Mortgage Administration Services (Calibre) Limited v Calibre Financial Services

[2012] NZHC 1921

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-3862 [2012] NZHC 1921

UNDER  the District Courts Act 1947

BETWEEN  MORTGAGE ADMINISTRATION SERVICES (CALIBRE) LIMITED First Appellant

ANDCAIRNS LOCKIE LIMITED (IN LIQUIDATION)

Second Appellant

ANDCALIBRE FINANCIAL SERVICES LIMITED

Respondent

Hearing:         4 July 2012

Appearances: S McAnally for Appellants

F Joychild on instructions for Respondent

Judgment:      2 August 2012

JUDGMENT OF PETERS J [re Leave to Appeal]

This judgment was delivered by Justice Peters on 2 August 2012 at 3 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

Solicitors:           Keegan Alexander, Auckland:  [email protected]

Sanderson Weir, Auckland:  [email protected]

Counsel:            P Rice, Barrister, Auckland – email: [email protected]

F Joychild, Auckland:  [email protected]

MORTGAGE ADMINISTRATION SERVICES (CALIBRE) LIMITED V CALIBRE FINANCIAL SERVICES LIMITED HC AK CIV-2011-404-3862 [2 August 2012]

Introduction

[1]      Calibre Financial Services Limited (“Calibre”) seeks leave to appeal to the Court  of  Appeal  against  a  judgment  I  gave  in  this  matter  on  18  April  2012. Mortgage Administration Services (Calibre) Limited (“MAS”) opposes the application.

[2]      My judgment was on appeal from a decision of the District Court at Auckland given on 31 May 2011.  I allowed an appeal by MAS and remitted the case back to the District Court for determination of another point raised on the pleadings.

[3]      To obtain leave to appeal, Calibre must show that its appeal would raise a question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost both to the Court system and to the parties, and the delay, of a further appeal.[1]

Background

[1] Waller v Hider [1998] 1 NZLR 412 (CA) at 414.

[4]      The issue before the District Court and before me was whether MAS was required to indemnify Calibre in respect of an amount of GST that Calibre had been required to pay to the Inland Revenue Department.

[5]      Calibre had advanced funds to a third party borrower pursuant to the terms of a loan agreement (“loan agreement”).  MAS had introduced the borrower to Calibre pursuant to the terms of an agreement between MAS and Calibre (“agreement”). The borrower defaulted and Calibre exercised its powers under security documentation to conduct a mortgagee sale of property of which the borrower was the registered proprietor.  Calibre was required to pay GST (“the GST amount”) on the proceeds of sale.

[6]      Calibre demanded that MAS indemnify it for the GST amount, MAS failed to do so and Calibre terminated the agreement for breach.  Calibre issued proceedings

seeking an order that MAS indemnify it for the GST amount, and for a declaration that it was entitled to terminate.  MAS defended the proceedings and counterclaimed for commissions it contended were due to it under the agreement.

[7]      Calibre’s case against MAS for the GST amount was based on cl 11.2(a) of the agreement, which reads as follows:

11.2     [MAS] to Indemnify Calibre for Costs

[MAS] must indemnify [Calibre] on demand for:

(a)       all  stamp  duty,  taxes,  registration  and  similar  fees  and charges payable on or in connection with any Secured Agreement, which are payable by the relevant Borrower under that Secured Agreement, and which are not paid by that Borrower; ...

[8]      It was common ground that the loan agreement was a Secured Agreement for the purposes of cl 11.2(a).

[9]      To succeed, Calibre was required to establish that the GST amount was a “tax payable on or in connection with” the loan agreement; that the tax was “payable by the relevant Borrower” under the loan agreement; and the borrower had not paid the GST amount.

[10]     The District Court held that each of these elements was satisfied.   MAS appealed.  On appeal I held that the GST amount was not a tax within the meaning of cl 11.2(a); that if it was, it was not “payable on or in connection with” the loan agreement; and that, if it was, it was not “payable by the [borrower]” under the loan agreement.

Leave to appeal

[11]     I accept Calibre’s submission that the questions of whether the GST amount is a tax within the meaning of cl 11.2(a) and, if so, whether it is “payable on or in connection with” the loan agreement are questions of law that are capable of bona fide and serious argument.

[12]     The next point is whether a question of law, capable of bona fide and serious argument, arises as to whether the GST amount was “payable by the relevant Borrower” under the loan agreement.   Calibre’s case is that the GST amount was payable by the borrower pursuant to cl 5.3 of the loan agreement, which reads as follows:

5.3      Enforcement expenses

You may have to pay Enforcement Expenses after a default.   All Enforcement Expenses are payable on demand or when we debit your Loan Account for them.

[13]     A GST sum payable by Calibre in connection with the sale of mortgaged real estate is an Enforcement Expense for the purposes of cl 5.3.  However, when I heard the appeal, there was no evidence of any demand of the borrower or of a debit of the kind referred to in cl 5.3.  On its face, cl 5.3 requires such a demand or debit before an Enforcement Expense is payable by the borrower.

[14]     In my judgment of 18 April 2012, I expressed reservations as to whether, in the absence of evidence of a demand or debit, the GST amount would be “payable by the relevant Borrower” for the purposes of cl 11.2(a).

[15]     When I heard this application for leave to appeal, counsel who appeared for Calibre was on instructions from counsel for Calibre at the hearing of the substantive appeal.  Counsel was not able to articulate the point that Calibre wishes to put before the Court of Appeal on this particular issue. Accordingly, I gave Calibre leave to file further submissions, with MAS to have a right of reply.

[16]     In the submissions I have received, Calibre has made it clear that it wishes to argue before the Court of Appeal that the GST amount would be “payable by the relevant Borrower” for the purposes of cl 11.2(a), despite a lack of demand or debit.

[17]     With  those  submissions,  Calibre  also  filed  affidavit  evidence  which  it contends provides evidence of such a demand or debit.  The prospect of this affidavit was not raised with me at the hearing of the application for leave to appeal.  MAS disputes that the evidence does show any such demand or debit but in any event

makes the point that it would be for the Court of Appeal to decide whether to admit fresh evidence.  I propose to disregard the affidavit for present purposes.

[18]     In the absence of evidence of a demand or debit of the type referred to in cl 5.3, I am not satisfied that any question of law, capable of bona fide and serious argument, can arise as to whether the GST amount was payable by the borrower as required by cl 11.2(a).

[19]     That being the case, it is unnecessary for me to address the matter of the importance of the case and the interests involved.

[20]     I decline leave to appeal.  Calibre is to pay MAS’s costs on this application.

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M Peters J