SOUTHLAND BUILDING SOCIETY v PRICE [2015] NZHC 1164

SOUTHLAND BUILDING SOCIETY v PRICE [2015] NZHC 1164 [28 May 2015]IN THE HIGH COURT OF NEW ZEALANDINVERCARGILL REGISTRYCIV-2014-425-000090[2015] NZHC 1164BETWEEN SOUTHLAND BUILDING SOCIETYPlaintiffAND JEFFREY WILLIAM PRICESecond DefendantHearing: 6 May 2015Appearances: J N P Young for PlaintiffD J More for Second DefendantJudgment: 28 May 2015JUDGMENT OF ASSOCIATE JUDGE OSBORNEas to plaintiff's summary judgment applicationIntroduction[1] In this proceeding, the plaintiff (SBS) sued three defendants (the defendants) as guarantors of loans made by SBS to Three Miners Vineyard Ltd (Three Miners).[2] Two of the defendants (Mr Price and Ms Mitchell) were husband and wife. The third defendant (Miners Lane) was their associated company. SBS obtained summary judgment against Ms Mitchell and Miners Lane on an unopposed basis.[3] Mr Price opposes the summary judgment application. He asserts that he has a set-off or cross-claim arising from a breach of SBS's duty as mortgagee whenexercising a power of sale over land which Mr Price and Ms Mitchell had provided as security for repayment of the SBS loans.Chronology13 January 2003 SBS registers a mortgage over land at Earnscleugh (theEarnscleugh property) owned by Ms Mitchell and Mr Price to secure their indebtedness to SBS (the Earnscleugh property containing "the Three Miners Vineyard" but withthe vines owned by Three Miners).27 April 2010 The defendants by deed guarantee, in the event of defaultof payment to SBS of Three Miners' debt, the payment of all indebtedness including future and contingent liabilities of Three Miners to SBS (the guarantee debt).June 2010 to May 2013 Three Miners obtains loans from SBS.November 2012 Ms Mitchell and Mr Price separate, Mr Price assuming all financial administration of Three Miners.31 January 2013 APL Property Queenstown Ltd (APL) assesses the current market value of the property at $1,550,000.July 2013 (to July 2014) SBS agrees to accept interest-only payments ($8,000 per month for one year).23 October 2013 APL assesses the current market value of the property at $1,550,000 (again).December 2013 Tentative resolution reached between Ms Mitchell and Mr Price (not subsequently implemented).February 2014 Ms Mitchell withdrew her consent to the December 2013 settlement.May 2014 SBS loans are due for renewal. Ms Mitchell refuses to execute the fresh security documents.June 2014 Mr Price advises SBS that the defendants had been unable to agree on a restructuring and that Three Miners wouldbe unable to meet principal and interest payments ($22,000 per month) due to recommence on 10 July 2014.20 June 2014 Meeting of SBS and defendants at which: defendants agree to sell the property; defendants seek further three months interest-only; payments; defendants seek further three months to sell the property; and SBS and defendants discuss possible deadline treaty sale by defendants, with defendants to prepare marketing plan.3 July 2014 SBS emails defendants to agree to defendants having until 25 July 2014 for deadline treaty sale (but reserving rights and not agreeing to interest-free payments).7 July 2014 Meeting between SBS and Mr Price with discussion as toThree Miners' continuing business in the meantime.25 July 2014 No offers received by defendants for the property.July 2014 SBS notes transfers totalling $55,629.52 in one monthfrom Three Miners' SBS account to Mr Price's Westpacaccount. Ms Mitchell notifies SBS that "Mr Price has been stealing money from Three Miners".August 2014 Three Miners defaults on payments to SBS.Mid-August 2014 SBS makes demands upon Three Miners and thedefendants for repayment of the Three Miners' loans.19 August 2014 SBS appoints receivers to Three Miners.20 August 2014 SBS files this proceeding and obtains a freezing orderover Mr Price's bank account.29 August 2014 APL assesses the property on a forced sale value, on an"as is" forced sale at $700,000 and on an "operational vineyard" forced sale at $1,000,000.24 October 2014 SBS, as mortgagee, sells the Earnscleugh property for $625,000 by mortgagee sale (with settlement due December 2014). Three Miners (in receivership) sells its business for $445,000 at the same time to the buyers of the Earnscleugh property (with settlement due December 2014).15 December 2014 Richard Cameron, a debt manager for SBS, filed an updating affidavit as to the quantum of the balance of the debt (after realisations), being a sum of $448,682.91 (as at 5 December 2014).Mr Price's opposition[4] Mr Price was initially self-represented.[5] On 22 January 2015, Mr Price filed a simple notice of opposition in which he essentially said that he had an arguable defence.[6] He referred to a statement of defence filed on the same day. It does not set out specific grounds of opposition or defence under distinct heads. Instead, in a somewhat narrative way, Mr Price explains his defence.[7] The statement of defence in turn refers to an affidavit of Mr Price (which was also filed on 22 January 2015). Mr Price explains that he and his wife, Ms Mitchell had separated in November 2012. He deposes that he later discovered that MsMitchell had made withdrawals of company funds. He refers to the ensuing difficult financial period during which SBS agreed to vary the terms of loan to allow Three Miners and the defendants to pay interest only (approximately $8,000 per month) on the loans for a year from mid-2013 to mid-July 2014 (full contractual payments of interest and principal would have required payments of $22,000 per month). Mr Price refers to subsequent difficulties with Ms Mitchell who refused to cooperate in relation to any financial reorganisation. He and Ms Mitchell had negotiations with SBS in June 2014. He alleges negligence and a lack of good faith on the part of SBS and the receivers in the process of realisation of securities and assets.[8] Mr More subsequently agreed to represent Mr Price. He filed submissions for Mr Price and represented him at the hearing.[9] An additional affidavit was filed on behalf of Mr Price. Ivan Cockroft deposed that he is an experienced commercial and property law solicitor, with experience of vineyards and the winemaking industry. He provided his opinion as to aspects of the sale process, to which I will return. He did not qualify himself as an expert in terms of r 9.43(2) High Court Rules. Leave was not expressly sought in terms of r 9.43(2) for his evidence to be offered. Having regard to the limited time available to Mr More to brief his evidence, I (of my own motion) grant such leave.[10] For the hearing, Mr More responsibly narrowed Mr Price's grounds ofopposition to the single issue of whether SBS had breached its duty under s 176 Property Law Act 2007.The plaintiff's summary judgment application – the principles[11] The starting point for a plaintiff's summary judgment application is r 12.2(1)High Court Rules, which requires that the plaintiff satisfy the Court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.[12] I summarise the general principles which I adopt in relation to this application:(a) Commonsense, flexibility and a sense of justice are required.1(b) The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.2(c) The Court will not hesitate to decide questions of law where appropriate.3(d) The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements and affidavits.4(e) In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.5(f) In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation – the defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the Notice of Opposition.6(g) In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.71 Haines v Carter [2001] 2 NZLR 167 (CA) at [97].2 Pemberton v Chappell [1987] 1 NZLR 1 (CA).3 European Asian Bank AG v Punjab & Sind Bank [1983] 2 All ER 508 (CA) at 516.4 Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21.5 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC).6 Middleditch v NZ Hotel Investments Ltd (1992) 5 PRNZ 392 (CA).7 Jowada Holdings Ltd v Cullen Investments Ltd CA 248/02, 5 June 2003 at [28].(h) The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process.8(i) Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.9The duty of the mortgagee exercising a power of saleThe statutory duty[13] By s 176 Property Law Act, a mortgagee who exercises a power to sell a mortgaged property owes a duty of reasonable care to the mortgagor (and others) to obtain the best price reasonably obtainable as at the time of sale.[14] In Robertson v ASB Bank Ltd, the Court of Appeal identified three propositions as being most relevant to the decision the Court had to make in that case:10(a) The duty is cast upon a mortgagee in an endeavour to ensure that steps are taken to obtain the best price reasonably obtainable, in the circumstances.(b) Taking proper steps does not guarantee that the best price reasonably obtainable will in fact be paid by a purchaser. The inquiry is into the conduct of the mortgagee in exercising its power of sale, not whether another purchaser (on another day) might have paid more for the property.(c) Compliance with the duty is assessed by reference to the steps taken from the time the mortgagee decides to sell the property to the point of actual sale. That assessment must be viewed in a practical way, having regard to relevant commercial dynamics.8 Bilbie Dymock Corporation Ltd v Patel & Bajaj (1987) 1 PRNZ 84 (CA).9 Pemberton v Chappell, above n 2.10 Robertson v ASB Bank Ltd [2014] NZCA 597 at [29].[15] The Court went on to recognise that whether there has been compliance with the s 176 duty will always be a question of fact and degree.11[16] In the context of a summary judgment application, the plaintiff must establish that it is not arguable that there has been a breach of the s 176 duty.The roles of SBS and Three Miners (in receivership)[17] In his written submissions, Mr More spoke of unreasonable action on the part of SBS and the receivers.[18] An inclination to look at the conduct of both SBS and Three Miners (in receivership) is understandable in this case because of the different ownership of the land (owned by Ms Mitchell and Mr Price) and the vineyard operation (owned by Three Miners). But, as was clearly appreciated by those involved and carried through in the way in which the sale transactions were separately documented (albeit with the one purchaser), the legal responsibilities of SBS and Three Miners (in receivership) were distinct. SBS was not responsible for the actions of Three Miners (in receivership). The s 176 duty upon SBS was in relation to the sale of the property only.[19] In this regard, a substantial proportion of Mr Cockroft's short affidavit wasaddressed to assessments in relation to the vineyard operation (controlled by thereceivers) rather than to the property itself (the subject of SBS's sale). Mr Cockroft's view that "the accounts do not show the need for a forced sale" misses the point.Any failure to properly understand the vineyard's accounts might be a criticism ofthe decision-making of Three Miners (in receivership) but it is not valid as against SBS.[20] In his oral submissions, Mr More accepted this position but suggested that there was sufficient evidence to indicate that SBS had become subservient to ThreeMiners' receivers in relation to the sale process. Further, Mr More submitted that11 At [30].negligent conduct on the part of the receivers at least arguably gives rise, throughSBS's adoption, to a claim against SBS. I return to this issue at [34] below.The decision of SBS to exercise its power of sale[21] Mr More submitted that the decision of SBS to exercise its power of sale, at the time the decision was taken, was flawed. He referred particularly to the fact that Three Miners had met its interest payments to July 2014. Mr More submitted that the financial position of Three Miners did not justify a forced sale.[22] As a matter of law, SBS's decision to exercise its power of sale cannot give rise to a mortgagor's claim for a breach of the s 176 duty. Once a mortgagor commits a breach entitling the mortgagee to exercise his power of sale, the decision to do so is for the mortgagee and not for the Court. As indicated by the Court ofAppeal's propositions in Robertson v ASB Bank Ltd, the duty is assessed by reference to steps taken from the time of the decision to sell the property, not in relation to the making of the decision to sell.12[23] As it is, if the Court were to assess the commercial justification of SBS'sdecision to exercise its power of sale, the circumstances affecting the property in August 2014 clearly justified the decision. The relationship between the shareholder/directors of Three Miners was dysfunctional. They had been unable to use the advantage of a one-year grace period of interest-only payments to resolve their problems. Mr Price had signalled to SBS that Three Miners would be unable to meet the August return to payments of principal and interest (the $8,000 per month requirement moving to $22,000 per month). SBS had detected worryingly largesums being moved from Three Miners' bank account to Mr Price's bank account,which this Court found sufficient to justify a freezing order. Ms Mitchell wasreporting to SBS that Mr Price was stealing Three Miners' money. The need for SBS to resort to its remedies was inescapable.12 At [29].Process of sale – tender process[24] Notwithstanding the separate ownership of the land and the vineyard operation, SBS and the receivers made the decision to market the two together. That this was the sensible course is reflected in the fact that Mr Price (when he had many other criticisms) did not criticise this aspect of SBS's approach.[25] Timothy Ward, one of the receivers of Three Miners, provided affidavit evidence as to his involvement. He deposes that the receivers went to great lengths to obtain the best price reasonably obtainable as at the time of sale and lists the following steps taken:28.1 Receiving marketing proposals from three real estate agents being Farmlands Real Estate, Southern Wide Real Estate and Harcourts Real Estate Group (who had previously been involved in marketing the property);28.2 Appointing Farmlands Real Estate, being a reputable Real Estate Agent with experience in the marketing of rural properties as our independent marketing and sales agents based on the merits of their proposal;28.3 As advised by Farmland Real Estate, carrying out marketing with a budget of $4,700 + GST. Advertisements were placed in the Christchurch Press, Southland Times, Otago Daily Times, Sunday Star Times and The Farmlander (Farmlands national publication) over a 5 week period. An information memorandum was also produced by Farmlands which was to be provided to interested parties.28.4 Conducting a tender process, thereby ensuring a competitive process to test the market.28.5 As detailed above, the commission of a registered valuation which was relied upon in the sales process.[26] Mr More submitted that the decision to hold a tender process as against an auction was flawed. Mr Price had not produced any evidence let alone expert evidence to support that submission. On the state of the evidence before me, it is not an arguable contention for at least two reasons.[27] First, SBS and the receivers took advice from the range of professionals normally involved in such processes.[28] In addition to what may be described as those more general matters pertaining to sale process, the receivers (having regard to Three Miners' interest inthe vineyard) themselves undertook a number of steps in relation to the vineyard itself. Mr Ward deposed that the steps undertaken by the receivers costapproximately $55,000. The receivers considered that the vineyard was in a "poor state" when they were appointed, with vines not pruned or maintained. Mr Warddeposes that the receivers:7.1 consulted with a number of independent viticulture experts;7.2 recovered one of the diesel pumps from a nearby property;7.3 reinstated the second diesel pump which had been returned onsite (presumably by the Second Defendant);7.4 purchased and reinstalled frost fighting alarming system;7.5 engaged a frost fighting manager;7.6 purchased and installed fuel tanks (which had also been removed);7.7 pruned the vineyard;7.8 mowed the vineyard area;7.9 sprayed the vines for disease protection and7.10 carried out ongoing maintenance of the irrigation systems.[29] Mr Price made a number of criticisms of the sale process.[30] First, Mr Price criticised the adoption of a tender process rather than an auction process. Mr More referred to observations by various courts in relation to the general acceptability of an auction process. For instance, he referred to the observation of the Court of Appeal in Long v ANZ National Bank Ltd, in which the Court observed, as one of the matters relevant to the application of s 176 Property Law Act:13Valuations lose much of their significance if reasonable care is taken, there has been a properly advertised and conducted auction, and the property has been sold at auction or by negotiation after the auction.(my emphasis)13 Long v ANZ National Bank Ltd [2012] NZCA 132 at [21](c) (emphasis added).[31] Mr More seeks to draw from observations such as those in Long v ANZ National Bank Ltd some form of judicial preference for auctions which is not warranted by the authorities. In cases such as Long, the Courts are discussing auctions because that was the sales process adopted in the particular case. I have not been referred to any suggestion by a Court that a sale by tender will generally be an inappropriate means of mortgagee sale.[32] In Westpac Banking Corporation v Chisholm, Associate Judge Doogue rejected such a suggestion which had been made in the evidence of a witness who was not qualified as an expert.14 I respectfully adopt his Honour's observation that:15 sale by tender is by no means an uncommon method of selling theproperty and is one, furthermore, that seems to be accepted by those in the market selling properties as being an acceptable and sensible way of maximising the price obtained for a property.[33] In this case, the rejection of Mr Price's criticism of a tender process isreinforced by the steps which SBS and the receivers took in relation to the sale process. In this regard, I am bound by the relevant observation of the Court of Appeal in Long v ANZ National Bank Ltd:16In considering the reasonableness of the care taken, the court should be slow to second guess the actions of a mortgagee acting on apparently sound professional advice.[34] Secondly, Mr More submitted that SBS breached its s 176 duty by advertising the fact that there was a forced sale. Mr Cockroft, in his affidavit, states that herecalls reference in the advertising to a "deadline sale" on 25 July 2014, following a "Listing in July". The criticisms similarly suffer from the fact that SBS took appropriate advice as to the marketing of the property and vineyard. The courts recognise that the express advertising of a "mortgagee sale" is not of itself a breachof the s 176 duty.17 The Court of Appeal, in Taylor v Westpac Banking Corporationrejected a mortgagor's criticism of the marketing of the subject property as a14 Westpac Banking Corporation v Chisholm HC Auckland CIV-2006-404-3230, 27 April 2007.15 At [21].16 Long v ANZ National Bank Ltd, above n 13, at [21](e) (citations omitted).17 Taylor v Westpac Banking Corporation (1996) 5 NZBLC 104,104 (CA), (1996) 7 TCLR 177;Bank of New Zealand HC Auckland CIV-2009-404-3534, 1 July 2009 at [61].mortgagee's sale where the bank was acting on apparently sound professional advicein the conduct of sale.18[35] Thirdly, Mr Price criticised the three-week marketing period adopted by SBS, a criticism which again suffers from the fact that SBS and the receivers had taken advice as to the marketing. The facts of this case are important background to the particular approach adopted. The vineyard operation Three Miners was already in receivership. To that extent, the distressed situation was publicly known. Mr Cockroft deposed that to his mind the time-frame for sale "would suggest to any prospective purchaser that the vendor's bank was applying pressure". That wasindeed the case, but both the receivership and the decision to effect a mortgagee sale would in any event signal "pressure" to the market. The three-week marketingperiod followed SBS's taking of advice. Three Miners was unable, on its trading to that point, to move from monthly interest payments of $8,000 to interest and principal payments of $22,000. The information available to SBS and the receivers suggested that the vineyard was in a physically distressed state to the extent that the receivers needed to incur costs of $55,000 to improve the appearance of the operation for sale. Against this background, the commercial desirability of a prompt sale is readily apparent.[36] Fourthly, Mr Price asserts that SBS was negligent in placing weight on the forced sale valuation of $1,000,000. Mr More identified two aspects of the $1,000,000 valuation which he submitted indicated it was unreliable and ought not to have been relied upon by SBS in its decision-making.[37] Mr More first emphasised the substantial difference between the forced sale valuation of $1,000,000 and the valuations carried out in January and October 2013 which put the value of the property (including the vineyard) at $1,550,000. On the evidence adduced in this case, there cannot be a criticism of the difference in valuation figures let alone a criticism of SBS's reliance on them. The valuations were conducted by the same firm. Indeed, the $1,000,000 forced sale valuation was prepared by the very same valuer as had prepared one of the current market valuation assessments in 2013. In the forced sale valuation, the valuer provided detail of the18 Taylor v Westpac Banking Corporation, above n 17.methodology by which he arrived at a forced sale figure. Mr Price did not adduce expert evidence as to any error of approach in the APL valuations, let alone one which would have been reasonably evident to SBS or the receivers, as parties relying on the reports.[38] Mr More's second criticism of SBS's reliance on the forced sale valuationwas that the valuation incorrectly assumed that the vineyard was in a distressed state.Mr More referred to Mr Price's affidavit evidence, in which Mr Price responded toobservations contained in the APL valuation. Mr Price had responded –(a) although the valuation referred to pruning, Mr Price was to have carried that out at the end of September (which he was prepared to undertake and for which he had provided a price to receivers);(b) whereas the valuation referred to a lack of frost-fighting equipment, Mr Price had in fact removed the frost-fighting pumps for maintenance and they would have been repaired and reinstalled in time for frost-fighting when needed around October; and(c) Mr Price responded also to an observation which he said had been raised by the receivers (rather than the valuer) as to sheep-grazing in the vineyard – Mr Price defended the grazing as a sound practice. MrPrice's evidence in this regard was supported by Mr Cockroft who confirmed the existence of the practice identified by Mr Price.[39] Mr More submitted that SBS's reliance on a valuation which madeassumptions as to the distressed state of the vineyard was flawed because the valuer must be taken to have been informed by SBS of the particular issues with the vineyard. I have no basis for making the assumption invited by Mr More. In fact,the observations in the valuer's report militate against the assumption. The valuer begins his report by recording that he had inspected the property on 27 August 2014.[40] It is clear from what follows in the valuer's report that his assessment of thedamaged state of the vineyard and the deferred maintenance issues with regard tobuildings flows from his inspection. That said, in connection with his rental assessment the valuer expressly states his assumption that the pumps will be replaced and able to be used for frost-fighting equipment and that there is a need for pruning by the end of September. His forced sale valuation expressly assumes that the frost-fighting equipment is in place and the pruning done. In short, and leaving aside the sheep-grazing matter which the valuer does not raise as an issue, the valuer has essentially pre-emptively responded to the criticisms levelled by Mr Price. There can be no criticism of SBS (or the receivers) for placing reliance upon the valuation in this regard.Dealings with potential purchasers[41] Mr Price criticises the tender process on the basis of a suggested failure by SBS (and the receivers) to pursue interested persons. Mr More framed it in this way in his written submissions:Mr Price had been negotiating with a number of interested persons (including the ultimate purchaser) at figures in the order of $1.3m. A public auction would have brought out the best price.[42] I have already dealt with Mr Price's contention that there ought to have beenan auction rather than a tender exercise. I examine the present point in relation to the suggestion of a failure to follow through on positive leads.[43] The source of Mr More's submission was Mr Price's evidence as to events ofJuly 2014. He deposes that during the period in July 2014, which preceded SBS's 21July deadline, there were: persons interested in purchasing at between $1,300,000 and $1,400,000. The person who ultimately purchased from the receiver was interested at $1,300,000.[44] The evidence does not establish any arguable failure to follow up on possible leads. In fact, what it indicates is that the ultimate purchaser through the tender exercise was one of the people who had expressed interest to Mr Price. Mr Price's reference to a person who was "interested at $1,300,000" cannot be equated to aperson who would have bought at that figure, even assuming that to be a relevant consideration. Had there been serious interest, one could have expected that MrPrice would have received a written offer either at the figure of "interest" or close toit. Mr Price has adduced no evidence from any person who would have paid more, in a private treaty setting, than the figure achieved at mortgagee sale.[45] As it is, Mr Price cannot point to an arguable breach of any responsibility SBS had to follow up on potentially interested purchasers.Absence of Mr Price from the vineyard[46] Mr More made a submission based on the premise that the receivers had little or no knowledge of the management of a vineyard. Consequently, he submitted that Mr Price had been available to continue to manage the vineyard until the completion of the sale and that opportunity should have been taken up. Mr More submitted that failure to do so was an unreasonable refusal on the part of the receivers.[47] In his submission, Mr More recognised that control of the vineyard operation lay with the receivers, and not with SBS. Even had there been a valid criticism of the receivers in their approach to Mr Price, it cannot be levelled at SBS with its security over the land only.[48] In any event, even had SBS been involved in the decision-making in relationto Mr Price's involvement, the circumstances in which SBS decided to proceed with a mortgagee sale preclude any justifiable criticism of a decision to exclude Mr Price. On any orthodox commercial analysis, the circumstances surrounding transfer ofmonies out of the Three Miners' bank account coupled with allegations receivedfrom Ms Mitchell (which led to the Court's imposition of a without notice freezing order) were unlikely to justify the retention of Mr Price in a managerial role.Financial viability of Three Miners[49] Mr More submitted that the financial position of Three Miners (at the time SBS decided to proceed with the mortgagee sale) did not justify a forced sale.[50] It is, however, clearly established that the s 176 duty of care does not qualifythe mortgagee's right to decide if and when to sell.19 The Privy Council, in DownsView Nominees Ltd v First City Corporation Ltd, recognised that the most basic principles in this area are, first, that a mortgage is security for the repayment of a debt and, secondly, that a security for repayment of the debt is only a mortgage. Lord Templeman, delivering the judgment of their Lordships then importantly added:20From these principles flowed two rules, first, that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment and secondly that, subject to the first rule, powers conferred on a mortgagee may be exercised although the consequences may be disadvantageous to the borrower.[51] There is no allegation in this case of bad faith on the part of SBS. SBS was clearly entitled to proceed as it did.[52] I do not overlook the possibility that within Mr More's submission there maywell have been a second line of argument, namely that SBS (and the receivers) should have settled on a longer sale process as such was justified by the sound financial position of Three Miners.[53] The answer to Mr More's submission again lies in the advice which SBS tookand the right of SBS to act promptly to protect its commercial interest when faced immediately with substantial repayment defaults and serious issues over the governance of Three Miners and the management of the vineyard.Standing back[54] Having reviewed specific matters raised by Mr More, I should stand back adopting the approach required by the Privy Council in Apple Fields Ltd v Damesh Holdings Ltd.21 In their Lordships' judgment, Lord Scott stated:2219 AGIO Trustees Co Ltd v Harts Contributory Mortgages Nominee Co Ltd (2001) 4 NZ ConvC 193, 480 (HC) at [70]; Downs View Nominees Ltd v First City Corporation Ltd [1993] AC 295, [1993] 1 NZLR 513 (PC).20 At 522.21 Apple Fields Ltd v Damesh Holdings Ltd [2003] UKPC 54, [2004] 1 NZLR 721.22 At [24]. in deciding whether reasonable steps have been taken by a mortgageeto obtain the best price, the steps taken by the mortgagee and those acting with it must be looked at in the round. The issue is a commercial one, to be viewed in practical commercial terms.[55] Mr Price is entitled to emphasise that at the time SBS decided upon a mortgagee sale, Three Miners had not been long in default. But Three Miners was about to move into significant default increasing monthly as it could not keep up with the resumed requirement of payments of both principal and interest. Three Miners, Ms Mitchell and Mr Price had effectively had the benefit of a one-year moratorium on principal repayments in order to satisfactorily reorganise their affairs but had been unable to do so. The report received by SBS and the receivers from the registered valuer pointed to a vineyard in a distressed state. The justifiable decision of the receivers to expend some $55,000 to improve the state and appearance of the vineyard meant that SBS was to be still further out of funds pending realisation of its security.[56] As a commercial decision viewed in practical commercial terms, the SBS decision to have a three-week marketing programme followed by a deadline tender, backed by the advice it received, appears sound. It is not for this Court to speculate that other people with marketing expertise might have given SBS different advice or might have suggested to this Court that the advice SBS received was wrong.Outcome[57] Mr Price has not raised any matter which establishes, at least arguably, a breach of the s 176 duty on the part of SBS.Costs[58] Costs would normally follow the event.[59] At the time of the hearing, Mr Price had applied for legal aid. Mr More has subsequently advised that Mr Price has been granted legal aid. By reason of s 45 Legal Services Act 2011, it is not appropriate to make an award of costs against Mr Price. There nevertheless should be a certificate in relation to what costs would have been awarded but for the provision of s 45.[60] As the contractual arrangements between SBS and the defendants provided for the payment of solicitor/client costs, the certificate will identify such a basis of costs.Orders[61] I order that there is judgment for the plaintiff against the second defendant in the sum of $528,371.39, as calculated in the Schedule hereto.Associate Judge OsborneSolicitors:Preston Russell Law, InvercargillMedlicotts Solicitors, DunedinCopy to: D J More, Barrister, DunedinSCHEDULE