Ju Yuan Investment Limited v New Zealand Shaoxing Trust Limited
[2024] NZHC 2911
•8 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-232
[2024] NZHC 2911
BETWEEN JU YUAN INVESTMENT LIMITED
Plaintiff
AND
NEW ZEALAND SHAOXING TRUST LIMITED
First Defendant
XIAN ZENG
Second Defendant
Hearing: 2 October 2024 Appearances:
R O Parmenter for Plaintiff
S O McAnally and A Ho for Defendant
Judgment:
8 October 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
(application for summary judgment)
This judgment was delivered by me on 8 October 2024 at 12.30pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
…………………………………
JU YUAN INVESTMENT LIMITED v NEW ZEALAND SHAOXING TRUST LIMITED [2024] NZHC 2911
[8 October 2024]
[1] Ju Yuan Investment Limited (JYIL) advanced to New Zealand Shaoxing Trust Limited (Shaoxing) $2,070,000 in April 2023.
[2] Mr Zeng, the shareholder and director of Shaoxing, guaranteed the obligations of Shaoxing to JYIL. Shaoxing provided a mortgage security to JYIL over a Mt Roskill property.
[3] The advance was for a term of one year and recorded that Mr Zeng was to be guarantor. Mr Zeng does not take issue with the fact he guaranteed Shaoxing’s obligations to JYIL.
[4] The ordinary interest rate under the agreement was 11.5 per cent with a penalty rate of 21.5 per cent. The penalty clause provided:
Penalty interest shall apply if the Borrower is in default of any obligation under this agreement or under any security by the Borrower to the Lender and will apply from the date of default. Penalty interest shall be payable on the amount of the loan outstanding as at the date of default together with all interest and costs then owing.
[5] The effect of the penalty clause is that the higher rate is payable not on the missed interest payment but on the full amount of the loan then outstanding.
[6] The agreement set out the following under the heading “Repayments Required”:
a.During the Term of the Loan interest will be calculated daily at the interest rate on the outstanding amount of the Principal. Interest will be paid monthly on the 6th day of each month with the first payment on 6th May 2023.
b.The Principal, any unpaid interest, penalty interest (if any) and any cost in relation to the repayment and discharge of mortgage (Final Payment) shall be paid on or before 3:00 pm on the 6th April 2024 (“Repayment Date”).
[7] Shaoxing failed to make the first interest payment which, as recorded above, was due on 6 May 2023. This failure to pay interest on 6 May 2023 resulted in the issue of a Property Law Act 2007 (the Act) notice dated 12 July 2023 (the PLA notice). That PLA notice under s 119 of the Act recorded the failure to pay the interest due on 6 May 2023 of $19,565.75 together with penalty interest from 6 May 2023 to
6 July 2023. The PLA notice recorded a credit for a payment made on 10 July 2023 which was for a little over two months’ interest — presumably the interest for May and June 2023. So by the date of the PLA notice, the interest arrears for May and June 2023 had been paid but not the penalty interest triggered by the May interest payment being missed.
[8] Mr Zeng acknowledges the interest payments due on 6 May 2023 and 6 June 2023 were not paid.
[9] While Mr Zeng made payment of the missed May and June 2023 interest payments on 10 July 2023, he also acknowledges he did not pay the further interest payment due on 6 July 2023. As I will address below, the payment on 10 July 2023 would be the last one made by Shaoxing or Mr Zeng.
[10] With a PLA notice under s 119 of the Act having been served, a further PLA notice under s 122 of the Act, in the form of a letter dated 21 August 2023, advising that JYIL intended to exercise its power of sale was served on 22 August 2023 on both Shaoxing and Mr Zeng. Shaoxing had not paid the penalty interest payable under the clause set out at [4] above, which was the subject of the 12 July 2023 PLA notice.
[11] There is no challenge to JYIL’s right to claim the penalty interest set out in the 12 July 2023 PLA notice nor to the accuracy of the calculation of that interest, nor to the fact the penalty interest was not paid. There is no challenge to the rate of penalty interest. The 12 July 2023 PLA notice advised that the default was to be remedied on or before 15 August 2023.
[12] I note here Mr Zeng denies receiving the PLA notices. However, an affidavit of service has been filed recording that the PLA notices were personally served on Mr Zeng and at his solicitors. At least as far as Shaoxing is concerned, the loan agreement records that PLA notices can be served at its solicitors (cl 14). PLA notices under the deed of guarantee could also be served on same firm of solicitors. However, the guarantee clause did not extend to notices under the Act. However, the only contact details for Mr Zeng in the guarantees are for his solicitor — I will return to this point below.
[13] The fact that the mortgagee sale progressed without any challenge being raised as to the requisite PLA notices having been served, undermines Mr Zeng’s evidence that he was not served. That is all the more so when the tenor of Mr Zeng’s evidence, as discussed below, is that JYIL “jumped the gun” in moving to a mortgagee sale when Mr Zeng says he had the ability to pay the amount that was outstanding. Had that been the case and had the PLA notices not been served, that would have been an obvious point to take in order to “buy more time” for the default to be rectified. Mr Zeng’s denial that he was served is in the circumstances not credible.
[14] The PLA notices went unremedied and the mortgagee sale took place by auction on 27 September 2023 with settlement a month later.
[15] Following the mortgagee sale there was a shortfall of $526,483.60 for which JYIL now seeks summary judgment, together with interest and costs, against Shaoxing and Mr Zeng. Demand was made for that sum in November 2023 and these proceedings followed in the New Year of 2024.
The opposition
[16] There are two aspects to the opposition. The first one is that the defendants say:
2 …
(c) …
(i)The plaintiff acted precipitously by persisting with the service of its Property Law Act notice when [Shaoxing] had, upon [Mr Zeng’s] return from China, brought the first and second missed interest instalments up to date,
[17] I note here that the notice of opposition does not assert the PLA notices were not served — indeed, the above pleading is inconsistent with that claim.
[18] The opposition says the first PLA notice was served only six days after the 6 July 2023 instalment was missed. While that is true, the PLA notice was issued in respect of the unpaid penalty interest that accrued from 6 May 2023 to 6 July 2023.
That the 6 July 2023 interest was also missed is besides the point. The notice of opposition alleges that JYIL failed to engage with Mr Zeng in relation to JYIL charging penalty interest or in relation to the mortgagee sale process. Mr Zeng says that at the time of the PLA notice in July 2023, Shaoxing had largely remedied the breaches of the loan agreement. Mr Zeng says he missed the first two months’ interest payments because at the time he was suffering a serious illness and had been in China for specialist medical treatment. Mr Zeng says missing the third instalment of interest due on 6 July 2023 was an oversight.
[19] These arguments are said to support the proposition that JYIL exercised its power of sale in a manner that was oppressive and the credit contract should be re-opened pursuant to s 120 of the Credit Contracts and Consumer Finance Act 2003 (CCCFA).
[20] The second limb of the defence is that JYIL breached s 176 of the Act through the manner in which it sold the secured property, in that it:
(i)did not allow sufficient time for the reasonable marketing of the property;
(ii)failed to reasonably or adequately market the property; and
(iii)sold the property at $1,200,000 less than its current market value … which loss the defendants may recover from the plaintiff and claim equitable set-off against any liability that they might have to the plaintiff;
(emphasis added)
Summary judgment principles
[21] The leading authority on applications for summary judgment is Krukziener v Hanover Finance Ltd.1 The Court of Appeal set out the following principles:2
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, there is no real question to be tried. The Court must be left without any real doubt or uncertainty.
(b)The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is not consistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
[22] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.3
The set-off arising from s 176 of the Act
[23] As noted at [20] above, the defendants assert they have an arguable set-off. However, cl 2.1 of the loan agreement provides:
2.1Payments to be free and clear. Each payment by the Borrower to the Lender under this Loan Agreement is to be made free and clear of any
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.
2 At [26].
3 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
deduction or withholding for or on account of tax or on any other account whether by way of set-off, counterclaim, charges or otherwise. Accordingly, for the avoidance of doubt and by way of illustration, you shall not be entitled to claim a right of set-off against any obligation arising under this Loan Agreement or to claim the benefit of any right of set-off in respect of any monies you may have on deposit with, or otherwise against, us.
[24]Mr Zeng’s obligations as guarantor require him to pay:
All moneys which are now or at any time in the future owing to the Lender by the Debtor …
[25] It follows that if Shaoxing is not entitled to a set-off, neither is Mr Zeng because as guarantor he is obliged to pay what Shaoxing is obliged to pay.
[26] While the no set-off clause is an answer to the set-off relied on by Mr Zeng,4 I comment on the evidence belatedly filed by JYIL in respect of its marketing. An affidavit from the real estate agent who conducted the sale was filed in reply as Mr Zeng took issue with the sale process in his affidavit in opposition. Evidence as to the sale process should be filed by a mortgagee with its original affidavit. Because JYIL’s evidence came in late, a reply affidavit on behalf of Mr Zeng relating to the sale process was provided. That evidence comes from a Mr Lockie who is experienced in the finance sector and held a senior position in arrears management for a finance company.
[27]Mr Lockie says:
12.After the expiry of a PLA, we would obtain a valuation which would include a recommendation of the method of sale. This was important if the property was specialised in nature. There is no indication, from the papers that I have reviewed, that a valuation and a recommendation regarding method of sale was obtained in the present case.
13.Depending on the security location (main centre or not) we would obtain appraisals from two real estate agents including marketing plans. This would contain a recommendation whether auction, tender or listing was the most appropriate method. The aim was to achieve the best price for the mortgagee and the borrower. There is no indication, from the papers that I have reviewed, that was done in the present case.
4 Browns Real Estate v Grand Lakes Properties [2010] 20 PRNZ 141 (CA); and Kitchener & Co (1989) Ltd v Concrete Solutions Ltd [2024] NZHC 653.
14.I am surprised that the time from the expiry of the PLA (15 August 2023) to the sale by auction (27 September 2023) was so short. In our experience this would not have allowed sufficient time for obtaining a valuation, two real estate appraisals, making a sale method decision, and marketing the property in order to obtain the best price available.
15.For the reasons detailed above, it is my opinion that the decision to serve the PLA notice, and then sell in what seems a somewhat hasty fashion, was not consistent with my understanding of the reasonable standards of commercial practice.
[28] Mr Lockie is not an expert in the marketing of property in a mortgagee sale context. He is not a real estate agent and so is not able to take issue with the advice JYIL received from its agent, which I address below.
The mortgagee sale process — duties on a mortgagee
[29] In Senior Trust Capital Ltd v Holmes, there is the following discussion of the principles:5
[15]Section 176 of the Property Law Act 2007 provides:
176. Duty of mortgagee exercising power of sale
(1)A mortgagee who exercises a power to sell mortgaged property, including exercise of the power through the Registrar under section 187, or through a court under section 200, owes a duty of reasonable care to the following persons to obtain the best price reasonably obtainable as at the time of sale:
(a)the current mortgagor:
(b)any former mortgagor:
(c)any covenantor:
(d)any mortgagee under a subsequent mortgage:
(e)any holder of any other subsequent encumbrance.
(2)A mortgagee who exercises a power to sell mortgaged property may not become the purchaser of the mortgaged property except in accordance with section 196 or an order of a court made under section 200.
5 Senior Trust Capital Ltd v Holmes [2023] NZHC 3108, (2023) 24 NZCPR 592.
[16] The obligation is to take reasonable care to obtain the best price reasonably obtainable, not to in-fact obtain that price.6
[17] In addressing the need under s 176 of the Act for a mortgagee to take “reasonable care … to obtain the best price reasonably obtainable”, Asher J in Public Trust v Ottow summarised the factors that indicate a mortgagee has made reasonable efforts to obtain the best price obtainable as follows:7
(a)the appointment of a reputable real estate agent to market the property;
(b)obtaining a valuation report from an experienced valuer as a guide to what could reasonably be expected for the property;
(c)marketing over a reasonably prolonged period of time;
(d)an extensive advertising and promotional campaign;
(e)a properly conducted auction;
(f)a sale price that given all the circumstances can be reconciled with the expert opinion as to value.
[18] Section 176 of the Act does not require a mortgagee to delay a sale in an attempt to obtain a higher price.8 Accordingly, the mortgagee’s right to decide whether and, if so, when to sell is not qualified by s 176 of the Act.9
[19] In deciding whether a mortgagee has breached s 176 of the Act, the facts must be looked at broadly and a mortgagee “will not be adjudged to be in default unless he is plainly on the wrong side of the line”.10
[20] The Court of Appeal in Long v ANZ National Bank Ltd held that: “the courts should be slow to second guess the actions of a mortgagee acting on apparently sound professional advice”.11 When a mortgagee has more to gain if a higher price is achieved, then it cannot be assumed likely that the mortgagee has acted contrary to his own interests.12
[21] In terms of valuations, the Court accepts that they lose much of their significance if reasonable care is taken by the mortgagee, there has been a properly advertised and conducted sale process, and the property has been sold after proper negotiations.13 If the mechanism adopted for the mortgagee sale properly tested the market, then the results obtained at auction, rather than the
6 Moritzson Properties Ltd v McLachlan HC Dunedin CP135/91, 4 December 2000 at [55].
7 Public Trust v Ottow HC Auckland CIV-2009-404-3825, 4 November 2009.
8 Allerby v ASB Bank Ltd [2014] NZHC 807.
9 Apple Fields Ltd v Damesh Holdings Ltd [2001] 2 NZLR 586 (CA).
10 Whitford Properties Ltd (in liq) v Bruce [2017] NZHC 625 at [74] and Robertson v ASB Bank Ltd
[2014] NZCA 597.
11 Long v ANZ National Bank Ltd [2012] NZCA 132 at [21] (leave to appeal dismissed: Long v ANZ National Bank Ltd [2012] NZSC 51).
12 Re Bank of New Zealand, ex parte O’Connor [2014] NZHC 3004 at [54], Harts Contributory Mortgage Nominee Company Ltd v Bryers HC Auckland CP403-IM00, 19 December 2001 at [43].
13 Long v ANZ National Bank Ltd [NZCA], above n 11, at [21].
opinion of the valuer, must be taken as demonstrating what the market value of the property is.14
Applying the above principles to this case
[30] I am not told if JYIL obtained a valuation from a registered valuer. Other than that issue, the steps identified in Public Trust v Ottow were largely met. Indeed, the steps taken by JYIL are broadly consistent with the steps identified by Mr Lockie, that is, the instruction of a real estate agent and taking their advice as to the appropriate method of sale. In the real estate agent’s affidavit, he explains he has worked as a real estate salesperson since 1994. He can therefore be said to be experienced. No issue is raised with the agent’s expertise or experience. He is a licensed real estate salesperson with Barfoot & Thompson, who are well known Auckland agents. The real estate agent carried out a comparative sales data analysis assessing the likely market value as being in the range of $2.2m — $2.5m. While this is not a report from a registered valuer, it is an assessment from an experienced agent. The real estate agent describes a four-week marketing period as a standard promotional period for auctions. That Mr Lockie’s company’s practice is to seek advice from two real estate agents does not of itself mean a reasonable mortgagee could not act on the advice of one experienced agent.
[31] The agent also notes that Shaoxing did not permit access to the property for inspections so potential buyers would have no idea of the interior layout or condition of the property. The agent says, “This is a very negative aspect for achieving a good sale price but nothing could be done about it.”
[32] The advertising budget and the advertising undertaken are summarised in the agent’s marketing report. There is no evidence to say the budget or the advertising undertaken was unreasonable save for Mr Lockie saying he thinks the marketing period was too short. A 63 page Information Pack and a LIM report was provided to buyers. No issue is taken with how the auction was conducted. The LIM report described the property as being in a flood prone area and that the property was apparently impacted by the February 2022 Auckland floods. The real estate agent, having liaised with interested parties, was hopeful, as reported in his week three
14 Mitchell v Trustees Executors Ltd [2011] NZCA 519.
marketing report, of achieving a sale in the $2.2m — $2.25m range. There were three active bidders at the auction and the property sold under the hammer for $1.8m plus GST (if any). The agent’s closing comment in his affidavit was, “I would like to think it would have achieved more if we could have got inside but, in the end result, the market spoke.”
[33] Mr Lockie is not able to give evidence that the marketing and sale process adopted by the Barfoot & Thompson agent was not one that a reasonable agent could not have undertaken. So long as the marketing and sale process was reasonable, it is not a defence that another agent may have taken different steps.
[34] The reality is that in a mortgagee sale, valuations lose much of their significance as noted in Senior Trust Capital Ltd at [29] above, particularly when access to the property is not facilitated by the mortgagor and where, as is normal in a mortgagee auction, no warranties are given.
[35] Given this was a mortgagee sale with no vendor warranties, no access to the property being possible, with the flooding issue raised by the LIM and with there being three bidders, the old adage that the market is always right applies.
[36] Accordingly, had it been open to Shaoxing and Mr Zeng to rely on a set-off, I would have concluded JYIL had established that Shaoxing and Mr Zeng did not have an arguable defence in respect of the mortgagee sale process.
Oppressive conduct
[37] The Court can re-open a credit contract pursuant to s 120(b) of the CCCFA if a party has exercised a power conferred by the contract in an oppressive manner. The term ‘oppressive’ is defined in s 118 of the CCCFA:
… oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice.
[38]Associate Judge Brittain in Chadda v Singh said that:15
The underlying idea is that the transaction or some term of it is in contravention of reasonable standards of commercial practice, an objective standard.
(footnote omitted)
[39]The enquiry is wide-ranging. His Honour went on to note:16
… where a mortgage is overdue, it is not oppressive for a mortgagee to claim interest at an increased rate under contractual powers reserved to the mortgagee.17 Similarly, under the CCCFA, higher penalty rates are not of themselves oppressive.18
[40] Mr McAnally, counsel for the defendants, acknowledges Shaoxing missed the interest payments due on 6 May and 6 June but paid them on 10 July 2023. While acknowledging the interest payment on 6 July 2023 was not made at the same time, this interest payment was not the subject of the PLA notice of 12 July 2023. Mr McAnally makes the point that the PLA notice was issued in respect of penalty interest only. However, it is not submitted on behalf of Shaoxing and Mr Zeng that JYIL was not entitled to issue the PLA notice upon the penalty interest not being paid.
[41] Mr McAnally submits JYIL acted in a manner that was oppressive, harsh unduly burdensome, unconscionable or in breach of reasonable standards of commercial practice19 and that it is arguable that the loan agreement and mortgage in this case are liable to be opened and that, pending that determination, summary judgment should not be entered.
[42] Mr McAnally submits reasonable standards of commercial practice required JYIL to take steps to ascertain the reasons for the breach by Shaoxing and had it done so it would have learnt of Mr Zeng’s illness and explored a commercial resolution.
15 Chadda v Singh [2024] NZHC 2318 at [57].
16 At [59].
17 G Fuller Laws of New Zealand Mortgages (online ed) at [333].
18 See, for example, Anderson v Burbery Finance Ltd [1986] 2 NZLR 20 (HC), affirmed on appeal [1988] 2 NZLR 196 (CA); Greenbank of New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA); and Bartle v GE Custodians [2010] 3 NZLR 601 (CA).
19 Contracts and Consumer Finance Act 2003, s 118.
[43] Mr McAnally submits an arguable defence arises from the manner in which JYIL chose to exercise its power of sale and that overall it was oppressive for it to sell the property in terms of s 120 of the CCCFA. If that argument succeeds then the loan agreement between the parties is liable to be reopened which would give the Court a wide discretion to grant such relief as it thinks necessary to remedy the matters that caused it to reopen the contract, which includes ordering that any obligation outstanding under the contract be extinguished, revised or altered.
[44] The submission is that it was premature to move straight to PLA notices when the loan was not badly in arrears. I do not accept that submission. The PLA notice was issued in respect of the penalty interest that started accruing from 6 May 2023 and was calculated to 6 July 2023. Because the 6 July 2023 interest payment was also missed, penalty interest continued to run on. Mr Zeng acknowledges not contacting JYIL in respect of the interest arrears due on 6 May and 6 June 2023, partly he says due to communication issues from him being in China for medical treatment. Mr Zeng says he contacted the broker he used to arrange the advance from JYIL but there is no suggestion that the broker was the agent of JYIL to receive such advice. The interest payments on 6 August and September 2023 were also not made.
[45] This was an advance for 12 months and by the time of the mortgagee sale none of the interest payments had been made on time. Only two of the five interest payments due from the commencement of the loan were made prior to the mortgagee sale. JYIL is criticised for not getting in touch with Mr Zeng. In my view, it was incumbent on Mr Zeng to contact JYIL to explain the reasons he now advances for the late or missed payments. Mr Zeng does not offer an explanation for not paying the August and September 2023 interest payments. There is an air of unreality in Mr Zeng saying JYIL was unreasonable in exercising its contractual rights for reasons he did not bother to communicate to JYIL at the time.
[46] It is also not clear that JYIL had any means of communicating with Mr Zeng other than through his solicitor because, as noted at [12], the guarantee provided the solicitors details as the means of contact for Mr Zeng. JYIL served the PLA notices for Shaoxing at the solicitors. Mr Zeng is the sole director and shareholder of
Shaoxing so he would have been informed of JYIL’s intention at the very least in his capacity as director.
[47] Mr Lockie, in his evidence, suggests JYIL should have communicated with Mr Zeng. As I have said, I do not accept Mr Zeng’s claim that he was not served with the PLA notices. From the PLA notices it is plain that Mr Zeng needed to take the initiative and communicate with JYIL. Mr Zeng does not explain why he did not communicate with JYIL after he returned to New Zealand, nor does he explain why he took no steps to challenge the mortgagee sale process given, as I have said, he claims he was not served.
[48] That Mr Zeng did not advise JYIL he had a serious medical condition, and the reason he had missed making payments was that he was in China for treatment, is significant. As far as JYIL was concerned, it was faced with a borrower who failed to make interest payments without any explanation, and which then failed to respond to PLA notices under the Act and continued to default on its monthly interest obligations. “A credit contract cannot be impugned as oppressive by reference to matters that affected the debtor but which were unknown to the lender”.20
[49] Mr McAnally submits that overall, what emerges is a somewhat absolutist attitude from JYIL in that it demanded, when the strict terms of the loan contract permitted it, immediate acceleration of the loan and a “fire sale” of the security. I note no acceleration of principle occurred here — the default was not paying the penalty interest. As already noted, claiming interest at an increased rate is of itself not oppressive and again, the interest rate here was not challenged. Mr McAnally submits there is no evidence of any inclination to work with Shaoxing and Mr Zeng or to reinstate the loan to one that can perform. Mr McAnally submits it cannot be the case that JYIL could be satisfied Shaoxing was incapable of rectifying the breaches of the agreement, as he says that would have required dialogue which did not occur.
20 Colley v Westpac New Zealand [2013] NZCA 57, (2013) 13 TCLR 639 at [36], referred to in Commercial Law in New Zealand, reopening of oppressive credit contracts, consumer leases and buy-back at para [22.12.2].
[50] However, as I have said, what is missing from Mr Zeng’s evidence is that he attempted to contact JYIL upon his return to New Zealand or during the mortgagee sale process to try and sort the matter out. JYIL was faced with the missed or late interest payments I have described. Faced with silence from Mr Zeng, JYIL could potentially be criticised for not moving promptly to a sale because of the effect of penalty interest. The longer JYIL delayed sale, the greater its risk of a shortfall.
[51] Mr McAnally includes in his argument that the power of sale was exercised in an oppressive manner the evidence of Mr Lockie as to the timing of the sale process.
[52] However, that submission, in my view, does not take into account the protections given to mortgagors and guarantors by virtue of the PLA notice requirements under ss 119 and 120 of the Act.
[53] A notice under s 119 of the Act must comply with s 120. Under s 120(1)(c), the mortgagor must be given at least 20 working days after the date of service of the notice to remedy the default. Section 121 of the Act requires that the notice also be served on a guarantor.
[54] The evidence is that the 12 July 2023 PLA notice was served personally on Mr Zeng and on his solicitors on 12 July 2023. On 22 August 2023, a letter for the purposes of s 122 of the Act from the solicitors acting for JYIL, was served on Mr Zeng and Shaoxing advising them that the PLA notice served in July 2023 had not been remedied and that JYIL intended to exercise its power of sale. There was nearly 11 weeks from the final PLA notice to the auction.
[55] At the risk of labouring the point, it is notable that Mr Zeng’s evidence offers no explanation as to what he did upon receiving on 22 August 2023 the letter personally served on him, notifying him that there was to be a mortgagee sale. The mortgagee sale took place on 24 September 2023 — there is no evidence Mr Zeng did anything prior to the sale to rectify the default in relation to the unpaid penalty interest and Shaoxing did not make any further interest instalments after the belated May/June payments or otherwise seek to negotiate with JYIL.
[56] There is nothing unreasonable in a mortgagee issuing PLA notices when they are entitled to do so, as such keeps their options open. Whether the mortgagee then moves to a mortgagee sale is another matter but here, the mortgagee had no communication with Mr Zeng and there was no attempt to address the non-payment of interest on 6 July or thereafter, or the outstanding penalty after the payment on 10 July 2023 recorded in the PLA notice.
[57] This was short-term lending of a substantial sum. The onus was on Mr Zeng to at least indicate he wanted to negotiate. JYIL clearly signalled to Mr Zeng it was preparing to exercise its rights and then moved to do so. In many respects, this was a conventional mortgagee sale. The reality is Mr Zeng appears to have put his head in the sand. It is too late to complain about this sale process now when he did not address the penalty interest, arrears of interest due or attempt to negotiate at the time — this against a background of an ongoing failure to pay monthly interest.
[58] Accordingly, I am satisfied that JYIL has established that Shaoxing and Mr Zeng do not have a reasonably arguable defence based on their allegation that JYIL acted oppressively in exercising its power of sale.
[59] It follows that I find JYIL is entitled to judgment against each defendant in the sum of $526,483.60 together with interest at the contractual rate pursuant to s 22 of the Interest on Money Claims Act 2016 from 26 October 2023 at the rate of 21.5 per cent being $301.12 per day, until payment is made in full. I so order.
Costs
[60] While JYIL has the benefit of an indemnity costs clause, costs are sought on a 2B basis.
[61] Accordingly, there is an order that each of Shaoxing and Mr Zeng are liable to JYIL for costs in respect of this proceeding on a 2B basis, together with disbursements as fixed by the Registrar.
Associate Judge Lester
Solicitors:
Winston Wang & Associates, Auckland (for Plaintiff) Crimson Legal, Auckland (for Defendants)
Copy to counsel:
R O Parmenter, Auckland (for Plaintiff)
S McAnally, Barrister, Auckland (for Defendants)
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