WESTPAC NZ LTD v LAU [2017] NZHC 3106

WESTPAC NZ LTD v LAU [2017] NZHC 3106 [13 December 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-002848[2017] NZHC 3106UNDER the Land Transfer Act 1952BETWEEN WESTPAC NEW ZEALAND LIMITEDApplicantAND EE KUOH LAUDefendantHearing: 12 December 2017Appearances: M V Robinson for the ApplicantNo Appearance of, or for the DefendantOrders: 12 December 2017Reasons: 13 December 2017JUDGMENT OF EDWARDS JThis judgment was delivered by Justice Edwardson 13 December 2017 at 4.45 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors: Simpson Grierson, AucklandCopy To: E K Lau, AucklandIntroduction[1] Westpac New Zealand Ltd (Westpac) applied for an order removing a caveatpursuant to s 143 of the Land Transfer Act 1952. There was some urgency in havingthe application heard and determined as Westpac had exercised its power of sale underits mortgage and sold the subject property to a third party. Settlement is due today, 13December 2017.[2] The application was called in the caveat list yesterday. The caveator, Mr Lau,did not appear and he has not filed any documents in opposition to the application.However, for the reasons set out below, I was satisfied that the proceeding had beenserved on Mr Lau, and that he had notice of the call date for the application.[3] After hearing from Mr Robinson, on behalf of Westpac, and reviewing theaffidavits, submissions and cases filed in support of the application, I was also satisfiedthat the caveat should be removed. I made orders accordingly. The orders made areset out at the end of this judgment. My reasons for making those orders now follow.Has Mr Lau been served?[4] Westpac filed its application, supporting affidavit and memorandum in supporton 1 December 2017. Those documents were served on Mr Lau by email on the sameday. The email address is one which Mr Lau has previously used. In fact, Mr Lauresponded to an email concerning this proceeding sent by Westpac's solicitors to thataddress on 24 November 2017.[5] More importantly, the documents were served by posting them to the postoffice box address provided in the caveat lodged by Mr Lau. The documents wereposted on 4 December 2017, and therefore included notice of the hearing date of12 December 2017.[6] Rule 19.12A provides that an originating application under s 143 of theLand Transfer Act 1952 for the removal of a caveat may be served, in accordance withr 6.5, at the address for service stated in the caveat. Rule 6.5 provides that a documentmay be served at an address for service by leaving the document at that address at anytime between 9.00 am and 5.00 pm.[7] At first blush, r 6.5 appears to be at odds with service being effected by postingthe documents to a post office box address. However, on closer scrutiny, I am satisfiedthat r 6.5 should be liberally interpreted so as to give effect to r 19.12A, and to allowservice to be effected by posting documents to a post office box address if that is theaddress provided in the caveat. That conclusion flows from the definition of "addressfor service" in r 1.3 which includes the address of a place in New Zealand "at which adocumentmay be sent by post to that party, under these rules". Such aninterpretation is also consistent with r 6.1(d) which allows service by posting to a postoffice box address if it has been specified by a party as the address for service. Incases to which r 19.12A applies, the address is specified in the caveat.[8] But, to the extent that there is any doubt about that, I note that I would havemade orders under r 6.8 deeming service to have been effected. Westpac has made allreasonable efforts to locate Mr Lau and effect service. These include making enquiriesabout the address mentioned in a recent Environment Court decision at which he wasresiding, and which has since been demolished. The proceeding is likely to have beenbrought to Mr Lau's attention by posting the proceeding to the post office boxspecified in the caveat, and by emailing the documents to him at his email address.[9] Accordingly, I was satisfied that posting the documents to the post office boxaddress in the caveat met the service requirements in this case. But to the extent thatthere was any non-compliance, I would have been prepared to make orders deemingservice to have been effected.Should the caveat be removed?[10] Westpac holds a mortgage over the subject property which was registered on12 April 2016. The mortgage grants Westpac the power to sell the property in theevent of default by the registered owner. Clause 3(j) of the memorandum of mortgagerequires the mortgagor to obtain Westpac's written consent to the grant of any interestin the property, including any lease.[11] The registered proprietor of the property fell into arrears in mortgagepayments. On 12 May 2017, Westpac issued a notice under s 119 of the Property LawAct 2007. The notice remained un-remedied and Westpac exercised its power of sale.The property is the subject of an unconditional sale and purchase agreement which isdue to settle today, 13 December 2017.[12] Mr Lau registered his caveat on 13 October 2017. The estate or interestclaimed in the caveat is recorded as follows:Persuation [sic] to deed of lease dated 18/4/2016 between registered proprietorYingyue Zhang and EE Kuoh Lau (caveator) from the lease date to 30/6/2021(pre-paid lease).[13] As is evident from the face of the caveat and the registration date, both thelease and the caveat post-date the registration of Westpac's mortgage.[14] An affidavit sworn in support of Westpac's application makes it plain thatWestpac did not have any knowledge of the lease, and did not consent to it.Section 105 of the Land Transfer Act 1952 provides that upon registration of anytransfer the estate or interest of the mortgagor passes to the purchaser free of any estateor interest except that which has priority over the mortgage or to which the mortgageehas consented. Section 119 is to similar effect in relation to a lease. Both thosesections provide:105 Transfer by mortgageeUpon the registration of any transfer executed by a mortgagee for the purposeof exercising a power of sale over any land, the estate or interest of themortgagor therein expressed to be transferred shall pass to and vest in thepurchaser, freed and discharged from all liability on account of the mortgage,or of any estate or interest except an estate or interest created by anyinstrument which has priority over the mortgage or which by reason of theconsent of the mortgagee is binding on him.119 Lease not binding on mortgagee without consentNo lease of mortgaged or encumbered land shall be binding upon themortgagee except so far as the mortgagee has consented thereto.[15] In National Mutual Finance (1988) Ltd v Berryman, McGechan J consideredan application to remove a caveat in similar circumstances.1 In that case, themortgagor in default had purported to sell the property to a third party who had thenregistered a caveat to protect their interest. That purported sale was made without theconsent of the mortgagee. The mortgagee then exercised its power of sale and soldthe property to another party. McGechan J held that the sale by the mortgagee waspursuant to a prior right, namely the registered mortgage, and as such it had priorityover the interest protected by the caveat.2 The caveat was accordingly removed.[16] Mr Lau is no stranger to litigation with Westpac over caveats. In WestpacNew Zealand Ltd v Set Kien Law, Associate Judge Christiansen consideredapplications by Westpac to remove caveats registered over properties which had beensold pursuant to the powers of sale under Westpac's mortgage. Mr Lau representedthe parties in that case and opposed the application to remove the caveats. TheAssociate Judge found that Westpac's rights could not be displaced without Westpac'sconsent being given. As there was no such consent given in that case, the interestclaimed in the caveat had no priority and had no protection on registration of thetransfer. The Associate Judge held that the interest claimed in the caveat was notsustainable against a first ranking registered mortgagee exercising its power of sale.The Associate Judge ordered the removal of the caveats.3[17] In Westpac New Zealand Ltd v Set Kien Law, Associate Judge Bell againconsidered an application to remove caveats which had been lodged by Mr Lau.4 Theissue in that case was whether Westpac's interests under its mortgages prevailed overinterests in agreements signed with the mortgagors. Westpac had not consented to theagreements entered into in that case. The Associate Judge held "it is perfectly clearthat Ms Law's interest is subordinate to the bank's interest and the interests claimedby Ms Law cannot prevent the bank exercising its powers of sale".5 Orders removingthe caveats were made accordingly.1 National Mutual Finance (1988) Ltd v Berryman HC Wellington M451/91, 2 October 1991.2 At pp 4–5.3 Westpac New Zealand Ltd v Set Kien Law HC Auckland CIV 2011-404-007989, 19 December2011 at [23]–[25].4 Westpac New Zealand Ltd v Set Kien Law [2012] NZHC 1065.5 At [28].[18] The onus of proof is on the caveator to establish that he or she has a reasonablyarguable case for the interest claimed. Even if such an arguable case is established,the Court retains a discretion to make an order removing the caveat, but the Court willact cautiously.6[19] I have carefully considered whether Mr Lau might have any grounds to opposethe application to remove. In a letter dated 24 November 2017, Westpac's solicitorswrote to Mr Lau advising him of the sale and settlement date, and requesting him toremove the caveat. In an email in response on the same day, Mr Lau said:The lease had been in place before your client registered the mortgage on thepropertyIn other words I never consent your client registered as mortgagee on thepropertyYour client never served the PLA notice to the owner of the property whoresiding in ChinaPlease forward all the service of the documents and the sales and purchaseagreement if the property [sic][20] Plainly these assertions are not correct. The title for the property clearly showsthat the mortgage has priority over the caveat, and over the alleged lease interest whichthe caveat purports to protect. The affidavit evidence before me shows that theProperty Law Act notice was served correctly.[21] In summary, I was satisfied that the caveat must be removed. Westpac'smortgage and power of sale take priority over the alleged lease and caveat. Westpacdid not consent to that lease being granted. Mr Lau has refused to remove his caveat.In the circumstances, I was satisfied that the orders sought by Westpac wereappropriate.Result[22] The application to remove the caveat was granted. The applicant was awardedcosts on a category 2B basis.6 Pacific Homes Ltd (in receive) v Consolidated Joineries Ltd [1996] 2 NZLR 652.[23] I made orders in the form set out in the draft orders provided to me which are,for convenience, set out again below:(a) That caveat 10930094.2 lodged against certificate of title NA71D/745(North Auckland Registry) lapse and be formally removed upon theregistration of a transfer by the mortgagee (Westpac New ZealandLimited) to the mortgagee's purchaser pursuant to its power of sale; and(b) Costs be paid by the respondent on a category 2B basis as set out in theannexed schedule, together with disbursements fixed by the Registraras set out in the annexed schedule totalling $7,641.50.Edwards J