COCKRELL V WARD HC AK CIV-2012-404-7155

COCKRELL V WARD HC AK CIV-2012-404-7155 [18 December 2012]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-7155[2012] NZHC 3434BETWEEN BRAD & ELLEN LOUISE COCKRELLAS TRUSTEES OF THE COCKRELLFAMILY TRUSTPlaintiffsAND RUSSELL STUART WARDDefendantHearing: 14 December 2012Appearances: Mr G Stringer for PlaintiffsMr Ward in personJudgment: 18 December 2012JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on18.12.12 at 10 a.m., pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors:Inder Lynch, P O Box 76,745, Manukau, Auckland - g.stringer@inderlynch.co.nzMr R S Ward – russ.ward@hotmail.comBackground[1] The plaintiffs purchased the property which is the subject of these proceedings at mortgagee sale. The property was sold by the ANZ National BankLimited ("the Bank") which was the mortgagee. The Bank's solicitors advised MrWard that the power of sale had become exercisable on 9 July 2012. Tenders weresought. The plaintiffs' tender of $707,400 plus GST was accepted. The settlementdate provided for in the tender documents was 16 October 2012.[2] On or about 21 September 2012 Mr Ward wrote to the Bank's solicitorsadvising that he had earlier sold the property to a third party, Mr Hubert Hays. This he considered was a ground for preventing the Bank from selling the property. The agreement recorded that the property was sold by Mr Ward to Mr Hays for $1 and that the possession date was to be 25 October 2011. In the section of the agreement appropriate for that purpose there was described a tenancy pursuant to which Mr Ward himself was the tenant with the rent being $100 and the term "ongoing".The agreement also contained the statement, "vendor to retain title". In the affidavit that he filed in support of the "statement of defence" Mr Ward produced a further copy of this agreement. He also produced a tenancy agreement which apparently was separate from the agreement for sale and purchase, it too being dated 25 October 2011.[3] Mr Ward who was the mortgagor applied for an injunction to stop the sale but his application was dismissed by Lang J in a judgment he gave on 15 October 2012. One of the grounds that Mr Ward advanced was the purported sale to Mr Hays. The Judge at paragraph [18] of his judgment recorded that he had told Mr Ward during argument that the purported sale to Mr Hays could not take priorityor precedence over the Bank's power of sale, the mortgage having been executed and registered long before Mr Ward entered into the agreement for sale and purchase. There is no need to traverse this ground again. I respectfully agree with the remarks of Lang J. The same outcome to the issue being raised in this case is inevitable. The Hays agreement cannot stand in the way of the plaintiffs. They are now the registered proprietors of the property.[4] Since they acquired the property the plaintiffs have attempted to carry on farming operations on it. Mr Ward will not however leave the property. There have been difficulties and confrontations between the parties which it is not necessary to canvass in this judgment.[5] The plaintiffs issued proceedings against the defendant seeking the recovery of the property from the defendant, in order that he vacate the property and other orders. Mr Ward has filed a statement of defence in which he denies that theplaintiffs are the registered proprietors of the land while adding that he "says theymay be the registered proprietors on the title only". He denies that the property waspurchased at mortgagee sale and denies that the plaintiffs have an indefeasible titleover the property "as they have not purchased the land". He also says that he iscurrently occupying the land by way of a registered lease and tenancy agreement granted by the current owner of the land. I interpolate that there is no evidence that any lease has been registered against the title to the property. Further consideration will be given to the lease arrangements below.[6] In the statement of defence1 Mr Ward admits to being the prior owner of theproperty "but denies he is not a tenant or sub-tenant holding over after the termination of a tenancy or sub-tenancy in relation to the property".[7] There is little need to comment on the apparent assertion that the plaintiffs have only a limited interest in the property. It has been proven in evidence that they are the registered proprietors. That disposes of any question about whether they have an indefeasible title over the property.[8] The essential issue that arises, though, concerns the lease/tenancy arrangements which the defendant says he entered into with Mr Hays in 2011 and it is that matter I deal with next.1 At para 5.Summary judgment principles[9] The principles relating to summary judgment applications are well known and I intend to be guided in the present case by the judgment of Krukzeiner26. 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 Yong v 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 v Patel (1987) 1 PRNZ 84 (CA)27 Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trialThe agreement with Mr Hays[10] In his affidavit Mr Ward said that this agreement constituted him a tenant ofthe property. He said that "to further ratify this agreement" the parties included the clause in the tenancy that it was "subject to the Residential Tenancies Act 1986" ("the Act").[11] The argument put forward is that in effect the agreement defeats theplaintiffs' entitlement to possession of the property. The reason advanced for thatview is that the tenancy is protected by the provisions of the Act.[12] The issues that arise under this heading are:a) Is the tenancy agreement ("the agreement") a sham?b) If the agreement is not a sham is it arguably a Residential Tenancy Agreement?[13] There have been various formulations of the principal relating to sham agreements. In NZI Bank Ltd v Euro-National Corporation Ltd, Richardson J stated, at 539:2A document may be brushed aside if and to the extent that it is a sham in two situations. The first is where the document does not reflect the true agreement between the parties in which case the cloak is removed and recognition is given to their common intentions. The second is where the document was bona fide in inception but the parties have departed from their initial agreement while leaving the original documentation to stand unaltered.[1] More recently the Supreme Court in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue said3:A document will be a sham when it does not evidence the true common intention of the parties. They either intend to create different rights and obligations from those evidenced by the document or they do not intend to create any rights or obligations, whether of the kind evidenced by the document or at all. A document which originally records the true common intention of the parties may become a sham if the parties later agree to change their arrangement but leave the original document standing and continue to represent it as an accurate reflection of their arrangement. A sham in the taxation context is designed to lead the taxation authorities to view the documentation as representing what the parties have agreed when it does not record their true agreement. The purpose is to obtain a more favourable taxation outcome than that which would have eventuated ifdocuments reflecting the true nature of the parties' transaction had beensubmitted to the revenue authorities...[14] The agreement that was entered into was dated approximately seven months before there was evidence that the Bank was going to move to take mortgagee sale steps against Mr Ward. The agreement does not appear to be a conventional contract leading to an exchange of land for its approximate money value. The property was2 NZI Bank Ltd v Euro-National Corporation Ltd [1992] 3 NZLR 528.3 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2009] 2 NZLR 289 (SC)at 313.ultimately sold at tender for approximately $700,000 in 2012. The agreement under which Mr Ward sold the same property in 2011 for a price of $1 does not carry the hallmarks of a bona fide transaction. Purportedly selling the property while the vendor at the same time was to retain title, is another feature that points away from this being a bona fide agreement. As well, the lease of the property for 99 years for $100 per month4 would not seem to fulfil any legitimate commercial purpose. Further, for a party to enter into a lease of property which he is the owner of, even if a legal possibility, is incomprehensible.[15] The overall result of the agreement was to change nothing. Mr Ward remained the owner of the property and remained in possession of it.[16] While I accept the need for caution at a summary judgment level, having regard to these features of the agreement and in the absence any explanation from Mr Ward as to the purpose of the arrangement, I conclude that the plaintiffs are correct in characterising the agreement as a sham. I consider that this is one of the circumstances where, in accordance with Krukzeiner a robust and realistic approach is justified on the facts. I regard it as being inherently improbable that the alleged tenancy agreement was ever tendered to have legal affect between these two parties. I therefore conclude that it is a sham. If that is the case, the assertion that Mr Ward makes that that agreement was the basis for a residential tenancy agreement is unsustainable.[17] In case I am wrong on that aspect of the matter, I shall consider further whether the agreement were it a genuine transaction intended to have binding effect, could qualify as a residential tenancy.[18] Before I consider that I need to make brief further reference to the evidence.[19] It was Mr Cockrell's undisputed evidence that:20. THE Defendant is living in a caravan in the hangar/barn which is not permitted – he has a makeshift shower set up in the corner and I4 In the agreement for sale and purchase the rent was described as $100 in its entirety – not for one month.am not sure what is septic system set-up is. We do not want this responsibility hanging over our shoulders should Council find out.[20] Nowhere in the evidence is there any mention of a house or other dwelling on the property. I conclude that the only residential facilities that are available and are being used by Mr Ward on the property are the caravan located inside the hangar.[21] Before considering whether this was an agreement to create a residential tenancy, I must first deal with the acknowledgment in the agreement between Mr Ward and Mr Hays that the agreement is a residential tenancy. The question is whether their agreement binds the Court. In my view it does not. The question of whether or not the agreement comes within the terms of the Residential Tenancy Act("the Act") is a mixed matter of fact and law for the Court to determine.[22] The issue then is whether the tenancy agreement conforms to the description in the definition section of the Act, section 2, as a tenancy "in relation to any residential premises". Further, the question is whether the factual circumstances ofthis Act come within the references to residential tenancies in s 4 of the Act whichsays the Act, applies "to every tenancy for residential purposes except as specificallyprovided".5[23] It cannot be said without straining the meaning of the Act, that this is atenancy relating to "residential premises". Nor is it one "for residential purposes".This is a lease of farm land which has on it a barn in which the purported tenant has located a caravan in which he apparently resides.[24] While the Act ought not to be narrowly interpreted in order to achieve its effect of protecting tenants who are renting residential properties, there must be some limits to the scope of what falls within the Act. I do not consider that the factual circumstances that exist with respect to this property so qualify. There is no doubt in my mind that the Court has the right to come to a conclusion on the question of whether the Residential Tenancies Act applies for the purposes of a summary judgment application. I respectfully agree with the remarks of Faire AJ in5 No relevant exception applies.Watson v Williams6 that the exclusive jurisdiction provision contained in s 82 of the Act does not apply because this is not a case involving a dispute between a landlord and a tenant.7[25] My conclusion is therefore that the Act does not apply. The provisions of the Act do not assist Mr Ward.Other points[26] Mr Ward raised two objections to my proceeding with the matter on 14 December 2012. The first was that he said that the header page to the statement of claim had not been included with the documents that were served on him. It is correct that a document must include a cover sheet8 however, this is a defect which can be cured under r 1.5 and I propose to proceed accordingly.[27] The other matter concerns certain adverse actions on the part of Mr Cockrell in regard to the property. These included authorising the spraying of herbicide. The herbicide was said not to be of an organic nature which adversely affected the organic status that the farm property has enjoyed. There are also complaints about the plaintiff removing property such as alkathene piping from the property and also harassing the defendant. Mr Ward said that he intended to take interlocutory steps to obtain evidence in support of his counter-claim including by way of discovery and interrogatories. He therefore submitted that the Court should adjourn without considering the plaintiffs' application for possession of the farm property.[28] Whether or not Mr Ward has any claim for damages arising out of the matters that he said he does cannot possibly be used as a basis for retaining possession which he is not otherwise entitled to. There is no reason therefore why adjudication on theplaintiffs' claim for possession ought to be deferred until the counter-claim has been dealt with. I do not therefore regard these grounds as justifying an application for adjournment of the proceeding.6 Watson v Williams HC Auckland, CIV-2012-404-5994, 23 November 2012, at [34].7 Section 77 of the Act.8 Rule 5.7.[29] I therefore intend to enter judgment in accordance with the plaintiffs' prayerfor relief at paragraph A.[30] There will also be an order in terms of prayer for relief B in a form that is to be approved by the Registrar. The plaintiffs are to submit an order in draft form for sealing after checking by the Registrar. Leave is reserved to the plaintiffs to apply for further orders as are necessary to implement the principal orders made. Costs on the application for summary judgment are reserved._____________J.P. DoogueAssociate Judge