Mules v R Cameron and Shortts Engineering & Plumbing Supplies Limited

[2017] NZHC 1966

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-1284 [2017] NZHC 1966

BETWEEN

ALAN THOMAS MULES AND SIM

TWO LIMITED SUING IN THEIR CAPACITIES AS TRUSTEES OF THE ALAN MULES TRUST

Plaintiffs

AND

R CAMERON AND SHORTTS ENGINEERING & PLUMBING SUPPLIES LIMITED

Defendant

Hearing:	15 August 2017
Appearances:	I Williams for Plaintiffs No appearance for Defendants
Judgment:	17 August 2017

JUDGMENT OF LANG J

[on application for summary judgment]

This judgment was delivered by me on 17 August 2017 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

MULES v R CAMERON AND SHORTTS ENGINEERING & PLUMBING SUPPLIES LTD [2017] NZHC

1966 [17 August 2017]

[1]      This proceeding concerns a commercial property situated at 47 Huia Road, Otahuhu (the property).   The plaintiffs, the trustees of the Alan Mules Trust (the trustees), purchased the property at a mortgagee sale conducted by the Bank of New Zealand (the BNZ) in July 2015.

[2]      The defendant, R Cameron & Shortts Engineering & Plumbing Supplies Ltd, was originally incorporated as GSE Group Ltd.  It changed its name to R Cameron and Shortts Engineering and Plumbing Supplies Ltd on 7 July 2011.  The defendant occupied the property some time ago and, although it no longer does so, it has left a number of items of plant and equipment on the property.

[3]      The plaintiffs have been placed on notice that the defendant claims that it is currently the lessee of the property even though the plaintiffs purchased the property from the mortgagee.  The defendant contends that it remains the lessee by virtue of an undated and unregistered deed of lease from the former owner of the property that was apparently executed in or about 2011.

[4]      In  this  proceeding  the  plaintiffs  seek  summary  judgment  against  the defendant in the form of an order declaring that they are not bound by the terms of the unregistered lease.  In addition, they seek an order declaring that the plant and equipment that the defendant has left on the property constitute a trespass on the property.

[5]      The plaintiffs served the proceeding on the registered office of the defendant on 4 July 2017 but the defendant has taken no steps to resist the application for summary judgment.   As a result, I am required to determine the application for summary judgment on an undefended basis.

Relevant principles

[6]      The  principles  to  be  applied  in  considering  an  application  for  summary judgment have been clearly established through decisions of the Court of Appeal

such  as  Pemberton  v  Chappell,  Grant  v  NZMC  Ltd  and  Westpac  Banking

Corporation v MM Kembla New Zealand Ltd.1

[7]      In considering the plaintiffs’ application I propose to apply the following general principles, which apply to all applications by a plaintiff for summary judgment:

(a)      The  plaintiffs  must  satisfy  the  Court  that  the  defendant  has  no arguable defence to the claim brought against it.   The issue is whether there is a real question to be tried.

(b)It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise.  Issues of law, even though they may be complex, can, however, be determined in an application for summary judgment.

(c)      Although the Court should adopt a robust approach, nevertheless summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.

The lease

[8]      The lease upon which the defendant relies describes the lessor of the property as being Trustees Link Trust No 1 and the lessee as GSE Group Ltd. A person by the name of Mr Harry Memelink is associated with both companies.  It is Mr Memelink who has asserted that the defendant remains the lessee of the property.

[9]      The lease was for a term of five years from 1 January 2011 at an annual rental of $102,000 plus GST and outgoings.   The lease gave the lessee a single right of renewal for an unspecified term, but there is no evidence that the lessee has ever

exercised that right.

1      Pemberton v Chappell [1987] 1 NZLR 1 (CA); Grant v NZMC Ltd [1989] 1 NZLR 8 (CA) and

Westpac Banking Corporation v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).

Decision

[10]     Section 105 of the Land Transfer Act 1952 prescribes the consequences that follow when a mortgagee sells a property to a third party using the power of sale contained in a mortgage.  It relevantly provides as follows:

105      Transfer by mortgagee

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.

(Emphasis added)

[11]     In the present case the plaintiffs could only be bound by the lease if the BNZ, as mortgagee, consented to that lease.   There is, however, no evidence before the Court that the BNZ ever consented to the lease.

[12]     The most that can be said is that the BNZ provided a copy of the lease to prospective purchasers along with the particulars and conditions in respect of the sale of the property.  The BNZ provided prospective purchasers with the following advice in relation to that lease:

Please note: the following document [the lease] has been supplied to the Bank of New Zealand as Mortgagee and Bayleys Real Estate Limited (Bayleys) by a third party to be made available to prospective purchasers. Bank of New Zealand as Mortgagee and Bayleys Real Estate accept no responsibility  for  its  accuracy  or  completeness.    In  all  cases,  interested parties should conduct their own verification of the information in this document. All parties are urged to take legal advice before entering into any contract or agreement regarding the property described herein.

[13]     It is now well established that mere knowledge of the existence of a lease is not sufficient to establish that a mortgagee is bound by it.   Instead, there must be some affirmative conduct on the part of the mortgagee by which it acknowledges it is bound by the lease.  Those principles are established by cases such as New Zealand

Fisheries Ltd v Napier City Council, Son v Ko, Cashmere Capital Ltd v Carroll and

Harbour City Construction 2012 Ltd v Link Technology 2000 Ltd.2

[14]     In the present case the Bank no doubt provided prospective purchasers with a copy of the lease agreement out of an abundance of caution.   There is nothing, however, to suggest that the Bank ever considered that it was bound by the lease. This is clearly demonstrated by the fact that the Bank expressly said that it had received  the document  from  “a third party to  be made available to  prospective purchasers”.  Furthermore, the Bank accepted no responsibility for the accuracy or completeness of the document, and it invited interested parties to conduct their own verification of the information in it.

[15]     The position in the present case is remarkably similar to that in Harbour City Construction, another case in which Mr Memelink was involved.   In that case the plaintiff sought summary judgment in identical terms to that sought in the present case after Mr Memelink contended his company remained lessee of a property that had been sold to the plaintiff by a mortgagee.   Mr Memelink argued that the mortgagee had consented to the lease remaining in existence. Associate Judge Smith held that the evidence fell well short of establishing that the mortgagee had agreed to

subordinate its rights as mortgagee to the defendant’s rights under the lease.3

[16]     I take a similar approach in this case.   I consider the fact that the Bank provided prospective purchasers with a copy of the lease document prior to the auction falls well short of establishing that it consented to having its rights under the mortgage subordinated to the lessee’s rights under the lease.

[17]     It follows that the plaintiffs have established they are not bound by the terms of the lease, and that any continued storage of plant and equipment on the property

by the defendant will constitute a trespass.

2      New Zealand Fisheries Ltd v Napier City Council (1990) 1 NZ ConvC 190,342 (CA) at 190,344; Son v Ko (2006) NZ ConvC 194,354 (HC); 27 September 2006; Cashmere Capital Ltd v Carroll [2009] NZSC 123, [2010] 1 NZLR 577 at [72]-[75]; Harbour City Construction 2012 Ltd v Link Technology 2000 Ltd [2017] NZHC 451.

3      Harbour City Construction 2012 Ltd v Link Technology 2000 Ltd, above n 2, at [80].

Result

[18]     I grant summary judgment in favour of the plaintiffs.  I make orders declaring that:

(a)      The  plaintiffs  are  not  bound  by  the  terms  of  the  undated  and unregistered deed of lease between Trustees Link Trust No 1 and GSE Group Ltd.

(b)The continued storage of plant and equipment on the property by the defendant constitutes a trespass on the land.

Costs

[19]     The  plaintiffs  are entitled  to  costs  on a category 2B basis  together  with disbursements as fixed by the Registrar.

Lang J

Solicitors:

Daniel Overton Goulding, Auckland