NGA URI WHAKATIPURUNGA O NGARAE (INC) V MARAC FINANCE LIMITED HC AK CIV 2008-404-006180

NGA URI WHAKATIPURUNGA O NGARAE (INC) V MARAC FINANCE LIMITED HC AK CIV 2008-404- 006180 9 December 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-006180IN THE MATTER OF Section 145A of the Land Transfer Act 1952 and the Te Ture Whenua Maori Act 1993 AND IN THE MATTER OF an application by NGA URI WHAKATIPURUNGA O NGARAE (INC) BETWEEN NGA URI WHAKATIPURUNGA O NGARAE (INC) Applicant AND MARAC FINANCE LIMITED Respondent Hearing: 24 September 2008 and subsequent memoranda Counsel: J D Dorbu for applicant D W Grove for respondent Judgment: 9 December 2008 at 4:30pmJUDGMENT OF ASSOCIATE JUDGE ABBOTTThis judgment was delivered by me on 9 December 2008 at 4:30pm, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy RegistrarSolicitors: Sione T Fonua, PO Box 91787, Shortland Streeet, Auckland 1140 for applicant Grove Darlow & Partners, PO Box 2882, Victoria Street West, Auckland 1142 for respondent[1] This is an application for an order that a caveat not lapse. The applicant claims a beneficial interest as purchaser from the registered proprietor. It has lodged a caveat to protect its claim to the beneficial interest under that agreement. [2] This application has been made necessary because the District Land Registrar has issued notice of lapse pursuant to s 145A of the Land Transfer Act 1952 at the request of the respondent. The respondent is the holder of a mortgage which was registered against the title well before the applicant and the owner of the property entered into the agreement for sale and purchase.Preliminary matters[3] The application was first called before me for mention in the general caveat list on 24 September 2008. At the invitation of both counsel (although their reasons for doing so differed), I heard argument at the end of the general list matters. Counsel for the applicant had sought an adjournment to answer affidavits in opposition filed the day before the hearing. However, he invited me to hear argument on a single issue which, if I found in his client's favour, could have determined the matter. Counsel for the respondent contended that there was no merit in the application and invited me to address all matters at that point. [4] After hearing counsel, and forming the view that the preliminary point did not assist the applicant, I adjourned the hearing to allow the applicant opportunity to file any evidence in reply, and to file written submissions on the applicant's other arguments. The applicant has filed a reply affidavit, and a memorandum of further submissions. Counsel for the respondent has filed a memorandum of further submissions in reply. I am satisfied that the issues have been fully canvassed without the need for a further hearing. [5] Counsel for the applicant did not seek an interim order at the time of the hearing on 24 September 2008. Subsequent to his further submissions he filed a memorandum requesting an interim order. As I had decided by that time that theapplication should be declined, I did not make an interim order. It will become apparent from the reasons I am about to give that I consider that the application had no possibility of success.Brief history[6] The land in question is owned by Twilight Trustee Limited (Twilight). [7] On 8 August 2007, Twilight entered into a loan agreement with the respondent Marac Finance Limited (in the name of its division, Ascend Finance) for a loan advance of $1,150,000 for a period of nine months. Twilight's obligations were guaranteed by its sole director Mohammed Sadiq, his wife, and the trustees of a family trust. [8] Twilight gave a mortgage to Marac as security for the loan. The mortgage was on the standard Auckland District Law Society memorandum. The mortgage was registered on 10 August 2007. By its terms, it was to have priority for the sum of $1,300,000. [9] On 26 June 2008, Twilight entered into an agreement for sale and purchase in respect of the land naming the applicant as purchaser. The purchase price was $1,750,000. There was no deposit payable. Settlement was to take place on 25 July 2008. On 18 July 2008 the parties agreed to vary the agreement. The purchase price was increased to $1,800,000 and settlement was deferred until 19 December 2008. [10] The applicant lodged a caveat against the land on 2 July 2008, claiming its interest as a purchaser pursuant to the agreement for sale and purchase. [11] On 26 August 2008, Marac issued notices to Twilight and the guarantors pursuant to ss 119 and 122 of the Property Law Act 2007 for failure to meet a demand for the sum of $1,369,011.75 then due under the term loan agreement. It required the default to be remedied by 3 October 2007. Those notices were served between 28 and 30 August 2008.[12] The agreement between Twilight and the applicant did not have Marac's consent. It did not know of the agreement at the time. It has not given its consent since Marac advised the District Land Registrar of this by letter dated 1 September 2008 and requested issue of notice of lapse of the applicant's caveat. [13] The District Land Registrar issued notice of lapse to the applicant by letter dated 5 September 2008. This application was filed on 18 September 2008.Principles for caveat applications[14] The principles which the Court applies in deciding a caveat application are well established. For the purposes of the present application the particular principles of relevance are: a) It is for the caveator to show that it has a reasonably arguable case for the interest it claims: Sims v Lowe [1988] 1 NZLR 656, 660 b) The Court has discretion to remove a caveat even where a caveatable interest has been established. That discretion will be exercised cautiously, but it will be exercised where the Court is satisfied that the legitimate interests of the caveator will not be prejudiced: Pacific Homes Limited (in receivership) v Consolidated Joineries Limited[1996] 2 NZLR 652, 656; c) When exercising its discretion, and weighing competing interests, the Court can have regard to the effect of potential actions by third parties as well as activities of the registered proprietor: Holt v Anchorage Management Limited [1987] 1 NZLR 108, 123.The application[15] The grounds set out in the application are that the applicant has acquired an equitable interest in the land under the agreement for sale and purchase, which interest would be defeated if the caveat lapsed. The application also refers to theapplicant being a Maori incorporation. It says that Twilight belongs to it and Twilight's assets are vested in it (although this may be a mistake in the application). [16] In written and oral submissions made at the hearing, counsel for the applicant also argued that Marac was not entitled to "foreclose" so as to deny Twilight's equity of redemption under the mortgage (this was counsel's preliminary point). [17] In his further submissions, counsel for the applicant submittted that there were also further issues as to whether the loan had been advanced and arising under Te Ture Whenua Maori Act 1993, which needed to be taken into account in deciding the competing claims. He argued that the caveat should remain at least until that had occurred in a substantive hearing. [18] Counsel for Marac acknowledged that the agreement for sale and purchase gave the applicant a beneficial interest in the land, but submitted that that interest could not affect Marac's indefeasible interest under its mortgage, which included the right to exercise its power of sale. He submitted that the caveat should be allowed to lapse, as its presence was inhibiting Marac's ability to pursue its entitlement to proceed to mortgagee sale (the statutory notices having expired). He further submitted that the applicant was not a legal entity, and the caveat was invalid as a consequence. In answer to the further "issues" raised in the further submissions for the applicant he said they were of no application in the present context. Marac does not accept the applicant's alleged dispute as to whether the loan was advanced, but says that in any event it cannot impugn the indefeasible nature of Marac's title as against the applicant. Counsel also submitted that Te Ture Whenua Maori Act 1993 has no application in the present case. Finally and centrally, counsel submitted that as the applicant was not a legal entity the application was a nullity.Is there a valid application?[19] The applicant is named as Nga Uri Whatkatipurunga O Ngarae (Inc). The abbreviation "Inc" is usually taken to be an abbreviation for "Incorporated Society". The applicant is not registered with the Companies Office as an incorporated society (which would have given it independent legal status).[20] The application is supported by an affidavit of David Ian Wright who says that he is the chairman of the applicant, which he describes as a Maori Tribal Entity. He refers to it as "a Maori social organisation characterised by common descent and ancestral history, laws and institutions conforming to tikanga Maori." Although he refers to it having "an official seal" is it clear that it is not a Maori Incorporation, as defined by s 4 of Te Ture Whenua Maori Act 1993. The Maori Land Court has confirmed in a letter to Marac's solicitors dated 24 September 2008 that "there is no Maori incorporation by the name of Nga Uri Whatkatipurunga O Ngarae (Inc) or other similar name". [21] I find that the caveat is a nullity, there is no legal person identified as the person having a beneficial interest under the agreement for sale and purchase of 26 June 2008. I should add that although the applicant had opportunity to address this in an affidavit in reply, it did not do so.Competing interests and indefeasibility[22] Leaving aside the need to have an identifiable claimant for the caveatable interest, the critical issue for the applicant in this case is whether its claim can prevent Marac taking steps to enforce its interest under its prior mortgage. In my view it is quite clear that it cannot. Although Twilight had a right to sell the land, that right could only be exercised subject to Marac's rights as mortgagee. The indefeasible rights of a registered mortgagee include the power of sale under the mortgage: Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Limited [1984] 2 NZLR 704, 715 – 6. [23] Purchasers take the risk that there will not be a mortgage default and a mortgagee sale pending settlement of the purchase. This is a particular consideration for purchasers under long term agreements: National Mutual Finance (1988) Limited v Berryman HC WN M451/91 2 October 1991, McGechan J. These rights of the mortgagee cannot be displaced without the mortgagee's consent or without conduct which equity will regard as reason to defer priority: National Mutual Finance (1988) Limited v Berryman.[24] Marac's rights as mortgagee were established long before the applicant obtained its beneficial interest from Twilight. Twilight could not give the applicant any greater rights than it had at the time of the agreement. Its rights as owner were by that time subject to Marac's rights under its mortgage. These included the power of sale. [25] There is no basis on the evidence before me for challenging the indefeasibility of Marac's mortgage. The only issue, therefore, is whether Marac has consented or acted in such a way as to justify the intervention of equity. The evidence is clear that it has not consented (the applicant did not contest Marac's evidence that it had no knowledge of the agreement and did not consent). There is no evidence which in any way supports an argument that Marac has acted improperly. There is no practical advantage to the applicant to maintaining the caveat to protect its beneficial interest under the agreement. That interest must give way to Marac's rights.Other grounds advanced[26] I will deal briefly with other points raised by counsel for the applicant. First is the preliminary point regarding foreclosure. Counsel argued that Marac was foreclosing, and thereby denying Twilight's equity of redemption. He submitted that this was precluded by s 117 of the Property Law Act 2007. This argument is misconceived. Section 117 merely removes the old equitable remedy of foreclosure (allowing the mortgagee to step in and take title following default). The law recognises Marac's right to sell, after giving proper notice, and it is obliged to account to Twilight for surplus sale proceeds. Twilight can still redeem the mortgage by paying what it owes to Marac. [27] The sole director of Twilight, Mr Sadiq, filed a second affidavit in reply to the affidavit of Marac's general manager Mr Wilkinson, filed the day before the hearing. In that affidavit, for the first time, he disputes that Marac paid the loan to Twilight. Counsel argued that this raised a dispute of fact (Mr Wilkinson had given evidence that $1,369,011.75 was due under the loan and mortgage). Counsel submitted that this raised a dispute of fact which could not be resolved on thisapplication and, if the applicant's case was established, would be justification for maintaining the caveat. [28] I accept the submission of counsel for Marac that this proceeding is not a challenge to the mortgage by Twilight, and therefore the dispute on this point is not relevant. Even if it were, I would not be inclined to accept it as a credible dispute. Mr Sadiq did not raise it in his first affidavit, and the language of the second affidavit is tentative in relation to it (he seems to be suggesting that Mr Wilkinson's evidence that $1,369,011.75 was not evidence in the absence of bank statements and other documents proving payment to Twilight). If there was any truth to the assertion that Marac had not paid the money I would have expected this to have been the first response to the Property Law Act notices served on Twilight and Mr Sadiq, rather than Mr Sadiq raising it, belatedly, in his evidence in this application. Even if Twilight believed that the matter was better advanced in this application (which I would regard as surprising but not wholly impossible) it is a matter that I would have expected to have been raised in the original evidence in support of the application. That would then have given Marac the opportunity to have replied in its opposition. [29] The Court is not required to accept every assertion of fact as raising a dispute, notwithstanding its inherent lack of credibility: Eng Mee Yong v Letchumanan[1980] AC 331 (PC). I find this evidence lacking any credibility. [30] Counsel for the applicant also argued that its interest was now vested in a Maori incorporation pursuant to Part 13 of Te Ture Whenua Maori Act 1993, and that this raised further legal issues which needed to be dealt with in the Maori Land Court. Counsel did not expand on this submission. I find no legal merit in it, nor any factual basis for it. [31] The last point that I will address is a further contention raised in the second (reply) affidavit of Mr Sadiq that he did not accept that proper disclosure had been made at the time of the loan. Counsel for the applicant did not develop this contention in any way in his supplementary submissions. Again, I find this evidence lacking in credibility for similar reasons given to the alleged dispute as to the loan having been advanced. It is a matter that I would have expected Twilight to haveadvanced on its own behalf, if necessary in a proceeding to challenge Marac's mortgagee sale process. I also note that one of the matters of alleged non-disclosure (a reference to trading signatures on the loan documents in local or international bond markets) is obscure to put it at its highest, and that both it and the other point (disclosure of the source of funds) are not matters that I would have expected to have been part of initial disclosure.Decision[32] The caveatable interest is claimed by an incompletely identified group of persons rather than a single legal person. There is no evidence to show what legal person (if any) can claim an enforceable interest under the agreement for sale and purchase. However, in any event the caveatable interest cannot prevail against Marac's prior indefeasible interest as mortgagee. There is no practical purpose in sustaining the caveat. [33] The application is dismissed.Costs[34] In a letter written on the day before the hearing Marac's solicitor invited the applicant to withdraw, and put it on notice that Marac would be seeking solicitor/client costs against deponents, solicitors and counsel should that not take place. The letter set out reasons why Marac's solicitors said that the application could not succeed. They accord with the two major points on which I have found for Marac. At the conclusion of the hearing counsel for Marac sought costs, but asked for leave to file a memorandum. [35] I make the following directions with regard to determination seeking costs: a) Counsel for Marac is to file and serve any memorandum for costs within 7 days;b) Counsel for the applicant is to file and serve any memorandum in reply within a further 7 days; c) I will determine costs on the basis of the memoranda filed, unless any issue is raised on which I consider that I would be assisted by further argument. In that event the Registrar will advise counsel of a hearing date. ____________________Associate Judge Abbott