Burgess v Tsb Bank Ltd

JurisdictionNew Zealand
JudgeCooper J
Judgment Date10 August 2015
Neutral Citation[2015] NZCA 361
Docket NumberCA47/2014
CourtCourt of Appeal
Date10 August 2015
BETWEEN
Gary Owen Burgess
Appellant
and
Tsb Bank Limited
Respondent

[2015] NZCA 361

Court:

Cooper, Mallon and Dobson JJ

CA47/2014

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court decision upholding a notice under s119 Property Law Act 2007 (mortgaged land — notice of exercise of powers) and awarding the respondent bank the shortfall from a mortgagee sale-notice did not provide a sum in para (a) of form 1 Property Law (Mortgagees' Sales Forms) Regulations 2007 and required calculation of the amount necessary to comply with its terms if interest and weekly default fees were to be paid down to the date of actual repayment-had included reference to interest that would be payable in the event that default was not remedied-whether the s119 notice had to state the sum of money that was required to remedy the default rather than requiring calculation of additional amounts depending on the date payment was actually made-whether the notice had improperly required payment of interest not yet due, being an amount in respect of which the appellant was not in default-whether it had failed properly to specify the consequences of not remedying the default, namely acceleration of the loan.

Counsel:

Appellant in person

D M Lester and G R Burgess for Respondent

  • A The appeal is dismissed.

  • B The respondent is entitled to indemnity costs in the High Court, subject to the reservation that where costs have already been fixed in relation to interlocutory steps, the cost orders originally made are to stand.

  • C The respondent is also entitled to indemnity costs in this Court, together with the usual disbursements.

JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by Cooper J)

1

Mr Burgess mortgaged his farm land at Medbury Road, RD1, Hawarden (the property) to secure two loans he obtained from TSB Bank Ltd (the bank). When he fell into arrears the bank served a notice under s 119 of the Property Law Act 2007 (the Act). Mr Burgess did not comply with the notice and the bank exercised its power of sale. The proceeds of sale were insufficient to meet his indebtedness to the bank, which commenced a proceeding in the District Court to recover the shortfall.

2

That proceeding was transferred to the High Court after Mr Burgess filed a counterclaim well in excess of the District Court's jurisdiction. 1 The bank applied for security for costs on the counterclaim, and by consent both the counterclaim and the bank's applications for security were stayed pending determination of the bank's substantive claim.

3

On 10 December 2013 Gendall J delivered a judgment in favour of the bank in respect of the shortfall sum of $22,911.70, and interest. 2 The Judge awarded costs on an indemnity basis together with disbursements.

4

Mr Burgess appeals against that judgment.

Background
5

In 2008 the bank advanced two loans to Mr Burgess, both of which were secured by a first mortgage over the property. The loans totalled $165,000, and comprised a table mortgage advance of $140,000 and a further revolving credit facility of $25,000.

6

Mr Burgess fell into arrears of interest. On 26 February 2010 the bank served a default notice under s 119 of the Act. When the default was not remedied, the bank proceeded to a mortgagee sale and the property was sold at auction on 11 June 2010. The proceeding commenced by the bank in the District Court was to recover the residual indebtedness which remained after the property was sold.

7

The debt claimed by the bank was ascertained in accordance with the following table, as set out by Gendall J in the judgment under appeal: 3

(a)

Gross amount realised from the mortgagee sale

$210,000.00

(b)

Less the following payments:

(i)

GST paid on sale

$23,333.33

(ii)

Principal balance of Mr Burgess' two loan accounts which were consolidated

$166,148.59

(iii)

Unpaid and accrued interest

$10,324.68

(iv)

Default and other fees payable under the loan agreements

$2926.42

(v)

Hurunui District Council rates paid by the bank on settlement

$95.19

(vi)

Real estate commission on sale

$8795.00

(vii)

Advertising costs for the mortgagee sale

$3651.91

(viii)

Valuer's fee

$945.00

(ix)

Process Server's fee

$710.00

Legal fees and disbursements incurred on the mortgagee sale

$ 15,981.58

$232,911.70

Total

$22,911.70

8

The Judge recorded it was common ground that the loans were made, default occurred and a notice was issued under s 119 of the Act. 4 However, Mr Burgess denied liability to the bank claiming that the notice was invalid on a number of grounds. Each of the issues raised by Mr Burgess was rejected. Although he has not repeated all of the issues pursued in the High Court, Mr Burgess has maintained on appeal the principal arguments he made in the High Court challenging the validity of the notice. He claims that because the notice was defective, judgment should not have been entered against him. He further submits that in holding against him the Judge inappropriately relied on the approach previously taken in cases concerning notices issued by mortgagees under the Property Law Act 1952 (the 1952 Act) requiring that the mortgagor show material prejudice, and wrongly relied on s 26 of the Interpretation Act 1999 for that purpose. Mr Burgess complains that the Judge elevated the commercial convenience for the bank over its obligations to comply with the applicable statutory requirements.

9

It will be convenient to summarise the High Court's reasoning when addressing each of the issues pursued on appeal. Before doing so, we set out the relevant terms of the notice and the statutory provisions on which Mr Burgess's argument focused.

The notice
10

The Judge recorded that the notice was dated 19 February 2010 and served on Mr Burgess on 26 February. 5

11

Paragraph A of the notice, headed “NATURE AND EXTENT OF DEFAULT” began by giving Mr Burgess notice that he was in default under the mortgage (described as “Mortgage number 7904873.4 (Canterbury Registry)”).

12

Paragraphs 1 and 2 of para A then stated as follows:

  • 1. You have failed to pay the following payments of interest which are secured by the Mortgage and due and owing under your TSB loan contract 76-0001164-40:

    • Interest due 20.09.2009

    117.14

    • Interest due 20.10.2009

    1,035.14

    • Interest due 20.11.2009

    1,064.49

    • Interest due 20.12.2009

    1,038.98

    • Interest due 20.01.2010

    1,082.58

    $4,338.33

  • 2. You have exceeded your Revolving Credit Limit of $25,000.00 set out in the Second Schedule of your TSB loan contract 76-0001164- 47 by:

    $ 559.25

    The total amount in arrears as at 1 February 2010 is:

    $4,897.58

13

The following paragraph of the notice alleged a failure to pay rates due on the property over which the mortgage was registered to the Hurunui District Council in the sum of $17.93.

14

Paragraph B of the notice was headed, “ACTION REQUIRED”. It set out the action required to remedy the default as follows:

  • 1.1 Payment of the sum of $4,338.33 being the arrears in interest due and owing as at 1 February 2010 together with payment of not less than the sum of $559.25 being the amount by which the Revolving Credit Limit has been exceeded as at 1 February 2010, plus interest and the Bank's weekly payment default fees to the date of repayment;

    • 1.2 Payment to the Hurunui District Council of the rates arrears amounting to $17.93.

    • 1.3 Payment of the costs and disbursements of preparing and serving this Notice which are made up as follows:

  • 1.3.1 Preparing the Notice – approximately $950.00 plus GST and disbursements; and

  • 1.3.2 Service of Notice – approximately $350.00 plus GST and disbursements.

15

Paragraph C required that the defaults be remedied by 8 April 2010. Then, para D of the notice provided that if the “above defaults” were not remedied before 8 April, the bank would have the right to sell the property, or to enter into possession of it.

16

Paragraph E, “NOTES” provided as follows:

  • 1. Payment of the said sum of $4,897.58 plus interest and the Bank's payment default fee of $35.00 per week to the date of repayment may be made at any branch of TSB Bank Limited or alternatively may be made at the offices of Auld Brewer Mazengarb & McEwen, Solicitors, 9 Vivian Street, New Plymouth 4310.

  • 2. Interest at the normal rate of 8.84% on loan no. 76-0001164-40 amounts to $35.22 per day and will continue to accrue for which sum you are also liable.

  • 3. Interest at the normal rate of 6.39% on loan no. 76-0001164-47 amounts to $4.47 per day and will continue to accrue for which sum you are also liable.

  • 4. Payment of the arrears of rates owing to the Hurunui District Council amounting to $17.93 can be made to the offices of the Hurunui District Council, 66 Carters Road, Amberley, or by post to the Hurunui District Council, PO Box 13, Amberley 7741.

  • 5. Any payments made by you to the Bank after service of this Notice (other than the full amount detailed in this Notice including costs) by any means will be accepted without prejudice to this Notice and all rights and remedies available to the Bank.

17

The notice showed on its face that it was copied to Susan Natalie Beaven, Malley & Co (a firm of Christchurch solicitors) and the Hurunui District Council at Amberley. Ms Beaven was Mr Burgess's former wife. Gendall J recorded that Mr Burgess had been engaged in litigation against Ms Beaven in the Family Court since about 2005, including appeals to the High Court, Court of Appeal and Supreme Court. 6 At one stage, Mr Burgess issued a third party notice against her in the context of the present proceeding. However, that notice was set aside on the bank's application. 7 Malley & Co were solicitors who formerly acted for Mr Burgess and who were instructed by the bank...

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