Ge Custodians v Dorbu HC Auckland CIV 2009-404-8024
[2010] NZHC 857
•1 June 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-8024
BETWEEN GE CUSTODIANS Plaintiff
AND JOHN EVANS DORBU Defendant
Hearing: 24 May 2010
Appearances: Mr D J Anderson for plaintiff
Mr J E Dorbu in person
Judgment: 1 June 2010 at 4 p.m.
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This judgment was delivered by me on
01.06.10 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Counsel:
Gibson Sheat Lawyers, Private Bag 31 905, Lower Hutt – by email:
Mr J Dorbu, Suite 2B, 18 Hobson Street, Auckland –by email: [email protected]
GE CUSTODIANS V DORBU HC AK CIV-2009-404-8024 1 June 2010
Background
[1] In this proceeding, the plaintiff seeks an order for possession of the property at 2B/18 Hobson Street, Auckland (“the property”).
[2] In September 2007, the plaintiff advanced to the defendant $945,098.23 by way of mortgage secured against the property to the defendant who is the registered proprietor of the property.
[3] The defendant defaulted in his payment obligations to the plaintiff. The plaintiff served the defendant with a notice under s 119 of the Property Law Act
2007 (“the notice”) on 15 September 2008 requiring the defendant to remedy the listed defaults by 20 October 2008. The defendant failed to remedy the defaults.
[4] On 29 September 2009, the plaintiff sought access to the property to enable the plaintiff to appraise and value the property. The defendant has declined to permit access. The reason that the plaintiff sought access was to enable it to make preparations for exercising its power of sale under the mortgage.
[5] The following issues arise from the defendant’s defences to the application for summary judgment:
•Has the plaintiff waived its rights under the mortgage; and if it has, is the plaintiff estopped from enforcing its rights?
•Does the current condition and value of the property have any bearing on the plaintiff’s right to obtain vacant possession?
•Is the plaintiff prevented from enforcing its right to possession because the defendant is now willing and able to resume payments?
Waiver
[6] The defendant says that the plaintiff wrote two letters to him dated 14
September 2009 (“the letters”) informing him that his loan had been restructured, the interest rate had been lowered and accrued interest had been capitalised to enable him to resume normal monthly repayments (“the representations”).
[7] The defendant claims:
a) This new arrangement had been put in place as a result explanations he had provided the plaintiff’s legal representatives; of b) He has changed his position in reliance of the representations.
[8]
The letters stated the following:
14 September 2009 Mr J E Y Dorbu
Apartment 2B/18 Hobson Street
AUCKLAND CENTRAL AUCKLAND 1001
Dear Mr Dorbu Your loan 192992 We are pleased to confirm the changes to your loan have been finalised on
14 September 2009.
As a result of these changes your current loan details are: Account 1 Current balance: $1,089,897.23 Amount of Credit: $ 945,377.97 Annual Percentage Rate: 7.85% Variable Repayment Type: Principal & Interest Loan Term: Matures on 13 September 2037 Monthly Payment Due Day: 14th Minimum Payment Changes As a result of these changes, your minimum monthly payment may be different from your current payment amount. If your minimum monthly
payment has changed, we will advise you separately of your new payment details before the due date.
You may find it helpful to keep this letter with your existing loan documentation for future reference.
You can check your loan details online using Loan Service Net or by calling our Customer Service team on 0800 945 658.
Feel free to contact us if you have any questions or if we can help you in any other way.
14 September 2009
Mr J E Y Dorbu
Apartment 2B/18 Hobson Street
AUCKLAND CENTRAL AUCKLAND 1001
Dear Mr Dorbu
Your loan 192992
A recent change to your loan requires us to adjust your minimum monthly payment amount(s). This may relate to a change in your loan balance or interest rate. Adjusting your minimum monthly payment will ensure your loan remains on target to be repaid within the agreed term.
The following minimum monthly payment(s) will be due on 14 October
2009. If you have elected to make weekly or fortnightly payments, please note the total monthly repayment must be received by this date. Your new minimum monthly repayment below does not reflect any salary credits and cheques deposited on or after the date of this letter.
Account 1
Your new minimum monthly payment has been reduced to $6,961.90.
There are currently no Direct Debits set up to meet the new minimum payment requirements. Please ensure your electronic or salary credit payments you have in place are sufficient to meet the new minimum monthly payment. You will need to contact your employer or the sender of these payments to make any changes or contact us to make alternative payment arrangements.
You can check your loan details online using Loan Service Net or by calling our Customer Service team on 0800 945 658.
Feel free to contact us if you have any questions or if we can help you in any other way.
[9] The background to these letters being sent to Mr Dorbu was that he was admittedly in default under the mortgage and had been since the previous year when a notice under the Property Law Act was served on him. The letters were consistent with that state of affairs because they show that the full amount of the principal was outstanding and as well there were interest charges of some $140,000 owing.
[10] Mr Anderson explained to me that these letters were in fact sent after the second anniversary of the initial making of the loan. This was coincident with the undenied fact that the loan was initially on an interest only basis for the first two years but that thereafter the lender would require payments both on account of
principal and interest. The plaintiff says that the documents were standard form type letters sent out, as I have said, at the point where the loan was effectively moving on to a different footing and was intended to give notice of the new payments that the defendant would be required to make.
[11] Mr Dorbu told me, and the plaintiff did not refute, that the new monthly payment of $6,961.90 shows that the arrears of interest were added to the principal sum and interest charged on those amounts. He says that after doing the necessary calculations it becomes apparent that the new monthly figure of $6,961.90 was the interest charge on the unpaid principal together with interest charges that had accrued up until the date of the notices. I will assume for present purposes that that is correct.
[12] From that starting point, Mr Dorbu argued that by sending to him these notices the plaintiff represented that it had “capitalised” all unpaid interest to date and that it was content for these amounts to continue to be owed by Mr Dorbu. Misrepresentation was said to be inconsistent with the earlier service of a notice under the Property Law Act advising Mr Dorbu that the mortgagee intended to exercise the power of sale. Mr Dorbu did not spell out exactly how matters came to rest as a result of the representation but it would seem to be implicit in his explanation of matters that the increased liability that he had to the plaintiff would continue to be outstanding with him paying interest only. Because he received these intimations from the plaintiff, Mr Dorbu says, he was influenced to not proceed with applying to the National Bank for a facility which would have enabled him to refinance the plaintiff’s loan.
[13] Mr Anderson for the plaintiff said that Mr Dorbu could not have believed that, in circumstances where a loan had been in default right from the beginning and a Property Law Act notice was long outstanding, the bank would agree to enter into an arrangement of the kind that Mr Dorbu said was represented to him. Mr Anderson said that before a party could rely on a representation of that kind it had to be clear and unequivocal. The representee had to actually rely upon it and the meaning that the representee said the representation bore had to be a reasonable one. Mr Anderson pointed out that even if Mr Dorbu considered that the documents of 14
September had the meaning that he ascribed to them, his understanding was soon corrected because within a fortnight, there was a further exchange of emails between him and a solicitor acting for the plaintiff in which he was left in no doubt that the plaintiff wanted to proceed with a mortgagee sale. That is because the solicitor, a Ms Syms, in an email to Mr Dorbu on 29 September 2009, stated that a valuer and real estate agents instructed by the plaintiff needed to visit the apartment for the purposes of carrying out a valuation. She said that if access was not made available is was highly likely that the plaintiff would give her firm instructions to apply to the Court for an order for possession. Mr Dorbu responded in an email the same day:
Are you threatening me with eviction?
[14] Then, later (on 16 November 2009) Mr Dorbu wrote a letter to the solicitors acting for the plaintiff, addressing it to Ms Syms. His letter opened by saying:
Refer to your letter dated 16 October 2009 by which you asked that I vacate the captioned premises on or before 15 November 2009 for the property to be sold at mortgagee sale.
[15] Mr Dorbu then went on to set out what he regarded as being relevant material including that the building had no code compliance certificate and that some renovations had been carried out in the past which were not completed in accordance with Auckland City Council authorisations and were not ‘certified’. He also said that further renovations were required and that as a result of litigation between the owners of the apartments and the Auckland City Council the latter had agreed to pay a substantial sum of money to have further renovations carried out. He said that until the renovations were completed and the code compliance certificate had been issued the building would not achieve its full valuation at sale and indeed might be “unmarketable”. He proposed staying in the property until completion of the renovations, paying weekly rent. He concluded:
I believe you understand the importance of drawing these matters to your attention so that you and your client can be brought up to speed with this situation. Therefore, I urge your firm not to take steps to sell this property at this time as to do so would be to damage the chances of the proceeding fetching realistic price on the market.
[16] Mr Anderson pointed out that all this was inconsistent with any understanding on Mr Dorbu’s part that the vendor by sending the notices of 14
September had agreed to suspension of the mortgagee sale action.
[17] In his affidavit, after referring to the letters of 14 September, Mr Dorbu said he was happy with the “new arrangement” which he thought the plaintiff had agreed to. That is, the defaults which were previously notified to him in a s 119 notice could now be disregarded because the plaintiff had agreed to a new mortgage the principal amount under which would, amongst other things, include all the unpaid interest under the old mortgage. But in his affidavit the defendant makes clear that notwithstanding his belief, the plaintiff a short time after the letter of 14 September again began to act in in a way which was inconsistent with his belief. Specifically, Ms Syms from the plaintiff’s legal represents asked for permission for real estate agents to come into the property and assess its value. Mr Dorbu said:
I was not really comfortable with that arrangement for two reasons, first, that seemed to contradict the plaintiff’s earlier letter of 14 September 2009. Secondly, my wife had been in labour and subsequently given birth to our third daughter on 4 October 2009. So I was not keen to let real estate agents through the property at that time.
[18] He then said in his affidavit that:
I had changed my position in respect to the refinancing arrangements with [National Bank] after a receipt of the offer of 14 September to resume the normal mortgage repayments. In the absence of that offer I would have continued with my efforts to get a suitable valuation to refinance the property to another lender.
[19] I do not consider that it is reasonably arguable that by sending the notices dated 14 September 2009 the plaintiff waived its entitlement to proceed with steps such as taking possession of the property, preparatory to a mortgagee sale. I do not believe that it was reasonable for Mr Dorbu to have believed that what seemed to have been computer generated type letters amounted to an offer to roll-over or re- advance the entire amounts owing under a mortgage which was in default and had been for over a year. Moreover the plaintiff made it clear a very short time later that it had no such intention. Even if the plaintiff were retracting a representation made to the defendant, that can be permitted provided no injustice is done to the other party by so doing: Connor v Pukerau Store Ltd [1981] 1 NZLR 384 at 387-388. The
reassertion by the bank, shortly after 14 September letters were sent, of its intention to take steps to sell the property could not have had any material affect on Mr Dorbu’s stated intention to pursue refinancing with the National Bank. He must have understood that the bank would be proceeding to a mortgagee sale. Indeed the very letter that Mr Dorbu wrote on 16 November 2009 is inconsistent with an understanding on his part that the plaintiff had represented to him that it would not be proceeding with the mortgagee sale. Rather, the letter recognised that that is what the plaintiff has in mind but attempted to persuade the plaintiff that to proceed along that path would be unnecessarily injurious to the plaintiff’s interests and to Mr Dorbu’s.
[20] The considerations which are decisive in answering the waiver argument are similarly influential in deciding the defendant’s other ground of defence – a promissory estoppel. There is no clear and unambiguous representation which the defendant can be said to have relied upon and further, it would not be inequitable or unconscionable to allow the plaintiff to resume its earlier position of proceeding to a mortgagee sale of the mortgaged premises.
[21] In any event, I do not accept that the defendant has an arguable case that he has suffered or would suffer detriment as a result of the plaintiff resuming its pre- representation position. Mr Dorbu has said that because of the “offer” that was made by the plaintiff on 14 September 2009, he discontinued his efforts to obtain a suitable valuation to refinance the property to another lender. He says he is not now sure whether the National Bank, which he made overtures to, would be willing to activate the loan on the same terms, or whether other conditions would be imposed, given that “the lending climate has changed considerable (sic) since September 2009.”
[22] However, as I have noted above, only a very short period of time elapsed between when Mr Dorbu received the notices dated 14 September 2009 and when the solicitor for the plaintiff communicated with him in terms that made it plain that the plaintiff intended to obtain vacant possession of the property as a prelude to proceeding with a mortgagee sale. It has not been established that during that period of time there was any major change in circumstances which could work an injustice to Mr Dorbu. Nor does his affidavit in fact address that particular point.
[23] In my view Mr Dorbu does not have an arguable defence based upon promissory estoppel.
Current Condition and Value of Property
[24] In his notice of opposition the defendant also says that, because the property has no code compliance certificate and because major renovations are scheduled, no practical purpose would be served by ordering an immediate possession.
[25] This proposed ground of opposition proceeds on the mistaken assumption that it is the function of the Court to review decisions of a mortgagee and in appropriate cases to decline to assist the mortgagee to exercise the power of sale where the Court believes that no good purpose would be served thereby. It would seem that the Court only has power to intervene where the mortgagee proposes to exercise the power of sale other than in good faith: Downsview Nominees Ltd v First City Corp Ltd [1993] 1 NZLR 513 at 524.
[26] Even if it was competent for the Court to intervene in circumstances like this, I do not accept that the mortgagee does not have good reason for seeking possession. Typical reasons why a mortgagee will seek possession is to safeguard its property; or it might wish to make arrangements to rent out the property (assuming it has power to do so). Further, a mortgagee does not have an obligation to expend money on repairs or on upgrades of a mortgage property. It is entitled to sell the property as it is ASB Bank Ltd v Anderson HC Christchurch CIV-2009-409-2522, 24 March
2010 at [40].
[27] Mr Dorbu submitted that in considering whether to allow summary judgment the Court was not restricted to determining whether there was an arguable defence apparent. He said that the Court could also decline summary judgment where there were material facts requiring further investigation prior to the Court forming a definitive conclusion of all issues of fact. Assuming that is correct for the purposes of argument, I am not aware of any other factual matters which require investigation.
Defendant says he is now willing and able to resume payments
[28] The plaintiff has established that on or about 15 September 2008 it served a notice on the defendant pursuant to s 119 of the Property Law Act 2007. That notice required the defendant to remedy the defaults by paying the sum of $33,378.10 on or before 20 October 2008. The notice also stated that:
1.Any payments made by you to the Mortgagee after service of this notice (other than the full amount detailed in this notice including costs) by any means will be accepted without prejudice to this notice and all rights and remedies available to the Mortgagee.
[29] The plaintiff has proved as well that the default specified in the notice which was served upon Mr Dorbu was not remedied in terms of the notice. In order for the defendant to stop the mortgagee sale he needed to comply with the notice under s
119 of the Property Law Act 2007. He did not have the alternative or additional option of advising the Court when an application for possession duly came before it that he:
..is able to resume the monthly repayments of the mortgage interest and principal pending completion of renovations, or refinance the mortgage either before or immediately thereafter.
[30] This ground of defence does not assist the defendant.
Conclusion
[31] The application for possession which the plaintiff seeks in the prayer for relief to the statement of claim dated 23 November 2009 is granted on the terms there set out.
[32] The parties should confer on the matter of costs and if they are unable to agree I will hear them on that issue at 9 a.m on a convenient date.
J.P. Doogue
Associate Judge
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