Pepper New Zealand (Custodians) Ltd v Busch
[2013] NZHC 187
•13 February 2013
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2012-419-1230 [2013] NZHC 187
BETWEEN PEPPER NEW ZEALAND (CUSTODIANS) LIMITED Plaintiff
ANDPATRICIA ELAINE BUSCH First Defendant
ANDMEGAN BUSCH Second Defendant
Hearing: 11 February 2013
Counsel: KF Lee for plaintiff
Appearances: PE Busch and M Busch, defendants in person, assisted by Ms EM Lambert
Judgment: 13 February 2013
JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]
This judgment was delivered by me on 13 February 2013 at 3:15pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: McVeagh Fleming, PO Box 4099, Auckland 1140
And To: P Busch, 41 Karapiro Road, Karapiro
PEPPER NEW ZEALAND (CUSTODIANS) LIMITED V BUSCH HC HAM CIV-2012-419-1230 [13 February
2013]
CONTENTS
The application ......................................................................................................... 3
Representation of the defendants — McKenzie Friend ........................................... 3
Grounds in opposition .............................................................................................. 3
The court’s approach to a summary judgment application ...................................... 4
Background .............................................................................................................. 6
Analysis of the claim................................................................................................ 8
Decision...................................................................................................................11
Costs ........................................................................................................................11
The application
[1] The plaintiff applies for summary judgment against the defendants. It seeks the following orders:
(a) An order that it is entitled to possession of a property situated at
41 Karapiro Road, Cambridge, contained and described in Certificate of Title SA31D/336 (South Auckland Registry) more particularly described as a fee simple being Lot 2 on Deposited Plan 35819, being
25.1730 hectares more or less (“the property”); and
(b)That the first defendant pay the costs of this application on a solicitor/client basis, and that the second defendant pay costs based on Category 2 Band B of the High Court Rules.
Representation of the defendants — McKenzie Friend
[2] Ms EM Lambert has assisted the defendants with preparation of submissions in relation to this case. At the defendants’ request, I granted leave for Ms Lambert to be seated with the defendants at counsel’s table to give advice in the course of the hearing and then in two aspects, the opportunity to address questions that I raised.
Grounds in opposition
[3] The defendants advanced the following matters in opposition to the claim for possession, namely:
(a) Any right that the plaintiff had to possession passed on settlement of a sale and purchase agreement between the first defendant and Ms Lambert on 21 January 2012;
(b) The first and second defendants are tenants under a lease signed with
Ms Lambert;
(c) The plaintiff, as mortgagee, has no direct right against a tenant under the land transfer system; and
(d)It is not an appropriate case for the court to deal with the matter on a summary judgment application.
The court’s approach to a summary judgment application
[4] Part 12 of the High Court Rules deals with applications for summary judgment. Rule 12.16 provides that rr 12.1 to 12.15 apply with all necessary modifications to counterclaims.
[5] Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the Court that a 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. The obligations imposed by the rule have been examined by a number of authorities.
[6] The correct approach to an application for summary judgment by a plaintiff was recently summarised in Krukziener v Hanover Finance Ltd where the Court said:1
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 (CA) at 3. 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 (PC) at 341. 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).
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
[7] In Pemberton v Chappell the Court also commented on the position where a
defence is not evident on a plaintiff’s pleading and said:2
If a defence is not evident on the plaintiff’s pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff’s right to have his case proceed to judgment without tendentious delay and a defendant’s right to put forward a real defence.
[8] That position was further reinforced in Australian Guarantee Corporation
(New Zealand) Ltd v McBeth where the Court said:3
Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the plaintiff’s verification stands unchallenged and ought to be accepted unless it is patently wrong.
[9] Hypothetical possibilities in vague terms, unsupported by any positive assertion or corroborative documents will not frustrate the obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland.4
[10] In Middleditch v New Zealand Hotel Investments Ltd, the Court raised a caution and said:5
The courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories. That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.
[11] A court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan.6 However, the Court will not reject even dubious affidavit evidence, even if there is suspicion as to the good faith of the deponent, if
there is an essential core of complaint that supports a defence. In essence, the
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
3 Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 (CA) at 59.
4 SH Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.
5 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 395.
6 Eng Mee Yong v Letchumanan [1980] AC 331 (PC).
inquiry is whether or not the person’s assertion passes the threshold of credibility:
Pemberton v Chappell;7 Orrell v Midas Interior Design Group Ltd.8
[12] In Tilialo v Contractors Bonding Ltd it was observed:9
Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment. Views may well differ.
Background
[13] This proceeding relates to a property at 41 Karapiro Road, Cambridge consisting of some 25 hectares. It also contains the home occupied by the two defendants who are respectively mother and daughter.
[14] On or about 15 September 2006, GE Custodians, as lender, agreed to advance to the first defendant $676,027 pursuant to terms contained in a loan agreement of that date. The agreement included a term that, as security for the loan, the first defendant was to grant to GE Custodians a mortgage over the property.
[15] In accordance with the terms of the loan agreement, the first defendant granted the mortgage over the property. The mortgage contained the usual terms, including the following:
8. Enforcement
(b) Where the mortgagor makes default in payment of the moneys hereby secured or any part thereof or in the observance or performance of any other covenant expressed or implied in this mortgage, the mortgagee may:
…
(ii) sell the mortgaged property or any part of it.
10. Costs
(a) The mortgagor will pay to the mortgagee upon demand the
mortgagee’s solicitor’s costs (as between solicitor and client) for:
7 Pemberton v Chappell, above n 2.
8 Orrell v Midas Interior Design Group Ltd (1991) 4 PRNZ 608 (CA) at 613.
9 Tilialo v Contractors Bonding Ltd CA50/93, 15 April 1994 at 6.
(ii) legal services arising from or relating to any default under this mortgage or the enforcement or exercise or attempted enforcement or exercise of any of the mortgagee’s rights, remedies and powers under this mortgage (including the giving or attempted giving of any notice under the Property Law Act 1952 or any enactment in substitution for that Act, the inspection and valuation of the land and, if the mortgagee is a solicitor’s nominee company, the cost of compliance by the relevant solicitor with the Solicitor’s Nominee Company Rules 1998 or any similar rules in relation to the matters mentioned in this paragraph (ii)).
[16] The loan agreement and mortgage was assigned by GE Custodians to the plaintiff on or about 15 August 2011. Subsequently, a transfer of the mortgage to the plaintiff was registered against the title to the property.
[17] The first defendant says that, on 21 January 2012, she sold the property to Ms
KMLambert. Particulars of that agreement included the following: (a) A purchase price of $1;
(b) A reference under the heading Tenancies to a 99-year term lease; and
(c) A term as follows:
The vendor retains the Certificate of Title, no conveyance … the vendor and the purchaser agree that the purchaser will resell the possession of the land to the vendor for $1 (one dollar only) should the vendor require the purchaser to do so
… the purchaser will remove her caveat at that time.
[18] No consent was obtained to this transaction.
[19] On 25 April 2012, the first defendant, who had obtained a lease from Ms Lambert, entered into a sublease for 95 years to her daughter, the second defendant.
[20] The first defendant defaulted under the mortgage. She failed to pay the sum of $20,409.48 being the principal and interest instalment due for the period 20 March
2012 to 20 June 2012. On 25 June 2012, the plaintiffs arranged service of a Property
Law Act notice on the first defendant. The first defendant failed to remedy the
default specified in the Property Law Act notice, with the result that on 3 August
2012 the full amount of moneys advanced to the first defendant became due and owing. On 17 August 2012, the plaintiff made demand on the defendants to vacate the property, which was ignored.
[21] These proceedings were filed on 10 September 2012 and were the subject of directions by the court leading to the fixture.
Analysis of the claim
[22] The use of leases to attempt to avoid a sale by a mortgagee and, more particularly, the granting of possession preparatory to the exercise of the power of sale has been the subject of a number of decisions involving Ms Lambert. To my knowledge all so far have been unsuccessful. They are recorded in the footnote.10
[23] The mortgage in this case, which is the foundation for the plaintiff’s claim,
pre-dates the effective commencement date of the Property Law Act 2007, namely
1 January 2008. The transitional provisions of s 367 of the Property Law Act 2007 provide that the powers and covenants existing prior to the commencement of the Property Law Act 2007 remain enforceable and are to be construed as they existed prior to that date.
[24] The plaintiff ’s statutory right to seek an order for possession derives from
s 106 of the Land Transfer Act 1952 that provides:
Mortgagee may, after default, enter into possession
The mortgagee, upon default in payment of the principal sum, interest, annuity, or rentcharge secured by any mortgage, or of any part thereof, may enter into possession of the mortgaged land by receiving the rents and profits thereof, or may bring an action for possession of the said land either before or after entering into the receipt of the rents and profits thereof, and either before or after any sale of the land is effected under the power of sale given or implied in his mortgage.
10 FM Custodians Ltd v Stewart Street Properties Ltd (in rec) HC Auckland CIV-2011-404-7171, 2
December 2011; Rabobank New Zealand Ltd v Busch [2012] NZHC 1547; Waterhouse v Westpac New Zealand Ltd [2012] NZHC 1578; Plateau Farms Ltd (in rec and liq) v Lambert [2012] NZHC 109; Plateau Farms Ltd (in rec and in liq) v Lambert [2012] NZHC 1478 [at Exhibits “C” to “G” of Affidavit of Cassandra Menzies sworn 30 October 2013]. See also Palmerston City Council v Birch [2012] NZHC 2979; Watson v Williams [2012] NZHC 3199.
[25] The sale and purchase contracts and the lease and sublease were all entered into subsequent to the registration of the mortgage in favour of the plaintiff.
[26] Section 119 of the Land Transfer Act 1952 provides:
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.
[27] The defendant has paid off the mortgage to the plaintiff by a payment of the consideration received on the sale and purchase transaction of $1.15. That must, however, be clarified because, in the first defendant’s written submissions it acknowledged that:
(a) The first defendant sold the property without the agreement of the mortgagee;
(b) She does not claim that she gave the mortgagee notice of the sale; and
(c) The first defendant does not claim that there has been any accord and satisfaction of the mortgage debt. Indeed, she acknowledges that there is a shortfall owing to the mortgagee.
[28] A registered mortgagee’s interest is protected by the principle of indefeasibility conferred by the Land Transfer Act 1952. Registration of the plaintiff’s mortgage conferred upon it an indefeasible title by virtue of s 62. A registered mortgagee’s title is paramount. That includes a mortgagee’s right to exercise its power of sale: Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd.11 It follows that the registered first mortgage and the interests it conferred take priority over any interest that the first and second defendants assert. The plaintiff’s powers upon a default of the mortgage and loan repayments, under clause 8 of the mortgage terms and the right to possession under
s 106 of the Land Transfer Act 1952, take priority over any interest held by the first
and second defendants.
11 Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd
[1984] 2 NZLR 704 (HC).
[29] I have already recorded that it is not alleged that any consent to the transactions was given by the plaintiff.
[30] For the avoidance of doubt I record that the defendants do not rely on the Residential Tenancies Act 1986, nor do they challenge the court’s jurisdiction in respect of this application in relation to that statute.
[31] I also refer to my judgment in Watson v Williams when I briefly commented upon this type of agreement and whether they were shams and should not be entertained by the court.12 For the same reasons that I expressed in that judgment, I do not determine that particular point in this judgment because it is simply not necessary to do so in order to dismiss the opposition to the application for summary judgment.
[32] My conclusion is that the plaintiff is entitled to an order for possession.
[33] I then discussed with counsel what would be a reasonable time in the circumstances. That discussion led to a probable time of 21 days from the date of issue of the judgment. That takes account of the defendants’ responsibility for certain animals that are grazing on the property. It also takes account of the fact that there should be no particular prejudice to the plaintiff by a delay of that time.
[34] The plaintiff’s application seeks indemnity costs against the first defendant. I intend to reserve costs and, in doing so, indicate that in principle a claim for indemnity costs against the first defendant is appropriate in this case. However, the material that must be considered for the making of an appropriate order needs to be expanded on that which has currently been given to the court. In this respect, I refer the parties to my judgment in Crown Money Corporation Ltd v Grasmere Estate Trustco Ltd and to the judgment of the Court of Appeal in Watson & Son Ltd v Active
Manuka Honey Association.13
12 Watson, above n 10.
13 Crown Money Corporation Ltd v Grasmere Estate Trustco Ltd (19) PRNZ 591 (HC); Watson & Son v Active Manuka Honey Association [2009] NZCA 595.
[35] I give the parties this background information so that the precise reasons for the time for the order for possession and the directions that I give regarding costs are understood.
Decision
[36] I grant summary judgment to the plaintiff against the first defendant in the following form:
The defendants shall, within 21 days of the date of delivery of this judgment, vacate and deliver up possession of the property at 41 Karapiro Road, Cambridge, being that parcel of land containing 25.1730 hectares more or less being Lot 2 on Deposited Plan 35819 and described in computer freehold registered identifier SA31D/336 (South Auckland Registry).
Costs
[37] I reserve costs and encourage the parties to agree on the quantum of costs, having regard to the comments made in this judgment. In the event that there is no agreement, memoranda and the appropriate affidavits in support, opposition and reply which deal with the issues relating particularly to indemnity costs shall be filed and served at seven-day intervals. The file shall be referred to me to complete the
judgment in relation to costs on receipt of the reply memoranda and affidavits.
JA Faire
Associate Judge
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