MORTGAGE HOLDING TRUST COMPANY LIMITED V CANNON CORPORATE TRUSTEE LIMITED (PREVIOUSLY CANNON HILL INVESTMENTS LIMITED) HC TIM CIV 2008-476-000329

MORTGAGE HOLDING TRUST COMPANY LIMITED V CANNON CORPORATE TRUSTEE LIMITED (PREVIOUSLY CANNON HILL INVESTMENTS LIMITED) HC TIM CIV 2008-476-000329 30 July 2008IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY CIV 2008-476-000329BETWEEN MORTGAGE HOLDING TRUST COMPANY LIMITED Applicant AND CANNON CORPORATE TRUSTEE LIMITED (PREVIOUSLY CANNON HILL INVESTMENTS LIMITED) Respondent Hearing: 30 July 2008 Counsel: E C Gellert for Applicant (By Telephone) No appearance for Respondent Judgment: 30 July 2008JUDGMENT OF FOGARTY J[1] This is an application by a first mortgagee to remove a title caveat lodged by a person claiming to be a fixed term tenant of premises. The title is to a property in Cromwell. The mortgagor was in default and the mortgagee sold the property on 8 May 2008. At no time prior did it know of the existence of any tenancy over the property. The property was not occupied at the time of sale. There had, however, been some minor issues between the couple who had been previously had access to the property and in particular, the lady's former partner. There had been some evidence that he, a Mr Murdoch, had been visiting the property prior to sale and had placed rods in the bottom cavity of the ranchsliders preventing the ranchsliders from being opened. [2] Following the sale of the property the land agent for the first mortgagee was informed by Mr Murdoch that he had a lease in respect of the property. The landagent subsequently received an email exhibiting this lease. This lease is dated April 2007 and is for a fixed term of five years commencing on 10 April of that year and terminating on 9 April. It is a term of the agreement that:This tenancy is for a fixed-term, cannot be terminated with notice [3] On 10 June the tenant, the respondent caveator, lodged a caveat claiming an interest in the property as a fixed term tenant. An application was then lodged to set aside the caveat. Notice of that application and the affidavits in support, together with the notice showing today's date and time of hearing at 2.15 pm was served at the address for service of the caveator set out in the caveat No. 7841781.1 being the registered office of the respondent. I have perused the affidavit of service and am satisfied it was served on the respondent. [4] Prior to this hearing the precincts of the Court were checked to see if there was any appearance for the respondent. There is none. The hearing has continued in the absence of the respondent. [5] The onus of proof is on the caveator to establish that it has a reasonably arguable case for the interest claimed. The first mortgagee's position is, I am satisfied, secured and addressed in s 58(1)(d) of the Residential Tenancies Act 1986:58 Mortgagee or other person becoming entitled to possession(1) Where a mortgagee or other person becomes entitled (as against the landlord) to possession of the premises, the following provisions shall apply: (a) The tenancy shall continue notwithstanding that the mortgagee or other person has become entitled (as against the landlord) to possession of the premises: (b) For the purposes of sections 15, 21A, and 43 of this Act, the mortgagee or other person shall be deemed to have acquired the landlord's interest in the premises, and the provisions of those sections, with any necessary modifications, shall apply accordingly: (c) The mortgagee or other person shall have the same rights (if any) as the landlord had under the tenancy agreement or this Act to give notice terminating the tenancy or to apply to the Tribunal for an order terminating the tenancy or for an order for possession of the premises:(d) Without limiting paragraph (c) of this section, but subject to paragraph (e) of this section, in the case of a fixed-termtenancy, the mortgagee or other person shall have the same right to give notice terminating the tenancy as the landlord would have had if the tenancy had been a periodic tenancy:(e) Paragraph (d) of this section shall not apply where the mortgagee or other person is bound by the tenancy or consented in writing to its creation. (2) Subsection (1) of this section shall apply notwithstanding anything to the contrary in the Property Law Act 2007 or the Land Transfer Act 1952 or any other enactment. (Emphasis added)[6] This section effectively gives the first mortgagee an entitlement to give notice to terminate the tenancy on 42 days' notice notwithstanding the term quoted in the tenancy preventing notice being given as between the landlord and the tenant. The application of this section was addressed by this Court in the case of Westpac Banking Corporation v Russell HC Tauranga M43/98 13 August 1998 Salmon J. Having cited s 58 Salmon J went on:It will be seen that the effect of that section read with s.51(1)(c) is that a mortgagee takes, subject to any tenancies, but may terminate the tenancy on 42 days' notice. It is clear from the evidence that the applicant had no knowledge of the claimed lease at the time it entered into the mortgage on the property. I conclude, therefore, that in circumstances such as the present there is no right to lodge a caveat.[7] I am satisfied that the passage applies also to this case. This is not a case where the applicant as first mortgagee has become bound by the tenancy prior to the exercise of the power of sale such that sub-paragraph (e) of s 58(1) applies. [8] Given that the tenancy may be terminated on 42 days' notice there is no basis to pursue a caveat under the Land Transfer Act 1952. There is no practicability to secure registration of an interest in the land on the title. For these reasons the applicant is entitled to the orders sought and it is ordered that caveat No. 7841781.1 lodged against Certificate of Title OT18A/753 (Otago Registry) be removed pursuant to s 143 of the Land Transfer Act 1952. [9] The applicant seeks costs. Costs are allowed.[10] Having heard from Ms Gellert I order costs on a 2B basis to be submitted to the Registry with leave to be referred to me prior to that order for costs being sealed.Solicitors: Simpson Grierson, Auckland, for Applicant