Lepionka & Company Investments Limited v Coltart
[2016] NZHC 5
•13 January 2016
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2015-441-36 [2016] NZHC 5
UNDER the Land Transfer Act 1952 BETWEEN
LEPIONKA & COMPANY INVESTMENTS LIMITED Applicant
AND
ANDREW WILLIAM CLYDE COLTART Respondent
Hearing: 11 December 2015
Further memoranda 14 December 2015
Counsel:
E Cox for the Applicant
D Chan for the RespondentJudgment:
13 January 2016
JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] There are two applications before the Court. First, the applicant (the
Lepionka mortgagee) applies for an order recalling the judgment I gave on 17
November 2015 (the judgment),1 in which I ordered that two caveats registered by Mr Coltart on certain land near Havelock North (the land) were to be removed from the title, as and when (i) a transfer of the land by the Lepionka mortgagee was presented to Land Information New Zealand (LINZ) for registration, or (ii) a transfer of part of the land (referred to in the judgment as the homestead lot) was presented to LINZ for registration.
[2] The second application is an application by Mr Coltart for a stay of the proceeding, or for a stay of execution on the judgment, pending the hearing of an
appeal which he has filed against the judgment.
1 Lepionka & Company Investments Ltd v Mr Coltart [2015] NZHC 2849.
LEPIONKA & COMPANY INVESTMENTS LIMITED v ANDREW WILLIAM CLYDE COLTART [2016] NZHC 5 [13 January 2016]
[3] It will be convenient to deal first with the recall application.
The recall application
[4] In an amended application to recall the judgment, the Lepionka mortgagee seeks the following orders:
1.1an order that the judgment dated 17 November 2015 be recalled and that paragraph 139 of the judgment be corrected (below) to allow subdivision and sale of the land, other than the homestead lot and the balance of proposed Lot 7 after completion of the subdivision(s); and
1.2that paragraph 139 be corrected, by insertion of the underlined words, to read:
[139] The application succeeds, and there will be an order for the removal of Mr Coltart’s caveats as and when (i) a transfer of the land by the Lepionka mortgagee (acting in the exercise of its power of sale as mortgagee) to some third party or (ii) there is presented to LINZ any document or documents which may be necessary to obtain separate titles to the land upon subdivision(s) of the land, provided that immediately upon issue of those new titles Mr Col t art ’s cave at s are reregistered, or carried down, on to those titles for the homestead lot and the new Lot 7 and that in respect of that new Lot 7, those caveats will again be removed, and further reregistered, or carried down, onto the balance of Lot 7 as and when documents are presented to LINZ to further subdivide Lot 7 to create any new lot, and/or (iii) a transfer of the homestead lot by the Lepionka mortgagee (acting in the exercise of its power of sale as mortgagee) to some third party, is presented to LINZ for registration. In the case of a sale of the homestead lot to a third party, “transfer” is intended to include the presentation to LINZ of any document or documents (with the memorandum of transfer to the third party) which may be necessary to obtain a separate title for the homestead lot which is capable of being transferred to the purchaser.
[5] The Lepionka mortgagee asks for costs if the recall application is opposed by
Mr Coltart.
[6] The application is opposed by Mr Coltart, but only on the basis of his contention that the proceeding, and/or the execution of the decision and any orders, should be stayed. The opposition to the recall application therefore does not raise any issue which does not already fall to be determined on Mr Coltart’s stay application.
[7] Before the hearing of the recall application, counsel identified the following issues:
(1)whether the judgment dated 17 November 2015 allows the Lepionka mortgagee to subdivide the land, and/or sell subdivided lots, other than the homestead lot and lot 7, without selling all of the land or the homestead lot (options (i) and (ii) in para [139] of the judgment);
(2)whether Mr Coltart’s caveatable interests are only in respect of those parts of the land that will, after each subdivision, be either the homestead lot or lot 7;
(3)whether Mr Coltart’s caveatable interest in lot 7 is subject to the right of the mortgagee to further subdivide lot 7;
(4)whether Mr Coltart’s stay application is relevant to this recall application.
[8] The principal difficulty, which has given rise to the recall application, is that the judgment addressed only two scenarios: the sale of the land as a whole, and the sale of the homestead lot. That is because Mr Lepionka’s evidence given for the August 2015 hearing was that he intended to proceed with the sale of the homestead lot first. Since the hearing, the Lepionka mortgagee has apparently decided that it will or may be expedient to proceed with the sale of other lots in the proposed subdivision, including the proposed lot 6, before the sale of the homestead lot is completed.
[9] It is common ground that the effect of s 141 of the Land Transfer Act 1952 is that Mr Coltart’s caveats prevent the registration of any instruments required for the subdivision and the issue of new titles. As the judgment is worded, then, Mr Coltart’s caveats are preventing the issue of new titles for all lots in the proposed subdivision apart from the homestead lot, and the Lepionka mortgagee is unable to complete agreements to sell lots which have not yet been sold without first completing the sale of the homestead lot or filing a fresh proceeding to have
Mr Coltart’s caveats removed so that good title can be passed to the purchasers of other lots.
[10] Recall of a judgment is provided for at r 11.9 of the High Court Rules. That rule provides:
11.9 Recalling judgment
A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.
[11] Although recalling a judgment is not a step to be taken lightly, I think it is justified in this case. The reason for that is that the Lepionka mortgagee’s originating application for removal of the caveats was not limited to the situation where it would be presenting for registration only those documents which would be required to obtain a new title for the homestead lot. If the Court was not prepared to order the immediate removal of the caveats, the Lepionka mortgagee asked for orders that the caveats be removed from the Computer Freehold Register for the land “upon submission (or immediately prior to submission, by way of manual dealing) of the Order for New Computer Freehold Registers by [the Lepionka mortgagee] as mortgagee exercising its power of sale to subdivide the land”. Although the focus of the argument at the August 2015 hearing was on the proposed early sale of the homestead lot, the originating application was never amended to reflect that limited intention, and Mr Chan does not dispute that the application as worded was intended to permit the Lepionka mortgagee to obtain new titles for all of the lots in the proposed subdivision. If that is right, the judgment has not addressed an issue which was before the Court and not withdrawn, and that omission should be corrected
under r 11.9.2
[12] The correction proposed by Mr Cox is set out at paragraph [4] above, in the proposed additions to para [139] of the judgment. As will be seen, it proposes that Mr Coltart’s caveats would be successfully removed for the purpose of issuing each new title, and in each case immediately re-registered on the title to the balance of the
land. Subject to one matter to which I will shortly refer, Mr Chan did not take issue
2 A judgment may be recalled where the Court has failed to determine an issue that was properly put to it (See for example Brake v Boote (1991) 4 PRNZ 86).
with the form of the orders as proposed by Mr Cox, and I think the discretion I have under s 143(2) of the Land Transfer Act 1952 (the LTA) to make such order “as to the Court seems meet” is sufficiently broad for me to make orders as proposed by Mr Cox.
[13] Dealing with the specific issues identified by counsel, for the reasons set out above I accept that the judgment does not allow the Lepionka mortgagee to subdivide the land and sell the subdivided lots (other than the homestead lot), without first selling the homestead lot. I accept also that the judgment should not have been so limited given the terms of the Lepionka mortgagee’s originating application, and the fact that the originating application was not limited in its scope at the hearing. If other lots were ready for sale before the homestead lot, it was not the Court’s intention to require the Lepionka mortgagee to wait until there was also a sale of the homestead lot before it could obtain new titles for those other lots. The judgment as sealed should reflect that intention.
[14] On the fourth issue identified by counsel, I cannot see how the stay application can affect the recall application. The stay application is concerned with whether the judgment, in whatever form it might take, should be enforced before Mr Coltart’s appeal is determined. The recall application, on the other hand, is concerned with whether the judgment sufficiently addresses all of the issues which were before the Court, and properly reflects the Court’s intentions on each of those issues. I think the recall issues must be decided on a stand-alone basis, without reference to the fact that Mr Coltart has filed an appeal against the judgment and sought a stay pending the determination of his appeal.
[15] It will be convenient to address the second and third issues raised by counsel together.
[16] In my view the extent of Mr Coltart’s unregistered equitable interests, including those presently protected by the caveat protecting the “right to roam” interest, cannot affect the Lepionka mortgagee in the exercise of its powers as mortgagee. In the judgment, I held that it was not reasonably arguable for Mr Coltart that the Lepionka mortgagee had consented to Mr Coltart’s interests
under the Coltart agreement, and in those circumstances it seems to me that s 105 of the LTA confers on the Lepionka mortgagee the right to sell any part of the land (including, for example, lot 6), without regard to Mr Coltart’s unregistered interests.3
Whether the registered proprietor GLW would have been entitled to proceed with the subdivision and sell these lots is beside the point: the Lepionka mortgagee’s right to sell exists independently of the rights conferrerd on Mr Coltart by GLW, and it is derived from a registered interest which pre-dates Mr Coltart’s unregistered interests. Absent consent on its part, the Lepionka mortgagee is entitled to subdivide and sell the land as its sees fit, subject only to the statutory and equitable obligations to which it is subject as a mortgagee exercising a power of sale.
[17] For the foregoing reasons, I am satisfied that the order sought by the Lepionka mortgagee at para 1.2 of its amended interlocutory application for recall is appropriate, subject to the addition of the words “is presented to LINZ for registration” in the fourth line of the proposed new paragraph [139], between the expression “to some third party” and the word “or”. There will be an order recalling the judgment and re-issuing it with para [139] of the judgment amended as per para [1.2] of the amended interlocutory application (as further amended in accordance with this paragraph).
The stay application
[18] Mr Coltart applies for an order that this proceeding and/or the judgment be stayed pending the hearing and determination of his appeal to the Court of Appeal. In his notice of application, he says that if a stay is not granted the Lepionka mortgagee will sell his home (the homestead lot), on which he has expended substantial time and money. He also says that his appeal will be rendered nugatory if a stay is not granted, and that the balance of convenience is in favour of granting a
stay.
3 Section 105 of the LTA provides:
Upon the registration of any transfer executed by a mortgagee for the purpose of exercising a power of sale over any land, the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.
[19] In a supporting affidavit, Mr Coltart says that his wife and he have been living in the house on the homestead lot since December 2010, and he has spent a lot of money renovating the old homestead on the homestead lot. If the caveats are removed in accordance with the judgment, he will lose his investment in the land, and in the homestead lot in particular, and his wife and he will lose their family home. He says that he would also like the opportunity to purchase the land. That would provide him with the opportunity to sell the remaining land and keep the homestead lot, thereby recouping at least some of the losses he has suffered.
[20] The stay application is opposed by the Lepionka mortgagee.
[21] Since the hearing of the stay application, the Court of Appeal has allocated a firm fixture for the hearing of the appeal. It is to be heard on 25 February 2016.
Events since the hearing on 14 August 2015
[22] The facts relevant to the stay application are substantially as set out in the judgment, and I will not repeat those facts here. However there have been some further developments since the August 2015 hearing of the application to remove Mr Coltart’s caveats, and I refer to those facts in paras [23]-[31] below.
[23] The most significant development since the August 2015 hearing has been that on 6 November 2015 the Lepionka mortgagee signed an agreement for sale and purchase of the homestead lot to a Mr Allchorne (as trustee for a trust called the Ladjen Trust), for $2.5 million (inclusive of any GST). It is a condition of the agreement that the Lepionka mortgagee must provide vacant possession, and in an affidavit sworn on 4 December 2015 Mr Lepionka said that a proceeding against Mr and Mrs Coltart seeking vacant possession of the homestead lot would be filed shortly. Other notable features of the agreement are that the Lepionka mortgagee has an absolute right to cancel the agreement at any time on giving notice to the purchaser (cl 24), and that either party may give notice cancelling the agreement if a new title for the homestead lot has not been issued by 1 March 2016 (cl 26).
[24] Mr Lepionka says that almost all of the physical works necessary for the completion of the subdivision have now been done, as has the necessary surveying
work. The current plan is that the subdivision will proceed in two or more stages by: (i) creating lots 2 (the homestead lot), 6, and 7; and then (ii) creating lots 3, 4, 5, 9,
10, 11 and 12 from the balance of lot 7 (the current common land) by subdividing it. The effect of the plan is that lot 7 will steadily decrease in size as other lots are created out of it. It will, however, remain the common area, albeit getting smaller in size as each new lot is created.
[25] According to Mr Lepionka, new titles could be obtained in January 2016 if Mr Coltart’s caveats were removed (or removed and brought back down on the titles to the new lots 2 and 7 if only a partial stay were granted). As soon as the new titles are issued, the Lepionka purchasers will complete settlement under their agreements to buy lots 3, 4, 5 and the associated fishing huts.
[26] Another significant development since the August 2015 hearing, is that on
11 September 2015 GLW and Mr Paterson filed a proceeding in this Court (the GLW proceeding) seeking interim and permanent injunctions against the Lepionka mortgagee, restraining the Lepionka mortgagee from proceeding with the subdivision and sale of the land. The statement of claim filed by GLW and Mr Paterson alleges breach by the Lepionka mortgagee of its duty as mortgagee to allow redemption of the mortgage, breach of the equitable duties owed by it as mortgagee, oppression under the Credit Contracts and Consumer Finance Act 2003, and breach of the mortgagee’s duty owed under s 176 of the Property Law Act 2007 (the PLA).
[27] The Lepionka mortgagee opposed GLW’s application for an interim injunction, and that application was dismissed on 1 October 2015. By then, it appears that Mr Paterson had been made bankrupt in Australia.
[28] Mr Lepionka refers to an affidavit sworn by Mr Paterson in the GLW proceeding, in which Mr Paterson refers to the Coltart agreement (including the granting of the option by GLW to Mr Coltart), saying that “subsequent to the settlement, I found out further details underlined [sic] the entire basis of the agreed settlement. In February 2013 I therefore advised Mr Coltart his option was void”. (Mr Coltart did not accept that position, and in February and May 2013 he lodged the two caveats which are the subject of the present proceeding.)
[29] A Court proceeding (the AFI proceeding) has also been commenced against the Lepionka mortgagee by AFI Management Pty Ltd (AFI), the holder of an unregistered second mortgage over the land. Mr Lepionka says that AFI has agreed to release its caveat to allow the Lepionka mortgagee’s subdivision to proceed, but has challenged the Lepionka mortgagee’s conduct of the mortgagee sale process.
[30] The AFI proceeding was commenced on 24 November 2015. In it, AFI asks for an order directing the Lepionka mortgagee to sell the land to a company controlled by a Mr McHardy called Tuki Tuki Ltd (Tuki Tuki), which has recently offered $7 million for the land. AFI has sought a shortened timetable for the hearing of the AFI proceeding, and that is not opposed by the Lepionka mortgagee as long as AFI provides particulars of the debt said to be secured by its unregistered second mortgage. Mr Lepionka entertains a suspicion that there may be relatively little owed by GLW to AFI. If that is so, he surmises that the AFI proceeding is unlikely to continue.
[31] The final development reported by Mr Lepionka in his 4 December 2015 affidavit is that the Lepionka mortgagee and the Lepionka purchasers have agreed to terminate the compensation agreement to which I referred at para [18] of the judgment.
Legal principles applicable to stay applications
[32] The application is made under r 12 of the Court of Appeal (Civil) Rules 2005. Rule 12(3) provides:
12 Stay of proceedings and execution
…
(3) Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on application,—
(a) order a stay of the proceeding in which the decision was given or a stay of the execution of the decision; or
(b) grant any interim relief.
Mr Coltart’s submissions
[33] In support of the stay application, Mr Chan relies on the following passage from the judgment of Dunningham J in Watherston v Kaikoura Pastoral Investments Ltd:4
[11] The relevant principles relating to stay applications are well established and were not in dispute. The Court of Appeal recently laid out those principles in Keung and Ors v GBR Investment Limited5. Delivering the judgment of the Court, Ellen France J, citing earlier decisions of both that Court and the Privy Council, stated (at [11]):
In determining whether or not to grant a stay, the Court must weigh the factors ‘in the balance’ between the successful litigant's rights to the fruits of a judgment and ‘the need to preserve the position in case the appeal is successful’. Factors to be taken into account in this balancing exercise include:
(a) whether the appeal may be rendered nugatory by the lack of a stay;
(b) the bona fides of the applicant as to the prosecution of the appeal;
(c) whether the successful party will be injuriously affected by the stay;
(d) the effect on [any] third party;
(e) the novelty and importance of questions involved; (f) the public interest in the proceeding; and
(g) the overall balance of convenience.
That list does not include the apparent strength of the appeal but that has been treated as an additional factor.
[12] The fact that an appeal is rendered nugatory, or even that no relief may ultimately be available as a result of the decision of the Court, is not determinative of the stay application.6 However, I accept that the need to preserve the position in case the appeal is successful is a primary consideration. This was reflected in the Court of Appeal's decision in New Zealand Insulators Ltd v ABB Ltd,7 where the Court adopted the following statement by Buckley LJ in Minnesota Mining and Manufacturing Co v Johnson and Johnson Ltd (No. 3):8
4 Watherston v Kaikoura Pastoral Investments Ltd [2015] NZHC 2429
5 Keung and Ors v GBR Investment Limited [2010] NZCA 396, [2012] NZAR 17.
6 Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (High Court) at [13]-[15].
7 New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 (CA) at [13].
8 Minnesota Mining and Manufacturing Co v Johnson and Johnson Ltd (No. 3) [1976] FSR 139
The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be. Where an injunction is an appropriate form of remedy for a successful plaintiff, the plaintiff, if he succeeds at first instance in establishing his right to relief, is entitled to that remedy upon the basis of the trial Judge's findings of fact in his application of law. This is, however, subject to the defendant's right of appeal. If the defendant in good faith proposes to appeal, challenging either the trial judge's findings or his law, and has a genuine chance of success on his appeal, the plaintiff's entitlement to his remedy cannot be regarded as certain until the appeal has been disposed of.
[34] Mr Chan emphasises the passage at para [12] of the judgment in Watherston, in which the Court accepted that the need to preserve the appellant’s position in case the appeal was successful is a primary consideration. Mr Chan also refers to para [39] of Watherson where the Court said that: “it would be an unusual case where it was held that a failure to grant a stay would render the appeal nugatory and yet an application for stay is declined. There must be some other factor that is so forcibly in favour of the party resisting the stay, that the practical negation of the applicant’s appeal rights is warranted…”.
[35] In Watherston, the applicant relied on an option to purchase a farm back from the respondent. The applicant’s interest under the option had been protected by a caveat registered on the title to the land, but the respondent successfully applied to have the caveat removed. In the event, the stay application pending an appeal against that decision was unsuccessful, as the applicant was not in a financial position to complete the purchase of the farm. On that basis, there was no reason to stay the removal of his caveat.
[36] Mr Chan submits that the Lepionka mortgagee will not be injuriously affected by a stay if the application is granted, as the only legitimate interest the Lepionka mortgagee has in the land is the repayment of the mortgage debt. The Lepionka mortgagee has more than adequate security over the land to repay that debt. Mr Chan further submits that the Lepionka mortgagee has an opportunity to
sell all of the land now, at a price that will fully repay the mortgage debt (and which
(CA) 144-145.
will not require the Lepionka mortgagee to incur further costs in subdividing the land and completing its contracts with the Lepionka purchasers).
[37] In considering the effect of the stay application on third parties, Mr Chan refers to the AFI proceeding, and AFI’s allegations that the purported adoption of the Lepionka purchasers’ contracts by the Lepionka mortgagee, and the Lepionka mortgagee’s related conduct, were not in good faith or for a proper purpose. Mr Chan also refers to Tuki Tuki’s offer to purchase the land as a whole, for $7 million plus GST, with no requirement for the removal of Mr Coltart’s caveats.
[38] Mr Chan submits that granting the stay pending the determination of Mr Coltart’s appeal would not detrimentally affect AFI’s rights, as the continuing existence of Mr Coltart’s caveats on the title to the land will prevent the proposed sale of the homestead lot and the completion of the Lepionka mortgagee’s contracts with the Lepionka purchasers. There would be no prejudice to the Lepionka mortgagee, as the price being offered by Tuki Tuki is more than sufficient to pay the first mortgage debt.
[39] The Lepionka purchasers will only suffer loss in the event that Mr Coltart’s caveats are upheld, and that will only occur if the Court of Appeal is satisfied that there has been unlawful conduct on the part of the Lepionka mortgagee in which the Lepionka purchasers have been intimately involved: the Lepionka purchasers should not be permitted to benefit from their own wrong. On the other hand, if the appeal is not successful, the adoption of the Lepionka purchasers’ contracts will be able to proceed.
[40] Mr Chan submits that the appeal raises novel and important issues, including issues over the party or parties to whom the duties of a mortgagee exercising its powers of sale are owed, and the degree of interest required to give a subsequent purchaser sufficient standing to challenge or prevent the unlawful exercise of those powers. Mr Chan further submits that the appeal cannot be said to be without merit, such as would justify the refusal of a stay.
[41] On the overall balance of convenience, Mr Chan submits that the various factors clearly favour the granting of a stay. With a stay, the Lepionka mortgagee will suffer no loss; without a stay, Mr and Mrs Coltart will lose their home.
[42] Mr Chan submits that the stay should apply to the whole of the land over which Mr Coltart’s caveats are registered, and not merely the homestead lot and the common land over which Mr Coltart would have a right to roam if he exercised his option.
The Lepionka mortgagee’s submissions
[43] The Lepionka mortgagee opposes the stay application on a number of grounds. Mr Cox identifies the following three issues:
(1) Was the option Mr Coltart’s only means of purchasing the homestead
lot?
(2) Did the caveatable interests claimed extend to all of the land?
(3)Whose interests are hurt more by a stay? Lepionka, GLW, AFI, and the Ladjen Trust on the one hand, or Mr Coltart on the other?
[44] Mr Cox submits that the homestead lot has now been sold to a bona fide third party purchaser, and that sale occurred before the stay application was filed. He further submits that the dwelling on the homestead lot is not Mr Coltart’s house – Mr Coltart has not only not bought the homestead lot, he has not yet exercised the option over it which he was given by GLW. He submits that if Mr Coltart had remedies, they were against GLW, and he has failed to exercise them. The fact that Mr Coltart has spent money on a property that he did not own was his own decision, and should not weigh in his favour on the stay application.
[45] Mr Coltart’s interest is in owning either the homestead lot or the land as a whole. The first of those is no longer an option for him, as it has been sold.
[46] If Mr Coltart’s various attempts to acquire the land, whether in concert with Tuki Tuki or otherwise, have been unsuccessful, that is not a factor which should be regarded as rendering Mr Coltart’s appeal nugatory. This is an unusual situation, in which the fact that Mr Coltart’s appeal might be rendered nugatory if no stay is granted should not be determinative. The caveatable interests are not, or were not, the only opportunity for Mr Coltart to purchase the homestead lot.
[47] Mr Cox submits that the balance of convenience favours the Lepionka mortgagee. In support of that submission, he submits that Mr Coltart’s caveatable interests do not extend to all of the land being subdivided, but only to the homestead lot and the common area (lot 7). A stay affecting the order for removal of the caveats insofar as they affect anything but the homestead lot and lot 7 would be an unjustifiable interference with the Lepionka mortgagee’s rights over the balance of the land. Further, if a stay is granted, the Lepionka mortgagee, AFI, and GLW will be detrimentally affected with ongoing interest and costs caused by the delay in achieving sales. Also, the Ladjen Trust, as purchaser of the homestead lot, would be compromised by the granting of a stay.
[48] As for the offer of $7 million from Tuki Tuki, Mr Cox notes that Mr McHardy is Mr Coltart’s nephew, and in making the offer has presumably been acting in consultation with Mr Coltart.
[49] Mr Lepionka’s evidence is that there is a priority amount of $3,025,000 under the first mortgage. The Lepionka mortgagee paid $2.6 million to acquire this mortgage, and the longer the delay before the Lepionka mortgagee can realise its security, the greater the risk that the amount owing to the Lepionka mortgagee by GLW will exceed the priority amount under the mortgage.
[50] In the event of a stay or partial stay being granted, Mr Cox proposes two conditions:
(1) That Mr Coltart be required to prosecute the appeal rapidly; and
unsuccessful.
[51] On the issue of a partial stay, which would permit the Lepionka mortgagee to sell other lots apart from the homestead lot, Mr Cox submits Mr Coltart’s “right to roam” over the common land was expressly subject to parts of the common land being sold off as new lots became available in the subdivision, thereby reducing the area to which the right to roam would apply. Mr Cox submits that there is no reason the Lepionka mortgagee should not be permitted to proceed with the subdivision pending the prosecution of Mr Coltart’s appeal.
Discussion and conclusions on the stay application
[52] In my view, the circumstances justify a stay of execution of the judgment pending the determination of Mr Coltart’s appeal to the Court of Appeal. The effect of the stay will be that the Lepionka mortgagee will not be able to present to LINZ for registration the sealed order giving effect to the judgment as recalled and reissued, pending determination of Mr Coltart’s appeal.
[53] Considering the various factors discussed by the Court of Appeal in Keung and by Dunningham J in Watherston, I accept Mr Chan’s submission that if a stay is not granted, the appeal is likely to be rendered nugatory. If it is, Mr and Mrs Coltart may lose their home, without having the opportunity to put their arguments forward on appeal. I accept Mr Chan’s submission that it would be unusual to decline to grant a stay in such circumstances, at least in the absence of other factors which are so forcibly in favour of the Lepionka mortgagee that the practical negation of Mr Coltart’s appeal rights is warranted.
[54] In opposition, Mr Cox notes on the “appeal rendered nugatory” issue that the caveatable interests asserted by Mr Coltart did not represent the only opportunity for him to purchase the homestead lot: he has made a number of attempts to acquire the land as a whole, and he had the opportunity to bid for and acquire the homestead lot in the sale process conducted by the Lepionka mortgagee (indeed Mr Lepionka suggests that Mr Coltart was probably behind an unsuccessful bid made by
October 2015). Mr Cox also emphasises that the homestead lot has now been sold to the Ladjen Trust. He submits that it is no longer possible for Mr Coltart to acquire the homestead lot.
[55] I acknowledge that there is some force in Mr Cox’s arguments, but I think three factors in particular weigh in favour of the granting of a stay pending the determination of the appeal. First, I accept that Mr Coltart’s appeal rights could well be rendered nugatory if a stay is not granted and the Lepionka mortgagee proceeds to settle the sale of the homestead lot to the Ladjen Trust. The fact that Mr Coltart has attempted to acquire the land or the homestead lot by other means does not affect that conclusion.
[56] Secondly, an early fixture has now been granted for the appeal, and there will not be the significant delay in disposing of the appeal which no doubt concerned the Lepionka mortgagee when the stay application was argued. The appeal will be heard in a little over one month’s time.
[57] A third factor which I think weighs in favour of the granting of a stay is that, although the homestead lot has been sold, there are some features of the sale agreement which I think can be described as unusual – in particular, the Lepionka mortgagee’s absolute right to cancel the agreement on giving notice to the purchaser. It seems to me that the trustees of the Ladjen Trust have entered into the agreement for sale and purchase on the clear basis that the agreement could be cancelled by the Lepionka mortgagee without the latter having to give any reason for the cancellation. The Trust’s position accordingly does not appear to be that of an ordinary purchaser, and it may be arguable for Mr Coltart that the sale to the Ladjen Trust does not necessarily make it impossible for him to still acquire the homestead lot (in the event of him being substantially successful with his claims against the Lepionka mortgagee).
[58] I note also that settlement under the sale agreement with the Trust is to be effected five working days after the Lepionka mortgagee has notified the Trust’s solicitors that (i) a new certificate of title has issued for the homestead lot and (ii) the
December 2015 the Lepionka mortgagee had not filed a proceeding seeking vacant possession. It seems unlikely that any order for vacant possession could be obtained before Mr Coltart’s appeal is heard on 25 February 2016, and the appeal should therefore be heard before the transaction with the Ladjen Trust is due to be settled.
[59] Turning to the various other factors referred to by the Court of Appeal in Keung, I apprehend that there is no issue over Mr Coltart’s bona fides in prosecuting the appeal. And although in the end I concluded that it was not reasonably arguable for Mr Coltart that the Lepionka mortgagee’s duty to comply with the statutory duty under s 176 of the PLA is owed to him, I think the question can fairly be categorised as an important one, when considering the stay application. Likewise, the scope of a mortgagee’s ability to cancel an existing sale contract made by the registered proprietor under s 178(2) of the PLA is an issue which I think can be regarded as important for mortgagees generally. Apart from the importance of those legal issues, I do not see any particular public interest which would favour the granting of a stay.
[60] The granting of a stay is unlikely to significantly prejudice the Lepionka mortgagee. Certainly it will be delayed a little longer in proceeding with the subdivision, and Mr Cox expressed some concern over the priority amount of
$3,025,000 in the mortgage. If and to the extent that significant further costs are incurred by the Lepionka mortgagee before it can sell the land, it may be unable to recover those costs, at least if there is a substantial sum owing on the unregistered second mortgage to AFI. But the early hearing date which has now been allocated for the appeal deprives this argument of its force. There should still be sufficient “room” between the priority amount under the mortgage and the amount owing to the Lepionka mortgagee that the Lepionka mortgagee should not suffer loss as a result of accumulating interest owing by GLW taking the total amount owing under the mortgage above the $3,025,000 ceiling. While there will no doubt be other holding costs accruing on the land, I do not have any evidence to suggest that, with accruing interest, the total due to the Lepionka mortgagee would be likely to exceed
$3,025,000 by the time Mr Coltart’s appeal is likely to have been determined. Nor is
there anything to suggest that the values of the lots in the subdivision may be falling.
parties. I have discussed the position of the Ladjen Trust, and I do not think that its position would justify the refusal of the stay which Mr Coltart seeks. As for GLW, it has of course created the difficulties by defaulting under the mortgage, and to the extent that the position is exacerbated by GLW’s failure to pay ongoing interest under the mortgage (or rates or other outgoings for which it is responsible), GLW can hardly complain if any amount left over after the Lepionka mortgagee and AFI have been paid is less than it might otherwise have been. There will likely be some ongoing interest cost for AFI as a result of further delay in determining the questions raised by Mr Coltart’s appeal, but any such loss is likely to be modest. Capital loss for AFI remains a possibility if the sale of the land does not yield sufficient to repay the Lepionka mortgagee and AFI in full, but I have insufficient material before me to find that the granting of a stay would be likely to increase any such loss. It may be that the values of the lots will increase – there is simply no evidence on the point. As for the Lepionka purchasers, I do not consider that the fairly short further delay which will be required to have Mr Coltart’s appeal heard creates any significant prejudice for them.
[62] Weighing all of those factors, I am satisfied that it is appropriate to order the stay of execution of the decisions in the judgment which Mr Coltart seeks.
[63] Mr Cox urges that any stay should not apply to lots other than the homestead lot, because Mr Coltart has no interest in any other lots. I am not prepared to limit the stay so that all that would be prevented pending determination of the appeal would be the completion of a sale of the homestead lot. In circumstances where the appeal appears to mount a legal challenge to all steps taken by the Lepionka mortgagee in the sale process, including the acquisition of the mortgage from Westpac and other steps having no direct connection with the homestead lot, and there is an issue for argument on appeal as to Mr Coltart’s standing to make those arguments (which I believe Mr Coltart should have the opportunity to raise), I do not think it appropriate to limit the stay in the way for which Mr Cox contends.
[64] As for the strength of the appeal, I do not think it necessary to express any firm view, as the overall balance of convenience in my view clearly favours a stay, and the appeal will be heard promptly.
[65] For the reasons set out above, there will be a stay of the execution of the judgment (as recalled and reissued), to the intent that no sealed order removing Mr Coltart’s caveats may be presented to LINZ for registration pending the hearing and determination of Mr Coltart’s appeal to the Court of Appeal. The stay is to be on an unrestricted basis, save and except that if for any reason Mr Coltart’s appeal is not heard as scheduled on 25 February 2016, leave is reserved to the Lepionka mortgagee to apply to this Court to have the stay lifted (or any terms imposed on a continued stay which may be appropriate), on giving two working days’ notice to Mr Coltart.
Orders
[66] I make the following orders:
(1)The judgment is recalled, and will be re-issued (contemporaneously with the delivery of this judgment), with para [139] amended in accordance with paragraph [17] of this judgment.
(2)Execution of the decisions made in the judgment (as recalled and re- issued) is stayed (so that LINZ is not to remove the caveats) pending the hearing and determination of Mr Coltart’s appeal, provided that if for any reason Mr Coltart’s appeal is not heard as scheduled on 25
February 2016 leave is reserved to the Lepionka mortgagee to apply to this Court to have the stay lifted (or any terms imposed on any continued stay which may be appropriate), on giving two working days’ notice to Mr Coltart.
(3)Mr Coltart did not seek costs on his stay application, and I do not consider that his opposition to the recall application raised sufficient additional matters (i.e. additional to those arising on the stay
application) to justify an award of costs to the Lepionka mortgagee on
the recall application. There will accordingly be no orders for costs.
Solicitors:
Associate Judge Smith
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