Chen v ANZ National Bank Limited
[2012] NZHC 1083
•17 May 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-1015 [2012] NZHC 1083
BETWEEN ZUNHUI CHEN Applicant
ANDANZ NATIONAL BANK LIMITED Respondent
Hearing: 17 May 2012
Counsel: NFD Moffatt for respondent
Appearance: EK Lau presented a power of attorney executed by the applicant and was granted leave to appear today
Judgment: 17 May 2012
(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application that caveat no 8710952.6 not lapse]
Solicitors: Bell Gully, PO Box 4199, Auckland 1140
And To: Z Chen, PO Box 276 138, Manukau
EK Lau, 2 Carousel Crescent, East Tamaki, Auckland 2016
CHEN V ANZ NATIONAL BANK LIMITED HC AK CIV-2012-404-1015 [17 May 2012]
[1] Mr Lau, who has appeared now on a number of these applications, 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. 8710952.6 not lapse. The application relates to a property at 14 Nicholas Gibbons Drive, Manurewa. The title to that property is NA135B/667. The registered proprietor of that property is Yun Ting.
[3] The caveat claims an estate or interest:
as purchaser and lessee pursuant to agreements dated 28 February 2011 between the registered proprietor Yun Ting and the caveator.
[4] The respondent opposes the orders sought. The grounds advanced in opposition are:
(a) ASB is the holder of the first registered mortgage that was granted over the property at 14 Nicholas Gibbons Drive, Manurewa (Certificate of Title NA 135B/667) by the registered proprietor, Yun Ting, on 23 July 2004;
(b) Ms Ting has been in default under the Mortgage since 1 March 2011;
(c) The interest claimed by the Applicant arises under a sale and purchase agreement between Ms Ting and the Applicant allegedly entered into on 28 February 2011 and/or a tenancy agreement between the same parties entered into on 1 October 2011;
(d)The Agreements were entered into in breach of the terms of the Mortgage which required ASB’s written consent to dispose of the Property or grant a lease;
(e) As the Agreements were entered into in breach of the Mortgage, ASB
is not bound by them;
(f) Even if the tenancy is a fixed term residential tenancy, ASB is entitled to terminate the alleged tenancy as if it were a periodic tenancy by giving notice;
(g)ASB as mortgagee has entered into a sale of the Property which was due to settle on 20 March 2012;
(h)Without the Property being sold, ASB is unlikely to be able to recover most or any of the $354,752.22 currently owed by Ms Ting; and
(i)In respect of the alternative application to relodge the Caveat after settlement of ASB’s sale, the purchasers, rather than ASB, would need to be party to such an application.
[5] In addition, the respondent relies on the affidavit of JM Allison.
[6] This application is made pursuant 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.
[7] 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 Lowe;
[2] Sims v Lowe [1988] 1 NZLR 656 (CA) at 659.
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.
[8] The respondent bank is the holder of a registered mortgage over the subject property. It was registered on 23 July 2004. That mortgage secured all of the obligations owed by the registered proprietor to the respondent. They included the obligations owed by the registered proprietor under a term loan agreement dated
3 June 2004, under which the respondent advanced to the registered proprietor the sum of $272,800 to be repaid within 300 months of the date of the advance, being
30 July 2004 and an Orbit Home Loan Agreement dated 19 May 2008 under which the respondent provided the registered proprietor with an on-demand revolving credit facility of $72,000.
[9] None of the amounts secured under the mortgage have been repaid by the registered proprietor since 1 March 2011.
[10] The caveat the subject of this application was registered against the title to this property on 18 March 2011.
[11] On 19 August 2011, pursuant to an order for substituted service the respondent served a notice under s 119 of the Property Law Act 2007. That notice expired unremedied on 26 September 2011. The affidavit of the respondent’s credit controller confirms that as at 6 March 2012 the total outstanding by the applicant to the respondent was $354,752.22.
[12] On 21 February 2012 a mortgagee auction of the property was held. The property was sold by the respondent for $321,500. Settlement was originally due to occur on 20 March 2012.
[13] This application was called before me on 15 March 2012. At that time I made an order that the caveat not lapse pending further order of this Court. I gave directions to ensure that the hearing of this application was ready and fixed today’s
date for the hearing of the application.
[14] The agreement referred to in the caveat has been produced. It is dated
28 February 2011. It lists the purchase price as $320,000. It provides for a deposit of $60,000. It provides for the payment of the balance of the purchase price on
1 October 2011. It provides for the giving of possession on 5 March 2011. It contains a special term:
17.Both parties agree the deposit can be converted to five years’ prepaid rent for the property if the settlement do not proceed on 1/10/11.
[15] The interest claimed in this caveat is identical to that which I considered in Chen v ANZ National Bank Ltd[6] by Associate Judge Christiansen in Westpac New Zealand Ltd v Set Kien Law.[7] Those cases hold that caveats of the type before the Court now simply cannot be sustained so as to frustrate the respondent’s power of sale. I shall repeat the reasons already prescribed in the earlier judgment that I have
referred to.
[6] Chen v ANZ National Bank Ltd [2012] NZHC 549, HC Auckland CIV-2011-404-1014.
[7] Westpac New Zealand Ltd v Law HC Auckland CIV-2011-404-7989 and CIV-2011-404-7990.
[16] 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.
[17] The respondent has not consented to any form of lease. The bank’s officer
says that the first time that the respondent saw a copy of the agreement was on
27 February 2012 when its solicitors forwarded a copy of an earlier application that had been sent and which had a copy of the agreement annexed to it. That in fact occurred some six days after the auction at which the respondent sold the property under the power of sale. The bank’s officer has confirmed that at no time did the respondent consent to the granting of a lease over the property. Clause 5.2(b) of the mortgage held by the respondent required such consent to be given before the
registered proprietor was permitted to grant any lease over the property.
[18] The registered mortgagee’s title is paramount. That includes the mortgagee’s right to exercise its power of sale:[8] Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd.
[8] Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd
[1984] 2 NZLR 104.
[19] 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.
[20] 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.
[21] In this case, the purported lease and sale and purchase agreement was entered
into in 2011 and subsequent to the respondent’s mortgage, which was registered on
23 July 2004. The respondent did not consent to the sale and purchase agreement for the security property, or to the purported lease.
[22] Mr Lau advanced a submission that in conducting the mortgagee sale the respondent acted in breach of s 176 of the Property Law Act 2007. This argument was raised without prior notice and without any supporting evidence. If there is any
substance the caveator may issue another proceeding. If that occurs, there must be
proper evidence to support this claim. The claim does not support the retention of this caveat.
[23] Counsel for the respondent, quite properly, seeks in this case an order in the following terms:
On presentation of its memorandum of transfer in the exercise of the
respondent’s power of sale of the land in identifier NA135B/667 Caveat No.
8710952.6 shall be removed; and
[24] I order accordingly.
Costs
[25] 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
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