Cashmere Capital Ltd v Patrick Kevin Carroll and Ors

JurisdictionNew Zealand
CourtSupreme Court
JudgeMcGrath J
Judgment Date04 December 2009
Neutral Citation[2009] NZSC 123
Docket NumberSC 46/2009
Date04 December 2009

[2009] NZSC 123



Elias CJ, Blanchard, Tipping, McGrath and Wilson JJ

SC 46/2009

Cashmere Capital Limited
Patrick Kevin Carroll
First Respondent


Thomas William Rainey
Second Respondent


B V Stranger
Third Respondent


Margaret Mary Teresa Cunneen
Fourth Respondent


Patrick Keith Brown
Fifth Respondent


June H Parsons
Sixth Respondent


Mary Ella Lory
Seventh Respondent

A C Hughes-Johnson QC and G A Hair for Appellant

N A Till QC for Respondents

Mortgage over unregistered retirement village — residents had life occupancy agreements with original village owner who had defaulted on mortgage — priority between competing interests in village.

Held: Although the property was declared to be a retirement village by an Order in Council in 2008, that was insufficient in itself give it the status of a registered village. A mortgagee could in some circumstances become the operator of the village, however this required detailed factual analysis unsuited to summary judgment proceedings. The proceeding was referred back to the High Court for a full hearing on the facts.

  • A The appeal is allowed.

  • B The judgment of the Court of Appeal is set aside.

  • C Costs are awarded to the appellant in the sum of $5,000, plus disbursements to be fixed if necessary by the Registrar, to be costs in the cause.


(Given by McGrath J)


This appeal raises an issue of priority between persons having competing interests in an unregistered retirement village. The appellant is the holder of a registered mortgage secured over property comprising part of the retirement village. The respondents occupy residential units in that part of the village. They have exclusive rights of occupancy for life under unregistered agreements which are accordingly leasehold interests. They entered into those agreements with a company which is the owner of the retirement village. It is also the mortgagor. The issues between the parties to the appeal have arisen because of irregular acts of the owner which appears now to be insolvent, although it has not at this point been put into liquidation.


Two issues in the appeal raise questions concerning the meaning of provisions of the Retirement Villages Act 2003, which was enacted to provide a regime for the protection of all residents of retirement villages. The third concerns whether the appellant mortgagee has consented to the residents' interests in a manner that has caused it to lose the priority it would otherwise enjoy under the Land Transfer Act 1952.


Since 1986 Crossdale Properties Ltd (Crossdale) has been registered as proprietor, under cross leasehold and freehold certificates of title, of eight residential units, in a complex comprising 22 former motel units, in Curlett's Road, Christchurch.


Between 1998 and 2004 Crossdale entered into agreements with five of the respondents, Messrs Carroll, Rainey, Stranger and Brown and Ms Lory. These agreements gave each the right of occupancy of a particular unit during his or her lifetime. In return each respondent made an unsecured loan advance to Crossdale and became liable to pay a weekly charge for village services. Similar agreements were entered into by Crossdale with two other respondents, Ms Cunneen in November 2006 and Ms Parsons in 2007. The loans ranged between $24,950 and $54,950. They were repayable on death, when possession of the unit would revert to Crossdale.


The agreements between Crossdale and the respondents (the residents) were not registered against the certificates of title, nor did any of them lodge caveats against the titles to notify their interest.


In August 2006 the appellant, Cashmere Capital Ltd (Cashmere) advanced a total of $875,000 on loan to Crossdale secured by a first mortgage registered over the certificates of title to the seven units occupied by the residents, and one additional unit not involved in the proceedings. There was a further advance of $65,000 on 28 September. Cashmere registered its mortgage under the Land Transfer Act 1952 on 11 September 2006. Crossdale's covenants as mortgagor are supported by the personal guarantee of Garry Campbell who was Crossdale's principal shareholder and director. Crossdale defaulted in payment of interest and repayment of principal on the loans and, following service of default notices under the Property Law Act 1952, it became Cashmere's intention to exercise its power of sale of the property.


In February 2008 an employee of Cashmere visited the property. Some of the residents advised her of the agreements they had entered into with Crossdale, their rights of occupancy and the payments they had made. Affidavits filed in this proceeding indicate that this was when Cashmere first learned of these transactions. Cashmere's evidence is that at the time when, in good faith, it made the loans it was informed by Crossdale and believed that the residents were each tenants of a unit at a weekly rental of $187. In fact, under their agreements, the residents were making weekly payments of only $30 for the very basic services provided by Crossdale to the complex and each unit.


Cashmere wrote to the residents on 14 February 2008 asserting that its mortgage had priority over their interests and seeking that they vacate their units. It also issued proceedings in the High Court against Crossdale, Mr Campbell and the residents.

The proceedings

Cashmere's statement of claim sought judgment against Crossdale and Mr Campbell, for the amount of the debt. Against the respondents it pleaded that it had the rights under its mortgage to enter into possession of the property and to sell it under its power of sale. Cashmere sought orders that the residents vacate and deliver up vacant possession of their respective units. It applied for summary judgment against all parties asserting that none of them had a defence to its claims.


In their notices of opposition the residents pleaded that Cashmere's rights as mortgagee were subject to their rights, under both their agreements with Crossdale and the Retirement Villages Act 2003. They said that statute required Cashmere to apply for and secure registration of their units as a residential village under the 2003 Act. Cashmere would then be precluded from disposing of the units, when exercising its power of sale as mortgagee, other than as part of a residential village which was a going concern.


Cashmere subsequently filed an amended statement of claim pleading that it was not bound by the residents' agreements. It claimed that Cashmere was not required to obtain registration of the units under the 2003 Act because it was not an “operator” of a village in terms of that Act. The Act did not impinge on Cashmere's interests as a registered mortgagee and it could sell the land as mortgagee under its power of sale on the basis that the purchaser was entitled to vacant possession.


One resident, Mr Carroll, then applied to strike out Cashmere's claim on the further ground that Cashmere had consented to the residents' agreements and accordingly was required by ss 105 and 119 of the Land Transfer Act 1952 to accord the residents' interests priority over its own registered mortgage.

Judgments of the High Court and Court of Appeal

In the High Court, 1 Cashmere's application for summary judgment against the residents came before Fogarty J who was not persuaded that there was no bona fide or reasonable ground for the residents to defend Cashmere's claim. He therefore dismissed Cashmere's application for summary judgment. During the hearing counsel for the residents had applied for judgment to be entered against Cashmere in the proceeding, on the ground that none of its causes of action against the residents could succeed. 2 Fogarty J set a date for the hearing of this application and that of Mr Carroll, giving Cashmere leave to file further affidavits on the two defences raised by the residents. The first was that Cashmere had consented to the residents' occupation agreements and was bound by them. The second defence was that Cashmere was an ‘operator’ of a retirement village comprising the residents' units. As operator, it was bound to obtain registration of the village under the 2003 Act. That precluded Cashmere from giving clear title when exercising its power of sale of the units under its mortgage.


After hearing argument at the resumed hearing, Fogarty J delivered a second judgment. 3 On the first issue he decided that Cashmere had consented to the residents' occupancy agreements as leasehold interests. It followed, through the combined effect of ss 105 and 119 of the Land Transfer Act 1952, that the residents' interests in the mortgaged land had priority and were binding on Cashmere. On the second issue the Judge accepted the residents' submission that Cashmere had become an operator of a retirement village as a result of the steps it had taken to enforce its mortgage. That conduct had made Cashmere a security holder who was exercising effective management or control of the village. 4 As an operator, Cashmere was required to ensure the residents' units were registered as a retirement village by making the necessary application under the 2003 Act. Under the Act the

effect of registration would be that the residents' interests would take priority over Cashmere's mortgage. 5

The residents had accordingly established the priority of their occupancy interest to Cashmere's interest as registered mortgagee on each of the grounds they relied on. Fogarty J accordingly gave judgment for them.


Cashmere appealed. The Court of Appeal differed from Fogarty J on the question of consent, holding that there was no positive affirmative act of acceptance of the occupancy agreements by Cashmere, nor any...

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