PEPPER NEW ZEALAND (CUSTODIAN) LTD V EBADA PROPERTY INVESTMENTS LTD HC AK CIV-2011-404-2737

PEPPER NEW ZEALAND (CUSTODIAN) LTD V EBADA PROPERTY INVESTMENTS LTD HC AK CIV- 2011-404-2737 [20 June 2012]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2011-404-2737[2012] NZHC 1415BETWEEN PEPPER NEW ZEALAND (CUSTODIAN)LIMITEDPlaintiffAND EBADA PROPERTY INVESTMENTS LIMITEDFirst DefendantAND BRIAN PATRICK GARRITYSecond DefendantCIV-2011-404-5497BETWEEN PEPPER NEW ZEALAND (CUSTODIANS)LIMITEDApplicantAND TAYLOR JADE SCHMIDTRespondentCIV-2011-404-6325BETWEEN TAYLOR JADE SCHMIDT AND ANTHONYMIKHAL SCHMIDTApplicantsAND EBADA PROPERTY INVESTMENTS LIMITEDFirst RespondentAND BRIAN PATRICK GARRITYSecond RespondentAND PEPPER NEW ZEALAND (CUSTODIANS)LIMITEDThird RespondentHearing: 18 June 2012Counsel: T J Anderson and K Mortimer for Pepper New Zealand (Custodians) LimitedI Razak for Ebada Property Investments Ltd and B GarrityR Pidgeon for A M SchmidtA Lankovsky for T J SchmidtJudgment: 20 June 2012RESERVED JUDGMENT OF ELLIS JThis judgment was delivered by me on 20 June 2012at 5 pm, pursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors: Gibson Sheat, PO Box 2966, WellingtonSmith & Partners, PO Box 104065, Lincoln North 0654Pidgeon Law, PO Box 6535, Auckland 1141Counsel: A E Lankovsky, 112 Michaels Avenue, Auckland 1051[1] On 15 November 2011 Heath J gave (joint) judgment in relation to three proceedings, namely CIV-2011-404-5497, CIV-2011-404-6325 and CIV-2011-404- 2737. Each of the proceedings related in some fashion to two parcels of land situated at 1493 and 1495 Kaiaua Road, Mangatangi. Mr and Mrs Schmidt on the one hand assert that they, or trusts associated with them, are the beneficial owners of the land. The registered proprietor of the land, however, is Ebada Property Investments Ltd ("Ebada") whose mortgage debt (now owed to Pepper New Zealand (Custodians) Ltd ("Pepper")) was guaranteed by Mr Brian Garrity.[2] Essentially Heath J's judgment:(a) ordered the removal of caveats placed by Mrs Schmidt over the properties (CIV-2011-404-5497);(b) dismissed an application by the Schmidts for rescission of a summary judgment entered by consent in favour of Pepper against Ebada and Mr Garrity in relation to mortgage defaults (CIV-2011-404-2737); and(c) dismissed an application by the Schmidts for an interim injunction halting steps by Pepper to take possession of the properties (CIV- 2011-404-6325).[3] All three of these decisions have been appealed by the Schmidts to the Court of Appeal. Although those appeals were filed more or less immediately followingHeath J's judgment, they have not since then been pursued by the Schmidts. The effect is that the appeals are deemed abandoned subject to the grant of an extension of time under r 43(2) of the Court of Appeal (Civil) Rules 2005. Although I was advised that an application for an extension has been filed in the Court of Appeal, that indulgence may well not be granted.[4] This judgment relates to applications by the Schmidts to stay each of the judgments to which I have referred in [2] above, pending the determination of their appeals. Those applications had been put on hold pending settlement negotiations between the relevant parties, but it is now apparent that those negotiations have notcome to fruition. But, given the state of affairs I have recorded in the previous paragraph, it is doubtful whether it can presently be said that there is any "appeal"whose determination is pending in terms of the jurisdiction to stay under High Court Rule 20.10. I nonetheless propose to deal with the issues on their merits.[5] I record at the outset that Mr Pidgeon has only last week been instructed by Mr Schmidt and Mr Lankovsky has only even more recently been instructed by Mrs Schmidt. An application for adjournment of today's hearing was made byMr Pidgeon but was declined by Rodney Hansen J on 13 June.[6] It was responsibly and properly accepted by Mr Pidgeon that the applications to stay the judgment relating to the removal of the caveats could not be sustained because the caveats have now been removed from the two certificates of title.[7] Mr Lankovsky, however, on the instructions of Mrs Schmidt, sought to amend the application and instead seek a stay of the "exposure of the first applicant'scaveatable interests over Kaiaua Road by granting the request to register secondcaveats". I accept that r 20.10 permits the Court to grant "interim relief" as an alternative to a stay properly so called. But, even if I were minded to permit amendment of the application, I do not consider that the relief sought by Mrs Schmidt could be ordered here. The issue of whether or not the caveats should be maintained has been determined by Heath J. It is not open to me effectively to reverse that by ordering that they now be reinstated.[8] As far as the question of a stay of the judgment relating to the interim injunction is concerned, there is, to my mind, a fatal flaw in the Schmidts' position. That is because there is nothing in fact or in law capable of being stayed; their application for an interim injunction application was unsuccessful. Any steps now pursued by Pepper to take possession of the properties do not involve "enforcing" Heath J's judgment; no positive, empowering, orders were made by His Honour in that respect. Put another way, the effect of ordering a stay would be to grant to the Schmidts by a side wind the remedy they sought but failed to obtain by way of their interim injunction application.[9] Any stay of the decision declining to rescind the summary judgment for vacant possession is also fundamentally problematic. Because the judgment againinvolved the Court refusing to do something (ie to rescind the summary judgment) there is, similarly, nothing to stay. While the summary judgment itself conferred a positive, empowering, benefit on Pepper (because it could then take possession of the property) that is not the judgment sought to be stayed.[10] For this reason Mr Pidgeon sought to amend this application so that Mr Schmidt instead applied for a stay of the underlying summary judgment entered by Judge Christiansen on 30 June 2011. He said that although the Schmidts were not a party to that judgment that was because they were (wrongly) not notified of the hearing or given the opportunity to be heard. More particularly, he said that this involved a breach of s 121 of the Property Law Act 2007, which relevantly provides:Copy of notice under section 119 must be served on former mortgagor, covenantor, subsequent mortgagee, and caveator(1) A copy of the notice served under section 119 must, as soon as possible, be served (whether by the mortgagee or receiver) on the following persons if either the mortgagee or receiver has actual notice of the name and address of the person:...(d) any person who has lodged a caveat under section 137 of the Land Transfer Act 1952, or a notice under section 42 of the Property (Relationships) Act 1976 having the effect of a caveat, against the title to the mortgaged land or any part of it.(2) A failure to comply with this section does not prevent—(a) any amounts secured by the mortgage from becoming payable; or(b) the exercise of the mortgagee's power to enter into possession of the mortgaged land; or(c) the exercise of the receiver's power to manage the mortgaged land or demand and recover income from it; or(d) the exercise of the mortgagee's or receiver's power to sell the mortgaged land.(3) However, if there is a failure to comply with this section, the mortgagee is liable in damages for any loss arising from that failure.[11] The first point to be noted is that s 121 relates to the service of a s 119 notice, not any subsequent legal proceedings, on a caveator. Moreover, it makes clear thatbreach of the provision does not prevent the exercise of a mortgagee's power to enterinto possession of the relevant land; damages is the remedy available. Even if thatwere not the case, it is apparent that neither Mr nor Mrs Schmidt in fact had a caveatover the properties at the time the s 119 notice was issued. Mr Schmidt's caveat hadby then lapsed and Mrs Schmidt's caveat had not yet been placed on the titles.Section 121 does not therefore assist the Schmidts here.[12] In any event, to the extent that it might be said that there was some broader failure of natural justice at the summary judgment hearing (Mrs Schmidt's caveat bythat time having been lodged), it was necessarily cured by the hearing before Heath J. The Schmidts applied to rescind the order for summary judgment, were heard on their application, but did not prevail. The matter therefore comes full circle; there is nothing now that this Court can stay.[13] For the reasons I have given I do not consider it necessary to consider the applications for stay by reference to the orthodox principles governing such applications. For the avoidance of doubt, however, I record my view that anapplication of those principles would not support the Schmidts' position. That isprincipally because:(a) Heath J held that there was no evidentiary basis for the Schmidts'allegation of imputed fraud against Pepper and thus no basis for disturbing its rights as mortgagee. Given the clear evidentiary vacuum in this respect there seems to me to be virtually no prospect that that finding might be reversed on appeal;(b) Accordingly, even to the extent that the Schmidts are later able to establish some equitable interest in the properties concerned, those interests would necessarily be subservient to those of the mortgagee (ie Pepper);(c) Pepper has undertaken to pay into Court in the proceedings between the Schmidts and Ebada/Mr Garrity any surplus amount following the sale of the properties. That amount would therefore be available to satisfy any damages claim;(d) Further delay will only reduce the amount of any such surplus which would be to the detriment of the Schmidts;(e) There is, in any event, a real doubt as to whether the appeals will be permitted to proceed.[14] Each of the applications for stay is dismissed for the reasons I have given. Pepper and Ebada are entitled to their costs on a 2B basis.______________________________Rebecca Ellis J