MULES v R CAMERON AND SHORTTS ENGINEERING & PLUMBING SUPPLIES LTD [2017] NZHC 1966

MULES v R CAMERON AND SHORTTS ENGINEERING & PLUMBING SUPPLIES LTD [2017] NZHC 1966 [17 August 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2017-404-1284[2017] NZHC 1966BETWEEN ALAN THOMAS MULES AND SIMTWO LIMITED SUING IN THEIRCAPACITIES AS TRUSTEES OF THEALAN MULES TRUSTPlaintiffsAND R CAMERON AND SHORTTSENGINEERING & PLUMBINGSUPPLIES LIMITEDDefendantHearing: 15 August 2017Appearances: I Williams for PlaintiffsNo appearance for DefendantsJudgment: 17 August 2017JUDGMENT OF LANG J[on application for summary judgment]This judgment was delivered by me on 17 August 2017 at 3 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] This proceeding concerns a commercial property situated at 47 Huia Road, Otahuhu (the property). The plaintiffs, the trustees of the Alan Mules Trust (the trustees), purchased the property at a mortgagee sale conducted by the Bank of New Zealand (the BNZ) in July 2015.[2] The defendant, R Cameron & Shortts Engineering & Plumbing Supplies Ltd, was originally incorporated as GSE Group Ltd. It changed its name to R Cameron and Shortts Engineering and Plumbing Supplies Ltd on 7 July 2011. The defendant occupied the property some time ago and, although it no longer does so, it has left a number of items of plant and equipment on the property.[3] The plaintiffs have been placed on notice that the defendant claims that it is currently the lessee of the property even though the plaintiffs purchased the property from the mortgagee. The defendant contends that it remains the lessee by virtue of an undated and unregistered deed of lease from the former owner of the property that was apparently executed in or about 2011.[4] In this proceeding the plaintiffs seek summary judgment against the defendant in the form of an order declaring that they are not bound by the terms of the unregistered lease. In addition, they seek an order declaring that the plant and equipment that the defendant has left on the property constitute a trespass on the property.[5] The plaintiffs served the proceeding on the registered office of the defendant on 4 July 2017 but the defendant has taken no steps to resist the application for summary judgment. As a result, I am required to determine the application for summary judgment on an undefended basis.Relevant principles[6] The principles to be applied in considering an application for summary judgment have been clearly established through decisions of the Court of Appealsuch as Pemberton v Chappell, Grant v NZMC Ltd and Westpac Banking Corporation v MM Kembla New Zealand Ltd.1[7] In considering the plaintiffs' application I propose to apply the following general principles, which apply to all applications by a plaintiff for summary judgment:(a) The plaintiffs must satisfy the Court that the defendant has noarguable defence to the claim brought against it. The issue is whetherthere is a real question to be tried.(b) It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise. Issues of law, even though they may be complex, can, however, be determined in an application for summary judgment.(c) Although the Court should adopt a robust approach, nevertheless summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.The lease[8] The lease upon which the defendant relies describes the lessor of the property as being Trustees Link Trust No 1 and the lessee as GSE Group Ltd. A person by the name of Mr Harry Memelink is associated with both companies. It is Mr Memelink who has asserted that the defendant remains the lessee of the property.[9] The lease was for a term of five years from 1 January 2011 at an annual rental of $102,000 plus GST and outgoings. The lease gave the lessee a single right of renewal for an unspecified term, but there is no evidence that the lessee has ever exercised that right.1 Pemberton v Chappell [1987] 1 NZLR 1 (CA); Grant v NZMC Ltd [1989] 1 NZLR 8 (CA) andWestpac Banking Corporation v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).Decision[10] Section 105 of the Land Transfer Act 1952 prescribes the consequences that follow when a mortgagee sells a property to a third party using the power of sale contained in a mortgage. It relevantly provides as follows:105 Transfer by mortgageeUpon 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.(Emphasis added)[11] In the present case the plaintiffs could only be bound by the lease if the BNZ, as mortgagee, consented to that lease. There is, however, no evidence before the Court that the BNZ ever consented to the lease.[12] The most that can be said is that the BNZ provided a copy of the lease to prospective purchasers along with the particulars and conditions in respect of the sale of the property. The BNZ provided prospective purchasers with the following advice in relation to that lease:Please note: the following document [the lease] has been supplied to the Bank of New Zealand as Mortgagee and Bayleys Real Estate Limited (Bayleys) by a third party to be made available to prospective purchasers. Bank of New Zealand as Mortgagee and Bayleys Real Estate accept no responsibility for its accuracy or completeness. In all cases, interested parties should conduct their own verification of the information in this document. All parties are urged to take legal advice before entering into any contract or agreement regarding the property described herein.[13] It is now well established that mere knowledge of the existence of a lease is not sufficient to establish that a mortgagee is bound by it. Instead, there must be some affirmative conduct on the part of the mortgagee by which it acknowledges it is bound by the lease. Those principles are established by cases such as New ZealandFisheries Ltd v Napier City Council, Son v Ko, Cashmere Capital Ltd v Carroll andHarbour City Construction 2012 Ltd v Link Technology 2000 Ltd.2[14] In the present case the Bank no doubt provided prospective purchasers with a copy of the lease agreement out of an abundance of caution. There is nothing, however, to suggest that the Bank ever considered that it was bound by the lease. This is clearly demonstrated by the fact that the Bank expressly said that it hadreceived the document from "a third party to be made available to prospectivepurchasers". Furthermore, the Bank accepted no responsibility for the accuracy orcompleteness of the document, and it invited interested parties to conduct their own verification of the information in it.[15] The position in the present case is remarkably similar to that in Harbour City Construction, another case in which Mr Memelink was involved. In that case the plaintiff sought summary judgment in identical terms to that sought in the present case after Mr Memelink contended his company remained lessee of a property that had been sold to the plaintiff by a mortgagee. Mr Memelink argued that the mortgagee had consented to the lease remaining in existence. Associate Judge Smith held that the evidence fell well short of establishing that the mortgagee had agreed tosubordinate its rights as mortgagee to the defendant's rights under the lease.3[16] I take a similar approach in this case. I consider the fact that the Bank provided prospective purchasers with a copy of the lease document prior to the auction falls well short of establishing that it consented to having its rights under the mortgage subordinated to the lessee's rights under the lease.[17] It follows that the plaintiffs have established they are not bound by the terms of the lease, and that any continued storage of plant and equipment on the property by the defendant will constitute a trespass.2 New Zealand Fisheries Ltd v Napier City Council (1990) 1 NZ ConvC 190,342 (CA) at 190,344;Son v Ko (2006) NZ ConvC 194,354 (HC); 27 September 2006; Cashmere Capital Ltd v Carroll[2009] NZSC 123, [2010] 1 NZLR 577 at [72]-[75]; Harbour City Construction 2012 Ltd v Link Technology 2000 Ltd [2017] NZHC 451.3 Harbour City Construction 2012 Ltd v Link Technology 2000 Ltd, above n 2, at [80].Result[18] I grant summary judgment in favour of the plaintiffs. I make orders declaring that:(a) The plaintiffs are not bound by the terms of the undated and unregistered deed of lease between Trustees Link Trust No 1 and GSE Group Ltd.(b) The continued storage of plant and equipment on the property by the defendant constitutes a trespass on the land.Costs[19] The plaintiffs are entitled to costs on a category 2B basis together with disbursements as fixed by the Registrar.Lang JSolicitors:Daniel Overton Goulding, Auckland