Asb Bank Ltd v Pi Anderson Hc Chch

JurisdictionNew Zealand
CourtHigh Court
JudgeD.I. Gendall
Judgment Date24 Mar 2010
Neutral Citation[2010] NZHC 803
Docket NumberCIV-2009-409-2522

[2010] NZHC 803

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2009-409-2522

BETWEEN
ASB Bank Limited
Plaintiff
and
Pamela Isobel Anderson
Defendant
Counsel:

S. Barker - Counsel for Plaintiff

D. Russ - Counsel for Defendant

Summary judgment application for repayment of loan — mortgagee exercised its power of sale over 2 neighbouring properties securing loan — whether mortgagee breached duty of care in s176 Property Law Act 2007 when exercising power of sale by not taking reasonable care to obtain the best price reasonably obtainable — whether the mortgagee was required to postpone the sale of the property in order to obtain boundary adjustments between the two properties it was selling.

Held: ASB Ltd as mortgagee was not absolved of the duty of care by putting the matter of valuation in the hands of a competent agent. The mortgagee's duty was more than merely procedural

A mortgagee is not required to break up assets and sell them in a piecemeal manner if this can only be carried out over a substantial period. Moreover, a mortgagee has no general duty to improve the value of the property before exercising its power of sale. A mortgagee is not under any duty to postpone exercising the power of sale until after the further pursuit of an application for planning permission or the grant of a lease. By analogy, a mortgagee in the position of the plaintiff here was not obliged to postpone the sale of the property in order to obtain boundary adjustments. The mortgagee was entitled to sell the property in the condition in which it stood without investing money or time into dividing it up to sell as two separate properties - the evidence clearly indicated that there would have been delay in a sale and ASB Ltd would have had to expend more than minimal efforts and significant moneys to sell the lots separately even if it was able to do so. There was no breach of the duty of care by ASB Ltd. Summary judgment application granted.

JUDGMENT OF ASSOCIATE JUDGE D.I. Gendall

Introduction
1

The plaintiff seeks an order for summary judgment for the balance of an unpaid loan owing to it by the defendant. As the defendant's mortgagee, the plaintiff exercised its power of sale over secured properties owned by the defendant or her interests. However, the proceeds from these sales were insufficient to discharge all of the debt.

2

The defendant does not dispute that she is liable under the loan agreement entered into with the plaintiff, but opposes the present application on the sole basis that the plaintiff did not take reasonable care to obtain the best price reasonably obtainable when exercising its power of sale of the properties it held as security under s 176 Property Law Act 2007.

3

The defendant had also initially alleged that the plaintiff's conduct in exercising its power of sale was unconscionable or oppressive, but this ground of opposition has now been abandoned.

Background
4

On 18 September 2007, the plaintiff made available a term loan of $735,000 to the defendant as trustee for the Pamela Anderson Education Trust. The loan agreement signed to record this facility was for a term of 30 years from the date of drawdown. It was secured by registered mortgages over several properties: a property situated at 19-21 Lachlan Place, Timaru (the Timaru property) and a property at 2 and 2A Harewood Road, Oxford (the Oxford property).

5

The Oxford property consisted of two separate and legally defined parcels of land contained in individual certificates of title. There was an original dwelling on 2 Harewood Road, and a relocated dwelling on 2A Harewood Road. Resource consent for relocation of the second dwelling had been granted. However, the existing boundary line between the two adjoining titles ran through the carport and sleep-out of the original dwelling.

6

In October 2008, the defendant failed to pay the monthly instalment due under the agreement. On 17 December 2008, the plaintiff wrote to the defendant demanding payment of the outstanding amount, but the defendant failed to comply with that demand. The plaintiff then served notices on the defendant under s 119 of the Property Law Act 2007, requiring that the defaults be remedied by 25 February 2009 and notifying the defendant that the plaintiff would have the right to enter into possession of and sell the properties.

7

When the notices were not complied with on 25 February 2009, the plaintiff arranged for the sale of the properties by auction. The Timaru property was to be sold for $340,000 with a settlement date of 25 June 2009, and the Oxford property was to be sold, as a whole, for $215,000 with a settlement date of 19 June 2009. The defendant does not dispute that the plaintiff took reasonable care in selling the Timaru property.

8

Back-tracking a little, in March 2009 when the plaintiff took steps to advance its mortgagee sale of the Oxford property, it requested a marketing appraisal from Grenadier Real Estate Limited (Grenadier) a Canterbury real estate company which operated under the Harcourts' franchise. Grenadier recommended a sale by public auction following a four-week advertising and marketing campaign. Its market appraisal analysed the value of 2 Harewood Road and 2A Harewood Road together because it said “boundary, title and compliance issues [had] not been satisfied as to Council requirements”. An auction date was scheduled for 1 May 2009 and the campaign, which was reasonably extensive, commenced.

9

On 27 April 2009, the plaintiff obtained an independent valuation report from registered valuers, Fordbaker Valuation Limited (Fordbaker), which concluded that, sold as one property, the Oxford property had a current market value of $265,000 and at, a forced sale, a value of $200,000. The valuation identified consent issues with the carport associated with 2 Harewood Road, and further noted that there would be a number of rectification costs if 2 Harewood Road and 2A Harewood Road were to be sold as separate properties, as

… the fence dividing the two dwellings is not located on the boundary of the property, with the studio associated with 2 Harewood Road appearing to be located on the parcel of land associated with 2A Harewood Road.

Those rectification costs were estimated to total about $75,000.

10

Six interested buyers had registered to bid at the first auction on 1 May 2009. Prior to this auction the plaintiff and the defendant had entered into negotiations. At the defendant's request, the 1 May 2009 auction was postponed the plaintiff granting the defendant additional time to arrange refinancing. It relisted the property for mortgagee sale however when the defendant's refinancing proposals failed to reach a conclusion.

11

A second auction was scheduled for 5 June 2009. Only three bidders registered for this auction. At the auction, bids opened at $150,000 with the highest bid received being $180,000, and the property was passed in. However, negotiation efforts following the auction resulted in an improved offer of $215,000 from the highest bidders. The plaintiff accepted this offer and the sale settled on 19 June 2009.

12

The net proceeds realised upon settlement of the sale of the properties were applied in reduction of the outstanding balance of the amount owing under the loan agreement. This left a total of $317,274.57 plus interest owing by the defendant as at 30 June 2009. According to the plaintiff, it was when the defendant failed to submit a proposal to settle the shortfall, that the plaintiff on 27 October 2009 brought these proceedings.

13

Then, on 15 December 2009, the defendant obtained a valuation of the Oxford property from Burnett & Associates This assessed the June 2009 value of each adjusted Lot for 2 and 2A Harewood Road on a separate basis as being $230,000 and $210,000. The defendant also went on to seek a review of Fordbaker's valuation from a Mr Tappenden, a registered valuer at TelferYoung (Canterbury) Limited. Mr Tappenden has provided a report which expresses the view that the lots had a value of between $165,000 and $220,000 each, had they been sold separately. Mr Tappenden's valuation is not, however, a formal registered valuation.

Summary Judgment Principles
14

The present summary judgment application is brought pursuant to r 12.2(1) of the High Court Rules which provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

  • (1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

15

The principles of summary judgment have been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187:

[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In...

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