Davies & Co Solicitors Nominee Company Limited v Yelcich
[2013] NZHC 1344
•6 June 2013
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV 2012-404-5184 [2013] NZHC 1344
BETWEEN DAVIES & CO SOLICITORS NOMINEE COMPANY LIMITED
Plaintiff
ANDBORIS YELCICH First Defendant
CHURCH ROAD CORPORATION LIMITED
Second Defendant
Hearing: 6 June 2013
Appearances: S R G Judd for plaintiff
J A R Cox for first defendant
No appearance for second defendant
Judgment: 6 June 2013
(ORAL) JUDGMENT OF ASSOCIATE JUDGE ABBOTT
Solicitors:
S, Davies, Davies Law, Auckland
J A R Cox, Blomkamp Cox, Auckland
Counsel
S R G Judd, Auckland
DAVIES & CO SOLICITORS NOMINEE COMPANY LIMITED v B YELCICH [2013] NZHC 1344 [6 June
2013]
[1] The plaintiff, Davies & Co Solicitors Nominee Company Ltd (Davies) seeks summary judgment for possession of land in Church Road, Matakohe, owned by the second defendant, Church Road Corporation Ltd (CRC). The first defendant (Mr Yelcich) has been joined as a defendant as Davies believes that he is the owner of stock grazing on the property.
[2] CRC has had no directors since its former directors were adjudicated bankrupt in 2010. It has been served pursuant to an order made under s 387 of the Companies Act 1993, by service on the Official Assignee. It has taken no steps.
[3] Mr Yelcich has opposed the application on two grounds. First he says that he is not in possession of the land. Secondly, he contends that Davies has no right to seek an order for possession because it did not serve a valid notice under s 92 of the Property Law Act 1952.[1]
Background
[1] Although the 1952 Act has been replaced by the Property Law Act 2007, Davies relies on a notice that was drawn up and served before 1 January 2008, and the provisions of the Property Law Act
1952 still apply to that notice by reason of the transitional provisions in s 127 of the Property Law
Act 2007.
[4] Davies carried on business as a solicitors’ nominee company. It made a loan of $6,626,812 to CRC and two other related companies in 2005. CRC gave Davies a mortgage as security for that loan. The mortgage was over a farm property comprising ten titles.[2]
[2] Set out in paragraph 3 of Davies’ statement of claim
[5] It is not in dispute that CRC defaulted on the mortgage, or that Davies issued a notice under s 92 of the Property Law Act 1952 on 28 March 2007 that required the default to be remedied by 7 May 2007. There is an issue over the date of service of that notice on CRC, but Davies accepts, for the purposes of this application, that the evidence shows that it was served on CRC on 11 April 2007.
[6] CRC did not comply with that notice, and has not remedied its default. The debt now due (with interest accumulating over the five years since) is in the order of
$13,600,000.
[7] Davies has applied for an order under s 137 of the Property Law Act 2007 granting it possession of the land. Initially its claim was brought only against Mr Yelcich. In an affidavit in support of the application, Davies’ principal, Mr S J Davies, contends that Mr Yelcich owns stock that is grazing on the land and has denied Davies possession of the land. CRC was added as a defendant by an amended statement of claim filed on 26 February 2013. It was served (on the Official Assignee pursuant to the order already mentioned) on 11 April 2013. It has taken no steps.
[8] Mr Yelcich, then acting in person, filed a notice of opposition on 9 April
2013. He is now legally represented. In his notice of opposition he says that he should not have been included as a defendant as he does not occupy the property, nor have rights to possession of the property. Additionally, he contends that Davies is not entitled to an order for possession because it has not complied with requirements of s 92 of the 1952 Act. The basis of that contention is stated in Mr Yelcich’s affidavit in support, namely that as the Property Law Act notice was served (at least for the purposes of this application) on 11 April 2007, the nominated date for compliance was two days short of the four weeks required under s 92(2).
Opposing contentions
[9] There is no dispute that CRC is in default under the mortgage, and that Davies as mortgagee is entitled to an order for possession provided it has served a valid Property Law Act notice. The first question to be resolved is whether Davies can rely on the notice served in 2007. Given a concession by Mr Davies in his evidence that the date of service can be taken to be 11 April 2007, this is a legal issue as to the consequence of the two day shortfall in the required four week period for remedying default. The second question is a factual one, namely whether Davies has satisfied the Court on the evidence that Mr Yelcich is in possession of the land.
[10] Mr Judd, for Davies, submitted that the notice remained valid notwithstanding the two day shortfall. He relied on s 92(1A) of the 1952 Act that stipulates that a notice under that section is not void by reason of variation from the prescribed form (including the date by which any default was to be remedied) unless
the variation materially prejudiced the interests of CRC as mortgagor. He argued that it could not be said that CRC had been prejudiced, because nothing had occurred in the additional two days that should have been allowed, nor had CRC done anything to remedy the default since then.
[11] On the second aspect of Mr Yelcich’s occupation, Mr Judd referred to Mr Davies’ evidence that there is stock on the property, and that, as far as Davies had been able to ascertain, that stock belonged to Mr Yelcich (although he acknowledged that this was hearsay evidence).
[12] Mr Cox, for Mr Yelcich, said that it was clear that the notice did not comply with the statutory requirements (because the date stated for remedying the default was two days short of the required four weeks), and argued that there was material prejudice by reason of that shortfall. He submitted that the prejudice should be viewed at the time of (or immediately after) service of the notice, but also contended that Mr Yelcich could rely on prejudice by reason of Davies’ failure to rectify the
omission when the shortfall was brought to its attention in August last year.[3]
[3] It appears to be common ground that the shortfall was not noticed by either party until sometime last year. When questioned on this, Mr Cox submitted that prejudice to Mr Yelcich could be taken into account when exercising the Court’s residual discretion whether or not to grant summary judgment.
[13] In respect of Mr Yelcich’s alleged possession of the property, Mr Cox submitted that there was no evidence of possession on which to make the order being sought (he referred to Mr Yelcich’s evidence that he was not a tenant or occupier of the land and was not in legal possession). Mr Cox submitted that Mr Yelcich had felt obliged to defend his position or otherwise potentially face costs on the application.
Can Davies rely on the Property Law Act notice?
[14] Davies’ right to possession of the property is dependent on service of a valid Property Law Act notice. The issue in this case is whether it can rely on the notice served on 11 April 2007.
[15] Section 92(1) of the 1952 Act stipulates that a mortgagee has no power to enter into possession unless and until it serves the owner for the time being of the
land with a notice that complies with the requirements of that section (and the requirements of that section include the need to specify a date by which the power will become exercisable if the default has not been remedied, which that date shall not be earlier than four weeks from date of service).
[16] If that was the extent of the section, there would be merit to Mr Yelcich’s position. However, the law governing validity of the notice served on CRC is to be found in the 1952 Act because the notice was issued before the Property Law Act
2007 came into force.[4] Section 92 of the 1952 Act was amended in 1983 by the
[4] See n 1.
inclusion of s 92(1A) which reads:
(1A) Every notice shall be in the form prescribed by regulations made under this Act; but no notice shall be void by reason of any variation from the prescribed form unless the notice does not adequately inform the mortgagor of—
(a) The nature and extent of the default complained of; and
(b) The date (being a date that complies with the provisions of subsection (2) of this section) by which he is required to remedy the default (if it is capable of remedy); and
(c) The rights that the mortgagee will be entitled to exercise if the default is not remedied within the specified period,—
and the variation materially prejudices the interests of the mortgagor.
[17] The stipulation of a date that is two days short of the required four weeks is a variation from the prescribed form. The issue in this case, therefore, is whether that variation “materially prejudices the interests of the mortgagor” [5]. I note that the requirement is for prejudice to the mortgagor (in other words, CRC) and not to Mr Yelcich.
[5] The need to show prejudice as a result of the error has been confirmed in Housing Corporation v Maori Trustee (No 2) [1988] 2 NZLR 708 (CA); Bryars v Hart’s Contributory Mortgages Nominee Co Ltd [2002] 3 NZLR 343 (CA).
[18] I accept Mr Cox’s submission that this prejudice should be assessed as at the time of service of the notice (or immediately afterwards), rather than being assessed at the time of the application (now more than five years later). However, in my view
that does not assist Mr Yelcich’s case. It might have been otherwise if there had
been any evidence that, at that time, CRC was in a position to remedy the default but lost that ability because of the early date stipulated in the notice. For example, if CRC had an ability to refinance at that time but failed to take up that opportunity or otherwise lost it, by reason of the error in the date, I would regard that as material prejudice. However, there is simply no evidence to that effect, and the fact that CRC has remained in default ever since suggests that it was in no position to do anything about the default. At the very least I would expect to see some evidence that CRC had challenged the notice and/or had sought further time on the basis that it was in a position to comply. That is consistent with the principles underlying the ability of a mortgagor to redeem the mortgage – and CRC has had that ability ever since.
[19] In summary, I find that there is no material prejudice to CRC as a result of the error in the date for remedying default stipulated in the notice. On that basis I find that the notice remains valid, as it has not been rendered void under the provisions of s 92(1A).
Should an order for possession be made against Mr Yelcich?
[20] The second question for the court is whether there is sufficient evidence before it to be satisfied that Mr Yelcich is in possession of the land, so as to justify an order for possession being made against him.
[21] His evidence on the point is relevant, not so much for what it says, but rather for what it does not say:
I am not a tenant or occupier of the land, and not in legal possession of the land.
It is significant that Mr Yelcich has not responded to the evidence that his stock is on the land, and hence has not explained whether he has any entitlement to have the stock there and, if so, whether that gives him some de facto right to possession. He has not responded to Mr Davies’ statement that Davies is being unlawfully prevented from entering into possession of the land as mortgagee by Mr Yelcich or his agents, tenants or associates. Nor has he responded explicitly to the statement that he had refused to let Davies enter into possession since 7 May 2007, or to the allegation that
the occupants of the land have not vacated it and are grazing stock on it and making hay using it.
[22] In response to Mr Yelcich’s affidavit, Mr Davies has given further evidence in which he says that Davies brought this application because Mr Yelcich was occupying the land by grazing his stock on it, and he understands from enquiries in Matakohe that the stock on this land belongs to Mr Yelcich.
[23] The court can take hearsay evidence into account on an application for summary judgment, but needs to be cautious about doing so. I accept that in the present case it may have been difficult for Davies to have obtained clear and direct evidence about the ownership of the stock. However, if the stock does not belong to Mr Yelcich, there is no basis for an order for possession. On the other hand, if it does, I consider that his evidence is evasive on the point. Given these uncertainties, it is appropriate to adjourn the application, to see what occurs as and when Davies takes steps to enforce its order for possession.
Should the Court exercise its discretion to refuse summary judgment?
[24] The last point I will consider is the argument advanced by Mr Cox that the court should decline summary judgment in the exercise of its residual discretion. The essence of his argument is that it is unfair for Davies to seek an order on the basis of an irregular notice, rather than first seeking a declaration that s 92(1A) applied (in other words that the notice was not void), or alternatively serving a new and compliant notice.
[25] I am not persuaded that this is an appropriate case to exercise any discretion not to give summary judgment for possession. Davies has been attempting to recover its loan for more than five years. Mr Yelcich is not a director or shareholder of CRC, yet comes to court seeking to challenge Davies’ right to possession, even though he contends that he is not in legal possession of the land. CRC (through the Official Assignee) has not seen any need to challenge the present application. In my view, this is yet another illustration of many attempts by Mr Yelcich to make life as
difficult as he can for Davies.[6] In my view that alone would be a factor against exercising my discretion. However, I also take into account that the steps that Mr Cox suggested should have been taken (rather than pursuing this application without taking those steps) will simply add additional cost, without any obvious benefit in terms of a legal entitlement to relief, in an already long drawn out dispute.
Decision
[6] There have been nine judgments to date arising out of resistance by parties related to Mr Yelcich (as borrowers and guarantors) and to efforts by Davies and other mortgagees to recover money lent to them.
[26] I make an order granting Davies & Co Solicitors Nominee Company Ltd possession of the land described in certificates of title NA85/215, NA585/168, NA585/171, NA585/172, NA585/173, NA585/174, NA1034/208, NA1066/4, NA136C/945, and identifier 146669.
[27] This order is made in respect of the second defendant, the registered proprietor Church Road Corporation Limited, only at this time. The application for an order against the first defendant, Boris Kazimir Yelcich, is adjourned to 10am on
9 July 2013, with leave to Davies to file and serve further affidavits in support of that aspect of the application by 26 June 2013, with any affidavits in reply by Mr Yelcich by 3 July 2013.
[28] Costs are reserved and will be considered further on 9 July 2013.
Associate Judge Abbott
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