Serepisos v Black Robin Equity Limited
[2023] NZHC 2996
•26 October 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2023-404-728
[2023] NZHC 2996
BETWEEN ELEFTHERIOS SEREPISOS and LAMBROS SEREPISOS
as Trustees of The JDS FAMILY TRUST First Plaintiffs
ELEFTHERIOS SEREPISOS
Second PlaintiffAND
BLACK ROBIN EQUITY LIMITED
First Defendant
NEVAY NOMINEES LIMITED, previously known as BLACK ROBIN NOMINEES
LIMITED
Second Defendant
Continued…
Hearing: 25 October 2023 Appearances:
S J Fraser for the plaintiff
R B Hucker for the first, second and fifth defendants N P Tetzlaff and D R Lang for the sixth defendants
Judgment:
26 October 2022
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 26 October 2023 at 10.00 am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
SEREPISOS and LAMBROS SEREPISOS v BLACK ROBIN EQUITY LIMITED [2023] NZHC 2996 [26
October 2022]
AND
AND
WINDSOR BRE LIMITED
Third Defendant
DAVID SHAW WIGMORE
Fourth DefendantSHAUN JAMES GLASGOW
Fifth DefendantDARREN IAN GANNON, ADELE GANNON and SMITH AND PARTNERS TRUSTEE CO. LIMITED
Sixth Defendants
BRP PROJECTS LIMITED
Third Party
[1] The plaintiffs apply for an interim injunction to restrain the sixth defendants (the mortgagees) from exercising their power of sale, as mortgagees, over a property at 91 Nevay Road, Miramar, Wellington (the property). The mortgagees oppose the application.
[2] The plaintiffs originally applied for an interim injunction in April 2023. In May 2023, the plaintiffs informed the Court that the application was no longer urgent and asked that it sit on the file, with leave to bring it back on at short notice. I made a direction to that effect.
[3] The plaintiffs renewed their application by filing an amended application on 10 October 2023. Regrettably, the renewed and amended application received its first call only yesterday morning in the Duty Judge list. Further, the property is listed for sale by auction tomorrow, at 12 pm on 27 October 2023. The plaintiffs wish to enjoin the mortgagees from, among other things, proceeding with that auction.
[4] Given the tight timeframe, I heard the application at the conclusion of the Duty Judge list yesterday. I record that the tight timeframe was in part attributable to the plaintiffs’ inaction. On 28 August 2023, the mortgagees sent a letter to the plaintiffs advising that they intended to continue the process of the mortgagee sale. They said they anticipated the plaintiffs may wish to bring their application for a interim injunction back before the Court. The mortgagees asked the plaintiffs to advise whether they intended to do so and, if so, to propose a timetable for the application. The mortgagees asked for a response by 31 August 2023 (a reasonable time in the circumstances). The plaintiffs did not respond substantively until renewing their application earlier this month. In the meantime, the mortgagees had taken further steps to progress a sale of the property.
Factual background
[5] The plaintiffs previously owned the property that is at issue. It has been the home of the Serepisos family for several decades.
[6] In September 2021 the plaintiffs sold the property to the second defendant (Nevay Nominees Ltd) for $2.4 million. This sale was part of a series of transactions
entered into between the plaintiffs and various entities. The plaintiffs allege that, among other things, Nevay Nominees Ltd agreed it would hold the property on trust for the first plaintiffs. After the sale, the second-named first plaintiff and the plaintiffs’ mother (who is now 89 years old) continued to reside in the family home on the property.
[7]To finance its purchase of the property, Nevay Nominees Ltd borrowed
$850,000 from the mortgagees. The loan was secured by a mortgage. That mortgage is registered against the property.
[8] In late 2021, a variation was agreed to the loan agreement, under which the mortgagees advanced a further $1 million to Nevay Nominees Ltd. That further advance has since been repaid. The plaintiffs allege that the mortgagees also received
$800,000 as interest under the variation.
[9] At some point, the plaintiffs lodged a caveat against the title to the property, to protect their claimed equitable interest in the property.
[10] The mortgagees formed the view that Nevay Nominees Ltd had defaulted in its obligation to repay the original principal of $850,000. The mortgagees served a notice on Nevay Nominees Ltd under s 119 of the Property Law Act 2007. The mortgagees did not, at least initially, serve the notice on the plaintiffs.
[11]Nevay Nominees Ltd is now in liquidation.
The plaintiffs’ claims against the mortgagees
[12] The plaintiffs’ claims are contained in a statement of claim dated 20 April 2023. They plead multiple causes of action, only two of which are against the mortgagees.
[13] In the sixth cause of action, the plaintiffs plead that the mortgagees did not serve the plaintiffs with any notice under the Property Law Act, nor give the plaintiffs any notice of the intended mortgagee sale. The plaintiffs say this has caused them to
incur substantial costs and suffer stress and emotional harm. The plaintiffs claim damages.
[14] In the seventh cause of action, the plaintiffs claim that the total interest and other fees charged and received by the mortgagees was excessive or oppressive. They also claim that the mortgagees have not accounted for certain payments or benefits. By way of relief, the plaintiffs ask for an investigation by the Court into the mortgage agreement, a declaration that the mortgage and interest charged is oppressive, an appropriate and just reconciliation of the mortgage sum, and damages.
[15] The plaintiffs do not allege that the mortgage is invalid or that the mortgagees do not currently have the right to validly exercise the power of sale.
Is there a serious question to be tried?
[16] To obtain an interim injunction, the plaintiffs must first show that there is a serious question to be tried. That means a serious question that the plaintiffs may ultimately succeed in obtaining a permanent injunction to restrain the mortgagees from exercising their power of sale.1 This requires the plaintiffs to show a serious question as to the validity of the mortgage itself or as to the validity of the purported exercise of the power of sale. It is not enough for the plaintiffs to show, for example, merely that there is a serious question to be tried that they have a claim for damages or other monetary relief against the mortgagees.
[17] The plaintiffs assert, in their amended application for an interim injunction, that there are five serious questions to be tried.
[18] First, the plaintiffs say there is a serious question that the property is held on trust for the plaintiffs. They say they have requested the liquidators of Nevay Nominees Ltd to transfer the property back to them but that the liquidators have refused.
1 Muzz Buzz Franchising Pty Ltd v JB Holdings (2010) Ltd [2012] NZHC 2490 at [10], and the cases there cited. I accept that the plaintiffs do not have to be claiming a permanent injunction in their statement of claim: r 7.53(1) of the High Court Rules 2016.
[19] This may raise a serious question as between the plaintiffs on the one hand and Nevay Nominees Ltd and its liquidators on the other. However, it does not raise a serious question as to the mortgagees’ right to exercise their power of sale. The plaintiffs do not allege that the mortgagees knew of the plaintiffs’ claimed equitable interest in the property before registering the mortgage. The plaintiffs do not, in their causes of action against the mortgagees, rely on their claimed equitable interest in the property. Mr Fraser, counsel for the plaintiffs, confirmed to me at the hearing that the plaintiffs were not suggesting that the mortgagees obtained their mortgage with any knowledge of the plaintiffs’ claimed equitable interest.
[20] The second and third asserted serious questions are merely variations on the first. The plaintiffs say they have equitable ownership of the property, are owed significant sums by the first to fifth defendants, and that these matters are demonstrated in formal documents. These do not advance matters as against the mortgagees.
[21] The next serious question that is said to arise is that the mortgagees have a claim against the first, fourth and fifth defendants (as guarantors of the obligations of Nevay Nominees Ltd) which they are pursuing by way of a cross-claim in this proceeding. The plaintiffs note that the mortgagees are seeking summary judgment on that cross-claim. The plaintiffs say this summary judgment claim should be determined before the mortgagees exercise their power of sale over the property. There is no serious question to be seen here. A mortgagee is at liberty to exercise a power of sale before exercising its personal remedies against the mortgagor and any guarantors. The Property Law Act, in s 122, contemplates this may occur.2 Indeed, it is commonplace.
[22] Finally, the plaintiffs say there is a serious issue about whether a Property Law Act notice was properly served on the plaintiffs and an issue as to whether the amount on the notice was valid. The plaintiffs claim that, because they lodged a caveat against the title to the property, the mortgagees were obliged under s 121 of the Property Law
2 Section 122 imposes some notice requirements. The plaintiffs did not rely on these. In any event, any failure to comply with the notice requirements sounds only in damages and does not prevent exercise of the power of sale: s 122(4) and (5).
Act to serve a copy of the s 119 notice on the plaintiffs. I accept there may be an issue as to whether the mortgagees complied with s 121 and whether the notice that was eventually served on the plaintiffs was in the correct amount. But this issue does not affect the mortgagees’ right to exercise the power of sale. Section 121(2)(d) expressly says so. Mr Fraser acknowledged that any failure to comply with s 121 sounded in damages only. This potential claim therefore cannot form the basis of a grant of an interim injunction.
[23] In addition to the serious questions asserted in the application, I have considered whether the statement of claim reveals any. The sixth cause of action relies on the alleged failure to serve a notice under s 121. As I have explained, this does not raise a serious question that would justify an interim injunction. The seventh cause of action pleads that interest and fees charged by the mortgagees are oppressive and that the mortgagees have not properly accounted for all payments or benefits received under the mortgage. There is some affidavit evidence that is said to support these allegations. But nowhere is it suggested that these allegations, if correct, mean that the mortgagees cannot validly exercise the power of sale.
[24] At the hearing, I explored with Mr Fraser what the serious questions were that were said to justify the grant of an interim injunction. He emphasised the allegation that Nevay Nominees Ltd holds the property on trust for the plaintiffs. He said the position was analogous to that in Avon Parnell Ltd v Chevin.3 There, a person posing as the director of the plaintiff company purported to grant to a mortgagee a mortgage over the plaintiff’s property. The plaintiff succeeded in obtaining an interim injunction restraining the mortgagee from exercising its power of sale. Muir J held there was a serious question to be tried as to whether the plaintiff was bound by the loan on which the mortgage was premised.4
[25] Mr Fraser submitted this case was analogous, as Nevay Nominees Ltd had dealt with the mortgagees as if it was the owner of the property, whereas the plaintiffs retained equitable ownership. I do not accept there is any analogy. In Avon Parnell, the question raised by the plaintiff impugned the validity of the loan agreement
3 Avon Parnell Ltd v Chevin [2020] NZHC 976.
4 At [40].
on which the mortgage was premised. By contrast, in this case the plaintiffs’ alleged equitable interest in the property does not (and is not said to) impugn the validity of the mortgage granted to the mortgagees. Further, it is not in dispute that Nevay Nominees Ltd was the registered owner of the property when the mortgage was registered.
[26] Mr Fraser also repeatedly emphasised that there would be serious consequences to the plaintiffs and their mother should the mortgagee sale proceed, but only purely financial consequences for the mortgagees if an interim injunction were granted. These consequences would go to the balance of convenience if the plaintiffs showed there was a serious question to be tried. But they do not establish that there is any serious question as to the validity of the mortgagees’ exercise of the power of sale. I also observe that any consequences for the plaintiffs and their mother seem to me to be a result of the decision that the plaintiffs made in 2021 to sell the property to Nevay Nominees Ltd.
[27] I conclude that the plaintiffs have not shown that there is serious question to be tried. It is therefore not necessary for me to address the balance of convenience or the overall justice of the case.
Result
[28]The plaintiffs’ application for an interim injunction is declined.
[29] The plaintiffs are to pay costs on the application to the mortgagees. Provisionally, a 2B basis seems appropriate. Memoranda may be filed if quantum cannot be agreed.
Campbell J
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