SCOTT GORDON AND PEPPER NEW ZEALAND LIMITED

[2024] NZHC 3105

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-2593

[2024] NZHC 3105

BETWEEN

SCOTT GORDON

Applicant

AND

PEPPER NEW ZEALAND LIMITED

Respondent

Hearing:	23 October 2024
Appearances:	No appearance for Applicant A E Simkiss for Respondent
Judgment:	24 October 2024

JUDGMENT OF O’GORMAN J

[Interlocutory application for interim injunction]

This judgment was delivered by me on 24 October 2024 at 12 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

Solicitors:

MinterEllisonRuddWatts, Auckland

Copy to: Applicant

GORDON v PEPPER NEW ZEALAND LIMITED [2024] NZHC 3105 [24 October 2024]

Overview

[1]    On 22 October 2024, Mr Gordon (the applicant) commenced this proceeding along with an interlocutory application seeking an urgent interim injunction restraining the respondent, Pepper New Zealand Ltd (Pepper), from exercising its power of sale as mortgagee. That application was accompanied by  an affidavit of  Mr Gordon in support. The affidavit exhibited a letter advising of an intended auction to be held at 2 pm on 23 October 2024. Accordingly, in the cover email filing the documents, Mr Gordon sought an urgent determination of the application before 2 pm on 23 October 2024.

[2]    In compliance with that request, Registry advised Mr Gordon that the application was placed in the 10 am Duty Judge’s list on 23 October 2024.

[3]    The matter was called in that list with no appearance by Mr Gordon. It was then stood down and called again at 10.24 am, with no appearance by Mr Gordon. Ms Simkiss appeared on behalf of Pepper.

[4]    Given the urgency of the matter, I nevertheless heard the matter, reviewing the material filed by Mr Gordon and hearing from Ms Simkiss. At the conclusion of the hearing, I dismissed the application, declining to make any injunction orders. I said I would give reasons for that decision when time permitted, hence this judgment.

Legal principles

[5]    The general principles governing the grant of relief by way of interim injunction apply equally in the case of mortgagee sales. The Court follows a three-step approach, assessing:1

(a)whether there is a serious question to be tried;

1      Kwok v HND Holding Ltd [2024] NZHC 1153 at [7], referencing NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90; (2013) 13 TCLR 531 at [12] and affirmed in Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344; [2020] NZCCLR 29 at [23]. See also Price (as trustees of the Price Karaka Trust) v Killarney Capital Ltd [2023] NZHC 2753, (2023) 24 NZCPR 574 at [38].

(b)the balance of convenience; and

(c)where the overall justice lies.

[6]In respect of the last two factors:2

…the question is whether refusing the injunction would be harder on a plaintiff who was successful at trial, than would granting it be to an ultimately successful defendant. This assessment is undertaken by reference to the adequacy of damages, preservation of the status quo, the uncompensable disadvantages to either party, and the relative strengths of their cases.

[7]    A further principle applicable when an interim injunction seeks to halt the exercise of a mortgagee’s power of sale (but where the mortgage itself is not sought to be impeached) is that the mortgagor is usually required to pay the amount secured into Court before an injunction will be granted restraining the exercise of that power.3

[8]    A registered mortgage may be  transferred  by  memorandum  of  transfer.4  By s 73 of the Land Transfer Act 2017, a transfer instrument must be used to  register such a transfer. Upon registration of the transfer, the interest of the transferor in the mortgaged land passes to the transferee.5 The transferee takes the mortgage subject to the state of the accounts as between the mortgagor and the original mortgagee at the date of the transfer. Once the transfer is registered, the new mortgagee has the benefit of the indefeasibility provisions of the Land Transfer Act.

Claim and factual background

[9]The statement of claim sets out the relevant background:

(a)On or about 24 May 2013, the applicant granted a mortgage to HSBC to secure a loan used to obtain finance to purchase the property.

2      Roman Catholic Bishop of the Diocese of Auckland v Boynton [2018] NZHC 2636 at [14] (footnotes omitted).

3      Parry v Grace [1981] 2 NZLR 273 (HC), referenced in Price (as trustees of the Price Karaka Trust) v Killarney Capital Ltd, above n 1, at [89].

4      DW McMorland and others Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [15.080].

5      Land Transfer Act 2017, s 75(a); Property Law Act 2007, s 84(3).

(b)The applicant made the required instalment payments under the terms of the agreement until December 2023.

(c)On or about 15 November 2023, the applicant received a letter from HSBC informing him that his mortgage had been unilaterally assigned to Pepper. The applicant did not consent to the assignment, nor was he consulted prior to the transfer.

(d)The applicant objects to the assignment of his mortgage to an unknown third party and contends that his consent should have been sought and obtained before such a significant transfer of rights and obligations.

[10]   In protest of the assignment (which Mr Gordon contends is unauthorised and therefore not permitted), the applicant withheld mortgage payments, starting in December 2023. The applicant contends that he reasonably believed that the conduct of purporting to assign the mortgage invalidated the terms of it and absolved him from any payment obligations until the dispute could be resolved.

[11]   Pepper issued a Property Law Act notice on or around 18 January 2024. That default has not been remedied and Pepper is now undertaking steps to exercise its power of sale.

[12]   The applicant asserts that Pepper’s exercise of the power of sale is unlawful, inequitable and premature because the underlying issues concerning the assignment of the mortgage and the validity of the default notice remain unresolved.

[13]   Accordingly, the applicant seeks the relief of declaring the assignment of mortgage improper and invalid, declaring the default notice invalid and unenforceable, and granting an injunction to restrain the exercise of the power of sale. He also seeks damages for any financial and emotional harm as a result of Pepper’s actions.

Analysis

[14]   Mr Gordon’s claim is based on an allegation that HSBC had no entitlement to unilaterally assign the mortgage and related loan.

[15]In this case, the registered mortgage contains the following at cl 18.1:

The Mortgagee may:

(i) assign, transfer or otherwise dispose of, or declare a trust over or otherwise create an interest in, any or all of its rights under this mortgage without the consent of the Mortgagor and free from any right of set-off or equities, in favour of the Mortgagor, between the Mortgagor and the Mortgagee;…

[16]   Correspondingly, the terms and conditions of the loan contain the following at cl 13.2:

… We may transfer all or any of our rights benefits or obligations under this Agreement, and Security and the debts secured by any Security, to anyone else who we reasonably consider capable of performing them at any time…

[17]   Given that the registered terms of the mortgage permit an assignment without prior notice to or consultation with the mortgagor, I accept that there is no serious issue to be tried.

[18]   In any event, balance of convenience factors do not favour granting the interim injunction sought by Mr Gordon. He was served with a Property Law Act notice in January 2024 and did not take any steps to challenge the power of sale until the day before a scheduled auction. That delay is a factor that counts against him assessing balance of convenience factors. In addition, he has not provided an undertaking as to damages or any adequate security for his claim failing, let alone for repayment of the money secured in terms of the principle in Parry v Grace.

[19]   Finally, if there were any basis for a claim against Pepper in respect of their exercise of rights as mortgagee, then damages would be available and adequate as a remedy for such breaches.

[20]   Overall, it is not in the interests of justice to grant the interim injunction that Mr Gordon seeks.

Result

[21]The application is dismissed.

O’Gorman J