KORONIADIS V BANK OF NEW ZEALAND CA522/2013 [2014] NZCA 197

KORONIADIS V BANK OF NEW ZEALAND CA522/2013 [2014] NZCA 197 [23 May 2014]IN THE COURT OF APPEAL OF NEW ZEALANDCA522/2013[2014] NZCA 197BETWEEN ATHANASIOS KORONIADISApplicantAND BANK OF NEW ZEALANDRespondentCourt: Stevens, White and French JJCounsel: Applicant in PersonG J Toebes for RespondentJudgment:(On the papers)23 May 2014 at 3.00 pmJUDGMENT OF THE COURTThe application to extend the time within which to bring the appeal is granted.____________________________________________________________________REASONS OF THE COURT(Given by Stevens J)Introduction[1] Mr Koroniadis (the applicant) applies for an extension of time under r 29A of the Court of Appeal (Civil) Rules 2005 (the Rules) to appeal the decision of Gendall J given on 8 July 2013 granting summary judgment against him in favour of the Bank of New Zealand (the bank).1[2] The applicant had 20 working days within which to bring his appeal. This period ended on 5 August 2013. The applicant filed his notice of appeal in this Court1 Bank of New Zealand v Koroniadis [2013] NZHC 1700 [High Court judgment].on 5 August 2013. However, he did not serve the notice of appeal on the bank until the following morning. Rule 31(1) of the Rules states that an appeal is only brought when the notice of appeal is filed with the Court and a copy of the notice of appeal is served on every person who is a party to the proceeding in the court appealed from. The applicant's appeal was thus not "brought" until 6 August 2013, one day out oftime.[3] The application for an extension of time is opposed by the bank. Both parties have consented to the matter being dealt with on the papers. The application was the subject of submissions on both sides, which we have considered. The applicant is self-represented.Background[4] We briefly summarise the relevant background. More detail is set out in the High Court judgment sought to be appealed.2[5] The bank provided financial accommodation to Miramar Development Ltd (in receivership and in liquidation) (the company) by way of a term loan for $1.1 million, and an overdraft facility. As security, the bank took personal guarantees from the applicant and his brother, who were directors of the company, as well as a general security agreement from the company (GSA) and a registered first mortgage over a commercial property in central Wellington owned by the company (the property).[6] The bank claimed that the company had defaulted in payments under the term loan. In August 2012, the bank made demand on the company to pay the debit balance of the overdraft account and the arrears on the loan facility. The demand was not complied with, and the bank therefore appointed receivers under the GSA.[7] On 5 October 2012 the bank issued notices under s 119 of the Property Law Act 2007 (the Act). The notices required the default to be remedied by 9 November 2012. The company was served with the s 119 notice on 5 October 2012, but the2 At [4]–[17].bank had trouble serving the applicant with a copy of the notice, as required by s 121 of the Act.3 The notice was finally served on him on 19 November 2012. By this time, the date by which the default had to be remedied had already passed.[8] None of the company's defaults under the loan arrangements were remedied. The bank sought summary judgment against the applicant as guarantor for the balance loan amount as at 7 January 2013 ($1,070,795.32) together with a current account loan balance ($36,436.70) plus default interest and costs. Summaryjudgment was also sought against the applicant's brother, Kostandinos Koroniadiswho did not oppose the application. Judgment against the applicant's brother was given by default against him and he has since settled with the bank.The judgment sought to be appealed[9] Gendall J granted summary judgment against the applicant. The defences advanced in the High Court were said to "relate almost entirely to process issues".4They raised questions over the service of demands, notices and other documents pursuant to the requirements of the Act and issues over whether it could be established that Mr Koroniadis received those documents. They included:(a) that the bank should prove the applicant received the notice of demand under the guarantee dated 7 January 2013, and the notice to the covenantor under s 121 of the Act;(b) that the notice to the covenantor was received after the remedy date specified in that notice;(c) that the bank had not proved service on the applicant of the demand under the guarantee of 7 January 2013; and(d) that the applicant had made arrangements to pay the outstanding overdraft amount but this was refused by the bank, or alternatively3 The bank was required by s 121 of the Property Law Act 2007 to serve this notice on Mr Koroniadis "as soon as possible" because as a guarantor he was a covenantor (as defined ins 4 of the Act) in respect of the property.4 High Court judgment, above n 1, at [23].that the bank added conditions improperly requiring repayment also of a debt owing by a related third party company.[10] Gendall J found that these defences were "quickly disposed of".5 In relation to the s 121 notice, he found that the bank had served the applicant with the s 121notice "as soon as possible" after service on the mortgagor as required by s 121 of the Act. The Judge was further satisfied that any delay in service on the applicant could not in the circumstances have caused any prejudice or lost opportunity to the applicant to remedy the defaults.6 In relation to the notice of demand under the guarantee the Judge found that the absence of proof of service of the 7 January 2013 notice had not in any way prejudiced Mr Koroniadis. In any case, the Judge found that on the balance of probabilities, Mr Koroniadis had received the notice. Mr Koroniadis had clearly also received a further copy of the notice on 28 March 2013 when he was served with the proceedings, and subsequently received two further copies of the notice. 7 In relation to (d) the Judge found Mr Koroniadis'sclaims to be unsupported by evidence, and seemingly incorrect.8[11] The Judge concluded that Mr Koroniadis was "quite unable to advance any arguable defence to the bank's summary judgment application" and that the bank "clearly has satisfied the Court here that [Mr Koroniadis] has no defence to its claimagainst him as guarantor".9 Judgment was entered in the sum of $1,107,232.02, with interest of $72,066.23 and costs of $13,352.00 plus disbursements totalling $2,256.00.The application[12] This appeal was brought one day out of time. Mr Koroniadis therefore filed an application for an extension of time under r 29A of the Rules. The application is made on the grounds that the notice of appeal was filed on time, and the reason for delay in service of the notice on the bank is a genuine one which arose from a genuine mistake or oversight on the part of the applicant. The reason given for the5 At [27].6 At [34].7 At [37] and [39].8 At [44]–[45].9 At [57].delay is that Mr Koroniadis did not get home from university until midnight on 5 August 2013. Additionally Mr Koroniadis says that the delay has not caused any prejudice to the bank, there is merit in the appeal, and that it is in the interests of justice to grant the extension as the bank is threatening to bankrupt the applicant. He says if leave is not granted he will be deprived of his rights of appeal.[13] The bank opposes the application. The bank submits that the appeal has no merit, that the appeal was deliberately not served in time, and that the bank is prejudiced by the delay. Counsel for the bank observes that he had notified the applicant twice on 5 August 2013 that it was necessary to serve the notice of appeal on the bank within the requisite time.Events subsequent to the application[14] Subsequent to the application being made, the bank has applied to have the applicant adjudicated bankrupt. The act of bankruptcy relied on is non-compliancewith a bankruptcy notice based on Gendall J's 8 July 2013 judgment. Thebankruptcy application is opposed by the applicant.[15] The applicant made an application to halt the bankruptcy proceeding under s 38 of the Insolvency Act 2006 while he pursues his appeal in this Court. This was granted by Associate Judge Bell on 25 October 2013.10 His reason for doing so was this:[13] In this case it is my judgment that Mr Koroniadis ought to be given the opportunity of trying to demonstrate to the Court of Appeal that he should have an extension of time for his appeal. There may be potential grounds for his appeal that he may wish to advance which may be worthy of consideration by the Court of Appeal. During the hearing today I have discussed two of them.[16] Associate Judge Bell then briefly discussed two of the points which he considered may be worthy of consideration by this Court:[14] One of them concerns the acceleration of the loan by the Bank of New Zealand. The bank did serve notices under s 119 of the Property Law Act. Service of a notice under s 119 is necessary before any acceleration10 Bank of New Zealand v Koroniadis [2013] NZHC 2865 [stay judgment].clause can operate. The definition of acceleration clause in s 4 of the Property Law Act covers both clauses where acceleration happens automatically and clauses where acceleration is not automatic but gives the occasion for a balance payable under a loan to be called up. The table loan facility in this case seems to be subject to a provision under which the balance payable under the facility is not repayable automatically on default, but only on the bank making demand. The bank does not seem to have included any evidence on its summary judgment application that it had called up the balance after the time for complying with the notice under s 119 had expired.[15] The other matter concerns the question of service of a notice under s 121 of the Property Law Act. The bank had difficulty serving Mr Koroniadis with a copy of the notice under s 119. The notice was issued on 5 October 2012 and required any defaults to be remedied by 9 November 2012. In fact Mr Koroniadis was not served until 19 November 2012, which was after the date for remedying the default. [Gendall J] accepted the bank's case that it had complied with s 121 because it had served the notice on Mr Koroniadis as soon as possible.[16] There remains the point whether the service must still be made on a former mortgagor or covenantor or other person required to be served under s 121 before the time for remedying the default has expired. Notices under s 121 serve a different purpose from notices under s 122. The purpose of notices under s 122 of the Property Law Act seems to be to give guarantors or former mortgagors the opportunity to exercise the power of redemption under s 97 of the Property Law Act. The purpose of serving a notice under s 119 on a former mortgagor or covenantor or other person under s 121 seems to be to give them an opportunity to remedy the mortgagor's default within the time provided under s 119. I understand from Mr Toebes that the requirements of s 121 may not have been the subject of any earlier considered decisions. The implications of serving a notice under s 121 outside the period for compliance is a matter that may be worthy of consideration by the Court of Appeal.[17] On 24 February 2014, the applicant filed an amended notice of appeal in this Court. This amended notice of appeal reflects the potential grounds of appeal discussed by Associate Judge Bell, as set out in the preceding paragraph.[18] For completeness, we note that the applicant filed a counterclaim against the bank. On 21 October 2013 Associate Judge Bell granted summary judgment in favour of the bank as counterclaim defendant.1111 Bank of New Zealand v Koroniadis [2013] NZHC 2775.Should the time for bringing the appeal be extended?[19] Rule 29A confers on the Court discretion to grant an extension of time in which to bring an appeal. The overarching consideration when determining whether or not an extension of time should be granted is where the interests of justice lie.12Relevant considerations in determining whether to grant an extension of time include:13(a) the length of the delay and the reasons for it;(b) the parties' conduct;(c) the extent of prejudice caused by the delay;(d) the prospective merits of the appeal; and(e) whether the appeal raises any issue of public importance.[20] The delay in bringing the appeal was very short: the notice of appeal was served on the bank by email at 7.48 am on the day after the time for appealing expired. Unusually, there is evidence that the applicant was clearly warned twice by counsel for the bank that he needed to serve the notice of appeal on the bank within the requisite time. The applicant has purported to explain the delay. We do not need to resolve the question of whether his explanation is credible or not. By any measure the breach was a technical one and was only in respect of service.[21] We acknowledge that some prejudice may have been caused to the bank by the delay. However, if the application is dismissed, bankruptcy may follow without the applicant having the chance to challenge what he considers to be a judgment wrongly given against him. Given the act of bankruptcy relied on by the bank, the bankruptcy would flow directly from the judgment sought to be appealed by the applicant. We consider it is preferable in the present circumstances that an applicant12 My Noodle Ltd v Queenstown-Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518 at [19].13 My Noodle, above n 12, at [19]; Robertson v Gilbert [2010] NZCA 429 at [24]; Barber v Cottle[2010] NZCA 31 at [6].facing bankruptcy has any matters disputed resolved before being made bankrupt. Once adjudicated bankrupt, the control of any appeal would pass to the Official Assignee.[22] A further factor weighing in favour of an extension of time is that there may be merit in the proposed appeal. The part of the judgment of Associate Judge Bell set out at [16] above outlines two points which may be worthy of consideration by this Court. These observations suggest, at least, that there may some merit in the appeal.[23] We note that s 121(2) of the Act makes it clear that failure to comply with the service requirements in that section does not prevent amounts secured by the mortgage becoming payable. The implications of failure to serve a notice under s 121 outside the period for compliance may, however, need to be considered in the light of the interrelationship between s 121(2) and 121(3).[24] Weighing these factors, we consider that the interests of justice require that the application to extend time is granted.Result[25] The application to extend the time to appeal is granted.[26] As the applicant is self-represented and has been given an indulgence by theCourt, we make no order as to costs.Solicitors:JTLAW, Wellington for Respondent