Ward v ANZ National Bank Ltd

[2012] NZHC 2694

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-006021 [2012] NZHC 2694

BETWEEN  RUSSELL STUART WARD First Plaintiff

ANDRUSSELL STUART WARD AS TRUSTEE OF THE RUSSELL WARD FAMILY TRUST

Second Plaintiff

ANDANZ NATIONAL BANK LTD First Defendant

ANDBARFOOT & THOMPSON Second Defendant

Hearing:         15 October 2012

Counsel:         R S Ward in person

R Gordon for first defendant
No appearance for second defendant

Judgment:      15 October 2012

(ORAL) JUDGMENT OF LANG J [on application for interim injunction]

RUSSELL STUART WARD V ANZ NATIONAL BANK LTD HC AK CIV-2012-404-006021 [15 October 2012]

[1]      Mr Ward filed this proceeding on 29 September 2012.   It contains three causes of action.   The first is that the ANZ National Bank Limited (“the Bank”) failed to meet its duty of care to Mr Ward as mortgagee under s 176 of the Property Law Act 2007.  He alleges that the Bank failed “to take reasonable care to obtain the best market price reasonably obtainable”.  The second cause of action alleges breach of “existing promissory estoppel conditions”.  The third cause of action is based on alleged wrongful exercise by the Bank of its power of sale under a mortgage.

[2]      Mr  Ward  now  seeks  an  interim  injunction  preventing  the  Bank  from exercising its power of sale under the mortgage given to it by Mr Ward.

Background

[3]      Mr Ward, in his capacity as trustee of the Russell Ward Family Trust, entered into a number of loan agreements and facilities with the Bank.  Mr Ward guaranteed the trusts obligation under the various agreements.  The trust provided security in the form of a mortgage secured a property it owned near Mercer.

[4]      The trust fell into default with its obligations, and the Bank duly gave notice of default under ss 119, 121 and 122 of the Property Law Act 2007.  The default went unremedied and, on 9 July 2012, the Bank’s solicitors sent a letter to Mr Ward advising him that the Bank’s power of sale had become exercisable, and that the Bank was entitled to enter into possession of the property.   Thereafter Mr Ward corresponded with the Bank, but did not at any stage remedy the defaults.

[5]      On 11 July 2012, the Bank instructed a reputable firm of registered property valuers to undertake a valuation of the property.  This revealed that the property had an estimated sale price to a residential buyer of $650,000, but that a sale to an “aviation enthusiast buyer” could attract a sale price of up to $750,000.

[6]      By letter dated 30 July 2012, the Bank’s solicitors advised Mr Ward that it had requested the second defendant, Barfoot & Thompson Limited, to undertake a marketing appraisal of the property with a view to selling it by way of mortgagee

sale.  The letter urged Mr Ward to take independent legal advice.  It also indicated that the Bank would not enter into further correspondence with Mr Ward.

[7]      Barfoot & Thompson duly provided a marketing proposal to the Bank on

14 August  2012.    This  recommended  marketing  the  property  over  a  four  week period, with tenders closing on the Tuesday after the fourth weekend of advertising. The proposal recommended listing the property for sale through Barfoot & Thompson’s 62 branches, and through advertising in the New Zealand Herald and Franklin County Times newspapers and the Property Hotline Chinese language publication.  In addition, the property was to be marketed online through Barfoot & Thompson’s  website,  through  the  TradeMe  website  and  two  other  real  estate websites.  The marketing proposal stated that Barfoot & Thompson believed a sale price of between $530,000 and $620,000 was likely to be achieved.

[8]      The Bank accepted Barfoot & Thompson’s proposal and, on 15 August 2012, it sent Mr Ward a letter advising him that Barfoot & Thompson had been instructed to undertake the sale of the property.

[9]      Barfoot  & Thompson  then  marketed  the  property in  accordance  with  its proposal.  The property was advertised for sale by tender, with tenders closing on 19

September 2012.

[10]     Barfoot & Thompson received six tenders for the purchase of the property. The Bank was concerned to ensure that it received the highest price available in the circumstances.   For that reason, it instructed Barfoot & Thompson to advise all tenderers of the competitive situation they were in, and to request them to make improved offers for the purchase of the property.

[11]     By 21 September 2012, Barfoot & Thompson had received increased offers for the purchase of the property.  The highest of these was a tender for $707,400 plus GST, if any. After considering these, the Bank entered into an agreement for the sale and purchase of the property to the entity that submitted this tender.  The sale of the property is due to be completed on 16 October 2012.

[12]     On or about 21 September 2012, Mr Ward sent the Bank’s solicitors a letter indicating that he had earlier sold the property to a third party, Mr Hubert Hays.  He advised the Bank that the sale price of the property was $1, and that the sale was to be the subject of a lease back to Mr Ward for a term of 99 years.  The agreement was also said to contain a condition under which Mr Ward was to retain title to the property notwithstanding the fact that Mr Hays had purchased it.

[13]     In an affidavit filed in opposition to the application for interim injunction, the Bank’s representative, Mr Terence McNamara, deposes that he is aware that Mr Hayes  is  currently  serving  a  sentence  of  two  years  imprisonment  after  having pleaded guilty to 87 charges of providing false or misleading information to the Inland Revenue Department.

[14]     Mr Hays lodged a caveat against the title to the property, but in a decision delivered on 8 October 2012, Judge Gendall made an order removing the caveat.1

He did so on the basis that he was satisfied that the agreement for sale and purchase was either a complete contrivance, or that any interest asserted by Mr Hays could only be an interest derived from Mr Ward, who was the mortgagor on default.  The Associate Judge found that the Bank had never consented to the agreement to sell the property to Mr Hays, and that it was not bound by that agreement.

[15]     Mr Ward’s application seeks an order preventing the Bank from completing the sale of the property to the Bank’s purchaser, and also for an order preventing the Bank from selling the property at all for a period of eight months from today.

[16]     The Bank has asked for Mr Ward’s application for an interim injunction to be heard urgently, because it wants to complete the sale of the property to its purchaser tomorrow.

Grounds of Mr Ward’s application

[17]     Mr Ward appeared in support of his application injunction today.  He relies on two grounds.  First, he relies on the fact that he has sold the property to Mr Hays.

1 ANZ National Bank Ltd v Hays HC Wellington CIV-2012-485-2055, 8 October 2012.

He contends that this sale takes priority over any sale that the Bank might have entered into with a third party pursuant to its powers under the mortgage.  Secondly, he contends that the interests of justice require an injunction to be granted so that he can arrange for any amount that might be owing to the Bank to be repaid.  He argues that a delay of eight months is reasonable in all the circumstances.

Decision

[18]     As I advised Mr Ward during argument today, the purported sale to Mr Hays cannot take priority or precedence over the Bank’s power of sale under its mortgage. The mortgage was executed and registered long before Mr Ward entered into the agreement for sale and purchase with Mr Hays.  As a result, any agreement that Mr Ward might have entered into with Mr Hays is subject entirely to the Bank’s power of sale under the mortgage.   The exercise by the Bank of its power of sale extinguishes any equitable interest that Mr Hays might have as purchaser of the property under an agreement with Mr Ward.  For that reason, Mr Hays’ interest under the agreement for sale and purchase cannot form a ground for an interim injunction to be granted.

[19]     The only remaining ground relates to Mr Ward’s desire to negotiate terms with the Bank under which he might repay the mortgage.  This matter has now been dragging on for some considerable period.  The Bank served the default notices on Mr Ward on 29 May 2012.  That gave him a specified period within which to remedy the default.  He has had since 29 May 2012 to put a firm proposal to the Bank for the repayment of the mortgage, but he has failed to do so.

[20]     In those circumstances, I am satisfied that the Bank should not be prevented from exercising its power of sale under the mortgage.  The application for an interim injunction is therefore dismissed.

Strike out

[21]     The Bank also asks that the Court make an order striking out the second and third causes of action on the basis that they have already been found to be frivolous

in an earlier judgment issued by Venning J.  I am not prepared to take that step at this stage.  Instead, I propose to direct that the Registrar is to allocate the proceeding a first case management conference before an Associate Judge in the usual way.  If the Bank wishes to apply for strike out, it can file an application to that effect prior to the next mention of the matter.

Costs

[22]     As  the  successful  party  in  the  injunction  proceeding,  the  Bank  would ordinarily be entitled to an award of costs in its favour.  It is not necessary to make that order in the present case, because the mortgage empowers the Bank to add its enforcement costs to the amount of any loan that might be outstanding by Mr Ward.

[23]     I therefore make no order for costs.

Lang J

Solicitors:

Minter Ellison Rudd Watts, Wellington
Copy to:

R S Ward