Westpac New Zealand Ltd v Manetakis Hc Ak

• Jurisdiction: New Zealand
• Judge: Abbott
• Judgment Date: 09 December 2011
• Court: High Court
• Docket Number: CIV-2009-404-4309
• Date: 09 December 2011

Under Part 12 Of The High Court Rules

In The Matter Of An Application For Summary Judgment

In The Matter Of

Westpac New Zealand Limited

Plaintiff

and

George Manetaris And Ann Manetakis

Defendants

CIV-2009-404-4309

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application for summary judgment for post judgment interest — defendant entered into loan agreement with bank for purchase of property for investment purposes — agreement provided for payment of interest at specified rates — property sold pursuant to mortgage powers — judgment entered in favour of bank on balance of principal and interest at contractual rates up to date of judgment — bank claimed interest at contractual rates after judgment (up to date of payment) — also claimed interest on amount due on current account at bank's rate applicable to current accounts — whether a party could claim interest owed pursuant to a contract after judgment — whether s87(1) Judicature Act 1908 (Interest on debts and damages) applied.

Counsel:

B J Upton and S M Cervin for the Plaintiff

RESERVED JUDGMENT OF ASSOCIATE JUDGE Abbott

1 The plaintiff (Westpac) applied for summary judgment against the defendants (Mr and Mrs Manetakis) for the balance of money advanced to Mr and Mrs Manetakis under a loan agreement made on 29 March 2006 and varied on 4 June 2008, together with a small amount due on a current account. The loan money was advanced to assist the purchase of two residential properties, and was secured by mortgages over those properties. The properties have since been sold, pursuant to the powers in the mortgage, and Westpac sought judgment for the balance owing after crediting the sale proceeds.

2 As well as seeking the balance of principal, Westpac sought judgment for interest on the unpaid principal at rates set out in the loan agreement or in accordance with Westpac's standard terms in respect of current accounts.

3 Mr and Mrs Manetakis did not oppose the application, and judgment was entered in favour of Westpac for the balance of principal and interest, at contractual rates, up to date of judgment, and for costs on a scale basis. Westpac's claim for interest after judgment (up to date of payment) was reserved, to be determined following the filing of further submissions.

4 This judgment addresses the claim for interest at contractual rates after judgment, after further submissions have been made on Westpac's behalf.

Contractual basis

5 The home loan agreement initially provided for payment of interest at a fixed rate for two years, and thereafter at a fluctuating rate (Westpac's base rate from time to time). The agreement also provided for a default margin, initially of five per cent per annum but with provision for Westpac to change that rate at any time. The loan agreement was varied at the end of the initial two year period to provide for interest at a fixed rate for a further five years (from 6 April 2008), and thereafter for the rate to be Westpac's variable annual interest rate, in each case compounding monthly. The agreed rate was 9.3 per cent per annum, Copies of these agreements were produced in evidence.

6 Westpac pleads as a separate cause of action that it made advances to Mr and Mrs Manetakis on current account, on terms including that they would pay interest on the outstanding balance from time to time at Westpac's current account rate, compounding monthly. It further pleads that its current interest rate at date of issue of the proceeding was 26.95 per cent per annum. Westpac's standard terms were not produced but evidence of the current account rate at date of issue was.

7 The loan agreement provided for Mr and Mrs Manetakis to give registered first mortgages over the two properties being purchased. Mr and Mrs Manetakis gave those mortgages on Westpac's standard mortgage document. The mortgage documents were produced.

8 The loan agreement contained Westpac's standard terms which included provision for default, including Westpac's entitlement to enforce the mortgage. The standard terms of the mortgage provided that the money secured included all money owed at the time of execution of the mortgage or in the future. It provided for payment of interest in paragraph 2.3 of the standard terms. The relevant parts of clause 2.3 read:

• 2.3 Interest

• The following will apply except to the extent that you and Westpac agree otherwise:

• • interest will accrue on all parts of the Secured Money at the same rate as applies to the Secured Money under your Loan Agreement. If there is no such rate, interest will accrue at the rate certified by an Officer to be Westpac's published Indicator Lending Rate (or the rate declared by Westpac to be in substitution for it) plus the margin then applicable to similar accounts. If that rate changes, the changed rate will apply from the day on which the changed rate becomes generally applicable;

• • …

• • the obligations in this clause apply after as well as before any judgment of a court.

Law re post judgment interest

9 The issue in this case is whether a party claiming an entitlement to contractual interest can claim that interest after judgment, or must rely on the statutory provision for interest in s 87(1) of the Judicature Act 1908. The issue has been addressed in many cases, particularly in terms of whether the doctrine of merger precludes such a claim. 1

10 The various issues, and authorities on the point, have recently been traversed thoroughly in FM Custodians Ltd v Patulo 2 where the lender sought contractual interest after judgment, up to date of payment, in reliance on a clause in a loan agreement under which the borrower agreed to pay interest on the principal sum “from the date of judgment until the date such sum is paid”.

11 I adopt, with respect, the following propositions to be drawn from that judgment:

• (a) The right of contracting parties to determine the rate of interest payable both up to and after judgment has...