PRICE & ORS v KILLARNEY CAPITAL LIMITED [2023] NZHC 2753

PRICE & ORS v KILLARNEY CAPITAL LIMITED [2023] NZHC 2753 [29 September 2023]IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYI TE KŌTI MATUA O AOTEAROAAHURIRI ROHECIV-2023-441-000038[2023] NZHC 2753BETWEEN MURRAY PRICE and SHARRON PRICEas trustees of the Price Karaka Trust, TRENTCARY and LYON TRUSTEE NO 10LIMITEDPlaintiffsAND KILLARNEY CAPITAL LIMITEDDefendantHearing: 26 September 2023Appearances: B Gustafson for PlaintiffsR J Gordon and S Howard-Brown for DefendantJudgment: 29 September 2023JUDGMENT OF CHURCHMAN J[Application for interim injunction]Introduction[1] The plaintiffs are guarantors of borrowing from the defendant in relation to asum which now exceeds $18 million. They seek an interim injunction restraining thedefendant from exercising its power of sale in relation to properties they had put up assecurity for the borrowing.Facts[2] Parklane Infrastruct Ltd (now in liquidation) (Parklane) was the owner andmortgagor of a nine stage property development in Wellington (the Development).Parklane is controlled by the plaintiffs.[3] The defendant's first involvement with Parklane occurred in 2016. Parklanewas at that stage in default on its obligations to its then funder, INNO Capital No. 3Ltd (INNO), in respect of the Development funding. INNO had commenced amortgagee sale process. Parklane refinanced the Development, avoiding themortgagee sale.[4] By April 2020, Stage 5 of the Development project had been completed, thefirst ranking lending to ANZ Bank had been repaid in full, the defendant had nowbecome the first mortgagee and the sum outstanding had been reduced to less than$2 million.[5] In April 2020, a new sum of $1,150,000 was advanced via Parklane but insteadof being related to the Development, it was for the personal benefit of two of theplaintiffs, Mr Price and Mr Cary.[6] In September 2020, a further loan was entered into in the sum of $8,200,000.This was to fund Stage 6 and Stage 8 in the Development. The term of the loan wasfor one year expiring 31 August 2021.[7] The reason for the one-year term was that it was anticipated that the provisionof the funds would allow these stages of the Development to be completed, the sectionssold and the funding repaid.[8] This timeline was not met because Parklane decided to pursue a variation totheir existing subdivision resource consent in order to create additional sections. Thisapplication resulted in significant delays.[9] In September 2021, the expired term loan was restructured. Additional fundingwas advanced to assist in progressing the Development. The term of the renewed loanexpired on 2 September 2022. Stages 6, 7 and 8 of the Development had still not beencompleted by September 2022.[10] The defendant was becoming increasingly concerned at the lack of pre-sales,but it agreed to one further variation which extended the term of the loan to 2 February2023. At the time of granting this final extension, the balance of the unpaid loan stoodat $14,320,071. The defendant expressly warned Parklane that there would be noextension beyond 2 February 2023.[11] The outstanding balance of $14,320,071 included a separate advance in thesum of $1,062,000. This advance had nothing to do with the Development project inWellington but was advanced in order to allow Mr Price and Mr Cary and interestsassociated with them to repay debt on a commercial investment property in Grey Lynnowned by a company called Park Avenue Properties Limited (PAPL) which waswholly owned by Murray and Sharron Price. The purpose of the new loan was toenable settlement of the purchase of a villa at Herne Bay, Auckland where Mr Caryand his wife (who is the daughter of Mr and Mrs Price) would reside.[12] The defendant advanced the money on the basis of assurances that anapartment in Parnell, Auckland, owned by one of the plaintiffs, Lyon Trustee No 10Ltd (of which Mr Cary was the sole director and shareholder), would be sold.[13] The PAPL loan term was 12 months. The amount of $250,000 of the loan wasto be repaid in one lump sum within six months of being advanced. That term expiredon 12 August 2022 and the $250,000 was not repaid.[14] The final date for repayment of all the borrowing expired on 11 February 2023.[15] Default notices under ss, 119, 122 and 128 of the Property Law Act 2007 (theAct) in respect of that part of the borrowing relating to the Development, were servedon 3 March 2023 and expired unremedied on 5 May 2023. Further default noticeswere served in respect of the other secured properties and all had expired (unremedied)by 6 July 2023.[16] As well as the loans being in default, unpaid interest in the sum of $350,000per month was also accruing.[17] The defendant resolved to exercise its power of sale over the remaining unsoldlots in the subdivision (39 individual lots and two larger lots referred to as "super lots")as well as the three Auckland properties the plaintiffs had put up as security for theirfurther personal borrowing, being properties in Takapuna, Parnell and Grey Lynn.[18] The defendant took professional advice from two established Wellington realestate agencies, Tommys and Bayleys. Tommys estimated the 39 lots, undermortgagee sale conditions, would realise between $219,000 to $326,000 per lot (GSTinclusive). One of the super lots (9A) had a forced sale estimate of $1 million (GSTexclusive). Tommys was unable to estimate the value of super lot 9B due to theextensive work still required on it. Tommys proposed as a method of sale a four weektender process.[19] Bayleys' appraisal was similar with an estimate of the 39 lots likely, undermortgagee sale conditions, to achieve between $280,000 to $330,000 per lot (GSTinclusive) and the two super lots, under mortgagee sale conditions, to achieve$900,000 and $950,000 respectively. The suggested method of sale was either anauction or a four to five week tender process.[20] The defendant accepted Bayleys' proposal and instructed it to commence themortgagee sale process on the basis recommended. However, other real estate agentswere still permitted to introduce purchasers and to receive commissions on anyresulting sale.[21] Bayleys marketed the Development lots for sale over a four week tender periodusing a variety of media.[22] The plaintiffs did not co-operate with the sale process. Throughout the fourweek sales and marketing campaign, they refused access to the site, resulting inBayleys' agents being unable to show potentially interested purchasers over theproperties and they removed large sign boards that Bayleys had erected at the entranceto the Development so as to promote the mortgagee sales.[23] As a result of the marketing campaign, Bayleys received some 24 tenders,which ranged from tenders on single lots to multiple lot tenders and tenders to buy theentire Development. The tenders received covered all the lots in the Development.Bayleys did not simply accept the tenders, but negotiated with tenderers to obtainbetter prices.[24] As at 20 September 2023, the defendant had in place unconditional salecontracts for 37 of the 39 lots. Mr Gordon advised at the hearing that the two superlots were also now unconditionally sold.[25] The defendant had received five tenders for the entire project, but rejected themall. The tenders ranged from $4,805,000 to $11,100,000. The highest of those tenderswas lower than the sum realised by the sale of the 37 single unit lots without anyallowance for the two remaining individual lots and two super lots.[26] The defendant estimated the total recovery from the mortgagee sale of theDevelopment was around $14,418,000 plus GST but net of commissions.[27] It is estimated that following the settlement of the sale of the sections in theDevelopment, there will still be a sum of between $4–5 million owing on theborrowing.[28] Of the Auckland properties, the Grey Lynn property has been tendered but notenders had yet been received. It allegedly has some leaky building issues. Bymemorandum filed on 14 September 2023, the defendant agreed to pause themortgagee sale process in respect of the Takapuna property and not enter into anyagreement for sale and purchase under a mortgagee sale until the interim injunctionapplication had been heard and determined by the Court. The Parnell property had notsold either. The defendant submitted that the plaintiffs had failed to co-operate withthe sale of the Auckland rental properties by failing to provide rental details.The plaintiffs' case[29] The plaintiffs' case has changed significantly since the initial statement ofclaim was filed on 8 September 2023. The original application was for without noticeorders directing that the defendant file any affidavits and notice of opposition to theinterim injunction within three working days and that a fixture be allocated as soon aspossible after the three working days had expired.[30] Following an urgent teleconference on 13 September 2023, I declined thatapplication, directed that the defendant was to file its notice of opposition andsupporting affidavits no later than 22 September 2023 and directed a hearing beallocated in relation to the interim injunction at the earliest possible date after22 September 2023.[31] The plaintiffs had initially sought an injunction in very broad terms seekingorders:(a) the defendant only sell any of the 33 (sic) subdivided lots in Stage 6 ofthe Development if the sale price for each lot was in excess of$450,000; and(b) the defendant cease marketing for sale as mortgagee:(i) the Takapuna property;(ii) the Grey Lynn property; and(iii) the Parnell property.[32] At the hearing, the plaintiffs abandoned the interim injunction application inrespect of any of the Development lots and also the Grey Lynn property. Theapplication was maintained in respect of the Takapuna property occupied byMr and Mrs Price as their home and the rental apartment in Parnell owned by Mr Cary.[33] During the course of submissions, Mr Gustafson's position was further refinedand it was suggested that all that the plaintiffs wanted was a 28 day delay in respect ofthe mortgagee sale of the two Auckland properties. This period of time was calculatedon the basis that the titles for all of the Development lots were anticipated to be issuedin early October with settlement promptly thereafter and therefore, in approximatelyfour weeks' time, the plaintiffs would know what the outstanding balance was in orderto redeem the mortgage.[34] The plaintiffs' case is founded on a claim of a breach of the duty in s 176 ofthe Act. Section 176(1) of the Act provides:A mortgagee who exercises a power to sell mortgaged property owes a dutyof reasonable care to obtain the best price reasonably obtainable as at thetime of sale:[35] That duty is owed to the current mortgagor, any former mortgagor, anycovenantor, any mortgagee under a subsequent mortgage and any holder of any othersubsequent encumbrance. The term "covenantor" is defined in s 4 of the Act asincluding a guarantor.[36] The main process defects relied on at the hearing to support a claim of breachof the s 176 obligation were the failure of the defendant to obtain a registered valuationof the lots in the Development prior to embarking on the mortgagee sale process andan alleged failure to market the whole of the Development offshore. The pleadingshad also alleged a breach of duty by the defendant in not adequately marketing theDevelopment as a going concern to developers and construction companies by meansof using a business broker, and marketing the Development nationally andinternationally; by not investing $300,000 in marketing the Development to potentialbuyers and not using the same real estate agent who had been used some yearspreviously to sell lots in Stages 1 to 5 of the subdivision.[37] The plaintiffs asserted that the alleged breaches of the duty in s 176 meant thatthere was a serious question to be tried, that the balance of convenience favoured theplaintiffs and that damages would not be an adequate remedy for the plaintiffs. Theseallegations are denied by the defendant. They also point to the fact that the plaintiffshave not made a payment into Court of the outstanding mortgage balance as requiredby the rule in Parry v Grace1 and that no undertaking as to damages was filed with theapplication as was required by r 7.54 of the High Court Rules 2016 and, when one was1 Parry v Grace [1981] 2 NZLR 273 (HC).belatedly filed on the morning of the hearing, it was only signed by one of the plaintiffs(Mr Price), who purported to sign on behalf of all the plaintiffs.The law on interim injunctions[38] The principles applying to the grant of an interim injunction are well-settled.It requires the Court to find that:(a) there is a serious question to be tried;(b) the balance of convenience favours the granting of the injunction; and(c) the overall justice of the case requires it.2[39] The purpose of an interim injunction is to improve the chance of the court beingable to do justice after a determination of the merits at trial.3 The basic principle is fora court to take whichever course seems likely to cause the least irremediable prejudiceto one party or another.4[40] A serious question is one that is not frivolous or vexatious, and one where theplaintiff is able to satisfy the court that it has a real prospect of succeeding at trial.5[41] The essence of the latter two stages is whether the effect of refusing theinjunction would be harder on a plaintiff who succeeds at trial than granting it wouldbe on an ultimately successful defendant.6 In making this assessment, the Court shouldconsider what is in the overall interests of justice by reference to the relative strengths2 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]; Intellihubv Genesis Energy Ltd [2020] NZCA 344 at [23]; Klissers Farmhouse Bakeries v Harvest BakeriesLtd [1985] 2 NZLR 129 at 142; and American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).3 Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [31], citingNational Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC 16, [2009] 1 WLR 1405at [16]–[17].4 At [31], citing National Commercial Bank Jamaica Ltd v Olint Corp Ltd, above n 3, at [16]–[17].5 Re Lord Cable (dec'd) [1976] 3 All ER 417 (Ch) at 431; and Hannon v Senior Trust Capital Ltd[2023] NZHC 16 at [40].6 Roman Catholic Bishop of the Diocese of Auckland v Boynton [2018] NZHC 2636 at [14].of the cases, the preservation of the status quo, the uncompensable disadvantages toeither party, and the adequacy of damages as a remedy.7[42] The second stage, assessing the balance of convenience, involves balancing therisk of doing an injustice. 8 It is a broad and flexible inquiry.9 The Court must decidewhether granting or refusing an injunction would, after the action itself has been triedand the issues between the parties determined, fairly allow the adjustment of the rightsof the parties in a way that accords with fairness and justice.10 The question of balanceof convenience arises generally only where there is doubt as to the adequacy ofdamages.11[43] The third stage is the overall justice assessment. The Court of Appeal hasemphasised that in every case the Judge has to stand back and ask where overall justicelies.12 Marshalling considerations under the non-exhaustive heads of serious questionto be tried and balance of convenience is an aid to determining this ultimate question.13It is essentially a check on the position that has been reached following analysis of thefirst two stages.14 It may involve considerations such as the public interest and theconnection of the defendant to New Zealand.[44] The overall grant of an interim injunction involves the exercise of a discretion,which is amenable to appeal on the basis that the judge has erred in law, taken accountof an irrelevant matter, failed to take account of a relevant matter or is plainly wrong.15However, the individual stages of the court's consideration involve judicial evaluationrather than the exercise of a discretion.7 Jacanna Holdings Ltd v Pacific Auto Carrier (NZ) Ltd [2019] NZHC 931 at [92]; and WellingtonInternational Airport Ltd v Air New Zealand HC Wellington CIV-2007-485-1756, 30 July 2008 at[6]–[14].8 McLaughlin v McLaughlin [2019] NZHC 2597 at [37], citing Cayne v Global Natural ResourcesPlc [1984] 1 All ER 225 (CA) at 237.9 At [38].10 Congoleum Corp Ltd v Poly-Flor Products (NZ) Ltd [1979] 2 NZLR 560 (CA) at 571.11 American Cyanamid Co v Ethicon Ltd, above n 2, at 408–409 and 510–511.12 Klissers Farmhouse Bakeries v Harvest Bakeries Ltd, above n 2, at 142.13 At 142; and see NZ Baking Trades Employees' Industrial Union v General Foods Corp (NZ) Ltd[1985] 2 NZLR 110 (CA).14 NZ Tax Refunds Ltd v Brooks Homes Ltd, above n 2, at [47].15 At [13].Section 176[45] The nature of the duty in s 176 was (ultimately) agreed between counsel asbeing an obligation to take a reasonable care to obtain the best price reasonablyobtainable as at the time of sale.[46] The fact that a mortgagee is exercising a power of sale when a mortgage is indefault is not, of itself, inherently unreasonable or oppressive.16 The focus is on theprocess followed by the mortgagee rather than on the decision to undertake amortgagee sale.[47] The relevant principles are set out in a number of leading cases. In HartsContributory Mortgagees Nominee Co Ltd v Bryers,17 the Court confirmed:18(a) The mortgagee has the power to decide, purely in the interests of themortgagee, if and when to sell and therefore, that it was only the bestprice reasonably obtainable at the time of sale that mattered.(b) Where the security is substantial or specialised property is involved, itwill usually be necessary for the mortgagee to obtain and act uponspecialised advice as to the method of sale — "appointing a competentagent to sell does not discharge the mortgagee's duties, but since itsduty is ultimately only one of reasonable care, putting the matter in thehands of a competent agent will usually go a long way towardsdischarging the mortgagee's duties".(c) In the normal course, the proposed sale will need to be advertised withan adequate description of the properties' attributes and, within reason,widely enough to attract all possible purchasers.16 Taylor v Westpac Banking Corp (1996) 7 TCLR 177 (CA) at 182–183.17 Harts Contributory Mortgagees Nominee Co Ltd v Bryers HC Auckland, CP403-IM00,19 December 2001.18 At [43].(d) There is no obligation to postpone the sale in the hope of a better pricelater, or to break up the assets and sell in a piecemeal manner if this canonly be carried out over a substantial period or at a risk of loss.(e) When assets are sold by tender or auction, a reasonable period mustusually be allowed for purchasers to inspect the property and to arrangefinance before submitting bids.(f) In evaluating judgements made by or on behalf of the mortgagee, itshould not be forgotten that in the absence of bad faith, the mortgageeshares with the mortgagor and guarantor an incentive to maximise theprice obtained. It is not likely to be assumed that the mortgagee hasacted in a way that was contrary to its own interests as well as theinterests of others.[48] The principles set out by Fisher J have been commented on in subsequentdecisions. Mr Gustafson put particular emphasis on the decision of Asher J in PublicTrust v Ottow.19 In that case, Asher J said:[31] The following steps indicate that a mortgagee has made reasonableefforts to obtain the best reasonably obtainable price:(a) The appointment of a reputable real estate agent to market theproperty.(b) Obtaining a valuation report from an experienced valuer as aguide to what could reasonably be expected for the property.(c) Marketing over a reasonably long period of time.(d) An extensive advertising and promotional campaign.(e) A properly conducted auction.(f) A sale price that given all the circumstances, can be reconciledwith expert opinion as to value.19 Public Trust v Ottow (2009) 10 NZCPR 879 (HC).[49] A particular paragraph that Mr Gustafson relied on was [33], where Asher Jsaid:[33] A failure to achieve an assessed valuation price at a mortgagee sale isnot in itself any indication of a breach of the mortgagee's duty of care to obtainthe best price reasonably obtainable: Moritzon Properties Ltd v McLachlan at[61]. A failure to achieve a price that a mortgagor believes the property shouldachieve, does not give rise to an inference that a mortgagee has breached itsduty to take reasonable care: Wallace v Bank of New Zealand HC Auckland,CIV-2009-404-3534, 1 July 2009 at [54]. Of course, a sale at a price which ismuch less than the assessed value, when there is no explanation for thediscrepancy, can indicate a failure to take reasonable care.[34] In a poor and receding market as there was in October 2008, it isentirely understandable that prices will be somewhat lower than thoseanticipated in valuations [50] In support of his contention that it was necessary for the defendant to haveobtained its own valuation prior to exercising its power of sale, Mr Gustafson reliedon the decision of the Queensland Supreme Court in Sablebrook P/L v Credit UnionAustralia Ltd.20 However, Applegarth J in that case appears to have indicated thateither an updated valuation "or at least, an estimate of current market value from localreal estate agents" was required and that without either of those, the mortgagee "hadno reliable information concerning the current market value of the land proposed tosell by private treaty".21 The fact that the mortgagee in the present case had obtainedestimates of current market value, in a forced sales situation distinguishes the presentcase from Sablebrook.[51] The utility of a valuation has been doubted by the High Court. In WestpacNew Zealand Ltd v Lamb, Wylie J noted:22A property is only worth what someone is prepared to pay for it at the time ofsale;Valuations lose much of their significance if reasonable care is taken, therehas been a properly advertised and conducted auction, then the property hasbeen sold has been auction or by negotiation after the auction [52] The New Zealand Courts have specifically rejected the submission that afailure to obtain a valuation prior to exercising a mortgagee sale is a breach of the duty20 Sablebrook P/L v Credit Union Australia Ltd [2008] QSC 242.21 At [52].22 Westpac New Zealand Ltd v Lamb [2012] NZHC 319 at [34].of care in s 176: see Southern Cross Building Society v Vuletic23 and Liddle v Bank ofNew Zealand.24[53] I therefore do not accept that where the defendant obtained estimates of valuefrom two reputable local real estate agencies, the failure to obtain a valuation per seamounted to a breach of the duty of care. It is now necessary to consider the subsidiaryargument, which was that the sale price was much less than the assessed value andthere was no explanation for the discrepancy.[54] Mr Gustafson relied on several different factors as establishing that the saleprice was much less than the assessed value and that there was no explanation for thediscrepancy. He referred to the sale price achieved for sections in Stage 1 to 5 of theDevelopment and the fact that the defendant had, in 2019, approved a release of threesections for sale at values in excess of $500,000. There was also reference of a saleof Lot 29 on 3 July 2023 for $640,000.[55] What this submission overlooks is that it is the best price reasonably obtainableas at the time of sale that is relevant.[56] The plaintiffs attached to the affidavit of Mr Cary a number of valuationsundertaken by Truebridge Valuation (Truebridge). Those documents noted that therehad been a rapid increase in house prices in Wellington until late 2021, but then asignificant downward adjustment to prices in most sectors of the housing market hadoccurred and from then through 2023 what was described as "major retrenchment" ofvalue had occurred.[57] On the plaintiffs' own evidence, what might have been achievable in 2019 or2020 is not an indicator of what would be achievable in 2023.[58] The contract for the sale of Lot 29 on 3 July 2023 is also unhelpful as the salenever became unconditional and ultimately fell over.23 See Southern Cross Building Society v Vuletic HC Auckland, CIV-2008-404-8684, Andrews J at[23].24 Liddle v Bank of New Zealand HC Auckland, CIV-2009-404-6189, Potter J at [45].[59] The plaintiffs also point to an offer made on 25 February 2022 for the sale ofsome 11 lots for $500,000 each plus GST. However, this sale did not proceed either.This transaction was addressed by the affidavit of Peter Cooke filed on behalf of thedefendant and Mr Cooke expresses the view that these 11 sales had nothing to do withany mortgagee sale and the relevant events occurred as long as ago as February 2022,some 18 months before the mortgagee sale process. He says the transaction was infact an attempt by Parklane to extract further loan funding out of the defendant. Henotes that some $5,100,189 of the Development funding was conditional upon anumber of matters, including Parklane providing the defendant with copies of "11qualifying sale and purchase agreements". These were agreements relating topre-sales of lots in the Development. There were qualifications around what a"qualifying sale and purchase agreement" had to be. These included:(a) on arm's length commercial terms;(b) for a purchase price of no less than $500,000 including GST;(c) with a deposit of not less than 10 per cent of the purchase price, to bepaid into a solicitor's trust account and held pending settlement of thesale; and(d) if the purchaser is a company, the obligations of the purchaser to bepersonally guaranteed by the directors or another person.[60] Mr Cooke deposes that by February 2022, the original $800,000 ofDevelopment funding had been exhausted and Mr Cary was pressuring the defendantto advance more money to Parklane, but no pre-sale contracts had been provided aswas required.[61] Mr Cooke said that he received advice on 25 February 2022 that Parklane wasnow in receipt of 11 unconditional agreements for sale and purchase which meet thequalifying sale price of $500,000. When Mr Cooke requested details and copies ofthe contract, he received a telephone call from Mr Cary which revealed that the 11purported sales contracts were to a company Modeco Ltd (Modeco), which was acompany owned 100 per cent by him. The deposits were well less than the 10 per centrequired and had not been paid into a solicitor's trust account. Because therequirements for "qualifying" sales had not been met, Mr Cooke refused to advancethe further funds sought. The 11 purported sales to Modeco are therefore of noassistance in establishing the value of the lots in the Development as at July 2023.[62] It was undisputed that prices reasonably achievable in the context of a forcedsale would be substantially lower than those otherwise achievable. The reason for thiswas explained by Truebridge in a "forced sale" valuation dated 6 July 2023commissioned by the plaintiffs. The valuation said:A sale under constrained circumstances does not meet the criteria of a normalmarket transaction as there is an element of undue compulsion or influenceaffecting the seller. Accordingly, one of the essential elements of thedefinition of Market Value is missing and therefore a sale under constrainedcircumstances is inconsistent with the definition of such. The circumstancesusually involve an owner under some form of duress or pressured to sell and/ora third party such as a mortgagee or receiver in possession.[63] Truebridge's estimate of the forced sale value of all of the remaining lots was$15,621,000.[64] The defendant, prior to undertaking the power of sale, possessed marketingappraisals from both Tommys and Bayleys. Those appraisals gave both a market valueand a forced sale value. Both were similar. Tommys assessed a market value of ready-to-build lots as being between $327,000 and $488,000 per lot, but a forced salevaluation of between $219,000 to $327,000. Bayleys' appraisal was a market value ofbetween $400,000 to $460,000 per lot or a forced sale valuation of $280,000 to$330,000 per lot. Tommys' forced sale estimate for the super lot 9A was $1,000,000.Bayleys was $900,000 for super lot 9A and $950,000 for 9B under forced saleconditions.[65] The defendant noted that the value of the unconditional sales achieved shortlybefore the hearing date of $14,418,000 (plus GST but net of commissions) was closeto the Truebridge valuation of July 2023 relied on by the plaintiffs which gave a forcedsales valuation for the same stages in the development of $14,758,000 in total.[66] Weighing this evidence, I do not accept that it can be said that the value of salesachieved is "much less than the assessed value" and that there is no explanation forthe discrepancy. Notwithstanding the obstructive efforts of the plaintiffs, valuesconsistent with the two real estate agent appraisals were achieved and the valuesachieved were not "much less" than the Truebridge estimate.[67] I now address the plaintiffs' contention that there was a "fire sale". Theevidence for the defendant was that they did not simply accept all of the offers receivedwhatever the price, but instructed Bayleys to continue to negotiate with tenderers toobtain better prices as well as receiving other offers following the close of the tenderprocess which were also negotiated and that the sale prices ultimately negotiated werein line with both of the real estate agents' estimates.[68] The plaintiffs also rely on the opinions expressed by Iain McLennan who filedan affidavit in support. Mr McLennan was not either a valuer or a real estate agent.He is the liquidator of Parklane. As well as his opinions arguably being outside hisarea of expertise, they also appear to be based on an incorrect understanding of thefacts. His view was that the defendant only marketed the lots within the Developmentas individual properties for sale rather than attempting to sell the Development as agoing concern. That is incorrect. The defendant's evidence was that the Developmentwas marketed as either individual lots, in multiples, or as one lot and that, in fact, fiveoffers were received at the close of tenders from builders or developers looking topurchase the entire development as a whole.[69] Mr McLennan's assumption that the marketing was limited to New Zealand isalso incorrect. This issue was addressed in Mr Cooke's affidavit, who confirmed thatthe Development was marketed both nationally and internationally (including in thelocations the plaintiffs suggested it should have been marketed) through Bayleys'international network. Mr McLennan expressed the view that there should have beena longer marketing campaign followed by a period for prospective purchasers tocomplete due diligence and then a further three week tender process. Such asuggestion is inconsistent with the timeframes recommended by both Tommys andBayleys, who I accept do have expertise in the marketing and sale of properties likethis.[70] Another opinion proffered by Mr McLennan is that the defendant should havespent an additional $300,000 in a marketing campaign. There are a number ofdifficulties with this proposition. Firstly, there is no legal obligation on a mortgageeto spend any money on a property subject to a mortgagee sale, let alone a sum as largeas $300,000. There is no suggestion here that the plaintiffs were prepared to provide$300,000 or any other sum of their own money for further advertising. In terms of thesuggestion of a longer sales campaign, the defendant was also entitled to have regardto the fact that not only had the mortgage been in default since February 2023, therewas an ongoing unpaid interest bill of $350,000 per month accruing.[71] There is nothing in the opinions of Mr McLennan that would justify a findingthat the defendant engaged in a "fire sale" or otherwise breached his duty of care. TheCourt is generally slow to come to a conclusion that a mortgagee has engaged in "firesale" tactics where that would work against the mortgagee's interest in obtaining thebest possible return. That is particularly so in the present case, where even on thevalues able to be obtained from sale of all the lots in the Development, there was stillan estimated $4–5 million deficit. Parklane itself is in liquidation and the defendant'sevidence was that the liquidator's initial statement indicated that, in addition to securedliabilities, there was some $4 million of unsecured trade and other debtors. Given thepotential exposure of the defendant, it defies common sense that they would have doneanything other than attempt to achieve the best sale price available in thecircumstances.[72] A further matter raised by the plaintiffs as supporting a breach of the duty ofcare was that the defendant should have agreed to let Mr Bagley, the Ray White agentinvolved in selling Stages 1 to 5, continue to sell the 39 subdivided lots. However,this submission ignores the defendant's evidence that other agents were at liberty tointroduce buyers and would have been paid their commission had they done so.Neither have the plaintiffs explained how Mr Bagley would have done things better orany different to Bayleys, particularly given the poor sales record since the completionof Stage 5.[73] For the reasons set out above, I have come to the conclusion that there is noserious question to be tried that the defendant breached the obligations in s 176 of theAct.Balance of convenience[74] Notwithstanding my finding on the issue of whether there is a serious question,I will now address the balance of convenience. A relevant matter here is whetherdamages would be an adequate remedy. There is no suggestion that the defendant isanything other than the substantial entity well able to meet any damages that mightpotentially be awarded.[75] The plaintiffs' case is that the Takapuna property is the Prices' family homeand that puts it in a different category to other properties. The plaintiffs also assertedthe defendant has not advised the Prices what the current equity of redemption toredeem the mortgage over the Prices' home is.[76] Mr Gustafson relied on the decision of Dobson J in McDonald v Toko,25suggesting that this case was analogous. A reading of that case does not support thatsubmission. It appears in that case that Ms McDonald had been dealt with fraudulentlyby Mr Toko and that he had become the registered proprietor of the property incircumstances where he had breached his equitable obligations to Ms McDonald.Once Mr Toko had wrongfully registered the property in his name, it seems hearranged substantial borrowings on mortgage and then disappeared. He did not paythe rates or the mortgage. The mortgagee refused to deal with anyone other than theregistered proprietor (Mr Toko) and would not even disclose the amounts sought to berecovered by the mortgagee from the sale. All that applicant sought was a deferral ofthe proposed mortgagee sale for one month to allow Ms McDonald to refinance andbe in a position to redeem the mortgage. On the issue of the balance of convenience,the Judge said:[14] I discussed with counsel the opposing views on the balance ofconvenience. My concern is that a mortgagee sale of a residential property inKaikoura that is inevitably sold subject to the undefined occupancy rights ofthe present occupant will more likely than not occur on "fire sale" terms 25 McDonald v Toko [2020] NZHC 2104.[77] The Judge also noted that Ms McDonald and her mother needed the propertyto live in and had nowhere else available to them in the short term. The Judge notedthat a sale at an undervalue would eliminate the rights Ms McDonald might haveagainst Mr Toko. The Judge also noted Ms McDonald's acknowledgement that if herattempts to repay the mortgage were not able to be confirmed unconditionally withinfour weeks, then she would take no further steps to disrupt a sale by the mortgagee.[78] All of this is very different to the circumstances of the plaintiffs in the presentcase. They are not the victims of fraud, and have not had a mortgagee sale sprungupon them without knowledge that there was a mortgage on their property and it wasin default. There is no suggestion that if the Prices' house was sold they would havenowhere else to go. The Parnell property is also not Mr and Mrs Cary's home.[79] Mr Burns filed an affidavit on behalf of the defendant demonstrating thatMr and Mrs Price were the owners of a property at Pauanui and that a company calledConnemara No. 6 Ltd (a company of which Mr Price was the sole shareholder anddirector of) owned a number of apartments in Hamilton. They would appear to havesome options for alternative accommodation should the Takapuna property be sold.[80] Mr Gustafson also relied on an Australian decision of Nolan v MBFInvestments Pty Ltd.26 But the facts of that case are also distinguishable. The plaintiffowned three adjoining parcels, all of which were mortgaged to the defendant. Oneparcel comprised the plaintiff's home, the other two were vacant land. The plaintiff'sposition was that sale of the two vacant lots would produce sufficient to discharge hisindebtedness to the defendant but, notwithstanding that, the defendant had sold allthree lots. The case involved interpretation of s 77(1) of the Victorian Transfer of LandAct 1958 which required a mortgagee to have regard to the "interest" of the mortgagorwhen conducting a mortgagee sale. There was valuation evidence as to the value likelyto be achieved by selling the two vacant lots and that selling the separate allotmentswould maximise the overall value obtained. The second mortgagee also supported theproposal to have the three lots sold separately in order to maximise value.26 Nolan v MBF Investments Pty Ltd [2009] VSC 244.[81] The Court held that the particular provision of the Victorian statute that applieddid not limit the "interest" of the mortgagor to the interest in obtaining the best pricefor the property. The Judge noted:[96] Apart from Tasmania, the requirements of s 77(1) TLA differmarkedly from those contained in a number of pieces of legislation inAustralia where the duty of a mortgagee in selling mortgaged property isconfined to achieving the market value of that property [82] There is no equivalent in the Act to the concept of "interest" in the Victorianlegislation that the Court in Nolan was construing.[83] That case also involved a consideration of rights conferred by the VictorianCharter of Human Rights, which included a right not to have one's home arbitrarilyinterfered with.[84] The defendant in that case had also received (but apparently ignored) advicefrom senior counsel immediately prior to the sale which was to the effect that themortgagee could only sell sufficient lots to satisfy the mortgage debt, interest andcosts.[85] The defendant insisted on selling all three lots. One of the vacant lots was soldfirst and achieved a sale price close to clearing all of the mortgage debt. However,instead of selling the other vacant lot, the defendant insisted on selling the lot with thehouse on it next. The sale of the second lot realised much more than was required todischarge all the debt, but the third lot was also sold. The results achieved from thesale of the two vacant lots yielded much more than what was required to repay bothmortgages. The judgment ultimately turned on the reasonableness of the sale of thevarious lots in the order that they were sold. The Court said:27 In exercising its power of sale in the way it did, [the defendant] carried intoeffect the indirect object of destroying [the plaintiff's] legal interest in the landby depriving him of full ownership of the property by the exercise of his rightof redemption. [The defendant's] decision also had the effect of evicting [theplaintiff] and his family from occupation of the land and the dwelling housesituated on the land.27 At [282].[86] Importantly, the Court also held:28There was no need for [the defendant] to sell this property for the purpose ofobtaining payment of its mortgaged debt.[87] As can be seen, both the statutory obligations and the facts of this case are sodifferent from those in the present case that the case is of no relevance.[88] I also note that the personal circumstances of the plaintiffs in the present caseare vastly different from the plaintiffs in either McDonald or Nolan. They are bothexperienced property developers. They were used to entering into mortgages. Someof the borrowings secured against the three Auckland properties had nothing to do withthe Development but related to other projects of the plaintiffs including the financingof a new house for Mr and Mrs Cary to live in, in Herne Bay. I conclude that, on thefacts of this case, there is nothing flowing from the Takapuna property beingMr and Mrs Price's residence that distinguishes that property being available to themortgagee by way of mortgagee sale.[89] A further factor relevant in the present case is the ability and/or willingness ofthe plaintiffs for an interim injunction to meet the costs that might be incurred by thedefendant if the injunction is granted. Here the principle in Parry v Grace29 alsoapplies where an injunction sought relates to the exercise of a mortgagee's powers butwhere the mortgage itself is not sought to be impeached. The normal rule is that themortgagor or guarantor seeking to restrain a mortgagee sale must first pay into Courtthe amount secured by the mortgage before they will be granted any injunctionrestraining the exercise of the mortgagee's powers. The decision in Parry is not anexception to that general rule but merely an example where the Court granted aninjunction for the express purpose of allowing the plaintiff time to arrange such apayment. The injunction was to lapse if the applicant for the interim injunction hadnot paid either into Court or to some other depository approved by the first defendants,within 28 days of delivery of the judgment, the full sum secured under the mortgageas well as costs to the defendant in respect of the application.28 At [283].29 Parry v Grace, above n 1.[90] The plaintiffs in the present case imply that they need to know the amountrequired to redeem their equity. However, the Auckland properties are not subject toa separate mortgage, they were provided as security for all of the sums advanced bythe defendant. They are security for the full amount of the borrowing. The amountthat will be realised once the sales of the various lots in the Development are settledis known and, at least to an approximate level, it is known what the deficit will be.Given that Parklane is now in liquidation and is hopelessly insolvent with some$4 million of unsecured debtors, it is inevitable that the guarantees of the plaintiffswill be called upon. While the $350,000 per month accruing interest will reduce asthe sale transactions settle, given the magnitude of the anticipated outstanding deficitonce all the lots in the Development settle, there will still be sizeable ongoing interest.[91] The failure of the plaintiffs to provide an undertaking as to damages when theproceedings were commenced is also relevant. The purpose of providing anundertaking as to damages is to satisfy the Court that if an interim injunction is issued,then the applicants are able to meet any damages. If there is any doubt about that thengenerally evidence of the worth of the undertaking is required.30 Here the plaintiffshave chosen not to provide any such evidence and there is also the difficulty of theundertaking as to damages having only been signed by Mr Price "on behalf of all theother plaintiffs". There is no evidence of any authority he might have to bind all ofthe plaintiffs. Neither is there any evidence of the financial ability of the otherplaintiffs to meet an award of damages.[92] Such inferences as I am able to draw from the information that is before theCourt does not support a conclusion that the plaintiffs are in a strong financial position.These factors all weigh against the grant of an interim injunction.Overall justice[93] The defendant submits that the conduct of the plaintiffs is relevant in assessingoverall justice. They refer to the obstruction of the sale of the lots in the Developmentand the refusal to disclose the tenancy details in relation to the Auckland investment30 See Sanson v Energy Products Ltd HC Auckland CIV 2009 404 5464, 4 December 2009 and ParkLane Builds Ltd v Shiva Eco Homes [2022] NZHC 1438 at [58].properties. They refer also to the purported 11 lot sale to Modeco discussed above andalso the way in which lot 32 was sold. Lot 32 was purchased by Mr Cary (via Modeco)from Parklane in March/April 2022 for the sum of $434,782 (excluding GST) (butsimultaneously on sold for $750,000 (including GST)). The effect of the purchase byMr Cary and on sale was that some $200,000 of the equity in lot 32 accrued to thebenefit of Mr Cary or his interests rather than to Parklane as mortgagor.[94] The defendant also refers to the fact that during the course of the past ninemonths (and unknown to the defendant), the plaintiffs caused Parklane to pay nearly$400,000 in undisclosed and unapproved "consultancy" charges to itself and to acompany called KCP Consultants Ltd. The sole director of that company is Mr Cary'swife (and Mr and Mrs Price's daughter (Kylie Cary-Price)). It is submitted this was atransparent scheme to remove money from Parklane that should otherwise have beenused by it to either progress the Development and/or pay its unpaid trade creditors. Iaccept that these matters are relevant to a consideration of where the overall justicelies.[95] Also relevant to the issue of overall justice is the apparent lack of utility ingranting even a period of 28 days' stay in the sale of the Auckland properties. Thereis no evidence that would support a conclusion that there is any realistic prospect ofrefinancing that could avoid the need for the Auckland properties to be sold. The Courtwould merely be delaying the inevitable at a time when interest continued to accrue.Outcome[96] For these reasons I conclude that there is no basis for the grant of an interiminjunction and the application is dismissed.Costs[97] It is appropriate for the costs in respect of the injunction to be fixed. I invitethe parties to agree amongst themselves but in the absence of agreement:(a) the defendant is to file and serve a synopsis of no greater than five pagesin length within 10 working days from the date of this judgment;with(b) the plaintiffs having 10 working days thereafter to file and serve aresponse.[98] Costs will then be dealt with on the papers.Churchman JSolicitors:Cowan Law, Auckland for PlaintiffsMinterEllisonRuddWatts, Wellington for Defendant