Berghuis v Bank of New Zealand

[2013] NZHC 758

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2012-454-638 [2013] NZHC 758

BETWEEN  RICHARD BERGHUIS Applicant

ANDBANK OF NEW ZEALAND Respondent

Judgment:      15 April 2013

JUDGMENT AS TO COSTS

OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by me on 15 April 2013 at 3.30 pm pursuant to r

11.5 of the High Court Rules.

Solicitors: Sanderson Weir, Solicitors, PO Box 856, Shortland Street, Auckland

R BERGHUIS V BANK OF NEW ZEALAND HC PMN CIV-2012-454-638 [15 April 2013]

[1]      This judgment relates to a costs order which the respondent Bank of New Zealand (BNZ) now seeks against the applicant, Richard Berghuis (Mr Berghuis) in this proceeding following its discontinuance.

[2]      This particular proceeding it seems involved two applications filed 19

September 2012 and 26 October 2012 by Mr Berghuis pursuant to s 145A Land Transfer Act 1952 to sustain caveats number 9161012.1 and number

9164575.1 registered over property at College Street, Palmerston North.  The involvement of Mr Berghuis with this College Street, Palmerston North property has a reasonably long and complex history.  Originally Mr Berghuis as the owner of the College Street property had given to the BNZ a registered first mortgage over the property which fell into default.  A default notice was issued in February 2012 which expired unremedied.  According to the BNZ, no payment had been made on its loans since December 2011.

[3]      In late May 2012 Mr Berghuis purported to transfer the College Street property to a Ms Elizabeth Lambert (Ms Lambert) without the consent of the BNZ and subject to the BNZ’s first registered mortgage.   Certain caveats were then registered over the property and related properties which it seems had the purpose of endeavouring to interfere with a mortgagee sale process which was being undertaken at the time by the BNZ.

[4]      On 4 July 2012, the College Street security property was sold at a BNZ mortgagee sale auction to a third party purchaser.  Settlement under this sale was due on 1 August 2012.

[5]      Original caveats which had been registered against the property were then removed it seems around 25 July 2012.  Further caveats, however, were registered against the title to the properties purporting to relate to claimed interests under a number of complicated lease and buy-back arrangements all dated  around  July  2012  orchestrated  it  seems  by  Mr  Berghuis  and  Ms Lambert.   It can only be concluded that these arrangements were again intended to upset the mortgagee sale of the properties in question to the third party due for settlement on 1 August 2012.

[6]      The  BNZ  then  arranged  for  notice  to  be  given  by  the  Registrar General of Land to the caveators in question including Mr Berghuis for the lapse of the caveats.

[7]      Mr Berghuis it seems was then out of time to obtain any order from the Court that his caveats not lapse and accordingly the caveats lapsed.  Then, on 29 November 2012 leave was granted to Mr Berghuis to discontinue the present proceeding which had endeavoured to sustain the caveats.

[8]      In doing so, I indicated in a Minute issued on that date that costs were reserved and if they were in issue between the parties they were to be the subject of memoranda filed sequentially.

[9]      Costs are in issue here as the BNZ in particular seeks costs on the proceeding.  Memoranda on costs have now been filed on behalf of the BNZ and by Mr Berghuis.

[10]     BNZ seeks costs here on a category 2B scale basis together with disbursements in accordance with r 15.23 High Court Rules. This rule states:

HR 15.23         Costs

Unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[11]     In  the present  case Mr Berghuis as  the discontinuing applicant  to sustain his caveat is effectively in the position of a plaintiff with regard to that discontinued application.

[12]     The principles to be applied by the Court in considering costs on a discontinuance are set out in McGechan on Procedure at para HR15.23.01 as follows:

HR15.23.01      Principles

The following emerge from Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 and FM Custodians Ltd v Pati & Ors [2012] NZHC 1902 at [10]-[12]:

(a)       Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply.

(b)       Although the Court is not limited in the factors it may take into account when considering whether the presumption is displaced, generally:

(i)       The Court will not consider the merits of the respective cases, unless they are so obvious that they should influence the costs outcome.

(ii)       The Court will consider the reasonableness of the stance of both parties: whether it was reasonable for the plaintiff to bring and continue the proceeding, and for the defendant to oppose the proceeding up to the point of discontinuance.

(iii)      Conduct prior to the commencement of the proceeding may be relevant (for example, if any conduct by a defendant precipitated the litigation), as may be the reason for discontinuing (for example, a change of circumstances rendering the proceeding unnecessary).

(c)        The Court’s general discretion in r 14.1 as to costs can also override

the general principles relating to discontinuance.

[13]     In the present case the material filed by Mr Berghuis, including his memoranda as to costs, do not in my view provide any substantive reasons to support a view that the BNZ should not be entitled to a costs award on the caveat applications, applications which were eventually discontinued by Mr Berghuis.

[14]     Instead, it seems Mr Berghuis has outlined in his submissions various matters which in my view are quite irrelevant to the BNZ’s claim for costs. On this, Mr Berghuis has alleged that the BNZ “fraudulently removed the caveats in question” and by doing so showed disrespect to “the authority of the Court”.   This is quite wrong.   It was not the BNZ who removed the caveats in question but it was the Registrar General of Land who removed them after they lapsed by operation of s 145A Land Transfer Act 1952.  The BNZ simply requested that the Registrar General of Land provide notice for the caveats to lapse which occurred as Mr Berghuis had not met the time limits required to have the caveats sustained.   In addition, it was after the lapse of the caveats that the Registrar General of Land simply registered the transfer from the BNZ in exercise of its power of sale under the defaulting mortgages.

[15]     I am satisfied also that, under the circumstances prevailing in this case, the complex web of purported agreements and caveats in which Mr Berghuis (with the help of Ms Lambert) has been involved, were designed simply as an abortive attempt to thwart the BNZ’s proper mortgagee sale processes with regard to the College Street properties following substantial default under its mortgages.

[16]     On these aspects, it is perhaps not insignificant that in the caveat application before me, Mr Berghuis referred the Court he said in support of his application to the decision Waterhouse v Westpac New Zealand Limited HC, Whangarei, 4 July 2012, CIV-2012-488-382 [2012] NZHC 1578, Associate Judge Bell. In that case, in rather similar circumstances to the present the Westpac Bank had made an application to lapse a caveat lodged also it seems involving the same Ms Lambert. Her earlier caveat had also lapsed in that case. Then, Mr Waterhouse had purported to register another caveat following the lapse of Ms Lambert’s caveat, as I understand the position, she having been adjudicated bankrupt in the meantime.

[17]     In the Waterhouse case, Associate Judge Bell, at para [31](b) found:

(b)       It is clear that Mr Waterhouse’s caveat was lodged not to protect his interests  as  a  residential tenant,  but  simply  to  delay  or  impede Westpac in the exercise of its powers to sell the house under the mortgage.  That is apparent from the participation of Ms Lambert in the scheme and the lack of commercial reality in the arrangements made.

[18]     In  that  case,  Associate  Judge  Bell  dismissed  Mr  Waterhouse’s application that his caveat not lapse, and ordered him to pay Westpac’s costs on the application.

[19]     In my view the situation which faces the Court in the present case is perhaps not surprisingly rather similar to that which prevailed in the Waterhouse case. The bona fides of Mr Berghuis in registering the caveat and bringing his present application must be seriously questioned.  I am satisfied that all this was purely an unsuccessful attempt on his part to impede the

BNZ’s  proper  mortgagee  sale  of  the  property,  following  acknowledged default under its mortgage.

[20]     Given all these matters, it is my view that, under the circumstances in this case, the presumption in r 15.23 that a discontinuing party is to pay the other party costs has not been displaced and should apply.   It is as I see it entirely just and equitable that the presumption continues to apply here.

[21]     The BNZ is accordingly entitled to costs on this application as sought. Costs are therefore awarded to the BNZ against Mr Berghuis on this application on a category 2B basis together with disbursements as approved by the Registrar.

‘Associate Judge D.I. Gendall’