Co-Operative Bank Limited v Brown

[2016] NZHC 882

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2016-442-000006 [2016] NZHC 882

BETWEEN

THE CO-OPERATIVE BANK LIMITED

Applicant

AND

CHERRY ANNE BROWN First Claimant

DANIEL VINE CHILDS and MELANIE JANE GILLETT Second Claimants

Hearing:	28 April 2016 (On the papers - after telephone conference)
Counsel:	R J Gordon for Applicant G J Praat for First Claimant
Judgment:	4 May 2016

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      The applicant Bank applies for orders by way of interpleader in relation to the net proceeds from a mortgagee sale of a property at 272 Uruwhenua Road, Upper Takaka.  At the time of the mortgagee sale the first defendant, Ms Brown, was the registered owner of a one-half share of the property, and each of the second defendants, Mr Childs and Ms Gillett, was the owner of a quarter share.  Prior to the proceeding being issued Ms Brown asserted ownership of the entitlement to the entire proceeds of sale, with the result that the Bank filed this proceeding seeking direction that the proceeds of sale, net of its costs, be paid to the Registrar of the High Court at Nelson, and then seeking leave for the Bank to cease to be a party to this  proceeding,  in  effect  leaving  the  first  and  second  claimants  to  assert  their

entitlement to the proceeds before the Court.

THE CO-OPERATIVE BANK LTD v BROWN & ORS [2016] NZHC 882 [4 May 2016]

[2]      The proceeding has been served on all the defendants.  Ms Brown has filed a statement of defence asserting her entitlement to the proceeds, but neither Mr Childs nor Ms Gillett has taken any step.  Evidence of service of the proceeding on them is before the Court.

[3]      At a telephone conference convened to make directions I made orders as sought by the Bank which will result in the net proceeds of sale after deduction of the Bank’s expenses being held by the Registrar of the High Court at Nelson.

[4]      The basis on which Ms Brown asserts entitlement to the entire proceeds is this.  When she and Mr Childs and Ms Gillett purchased the property in 2010 for

$450,000, Ms Brown  contributed $225,000 in  cash.   Mr Childs and  Ms Gillett borrowed their entire contribution of $225,000 from the Bank, and Ms Brown was required to be a guarantor of that advance.

[5]      Mr Childs and Ms Gillett defaulted on their obligations to the Bank under its mortgage and this resulted in the property being sold by a mortgagee sale in December 2015.  The sale price was $400,000, and after deduction of sale expenses and repayment of all sums owing under the loan, the Bank held $177,332.34.

[6]      The Bank was then required to pay $52,173.91 from the proceeds of sale in satisfaction of a demand by the Inland Revenue Department for repayment of a GST deduction claimed by Mr Childs and Ms Gillett at the time of purchase.  This left the sum of $125,347.30 in the hands of the Bank, as at 28 January 2016.

[7]      The order sought by Ms Brown under r 4.63(2)(c) of the High Court Rules is that payment of the balance of the sale proceeds be paid to her.  She accepts that her costs should be met from this sum.

[8]      As will be apparent from the figures which I have recited payment of the full amount left from the proceeds of sale will result in Ms Brown receiving only just over half of her initial cash injection into the property.   She will bear the entire consequences of Mr Childs and Ms Gillett failing to meet their obligations to their

Bank, and failing to meet their obligations to repay the GST which they claimed at the time of purchase.

[9]      It is clear that the correct approach of the Court to assessment of Ms Brown’s claim is that it should recognise and evaluate competing legal and equitable interests in the fund, after satisfaction of secured creditors.1

[10]     Mr Childs and Ms Gillett do not make any claim to the proceeds of sale, and in the circumstances I have outlined the claim to the entire proceeds by Ms Brown is compelling.

[11]     I direct the Registrar of the High Court at Nelson to pay the sum paid to the

Court by the Bank to Ms Brown’s solicitors as promptly as practicable.

[12]     There are no issues over costs.

J G Matthews

Associate Judge

Solicitors:

Minter Ellison Rudd Watts, Wellington. Knapps Lawyers, Nelson.

1      Adams  v  Sun  [2014]  NZHC  912,     Australian  Guarantee  Corporation  (NZ)  Ltd  v  CFC Commercial Finance Ltd [1995] 1 NZLR 129 (CA), Green v Meltzer [1993] 6 NZCLC 68, 393.