Bank of New Zealand v Padamati
[2021] NZHC 45
•2 February 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-2214
[2021] NZHC 45
UNDER Section 339 of the Property Law Act 2007 BETWEEN
BANK OF NEW ZEALAND
Plaintiff
AND
SREEKAR REDDY PADAMATI
First Defendant
SARITHA MARAKANTI
Second Defendant
Hearing: 2 February 2021 Appearances:
HCMS Snell for the Plaintiff
No appearance by or for the Defendants
Judgment:
2 February 2021
JUDGMENT OF GAULT J
This judgment was delivered by me on 2 February 2021 at 3:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors:
Mr D T Broadmore and Mr HCMS Snell, Buddle Findlay, Auckland
BANK OF NEW ZEALAND v PADAMATI [2021] NZHC 45 [2 February 2021]
[1] The plaintiff’s application for summary judgment was listed for first call in the summary judgment/caveat list this morning. The plaintiff seeks an order that the property situated at 117 Matua Road, Huapai, Kumeu, as detailed in record of title no. 698621 (property) be sold and the proceeds divided among the co-owners pursuant to s 339(1)(a) of the Property Law Act 2007 (PLA).
[2] The defendants have neither filed notices of opposition nor appeared this morning. Mr Snell, for the plaintiff, sought judgment at the first call, having filed a helpful memorandum of counsel dated 29 January 2021.
[3] The documents have been served on both defendants and on the Official Assignee due to the bankruptcy of the first defendant, Mr Padamati. No other party has an interest in the property that may be affected by the granting of the application. Accordingly, all interested parties have been served as required under s 341(2) of the PLA.
[4] The orders are sought because, as the documents indicate, on or about 1 August 2017 the first defendant granted the plaintiff a mortgage over the property to secure a loan advanced by the plaintiff to the first defendant. At the time, the property was jointly owned by the defendants. The second defendant did not grant a mortgage to the plaintiff. On 29 July 2019 the first defendant was adjudicated bankrupt, defaulting on his loan obligations to the plaintiff. The plaintiff, as mortgagee, wishes to exercise its power of sale over the first defendant’s interest in the property. The Official Assignee is not taking any steps in relation to the property.
[5] The property was owned by the defendants as joint tenants. The first defendant’s adjudication in bankruptcy severed the joint tenancy so that the property does not pass by survivorship to the other joint tenant but is held by both as tenants in common.1
[6] Under s 339 of the PLA, the Court may make, in respect of property owned by co-owners, an order for the sale of the property and division of the proceeds among
1 Official Assignee v Peachey [2018] NZHC 1949 at [6].
the co-owners. In considering an application under s 339, the Court must have regard to the following factors set out in s 342:
(a)the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made;
(b)the nature and location of the property;
(c)the number of other co-owners and the extent of their shares;
(d)the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order;
(e)the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property; and
(f)any other matters the Court considers relevant.
[7] For the reasons set out in the affidavit in support of Ms Warrington, I am satisfied that the above factors weigh heavily in favour of the orders sought. This is particularly because:
(a)neither the Official Assignee nor the second defendant opposes the plaintiff’s claim;
(b)Over $697,000 plus interest remains outstanding and owing to the plaintiff by the first defendant under a home loan agreement and transaction account;
(c)the plaintiff would suffer hardship if it could not realise its security as first-ranking mortgagee; and
(d)the defendants have a financial interest in the property but it is not their family home.
[8] The order sought follows the precedent of Official Assignee v Peachey,2 which in turns follows the orders approved in Official Assignee v Faresa,3 with one exception. The order sought omits the short stay included in both precedents to enable the second defendant to make an offer to acquire the plaintiff’s interest.4 Mr Snell submits that such a stay is unnecessary because the plaintiff’s solicitors have been communicating with the second defendant and there has never been any indication from her that she would be capable of, or interested in, purchasing the plaintiff’s interest in the property. However, the plaintiff also acknowledges that it will suffer no prejudice by such a stay being granted and abides the decision of the Court on this issue. I acknowledge that correspondence. In the circumstances, I propose to include in the order a very short stay of seven days to enable the second defendant to make an offer to acquire the plaintiff’s interest.
[9]I make the order in the terms sought, save for that modification, as follows:
(a)The property shall be sold under the control and conduct of the plaintiff.
(b)The plaintiff shall appoint a reputable real estate agent or agents to act in respect of the sale of the property.
(c)In consultation with such real estate agent or agents and the second defendant, the plaintiff shall determine the most appropriate means of marketing and selling the property and shall set any asking, selling or reserve prices.
(d)The plaintiff shall be authorised to execute on the first and second defendants’ behalf any listing agreement, agreement for sale and purchase, memorandum of transfer or other document necessary to carry out or effect the sale of the property.
2 Official Assignee v Peachey [2018] NZHC 1949 at [12].
3 Official Assignee v Faresa HC Auckland CIV-2007-404-7920, 13 February 2008.
4 Official Assignee v Peachey at [12](viii) and Official Assignee v Faresa at [9](f).
(e)Pending sale, the first and second defendants shall ensure that the property is kept in a clean, tidy and presentable condition for sale and shall make such reasonable access available for viewing as the plaintiff or its agents shall require.
(f)Within 30 days of being served with notice that an unconditional agreement for sale and purchase of the property has been entered into, the first and second defendants shall give up vacant possession of the property to the plaintiff.
(g)The proceeds of sale of the property shall be disbursed in the following priority and manner:
(i)Payment of any outstanding rates or insurance premiums in respect of the property, real estate agent’s commission or fees, valuation costs, costs of advertising or marketing, legal fees incurred in connection with the sale of the property (including the costs and disbursements of this proceeding), and any other amounts under s 185(1)(a)-(c) of the PLA, and the balance as follows:
(1)half to the plaintiff in repayment of the amount due and owing by the first defendant to the plaintiff and secured by the mortgage; and
(2)half to the second defendant.
(ii)To the extent that there are any remaining amounts from the first defendant’s half share after repayment to the plaintiff in accordance with para [9](g)(i)(1) above, that those amounts be transferred to the Official Assignee for the benefit of the first defendant’s remaining creditors.
(h)The orders set out at paras (a) to (g) shall be stayed for a period of seven days from the date of service of the Court’s order on the second defendant to enable her to make an offer to acquire the plaintiff’s interest in the property, should she wish to do so.
(i)The parties shall have leave to apply for further directions if necessary.
[10] The plaintiff is entitled to costs on a 2B basis, together with disbursements as fixed by the Registrar.
Gault J
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