Dorchester Finance Ltd v Fetherston HC Auckland CIV 2007-404-2384
[2007] NZHC 2114
•13 September 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2007-404-2384
BETWEEN DORCHESTER FINANCE LIMITED Plaintiff
ANDDENIS JOHN FETHERSTON Defendant
Appearances: Mr P Shackleton for the plaintiff
Mr A MacLean for the defendant
Judgment: 13 September 2007
ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Counsel
Kidd Tattersfield MacLean, P O Box 40294, Glenfield, Auckland
P Shackleton, Martelli McKegg Wells & Cormack, PO Box 5745, Auckland
DORCHESTER FINANCE LTD V DJ FETHERSTON HC AK CIV 2007-404-2384 13 September 2007
Introduction
[1] The plaintiff financier seeks summary judgment against the defendant with respect to two loan agreements and mortgages over a residential property at 26
Marama Street, Milford, Auckland (“the property”). [2] The application is opposed by the defendant.
Background Facts
[3] The defendant currently is the sole trustee of the Denis and Ans Fetherston
Family Trust (“the Trust”) which was constituted by deed dated 17 December 2002.
[4] The parties accept that on 3 April 2004 the Trust purchased the property with the assistance of a first mortgage from ASB Bank securing $900,000. Around March 2004 a loan agreement and mortgage with ASB (“the first loan agreement”) was entered into. The loan under the mortgage was to be repaid over a 25-year term with interest at 6.75% per annum (and default interest rate of 11.75%). The trustees of the Trust were to be personally liable for their obligations under the first loan agreement and the first mortgage.
[5] Then on 7 March 2005 the trustees of the Trust entered into a second loan agreement and a second mortgage with the plaintiff Dorchester Finance Limited (“the second loan agreement”) securing a loan of $676,000. The interest rate under this loan was 13% per annum (with a default interest rate of 19% per annum) and the loan was to be repaid after six months with monthly interest payments in the meantime. This loan was secured by second mortgage over the property.
[6] The Trust and the Fetherstons defaulted in their obligations under both the first loan agreement and the first mortgage by failing to pay the monthly instalments of principal and interest when due.
[7] On 15 August 2005 the ASB Bank served a default notice under s 92 of the Property Law Act 1952 with respect to this default. The Property Law Act notice expired unremedied.
[8] On 4 October 2005 the ASB Bank assigned the first loan agreement and first mortgage to the plaintiff Dorchester Finance Limited. The assignment included the benefit of the expired unremedied Property Law Act notice.
[9] At 5 October 2005 the amount owing under this first loan agreement and first mortgage was $915,281.28. According to the plaintiff default interest has accrued under these loan arrangements from 6 October 2005 until 12 June 2007 at the 11.75
% per annum penalty rate totalling $180,915.
[10] With respect to the second loan agreement and the second mortgage the Fetherston’s paid the first two interest payments only. They failed to pay all other instalments and to repay the principal sum when due six months after the date of advance.
[11] Default interest has accrued on this $676,000 loan under the second loan agreement. According to the plaintiff from 24 May 2005 until 12 June 2007 (749 days) at the default interest rate of 19% per annum this amounts to $263,565.61.
[12] The plaintiff now seeks summary judgment against the defendant as surviving trustee of the Trust and personally for the amounts set out at paragraphs [9] and [11] above. In addition continuing default interest from 13 June 2007 under both the first loan agreement and the second loan agreement is sought.
[13] Further, the plaintiff in its statement of claim seeks an order pursuant to the first loan agreement that the defendant vacate and deliver up possession of the property.
[14] In addition costs on a solicitor/client full indemnity basis under the terms of the loan agreements for the period up to 12 June 2007 totalling $6,196.21 are sought
together with further legal costs incurred by the plaintiff in the present proceedings from 13 June 2007.
[15] With respect to these claims it appears that the defendant does not dispute:
a) That he entered into both the first loan agreement, and the second loan agreement and the respective mortgages as outlined in the plaintiff’s amended statement of claim.
b)That those loan agreements and mortages contain the terms and conditions as set out in the plaintiff’s amended statement of claim.
c) That certain defaults alleged by the plaintiff have occurred.
d)The plaintiff’s broad calculation of the major portion of the claim against the defendant appears not to be disputed. Before me Mr MacLean for the defendant acknowledged that the defendant did not dispute liability for the principal sums owing under both the first loan agreement and the second loan agreement nor the interest claimed up to 4 October 2005 (the date of assignment of the second loan agreement to the plaintiff). The issue he raised however was as to the penalty interest claimed by the plaintiff from 5 October 2005. The defendant disputes this particularly.
[16] Broadly however, from the defendant’s opposition to the present summary judgment application four grounds were advanced originally. These were:
a) That the status of the Trust and the defendant’s obligations as the trustee of the Trust, and the two charging orders which have been placed over the property by Isolare Investments Limited have together prevented the defendant from re-financing or selling the property to repay the mortgages and further that these aspects need to be examined through a full enquiry as the defendant contends Williams J suggested in earlier proceedings noted as CIV 2002-404-1791.
Before me however Mr MacLean for the defendant advised that the plaintiff abandoned this ground of opposition. I need say nothing further on this aspect therefore.
b)The plaintiff has received a reasonable offer to redeem the mortgages from the defendant but to date has refused to consider any offer of settlement.
c) The actions of the plaintiff have unfairly inflated the interest that has accrued.
d)The property is subject to a residential tenancy covered by the Residential Tenancies Act 1986 and the High Court has no jurisdiction to make an order requiring the defendant to vacate and deliver up possession of the property as sought by the plaintiff.
[17] Although this additional argument does not seem to be set out in the defendant’s notice of opposition, in an affidavit filed in this proceeding the defendant appeared to contend that the plaintiff is also in breach of its obligations under the Fair Trading Act and the Consumer Guarantees Act. No argument was put to me on these aspects however.
Counsels arguments and my decision
[18] The present application is brought pursuant to r 136(1) High Court Rules which states:
(1)The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular part of any such claim.
[19] The legal principles with respect to summary judgment under this Rule are well settled. The plaintiff is required to satisfy the Court that the defendant has no defence. This is explained by the Court of Appeal in Pemberton v Chappell [1987] 1
NZLR 1 as:
In this context the words “no defence” have reference to the absence of any real question to be tried. The notion has been expressed in a variety of ways, as for example, no bonafide defence, no reasonable ground of defence, no fairly arguable defence.
[20] Under r 136(1) the onus rests with the plaintiff although there is upon the defendant a need to provide some evidential foundation for any defence which is raised – Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54 and Auckett v Falvey HC WN CP 296/86, 20 August 1986, Eichalbaum J.
[21] And it is clear that the Court is not required to accept without question:
…every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.
- Eng Mee Young v Letchumanan [1980] A.C. 331 at 341.
[22] The Court of Appeal confirms that affidavits must also have an aura of credibility and accordingly the Court is entitled to take a robust and common-sense approach in applications of this sort – Bilbie Dymock Corporation Limited v Patel (1987) 1 PRNZ 84 (CA) and United Homes (1998) Limited v Workman [2001] 3
NZLR 447.
[23] This application on its face is to enforce a debtor/mortgagor’s liability under two straightforward loan agreements. I turn now to consider the remaining grounds of opposition to the application noted in paragraph 16 above. In doing so, although slightly out of sequence, I will look first at the ground advanced in paragraph 16(d) regarding the Residential Tenancies Act 1986.
The Residential Tenancies Act 1986
[24] The defendants final pleaded ground of opposition to this application is that the property is subject to a residential tenancy covered by the Residential Tenancies Act 1986 and the High Court has no jurisdiction to make an order requiring the defendant to vacate and deliver up possession of the property.
[25] Hinde McMorland and Sim Land Law in New Zealand at paragraph 12.020 deals with the issue of a mortgagee becoming entitled to possession of a residential property which is subject to the Residential Tenancies Act 1986. There the learned author state:
Section 58 of the Residential Tenancies Act 1986 provides that where a mortgagee, or other person (for example a purchaser) becomes entitled to possession of the premises as against the landlord, the tenancy continues notwithstanding anything to the contrary in the Land Transfer Act 1952 or the Property Law Act 1952.
[26] Given that statement of principle and after some discussion with Mr Shackleton counsel for the plaintiff and Mr MacLean counsel for the defendant before me this morning it became clear that an amended form of possession order sought by the plaintiff in its summary judgment application was appropriate and would not be opposed by the defendant.
[27] This obviates the need for me now to repeat at length the various arguments which were advanced to me on this Residential Tenancies Act 1986 question.
[28] Instead an order in the following terms may effectively be made with regard to the possession issue without opposition from the defendant.
[29] An order is now made therefore that the defendant Denis John Fetherston is to forthwith vacate and deliver up possession of the property at 26 Marama Street, Milford being all the land comprised in Certificate of Title NA921/272 in his capacity as a trustee of the Fetherston Family Trust, as mortgagor and as landlord of the property but not in his capacity as a residential tenant of the property.
[30] That effectively deals with this aspect of the summary judgment application which has succeeded to some extent.
Conduct of the Plaintiff
[31] I turn now to consider the grounds of opposition advanced by the defendant before me and noted at paragraphs [16](b) and (c) above. These are first to the effect that the plaintiff has received a reasonable offer to redeem the mortgages from the
defendant but to date has refused to consider any offer of settlement and secondly that the actions of the plaintiff have unfairly inflated the interest that has accrued.
[32] Turning to deal with the allegation of a failure on the part of the plaintiff to settle, the defendants argument as I understand it is that the plaintiff has been offered a reasonable offer to redeem both the first and second loan agreements and mortgages but to date has refused to consider any offer of settlement.
[33] The defendant points to attempts which have been made to refinance the first and second loan agreements and mortgages and certain offers which have been made to the plaintiff regarding these attempts in the past.
[34] What is clear however from these aspects, is that in no case has the defendant been in a position to offer to the plaintiff a full redemption of all moneys outstanding under the mortgages and loans in question. There has been no offer from the defendant to repay the full amounts owing to the plaintiff and as I see the position there is no contractual or legal obligation on the defendant to accept as redemption for its registered securities a settlement involving amounts which are less than the full amount owed to it under these loan security arrangements.
[35] In my view there is no evidence before the Court of any kind indicating an unreasonable attitude adopted by the plaintiff here in signalling throughout that it simply required full repayment of the amounts secured and owing.
[36] I reject this ground advanced by the defendant in its notice of opposition to the current application.
[37] I turn now to consider the second complaint under this head advanced by the defendant which is that the conduct and actions of the plaintiff have unfairly inflated the interest that has accrued.
[38] Although this ground of opposition, in my view, is not particularised to any significant extent the basis of it appears to be as outlined in Mr Fetherston’s affidavit that the plaintiff for some 18 months took no action pursuant to its mortgages
following the defaults which occurred while it accumulated around $280,000 in interest.
[39] The plaintiff acknowledges that no action was taken for a period of time. It contends however that this was due to requests for more time from the defendant and Mrs Fetherston themselves.
[40] Following the default by the Fetherston’s and the assignment of the first loan agreement to the plaintiff, it served notices attempting to terminate the Fetherston’s residential tenancy in an effort to obtain vacant possession preparatory to a mortgagee sale of the property. As I understand the position these notices however were subsequently allowed to expire by the plaintiff because the Fetherston’s who at the time were seeking to deal with charging orders registered against the title to the property requested and obtained forbearance from the plaintiff.
[41] As to this aspect, significantly in my view on 6 March 2006 an email was forwarded to the plaintiffs or their advisers from a Mr Clark on behalf of the defendant which stated in part:
Your client’s (the plaintiff) continued support for my clients (the Fetherstons) in their predicament will be much appreciated and hopefully they will be able to complete the re-finance in the near future.
[42] This 6 March 2006 email from Mr Clark who I understand was the Fetherston’s lawyer at the time which sought a forbearance drew a response from the plaintiff’s solicitors on 16 March 2006 which noted in part:
… our client will bide their time a short while longer.
[43] As I understand the position the charging order issue was not resolved until around September 2006 and the following month the plaintiff’s again served notices on the Fetherstons purporting to terminate the residential tenancy.
[44] Since then it seems the parties have been involved in a range of Tenancy Tribunal and other “skirmishes”. As I understand it these resulted in the plaintiff obtaining an order from the Tenancy Tribunal which terminated the Fetherston’s
residential tenancy but that matter is now the subject of a stay and/or appeal before the District Court and other steps are required.
[45] According to Mr Shackleton throughout all this time the plaintiff has been endeavouring to work towards being in a position to conduct a proper mortgagee sale of the properly. Mr Shackleton noted that in terms of s 103A Property Law Act
1952 the plaintiff as mortgagee has an obligation to obtain the best price at mortgagee sale reasonably obtainable at the time of sale and it is seeking to achieve this by first obtaining vacant possession of the property.
[46] It appears that these efforts to obtain vacant possession have been thwarted by the defendant and Mrs Fetherston who are continuing to maintain claims in their capacity as tenants under the Residential Tenancies Act.
[47] I mention these matters at some length because as I see it they permeate the opposition advanced on behalf of the defendant here that the plaintiff has unjustifiably delayed a mortgagee sale of the property and hence penalty interest has accrued.
[48] As to these apsects Brookers Land Law at paragraph 8.12.02 notes:
It is clear there is no obligation on a mortgagee to delay a sale to get a higher price: Bank of Cyprus (London) Ltd v Gill (1980) 2 Lloyds LR 51; Reily v Review One Limited 13 September 1996 Morris J HC AU CP2059/91; Southern Goldfields Limited v General Credits Limited (1993) ANZ Conv. Reports 594.
Conversely, a mortgagee will not be penalised for delay: China & South Sea Bank v Tan Soon Gin [1990] 1 AC 536 Countrywide Banking Corp Limited v Robinson (1991) 1 NZLR 75.
[49] In light of the matters noted above in my view there can be no substance in any suggestion here that the plaintiff through its own actions has chosen to unreasonably delay a sale of the property in question. If anything, as I see it, that delay has occurred first at the request of the defendant to delay matters for a significant period and secondly because of the actions taken by the defendant to insist on continuing the occupy the property.
[50] I reject the ground advanced in opposition to the plaintiff’s application that the plaintiff’s conduct here should disqualify it from seeking penalty interest for the continuing delay in redeeming the mortgages.
[51] One final matter needs to be mentioned. This relates to an agreement loosely advanced by the defendant in opposition to the current application that the defendant has found himself trapped in a situation of being unable to refinance the two mortgages because of the actions of two subsequent chargeholders.
[52] In his affidavit Mr Fetherston hint at some fault on the part of the plaintiff with respect to these particular charges and the possibility that an element of collusion may have occurred between the plaintiff and those chargeholders. Before me however Mr MacLean quite properly acknowledged that there is no evidence before the Court of any such collusion between the plaintiff and the chargeholders.
[53] As I see it therefore any difficulty which the defendant may be experiencing in completing a re-financing because of the presence of those subsequent charges on the title to the property is a matter for the defendant. No responsibility or complaint can be made against the plaintiff with respect to that aspect. That argument also does not assist the defendant here.
[54] In conclusion then, it will be apparent here that I find the defendant has been quite unable to put before the Court any matters of a credible nature to oppose the plaintiff’s present summary judgment application.
[55] Before me Mr MacLean acknowledged too that other than the defendant’s general complaint over liability generally for any penalty interest beyond 4 October
2005 (the date of assignment of the first loan agreement and mortgage) there was no complaint concerning any of the plaintiff’s mortgage quantum calculations.
[56] Finally therefore I confirm that, in my view, the plaintiff has done sufficient here to satisfy the onus upon it to show that the defendant has no arguable defence to the claim for principal, interest and costs sought under the first loan agreement and mortgage and the second loan agreement and mortgage.
[57] That said summary judgment is now granted in favour of the plaintiff against the defendant for the following amounts:
a) $915,281.28 being the outstanding balance owing under the first loan agreement and first mortgage as at 5 October 2005;
b)$180,915.10 being default interest at 11.75% per annum owing under clause 3.3 of the first loan agreement on the outstanding balance of
$915,281.28 since 6 October 2005 until 12 June 2007 being default interest at $294.65 per day for 614 days;
c) Continuing default interest under clause 3.3 of the first loan agreement from 13 June 2007 until the date of payment;
d)$676,000 being the principal sum advanced under the second loan agreement and second mortgage remaining unpaid;
e) Default interest at 19% per annum on the $676,000 principal sum under clause 4.1 of the second loan agreement from 24 May 2005 until 12 June 2007 in the sum of $263,565.61 being default interest at
$351.89 per day for 749 days;
f) Continuing default interest under clause 4.1 of the second loan agreement from 13 June 2007 until the date of payment;
g) Costs with respect to these proceedings incurred by the plaintiff to 12
June 2007 on a solicitor/client full indemnity basis under clause 8.5 of the first loan agreement, clause 22.1 of the first mortgage and clause 6 of the second loan agreement totalling $6,196.21;
h)A further order for costs reasonably incurred by the plaintiff in these proceedings from 13 June 2007 calculated on a solicitor/client full indemnity basis is now made;
i)As to this last order if there is any dispute between the parties as to the amount of the further indemnity costs ordered, counsel are directed to file memoranda on this quantum issue sequentially 14 days apart. These memoranda are to be referred to me and I will decide that quantum issue on the basis of the material before the Court.
[58] The order for possession of the property sought by the plaintiff is made in the terms outlined at para [29] above.
‘Associate Judge
D I Gendall’
0
0
0