White v Bank of New Zealand

[2013] NZHC 1087

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-2298 [2013] NZHC 1087

BETWEEN  AMANDA ADELE WHITE First Plaintiff

ANDANNE LEOLINE EMILY FREEMAN Second Plaintiff

ANDBANK OF NEW ZEALAND Defendant

Hearing:         9 May 2013

Appearances: A A White and A L E Freeman in person

D T Broadmore for Defendant

Judgment:      9 May 2013

Reasons:        14 May 2013

REASONS FOR JUDGMENT OF KATZ J

Solicitors:

L O’Gorman/D Broadmore, Buddle Findlay, Auckland

Copy to:
A A White

A L E Freeman

WHITE V FREEMAN HC AK CIV-2013-404-2298 [14 May 2013]

Introduction

[1]      The plaintiffs, Amanda White and Anne Freeman, have various loan facilities with the Bank of New Zealand (“Bank”) in their capacity as trustees of the DCT Trust.  They are in arrears on those loans and as a result the Bank has issued notices under the Property Law Act 2007 (“PLA Notices”) requiring payment of the sums outstanding.

[2]      The plaintiffs sought an injunction restraining the Bank from exercising its rights as mortgagee on expiry of the PLA Notices, which were due to expire on

10 May 2013.  After expiry of the notices the Bank will be entitled to exercise its rights as mortgagee in respect of two properties provided as security for the loan advances.    At  the  conclusion  of  the  hearing  on  9  May  2013,  I  dismissed  the injunction application.  My reasons for that decision are set out below.

The plaintiffs’ claims against the Bank

[3]      The statement of claim lacks clarity and is somewhat difficult to follow. However, it appears that the plaintiffs’ key allegations are that:

(a)       the Bank breached a duty or care owed to Ms White and Ms Freeman;

(b)      the Bank breached Ms White’s rights to privacy under the Privacy Act

1993 in its dealings with her former de facto partner, Stuart Spence;

(c)      the Bank wrongfully took into account false information provided by Mr Spence when making commercial decisions regarding its lending facilities with the plaintiffs; and

(d)the Bank is estopped from exercising its rights as mortgagee because an employee of First Mortgage Services (who were engaged by the Bank to manage recovery of the Bank’s loans to the plaintiffs) informed Ms White that the Bank would not take any steps until

resolution of related Court proceedings involving the plaintiffs and

other parties.1

Background

[4]      Ms White filed an affidavit in support of the injunction application.    She deposes that in early 2009 the Bank offered the DCT Trust (of which the plaintiffs are trustees) three pre-approved loans to purchase investment properties.   Her evidence  is  that  the  Bank  subsequently withdrew  its  offer  to  make  those  loans available based on false information provided to the Bank by Mr Spence regarding sums allegedly owed to him by the DCT Trust.

[5]      Janine Fenton, a Manager in the Bank’s Loan Management Team, provided an affidavit (supported by comprehensive annexures) outlining the relevant events from the Bank’s perspective.   Mr Lloyd of First Mortgage Services also swore an affidavit in support of the Bank’s opposition to the interim injunction application.  I set out below the relevant events from their perspective.

[6]      On 2 April 2009, the plaintiffs entered into a loan agreement with the Bank under which the Bank agreed to lend the plaintiffs $300,000 to purchase a property at Greenmeadows Avenue, Manurewa (“Greenmeadows Ave”).  The lending was to be secured over Greenmeadows Ave and the plaintiffs’ property at Glenbrook Road, Patumahoe (“Glenbrook Road”).  The loan was subject to conditions, including that no dealings had been lodged on the title to Glenbrook Road.

[7]      On 8 April 2009, the Bank conducted a title search of Glenbrook Road.  At that time, Glenbrook Road was subject to a notice of claim registered on 13 June

2008 by Mr Spence pursuant to s 42 of the Property (Relationships) Act 1976.  As a result of the notice of claim, the Bank was not prepared to advance any funds in reliance upon Glenbrook Road as security until the Notice of Claim was removed.

[8]      By 19 May 2009, the Notice of Claim had been removed and the Bank advanced the plaintiffs funds to purchase Greenmeadows Ave.

[9]      As at 11 January 2013, the plaintiffs were in arrears under their various loan facilities.  The amount outstanding was $128,353.50.  On 11 January 2013, the Bank (through its agent First Mortgage Services) issued a notice of demand, requiring the arrears of $128,353.50 to be paid by 25 January 2013.

[10]     On  24  January  2013,  Ms  White  met  with  Mr  Lloyd  of  First  Mortgage Services and explained that she had proceedings on foot, from which the funds recovered would be used to clear the arrears of $128,353.50.  Despite this, Mr Lloyd advised Ms White that the Bank would issue notices under the Property Law Act

2007 (“PLA Notices”) if the demand was not paid.  The amount outstanding was not repaid.  On or about 4 February 2013, the Bank issued PLA Notices.

[11]     On 18 February 2013, the PLA Notices were served on Ms White.  However, Ms Freeman was unable to be served.  The PLA Notices were eventually served on her on 27 March 2013 and re-served on Ms White on 4 April 2013.

[12]     On 30 April 2013, Ms Freeman called Mr Lloyd and requested an extension of 3 to 4 weeks for payment of the amount outstanding.   Mr Lloyd declined that request for a variety of reasons, including the size of the arrears.

[13]     As at 8 May 2013, the arrears under the plaintiffs’ loan facilities totalled

$152,993.09.  In the event that the PLA Notices expire unremedied on 10 May 2013, the total amount outstanding under the loan facilities of $997,358.37 (as at 8 May

2013) will be due and owing.  Ms Fenton deposed that it is unlikely that the Bank will recover the full amount outstanding from a sale of the properties.

Interim injunction principles

[14]     The principles governing an application for an interim injunction are well settled.  The Court must first consider whether the plaintiff has established that there is  a  serious  question  to  be  tried.    In  answering  that  question  the  Court  must consider:2

...first, what each of the parties claims the facts to be; second, what are the issues between the parties on these facts; third, what is the law applicable to those issues, and, fourth, is there a tenable resolution of the issues of fact and law on which the plaintiff may be able to succeed at the trial: see Shotover George Jet Boats Ltd v Marine Enterprises Ltd [1984] 2 NZLR 154, 157.

[15]     The Court  is  not  required  to  attempt  to  resolve conflicts  of evidence  in respect of facts which may determine the case, nor is it concerned with deciding difficult questions of law which “call for detailed argument and mature considerations”.3

[16]     The Court must then consider where the balance of convenience lies.   In assessing the balance of convenience, regard may be had to the adequacy of damages should relief not be granted, the relative strength of each party’s case and the impact of the decision on the rights of third parties.4     If damages would be an adequate remedy and the defendant would be in a financial position to pay them, an interlocutory injunction will not usually be granted.5

[17]     These  issues  may  all  be  taken  into  account  in  order  to  help  the  Court determine where the overall justice of the matter lies, although they are not exhaustive.6   Other matters may also be relevant, depending on the particular context of the case.  Where the injunction application relates (as it does here) to the exercise of a mortgagee’s power of sale, a mortgagor is usually required to first pay the amount secured into Court before an injunction restraining the exercise of the power of sale is granted.7

[18]     The mortgagee’s duty of care does not qualify its right to decide, in its own interest, if and when to sell.  A mortgagee is entitled as a matter of law to make its own  commercial  decision  about  whether,  and  if  so  at  what  time,  to  sell  the

mortgaged property.8

3      American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407.

4      Air New Zealand Ltd v Wellington International Airport Ltd HC Wellington CIV-2007-485-

1756, 30 July 2008 at [6] and [13].

5      American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 408.

6      Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142.

7      Parry v Grace [1981] 2 NZLR 273, Herbison v Papakura Video Ltd (1985) 2 NZCLC 99, 364.

8      Mullen v Rodney District Council HC Auckland CP31/SD00, 22 April 2002 at [42] per Heath J and Silven Properties Ltd & Anor v Royal Bank of Scotland Plc & Ors [2004] 1 WLR 997at [13] to [20].

[19]     As noted above, the statement of claim lacks clarity and is somewhat difficult to follow.  I have real reservations as to whether the “serious question to be tried” threshold is met in this case.  The plaintiffs do not deny that the arrears owing are due and payable.  Rather, it appears to be alleged that the conduct of the Bank in not lending additional funds to the plaintiffs is such that it would give rise to an entitlement to damages (because the plaintiffs were unable to continue with their property development activities due to a lack of funds).

Breach of duty of care

[20]     The plaintiffs appear to allege that the Bank owed them some form of duty of care, which it breached in April 2009 by relying on information provided to it by the Ms White’s former de facto partner, Mr Spence.   The plaintiffs say that the information Mr Spence provided was false.

[21]     I am not aware of any legal basis for the Bank to owe a duty of the nature alleged.   Further, the Bank’s evidence is that it relied on the registered title of Glenbrook Road and the interests claimed on the register in making its decisions as to the amount of funding it was willing to lend to the plaintiffs and the timing of any such funding.   Ultimately the provision (or not) of funding to the plaintiffs was a commercial  decision  for the  Bank,  taking into  account  all  information  which  it believed to be relevant.

Breach of privacy

[22]     The Bank’s evidence was that it did not discuss the DCT Trust’s business affairs with Mr Spence or disclose any confidential information to him.   In any event, even if it had, it is difficult to see how this could give rise to any recoverable loss by the plaintiffs against the Bank or justify the granting of the injunction sought by the plaintiffs.

[23]     The requirements for “promissory” estoppel are as follows:9

(a)      A clear unambiguous representation or promise by one party to the other, which created a belief or expectation in the other.

(b)Reliance by the party to whom the promise was made such that the party to whom the promise was made alters his or her position.

(c)      The reliance must be to such an extent that it would be inequitable (or unconscionable) to allow the promisor to go back on his or her word or the reliance must be to the detriment of the party to whom the promise was made.

[24]     In Krukziener v Hanover Finance Limited,10  the Court of Appeal noted that departure from a voluntary promise is not unconscionable in itself, even if detriment results.  An estoppel may create a suspension of legal rights, but legal rights may be resumed on giving notice, so long as the promise can resume its former position.11

[25]     The plaintiffs alleged that in February 2013, Mr Lloyd verbally advised the first plaintiff that foreclosure would not be actioned by the Bank until such time as a separate proceeding had been heard and determined.

[26]     Mr Lloyd’s evidence, which appears to be supported by contemporaneous documents, was that he did not make such a statement.   The contemporaneous documents indicate that Mr Lloyd in fact declined the requests for an extension and informed the plaintiffs that the Bank would be proceeding with enforcement steps.

[27]     Even assuming that the plaintiffs could establish that such an assurance was given, it is unclear how the plaintiffs acted on any such assurance to their detriment,

9      John Burrows, Jeremy Finn & Stephen Todd Law of Contract in New Zealand (4th ed, Lexis

Nexis, Wellington, 2012), at 4.7.4

10     Krukziener v Hanover Finance Limited (2008) 19 PRNZ 162 (CA) at [37] – [38].

11     At [37] – [38]. See also Bank of New Zealand v Shukla [2012] NZHC 2591 at [30] – [34].

particularly given the short period of time between the alleged assurance and the service of the PLA Notices.

[28]     Assuming, for present purposes, that some form of estoppel is arguable, the claim is a weak one, on the evidence currently before the court.

Balance of Convenience

[29]     The plaintiffs’ claims are weak, to the point that I have real doubts as to whether there is a serious question to be tried.   I will assume, however, that the plaintiffs are able to meet this threshold requirement.   In that event it becomes necessary to consider where the “balance of convenience” lies.

[30]     If an injunction were not granted, the Bank would suffer losses because there will be delays in realising the Bank’s security and applying the sale proceeds to the amounts outstanding under the plaintiffs’ loans.   In the meantime, interest would continue to accrue on the full amount outstanding under the plaintiffs’ loans.  The Bank’s evidence was that it is currently unlikely that the Bank will recover the full amount outstanding from the sale of the properties. Any shortfall will likely increase with the passage of time.

[31]     The plaintiffs do not appear to be in a position to pay any damages to the Bank in the event that an interim order is granted and the Bank successfully defends the claim.  As at 8 May 2013, the total amount outstanding under the plaintiffs’ loan facilities with the Bank was $997,358.37, with arrears of $152,993.09.  The Bank’s only security for the amount outstanding is the properties and a guarantee from the first plaintiff.  The plaintiffs indicated in Court that they are impecunious.  In these circumstances, the plaintiffs’ undertaking as to damages is unlikely to have any value.

[32]     If the plaintiffs were successful with their claim on the other hand, the Bank is in a position to pay any damages.  In my view damages would be quantifiable and would be an adequate remedy for the plaintiffs.

[33]     The Bank is under no obligation to wait to realise its securities as a matter of general law. The estoppel claim appears to be weak and unsupported by the contemporaneous evidence.  Where the injunction application relates to the exercise of a mortgagee’s power of sale, a mortgagor is generally required to first pay the amount secured into Court before an injunction restraining the exercise of the power of sale is granted.  No such sum has been tendered by the plaintiffs.

[34]     All of the above factors, combined with the fact that the plaintiffs’ claims are weak, lead inevitably to the conclusion that the balance of convenience and the overall interests of justice strongly favour the defendant.

Conclusion

[35]     For the reasons outlined above I dismissed the plaintiffs’ application for an

injunction.    I  directed  the  defendant  to  file  any  memorandum  on  costs  within

14 days, with the plaintiffs to file any response within seven days thereafter.

Katz J