Shea v Bracanov
[2025] NZHC 283
•25 February 2025
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2024-419-124
[2025] NZHC 283
UNDER the Property Law Act 2007 IN THE MATTER OF
an originating application seeking a discharge of mortgage
BETWEEN
RONALD THOMAS SHEA
Applicant
AND
LILIANA BRACANOV and
ZORAN BRACANOV as trustees of the LILIANA BRACANOV TRUST
Respondents
Hearing: 25 February 2025 Counsel:
S Poborowski for Applicant
No appearance for Respondents
Judgment:
25 February 2025
JUDGMENT OF GWYN J
[Formal proof]
Introduction
[1] On 16 May 2024, the applicant, Ronald Shea, filed an originating application seeking orders under ss 115 and 116 of the Property Law Act 2007 (Act) and an order that the respondents pay his costs and disbursements in relation to this proceeding.
[2] The originating application, memorandum of counsel in support (dated 16 May 2024), affidavit of Ronald Shea dated 18 April 2024, and a notice of a case management conference dated 2 July 2024, were served on Liliana Bracanov, the first respondent, on 20 August 2024.
SHEA v BRACANOV [2025] NZHC 283 [25 February 2025]
[3] It appears that the second named respondent, Zoran Bracanov, is no longer a trustee of the Trust and has not been since 2018. Liliana Bracanov has confirmed that she is now the sole trustee.
[4] By a minute of 11 September 2024, Jagose J issued a minute directing the respondents to file and serve any opposition to the originating application by 25 October 2024. The respondents did not do so.
[5] By a minute of 18 November 2024, Associate Judge Sussock directed that the date for filing and serving any notice of opposition was extended to 20 November 2024, and a memorandum was to be filed by the respondents by 20 November 2024 confirming whether they intended to attend the scheduled judicial settlement conference on 28 November 2024.
[6] The respondents did not file and serve a notice of opposition or a memorandum. By minute of 27 November 2024, Associate Judge Sussock vacated the judicial settlement conference scheduled for 28 November 2024 and directed that the application proceed by way of formal proof. The applicant was directed to file a memorandum together with any further affidavit evidence necessary to establish his claim, by 10 working days in advance of the hearing date allocated. That formal proof hearing took place before me on 25 February 2025.
Background
[7] The applicant, Mr Shea, and the first respondent, Ms Bracanov, were previously in a relationship. On 27 July 2012, the parties entered into a settlement agreement (Agreement). The key terms of the Agreement were:
(a)the applicant was to transfer his interest in the property at 5 Birdwood Road, Horotiu to the Liliana Bracanov Trust (Trust), and provide the Trust with an executed transfer capable of registration, and to complete all further documentation necessary to register the transfer of the property;
(b)the applicant was to pay to the Trust $100,000 (the Debt) over 338 weeks as follows:
(i)52 consecutive weekly payments of $100 each, followed by–
(ii)53 consecutive weekly payments of $250 each, followed by–
(iii)233 consecutive weekly payments of $350 each;
(c)the Debt was to be secured by way of mortgage over the applicant’s interest in the property at 98 Knighton Road, Hamilton (Property), and the applicant was to provide the Trust with an executed mortgage capable of registration.
[8] Separate to the Debt, which was secured by way of the mortgage over the Property, the applicant was to pay penalty interest which would accrue on default on any weekly payment not remedied by the end of the calendar month following the date of default.
[9] The Agreement also provided that if a default on any weekly payment was not remedied by the end of two calendar months following the date of default then the Trust shall be entitled to pursue any legal remedies to recover the outstanding arrears and shall be entitled to recover from the applicant the trustees’ reasonable costs on an indemnity basis.
[10] The applicant deposes that the Debt was secured by way of mortgage over the Property on 29 January 2013.
[11] On 27 July 2012, the applicant transferred his interest in the property at 5 Birdwood Road, Horotiu to the Trust and provided it with an executed transfer capable of registration.
[12] On 2 April 2013, the applicant made his first payment of the Debt to the Trust in accordance with the Agreement. As at the date of the applicant’s supporting affidavit (18 April 2024), he had paid $89,750 to the Trust, towards the Debt.
The originating application
[13] The applicant deposes that he and his family would like to sell the Property but cannot do so while the Trust’s mortgage is still secured over his share of the Property.
[14] Through his lawyers, the applicant requested that the trustees of the Trust sign and return an authority and instrument form in relation to the discharge of mortgage (A&I form) on the basis that the applicant would repay the remainder of the Debt to the Trust in one lump sum. Ms Bracanov has failed to provide the A&I form or an undertaking that she will provide the A&I form on receipt of the lump sum payment of the Debt.
[15] The applicant says he wants to pay the remainder of the Debt in one lump sum and obtain the discharge of the mortgage, but is prevented from doing so until the Trust discharges the mortgage.
[16] The applicant, in his affidavit of 18 April 2024, calculates that the remainder of the Debt owing is $10,250, as he had paid $89,750 as of 2 April 2024. However, the originating application and supporting memorandum of counsel (both dated 16 May 2024) refer to the amount of $10,850 being owing.
[17] The applicant’s position is that at the settlement meeting on 27 July 2013, it was agreed that the “loan” was made up of $80,000, this being the amount borrowed, and $20,000, being the agreed interest component, although this breakdown was not recorded in the written agreement. That breakdown was recorded in a 27 February 2023 letter from the applicant’s solicitors to Ms Bracanov. Ms Bracanov did not respond to that letter.
[18] In the memorandum of counsel filed with the originating application, counsel for the applicant, Mr Braun, submitted that the interest component set out at [7(c)] above, does not form part of the Debt secured by the mortgage. Counsel says the Trust’s process for recovery of any interest owing by the applicant to the Trust is set out at [9] above.
[19] The applicant deposes that he does not consider there is any interest owing in the periodical payments towards the amount secured by the mortgage which would prevent him bringing this application.
[20] On that basis, the applicant seeks an order under s 115 of the Act, directing or allowing payment into court of $10,850 or a specified amount that, in the opinion of the court, is sufficient to constitute a fund that will produce enough income to meet any periodical payment secured by the mortgage against the Property.
[21] The applicant also seeks an order that on receipt of the amount ordered to be paid into court, the Registrar forthwith issue a certificate pursuant to s 116 of the Act, having effect as if it were a duly executed mortgage discharge instrument for the mortgage, under s 83 of the Act.
[22] The applicant also seeks an order that the respondents, as trustees of the Trust, pay his costs and disbursements of and incidental to these proceedings.
Sections 115 and 116 of the Property Law Act
[23]Section 115 of the Act provides:
115 Court may order discharge of mortgage if periodical payments secured are otherwise provided for
(1)This section applies if a mortgage over property secures the payment to any person of a periodical payment, other than interest on the amounts secured by the mortgage.
(2)A court may, on the application of the current mortgagor or any other person entitled to redeem the mortgaged property, make an order directing or allowing the payment into court of a specified amount that, in the opinion of the court, is sufficient to constitute a fund that will produce enough income to meet any periodical payment secured by the mortgage as it falls due.
(3)In determining the specified amount under subsection (2), the court must—
(a)assume that the fund will be invested as a trustee is entitled and required to invest trust funds under Part 2 of the Trustee Act 1956; and
(b)make reasonable provision, in addition to the amount sufficient for the purpose specified in subsection (2), for the
contingency of further costs, expenses, and interest, and any other contingency except the depreciation of any investment.
(4)The court may, after giving notice to every person who is entitled to receive a periodical payment secured by the mortgage, make further orders directing the application or distribution of the income or the capital of the fund.
[24] The applicant says that in this case there is a mortgage over the Property that secures the payment by the applicant of a periodical payment, other than interest on the amounts secured by the mortgage. Accordingly, s 115 of the Act applies and the Court is entitled to issue a certificate under s 116 that the amount specified in an order under s 115 has effect as if it were a duly executed mortgage discharge instrument for the mortgage under s 83 of the Act.
Result
[25] I am satisfied it is appropriate to make an order under s 115 of the Act, this being a case where a mortgage secures the payment to any person of a periodical payment, other than interest on the amounts secured by the mortgage.
[26] I am also satisfied it is appropriate to make the orders sought by way of formal proof, having regard to the matters set out at [2] to [6] above.
Orders
[27]I make the following orders:
(a)An order pursuant to s 115 of the Property Law Act 2007 directing or allowing payment into court by the applicant of $10,850, or other such sum sufficient to constitute a fund that will meet any remaining periodical payments secured by the mortgage 9152584.1 registered against the property situated at 98 Knighton Road, Hamilton, comprised in Record of title reference SA2005/5, legal description Lot 4 Deposited Plan South Auckland 6806 as it falls due.
(b)An order that on receipt of the payment to be made under (a) hereof, the Registrar shall forthwith issue a certificate pursuant to s 116 of the
Property Law Act 2007, having effect as if it were a duly executed mortgage discharge instrument for the mortgage under s 83 of the Property Law Act 2007.
(c)An order that the respondent pay the applicant’s reasonable costs and disbursements of bringing this application.
Gwyn J
Solicitors:
Braun, Bond and Lomas, Hamilton cc: L Bracanov
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