Rupa v Bank of New Zealand

[2008] NZCA 199

IN THE COURT OF APPEAL OF NEW ZEALAND

CA76/2008
[2008] NZCA 199

BETWEENDILIP-KUMAR RUPA, SARADADEVI RUPA AND KOKILA RUPA

Appellants

ANDBANK OF NEW ZEALAND

Respondent

Hearing:27 June 2008

Court:O'Regan, Arnold and Ellen France JJ

Counsel:Dilip Rupa in person for the Appellants

M J Tingey for Respondent

Judgment:27 June 2008 at 4.30 pm

JUDGMENT OF THE COURT

A        The application for stay is dismissed.

BCosts are reserved.

REASONS OF THE COURT

(Given by O’Regan J)

Introduction

[1]       This is an application for a stay of execution of a judgment of the High Court against which the appellants have appealed.  We convened a hearing by telephone earlier today at which we heard from Dilip Rupa on behalf of the appellants and Mr Tingey as counsel for the respondent, the Bank of New Zealand (the Bank).  We did so because the Bank, having obtained summary judgment against the appellants in the decision which is now under appeal, has commenced a mortgagee sale process which involved tenders for a property owned by the appellants and mortgaged to the Bank to be submitted by a deadline of 1 July 2008.  The object of the stay sought by the appellants is to prevent the Bank, as mortgagee, from selling that property before the appeal to this Court is heard.

Background

[2]       The appellants are indebted to the Bank under various loan agreements which are secured by mortgages over three properties owned by the appellants.  Two of those properties are residential properties located in Grey Lynn, Auckland and the third is a commercial property located in Freemans Bay, Auckland.  It the last of these properties which is the subject of the proposed mortgagee sale.  The company associated with the appellants operates a commercial business from the Freemans Bay property.

[3]       The appellants fell into arrears in payment of the amounts owing under the loan agreements to the Bank.  The Bank demanded payment and issued Property Law Act notices.  When this occurred, the appellants issued proceedings in the High Court seeking declarations that the loan agreements and mortgages were void and unenforceable, and challenging the Bank’s ability to recover the principal owing to the Bank.  The Bank counterclaimed against the Rupas for the amount it said was owed to it which was, at the time of the application, just under $500,000.

[4]       The Bank sought defendant’s summary judgment in relation to the appellants’ application and also sought summary judgment on its counterclaim.  Both applications were heard on 5 February 2007 by Associate Judge Abbott.  In a judgment delivered on 31 January 2008, the Associate Judge made an order of summary judgment for the Bank on the appellants’ claim and also entered summary judgment in favour of the Bank on its counterclaim.

[5]       The appellants appealed to this Court.  They also sought a stay of execution of the High Court judgments pending the resolution of the appeal.  That application for stay was heard by Heath J on 15 May 2008.  In a judgment dated 16 May 2008, he dismissed the application for stay.

[6]       In brief, Heath J concluded that there was no arguable basis to contend that the principal owing under the loan agreement could not be recovered.  He considered the appellants’ need for shelter, their attachment to the land subject to the Bank’s mortgages and the desirability of income being generated for the appellants from the business conducted at the Freemans Bay property.  However he did not accept that those factors outweighed the Bank’s right “to exercise securities to recover a debt which this Court has found to exist and in respect of which spurious arguments are advanced to avoid payment”.

[7]       Heath J then continued:

[24]     As the Bank has not yet commenced enforcement action, it is clear that any sale would not take place for at least three to four months.  That will give the Rupas time to seek priority for their appeal on the grounds that their properties might be lost.  If priority could not be afforded it would be possible for the Rupas to apply directly to the Court of Appeal to stay enforcement action; see r 12(3)(b).  For that reason, I do not accept that the appeal will be rendered nugatory if I dismiss the application now.

[8]       After the judgment of Heath J was delivered, the Bank set in motion a mortgagee sale process in respect of the Freemans Bay property.  As already noted, that process is a tender process and tenders close on 1 July 2008.  This Court is unable to allocate a fixture for the hearing of the appellants’ appeal before 19 August 2008.  The appellants have therefore sought a stay of execution from this Court until the hearing of their appeal.

Applicable principles

[9]       The application invoked r 12 of the Court of Appeal (Civil) Rules 2005, which empowers this Court to order a stay of execution of a decision of a High Court.  The principles to be applied in deal with such applications are well known.  Those which have particular relevance to the present case are the following:

(a)Whether the right of appeal will be rendered nugatory if a stay is not granted;

(b)Whether the successful party will be injuriously affected by a stay;

(c)The overall balance of convenience.

Submissions

[10]     Dilip Rupa, on behalf of all appellants, argued that:

(a)Heath J’s assumption that a mortgagee sale could not take place for three to four months had proved to be incorrect.  He said this was because the Bank had “fast-tracked” the mortgagee sale of the Freemans Bay property.  He said that if the three to four month period had been correct, the appeal could have been heard before a mortgagee sale took place;

(b)This was significant because the appellants’ appeal would, in fact, be rendered nugatory (at least in respect of the mortgage over the Freemans Bay property) if a stay was not granted and the Freemans Bay property was sold by the Bank;

(c)The refusal of a stay would involve depriving the appellants of various rights guaranteed to them under international human rights covenants to which New Zealand is a party;

(d)The appellants’ livelihood would be adversely affected because their company’s business operates from the Freemans Bay property;

(e)The Bank would not be prejudiced because it has adequate security over the three properties.

[11]     On behalf of the Bank, Mr Tingey argued that the stay should not be granted and the Bank should be permitted to proceed with the mortgagee sale over the Freemans Bay property.  He accepted that Heath J had assumed that the process would take three to four months, but said that there was no question that the Bank was “fast tracking” the sale process.  He referred to an affidavit from an officer of the Bank in which it was stated that:

(a)The time process for the sale of the Freemans Bay property is in accordance with virtually all mortgagee sale processes undertaken by the Bank (a tender process involving advertising over four weekends prior to the tender closing);

(b)The Bank had advised the appellants that it had intended to sell the Freemans Bay property on 27 March 2008, and received no reply.  It then instructed a real estate agent to undertake the sale process and notified the appellants that it had done so on 4 June 2008.  The letter of advice to the appellants told them that tenders would close on 1 July 2008.  Advertising began on 7 June 2008 and has continued every week since then.

[12]     Mr Tingey said there would be detriment to the Bank if the property had to be removed from sale.  Not only would the costs so far incurred be wasted, but there could be a detrimental effect on the property value.

[13]     Mr Tingey also argued that the Bank should not be required to defer the sale process because the appellants’ appeal had no prospect of success.  He referred to the assessment of Heath J that there was no arguable basis for the appellants to contend that the principal owed to the Bank cannot be recovered and that the arguments which the appellants make to support their claim that the Bank’s securities are unenforceable are “spurious arguments”.

[14]     We asked Mr Tingey whether the Bank was prepared to commit to not instituting any mortgagee sale process in respect of the two Grey Lynn properties prior to the hearing of the appeal if that hearing took place on 19 or 20 August 2008.  He took instructions on this and confirmed that the Bank undertook that it would not conduct a mortgagee sale of either of those properties before such hearing. 

[15]     Mr Tingey disputed that the livelihood of the appellants was at risk if the Freemans Bay property was sold, because the business undertaken in that property was undertaken by a company associated with the appellants rather than the appellants themselves, and whatever tenure that company had in respect of the Freemans Bay property would continue after the settlement of the mortgagee sale.

Decision

[16]     The two principal arguments made by the appellants before the Associate Judge were that the Bank had improperly advanced the loans to the appellants by electronic credit to the appellants’ bank accounts, rather than by providing hard currency, and that the Bank had sold the loan agreements and mortgage security in a securitisation process.  The Bank’s evidence (accepted by the Associate Judge) was that no securitisation had occurred in respect of the mortgages, and that the advancing of money by direct credit was orthodox banking practice.  The appellants also made arguments based on the Credit Contracts Act 1981, which the Associate Judge found could not succeed.  We agree with Heath J’s assessment of the merits of these arguments, and of the lack of any real prospect that the proposed appeal would succeed.

[17]     We are satisfied that the Bank is not “fast tracking” the sale process, but rather conducting a mortgagee sale process in accordance with its normal practice.  However, we acknowledge that this means the sale will conclude more quickly than Heath J anticipated.  This is material because it means that one of the properties will have been sold before the appeal is heard.  Heath J noted that the appellants could seek a stay from this Court if the appeal could not be heard before a sale took place.  The present application confirms the correctness of that observation.

[18]     We accept that, at least in respect of the Freemans Bay property, the sale which the appellants seek to avoid by pursuing the appeal will have occurred before the appeal is heard.  We gave that considerable weight in our assessment, but it is outweighed by the lack of merit in the points to be pursued on appeal and the detriment to the Bank if the sale process has to be abandoned at this late stage.  As noted earlier, there have been no payments in respect of the loans secured by the Bank’s mortgage for a number of years.  We agree with Mr Tingey that the livelihood of the appellants is not necessarily compromised by a sale of the Freemans Bay property.

[19]     In our view the Bank should be permitted to enforce the judgment which it obtained in the High Court without further delay.  It should not be further delayed by an appeal at which the same arguments that both the Associate Judge and Heath J found to be baseless will be made again.

[20]     As mentioned earlier, the Bank’s counsel confirmed an undertaking on the part of the Bank not to commence a mortgagee sale process in respect of either of the two Grey Lynn properties until the hearing of the appeal.  The Court has time available on both 19 and 20 August at which the appeal could be heard.  Mr Tingey indicated some difficulty for him in accepting that fixture: if it is to be delayed to accommodate him, we will expect the Bank’s undertaking to extend to the new fixture date.  We ask that the Registry liase with Dilip Rupa and Mr Tingey with a view to confirming a fixture date, and, if the fixture is delayed until after 20 August to accommodate counsel for the bank, the continuation of the Bank’s undertaking to the later fixture date (or until further order of the Court).

Costs

[21]     We reserve costs on this application for determination in conjunction with the appeal.

Solicitors:
Bell Gully, Auckland for Respondent