Westpac New Zealand Limited v Wang HC Auckland CIV-2011-404-000416

[2011] NZHC 1744

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-000416

UNDER  Part 12 of the High Court Rules

IN THE MATTER OF     an application for summary judgment

BETWEEN  WESTPAC NEW ZEALAND LIMITED Plaintiff

ANDYEAN WANG Defendant

Hearing:         6 July and 26 September 2011

Appearances: Mr B Upton for Plaintiff

Mr N Farrands for Defendant

Judgment:      4 October 2011 at 11:00 AM

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

04.10.11  at  11 a.m., pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Simpson Grierson, Private Bag 92518, Wellesley Street, Auckland – [email protected]
Morrison Kent, P O Box 222, Auckland - [email protected]

WESTPAC NEW ZEALAND LIMITED V WANG HC AK CIV-2011-404-000416 4 October 2011

[1]      The plaintiff advanced funds of $356,000 to the defendant in August 2006 to enable her to purchase an apartment in a development called the Beaumont Quarter. The  plaintiff  registered  a  first  mortgage  over  this  leasehold  property  that  the defendant was intending to purchase as security.  The loan went into default in July

2008.  On 5 November 2008 the plaintiff served a notice under s 119 of the Property Law Act 2007 by way of substituted service.  The Property Law Act notice expired unremedied.   Three attempts were made to sell the property throughout 2009 and

2010.   The defendant paid a purchase price of $445,000 for the property.   It was eventually sold for $92,000 on 25 June 2010.   The transaction was  a financial disaster from the defendant’s perspective.  She no longer has the property but she does have a major debt to the plaintiff.

[2]      The plaintiff now seeks summary judgment to recover that debt.

[3]      The  defendant  does  not  deny  the  fact  that  she  borrowed  the  amount concerned from the plaintiff.  She has put forward a number of points in opposition to the claim which centre on the plaintiff’s actions.

[4]      In the initial stages of the litigation, before Mr Farrands was instructed, the defendant raised several points by way of defence. After the proceeding was part heard  in  July,  it  was  adjourned  until  26  September  2011,  when  the  hearing completed.  Mr Farrands appeared as counsel at the hearing on the latter date.  He told me that the following matters were now in issue (as appears from the excerpt from Counsel’s submissions).  The defendant opposes the application for summary judgment on the following grounds:

2.1       Service of the Property Law Act notice by Westpac was defective in that the notice was not served in accordance with the order for substituted service;

2.2      As a result of the defective service, the Defendant had no notice in law of the

mortgagee’s intention to exercise its rights of sale;

2.3      In attempting to exercise the rights of sale, Westpac acted unlawfully;

2.4      The defendant has suffered loss as a result of the unlawful mortgagee process;

2.5       Because of the failure by Westpac to properly notify the defendant of the Property Law Notice in law and otherwise, the defendant was unaware that Westpac was attempting to sell the property by mortgagee sale for approximately 1 year;

2.6       Had the defendant known that Westpac was attempting to sell the property, she could  have  taken  steps  which  may  have  averted  the  extent  of  loss  now suffered;

2.7       The defendant did ultimately sell the property herself but was forced to do so through the unlawful mortgagee sale process.  It is conceivable that a better price could have been obtained if the defendant had not been forced to sell the property; and

2.8      There is an arguable defence to Westpac’s claim for default by the defendant

on her current account on the basis of cumulative loss.

[5]      The question, then, is whether she has any valid claim against the plaintiff.

Legal Principles

[6]      I accept the parties’ submissions that the applicable authorities establish that the Court is to be guided by the following principles:

a)       A robust view of the evidence in summary judgment applications must be taken in light of commercial realities, and in the end it is a matter of judgment on the particular facts: O’Leary v Sygrove.[1]

[1] O’Leary v Sygrove CA 385-92, 17 June 1993.

b)        Further, as in accordance with the judgment of the Court of Appeal in

Krukziener v Hanover Finance Ltd:[2]

[2] Krukziener v Hanover Finance Ltd [2008] NZCA 187; (2228) 19 PRNZ 162 at [26]:

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).

[7]      It is also necessary to make brief reference to defences by set-off.    The principles relating to set off were stated in Grant v NZMC in the following terms:[3]

[3] Grant  v NZMC [1989] 1 NZLR 8 (CA)at 13.

The principle is, we think, clear. The defendant may set-off a cross-claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard  to  the  other;  the  defendant's  claim calls  into  question  or  impeaches  the plaintiff's demand.  It is neither necessary, nor decisive, that claim and cross-claim arise out of the same contract.

[8]      In Grant summary judgment was declined because the cross-claim alleged could give rise to an equitable set-off that the defendant would be able to rely on as a defence.

Substited Service of PLA notice properly served?

[9]      Judge Hubble’s order dated 22 October 2008 provided, so far as relevant, that

it be effected:

[B]y affixing copies of any such notices to the front door of the premises at Unit B307/20 Beaumont Street, Freemans Bay, Auckland and advertising copies of any such notices in the New Zealand Herald on one occasion.

[10]     There is no dispute that the second part of the order requiring advertising took place in accordance with Judge Hubble’s order.   There is a dispute about whether the documents were properly served by affixing them to the door.   This point was only raised in the submissions that the defendant filed prior to the resumed hearing of this matter. Mr Upton for the plaintiff therefore invited me to accept for filing a further affidavit which explained some additional background to the service of the documents.  Mr Farrand’s position was that he would abide the decision of the

Court.  Given the sequence of events and the circumstances in which this issue was

raised, I agreed to consider the affidavit, sworn by Mr M A Powell on 26 September

2011.

[11]     That evidence may be summarised as follows.   The service agent was not able to obtain access into the complex where the defendant’s apartment is located because it is a multi-apartment development.   Therefore, instead of affixing the notice to the door of the specific apartment in question, he affixed it to the external door to the street at the complex.  The defendant submits that this was not service in compliance with the order for substituted service.

[12]     In the end I do not need to decide this point.  As Mr Upton submitted, the circumstances in which it would have been incumbent upon the plaintiff to prove compliance with the substituted service order never came to pass.   The plaintiff would only have been required to serve the Property Law Act notice in accordance with the order if it wanted to proceed to carry out a mortgagee sale.  However, it did not do this.  Instead it was the defendant who located the intending purchaser.  That party offered $92,000 for the property and, the plaintiff consenting to discharge its mortgage. The transaction proceeded.   The defendant instructed solicitors who attended to settlement and, following completion, they sent the balance of the funds received to the plaintiff on or about 21 July 2010.

[13]     I conclude that it is unarguable that the defendant carried out the sale of the property and  not  the  plaintiff.  Therefore,  the issue of whether the  plaintiff had complied with section 119 of the Property Law Act 2007 does not arise.   The defendant  herself  accepts  this.    Thus,  no  arguable  defence  is  disclosed  on  this ground.

[14]     Counsel for the defendant frames a related point in the following terms:

2.7       The defendant did  ultimately sell  the  property herself but  was forced  to do so through the unlawful mortgagee sale process. It is conceivable that a better price could have been obtained if the defendant had not been forced to sell the property.

[15]     However it is clear that no mortgagee sale process, whether lawful or unlawful, actually took place.  Nothing else needs to be said about this asserted ground of defence.  It does not give rise to an arguable defence.

Discretionary reasons for not permitting summary judgment.

[16]     Counsel for the Defendant further submitted -

4. There are also other factors which the defendant asks the Court to take into account as follows:

3.1The defendant  asked  the plaintiff  to  sell  the property well before     the mortgagee sale process was instituted and says that if that had occurred, the shortfall and loss suffered would have been far less substantial;

3.2The defendant says the plaintiff could have taken simple steps to  ensure that she was aware of the Property Law notice either by contacting her by email, phone, or through her real estate agent;

3.3The condition of the property at the time of sale devalued the price obtained and the defendant considers that it would have been reasonable for the plaintiff to take efforts to remedy the poor state of repair and/or presentation so as to obtain a better price;

3.4The defendant says that the plaintiff through its (real estate) agent insisted that the property was vacant.   As a result, the defendant has suffered loss through not being able to tenant the property; and

3.5The  declining  valuations  over  time  and  price  ultimately obtained for the property indicate that Morley and Associates overvalued the property.

[17]      Mr Farrands explained to me that even if the above grounds did not amount to arguable defences, they were grounds upon which the Court ought to exercise its residual discretion to decline the application for summary judgment.

[18]     McGechan on Procedure makes clear that this discretion is intended to be used  only  in  special  circumstances.[4]  In  considering  whether  to  exercise  its

[4] McGechan on Procedure at HR 136.11.

discretion,  the  possibility  that  summary  judgment  may  cause  injustice  is  the dominant factor: Berg v Anglo-Pacific International (1988) Limited.[5]

[5] Berg v Anglo-Pacific International (1988) Limited (1989) 1 PRNZ 713, 717.

[19]     Dealing with the first point relied upon by the defendant (sub paragraph 3.1 in above), I am unable to agree that the circumstances of the sale of the property disclose a possible injustice to the defendant.

[20]     The plaintiff was under no obligation to exercise its power of sale at any particular time or to exercise it at all.   On the other hand it was always open to the defendant to sell the property. Admittedly, she would have had to obtain the agreement of the plaintiff to discharge its mortgage over the property if the amount to be realised was not going to yield a net amount that would entirely clear the mortgage.    That is to say, the mortgagee had the ability to control the sale process. But in that regard the defendant's position would have been no different from what would have resulted had the plaintiff decided to exercise the power of sale vested in it.

[21]     The Court would not be entitled to exercise its discretion in such a way as to cut across clearly established principles regulating mortgagee sales. In any case, there is no evidence to reasonably suggest that the matters set out in paragraph 3.1 caused the defendant to suffer loss.

[22]     The matters set out at 3.2 similarly do not give rise to any concern that summary judgment might cause the defendant injustice. The defendant knew that she was not able to cope with a mortgage.  She was in default from July 2008.  It is idle to suggest, as is implicit in sub-paragraph 2 above, that she did not know that the bank wanted to have the property sold.  She did not need to have the Property Law Act notice brought to her attention to come to that realisation.  There is no reason why the Court should exercise its discretion to disallow summary judgment on the basis of the matters raised in this sub-paragraph.

[23]     I deal next with matters raised in the subparagraph 3.3.

[24]     The circumstances in which a mortgagee enters into possession have been accurately described in Laws of New Zealand in the following terms:

223.     Mortgagee’s exercise of power to enter into possession. If a mortgagee becomes entitled under a mortgage, after compliance with all requirements in relation to the service of notice and other matters, to exercise a power to enter into possession of mortgaged land, the mortgagee may exercise that power by:

•entering into or taking physical possession of the land peaceably, and without committing forcible entry;

•asserting  management  or   control  over  the   land  by requiring a lessee or occupier of the land, to pay to the mortgagee any rent or profits that would otherwise be payable to the current mortgagor or

•applying to a court for an order for possession of the land.

[25]     I agree with the author’s statement that the foundation of a claim for waste lies in the mortgagee’s action in relation to the property.[6]  Mere inaction leading to dilapidation of the premises is no longer the basis for a claim.[7]

[6] Law of New Zealand, [235].

[7] Property Law Act 2007, s 70.

[26]     Notwithstanding the passage of the Property Law Act 2007,  the position therefore remains that a mortgagee in possession who commits waste may be liable to the mortgagee for resulting damages.  But there is no obligation on the mortgagee to actively maintain a property in any circumstances, let alone where the plaintiff, as here, has not entered into possession of the property.  Further, s 70 of the Property Law Act 2007 provides that permissive waste (as opposed to waste resulting from affirmative action’s on the part of a mortgagee) is not actionable.

[27]     It is therefore not reasonably arguable that the plaintiff is liable for waste in relation  to  the  secured  property.    There  is  no  other  ground  in  contract,  or  the common law or statute of which I am aware that would impose upon the plaintiff an obligation of the kind for which the defendant contends.  The plaintiff cannot have been under any duty to repair the apartment.  The plaintiff is therefore not liable for any losses said to flow from the failure to repair. It would be inconsistent with these circumstances  to  contend  that  were  the  Court  to  enter  summary  judgment  the

defendant would suffer an injustice.

[28]     Furthermore, it would be impossible for the Court to quantify any loss on the basis of the sparse particulars of this purported defence that the defendant provides in her affidavit.

[29]     I next deal with the issues set out in subparagraph 3.4.

[30]     There  is  some  evidence  that  the  real  estate  agent  instructed  to  sell  the property advised the defendant that it would be easier to market the property if it was vacant. The defendant’s rental manager reported on 14 May that the “bank/sales agent wanted it empty as the sale was in two weeks”.  That would indicate that the agent may have communicated this view ahead of the first attempted sale which occurred on 29 March 2009.    However, the property was tenanted until 23 March

2009. After that, it remained untenanted until the sale in July 2010. For the purpose of deciding whether there is an arguable defence available to the defendant, I will assume that that is what happened.

[31]     The defendant then says that the real estate agents “insisted” on the property being vacant.  This would suggest that the defendant was left with no alternative but to accede to the plaintiff’s agent’s requirements.  The defendant gives no evidence as to why she is of that view.  She does not state that she had any direct communication with the agents to that effect.  The only relevant evidence that has been adduced is a copy of the email from the defendant's rental manager dated 14 May 2009 to the following effect:

I have been emailing you and have not had a response.   Apparently the mortgage has gone mortgagee sale.  As far as I know it has not sold.  The tenant moved out on the 23 March and the bank/sales agent wanted it empty as the sale was in two weeks.

[32]     The property did not in fact sell in March 2009 or even in the following year. In February of 2010, some 11 months later, the defendant asked if she could market the property.

[33]     Irrespective  of  the  defendant’s  belief  that  the  plaintiff  insisted  that  the property was vacant for marketing and sale, as noted above, the plaintiff never entered into possession.  While it may have been attempting to sell the property that

is not the same thing as entry into possession.   Accordingly, it was open to the defendant at all times to rent the property out.  She may not have done so because her rental agent seems to have accepted as a fait accompli that the selling agents appointed by the bank could if they wish, require her to have the property vacant. The fact that the defendant was under a misapprehension of her legal  position, though,  does  not  seem  to  have  been  attributable  to  any breach  of  duty  by the mortgagee.

[34]     I deal next with the matters raised in ground 3.5 above. There is no basis upon which the plaintiff can be found liable for loss consequent upon a negligent valuation carried out by a valuer who has been appointed by it to value the property. The valuer was an independent contractor.

[35]     I accept that the factual matters are complicated.  It is not, of course, for a Court  at  summary  judgment  stage  to  make  findings  where  there  is  a  proper foundation for concluding that there is a dispute as to the relevant facts.  However, I consider, that the Court has an obligation to go as far as it can in assessing whether there is any substance to a defence put forward by the defendant.

[36]     As a result, even taking a view of the facts most favourable to the defendant, I am unable to find a reasonably arguable defence that would allow the defendant to avail herself liability to the plaintiff as an equitable set-off.

[37]     I have sympathy for the defendant.  She has found herself well on in life, she was aged 59 at the relevant time, her marriage had recently ended and on her own she was attempting to deal with what had turned into a most disadvantageous investment.  From what I have seen of her depositions and emails, I also conclude English was not her first language.  She does not appear to have taken legal advice or even understood the need to do so.   However, even making allowance for those matters, I am unable to conclude that she has an arguable defence or that there are matters which give rise to a concern that to enter summary judgment would cause her injustice.

Result

[38]     I conclude that the plaintiff is entitled to summary judgment.   There is no doubt that in this case that the defendant’s investment in this property was nothing less than disastrous.  But on closer examination it appears that there are a number of factors which account for the apparently poor return on the mortgagee sale.  These included the fact that the defendant may well have purchased at a time when there was considerable speculative interest in properties in the Beaumont Quarter.   The price paid may well have represented the market then but of course market values are not static.

[39]     I enter judgement against the defendant as follows:

First cause of action  $400, 180. 85

Second cause of action  $  61, 913. 69

Costs  $  15,510.00

Disbursements                    $      1,148.30

Total  $478, 752. 84

J.P. Doogue

Associate Judge