Chen v ANZ National Bank Limited

[2012] NZHC 549

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-1014 [2012] NZHC 549

BETWEEN  ZUNHUI CHEN Applicant

ANDANZ NATIONAL BANK LIMITED Respondent

Hearing:         26 March 2012

Counsel:         SJ Telford for respondent

Appearance:    EK Lau presented a power of attorney executed by the applicant and was granted leave to appear today

Judgment:      26 March 2012 at 2:45pm

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application that caveat not lapse]

Solicitors:           Morgan Coakle, PO Box 114, Auckland 1140

And To:             EK Lau, 2 Carousel Crescent, East Tamaki, Auckland 2016

CHEN V ANZ NATIONAL BANK LIMITED HC AK CIV 2012-404-1014 [26 March 2012]

[1]      Mr Lau sought leave to appear on the applicant’s behalf.   He referred to a power of attorney executed by the applicant.   I have granted him leave to appear today.

[2]      The applicant applies for an order pursuant to s 145A of the Land Transfer Act 1952 that Caveat No. 8710952.4 not lapse.  The titles affected by the caveat are NA135B/655  and  NA76C/620.    Those  titles  relate  respectively  to  properties  at

27 Nicholas  Gibbons  Drive,  Clevedon  Park, Auckland  and  1/12  Goldnib  Place, Randwick Park, Auckland.   The registered proprietor of both those properties is Guilan Jia.

[3]      The caveat claims an estate or interest:

as purchaser and lessee pursuant to an agreement dated 25/2/2011 in respect of  the  land  described  in  identifier  NA135B/655  and  agreement  dated

1/3/2011 in respect of land described in identifier NZ76C/620 between the

registered proprietor Guilan Jia and the caveator.

[4]      The  respondent  opposes  the  order  sought.     The  grounds  advanced  in opposition are:

(a)       The registered proprietor/mortgagor did not seek the consent of the respondent  mortgagee  to  sell  27  Nicholas  Gibbons  Drive  and

1/12 Goldnib Place;

(b)      The respondent’s mortgage was registered on the land described in

identifier 76C/620 on 26 September 2007;

(c)       The respondent’s mortgage was registered on the land described in

identifier 135B/655 on 13 November 2007;

(d)The    respondent,    as    mortgagee,    has    entered   into    conditional agreements for sale and purchase of 27 Nicholas Gibbons, Drive and

1/12 Goldnib Place;

(e)      The applicant’s sale and purchase agreement concedes priority to the respondent’s mortgages; and

(f)      The sale proceeds from the mortgagee sale are insufficient to pay the amount owed by the mortgagor/registered proprietor to the respondent secured by the respondent’s mortgages.

[5]      The applicant applies under s 145A of the Land Transfer Act 1952 which provides:

145A   Early lapse of caveat against dealings

(1)       The  registered  proprietor  of  any  estate  or  interest  in  the  land protected by a caveat against dealings (other than a caveat lodged by the Registrar) may apply to the Registrar for the caveat to lapse.

(2)       The Registrar must give the caveator notice of an application under subsection (1).

(3)       The caveat lapses with the close of the prescribed period after the date on which the notice under subsection (2) is given unless—

(a)       the caveator has earlier given to the Registrar notice that an application for an order to the contrary has been made to the High Court; and

(b)       an order to that effect has been made and served on the Registrar  within  the  prescribed  period  after  the  date  on which the notice under paragraph (a) is given to the registrar.

[6]      The  applicable  principles   which   apply  when   considering  applications pursuant to s143, 145 and 145A of the Land Transfer Act 1952 are well known and can be shortly stated. They are:

a)       Ss 143, 145 and 145A of the Land Transfer Act 1952 give no guide as to the circumstances in which the court may make an order that a caveat be removed:[1]   Catchpole v Burke;

[1] Catchpole v Burke [1974] 1 NZLR 620 (CA) at 623.

b)If it is clear that there was no valid ground for the lodging of a caveat, or that the interest which in the first place justified the lodging of the

caveat no longer exists, such a caveat should be removed:[2]   Sims v

[2] Sims v Lowe [1988] 1 NZLR 656 (CA) at 659.

Lowe;

c)       The onus under s 143 of the Land Transfer Act 1952 lies on the caveator  to  show  that  he  has  a  reasonably  arguable  case  for  the interest he claims:[3]   Castle Hill Run Ltd v NZI Finance Ltd;

[3] Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104–106 (CA).

d)The caveat, being a creature of statute, may be lodged only by a person upon whom a right to lodge it has been conferred by statute.  It is not enough to show that the lodging and continued existence of the caveat  would  be  in  some  way  advantageous  to  the  caveator:[4]

[4] Guardian Trust & Executor Co of New Zealand Ltd v Hall [1938] NZLR 1020 (CA) at 1025.

Guardian Trust & Executor Co of New Zealand Ltd v Hall;

e)       What the caveator must establish is an arguable case for claiming an interest of the kind referred to in s 137 of the Land Transfer Act 1952; and

f)        Even if the caveator establishes an arguable case for the interest in the land claimed, the court retains a discretion to make an order removing the caveat although it will be exercised cautiously:[5]    Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd.

[5] Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 656.

[7]      The respondent bank registered mortgages over both properties.  They were lodged for registration on 28 September and 13 November 2007.

[8]      The registered proprietor is in default in relation to both mortgages.    On

10 February 2012, $838,437.55 was due and owing.

[9]      The respondent took steps to exercise its right of mortgagee sale. As a result, it entered into sale and purchase agreements for the sales of the properties, which are

both due to settle on or before 30 March 2012.  The sale price for 1/12 Goldnib Place

is $180,000 and for 27 Nicholas Gibbons Drive is $451,000.   There will be, as a result, a substantial shortfall following settlement of the mortgagee’s sales and in respect of the amount owing by the registered proprietor to the respondent bank.

[10]     The caveats the subject of this application were lodged on 18 March 2011. The agreements referred to in the caveats have been produced.  The agreement dated

25 February 2011 for the property at 27 Nicholas Gibbons Drive is for $550,000 and has a possession date of 8 March 2011 and a settlement of 30 September 2011.  It includes a term:

17.Both parties agree the $100,000 deposit can be converted to six years’ rent  for  the  property  if  settlement  do  not  proceed  on  the settlement date.

[11]     The agreement for sale and purchase dated 1 March 2011 for the property at

1/12 Goldnib Place is for $200,000 and has a possession date of 8 March 2011, a settlement date of 31 March 2011 and another term about converting the deposit of

$40,000 to rent. The sale price is said to have been reduced to $160,000.

[12]     Section 119 of the Land Transfer Act 1952 provides:

119     Lease not binding on mortgagee without consent

No  lease  of  mortgaged  or  encumbered  land  shall  be  binding  upon  the mortgagee except so far as the mortgagee has consented thereto.

[13]     The respondent has not consented to any form of lease.  The bank says that if it had been asked to consent it would have refused to have consented.

[14]     A registered mortgagee’s title is paramount.  That includes the mortgagee’s right to exercise its power of sale:[6]  Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd.

[6] Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd

[1984] 2 NZLR 104.

[15]     Section 105 of the Land Transfer Act 1952 provides:

105      Transfer by mortgagee

Upon  the  registration  of  any  transfer  executed  by  a  mortgagee  for  the purpose of [exercising a power of sale over any land], the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.

[16]     The  interest  claimed  in  the  caveat  has  no  priority  and  is  entitled  to  no protection in respect of the registration of any transfer executed by a mortgagee for the purpose of the exercise of the mortgagee’s power of sale over the land.   The registered proprietor’s interest in the land ends with the transfer by the mortgagee to the mortgagee’s purchaser.  From that point in time nothing will support the caveat. When that position is taken into account the appropriate exercise of jurisdiction in this case is to make an order which provides for the lapsing of the caveat and its removal from the title pursuant to s 143 of the Land Transfer Act 1952 upon the registration of the transfer by the mortgagee to the mortgagee’s purchase pursuant to the power of sale.

[17]     In this case, the purported leases and sale and purchase agreements were entered into in 2011 and subsequent to the respondent’s mortgages, which were registered in 2007.   The respondent did not consent to the sale and purchase agreements for the security properties, or to the purported leases.

[18]     Counsel for the respondent, quite properly, seeks in this case an order in the following terms:

(a)       On presentation of its memorandum of transfer in the exercise of the

respondent’s power of sale of the land in identifier NA135B/655

Caveat No. 8710952.4 shall be removed; and

(b)       On presentation of its memorandum of transfer in the exercise of the

respondent’s  power  of  sale  of  the  land  in  identifier  NA76C/620

Caveat No. 8710952.4 shall be removed.

[19]     I order accordingly.

Costs

[20]     The  respondent  seeks  costs  based  on  Category  2  Band B  together  with disbursements as fixed by the Registrar.  I order accordingly.

JA Faire

Associate Judge