Sm v Asb Bank Ltd

• Jurisdiction: New Zealand
• Judge: Randerson J
• Judgment Date: 21 March 2012
• Neutral Citation: [2012] NZCA 103
• Docket Number: CA690/2011
• Court: Court of Appeal
• Date: 21 March 2012

BETWEEN

SM

Appellant

and

ASB Bank Limited

Respondent

[2012] NZCA 103

Court:

Arnold, Randerson and Stevens JJ

CA690/2011

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from a High Court decision removing the appellant's notice of claim over a property on condition she was allowed to reside in property until an occupation order given by Family Court was set aside or Family Court proceedings settled — cross — appeal that removal order should have been made without conditions — property owned by appellant's ex — de facto partner — respondent conducted mortgagee sale — whether a registered mortgagee over a residential property had priority over an interim occupation order made by the Family Court — whether respondent sold property with intention of defeating appellant's interest under the Property (Relationships) Act 1976 — reconciling provisions of Property (Relationships) Act and the Land Transfer Act 1952.

Counsel:

P Twist for Appellant

M V Robinson and E C Gellert for Respondent

JUDGMENT OF THE COURT

• A The appeal is dismissed.

• B The cross-appeal is allowed.

• C In substitution for the orders made by the High Court, the Notice of Claim of Interest Number 8017423.2 lodged against Certificate of Title NA633/77 (North Auckland Registry) shall be formally removed, without conditions, upon the registration of a transfer by the respondent to the purchasers in exercise of the respondent's power of sale.

• D Counsel are to confer and submit memoranda to the Court as to when the appellant must vacate the subject property. If agreement cannot be reached, the appellant must file and serve a memorandum within 14 days of the date of this judgment and the respondent within a further 14 days thereafter. The Court will determine this issue on the papers unless it appears appropriate for counsel to be heard further.

• E The appellant must pay costs to the respondent as for a standard appeal on a band A basis together with disbursements as fixed by the Registrar.

• F The costs in relation to the High Court proceeding are to be fixed by that Court.

REASONS OF THE COURT

(Given by Randerson J)

Table of Contents

Para No

Introduction [1]

The facts in more detail [7]

The statutory framework [17]

The approach to applications to remove a notice of claim [35]

First issue: should the notice of claim have been removed? [36]

The approach in the High Court [36]

Discussion [40]

Section 43 [41]

Section 44 [50]

Conclusions on first issue [57]

Second issue: the condition permitting SM to occupy the property [59]

Third issue: the condition requiring payment into court of the net proceeds of the sale of the property and limiting recovery of interest and costs [67]

Result [72]

Introduction

1 The essential question in this appeal is whether a registered mortgage held by the respondent bank (ASB) over a residential property has priority over an interim occupation order subsequently made by the Family Court in favour of the appellant SM.

2 The mortgage was granted in 2006. Title to the property was registered in the sole name of SM's de facto partner to whom we shall refer as DB. The couple parted in January 2009, at which time SM registered a notice of claim of interest under s 42 of the Property (Relationships) Act 1976 (the PRA) to protect her interests in the property. ASB later exercised its power of sale under the mortgage and sold the property unconditionally. It then sought an order from the High Court removing SM's notice of claim so that the property could be transferred to the purchasers.

3 ASB's application was opposed by SM but Whata J decided on 30 September 2011 that her notice of claim was to be removed. 1 The Judge imposed two conditions on the removal of the notice:

• (a) SM was allowed to occupy the property until the Family Court order granting her right of occupation was set aside or the Family Court proceedings issued by her were resolved.

• (b) The proceeds of sale, net of the original loan and any unpaid interest as at 22 January 2009, were to be paid into Court pending the resolution of the Family Court proceedings. 2

4 SM appeals against the making of the removal order, contending that the occupation order in her favour has priority under the PRA over ASB's mortgage. ASB cross-appeals on the ground that the removal order should have been made without conditions. ASB submits that its mortgage has priority over SM's occupation order and any other claims she may have under the PRA to an interest in the property. As such, ASB submits that, the property having been sold pursuant to the power of sale, it is entitled to immediate possession of the property and that it is entitled to recover the principal as well as all outstanding interest and costs due to it under the mortgage up to the date of settlement of the sale of the property.

5 On 13 October 2011, Whata J granted SM a stay of execution of his earlier judgment. 3 The present position is that SM remains in possession of the property and the sale has not been settled. We were informed by ASB's counsel that the total

amount due under the mortgage now exceeds the sale price so that no net surplus is expected to be available

6 The issues to be determined are whether the High Court Judge erred in:

• (a) Concluding that the notice of claim be removed.

• (b) Imposing a condition permitting SM to remain in occupation of the property until the occupation order was set aside or the Family Court proceedings were resolved.

• (c) Imposing a condition requiring payment into Court of the net proceeds of the sale of the property which had the effect of limiting ASB's right to deduct interest after 22 January 2009 and any other expenses recoverable under the mortgage.

The facts in more detail

7 In 1995, SM commenced a de facto relationship with DB. In May 2006, DB purchased the subject property for $1.575 million. To assist the purchase, he borrowed $1.184 million from ASB. Title to the property was taken in DB's sole name and a mortgage securing the borrowing from ASB was registered against the title.

8 In January 2009, the parties separated. SM registered a notice of claim of interest against the title to the property under s 42 of the PRA on 22 January 2009. Soon afterwards, SM filed proceedings in the Family Court against DB. The relationship property includes the subject property as well as other extensive assets which are said to exceed some $4 million.

9 On 22 March 2010, the Family Court made the following order: 4

An order granting [SM] the right to continue to occupy [the property]. This is an interim order and it is to be reviewed in 12 months time or upon resolution of the Property (Relationships) Act 1976 proceedings, whichever event occurs earlier.

10 Although it was not part of the Family Court's formal order, Judge Ryan stated in his decision that, by providing for SM to continue to occupy the home, this created an ongoing obligation upon DB to meet the interest on the mortgage which exceeded $1,200 per week. For present purposes, it is accepted that DB was effectively ordered to pay the interest on the ASB mortgage.

11 There is some dispute as to when ASB first received formal advice of SM's notice of claim but Mr Robinson for ASB accepted that formal notice was received at the latest by September 2009. The precise date upon which ASB received notice is not material to the outcome of this appeal since notice was received well before ASB exercised its power of sale of the property.

12 On 30 April 2010, SM obtained a further order from the Family Court restraining DB from disposing of, charging and/or otherwise encumbering any property in New Zealand, including the subject property. 5

13 SM continued to occupy the property, but on 8 February 2011 DB advised ASB that he had “exhausted all avenues in regard to continuing with the repayments”, adding that both his accountants and solicitors had advised him that he “should contact [ASB] immediately to arrange the relinquishment of the property to the ASB for a mortgage [sic] sale”.

14 On 6 April 2011, ASB issued a notice under s 119 of the Property Law Act 2007 for arrears of interest amounting to $12,545. The notice was served on DB and a copy provided to SM's solicitors. Following expiry of the Property Law Act notice, ASB began marketing the property. SM declined to co-operate in that process or to remove her notice of claim when requested by ASB.

15 The property was sold unconditionally at auction on 17 August 2011 for $1.5 million and a deposit paid. The sale was subject to existing tenancies or occupancies. ASB reserved the right to rescind the sale if difficulties arose over removing any caveat or notice of claim under the PRA. The purchasers were aware

of the Family Court order in favour of SM. Settlement was due to take place on 14 September 2011 but could not because SM's notice of claim remained on the title

16 On 20 August 2011, ASB filed an application for removal of the notice of claim which resulted in Whata J's judgment of 30 September 2011.

The statutory framework

17 The Judge saw the central issue as involving an interpretative exercise with a view to reconciling potentially conflicting provisions in the PRA and the Land Transfer Act 1952 (the LTA). He concluded, after analysis of these statutes, that they could be reconciled. We agree, but we have reached a different conclusion from the Judge about the interpretation of the legislation and its application to the facts of this case.

18 It is not contested that the purpose of the PRA is to provide for the just division of relationship property between spouses or...