Trustees Executors Limited v Cary HC Auckland CIV 2010-404-4645
[2011] NZHC 714
•18 February 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-4645
BETWEEN TRUSTEES EXECUTORS LIMITED Plaintiff
ANDTRENT CARY First Defendant
ANDKYLIE JANE PRICE Second Defendant
ANDTRENT CARY AND MURRAY GAVIN PRICE
Third Defendant
Hearing: 16 February 2011
Counsel: BR Balderstone for plaintiff
JT Burley for defendants
Judgment: 18 February 2011 at 4:30 PM
JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]
This judgment was delivered by me on 18 February 2011 at 4:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Buddle Findlay, PO Box 2694, Wellington 6140
Callaghan & Co, PO Box 1434,Auckland
TRUSTEES EXECUTORS LIMITED V CARY HC AK CIV 2010-404-4645 18 February 2011
Introduction
[1] On 22 July 2010 the plaintiff filed its application for summary judgment and related documents. The statement of claim:
(a) Sought judgment against the first defendant for $2,601,990 plus interest and costs and is based on a guarantee given by the first defendant of a debt due to the plaintiff by Puerto Villarta Family Trust; and
(b)Sought an order against the first and second defendants requiring them to give possession of a residential property at 52 Benson Road, Remuera, Auckland and costs.
[2] The application had been enlarged for its call to 7 October 2010 following the plaintiff’s counsel’s advice concerning difficulties with service. A memorandum was filed prior to 7 October 2010 in which counsel for the plaintiff and first defendant outlined further steps which were required in respect of the application and sought a fixture. Associate Judge Doogue allocated a fixture and made the appropriate directions as sought on a consent basis by counsel.
[3] The plaintiff filed an amended statement of claim on 10 February 2011. It added further defendants, namely the trustees of the Puerto Villarta Family Trust. It sought an order for possession against those trustees. This document was not verified as is required by r 12.5(b) if it was to be relied upon as the basis for summary judgment. In addition, it was filed without any order being made approving the addition of defendants pursuant to r 4.56. It added a cause of action which necessarily requires a consideration of r 7.77. There was no specific evidence of service of the document on the third defendants.
Ruling given on how matter would proceed
[4] Because there was no consent to the joinder of the additional defendants and because the lack of verification of the amended statement of claim was not waived I
ruled that the plaintiff could proceed on the statement of claim as originally filed and that leave would be reserved at this stage for the making of an application for summary judgment in relation to the matters pleaded against the third defendants at a later time. The plaintiff then proceeded on that basis. When I completed this judgment I realised that as the only prayer for relief which affects the third defendants is the same as that claimed against the second defendant, it is appropriate that the amended statement of claim be dealt with in the same way as I deal with the second cause of action for reasons which become clear later in this judgment.
The parties
[5] The plaintiff is an incorporated company which carries on business as a lender. The first and second defendants are husband and wife. They are the current occupiers of a residential property at 52 Benson Road, Remuera, Auckland. The Puerto Villarta Family Trust, in respect of which the first defendant and Mr MG Price are trustees, is the owner of the property at 52 Benson Road, Remuera, Auckland.
Background
[6] On 8 December 2006 the plaintiff and the trustees of the Puerto Villarta Family Trust entered into an agreement whereby a loan of $2,520,000 was advanced to the trust. It was for a term of five years. The loan was secured by a first ranking mortgage over 52 Benson Road, Remuera, Auckland. The loan was guaranteed by the first defendant. The first and second defendants live in the property at 52 Benson Road, Remuera, Auckland with their infant child.
[7] The trust defaulted in its obligations under the loan in January 2008. That, and later defaults, were remedied on a spasmodic basis. Property Law Act notices were issued in August and November 2008. The November 2008 Property Law Act notices were not remedied and summary judgment proceedings were issued. That proceeding, however, was discontinued following payment of the areas which were owing.
[8] Subsequently a further default occurred in February 2010. Further notices under the Property Law Act 2007, ss 119 and 122 were served. The Property Law Act notices were not complied with. The plaintiff attempted to set in motion steps towards the completion of a mortgagee sale and claimed that it was not able to because access to the property was denied.
[9] The first and second defendants have sworn affidavits. It is alleged by them that a tenancy agreement was entered into by the second defendant with the first defendant in his capacity as trustee in respect of 52 Benson Road, Remuera, Auckland and in favour of the second defendant as tenant. Although initially the agreement was not produced a copy has now been made available to the court. The agreement provides no fixed term. It provides for the payment of a weekly rental of
$1,200 to be paid “as and when required by the trust”.
[10] The second defendant alleges that payments of the following sums on account of rent were made, namely:
on 9 September 2009 $57,363.83 in December 2009 $67,948.03 and in February 2010 $22,686.75.
Based on those payments, the second defendant claims that rent has been paid by her to the trust for the period up to 8 August 2011. Although the fact of payment is not admitted there is no contest that if payment has been made that the arithmetic supports the claim made by the second defendant.
The court’s approach to a plaintiff ’s summary judgment application
[11] Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a 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. The obligations imposed by the rule have been examined by a number of authorities.
[12] The correct approach to an application for summary judgment by a plaintiff was recently summarised in Krukzeiner v Hanover Finance Ltd1 where the court said:
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: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). 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: MacLean v Stewart (1997) 11
PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically 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: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[13] In Pemberton v Chappell2 the court also commented on the position where a
defence is not evident on a plaintiff’s pleading and said:
If a defence is not evident on the plaintiff's pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff's right to have his case proceed to judgment without tendentious delay and a defendant's right to put forward a real defence.
[14] That position was further reinforced in Australian Guarantee Corporation
(New Zealand) Ltd v McBeth3 where the court said:
Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the plaintiff's verification stands unchallenged and ought to be accepted unless it is patently wrong
[15] Hypothetical possibilities in vague terms, unsupported by any positive assertion or corroborative documents advanced by defendants will not frustrate the
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 (CA) at [26].
2 Pemberton v Chappell [1987] 1 NZLR 1(CA) at 3.
3 Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59.
obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v
Oremland.4
[16] In Tilialo v Contractors Bonding Ltd5 the court raised a caution and said:
The Courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories. That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.
[17] A court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan.6 However the court will not reject even dubious affidavit evidence, even though there must be suspicion as to the good faith of the deponent, if there is an essential core of complaint that supports a defence. In essence, the inquiry is whether or not the person’s assertion passes the threshold of credibility: Pemberton v Chappell;7 Orrell v Midas Interior Designs.8
[18] In Tilialo v Contractors Bonding Ltd9 it was observed:
Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment. Views may well differ.
The grounds advanced in opposition
[19] Four matters are raised which I shall shortly fully particularise but, in summary, are:
(a) The Property Law Act default notices served in reliance on the
Property Law Act 2007, ss 119 and 122 were defective;
4 SH Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.
5 Tilialo v Contractors Bonding Ltd CA 50/93, 15 April 1994 (CA) at 6.
6 Eng Mee Yong v Letchumanan [1980] AC 331.
7 Pemberton v Chappell, above n 2.
8 Orrell v Midas Interior Designs (1991) 4 PRNZ 608 at 613.9 Tilialo v Contractors Bonding Ltd, above n 5, at 8.
(b)The interest charged by the plaintiff on the unpaid loan is oppressive and therefore in breach of the Credit Contracts and Consumer Finance Act 2003 s 118;
(c) An order for possession cannot be made against the second defendant because she is a tenant under a residential tenancy and is entitled therefore to the protection accorded by the Residential Tenancies Act
1986, s 58; and
(d)An order for possession is not required because the first defendant will not adversely affect the interests of the plaintiff as mortgagee and will co-operate in an orderly sale of the property.
[20] Each of the defences is now considered. It is appropriate that I record at the outset that all are defences which are not evident on the plaintiff ’s pleading and therefore require from the defendants an affidavit which raises the specific issue of fact or law and gives reasonable particulars of the matters in issue with some evidential foundation for this.
[21] The defences that are recorded in the notice of opposition were pleaded in full as follows:
3.1The Notice under Section 119 of the Property Law Act 2007 (“the Act”) served on the First Defendant on 9 April 2010, and in reliance upon which a further Notice under Section 119 of the Act was also served on the First Defendant on 9 April 2010, was/is defective in that:
a.the Notice failed to properly advise the mortgagors, including the First Defendant, of the amount required to be paid to the Plaintiff to remedy the default specified in the Notice;
b.Clause 1(b) of the Notice did not clearly advise the mortgagors, including the First Defendant, whether the stipulated “extra 4%” interest applied to the earlier unpaid term loan instalments of interest, or to the principal sum, in the absence of a specified daily rate;
c.The Notice did not include the contact details of a specified person at a specified communication address for the Plaintiff to enable the mortgagors, including the First
Defendant, to obtain a statement of the amount due to remedy the notified default, and the consequences of the same in the event that the mortgagors wished to ascertain the amount they had to pay to remedy the default on any specific date.
3.2As a consequence of the defective Section 119 Notice, the separate Notice served on the First Defendant under Section 122 of the Act was/is also invalid, together with the Notice of Demand dated
14 May 2010 subsequently served on the First Defendant.
3.3The interest rate charged by the Plaintiff over and above the first mortgage lending rate available from other first tier institutional lenders at the time the loan to the registered proprietors of the property was made, in combination with the Plaintiff’s subsequent refusal to reduce the said interest rate in line with prevailing market rates during 2008 and 2009 amount to oppressive conduct for the purposes of Section 118 of the Credit Contracts and Consumer Finance Act 2003, and in particular, constituted a breach of “reasonable standards of commercial practice”.
3.4The Second defendant occupied the property at the time of service of the Property Law Act Notices on the mortgagors and the First Defendant, and continues to occupy the property pursuant to a residential tenancy for the purposes of the Residential Tenancies Act
1986, and therefore has the protection of Section 58 of that Act via the continuation of the residential tenancy, and despite expiry of the
Section 119 Property Law Act Notice, if the Court determines that the Notice was/is not invalid.
3.5The continuing occupation of the property by the First Defendant as joint mortgagor (and by the Second Defendant as tenant) will not adversely affect the interests of the Plaintiff as mortgagee where the First Defendant, in his capacity as co-mortgagor, has formally notified the Plaintiff of the bona fide intention to sell the property in order to repay or reduce the mortgagor’s outstanding debt due to the Plaintiff from the proceeds of sale, and in the absence of any evidence of damage having been caused, or likely to be caused to the property directly or indirectly by the Defendant, pending sale.
[22] Mr Burley did not specifically address on the defences based on the alleged invalidity of the Property Law Act notices. Nor did he address specifically on the claim that the interest charge in respect of the loan was oppressive. Ms Balderstone, in her written submission, thoroughly and comprehensively addressed both issues. I adopt the argument she advanced and what follows is very much a short summary of those reasons.
[23] The notices make it plain that they required the first defendant to remedy the default. He took no steps and the defaults were not remedied. I cannot see from my
reading of the documents that there was any doubt or confusion as to what was required to be done. The position was further clarified, however, as a result of a request from the first defendant’s solicitors, which was immediately responded to by the plaintiff’s solicitors.
[24] I can find no basis for the claim that there was no contact address. The notices simply reveal such an address. There is in the allegation that the notices were in some way ambiguous as to the interest rate. What is in the notices are clear and unambiguous. I am not surprised, therefore, that Mr Burley elected not to address specifically on the challenge to the Property Law Act notices which I find to be without substance.
[25] The second ground alleges oppression in relation to the interest rate. The substance of the complaint appears to be that the plaintiff’s interest rates were higher than those of the trading banks. That, by itself, simply does not lead to a conclusion or even necessarily a suspicion of oppressiveness.
[26] Accordingly, it is necessary to analyse this defence. It is a positive defence. The authorities and the position which I have recorded in [12], [13], [14], [15] and [16] of this judgment are important in analysing the defence.
[27] In Greenbank New Zealand Ltd v Haas10 the Court of Appeal considered the provisions of the former Credit Contracts Act 1981.
[24] To determine whether a contract or term is oppressive within any of the words or phrases in the definition, it is necessary to have some basis of comparison. In the context the comparator can only be what would be expected or acceptable in terms of reasonable standards of commercial practice. Something which is in accordance with such reasonable standards could hardly be held to be oppressive. Conversely something which is not in accordance with (ie in contravention of) such standards is, by definition, oppressive. It is therefore important, unless the oppressive aspect is beyond rational dispute, for the Court to be properly informed how the contract or term measures up against reasonable standards of commercial practice.
[25] That will usually, indeed almost always, necessitate the calling of evidence on the point, as is contemplated by s 13. There would be
10 Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA).
difficulties and dangers in expecting Judges and Masters to take an intuitive or impressionistic approach to the question. What to one Judge might seem unjustly burdensome might not necessarily seem so to another. The commercial experience of judicial officers may differ markedly. Save in the plainest of cases, Judges cannot be expected to take some form of judicial notice of what is or is not in accordance with reasonable standards of commercial practice.
[28] There will always be those cases where the oppression is self-evident from the contract document itself for reasons, for example, which were explained by the Court of Appeal in Raptorial Holdings Ltd (in receivership) v Elders Pastoral Holdings Ltd.11
[29] What is apparent in this case is that the loan represents a substantial portion of the total value of the property. The only valuation evidence before me indicated that, on a willing buyer/willing seller basis the property had a valuation of
$2,950,000 and a forced sale valuation of $2,225,000. Those figures were established by a registered valuation undertaken as a result of an inspection on
18 February 2009 by a registered valuer. The report indicates that the property had been purchased in December 2006 for $3,200,000 at what the valuer described as the peak of the current cycle. The valuation report also records the capital value as at
1 July 2008 as being $2,350,000. Although not complete, it indicates that there was only small, if any, equity in the property at the time the loan was provided. No information has been placed before me as to what were comparable rates of interest for mortgages with the degree of security available. There is nothing before me to indicate the worth of the personal covenants of the borrowers and its effect on interest rates. I am simply not satisfied that there has been placed before me any foundation for the proposition that there was oppressiveness relating to the plaintiff’s charge of interest on this loan.
[30] In short I conclude that the first defendant has not demonstrated a tenable basis for a defence which negates the plaintiff ’s assertion that there is no defence in relation to the first cause of action. A consequence of that is that the plaintiff is
entitled to judgment for the principal sum claimed of $2,601,990 plus interest
11 Raptorial Holdings Ltd (in receivership) v Elders Pastoral Holdings Ltd [2001] 1 NZLR 178 .
calculated to the date of hearing of $282,143.30. Because there may be some claim to additional interest I reserve the question of additional interest.
[31] The next matter that requires consideration is the third of the defences raised and that relates to the application for a possession order. The question here is whether the second defendant, in particular, and by implication the first defendant, can resist an order for possession because of the existence of the tenancy agreement. The defendants rely on the Residential Tenancies Act 1986, s 58(1)(a). That provides:
58 Mortgagee or other person becoming entitled to possession
(1) Where a mortgagee or other person becomes entitled (as against the landlord) to possession of the premises, the following provisions shall apply:
(a) The tenancy shall continue notwithstanding that the mortgagee or other person has become entitled (as against the landlord) to possession of the premises:
[32] Ms Balderstone, recognising the force of this defence concentrated her submissions with an attack on whether I should accept the assertion of the second defendant that she had entered into a tenancy agreement on behalf of herself as tenant with the first defendant, her husband, as trustee of the subject property. In short, Ms Balderstone asked me to apply the principle referred to Eng Mee Yong v
Letchumanan.12
[33] Neither counsel’s submissions drew attention to the jurisdictional issue that is raised by this defence. Nevertheless, I put before them in the hearing whether I was at liberty jurisdictionally to deal with the question of whether or not there existed a residential tenancy. The reason for that is that the Residential Tenancies Act 1986, s 77 sets out the jurisdiction of the Tenancy Tribunal. Section 77(2)(b) provides that the tribunal shall have jurisdiction to determine whether there is or is not, or was or was not, at any material time, a tenancy agreement to which the Act applies in force in respect of a residential premise and also to determine the terms of and the parties to such an agreement. That must be read in conjunction with the Residential
Tenancies Act 1986, s 82 which provides that no court or other body shall have
12 Eng Mee Yong v Letchumanan, above at n 6.
originating jurisdiction in respect of any matter that is in the jurisdiction of the tribunal subject to certain exceptions which do not apply.
[34] Faced with this problem, and what appears to be an absolute bar to my ruling on the existence of the tenancy agreement, I suggested to counsel that the appropriate course was to stay this proceeding in respect of this cause of action until the matter was determined by the Tenancy Tribunal. Counsel agreed that that, in the circumstances, was the only practical course that could be followed. That then is the reason for the order in relation to the second cause of action and the amended statement of claim which appears at the foot of this judgment. I anticipate that the stay might be lifted on conclusion of a ruling as to the existence of the tenancy by the Tenancy Tribunal or otherwise if the parties agree.
[35] The fourth matter in opposition relates to the general discretion not to enter judgment for possession because the defendants allege that they would co-operate in the orderly sale of the property. There is, in fact, no point in ruling on this matter because it is not possible for me to make an order for possession for the reasons set out in relation to the third ground.
Costs
[36] In relation to the judgment entered on the first cause of action the plaintiff is entitled to costs based on Category 2 Band B together with disbursements as fixed by the Registrar against the first defendant. In relation to the balance of the claim costs must be reserved until the issues by the balance of the claim are resolved. That is the reason, then, for the order in relation to costs which appears in this judgment.
Judgment and orders
[37] Having regard to the conclusions reach in this judgment I now enter judgment as follows:
(a) Against the first defendant for $2,601,990 plus interest calculated to
16 February 2011 of $282,143.30;
(b)Leave is reserved to counsel to apply by memorandum in respect of additional interest. Memoranda in support, opposition and reply shall be filed at seven day intervals if this issue is to be pursued. If such memoranda are filed the Registrar shall refer the file to me to consider whether judgment for additional interest should be entered;
(c) The second cause of action and the amended statement of claim are stayed. Application to lift the stay may be made on seven day’s notice; and
(d)Costs are ordered against the first defendant in respect of the first cause of action based on Category 2 Band B together with
disbursements as fixed by the Registrar.
JA Faire
Associate Judge
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