BANK OF NEW ZEALAND LTD v FERNANDO [2021] NZHC 2595

BANK OF NEW ZEALAND LTD v FERNANDO [2021] NZHC 2595 [30 September 2021]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2021-409-000015[2021] NZHC 2595BETWEEN BANK OF NEW ZEALAND LIMITEDPlaintiffAND JOHN WINSTON LAKSHAN FERNANDODefendantHearing: 15 September 2021Appearances: N J Robertson for PlaintiffG P Davis for DefendantJudgment: 30 September 2021JUDGMENT OF ASSOCIATE JUDGE PAULSEN[with Redactions to [8](a)-(g)]This judgment was delivered by me on 30 September 2021 at 11.00 ampursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] The plaintiff, Bank of New Zealand Ltd (the Bank), seeks:(a) summary judgment against the defendant, John Fernando(Mr Fernando) for $370,057.23 plus default interest and costs pursuantto Mr Fernando's personal guarantee of Housing Term Loanagreements between the Bank and Mr Fernando's company, JohnF-LTC Ltd; and(b) summary judgment against Mr Fernando for $74,463.45 plus defaultinterest and costs pursuant to Mr Fernando's personal guarantee ofadvances made pursuant to an overdraft facility provided by the Bankto another of Mr Fernando's companies, Worcester Developments Ltd.[2] The amounts claimed represent shortfalls following the mortgagee's sale ofproperties provided as security to the Bank.[3] There is no dispute the Bank made the advances or as to the terms upon whichthey were made. There is no dispute that Mr Fernando guaranteed the Bank's advancesor as to the terms of the guarantees. There is no dispute either as to the defaults thatoccurred that triggered the steps taken by the Bank to sell the properties provided assecurity for the Bank's advances, nor that the sale proceeds were properly applied toreduce the amounts owing to the Bank. Further, Mr Fernando does not dispute thatthere is an amount owing by him to the Bank under the guarantees.[4] However, Mr Fernando opposes the Bank's application for summary judgment.He asserts the Bank's claims are unsuitable for summary judgment because he has twoarguable defences as follows:(a) that the Bank, as mortgagee, breached the duty of reasonable care owedunder s 176 of the Property Law Act 2007 to obtain the best pricesreasonably obtainable as at the time of sale when it sold three propertiesheld as security for the advances, known as units 313, 314 and 323, 116Stanmore Road (units 313, 314 and 323 respectively); and(b) the Bank acted oppressively in respect to payment negotiations, themortgagee sale process of units 313, 314 and 323 and the sale of themin breach of s 120(b) of the Credit Contracts and Consumer FinanceAct 2003 (CCCF Act) such that the Court should reopen the term loansand facility agreement between the Bank and Mr Fernando'scompanies.[5] Mr Fernando also argues there are material conflicts of evidence which makethe Bank's claims unsuitable for summary judgment.[6] The Bank rejects Mr Fernando's defences and says there is no properfoundation for them. It says it has satisfied its onus to establish Mr Fernando has noarguable defence to the claims.Background[7] Mr Fernando was the sole director and shareholder of JohnF-LTC Ltd andWorcester Developments Ltd.[8] The Bank made a series of advances to Mr Fernando, JohnF-LTC Ltd andWorcester Developments Ltd. Not all of the advances are the subject of these claims,but some mention of them provides the relevant context. They are summarised asfollows:(a) a Special Rate Housing Term Loan (account 000) dated 19 July 2018for $1,180,000 to Mr Fernando in respect of which security wasprovided by way of a first registered mortgage over a property at63 Quaifes Road, Halswell, Christchurch (the Quaifes Road property);(b) Mr Fernando's You Money Account (account 000);(c) a Housing Term Loan (account 000) dated 17 August 2018 for $283,500to JohnF-LTC Ltd in respect of which security was provided by way ofa first registered mortgage over units 313, 314 and 323;(d) a Housing Home Loan (account 000) dated 17 August 2018 for$283,500 to JohnF-LTC Ltd in respect of which security was providedby way of a first registered mortgage over units 313, 314 and 323;(e) a Housing Term Loan (account 000) dated 17 August 2018 for $373,500to JohnF-LTC Ltd in respect of which security was provided by way ofa first registered mortgage over units 313, 314 and 323;(f) a Small Business facility (account 000) for JohnF-LTC Ltd; and(g) a Small Business account and overdraft facility (account 000) forWorcester Developments Ltd.[9] Mr Fernando provided the Bank with an unlimited Deed of Guarantee andIndemnity in respect of the borrowing of JohnF-LTC Ltd on 17 August 2018. Heprovided a guarantee limited to $200,000 in respect of Worcester Developments Ltd'sSmall Business facility by a facility document dated 14 November 2018.[10] The performance of Mr Fernando and his companies in respect to theirpayment obligations to the Bank was unsatisfactory. As a consequence, betweenDecember 2018 and early May 2019 the accounts were subject to oversight by theBank's Loan Management Team. By 1 March 2019, the arrears (across all accounts)totalled $41,312. Mr Fernando made promises to clear arrears which were nothonoured.[11] On 3 April 2019, the Bank wrote to Mr Fernando that the arrears totalled$50,144.38 and provided advice as to the options available to remedy the situation ifthe arrears could not be cleared.[12] The arrears were not cleared. On 24 April 2019, the Bank advisedMr Fernando that due to the high level of defaults a formal recovery process wouldcommence from 3 May 2019.[13] The Bank instructed Verofi Ltd (Verofi) to act on its behalf to manage therecovery process. Mr Fernando was advised of this on 8 May 2019.[14] On 22 May 2019, Verofi sent demand notices to JohnF-LTC Ltd, WorcesterDevelopments Ltd and to Mr Fernando demanding repayment of the amounts inarrears by 5 June 2019. The defaults were not remedied.[15] On 13 June 2019, the Bank issued the requisite notices under the Property LawAct to JohnF-LTC Ltd and Mr Fernando which specified that all the amounts securedby its mortgages over Quaife's Road and units 313, 314 and 323 would become dueand payable if the defaults were not remedied by 29 July 2019. Mr Fernando waspersonally served on 22 June 2019.[16] Mr Fernando instructed a local lawyer, Mr Shaun Cottrell. On 24 June 2019,Mr Cottrell put a proposal to Verofi to reduce the arrears at the rate of $7,000 permonth provided Worcester Developments Ltd's facility of $150,000 remained in place.[17] On 25 June 2019, Verofi declined the proposal noting the defaults must beremedied by 29 July 2019.[18] The defaults were not remedied by 29 July 2019. On 30 July 2019, Mr Cottrellmade a further proposal to "clear all of the arrears (except the cancelled overdraftlimit)" by a payment of $55,375 on the basis that the overdraft facility was put backin place or additional time was allowed to refinance the overdraft.[19] On 2 August 2019, Mr Cottrell advised Verofi that he was holding $55,000 inhis trust account to make payment on the proposed terms.[20] Also, on 2 August 2019, Verofi advised Mr Cottrell that the Bank was notprepared to reinstate the overdraft facility but would allow four weeks until 30 August2019 for JohnF-LTC Ltd, Worcester Developments Ltd and Mr Fernando to refinanceand repay their loans.[21] On 5 August 2019, Verofi issued a letter to Mr Fernando and JohnF-LTC Ltdthat the Property Law Act notices had expired unremedied and included demandnotices to Mr Fernando and JohnF-LTC Ltd requiring full repayment of the loans andguaranteed amounts within 28 days, failing which the Bank would exercise its rightsto sell the Quaifes Road property and units 313, 314 and 323.[22] On 30 August 2019, Verofi requested an update from Mr Cottrell who advisedthat Mr Fernando had an offer on the Quaifes Road property. Ultimately, the Bankconsented to the sale of the Quaifes Road property. Settlement occurred on 25 October2019. The Bank received $1,315,000 upon settlement which cleared Mr Fernando'spersonal loan and $92,718.82 was applied to the debt owed by WorcesterDevelopments Ltd (guaranteed by Mr Fernando).[23] At around this time, Verofi did searches to see whether units 313, 314 or 323had been listed for sale and could find no evidence of that. There was also no detailsprovided by Mr Fernando of any marketing of the properties for sale.[24] On 17 October 2019, JohnF-LTC Ltd was struck from the Register ofCompanies.[25] Verofi obtained market and forced sale appraisals of units 313, 314 and 323from a licenced real estate agent, Total Realty Ltd. It also obtained market and forcedsale appraisals and marketing proposals for the units from another licenced real estateagent, Grenadier Real Estate Ltd (Harcourts Grenadier). These were received on24 October 2019 and 29 October 2019 respectively.[26] On 8 November 2019, the Bank obtained registered market and forced salevaluations of units 313, 314 and 323 from Metro Valuations Ltd.[27] On 11 November 2019, Mr Fernando was advised the Bank had obtainedappraisals for units 313, 314 and 323 and that Harcourts Grenadier had been instructedto auction the units on 11 December 2019. He was also advised the agents wouldmake contact with the tenants to arrange access to the properties emphasising "[i]t isimportant that prospective purchasers are able to fully view the property so your co-operation in this process would be appreciated."[28] Harcourts Grenadier was appointed by the Bank to complete mortgagee's salesof units 313, 314 and 323. It commenced marketing the properties from 11 November2019. The units were put up for sale by auction on 11 December 2019. Units 313and 314 sold at auction. Unit 323 did not sell at auction but subsequently followingnegotiation.[29] On 12 December 2019, Verofi emailed Mr Fernando advising of the sales.[30] Settlement of the sale of unit 313 occurred on 23 December 2019. Settlementof the sales of units 314 and 323 occurred on 17 January 2020. After application ofthe proceeds of sale there remained a residual balance of $370,057.23 owing on theloans made to JohnF-LTC Ltd and $74,463.45 owing by Worcester Developments Ltdin respect of its overdraft facility. In total $444,520.68 remained owing to the Bankin respect of which Mr Fernando had given his personal guarantees.[31] On 20 January 2020, Verofi advised Mr Fernando in writing how the proceedsof sale of units 313, 314 and 323 were applied and of the residual debts that remainedowing.[32] That same day, a notice of demand for payment of the debts was sent toMr Fernando requiring payment by 3 February 2020. This demand expiredunremedied and nothing has been paid.Summary judgment principles[33] The Bank's application is brought pursuant to r 12.2(1) of the High Court Rules2016. It provides:The court may give judgment against a defendant if the plaintiff satisfies thecourt that the defendant has no defence to a cause of action in the statement ofclaim or to a particular part of any such cause of action.[34] The Court may give judgment in relation to a part of a claim even if the plaintiffcannot prove the whole of it.1 Further, the Court may give judgment on liability and1 See Andrew Beck and others (eds) McGechan on Procedure (online ed, Thompson Reuters) at[HR12.2.10].order a trial on the issue of amount if the party applying for summary judgmentsatisfies the Court that the only issue to be tried is one of the amount claimed.2[35] An often-cited summation of the correct approach to summary judgmentapplications is contained in Krukziener v Hanover Finance Ltd as follows:3[26] The principles are well settled. The question on a summary judgmentapplication is whether the defendant has no defence to the claim; that is, thatthere is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1at 3 (CA). The Court must be left without any real doubt or uncertainty. Theonus is on the plaintiff, but where its evidence is sufficient to show there is nodefence, 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 normallyresolve material conflicts of evidence or assess the credibility of deponents.But it need not accept uncritically evidence that is inherently lacking incredibility, as for example where the evidence is inconsistent with undisputedcontemporary documents or other statements by the same deponent, or isinherently 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 ofjudgment. The Court may take a robust and realistic approach where the factswarrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).[36] I emphasise the following: 4(a) the Bank must satisfy the Court that Mr Fernando has no arguabledefence to its claims. The issue is whether there is a real question to betried;(b) the onus remains on the Bank throughout, but where its unchallengedevidence is sufficient to convince the Court Mr Fernando has noarguable defence, Mr Fernando will have to respond with evidence ofan arguable defence in order to defeat the application;(c) it is generally not possible to determine disputed issues of fact based onaffidavit evidence alone, particularly when issues of credibility arise;2 High Court Rules 2016, r 12.3.3 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 and confirmed inMitchell v Trustees Executors Ltd [2011] NZCA 519, (2011) 12 NZCPR 659 at [35].4 See Pemberton v Chappell [1987] 1 NZLR 1 (CA); Westpac Banking Corp v MM Kembla NewZealand Ltd [2001] 2 NZLR 298 (CA); Krukziener v Hanover Finance Ltd, above n 3, at [26];Bilbie Dymock Corp Ltd v Patel (1987) 1 NZPC 84 (CA) and Sudfeldt v UDC Finance Ltd (1987)1 PRNZ 205 (CA) at 209.(d) issues of law, even though they may be complex can, however, bedetermined in an application for summary judgment;(e) the Court is not required to accept possible defences which are not bonafide, credible or are lacking in detail. The Court should adopt a robustand realistic approach to the assessment of evidence, but neverthelesssummary judgment may be inappropriate where the ultimatedetermination turns on a judgement that can only properly be reachedafter a full hearing of all the evidence; and(f) the Court's power to enter summary judgment is discretionary, but thediscretion is of a residual kind. There is also little scope for exercisingthe discretion not to grant summary judgment where there is nosuggestion of injustice.First defence – s 176 of the Property Law ActThe law[37] Section 176 of the Property Law Act provides: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 section187, or through a court under section 200, owes a duty of reasonablecare to the following persons to obtain the best price reasonablyobtainable as at the time of sale:(a) the current mortgagor:(b) any former mortgagor:(c) any covenantor:[38] A covenantor is defined in s 4 to include a person, other than the mortgagor,who has agreed to pay money or perform obligations secured by the mortgage. Itincludes a guarantor, so the duty in s 176 is owed by the Bank to Mr Fernando.[39] In Public Trust v Ottow, Asher J stated the following principles: 5[17] When a mortgagee does exercise the power of sale, that power of salemust be exercised in accordance with s 176. Although s 176 imposes aspecific duty on the New Zealand mortgagee, there is a similar duty atcommon law on English mortgagees. The English authorities on the duties ofmortgagees offer useful guidance despite the different land transfer andconveyancing practices. Given the wide ranging complaints of Mr Ottowconcerning the sale, it must be observed that a mortgagee is "not a trustee ofthe power of sale of the mortgagor":6 It can be noted that:a) A mortgagee has no duty at any time to exercise the powers of sale orpossession. In default of any provision to the contrary in themortgage, the power of sale is for the benefit of the mortgagee, whocan sell at any time in accordance with the mortgagee's convenience.7b) The mortgagee's duty of care is to take reasonable care to obtain thebest price reasonably obtainable at the time of sale.8c) It does not matter that the time may be unpropitious and that bywaiting a higher price could be obtained.9d) A mortgagee is under no obligation to improve the property orincrease its value.10e) A mortgagee sale for a price less than the current market valueassessed by valuers does not, of itself, establish a breach of duty,although a large discrepancy may indicate a failure to take reasonablecare.11f) A mortgagee does not have any general duty to maintain propertiesprior to sale.12g) Following the service of a Property Law Act Notice there is no dutyon a mortgagee to keep a guarantor informed of sales activities.13h) The mortgagee is not entitled to sell in a hasty way at a knock-downprice sufficient to pay the debt, which because of the speed of saleleads to a lower price than could otherwise be obtained.145 Public Trust v Ottow (2009) 10 NZCPR 879 (HC).6 Nash v Eads (1880) 25 SJ 95.7 Raja (Administratrix of the Estate of Raja (Dcd)) v Austin Gray (A Firm) [2002] EWCA Civ 1965at [55]; Silven Properties v Royal Bank of Scotland Plc [2004] 1 WLR 997 (CA) at [14].8 Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd (2001) 4 NZ ConvC193,480 (HC).9 Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54 at 61; Silven Properties v Royal Bank ofScotland Plc, above n 7 at [14].10 Silven Properties v Royal Bank of Scotland Plc, above n 7, at [16].11 Moritzson Properties Ltd v McLachlan (2001) 9 NZCLC 262,448 at [61].12 Silven Properties v Royal Bank of Scotland Plc, above n 7, at [16].13 G Merel & Co Ltd v Barclays Bank (1963) 1 SJ 542 (Ch).14 Palk v Mortgage Services Funding Plc [1993] 2 All ER 481 at 486.i) Proper care must be taken to expose the property to the market and toobtain the best price reasonably obtainable.15[40] Asher J considered factors which are likely to indicate whether a mortgageehas taken reasonable care to obtain the best reasonably obtainable price were:[31] The following steps indicate that a mortgagee has made reasonableefforts to obtain the best reasonably obtainable price:a) The appointment of a reputable real estate agent to market theproperty.b) Obtaining a valuation report from an experienced valuer as aguide to what could reasonably be expected for the property.c) Marketing over a reasonably long period of time.d) An extensive advertising and promotional campaign.e) A properly conducted auction.f) A sale price that, given all the circumstances, can bereconciled with expert opinion as to value.[41] These principles were referred to by Wylie J in Westpac New Zealand Ltd vLamb and he further elaborated:16[34] I hesitate to supplement this careful analysis, but would suggest asfollows:(a) The statutory obligation is not to obtain the best pricereasonably obtainable, but to take reasonable care to obtainthe best price reasonably obtainable;17(b) A property is only worth what somebody is prepared to payfor it at the time of sale;(c) Valuations lose much of their significance if reasonable careis taken, there has been a properly advertised and conductedauction, and the property has been sold at auction or bynegotiation after the auction;1815 Harts Contributory Mortgages Nominee Co Ltd v Bryers HC Auckland CP403-IM00,19 December 2001 at [43](d) and (f).16 Westpac New Zealand Ltd v Lamb [2012] NZHC 319.17 Land Law (online, loose-leaf ed, Brookers) at [8.9.06(4)] and cases there cited.18 Harts Contributory Mortgages Nominee Co Ltd v Bryers, above n 15, at [49]; ASB Bank Ltd vUrquhart HC Auckland CIV-2010-404-6913, 20 May 2011 at [85].(d) If reasonable care is taken, it does not necessarily follow thatthe best price reasonably obtainable will, in fact, beachieved;19(e) What constitutes reasonable care will always turn on the factsof the case. The steps taken by the mortgagee in fulfilling thestatutory duty have to be looked at in the round.20(f) In considering the reasonableness of the care taken, the courtsshould be slow to second-guess the actions of a mortgageeacting on apparently sound professional advice.21Mr Fernando's submissions[42] Mr Fernando's arguments in relation to s 176 were marshalled under threeheadings namely:(a) the mortgagee sale and marketing process;(b) disputed valuations – a conflict of evidence; and(c) conduct of the auction/the reserve prices.[43] Before dealing with the arguments advanced, something must be said aboutMr Fernando's approach to the evidence. Mr Fernando makes several assertions uponwhich his defences are based for which there is no or insufficient supporting evidence.One such assertion is that units 313, 314 and 323 were sold at an undervalue. He hasprovided no evidence of the market value of the units at the time of sale. Mr Davissubmits this is a trial issue and that Mr Fernando has not had time to obtain valuationevidence. I do not agree. Mr Fernando has had adequate time since he was servedwith this proceeding on 2 March 2021 to obtain valuation evidence and put it beforethe Court. The evidence before me as to the value of the units at the time of sale islimited to what has been provided by the Bank in the real estate appraisals andregistered valuations it obtained and, of course, the sale prices actually achieved atauction following the marketing campaign.19 Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd, above n 8.20 Apple Fields Ltd v Damesh Holdings Ltd [2001] 2 NZLR 586 (CA) at [50]; affirmed on appeal inNewport Farm Ltd v Damesh Holdings Ltd [2003] UKPC 54, [2004] 1 NZLR 721.21 Taylor v Westpac Banking Corp (1996) 7 TCLR 177 (CA) at 182–183.[44] But there are other such assertions also. Mr Fernando says he asked the Bank'slisting agent for the appraisals obtained by the Bank but does not say when or howsuch a request was made and his counsel accepts there is no other evidence of such arequest. Similarly, Mr Fernando says he could have sold the units himself and he hadbuyers interested in buying them but he never produced any agreement for the sale ofthe units to the Bank or in his affidavits. He also says he could have refinanced buthas produced no evidence of any offers of finance.[45] While it is not usually appropriate to determine disputed questions of fact on asummary judgment application, a realistic approach to the evidence is required. Here,the central contentions made by Mr Fernando lack a sufficient evidential foundationor credibility and can be safely dismissed.[46] I will deal with each of the matters raised by Mr Fernando seriatim.The mortgagee sale and marketing process[47] Mr Fernando argues it is not clear whether "any considerable thought" wasgiven to whether Harcourts Grenadier's proposal to sell the units by auction was theappropriate method of sale. Related to this, he contends the marketing period was tooshort given a recommendation in Metro Valuation Ltd's report of a marketing periodof one to three months.[48] A mortgagee in the position of the Bank must decide whether a sale should beby auction or private treaty. I accept, as a general proposition, the fact a property issold by auction does not necessarily mean the best price reasonably obtainable was infact obtained.22 However, I do not accept Mr Fernando's assertion that the Bank didnot care what it got for the units and was simply trying to get sales completed so thatit "could then come after me for the shortfall". Such an approach would clearly notbe in the Bank's interest. Further, given the long history of defaults the Bank couldhave no expectation that any shortfall would be readily recoverable from Mr Fernando.22 Tse Kwong Lam v Wong Chit Sen, above n 9.[49] Just as he has put no evidence before the Court as to the value of the units asat the time of sale, Mr Fernando has put no evidence before the Court to suggest therewere characteristics of the units, market conditions or some other factors that meantsale by auction was inappropriate or would fail to obtain the best price reasonablyobtainable.[50] For the Bank, the management of the loans and sales process were under thestewardship of Marc Gilmour, a default recovery manager at Verofi with experienceoverseeing mortgagee's sales on behalf of banks and other financial institutions.[51] The decision to proceed by way of auction was made after market appraisalswere received from both Harcourts Grenadier and Total Realty. In the case ofHarcourts Grenadier, it also provided a proposed marketing programme, marketingcalendar and draft advertisements. It was Harcourts Grenadier that advised that thebest method of sale was through a four week marketing programme and an auctionprocess.[52] Harcourts Grenadier is a well-established licensed real estate agency tradingunder the nationwide Harcourts banner. The marketing appraisals were signed-off byCedric King, the City Office Manager and an Associate Member of the Real EstateInstitute of New Zealand, and Tristan Harcourt, a Licensed Property Consultant.Harcourts Grenadier's marketing proposal included advertising on several prominentwebsites, the placing of advertisements in newspapers and in the Harcourts Bluebook.It also included biweekly open days.[53] During the marketing period, Harcourts Grenadier reported to the Bank eachweek recording the marketing activity and providing buyer feedback. HarcourtGrenadier's marketing of the units also included use of databases to identify andcontact persons who might be interested in purchasing the units. Harcourt Grenadier'smarketing reports recorded phone and internet enquiries generated by its efforts aswell as buyer inspections. Buyer feedback obtained during the marketing period wasconsidered in Harcourt Grenadier's recommendation of the reserve prices for auction.[54] Relevant to the question whether sale by auction was appropriate,Mr Fernando's evidence is that he was attempting to sell the units privately. Thisfailed to produce any buyers. On 18 November 2019, Mr Fernando advised that hehad a buyer for unit 323 who would settle before 11 December 2019. He also advisedhe was looking at refinancing units 313 and 314. However, when he was requested toprovide a copy of the agreement for sale and purchase of unit 323 for the Bank'sconsent to the sale, he did not do so. His evidence that he could have sold or refinancedand obtained $361,000 more than the Bank obtained at mortgagee's sale iscontradicted by the fact he never produced any agreement for sale, nor any offers torefinance.[55] As far as the marketing period is concerned, the one month period adopted(from 11 November 2019 to 11 December 2019) was in accordance with MetroValuation Ltd's recommendation (albeit at the low end) but, more importantly, was asrecommended by Harcourts Grenadier which specialises in the marketing of realestate.[56] There is nothing before me to suggest the Bank's decision to sell the units byauction or the marketing period were inappropriate. The Bank acted on specialistadvice. In the absence of something to suggest it was incorrect, it is not for the Courtto gainsay the advice.[57] Second, Mr Fernando submits that neither the real estate agents' appraisals norvaluations obtained for the properties were provided to him despite him requestingthem from the listing agent.[58] Verofi kept Mr Fernando up-to-date with the sale process. He was advised thatappraisals had been obtained in a letter of 11 November 2019 but there is no record herequested them. He provides no detail of when or how he requested the information.[59] In any event, there was no obligation upon the Bank to supply this informationeven if a request had been made.23 Further, I cannot imagine that a mortgagee would,except in exceptional circumstances, provide such information to a mortgagor (or the23 Public Trust v Ottow, above n 5, at [17(g)], citing G Merel & Co Ltd v Barclays Bank, above n 13.guarantor of the mortgagor's obligations) when the disclosure of such informationcould prejudice the mortgagee's efforts to obtain the best price for the property.[60] Third, it is submitted the Bank has not provided evidence of the advertisementsthat were run marketing the properties which, it is suggested, is a significant gap inthe evidence from which inferences should be drawn against the Bank. Mr Davisdeveloped this argument by submitting that if advertisements were in fact run and tookthe form of the draft advertisements prepared by Harcourts Grenadier, then they werevery spartan and took no care to actively promote the units for sale.[61] There is nothing in this point. Draft advertisements were attached to HarcourtsGrenadier's marketing proposal. Harcourts Grenadier's marketing reports record thedates that the advertisements appeared in The Press and the Harcourts Bluebook. Theadvertisements were prepared by Harcourts Grenadier. It is unclear what Mr Davismeans when he says they did not actively promote the units for sale. They clearlyproduced interest in the market. There is no evidence before me that theadvertisements were unsatisfactory.[62] Fourth, it is submitted that Harcourts Grenadier did not market the units ingood faith because they disclosed to the Bank the content of a confidentialconversation between Mr Fernando and the salesperson.[63] In its market appraisals of 29 October 2019 Harcourts Grenadier recorded aconversation with Mr Fernando which he asked to be confidential. Counsel accept theconversation is irrelevant to the question of whether the Bank obtained the best pricereasonably obtainable at the time of sale.[64] Fifth, it is submitted that Harcourts Grenadier's marketing reports indicate thatit had not provided accurate information to prospective buyers about Body Corporatefees.[65] The marketing reports record that prospective buyers made negative commentsabout the units for several reasons which included a lack of sun, poor workmanship, alack of parking and that Body Corporate fees were payable when there were otherproperties competing in the market where no such fees applied. Mr Fernando saysthese comments do not "ring true". Mr Davis went further and submits the situationwith Body Corporate fees does not appear to have been properly or accuratelyexplained to prospective buyers. Once again, there is no evidence to support thissubmission. Harcourts Grenadier has simply recorded feedback received about theunits. There is nothing to suggest the position in relation to Body Corporate fees wasmisrepresented to prospective buyers.Disputed valuations[66] The kernel of Mr Fernando's defence is that the units were sold at anundervalue and for less than he would have obtained for them if he had been able tosell them or refinance. He does not accept the appraisals/valuations obtained by theBank prior to auction were accurate.[67] As noted, the Bank obtained market appraisals from Harcourts Grenadier andTotal Realty and registered valuations from Metro Valuations Ltd. These providedboth market and forced sale values for each unit. In the cases of units 313 and 314 thesale prices obtained were at the high-end of the forced sale values. In the case of unit323, it was passed in at auction at $265,000 and only as a result of post-auctionnegotiations did the Bank receive and accept an offer of $280,000. This was mid-range of the forced sale value provided by Metro Valuations Ltd. The position is as setout in the table below.[68] The advice obtained by the Bank recognised the likelihood that a forced salewould result in a lower sale price than might otherwise be achieved. The reasons forthis are well-known and are set out in the evidence of Mr Gilmore. They include thepotential for a lack of vendor cooperation, limited or no access to a property formarketing purposes, an absence of the usual vendor warranties and increased riskassumed by a purchaser who may not be guaranteed vacant possession uponsettlement.[69] Here, it is notable that access to unit 314 was only obtained during themarketing period and no buyers were able to be shown into unit 323. HarcourtsGrenadier asked Mr Fernando for the contact details of the tenants of the units soProperty Metro Valuations Total Realty Harcourts Sale PriceUnit 313– 116StanmoreRoad,LinwoodMarket:$250,000Forced Sale:$176,000 –208,000Market:$210,000 –220,000Forced Sale:$180,000Market:$210,000 –240,000Forced Sale:$180,000 –210,000$201,000Unit 314– 116StanmoreRoad,LinwoodMarket:$250,000Forced Sale:$176,000 –208,000Market:$210,000 –220,000Forced Sale:$180,000Market:$210,000 –240,000Forced Sale:$180,000 –210,000$203,000Unit 323– 116StanmoreRoad,LinwoodMarket:$360,000Forced Sale:$264,000 –296,000Market:$330,000 –350,000Forced Sale:$300,000Market:$340,000 –370,000Forced Sale:$290,000 –320,000$280,000access could be obtained, but he advised he had no idea who was renting them as theywere being managed by a rental agency. Harcourts Grenadier contacted the rentalagency to be advised that it would not provide the tenants' details due to privacy issues.It is inconceivable that Mr Fernando could not have obtained and provided the tenants'contact details to Harcourts Grenadier. In any event, it appears that HarcourtsGrenadier did what it could to obtain access to the units for marketing purposes. Inthe absence of Mr Fernando facilitating access the Bank was not required to do moreor to go into possession.[70] Mr Fernando relies upon valuations he obtained for units 314 and 323 on6 June 2018 from Jones Lang LaSalle. In Jones Lang LaSalle's opinion the marketvalue of unit 314 was in the range of $295,000 to $325,000 and it adopted a value atthe higher end of this range of $315,000. In respect of unit 323, Jones Lang LaSalle'sopinion was its market value was in the range of $395,000 to $425,000 and, again, itadopted a value at the higher end of this range of $415,000.[71] I do not consider Jones Lang LaSalle's valuations are of assistance for severalreasons. First, the valuations were 18 months old at the time of sale of the units by theBank. Second, at the date of Jones Lang LaSalle's valuations the units were new andin excellent condition. That was not the case at the time of sale by the Bank. Third,Jones Lang LaSalle did not provide forced sale valuations. Relevantly, the MetroValuations Ltd report notes both a decrease in the average house price in theCanterbury Region as well as in total houses sold and that the value of a property undermortgagee's sale can vary and a reduction of 20 to 40 per cent could be evident.[72] Mr Fernando also says that unit 323 recently sold for $418,000. This is takenfrom a website www.homes.co.nz. Again, this is of little assistance. The sale isrecorded as having occurred on 8 March 2021 which is approximately 15 months afterthe sale of unit 323 by the Bank. There is no evidence before me as to thecircumstances of the sale, the terms upon which it was made (other than the price), thestate of the unit at the time of sale or the market conditions compared to those thatprevailed in 2019.[73] In Public Trust v Ottow Asher J said:24[33] A failure to achieve an assessed valuation price at a mortgagee sale isnot in itself any indication of a breach of the mortgagee's duty of care to obtainthe best price reasonably obtainable 25 A failure to achieve a price that amortgagor believes the property should achieve, does not give rise to aninference that a mortgagee has breached its duty to take reasonable care 26Of course, a sale at a price which is much less than the assessed value, whenthere is no explanation for the discrepancy, can indicate a failure to takereasonable care.[34] In a poor and receding market as there was in October 2008, it is entirelyunderstandable that prices will be somewhat lower than those anticipated invaluations. There is not such a sufficient disparity between the valuer'sfigures and the actual sales prices to warrant any inference of a breach of themortgagee's duty.[74] To similar effect in Westpac New Zealand Ltd v Lamb, Wylie J said:27[61] There is no significant discrepancy between the valuations and the saleprice. Such limited discrepancy as exists is readily explained given theconcerns which purchasers reported to Barfoot and Thompson, and whichwere in turn, relayed back to Westpac. ultimately a property is only worthwhat somebody is prepared to pay for it, and valuations lose much of theirforce when the mortgagee has taken reasonable care and there has been aproperly conducted auction.[75] Applied to this case, there is no discrepancy between Metro Valuation Ltd'sforced sale valuations and the prices obtained by the Bank at mortgagee's sale. Whenone considers these were forced sales, the concerns expressed by prospective buyersin relation to several aspects of the units and the fact Harcourts Grenadier hadrestricted access to two units, the sale prices achieved are entirely understandable.Conduct of the auction/the reserve prices[76] Mr Davis submits there is no evidence as to how the auctions were actuallyconducted and, again, that the Court should draw an adverse inference against theBank. I reject the submission as there is evidence the auctions were conducted by areputable real estate agency after a proper marketing campaign at the auction rooms24 Public Trust v Ottow, above n 5 (footnotes added).25 Moritzson Properties Ltd v McLachlan, above n 11.26 Wallace v Bank of New Zealand HC Auckland CIV-2009-404-3514, 1 July 2009.27 Westpac New Zealand Ltd v Lamb, above n 16.of Harcourts Grenadier at which two of the units were sold under the hammer and onewas passed in before negotiations successfully concluded a sale.[77] The final matter upon which Mr Fernando relies is that he had not been advisedof the reserve prices placed on the units by the Bank which, he argues, prevented himfrom obtaining finance to repurchase the properties. The Bank was, Mr Davis submits,aware Mr Fernando was actively trying to sell the properties himself or to refinancethem and he should have been given at least an indication of the reserve price. This,Mr Davis submits, is because Mr Fernando would then have realised the Bank wasprepared to sell the units at an under-value and he would have refinanced or purchasedthem himself.[78] These submissions are premised on assumptions that the Bank was prepared toand did sell the units at an undervalue and that Mr Fernando had the means to eitherpurchase or refinance them. I do not accept these assumptions.[79] The Bank was not obliged to advise Mr Fernando of the reserve prices of theunits. The evidence of Mr Gilmore, which I accept, is that reserve prices formortgagee's sales are set on the day of the auction or the day prior to it and that suchinformation is confidential so as not to interfere with a competitive auction process.Consistent with this, a relevant factor that a mortgagee will consider in setting thereserve price is feedback from prospective buyers and it is notable that HarcourtsGrenadier provided reserve recommendations to the Bank only with its final marketingreport on 9 December 2019.[80] I have no hesitation in finding that the Bank acted responsibly in the mannerin which it marketed the units to obtain the best possible sale prices for them. Whilethe sale prices achieved were no doubt disappointing to Mr Fernando there is nosignificant discrepancy between them and the forced sale valuations/appraisals. Theoverwhelming impression of the evidence is that there was significant negativefeedback in relation to several aspects of the units. There is no evidential foundationfor complaints made by Mr Fernando as to the manner of sale of the units or theassertion the Bank did not take reasonable care to obtain the best price reasonablyobtainable at the time of sale. Accordingly, the first defence is not arguable.Second Defence – s 120 CCCF Act – oppressive conduct[81] Section 120 of the CCCF Act relevantly provides:120 Reopening of credit contracts, consumer leases, and buy-backtransactionsThe Court may reopen a credit contract, a consumer lease, or a buy-back transaction if, in any proceedings (whether or not brought underthis Act), it considers that---(a) the contract, lease, or transaction is oppressive; or(b) a party has exercised, or intends to exercise, a right or powerconferred by the contract, lease or transaction in an oppressivemanner .[82] Under s 118 "oppressive" is defined in the following manner:In this Act, oppressive means oppressive, harsh, unjustly burdensome,unconscionable, or in breach of reasonable standards of commercial practice.[83] The case law establishes that for a credit contract to be "oppressive" there mustbe something more than mere unfairness or a consequence that is generally associatedwith the exercise of a remedy by a creditor.28 In Greenbank New Zealand Ltd v Haas, Tipping J said:29To determine whether a contract or term is oppressive it is necessary tohave some basis of comparison. In the context the comparator can only bewhat would be expected or acceptable in terms of reasonable standards ofcommercial practice. Something which is in accordance with such reasonablestandards could hardly be held to be oppressive. Conversely something whichis not in accordance (ie in contravention of) such standards is, by definition,oppressive.[84] In deciding whether s 120 applies, and whether to reopen a credit contract theCourt must have regard to the matters set out in s 124 of the Act to the extent that thosematters are applicable in the particular circumstances. Whilst drawing my attention tothis section Mr Davis placed no particular emphasis on any of those matters in hissubmissions.28 Shotter v Westpac Banking Corp [1988] 2 NZLR 316 (HC) at 322; AXA New Zealand NomineesLtd v 10 Gilmer Ltd (in rec) HC Wellington CIV-2011-485-1572, 6 December 2011 at [24] andItalia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland ) Ltd [1984] 2 NZLR 1 (HC).29 Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA) at [24].[85] Although, under s 125 the time has passed within which Mr Fernando can bringa reopening claim, it is accepted the Court retains the power to reopen a credit contractunder s 120 which may be exercised in any proceeding where the Court considers thatoppression arises in a credit contract, including debt recovery proceedings brought bya creditor. 30[86] The Court has very broad powers upon reopening a credit contract. Theremedies under s 127 include "any orders that it thinks necessary" to remedy thematters that lead to the reopening.[87] There is some overlap with this defence and Mr Fernando's defence unders 176 of the Property Law Act. For instance, Mr Fernando argues the sale of the unitswas at an undervalue and the failure to provide him with information about theappraisals, the marketing process and the reserve prices was oppressive. I reject thesearguments for the reasons I have already given.[88] The additional matters raised by Mr Fernando are advanced under theheadings:(a) negotiations with Mr Gilmore; and(b) BNZ's approach to Mr Fernando's attempts to sell.Negotiations with Mr Gilmore[89] Mr Fernando's evidence is that he had difficulties with the approach taken byMr Gilmore from an early stage after Verofi was engaged by the BNZ. He argues thatit was oppressive for Verofi to issue demand notices for full repayment of the loans on22 May 2019 giving just two weeks for payment of all the loans when he was unableto pay. He also argues that the refusal to accept proposals made on his behalf byMr Cottrell and the Bank's "all or nothing" approach was harsh and unjustlyburdensome. He contends, because the Bank was only interested in payment of allloans immediately, he could not secure buyers for the properties himself and had the30 Real Finance Ltd v Setefano [2016] NZHC 2293 at [61].Bank accepted his proposals it would have gone "a long way in mitigating each sides'losses".[90] There was nothing oppressive in the Bank's conduct or in the approach takenby Mr Gilmore in his dealings with Mr Fernando. The Bank handed over managementof the defaults to Verofi in early May 2019 at which time Verofi wrote to Mr Fernandoand his companies that Verofi had been instructed as recovery agents for the Bank andinvited contact from Mr Fernando. The demands issued for the Bank on 22 May 2019were not for full repayment of the loans. The demands related to the arrears, save inrespect of the overdraft facility of Worcester Developments Ltd which was cancelled.[91] This action taken by Verofi followed a long history of defaults by Mr Fernandoand his companies in respect of which the accounts had been under loan defaultmanagement by the Bank since December 2018. When there was no satisfactoryresponse to the 22 May 2019 demands the Bank issued the Property Law Act noticesand, when they expired unremedied, Verofi issued letters demanding full payment ofthe balance of all of the loans. Given the history of defaults and failures byMr Fernando to honour promises to remedy them it is hard to see what more the Bankcould be expected to do to assist him prior to taking steps to recover the advances.[92] Similarly, there was nothing oppressive in the manner in which Verofi or theBank responded to Mr Fernando's proposals. Mr Fernando made two relevantproposals in respect to the payment of arrears. These were the proposals of 24 June2019 and 30 July 2019 made on Mr Fernando's behalf by his lawyer Mr Cottrell towhich I have earlier referred. It is not at all surprising that these proposals wererejected. The reasons for doing so are set out in Mr Gilmore's second affidavit.[93] In respect to the first proposal to pay arrears at the rate of $7,000 per monthwhilst meeting current commitments, that was rejected because of the default historyand the continuing poor account conduct that did not demonstrate the ability to meetthe ongoing commitments as they fell due. It is notable that contrary to Mr Fernando'splea of oppression, in response to this proposal the Bank gave him four extra weeksuntil 30 August 2019 to obtain alternative finance.[94] In respect to the second proposal to pay approximately $55,375, that would notonly have failed to clear the arrears but was contingent on the Bank agreeing toreinstate Worcester Developments Ltd's overdraft facility. Mr Gilmore deposes thatthe relevant factors taken into account in rejecting the proposal included the expiry ofthe default notices, the default history of the accounts, the level of the arrears and thecontinuing poor account conduct that demonstrated Mr Fernando and his companiesdid not have the ability to meet ongoing commitments as they fell due. Importantly,as at 5 August 2019, the total arrears had increased to $75,140.63 and WorcesterDevelopments Ltd's overdraft stood at $155,226.94.BNZ's approach to Mr Fernando's attempts to sell[95] It is submitted that the "BNZ's inflexibility" prevented several serious offersby potential buyers sourced by Mr Fernando from going ahead. Mr Davis submitsBNZ was not interested in advancing Mr Fernando's position unless all loans werepaid off immediately. Three examples were given.[96] On 30 August 2019, Mr Cottrell emailed Mr Gilmore advising thatMr Fernando had an offer for $1.32 million for the Quaifes Road property and askedfor confirmation the Bank was happy with a sale at that price. Mr Gilmore respondedthat the Bank would not confirm its consent without seeing a completed agreement forsale and purchase. He stated that any agreement entered into should be madeconditional upon the Bank's consent. There was nothing unreasonable in this. TheBank was in a position to exercise its power of sale and could not have been expectedto give its agreement to a sale by Mr Fernando based on nothing other than the saleprice. In any event, the Bank's attitude was clearly not problematic because the salesubsequently proceeded with its consent.[97] Then, it is said Mr Fernando had, in October 2019, located a person interestedin buying all three units but the buyer wanted to delay until he had completed buildinghis own home. If there was such a buyer his decision not to proceed had nothing todo with the attitude of the Bank.[98] Finally, it is said that on 18 November 2019, Mr Fernando emailed the Bankadvising he had another buyer for unit 323 and that he was intending to refinance theother two units. He says that would have left the balance of around $70,000 owingand he asked if that could be paid over 12 months. Mr Fernando has produced no otherevidence that he had secured a buyer or that he had offers of finance.[99] It is said Mr Gilmore dismissed the proposal out of hand. In fact, Mr Gilmore'sresponse to the proposal was an email to Mr Fernando of 18 November 2019 stating:Hi JohnCan you please send me a copy of the Agreement for sale and purchase forUnit 323 as I will need to seek the bank's consent to the sale. We also notethat the company Johnf-LTC Ltd is no longer registered. It will have to bereinstated before the sale can proceed.If the Bank consents to the sale, they will need confirmation that it isunconditional and that the refinance is unconditional before they willwithdraw the property from sale.With regards to the residual debt, the Bank don't usually enter into long termarrangements. We recommend you look to also include this in your refinance.Can you also get back to me regarding the GST status of the company.Yours faithfully,Marc Gilmore[100] As this email shows, Mr Gilmore did not reject the proposal but asked for acopy of the agreement for sale and purchase of unit 323 so that he could seek theBank's consent to it. Furthermore, JohnF-LTC Ltd had been struck off the Register ofCompanies and was in no position to sell anything to anyone. Mr Gilmore's advicethat the Bank does not usually enter into long term arrangements for payment ofresidual debt was by way of advice to Mr Fernando and not a rejection of the proposal.[101] There is therefore nothing in the matters advanced by Mr Fernando thatsuggests that in the exercise of any right or power the Bank acted oppressively towardshim as a consequence of which he has suffered any loss. The reality of the situationis that Mr Fernando and his companies borrowed money they could not service andfrom around December 2018 fell consistently into arrears. For its part the Bankexercised considerable patience and restraint before enforcing its rights and then onlyafter Mr Fernando made promises to clear arrears which he did not honour. Havingobtained the right to sell the properties the Bank even agreed to give Mr Fernandoadditional time to refinance. While Mr Fernando says that he was in a position toobtain sales of the units and/or refinance on beneficial terms, he has never producedany agreement for the sale of any units, nor evidence that alternative finance wasavailable to him. Ultimately the Bank sold the units as mortgagee for prices that werereasonable in all of the circumstances. It is entitled now to recover the shortfall. Forthose reasons I reject as unarguable this ground of defence also.Result[102] I am satisfied that Mr Fernando does not have an arguable defence to theBank's claims and that the Bank is entitled to summary judgment. There being nochallenge to the Bank's calculation of the amounts owed there will be summaryjudgment for the Bank and against Mr Fernando for the following amounts:(a) $370,057.23 plus interest at a daily rate of $74.01 from 20 January 2020to the date of judgment; and(b) $74,463.45 plus interest at a daily rate of $49.37 from 20 January 2020to the date of judgment.[103] The Bank is entitled to costs and reasonable disbursements. I would encouragecounsel to confer and reach agreement on the amount payable. In this regard, I notethat in neither the statement of claim nor in submissions was any claim made forindemnity costs and so in those circumstances it would appear that 2B costs areappropriate. However, I formally reserve costs so that if agreement is not reachedcounsel may submit memoranda within 14 days. Memoranda shall be no more thanfive pages._______________________O G PaulsenAssociate JudgeSolicitors:Sanderson Weir Limited, AucklandShaun Cottrell Law, Christchurch