BANK OF NEW ZEALAND V MD MAHONEY HC WN CIV-2010-485-2252

BANK OF NEW ZEALAND V MD MAHONEY HC WN CIV-2010-485-2252 29 June 2011IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2010-485-2252BETWEEN BANK OF NEW ZEALANDPlaintiffAND MICHAEL DAVID MAHONEYDefendantHearing: 31 May 2011(Heard at Wellington)Counsel: J. Toebes - Counsel for PlaintiffP.A. Morten - Counsel for DefendantJudgment: 29 June 2011 at 12:00 PMJUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by Associate Judge D.I. Gendall on 29 June 2011 at 12.00 pm under r 11.5 of the High Court Rules.Solicitors: J.T. Law, Solicitors, PO Box 25443, WellingtonHarkness Law Limited, Solicitors, PO Box 25148, WellingtonIntroduction[1] The plaintiff bank, the Bank of New Zealand (BNZ), applies for summary judgment to enforce a debt said to be owing under a guarantee signed by the defendant, Michael David Mahoney (Mr Mahoney) on 17 May 2007. The guarantee was provided for a loan granted by BNZ to Cloudy Bay Business Park Limited (Cloudy Bay) as trustee of the Cloudy Bay Business Park Trust (the Trust). Mr Mahoney is the sole director of Cloudy Bay. On 15 May 2007 Cloudy Bay was granted a loan by BNZ for $6,500,000.00 to be repaid by 1 June 2010. Interest was payable on the first $2,000,000.00 of the principal at a capped rate and interest on the remaining $4,500,000.00 was fixed at 9.17 per cent per annum. As security, a mortgage was granted by Cloudy Bay over 20 titles to apartments and business properties developed and owned by the Trust in a Herd Street, Wellington development, known as Chaffers Dock and Boathouse (Chaffers Dock).[2] Over a period, Cloudy Bay sold 12 of those properties, crediting the proceeds gained from the sales to part repay Cloudy Bay's debt with the BNZ.[3] Then, Cloudy Bay encountered difficulties and eventually defaulted in its obligations. On 10 February 2010 BNZ served notice on Cloudy Bay under ss 119 and 128 of the Property Law Act (PL Act). Cloudy Bay did not remedy the default. BNZ accordingly initiated morgagee sales of the remaining properties. These sales reduced the debt owed to BNZ but did not clear it. Mr Mahoney now alleges that those saleswere what is commonly referred to as, ―fire sales and the BNZ did not realise proper market values for each of the properties in question.[4] On 13 August 2010, BNZ made demand on Mr Mahoney for the outstanding loan balance due being the sum of $2,096,554.81. This represented the balance debt (plus interest) due from Cloudy Bay after taking into account the earlier part repayments from the company and the net proceeds from the mortgagee sales.[5] On 7 February 2011, liquidators were appointed to Cloudy Bay.[6] BNZ now applies for summary judgment against Mr Mahoney as guarantor to recover that debt. He opposes this application effectively on the sole ground that BNZ has breached its statutory obligation under s 176 PL Act when exercising its mortgagee sale powers.[7] Before me the parties have raised four issues for consideration:i. Does a mortgagee owe a duty to a guarantor under s 176 PL Act;ii. Even if Mr Mahoney can show a breach of s 176 PL Act, is that sufficient grounds for declining summary judgment here;iii. In any event, was that duty breached by BNZ in selling Cloudy Bay'sproperties;iv. Is there sufficient material before the Court in this case to allow summary judgment.[8] Before turning to the relevant legal principles and those issues, I first further develop the relevant factual background.Background[9] The Chaffers Dock complex comprises 66 apartments, 15 retail shops and 70 carparks. The development was completed in February 2007. Cloudy Bay was the developer of that complex. Mr Mahoney records that the residential apartments soldsuccessfully. The present proceedings relate essentially to arguments over the BNZ'smortgagee sale of eight of the ground floor retail units (the units).[10] It seems the Chaffers Dock retail complex project may have begun reasonably successfully. However, in the first 18 months, I understand eight commercial tenants in the retail complex failed. That obviously led to an inconsistent rental revenue stream for Cloudy Bay. This lack of revenue it is said, placed Cloudy Bay in a position of not being able to meet its mortgage and expenses which led BNZ to commence the mortgagee sale process.[11] In order to sell the units, in 2010 BNZ engaged Capital Commercial Limited (Bayleys Real Estate) on the bank's behalf. The agent from Bayleys Real Estate, (an experienced commercial real estate agency) with whom BNZ dealt, was the same agent as Mr Mahoney had used previously in selling and leasing several of the units in the Chaffers Dock complex, a Mr Thomas Sherlock (Mr Sherlock). At the time of the mortgagee sale process, the units had been on the market in one form or another since 2007. Mr Sherlock it seems was of the opinion that previous pricing on the units was based on what had turned out to be unsustainable rents and unsustainable yields and vacancies had now occurred. In July 2010, Mr Sherlock advised BNZ to undertake a tender sale process.[12] At the time of sale by BNZ, only two of the units, units 5 and 6 were occupied. I note, however, that in the affidavit sworn by Mr Martin Bosley (Mr Bosley) insupport of Mr Mahoney's opposition, he deposes that he used, and continues to use,units 10 and 15 for a weekly Sunday market as well as for special event functions. But, Mr Sherlock at paragraph 18 of his affidavit filed for this proceeding alleges thatpayment for this arrangement was made by way of ―cash under the table and so therewas no formal record of that relationship. Accordingly, Mr Sherlock advised all prospective purchasers in the sale process that the market run was on a casual basis.[13] In all, 14 tenders were received for the units by the closing date for tenders (18 August 2010) and a further two offers were received after that date.The Valuations[14] In June 2009, Mr Mahoney engaged Colliers to provide a valuation of several of the units. At that time all the units were occupied by tenants who had signed leases with Cloudy Bay for between 3 and 35 years (the majority were for a 6 year term). In other words, all provided a steady flow of income.[15] In July 2010, BNZ also obtained valuations of the units from two firms: Jones Lang LaSalle and Darrochs Limited. (BNZ also had access to valuations obtained by Mr Mahoney from Colliers in 2006, 2007 and 2009). Darrochs then provided BNZwith a valuation update in August 2010. The resulting valuation figures are provided in the table at [19] below.[16] Jones Lang LaSalle provided its valuation based on a willing buyer willing seller basis, that is, a current market value. It also noted in its valuation that a forced sale value could be equated as between 20 and 35 per cent less than that amount (forced sale value in parenthesis below).[17] Darrochs also provided a current market value estimate (Darrochs (1)). It too then gave specific values on a forced sale basis (in parenthesis below).[18] On 23 August 2010 Darrochs subsequently provided a second updated valuation which also revalued one of the units, unit 15 on the basis that a southern tenancy wall could not be created. This valuation also further revised its forced sale estimates which are noted below (Darrochs (2)).[19] As I understand it, the valuations and final sale prices were:Unit Size(m2)Colliers Jones LangLa SalleDarrochs (1) Darrochs (2) Sale Price2 194 $830,000 $330,000($214,500-$264,000)$373,000($317,000)$260,000-$300,000$672,000(for both)3 233 $925,000 $460,000($299,000-$368,000)$425,000($361,000)$300,000-$340,0004 11.1 $105,000 $105,000($59,150-$72,800)$140,000($126,000)$105,000-$120,000$40,0005 38 $170,000 $300,000($195,000-$240,000)$311,000($280,000)$235,000-$265,000$260,0006 123 $555,0009 46 $180,000 $83,000($53,950-$66,400)$105,000($89,000)$70,000-$80,000$72,50010 101 $385,000 $100,000(65,000-$80,000)$186,000($158,000)$120,000-$140,000$460,000(for both)15 471 $1,200,000 $550,000($357,500-$440,000)$599,000($509,000)$245,000-$285,000Total $4,350,000 $1,928,000($1,244,100-$1,531,200)$2,139,000($1,930,000)$1,335,000-$1,530,000$1,504,500Summary Judgment Principles[20] As this matter is still a matter of summary judgment, r 12.2(1) of the High Court Rules applies. That rule 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.[21] The principles of summary judgment have been relatively recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]:The principles are well settled. 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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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 Yongv Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. 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 vPatel (1987) 1 PRNZ 84 (CA).Counsels' Submissions and My Decision[22] In the present case, it is not disputed that Mr Mahoney signed a valid and enforceable guarantee and that Cloudy Bay as mortgagor has defaulted in its obligations. The issues outlined at [7] above illustrate the defined compass in which these proceedings sit. I now turn to consider each issue in turn.Does a mortgagee owe a duty to a guarantor under s 176?[23] Mr Toebes, counsel for BNZ, submitted that the only party that can suffer a loss under s 176 is the mortgagor as the owner of the properties that have been sold. Therefore, if there has been an alleged breach of the duty by a mortgagee, it is the mortgagor who must bring an action against the mortgagee.[24] Section 176 PL 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 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 a subsequent mortgage:(e) any holder of any other subsequent encumbrance.(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.[25] Under s 4 of the Act:covenantor, in relation to a mortgage,—(a) means a person, other than the mortgagor, who has agreed to pay money or perform obligations secured by the mortgage; and(b) includes a guarantor.[26] It is evident that s 176 does afford a duty to a guarantor: see Crown Money Corporation Ltd v Pink-Martin HC Auckland CIV-2008-404-297, 5 September 2008 at [26] and Odin Enterprises Limited v Crawford HC Auckland CIV-2008-404-581, 17 October 2008 at [29]. I cannot see, therefore, any reason in principle why a guarantor ought not to be able to claim for any breach of a mortgagee's duty under s 176 PL Actand as such be able to offer that claim as a defence to an application for summary judgment.Even if Mr Mahoney can show a breach of s 176 is that sufficient grounds for declining summary judgment?[27] Mr Morten, counsel for Mr Mahoney, argued that s 176 PL Act operates either to provide an equitable set-off (in which case the summary judgment application should be dismissed), or as a counterclaim or statutory set-off (in which case thesummary judgment application should be stayed). In response, Mr Toebes relies on paragraph 15.1 of the guarantee which provides:You must pay us without any set-off or counterclaim and without any deduction or withholding.[28] Mr Toebes for BNZ argued that the effect of that paragraph 15.1 is that payment must be made notwithstanding any liability under the PL Act . For that proposition, Mr Toebes relied on a decision of Associate Judge Faire in Odin Enterprises Limited v Crawford HC Auckland CIV-2008-404-581, 17 October 2008. In Odin Enterprises the contract contained a clause materially similar to paragraph15.1 of the guarantee in the present case. At [31] of his Honour's judgment, theAssociate Judge records:Mr Toebes submitted, correctly in my view, that the defendants must therefore pay the amount demanded under the guarantee without set-off or deduction of any kind. That, he submitted, justified the entry of summary judgment as sought.[29] However, the Associate Judge did note, in the following paragraph: (at [32]):I put to Mr Toebes, however, that the terms of the contract did not prohibit the staying of execution of a judgment if the Court was satisfied that there was a foundation for breach of the equitable duty of good faith. He agreed, in principle, with theproposition[30] For two reasons, I consider that if there is a breach of BNZ's duty under s 176PL Act, that constitutes grounds for declining summary judgment. First, in Odin Enterprises, the relevant mortgagee sale occurred prior to the Act's coming in to force. Therefore, the relevant duty was in s 103A of the Property Law Act 1952. Section 103A was silent as to a duty owed to a guarantor. Therefore, the obligations owed to the guarantor were owed in equity and depended upon the terms of the contract:Bryers v Harts Contributory Mortgages Nominee Co Ltd [2002] 3 NZLR 343 (CA) at 347. The second is that in Crown Money Corporation Ltd v Pink-Martin HC Auckland CIV-2008-404-297, 5 September 2008 at [77] Associate Judge Faire, after a very careful and detailed analysis, was of the view that the duty contained in s 176 was―inalterable (see also Public Trust v Ottow (2010) 10 NZCPR 879). Respectfully, I adopt that analysis.[31] Although, for the reasons set out below, it will become apparent that I am not satisfied that BNZ has breached its duty under s 176, as it does not alter the outcome in the present case, I make no determination here as to whether a breach of s 176 oughtto be treated as an equitable set-off and so the application should be dismissed or whether the defence is one of counterclaim or statutory set-off.Was that duty breached by BNZ in selling Cloudy Bay's properties[32] The nature of the mortgagee's duty of care to obtain the best price reasonablyobtainable at the time of sale has been well traversed. In Crown Money Corporation Ltd v Pink-Martin HC Auckland CIV-2008-404-297, 5 September 2008 at [32] Associate Judge Faire provides the following principles as relevant to that duty: (adopted in ANZ National Bank Limited v Taylor HC Auckland CIV-2010-404-201, 17 December 2010; Public Trust v Kumar HC Auckland CIV-2009-404-4886, 13 October 2010; Bank of New Zealand v Cannell HC Auckland CIV-2010-404-3877, 2 May 2011):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 v Damesh Holdings Ltd [[2004] 1 NZLR 721] at 728 (PC). 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 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 and Others 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 whento sell: Agio Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd [(2001) 4 NZ ConvC 193,480 (HC)] at [70]; Downsview Nominees Ltd v First City Corporation Ltd [1993] 1 NZLR 513.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 AK CP 403im00 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). Appointinga competent agent to sell does not discharge the mortgagee'sduties, but since its duty is ultimately only one of reasonable care, putting the matter in the hands of a competent agent will usuallygo a long way towards discharging the mortgagee's duties.[d] In the normal course the proposed sale will need to be advertisedwith 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 NZI Finance Ltd(unreported, Wellington Registry, A434/83, Quilliam J, 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 Fairer Fishing Co Ltd v Broadlands Finance Ltd (unreported, Timaru Registry, 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.[33] In ANZ National Bank Limited v Taylor HC Auckland CIV-2010-404-201, 17 December 2010 Associate Judge Sargisson added to that list at [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.[34] The Court of Appeal further noted in Apple Fields Ltd v Damesh Holdings[2001] 2 NZLR 586 (as affirmed by the Privy Council) that the duty under the then s 103A (now s 176) was a codification of the duty recognised by the New Zealand courts. McGrath J, giving the judgment of the Court, continued at [41]:That duty developed from the principles originally stated by Salmon LJ in [Cuckmere Brick Co v Mutual Finance [1971] Ch 949] in the cases referred to in this judgment upto and including the Court of Appeal's decision in the [Downsview Nominees Ltd &Russell v First City Corporation Ltd [1993] 1 NZLR 513] and [Countrywide Banking Corporation v Robinson [1991] 1 NZLR 75] cases.[35] And in Cuckmere Brick Co v Mutual Finance Salmon LJ stated at 968-969:I accordingly conclude, both on principle and authority, that a mortgagee in exercising his power of sale does owe a duty to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it. No doubt in deciding whether he has fallen short of that duty the facts must be looked at broadly, and he will not be adjudged to be in default unless he is plainly on the wrong side of the line.[36] Richmond J reiterated that qualification in Alexandre v NZ Breweries Ltd[1974] 1 NZLR 497 (CA), after indicating he was content to assume a duty of care existed, he added at 501-502:But whether in any particular case there has been a breach of that duty should I think be judged in a realistic way and with ample regard to the fact that a power of sale is given to a mortgagee to enable him to obtain repayment of his advance.[37] Before me, Mr Morten argued, in effect, that BNZ breached its duty in not obtaining the best price reasonably obtainable in four respects:i. In selling at amounts considerably less than the valuations obtained by Mr Mahoney in June 2009;ii. In providing inadequate and inappropriate advertising;iii. In not providing potential buyers with certainty as to permitted uses of the units; andiv. In dismissing other more substantial offers.Sale at less than Valuation[38] Turning to the first, in my view, those valuations cannot be instructive as to the best price reasonably attainable at the time that the sale was made. As Wylie J noted in Wallace v Bank of New Zealand HC Auckland CIV-2009-404-3534 1 July 2009 at [54]:The duty imposed by s 176 is a duty of reasonable care to obtain the best price reasonably obtainable at the time of sale. It is a duty to take reasonable care, and it does not necessarily follow that the best price reasonably obtainable will in fact be achieved - see Agio Trustees Company Ltd & Anor Ltd v Harts Contributory Mortgages Nominee Company Ltd (2001) 4 NZ ConvC 193,480. The best price reasonably obtained at the time of sale will often be the current market value of the property – see Downsview Nominees Ltd and Harris v ANZ Banking Group (NZ) LtdCA165/01, 10 June 2002 at [16]. However, in some cases, a forced sale value may be the best price reasonably obtainable – see Westpac Banking Corporation v Chisholm HC AK CIV 2006-404-3230 27 April 2007 at [19]. The fact that a mortgagee obtained a price less than the current market value assessed by valuers does not, of itself, establish a breach of duty – see Moritzson Properties Limited v McLachlan & Anor (2000) 9 NZCLC 262,448 at [61].[39] Both the state of the market, and the state of the units was materially different between June 2009 and August 2010. In Jones Lang LaSalle's June 2010 valuation, the writer notes the following at paragraph 12:The property market has shown signs of strengthening again over the last 6 – 12 months, although we note there are an increasing number of mortgage [sic] sales in the current market and the recession is still continuing. These are factors of consideration when trying to quantify the discount in sale price that may be incurred under a forced sale situation for the subject. Also, our experience of the market indicates that a mortgagee or forced sale process in the current market willautomatically affect the market's perception of the property and the level at whichpotential purchasers put in offers.[40] Therefore I must disregard the 2009 valuations' in the sense that, in my view, they provide little assistance in determining whether BNZ failed in its duty to obtain the best price reasonable attainable and turn to consider the circumstances at the time of the sale. The property market was in a reasonably serious decline at the operative time and buyers were few and far between, as shown by the length of time that the properties had been on the market previously. Secondly, there was, in respect of unit 15, no certainty in the use of the title. Thirdly, many of the properties were not tenanted.[41] Valuations were provided by reputable providers in 2010. On the valuation evidence it cannot be said that there has been a sale at an undervalue. The price achieved in the tender process was within or above the figure provided for a forced sale by each of the valuers for each of the units except for unit 4, which was sold after these proceedings were filed. The explanation for the reduced value of that property appears to involve issues with its lease – it was leased to Vodafone New Zealand in order for them to operate a cell site. In all, a decrease in value between 2009 and 2010 is explicable. The evidence therefore suggests that BNZ sold all the units at less than assessed current open-sale market values, but that in each case the discounts were what one would expect for forced sales in the circumstances of this case. I am not, therefore, satisfied that the difference in the market values appraised in 2009 and thosefor which the units were ultimately sold is a sufficient basis on which Mr Mahoney can claim a breach of the bank's duty under s 176.Inadequate Advertising[42] Turning to the second argument advanced for the defendant, the bannerheadline of the advertisement, contained in the DominionPost, read ―WATERFRONT SELLDOWN. Contained in a red banner running diagonally across the side of thepicture of the Chaffers Dock complex were the words ―MORTGAGEE TENDER in white font. In bold in the body of the advertisement is the tagline ―Forget previous pricing.[43] While an advertisement may refer to a sale being a mortgagee sale (Taylor v Westpac Banking (1996) 5 NZBLC 104,104 (CA)), Mr Morten argued that BNZ unnecessarily advertised these units as a forced mortgagee sale. That is because he said it had been previously agreed between BNZ and Mr Mahoney that the units wouldbe sold with Cloudy Bay being the vendor so as to avoid attracting ―bargain hunters. Mr Morten argues that the breach of that agreement adds to BNZ's breach of its dutyto get the best price for the units. This is in addition to his complaint over the actual words used in the advertisements and the advertising campaign. That is, in so far as that breach occurred, in addition to the advertising campaign breaches which are alleged to have occurred, he suggests it evidences a desire by BNZ to sell the properties without regard to market prices.[44] BNZ strongly disputes these contentions. Mr Willdig, a manager at BNZ, records that while the Property Law Act notice expired on 26 March 2010, by email dated 7 April 2010, he states that BNZ was willing to forebear from taking any further action prior to 27 April 2010. This was to enable Mr Mahoney time to either come up with a proposal to sell the units or to come up with an alternative way to refinance theTrust's indebtedness. On 3 May 2010 Mr Willdig sent a further email to Mr Mahoney confirming that BNZ would not take any further action until after 11 May 2010 as no response to those options given to Mr Mahoney on 7 April had been forthcoming. On 20 May 2010 Mr Willdig sent a further email to Mr Mahoney. This time on behalf of BNZ he stated that it intended to engage a real estate agency and commence the mortgagee sale process if no further progress was made by Mr Mahoney in securingleases for the units or obtaining an alternative financier by 21 May 2010. On 24 May 2010 Mr Willdig wrote again noting that no further extensions of time would be provided and he advised that the mortgagee sale process would proceed.[45] From that entire process, it is clear that BNZ gave Mr Mahoney, and Cloudy Bay, a considerable amount of time to be involved in the process. There is a reasonable argument, in my view, from the evidence before the Court that no reciprocal courtesy was provided by Mr Mahoney. Therefore, I consider that BNZ was quite entitled to engage its own process, it having given Mr Mahoney sufficient indulgence to be involved. As such, it cannot be said that BNZ breached any prior―agreement and went ahead unnecessarily in advertising the units as a mortgagee sale.[46] In the actual advertisements themselves, Mr Mahoney considered that the useof the tagline ―forget previous pricing was indicative of the fact that BNZ wasinitiating a fire sale. In response, Mr Toebes for BNZ submitted that this advertisingin fact demonstrated BNZ's care in undertaking this process, that is, it sought to get in as many offers as possible and create some competition. Indeed, the agent Mr Sherlock said that the use of that tagline was to persuade people who had previously enquired to reinitiate their enquiry as previous pricing was based on what turned out to be unsustainable potential rents. As I see it, this was an acceptable approach on the part of BNZ under the circumstances here. In light of the change in market conditions outlined above, and the fact that most of the units had been on the market for a considerable period previously which meant that many potential buyers would have been on notice of previous asking prices, it was reasonable for the agents Bayleys Real Estate (who were the same agents as the defendants had involved before) and BNZ to suggest to the market that any previous pricing was no longer relevant.Permitted Uses of the Unit[47] As to the third argument advanced for the defendant, Mr Mahoney alleges that the price obtained for unit 15 was unreasonably low as BNZ, or its agent, did not take reasonable care in ascertaining what the amount could be used for. Mr Sherlock recalled that while there was much interest in unit 15 (a unit known as the ―Atrium) itbeing a unit open to the public and not separately partitioned, that interest fell awaywhen advice was obtained to the effect that the unit could not be partitioned so as to allow for private office use of part of it. That advice was provided by Mr Michael Faherty (Mr Faherty) of Wellington Waterfront Limited, the head lessor of the property site. (It was apparent that Cloudy Bay only held leasehold estates in the units). Clause 3.3 of that head lease as I understand the position provides:The Lessee will ensure that a predominant proportion of the ground floor areas of all buildings on the Land are available for general public use at all reasonable times. The parties acknowledge that food, beverage and retail outlets and such other uses which are open to the public during normal service hours shall be deemed to be for general public use for the purposes of this clause; but office and residential uses do not satisfy the requirement for general public use.[48] Mr Morten submitted that that advice from Mr Faherty was important. He said that if unit 15 could have been partitioned it would have returned a rental at a minimum rate of $300 per square metre. Mr Mahoney stated in his first affidavit that Mr Sherlock had been involved in negotiations with Xero and FNZ, two companies interested in leasing unit 15 if it could have been partitioned. Presumably these negotiations proceeded on the basis that the unit could be partitioned. Mr Mahoney also noted that Archaus Ltd, an architecture firm, was engaged and produced plans inApril 2010 for FNZ Ltd's partition of unit 15 and its use as office space.[49] Upon inquiry on this issue from Mr Sherlock in July 2010, Wellington Waterfront Limited obtained advice from DLA Phillips Fox. That advice stated that the answer as to the permitted use was in clause 3.3 of the lease. The opinion recorded at paragraph 5.5:While this clause does refer to the ensuring [sic] the ―predominant proportion ofthe ground floor area is publicly accessible, this does not mean that some units can contain activities that do not provide for public use. This is simply to reflect that entire [sic] area cannot be open to the public. For example, with activities such as cafes and restaurants there will be some areas that the public cannot have access to (eg, kitchens, chillers, storage areas, etc).[50] On this, Mr Sherlock records that accordingly he then advised any prospective purchaser of unit 15 that they should make their own enquiries of Wellington Waterfront Limited as to permitted use, and obtain independent advice from their solicitors.[51] I consider that on this aspect the course adopted by Mr Sherlock, and accordingly BNZ, was entirely reasonable. Mr Sherlock sought advice on the matter,but advisedly directed any prospective purchaser to investigate on their own behalf. It is fair to say that those prospective purchasers must have known that the risk associated with the status of the unit, regarding its potential uses, would lower the price that they as willing buyers might be prepared to pay. In that light, prices were obviously adjusted to take into account what was a possible commercial risk. Accordingly, I do not consider that BNZ erred in its duty to obtain the best price for this unit.Other More Substantial Offers[52] As to the fourth defence advanced for the defendant, it seems at the time there were at least two unit purchase offers made at higher prices than the ultimate sale prices achieved, which were declined. Indeed, one offer received was from an Auckland buyer for all units for $2,000,000. Both of those dismissed offers however were conditional, I understand on a due diligence process being completed to the satisfaction of the buyers. On this, Mr Willdig records in his 21 April 2011 affidavit:The Bank decided not to risk losing all the buyers it had achieved from the sales process for the uncertainty of the offer from an out of town purchaser, who had not yet commenced a due diligence process.[53] As noted above, the issue as to whether the mortgagee's duty has been breached in any particular case is a commercial one, to be viewed in practical terms. Here, the evidence shows that BNZ had already delayed the sale of the units for over four months. It made a commercial decision to go with what turned out to be a lower priced but more certain option over higher but entirely uncertain conditional bids. In those circumstances, I am satisfied that BNZ did not breach its duty here in deciding to decline the higher conditional tender offers.Summary[54] Given first, that this was a forced sale, and secondly, given the steps that the BNZ has taken – which I must say are standard steps taken by a mortgagee in this situation – I find that there is no room for argument that the BNZ breached its duty under s 176 PL Act here. In particular it is not open to take issue with the timing of the sales, because that is not a matter which can be challenged under s 176 and, in any event, that timing was reasonable here. The steps taken by way of obtaining valuationadvice, getting advice on promotion and marketing and a recommendation for sales by tender and conduct of the tender sales process are all standard steps taken. The sale prices were obviously lower than what the parties might have hoped for, but I am satisfied that the BNZ took proper efforts to obtain the best price reasonably obtainable on the market at the time.[55] In summary, I do not consider that s 176 PL Act was breached on any of the grounds advanced for the defendant here. While a mortgagee merely delegating its responsibilities to an agent will not be sufficient to discharge its obligations under s 176 (Commercial & General Acceptance Ltd v Nixon [1981] HCA 70; (1981) 152 CLR 491 at [7]), Mr Sherlock and Bayleys Real Estate as I see it undertook anappropriate process to discharge BNZ's duty under s 176. I note also that there was a small matter raised by the defendant here of gas charges paid by BNZ, on behalf of Cloudy Bay, to the body corporate in a situation where Mr Mahoney was disputing theTrust's liability for those charges. The charges related to unpaid gas of $10,977.99 for unit 10. In the circumstances, I am satisfied that this small sum, whether BNZ oughtto have investigated the Trust's liability or not, cannot be sufficient to find that BNZ breached its duty to Mr Mahoney under s 176 PL Act.Is there sufficient material before the Court to allow summary judgment[56] This issue relates to a claim that Mr Mahoney has not been provided with details of the minutiae of the marketing process undertaken by BNZ. In particular details of the entire dealings of BNZ's agent, Mr Sherlock, it seems were not disclosed by BNZ.[57] On this particular question, Mr Mahoney attributes to Mr Sherlock various statements claimed to be made to potential purchasers along the lines of ―the bank wants the units gone. One was claimed to be made to Mr Heginbotham, MrMahoney's brother-in-law. Mr Heginbotham, however, declined to provide an affidavit. In response, Mr Sherlock denies making any such statement. Further, as submitted by Mr Toebes, in any event, they are hearsay statements which ought not to be taken into account.[58] I also refer to statements attributed to Mr Bosley that Mr Sherlock said to himthat he should ―put in a bid, any old bid, and that he was not formally told of thetender process. Again, Mr Sherlock refutes both suggestions. He said that he contacted Mr Bosley by phone during the first week of the advertising campaign and merely informed Mr Bosley as to the mortgagee sale process.[59] Of course, a mortgagee is responsible for the conduct of agents in connection with a sale: Earlston Farm Ltd v Trusteebank Wanganui (1986) 2 NZCPR 528. I am satisfied here, however, that notwithstanding that a discovery process might possibly provide some further evidence as to these matters, in light of the overall position that a competitive tender process was undertaken and prices achieved for the units were at or about the estimated forced sale values by the engaged registered valuers, I do not consider those suggestions to be of any moment to this decision.Conclusion[60] For the foregoing reasons I am satisfied that BNZ has not breached its duty under s 176 of the Act and therefore Mr Mahoney has disclosed no reasonably arguable defence to his claim. The form of guarantee signed by Mr Mahoney has not been in any way challenged and there is an obvious commercial explanation for his having signed the guarantee given that he was the sole director of Cloudy Bay. There being also no dispute before me of any kind on quantum, BNZ has shown that no defence exists to its present claim and I accordingly enter summary judgment for BNZ for the amount of $2,096,554.81 sought in BNZ's statement of claim.[61] BNZ also sought interest on that sum at the contractually agreed rate of 13.09 per cent per annum from 1 October 2010 up to the date of this judgment. Again, there was no argument before me on this issue. I see no reason therefore why interest at the rate directly agreed to contractually between the parties ought not to be ordered here. This interest amount is to take into account a credit for the sum of $40,000.00 applied in reduction of that interest from the sale proceeds of Unit 4 received by BNZ on 2 December 2010. The total interest award is therefore to be:(a) $7,368.92 representing interest on $2,096,554.81 at 13.09% p.a. from 1 October 2010 to 2 December 2010 (63 days) of $47,368.92 less the $40,000.00 paid on that date; and(b) $149,625.64 being interest on $2,096,554.81 at 13.09% p.a. from 2 December 2010 to 31 May 2011 (199 days); and(c) Interest at 13.09% p.a. on $2,096,554.81 from 31 May 2011 to 29 June 2011.[62] As to costs, I also see no reason why costs should not follow the event in the normal way. Costs on this application are therefore awarded to BNZ on a 2B basis together with disbursements to be fixed by the Registrar.Orders[63] Orders by way of summary judgment are now granted to the plaintiff BNZ against the defendant Michael David Mahoney for the following:(a) the sum of $2,096,554.81 as sought in BNZ's statement of claim; and(b) interest thereon as set out at para [60] above; and(c) costs on a 2B basis together with disbursements as fixed by the Registrar as outlined at [61] above.'Associate Judge D.I. Gendall'