Barry John Hart v ANZ National Bank Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeAbbott
Judgment Date29 October 2012
Neutral Citation[2012] NZHC 2839
Date29 October 2012
Docket NumberCIV 2012-404-002583

[2012] NZHC 2839

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2012-404-002583

Between
Barry John Hart
First Plaintiff/First Counterclaim Defendant

and

Woodhill Stud Limited
Second Plaintiff/Second Counterclaim Defendant

and

Woodhill Holdings Limited
Third Plaintiff/Third Counterclaim Defendant

and

Malory Corporation Limited
Fourth Plaintiff/Fourth Counterclaim Defendant
and
ANZ National Bank Limited
Defendant/Counterclaim Plaintiff
Appearances:
Counsel:

B J Hart, first plaintiff/first counterclaim defendant in person M J Porner for second, third and fourth plaintiffs/counterclaim defendants

L A O'Gorman/ A L Williams for defendant/counterclaim plaintiff

M J Porner Barrister, PO Box 47016, Ponsonby, Auckland 1044

Also to:

B J Hart, 1331 State Highway 16, Waimauku, Auckland, New Zealand

Application for summary judgment — bank had made loans in excess of $30 million which were guaranteed by various plaintiffs and secured by “all obligations” mortgages over properties owned by the plaintiffs or family members — loans fell into arrears — bank sold seven of eight security properties in mortgagee sales — efforts of plaintiffs to prevent sales were unsuccessful and their claim was amended to one for damages — bank applied for summary judgment of the plaintiffs' claims, and its counter-claim for the loan debt — plaintiffs said first set of Property Law Act (“PLA”) notices were invalid as they included claims for interest that was not quantified or due — argued second set of notices did not validate sales already effected and bank had to recommence mortgagee sale process — whether bank breached duty of care to the plaintiffs under s176 PLA (duty of mortgagee exercising power of sale).

Held: ANZ had taken the steps needed to exercise its power of sale. The issue could be determined by reference to the second set of notices, as the position was clear in respect of them. However, notwithstanding the decision in Propst, the first notices were valid because:

  • • Industry practice appeared to support the practice of including a requirement for payment of interest up to date of payment in order to remedy the defect, at least where the applicable rates of interest were stated;

  • • The first set of notices showed the calculation of interest up to a date around the time that they were issued, set out the variable interest rates that were applicable to the amounts owing at the date of the notices, and advised that interest continued to accrue up until the date of payment.

  • • No issue was taken (prior to delivery of the Propst decision) by the plaintiffs over the notices either in regard to the claim for interest after the date of issue of the notice or the plaintiffs' ability to calculate what was due.

  • • It was always open to the party receiving the notice(s) to ask ANZ to stipulate the sum due for payment at a date on or before the date for remedying the default, which obviated any concern arising in cases of variable interest rates.

  • • Prior case law indicated that the focus of the statutory provision was whether the mortgagor had been adequately informed of the amount required to clear the default, and whether the party required to respond to the notice could be said to be prejudiced in that respect. The lack of any such contention, or even a challenge to the notices generally prior to receipt of judgment in Propst, indicated that there was no prejudice in this case.

  • • An inability to require payment of interest up to the date of payment so as to remedy the default completely would leaves a gap which could not be filled: the recipient of the notice could meet a demand for interest only up to the date of demand but still be in default for failing to pay interest between the date of issue of the notice and the date of payment, hence requiring issue of a further Property Law Act notice (with the potential for the same to happen again).

Notwithstanding this, the second set of notices were valid. ANZ had not exercised a power of sale by entering into a contract to sell the land that was conditional on the default not being remedied by the expiry of the notice. The notices had expired and the defaults were unremedied.

In terms of ANZ's obligations under s176 PLA:

  • • ANZ had selected its marketer in a competitive process;

  • • there was no reason to criticise the strategy of marketing widely to all possible interest groups rather than focussing primarily on the farming sector and a possible conversion to dairy farming;

  • • there was no merit in H's contention that the blocks should have been marketed separately from the combined marketing as the marketing made it clear that the properties could be purchased individually;

  • • H's criticisms of an information memorandum were unfounded as ANZ had to provide enough to inform potential bidders, but it had to be a matter of judgment how much information to put into such a document;

  • • the submission that the properties were marketed over too short a period or a better price could have been obtained if more time had been allowed could not be accepted. Authorities showed that four to six weeks was an acceptable period;

  • • ANZ was entitled to advertise the sale as a mortgagee sale and it was not improper to do so;

  • • the evidence did not support H's submission that ANZ did not inform him of its marketing proposals;

  • • ANZ had not had the opportunity give evidence in response to an allegation that it acted in bad faith by not responding to H's sister's offer to purchase the home block, but given the substantial shortfall between the loans and the recoveries from the security properties, it was not credible that ANZ would not accept that offer if it was higher than the tenders it had received;

  • • there was nothing in the point that ANZ sold some of the other properties subject to tenancies but was now seeking vacant possession of the home block. There was no requirement on a mortgagee to sell with vacant possession, and further the Tenancy Tribunal had ruled that there was no residential tenancy in place for the home block.

On the evidence, the steps that ANZ took to obtain the best prices were sufficient to meet its duty of reasonable care. The plaintiffs did not have an arguable case for their claim, nor did they have an arguable defence to ANZ's claim.

Although H had a right to redeem the mortgages, the mortgages secured all indebtedness and the redemption sum was the total indebtedness. H did not tender that sum. ANZ was not obliged to advise H as to the amounts of the tender bids. The tender noted that referential bids (a tender expressed as an amount exceeding any other tender received) would not be accepted. ANZ did not have to accept H's bid for the home block, particularly given the terms of the tender process ( Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd).

Summary judgment entered for ANZ.

JUDGMENT OF ASSOCIATE JUDGE Abbott

1

This proceeding arises out of loans made by the defendant bank (ANZ National Bank Limited (ANZ)) to the first plaintiff, Mr B J Hart, and the fourth plaintiff, Malory Corporation Limited (Malory). The loans to Malory were guaranteed by Mr Hart and by the second and third plaintiffs. All loans were secured by “all obligations” mortgages over properties owned by the plaintiffs or Mr Hart's family members.

2

The total of the loans was substantial (collectively in excess of $30 million), as were the land holdings provided by Mr Hart and the related parties (10 titles together comprising a little over 970 hectares of rural land).

3

The loans fell into arrears. After undertaking a lengthy review of the loans and the securities, ANZ made demand for arrears on fixed term loans that had not become due, and for repayment of loans that were either due for payment or were repayable on demand. The parties entered into a “stand still” arrangement to allow the plaintiffs a six month period in which to attempt to sell the security properties. Sales had not been effected by the end of that period and ANZ commenced steps to sell as mortgagee. This led to the issue of the present proceeding.

4

This proceeding commenced with an application by the plaintiffs for an interim injunction to prevent the mortgagee sales. The plaintiffs withdrew both the initial application, and a second one brought on expanded grounds, at the hearing of those applications and before they were substantively determined. ANZ has since entered into agreements for the sale of seven of the eight security properties and, after obtaining court orders for the removal of caveats over the titles, has settled the sale of those properties. The plaintiffs have recently amended their claim to one for damages.

5

Following the dismissal of the first application for an interim injunction, ANZ filed a statement of defence and counterclaimed for the debt due to it under the loan agreements. At the same time it applied for summary judgment (or strike out) of the plaintiffs' claims, and for summary judgment on its counter-claims for the loan debt and for vacant possession of one of the security properties (the property where Mr Hart resides). This is the application now before the Court.

6

The plaintiffs oppose all applications. They say they have an arguable defence that ANZ breached its statutory duty of care 1 in relation to the mortgagee sale process (resulting in the sale prices achieved by ANZ's tender process falling substantially short of the current market value of the properties), and breached another statutory duty 2 by failing to allow Mr Hart to redeem the mortgage over the property where he lives. The plaintiffs say that they have an arguable claim for damages 3 which cannot be determined by summary judgment, and that this also gives them an arguable...

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