North South Finance Limited v Brown and others HC Ak CIV 2007-404-7997
[2009] NZHC 2448
•19 November 2009
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2007-404-7997
BETWEEN NORTH SOUTH FINANCE LIMITED
Plaintiff
ANDANDREW MARK BROWN AND JOANNA MAREE PIDGEON
First Defendant
ANDANDREW MARK BROWN Second Defendant
Hearing: 31 October 2008
27 March 2009
Counsel: J Waymouth for Plaintiff
A Brown in person
Judgment: 19 November 2009 at 4 pm
RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by Associate Judge Sargisson on 19 November 2009 at
4 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date ..........................
Solicitors:
John Waymouth, PO Box 33-774, Takapuna, North Shore City 0740A Brown c/- J Perillo, 10/40 Upper Queen Street, Auckland 1010
NORTH SOUTH FINANCE LIMITED V A M BROWN AND J M PIDGEON AND ANOR HC AK CIV-2007-
404-7997 19 November 2009
[1] North South Finance Ltd seeks summary judgment against Andrew Mark
Brown for $267,094.65, plus interest on that sum to the date of judgment, together with costs and disbursements on a solicitor client basis.
[2] The basis of North South’s claim is a guarantee signed by Mr Brown on 25
January 2006 as security for a loan advanced by North South to the trustees of the Motu Grande Trust, who are named as first defendants in this proceeding. The trustees, who included Mr Brown, defaulted on their obligations under the loan agreement they had signed for the loan advance. Eventually, North South sold, by mortgagee sale, two properties at Pauanui owned by the Trust over which it held mortgage securities. After realisation of the mortgage securities, there was a significant shortfall, which North South now seeks to recover from Mr Brown in his capacity as guarantor.
[3] An officer of North South has verified, in the usual way, the allegations in the statement of claim and deposed to the belief that Mr Brown has no defence to the claim. For his part, Mr Brown accepts that he gave the guarantee and is liable on the face of it for the sums claimed. However he opposes summary judgment and contends that he has an arguable defence against North South based on a breach of s
176 of the Property Law Act 2007 and that it is worthy of trial. In these circumstances it is for Mr Brown to raise a tenable basis for the contention that he has an arguable defence, albeit that North South retains the overall onus of showing he has no defence.
[4] The documents Mr Brown filed for the purpose of demonstrating that the defence is arguable are more than a little deficient, explained possibly by his being self-represented. There is for instance no formal notice of opposition setting out the grounds of opposition. Nevertheless, counsel for North South recognised fairly that
it is clear enough from the memorandum and other documents Mr Brown filed that
he has raised breach of s176, and it was agreed the hearing should precede on that
basis. Counsel for North South also advised at the hearing that his client takes no issue with the form of the opposition documents.
[5] Mr Brown’s discernible ground of opposition under s 176 is that North South did not take reasonable steps to achieve the best price for one of the two security properties. This is in turn based on three allegations Mr Brown confirmed at the hearing. All relate to the house property which is the larger of the two security properties. They are:
a) The property was sold for just over $1.5 million which seems to equate to the value of the land alone, yet the house on the property must have had a value. Although the house suffered weather tightness problems it was not a leaky home at the time of the mortgagee sale. Mr Brown spent his last dollars fixing the bathroom and waterproofing the roof.
b) Mr Brown’s real estate agent, Mr Braithwaite of Ray White Real
Estate, had a genuine buyer who would have purchased the property
in November 2006 at $2.5 million subject only to valuation. However the sale was lost as a result of North South’s lack of cooperation;
c) Mr Braithwaite also had a genuine buyer who bid at the auction held for the purpose of the mortgagee sale, but again, because of North South’s lack of cooperation, a sale at a higher price than that ultimately realised was lost.
[6] Mr Brown raised other grounds in his opposition documents, but withdrew them. He also did not pursue general criticisms made at the hearing about an alleged failure on North South’s part to appoint the most competent agent and the agent’s failure to undertake adequate advertising for the purpose of attracting potential buyers in the market.
[7] For completeness I should note two other matters. First, that North South’s claim in the statement of claim for penalty interest on the judgment sum to the date
of payment was expressly abandoned at the first hearing. The concession was appropriate in view of the Court of Appeal’s decision in Nottingham v Registered Securities Ltd 12 PRNZ 625 at 633.
[8] Secondly, during the course of the hearing I considered the possibility that there may be evidence of a sale offer at $2.5 million, unconditional save only as to valuation, and I directed that the hearing be adjourned on a part heard basis for the filing of further evidence and further hearing. The further evidence was to be provided by both sides, by North South as to valuations it held and agreed should be produced, and by Mr Brown as to any agreements for sale and purchase relied on to support his claim or indeed that might show any other offers he or Mr Braithwaite had secured.
Section 176 and issues raised for determination
[9] As the defence relies on s 176, I set out next its terms and the related issues raised for determination. Section 176 states:
176 Duty of mortgagee exercising power of sale (1)
A mortgagee who exercises a power to sell mortgaged
property,
including exercise of the power through the Registrar under section
187, or through a court under section 200, owes a duty of reasonable care to the following persons to obtain the best price reasonably obtainable as at the time of sale:
(a) the current mortgagor: (b) any former mortgagor: (c) any covenantor:
(d) any mortgagee under a subsequent mortgage:
(e) any holder of any other subsequent encumbrance.
(2)A mortgagee who exercises a power to sell mortgaged property may not become the purchaser of the mortgaged property except in accordance with section 196 or an order of a court made under section 200.
[Emphasis added]
[10] There is no suggestion of any breach of s 176(2). The alleged breach is of s
176(1), the broad issue being whether Mr Brown is able to adduce material that
supports the conclusion that North South has not satisfied the Court that there is no defence to the claim. More specifically, the issues are whether Mr Brown has raised
an evidential foundation sufficient to point to the real possibility or inference that there was a breach of s 176 by reason of one or other of the three factors he relies on that could avail him of a defence and if so, whether the Trust has suffered a resulting loss.
Background
Loan agreement and guarantee
[11] North South advanced a loan of $2 million to the trustees of the Motu Grande Trust on 25 January 2006, pursuant to a loan agreement in which the trustees, as borrower, granted a mortgage over trust properties on a canal at 148 and 150 Motu Grande at Pauanui. The agreement also required the provision of a guarantee.
[12] On the same day that the trustees signed the loan agreement Mr Brown signed the necessary guarantee in favour of North South, assuming responsibility as guarantor of the trustees’ performance under the loan agreement and mortgage.
[13] Hesketh Henry acted as the legal advisers to the trustees and to Mr Brown in
his capacity as guarantor. Mr Brown advised at the hearing that he took no issue with the adequacy of the legal advice given either to the trustees or to himself as guarantor in respect of the loan advance and guarantee.
Default and mortgagee sale
[14] The trustees found they were unable to meet their obligations under the loan agreement and the loan fell into arrears on 25 October 2006, being the date the loan came due for repayment. North South commenced enforcement proceedings and from 25 October 2006 penalty interest began to accrue.
[15] On 12 December 2006 North South issued a default notice to the trustees under s 92 of the Property Law Act 1952. It also served a default notice on Mr Brown in accordance with s 92(6).
[16] The trustees and Mr Brown failed to comply with the notices and North South ultimately sold both of the security properties by or following auction pursuant to its power of mortgagee sale. For marketing and sale purposes North South granted a sole agency to Harcourts Coromandel Peninsular Real Estate Ltd, a member of the Real Estate Institute of New Zealand.
[17] The first property, located at 148 Motu Grande, comprised land and a house built by Mr Brown. Harcourts sold the property at auction on 11 April 2007 for $1,526,000. Settlement occurred on 11 May 2007.
[18] The second property, located at 150 Motu Grande, was a vacant section of
589m2 on a separate title. Harcourts sold the section at auction on 9 April 2007 for
$725,000. Settlement took place on 11 May 2007.
[19] The total sale proceeds were not sufficient to clear the entire loan. There was
a total shortfall of $224,455.28 taking into account outstanding interest, the costs of sale, and cleaning costs. By 22 September 2007 the total shortfall had grown to $267,094.65 because of unpaid monthly interest.
[20] North South’s evidence on the method of sale and pre-sale marketing was limited but as observed by Associate Judge Doogue in Westpac Banking Corporation v Chisholm HC AK CIV2006-404-3230 27 April 2007 at [16]:
The plaintiff is not obliged to anticipate that there might be a challenge to the reasonableness of the way in which it sold the … property.
[21] North South did however provide the valuations in its possession at the time
of sale, as directed.
Valuations
[22] One of the valuations was obtained by North South for the purpose of the mortgagee sales. North South instructed Townsend Cullen Associates, registered valuers of Whangamata, for the purpose. The valuation, dated 24 February 2007, was carried out approximately two months before the auctions and states it is a “Forced Sale” valuation undertaken as a guide to North South and on a curb-side
inspection only. The assessed combined value of the properties was $2.44 million, comprised of:
a) House property at $1.74 million being: (i) Land of (1000m2) - $1,320,000
(ii) Buildings and improvements- $420,000
b) Section (589m2) - $700,000.
[23] The valuation noted that under forced sale conditions properties tend to realise values considerably below their market value. It also referred to a builder’s report of 26 January 2007 prepared by a Mr Durston of Joyce Group and noted that building reports on the condition of the house indicated significant issues with the integrity of the house due to limited maintenance. In addition, it contained a cautionary recommendation that prospective purchasers or lenders instruct a suitably qualified professional to survey the property for defects before proceeding, as follows:
If you intend to purchase the property or lend money secured on it, we recommend that you instruct a suitably qualified professional to survey the property for defects before you proceed further.
[24] There were two prior valuations, also carried out by Townsend Cullen. Counsel for North South accepted that both valuations were in the hands of North South when the auctions took place.
[25] The first is dated 29 November 2005 and was commissioned by North South before it advanced the loan to the trustees. It states it was undertaken to assess the current market value of both properties for the purpose of securing a mortgage advance. The combined assessed value of the properties was $3.81 million made up of:
a) House property at $2.86 million being:
i) Land (1000m2) - $2 million
ii) Buildings and improvements - $860,160
b) Section (589m2) - $950,000.
[26] The valuation recommended a loan limit of 66% of total valuation or $2.515 million. The valuation recorded certain assumptions, including that the building was weathertight.
[27] The second valuation is dated 22 November 2006 and was undertaken just three months prior to the valuation that North South obtained for the purpose of the mortgagee sales. It states Townsend Cullen was requested by a trustee of the Motu Trust to provide an updated valuation and that the purpose of the valuation was to be a guide to the clients in setting a sale price for the property. It assessed the market value (taking into account repair costs and an allowance for risk) at $3.32 million, made up of:
a) House property:
i) Land - $2,000,000
ii) Buildings and improvements - $445,000
b) Section - $875,000.
[28] The valuation includes a number of comments by way of limitation. It indicates that the valuers did not undertake a re-inspection but had been furnished with a report dated November 2006 prepared by Joyce Group, described as an independent quality assurance company, and that the valuers had the benefit of an extended telephone discussion with the author of the report, Mr Durston, about the integrity of the building.
[29] The valuation includes the same caution as to survey as the later 2007
valuation. In addition, it states with respect to the Joyce Group report:
The Joyce Group report outlines a number of faults evident on inspection of the dwelling relating mainly to water leaks. They outline specific measures necessary to further investigate potential problems and comment on the limited maintenance completed on the dwelling in recent years. Mr Durston’s report states the “interior and exterior throughout was in an un- kept state.”
Although the Joyce Group report outlines the damage evident, they do not provide an estimated cost to rectify the problems. In discussion with Mr Durston he estimated the cost of rectifying evident problems would be in the order of $90 -120,000, however as no invasive inspection was completed he estimated the cost could balloon out to in excess of $200,000.
... We consider the Joyce Group report and Mr Durston’s estimates have a significant impact on the Current Market Value of the property.
The nature of the s 176 duty
[30] That brings me back to the three issues that have been raised for determination. As they are to be considered in terms of their relevance to the mortgagee’s duty of care, I start by discussing the nature of that duty. For that purpose I adopt the summary of general propositions extracted by Associate Judge Faire from the authorities and noted by him at [72] in Crown Money Corporation Ltd
v A Pink-Martin and Anor CIV2008-404-297 5 September 2008.
[31] His Honour noted:
(a) Section 176 of the Property Law Act 2007 and its predecessor
s 103A of the Property Law Act 1952, codify the duty which, under the general law, a mortgagee exercising a power of sale would be taken to owe to the persons mentioned in s 176 of the Property Law Act 2007: Apple Fields v Damesh Holdings Ltd at 728 (PC). I have already mentioned that this now has been extended to cover guarantors.
(b)The duty of care is concerned with obtaining the best price reasonably obtainable as at the time of sale: Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd at [70]. It is a duty
to take reasonable care. It does not necessarily follow that the best price reasonably obtainable will be achieved.
(c) The duty has to be measured at the time of the sale: Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd at [75]. The duty arises at the time the decision to sell is made: Tse Kwong Lam v Wong Chit Sen and Others at [77]. There is thus a need to analyse the steps taken once the decision to sell is made, up to the time of sale.
(d) The duty of care does not qualify the mortgagee’s right to decide if and when to sell: Agio Trustees Co Ltd v Harts Contributory
Mortgages Nominee Co Ltd at [70]; Downsview Nominees Ltd v
First City Corporation Ltd [1993] 1 NZLR 513.
(e)When deciding for the purposes of s 176 whether reasonable steps have been taken by a mortgagee to obtain the best price, the steps taken by the mortgagee and those acting with it must be looked at in the round. The issue is a commercial one to be viewed in practical commercial terms: Apple Fields v Damesh Holdings Ltd at 729.
(f)Assistance in determining the issue mentioned in (e) above can be found by considering the steps endorsed by Fisher J in Harts Contributory Mortgages Nominee Co Ltd v Bryers HC AK CP 403im00 19 December 2001 at [43] where the following matters were mentioned:
[c] Where the security is substantial, or specialised property is involved,
it will usually be necessary for the mortgagee to obtain and act upon specialised advice as to the method of sale: Tse Kwong Lam v Wong
Chit Sen [1983] 3 All ER 54 (PC). Appointing a competent agent to
sell does not discharge the mortgagee’s duties, but since its duty is ultimately only one of reasonable care, putting the matter in the hands of a competent agent will usually go a long way towards discharging the mortgagee’s duties.
[d]In the normal course the proposed sale will need to be advertised with an adequate description of the property’s attributes and, within reason, widely enough to attract all possible purchasers. In some cases this will need to extend to both general and specialist publications: See Kwong supra at p 61; Ansell v NZI Finance Ltd (unreported, Wellington Registry, A434/83, Quilliam J, 14 May 1984).
[e]There is no obligation to postpone the sale in the hope of a better price later, or to break up the assets and sell in a piecemeal manner if this can only be carried out over a substantial period or at a risk of loss: Kwong supra at p 59.
[f]When assets are sold by tender or auction, a reasonable period must usually be allowed for purchasers to inspect the property and arrange finance before submitting bids: see Fairer Fishing Co Ltd v Broadlands Finance Ltd (unreported, Timaru Registry, A35/77,
17 August 1984); discussed by Ross, supra, along with Ansell v NZI Finance Ltd.
(g) For the breach of duty to be actionable there must be proof of damage: Apple Fields Ltd v Damesh Holdings Limited at 729 PC.
[32] North South’s evidence about the steps taken in fulfilment of its duty as mortgagee is that it put the sale in the hands of a competent real estate agent who advertised the property in the normal way. Although this evidence is limited, applying the court’s reasoning in Westpac Corporation that there is no obligation on
a plaintiff to anticipate a challenge to the reasonableness of the way in which it sold
the mortgaged properties, there is no reason to surmise that North South’s agent did not carry out advertising that was reasonable for the purpose of attracting potential buyers to the auction, or that it did not allow a reasonable opportunity for potential buyers to inspect the property. Conversely it can be assumed that the need to analyse the steps taken in pursuit of the s 176 duty referred to in Tse Kwon Lam will arise only if Mr Brown has produced sufficient material to raise a real question about the adequacy of the steps North South took once it made its decision to sell.
[33] It is against this background that the three issues raised by Mr Brown need to
be considered.
Discussion - Issues
Is it arguable that the house property was sold at a serious undervalue?
[34] Mr Brown’s primary argument appeared to be that the sale of the house property was concluded at a serious undervalue, relative especially to the valuation undertaken in 2006, but also having regard to the disparity between the sale price that was actually realised and the assessed value in the 2007 valuation. He also submitted that it can be inferred, especially given the failure to achieve even the forced sale valuation, that nothing was paid for the house. He said even allowing for perceived problems with weather tightness, this outcome is evidenced by comparing the sum realised for the vacant section with the sum realised for the house property.
He submitted it is reasonable to expect the house should have realised something.
[35] I agree with Mr Brown that the sum realised for the house property was indeed a lot less than the values assessed by Townsend and Cullen in its 2006 valuation, and somewhat less than the assessed value in Townsend Cullen’s later assessed forced sale values. Relative to the November 2006 valuation the sum realised for the house property fell short by just over $900,000. Relative to the February 2007 valuation the sum realised fell short by just over $200,000.
[36] However, while the best price reasonably obtainable at the time of sale normally equates to the current market value of the property: Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 (PC); Harris & Ors v ANZ Banking Croup (NZ) Ltd CA165-01 10 June 2002 at [16], in some situations, a “forced sale
value” may be the best price reasonably obtainable. As Doogue J also observed in Westpac Banking Corporation at [19] the degree to which a property will be marked down because of a forced sale is a matter of fact in each case. His Honour also said:
… failure to achieve the assessed market value of the property on a mortgagee sale does not necessarily give rise to an inference that the mortgagee has breached his/her duty to take reasonable care to obtain the best price reasonably obtainable as at the date of sale.
[37] Viewed in this light, Mr Brown’s argument seems to be that there must be an inference that there has been a breach of the duty to take reasonable care because of the extent of the disparity between the sum realised and Townsend and Cullen’s valuations and because of the sale price of the vacant section.
[38] In dealing with the question whether the disparity was of such a size that it gives rise to an inference that the seller breached the duty under s 176, I put aside the 2005 valuation. Mr Brown did not rely on it, and in any event it pre-dates the mortgagee sales by approximately 18 months. There is no evidence before me to show it has any probative value in determining value as at the date of the sale. That leaves the two more recent valuations. Counsel for North South acknowledged that the sum realised by mortgagee sale for the house property fell short of the assessed value in both valuations and possibly that the disparity does indicate the house sold for very little. He argued however that the outcome was not surprising and that it does not raise an inference that there may have been a breach of duty because:
a) The sale was a forced sale and it also involved a leaky building; and
b)The 2006 valuation, which Mr Brown himself commissioned expressed very real reservations about the leaking problems referred
to in the Joyce Group report and noted the possibility of a significant impact on the current market value of the property.
[39] As to any inference to be taken from the sum realised for the section, counsel
for North South submitted that the assessed land values at forced sale for both the house site and the vacant section were comparable and approximately 76% of the previous valuation. The sum realised for the section exceeded Townsend and
Cullen’s assessment of the forced sale value by a modest amount and shows that the valuer made a fair assessment of the forced sale value of the land at both properties.
[40] Counsel went on to submit that in these circumstances, if there is any inference it is that the leaky house did depress what was able to be realised. And in the absence of tenable evidence that there was some significant deficiency in the sale process, there is no reason to suppose that the sum realised was other than what the market was prepared to pay for the house property with its leaky home.
[41] I accept counsel’s argument. There is no evidence before the Court to support Mr Brown’s suggestions that the forced sale suffered deficiencies that could indicate that the shortfall between the sum realised and the two relevant valuations, was such that a possible breach of duty is to be inferred. While Mr Brown may at first glance appear to have a point that when he argues breach of duty arises because the house property seems to have been sold at less than market value and at less than the assessed forced sale value, the argument must fail for lack of any acceptable evidence that provides confirmation of the possibility that North South did not take reasonable steps to obtain the best price as at the time of the sale. It can only be assumed that potential buyers were not prepared to pay more for a property with a house said to suffer from leaky building syndrome.
[42] Mr Brown also raised in submission that he had in fact done remedial work
on the house and that North South should have taken care to let purchasers know that weather tightness problems had been remedied. These submissions were unsubstantiated by the evidence. There was nothing in the evidence to indicate he had restored the building to a state where leaking was repaired fully or at all.
[43] There was as I have noted no complaint in the evidence about the way in which North South went about the mortgagee sale process insofar as its appointment
of Harcourts was concerned or with respect to the marketing that was undertaken. The only complaints Mr Brown pursued with respect to the mortgagee sale process related to North South’s dealings with potential purchasers that Mr Brown’s agent introduced to North South and Harcourts in November 2006 and later, at the time of the auction. I turn next to the two complaints.
Did North South cause a genuine purchaser or purchasers to withdraw in November
2006 or at the time of the auction? If so, was a sale at a higher value lost as a result?
[44] Mr Brown submitted with respect to his first complaint that he lost a genuine purchaser he introduced to the property in November 2006, because North South and
its agent refused to deal with his buyer. He contended the buyer was prepared to pay
$2.5 million for the house property subject only to valuation and signed an agreement for sale and purchase on that basis. He says that he had commissioned a valuation in November 2006 but was unable to show it to the buyer because he could not afford to uplift the valuation from the valuer. He claims when the valuation found its way into North South’s hands North South refused to show it to Mr Braithwaite who wanted to show it to the buyer, and that North South also refused to negotiate with Mr Braithwaite. Mr Brown maintains that had North South shown Mr Braithwaite the valuation, the sale would have been concluded.
[45] Mr Brown submitted with respect to his second complaint that not only did North South’s auctioneer refuse at the auction to take the bids of a genuine buyer introduced by Mr Braithwaite, but that North South refused to negotitate with Mr Braithwaite after the property was passed in. He said the result was that a sale at or close to market value was lost.
[46] Mr Brown produced in support an affidavit sworn by Mr Braithwaite. The affidavit is short on specifics about an agreement and falls well short of supporting the contention that there was an offer from a genuine buyer in November 2006 that was unconditional save as to valuation. Mr Braithwaite deposes only that when he was retained by Mr Brown to market the properties, he obtained several agreements many months prior to the properties being sold at mortgagee sale, but was hampered during the negotiation process by his inability to obtain valuations of the properties. He says he understood valuations had been obtained by Mr Brown but were in the possession of North South, and that North South declined to release the valuations or to allow the valuers to readdress the valuations to any interested parties that he introduced to the properties. He asserted, without giving any details as to the buyer, the price or the terms, that:
This resulted in the first offer I had on the properties being reduced by
$500,000 and then subsequently falling over.
[47] The affidavit also does not say that North South’s auctioneer refused to take bids from Mr Braithwaite or Mr Braithwaite’s buyer at auction. Indeed, Mr Braithwaite deposes, that he attended and bid at the auction when the property was passed in. Nor does the affidavit lend support for Mr Brown’s contention that North South’s alleged refusal to negotiate with Mr Braithwaite after the property was passed in caused the loss of a genuine sale. Mr Brown deposes he negotiated with the agents on site and made a written offer higher than the final bid at auction, and while he says that North South’s representative made himself unavailable to negotiate, he says nothing that supports the conclusion that the offer would have produced a binding deal. His evidence about a written offer is so devoid of any detail about the buyer and the key elements of the offer or any conditions it might have been subject to, that it does not go beyond mere assertion.
[48] In his subsequent affidavit, Mr Braithwaite did not provide any further clarification. He deposed that he secured a contract for both properties within a few weeks and that he obtained through Mr Brown’s accountant a copy of an old valuation of the property for, he believed, $3.55 million. Again, the evidence was devoid of details about the basis of the alleged contract. He does not say what the essential terms of the contract were and whether or not it was conditional only as to valuation. Mr Braithwaite claimed the purchaser requested the valuation to be readdressed to him and his finance institution, and that after being directed to North South he asked that the valuation be released. He contends that North South was uncooperative and unwilling to assist Mr Brown with the result that he was unable to obtain a readdressed valuation and the agreement came to an end. He says he has been unable to locate a copy of the agreement for sale and purchase and had not appreciated the need to keep a copy.
[49] Mr Braithwaite also deposed that he had two other purchasers who expressed
a very keen interest in the two properties. He says they were interested at a price that was well over a $1 million more than the price eventually achieved by mortgagee sale and he was surprised that North South would do nothing to help Mr Brown. He ended up losing confidence that North South would accept an agreement even if it
would have fully repaid the North South monies. He claims that at the eventual auction he was surprised at how low the final bid was. He said that he had wanted to negotiate a higher price but was told bluntly his offer was not going to be looked at
or accepted. He said that he no longer held a copy of the offer he made at auction.
[50] A key difficulty for Mr Brown is that Mr Braithwaite’s evidence is so vague that in its totality it amounts to nothing more than unsubstantiated assertion. It does not advance Mr Brown’s contention that he had a genuine offer in November 2006 that was unconditional save only as to valuation and for about $1 million more than the sum realised at mortgagee sale for the two properties. I extended considerable latitude to Mr Brown, given that he was unrepresented and when I adjourned the first hearing to allow for further evidence, I considered the possibility that there may be unearthed evidence of such a sale. However no agreement for sale and purchase was ever produced. Even allowing for Mr Braithwaite’s explanation that the agreement was probably discarded after it fell through when North South refused to provide the valuation requested, no purchaser was ever named or key terms identified. Mr Brown had ample opportunity to provide details of the agreement with any evidence relied on to support a finding that the agreement was most likely to proceed. Yet no acceptable evidence was given that provides any confirmation of an agreement that would likely have proceeded, let alone at the sum claimed. Other assertions about buyers are similarly so devoid of detail that they must be put to one side.
[51] Even assuming there was a buyer who required nothing more than a copy of the November 2006 valuation before making a binding offer for the house property
at $2.5 million, the valuation gives no reason for confidence that a sale would have been secured at $2.5 million or any sum approximating that amount had the valuation indeed been provided. This is because the valuation is couched in terms that could well deter a potential buyer at that kind of sum. It makes clear the assessed value assumes the building is sound but it goes on to caution that the building is in fact a leaky building. Further, the cautionary recommendation urges the need for further investigation. These factors belie Mr Brown’s and Mr Braithwaite’s confidence.
[52] As against Mr Braithwaite’s vague evidence is the undisputed evidence of Ms Collins, North South’s loans registrar, that no unconditional agreement for sale and purchase was ever presented by Ray White Real Estate to North South. Ms Collins explains that North South understood that Mr Brown’s previous attempts to market the property had not produced any offers as North South had never been presented with copies or details of any such offers. North South pointed out that it wrote to the solicitor who was a trustee of the trust on 13 February 2007 in the following terms:
Thank you for forwarding the recently completed/updated building report from Joyce Group Ltd.
We note however that despite several requests your client has still not supplied a copy of the supposed sale and purchase agreement relating to sale of the security property. We are disappointed that despite allowing Mr Brown yet another chance and several extensions of time this has again been to no avail.
We are now proceeding with a mortgagee sale as we are entitled to do under the terms of the now expired Property Law Act notice. Please advise your client that within the next few days he will be contacted by our chosen Real Estate Agent to secure keys for open homes, placement of advertising signs etc as soon as possible.
We will be selling the property on a vacant possession basis and ideally we would prefer Mr Brown to vacate the property as soon as possible so that both we and our agent/s have free access for any prospective buyers and to undertake any property maintenance, cleaning etc deemed necessary. Naturally all costs associated with this in the sale process will be added to the client’s loan with ourselves.
[Emphasis added]
[53] Ms Collins also noted that:
Substantial remedial works were required on the house property at 148, as it was a “leaky home”. Matters at this stage became very strained between Brown and NSFL, but NSFL as previously deposed, commenced mortgagee sale proceedings.
[54] When all is said and done, Mr Brown’s case in opposition essentially comes down to a complaint that the house property was sold at a sum that does not reflect the first two valuations. That is not sufficient to lead me to conclude that the defendant is not able to adduce material that lays a foundation for the claim that North South has failed to show that there is no defence to the claim.
[55] The net result is that I am unable to accept there is adequate evidence of a sale that arguably would have proceeded and realised a significantly greater sum than that realised at mortgagee sale. In the absence of such evidence the possibility of a breach of s 176 does not arise.
[56] In the circumstances I accept that there is no tenable defence based on failure
by North South to fulfil its duty as mortgagee to take reasonable steps to obtain the best price reasonably obtainable as at the time of sale.
Result
[57] For the reasons I have discussed I allow North South’s claim for summary judgment, and for that purpose I order:
(a)Judgment for the sum of $267,094.65, being the sum owing under the loan agreement and the guarantee as at 22 September 2007 after setting of the net proceeds of the two mortgagee sales;
(b)Interest on the sum of $267,094.65 at the rate of $160.99 per day until the date of this judgment.
[58] With respect to costs and disbursements on a solicitor/client basis the plaintiff
is to file an affidavit plus a supporting memorandum, setting out the costs it has incurred and claims as reasonable actual costs together with the terms of the loan agreement or guarantee that allow those costs.
Associate Judge Sargisson
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