Palmerston North City Council v Birch

[2012] NZHC 2979

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2012-454-670 [2012] NZHC 2979

BETWEEN  PALMERSTON NORTH CITY COUNCIL Plaintiff

ANDVANYA BIRCH First Defendant

ANDRICHARD BERGHUIS Second Defendant

ANDAPRIL SUN ON CUBA LIMITED Third Defendant

ANDVANYA BIRCH Fourth Defendant

Hearing:         8 November 2012

(Heard at Palmerston North)

Counsel:         P.J. Reardon & A. Kirk - Counsel for Plaintiffs

V. Birch - First and Fourth Defendant
R. Berghuis - Second Defendant
E. M. Lambert - McKenzie friend for the Defendants

Judgment:      13 November 2012

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

Under r 11.5 of the High Court Rules I direct the Registrar to deliver this judgment at 3.30 pm on 13 November 2012.

Solicitors:           Cooper Rapley, Solicitors, PO Box 1945, Palmerston North

PALMERSTON NORTH CITY COUNCIL V V BIRCH & ORS HC PMN CIV-2012-454-670 [13 November

2012]

Introduction

[1]      The plaintiff in this proceeding, Palmerston North City Council, applies for summary judgment seeking an order for possession of a property at 107 Cuba Street, Palmerston North being Certificate of Title WNC2/1017 (Wellington Land Registration District) (the property) from the defendants. The defendants oppose this application and in turn seek an order to strike out the plaintiff’s claim against them.

Preliminary Matters

[2]      At the outset of the hearing of this matter on 8 November 2012, Ms Birch and Mr Berghuis who appeared for the defendants raised a preliminary matter whereby they sought an adjournment of this proceeding for reasons I outline below.   That adjournment application was declined.  In doing so, I indicated that my reasons for that decision would follow.  I now set out those reasons.

[3]      The plaintiff’s summary judgment application was set down for hearing at a date allocated in the presence of Ms Birch and Mr Berghuis when this matter was last called before me exactly one week ago on 31 October 2012.   The Minute I issued at the time stated that both the summary judgment application by the plaintiff and the strike-out application by the defendants were set down for hearing on 8

November 2012.

[4]      The defendants’ present complaint is that they only received submissions for this hearing from counsel for the plaintiff on 7 November 2012 and they claim it was too late for them to properly consider these before the hearing the next day.

[5]      These submissions as I understand it were in fact served at the address for service of the defendants on the morning of 7 November 2012.

[6]      The statement of claim in this case however states specifically that this is a claim under r 13 High Court Rules – this is despite the claim from the defendants that a principal complaint they have is that they did not know that this matter related to r 13 until they received the submissions yesterday.

[7]      In addition, it is clear here that the statement of claim from the defendants is a very detailed document containing eight full pages and as I see it the plaintiff’s submissions align more or less directly with that statement of claim.  The only new material provided to the defendants related to legal argument and the case law which was to be relied upon.

[8]      Any suggestion that the defendants did not know that this hearing today was to seek an order by way of summary judgment for possession of the land in question is entirely surprising.

[9]      For all these reasons I am satisfied first, that the defendants have not in any way been taken by surprise here, secondly, that they have had ample opportunity to prepare for the present summary judgment and strike-out hearing and thirdly, that no prejudice  exists  here  and  their  late  adjournment  request  must  be  declined.    A direction to that effect was made on 8 November 2012.

[10]     As I have noted above, there are two applications before the Court:

(a)      An application by the plaintiff seeking an order for possession of the property by way of summary judgment pursuant to r 13 High Court Rules.

(b)An application by the defendants which is described as an application to strike-out the plaintiff’s summary judgment application.

[11]     Shortly, I will turn to address the plaintiff’s summary judgment application and the defendants’ strike-out application.  But first an additional preliminary matter arises.  This relates to an event which occurred on 6 November 2012 just before the hearing of these applications when Ms Birch filed a document headed “An Appearance by Vanya Birch pursuant to High Court Rule 5.49 objecting to jurisdiction to the Court to hear and determine the matter.”

[12]     This   objection   to   jurisdiction   application   in   my   view   was   entirely misconceived.  To her credit Ms Birch, after hearing submissions from counsel for

the plaintiff, confirmed before me that this application was withdrawn.  She said that the defendants no longer raised any objection to the jurisdiction of this Court to hear and determine these matters and she acknowledged that r 5.49 High Court Rules did not apply in this case.   Accordingly, that objection to jurisdiction application is dismissed.

Background Facts

[13]     Before considering the applications before the Court, a brief summary of the background facts in this matter is useful.

[14]     The  property  in  question  in  this  case  is  situated  at  107  Cuba  Street, Palmerston North and is essentially a commercial property from which for some time a day spa business has been operated.  The property also includes a residential component at 107A and 107B Cuba Street, Palmerston North but, as will appear later in this judgment, these residential “flats” are vacant now, having been the subject of earlier orders made in favour of the plaintiff by the Tenancy Tribunal.

[15]     On 2 May 2012 the plaintiff purchased the property at mortgagee sale and on

14 June 2012 it became registered on the title as proprietor by way of a transfer in exercise of the power of sale under the mortgage over the property which was held by Mortgage Holding Trust Company Limited (Mortgage Holding).   On 23 May

2012 it seems the plaintiff approached the first defendant Ms Birch to advise her of its purchase of the property and to say that she could lease the property from the plaintiff, but it is clear that nothing came of this.

[16]     The second defendant Mr Richard Burgess was the registered proprietor of the property at the time of the mortgagee sale and the defaulting mortgagor.  When he acquired the property in 2009 he had arranged a mortgage advance of about

$550,000.00 from Mortgage Holding but thereafter he fell into default under that mortgage. The other defendants are related parties to the mortgagor.

[17]     The plaintiffs contend that prior to and soon after (particularly on 25 May

2012) the time of the mortgagee sale, the defendants entered into a number of “sham

transactions” relating to the property, presumably in an attempt to frustrate Mortgage Holding’s mortgagee sale and later possession issues.    Pursuant to these arrangements, the defendants maintain that they have an equitable lease of the property which entitles them to possession.   They endeavoured to argue that the plaintiff had knowledge of the purported lease prior to taking title to the property, but this is a matter which is strongly disputed by the plaintiff.   It seems also to be entirely unsupported by the evidence before the Court.

[18]     The defendants’ purported interest according to the plaintiff was defeated by Mortgage Holding’s power of sale under its mortgage to pass title to the plaintiff free of any estate or interest except those consented to or in priority of the mortgagee.

[19]     It appears to be common ground that the plaintiff is not the landlord of the defendants here.  There is also no real dispute that neither the plaintiff nor Mortgage Holding, the mortgagee, consented to any of the defendants’ purported leases.  And prior to the auction the mortgagee advised the plaintiff that it was not aware of any leases.   Nor is it suggested in any way that these leases were prior in time to the interest of Mortgage Holding as mortgagee in the property.

[20]     As I have noted above, it had been suggested at some point that there were two residential tenancies at the property being effectively 107A and 107B Cuba Street, Palmerston North.  These tenancies were clearly terminated by the Tenancy Tribunal in orders made on 11 September 2012 when possession of the residential part of the property was granted to the plaintiff.   In any event and perhaps rather curiously, the defendants now appear to plead that they have a “commercial tenancy” of the whole of the property including 107, 107A and 107B Cuba Street, Palmerston North.

[21]     Finally, the plaintiff contends in this case that as it has an interest in the property as registered proprietor, it is entitled to seek an order for possession as the defendants are clearly unlawful occupiers under r 13.1 High Court Rules.  It says the defendants are occupying the property in a manner entirely inconsistent with the plaintiff’s rights to the land and, despite numerous requests, have refused to vacate. The plaintiff accordingly seeks an order for possession of the property.

Summary Judgment Application

[22]     I turn now to the substance of the summary judgment application before the

Court.

[23]     Rule  12.2(1)  of  the  High  Court  Rules  deals  with  summary  judgment applications and provides:

12.2     Judgment when there is no defence or when no cause of action can succeed

(1)       The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[24]     The principles of summary judgment have been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd: [2008] NZCA 187, [2010] NZAR 307 at [26]:

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[25]     Therefore, the plaintiff ’s application for summary judgment can only succeed if I am satisfied that the defendants have no arguable defence to the claim for an order for possession of the property.

[26]     The starting point for the Court on the present summary judgment application and in Part 13 High Court Rules proceedings generally, is that a registered proprietor is entitled to exclude all other persons from their land – Kelly v Green HC, Tauranga,

CIV-2009-470-426, 27 January 2010 at [4]. The plaintiff here as registered proprietor of the property has a prima facie right to the possession order it seeks.

[27]     And often in cases such as Bilbie Dymock Corp v Patel (1987) 1 PRNZ

84(CA) the Court takes a robust approach where the plaintiff has full legal title to the property and the defendants, accordingly, have no interest in the property.   In my view, the present case is also one which requires that a robust approach is adopted.

[28]     Turning now to the defences advanced by the defendants here, essentially before me the major defence which both Ms Birch and Mr Berghuis endeavoured to argue relied on r 13.1 High Court Rules.  Part 13 of the High Court Rules relates to summary proceedings for recovery of land and this r 13.1 states that in this part “unlawful occupier” means a person who:  “(a) occupies or continues to occupy land of the plaintiff without the licence or consent of the plaintiff or the plaintiff’s predecessor in title; and (b)   is not a tenant or sub-tenant holding over after the termination of a tenancy or sub-tenancy.”     (emphasis added)

[29]     In this case, the defendants contend that they are not “unlawful occupiers” of the property because they have the consent of the “plaintiff’s predecessor in title” to remain pursuant to what they say is a proper lease.  As to this, they claim first, that the plaintiff’s predecessor in title is a Ms. Elizabeth Lambert (the defendants’ McKenzie Friend for this hearing) who acquired the property for $1.00 in December

2011  but  was  registered  on  the  title  only on  28  May  2012  (subsequent  to  the mortgagee sale) and secondly, that she consented to a lease of the property to the fourth defendant Trust and a sub-lease to the third defendant.

[30]     Addressing this  aspect,  Mr Reardon for the plaintiff made the following points which in my view are compelling:

(a)      The evidence before the Court indicates quite clearly that Mortgage Holding, the mortgagee from whom the plaintiff purchased the property at mortgagee sale, at no time consented to any of the suggested leases of the premises.

(b)Any suggestion that there may have been knowledge of a tenancy and therefore an informal consent given by the mortgagee is not sufficient here.  Actual consent is required.

(c)      In addition, there is no suggestion whatever that the plaintiff itself consented to any of the suggested leases.

(d)That said, it is also abundantly clear that the plaintiff’s predecessor in title to the property must be Mortgage Holding, the mortgagee from whom the plaintiff purchased at mortgagee sale.

(e)      Jowitt’s Dictionary of English law, Third Edition (2010) at p 1767 notes, in reference to the definition of “predecessor” at sub-paragraph [4]:

(4)        A predecessor in title is a person through whom another traces his title to property.

In addition the Concise Oxford Dictionary under the definition of “title” notes that this is a “right to ownership of property with or without possession”.

(f)       The plaintiff’s title to the property and right to ownership was derived solely from the mortgagee and not from Ms Elizabeth Lambert or anyone else.  It traces its title to the property only through Mortgage Holding as mortgagee.  The provisions of r 13.1 therefore in my view do not preclude the present application.

(g)      Further, as a matter of principle, if the defendants’ argument on r 13.1 did have some substance, then it would mean that disgruntled mortgagors might have the ability to torpedo attempts by legitimate purchasers at mortgagee sales later to seek  and  obtain possession orders for the land they had properly acquired simply because a mortgagor claimed that it was not an “unlawful occupier” by unilaterally entering into a range of “bogus” transactions with friendly

third parties.  That cannot be the case, nor can that course of conduct be countenanced.

[31]     A second  defence  which  the  defendants  have  purported  to  advance  here endeavoured to make something of para 16.1 of the Particulars and Conditions of Sale for Mortgage Holding’s mortgagee sale by which the plaintiff acquired the property.

[32]     This clause 16.1 of the Particulars and Conditions states:

16.1     The property is sold (as between the vendor and the purchaser) subject to all existing tenancies or sub-tenancies or occupations (if any), including holding over by the mortgagor, or any person claiming an interest through the mortgagor, and the vendor shall not be required to give vacant possession of the property or any part thereof.

[33]     As I understand the defendants’ argument, it is that the plaintiff in accepting this clause 16.1 of the Particulars and Conditions of Sale has acknowledged that it buys the property subject to those existing tenancy and lease arrangements which the defendants claim give them the right of occupation.

[34]     This defence is quickly dealt with, however.

[35]     This clause 16.1 in my view clearly does not assist the defendants here.  It is part of an agreement between Mortgage Holding the vendor (mortgagee) and the plaintiff.  The purpose of the clause is to prevent the plaintiff taking action against the mortgagee in circumstances such as those that prevail here currently.  In Chen v Prasad HC, Auckland, CIV-2012-404-1637, 20 June 2012, a similar fact situation arose where the respondent purchased property at a mortgagee sale.  The applicant purported to have a tenancy over the property and continued in occupation.   The applicant sought leave to register a caveat over the respondent’s property and cited the (equivalent of) clause 16.1 of the agreement.   The Court applied s 105 Land Transfer Act 1952, and did not accept that clause assisted the applicant where the mortgagee had not consented to the tenancy.  There was no evidence of consent. The applicant was denied his caveat.  In the present case, it is also common ground that the mortgagee has not consented to any lease of the property.

[36]     To repeat, this clause 16.1 specifies quite clearly that the sale and purchase of the property is  not  necessarily with  vacant  possession  but  that  this  is  only “as between the vendor and the purchaser”.  It does not in any way affect the right of the plaintiff as purchaser at the mortgagee sale to take proper steps to gain possession of the property from unlawful occupiers.  Issues as to the plaintiff’s indefeasibility of title under s 62 Land Transfer Act 1952 clearly arise here.  In addition, s 119 Land Transfer Act 1952 dealing with leases provides:

119.      Lease not binding on mortgagee without consent

No lease of mortgaged or encumbered land shall  be binding upon the mortgagee except so far as the mortgagee has consented thereto.

As noted above, there has been no consent given to any lease by Mortgage Holding here.

[37]     In addition, s 105 Land Transfer Act states:

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 consent of the mortgagee is binding on him.

(emphasis added)

The purported leases here do not fall into either of those two highlighted categories.

[38]     In  addition,  Mr Reardon  for the  plaintiff before me referred  to  a  recent decision in Hart v ANZ National Bank [2012] NZHC 1704 where similar arguments to those which the defendants have endeavoured to advance here were made but these were entirely unsuccessful and were dismissed by this Court.

[39]     At this point, I remind myself that the plaintiff’s application before me is one for summary judgment, on which I need to be satisfied that the defendants have no real defence to the claim made against them.  To repeat in this case, the plaintiff is the registered proprietor of the property.  Except in the case of fraud, the estate of a registered proprietor is paramount to all unregistered estates or interests not notified

on the register – s 62 Land Transfer Act 1952.   The defendants have not pleaded fraud here nor do any of the facts in this case in my view give rise to any arguable case for fraud.

[40]     In addition it is clear from s 119 Land Transfer Act 1952 as noted above that no lease of mortgaged land is binding on the mortgagee unless the mortgagee has consented.   It is common ground that Mortgage Holding, the mortgagee did not consent to the defendants’ purported leases in question.

[41]     The plaintiff purchased the property at mortgagee sale under which, in terms of s 105 Land Transfer Act 1952, it acquired the property freed and discharged from any estate or interest, except an estate or interest created by an instrument which had priority over the mortgage or which by reason of the consent of the mortgagee was binding on it. As also noted above, neither situation applies here.

[42]     It is clear therefore in my view that the plaintiff has taken a transfer of the property free from any of the purported interests claimed by the defendants.  This is a similar situation to those which prevailed in Chen v Prasad and in Hart v ANZ National Bank.

[43]     I am satisfied that no arguable defence has been advanced by the defendants here.

[44]     That said, the plaintiff ’s summary judgment application before the Court

must succeed.

Terms of the Order

[45]     The next issue relates to the terms of the possession order to be made here. [46]     Mr Reardon for the plaintiff has suggested that 14 days should be allowed to

enable the existing business operating from the premises to be relocated and he seeks a possession order along these lines.  I agree that this is appropriate here.

[47]     Issues arise, however, over what might prove to be the condition of the premises at the conclusion of this 14 day period by which time the defendants will have vacated, particularly given matters which Mr Reardon says have arisen regarding alleged damage to the adjacent residential units when they were vacated.

[48]     To cover this aspect, a bond of $10,000.00 is sought by the plaintiff.   In addition, the plaintiff wishes to have its officers in the meantime undertake work to extract agreed fittings from the property which are to be made available to the defendants. This, it says, will minimise any possible future damage to the property.

[49]     I am mindful that the application before me is one for summary judgment and it essentially seeks only an order for possession of the property and certain other ancillary orders which in my view are not appropriate to be disposed of summarily. The additional orders noted in para [48] above as I see it are not appropriate to include in the summary judgment orders which are to follow.

[50]     Notwithstanding this, leave is to be reserved for any party to approach the Court further if required for additional directions regarding implementation of the possession order or otherwise.   I say this bearing in mind that Ms Birch for the defendants has assured the Court that the defendants are responsible people, they did not cause undue damage when vacating the residential units and if required they would grant possession of the remainder of the property in a proper and reasonable manner.

[51]     Lastly, the other prayers for relief in the plaintiff ’s statement of claim (other than prayer (a) seeking an order for possession) including prayer (d) seeking an account of rent or other payments received by the defendants for the property from 6

July 2012, in my view are also inappropriate for summary judgment here.  No real argument was advanced before me addressing these issues.  It may well be that in light of the amounts involved these matters should be the subject of proceedings in the Disputes Tribunal. That is a matter, however, for the parties.

Orders

[52]     The plaintiff’s summary judgment application succeeds and orders are now made under Part 13 High Court Rules:

(a)      Granting  the  plaintiff  possession  of  the  property  (which  for  the avoidance of doubt is to be 107 Cuba Street, 107A Cuba Street and

107B Cuba Street, Palmerston North) being all Certificate of Title

WN C2/1017 (Wellington Land Registration District); and

(b)Requiring  the  defendants  by  4.00  pm  on  27  November  2012  to vacate  in  a  proper  and  orderly  manner  and  to  deliver  up  to  the plaintiff vacant possession of the property.

[53]     As noted above, given that the application before me is one for summary judgment, there are to be no further orders made regarding the process for delivering up possession.

[54]     Nevertheless, leave is reserved for any party on 24 hours notice to approach the Court further if additional directions in this regard may be required.

[55]     As the plaintiff has been successful in this summary judgment application, I see no reason why they should not be entitled to an order for costs in the usual way. Costs are therefore awarded to the plaintiff against the defendants on this application on a category 2B basis together with disbursements as fixed by the Registrar.   I certify for one counsel only however.

Strike Out Application

[56]     Given  my  decision  above  granting  the  plaintiff’s  summary  judgment application, it follows of course that is  unnecessary to consider the defendants’ strike-out application which must be dismissed.  An order is now made dismissing the defendant’s strike-out application.

[57]     Again, costs on that application are awarded to the successful plaintiff against the defendants on a category 2B basis together with disbursements (if any) as fixed by the Registrar. Again I certify for one counsel only.

Next Step

[58]     As  the  plaintiff’s  summary  judgment  application  has  succeeded  only  in relation to the principal order for possession which it sought, this proceeding is adjourned as to the remaining relief sought by the plaintiff in its statement of claim. The Registrar is directed to set this matter down for call in the next available List at Palmerston North to address issues as to a way forward for these remaining matters.

‘Associate Judge D.I. Gendall’