CRIBB AND STEVENS v FM CUSTODIANS LIMITED [2018] NZCA 183

CRIBB AND STEVENS v FM CUSTODIANS LIMITED [2018] NZCA 183 [6 June 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA432/2017[2018] NZCA 183BETWEEN ROBERT HOANI CLIFFORD CRIBB ANDKAREN LYNNE STEVENSAppellantsAND FM CUSTODIANS LIMITEDRespondentHearing: 8 March 2018Court: Asher, Brewer and Collins JJCounsel: S A McKenna and J A Alchin-Boller for AppellantsN L Penman-Chambers and R W Belcher for RespondentJudgment: 6 June 2018 at 11 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellants must pay the respondent costs for a standard appeal on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Asher J)Introduction[1] The issue in this appeal is whether a mortgagee selling a property occupied bynon-owners under its power of sale is entitled to recover the costs of removing andstoring the non-owners' chattels. In the High Court the statement of claim ofthe respondent mortgagee, FM Custodians Ltd (FM Custodians), pleaded that theappellants, Robert Cribb and Karen Stevens, trespassed by leaving their chattels onthe mortgaged property after they were given notice to vacate. It asserted that, asinvoluntary bailee of the trespassing chattels, it acted reasonably in removing andstoring the chattels. It claimed the costs associated with that removal and storage. Thestatement of defence of Mr Cribb and Ms Stevens alleged that the removal of thechattels was unlawful, and asserted a counterclaim in trespass based onFM Custodians' removal of the chattels. After a short trial Woolford J upheld the claimof FM Custodians, and that judgment is the subject of this appeal.1Background[2] There is a long and unfortunate history of dealing between FM Custodians andMr Cribb, which we do not need to traverse in detail. The land in question is asubstantial residential property at 103 Te Awa Road, Hamilton. It was owned bySOS Investments Ltd (SOS). Mr Cribb was SOS's sole director, and was a shareholderof the company. There was a mortgage of the property to FM Custodians. SOS didnot make loan payments and was in default of its mortgage obligations.[3] On 7 November 2013 FM Custodians filed High Court proceedings seeking anorder for possession of the property as mortgagee. On 17 April 2014 the High Courtmade an order in favour of FM Custodians directing SOS to deliver possession of theproperty to it.2 This decision was appealed to this Court and the appeal wasunsuccessful.3[4] Following that decision, on 19 August 2015 FM Custodians' solicitors wroteto SOS's solicitors by email requiring Mr Cribb to vacate the property and deliver upthe keys by 26 August 2015. On 21 August 2015 Mr Cribb's solicitor replied advisingthat Mr Cribb would "cooperate regarding possession" and invited FM Custodians'solicitors to enter into discussions to make arrangements in that regard. This email onbehalf of Mr Cribb effectively ignored the request that he vacate and deliver the keyswithin the stated time.1 FM Custodians Ltd v SOS Investments Ltd [2014] NZHC 817.2 At [58].3 SOS Investments Ltd v FM Custodians Ltd [2015] NZCA 380.[5] On 24 August 2015 Mr Cribb's solicitors wrote to FM Custodians' solicitors,again stating that Mr Cribb was willing to cooperate to obtain the best price for theproperty and willing to make the keys available. However, they said that Mr Cribband Ms Stevens were in Europe and the property was being looked after by a familyfriend. Mr Cribb was prepared to arrange to vacate the property at an agreed datewhich it was anticipated would coincide with the arrangements for the sale of theproperty. We comment that despite the mild language used, Mr Cribb was effectivelythumbing his nose at FM Custodians, given that he had no right to remain in theproperty and had been asked to vacate by 26 August 2015.[6] On 26 August 2015 the High Court issued an order instructing the sheriff ofthe High Court at Hamilton to take possession of the property on behalf ofFM Custodians. The possession order was in a standard form, and had a section fortaking possession of chattels, but that had been crossed out. On 4 September 2015FM Custodians' solicitors sent a copy of that possession order to Mr Cribb's solicitorsadvising that their instructions were to proceed to enforce the order.[7] On Monday 7 September 2015 a process server served the possession order onthe occupier of the property at the time, Ms Lorna Hose, who was associated with theappellants. On 9 September 2015, the sheriff executed the possession order. This wasdone by bailiffs with the police in attendance. Immediately prior to the taking ofphysical possession by FM Custodians, a removal firm removed the chattels that werein the property and put them into storage.[8] On 11 September 2015 the appellants' solicitors wrote to the solicitors forFM Custodians objecting to the taking of possession and the removal of the chattels.FM Custodians responded on 16 September 2015 stating that it was entitled to takethe steps it had, and that it had given the appellants an opportunity to deliver vacantpossession. It stated that the chattels had been packed and wrapped and provided aninventory of the chattels taken. The letter advised where the chattels were stored, andforwarded the invoice of the firm that had removed the chattels with its costs to datein removing and storing those chattels. It provided trust account details for thepurposes of payment for those costs.[9] During the enforcement process Mr Cribb had provided written authority foran agent to uplift a limited number of the chattels. FM Custodians had cooperated,with Mr Cribb's agent taking those items into his care. In terms of the bulk of itemsstill not uplifted FM Custodians said that it would provide access to the property for afurther 14 days.[10] The chattels then stayed in storage for a year and a half until the appellantsprovided an address to which they could be delivered. The chattels were delivered tothat address on 28 March 2017. The costs of removal and storage were not paid.FM Custodians filed proceedings to recover those costs in the High Court.The High Court decision[11] Woolford J held that under s 139(1)(c) of the Property Law Act 2007 (the Act),FM Custodians had become a mortgagee in possession of the property on the date ofits application to the High Court for a possession order on 7 November 2013.4 Thedate that FM Custodians entered into or took physical possession was not significant.5It had the right to take possession when it did and the appellants had notice that theyhad to vacate and take away any chattels that happened to be on the property.6 He heldthat FM Custodians was an involuntary bailee when it removed the chattels. It wasentitled to be compensated for expenditure incurred in the fulfilment of the duty ofcare imposed on it. What FM Custodians did in storing and insuring the chattels wasright and reasonable.7[12] He noted that the appellants chose not to provide a delivery address for18 months, and could not complain about the costs. He gave judgment against theappellants for $51,586.40 together with interest.84 FM Custodians Ltd v Cribb [2017] NZHC 1562 at [19].5 At [20].6 At [22].7 At [31].8 At [32].The contentions of the parties[13] Mr McKenna for the appellants submitted that the appeal turned ultimately onthe issue of whether, for the purposes of the law of trespass, the party trespassedagainst must be in actual physical possession of the land. He argued that a plaintiffwho claims damages in this situation must have exclusive possession and there mustbe an intention to possess the land. FM Custodians had neither at the time the chattelswere removed, which was immediately prior to the physical taking of possession.At that time, FM Custodians only had what Mr McKenna termed "technicalpossession", a form of backdated possession by virtue of s 139(1)(c) of the Act.He submitted that such possession is not sufficient to found a claim in trespass.[14] He submitted that FM Custodians should have allowed the chattels to remain,after physical possession had been taken by it, and there should have been anegotiation while the property was marketed. The chattels should only have beenremoved from the property when the time came for vacant possession to be handedover to the purchaser. If during that time explicit notice had been given for the removalof the chattels, that could have given rise to a right to claim for the costs of removingthe chattels. He submitted that the error was not of FM Custodians but of the sheriffin requiring that the chattels be removed, and that the sheriff should be liable for anydamage that was caused by the mistake.[15] Ms Penman-Chambers for FM Custodians submitted that when the sheriff tookpossession of the property on behalf of FM Custodians on 9 September 2015,FM Custodians had the right to immediate possession by virtue of the High Courtorder granting possession on 17 April 2014, and later affirmed on appeal on18 August 2015. The right of possession dated back to 7 November 2013 by virtue ofs 139(1)(c) of the Act. The chattels were trespassing from that date, andFM Custodians was entitled to remove and store the chattels. In general termsFM Custodians supported the judgment of Woolford J in all respects.FM Custodians' right to possession[16] Section 137(1)(c) of the Act provides:137 Exercise of power to enter into possession(1) If a mortgagee becomes entitled under a mortgage, after compliancewith subpart 5, to exercise a power to enter into possession ofmortgaged land or goods, the mortgagee may exercise that powerby—(c) applying to a court for an order for possession of the land orgoods.[17] Section 139(1)(c) of the Act provides:139 When mortgagee becomes mortgagee in possession(1) A mortgagee who exercises a power to enter into possession ofmortgaged land or goods in accordance with section 137 becomes amortgagee in possession of the land or goods on the earlier of—(c) the date of the mortgagee's application to the court for theorder if—(i) the mortgagee applies to the court for an order forpossession of the land or goods; and(ii) the court, in response to the mortgagee's application,makes the order.[18] In this case the High Court, confirmed by the Court of Appeal, made anunambiguous order for possession of the property on 17 April 2014. At that pointFM Custodians had a right to possession by virtue of ss 137(1)(c) and 139(1)(c),backdated to 7 November 2013 when the application was made. Rule 17.80 of theHigh Court Rules 2016 provides:17.80 Effect of possession order(1) A possession order authorises and requires an enforcing officer todeliver possession of the land or chattels described in the order to theperson named in the order.(2) For the purpose described in subclause (1), the officer may—(a) eject any other person from land; or(b) seize and take possession of the chattels.(3) A possession order may be in form E 8.[19] It can be seen that delivery of possession is not defined. Nevertheless, deliveryof possession must take place when the sheriff ejects the occupying party. That isimplicit in r 17.80(2)(a). Form E 8 of the High Court Rules, which sets out the formof a possession order, authorises and requires the sheriff to take possession of the liableparty's land, "ejecting others from the land as necessary".[20] The appellants and the person occupying the property, Ms Hose, had beenserved with the possession order on 4 and 7 September 2015 respectively, and thebailiffs took possession and ejected Ms Hose on 9 September 2015 as we havepreviously described. The chattels were still in the property. In that regard it had notbeen vacated as requested on 19 August 2015.[21] The appellants and indeed Ms Hose had ample opportunity to vacate thepremises and remove the chattels between 19 August 2015 and 9 September 2015.The actions of FM Custodians in enforcing the possession order, and the sheriffthrough the bailiffs in entering the property, were lawful having been ordered by theCourt, and reasonable in that fair notice had been given. From 9 September 2015FM Custodians had physical possession of the property.Were the chattels trespassing?[22] Historically trespass has been a cause of action available to the person in actualpossession of the land. However, the law has developed to enable a person with animmediate right to possession to sue. This was recognised by this Court inLockwood Buildings Ltd v Trust Bank Canterbury Ltd where it was observed that aperson has the right to sue in trespass if that person had the right to immediatepossession, providing actual possession is obtained before suit.9 It was stated: "[t]hisis known as trespass by relation; the possession actually taken is deemed to relate backto the time when the right to take possession accrued".109 Lockwood Buildings Ltd v Trust Bank Canterbury Ltd [1995] 1 NZLR 22 (CA) at 32.10 At 32.[23] Tipping J went on to quote a statement from Todd on Torts that is substantiallythe same in the current edition:11In order to sue under this exception [trespass by relation], therefore, theplaintiff must establish two things. First, the plaintiff must establish that atthe time of the trespass he or she was entitled to immediate possession.Normally, therefore, he or she will point to the title or an interest under a leaseor mortgage. In the last case, the mortgagee will need to show that, at the timethe trespass was committed, he or she had served on the mortgagor a noticeunder s 92 of the Property Law Act 1952 and that the mortgagor had failed toremedy the default specified in the notice before the date therein specified.That is because the power to enter into possession does not becomeexercisable before then.The second matter which the plaintiff must establish is the taking of possession beforecommencing the proceeding.12 The common law concept of relation back is codifiedwith respect to mortgagees by s 139(1)(c) of the Act.13[24] The fact that the chattels were removed before physical possession was takendoes not affect FM Custodians' ability to sue in trespass, or to treat the chattels astrespassing. It is plain that to place or leave a chattel on the land of another who hasa right to possession without consent is a trespass. A party lawfully in possession ofland is entitled to enjoy that land free from trespassing chattels.14 Any form ofpossession if it is clear and exclusive, and exercised with the intention to possess, issufficient to support a claim.15The rights of FM Custodians as involuntary bailee[25] What steps then could FM Custodians take with the trespassing chattels? Inpractical terms their options were limited. They could leave them there, but that wouldpreclude them selling the property and in the short term could constrain the marketingand maintenance of the property. They could place them out on the street, but thechattels clearly had considerable value, and that would be a needlessly destructive act.11 At 32. See also Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters,Wellington, 2016) at [9.2.04(4)].12 Lockwood Buildings Ltd v Trust Bank Canterbury Ltd, above n 9, at 32.13 Law Commission A New Property Law Act (NZLC R29, 1994) at 325–326.14 HongKong and Shanghai Banking Corp Ltd v Erceg HC Auckland CIV-2010-404-2835,1 November 2010 at [21].15 Halsbury's Laws of England (5th ed, 2015, online ed) vol 97 Tort at [574].The appellants were plainly of no mind to uplift them in the short term or to assist intheir storage.[26] Ms Penman-Chambers submitted that in this situation FM Custodians wasentitled to relief by virtue of its status as an involuntary bailee of the trespassingchattels. An involuntary bailee is defined in Palmer on Bailment:16 as a person whose possession of a chattel, although known to him and theresult of circumstances of which he is aware, occurs through events overwhich he has no proper control and to which he has given no effective priorconsent.[27] We accept that this is a correct statement of the law in New Zealand.17 Amortgagee who takes possession of a property, which contains inside it chattelsbelonging to or under the control of the mortgagor or a third party who is aware of themortgagee's right to possession, may be in the position of an involuntary bailee. Insuch a situation possession of the chattels has not been sought by the mortgagee, andthe mortgagee finds them in the property without that mortgagee's permission orconsent, despite the mortgagee's expressed wish to take possession of the property byan earlier date. The chattels are likely to be an impediment to any sale. In suchcircumstances the mortgagee must, if it has acted reasonably by having given fairnotice, be able to remove and store the chattels.[28] In Da Rocha-Afodu v Mortgage Express Ltd a mortgagee found chattels on aproperty when it took possession. The chattels were not removed by the mortgagordespite numerous requests by the mortgagee both before and after the mortgagee tookpossession. The mortgagee disposed of the chattels having given 14 days' notice oftheir intention to do so. The Court found there to be an involuntary bailment, and themortgagee's acts to be lawful. It was observed by Arden LJ of the English and WalesCourt of Appeal:18 within each category of bailee there will indeed be a wide variety ofcircumstances. However, the Court can take those into account when applying16 Norman Palmer Palmer on Bailment (3rd ed, Thomson Reuters, London, 2009) at [13-001](footnotes omitted).17 We note that it was endorsed by the English Court of Appeal in Da Rocha-Afodu v MortgageExpress Ltd [2014] EWCA Civ 454 at [9] and [49]. See also Laws of New Zealand Bailment(online ed) at [12].18 Da Rocha-Afodu v Mortgage Express Ltd, above n 17, at [50].the duty which is imposed on involuntary bailees that they should do what isright and reasonable in all the circumstances. The Court must be alert to haveregard to all the particular circumstances in the case.The Court of Appeal upheld the trial Judge's ruling that the defendant bailee had donewhat was right and reasonable in the circumstances.[29] What is right and reasonable depends upon the facts in each case. In Campbellv Redstone Mortgages Ltd, a decision of the English High Court, a mortgagee hadenforced a possession order and became the involuntary bailee of goods left at theproperty.19 It was held there that the mortgagor had acted unreasonably in notremoving the chattels, and that the mortgagee was entirely justified in commencing toclear the property of the chattels and dispose of them.20 There was no claim for thecosts of storage or removal. It was observed:21As the mortgagee in possession, Redstone became a bailee through eventsover which it had no proper control. Its obligation in law as involuntary baileewas to do what was right and reasonable in the circumstances of the case.[30] In the decision of the Ontario Court of Appeal of R v Howson Laskin JAcommented that an involuntary bailee who removed a trespassing chattel from his orher property to a place of safekeeping should be entitled to recover the reasonableexpenses incurred in doing so.22[31] FM Custodians acted lawfully and reasonably in taking possession of theproperty. The position of the appellants in deferring any meaningful engagement onthe issue of vacant possession was unreasonable. It should also be observed that amplenotice had been given to the appellants and indeed Ms Hose of the pending taking ofpossession. The appellants chose to stay in Europe. Ms Hose chose to stay on theproperty and clearly was not prepared to leave without instructions from the appellantsto do so.[32] Therefore, when the options available to FM Custodians are considered, theoption chosen of removal, storage and forwarding of the chattels as soon as an address19 Campbell v Redstone Mortgages Ltd [2014] EWHC 3081 (Ch).20 At [122].21 At [117].22 R v Howson (1966) 55 DLR (2d) 582 (ONCA) at [37].was provided, was entirely right and reasonable. There was no submission forMr Cribb that the giving away or destruction of the chattels would have beenpreferable. As we have discussed, Mr McKenna's suggestion that they should havebeen left in place for some further negotiation or return closer to sale is not areasonable expectation of a mortgagee who is trying to sell. Moreover, the unhelpfulcorrespondence of Mr Cribb and the long history of failures to respond to deadlineson his part and that of SOS could not leave a reasonable mortgagee with anyconfidence that Mr Cribb would be any more helpful about the removal of the chattelsat any later date. An involuntary bailee in the position of FM Custodians was entitledto act to remove the chattels, and recover its reasonable costs in these circumstances.Conclusion[33] It follows that we are satisfied that FM Custodians was entitled to remove andstore the chattels of the appellants on 9 September 2015 as involuntary bailee, andshould be reimbursed for the reasonable costs incurred in doing so. We are satisfiedthat FM Custodians' actions were lawful and reasonable. The appellants' conduct, intaking no meaningful action in relation to the chattels until approximately 18 monthsafter FM Custodians took possession, and refusing to co-operate in giving up vacantpossession, were not. Therefore we agree with the decision of Woolford J and thedamages award that he made.Result[34] The appeal is dismissed.[35] The appellants must pay the respondent costs for a standard appeal on a band Abasis and usual disbursements.Solicitors:Grantham Law, Hamilton for AppellantsHesketh Henry, Auckland for Respondent