Price v Killarney Capital Limited - [2023] NZHC 2753

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2023-441-000038

[2023] NZHC 2753

BETWEEN
MURRAY PRICE and SHARRON PRICE

as trustees of the Price Karaka Trust, TRENT CARY and LYON TRUSTEE NO 10
LIMITED
Plaintiffs

AND

KILLARNEY CAPITAL LIMITED

Defendant

Hearing: 26 September 2023

Appearances:

B Gustafson for Plaintiffs

R J Gordon and S Howard-Brown for Defendant

Judgment:

29 September 2023

JUDGMENT OF CHURCHMAN J

[Application for interim injunction]

Introduction

[1] The plaintiffs are guarantors of borrowing from the defendant in relation to a sum which now exceeds $18 million. They seek an interim injunction restraining the defendant from exercising its power of sale in relation to properties they had put up as security for the borrowing.

Facts

[2] Parklane Infrastruct Ltd (now in liquidation) (Parklane) was the owner and mortgagor of a nine stage property development in Wellington (the Development). Parklane is controlled by the plaintiffs.

PRICE & ORS v KILLARNEY CAPITAL LIMITED [2023] NZHC 2753 [29 September 2023]

[3] The defendant’s first involvement with Parklane occurred in 2016. Parklane was at that stage in default on its obligations to its then funder, INNO Capital No. 3 Ltd (INNO), in respect of the Development funding. INNO had commenced a mortgagee sale process. Parklane refinanced the Development, avoiding the mortgagee sale.

[4] By April 2020, Stage 5 of the Development project had been completed, the first ranking lending to ANZ Bank had been repaid in full, the defendant had now become the first mortgagee and the sum outstanding had been reduced to less than
$2 million.

[5] In April 2020, a new sum of $1,150,000 was advanced via Parklane but instead of being related to the Development, it was for the personal benefit of two of the plaintiffs, Mr Price and Mr Cary.

[6] In September 2020, a further loan was entered into in the sum of $8,200,000. This was to fund Stage 6 and Stage 8 in the Development. The term of the loan was for one year expiring 31 August 2021.

[7] The reason for the one-year term was that it was anticipated that the provision of the funds would allow these stages of the Development to be completed, the sections sold and the funding repaid.

[8] This timeline was not met because Parklane decided to pursue a variation to their existing subdivision resource consent in order to create additional sections. This application resulted in significant delays.

[9] In September 2021, the expired term loan was restructured. Additional funding was advanced to assist in progressing the Development. The term of the renewed loan expired on 2 September 2022. Stages 6, 7 and 8 of the Development had still not been completed by September 2022.

[10] The defendant was becoming increasingly concerned at the lack of pre-sales, but it agreed to one further variation which extended the term of the loan to 2 February

2023. At the time of granting this final extension, the balance of the unpaid loan stood at…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 2753
Decision Date: 29 September 2023

CaseChat Overview and Summary

The plaintiffs, Murray Price and Sharron Price as trustees of the Price Karaka Trust, Trent Cary, and Lyon Trustee No 10 Limited, sought an interim injunction against the defendant, Killarney Capital Limited, to restrain the defendant from exercising its power of sale on properties provided as security for loans exceeding $18 million. The plaintiffs, guarantors of the loans, argued that the defendant breached its duty under section 176 of the Property Law Act 2007 to obtain the best price reasonably obtainable when selling the mortgaged property. They claimed that the defendant failed to obtain a registered valuation and did not adequately market the properties, particularly the Development lots in Wellington and the Auckland properties. The plaintiffs requested a 28-day delay in the sale of the Auckland properties to allow them to determine the outstanding balance and potentially redeem the mortgage.

The court considered the principles for granting an interim injunction, which required the plaintiffs to demonstrate a serious question to be tried, a balance of convenience favoring the injunction, and that overall justice required the injunction. The court assessed whether the defendant breached its duty under section 176 by failing to obtain a valuation and adequately market the properties. The court found that the defendant's actions in obtaining estimates from reputable real estate agents and conducting a marketing campaign aligned with industry standards. The court also noted that the sale prices achieved were consistent with the market conditions and appraisals. The plaintiffs' claim of a "fire sale" was rejected due to the defendant's efforts to negotiate better prices and the significant deficit remaining after the sale.

Regarding the balance of convenience, the court found that damages would be an adequate remedy for the plaintiffs, as the defendant was a substantial entity capable of meeting any potential damages. The court also noted the plaintiffs' failure to provide an undertaking as to damages and their obstructive conduct during the sale process. The court concluded that there was no serious question to be tried regarding the defendant's breach of duty, and the balance of convenience and overall justice did not favor granting the injunction. The application for an interim injunction was dismissed, and the parties were directed to agree on costs or have them determined on the papers.

Orders