Finlay v Bank of New Zealand

[2015] NZHC 3129

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-2688 [2015] NZHC 3129

BETWEEN

PETER AND JOANNE FINLAY AS

TRUSTEES OF THE ROSA MYSTICA FAMILY TRUST

Plaintiffs

AND

BANK OF NEW ZEALAND Defendant

Hearing:	8 December 2015 (by telephone)
Appearances:	Mr and Mrs Finlay, Plaintiffs in person B J Upton for Defendant
Judgment:	8 December 2015

JUDGMENT OF BREWER J

Solicitors:           Plaintiffs in person

Simpson Grierson (Auckland) for Defendant

FINLAY AS TRUSTEES OF THE ROSA MYSTICA FAMILY TRUST v BANK OF NEW ZEALAND [2015] NZHC 3129 [8 December 2015]

[1]      On  16  November  2015,  Woolford  J  dealt  with  an  application  for  an injunction to stop a mortgagee sale of the family home of Mr and Mrs Finlay.  The property is owned by Mr and Mrs Finlay as trustees of the Rosa Mystica Family Trust.  Mrs Finlay appeared in person to represent the Trust.

[2]      Following negotiations between Mrs Finlay and the mortgagee (the Bank of New Zealand), a joint consent memorandum was filed.   Justice Woolford records that Mr and Mrs Finlay had advanced a possible refinancing and so the Bank of New Zealand was willing to defer the mortgagee sale of the property to 9 December

2015.  The deferral would give Mr and Mrs Finlay an additional 15 working days to finalise and complete the refinancing.  Justice Woolford recorded:

[6]       On that basis, the parties agree by consent that the application for injunction will be withdrawn on the following terms:

(a)       BNZ undertakes not to proceed to mortgagee auction of the property until Wednesday, 9 December 2015, but otherwise will continue to market the property for sale; and

(b)      No order for costs is required as these are addressed contractually within the loan documents and the relevant mortgage securities.

[3]      Matters have not worked out as the parties might have wished.  The Bank of New Zealand remains unpaid and this morning Mrs Finlay, on behalf of the Trust, filed an amended statement of claim, an affidavit and a document intituled “application  for  injunction  against  mortgagee  sale  proceeding”.    It  is  clear  that Mrs Finlay has produced these documents herself.

[4]      Mrs Finlay asks for “an injunction on the Bank of New Zealand thereby preventing them from proceeding with the sale of the property …”.  The application adds, “I dispute the mortgagee’s right to power of sale and to proceed with the advertising of the property on the grounds as set out in the statement of claim and supporting affidavit”.

[5]      I note at this point that there is no signed undertaking as to damages as required by r 7.54 of the High Court Rules.  However, I would not find that to be an insurmountable obstacle if I found that the merits required the granting of interim

relief.  If I found that, then I could make an interim injunction conditional upon the signed undertaking being provided.

[6]      I directed service of the application and the supporting documents on counsel for the Bank of New Zealand on a Pickwick basis.  That was done.  I have now heard from Mr and Mrs Finlay and from Mr Upton for the Bank of New Zealand via telephone conference.

[7]      This  is  a  sad  situation.    Mr  and  Mrs  Finlay  are  fighting  desperately  to preserve their family home.   They are not lawyers and do not appreciate the tests which the law requires me to consider.  Their case is that if they are given more time then they will be able to repay the Bank of New Zealand.

[8]      In a memorandum filed today, Mr Upton puts the debt currently as $901,150. Mr Finlay says that he and Mrs Finlay have secured loan offers from two financiers that would enable them to come up with something like $880,000 of that amount. They say also that there are two other properties which, if they were sold, should release around $100,000.  The two sums combined should be sufficient to repay the Bank of New Zealand.  However, this will take some time, particularly the sale of the two properties which might release about $100,000.

[9]      On a second proposition, Mrs Finlay’s documents tell me about a possible sale to a Chinese investor which would realise enough money to repay the Bank. This is not straightforward because a covenant on the title of the property would have to be removed as a condition of the purchase.  There are, as I understand it, about 10 land owners who would have to agree to that process and I am told that the last of the owners, a Chinese national living in China, has consented or is very close to consenting.

[10]     In short, Mr and Mrs Finlay say that the fair thing would be for me to prevent the Bank from conducting a mortgagee sale of the property tomorrow so that either the refinancing can take place, including the sale of the two properties that would realise the approximately $100,000, or alternatively that they should have time to

complete the sale of the family home to the Chinese investor, although acknowledging that they would have to have the covenant removed.

[11]     Where there is an application for an interim injunction, the first hurdle the applicant has to clear is that the applicant must show the Judge that there is a serious question to be argued.  In this case, documents filed by Mrs Finlay are to the effect that she disputes that the Bank has a valid Property Law Act notice which enables it to exercise its power of sale.

[12]     Mr Upton disputes that.  He identifies the Property Law Act notice which has expired as being the notice that is dated 26 September 2014.  There is no doubt that that notice was served.  It is one of the exhibits to one of Mrs Finlay’s affidavits.  At that time the sum identified as being owed was about $527,000.  The amount owing to the Bank has waxed and waned depending upon the realisation of other assets and part payments which have been made, but also through the accretion of further interest.

[13]     For there to be a serious question to be argued, there would have to be evidence that this Property Law Act notice is ineffective.  I do not see any evidence that would lead me to conclude that.

[14]     The  second  question  that  a  Judge  has  to  answer  comes  only if  there  is identified a serious question to be argued.  The second factor is where the balance of convenience lies.  Within that issue is an inquiry into whether damages might be an effective remedy for the applicant if the applicant were successful on the substantive proceeding.

[15]     If there were a serious question to be argued as to whether the Property Law Act notice is valid, then I would hold that the balance of convenience favours Mr and Mrs Finlay.   That is because this is a family home and if there is a serious question to be argued as to whether the Bank is entitled to sell the family home then it would be difficult to equate the human balance of convenience with the financial balance of convenience.

[16]     Having said that, it would be futile to delay the mortgagee sale and thus increase the debt  if  there was  no  ability on  the part  of Mr  and  Mrs  Finlay to eventually repay the Bank.  As it is, I am left with the situation that the Bank has a valid mortgage.  It has a legal right to sell the property.  Mr and Mrs Finlay have not satisfied me that there is a serious legal question to be argued as to the right of the Bank to exercise its power of sale.

[17]     Mr and Mrs Finlay have, through the medium of this hearing, addressed Mr Upton as to their efforts to raise the money to repay the Bank.  Mr Upton has said that if Mr and Mrs Finlay can produce signed loan documents and point to a reasonable ability to pay what is owed then, of course, he as the solicitor for the Bank would advise his client on the merits of delaying the mortgagee sale.  To this point, Mr Upton has not seen signed loan documents.

[18]     Mr Upton  has  also  pointed out  to Mr and  Mrs  Finlay that  the  Bank  of New Zealand acknowledges it has to discharge its duty as mortgagee to achieve the best  price  reasonably obtainable at  the auction.    If  it  does  not,  then  it  will  be vulnerable to an action by Mr and Mrs Finlay.  Of course, the Bank has to make its own assessment of whether it has met that duty if and when the auction takes place.

Decision

[19]     The application for interim injunction is dismissed.

[20]     I urge Mr and Mrs Finlay to provide Mr Upton, prior to the auction, with signed copies of the loan agreements and a proposal as to the freeing up of the

$100,000 equity in the other two properties.  If they do that then Mr Upton will be able to advise his client on the Bank’s legal obligations in relation to obtaining the best price reasonably available to satisfy its debts.  But that is the extent that I can try to achieve the outcome that Mr and Mrs Finlay desire.

[21]     If costs are in issue, memoranda are to be filed within five working days of

today’s date.

Brewer J