Burke v Advanced Securities Limited HC Tauranga CIV 2007-470-000143

[2008] NZHC 2664

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV 2007-470-000143

BETWEEN  JULIAN PAUL BURKE AND GILLIAN ELIZABETH BURKE

Applicants

ANDADVANCED SECURITIES LIMITED Respondent

Hearing:         30 October 2008 (Heard at Auckland)

Appearances: Applicants in Person

K I Bond for Respondent

Judgment:      30 October 2008

ORAL JUDGMENT OF VENNING J

ON APPLICATION FOR INJUNCTION AND APPLICATION FOR STAY

Solicitors:           Harkness Henry & Co, Hamilton

Copy to:            JP Burke and GE Burke, Tauranga

BURKE AND BURKE V ADVANCED SECURITIES LIMITED HC TAU CIV 2007-470-000143  30 October

2008

Introduction

[1]      This matter has come before the Court today on an application to stay.  The application to stay is directed at both a monetary judgment and an order for possession.

Background

[2]      The background to the application is somewhat complicated.  I draw from the background summary referred to in the Court of Appeal decision on this matter.

[3]      Mr and Mrs Burke are currently registered proprietors of a property situated at 1911 State Highway 39, Tauranga.  They applied to Advanced Securities Limited (ASL) for a loan facility.   They were initially offered $965,000 to assist with refinancing existing debt and development costs.  The development costs related to the land in issue.  Mr and Mrs Burke signed an acceptance form attached to the loan offer  on  12  September  2005.    On  14  September  2005  the  solicitors  for  ASL forwarded  relevant  loan  documentation  to  the  solicitors  acting  for  Mr  and  Mrs Burke.   Included were declarations which Mr and Mrs Burke subsequently made. The  declarations  were  directed  at  the  provisions  of  the  Credit  Contracts  and Consumer Finance Act 2003 confirming that the advance was for use primarily for business or investment purposes or for both purposes.

[4]      There were further discussions between the parties.  ASL agreed to increase the advance to $1,075,000.  The difference between the two sums is explained by reference to some additional interest and costs payable to the original financier to repay its debt and to obtain discharges of the securities.  Further declarations were executed in similar terms to the original declarations.

[5]      The  principal  was  advanced  by ASL to  Mr  and  Mrs  Burke.    It  fell  for repayment on 16 May 2006.  Mr and Mrs Burke defaulted.  They failed to repay the principal on the due date.  In September 2006 ASL issued notices under s 92 of the

Property Law Act 1952.  The notices were served on Mr and Mrs Burke.  The arrears claimed were $1,088,317.55 including a claim for interest.  In February 2007 ASL commenced proceedings against Mr and Mrs Burke in the High Court and made application for summary judgment.  The application for summary judgment included a claim for the interest that had accrued since default.  Mr and Mrs Burke opposed the entry of summary judgment contending that the advance was a non-business loan and disclosure had not been properly made.  That contention was confirmed by Mr Burke in an affidavit sworn in opposition to the application for summary judgment.

[6]      ASL filed an amended statement of claim to seek, in addition, an order for possession of three lots being the land described in the developed and subdivided titles.  The draft order for possession included a reference to the additional land that had been amalgamated into Lot 1 as a result of steps taken by Mr and Mrs Burke under s 242 of the Resource Management Act 1991.  The original security did not incorporate or include that additional land.

[7]      The  application  for  summary  judgment  came  before  Associate  Judge Doogue.   On 18 July 2007 he delivered a monetary judgment in favour of ASL. Subsequently on 15 August 2007, after hearing further from parties on the issue of the orders for possession, the Judge approved a form of judgment incorporating both the monetary judgment and an order for possession.  The monetary judgment was in the sum of $1,088.317.55 plus disbursements of $1,740.00.  The order for possession referred to and included balance Lot 1 DP 360598 “with additional land amalgamated”.

[8]      The monetary judgment was for a lesser sum than that claimed as  ASL decided to pursue the claim for the lesser sum due as at the date of repayment because of issues raised by Mr and Mrs Burke.  ASL reserved its position in relation to the balance claimable under the mortgage advance for later hearing.

[9]      Mr and Mrs Burke appealed the judgment to the Court of Appeal.   In a judgment delivered on 18 April this year the Court of Appeal noted the appeal was directed at both the monetary judgment and the order for possession.  It was said on behalf of Mr and Mrs Burke, who were represented for the purposes of the appeal,

that the advance had been made contrary to the Credit Contracts and Consumer Guarantees Act and that the declarations obtained did not satisfy the requirements of s 14 of that Act as they were not made in the proper timeframe, in other words before entering into the contract.  The Court considered the effect of s 13 of the Act which provides:

13       Presumption relating to consumer credit contract

In  any  proceedings  in  which  a  party  claims  that  a  credit  contract  is  a consumer  credit  contract,  it  is  presumed  that  the  credit  contract  is  a consumer credit contract unless the contrary is established.

[10]     The Court accepted that the declarations were not executed within time and as such could not operate to  rebut  the  s  13  presumption.    However,  the  Court accepted on the evidence that the s 13 presumption was rebutted.   As a result the initial  disclosure  provisions  of  the  Act  could  not  apply  to  prevent  ASL  from obtaining judgment for the outstanding loan.   The Court of Appeal confirmed the monetary judgment.

[11]     In relation to the order for possession the Court accepted the submissions for Mr and Mrs Burke that there was an error in the inclusion of the additional land.  The additional land was not covered by ASL’s mortgage.  Counsel effectively accepted that position.

[12]     The Court upheld the possession order in respect of Lots 4 and 5 but deleted the words “and balance Lot 1 deposited plan 360598 with additional land amalgamated” from the order.  Leave was reserved for ASL to apply to include land within Lot 1 over which it could demonstrate a right to possession under the mortgage.  The matter was then returned to the High Court at Tauranga.  ASL sought a further order for possession.  Following a hearing on 7 October Associate Judge Doogue delivered a further decision on the matter, concluding that there were no legal or practical reasons why judgment for possession of the land should not issue in the form submitted by the plaintiff.   That form was  a plan with survey co- ordinates that excluded the land which the mortgage did not cover.

[13]     The applications for stay before this Court are brought in response to the Court of Appeal judgment and in response to Associate Judge Doogue’s subsequent judgment on the order for possession.

[14]     Mr and Mrs Burke now represent themselves.  They brought the application themselves.  Mr Burke advanced submissions.  The application is supported by an affidavit from Mrs Burke.

Mortgagee sale

[15]     During the course of submissions Mr Burke advised the Court that there was a mortgagee sale this afternoon for Lots 1 and 5.  Mr Bond took further instructions on that matter at the Court’s request and obtained copies of the relevant documents relating to the mortgagee sale.

[16]     The particulars and conditions of sale disclose that in relation to Lot 1 the contract is stated to be conditional upon ASL becoming the registered proprietor of the second mortgage currently held by Basecorp Finance Limited and upon Basecorp Finance Limited serving notices under s 119 of the Property Law Act on the mortgagor with those notices expiring unremedied, both conditions to be satisfied on or before the 20th working day after the date of the agreement.

[17]     The title to Lot 1 records a caveat registered by ASL in relation to the Basecorp mortgage.  The caveat discloses that ASL claims an interest pursuant to an agreement for sale and purchase on 8 October between it and Basecorp for ASL to purchase the Basecorp mortgage.   Mr Bond candidly acknowledged that although there was such an agreement there were a number of unresolved conditions to it.

[18]     In short the position is that ASL is not itself able to sell Lot 1 as the legal title to the Lot 1 that now exists includes additional land which is not subject to its mortgage.  It could possibly seek to sell the part of Lot 1 that its mortgage relates to but there would be considerable difficulties for it in that regard.   The Basecorp second mortgage, however, is over the entire Lot 1.  If ASL was able to complete the

purchase  of  the  Basecorp  mortgage  then  it  would  have  rights  as  the  second mortgagee to sell the entire Lot 1.

[19]     I  treated  Mr  Burke’s  submissions  as  an  application  to  prevent  ASL proceeding with the mortgagee sale in relation to Lot 1.  I concluded there should be an injunction issued to prevent the mortgagee sale of Lot 1.  I have come to that view for the following reasons.

[20]     While I accept that a mortgagee can proceed to sell under the provisions of its mortgage in advance of issuing the appropriate notices under s 119 of the Property Law Act 2007:  s 124, the position in the present case is somewhat different to that. ASL has no right under the terms of its existing mortgage to sell the entire land held in Lot 1.  Despite that the particulars and conditions of the sale purport to be a sale by ASL in relation to the entire land currently comprised in Lot 1.  The only basis upon which ASL would have such a right to do so would be if it completed its agreement with Basecorp Finance.  That agreement has not yet been completed.  I understand there are issues in relation to that.

[21]     In  the  circumstances  ASL  is  effectively  seeking  to  exercise  rights  as  a mortgagee which it presently does not hold.  It is at least arguable that it may never be in a position to proceed to sell as mortgagee.  That is different to the position of a mortgagee with existing rights that has not yet issued the appropriate notices.

[22]     I accept that there will be a cost to ASL as a result of wasted advertising in relation to Lot 1.  If ultimately ASL’s position is maintained or upheld then it will of course be entitled to recover those wasted costs under the provisions of its mortgage.

[23]     The disadvantage to Mr and Mrs Burke as current owners of the property is significantly more.  The balance certainly favours them in relation to the mortgagee sale at least.

[24]     For those reasons I directed that an injunction issue to prevent the mortgagee sale this afternoon.

[25]     The injunction having issued Mr and Mrs Burke should now take advice about the matter.   They should file a formal application for injunction preventing ASL from proceeding to mortgagee sale on the existing terms and conditions that are currently before the Court in relation to Lot 1.  Such application is to be filed and served by 7 November 2008 so that there is a record of such formal application on the file.   They should file with the application an affidavit attaching the relevant papers which have been made available to the Court this morning, again for record purposes.

The applications for stay

[26]     That then leaves the issues of Mr and Mrs Burke’s applications for stay which is what brought the matter before the Court in the first place.  The first issue is in relation to the stay as it relates to the monetary judgment.  There are two bases upon which the application for stay is sought.  First, I am told that Mr and Mrs Burke wish to seek leave from the Supreme Court to appeal to that Court from the decision of the Court of Appeal.  To the extent that they wish to seek leave from the Supreme Court to appeal the decision of the Court of Appeal this Court cannot grant a stay of the Court of Appeal judgment.  That can only be granted by the Court of Appeal or the Supreme Court:  r 30 of the Supreme Court Rules.  I note that although the Court of Appeal decision was delivered on 18 April and the time for making application to the Supreme Court expired on 20 May the application for leave  to  appeal  was apparently not filed until 26 September.

[27]     This Court does have jurisdiction in relation to the stay of the monetary judgment under r 565.  The stay under r 565 is separate and distinct from the power to stay executing pending appeal.

[28]     Under  that  Rule  this  Court  has  a  general  discretion  to  direct  a  stay  of judgment upon the ground that a substantial miscarriage of justice would be likely to result if the judgment were executed.  The Court may give relief on such terms as appear just.

[29]     The onus is on the applicant to establish both the likelihood and substantial nature of any miscarriage of justice and it needs to be shown that a miscarriage is probable  rather  than  possible:    Amalgamated  Finance  Ltd  v  Fairlie  HC  AK A1232/83 3 September 1986 Wylie J.   It requires a balancing exercise where the Court must recognise and reconcile the conflicting interests of both parties.

[30]     In this case there is no dispute that ASL made the advance to Mr and Mrs Burke.  Mr and Mrs Burke have had the use of the money.  They were obliged to repay it in May 2006.  They failed to do so.  The Associate Judge and the Court of Appeal have confirmed their liability to pay the principal and interest to that date. The basis upon which Mr and Mrs Burke say they should not have to pay the judgment at present is that they intend to pursue a claim against ASL in relation to its conduct as mortgagee.   They wish to raise a number of issues.   Through the course of  her  affidavit  Mrs  Burke  refers  in  a  pejorative  way to  ASL’s  actions suggesting “conspiracy with a solicitor”, referring to “perverse conduct”, and describing its intentions as “plunderous”.   The affidavit is replete with emotive language.

[31]     But despite the fact that this matter has been before the Court for some years now as yet Mr and Mrs Burke have not formulated in legal terms a claim against ASL for its actions in any precise or clear way.  To the extent that they do have a claim against ASL they are free to pursue such claim.   I am advised by them that there is a case management conference on the file scheduled for next year.   They anticipate that directions will be made at that conference to advance their claim.  But the onus is on them to formulate it with clarity.

[32]     The summary judgment that has been entered is only in relation to ASL’s claim against Mr and Mrs Burke up until mid 2006.  ASL itself retains a potentially substantial additional claim for interest and costs from that date.

[33]     The possible claim that Mr and Mrs Burke have referred to and sought to identify in a general way in the papers before the Court is not such as to require this Court to direct a stay of the monetary judgment at this time.  As Tomkins J observed in Econotek Construction Ltd v Kale HC AK CP8/87 7 January 1988:

A miscarriage of justice can hardly be said to result where the defendant is require to pay to the plaintiff an amount that is owing to it, and the defendant will be free to pursue his claim against the plaintiff in the normal way.

[34]     There is a substantial sum of money owing by Mr and Mrs Burke to ASL.  It should be paid.   ASL should be left to its remedies to pursue that payment in whatever way it sees fit.

[35]     The application for stay of the monetary judgment is declined.

[36]     That leaves the issue of possession.  Mr and Mrs Burke wish to appeal the most recent decision of Associate Judge Doogue to the Court of Appeal.  They wish to raise a number of issues including that it is not legally possible for the land to be partitioned in the way that the Judge has identified in the order for possession.  They say that the land identified in the annexure does not have access, which is contrary to provisions of the Resource Management Act and that the land is landlocked.  But the land is not landlocked in that at present it is not intended to subdivide it or create titles where it would be landlocked.

[37]     Mr and Mrs Burke also refer to the evidence before Associate Judge Doogue from Mr McLennan as to the difficulties in relation to such land:

Difficulty arises where an allotment, in one certificate of title, is subject to a mortgage that only affects part of that allotment.  The portion affected by the mortgage and the portion not affected by the mortgage ... are both held as one allotment that cannot be divided to separate the different areas, without undertaking a subdivision and obtaining consent for that subdivision from the Local Authority.  The former titles are cancelled and cannot be recreated without subdividing.

[38]     That evidence, however, seems to me to relate to the question of the issue of formal legal title to the property rather than the practical issue of defining land for possession  purposes  which  is  what  was  addressed  by the  Court  of  Appeal  and Associate Judge Doogue.

[39]     Even though ASL is not able to sell Lot 1 in its entirety under the existing mortgage it holds there will be practical advantages to it in having possession of Lot

1 (with the annexure excluded) for the purposes of survey if any further applications

may be necessary and also for the purposes of ensuring ease of sale of the land in the future.

[40]     I note that the Court of Appeal contemplated in its judgement that Associate Judge Doogue might make an amended order for possession in relation to Lot 1. That is precisely what the judgment does in response to the appeal decision.

[41]    The additional land has been excluded from the order for possession as contemplated.  I see no basis upon which to direct any stay in relation to the order for possession  pending  whatever  further  appeal  Mr  and  Mrs  Burke  might  wish  to advance in relation to that matter to the Court of Appeal.

[42]     There is, however, a practical matter in relation to possession.  I am told by

Mr Burke Lot 1 encompasses both Mr and Mrs Burke’s home and approximately

100 or so deer.  It will take some time for Mr and Mrs Burke to make alternative arrangements for themselves and for the deer.

[43]     In  the  circumstances  I grant  an  interim  stay in  relation  to  the  order  for possession by directing that it lie in court for 10 working days from today.   But otherwise the order for possession is to issue in the terms fixed by Associate Judge Doogue.

Costs

[44]     ASL has succeeded in opposing the applications formally brought before the Court today.  Effectively the injunction matter has been dealt with by the Court on behalf of Mr and Mrs Burke.   In the circumstances ASL is entitled to costs on its successful opposition to the applications for stay.  Costs will be payable to ASL in

terms of the mortgage.

Venning J