Lin v ANZ National Bank Limited HC Auckland CIV-2011-404-5395
[2011] NZHC 1254
•22 September 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-5395
BETWEEN JIANJUN LIN Applicant
ANDANZ NATIONAL BANK LIMITED Respondent
Hearing: 13 September 2011
Counsel: S-J Telford for Respondent
Judgment: 22 September 2011 at 4:00 PM
RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 22 September 2011 at 4 pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date ..........................
Solicitors:
Morgan Coakle, PO Box 114, Shortland Street, Auckland
Mr Lin, PO Box 276138, Manukau, Auckland
LIN V ANZ NATIONAL BANK LIMITED HC AK CIV-2011-404-5395 22 September 2011
The application
[1] The applicant, Jianjun Lin, applies under s145A(3) of the Land Transfer Act
1952 for an order that a caveat not lapse. Section 145A states:
145A Early lapse of caveat against dealings
(1) The registered proprietor of any estate or interest in the land protected by a caveat against dealings (other than a caveat lodged by the Registrar) may apply to the Registrar for the caveat to lapse.
(2) The Registrar must give the caveator notice of an application under subsection (1).
(3) The caveat lapses with the close of the prescribed period after the date on which the notice under subsection (2) is given unless—
(a) the caveator has earlier given to the Registrar notice that an application for an order to the contrary has been made to the High Court; and
(b) an order to that effect has been made and served on the Registrar within the prescribed period after the date on which the notice under paragraph (a) is given to the registrar.
[2] The respondent, ANZ National Bank Limited, opposes the application and seeks that it be dismissed. It has exercised its power of sale as mortgagee. Settlement is due to occur on 28 September 2011.
The Background
[3] The caveat is caveat No. 8710952.1. The computer registers affected by the caveat, all in the North Auckland Land District, are identified as 413621, 413650, NA66D/270, and NA75A/629.
[4] Mr Lin claims an interest in the properties described in the registers and that such interest entitles him to the protection of the caveat. The caveat, lodged on 18
March 2011, describes the interest claimed in the following way:
As purchaser and lessee pursuant to agreement dated 15/2/2011 in respect of land described in identifier 413650 and agreements dated 18/2/2011 in respect of land described in identifiers NA66D/270 & NA75A/629 and agreement dated 22/2/2011 in respect of land described in identifier 413612 between the registered proprietor Tai Ting and the caveator.
[5] On 6 and 17 June 2008, the Bank registered first mortgages over two of the caveated properties, identified in registers 413621 and 413650 respectively. They are Lots 167 and 207 on Deposited Plan 403550 and they are vacant sections at 90 and 106 Keri Vista Rise, Papakura. Tai Ting is the registered proprietor of these properties.
[6] Tai Ting is seriously in default under the mortgages and failed to comply with the Bank’s Property Law Act Notice that was duly served on his solicitor pursuant to an order for substituted service. The result was that the Bank exercised its power as mortgagee to sell the properties. As at 5 September 2011, Tai Ting owed the Bank $419,080.42. The debt continues to grow.
[7] In order to be able to settle its sales of the properties, and to pass clear title to its purchasers, the Bank applied to the Registrar of Land for the caveat to lapse pursuant to s145A. Mr Lin counters with this application seeking that the court make an order to the contrary.
[8] For present purposes, the Bank does not dispute that Mr Lin may have a caveatable interest in the two properties, or that he would ordinarily be entitled to maintain the caveat despite the Bank’s mortgage security. Its contention is however that its rights as mortgagee, exercising the power of sale, trump Mr Lin’s caveat as:
a) Pursuant to ss105 and 119 of the Land Transfer Act, the agreements for sale and purchase and leases cannot be binding on it and it may still exercise its power of sale to sell as mortgagee, unless it gave its consent to them;
b)It did not consent to the sale and purchase agreements between Mr Lin and Mr Ting, or to any form of lease between them, and Mr Lin does not contend otherwise. Indeed, it would never have considered consenting, as both agreements are for less than market value and were entered into when Mr Ting was considerably in default of his loan repayments secured by the mortgages.
[9] This application was listed for hearing before me on 13 September 2011, when I gave leave, with the consent of counsel for the respondent, for Mr Lau to speak on behalf of the applicant. Mr Lau says he holds a power of attorney.
[10] I heard submissions from counsel for the respondent and Mr Lau both of whom provided written submissions. In the case of the latter, the submissions are signed by Mr Lin. I indicated I would take time to reflect on the submissions and would issue my decision shortly.
[11] On 14 September 2011, I made an interim order that the caveat not lapse in respect of all four registers pending the issue of this judgment, so as to maintain the status quo. Counsel has since advised that the Bank has no interest, and does not challenge the caveats lodged against computer registers NA66D/270 and NA75A/629 as mortgagee or otherwise. I proceed on that basis.
[12] There is some urgency. The Bank wishes to complete settlement as and when due.
Issue
[13] The issue for determination is a narrow one. It is whether, as the Bank contends, its power of sale trumps Mr Lin’s interest that is presently protected by the caveat. If the Bank’s contention is correct, it will be entitled to an order dismissing Mr Lin’s application.
[14] I am satisfied that the Bank’s power of sale will trump the claimed interest.
[15] I am also satisfied that the caveat will serve no practical advantage in the event of a mortgagee sale and should therefore be removed.
[16] Before coming to my reasons it is appropriate to set out the legal principles that are relevant when determining this application.
Applicable principles when considering applications to maintain caveats
[17] The general principles that the court applies in considering applications under s 145A are well known and can be stated briefly. They are the same as the general principles that apply to applications for the removal of caveats under s 143. Relevantly:
a) The onus lies on the caveator to show a reasonably arguable case for the interest claimed;[1]
[1] Castlehill Run Ltd v NZI Finance Ltd [1985] 2 NZLR at 104-106 (CA).
b)If the caveator establishes an arguable case, the Court will exercise its discretion to remove the caveat cautiously.[2] However, if the caveator has no reasonable expectation of a practical benefit in sustaining the caveat or if the caveator’s interests can be reasonably accommodated in some other way, such as substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to be removed notwithstanding that there is a right to a claimed interest.[3]
[2] Varney v Anderson [1988] 1 NZLR 478 (CA).
[3] Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 656 (CA)
[18] Other principles relevant to this case are:
a) In appropriate cases, the Court may also order the removal of the caveat where a mortgagee has exercised the power of sale and sold the interests that the caveat protects;[4]
[4] MacDiarmid v Burton (1980) 1 NZCPR 238 (HC), Jenssen & Anor v Jenssen & Ors CA 246/90, 13 December 1990 (CA).
b)However, where the caveator has a caveatable interest, the caveat should remain until the registration of the mortgagee’s memorandum of transfer to the purchaser. Until registration of that transfer the caveator is entitled to maintain its claim against the mortgagee’s
estate in the land. The appropriate order will be therefore that the
caveat be removed only upon presentation of the memorandum of transfer for registration.[5]
[5] Cantab Management Ltd v Greagh Investments Ltd HC Hamilton M95/02 20 November 2002 (HC).
Discussion/Reasons
[19] Though Mr Lin’s interest in the Lots 167 and 207 is not presently in issue, his right to maintain his caveat against the power of sale is.
[20] Section 105 governs the effect of a transfer executed by a mortgagee for the purpose of exercising a power of sale. The section states:
Transfer by Mortgagee
Upon the registration of any transfer executed by a mortgagee for the purpose of exercising the 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 an instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.
[Emphasis added]
[21] It is clear that the purchaser obtains clear title from the mortgagee unless there is an estate or interest that has priority over the mortgage, or the mortgagee consents to an estate or interest created by an instrument.
[22] Materially, s119 provides that:
No lease of mortgaged or encumbered land shall be binding upon the mortgagee except so far as the mortgagee has consented thereto.
[23] There can be no suggestion in this case, and there indeed is none, that Mr Lin’s claimed interests were created by any instrument that has priority over the mortgages. The agreements for sale and purchase and the leases were entered into well after the Bank’s mortgages were registered in 2008, and the Bank did not consent to them.
[24] Since there is no evidence to support a finding of consent, there is no bona fide argument that the agreements for sale and purchase and the leases are binding on the Bank for the purpose of ss 105 or 119.
[25] Given the above findings, the Bank is also entitled to a finding that for the purpose of s 105, it is entitled to have the caveat removed on registration of its transfer in the exercise of its power of sale as mortgagee. It is entitled to pass its interest to purchasers free of any interest or estate that the caveat purports to protect.
Other Matters
[26] In his written submissions, Mr Lin raised new issues in support of his application to sustain the caveat. He contends first that the Bank was negligent in not entering into an agreement with him for sale of the properties. Secondly, he raises an allegation of defamation said to have caused him losses of over $1,000,000.
[27] Neither allegation is relevant to Mr Lin’s application. The matters to be considered in an application to sustain a caveat are limited to the grounds set out in the caveat instrument itself.
[28] The Bank was under no obligation to negotiate with him. The Bank’s duty was to obtain the best sale price possible.[6] If, as the applicant contends, he has a claim against the Bank for losses or damages, such claim may be pursued by him. But it does not give him an interest in the land in question, nor trump the Bank’s rights to sell the property and to pass clear title.
[6] Property Law Act 2007, s176
Result
[29] I order that the interim order made on 14 September 2011 will continue until such time as the Bank presents a memorandum of transfer in the exercise of its power of sale, at which point:
a) The order will lapse;
b) Caveat No. 8710952.1 lodged against computer registers 413621 and
413650 (North Auckland Land Registry) shall be removed.
[30] As the Bank is the successful party, it is entitled to costs under the statutory regime. Accordingly, I also make an order for costs on a 2B basis in its favour
against Mr Lin, together with disbursements to be fixed by the Registrar.
Associate Judge Sargisson
0
0
1