Vegar-Fitzgerald v Aorangi Forests Ltd - [2014] NZCA 200

IN THE COURT OF APPEAL OF NEW ZEALAND

CA44/2014
[2014] NZCA 200

BETWEEN	PATRICIA VEGAR-FITZGERALD Appellant
AND	AORANGI FORESTS LTD Respondent

Hearing:	6 March 2014
Court:	O'Regan P, Harrison and Wild JJ
Counsel:	K Fulton for Appellant J A McMillan and B J Murphy for Respondent
Judgment:	23 May 2014 at 10.15 am

JUDGMENT OF THE COURT

A The appeal is dismissed.

B The appellant is ordered to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Introduction

Vegar Properties Ltd (VPL) owns a 15.7 hectare block of land at Matakana, north of Auckland. The property was used for the commercial production of grapes for winemaking. VPL mortgaged the property separately to the Bank of New Zealand (the BNZ) and Aorangi Forests Limited (AFL) to secure financial advances. The company fell into financial difficulties. It agreed to sell the land to one of its directors, Patricia Vegar-Fitzgerald, for a sum well below the amounts owing to each mortgagee.
VPL claims that both mortgagees consented to the sale to Ms Vegar‑Fitzgerald, which each mortgagee denies. In the exercise of its power of sale, AFL has since agreed to sell the land to a third party.
Ms Vegar-Fitzgerald has lodged a caveat against the title to the property. On AFL’s application, Ellis J ordered its removal.[1] Ms Vegar-Fitzgerald appeals against that judgment. At issue on appeal is whether it is reasonably arguable that the BNZ and AFL consented to the sale. The answer to that question is essentially fact dependent.

Background

[1]Aorangi Forests Ltd v Vegar-Fitzgerald [2013] NZHC 3370.

In March 2009 AFL agreed to advance a related company, Orakei Securities Limited (OSL), the sum of $1.5 million. OSL in turn agreed to advance these funds to companies in the Vintage group which were associated with the Vegar family. In exchange, Vintage signed a general security deed and VPL gave a guarantee and indemnity. That agreement provided that it was also to constitute an agreement to mortgage VPL’s land which OSL was entitled to register in the event of a default by Vintage. Shortly after the agreements were signed, OSL assigned all its rights to AFL. Notice of the assignment was not given to VPL until March 2011.
OSL and AFL were beneficially owned by a retired American couple, Burvle and Carolie Swindle. Along with two New Zealanders, John Sax and Arthur Young, the Swindles were directors of both companies. In effect OSL was acting as the conduit for the Swindle’s investments in New Zealand. Its director is Kingsley Turner of Auckland.
In May 2009, VPL commissioned a registered valuation which placed the value of the property at $3.4 million. In June 2009 BNZ granted VPL a loan facility for $2 million, secured by a first mortgage over the property. However, in late 2010 VPL encountered difficulties meeting its financial obligations to the BNZ. The parties discussed proposals advanced by Paul Vegar, VPL’s managing…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZCA 200
Decision Date: 23 May 2014 at 10.15 am

CaseChat Overview and Summary

Patricia Vegar-Fitzgerald appeals against the decision of the High Court, which ruled that she was not entitled to the protection of a caveat she lodged against a property at Matakana, north of Auckland. Vegar Properties Ltd (VPL) owns the property and had mortgaged it separately to the Bank of New Zealand (BNZ) and Aorangi Forests Limited (AFL) to secure financial advances. The company fell into financial difficulties and agreed to sell the land to Vegar-Fitzgerald for a sum well below the amounts owing to each mortgagee. VPL claims that both mortgagees consented to the sale, which each mortgagee denies. Vegar-Fitzgerald lodged a caveat against the title to the property, but AFL applied to have it removed. Ellis J ruled in favour of AFL, and Vegar-Fitzgerald now appeals that decision. The appeal hinges on whether it is reasonably arguable that both BNZ and AFL consented to the sale.

The Court of Appeal rejected the submission that the burden of proof was on AFL to completely satisfy the Court that VPL had not arguably consented and thus no risk of prejudice arises. The Court found that the correct test is whether it was reasonably arguable that both mortgagees gave consent. The Court found that Vegar-Fitzgerald failed to meet the threshold of arguability that BNZ clearly and unequivocally, and by a positive and demonstrative act, consented to VPL’s agreement to sell her the property. The Court also found that Vegar-Fitzgerald failed to show it was arguable that AFL consented to the sale, either through its agent or by holding out that its agent had authority to consent. Vegar-Fitzgerald’s appeal was dismissed, and she was ordered to pay costs to AFL.

The appeal is dismissed, and Vegar-Fitzgerald is ordered to pay costs to AFL for a standard appeal on a band A basis and usual disbursements.

Orders