THE STARK TRUSTEES LIMITED & ORS v BRIDGEWEST FINANCE (NEW ZEALAND) [2020] NZHC 1775

THE STARK TRUSTEES LIMITED & ORS v BRIDGEWEST FINANCE (NEW ZEALAND) [2020] NZHC1775 [22 July 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-000938[2020] NZHC 1775BETWEEN THE STARK TRUSTEES LIMITEDFirst Plaintiff/ApplicantMSJW TRUSTEES LIMITEDSecond Plaintiff/ApplicantSTEFANIE WINITANAThird Plaintiff/ApplicantAND BRIDGEWEST FINANCE (NEWZEALAND)DefendantHearing: 9 July 2020Appearances: Paul Sills for the Plaintiffs/ApplicantsAnita Birkinshaw and Chantal Ottow for the DefendantJudgment: 22 July 2020JUDGMENT OF MOORE JThis judgment was delivered by me on 22 July 2020 at 4:00 pmpursuant to Rule 11.5 of the High Court Rules.Registrar/ Deputy RegistrarDate:Background[1] The Stark Trustees Limited and MSJW Trustees Limited are the trustees of theStark Trust ("the Trust") and the registered proprietors of the 34 Rawene Avenue,Westmere ("the Property"). Stefanie Winitana is a director of the Trust and theProperty is her family home.[2] Bridgewest Finance (New Zealand) ("Bridgewest Finance") holds a secondranking mortgage over the Property. It is owed over $2.6 million by third parties, adebt which has been outstanding since 8 March 2020. Following the bankruptcy ofone of the debtors (Mr Ensom, Ms Winitana's partner), the Property was transferredto the first and second applicants.[3] Bridgewest Finance served a notice to the first and second applicants requiringpayment of the debt. It expired unremedied. The first and second applicants wereinformed that mortgagee sale processes would commence. The applicants resultantlyfiled an application, seeking interim orders that Bridgewest Finance be restrained fromtaking further steps:(a) toward the mortgagee sale, including advertising the property for sale;and(b) to enforce it mortgage over the Property.[4] A hearing has been set down for 24 July 2020 to determine the applicants'second cause of action. The issue for this Court to determine is whether the applicantsshould be granted an order restraining the advertising of the Property for sale.Should the interim order be made?[5] I am satisfied that the applicants have raised a serious question as to theenforceability of the mortgage against the Property and the calculation of theoutstanding amount. I must ask where the balance of convenience and the overalljustice lies.1[6] In considering the balance of convenience, I have had regard to the affidavitsfiled by Bridgewest Finance from Mr Duncan Ross, a senior member of Bayleys, andMelanie Hern, the CEO of Bridgewest Finance. Bayleys states that marketing of theProperty could begin immediately and sets out its likely approach.[7] Mr Sills, for the applicants, states that the Property should not be advertisedfor sale with the application pending, because it would create further tension betweenthe parties and open homes or inspections would not be practical. I agree withMs Birkenshaw, for Bridgewest Finance, whether the marketing process causes stressis in the hands of the applicants. Bayleys will seek to work with Ms Winitana to avoidunnecessary disruption.[8] Despite Mr Sills' assertion that it will be apparent that it is a forced sale, andthat would negatively impact the Property value, the advertising will not label it as a"mortgagee sale". Regardless, case law suggests a property may be marketed as a"mortgagee sale".2[9] I am satisfied that the biggest threat to the sale price will be delay in startingthe sale processes. Mr Sills suggests that this would amount to minimal prejudice tothe respondent (if the mortgagee sale can go ahead) because it will likely be a shortdelay and the middle of winter is a poor time to sell. Mr Sills stated that Bayleys couldjust as easily commence advertising following the determination of the order as thereis nothing in particular that requires immediate action.[10] However, Mr Ross deposes to gain the best value for the property, marketingshould begin as soon as possible given the uncertainty of the post-COVID-19 market.Although this is a high-end waterfront property, it would be bold to assume its valueis immune to future economic pressure. Given the size of the debt, the growing interest1 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 adopting AmericanCyanamid Co v Ethicon Ltd [1975] AC 396.2 Taylor v Westpac Banking Corporation Ltd (1996) 7 TCLR 177 (CA); Coronation Gardens Ltd vSmall (2005) Ltd [2017] NZHC 1662.owed and the time it has been outstanding, I accept that the predicted drop couldprejudice Bridgewest Finance, the applicants themselves and the first mortgagee. Ialso note Ms Birkenshaw's suggestion that the applicants probably cannot paydamages if they are successful here but unsuccessful in preventing a mortgagee sale.[11] As to concerns that commencing marketing in these circumstances will affectthe value of the Property on a longer-term basis (through the "stigma" of a forced sale),I agree with Ms Birkenshaw that any potential purchaser is likely to undertake duediligence into the registered proprietors' finances anyway.[12] Accordingly, I consider that the balance of convenience favours BridgewestFinance. It has undertaken not to enter into a binding sale contract until the substantivematter is determined, but it is practical for Bayleys to be able to prepare for the salenow.[13] The question of whether Bridgewest Finance, or indeed the applicants, havecome to this matter with clean hands should be left to the hearing on 24 July 2020.Orders[14] The application is dismissed.Moore JSolicitors:Mr Sills, AucklandBuddle Findlay, Auckland