Westpac New Zealand Ltd v Cooper HC Auckland CIV 2009-404-000990
[2010] NZHC 16
•29 January 2010
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2009-404-000990
BETWEEN WESTPAC NEW ZEALAND LIMITED
Plaintiff
ANDMARK ALAN COOPER Defendant
Hearing: 24 September 2009
Appearances: M A Sandelin and S K Hindle for the Plaintiff
J R F Cochrane and L M Van for the Defendant
Judgment: 29 January 2010
JUDGMENT OF DUFFY J
This judgment was delivered by Justice Duffy
on 29 January 2010 at 3.00 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors: Minter Ellison Watts P O Box 3798 Shortland Street Auckland 1140 for the
Plaintiff
Kensington Swan Private Bag 92101 Auckland 1142 for the Defendant
WESTPAC NEW ZEALAND LTD V COOPER HC AK CIV-2009-404-000990 29 January 2010
[1] Westpac New Zealand Limited (“Westpac”) has applied for summary judgment against the defendant, Mark Cooper, in reliance on guarantees Mr Cooper gave to Westpac for money and obligations owed to Westpac by South Pacific Venture Capital Limited (“South Pacific”) and Enfield Estates Limited (“Enfield”). Although it is not clear from the statement of claim or from the orginal affidavits filed in support of the summary judgment application, Westpac’s claim against Mr Cooper is for the deficiency between the amount Westpac realised from mortgagee sales relating to the money Mr Cooper has guaranteed and the amounts originally owing under those guarantees, as well as for costs associated with it.
[2] Mr Cooper opposes the application for summary judgment. He contends that Westpac has failed to make out its claim properly and, furthermore, it cannot show that he has no defence to its claim.
[3] At the beginning of the hearing, Mr Cooper sought leave to adduce further evidence in reply to Westpac’s reply evidence, and an adjournment of the substantive summary judgment application hearing until such time as the additional evidence, and any evidence in reply to that evidence, had been filed. Westpac opposed Mr Cooper’s applications and sought to persuade the Court to proceed with the summary judgment application.
[4] I considered that I needed to be aware of the issues for determination in the summary judgment proceeding before I could determine whether or not additional time to file further evidence should be granted in the interests of justice and, therefore, if it was appropriate to adjourn the summary judgment application. For this reason I proceeded to hear the summary judgment application.
Summary judgment application
[5] Westpac relies on guarantees Mr Cooper gave for the borrowings of South Pacific and Enfield. Those borrowings were secured by registered mortgages against titles to land subject to the Land Transfer Act 1952. Neither company has paid Westpac the monies it has borrowed. The mortgage securities have been realised, following mortgagee sales of the subject properties. Those sales did not
achieve prices that satisfied the full indebtedness of each company to Westpac, and
so it now seeks to enforce the guarantees it holds from Mr Cooper.
[6] Mr Cooper opposes the application on the following grounds:
a) Westpac has failed to make demand properly on Mr Cooper, as guarantor, for the entire sums allegedly owed by him under the South Pacific and Enfield guarantees;
b) Westpac has failed to serve the requisite Property Law Act 2007
notices properly on Mr Cooper;
c) Westpac has failed to prove Mr Cooper’s alleged indebtedness to it;
d)Westpac has failed to discharge its statutory duty of care to Mr Cooper under s 176 of the Property Law Act in relation to the sales of the South Pacific and Enfield properties; and
e) Westpac has failed to discharge the equitable duty of good faith it owed to Mr Cooper in relation to the sales of the South Pacific and Enfield properties.
[7] In his submissions in opposition to the summary judgment application, Mr Cooper’s counsel, Mr Cochrane, has helpfully set out four key issues which arise for the Court to determine. They are:
a) Whether Westpac has complied with its obligations under the guarantee and the Property Law Act to make good and proper service of the demands and notices;
b)Assuming there has been proper compliance (which Mr Cooper rejects), has Westpac provided evidence of the outstanding quantum Mr Cooper is said to owe for both debts;
c) Has Westpac satisfied the Court that the duty owed to Mr Cooper under s 176 of the Property Law Act in relation to the mortgagee sales has been discharged such that there is no prospect of Mr Cooper being able to show he has a defence for breach of that duty, which would entitle him to a defence by way of equitable set-off; and
d)Has Westpac satisfied the Court that any equitable duty of good faith owed to Mr Cooper in relation to the mortgagee sales has been discharged such that there is no prospect of Mr Cooper being able to show he has a defence for breach of that duty, which would entitle him to a defence by way of equitable set-off.
[8] I consider that this case also raises a further key issue for determination. That
is whether or not Westpac has discharged the burden placed on applicants for summary judgment to make out a case which satisfies the Court that the defendant has no defence. Ordinarily this enquiry focuses on the absence of a substantive defence. However, the form of the plaintiff’s claim, and the evidence to establish the claim is also relevant to this enquiry. A statement of claim which fails to include material allegations, and primary affidavits which fail to adduce evidence relevant to proving those allegations, can also result in the application for summary judgment being dismissed. Minor errors or omissions may be curable by permitting the applicant leave to amend its pleading and to file additional affidavit evidence. But where such errors and omissions create real prejudice for a defendant, the likely result will be refusal of summary judgment.
Guarantee of South Pacific’s indebtedness and failure to pay thereunder
[9] In April 2004, South Pacific borrowed $1.925m from Westpac under a property finance wholesale term loan (the South Pacific term loan). The borrowings were secured by a mortgage registered against a property on Waiheke Island, which was owned by Mr Cooper and John Heimsath as trustees of the Cooper Family Trust. Mr Cooper guaranteed the South Pacific term loan, and South Pacific’s performance of its obligations under the South Pacific term loan. The mortgage and the guarantee was executed on Mr Cooper’s behalf by Mr Heimsath pursuant to a power of
attorney which Mr Cooper had given to Mr Heimsath on 21 February 2001. The guarantee was a continuing guarantee. It covered all money which South Pacific might owe to Westpac as a present or contingent debt, both then and for the future, in relation to principal and interest. The South Pacific term loan expired on 31 October 2008.
[10] The terms of the guarantee required Mr Cooper to pay Westpac all costs and liabilities which it incurred in relation to the exercise, contemplated exercise, or attempted exercise, of any of its rights, powers or remedies relating to the guarantee, or any security for the guarantee. The guarantee also required Mr Cooper to pay Westpac interest on all amounts which Westpac demanded from Mr Cooper as guarantor under the guarantee.
[11] In addition to Mr Cooper’s obligations under the guarantee, it was a term of the guarantee that he agreed to perform the obligations of South Pacific as if he were South Pacific. His liability was not affected if Westpac chose not to exercise any of
its rights against South Pacific or anyone else. There was no limit on the amount Westpac could recover from Mr Cooper under the guarantee, and any security was independent of the guarantee.
[12] South Pacific operated two accounts with Westpac that are relevant to the claim under the guarantee. The first was a business transaction account. The general terms and conditions of that account included that overdrafts were repayable immediately on demand, and interest rates on overdrafts and other amounts owed were subject to market fluctuations and could be varied by Westpac at times. The second was a standard cheque account. The same terms and conditions that applied to the business transaction account applied to the cheque account.
[13] As at 8 August 2008, there were arrears of $29,662.13 in respect of the business transaction account. The cheque account was seemingly in credit as a schedule in the statement of claim shows money in the cheque account being offset against the arrears in the business transaction account, and the South Pacific term loan. Westpac sent letters of demand to Mr Cooper as a guarantor and as a mortgagor. The letters were dated 8 August 2008, and they were sent to Mr Cooper
at various addresses. The first was sent care of David Peterson at a post office box in
Levin. The second was sent to Mr Cooper care of Pacific Northstar Property Group
at the Wiltshire Boulevard Hotel, Beverly Hills, California, United States of America. These were the addresses which Westpac had for Mr Cooper. The arrears were not paid.
[14] As at 27 August 2008, the arrears totalled $45,301.78. This was made up of
an outstanding balance of $29,423.04 in the business transaction account, interest and charges of $713.12, and interest due on the South Pacific term loan of $15,165.62.
[15] On 8 September 2008, Westpac issued a series of Property Law Act notices. There was notice under s 119 to Mr Cooper and Mr Heimsath as mortgagors that they were in default under the mortgage. The notice specified the amounts owing as
at 27 August 2008. The notice listed a postal address for Mr Heimsath, but not for Mr Cooper, he was simply referred to as “Mark Cooper Auckland”. There were also notices under ss 121 and 122 to named recipients which included South Pacific, Mr Cooper and Mr Heimsath. As with the s 119 notice, the ss 121 and 122 notices gave no address for Mr Cooper other than “Mark Cooper Auckland”. The s 119 notice expired unremedied on 17 October 2008. Mr Cooper has made no payments towards the amounts owing.
[16] When the South Pacific term loan expired on 31 October 2008, the principal debt under the loan agreement became due, as well as interest arrears and accrued interest. As at February 2009, the total amount of South Pacific’s indebtedness to Westpac was $1,703,431.27. No notice of demand was issued for payment of the principal debt, and the interest that had accrued on it. No s 119, or ss 121 and 122 notices were issued for the money outstanding under the South Pacific term loan.
[17] On 5 February 2009, the Waiheke property was the subject of a mortgagee sale and sold at auction for $1.4m. The outstanding balance, together with interest and associated costs, is the amount that Westpac now seeks to recover from Mr Cooper under the guarantee.
Guarantee of Enfield’s indebtedness and failure to pay thereunder
[18] In November 2007, Enfield obtained a property finance wholesale term loan facility from Westpac under which Westpac agreed to lend Enfield up to a maximum sum of $3.8m (the Enfield term loan). The Enfield term loan was to expire on
30 May 2008, but the term was extended until 30 July 2008. The terms and conditions of this loan were the same as the terms and conditions of the South Pacific term loan. The Enfield term loan was secured by a first registered mortgage, dated 26 November 2007, granted in favour of Westpac by Enfield. The terms and conditions of the Enfield mortgage were the same as those of the South Pacific mortgage.
[19] On 26 November 2007, Mr Cooper guaranteed the money and obligations owed to Westpac by Enfield. The terms and conditions of the Enfield guarantee were the same as those of the South Pacific guarantee. Like South Pacific, Enfield also operated a business transaction account with Westpac. It too was subject to the general terms and conditions of Westpac’s lending.
[20] As at 8 August 2008, there was a total of $3,876,145.77 owing to Westpac by Enfield. This was made up of an outstanding balance of $32,677.06 in the business transaction account, interest and charges of $360.03, and, under the Enfield term loan, a principal debt of $3.8m, interest arrears of $34,168.76, and accrued interest to 8 August 2008 of $8,939.92.
[21] The documents attached to the affidavit of Craig Morton in support of the application for summary judgment disclose that by letter dated 5 September 2008, Westpac’s solicitors wrote to Mr Cooper advising him of Enfield’s default under the mortgage. Enclosed with the letter was a ss 121 and 122 notice dated 8 September
2008. The letter and the ss 121 and 122 notice specifies Mr Cooper’s Beverley Hills address. The notice does not specify the amount owing under the default. The notice refers to Westpac having given notice under s 119 to Enfield of it being in default under the mortgage. The amounts owing are set out in the s 119 notice. However, the letter sent to Mr Cooper does not state that he was also sent a copy of the s 119 notice. In his affidavit, Mr Morton refers to Mr Cooper being sent
Property Law Act notices on 20 August 2008. This is not borne out by the attached documents to which Mr Morton refers in his affidavit. There is nothing to prove that Mr Cooper received anything other than the notice which accompanied the letter of
5 September 2008. This letter is silent about any s 119 notice. Presumably, the disparity in the dates whereby the letter is dated 5 September 2008 and the notice to which the letter refers is dated 8 September 2008, is the result of the letter being prepared before the notice. The only notice that is dated 20 August 2008 is the s 119 notice to Enfield. That notice does not refer to Mr Cooper, and there is no evidence to show that it was sent to Mr Cooper. Mr Morton deposes that the s 119 notice expired unremedied on 26 September 2008.
[22] There were some unsuccessful attempts to sell the Enfield property. It sold
on 13 May 2009 for $2.8m. Once relevant expenses were deducted from the sale price, the balance came to $2,746,776.86. This was insufficient to clear all of Enfield’s indebtedness to Westpac. Hence, Westpac’s reliance on the guarantee provided by Mr Cooper. Mr Cooper has failed to pay the outstanding amounts.
Is an adjournment necessary?
[23] Mr Cooper contends that Westpac’s initial documents (application for summary judgment, statement of claim and affidavits of Mr Morton) did not properly inform him of Westpac’s case against him. He says that it was not until he had filed his notice of opposition that Westpac then filed reply evidence. This evidence provided new information that should have been made available at the outset. He contends that he should be given the opportunity to file additonal evidence that answers the evidence contained in Westpac’s reply affidavits. Mr Cochrane drew my attention to arguable defects in the summary judgment application. He complained that there was no mention of the mortgagee sales, or the manner in which demands and Property Law Act notices were purportedly served on Mr Cooper in the documents initially filed with the summary judgment application. In this he is partly correct. The form of the notices was apparent from Mr Morton’s first affidavit. However, other details relating to the service of the notices, as well as details of the mortgagee sales, did not emerge until Westpac filed its reply affidavits.
[24] Westpac opposes any adjournment and contends that its original documentation satisfied the requirements for summary judgment. It says that the material it introduced in its reply affidavits is truly reply material, and was only produced to counter evidence adduced by Mr Cooper.
[25] The first step is to consider the key issues for determination, and how they relate to this procedural dispute. The first issue revolves around the form of the demands for payment which Westpac has made, as well as the form of the Property Law Act notices which Westpac issued. Westpac contends that under the terms of the guarantees, it is not necessary for it to issue notices of demand to Mr Cooper. However, the notice requirements of the Property Law Act cannot be contracted out of. I will, therefore, focus on those notice requirements.
[26] Regarding South Pacific’s indebtedness, the only notice specifying the amount is the s 119 notice that was sent to Mr Cooper and Mr Heimsath as mortgagors. This notice only specifies the arrears in the business transaction account. A total of $45,301.78 was owing as at 27 August 2008. The principle sum of the South Pacific term loan expired on 31 October 2008. No Property Law Act notice has been issued in relation to the recovery of the principal amount, and any interest or costs associated with that loan.
[27] The Property Law Act notices Westpac issued in relation to South Pacific’s indebtedness do not list a full address for Mr Cooper. He, therefore, disputes that the notices were properly served on him. He also says that it was for Westpac to prove service of the notices from the outset. He says that for him to dispute service, and then for Westpac to reply by adducing the evidence it relies on to prove service, has the effect of precluding him from being able to present an informed challenge to Westpac’s evidence on this topic.
[28] Regarding Enfield’s indebtedness, Mr Cooper makes the same complaint about the Property Law Act notices as he does for the South Pacific notices and, in addition, he argues that the Enfield notice is deficient because it fails to specify the amount owed. With the South Pacific borrowings, a s 119 notice setting out arrears
of $45,301.78 was prepared for service on Mr Cooper as mortgagor. Consequently,
if he did in fact receive this notice, he would also as guarantor have come by knowledge of the arrears owing. But with the Enfield loan he was not a mortgagor. He could only learn of the arrears under that loan if a notice to him as guarantor specified the arrears, or he was sent a copy of the s 119 notice in addition to a notice under ss 121 and 122.
[29] Westpac argues that its Property Law Act notices are valid and were properly sent to Mr Cooper. But it also argues that if the notices were deficient, then the failure to provide proper notice has not prejudiced Mr Cooper. Mr Cooper says he has been prejudiced. Westpac contends that Mr Cooper has not established he was prejudiced, whereas Mr Cooper contends that it is for Westpac to establish there is no prejudice before he should attempt to respond to that allegation with proof of prejudice.
[30] The competing arguments raises the question of what Westpac should have done in its application for summary judgment. I consider that Westpac’s initial documents should have included the following:
a) A statement of claim which, in relation to both guaranteed debts, pleaded:
i)the creation of the debts and the guarantees, the existence and nature of Mr Cooper’s obligations under the guarantees, the defaults and arrears owing, and the steps Westpac took to recover the arrears arising after the mortgagee sales;
ii)the steps Westpac took to recover the outstanding balance under the guarantee, including an outline of the process followed to achieve compliance with the statutory notice regime under the Property Law Act; and
iii)an allegation that should the notice process have been defective in any way, this has not resulted in any prejudice to Mr Cooper;
b)Affidavit evidence which proved the allegations required to be pleaded. Regarding proof of no prejudice, if notices were not properly given to Mr Cooper, I consider that something of the kind identified by Asher J in Public Trustee v Ottow & Ottow HC AK CIV 2009-404-3825 4 November 2009 at [31] may serve to show prima facie that the mortgagee sale process had not prejudiced Mr Cooper:
[31] The following steps indicate that a mortgagee has made reasonable efforts to obtain the best reasonably obtainable price:
a)The appointment of a reputable real estate agent to market the property.
b)Obtaining a valuation report from an experienced valuer as a guide to what could reasonably be expected for the property.
c)Marketing over a reasonably long period of time.
d)An extensive advertising and promotional campaign.
e) A properly conducted auction.
f) A sale price that, given all the circumstances, can be reconciled with expert opinion as to value.
[31] In Price Waterhouse v Fortex Group Ltd CA179/98 at 13, although in a different context, the Court of Appeal had this to say on the importance of pleadings:
It has become fashionable in some quarters to regard the pleadings as being
of little importance. There was an echo of that approach in the implicit suggestion floated in this case that exchange of briefs of evidence before trial might be seen as curing any lack of particularity in the pleadings. Any such view is misguided. Pleadings which are properly drawn and particularised are, in a case of any complexity, if not in all cases, an essential road map for the Court and the parties. They are the documents against which the briefs of evidence are or should be prepared. They are the documents which establish parameters of the case, not the briefs of evidence.
We are not casting aspersions on the pleadings in this case which, leaving aside issues about necessary particularity, are well drawn on each side. Nor are we advocating a pedantic approach to the topic. Pleadings should be read
as conveying what they would reasonably convey, in the context of the case,
to a sensible legal mind. Even less are we advocating prolixity of pleadings,
or the raising of every conceivable cause of action irrespective of its potential for success; this type of pleading often contains the additional flaw
of overlooking R114 which requires each cause of action to be separately pleaded. What we are saying is that both the Court and opposite parties are
entitled to be advised of the essential basis of a claim or defence, and all necessary ingredients of it, so that subsequent processes and the trial itself can be conducted against recognisable boundaries. Neither the Court nor
opposite parties should be placed in the position of having to deal with a proposition of whose substance adequate notice has not been given in the pleadings.
[32] I consider that the Court of Appeal’s comments are apposite to the present case. The statement of claim in a summary judgment application should provide the Court and the defendant with a road map which sets out the essential elements of the plaintiff’s claim. Neither the Court nor the defendant should be placed in the position of having to make sense of the plaintiff’s claim by reference to the plaintiff’s affidavit evidence, particularly evidence that has been filed by way of reply.
[33] Westpac’s statement of claim is not well drawn. It does not provide a road map for either Mr Cooper or the Court. The statement of claim does not inform the reader that part of the indebtedness of South Pacific and Enfield has been recovered under mortgagee sales. At the time the statement of claim was filed, one of the mortgagee sales had not gone ahead, but by the time the application was due to be heard, that sale had been completed. Westpac had the opportunity to file an amended statement of claim to take this event into account.
[34] Westpac’s ability to rely on the guarantees to recover from Mr Cooper is affected by whether or not proper notice has been given to him of the exercise of the power to effect a mortgagee sale. Where, as is the case here, there have been mortgagee sales, which have reduced the indebtedness in part, and the mortgagee attempts to recover the deficiency between what was realised in the mortgagee sales and the arrears outstanding and other associated costs, the Property Law Act contains specific requirements for notice to be given to guarantors before such sales occur. If the notice requirements are not complied with, recovery becomes more difficult, if not impossible. Hence, in order to show that Mr Cooper has no defence to Westpac’s claim, Westpac has to show that either it has properly complied with the notice requirements, or its failure to do so has not prejudiced Mr Cooper. The
impact of the Property Law Act notice requirements in such circumstances is pivotal
to Westpac’s ability to show that Mr Cooper has no defence.
[35] Section 119 prohibits Westpac from selling the secured land under a mortgagee sale without having first issued a s 119 notice.
[36] Section 123 negates any contractual attempt to counter the effect of ss 119,
120, 121 and 122. Section 123 defeats Westpac’s argument that the steps it took to effect demands for payment, and the notices it issued under the Property Law Act were in accordance with Westpac’s obligations under the guarantee. The terms of that instrument regarding the form of both notices and manner of serving those notices cannot override the Property Law Act’s requirements.
[37] Section 121 requires a copy of the s 119 notice to be served on a guarantor. Under this section, a failure to comply with this notice requirement does not prevent
a mortgagee sale from proceeding, but the mortgagee can be liable in damages for any losses arising from a failure to comply with s 121. However, in this case, Westpac is attempting to recover from Mr Cooper the deficiency between what was realised in the mortgagee sales, and the arrears outstanding and other associated costs. This circumstance is covered by s 122(1).
[38] Section 122(2) provides that Westpac must serve notice of its intentions to exercise its power to sell the mortgaged land on Mr Cooper (as guarantor) at least 20 working days before the exercise of this power. Section 122(3) provides that such notice should be given, whether or not a copy of the s 119 notice has been served on Mr Cooper. Section 122(4) provides that a failure to serve a notice in compliance with s 122(2) does not prevent Westpac from exercising its power as mortgagee to sell the mortgaged land. However, s 122(5) provides that if Mr Cooper is prejudiced
by a failure to serve a notice under s 122(2), then to the extent of that prejudice, Mr Cooper is released from liability to Westpac for the deficiency.
[39] Regarding the application of s 122(5), I consider that the onus of proving that there should be a release from liability to pay the deficiency lies on the party seeking
to obtain the benefit of s 122(5). This would be Mr Cooper. However, I also
consider that before Mr Cooper should be required to satisfy this onus, he would have to have received adequate notice from Westpac’s statement of claim that he was facing a claim as guarantor to pay the deficiency following a mortgagee sale. This is because of the possibility of release from liability under s 122(5). The effect of this provision makes the nature of the claim different from a claim in which, without having first exercised its right to a mortgagee sale, Westpac chooses simply to sue Mr Cooper under the guarantee. Furthermore, since this is a summary judgment application, Westpac is required to show that Mr Cooper has no defence to its claim. Therefore, Westpac must raise something in its evidence to show that even if the notices were inadequate, or not received by Mr Cooper, there has been no prejudice to him.
[40] The presence of s 122(5) makes it clear that failing to comply with the notice requirements, coupled with prejudice arising from such a failure will result in a release from liability, which is a defence. To maintain the summary judgment application, Westpac has to show that Mr Cooper has not been released from liability for the deficiency. Westpac would be in the position of having to exclude a negative, which is not always easy. However, it could have met this requirement by pleading the absence of prejudice in the statement of claim, as an alternative to pleading there had been proper notice of the mortgagee sales. It could then have provided details of the mortgagee sale process in its original affidavit evidence, which were sufficient to show it had taken all reasonable care to sell the properties. Once Westpac had raised these factors in its summary judgment application, the evidential onus would have shifted to Mr Cooper to show he had been prejudiced.
[41] If matters had been approached in this way, the statement of claim would have provided Mr Cooper with proper notice that Westpac was alleging he had no defence to the application because the recovery of the deficiency from him as guarantor was in accordance with s 122’s requirements. Mr Cooper could then have responded with his defence that he was not properly notified under s 122(2), and he could have attempted to negate any suggested absence of prejudice which Westpac may have alleged. Done this way, there would have been no need for Mr Cooper to apply to adduce additional evidence to answer Westpac’s reply evidence.
Everything that Westpac needed to establish its entitlement to summary judgment would have been filed and served as part of the original documents.
[42] As matters stand, Westpac has outlined the events of the mortgagee sales in
its reply affidavits. This is the first time that Westpac makes any reference to there having been mortgagee sales, or that they want to recover the deficiency from Mr Cooper under the guarantees. The statement of claim gives no indication that Mr Cooper is being sued as guarantor for the deficiency following mortgagee sales. The allegations as pleaded, and the amounts of money sought to be recovered from him read as if he was simply being sued on the guarantees he gave for the full amount of the indebtedness.
[43] The importance of the form of the Property Law Act notices which Westpac issued, and whether they were in fact served on Mr Cooper, to his continued liability under the guarantees only becomes clear from a combination of Mr Cooper’s opposition and Westpac’s reply affidavits. In essence, Westpac has left it to Mr Cooper and the Court to chart their way through the highways and byways of the parties’ evidence, including Westpac’s reply evidence, with reference back to the statement of claim, in order to understand the true nature of the claim that is now made against Mr Cooper. This is not the road map the Court of Appeal referred to in Price Waterhouse v Fortex Group Ltd. The result has been Mr Cooper’s complaint that it was not until he received Westpac’s reply affidavits that he fully understood the claim against him, and could only then oppose summary judgment by showing that he had a defence to the claim. His complaint is one of a lack of procedural fairness. The defects in Westpac’s case have deprived him of a proper opportunity to answer the case against him. This is why he wants the opportunity to file additional evidence, and for the hearing of the summary judgment application to be adjourned. It is difficult to see how an adjournment, in this circumstance, could be refused.
[44] Westpac contends that it has discharged the onus of showing it is entitled to summary judgment, and that Mr Cooper has failed to show that he has an arguable defence to its claim. Westpac also opposes Mr Cooper being granted leave to file additional evidence to respond to its reply affidavits.
[45] Westpac relies on the principle in Australian Guarantee Corporation (NZ) Ltd v McBeth (1992) 4 PRNZ 544 (CA) that if a plaintiff’s verification of its claim stands unchallenged, it ought to be accepted unless it is patently wrong. The problem Westpac faces, however, is that in this case the claim it has verified does not establish the facts Westpac needs in order to sue Mr Cooper for the deficiency. This is not, as Westpac suggests it is, a circumstance of Mr Cooper attempting to frustrate a properly made out claim by raising hypothetically possible defences unsupported by positive assertions. Mr Cooper has identified essential missing steps in Westpac’s case. Westpac has attempted to overcome this problem with the evidence contained in Mr Morton’s reply affidavit. But in doing so, Westpac has for the first time expressed material issues which should have been stated at the outset. And it has done so via evidence set out in an affidavit, rather than as part of its pleading. By introducing material issues at this late stage, Westpac has deprived Mr Cooper of the opportunity to respond to its case, as is his right. This outcome is contrary to fair process, which means that the summary judgment application is oppressive. The oppression is compounded by Westpac’s stance in opposing Mr Cooper being given leave to produce evidence in response to answer Mr Morton’s reply affidavit. In such circumstances, Mr Cooper should at the very least be granted an adjournment, and the opportunity to file additonal evidence. However, before continuing in this way, it is worth considering whether the summary judgment application should be permitted to continue when it is in such an unsatisfactory shape.
Westpac cannot exclude the existence of a defence
[46] There may be problems with the form of the notices which were issued, as well as their service.
[47] Mr Cooper contends that the notices Westpac issued should have provided details of the arrears owing under the mortgages. For South Pacific’s debts, the ss 121 and 122 notice dated 8 September 2008 does not specify the amounts then owing under the mortgage. The s 119 notice, which is also dated 8 September 2008, specifies that $45,301.78 is owing. Mr Morton deposes that on 8 September 2008, Property Law Act notices were issued to Mr Cooper. He does not say what these
notices were, but since Mr Cooper was also a mortgagor for these debts, it can probably be safely assumed that Westpac issued both notices to him. Whether he received them, and whether Westpac has proved he received them is another matter.
[48] Section 120 prescribes the form of the notice to be given under s 119. The section provides that the notice must be in the prescribed form and must adequately inform the mortgagor of the nature and extent of the default, the action required to remedy the default, as well as the time in which to do so, and the consequences of failing to remedy the default. Regulation 4 of the Property Law (Mortgagees’ Sales Forms and Fees) Regulations 2007 requires every notice issued under s 119 to be in form 1, which is found in the schedule to these regulations.
[49] There is no prescribed form for a s 122 notice. However, since the Act contemplates in s 121 that a guarantor will receive a copy of the s 119 notice, it follows that the type of information contained in the s 119 notice will become available to a guarantor under s 121. If a guarantor has been served with a s 121 notice which complies with the prescribed form for a s 119 notice, then there may be little reason to require the s 122 notice to have all the information that the s 119 notice contains. It may be enough to simply inform the guarantor that the mortgagee will be looking to the guarantor to make up any deficiency following a mortgagee sale. But if there is no notice, or inadequate notice is given under s 121, the importance of ensuring that the s 122 notice contains the same details as the s 119 notice becomes more obvious.
[50] A guarantor who has advance notice of an impending mortgagee sale can pay the mortgage and assume the benefit of the mortgage security. This would be relevant when a guarantor considered that he or she could market the mortgaged property more effectively than the mortgagee. When a mortgagee sells a mortgaged property without providing a guarantor with proper (advanced) notice of the sale, the mortgagee deprives the guarantor of this opportunity. This is why, under s 122(5), failure to provide notice under s 122(2) may result in the guarantor being released from liability for any deficiency. To enjoy the benefit of this opportunity, the guarantor must know what he or she must pay in order to obtain the benefit of the mortgage security. Similarly, where the arrears owing under the mortgage are small,
a guarantor may choose to pay them and seek repayment from the debtor rather than risk being liable for a deficiency should the mortgagee have the property sold. I consider, therefore, that in circumstances where a mortgagee cannot establish that in accordance with s 121 it has supplied a guarantor with a copy of a compliant s 119 notice, it is incumbent on a mortgagee to establish that the notice it has given under
s 122(2) provides the same type of information as would be found in a s 119 notice.
[51] In this case, the s 119 notice for South Pacific only covers the $45,301.78. I consider this to be inadequate notice under s 122 when it comes to Westpac then seeking to recover the deficiency. The form of this notice did not achieve Parliament’s intent and purpose in requiring mortgagees to issue notice under s 122.
[52] In the case of Enfield, there is no evidence that Westpac ever issued the s 119 notice to Mr Cooper. The only notice the evidence establishes was issued to Mr Cooper is the ss 121 and 122 notice. This notice says nothing about the total amount Enfield owed. I consider, therefore, that this notice was inadequate for the same reason as the South Pacific notice.
[53] There is also the separate question of whether or not the absence of notice can be excused on the ground that Mr Cooper has suffered no prejudice from not receiving proper notice. Westpac, in the course of its submissions, contended that Mr Cooper has failed to prove he was able to pay the arrears owing, and so he cannot have suffered prejudice. However, it was not until Westpac filed its reply evidence that it raised the issue of the mortgagee sales. Until then it would not have been clear that this was a case where Westpac was seeking to recover deficiencies following mortgagee sales, and that Westpac needed, therefore, to show it had complied with s 122. Under the terms of the guarantees, Westpac could have proceeded directly against Mr Cooper without first exercising its powers under the mortgage. Had it done so, Mr Cooper may have had no defence under the guarantees. But since Westpac did choose to exercise its mortgagee powers of sale first, this means that it must comply with the Property Law Act’s notice requirements, otherwise that Act may release Mr Cooper from his obligations under the guarantees to pay the deficiencies. Until the relevance of any prejudice resulting from inadequate, or no notice became known to him (which could only have been
after the reply affidavits were filed), he would have been unaware of the need to deal with the topic of prejudice in terms of s 122(5). This is one of the reasons why he wants leave to file additional evidence. As matters stand, I consider that if Westpac is to show that Mr Cooper has no defence to its claim, it needed to do more than assert in submissions that Mr Cooper has failed to present evidence of his ability to pay the money owing.
[54] Mr Cooper also contends that he was not properly served with the notices. The Act expressly deals with service in Part 7. The key section is s 359. First, s 352 provides that s 353 applies to notices required to be given under ss 119 and 122. Section 353 provides that service on an individual person is to be effected in accordance with s 359. Section 353(2) provides that s 353 overrides anything in any other agreement or instrument, and it makes s 353 subject to ss 355 to 357, but these sections are not relevant for present purposes.
[55] Section 359 reads:
359 Manner of giving or serving notices
(1)A notice, cross-notice, or other document is given to, or served on, an individual person (including an individual person referred to in section 355) when it is, either in New Zealand or elsewhere,—
(a)delivered by registered post to that person or that person's agent; or
(b) received by that person in accordance with section 360. (2) In this section,—
agent, in relation to a person to whom an envelope or package is to be delivered (person A), means a person who has actual or ostensible authority to take delivery, on person A's behalf, of an envelope or package—
(a) directed to person A by name; and
(b) purporting to contain a document
registered post includes any service that—
(a) provides a system of recorded delivery; and
(b) is similar in nature to a registered post service provided by a person registered as a postal operator under the Postal Services Act 1998.
[56] Section 360 provides that notice has been received by a person for the purpose of s 359 when:
360 Receipt for purposes of section 359
A notice, cross-notice, or other document is received by a person for the purposes of section 359 when—
(a) it is handed to, and accepted by, that person; or
(b)if that person does not accept it when it is handed to him or her, it is put down in that person's presence and brought to his or her attention; or
(c) it is otherwise received in writing by that person.
[57] It was for Westpac to establish that it has served Mr Cooper with the s 122 notices in accordance with the requirements of ss 359 and 360. This should have been done in the original evidence which Westpac filed. The copies of the notices, and the accompanying letters do not establish that service was effected in accordance with s 359. There is nothing in the original evidence to show that Westpac complied with the requirements of ss 359 and 360. Nor does Westpac’s reply evidence specifically address the question of service in terms of s 359. Westpac focuses on how it has met the service requirements imposed under the guarantee. However, the terms of this instrument cannot override the requirements of ss 359 and 360.
Westpac’s discharge of its duties when effecting the mortgagee sales
[58] The only information providing particulars of the mortgagee sales is to be found in Westpac’s reply affidavits. Mr Cooper complains that this means he has had no proper opportunity to respond to Westpac’s case on that issue. He contends that he has been prejudiced by the way in which the mortgagee sales occurred. Section 176 sets out the duties of a mortgagee when exercising a power of sale. The scope of those duties was considered in Public Trustee v Ottow & Ottow, and in Wallace v Bank of New Zealand HC AK CIV 2009-404-3534 1 July 2009. Wallace
v Bank of New Zealand at [54] establishes the principle that a failure to achieve a
price that a mortgagor believes the property should achieve, does not give rise to an inference that a mortgagee has breached its duty to take reasonable care. Westpac relies on this principle to answer Mr Cooper’s complaint that the mortgagee sales were poorly handled, as well as to show that any failure to provide proper notice under s 122(5) has not been prejudicial to Mr Cooper. But, whether that is so is a different issue from whether Mr Cooper has been given a proper opportunity to address the potential for prejudice following any failure on the part of Westpac to issue proper notice.
[59] The potential prejudice in relation to this circumstance arises in two ways. First, the failure to provide proper notice results in the denial of an opportunity to address the issue. Secondly, the failure to provide proper notice deprives the guarantor of the opportunity to take over the mortgagee sale process through paying the debt and taking the benefit of the mortgage security. If the guarantor has no proper notice of the mortgagee exercising this power, he or she has no opportunity to act. The prejudice to the guarantor is the lost chance to control the mortgagee sale process for him or herself. In this regard, I consider it is open to a guarantor to argue that he or she would have achieved a better sale price than the mortgagee did. The type of prejudice a guarantor may suffer through the mortgagee failing to conduct a mortgagee sale, as well as the guarantor may have done, had he or she obtained the benefit of the mortgage security, will be relevant to considerations under s 122(5).
Exercise of discretion
[60] The decision to grant or refuse summary judgment is a discretionary one to
be made on the particular facts of the case: see Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA). So are decisions to allow further evidence from a defendant to answer an applicant’s reply evidence, and to adjourn an application for that to be done.
[61] The purpose of an application for summary judgment is to provide a robust and efficient means of obtaining judgment in cases where the defendant has no available defence. This should be done in a clear and cogent manner by way of the original documents the applicant files in the Court. Applicants whose cases get off
to a poor start through material failures to plead the claim properly, and to provide
all the necessary and relevant evidence in the original affidavits should not be able to keep such cases going through filing reply evidence, which result in defendants then needing leave to respond. What is intended to be a quick and efficacious remedy becomes instead something that is long and drawn out. As a matter of policy, I consider that it is wrong in principle for applicants for summary judgment to bring poorly prepared applications and then to attempt to repair them once the defendant has identified the deficiencies. Westpac’s application comes within this category.
[62] In addition, it is not clear that Westpac has repaired its application with its reply evidence. As the evidence stands, Westpac cannot show that Mr Cooper has
no defence. The notices Westpac rely on are not in the form I consider they should
be to meet Parliament’s intent and purpose in enacting s 122. The question of whether they were properly served is not readily ascertainable. There is a conflict of evidence as to whether or not personal service on Mr Cooper was effected. Mr Cooper’s and Mr Morton’s accounts conflict with each other. Mr Morton’s affidavit does not specify what notices were served. Nor does the email dated 11 September 2008, which he sent to Westpac’s solicitors confirming service on Mr Cooper make it clear what notices were served. The language used in Mr Morton’s affidavit, and the email is too general. There are also admitted factual errors in Mr Morton’s affidavits, which he has addressed in subsequent affidavits. Faced with this type of affidavit evidence, I am not prepared to rely on Mr Morton’s general assertions of fact to determine the question of personal service on Mr Cooper without something more to establish what specifically what served. Since Mr Cooper says he does not recall being served with the notices, and the entire tenor
of his affidavit is that he would have recalled this event if it had occurred, I consider there is an evidential conflict which cannot be resolved on the affidavit evidence.
[63] Westpac has failed to address properly, either in the statement of claim or in
its affidavit evidence, the question of there being no prejudice to Mr Cooper if there has been no proper notice under s 122. Until any such prejudice can be safely ruled out, there is nothing to counter the effect of s 122(5). Hence, Westpac cannot rule out the availablity of this defence to Mr Cooper.
[64] In the end, the form of this summary judgment application is so unsatisfactory that I consider that rather than adjourn the application for further evidence to be filed, the better course is to refuse to grant summary judgment. I have not dealt with all the arguments Mr Cooper raised. This is because I consider his first argument that Westpac’s documentation has failed to establish its case answers Westpac’s claim. Whilst Mr Cooper sought the opportunity to file additional evidence, he also sought the dismissal of the application. I consider that the application to file further evidence was made out of an abundance of caution, and that Mr Cooper’s opposition to the application should be determined in his favour. It follows that the application for summary judgment is refused. Mr Cooper is entitled to costs.
Result
[65] Application for summary judgment is refused.
[66] The defendant is entitled to costs. If the parties are unable to agree on costs, they are to file memoranda setting out what they contend should be awarded.
Duffy J
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