Westpac New Zealand Limited v Lau
[2017] NZHC 3106
•13 December 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-002848 [2017] NZHC 3106
UNDER the Land Transfer Act 1952 BETWEEN
WESTPAC NEW ZEALAND LIMITED Applicant
AND
EE KUOH LAU Defendant
Hearing: 12 December 2017 Appearances:
M V Robinson for the Applicant
No Appearance of, or for the DefendantOrders:
12 December 2017
Reasons:
13 December 2017
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 13 December 2017 at 4.45 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
WESTPAC NZ LTD v LAU [2017] NZHC 3106 [13 December 2017]
Solicit ors : Simpson Grierson, Auckland
Copy To : E K Lau, Auckland
Introduction
[1] Westpac New Zealand Ltd (Westpac) applied for an order removing a caveat pursuant to s 143 of the Land Transfer Act 1952. There was some urgency in having the application heard and determined as Westpac had exercised its power of sale under its mortgage and sold the subject property to a third party. Settlement is due today, 13
December 2017.
[2] The application was called in the caveat list yesterday. The caveator, Mr Lau, did not appear and he has not filed any documents in opposition to the application. However, for the reasons set out below, I was satisfied that the proceeding had been served on Mr Lau, and that he had notice of the call date for the application.
[3] After hearing from Mr Robinson, on behalf of Westpac, and reviewing the affidavits, submissions and cases filed in support of the application, I was also satisfied that the caveat should be removed. I made orders accordingly. The orders made are set out at the end of this judgment. My reasons for making those orders now follow.
Has Mr Lau been served?
[4] Westpac filed its application, supporting affidavit and memorandum in support on 1 December 2017. Those documents were served on Mr Lau by email on the same day. The email address is one which Mr Lau has previously used. In fact, Mr Lau responded to an email concerning this proceeding sent by Westpac’s solicitors to that address on 24 November 2017.
[5] More importantly, the documents were served by posting them to the post office box address provided in the caveat lodged by Mr Lau. The documents were posted on 4 December 2017, and therefore included notice of the hearing date of
12 December 2017.
[6] Rule 19.12A provides that an originating application under s 143 of the Land Transfer Act 1952 for the removal of a caveat may be served, in accordance with r 6.5, at the address for service stated in the caveat. Rule 6.5 provides that a document may be served at an address for service by leaving the document at that address at any time between 9.00 am and 5.00 pm.
[7] At first blush, r 6.5 appears to be at odds with service being effected by posting the documents to a post office box address. However, on closer scrutiny, I am satisfied that r 6.5 should be liberally interpreted so as to give effect to r 19.12A, and to allow service to be effected by posting documents to a post office box address if that is the address provided in the caveat. That conclusion flows from the definition of “address for service” in r 1.3 which includes the address of a place in New Zealand “at which a document…may be sent by post to that party, under these rules…”. Such an interpretation is also consistent with r 6.1(d) which allows service by posting to a post office box address if it has been specified by a party as the address for service. In cases to which r 19.12A applies, the address is specified in the caveat.
[8] But, to the extent that there is any doubt about that, I note that I would have made orders under r 6.8 deeming service to have been effected. Westpac has made all reasonable efforts to locate Mr Lau and effect service. These include making enquiries about the address mentioned in a recent Environment Court decision at which he was residing, and which has since been demolished. The proceeding is likely to have been brought to Mr Lau’s attention by posting the proceeding to the post office box specified in the caveat, and by emailing the documents to him at his email address.
[9] Accordingly, I was satisfied that posting the documents to the post office box address in the caveat met the service requirements in this case. But to the extent that there was any non-compliance, I would have been prepared to make orders deeming service to have been effected.
Should the caveat be removed?
[10] Westpac holds a mortgage over the subject property which was registered on
12 April 2016. The mortgage grants Westpac the power to sell the property in the event of default by the registered owner. Clause 3(j) of the memorandum of mortgage
requires the mortgagor to obtain Westpac’s written consent to the grant of any interest in the property, including any lease.
[11] The registered proprietor of the property fell into arrears in mortgage payments. On 12 May 2017, Westpac issued a notice under s 119 of the Property Law Act 2007. The notice remained un-remedied and Westpac exercised its power of sale. The property is the subject of an unconditional sale and purchase agreement which is due to settle today, 13 December 2017.
[12] Mr Lau registered his caveat on 13 October 2017. The estate or interest claimed in the caveat is recorded as follows:
Persuation [sic] to deed of lease dated 18/4/2016 between registered proprietor Yingyue Zhang and EE Kuoh Lau (caveator) from the lease date to 30/6/2021 (pre-paid lease).
[13] As is evident from the face of the caveat and the registration date, both the lease and the caveat post-date the registration of Westpac’s mortgage.
[14] An affidavit sworn in support of Westpac’s application makes it plain that Westpac did not have any knowledge of the lease, and did not consent to it. Section 105 of the Land Transfer Act 1952 provides that upon registration of any transfer the estate or interest of the mortgagor passes to the purchaser free of any estate or interest except that which has priority over the mortgage or to which the mortgagee has consented. Section 119 is to similar effect in relation to a lease. Both those sections provide:
105 Transfer by mortgagee
Upon the registration of any transfer executed by a mortgagee for the purpose of exercising a power of sale over any land, the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.
119 Lease not binding on mortgagee without consent
No lease of mortgaged or encumbered land shall be binding upon the mortgagee except so far as the mortgagee has consented thereto.
[15] In National Mutual Finance (1988) Ltd v Berryman, McGechan J considered an application to remove a caveat in similar circumstances.1 In that case, the mortgagor in default had purported to sell the property to a third party who had then registered a caveat to protect their interest. That purported sale was made without the consent of the mortgagee. The mortgagee then exercised its power of sale and sold the property to another party. McGechan J held that the sale by the mortgagee was pursuant to a prior right, namely the registered mortgage, and as such it had priority over the interest protected by the caveat.2 The caveat was accordingly removed.
[16] Mr Lau is no stranger to litigation with Westpac over caveats. In Westpac New Zealand Ltd v Set Kien Law, Associate Judge Christiansen considered applications by Westpac to remove caveats registered over properties which had been sold pursuant to the powers of sale under Westpac’s mortgage. Mr Lau represented the parties in that case and opposed the application to remove the caveats. The Associate Judge found that Westpac’s rights could not be displaced without Westpac’s consent being given. As there was no such consent given in that case, the interest claimed in the caveat had no priority and had no protection on registration of the transfer. The Associate Judge held that the interest claimed in the caveat was not sustainable against a first ranking registered mortgagee exercising its power of sale. The Associate Judge ordered the removal of the caveats.3
[17] In Westpac New Zealand Ltd v Set Kien Law, Associate Judge Bell again considered an application to remove caveats which had been lodged by Mr Lau.4 The issue in that case was whether Westpac’s interests under its mortgages prevailed over interests in agreements signed with the mortgagors. Westpac had not consented to the agreements entered into in that case. The Associate Judge held “it is perfectly clear that Ms Law’s interest is subordinate to the bank’s interest and the interests claimed by Ms Law cannot prevent the bank exercising its powers of sale”.5 Orders removing
the caveats were made accordingly.
1 National Mutual Finance (1988) Ltd v Berryman HC Wellington M451/91, 2 October 1991.
2 At pp 4–5.
3 Westpac New Zealand Ltd v Set Kien Law HC Auckland CIV 2011-404-007989, 19 December
2011 at [23]–[25].
4 Westpac New Zealand Ltd v Set Kien Law [2012] NZHC 1065.
5 At [28].
[18] The onus of proof is on the caveator to establish that he or she has a reasonably arguable case for the interest claimed. Even if such an arguable case is established, the Court retains a discretion to make an order removing the caveat, but the Court will act cautiously.6
[19] I have carefully considered whether Mr Lau might have any grounds to oppose the application to remove. In a letter dated 24 November 2017, Westpac’s solicitors wrote to Mr Lau advising him of the sale and settlement date, and requesting him to remove the caveat. In an email in response on the same day, Mr Lau said:
The lease had been in place before your client registered the mortgage on the property
In other words I never consent your client registered as mortgagee on the property
Your client never served the PLA notice to the owner of the property who residing in China
Please forward all the service of the documents and the sales and purchase agreement if the property [sic]
[20] Plainly these assertions are not correct. The title for the property clearly shows that the mortgage has priority over the caveat, and over the alleged lease interest which the caveat purports to protect. The affidavit evidence before me shows that the Property Law Act notice was served correctly.
[21] In summary, I was satisfied that the caveat must be removed. Westpac’s mortgage and power of sale take priority over the alleged lease and caveat. Westpac did not consent to that lease being granted. Mr Lau has refused to remove his caveat. In the circumstances, I was satisfied that the orders sought by Westpac were appropriate.
Result
[22] The application to remove the caveat was granted. The applicant was awarded costs on a category 2B basis.
6 Pacific Homes Ltd (in receive) v Consolidated Joineries Ltd [1996] 2 NZLR 652.
[23] I made orders in the form set out in the draft orders provided to me which are, for convenience, set out again below:
(a) That caveat 10930094.2 lodged against certificate of title NA71D/745 (North Auckland Registry) lapse and be formally removed upon the registration of a transfer by the mortgagee (Westpac New Zealand Limited) to the mortgagee’s purchaser pursuant to its power of sale; and
(b)Costs be paid by the respondent on a category 2B basis as set out in the annexed schedule, together with disbursements fixed by the Registrar as set out in the annexed schedule totalling $7,641.50.
Edwards J