Marunui v The Co-Operative Bank Limited
[2019] NZHC 765
•10 April 2019
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2019-463-022
[2019] NZHC 765
BETWEEN AROHA and TEAHINAMU MARUNUI
Applicants
AND
THE CO-OPERATIVE BANK LIMITED
Respondent
Hearing: 10 April 2019 Appearances:
Applicants in person
D MacKenzie for Defendant
Judgment:
10 April 2019
JUDGMENT OF LANG J
[on application for interim injunction]
This judgment was delivered by me on 10 April 2019 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
MARUNUI v THE CO-OPERATIVE BANK LTD [2019] NZHC 765 [10 April 2019]
[1] Mr and Mrs Marunui seek an interim injunction to prevent the Co-operative Bank Ltd (the Bank) from continuing with a mortgagee sale of their property that is scheduled to be held on 24 April 2019. This requires them to demonstrate that they have a good arguable case against the Bank and that the balance of convenience favours the granting of an injunction.1
[2] The Bank opposes the injunction being granted and contends the application and the proceeding are both entirely without merit.
Background
[3] The factual background is largely not in dispute. On 23 September 2013 Mr and Mrs Marunui entered into a loan agreement under which they borrowed the sum of $191,700 from the Bank. The loan was secured by way of mortgage registered against their residential property situated at 52 Homedale Street, Rotorua. In late 2017 Mr and Mrs Marunui fell into default in making repayments under the loan agreement. This led the Bank to issue notices of demand under the Property Law Act 2007. Mr and Mrs Marunui eventually remedied the defaults and the Bank took no further enforcement action.
[4] By September 2018 Mr and Mrs Marunui were in arrears with loan repayments in the sum of $2,774.88. On 18 September 2018 the Bank issued a final demand notice requiring Mr and Mrs Marunui to pay this amount. This met with no response.
[5] On 30 October 2018 the Bank issued default notices under s 119 of the Property Law Act 2007. It was unable to serve these on Mr and Mrs Marunui, however, and therefore issued new notices on 16 November 2018. These were served on Mr and Mrs Marunui on 22 November 2018. The notices expired on 11 January 2019 with the defaults unremedied.
[6] On 22 January 2019 the Bank’s solicitors wrote to Mr and Mrs Marunui making demand for the full amount outstanding under the loan agreement. As at that date the amount outstanding was $174,456.05. The Bank’s solicitors also advised
1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129.
Mr and Mrs Marunui that the Bank was embarking on the process of selling their property using the powers given to it under the mortgage. The Bank sought Mr and Mrs Marunui’s cooperation in the marketing and sale of the property in order to ensure it obtained the best price possible for it.
[7] The real estate agents engaged by the Bank are now part-way through an advertising and marketing campaign for the sale of the property in anticipation of an auction currently scheduled to be held on 24 April 2019.
Mr and Mrs Marunui’s argument
[8] For the last six months Mr and Mrs Marunui have maintained they have repaid the debt owing to the Bank. The evidence for the Bank is that they initially claimed they had repaid the loan using documents headed up “Letter-Patent-Letter of Credit- Letter of Confirmation-Letters Robatory”. The payments referred to in these documents were said to be drawn upon an account in the name of “Aroha Pauline Marunui Crown Account”. Mr and Mrs Marunui left these documents at the Rotorua Branch of the Bank. The Bank immediately advised them that it did not accept the documents constituted valid payment of the outstanding debt owed.
[9] Mr and Mrs Marunui now rely on another document headed “Promissory Note” that they left with the Bank. A copy of this document is attached as an appendix to the judgment. The promissory note says that Mr and Mrs Marunui will repay the full amount owing under the loan at the rate of $100 per month on the seventh day of every month. Mr and Mrs Marunui claim this is a valid promissory note that the Bank was required to accept as legal tender under the Bills of Exchange Act 1908.
Decision
[10] Mr and Mrs Marunui do not dispute the fact that they fell into arrears or that the Bank has demanded repayment of the loan in full. Rather, their argument is based solely on the legal effect of the so-called promissory note.
[11] This is not the first occasion on which a debtor has endeavoured to claim that a debt has been repaid using an instrument purporting to be a promissory note or bill
of exchange. Mr MacKenzie for the Bank has referred me to several cases in which this has occurred.2 The arguments have without exception been rejected by the courts. One of the cases is Bank of New Zealand v Donaldson, in which Associate Judge Smith observed:3
[47] The historical position in New Zealand was that payment of an amount owing could only be made in money, unless the parties had agreed otherwise. The authors of Laws of New Zealand observe:
The general rule is that only the production of money in authorised “legal tender” can constitute a valid tender, unless the creditor waives it or agrees to accept some other method of payment.
[48] But recent decisions of the Supreme Court and Court of Appeal have made inroads on that rule, variously holding that electronic transfers and cheques constitute payment, even absent agreement to that effect. The substance of the current position is summarised by the authors of Law of Contract in New Zealand as follows:
These cases suggest a mode of construction that the result is more important than the means: if unconditional payment of funds has been effected, and the payee is in just as strong a position as if the specified mode of payment had been used, then the means of achieving that result are subsidiary to the result itself unless the contract very clearly requires otherwise.
[49] Some bills of exchange, such as bank cheques, may be good legal tender, but generally bills of exchange or promissory notes are not regarded as legal tender. The only risk with a bank cheque is insolvency of the bank, a risk so remote that it does not distinguish the bank cheque from legal tender. By contrast, the Supreme Court has held (in the context of conveyancing transaction) that a personal cheque could not constitute payment unless the parties had agreed to it.
[50] The purported promissory notes in this case are clearly not akin to cash or a bank cheque.
(Footnotes omitted)
[12] The argument advanced by Mr and Mrs Maranui is clearly untenable. A promise to pay the sum of $100 a month in reduction of the loan fails to respond to the Bank’s demand that they repay the loan in full immediately. The Bank has not agreed to accept repayment of the loan in that way and it is not obliged to. It is entitled to rely on its rights under the term loan agreement and to require repayment in full.
2 Guy v Bank of New Zealand [2013] NZHC 836; Commissioner of Inland Revenue v Meredith
[2015] NZHC 3030; Bank of New Zealand v Donaldson [2016] NZHC 1225.
3 Bank of New Zealand v Donaldson, above n 2.
Failing that, the Bank is entitled to exercise the power of sale granted to it by the mortgage. As in Donaldson, the document on which Mr and Mrs Marunui rely is obviously not akin to cash or a bank cheque. It is therefore essentially worthless and of no legal effect.
[13]The application for an interim injunction is dismissed.
Costs
[14] I make no order as to costs because I anticipate, as I endeavoured to explain to Mr and Mrs Marunui during the hearing, that the contractual arrangement between the parties gives the Bank the right to recover its costs in relation to this proceeding from Mr and Mrs Maranui on a solicitor/client basis.
The substantive proceeding
[15] In accordance with an earlier minute issued by the Court, Mr and Mrs Marunui have now filed a notice of proceeding and statement of claim. The statement of claim is based solely on the document that I have held is of no legal effect. It would be an abuse of the Court’s process to enable the claim to continue further because it has no tenable legal basis. Continuation of the litigation will also expose Mr and Mrs Maranui to further costs on a solicitor/client basis.
[16]The proceeding is accordingly struck out as an abuse of the Court’s process.
Lang J
Solicitors:
Minter Ellison Rudd Watts, Wellington Copy to Applicants
Number: 196d -o4-02-01:
This Protnissory NOTE was issłzed al: (Place): Notorua, New Zealand
m 3£0,000 00
TWO-ŁIUNDRCD-RND-FIFT\'-”fHOUSAND DOLLARS ONLY
ID Nuinber: 5G14078-9100
S64 4078•9200
ID Number: 564 4078 -99
This certifies that
We Aroha Pauline Marunui and Teahinamu Marunui
Hereby promise to pay The Co-operative Bank (HOLDER) the full amount
specified on this NOTE, for the value received
TERMS & CONDITIONS;
The payrnent wil) be made in monlŁTly instalments of $100.00 per month. on the 7th (seventh) day or every consecutlve montłi unlll the ob)Igation hąs been fuIfiI)ed. The pąyment can be obtained by the I-)OLDER at: 52 Homedale Street, ROTORUA. I hereby give permisslon to the HOLDER and/or like HOLDER IN DUE CDURĘE of tŁiis Promlssory Note, to use tfiis NOTE In ąny way necessary as a negotiable instrument to be traded on; whereas such trade sfiall teminate like obligation Łierein.
Witnes
Millim0t Mary Burge, IP
¥92113
•Thts tias been signed in wet blue ink.
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