Secure Funding Limited v Milgrew
[2024] NZHC 176
•15 February 2024
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-99
[2024] NZHC 176
UNDER the Companies Act 1993 and the Property Law Act 2007 BETWEEN
SECURE FUNDING LIMITED
Applicant
AND
LISA ANNE MILGREW and MILGREW TRUSTEE LIMITED
First Respondents
LISA ANNE MILGREW
Second Respondent
Hearing: 5 December 2022 Counsel:
OJ Morgan and CS Frost for the Applicant No appearance for the Respondents
Judgment:
15 February 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 15 February 2024 at 10 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Tompkins Wake, Hamilton
SECURE FUNDING LTD v MILGREW [2024] NZHC 176 [15 February 2024]
Table of Contents
Introduction [1]
Summary judgment principles [7]
Factual background [9]
The Agreement [10]
Extension of initial six-month loan term [14]
Default under the Agreement [16]
Have the PLA requirements been complied with? [27] Should summary judgment be granted for an order for possession [42] Should summary judgment be entered for the judgment sum sought? [46] Costs [99]
Result [101]
Introduction
[1] The applicant, Secure Funding Ltd, applies for summary judgment of its claim for an order for possession of a property in Hidcote Place, Bethlehem, Tauranga, together with judgment for $277,420.33 plus ongoing interest, costs and disbursements. The claim is based on the respondents’ default under a loan agreement which was secured by way of mortgage over the property.
[2] An order for possession may be made by the Court once a mortgagee is entitled to enter into possession of the mortgaged land under the mortgage and has complied with the notice and remedial period requirements in subpart 5 of pt 3 of the Property Law Act 2007 (PLA).1
[3] The respondents did not file a statement of defence or notice of opposition within the time required or at all so the applicant sought to proceed to summary judgment on the papers. Since then, I have issued two minutes directing further submissions and evidence as several issues have arisen including in relation to the s 119 notices served under the PLA and the calculation of the sums outstanding.
[4] The applicant now seeks judgment for the increased amount of $362,432.84. The original sum sought included principal, interest and default fees owing at 30 August 2022 plus ongoing interest, costs and disbursements. The amended sum
1 Property Law Act 2007, s 137(1).
corrects errors made (as discussed in further detail below) and includes interest accrued up to 7 June 2023.
[5] Below, I consider the PLA requirements and whether they have been complied with before considering the appropriate orders to be made.
[6] For completeness I record that when the proceedings were first issued, Milgrew Trustee Ltd had been removed from the Companies Register so, in addition to the orders for possession and judgment, Secure Funding applied for restoration orders. On 7 October 2022, the Registrar of Companies restored Milgrew Trustee to the Register so an order for restoration is no longer required.
Summary judgment principles
[7] Rule 12.2(1) of the High Court Rules 2016 provides that summary judgment may be granted where 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.”
[8] The principles applying to summary judgment applications are well established. The following summary can be taken from the leading authority,
Krukziener v Hanover Finance Ltd:2
(a)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.3
(b)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.4
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
3 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
4 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. However, it need not uncritically accept 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.5
(d)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.6
Factual background
[9] I record the factual background below in reliance on the affidavits of Mr Menzies, an Asset Realisation Officer for Liberty Financial Group of which Secure Funding is a member company. For the benefit of the respondents, I record that the correspondence with the respondents appears in many cases to have been sent by Liberty on behalf of Secure Funding but I refer to it as correspondence from Secure Funding as there is no need to differentiate between the two for the purposes of this judgment.
The Agreement
[10] Mr Menzies confirms the parties entered into a mortgage loan agreement on 24 March 2021 pursuant to which the applicant agreed to advance the sum of $225,000 to the respondents. Ms Milgrew and Milgrew Trustee are trustees of the Milgrew Trust. The trustees and Ms Milgrew, in her personal capacity, are the registered proprietors of the property in issue at Hidcote Place, Bethlehem, Tauranga (Property).
[11] The mortgage loan agreement comprised a specific terms document (Specific Terms) together with a form of registrable memorandum 2010/4284 (Memorandum) (together, Agreement). The Agreement records that Ms Milgrew is
5 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
6 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
signing “as a trustee of the Milgrew Trust with full personal and unlimited liability”. It is on this basis that Secure Funding has sued Ms Milgrew personally as the second defendant.
[12] Mr Menzies’ first affidavit, dated 28 September 2022, confirms that the respondents granted a registered mortgage over the Property to Secure Funding on 26 March 2021,7 and the respondents drew down $225,000 under the Agreement. The Agreement included the following terms:
(a)The respondents agreed to repay “outstanding money” being the loan, interest (including default interest), costs and all other moneys payable under the loan in accordance with the terms of the Agreement.
(b)The respondents would initially make a total of six-monthly payments, all of which would be interest only payments, the first being due one month after the date of the advance of the loan.
(c)The loan would be advanced to the respondents for a term that was variable at Secure Funding’s discretion with the initial term being for six months.
(d)The respondents could elect to advise Secure Funding and repay the loan on the expiry of the initial fixed rate period, or Secure Funding could extend the loan term at its discretion for five further six-month fixed rate periods, up to a maximum loan term of three years from the date of advance.
(e)The respondents would pay interest on the principal sum at the rate of
10.55 per cent per annum until the expiration of the initial fixed rate period of six months, but from then on interest was subject to change in accordance with the Agreement.
(f)On the expiry of the initial period, and on each six-monthly rollover, the annual interest rate would consist of a base rate that may be subject
7 Mortgage number 12063294.3.
to change in accordance with market conditions, and a margin added for each successive six-month rollover within the three‑year loan term.
(g)If the respondents did not repay the loan amount on the last day of any fixed rate period and the applicant did not agree to extend the loan term, the interest rate that would apply until the loan is repaid would be
22.55 per cent per annum plus default interest of six per cent per annum.
(h)Except as specifically provided in the Agreement, all amounts payable by the respondents to Secure Funding under the Agreement were payable on demand and secured by the mortgage.
(i)The Agreement defined “secured money” as all amounts of any nature which the respondents (whether alone, jointly or jointly and severally with any other person (whether or not another mortgagor)) is, or may at any time become, liable to pay or deliver to Secure Funding, and reference to secured money includes any part of it.
(j)The respondents will have defaulted under the Agreement if (among other things) they breached any term of any relevant document, including failing to pay any secured money on its due date.
(k)Any time after the respondents defaulted, Secure Funding could under cl 17.2 of the Memorandum:
(i)take action to recover the outstanding money immediately due and payable upon the respondents’ default, including a discharge administration fee and break costs, to be calculated in accordance with the Specific Terms;
(ii)take action to recover the secured money immediately due and payable upon the respondents’ default;
(iii)exercise any powers of a receiver (whether or not a receiver has been appointed) including, but not limited to, exercising a
power of sale and/or entering into possession of the Property; and
(iv)pay any expenses incurred in the exercise of any such powers out of the revenue from, or proceeds of realisation of, the secured Property.
(l)If the respondents failed to fulfil any payment obligation under the Agreement or any security, then default interest could be charged, defined as the aggregate of the interest rate from time to time plus six per cent.
(m)Default interest is to be calculated by applying the daily default interest rate to the amount due but unpaid at the end of each day and default interest is entitled to be charged until all overdue amounts are paid.
(n)If the respondents failed to fulfil any payment obligation under the Agreement or any security, the respondents would be required to pay default fees as set out in the Specific Terms.
(o)Secure Funding’s costs, losses and other liabilities (including legal expenses on a full indemnity basis) incurred or sustained by Secure Funding in connection with (amongst other things) the exercise, enforcement or preservation, or attempted exercise, enforcement or preservation, of any right under the security or in suing or recovering any secured money, are payable by the respondents.
[13]The annual interest rate in respect of the first six-month fixed rate period was
10.55 per cent with a default interest rate of 16.55 per cent.
Extension of initial six-month loan term
[14]On 23 August 2021, Secure Funding sent a letter to Ms Milgrew recording that:
(a)the fixed rate period would be ending on 26 September 2021;
(b)the respondents could either repay the loan in full or in part at the end of that period or rollover the remaining loan balance for a further six‑month period at an indicative fixed interest rate of 12.05 per cent per annum, estimating the minimum monthly payment for the second fixed rate period would be $2,270;
(c)if Secure Funding did not hear from the respondents prior to 26 September 2021, it would automatically rollover the remaining loan balance for a further six-month fixed rate period; and
(d)automatic rollover was subject to the respondents meeting all repayments and Secure Funding’s lending guidelines.
[15] On 29 September 2021, Secure Funding advised by letter that the loan had been rolled over for six months and that the new annual interest rate applying was
12.05 per cent. The letter confirmed that the minimum monthly repayment amount was $2,270 with the next repayment due on 26 October 2021.
Default under the Agreement
[16] The respondents failed to make the minimum payment due on 26 October 2021.
[17] Mr Menzies deposes that in accordance with the Agreement, from 27 October 2021 onwards Secure Funding charged default interest on the amount that was due but that remained unpaid at the end of each day. The default interest rate that applied was 18.05 per cent, being the current fixed interest rate of 12.05 per cent plus 6 per cent. Mr Menzies deposes that Secure Funding continued to apply the fixed annual interest rate of 12.05 per cent to the portion of the loan amount that was not overdue.
[18] On 15 November 2021, Secure Funding sent a letter to the respondents recording that the payment of “$2,104.12” due on 26 October 2021 remained outstanding. The letter says that Secure Funding had tried to contact Ms Milgrew
without success and asked Ms Milgrew to contact them by telephone, noting that failure to do so may result in further action.
[19] Mr Menzies explains in his most recent affidavit that the amount recorded as being overdue in this letter is less than the minimum monthly repayment amount of
$2,270 because a review of Secure Funding’s systems revealed that Secure applied a lower interest rate of 11.04 per cent to the loan between 26 September 2021 and 29 September 2021 — before adjusting it to the correct rate of 12.05 per cent.
[20] Mr Menzies deposes that during December 2021 and January 2022 Secure Funding unsuccessfully attempted to serve notices under s 119 of the PLA on the respondents. Orders for substituted service of the s 119 notices were then obtained from the District Court in Hamilton on 2 March 2023.
[21] Despite the above steps being taken, in Mr Menzies’ most recent affidavit he annexes a letter sent to the respondents on 3 March 2022, recording:
(a)the second fixed rate period would be ending on 26 March 2022;
(b)the respondents could either repay the loan in full or in part at the end of that period or rollover the remaining loan balance for a further six‑month period at an indicative interest rate of 12.55 per cent per annum estimating that the minimum monthly payment for the third fixed rate period would be $2,364;
(c)if Secure Funding did not hear from the respondents prior to 26 March 2022, it would automatically rollover the remaining loan balance for a further six-month fixed rate period; and
(d)automatic rollover was subject to the respondents meeting all repayments and Secure Funding’s lending guidelines.
[22] On 10 March 2022, a s 119 notice was served on Ms Milgrew in accordance with the orders for substituted service. That same day a notice was served on Milgrew Trustee, at its registered office. I am satisfied that the 10 March 2022 service
on Milgrew Trustee was effective service as Milgrew Trustee was still on the Companies Register at that time.
[23] The s 119 notices were dated 4 March 2022 and recorded that the mortgage was in default in the amount of $14,328.79, comprised of:
(a)repayment arrears of $11,372.03 (noting that repayment arrears may include missed principal and interest payments);
(b)enforcement expenses of $776.25 (noting that enforcement expenses may include fees payable when the loan is in default such as legal, council, agent and other recoverable fees) ; and
(c)$2,180.51 in fees and costs (noting that fees and costs may include fees and costs payable when the loan is in default including default administration, payment dishonour and other fees.
[24]The s 119 notices required the defaults to be remedied by 13 May 2022.
[25] According to Mr Menzies’ evidence, no payments have been made by the respondents since 26 September 2021.
[26] The proceedings and application for summary judgment were served on Ms Milgrew on 12 October 2022 and on Milgrew Trustee on 20 October 2022. An affidavit of service has been filed confirming this.
Have the PLA requirements been complied with?
[27]Section 119 of the PLA relevantly provides:
119Notice must be given to current mortgagor of mortgaged land of exercise of powers, etc
(1)No amounts secured by a mortgage over land are payable by any person under an acceleration clause, and no mortgagee or receiver may exercise a power specified in subsection (2), by reason of a default, unless—
(a)a notice complying with section 120 has been served (whether by the mortgagee or receiver) on the person who, at the date of the service of the notice, is the current mortgagor; and
(b)on the expiry of the period specified in the notice, the default has not been remedied.
(2)The powers are—
(a)the mortgagee’s power to enter into possession of mortgaged land:
(b)the receiver’s power to manage mortgaged land or demand and recover income from mortgaged land:
(c)the mortgagee’s or receiver’s power to sell mortgaged land.
(3)Subsection (1) is subject to sections 125 and 126.
(4)A notice required by this section may be given in the same document as a notice under section 118.
[28] As set out above, s 119(1)(a) requires a notice under s 119 to comply with s 120. Section 120 provides:
120Form of notice under section 119
(1)The notice required by section 119 must be in the prescribed form and must adequately inform the current mortgagor of—
(a)the nature and extent of the default; and
(b)the action required to remedy the default (if it can be remedied); and
(c)the period within which the current mortgagor must remedy the default or cause it to be remedied, being not shorter than 20 working days after the date of service of the notice, or any longer period for the remedying of the default specified by any term that is expressed or implied in any instrument; and
(d)the consequence that if, at the expiry of the period specified under paragraph (c), the default has not been, or cannot be, remedied,—
(i)the amounts secured by the mortgage and specified in the notice will become payable; or
(ii)the amounts secured by the mortgage and specified in the notice may be called up as becoming payable; or
(iii)the powers of the mortgagee or receiver specified in the notice will become exercisable; or
(iv)more than 1 of those things will occur.
(2)A notice required by section 119 may specify that the action required to remedy the default includes the payment (whether to the mortgagee or receiver) of a specified amount, being the reasonable costs and disbursements (whether of the mortgagee or receiver) in preparing and serving the notice.
[29] Sections 120A to 120E of the PLA doubled the remedial period referred to in s 120(1)(c) to 40 working days in respect of mortgagors in default during the
COVID‑19 period as defined in s 120A. The default in this case occurred during the COVID-19 period and so the period within which the mortgagor was required to remedy the default was a minimum of 40 working days from service of the notices.
[30] Before entering summary judgment, I am required to be satisfied that the s 119 notices served were in the prescribed form and adequately informed the mortgagor, amongst other things, of:
(a)the nature and extent of the default;
(b)the action required to remedy the default (if it could be remedied);
(c)the period within which the mortgagor was required to remedy the default (or cause it to be remedied); and
(d)the consequence if not remedied by the expiry of the specified period that the mortgagee would become entitled to exercise certain specified powers.
[31] The Court of Appeal held in Burgess v TSB Bank Ltd that the requirement to “adequately inform” connotes an assessment of fact and degree.8
[32] The prescribed form for s 119 notices requires the mortgagee to “specify each default of payment claimed, stating the amount, due date, and nature (for example, principal, interest, insurances premiums, etc) of each missed payment, and any other particulars necessary to adequately inform the mortgagor of the nature and extent of the default”.9
[33] The s 119 notices served in this case did not specify whether the repayment arrears were for principal or interest. Furthermore, Mr Menzies’ latest affidavit records that an interest rate of 11.04 per cent was applied for the first three days, a $25 dishonour fee was inadvertently included in the arrears instead of the fees and costs
8 Burgess v TSB Bank Ltd [2015] NZCA 361, (2015) 16 NZCPR 728 at [40].
9 Property (Mortgagees’ Sales Forms) Regulations 2007, Form 1.
category and the loan was $2.97 in advance on 26 October 2021. The amount required to bring the loan up to date on 26 October 2021 was therefore $2,104.12, as recorded in the 15 November 2021 letter, rather than $2,270 as included in the repayment arrears in the s 119 notices. The repayment arrears were therefore overstated in the notices by
$165.88.
[34] Secure Funding submits the s 119 notices still complied with the requirements of the PLA, relying on Housing Corporation of New Zealand v Maori Trustee (No 2) where the mortgagee served a notice under s 92 of the Property Law Act 1952 (the 1952 Act). While stating the total sum due, the notice in that case did not distinguish between principal, interest and other sums.10 The Court of Appeal held that there was still sufficient compliance with the 1952 Act and associated regulations. In that case an earlier demand received two days prior to the PLA notice remained operative and fully particularised the make-up of the sum. The Court therefore held there could be no suggestion that the mortgagor did not know the components of the total sum referred to in the s 92 notice.11
[35] In this case the Agreement confirms that the mortgage is an “interest only” loan. Secure Funding submits the respondents can therefore readily ascertain by reference to that Agreement that the repayments and therefore the “repayment arrears” are comprised of interest only. In addition to “repayment arrears”, the s 119 notices particularised the default amount into enforcement expenses and fees and costs. On this basis counsel submits that, in accordance with the Court of Appeal’s reasoning in Housing Corporation of New Zealand, the s 119 notices sufficiently complied with s 120 of the PLA as they adequately informed the respondents of the nature and extent of their default.
[36] Furthermore, Secure Funding submits that the overstatement by $165.88 does not invalidate the s 119 notices. Counsel refers to Bryers v Harts Contributory Mortgages Nominee Co Ltd where the Court of Appeal confirmed that what matters is whether a reasonable recipient would have understood, notwithstanding an error in the
10 Housing Corporation of New Zealand v Maori Trustee (No 2) [1988] 2 NZLR 708 (CA).
11 At 723.
notice, what the notice giver intended to specify.12 Secure Funding says a minor calculation error or overstatement of the amount due will not render a notice defective.13
[37] Secure Funding also relies on s 52 of the Legislation Act 2019 which provides that minor differences from prescribed forms will not invalidate a form as long as it still has the same effect and is not misleading.
[38] I am satisfied that the s 119 notices in this case sufficiently complied with the requirements of s 120 of the PLA, including that they adequately informed the mortgagors of the nature and extent of the default. Although Secure Funding’s evidence now is that the amount was overstated, it appears that this is because a lower interest rate of 11.04 per cent was applied for three days rather than the interest rate of
12.05 per cent. Secure Funding are not seeking to adjust that rate now to the higher rate provided for in the Agreement. In addition, a fee of $25 was incorrectly included in the repayment arrears. Neither of these errors ought to invalidate the notices because the amount included in the notices was calculated by relying on the minimum monthly interest payment of $2,270 that had been advised to Ms Milgrew, with the
$25.00 fee inadvertently added. If what Secure Funding now says is the correct amount, $11,206.15, had been set out in the notices rather than $11,372.03, it is not likely to have affected whether the default amounts were paid.
[39] Furthermore, in accordance with the dicta of the Court of Appeal in Burgess the references to amounts owing are “references to matters able to be ascertained under the terms of the loan documents.”14
[40] The notices complied with the remaining requirements, setting out the action required and the period within which the mortgagors must remedy that default and that period was not shorter than 40 working days after the date of service of the notice, as required by s 120B.
12 Bryers v Harts Contributory Mortgages Nominee Co Ltd [2002] 3 NZLR (CA) at [15].
13 Parker v Rock Finance Co Ltd [1981] 1 NZLR 488 (CA) at 494.
14 Burgess v TSB Bank Ltd, above n 8, at [41].
[41] Mr Menzies confirms that the respondents failed to remedy the default within the required number of days or at all.
Should summary judgment be granted for an order for possession?
[42]Section 137 of the PLA provides:
137 Exercise of power to enter into possession
(1)If a mortgagee becomes entitled under a mortgage, after compliance with subpart 5, to exercise a power to enter into possession of mortgaged land or goods, the mortgagee may exercise that power by—
(a)entering into or taking physical possession of the land or goods peaceably and without committing forcible entry under section 91 of the Crimes Act 1961; or
(b)asserting management or control over the land or goods by requiring a lessee or occupier of the land, or a lessee or bailee of the goods, as the case may be, to pay to the mortgagee any rent or profits that would otherwise be payable to the current mortgagor; or
(c)applying to a court for an order for possession of the land or goods.
(2)A mortgagee may do all or any of the things referred to in subsection (1) before or after taking any steps to exercise any power to sell the mortgaged land or goods.
(3)Subsection (1)(a) is subject to section 138.
(4)Unless the context otherwise requires, a reference in this subpart to land or goods includes a reference to land and goods.
[43] Section 137 therefore provides the mortgagee with options to exercise the power to enter into possession of the property without applying to the Court for such an order. In determining whether to grant the order sought in this case, I must consider the basis for such an order to ensure that an order can be justified to avoid s 137(1)(c) being used inappropriately.
[44] Section 138 applies where there is a lease of the mortgaged land but that is not the case here.
[45] Having considered the evidence of Mr Menzies in the affidavits filed, I am satisfied that Secure Funding has complied with subpart 5 of pt 3 of the PLA and that
the respondents have failed to remedy the default so it is appropriate for an order for possession to be made.
Should summary judgment be entered for the judgment sum sought?
[46] Judgment was originally sought for $277,420.33, being the amount calculated as outstanding on 30 August 2022, plus interest and costs. Secure Funding submits that it would have been entitled under the Agreement to claim interest at 28.55 per cent on the whole of the amount outstanding but that instead it was charging interest on:
(a)the principal sum “of $277,102.00” at 22.05 per cent; plus
(b)the arrears of $50,318.33 at 28.55 per cent.
[47] Following a direction to file a further memorandum setting out a breakdown of this amount, a further affidavit has been filed by Mr Menzies which includes a summary of the interest rates claimed over the period of the loan as follows:
Date interest rate applied Annual
interest rate
Default interest rate (applied to overdue
payments)
26.03.2021 – 25.09.2021 10.55 per cent 16.55 per cent 26.09.2021 – 29.09.2021 11.04 per cent 17.04 per cent 30.09.2021 – 31.03.2021 12.05 per cent 18.05 per cent 01.04.2022 – 30.05.2022 24.04 per cent 30.05 per cent 31.05.2022 – current 22.05 per cent 28.05 per cent
[48] As can be seen from the summary, Secure Funding did not roll over the loan for a third six-month period. Instead, Secure Funding submits it applied the expired facility rate under the Agreement to the loan due to the respondents’ failure to meet their payment obligations under the loan. However, in error, from 1 April 2022 to 30 May 2022, rather than the expired facility rate of 22.55 per cent, Secure Funding instead applied 24.05 per cent with a default rate of 30.05 per cent. This was corrected on 31 May 2022 but, again in error, instead of 22.55 per cent as provided for in the Agreement, the lower rate of 22.05 per cent was applied. Secure Funding has continued to apply this rate.
[49] Secure Funding says that it has now remedied the application of the fixed interest rate of 24.05 per cent and default rate of 30.05 per cent applied in error for the two month period between 1 April and 30 May 2022 by applying an interest adjustment credit of $1,064.30 to the loan account.
[50] In the minute directing Secure Funding to provide a further breakdown of the amount outstanding, I recorded that no evidence had been included in Mr Menzies’ earlier affidavits of correspondence with the respondents in relation to the outstanding arrears and calculation of those amounts. I directed Secure Funding to file a further affidavit annexing such correspondence.
[51] In Mr Menzies’ further affidavit filed in response, he annexes call logs with the respondents, letters dated 15 November 2021, 3 March 2022 and 20 May 2022 and email correspondence following the filing and service of proceedings. In my view it is not clear from this correspondence that the respondents were advised that the facility had expired on 26 March 2022 and that the expired facility rate would be applying to the facility from 26 March 2022.
[52] The 3 March 2022 letter referred to above advised that the fixed interest rate for the third six-month period would be 12.55 per cent with a minimum monthly payment of $2,364. As with the 23 August 2021 letter concerning the second six‑month period, the letter recorded that if Secure Funding did not hear from Ms Milgrew prior to the expiry of the then current six-month period, it would automatically roll over the remaining loan balance for a further six-month fixed rate period.
[53] I accept the letter records that automatic rollover is subject to Ms Milgrew meeting all repayments and Secure Funding’s lending guidelines. However, at the time that the letter was sent, Ms Milgrew had defaulted on the last five monthly interest payments due under the loan. From the evidence filed, it appears that the only correspondence with Ms Milgrew over this time was on 21 November 2022 (other than the s 119 notices).
[54] Mr Menzies records that during December 2021 and January 2022 Secure Funding attempted to serve the respondents with s 119 notices but was unable to locate and personally serve Ms Milgrew. The s 119 notices were eventually served by substituted service on 10 March 2022 after the 3 March 2022 letter advising that the loan would be automatically rolled over for a further six-month period at the 12.55 per cent interest rate.
[55] Furthermore, the s 119 notices advised that the default was not required to be remedied 13 May 2022 and that the consequences of not remedying the default were that:
(a)All amounts secured by the mortgage will become payable (to the extent they have not already). The amount increases with interest and any other amount Secure Funding may debit to the respondents’ account under the Agreement, until the loan is paid out in full.
(b)The following powers of the mortgagee will become exercisable:
(i)Mortgagee’s power to enter into possession of the mortgaged land; and
(ii)Mortgagee’s power to sell the mortgaged land.
[56] I record that the notices did include in the section headed “Important Information for Recipient of Notice” that the respondents “must continue to meet your ongoing instalments as they fall due under your mortgage.”
[57] Approximately two weeks after service of the s 119 notices, Secure Funding says the facility expired because it had decided not to roll it over for a third term. But there is no correspondence in evidence confirming this to the respondents or seeking repayment of the full amount and advising that the expired facility interest rate was now applying to all of the amounts outstanding (plus additional default interest of six per cent on the amounts overdue).
[58]Mr Menzies attaches copies of Secure Funding’s call log which records that at
7.34 am on 13 May 2022 (when the s 119 notices required the default to be remedied) Ms Milgrew called Secure Funding and stated she had been kicked out of the house by her daughter and there were gang members involved. Ms Milgrew had gone to the police but was now back in the Property. Ms Milgrew further records that she was borrowing money from family and would pay the arrears that day via direct deposit. She also asked if Secure Funding was able to review the fees. The call log records that Ms Milgrew was advised the arrears figure was payable. Ms Milgrew asked about an interest rate review and was told to bring the loan up to date and make a few payments and then to contact the Auckland Office.
[59] Ms Milgrew called again on 13 May 2022 at 1.20 pm advising that she was looking to make a manual payment for the arrears that day and asked for the loan balance. The call log records Ms Milgrew was advised that the loan balance was
$256,081.77 and that she asked if Secure Funding could review the fees charged on the account. Ms Milgrew was advised that this could be raised with the account manager but that the manager had already said the fees were payable. The call log records that Ms Milgrew was looking to pay out the loan balance in the next few days and that she had funds from a friend to pay the arrears. The call log further records that Ms Milgrew asked if Secure Funding would review the interest rates but it does not record whether Ms Milgrew was advised what they were. Secure Funding advised that it was unlikely to be able to review the interest rates but said she should speak with the New Zealand service team if she would like to.
[60] At this stage Mr Menzies’ evidence is that an interest rate of 24.5 per cent was being charged to the facility with a default rate of 30.5 per cent.
[61]On 20 May 2022, Secure Funding sent a letter to the respondents recording:
(a)that the loan had been transferred to Assured Credit Management Team to recover the full amount now outstanding under the loan and that Secure Funding was now in a position to sell the Property on behalf of Liberty;
(b)that Secure Funding had engaged the services of Mike Pero Tauranga to inspect the Property to provide a market appraisal and that another agent would also be engaged and a valuer;
(c)that the respondents' cooperation was sought to allow all appointed agents access to the Property to ensure the highest price was received; and
(d)if its agents were not provided access, Secure Funding would have no option but to file proceedings to obtain vacant possession of the Property and that the costs of this process were high and the respondents may be liable to pay those costs.
[62] Again, the letter does not confirm that Secure Funding was treating the facility as expired and that the expired facility rate of 22.55 per cent (or any other rate) was now applying to the loan.
[63] On 31 May 2022, the call log records that Ms Milgrew called with Cody Westworth from a budget advisory service and that:
(a)Mr Menzies advised Ms Milgrew of the pay-out figure and arrears and that Secure Funding’s “preference” was for the loan to be paid in full.
(b)Ms Westworth asked if the arrears were paid if this could be reviewed and Mr Menzies advised that Secure Funding would review this if the arrears were paid.
(c)Ms Westworth asked if there were any other options and Mr Menzies advised that Secure Funding could offer time to sell which Ms Westworth confirmed she would discuss with Ms Milgrew.
[64] That same day Secure Funding adjusted the interest rate applying to the loan down from 24.05 per cent, the rate being charged in error, to 22.05 per cent with the default interest rate applying of 28.05 per cent. There is no evidence that the respondents were advised of this change.
[65] The call logs further record that on 3 June 2022, Ms Westworth called to advise that Ms Milgrew had applied for early release of her KiwiSaver and that it could take up to 15 days to be approved. Mr Menzies called Ms Westworth back later that day when the call log records:
(a)Ms Westworth confirmed that Ms Milgrew had applied for KiwiSaver and had plenty of funds available to fix the arrears.
(b)Mr Menzies asked if Ms Milgrew would be able to maintain ongoing payments as the KiwiSaver funds would not help if Ms Milgrew slipped back into arrears. Ms Westworth advised she had worked with Ms Milgrew and that she would have no issues maintaining the ongoing payments as her issues with unwanted house guests had been resolved and she had a boarder moving in.
(c)Ms Westworth also advised that KiwiSaver is usually quicker than 15 days and she would keep Secure Funding updated.
[66] On 28 June 2022, the call logs record that Ms Westworth called Mr Menzies and noted that:
(a)Ms Westworth was chasing Ms Milgrew for an update regarding KiwiSaver and waiting for a call back; and
(b)Mr Menzies advised the June repayment due under the loan had also been dishonoured.
[67] There is then a further call between Mr Menzies and Ms Westworth on 13 July 2022. The call log records that:
(a)Ms Westworth had heard briefly from Ms Milgrew the week before that she was chasing up the loan arrears and that she only had the loan balance; and
(b)Ms Milgrew had mentioned she had something in the works but had to go so Ms Westworth confirmed she would chase Ms Milgrew again and get back to Mr Menzies.
[68] There is no further correspondence in evidence until the service of the proceedings on Ms Milgrew on 12 October 2022 and on Milgrew Trustee on 20 October 2022.
[69] The conversations summarised in the call log do not show that it was made clear that the facility had expired, the expired facility rate was applying and the respondents were required to repay the whole loan, rather than it being a “preference.” This may be clear from other correspondence between the parties but at this stage Secure Funding has not established that there is no arguable defence in respect of the interest rate payable.
[70] Once proceedings were served there was then correspondence between Secure Funding’s solicitors, Tompkins Wake, and David Harrison, who identified himself as a childhood friend of Ms Milgrew. Copies of the email correspondence are annexed to Mr Menzies’ June 2023 affidavit.
[71] The first email annexed is on 25 October 2022 from Mr Harrison to Tompkins Wake and records that Ms Milgrew had asked Ms Harrison for help and she had agreed to list the house for sale/auction with Eves Real Estate. Mr Harrison requested that Tompkins Wake contact him and confirm what was required.
[72] On 28 October 2022, Tompkins Wake replied to Mr Harrison recording that the first call of the proceedings was on Monday 31 October 2022. Tompkins Wake said they were instructed to seek an adjournment at the first call and would be in contact to discuss how Secure Funding and Ms Milgrew could reach a resolution.
[73] On 9 November 2022, Tompkins Wake sent a further email to Mr Harrison, recording that:
(a)the Court had granted an adjournment until Monday 5 December 2022;
(b)if Ms Milgrew was willing to cooperate with the sale of the Property to repay the mortgage then Secure Funding was willing to seek a further adjournment to allow this to occur;
(c)Secure Funding required Ms Milgrew, in her personal capacity and as a trustee of the Milgrew Trust, and Milgrew Trustee to enter into a deed of acknowledgement of debt and to list the Property for sale in accordance with the terms of the deed; and
(d)Secure Funding was willing to provide Ms Milgrew until 5.00 pm 23 November 2022 to consider the above proposal but if Tompkins Wake did not hear back, Secure Funding would continue to seek judgment.
[74] A copy of the attached deed of acknowledgement of debt is not included in the evidence. It is not clear therefore whether the amount of the debt that was required to be acknowledged includes the amounts that Secure Funding now accepts it charged in error.
[75] On 15 November 2022, Mr Harrison responded to Tompkins Wake's 28 October 2022 email apologising for not being in contact as he had been unwell with COVID-19 and requesting an update.
[76] Later that day Tompkins Wake replied repeating the update from 9 November 2022 and seeking urgent confirmation of the respondent’s position on the deed of acknowledgement of debt.
[77] On 24 November 2022, Mr Harrison emailed Tompkins Wake recording that he had been in hospital and asking Tompkins Wake to inform Secure Funding that he and Ms Milgrew had made progress and were meeting with a real estate agent and lawyer the next Thursday and that he and Ms Milgrew were aiming to sell the Property.
[78] On 28 November 2022, Tompkins Wake responded to Mr Harrison, recording that Secure Funding agreed to provide the respondents until 2 December 2022 to
execute the deed of acknowledgement of debt, failing which it would seek judgment on 5 December 2022. Again, the deed of acknowledgement of debt is not attached to the affidavit.
[79] On 14 December 2022, Mr Harrison emailed Tompkins Wake recording that he was sitting with Ms Milgrew with the deed documents and asking what the status of the proceedings were as he was confident the deed would be signed and forwarded by the end of the business day if need be.
[80] Mr Harrison sent a further email to Tompkins Wake on the same day, recording he had seen that Ms Milgrew was a director of Milgrew Trustee again (presumably as a result of the restoration of Milgrew Trustee) and asked if the matter was now in the hands of others to proceed with the sale.
[81] Tompkins Wake responded to Mr Harrison on the same day recording that Secure Funding had sought judgment at the hearing on 5 December 2022, that the decision had been reserved and that Tompkins Wake would discuss Mr Harrison's emails with Secure Funding and respond once instructions were obtained.
[82] Since then, there have been delays as a result of the need to seek further submissions and evidence from Secure Funding and then as a result of the number of errors that have been identified in Secure Funding’s operation of this facility. Even after seeking further breakdowns, whilst a breakdown has been provided of the amount claimed in the s 119 notices, there is not a clear breakdown of the amount now claimed in judgment of $362,421.84, categorised into principal, interest and fees.
[83] I do not consider that the plaintiff has established that there is no arguable defence in respect of the claim for interest at the expired facility rate from 27 March 2022.
[84] As noted above, a copy of the proposed deed of acknowledgement of debt is not included in the evidence. The debt included in the deed of acknowledgement is likely to have included interest at 24.05 per cent and a default rate of 30.05 per cent from 1 April 2022 to 30 May 2022 which is not provided for in the Agreement.
Secure Funding must have realised that this was incorrect because it was reduced to the rate of 22.05 per cent on 31 May 2022 (after phone calls in which Ms Milgrew asked Secure Funding to review the rates). However, no credit appears to have been given until I directed that a breakdown of the amount claimed needed to be filed.
[85] I accept that following the error, Secure Funding was charged 22.05 per cent rather than the expired facility rate of 22.55 per cent provided for in the Agreement but for the reasons already set out, it is not clear that the respondents were clearly advised that the facility had expired from 27 March 2022 and the expired facility rate was being applied.
[86] The lender responsibility provisions in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) include an obligation to ensure:15
any information provided by the lender to the borrower after the agreement has been entered into is not presented in a manner that is, or is likely to be, misleading, deceptive, or confusing …
[87] If a lender does not comply with these principles and a person has suffered loss or damage by the conduct of the lender, then the Court has the power to make orders under s 94 of the CCCFA.16
[88] In addition, a lender must ensure, in respect of an agreement to which pt 5 of the CCCFA applies that the agreement is not oppressive and the lender does not exercise a right or power under the agreement in an oppressive manner.17
[89] Section 118 of the CCCFA defines oppressive as “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”.
[90] Where the loan agreement is oppressive, the Court has the power under s 120 of the CCCFA to reopen the contract. Section 124 sets out the matters that the Court is required to have regard to in determining whether to reopen a contract. These
15 Credit Contracts and Consumer Finance Act 2003, s 9C(3)(c)(ii).
16 Section 93.
17 Section 9C(3)(e)(i) and (ii).
matters include whether the lender has complied with the lender responsibility principles in s 9C(2), the relative bargaining power of the parties, whether after taking account of the particular characteristics of the debtor (for example age or physical or mental condition) that person was reasonably able to protect their interests and whether the contract is a consumer credit contract.
[91] The Court then has broad powers under s 127, including to order that any obligation outstanding under the credit contract be extinguished and to revise or alter any term of the credit contract.
[92] In addition, under s 128 the Court has the power, if it has reopened a consumer credit contract, to make an order for payment by any party of the full costs incurred in connection with the proceedings by any other party to the proceedings.
[93] For all the above reasons I consider that on the evidence filed it is reasonably arguable that interest may only be payable at the fixed interest rate advised of 12.55 per cent from 27 March to 26 September 2022.
[94] Ideally this judgment would have been issued more promptly but the evaluation of how interest was calculated and charged required additional memoranda, affidavits and time. I have considered whether to seek further submissions but given the delays already I consider instead that it is better to enter summary judgment for the matters which are beyond argument and leave it to the parties either to resolve the remaining amounts due or for Secure Funding to continue to formal proof in respect of the additional interest. It may be that there is further correspondence in which Secure Funding confirms that the interest rate now payable is the expired facility rate that has not been provided to the Court.
[95] For the purposes of summary judgment, I therefore award interest at the rate of 12.55 per cent plus default interest of an additional six per cent on the monthly interest payments as they fell due but were not paid. I continue to apply this rate until payment as the appropriate fixed interest rate for a fourth six-month fixed interest period is not in evidence. It would not however have been less than the rate for the 27 March to 26 September 2022 period.
[96]Finally, I note that there are several different figures referred to as the principal.
[97] The loan advanced in the Agreement and statement of claim was $225,000. In his June 2023 affidavit, Mr Menzies says that the original amount claimed of
$277,420.33 in the summary judgment included principal of $225,000. Secure Funding then increased the amount it is claiming to $362,432.84 and refers to the principal as being $227,407.00. Despite the fact that I directed a breakdown of the amount claimed originally, when Secure Funding increased the amount sought it did not provide a breakdown of the increased amount. Mr Menzies does however, in his latest affidavit, refer to a principal sum of $227,025.46, with no explanation as to why this is more than $225,000.
[98] I therefore only enter summary judgment for principal of $225,000 as well as directing summary judgment of the fees set out in the breakdown of the original amount. Any further fees can be sought by way of formal proof if Secure Funding wishes to do so.
Costs
[99] Secure Funding sought indemnity costs in respect of its legal costs up to 2 December 2022, attaching copies of invoices up to that date. The Agreement provides a right to claim indemnity costs including legal expenses at cl 29.1 of the Memorandum. Secure Funding has not claimed any additional costs since then.
[100] The additional legal fees incurred have largely arisen as a result of the errors made by Secure Funding by applying incorrect interest rates, wrongly categorising fees and the failure to provide correspondence confirming matters advised to the respondents until the most recent memorandum and affidavit. Given the court’s powers under the CCCFA as discussed above, I therefore make no order in respect of further costs or disbursements on this summary judgment application. If Secure Funding wishes to seek further costs or disbursements, then they can be sought by way of formal proof in the same way as any additional interest or fees.
Result
[101] I grant the application by Secure Funding for summary judgment in part and make the following orders:
(a)That the respondents, and any other occupant of the Property at 20 Hidcote Place, Bethlehem, Tauranga, Record of Title SA60A/993 (South Auckland Registry), Lot 90 DPS 74813, vacate and deliver up possession of the Property.
(b)For judgment in respect of the principal sum of $225,000.
(c)For interest in accordance with s 22 of the Interest on Money Claims Act 2016 on the principal sum at the following rates:
(i)from 26 March 2021 to 25 September 2021 at 10.55 per cent on the principal sum;
(ii)from 26 September 2021 to 25 March 2022 at 12.05 per cent;
(iii)from 26 March 2022 onwards at 12.55 per cent; and
(iv)default interest of an additional six per cent applying in respect of the monthly interest payments due but not paid.
(d)For judgment for $13,076.25 in fees from 26 March 2021 to 30 August 2022 comprising of:
Rebatable Origination Fees $4,500.00 Default fees $950.00 Service fees $170.00 Dishonour fees $250.00 Expired insurance fees $300.00 Mercantile agent fees $5,406.25 Property law act notice $15,000.00 Total $13,076.25
(e)Costs in the sum of $15,583.50 (excluding GST) representing Secure Funding’s actual solicitor-client costs to 30 November 2022.
(f)Disbursements of $2,155.28 (excluding GST) accrued up to 30 November 2022.
(g)Leave is reserved to seek further orders or directions from the Court.
Associate Judge Sussock
0