DOHERTY V BANK OF NEW ZEALAND HC WN CIV-2012-485-543

DOHERTY V BANK OF NEW ZEALAND HC WN CIV-2012-485-543 [15 March 2012]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2012-485-543[2012] NZHC 429UNDER the Property Law Act 2007IN THE MATTER OF Mortgage Instrument No. 5998404.3BETWEEN HELEN MARY DOHERTYFirst ApplicantAND PETER JOHN DOHERTYSecond ApplicantAND BANK OF NEW ZEALANDRespondentHearing: 14 March 2012(By telephone)Counsel: P Withnall for ApplicantsS Barker and N Whalley for RespondentJudgment: 15 March 2012JUDGMENT OF MILLER J[1] This hearing was convened urgently to deal with the Dohertys' applicationfor an injunction restraining the Bank of New Zealand from exercising its power of sale over two Masterton properties. They are residences which are owned by the Dohertys as investment properties.[2] The Dohertys have a long history of serial defaults on the mortgages. No fewer than 22 default notices have been issued since 2007. Typically such notices are remedied at the last moment.[3] The Property Law Act notice issued on this occasion was served on 15 September 2011, and it expired unremedied on 15 October 2011. Thereupon the principal sum payable under the mortgages became due and payable.[4] The notice had been issued for $18,403.55 plus outstanding rates of $1,496.04. The amount payable under the mortgages, which are all-obligations documents, is significantly more than $500,000.00.[5] Steps were taken to sell the properties by mortgagee's auction on 15 March. That brought from the Dohertys an application for injunction dated 6 March, supported by an affidavit complaining that the default notice was defective. The Dohertys also sought a waiver of the filing fee, which was refused by Ronald Young J on 13 March. I refer to his judgment of that date.[6] The Dohertys appeared by counsel, Mr Withnall, who recognised that their complaint about the notice is misguided. He sought relief on the basis that there is an arguable case that it would be oppressive to continue with the mortgagee sale in circumstances where the Dohertys have very recently paid, or will by today pay, not only the amount claimed in the default notice but also any further arrears accrued until 7 March. The figure given as at 7 March by the Bank was $36,657.61 plus a significant sum for rates unpaid. I approach the application on the basis that these payments have been or will be made.[7] Mr Withnall's instructions further are that two matters have changed. First,one of the properties was rented to a defaulting tenant but that situation has now been remedied, so both properties have reliable tenants who are paying rent. Second, Mr Doherty who is a qualified lawyer, will shortly commence practice in Australia, where the Dohertys have lived for some time. Thus, Mr Withnall submitted, there is reason to suppose that the pattern of defaults will not continue.[8] The jurisdiction invoked is that under s 127 of the Credit Contracts andConsumer Finance Act 2003. The term "oppressive" receives a definition in s 118. Ineed not rehearse it. For my purposes, it suffices to note that it requires something more than unfairness: Taylor v Westpac (1996) 5 NZBLC 104,104. The reasonablestandards of commercial practice are the touchstone for the assessment of oppression: Bartle v G E Custodians [2010] 3 NZLR 601 at [177].[9] It is settled that a lender does not act oppressively merely because the default following which required the legal right to sell has subsequently been remedied:Grose v Development Finance Corporation of New Zealand (1987) 1 NZBLC102,646. The mortgagee's right to sell in consequence of default is the primary remedy by which it may recover money which is contractually due to it.[10] I accept that there may be circumstances in which it is nonetheless oppressive to call up a mortgage following the expiry of a default notice. Several considerations weigh against the Dohertys in this case, however.[11] First, the Bank has not acted precipitously following the expiry of the default notice. Months have gone by.[12] Second, no attempt was made to reach an accommodation with the Bank. Only at the last minute did the Dohertys act by seeking the Court's intervention.[13] Third, the Dohertys have an extraordinary history of defaults. A debtor'sunreliability is a relevant consideration because it points to a real and reasonable concern that there will be further defaults in the future: Gault Introduction to Commercial Law – Credit Contracts and Consumer Finance at 4C.7.03. The suggestion that matters will come right is speculative. If there were substance in it, I would expect to see that reflected in negotiations with the Bank since the default notice was issued, but the record suggests rather that Mr Doherty spent his time disputing the notice on technical grounds.[14] Finally, it is common ground that the amount payable under the mortgages exceeds the value of the two properties. This is not one of those cases in which it can be said that the Bank ought to wait because it will be paid in any event. If the sale goes off, the costs of conducting it will have been wasted and there will be a delay while more interest accrues. This is not to deny that the Dohertys have an economic interest in the deficit, for which the Bank is likely to pursue them.[15] In the circumstances, I am not persuaded that there is an arguable case that it would be oppressive for the Bank to proceed with the mortgagee sale. The application for an injunction is dismissed. If any issue arises as to costs counsel may file memoranda.Miller JSolicitors:Buddle Findlay, Wellington for Respondent