email protected]

R Robertson, Auckland:  [email protected]

LawesLaw, Orewa:  [email protected]

ASB BANK LIMITED V ROBERTSON & ANOR HC AK CIV-2012-404-0910 [5 July 2012]

[1]      The defendants owe the plaintiff, ASB Bank Limited (“the Bank”) just under

$2 million.  They are in serious default in the payment of amounts due under two loan agreements with the Bank, which were secured by a first ranking mortgage over the defendants’ property at 710 Hibiscus Coast Highway, Hatfields Beach, Auckland (Certificate of Title NA139C/382) (“the property”).

[2]      The memorandum of mortgage securing the advances provides, among other things, the right of the Bank as mortgagee to take possession of the property and sell it in the event of such default.  The Bank now seeks to exercise that right in order to recover as much as it can of the outstanding debt.   It has applied for summary judgment on the basis that the defendants have no defence to its claim.

[3]      I record that, at the commencement of the hearing, Mr Lawes of counsel announced his attendance for the limited purpose of providing informal assistance to the defendants, who are unrepresented.  Mr Lawes had been asked by the defendants to assist them but no grant of legal aid has been made.   Mr Lawes was present throughout the hearing; he addressed me briefly and helpfully on some matters and both of the defendants addressed me in person.

[4]      The defendants claim that the Bank and its agents have failed to take all reasonable steps to obtain the best price obtainable for the property.  Their case to this  effect  is  contained  in  affidavits  which  I  admitted  into  evidence,  despite opposition from the Bank on the grounds of delay and, in some respects, hearsay. They say that the Bank has breached its duty of care under s 176 of the Property Law Act  2007  (“the Act”) and  they seek  an  order  restraining the  Bank  from  taking possession, on the basis that the prospects of obtaining a fair price for the property would be enhanced if they were able to remain in possession themselves until an orderly sale is completed.

[5]      The defendants do not dispute the terms of the loan agreements and the mortgage.  It is not denied that:

(a)       they entered into the loan agreements and were advanced the sums of

$1,450,000 and $62,000 respectively under them;

(b)they granted the mortgage to the Bank on the terms set out in the memorandum of mortgage, which included the Bank’s right to take possession of the property under the security on the mortgage becoming enforceable;

(c)      their account with the Bank was overdrawn by $115,406.40 on or about 24 November 2010;

(d)      they were sent a demand for payment of the outstanding amount on

24 November 2010, and they failed to make payment in respect of the demand;

(e)      that they were served with a notice under s 119 of the Act requiring them to make payment of the outstanding sum of $115,406.40 by

25 January 2011, and they failed to remedy their default; and

(f)       the   Bank   requested   them   to   vacate   the   property   on   10   and

19 October 2011, and again on 19 January 2012, but they have failed to do so.

[6]      The defendants do not dispute that the amount currently owing under the loan agreements and in respect of a credit card totals $1,941,678.  They understand the Bank also claims post-judgment interest and costs.

[7]      Although not denying the essential facts as to the loan arrangement, the terms of the mortgage and the Bank’s right to enter into possession and sell the property, the defendants argue that the Court should not enter judgment until it has considered their allegations that the Bank has breached its duty of care to them to obtain the best price reasonably obtainable as at the date of sale.  Because of the view I have come to as to the ability of the defendants to rely on this ground in resisting the entry of

summary judgment, it is unnecessary to discuss the grounds for that allegation in any detail.  In brief, the defendants say that:

(a)      the Bank has employed real estate agents who have marketed the property well below its true value;

(b)the real estate agents and the Bank undermined a private treaty deal which  the  defendants   had  arranged   for  a  sale  at  a  price  of

$2.1 million;

(c)       the Bank unreasonably rejected a conditional offer which would have

seen the defendants’ debt repaid in full;

(d)      the Bank is acting unreasonably in forcing a mortgagee sale during

“the worst property collapse in recent history”;

(e)      the Bank has failed to communicate with the defendants regarding other practical options; and

(f)      permitting the Bank to enter into possession and evict the defendants will further devalue the asset and lead to a further underselling of the property.

[8]      Mr Lawes  informed  me  that  the  defendants  also  raise  a  potential  set-off argument in that the defendants say that they offered to the Bank the opportunity to rent the property at a rental of $50,000 per year approximately, while the Bank held off  exercising  its  right  to  take  possession  pending  a  sale.    Mr Lawes,  at  least, accepted that there was no obligation on the Bank to permit such an arrangement.  It would be predicated on an assumption that the defendants would remain in possession, and really that amounts to no more than saying that the Bank should have held off exercising its rights.   I do not consider that gives rise to a set-off argument which would prevent the entering of summary judgment.

[9]      I accept the submission for the plaintiff that, although the duty of care under s 176(1) arises at the time the decision is taken to sell, compliance with the duty

cannot be measured until the property is actually sold.  This is because a breach of the duty is not actionable without proof of damage.[1]   The damages awardable are the loss resulting from the property being sold at a price lower than the best price reasonably obtainable;[2] such damage cannot be determined until the property is sold.

[1] Apple Fields Limited v Damesh Holdings Limited [2003] UKPC 54, [2004] 1 NZLR 721 at [22].

[2] Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54 at 64(a)-(b).

[10]     The defendants do not deny that the terms of the Bank’s security and the application  of  the Act  entitle  the  Bank  to  sell  the  property.    If,  following  the inevitable sale, the defendants consider that the price obtained is inadequate, they have a right to bring a claim for damages against the Bank.  It is at that time, and not now, that their allegations of breach of the Bank’s duties to them will be assessed.

[11]     Under r 12.2 of the High Court Rules, the Court may give judgment against a defendant if the plaintiff satisfies the Court that there is no reasonable ground of defence and no real question to be tried.[3]     I am wholly satisfied that there is no arguable defence to the plaintiff’s claim.

[3] Pemberton v Chappell [1987] 1 NZLR 1 (CA).

[12]    The plaintiff seeks judgment for the outstanding amount under the loan agreements  and  the  credit  card  plus  interest  and  costs,  and  an  order  that  the defendants vacate the property and deliver up possession to the plaintiff.

[13]     After hearing from Mr Moffatt for the Bank and each of the defendants, I adjourned the hearing for 90 minutes to enable Mr Moffatt to seek instructions as to the amount owing to date, and as to whether the Bank will allow the defendants a period of grace to arrange their departure from the property.   The total amount claimed to date in respect of outstanding principal and interest under the loan agreement and the credit card is $1,941,678, and Mr Lawes informed me after taking instructions that the defendants accept that amount.  The Bank has indicated that, if judgment is entered today, it will not seek vacant possession for five working days

but was prepared to consider allowing 10 working days.

[14]     Mr and Mrs Robertson asked for a month’s grace, but they have been aware since 14 May 2012, when the fixture was allocated, that an order for possession might have been made today.

[15]     I propose to allow Mr and Mrs Robertson two weeks to vacate.

[16]     In  the  circumstances,  I  enter  judgment  for  the  plaintiff  and  make  the following orders:

(a)      The defendants shall pay the plaintiff the sum of $1,941,678, being the amount owing to the Bank as of today;

(b)The plaintiff   shall have interest on the outstanding balance of the judgment sum from the date of judgment to payment at the prescribed rate of five percent per annum;

(c)      I order that, no later than 5 00 pm on Thursday, 19 July 2012, the defendants shall vacate and deliver up to the plaintiff possession of the property contained and described in Certificate of Title NA139C/382; and

(d)The defendants shall pay the plaintiff ’s costs calculated in accordance with  the  provisions  of  clause 16.8  of  the  standard  terms  and conditions attached to the two loan agreements.

[17]     In the event of any dispute between the parties as to the appropriate amount of costs, any party shall have leave to apply to the Court for further orders.

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Toogood J