My Trustee Company (Soho) Ltd v Magna Trust Company Ltd

[2021] NZHC 3047

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2079

[2021] NZHC 3047

UNDER

Sections 119-120, 176, 279, 281, 288, 317,

318, 327-329 of the Property Law Act 2007

IN THE MATTER

of an interim injunction restraining a mortgagee sale of the property

BETWEEN

MY TRUSTEE COMPANY (SOHO) LTD

Applicant

AND

MAGNA TRUST COMPANY LTD

Respondent

Hearing:

10 November 2021 (via VMR)

Counsel:

C T Patterson for Applicant

P J Napier and A M Ryder for Respondent

Judgment:

10 November 2021

JUDGMENT OF BREWER J

Solicitors:

Lateral Lawyers Ltd (Auckland) for Plaintiff Keegan Alexander (Auckland) for Defendant

MY TRUSTEE COMPANY (SOHO) LTD v MAGNA TRUST COMPANY LTD [2021] NZHC 3047 [10

November 2021]

[1]                 The applicant applies without notice for an interim injunction to halt the mortgagee sale of a property which is scheduled for tomorrow. The respondent was served on a Pickwick basis and is represented by Mr Napier at today’s hearing.

[2]                 The background is that the applicant borrowed money from the respondent to assist with the development of a commercial property. The applicant purchased the property and has been developing it into separate apartments with a view to selling them for a profit. Unfortunately, there have been problems with getting the apartments into a saleable condition. Problems with neighbours and with the title have resulted in an ongoing arbitration and a separate proceeding filed in this Court. The expectation is that the arbitrator can deliver his decision by the end of the year but the proceeding in this Court has yet to be allocated a trial date.

[3]                 The statement of claim filed in the substantive proceeding contains two causes of action aimed at establishing grounds for a permanent injunction. The first is breach of mortgagee’s duties. The submission is that if the mortgagee sale were to proceed tomorrow, then the respondent would be in breach of its duty pursuant to s 176 of the Property Law Act 2007 to obtain the best price reasonably obtainable at the time of the sale.

[4]                 The applicant points to the current Covid-19 lockdown. The submission is that the restrictions on free movement in Auckland during this period compromises the ability of the respondent to obtain the best price reasonably obtainable for the property. Further, Lot 2 of the property is currently tenanted and occupied by people of Māori or Pasifika descent. They currently have a right to reasonably refuse entry to the apartments to third parties. They are currently exercising that right.

[5]The second cause of action is in promissory estoppel. It is pleaded:

29. In or about March 2021 the parties entered into an understanding or agreement in that the Defendant and/or its agent, Zagga Limited (New Zealand) (“Zagga”), promised that they would support the Plaintiff in pursuing the arbitration proceedings and Landlock proceedings to obtain the requisite easements (legal or equitable), to completion, and to fund or otherwise contribute to associated costs and expenses (“the Promise”).

[6]                 I note at this point that the interlocutory application and the substantive proceeding are open-ended in terms of the duration of the injunctions sought. The second cause of action seeks as relief, inter alia, a direction that the respondent must immediately take any and all steps to give effect to the promise. I infer that means a direction that Zagga supports the applicant in pursuing the arbitration proceedings and Landlock proceedings to obtain the requisite easements and to fund or otherwise contribute to associated costs and expenses.

[7]                 The first issue is whether the proceedings disclose a serious question to be tried. I note that it is insufficient for an applicant to assert that there is a serious question to be tried and to point to differences in factual positions. The applicant needs to demonstrate a real prospect of succeeding.

[8]I have a real doubt as to whether there is a serious question to be tried:

(a)As to the first cause of action, Mr Patterson for the applicant accepts that the obligation on a mortgagee under s 176 of the Property Law Act 2007 focuses on the time of the sale. The Covid-19 lockdown regime has nothing to do with the respondent. So long as within the constraints of the Covid-19 lockdown regime the respondent has taken all reasonable steps to obtain the best price at the time of the sale, then it seems to me that the respondent will have fulfilled its obligations under s 176. It is not suggested that the respondent has failed to take such steps. It is alleged simply that the regime will necessarily reduce the price that would otherwise be obtainable.

(b)As to the promissory estoppel cause of action, Mr Patterson cannot point to a record of the promise. I have read the affidavit of Ms Nichola Jane Keast in support of the interlocutory application. Her evidence is:

47. Mr Marcus Morrison (“Mr Morrison”) from Zagga promised, or agreed, to take over the Applicant’s debt due under the Term Loan Agreement and to initiate and continue fund the pursuit of the Disputes and the Landlock Issue through actions in arbitration and in the High Court (“the Promise”). Annexed marked

“NJK1-16” are true copies of the correspondence and documents confirming Zagga’s initial position.

Mr Patterson submits that there is evidence that Zagga acted as the agent of the respondent.

[9]                 I have looked at the attachments to which Ms Keast refers. There is no document evidencing a  promise.  There  are  simply  documents  that  show  that  Mr Morrison tried to assist the applicant. Mr Patterson submits that this is evidence consistent with there being a promise.

[10]             I would have expected that if a businessperson, or indeed a mortgagee, had decided to take over the obligations of a mortgagor and to pursue litigation and arbitration with a view to eventually securing titles to property which would make it more valuable on resale, there would be at least a commercial document which would set out what the person taking over the obligations would get out of it. Mr Patterson accepts that there is no such document.

[11]It follows that I do not see there is a serious question to be tried.

[12]             But, even if there were, I find that the balance of convenience favours the respondent. Really, what the applicant seeks is for the respondent to be deprived of its ability to exercise its power of sale until an arbitration and a litigation have been concluded. It might be that if the arbitration and the litigation are concluded in favour of the applicant, and if in due course titles are issued which have the necessary easements, then there would be sufficient money to pay the respondent, even though interest will have been accruing through the period.

[13]             But, this is a commercial transaction. If the interim injunction is refused and ultimately on the substantive application the applicant succeeds, then damages would be an adequate remedy. For that reason, I find the balance of convenience favours the respondent.

[14]             Standing back and looking at the issue of overall justice, I come back to the fact that this is a commercial transaction. The applicant borrowed money and the

lender provided the money on a security underwritten by a mortgage. The applicant has not been able to complete the development of the property in the time expected and is continuing to battle to try to maximise its financial return. Unfortunately, it cannot meet the terms of its obligations to the respondent as mortgagee. There is a consequence for that. The mortgagee is entitled to sell the property. In such circumstances, the interests of overall justice favour the commerciality of the situation.

[15]             Finally, although I do not consider this to be determinative, the undertaking as to damages relies entirely on there being a residual equity in the property sufficient to meet any damages if the interim relief were granted. The value of the undertaking is not established by evidence.

[16]In all the above circumstances, I dismiss the applications for interim relief.

[17]             If there are issues as to costs which cannot be resolved between the parties, then memoranda must be filed within 10 working days of today’s date.

Brewer J