AUSTIN V SOUTHLAND BUILDING SOCIETY COA CA314/2012

AUSTIN V SOUTHLAND BUILDING SOCIETY COA CA314/2012 [27 July 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA314/2012[2012] NZCA 337BETWEEN MICHAEL DAVID AUSTINApplicantAND SOUTHLAND BUILDING SOCIETYRespondentHearing: 17 July 2012Court: Glazebrook, White and Simon France JJCounsel: Applicant in personD Chan for RespondentJudgment: 27 July 2012 at 3.00 pmJUDGMENT OF THE COURTA The application for an extension of time is declined.B The applicant must pay the respondent costs for a standard application on a band A basis and usual disbursements.REASONS OF THE COURT(Given by Glazebrook J)Introduction[1] The applicant, Mr Austin, applies for an extension of time to file a notice of appeal under r 29A of the Court of Appeal (Civil) Rules 2005.[2] The proposed appeal is against a decision of Associate Judge Bell granting the respondent, Southland Building Society (Southland), summary judgment against Mr Austin and two co-defendants (his wife and daughter).1[3] Mr Austin assumed that he had to file his notice of appeal against Associate Judge Bell's decision at the Whangarei High Court. He found out that he had to file it at this Court when he made an enquiry to the High Court four hours before the deadline. Mr Austin couriered the appeal documents to this Court but they arrived one day late. Hence the need for this application.Background[4] Mr Austin and his co-defendants were the guarantors of three loans made by the Hastings Building Society (HBS), which later merged with Southland, to a company called Good Start Property Development Ltd (Good Start).[5] The loans were secured by mortgages over properties. After Good Start defaulted on the loan repayments, the properties were the subject of mortgagee sales. Southland brought the summary judgment application to recover the shortfall left owing on the loans after the sales from the guarantors.Mr Austin's submissions[6] The affidavit filed by Mr Austin addresses the proposed grounds of appeal.They are that the personal guarantee was not properly executed and that Southland'sclaim was incorrectly quantified because the process it used to sell the securedproperties was flawed. Mr Austin addressed us orally on the first ground, indicatingthat this was his primary ground.[7] Mr Austin asserts that the solicitor who signed the guarantee as a witness was not in fact present when the document was signed by the guarantors. Further, he says she did not advise them as to the content of the documents, despite signing asolicitor's certificate stating that she had "explained generally the nature and extent1 Southland Building Society v Austin [2012] NZHC 497 [Summary judgment decision].of the obligation of the Guarantor(s) contained in this Guarantee and Indemnity."This means in his submission that the guarantee is "fraudulent". In his submission,Southland should not have acted upon it, once they were made aware of this fact. (We understand the circumstances surrounding the execution of the guarantee were signalled to Southland when it tried to enforce the guarantee).[8] In terms of quantum, Mr Austin argues that the properties were sold for less than they should have been. In particular, he says:(a) The terms of bidding at an auction of forced-sale properties require participants to be cash buyers, which presents a barrier to the majority of purchasers. That increases the likelihood of having a sole bidder (and the properties in this case were purchased by sole bidders). It is easier for sole bidders to negotiate a lower price.(b) Selling the Kaimaumau properties as one lot rather than two reducedthe total value of the sale. Further, LJ Hooker's market valuation forthe Kaimaumau properties was not supported by any empirical sales data.(c) The Lester Heights property was sold for $140,000, below the$150,000 lower limit of Telfer Young's registered valuation forced- sale band. Mr Austin says that he could have given purchasers information that would have mitigated their concerns about the property due to its leaky-home history, but HBS refused to pass that information on because it might amount to a representation or warranty on their part.Southland's position[9] Southland opposes Mr Austin's application on the grounds that the proposedappeal lacks merit and does not raise any issue of public importance.[10] As to the first proposed ground of appeal, Southland argues that Mr Austinhas no basis for challenging the guarantee. He and the other guarantors admittedsigning the guarantee. Even if the guarantee was not properly attested by a witnessin accordance with s 4 of the Property Law Act 1952, it was still enforceable as avalid contract.[11] Further, Southland points out that the guarantors did not claim that they did not understand the guarantee, lacked capacity or were under undue influence. Lack of independent legal advice is not sufficient on its own to impugn the guarantee,2particularly given that the guarantors signed an acknowledgment that they declined to take independent advice. HBS had no obligation to ensure that the guarantors received independent advice3 and was entitled to rely on the solicitor's certificate.4[12] On the quantum point, Southland says:(a) Two real estate agents advised Southland to sell by auction, and the courts have held that auction is a reasonable method of mortgagee sale.5 At the High Court hearing the defendants did not adduce any evidence that sale by auction was inappropriate or that a higher price could have been obtained by an alternative method.(b) Southland attempted to sell the Kaimaumau properties as two lots, but no one bid on either property. The properties were then called together and one bid was received, so the properties were sold as one lot to that bidder after negotiation. As to the allegation that LJ Hooker's valuation was not based on empirical data, Southland says that LJ Hooker only provided a price estimate; Southland also obtained a valuation from an experienced and reputable valuation practice.(c) Southland had no obligation to tell prospective purchasers to seek information about the property from Mr Austin. In any case,2 Citing McCaw v McCaw HC Napier CIV-2010-441-342, 7 September 2010.3 Citing Clarke v Westpac Banking Corp (1996) 7 TCLR 436 (HC) at 445.4 Citing GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [48]–[50] and [53].5 Citing Public Trust v Ottow (2009) 10 NZCPR 879 (HC) at [31].Mr Austin adduced no evidence about what information he could have provided and whether a higher price could have been obtained as a result.Our assessment[13] Mr Austin has provided a satisfactory explanation for the delay in filing the appeal. Nevertheless, as Mr Austin is now seeking an indulgence, the merits of the proposed appeal require consideration.6[14] In terms of the attack on the validity of the guarantee, and assuming for these purposes that the solicitor was not present when the guarantee was signed by the guarantors, the result would be that the guarantee is not a valid deed because the witnessing requirements in s 4(1) of the Property Law Act 1952 are not met.7[15] But, even if that is the case, it does not mean that the guarantee is unenforceable. It is only necessary for a guarantee to be in deed form if no consideration is given for the guarantee (which may be the case, for example, where the guarantee is of an existing debt and the creditor gives no forbearance). If consideration is given for a guarantee, it is only required to be recorded in writing.8[16] The consideration given by HBS (currently Southland) in this case was that itagreed to provide further loans to Good Start and to forebear from requiringimmediate repayment of existing loans. The guarantee, in addition to being givenfor consideration, was recorded in writing and signed by the guarantors as requiredby s 2 of the Contracts Enforcement Act 1956. Accordingly, the guarantee is a validand enforceable contract even if it is not valid as a deed.6 See Angus Properties (HB) Ltd v Walker [2008] NZCA 551 at [13].7 See Dixon v Laurie McGoverne Ltd HC Christchurch M 254-00, 8 September 2000 at [9] and [22]–[26]. Section 4(1) of the Property Law Act 1952 applied to deeds at the time the guarantee in this case was signed. It has now been repealed and replaced by s 9 of the Property Law Act 2007, which is to similar effect.8 Section 2 of the Contracts Enforcement Act 1956 was the applicable provision in this case. Ithas now been repealed and replaced by s 27 of the Property Law Act 2007.[17] As to the independent advice aspect, lack of independent advice cannot in itself render the guarantee invalid. Rather, lack of independent advice is generallyraised in the context of determining whether a party's consent was obtained throughundue influence or unconscionable bargain, which is not alleged here.9Associate Judge Bell was therefore correct to reject this as a ground of opposition to the summary judgment application. Indeed, in this case, Mr Austin and his fellow guarantors signed an acknowledgment that they had declined to take independent advice.[18] That leaves the issue of quantum. Mr Austin accepted before us that this ground was unlikely to stand alone if he did not succeed on his first ground. We deal with it briefly only.[19] The duty owed by a mortgagee exercising a power of sale under s 176 of the Property Law Act 2007 is to take reasonable care to obtain the best price reasonably obtainable at the time of sale. It therefore does not follow that the best price reasonably obtainable will necessarily be achieved.10 There is no obligation on the mortgagee to postpone the sale in the hope of obtaining a better price later, and a sale for less than the current market value does not in itself establish a breach of duty.11What constitutes reasonable care will always turn on the facts of the case.12 Putting the sale in the hands of a competent agent, obtaining a valuation from an experienced valuer, marketing the property effectively for a sufficient period and selling at a properly conducted auction will go a long way towards discharging the duty.13[20] In this case we accept Southland's submissions that it did those things. We also accept its answers to the specific points made by Mr Austin.14 It seems that the low prices obtained were a result of a slow market at the time.159 See McCaw v McCaw HC Napier CIV-2010-441-342, 7 September 2010 at [32].10 See Long v ANZ National Bank Ltd [2012] NZCA at [21(a)] (leave refused in Long v ANZNational Bank Ltd [2012] NZSC 51).11 Public Trust v Ottow (2009) 10 NZCPR 879 (HC) at [17] and [33].12 Long v ANZ National Bank Ltd at [21(d)].13 Public Trust v Ottow at [31].14 See at [12] above.15 Summary judgment decision at [36].Result[21] We accept Southland's submission that the proposed appeal could notsucceed. The application for an extension of time is therefore declined.[22] The applicant must pay the respondent costs for a standard application on a band A basis and usual disbursements.Solicitors:Carlile Dowling Lawyers, Napier for Respondent