ANZ NATIONAL BANK LIMITED V TAYLOR HC AK CIV-2010-404-201

ANZ NATIONAL BANK LIMITED V TAYLOR HC AK CIV-2010-404-201 17 December 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2010-404-201BETWEEN ANZ NATIONAL BANK LIMITED Plaintiff AND CRAIG WIRAPE TAYLOR Defendant Hearing: 9 June 2010 27 August 2010 Counsel: S J Telford and C Moody for Plaintiff C Taylor in person Judgment: 17 December 2010 at 2 pmRESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Summary Judgment Application)This judgment was delivered by me on 17 December 2010 at 2 pm pursuant to Rule 11.5 of the High Court Rules Registrar/Deputy Registrar Date .......................... Solicitors: Morgan Coakle, PO Box 114, Auckland 1140 C Taylor, 41 Martin Ave, Mt AlbertIntroduction[1] The plaintiff, ANZ National Bank Limited, applies for summary judgment on its claim against the defendant, Mr Craig Wirape Taylor. The claim is for the balance owing under a loan following the mortgagee sale of a property over which the loan was secured. [2] The application is opposed.Background[3] On 19 July 2007 the defendant by written agreement borrowed $355,000 from the plaintiff. The loan was interest-only and for a term of 10 years. The principal was repayable on expiry of the term. [4] On 27 July 2007 the plaintiff by memorandum of mortgage secured a mortgage over the defendant's property at 64 Raglan Road, Kawhia to secure the defendant's obligations under the loan agreement. [5] From early 2009 the defendant defaulted on his obligation to pay interest under the loan agreement. On 20 April 2009 the plaintiff served on the defendant a notice under s 119 of the Property Law Act 2007 requiring that the defaults be remedied. They were not. [6] On 3 September 2009 the plaintiff exercised its power of sale under the mortgage. It obtained a sale price of $100,000 for the property. Net proceeds of $90,812.17 were credited to the defendant's account. The plaintiff applies for summary judgment on the balance owing under the loan, plus interest and costs. [7] The application first came before me on 9 June 2010. The defendant has represented himself throughout. No doubt reflective of that fact, he had failed to file and serve a notice of opposition. He had filed affidavit evidence. It was rambling and largely irrelevant. It did not provide an evidential foundation for an arguable defence. It appeared, however, from what the defendant said at that hearing, thatthere was a possible arguable defence in respect of the price the plaintiff obtained for the property, and the steps taken to obtain that price. I adjourned the application. I considered it was in the interests of justice that the defendant be granted the opportunity to file a notice of opposition setting out clearly the grounds on which the plaintiff's application was to be opposed, and to file a further affidavit setting out his evidence as to the market value of the property at the time it was sold and his concerns in respect of the sale process. [8] The defendant again failed to file and serve a notice of opposition, though he did file further affidavits. The plaintiff, with appreciable forbearance and, in my view, fairly and responsibly, was content to proceed notwithstanding these procedural irregularities, in light of the defendant's lack of representation. [9] Three grounds of opposition were broadly discernible in the defendant's affidavits. Two may be promptly disposed of. Both are entirely lacking in substance. These are: a) That the loan agreement relied on by the plaintiff does not bind the defendant because, though signed by the defendant, it is unsigned by the plaintiff. The defendant accepted at the earlier hearing that the plaintiff advanced him $355,000 pursuant to an agreement on terms as pleaded by the plaintiff, and that he fell into default on his obligations under that agreement. There was one qualification: he thought the term of the loan was 29 rather than 10 years. The loan agreement, however, makes clear the term is 120 months. The defendant was advised as to the meaning and effect of the loan agreement by solicitors Gallie Miles. b) That this Court lacks jurisdiction. This ground is advanced on a number of bases, going principally to the land being Maori land and issues of Maori sovereignty. It is, however, clear from the certificate of title that the land is general and not Maori land. It is subject to the provisions of the Land Transfer Act 1952 and the Property Law Act.This Court plainly has the jurisdiction to deal with an application of the present kind. [10] The defendant's remaining ground of opposition is, couched in legal terms, that the plaintiff failed in its duty under s 176 of the Property Law Act to obtain the best price for the property reasonably obtainable as at the time of sale. [11] I turn presently to this ground. I first set out the legal principles applying to an application for summary judgment and those applying to the exercise of the mortgagee's power of sale under s 176.Legal principles – summary judgment[12] The plaintiff applies for summary judgment under r 12.2 of the High Court Rules. Rule 12.2 provides:12.2 Judgment when there is no defence or when no cause of action can succeed(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action. [13] The legal principles applying to applications for summary judgment were succinctly expressed by the Court of Appeal in Krukziener v Hanover Finance Ltd[2008] NZCA 187, (2008) 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).[14] While the onus is on the plaintiff, the defendant will need to provide some evidential foundation for the defences raised: Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54 (CA) at 59.Legal principles – the duty of a mortgagee exercising a power of sale[15] The relevant provision is s 176 of the Property Law Act. Section 176 states:176 Duty of mortgagee exercising power of sale(1) A mortgagee who exercises a power to sell mortgaged property, including exercise of the power through the Registrar under section 187, or through a court under section 200, owes a duty of reasonable care to the following persons to obtain the best price reasonably obtainable as at the time of sale:(a) the current mortgagor: (b) any former mortgagor: (c) any covenantor: (d) any mortgagee under subsequent mortgage: (e) any holder of any other subsequent encumbrances. (2) A mortgagee who exercises a power to sell mortgaged property may not become the purchaser of the mortgaged property except in accordance with section 196 or an order of a court made under section 200. (Emphasis added.)[16] The nature of the mortgagee's duty of care is discussed in Crown Money Corporation Ltd v Pink-Martin HC Auckland CIV-2008-404-297, 5 September 2008. In that case, Associate Judge Faire extracted the following general propositions from the authorities (at [32]):a) Section 176 of the Property Law Act 2007 and its predecessor s 103A of the Property Law Act 1952, codify the duty which, under the general law, a mortgagee exercising a power of sale would be taken to owe to the persons mentioned in s 176 of the Property Law Act 2007: [Apple Fields Ltd v Damesh Holdings Ltd [2003] UKPC 54, [2004] 1 NZLR 721 at [22]]. I have already mentioned that this now has been extended to cover guarantors.b) The duty of care is concerned with obtaining the best price reasonably obtainable as at the time of sale: Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd [(2001) 4 NZ ConvC 193,480 (HC)] at [70]. It is a duty to take reasonable care. It does not necessarily follow that the best price reasonably obtainable will be achieved. c) The duty has to be measured at the time of the sale: Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd at [75]. The duty arises at the time the decision to sell is made: Tse Kwong Lam v Wong Chit Sen [[1983] 3 All ER 54 (PC)] at [77]. There is thus a need to analyse the steps taken once the decision to sell is made, up to the time of sale. d) The duty of care does not qualify the mortgagee's right to decide if and when to sell: Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd at [70]; Downsview Nominees Ltd v First City Corporation Ltd [1993] 1 NZLR 513 [(PC)]. e) When deciding for the purposes of s 176 whether reasonable steps have been taken by a mortgagee to obtain the best price, the steps taken by the mortgagee and those acting with it must be looked at in the round. The issue is a commercial one to be viewed in practical commercial terms: Apple Fields v Damesh Holdings Ltd at 729. f) Assistance in determining the issue mentioned in (e) above can be found by considering the steps endorsed by Fisher J in Harts Contributory Mortgages Nominee Co Ltd v Bryers [HC Auckland CP403-IM00, 19 December 2001] at [43] where the following matters were mentioned: [c] Where the security is substantial, or specialised property is involved, it will usually be necessary for the mortgagee to obtain and act upon specialised advice as to the method of sale: Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54 (PC). Appointing a competent agent to sell does not discharge the mortgagee's duties, but since its duty is ultimately only one of reasonable care, putting the matter in the hands of a competent agent will usually go a long way towards discharging the mortgagee's duties. [d] In the normal course the proposed sale will need to be advertised with an adequate description of the property's attributes and, within reason, widely enough to attract all possible purchasers. In some cases this will need to extend to both general and specialist publications: See Kwong supra at p 61; [Ansell v New Zealand Insurance Finance Ltd HC Wellington A434/83, 14 May 1984]. [e] There is no obligation to postpone the sale in the hope of a better price later, or to break up the assets and sell in a piecemeal manner if this can only be carried out over a substantial period or at a risk of loss: Kwong supra at p 59.[f] When assets are sold by tender or auction, a reasonable period must usually be allowed for purchasers to inspect the property and arrange finance before submitting bids: see [Seafarer Fishing Co Ltd v Broadlands Finance Ltd HC Timaru A35/77, 17 August 1984]; discussed by Ross, supra, along with Ansell v NZI Finance Ltd.g) For the breach of duty to be actionable there must be proof of damage: Apple Fields Ltd v Damesh Holdings Limited at 729 PC.[17] Fisher J's observation in Harts Contributory Mortgages Nominee Company Ltd v Bryers HC Auckland CP403-IM00, 19 December 2001 at [43](i) is also helpful: in evaluating judgments made by or on behalf of the mortgagee it should not be forgotten that in the absence of bad faith, the mortgagee shares with the mortgagor and guarantor an incentive to maximise the price obtained. It is not lightly to be assumed that the mortgagee has acted in a way that was contrary to its own interests as well as the interests of others.Discussion[18] The steps taken by the plaintiff to obtain the best price obtainable are as follows. [19] The plaintiff commissioned a valuation from Curnow Tizard Limited on 23 June 2009. The property was valued on the basis of a roadside inspection. The valuer assessed the current market value of the property at $165,000. It anticipated that should the property be sold on a forced sale basis it would reasonably be expected to achieve a sale price of $100,000. To this difference the valuer stated:This reduced sale price by 40% is due to the increased costs often associated with purchase at mortgagee sale, uncertainty as to the state of the property on transfer, and the normal public expectation of a relatively low price.[20] The plaintiff, through its solicitors, then retained Blue Ribbon Realty Limited, a member of the Harcourts Group (Harcourts), to market and sell the property. In a letter to the plaintiff's solicitors of 10 July 2009 Mr Ken McGrath of Harcourts stated:ESTIMATION OF CURRENT MARKET VALUE Having viewed the said property, should the property be marketed under normal conditions with the full co-operation of those involved, we would estimate current market value at approximately $150,000 (One Hundred and Fifty Thousand Dollars). However under the forced sale conditions as described to me by yourself, we would estimate that the property may sell between $70,000 (Seventy Thousand Dollars) and $90,000 (Ninety Thousand Dollars).[21] The recommended marketing programme included three advertisements in each of the Waitomo News, the Waikato Times and the Te Awamutu Courier over three weeks, a large sign board to be erected at the property, property profile presentation folders and advertisements on the Harcourts website and a website called Realestate.co.nz. The marketing programme was to culminate in an auction. [22] The programme, it is clear, was accepted. In a letter to the plaintiff's solicitors of 4 August 2009 Mr McGrath acknowledged receipt of a letter of authority to proceed with the marketing of the property. He advised advertising would commence on 13 August 2009 with the auction scheduled for 3 September 2009. He noted the salesperson, Ms Yvonne Rothery, had "established that access to the property will be difficult, therefore a sale may have to be generated from a roadside viewing". [23] In a letter to the plaintiff's solicitors of 17 August 2009 Ms Rothery provided an update. She stated:Enclosed please find flyer & advertisements as they have appeared in the Waitomo News, Courier & Waikato Times over the weekend for the first time. I have fielded several calls over the past few days & have met with a few potentially interested parties at the roadside. No access is available.My signs at the intersection & on the property disappear as fast as I put them up. A total of 5 so far. I have given out 5 Terms & Conditions of Auction & Certificate of Titles. Some people are no longer interested with the caveat on the Title & others want access to view the property at a closer range. There is no power to the property & it has been ascertained that the possibility of power in the foreseeable future is improbable. The buildings are in a very bad state of repair with massive holes in roofs. The land itself has been heavily overgrazed & lacking in fertilizer with blackberry establishing itself in areas. I am being told that perhaps at around $30,000 we may have some interest in the property at Auction & of course this will depend on who we have on the day & if we can attract competition to increase this expectation[24] The caveat Ms Rothery referred to had been lodged by "Tapaeururangi Hapu Inc" on 18 May 2009. It is apparent it was lodged at the defendant's behest, on poor advice. The plaintiff through its solicitors applied to have it lapse. It was ultimately removed prior to settlement through proved, as is clear from the plaintiff's evidence, obstructive to the sale process. [25] In an email to the plaintiff's solicitors of 1 September 2009 Ms Rothery stated:Price indications are hard to obtain, but the comments made to me are that with all the negative factors such as no power, no direct access to harbour, clay type country, caveat on the title, relatives of the vendor living next door, no access to view the property at close range other than from the road, the overgrazed land, blackberry patches, & the state of the unfinished buildings & mess to be cleared up, we can not be expecting to reach anywhere near the price of the close neighbouring property that sold in January for $118,000. More likely will be the previous price indications of under $50,000, but of course this is very hard to predict. It must be understood that at the time of our estimation, we were not aware of a lot of the negatives as we were not able to view the property but since then we have had the opportunity for a closer more accurate appraisal & become a lot more aware of the issues involved. As you know there are very few recent sales to help with a valuation, & the market here continues to decline rapidly with very little interest unless prices are well reduced & perceived as very good buys. In some cases $100,000 is dropping off the prices of some properties... & they are still not selling. I would recommend that after a successful marketing program which has created quite some interest, we will have the best chance to sell at auction,hopefully with some competition & in this way realise the highest possible price at this present time. It will be a good indication of true market value. And at the end of the day, the property is worth what someone is willing to pay for it on the day.[26] The property was then auctioned, as anticipated, on 3 September 2009. The plaintiff requested the reserve be set at $100,000. By letter to the plaintiff's solicitors of 3 May 2010 Mr McGrath reported on the auction:The said property was put up for sale on Mortgagee Auction on Thursday 3 rdSeptember 2009 at 1pm. Following an adequate period of marketing, the Auction was attended by 18 registered possible buyers, 8 of these Individual registrations indicated by address given to be couples therefore leaving us to assume a truer indication of 14 different groups registered as buyers. The bidding commenced at $50,000.00 and witnessed seven further buyer bids at $5000.00 each ceasing at $85,000.00. As Auctioneer I explained to the highest bidder that this was not enough to sell the property, and that they should consider offering their highest price they were prepared to pay. A further bid was then taken from this party of $100,000.00 and as Auctioneer I asked for further bids, with no further bids and $100,000.00 being acceptable to the sellers; the property was then sold in the Auction room for $100,000.00.[27] There can, in my view, be no wide-ranging challenge to the steps taken to market and sell the property. The plaintiff obtained a valuation. It appointed a competent agent to market and sell the property. The agent marketed the property over a period of approximately three weeks, described by Ms Rothery as a standard length for a property going to auction. The defendant, it is quite clear, proved an impediment to the smooth and effective discharge of the mortgagee's duty of care. The caveat lodged had the predictable result of dissuading prospective purchasers. The defendant denied or at least restricted access to the property for inspection. He erected or had erected a "no trespassers" notice on the gate. There were other impediments, whether attributable to the defendant or not. Signs were defaced and removed. Despite all this the plaintiff obtained the forced sale estimate of the valuers. The sale price was considerably in excess of various indications provided to the plaintiff's solicitors by the agent (which were as low as $30,000). The sale price was $15,000 in excess of the highest bid initially received at auction. The evidenceof the plaintiff would ordinarily satisfy me that it had discharged its duty of reasonable care to obtain the best price reasonably obtainable as at the time of sale. [28] The defendant raises, however, two discrete considerations which, he contends, dictate a contrary conclusion: a) An earlier valuation assessing the then market value of the property at $360,000; and b) The absence of reference in the marketing to the fact that resource consent had been granted for the subdivision of the property. [29] I deal first with the earlier valuation. The evidence of the defendant establishes that the plaintiff obtained a valuation for mortgage lending purposes from registered valuers Hawken & Co on 24 May 2007. It assessed the market value of the property at $360,000, was it to be sold on the open market as at the date of the valuation "under the willing seller, willing buyer concept". [30] The later valuation applied a 40 per cent discount to arrive at an expected sale price if the property was to be sold on a forced sale basis. Application of that discount to the earlier valuation results in a value of $216,000. There remains, it is clear, a marked difference between the earlier and later valuations. The former, which, it was conceded, the plaintiff had on its file, is over double the latter. [31] The earlier valuation was, however, in 2007, when the property market was considerably more buoyant than when the property was later valued, marketed and sold in 2009. This is readily appreciated from the comparable sales to which each of the respective valuations makes reference. More importantly, however, the sale price actually obtained was obtained at a properly advertised auction. As Fisher J stated in Harts Contributory Mortgages Nominee Company Ltd v Bryers at [49]:Regardless of valuations altogether, the ultimate test was the auction. Valuations lose most of their significance once there has been a properly advertised auction.[32] Even if one might have expected the plaintiff to query the difference between the two valuations, any significance this might otherwise have had is answered by the fact of the properly advertised auction. Indeed, in the event it appears the later valuation prompted the plaintiff to insist on a higher price than that anticipated by the agent, and indeed that initially secured. The fact of the earlier valuation is not, in my view, evidence disclosing an arguable defence to the plaintiff's claim. [33] I turn then to the issue of subdivision consent. The defendant's evidence establishes that on 26 May 2005 resource consent was granted on the application of the defendant and his wife to create four allotments on the property. Consent was granted conditional on a reserve contribution of $1,050 plus GST payable for the three additional certificates of title, modifications to vehicular access to two of the lots, and easements on two of the lots granting the other two lots rights of way. [34] It is apparent from a recent certificate of title, produced in evidence, that new titles have not been uplifted, and that to this extent the consent was not fully implemented. The present status of the consent is unclear, but s 125 of the Resource Management Act 1991 provides it would not ordinarily have lapsed until five years after its commencement. This suggests subdivision consent was extant when the property was being marketed and when it was sold. I accept that, arguably, had this feature of the property been marketed, a higher price might have been reasonably obtainable. This is so notwithstanding the other impediments to sale. [35] Fisher J in Harts Contributory Mortgages Nominee Company Ltd v Bryersstated at [43](d) that:In the normal course the proposed sale will need to be advertised with anadequate description of the property's attributes . (Emphasis added.)[36] Advertisement and marketing absent reference to extant subdivision consent arguably inadequately described the property's attributes. It is quite clear the plaintiff knew of at least the intended subdivision. Mr Steven McCullough for the plaintiff deposes that his recollection of why the loan was interest-only was that the defendant was "looking to subdivide his property at 64 Raglan Road". I cannot, onan application for summary judgment and on the evidence before me, exclude the possibility that the plaintiff knew resource consent for the subdivision of the property had been granted and remained extant. [37] It is therefore arguable the plaintiff failed to take reasonable steps to obtain the best price reasonably obtainable as at the time of sale. The description of the property's attributes was arguably inadequate. I cannot be satisfied, albeit on a fine balance, that the defendant does not have a defence to the plaintiff's claim on this narrow ground, which should be determined at trial.Result[38] The plaintiff's application for summary judgment is declined. [39] I reserve costs in accordance with the decision of the Court of Appeal in NZI Bank Ltd v Philpott [1990] 2 NZLR 403. [40] The case is to be listed in the chambers list on 9 February 2011 at 2.15 pmfor further directions. Memoranda should be filed at least two days prior with proposed directions. ________________________ Associate Judge Sargisson