Mooney v Small Car World
[2025] NZHC 93
•10 February 2025
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2024-409-713
[2025] NZHC 93
BETWEEN JOHN WILLIAM SPENCER MOONEY and REBECCA GOLDING SMITH
ApplicantsAND
SMALL CAR WORLD LIMITED
Respondent
Hearing: 23 December 2024 Appearances:
S E Bray for Applicants
S F Whitaker and R V Smith for Respondent
Judgment:
10 February 2025
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 10 February 2025 at 10.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
MOONEY v SMALL CAR WORLD LIMITED [2025] NZHC 93 [10 February 2025]
Introduction
[1] On the morning of 23 December 2024, an application was filed by the applicants seeking an interim injunction restraining the respondent, Small Car World Ltd, from proceeding with a mortgagee sale at noon that day.
[2] I directed that the proceedings be served on the lawyers for the respondent, and that a telephone conference be convened at 11 am that day to hear the application.
[3] At 11.40 am, after hearing from Mr Mooney on behalf of both applicants, and Mr Whitaker and Mr Smith on behalf of the respondents, I declined the application. I said my reasons would follow. This judgment contains my reasons.
Background facts
[4] The applicants, John Mooney and Rebecca Smith, own 13.28 hectares of land at 73 Finlays Road, close to West Melton township (the property).
[5] For some time now, they have been working in conjunction with their neighbours, Keith and Cathy Cowan, to complete a five-lot subdivision of the property. In July 2022, Servus Consultants were engaged to complete the subdivision consent application and surveying.
[6] In November 2022 the applicants refinanced with the defendant in order to obtain $200,000 in finance to undertake the subdivision. Although the loan agreement was not provided in evidence, there was no dispute that its key provisions were as follows:
(a)a facility to borrow $1,000,000;
(b)interest fixed at $200,000 lump sum;
(c)$800,000 of the loan facility was advanced to clear the previous mortgage;
(d)the balance was held by the respondent’s lawyers to pay subdivision costs as they arose; and
(e)in default, the interest rate was 25 per cent per annum plus $50,000.
[7] As Mr Mooney explained in his affidavit, the process of obtaining a subdivision consent was slow and met several hurdles. For example, in August 2023, the activity status of the subdivision changed to a discretionary activity under the partially operative Selwyn District Plan. This required further information to be provided to the Council on the subdivision application.
[8] Issues also arose because the land being subdivided was located adjacent to a pig farm and the owners of the pig farm required a covenant to be registered on the land being subdivided, placing certain restrictions on how it was used in order to protect the ongoing use of their land as a pig farm. Mr Mooney explained it took some 10 months to resolve matters to the satisfaction of all parties in relation to the pig farmer’s requests.
[9] The subdivision application was finally lodged on 4 April 2024, but there were delays in processing it. The subdivision consent did not issue until 9 December 2024. However, as a result of those various delays, the applicants were in default of their loan agreement which required the loan to be repaid in full on 9 November 2023. While the applicants take issue with the calculation of what was owing at that point, the amount owing as at 14 March 2024 was approximately $1,200,000. The respondent issued a notice of demand for this amount on that date.
[10] Mr Mooney obtained a valuation from Ford Baker for the property in November 2022 to support the application for finance from the respondent. It valued the property at $1,900,000 but, based on the subdivision being fully implemented, it estimated that the applicants’ three lots would be valued at $2,850,000 in total.
[11] The applicants again gave access to the property for Ford Baker to complete an updated valuation and this confirmed that the current value, with the subdivision consent, remains $1,900,000.
[12] The respondent then issued a notice under the Property Law Act 2007 (PLA) in June 2024. For the balance of the year Mr Mooney pursued refinancing options while awaiting the grant of the subdivision consent. During this period the respondent’s lawyers granted various extensions to the applicants and refrained from listing the property for mortgagee sale. The respondent’s solicitors provided a settlement statement on 4 November 2024, being the date by which Mr Mooney advised he had reasonable expectation of alternative finance being available based upon information from a mortgage broker. However, that alternative finance did not eventuate, and the respondent proceeded to arrange a mortgagee sale.
[13] The respondent initially proposed to sell the property by auction on 12 December 2024. On 10 December 2024 the applicants, through their lawyers, sent a letter seeking a deferral of the sale, arguing that because it had been marketed without a subdivision consent, that would have a “significant impact on the value of the land” compared with the current position where the subdivision consent had issued. The applicants claimed that the respondent, as mortgagee, was “under a duty to obtain the best possible price” and said that because the property was not being marketed with a resource consent for subdivision, the marketing campaign was deficient. The letter also argued that there was no prejudice in postponing the sale of the property because there was sufficient equity in the property to cover the existing debt of approximately
$1,500,000 and the costs of sale. They sought that the sale process be postponed until mid-February 2025.
[14] What followed was an important chain of communication. The respondent’s lawyer, Mr Richard Smith of Duncan Cotterill, responded to the applicants’ lawyers’ letter pointing out it had some inaccuracies. In particular, he noted that his client did not have an obligation to get the “best possible price” but only to take reasonable care to obtain the best price reasonably obtainable at the time of sale. He also pointed out that the Ford Baker valuation of $2,750,000 only applied after titles had issued, not on the issue of the subdivision consent, saying there was significant work, time, and cost involved in getting from the current stage to the stage of titles issuing.
[15] The letter concluded, however, with an offer to defer the auction date until no earlier than 30 January 2025, provided that Duncan Cotterill received from Mr Mooney written confirmation that:
(i)effective immediately your clients will work with Bayleys to allow interested purchasers access to the property to view it;
(ii)if at any time between now and 30 January 2025 your clients do not allow interested purchasers access to the property to view it our clients may proceed with an auction on a date earlier than 30 January 2025;
…
[16] The letter also advised the applicants that if they did not “co-operate with providing access to the property for prospective purchasers then our client may set a new auction date at any time (and that date could still be prior to Christmas).”
[17] Mr Steven Bray, the applicants’ lawyer, responded to this email querying the request to allow access because Mr Mooney had understood that no access would be sought prior to Christmas. He said, “if it is sought in the New Year Tuesday and Thursdays would be the days made available” and asked Mr Smith to confirm that position.
[18] However, Mr Smith responded noting that Mr Mooney had called Mr Graham Beirne, their client’s representative, that morning, “pleading for mercy”. However, Mr Beirne was “adamant he wanted purchaser inspections to commence immediately, and certainly prior to Christmas. He would not have agreed to a 30 January 2025 deferment otherwise, and that has not changed.” The letter concluded:
Please speak to Mr Mooney and tell him the terms upon which our client will agree to defer any auction are set out in our letter. I understand Mr Mooney believes he will achieve a refinance, and I hope he does, but clearly if he doesn’t then access by prospective purchasers are [sic] in his best interests.
[19] Mr Bray responded on behalf of the applicants saying “all terms of your email of today’s date are accepted”.
[20] I am satisfied that as a result of this correspondence, there was a concluded agreement whereby, so long as the applicants agreed to immediately allow access to prospective purchasers to inspect the property, and certainly before Christmas, then the respondent would defer the auction but, if not, “the auction would be brought on promptly.” Indeed, when making submissions during the telephone conference, Mr Mooney acknowledged that was the agreed position.
[21] What happened next was unfortunate. Mr Mooney had been advised that Andrew Taylor of the real estate agency, Bayleys, would contact him to arrange visits from prospective purchasers. Mr Taylor text messaged Mr Mooney at 6.01 pm on Saturday 14 December. The text message referred to the agreement for viewings, and asked “what time works for you”.
[22] Mr Mooney advised that when he received that message, he was tired because he had been travelling the previous day and had just learned that his daughter’s mentor at NZ Rugby, Matua Luke Crawford, had died of a heart attack. He was upset to learn of Mr Crawford’s death. As a consequence, when he received the text message from Mr Taylor, he thought it came from his solicitor, and he says he responded “somewhat candidly and forcefully” saying:
It is not what GB agreed …
I will play hardball on this. He agreed clear air to get financing … They are acting oppressively.
To be clear, yes mid Jan but as I said to GB I will need to have $s sorted by then. … GB is a bullshitter who reworks everything in his favour. …
[23] On Monday morning Mr Mooney telephoned his solicitor first thing and asked her to do two things:
(a)ring Mr Taylor and apologise for the misdirected text message and explain that he had decided to go to Wellington for Mr Crawford’s funeral and no-one would be at home in Christchurch for visits to the property;
(b)ring the defendant’s solicitor Mr Smith and say the same thing.
[24]Unfortunately, these calls were not made until Wednesday that week.
[25] On Monday, Mr Smith sent a letter to the applicants’ lawyers, which, among other things, said that the agent had advised them that Mr Mooney was resisting viewing times being arranged for the coming week and asking them to urgently confirm that this was not the case. Mr Mooney’s lawyer responded saying that “there must be a misunderstanding and I have been trying to reach Andrew Taylor of Bayleys.” However, Mr Smith replied saying that there could be no misunderstanding; agreement had clearly been reached that inspections would commence that week and he pointed out the consequences if that did not happen.
[26] By Wednesday, 18 December 2024, the respondent’s lawyers had still not had a reply from Mr Mooney or his lawyers and advised that the applicants were “clearly in breach of the terms that were agreed in order for our client to defer the auction.” It seems that on 19 December 2024, Bayleys were instructed to proceed with the auction and contact all parties who had registered interest in the property. At the telephone conference I was advised by the respondent’s lawyers that there were six parties registered who were “very interested” in the property.
[27] It is this rescheduling of the auction that Mr Mooney took exception to, and which prompted this application for an interim injunction. In his application he sought to delay the sale to no earlier than 1 February 2025.
The application for an interim injunction
[28] The applicants have not filed a statement of claim. However, the grounds for seeking the interim injunction are set out in a memorandum filed under r 7.23(3) and in a memorandum on the law relating to s 176 of the PLA and relating to implied terms and their breach.
[29] The applicants’ case is based, first, on a claim of breach of the duty in s 176 of the PLA which provides:
A mortgagee who exercises a power to sell mortgaged property, … owes a duty of reasonable care … to obtain the best price reasonably obtainable as at the time of sale:
[30] The breach asserted by the applicants in their written application, and elaborated on when the parties addressed me by telephone, was that the mortgagee had not completed an adequate marketing campaign to realise the best price reasonably obtainable as at the time of sale. In support of that claim Mr Mooney relied on:
(a)the short timeframe in which the property was relisted for sale; and
(b)the fact the advertisements used a banner head line which read “liquidation sale” and not “mortgagee sale”. Mr Mooney says this implies “a hurried fire sale”, contrary to the statutory duty in s 176(1) of the PLA.
[31] The second ground on which the interim injunction is sought is on the ground there has been a breach of an implied term in the settlement agreement reached on 12 December 2024 to give “reasonable notice to the [applicants] if the respondent believes that the agreement has been breached.”
The law on interim injunctions
[32] The principles applying to the grant of an interim injunction are well settled. They require the Court to find that:
(a)there is a serious question to be tried;
(b)the balance of convenience favours the granting of the injunction; and
(c)the overall justice of the case requires it.1
[33] A serious question is one that is not frivolous or vexatious, and one where the plaintiff is able to satisfy the Court that it has a real prospect of succeeding at trial.2
1 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]; Intellihub v Genesis Energy Ltd [2020] NZCA 344 at [23]; Klissers Farmhouse Bakeries v Harvest Bakeries Ltd [1985] 2 NZLR 129 at [142]; and American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).
2 Re Lord Cable (Dec’d) [1976] 3 All ER 417 (CH) at 431; and Hannon v Senior Trust Capital Ltd
[2023] NZHC 16 at 40.
[34] The second stage, which requires me to assess the balance of convenience, involves balancing the risk of doing an injustice.3 The question of balance of convenience arises generally only where there is doubt as to adequacy of damages.4
[35] The third stage is the overall justice assessment. The Court of Appeal has emphasised that, in every case, the Judge has to stand back and ask where the overall justice lies.5 It is essentially a check on the position that has been reached following analysis of the first two stages.6
Is there a serious question to be tried?
[36] The first ground relied on is an alleged breach of the duty in s 176 to take reasonable care to obtain the best price reasonably obtainable at the time of sale.
[37] There are a number of cases which set out the indicia of what may involve reasonable efforts sufficient to satisfy this duty. For example, in Public Trust v Ottow,
Asher J said:7
[31] The following steps indicate that a mortgagee has made reasonable efforts to obtain the best reasonably obtainable price:
(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 long 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 expert opinion as to value.
3 McLaughlin v McLaughlin [2019] NZHC 2597 at [37], citing Cayne v Global Natural Resources PLC [1984] 1 All ER 225 (CA) at 237.
4 American Cyanamid Co v Ethicon Ltd, above n 1, at [408]–[409] and [510]–[511].
5 Klissers Farmhouse Bakeries v Harvest Bakeries Ltd, above n 1, at [142].
6 NZ Tax Refunds Ltd v Brooks Homes Ltd, above n 1, at [47].
7 Public Trust v Ottow [2009] 10 NZCPR 897 (HC).
[38] I note at the outset that a reputable real estate agent had been appointed to market the property and that real estate agent had obtained a valuation report from an experienced valuer. I have no evidence as to the extent of time that the property has been marketed for, but clearly marketing began sometime before the first proposed auction date of 12 December 2024 and a number of potential buyers had registered their interest at the date of the hearing. Furthermore, I was advised from the bar that the buyers were updated every time further information was obtained about the property including, in particular, the fact that the subdivision consent had been granted.
[39] The fact that six buyers were identified as interested purchasers appears on the face of it to suggest the marketing campaign was reasonably successful. While the speed with which the auction was brought back on might be seen to be hasty, it has to be seen in light of the previous marketing period from which a number of interested buyers have been identified.
[40] While Mr Mooney also took exception to the use of the banner “liquidation sale” in the advertising material instead of the term “mortgagee sale” which Mr Mooney prefers, I do not consider this would materially prejudice the marketing campaign. Both terms indicate that assets are being liquidated or sold to pay down debt and there is no evidence that the use of the term liquidation sale would be an impediment to satisfying the obligation under s 176.
[41] Accordingly, I am not satisfied that there is a serious question to be tried that the respondent has breached the obligations in s 176 of the Act.
[42] The second argument relied on is that there has been a breach of an implied term of the December 11 “settlement agreement”.
[43] I have set out the steps taken to reach agreement to defer the sale no earlier than 30 January 2025, in [13] to [19] above. Significantly, it was important to the respondent that the applicants immediately co-operate with the real estate agent in providing access to the property. A clear term of the agreement was that the respondent
“may set a new auction date at any time, and that date could be prior to Christmas”, if the requirement to facilitate access was not provided.
[44] It is abundantly clear from the correspondence that this term of the agreement was breached. Mr Taylor of Bayleys Real Estate contacted Mr Mooney on 14 December to arrange for inspections of the property on the following Tuesday and Thursday and that proposal was clearly rebuffed by Mr Mooney’s reply. While it is unfortunate he thought he was replying to his lawyers rather than to Mr Taylor, it is nevertheless clear that he was reneging on the agreement. His reply suggested that, in fact, it was the respondent which was not abiding the agreement and that he expected not to have to show visitors through until mid-January. As Mr Mooney acknowledged during our hearing by telephone, the agreement reached required him to co-operate by providing access immediately. Thus, even if this reply had been sent to his lawyers, he would have been asking his lawyers to reject this proposal and to give him “clear air” until mid-January. That is contrary to the agreement that had been reached to defer the auction.
[45] While it is unfortunate that access was sought on a week that turned out to be difficult for Mr Mooney, that did not justify his blanket refusal to co-operate which was conveyed in his email on 14 December 2024.
[46] I now consider whether it could be argued that the agreement included an implied term that the respondent was required to inform Mr Mooney of the breach or default before taking other action.
[47] Mr Mooney cites the test set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings,8 for the implication of implied terms, noting that this test has been used in a number of cases, including, more recently, in Ward Equipment Ltd v Preston.9 While time constraints prevented him from giving detailed submissions on why the implied term to inform the other party of a breach or default before taking further action should be recognised here, he did suggest that it was an extension of the mortgagee’s duty, in equity, to act in good faith.
8 BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13.
9 Ward Equipment Ltd v Preston [2017] NZCA 444.
[48] However, I do not consider such a term can reasonably be implied into the agreement reached on 11 December 2024. It was quite clear that the respondent was deferring the auction on very strict criteria, one of them being that Mr Mooney would facilitate access to the property for prospective purchasers immediately. It was also made clear that a failure to do so meant that the respondent reserved the right to set a new auction date at any time, including prior to Christmas.
[49] In my view, there is no room for implying the procedural requirements which are suggested by Mr Mooney. To do so would contradict the express term of the agreement which allowed the respondent to set a new auction date in a very short timeframe, including before Christmas, if access to prospective purchasers was denied. It would be inconsistent with that express term of the agreement to imply a term requiring the respondent to give notice and to give time for rectification of the default.
[50] Accordingly, I have also come to the conclusion there is no serious question to be tried that the respondent breached an implied term of the 11 December 2024 settlement agreement.
Balance of convenience
[51] Although I have found there is no serious question to be tried, for completeness I will also briefly address the balance of convenience. This includes consideration of whether damages would be an adequate remedy. I really had a dearth of information from either side on this issue. Nothing was advanced by Mr Mooney to say why damages would not be an adequate remedy and there is no suggestion that the respondent would not be able to meet any damages that might be awarded.
[52] I also note that the position is being reached where the amount earned on a mortgagee sale may not cover the debt owed. As at March, Mr Mooney owed
$1,500,000. It will clearly be more now and the valuation given for the land of
$1,900,000 is in circumstances not involving a forced sale. A mortgagee sale is, of course, different from a normal sale on the open market, and a lesser price can be expected to be achieved. The longer the respondent defers the mortgagee sale, the more at risk it is of not recouping the debt. While Mr Mooney has provided an
undertaking as to damages, when he has been unable to refinance despite attempting to do so for a long period of time, I can have no confidence that he would be able to meet an award of damages.
[53] A further factor to take into account is that there is no evidence to suggest that Mr Mooney will be able to obtain alternative finance in the next month. Clearly Mr Mooney has been attempting for a number of months to obtain finance and he has been unsuccessful. He candidly acknowledged that he could not say that a finance offer was “imminent”. Given the latitude which the respondent has afforded to Mr Mooney over a number of months, I was not satisfied that the respondent should be required to defer the auction of the property even further.
[54] Finally, I note that from the particulars and conditions of sale there is a condition (term 31) that provides that the respondent may cancel the agreement if the applicants redeem their mortgage in full at any time prior to settlement date. I was advised that settlement date in the terms and conditions of auction is 17 January 2024. While Mr Mooney complains that much of this period is when lawyers and financiers are on leave, so it would be difficult to obtain finance in this period, it does provide a further opportunity for him to salvage the situation if he can obtain the necessary finance to repay the respondent. However, in the absence of any evidence that there is a realistic prospect of obtaining finance in the next month, I consider the balance of convenience does not favour the grant of an injunction.
[55] Finally, I briefly consider the overall justice of the case. In doing so, I have had regard to the history of the dealings between the parties, and the accommodation which has been afforded to the applicants since the PLA notice was issued in April 2024. It is clear that considerable leniency has been afforded to the applicants, but that patience has now run out. If I had any evidence that finance was likely to be obtained in the next four to five weeks, that might have been a factor pointing in favour of granting the injunction, but in the absence of such evidence, I see no utility in granting the application to defer the auction. There was simply no evidence to suggest there was a realistic prospect of refinancing that could avoid the need for the property to be sold.
[56] For these reasons, I orally declined the application for an interim injunction on 23 December 2024.
Costs
[57] I was not addressed on the issue of costs. However, given that counsel for the respondent had to do no more than participate in a telephone conference, I would discourage any application for costs. However, as I have not heard from the parties on the issue, I reserve the issue of costs.
Solicitors:
KT Law Ltd T/A Kannangara Thomson Duncan Cotterill, Christchurch
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