Senior Trust Capital Limited v Hannon
[2023] NZHC 3628
•12 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1141
[2023] NZHC 3628
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of CATHERINE PHYLLIS HANNON
BETWEEN
SENIOR TRUST CAPITAL LIMITED
Judgment Creditor
AND
CATHERINE PHYLLIS HANNON
Judgment Debtor
CIV-2022-404-2442 BETWEEN
CATHERINE PHYLLIS HANNON
First Plaintiff/Counterclaim Defendant AND
CATHERINE PHYLLIS HANNON and
TOMPKINS WAKE TRUSTEES 2019 LIMITED Second Plaintiffs AND
SENIOR TRUST CAPITAL LIMITED
Defendant/Counterclaim Plaintiff
Hearing: 27 November 2023 Appearances:
B P Molloy and C A Wooller for First and Second Plaintiffs and Counterclaim Defendant
M J Tingey and T Y Pan for Defendant/Counterclaim Plaintiff
Judgment:
12 December 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 12 December 2023 at 12:30 pm
pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
SENIOR TRUST CAPITAL LIMITED v HANNON [2023] NZHC 3628 [12 December 2023]
[1] Catherine Hannon (Catherine) was a director and (indirect) shareholder in Roy’s Bay Estate Limited (RBEL). RBEL from its incorporation in February 2015 through to late 2021/early 2022, carried out a substantial multi-unit property development in Wānaka. Mr Chris Holmes was a director with Catherine. Catherine’s then husband, Tony Hannon, while not a director, was a shareholder in RBEL.
[2] The funding for the development was initially from Senior Trust Capital Limited (Senior Trust). In June 2020, further funds were required by RBEL. Senior Trust Retirement Village Income Generator Limited (Income Generator) agreed to refinance Senior Trust and become the senior lender and Senior Trust would be subordinated as junior lender.
[3] Mr Holmes and Mr Hannon provided a guarantee to Senior Trust in respect of RBEL’s debt. RBEL went into liquidation on 23 March 2023. Judgment has been entered against Messrs Holmes and Hannon under their guarantee for approximately
$3,400,000.00.1
[4] While Catherine also provided a guarantee to Senior Trust, she was not named as a defendant in the proceedings just referred to. In late 2022, Catherine sought an injunction to restrain Senior Trust from exercising its power as mortgagee in respect of a unit in the development (Unit R4 being the show home unit) which Catherine, or rather, her trust, had purchased from RBEL to provide the company with further funding.
[5] Catherine’s without notice application for an injunction was directed to be heard on notice and following a hearing on 16 January 2023, Justice Tahana in a judgment released on 19 January 2023, held there was not a serious question to be tried in respect of any of the causes of action raised by Catherine against Senior Trust.2
1 Senior Trust Capital Ltd v Holmes [2023] NZHC 3108.
2 Hannon v Senior Trust Capital Ltd [2023] NZHC 16.
[6] With the injunction having been declined, the mortgagee sale proceeded and Senior Trust filed a defence and counterclaim. Because of an oversight by counsel then instructed for Catherine (not Mr Molloy presently instructed), a statement of defence was not filed to the counterclaim. Senior Trust’s claim was for a liquidated amount, being the amount it claimed under Catherine’s guarantee together with interest and costs. Judgment by default was entered against Catherine on 22 May 2023.
[7] Senior Trust then obtained a bankruptcy notice and when that was served on Catherine, the fact that no defence to the counterclaim had been filed came to light. On 13 July 2023, Catherine filed an application to have the default judgment set aside along with an application to have the bankruptcy notice set aside.
[8] Senior Trust’s judgment against Catherine is made up of two distinct elements. The first is pursuant to a guarantee Catherine gave in respect of RBEL’s facility. The second arises from a separate term loan between Senior Trust and Catherine and her husband dating from 25 August 2021 (the Hannon loan). Following the hearing, Mr Malloy, counsel for Catherine, abandoned the principal defence raised in relation to the guarantee claim which was that Catherine’s guarantee was obtained by duress. The other defence to the guarantee claim is that Senior Trust in selling RBEL’s secured property, failed to meet its obligations under s 176 of the Property Law Act 2007.
Principles applying to the setting aside of a default judgment
[9] These principles were agreed. Rule 15.10 of the High Court Rules 2016 (the Rules) provides:
15.10 Judgment may be set aside or varied
Any judgment obtained by default under rule 15.7, 15.8, or 15.9 may be set aside or varied by the court on such terms as it thinks just, if it appears to the court that there has been, or may have been, a miscarriage of justice.
[10] It is not suggested that the judgment was irregularly obtained and therefore three matters are commonly highlighted as guiding the assessment of whether there has been a miscarriage of justice such that the judgment must be set aside.
[11]The three criteria are:3
(i)whether the delay in seeking to set aside the default judgment is reasonably explained;
(ii)whether the defendant has a substantial ground of defence; and
(iii)whether the plaintiff will suffer irreparable injury if the judgment is set aside.
[12] Mr Tingey, counsel for Senior Trust, recognised that often the existence of a substantial defence becomes the Court’s primary focus,4 and that “the defendant must show more than a substantial (sic) or flimsy defence but rather one which appears sufficient to justify delaying the plaintiff in obtaining the fruits of [its] judgment.5
[13]Then:6
The real question is whether the defence now mounted is strong enough to suggest that a miscarriage of justice may have occurred when judgment was entered … without the Court having had the benefit of hearing from them.
[14] As to why a defence was not filed, I accept Catherine’s explanation that this was an oversight by her counsel. The Court is traditionally reluctant to visit such errors on parties if that can be avoided. I proceed on the basis that Catherine has a reasonable explanation as to why a defence was not filed. Mr Tingey sought to make something of it taking a month or so for the application to set aside the judgment to be filed. I do not consider that delay to be significant having regard to the substantial material that has been filed.
[15] I now turn to consider whether Catherine has a defence to the two claims made against her, that is, in respect of the Hannon loan and in respect of her guarantee of RBEL’s indebtedness.
3 Russell v Cox [1983] NZLR 654 (CA) at 659.
4 Beachlands Childcare Ltd v Sweet Homeek Ltd [2021] NZHC 382 at [17].
5 Sandall v Cardno HC Blenheim 2/87, 18 May 1987 at 3.
6 Pioneer Farms Ltd v Stoddard [2012] NZHC 3114 at [34].
The Hannon loan
[16] It is necessary to give a little more context to the circumstances in which the Hannon loan was sought. RBEL obtained its advance from Senior Trust in November 2016. The facility was to be repaid in May 2018 but was extended, the amount of the facility increased and the expiry date extended to 20 April 2021.
[17] In September 2019, Catherine purchased Unit R4 (the show home unit), from RBEL essentially as a means of introducing funds to RBEL. Catherine held that unit on bare trust for the Catherine Hannon Investment Trust of which Catherine and Tompkins Wake Trustees Limited are the trustees.
[18] On 22 April 2021, RBEL’s facility was extended to 19 July 2021 with a further extension to 30 September 2021.
[19] At the time of the Hannon loan, RBEL was under pressure from its creditors. RBEL required funds to meet its debts, in particular, the ongoing amounts due to its builder.
[20] Senior Trust was not prepared to advance further funds to RBEL. However, it was prepared to make an advance to Catherine and her husband.
[21]Catherine’s evidence in respect of the Hannon loan is:
Loan to Tony and me
29. On 25 August 2021, Tony and I entered into an agreement to borrow
$150,000 from Senior Trust (Hannon Loan) ... Senior Trust had again refused to advance the funds RBEL needed to pay the builder for that stage of the development (Archi Build Limited), so Tony and I agreed to borrow the funds in our names to ensure that the builder was paid. I note that, while the lending was to Tony and me personally, Senior Trust was concerned to have recorded that it was a commercial contract.
[22]At the time of this advance, RBEL had a contract for the sale of Unit R1 (R1).
[23] The day before the loan agreement was signed, Mr Hannon emailed John Jackson at Senior Trust as follows:
John – again per conversation this morning – we are both happy to sign the Loan Agreement consequent on the understanding that it is repaid from the proceedings of R1 settling and that the STC mortgage on R4 will be released to allow that settlement also.
[24]Senior Trust did not reply to that email.
[25] The sale of R1 was due to settle on 30 September 2021 which, as already noted, was the repayment date pursuant to the last extension of the Senior Trust facility with RBEL.
[26] On 25 August 2021, Catherine emailed Senior Trust and copied in her husband and Chris Holmes (her co-director) in relation to the $150,000.00 loan as follows:
Hi John
Please find attached the executed loan agreement. We have decided to reduce the loan amount to $150,000 as this will take care of the most urgent creditors.
When Chris’s settlement on R2 comes through on the 31 August the rest of the creditors will be repaid (and also this loan if there is any left over). The residual of this loan will be repaid when R1 settles on the 30th of September.
We would appreciate your urgent attention to release the funds as we would like to pay creditors today.
Thanks Catherine
[27] The advance was duly made. The loan agreement does not require the sale proceeds of R1 to be applied to the amount owed by the Hannons to Senior Trust.
[28] Accordingly, at this point, RBEL owned R1 and had a contract for its sale to a third party settling on 30 September 2021. RBEL’s secured creditors had a right to the sale proceeds with Income Generator being the senior secured creditor.
[29] “John”, who is referred to in the two email extracts above, is a director of Senior Trust. The representative of Income Generator, a Mr Scott Lester, while also having a Senior Trust email address, is not copied in to the emails of 24 or
25 August 2021 ([23] and [26] above). The relationship between Senior Trust and Income Generator is not exactly clear. Mr Lester is a director of Income Generator. John Jackson is a director of both Senior Trust and Income Generator. Apparently, where their interests are in conflict then Mr Lester makes decisions for Income Generator.7
[30] When R1 was sold, the proceeds were paid to Income Generator as first mortgagee. The emails of 24 and 25 August 2021 were considered by Justice Tahana in her judgment.
[31] I note here there is a further email relevant to whether Catherine has an arguable defence in respect of the Hannon loan dated 9 September 2021. This is an email sent by Chris Holmes to Mr Scott Lester and John Jackson of Senior Trust and copied to Catherine with the subject line “Sale proceeds”. That email says:
Can you confirm that the unconditional status of R1 sale proceeds will be available for payment of Archibuild and other creditors??And that the unconditional status of R1 will free up the balance of R2 sale proceeds for the same.
[32] Justice Tahana concluded there was not a serious question to be tried in respect of the proposition then advanced by Catherine that Mr John Jackson of Senior Trust had agreed that the R1 proceeds were to be used to repay the Hannon loan.
[33] Tahana J noted the 2016 loan agreement included an express requirement that RBEL pay to Senior Trust the sale proceeds of a number of units including R1. The Hannons could not dictate where RBEL’s funds were paid.
[34] Tahana J concluded that Mr Jackson had, at best, acknowledged Catherine’s desire that the proceeds of R1 would be applied to the personal loan when, in reply to Catherine’s email of 25 August 2021 (at [26] above), Mr Johnson said “thanks will get onto this right away”.
7 Hannon v Senior Trust Capital Limited, above n 2, at [13].
[35] The further practical point noted by Tahana J was that Catherin was a director of RBEL, she was in a position to have RBEL repay the Hannon loan from the funds it drew down to pay creditors.
[36] To meet Tahana J’s conclusion that there was not a serious case to be argued in respect of it being an agreed term of the Hannon loan that it would be repaid from the proceeds of R1, Mr Molloy (counsel for the first and second plaintiffs and counterclaim defendants) argued the emails of 24 and 25 August 2021 gave rise to an estoppel.
[37] Before I address that argument, I address an alternative but related argument raised by Catherine that the trust’s actions (or its silence given the August emails), were a breach of the Fair Trading Act 1986.
[38] A Fair Trading Act argument was rejected by Tahana J in her judgment. The claim before her Honour was that Mr Jackson, on behalf of Senior Trust, represented that the Hannon loan would be repaid from the R1 sale proceeds. The email reproduced at [23] above, refers to a conversation between Mr Hannon and Mr Jackson on the morning of 24 August. However, there was no evidence as to the contents of that conversation before Justice Tahana and that position has not changed.
[39] Mr Jackson’s evidence is that he never said or agreed that the Hannon loan could be repaid from the proceeds of R1.
[40] Despite the significance placed by Tahana J on the absence of evidence as to the contents of the conversation between Mr Hannon and Mr Jackson, it remains the case that there is no evidence as to that conversation before the Court. That is notwithstanding Mr Hannon having filed an affidavit in this proceeding on 13 July 2023. I can only conclude from Mr Hannon’s apparent unwillingness (or inability) to provide evidence on this issue that it either does not exist or it would not be helpful.
[41] However, that is not the end of the estoppel or Fair Trading Act defences. The representation relied on for each cause of action is said to be Senior Trust’s silence in the face of the emails referred to at [23] and [26] above.
[42] Mr Molloy argues that Senior Trust acknowledged Catherine’s email of 25 August 2021, when John Jackson said: “Thanks will get onto this right away. Can you and Tony also sign the additional document sent acknowledging this is a commercial contract.”
[43] Mr Molloy submits that Senior Trust did not raise objection to the contents of the 24 or 25 August 2021 emails. Mr Molloy submits the Senior Trust had a duty to correct any misunderstanding as to how the proceeds of R1 would be applied, and by remaining silent, Senior Trust gave Catherine good reason to rely (by signing the loan agreement) on her understanding as to how the R1 proceeds would be applied. Mr Molloy submits it would be unconscionable for Senior Trust to now enforce the Hannon loan in circumstances where it did not seek to correct or disavow Catherine’s belief that the R1 proceeds would be applied to repay the loan. Mr Molloy submits that this is a matter that requires a full hearing rather than determination in a summary context. Similarly, it is said that Senior Trust’s silence was misleading and deceptive conduct as it had a duty to correct Catherine’s understanding as recorded in the emails.
[44] Mr Tingey submits that estoppel was not raised by Catherine in her application to set aside the default judgment and therefore should not be considered. Given it has been argued, I consider it preferable to address it.
[45] Mr Tingey submitted there was no basis to impose a duty to speak in a commercial lending arrangement where both parties were represented by lawyers and where there is no basis to conclude Senior Trust knew Catherine was acting on a mistaken assumption. However, the email of 24 August 2021 does record that the Hannons were expecting the Hannon loan to be repaid from the R1 sale proceeds, presumably because the Hannons were using the money to pay RBEL creditors.
[46] However, the 9 September 2021 email set out at [31] above, shows a change of position by RBEL. At this time, the Hannon interests were 50 per cent shareholders
in RBEL and Catherine was a director. It must be remembered that the sale proceeds of R1 were the property of RBEL. In the 9 September 2021 email, copied to Catherine, Mr Holmes sought confirmation that the sale proceeds of R1 would be available for the payment of the builder and other creditors. As it happens, the sale proceeds were applied to the Income Generator, the secured creditor, but the 9 September 2021 email shows that whatever Catherine may have been thinking at the time of the advance, it was overtaken by RBEL seeking confirmation that the R1 sale proceeds could be applied to the builder’s costs.
[47] Catherine is described by the solicitor who had acted for her as being a: “[S]ophisticated and experienced businesswoman with a good commercial understanding and a strong ability to ascertain her own best interests in a given scenario”. She was described as having “extensive experience with trusteeships and commercial property.”
[48] As director of RBEL, Catherine was aware that Income Generator was the senior secured creditor with Senior Trust, the junior secured creditor. Both secured creditors had to waive their entitlement to the sale proceeds of R1 before RBEL could use the funds. Catherine’s position that $150,000.00 of the R1 sale proceeds should have been applied to the debt owed to Senior Trust by the Hannons amounts to saying the secured creditors were willing to forego $150,000.00 of their security. The Hannon loan was necessary as Senior Trust was not prepared to advance more money to RBEL. There is no commercial reason whatsoever for Senior Trust (or Income Generator) to prejudice its position in the way argued for by Catherine. Catherine’s position amounts to saying that Income Generator was prepared to forego repayment of
$150,000.00 from the sale of R1.
[49] Where Senior Trust was not prepared to make further advances to RBEL, Catherine, as a sophisticated and experienced businesswoman with a good knowledge of commercial transactions, cannot have reasonably relied on Senior Trust’s silence as amounting to it (or Income Generator) being prepared to forego $150,000.00 of their security.
[50] The ultimate issue in respect of the application to set aside the judgment entered against Catherine for the Hannon loan is whether there has been a miscarriage of justice.
[51] If $150,000.00 of R1 sale proceeds had been applied to the Hannon loan, that amount would not have been available to meet RBEL’s indebtedness to its secured creditors. Therefore, the amount due from the Hannons under their guarantees would be $150,000.000 higher. Given I am satisfied that Catherine has no reasonably arguable defence in respect of Senior Trust’s claim under its guarantee, Catherine’s estoppel/Fair Trading Act claims do not give rise to a miscarriage of justice. At the end of the day, Catherine will be liable to pay the amount represented by the Hannon loan either pursuant to that loan or under her guarantee. What she might avoid in terms of liability under the Hannon loan increases her exposure under her guarantee. Catherine’s challenge to the Hannon loan is a zero sum issue as success in her argument in relation to the R1 proceeds increases the amount she must pay under her guarantee by the same amount.
Implied term
[52] In addition to submitting Catherine’s emails could give rise to an estoppel, Mr Molloy submitted repayment of the Hannon loan from the sale proceeds of R1 became “… an agreed term implied into the Personal Loan. The repayment priority was expressly raised as a term by [Catherine] in her email correspondence with [Senior Trust].”
[53] I have already noted that Tahana J found there was not a serious question to be tried in respect of it having been agreed as part of the Hannon loan that it would be repaid from the R1 proceeds. This submission represents Catherine seeking to have a term implied into the Hannon loan that contradicts the written loan agreement. The written loan agreement contains an express obligation on the Hannons to repay the advance. That would not have been necessary if the advance was going to be repaid from the sale proceeds of R1.
[54] At the time of the loan agreement, R1 was subject to a contract to a third party. Catherine undertook in the loan agreement to execute a backup agreement to purchase
R1 for a minimum price specified in the agreement in the event the existing contract did not settle.
[55] There is no suggestion the backup contract to be provided by Catherine was at a price that gave a credit for the $150,000.00. In addition, the loan agreement contains a clause that provides any amendment must be in writing, which is not satisfied here. The Hannon loan is with Senior Trust and not Income Generator. which company would have had to agree to waive its priority before RBEL was free to deal with the sale proceeds of R1 in the manner contended for by Catherine.
[56] Catherine’s position that the Hannon loan would be repaid from the sale proceeds of R1 also begs the question of why the Hannons reduced the loan amount to $150,000.00, (the amount in the loan agreement was originally $300,000.00) if that amount was always going to be repaid from the sale proceeds of R1. In other words, on Catherine’s case the loan agreement presented no personal risk or exposure to the Hannons because the money they were borrowing was always going to be repaid from R1. If that was the case, then the amount of the advance was essentially irrelevant and there was no reason to halve the amount of the loan.
[57] The proposed implied term does not meet the traditional test for an implied term relied on by Mr Molloy that the term must be so obvious that it “goes without saying”.8
[58] Similarly, there would have been no need for Mr Holmes’ email of 9 September 2021 at [31] above, asking for confirmation as to how the R1 sale proceeds would be used if the Hannons controlled at least $150,000.00 of those sale proceeds as a result of what they say was an implied term of their loan agreement. Mr Holmes’ email of 9 September 2021, refers to the R1 sale proceeds generally and not simply those funds available after repaying the Hannons.
8 Jacks Point Village Holdings (No 2) Ltd v Long Capital Holdings NZ Ltd [2019] NZHC 1404 at
[43] referring to BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 277.
[59] Recharacterising the claimed right to have the Hannon loan repaid from the R1 sale proceeds as an implied term does not alter my conclusion that this claim does not make the entry of judgment by default a miscarriage of justice.
Duress – defence abandoned
[60] The primary defence raised by Catherine to her being liable under the personal guarantee was that it was entered into under duress. Catherine claimed she did not receive legal advice in respect of the guarantee. However, in the evidence that came in from a solicitor, Mr Chambers (who acted for RBEL and for Catherine in various other contexts), it is clear that while formally Mr Chambers was not acting for Catherine, there were extensive discussions between them in respect of her proposed guarantee. Mr Tingey identified what he characterised as significant inconsistencies between Catherine’s affidavit and Mr Chambers’ affidavit.
[61] Significantly, in an email of 11 June 2020, Catherine emailed Scott Lester and John Jackson as follows:
Thank you for your patience in this matter.
Chris, Tony, and I have reached an agreement as to the share allocation of Roys Bay giving consideration to CHIT for the offer to Senior Trust of a limited guarantee.
Therefore I would like to offer Senior Trust a limited guarantee from CHIT for the amount of $900,000 supported by a first mortgage registered security on the Roys Bay R block Show Home, which will meet the previously stated requirement for additional security.
We hope that this meets with your approval and look forward to next steps.
[62] The guarantee was not given until 17 July 2020. The tenor of the material produced by Mr Chambers was inconsistent with a claim for duress and it was appropriate that the defence was abandoned.
[63] In any event, there were further difficulties with the duress argument being the absence of any contemporary protest by Catherine or that she affirmed the guarantee.
[64] Catherine gave her guarantee on 17 July 2020. As already mentioned, on 22 April 2021, Senior Trust’s facility, which had by then just expired, was extended to
19 July 2021 with a further extension on 30 September 2021. Catherine, as an astute businessperson, would know that Senior Trust when deciding to grant extensions, would rely on the securities it held including Catherine’s guarantee. At no point did Catherine assert that her guarantee was obtained by duress and could not be relied on by Senior Trust.
[65] As a director of RBEL seeking extensions of its facility, Catherine had full knowledge of all relevant circumstances. By having RBEL seek an extension, which she would have known would be considered on the basis of the existing securities, she affirmed her guarantee. Catherine could not seek the benefit of the guarantee on behalf of RBEL (and indirectly for her own benefit as an indirect 50 per cent shareholder via her trust) through seeking extensions of the facility, but at the same time hold secret to herself the idea her guarantee was valueless as she would seek to avoid it if it was ever called upon.
[66] The other barrier to Catherine raising duress is that when the guarantee was required, she negotiated a guarantee fee in the form of RBEL issuing her further shares, taking her shareholding up to 50 per cent. Accordingly, Catherine, or at least her investment trust, received consideration for the giving of the guarantee. It was not open to Catherine to claim a benefit she received for the guarantee, that is, the issue to her (or her trust) of further shares, and at the same time maintain that the guarantee was worthless because of duress. That the guarantee fee was sought, negotiated and granted stands against Catherine giving her guarantee because of duress.
[67] I briefly mentioned above Catherine’s claim that when Senior Trust conducted a mortgagee sale of RBEL’s property, it breached s 176 of the Property Law Act in failing to take reasonable care to obtain the best price reasonably obtainable at the time of sale.
[68] Catherine’s co-guarantors, Chris Holmes and Mr Hannon, raised the same defence to Senior Trust’s summary judgment application against them determined by me. I rejected the defence, principally on the grounds that Mr Holmes and Mr Hannon did not dispute that the mortgagee sale process undertaken by Senior Trust was somehow inadequate. Mr Molloy also did not challenge the mortgagee sale process,
that is, there is no suggestion the sales process including marketing undertaken by Senior Trust was inadequate. Given that acknowledgement, it is difficult to argue the sale process resulted in an undervalue.
[69] It is evident from the above narrative that towards the end of 2021, RBEL was in financial difficulty. Its directors were conscious of the need to try and sell its development. RBEL had obtained a conditional contract to sell the Wānaka site to a company called “S5 Consulting Group Limited” (S5) for $24,000,000.00. While that contract became unconditional in December 2021, it was replaced by a further contract with S5 in February 2022 at a price of $22,000,000.00. The February 2022 sale contract was due to settle on 31 March 2022 but did not settle.
[70] Senior Trust, in February 2022, instructed real estate agents to conduct the mortgagee sale. In May 2022, Senior Trust as mortgagee, sold the Wānaka land to a company called Roy’s Bay GCO Limited, a subsidiary of S5. The sale price was
$18,000,000.00, that is, $4,000,000.00 less than the February 2022 contract.
[71] The submission I rejected was that the difference between the February 2022 sale price to S5 and the May 2022 contract to a subsidiary of S5 at $18,000,000.00, indicated a failure to obtain the best price reasonably possible. That submission did not take into account that the two contracts were materially different. The sale at
$18,000,000.00 excluded two of the units with a value in the region of $800,000.00 plus GST each. The $18,000,000.00 contract had a number of exclusion clauses and included no warranties. No further material is relied on by Catherine in this proceeding to establish an arguable breach of s 176 of the Property Law Act.
[72] Accordingly, and essentially for the reasons set out in my 3 November 2023 judgment, I do not accept that Catherine has a reasonably arguable defence in respect of the mortgagee sale process.
Other claims in Catherine’s pleading against Senior Trust
[73] It will be recalled that this proceeding has its origins in a claim commenced by Catherine against Senior Trust. Catherine’s statement of claim raises causes of action linked to Senior Trust knowing that Catherine was dealing with property she held as
bare trustee for her investment trust. Mr Molloy in his submissions, confirmed that Catherine does not wish to place weight on those causes of action in this application but they remain to be addressed in Catherine’s substantive proceeding.
The application to set aside the bankruptcy notice
[74] Mr Molloy submitted that if the judgment was set aside, the foundation for the bankruptcy notice was removed and it would be appropriate for the bankruptcy notice to be set aside. The only other submission made in respect of the bankruptcy notice was that Catherine’s claims in her substantive proceeding exceed the amount in the bankruptcy notice. However, none of the claims in Catherine’s original (and only) statement of claim passed the threshold of a serious question to be tried when assessed by Justice Tahana. Such claims do not found a basis for setting aside the bankruptcy notice.
Orders
[75]I make the following orders:
(i)The applications dated 13 July 2023 to set aside the judgment entered by default on 22 May 2023 and to set aside the bankruptcy notice dated 1 June 2023, served 29 June 2023 are both dismissed.
(ii)Senior Trust is entitled to costs. Counsel were not heard on costs. Senior Trust may file a memorandum in respect of costs within five working days. If it does not file such a memorandum (not more than five pages) the costs order is that Senior Trust is entitled to costs on a 2B basis plus disbursements as fixed by the Registrar. If a costs memorandum is filed, a reply of not more than five pages, is to be filed within five working days of receipt of Senior Trust’s memorandum.
(iii)The order dismissing the application to set aside the bankruptcy notice is not to be sealed for five working days after the date of this judgment. This deferral is to give Catherine the opportunity to satisfy the judgment as sought by Mr Molloy in his written submissions.
Associate Judge Lester
Solicitors:
Couch Harlowe Kovacevich, Auckland Haigh Lyon Lawyers Limited, Auckland
Copy to counsel:
M J Tingey, Barrister, Auckland
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