The Stark Trustees Limited v Bridgewest Finance (New Zealand)

[2020] NZHC 1775

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-000938

[2020] NZHC 1775

BETWEEN

THE STARK TRUSTEES LIMITED

First Plaintiff/Applicant

MSJW TRUSTEES LIMITED
Second Plaintiff/Applicant

STEFANIE WINITANA
Third Plaintiff/Applicant

AND

BRIDGEWEST FINANCE (NEW ZEALAND)

Defendant

Hearing:

9 July 2020

Appearances:

Paul Sills for the Plaintiffs/Applicants

Anita Birkinshaw and Chantal Ottow for the Defendant

Judgment:

22 July 2020

JUDGMENT OF MOORE J

This judgment was delivered by me on 22 July 2020 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

THE STARK TRUSTEES LIMITED & ORS v BRIDGEWEST FINANCE (NEW ZEALAND) [2020] NZHC 1775 [22 July 2020]

Background

[1]    The Stark Trustees Limited and MSJW Trustees Limited are the trustees of the Stark Trust (“the Trust”) and the registered proprietors of the 34 Rawene Avenue, Westmere (“the Property”). Stefanie Winitana is a director of the Trust and the Property is her family home.

[2]    Bridgewest Finance (New Zealand) (“Bridgewest Finance”) holds a second ranking mortgage over the Property. It is owed over $2.6 million by third parties, a debt which has been outstanding since 8 March 2020. Following the bankruptcy of one of the debtors (Mr Ensom, Ms Winitana’s partner), the Property was transferred to the first and second applicants.

[3]    Bridgewest Finance served a notice to the first and second applicants requiring payment of the debt. It expired unremedied. The first and second applicants were informed that mortgagee sale processes would commence. The applicants resultantly filed an application, seeking interim orders that Bridgewest Finance be restrained from taking further steps:

(a)toward the mortgagee sale, including advertising the property for sale; and

(b)to enforce it mortgage over the Property.

[4]    A hearing has been set down for 24 July 2020 to determine the applicants’ second cause of action. The issue for this Court to determine is whether the applicants should be granted an order restraining the advertising of the Property for sale.

Should the interim order be made?

[5]    I am satisfied that the applicants have raised a serious question as to the enforceability of the mortgage against the Property and the calculation of the

outstanding amount. I must ask where the balance of convenience and the overall justice lies.1

[6]    In considering the balance of convenience, I have had regard to the affidavits filed by Bridgewest Finance from Mr Duncan Ross, a senior member of Bayleys, and Melanie Hern, the CEO of Bridgewest Finance. Bayleys states that marketing of the Property could begin immediately and sets out its likely approach.

[7]    Mr Sills, for the applicants, states that the Property should not be advertised for sale with the application pending, because it would create further tension between the parties and open homes or inspections would not be practical.   I agree with     Ms Birkenshaw, for Bridgewest Finance, whether the marketing process causes stress is in the hands of the applicants. Bayleys will seek to work with Ms Winitana to avoid unnecessary disruption.

[8]    Despite Mr Sills’ assertion that it will be apparent that it is a forced sale, and that would negatively impact the Property value, the advertising will not label it as a “mortgagee sale”. Regardless, case law suggests a property may be marketed as a “mortgagee sale”.2

[9]    I am satisfied that the biggest threat to the sale price will be delay in starting the sale processes. Mr Sills suggests that this would amount to minimal prejudice to the respondent (if the mortgagee sale can go ahead) because it will likely be a short delay and the middle of winter is a poor time to sell. Mr Sills stated that Bayleys could just as easily commence advertising following the determination of the order as there is nothing in particular that requires immediate action.

[10]   However, Mr Ross deposes to gain the best value for the property, marketing should begin as soon as possible given the uncertainty of the post-COVID-19 market. Although this is a high-end waterfront property, it would be bold to assume its value is immune to future economic pressure. Given the size of the debt, the growing interest

1      Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 adopting American Cyanamid Co v Ethicon Ltd [1975] AC 396.

2      Taylor v Westpac Banking Corporation Ltd (1996) 7 TCLR 177 (CA); Coronation Gardens Ltd v Small (2005) Ltd [2017] NZHC 1662.

owed and the time it has been outstanding, I accept that the predicted drop could prejudice Bridgewest Finance, the applicants themselves and the first mortgagee. I also note Ms Birkenshaw’s suggestion that the applicants probably cannot pay damages if they are successful here but unsuccessful in preventing a mortgagee sale.

[11]   As to concerns that commencing marketing in these circumstances will affect the value of the Property on a longer-term basis (through the “stigma” of a forced sale), I agree with Ms Birkenshaw that any potential purchaser is likely to undertake due diligence into the registered proprietors’ finances anyway.

[12]   Accordingly, I consider that the balance of convenience favours Bridgewest Finance. It has undertaken not to enter into a binding sale contract until the substantive matter is determined, but it is practical for Bayleys to be able to prepare for the sale now.

[13]   The question of whether Bridgewest Finance, or indeed the applicants, have come to this matter with clean hands should be left to the hearing on 24 July 2020.

Orders

[14]The application is dismissed.

Moore J

Solicitors:

Mr Sills, Auckland Buddle Findlay, Auckland