GE Custodians v Haddon HC Auckland CIV 2009-404-6464
[2010] NZHC 1303
•2 July 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-006464
BETWEEN GE CUSTODIANS Plaintiff
ANDGARY FRANCIS HADDON First Defendant
ANDGARY FRANCIS HADDON IN HIS CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Second Defendant
ANDBARBARA GAIL HADDON Third Defendant
ANDBARBARA GAIL HADDON IN HER CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Fourth Defendant
ANDGRAEME DOUGLAS HADDON Fifth Defendant
Hearing: 2 July 2010
Appearances: E M S Cox for Plaintiff
C S Henry for First and Second Defendants
Judgment: 2 July 2010 at 3:30 pm
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on 2 July 2010 at 3:30 pm pursuant to Rule 11.5 of the High Court Rules
………………………………………..
Registrar/Deputy Registrar
………………………………………..
Date
GE CUSTODIANS V HADDON AND ORS HC AK CIV-2009-404-006464 2 July 2010
ANDGRAEME DOUGLAS HADDON IN HIS CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Sixth Defendant
ANDCHRISTOPHER TE IKA TEPARA Seventh Defendant
ANDCHRISTOPHER TE IKA TEPARA IN HIS CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Eighth Defendant
ANDGRAEME DOUGLAS HADDON IN HIS CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Sixth Defendant
ANDCHRISTOPHER TE IKA TEPARA Seventh Defendant
ANDCHRISTOPHER TE IKA TEPARA IN HIS CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Eighth Defendant
ANDSANDRA RAEWYN JAMIESON IN HER CAPACITY AS TRUSTEE OF THE HADDON FAMILY TRUST
Ninth Defendant
Solicitors:
E M S Cox, Gibson Sheat, Lower Hutt
A J H Witten-Hannah, AucklandCopy:
C S Henry, Barrister, Auckland
Preliminary Matters
[1] Formerly all defendants were represented by Mr Minchin under instructions from the law firm Otene Ellis. On 19 April 2010 I gave Mr Minchin leave to withdraw subject to Otene Ellis remaining the address for service until any further notice of representation was filed on behalf of the defendants.
[2] On 23 June 2010 a notice of change of representation was filed on behalf of the first and second defendants. The firm of Witten-Hannah Howard are noted as solicitors acting for those defendants. Mr Cox advises that the firm of Otene Ellis has apparently dissolved without any notice of change of representation being filed on behalf of the third – ninth defendants.
[3] This fixture was scheduled by me on 19 April 2010. At the time I directed the plaintiff’s synopsis and bundles be filed and served by 23 June 2010. That direction was complied with.
[4] I also directed the defendants’ synopsis and bundles to be filed and served by
28 June 2010. Instead of receiving submissions on behalf of the defendants, the Court has received an application on behalf of the first and second defendants to join a law firm as a third party to the proceeding. As well, an application has been filed requiring United Home Loans Limited (U.H.) to provide non-party discovery.
[5] On the same date an amended notice of opposition to the plaintiff’s summary judgment application has been filed. The case in opposition is now advanced upon the grounds:
a) The transaction was oppressive.
b)The plaintiff has exercised a right or power conferred by contract, in an oppressive manner.
[6] Mr Henry now acts for the first and second defendants, having only recently been instructed. Mr Haddon has been granted legal aid. Although Mrs Haddon is
not represented, Mr Henry perceives, correctly, that her position will be dealt with in the outcome of the case concerning her husband.
[7] Mr Henry is the architect of those documents recently filed on behalf of the first and second defendants. He was also involved in the drafting of a supplementary affidavit which too was filed on 28 June 2010. The affidavit was sworn by Sandra Jamieson, the ninth defendant. It is dated 25 June 2010. It was filed on
28 June 2010. Previously by affidavit dated 9 November 2009, and filed on that date, Miss Jamieson filed an affidavit in opposition on behalf of all defendants.
[8] Mr Henry confirms that the sole ground of the first and second defendants in opposition concerns a claim of oppression. Over Mr Cox’s objection, Mr Henry requests the second affidavit of Sandra Jamieson be read in support of the first and second defendants’ case.
[9] In response to Mr Cox’s objection I ruled the affidavit could be read.
[10] Prior to this hearing I have made it clear to counsel that the fixture would proceed today as I directed, notwithstanding the first and second defendants’ two standing applications for joinder and discovery respectively. As advised to Mr Henry, no affidavit was filed in support of those applications and, further, the plaintiff has had to wait long enough for this fixture to proceed. By this Mr Henry fully understood that it was available to the first and second defendants to raise by way of defence to the summary judgment claim that there was good purpose in the Court of making further enquiry and seeking recourse to discovery before determining important issues of fact.
The claim for summary judgment
[11] The plaintiff is the mortgagee of two properties, one at Paeroa and the other at Glendene, Auckland. It seeks orders against the defendants for vacant possession of both properties. That relief is sought by the summary judgment procedure.
a) Mr and Mrs Haddon Senior, who live at the Glendene property;
b) Mr and Mrs Haddon and Ms Jamieson, as trustees of the Haddon
Family Trust;
c) Mr and Mrs Haddon’s son, Graeme Haddon, and his partner, Christopher Tepara.
[13] In October 2007 the defendants borrowed $730,437.00 from the plaintiff to allow Graeme Haddon and Christopher Tepara to repay existing debt and to purchase a 3.8 hectare lifestyle property at Paeroa. Security for the lending was mortgages over Mr and Mrs Haddon’s property at Glendene, the Paeroa property, and a residential property at Otorohanga owned by Graeme Haddon and Christopher Tepara. The plaintiff has already obtained vacant possession of the Otorohanga property, so it is not the subject of this proceeding.
[14] Graeme Haddon and Christopher Tepara purchased the Paeroa property on
22 August 2007 through a Paeroa real estate agent. The purchase was conditional upon their obtaining a valuation of the property suitable to their financiers. In September 2007, Christopher Tepara’s son died. Ms Jamieson deposes that in December 2007 or thereabouts, Graeme Haddon and Christopher Tepara lost their source of income as private caregivers to Department of Child Youth and Family. Christopher Tepara was physically and emotionally unable to work following his son’s death. A hardship application was made to the plaintiff under s 55 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
[15] In October 2007 the advance by the plaintiff to the defendants was made creating two accounts. One, under Reference 195552/1, was a fixed interest only advance of $140,000.00 with initial instalments of $1,130.50 per month. The second, under Reference 195552/2, was a fixed interest only loan of $590,437.00 payable by initial instalments of $4,767.78 per month. As well, Mr and Mrs Haddon
also borrowed $100,000.00 at the same time from Westforce Union to repay the debts of Graeme Haddon and Christopher Tepara.
[16] As at January 2008 the defendants were in default on the 195552/2 account in the sum of $4,767.78. It has remained in default for most of the period since. With the exception of the period September – November 2008 the 195552/1 account has been in default since April 2008.
[17] The defendants have defaulted under the mortgages and default notices under s 119 of the Property Law Act 2007 were issued. Service of these notices was effected by July 2008. The defaults were not remedied and the plaintiff made demand for vacant possession of the Glendene and Paeroa properties.
[18] The evidence establishes the plaintiff’s entitlement to vacant possession, subject to defences raised.
[19] As earlier noted in [1]-[10] herein, the scope of the defences raised on behalf of Mr and Mrs Haddon personally has changed to a claim of oppression. The other defendants are not represented at this hearing, although Ms Jamieson’s recent affidavit is relied upon by Mr and Mrs Haddon in support of their oppression defence. It appeared by Mr Henry’s submission to this Court that the claim of oppression largely encompassed the parameters of the claims of defences contained in the original notice of opposition. It is convenient that I deal with those in particular before addressing a general submission of oppression.
Original Notice of Opposition – An Overview
[20] The defences rely on one of three legal relationships being alleged:
a) A tortious duty of care between the plaintiff and the defendants;
b) A fiduciary relationship between the plaintiff and the defendants;
c) A contractual duty of care with a scope of duty or obligations not recorded in the written documents.
[21] This defence relies upon Bartle & Anor v GE Custodians & Ors.[1]I accept Mr Cox’s submission that Bartle is distinguishable from the facts in this case because this was not a sophisticated, Blue Chip-like, non-transparent, investment driven transaction in which elderly home owners were targeted. Rather, in this case the defendants simply borrowed money to allow a family member to purchase a lifestyle block. The Paeroa property was purchased before funding for it was sought. There was no third party involvement. Allegations of embellishment of documents in Bartle related to the description of Mr and Mrs Bartle as self-employed. In this case the key borrowers, Graeme Haddon and Christopher Tepara, were self- employed in the ordinary sense of those words.
[1] Bartle & Anor v GE Custodians & Ors [2010] 1 NZLR 802.
[22] Bartle is relevant for its findings on duty of care. Randerson J held there was no duty of care.[2] Likewise in this case I am satisfied there is none.
[2] At [354].
[23] The defences of agency allege U.H. was the agent of GE. In Bartle and after a detailed review of the contractual documents, His Honour held[3] that neither Tasman Mortgages Limited (TML) nor Blue Chip were the agent of GE. TML had no ability to approve loans or to bind GE in any way.
[3] At [276].
[24] The Court of Appeal found that responsibility for an unconscionable or oppressive transaction conducted by TML could be attributed to GE. That issue is now on appeal to the Supreme Court. Our present case is clearly distinguishable from those circumstances dealt with by the Court of Appeal.
[25] The defences originally raised in this proceeding on behalf of the defendants referred to the conduct or relationship with the broker. For present purposes the Court should treat the relationship between GE and U.H. as being similar to that described in Bartle between GE and TML. Regardless, I am firmly of the view that no defence alleging a duty of care can succeed.
[26] For such to exist it would have to arise from the express terms of the agreement or be implied. But none of the contract documents in question provides for a contractual duty of care as alleged. Therefore, a duty could only arise from an implied term. For such to apply (despite the existence of a contractual clause confining terms and conditions to those expressed by the documents), it must be
shown:
a)
b)
It is reasonable and equitable;
It is necessary to give business efficacy to the contract, so that no term
will be implied if the contract is effective without it; c)
It is so obvious that “it goes without saying’;
d)
It is capable of clear expression;
e)
It does not contradict any express term of the contract.[4]
[27]
In
this case I accept Mr Cox’s submission that the implication of a
[4] BP Refinery Westernport Pty Ltd v Shire of Hastings (1977) ALR 636 at 376.
contractual duty of care beyond the express term of the contract documents must fail because it is not necessary to give business efficacy to the parties’ arrangement. Accordingly, there is no basis for implying a contractual duty of care.
Fiduciary duty to the defendants
[28] A fiduciary relationship arises when one party reposes trust and confidence in another. Claims of a fiduciary relationship will not usually arise in a bank and customer relationship without additional circumstances demonstrating that trust and confidence.
[29] I accept the submission of Mr Cox that there are no circumstances alleged by the defendants that would elevate this creditor/debtor relationship to a fiduciary
relationship. Instead, the affidavit evidence suggests a relationship in which the giving of advice was between the family members and Ms Jamieson and/or their solicitors. I accept the submission that defences based on a fiduciary relationship cannot succeed.
Comment upon the evidence provided in support of the aforementioned defences
[30] Whereas here the plaintiff has established a prima facie case that no reasonably arguable defence is available, a defendant must raise questions of fact on which a Court’s decision will turn if summary judgment is to be considered inappropriate. A defendant must provide some evidential foundation for the defences raised, and simple assertions are usually insufficient.
[31] A Court will not attempt to resolve conflicts of evidence, but is not bound to accept uncritically every statement however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable they may be: Attorney General v Rakiura Holdings Limited.[5]
[5] Attorney General v Rakiura Holdings Limited (1986) 1 PRNZ 12, 14.
[32] Here, reference is made to embellished documents and falsified documents. Plainly there is no evidence of their existence. There is no suggestion of documents having been falsified or of there being a pattern or history of same involving U.H.
[33] The defendants claim they did not receive relevant warning concerning the risk of borrowing, but even Ms Jamieson deposes giving Mr and Mrs Haddon advice about the risk of using the Glendene property as security. Also, it was she (whom she describes herself as a broker) who submitted the loan application and she was clearly aware of Graeme Haddon and Christopher Tepara’s adverse credit history.
[34] Ms Jamieson recounts a reported comment of Mr Fitzgerald from U.H. when she said she telephoned him to advise of Christopher Tepara’s health and mental situation. She reports that Mr Fitzgerald advised her not to panic and she should not worry about it. In short, this evidence provides too little to form the basis of an
allegation of failure to advise about risk or ensure the defendants’ understanding of risk.
[35] I am firmly of the view there is no evidence of a fiduciary relationship between the plaintiff and the defendants. Even assuming Mr Fitzgerald’s conduct could be attributed to GE, it is insufficient to imply a relationship of fiduciary duty. Rather, the evidence shows the defendants received independent legal advice from a firm called The Conveyancing Shop, and that advice was obtained before the defendants were committed to the plaintiff. The defendants may have a claim against The Conveyancing Shop and the solicitors involved for negligent advice or breach of another duty, but that is not a defence to the plaintiff’s rights to vacant possession.
[36] The defences suggest U.H. inserted new material into the credit application that was not correct. In my view, there is simply no factual evidence at all to support that allegation. There is no evidence of the plaintiff’s knowledge of the broker’s conduct; or of serial conduct of the broker altering documents; or of the mortgage insurance being void or declined.
[37] The defendants claim the plaintiff refused to accept Mr and Mrs Haddon’s offer to buy their family home out of the mortgage, at market value. In fact the evidence discloses the plaintiff agreed to give a discharge of its mortgage over the Glendene property in exchange for the $300,000.00 offered. What the plaintiff would not agree to was to release Mr and Mrs Haddon personally and the trustees from their personal covenants in the mortgage. It was under no obligation to do so. A mortgagee is entitled to demand full payment for providing a discharge of its mortgage.
[38] The defendants plead that the plaintiff breached its contractual obligation to provide Mr and Mrs Haddon with statements of account. But, there is no express contractual obligation to provide statements of account. It is not claimed there was a breach concerning disclosure requirements under the CCCFA but even if there had been, the CCCFA disclosure requirements do not preclude enforcement of a
consumer credit contract. In any event, it is clear from Ms Jamieson’s evidence that Mr and Mrs Haddon were receiving direct correspondence from U.H. from May 2008.
[39] It is pleaded that the plaintiff has breached s 55 of the CCCFA by not granting a “mortgage holiday”. In December 2007 and September 2008, the defendants applied for changes to the consumer credit contract on grounds of unforeseen hardship. The first application was declined. The second required arrears to be brought up to date. In October 2008 payments totalling $54,926.22 was paid on account of arrears, and by November 2008 the parties were negotiating a discharge of the mortgage over the Glendene property. For s 55 to apply an application can be made in circumstances of unforeseen hardship if the debtors reasonably expect to be able to discharge their obligations; they cannot apply if they have defaulted and that default has not been remedied; and, in any event, ss 55-59 of the CCCFA do not impose any obligations on the creditor in respect of the application. Section 58 enables a debtor to apply to the Court to change the terms of the contract, but no such application has been filed in this case. Mr Cox submits, and I agree, that had a s 58 application been made a Court would likely have considered sale of the mortgage properties as the most appropriate remedy.
[40] The evidence falls far short of proof of claims of breaches of tortious or contractual duty, or of breach of fiduciary duty.
Oppression
[41] The claim of oppression arises in the very unfortunate situation Mr and Mrs Haddon now find themselves. They have owned and occupied the Glendene property for about 40 years. Mr Haddon is a dock worker. I am informed from the Bar that Graeme Haddon and Christopher Tepara wish to sell the Paeroa property, but I have been given no information about what steps have been taken in this regard.
[42] Mr and Mrs Haddon are an elderly couple. It is understandable they would wish to try to retain it. In part it is for those reasons, but also because of identified
concerns in particular surrounding the ‘relationship’ between the plaintiff and U.H., that is behind their defence of the summary judgment application. Mr Henry submits there is a need for discovery because Mr and Mrs Haddon want to ascertain precisely what went on in the dealings between the plaintiff and U.H. There is, he submits, reason to assume that the relationship was not merely one of banker and broker but where the broker was acting as agent for the banker. Mr Henry recounted to the Court his difficulties in serving his discovery application upon U.H. His further inquiries revealed the name of United Loans being associated with a number of separately incorporated companies. Therefore, I infer the Court should be dubious of claims that there was no connection between broker and banker. As Mr Henry submitted “all is not what it appears to be”.
[43] In another respect, Mr Henry submits this is not an appropriate case for summary judgment because recourse to the CCCFA may result in the Court determining that it was unreasonable and unfair for the plaintiff to insist on retaining personal covenants in exchange for their agreement to release the mortgage over the Glendene property.
[44] Finally, Mr and Mrs Haddon want an opportunity to join The Conveyancing Shop as a party to the proceeding. In that outcome they may have a source of indemnity to off-set their own responsibilities to the plaintiff. The solicitor at The Conveyancing Shop should have, Mr Henry submits, referred Mr and Mrs Haddon for advice elsewhere in circumstances whereby they were offering security for their son’s borrowings.
Considerations
[45] Mr and Mrs Haddon want discovery but there is no evidence at all to suggest what might arise from that. A Court should not authorise discovery on the basis that something might arise.
[46] The claim against The Conveyancing Shop arises out of a completely separate contractual or fiduciary relationship and ordinarily will not permit such to influence a quite discreet issue between the parties.
[47] Considerations of oppression are founded upon suspicion, but it is not quite clear what those suspicions really are. This case is quite distinct from that reviewed by the Court of Appeal in Bartle. There the Court considered a number of possible permutations of a relationship between two parties between whom Randerson J in the High Court considered no duty of care lay. Obviously each case depends on its own circumstances, but I consider the circumstances of the present to be quite distinct from the range of options reviewed by the Court of Appeal.
[48] In characterising the distinction in this case I endorse the submissions of Mr Cox. This case involves a simple, transparent, borrower-initiated transaction. The transaction was initiated by Graeme Haddon and Christopher Tepara and was supported by Graeme’s parents. Their loan application indicated all four were income earners and that the repayment ability was not in issue. The defendants were not sequentially drawn into this transaction like the Bartles were in the Blue Chip investment. In that case when the Bartles signed up it was not clear how much they would be borrowing, much less that further and sequential borrowing would be required. Also, it is clear from the evidence of Ms Jamieson that Mr and Mrs Haddon were aware of the risks of the transaction and had an opportunity to pull out before completing their contractual committment to the plaintiff.
Result
[49] In the outcome I am satisfied there is no reasonably arguable defence to the plaintiff’s claim. I certify that had Mr Haddon not been in receipt of legal aid that this is an appropriate case for costs to be awarded on a 2C basis.
Orders
a) There is an order pursuant to s 137(1)(c) of the Property Law
Act 2007 that the defendants give vacant possession of the land at
315 Awaiti Road, Paeroa, as described in Certificate of Title SA67A/87 (South Auckland Registry), and 3 Blue Spur Way, Glendene, Auckland, as described in Certificate of Title NA18A/631 (North Auckland Registry) to the plaintiff within fourteen (14) days
after service of the order (which shall include service in accordance with any substituted service order made in this proceeding) or any
other method of service allowed by the rules;
Associate Judge Christiansen
0
1
1