WESTPAC NEW ZEALAND LIMITED V NEUMEGEN & CO HC AK CIV-2007-404-6529

WESTPAC NEW ZEALAND LIMITED V NEUMEGEN & CO HC AK CIV-2007-404-6529 16 December 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2007-404-6529BETWEEN WESTPAC NEW ZEALAND LIMITED Plaintiff AND NEUMEGEN & CO Defendant Hearing: 18 August 2008 Counsel: M V Robinson for Plaintiff P M Fee and L L Lamantia for Plaintiff Judgment: 16 December 2008 at 2 pmRESERVED JUDGMENT OF ASSOCIATE JUDGE H SARGISSONThis judgment was delivered by Associate Judge Sargisson on 16 December 2008.at 2 pm pursuant to Rule 540(4) of the High Court Rules Registrar/Deputy Registrar Date .. Solicitors: Simpson Grierson, Private Bag 92518, Auckland Jones Fee, P O Box 1801, Auckland[1] The plaintiff, Westpac New Zealand Limited, is seeking summary judgment against the defendant, Neumegen & Co, for alleged breach of a solicitor's certificate and undertaking dated 30 November 2006. Westpac seeks orders in terms of its statement of claim for $921,148.04 with interest at the rate of 13.15% per annum compounding on the 13 th day of each month from 20 September 2007 to the date of payment plus costs on a solicitor client basis. [2] Westpac's claim arises out of a loan advance that it made to a Mr Chatfield. Westpac says that Neumegen & Co, who were Mr Chatfield's solicitors but also acted for Westpac in respect of the relevant security documentation, gave an undertaking to ensure Westpac would receive a registered first mortgage over a property at 24 Dilworth Ave, Remuera as security for the advance. However, Westpac's security when registered was relegated to the status of a third registered mortgage. Subsequently the prior mortgagee sold the property at mortgagee sale and the proceeds were insufficient to repay Westpac's advance. It was common ground at the hearing that the proceeds of the mortgagee sale would have been sufficient to repay Westpac's advance had they been so applied. Westpac is now looking to Neumegen & Co to make good its loss. [3] Neumegen & Co opposes summary judgment and it raises various grounds of defence which may be summarised as follows:Defences as to Liability and Compensationa) There was no breach of any undertaking as it gave one undertaking and it did not breach that undertaking; b) Alternatively, the factual circumstances surrounding the alleged undertaking and breach are uncertain; c) In any event it has defences that go to the Court's discretion to grant compensation for breach of undertaking because Westpac is in the same position as if it had a negotiated a first mortgage because it has:i) An equitable interest in the Dilworth property, or ii) A right of subrogation; or iii) Breached its duty to mitigate its loss;Residual Discretiond) There is a need to join other parties. The need is a discretionary factor that warrants the exercise of the Court's residual discretion not to make orders by way of summary judgment.Background[4] In September 2006 Mr Chatfield entered into several agreements to purchase a bar and nightclub business plus the land and building where the business was to be operated. [5] The vendors agreed to partially finance the purchases, which were to be secured in part by a first ranking general security agreement. In order to raise the balance of the finance he needed, Mr Chatfield proposed to use for further security the property at 24 Dilworth Ave, which was owned by the Leicester Chatfield Family Trust of which he was a trustee. This necessitated refinancing the three mortgages that were registered on the title to the property. They were: a) A first ranking mortgage to the National Bank securing lending of approximately $600,000; and b) A second ranking mortgage to Auckland Finance Limited which was acquired by Easy Factors International Ltd (Easy Factors), and a third ranking mortgage to Easy Factors. [6] As part of the financing arrangements, Westpac agreed on 30 November 2006, to advance the trust $880,000 to be secured by a first registered mortgage over the Dilworth property. Westpac instructed Neumegen & Co, who was acting for MrChatfield and the Trust, to prepare and register a first mortgage over the property. It also sent a home loan agreement to Neumegen & Co for the trustees to execute, together with a letter of instructions. The letter stated:Please act for the Bank[s] to complete and arrange for execution and, where relevant, registration of the following documents (the "Documents"):- Solicitors certificate ; - Trustees Certificate ;- Loan/ facility agreement(s)- Registered first and only Mortgage over 24 Dilworth Avenue, Remuera, Auckland with section 80A(2) Property Law Act 1952 priority amount $1,100,000. The mortgagee will be Westpac New Zealand Limited. You may register this mortgage via e-dealing.[Emphasis added] [7] Later the same day Neumegen & Co provided Westpac with relevant documentation including its solicitor's certificate certifying in respect of the Dilworth property that:2. We have made such enquiries and searches as are appropriate as at the date of this certificate (including obtaining a guaranteed search of the property described in Schedule 1 (Property). 3. We confirm that except for the interests (if any) referred to in paragraph 4 below, we are not aware of anything which would prevent Westpac NZ's mortgage in relation to the Property being registered and obtaining the priority required by the Banks. 4. We have obtained releases of, or satisfactory undertakings to provide releases on settlement in respect of all encumbrances registered against the Property other than those described in Schedule 3 in respect of which Westpac NZ's consent has been obtained.10.1 We will promptly lodge or submit, in registrable form to Land Information New Zealand ("LINZ"), all Documents [as defined in the Instructions] which are required by Westpac NZ to be registered(or the non-registration of which might affect the priority of Westpac NZ's security).[8] Schedule 1 to the certificate provided the following information: Address of land over which mortgage is to be granted 24 Dilworth Avenue Remuera Priority ranking of mortgage FirstDates documents disclosed 30 November 2006 Security documents: First registered all obligations mortgage in favour of Westpac Banking Corporation[Emphasis added] [9] Nothing was listed in schedule 3 to the certificate. [10] Westpac advanced $880,000 to the trustees on 13 December 2006. Neumegen & Co discharged the National Bank's first ranking mortgage but it did not ensure beforehand that it had the necessary documents or undertakings to complete registration of Westpac's mortgage as a first ranking mortgage. Indeed it transpires that Westpac's mortgage was not registered until months later and when the mortgage was eventually lodged for registration in February 2007 it could only be registered as a third ranking registered mortgage. The reason was Neumegen & Co had been unable to obtain the necessary releases from Easy Factors whose mortgages had advanced to first and second ranking mortgages upon the discharge of the National Bank mortgage. Easy Factors had provided a conditional undertaking to provide the necessary releases on discharge of the National Bank mortgage to ensure priority for Westpac's mortgage, but it did not accept its conditions were satisfied. [11] On 23 November 2007 Easy Factors sold the Dilworth property at mortgagee sale because its mortgages were in default and the defaults had gone unremedied. The proceeds of the sale were insufficient to pay anything to Westpac as third registered mortgagee. [12] Earlier on 12 October 2007 Westpac issued summary judgment proceedings against Neumegen & Co alleging breach of undertaking.Issues[13] In broad terms the questions the parties raise for determination are whether Westpac has discharged its onus of showing that: a) Neumegen & Co gave an undertaking it would ensure Westpac received a registered first mortgage over the Dilworth property; b) Neumegen & Co did not do what was required to satisfy the undertaking; c) Neumegen & Co has in any event not raised an arguable defence that goes to the Court's discretion to order compensation for Westpac's loss arising from breach of undertaking. [14] It is common ground that if Westpac has discharged the onus in respect of the above then the remaining issue in determination will be whether Neumegen & Co has raised a discretionary ground that justifies the exercise of the Court's residual discretion not to order summary judgment.Principles relating to summary judgment and breach of solicitor's undertaking[15] Rule 136 in so far as it is relevant reads:136 Judgment where there is no defence(1) The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular part of any such claim.[16] The principles applying to a plaintiff's summary judgment application are well established. They were summarised by the Court of Appeal in Jowada Holdings Ltd v Cullen Investments Ltd (CA 248/02, 5 June 2003) at [28]:In order to obtain summary judgment under Rule 136 of the High Court Rules a plaintiff must satisfy the Court that the defendant has no defence to its claim. In essence, the Court must be persuaded that on the material before the Court the plaintiff has established the necessary facts and legal basis forits claim and that there is no reasonably arguable defence available to the defendant. Once the plaintiff has established a prima facie case, if the defence raises questions of fact, on which the Court's decision may turn, summary judgment will usually be inappropriate. That is particularly so if resolution of such matters depends on the assessment by the Court of credibility or reliability of witnesses. On the other hand, where despite the differences on certain factual matters the lack of a tenable defence is plain on the material before the Court, to the extent that the Court is sure on the point, summary judgment will in general be entered. That will be the case even if legal arguments must be ruled on to reach the decision. Once the Court has been satisfied there is no defence Rule 136 confers a discretion to refuse summary judgment. The general purpose of the Rules however is the just, speedy, and unexpensive determination of proceedings, and if there are no circumstances suggesting summary judgment might cause injustice, the application will invariably be granted. All these principles emerge from well known decisions of the Court including Pemberton v Chappell [1987] NZLR 1, 304, 5; National Bank of New Zealand Ltd v Loomes (1989) 2 PRNZ 211, 214; and Sudfeldt v UDC Finance Ltd (1987) 1 PRNZ 205, 209.[17] In Pemberton v Chappell [1987] 1 NZLR 1 at 3, Somers J explained the concept of "no defence" as meaning the "absence of any real question to be tried". His Honour also noted at 3 that to defeat the application the defendant must provide sufficient particulars to show that there is a factual or legal issue worthy of trial. [18] It is worth emphasising the approach, which the Court will adopt to disputes of fact on summary judgment applications. As Somers J stated in Pemberton at 4:Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment.[19] At the same time, the Court will take a robust approach to summary judgment applications: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 at 85-86 (CA). The object of the procedure would be thwarted if spurious defences or plainly contrived factual conflicts were permitted to prevent judgment being obtained, especially in the context of the structure of r 136 where the onus is on the applicant. A helpful indicator as to where the line should be drawn is found in the judgment of Greig J inAttorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14:In a matter such as this it would not be normal for a judge to attempt to resolve any conflicts in evidence contained in affidavits or to assess the credibility or plausibility of averments in them. On the other hand, in the words of Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331, at 341E, the Judge is not bound:"to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be."[20] Finally, it is important to bear in mind the Court's residual discretion to refuse summary judgment. In Jowada, the Court explained at [30] the nature of the residual discretion to refuse summary judgment:Once the Court has been satisfied that there is no defence Rule 136 confers on it a discretion to refuse summary judgment which is of a residual kind. While the types of cases in which the discretion will be exercised to refuse summary judgment cannot be exhaustively defined, the most common instance is where there would be an unfairness in proceeding immediately to judgment, for example if the defendant were unable to get in touch in the time available with a material witness who it was reasonably thought might be able to provide it with material for a defence: Bank Für Gemeinwirtschaft v City of London Garages Ltd [1971] 1 All ER 541. 548 (CA). In that case Cairns LJ also said that harsh or unconscionable behaviour of the plaintiff might require a matter to proceed to trial so that any judgment obtained was in the full light of publicity.[21] The principles in relation to the solicitor's undertakings were summarised by the High Court in Australian Guarantee Corporation (NZ) Ltd v East Brewster Urquhart & Partners [1990] 2 NZLR 167 at p 171 by Fisher J:Based on those authorities my understanding of the principles applicable to a case such as the present one can be summarised as follows: (a) As part of the general disciplinary powers of the High Court over the conduct of its officers, the Court can require that a solicitor who has defaulted on an undertaking to a third party with respect to his client's affairs pay: (i) damages for the loss suffered by the third party in consequence and/or (ii) the third party's costs on a solicitor and client basis. (b) If such payment is ordered the solicitor normally has a right of indemnity against his client. (c) The jurisdiction is a discretionary punitive and disciplinary one and does not exist for the purpose of enforcing legal rights. (d) Such cases can be dealt with by summary judgment, although of course that is by no means the only appropriate procedural vehicle.(e) An undertaking for this purpose must be a personal undertaking given by the solicitor in his professional capacity. It is not sufficient if the undertaking is merely given on behalf of a client or if it is given by a solicitor in some capacity other than as solicitor.(f) Before such an undertaking can be enforced it must be clear in its terms .(g) In construing the meaning of such an undertaking it will generally be assumed that the undertaking was intended to facilitate the successful completion of an essentially commercial dealing. It should not normally be construed in any technical or legalistic fashion but rather by reference to the evident substance and intention.[Emphasis added] [22] I also note the comments of Lord Esher MR in Re Grey [1892] 2 QB 440 at p 443 as to the true nature of this summary jurisdiction in respect of undertakings:". . . the Court has a punitive and disciplinary jurisdiction over solicitors, as being officers of the Court, which is exercised, not for the purpose of enforcing legal rights, but for the purpose of enforcing honourable conduct on the part of the Crown's own officers. That power of the Court is quite distinct from any legal rights or remedies of the parties, and cannot, therefore, be affected by anything which affects the strict legal rights of the parties."[Emphasis added] [23] See also the fifth principle stated by Balcombe LJ in his summary of the jurisdiction in Udall v Capri Lighting Ltd [1987] 3 All ER 262 at p 269:"(5) Neither the fact that the undertaking was that a third party should do an act nor the fact that the solicitor may have a defence to an action at law (eg the Statute of Frauds), preclude the court from exercising its supervisory jurisdiction: see Ex p Hughes (1822) 5 B & Ald 482, 106 ER 1267 and Re Greaves (1827) 1 C & J 374, 148 ER 1466. However, these are factors which the court may take into account in deciding whether or not to exercise its discretion and, if so, in what manner."[Emphasis added]Discussion Did Neumegen & Co give and breach the alleged undertaking?[24] There is no dispute that Westpac's entitlement to summary judgment turns in part on two preliminary questions. It is convenient to deal with them together. The questions are did Neumegen & Co: a) Give Westpac an undertaking to ensure its mortgage would be a registered first mortgage? b) Do what was required to satisfy the undertaking? [25] Westpac submits that the existence and breach of the alleged undertaking could not be clearer. It says that its instructions were to prepare and register a first mortgage. It submitted, by reference to the solicitor's certificate at clauses 2 - 4 and 10.1, that Neumegen & Co gave undertakings about a certain state of affairs and to prepare and register a first mortgage as well. In particular it says Neumegen & Co undertook: a) By clause 4, that it had obtained releases or satisfactory undertakings to adjust the ranking of Easy Factors' mortgages when in fact it had not. It had merely obtained a conditional undertaking from Easy Factors; b) By clause 3, that it was unaware of anything that would prevent its obtaining a first registered mortgage when it knew that Easy Factors' conditions to the undertaking had not been met and did not know they would be; c) By clause 10.1, that it would lodge for registration all documents necessary to give Westpac a first registered mortgage when it could not comply with that undertaking at the time it was given or any time thereafter.[26] Neumegen & Co's position (in response) is that the certificate did not give the alleged undertaking and therefore no issue of breach arises. It advanced several reasons: a) The only undertaking it gave was in clause 10.1 of the certificate where it states it will promptly lodge all the documents as defined in the undertaking. It says it complied with that undertaking as it did lodge for registration the documents listed in Westpac's instructions. The instructions, correctly construed, require registration of Westpac's mortgage but not as a first mortgage. b) There are no other undertakings in the solicitor's certificate. Clauses 3 and 4 of the certificate do not contain an undertaking. They contain representations of fact and as such, the Court's jurisdiction to enforce an undertaking does not arise in respect of their contents; c) In the event that the representations in clauses 3 and 4 amount to an undertaking or undertakings relating to a first mortgage the representations were correct. They were correct because Neumegen & Co had obtained an undertaking to provide releases that were "satisfactory" to it, albeit that the undertaking was conditional. It believed Easy Factors would discharge its two mortgages. [27] I accept that Westpac has made out its case that Neumegen & Co gave the alleged undertaking to ensure Westpac's mortgage would be a first mortgage. This is clear from a plain reading of Westpac's letter of instructions to Neumegen & Co and solicitor's certificate Westpac received in response. As can be seen, the former clearly instructs that a first mortgage is to be registered, and the certificate at clause 10.1 undertakes to meet the instructions by lodging the stipulated documents. Counsel for Neumegen & Co argued that the use of the term "registered first and only mortgage" in the letter's definition of documents is a misnomer and an insufficient instruction for the purpose of requiring a first registered mortgage. She gave as the reason that as one can not lodge a "registered first and only mortgage," one can only lodge a mortgage, which, on registration, may become the firstmortgage registered on the title. Furthermore, Westpac's mortgage could only be the "only mortgage" if all other mortgages were discharged and it was never intended that Westpac would have the only mortgage registered on the title to the property. [28] I consider that Nemegen & Co's interpretative arguments are too legalistic and technical. I am satisfied, having regard to the relevant provisions of the letter and the certificate, that not only was Westpac's instruction that its mortgage be registered as a first mortgage obvious, but that what Neumegen & Co certified in clause 10.1 was clear. It was that all documents needed to give Westpac a first registered mortgage would be lodged for registration with LINZ. There was no ambiguity. Indeed it is evident Neumegen & Co itself interpreted of the instructions and solicitor's certificate in this way too and was in no doubt about what it was asked to do. In a letter dated 13 December 2006 Neumegen & Co wrote to Westpac saying:We refer to your instructions dated 13 [sic] November 2006 and enclose: 1. Our Solicitor's certificate 2. Please note that, upon receipt of the loan advance, we will ensure that Westpac Banking Corporation is listed as the first mortgagee on the insurance policy.[29] That brings me to the question whether Neumegen and Co did what was required to satisfy the undertaking. [30] The short answer is "no", as evidenced by the unfortunate outcome. Further, that what Neumegen and Co promised became impossible to perform, as counsel for Neumegen & Co pointed out, does not mean there was no breach of undertaking and is no defence to a breach of undertaking: Bhanabhai & Anor v Commissioner of Inland Revenue [2007] 18 PRNZ 429 at [42]. [31] It is not necessary in the circumstances to deal with Neumegen & Co's contention that clauses 3 and 4 of the certificate do not equate to undertakings. Suffice it to note two points. First, I accept, as counsel for with Neumegen & Co submitted, that an undertaking is a promise to do a future act, and that clauses 3 and4 do not contain promises of future action. Secondly, however, the significance of the clause for present purposes is not whether they are or are not undertakings but that they form part of the context in which the undertaking in clause 10.1 was given and must be construed. Clearly the certificate taken together with the letter of instruction assures Westpac that its mortgage will be registered as the first ranking mortgage over the Dilworth property. That is a future act or promise and therefore an undertaking. The undertaking was breached as Neumegen & Co failed to register the mortgage as a first ranking mortgage. Again I re-emphasise the comments inAustralian Guarantee Corporation (NZ) Ltd v East Brewster Urquhart & Partners, namely the undertaking should "not normally be construed in any technical or legalistic fashion but rather by reference to the evident substance and intention". [32] I come then to the alternative grounds of defence Neumegen & Co has raised.Westpac's position is the same as if it had a registered first mortgage?[33] The starting point is that the Court's power to order compensation is discretionary, as stated in Australian Guarantee Corporation. [34] Counsel for Neumegen & Co submitted there are several good reasons why it should not be ordered to make good the loss. I consider each in turn.Estoppel:[35] Counsel submitted first that Westpac can not claim that it has suffered any loss because it is in the same position as if it obtained a first registered mortgage. The reasons claimed are Westpac has an unregistered equitable interest in the Dilworth property that takes priority to Easy Factors' registered interest because Easy Factors intended that Westpac's interest should be registered first. The intention estops Easy Factors denying Westpac's priority. [36] I reject the submission. Plainly Westpac is not and never was in the same position as if it had obtained a registered first mortgage. Had Westpac obtained a registered first mortgage it would not be in the position it is in now. The positionnow is that the property has been sold and Westpac can never be elevated to registered first mortgagee. Whatever interest in the land Westpac had it no longer has. At best, relative to Easy Factors, it has a right to claim the proceeds of sale, but that is not the same as an interest in the land. Were it in a position where it had held a registered first mortgage the proceeds of sale would have been paid to it with the surplus (if any) going to Easy Factors automatically. Further, Westpac never was in the same position. Westpac's entitlement to priority depended on Easy Factor's conditional undertaking. A conditional undertaking always carries a risk that fulfilment of the condition(s) may not occur, hence its conditional nature. Such an undertaking is not the same as an unconditional undertaking. The latter by definition creates an automatic entitlement to a first mortgage. The distinction is far from semantic as the actual events in this case demonstrate. [37] That brings me to the second factor Neumegen & Co relies on in support. It is that Westpac has a right to subrogate into the position of previous first mortgagee (National Bank) upon the discharge of its first ranking mortgage.Subrogation:[38] Where a third party pays off a mortgage that party is presumed, unless the contrary appears, to intend that the mortgage shall be kept alive for its own benefit:Ghana Commercial Bank v Chandarim and Another [1960] AC 733. The phrase kept alive is not a literal truth but rather a metaphor or analogy: Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221, per Lord Hoffmann. As noted by Lord Hoffmann at p 236D:When judges say that the charge is 'kept alive' for the benefit of the plaintiff, what they mean is that his legal relations with the defendant who would otherwise be unjustly enriched are regulated as if the benefit of the charge had been assigned to him.[39] It is therefore evident that the repayment of the whole debt and discharge of the mortgage do not by themselves rebut the presumption of subrogation; something more is required. In Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291 the English Court of Appeal summarised the principles as to subrogation as follows:1. Subrogation embraces more than a single concept: it is sometimes contractual in nature and it is sometimes based on equity. 2. Subrogation is a remedy primarily aimed at preventing unjust enrichment. 3. Subrogation is a flexible remedy, which nonetheless must be applied, in a principled fashion. 4. A classic case of subrogation is that described by Walton J in Burston Finance Limited v Speirway Limited (in Liquidation) [1974] 3 All ER 735, [1974] 1 WLR 1648 at 1652B-C, namely:[W] here A's money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of B's rights as a secured creditorIt finds one of its chief uses in the situation where one person advances money on the understanding that he is to have certain security for the money he has advanced, and for one reason or another, he does not receive the promised security. In such a case he is nevertheless to be subrogated to the rights of any other person who at the relevant time had any security over the same property and whose debts have been discharged in whole or in part by the money provided by him.5. Although the classic case of subrogation involves a lender who expected to receive security (in the proprietary sense e.g. a mortgage) claiming subrogation to another security, it can apply to personal rights. 6. The fact that a lender of money gets some security does not prevent him from claiming to be subrogated to another security. 7. A lender cannot claim subrogation if he obtains all the security which he bargained for. 8. The fact that the lender's failure to obtain the security he bargained for was attributable to his negligence is irrelevant: see per Lord Hoffmann at 235E-G in Banque Financiere.9. The absence of a common intention on the part of the borrower and the lender that the lender should have security is by no means fatal to a lender's subsequent claim for subrogation. However, the intention of the parties to the arrangement which is said to give rise to claim for subrogation, may be 'highly relevant'. 10. Subrogation cannot be invoked so as to put the lender in a better position than that in which would have been if he had obtained all the rights for which he bargained.11. It is difficult, and may be impossible, for a lender who has obtained security to invoke subrogation where the security he has obtained gives him all the rights and remedies of security to which he claims to be subrogated, or is a security in which the original security would naturally merge. 12. The capital sum in respect of which a lender is subrogated cannot normally be greater than the amount of the secured debt has been discharged. 13. Normal equitable principles apply to subrogated rights. Thus, the familiar equitable defences can be raised against a claim for subrogation, and priority as between the person with the subrogated right and other parties are to be determined in accordance with normal equitable principles. 14. There is a limit to the extent to which one can extract general rules applicable to subrogation bearing in mind that the remedy of subrogation may vary with the circumstances of the case, the object being to effect a fair and just balance between the rights and interests of the parties concerned. [40] In view of the eighth principle and the reasoning in the recent English Court of Appeal decision of Cheltenham & Gloucester PLC and Appleyard & Another[2004] EWCA CIV 291, it would appear that if a lender takes as security a charge over the whole of the property that the lender inadvertently fails to register, the lender is not automatically viewed as intending to replace any equitable rights of subrogation. The better view is that the lender intends to maintain any rights of subrogation until: a) It has obtained all that it has bargained for, namely until the charge is legally registered or; b) The charge can no longer be legally registered and therefore is no longer enforceable. [41] Applying those principles to the present case, I am satisfied that if Westpac ever had a right of subrogation it was up to Neumegen & Co to register the mortgage to replace the equity rights of subrogation with an indefeasible right to a first registered mortgage. Neumegen & Co did not. It may not now rely on an equity right, as the right cannot be maintained in any practical sense. Because the propertyhas been sold, Westpac's former equitable charge cannot be legally replaced with a registered charge. Furthermore, there is no suggestion the new owner's title is not subject to the normal rights of indefeasibility. In short, Westpac can no longer subrogate so as to get rights that Neumegen promised in its undertaking to Westpac.The circumstances are not clear[42] In this next ground, counsel for Neumegen & Co submitted the Court should not in any event award summary judgment to Westpac as the circumstances surrounding the giving of the undertaking and the potential breach of the undertaking are far from clear. Counsel submitted that the consequence is the Court has not had the benefit of hearing evidence of those principally involved in the transaction. For example, it has not heard from Mr Rowe, the solicitor who handled the file for Neumegen & Co or from Mr Chatfield who was clearly actively involved in negotiations with Easy Factors about the terms on which it would allow priority for Westpac's mortgage. [43] I do not accept the submission. The undertaking is clear on its face, and there is no evidence suggesting that the undertaking was anything other than that. Neumegen & Co undertook it would obtain a first registered mortgage over the Dilworth property on Westpac's behalf. There was also a clear breach of that undertaking by Neumegen & Co, who never obtained for Westpac a first registered mortgage over the Dilworth property. The property has since been sold to another and there is no suggestion the buyer was other than a bona fide purchaser for value. There is also no suggestion of any circumstance that might exist to show that there was something unusual about Westpac's role that might call for further investigation. [44] As to the terms on which Easy Factors would have allowed priority for Westpac's mortgage, this matter is only relevant to Westpac's duty to mitigate (if indeed it has such a duty). As will become apparent I have concluded that a defence based on such a duty is not available to Neumegen & Co.Duty to mitigate[45] Neumegan and Co argue that Westpac had a duty to mitigate its loss and it breached the duty by not pursuing a claim against Easy Factors for the proceeds ofsale of the Dilworth property before seeking compensation from the defendant. [46] I am satisfied that there can be no such duty in the context of the present case. As noted by Fisher J in Australian Guarantee Corporation (NZ) Ltd v East Brewster Urquhart & Partners in construing the meaning of an undertaking it will be assumed that the undertaking was intended to facilitate the successful completion of an essentially commercial dealing. That intention is inconsistent with any duty to mitigate on Westpac's part via the pursuing of a claim against a third party. To pursue such a claim would likely have drawn Westpac into months of litigation and an uncertain outcome, all the while remaining out of pocket. The parties can not have intended that.The need to join Easy Factors[47] I come then to the last of Neumegen & Co's grounds. It is based on the Court's residual discretion. [48] As the Court of Appeal stated in Jowada Holdings Ltd v Cullen Investments Ltd (CA 248/02, 5 June 2003) at [30] summary judgment may be refused on the grounds of unfairness. An unfairness may arise where the proceeding involves the actions or possible liability of a third party that is not before the court: seeMcGechan on Procedure at HR136.11. [49] Neumegen & Co argues Westpac is entitled to join Easy Factors as a defendant but has failed to exercise the right. Therefore it should be given leave under r 75 of the High Court Rules to issue a third party notice based on its own claim that it is entitled to contribution or indemnity from Easy Factors. As Neumegen & Co would have it, it would be unfair not to allow such a course because the real dispute at the heart of the case is between Easy Factors and Westpac and is whether Westpac or Easy Factors is entitled to the proceeds of sale. Counselsubmitted it is clearly arguable that Westpac is the entity with the entitlement and it would be inappropriate to allow Westpac to abandon a good claim against Easy Factors simply because a summary judgment application against Neumegen & Co presents an easier route to recovery. [50] I disagree with the submission. The key contest is not between Westpac and Easy Factors. Westpac plainly has a separate and independent claim against Neumegen & Co for breach of undertaking and as in Bhanabhai & Anor v Commissioner of Inland Revenue [2007] 18 PRNZ 429 it is entitled to pursue it. Having regard to the evidence before the Court, Westpac is entitled to judgment for breach of undertaking and to the fruits of that judgment. As earlier noted in construing the meaning of an undertaking it will be assumed that the undertaking was intended to facilitate the successful completion of an essentially commercial dealing. That intention is inconsistent with an approach that effectively seeks to force Westpac to go to trial to enforce its undertaking. Such an approach would meet Neumegan & Co's convenience but it would seriously delay Westpac's right to a remedy for breach of undertaking when it is clearly entitled to the remedy it seeks and prolong the time Westpac remains out of pocket. [51] I am also satisfied that there would be no real unfairness in declining Neumegen's application for joinder. The reasons are as follows: a) While there is a dispute involving Easy Factors in reality it is a dispute between Neumegen & Co and Easy Factors about an undertaking negotiated between them and whether Easy Factors breached an undertaking to Neumegen & Co; b) It is still open to Neumegen & Co to issue separate proceedings against Easy Factors. Had it done so, its proceeding would have been well advanced. The fact that it has delayed is a situation of its own choosing, not Westpac's; c) Westpac has in any event made clear it would assign such rights of action as it had against Easy Factors to Neumegen & Co.Result/Orders[52] I am satisfied for the above reasons Wespac has shown it has an unanswered case for compensation for breach of undertaking and that it is entitled to compensation for its loss. [53] There will be orders by way of summary judgment against Neumegen & Co for: a) Compensation of $921,148.04 being the undisputed amount owing under the loan agreement and the mortgage as at 27 September 2007; b) Interest on that sum at the rate of 13.15% (being the fixed rate plus the default margin of 5% under the loan agreement) compounding on the 13th day of each month from 27 September 2007 to the date of payment; c) Costs on a 2B basis plus disbursements as fixed by the Registrar. ___________________________ Associate Judge Sargisson