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Austin v Southland Building Society [2012] NZCA 337 (27 July 2012)

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Austin v Southland Building Society [2012] NZCA 337 (27 July 2012)

Last Updated: 1 August 2012


IN THE COURT OF APPEAL OF NEW ZEALAND
CA314/2012
[2012] NZCA 337

BETWEEN MICHAEL DAVID AUSTIN
Applicant

AND SOUTHLAND BUILDING SOCIETY
Respondent

Hearing: 17 July 2012

Court: Glazebrook, White and Simon France JJ

Counsel: Applicant in person
D Chan for Respondent

Judgment: 27 July 2012 at 3.00 pm

JUDGMENT OF THE COURT


A The application for an extension of time is declined.


  1. The applicant must pay the respondent costs for a standard application on a band A basis and usual disbursements.

REASONS OF THE COURT


(Given by Glazebrook J)


Introduction

[1] The applicant, Mr Austin, applies for an extension of time to file a notice of appeal under r 29A of the Court of Appeal (Civil) Rules 2005.
[2] The proposed appeal is against a decision of Associate Judge Bell granting the respondent, Southland Building Society (Southland), summary judgment against Mr Austin and two co-defendants (his wife and daughter).[1]
[3] Mr Austin assumed that he had to file his notice of appeal against Associate Judge Bell’s decision at the Whangarei High Court. He found out that he had to file it at this Court when he made an enquiry to the High Court four hours before the deadline. Mr Austin couriered the appeal documents to this Court but they arrived one day late. Hence the need for this application.

Background

[4] Mr Austin and his co-defendants were the guarantors of three loans made by the Hastings Building Society (HBS), which later merged with Southland, to a company called Good Start Property Development Ltd (Good Start).
[5] The loans were secured by mortgages over properties. After Good Start defaulted on the loan repayments, the properties were the subject of mortgagee sales. Southland brought the summary judgment application to recover the shortfall left owing on the loans after the sales from the guarantors.

Mr Austin’s submissions

[6] The affidavit filed by Mr Austin addresses the proposed grounds of appeal. They are that the personal guarantee was not properly executed and that Southland’s claim was incorrectly quantified because the process it used to sell the secured properties was flawed. Mr Austin addressed us orally on the first ground, indicating that this was his primary ground.
[7] Mr Austin asserts that the solicitor who signed the guarantee as a witness was not in fact present when the document was signed by the guarantors. Further, he says she did not advise them as to the content of the documents, despite signing a solicitor’s certificate stating that she had “explained generally the nature and extent of the obligation of the Guarantor(s) contained in this Guarantee and Indemnity.” This means in his submission that the guarantee is “fraudulent”. In his submission, Southland should not have acted upon it, once they were made aware of this fact. (We understand the circumstances surrounding the execution of the guarantee were signalled to Southland when it tried to enforce the guarantee).
[8] In terms of quantum, Mr Austin argues that the properties were sold for less than they should have been. In particular, he says:

Southland’s position

[9] Southland opposes Mr Austin’s application on the grounds that the proposed appeal lacks merit and does not raise any issue of public importance.
[10] As to the first proposed ground of appeal, Southland argues that Mr Austin has no basis for challenging the guarantee. He and the other guarantors admitted signing the guarantee. Even if the guarantee was not properly attested by a witness in accordance with s 4 of the Property Law Act 1952, it was still enforceable as a valid contract.
[11] Further, Southland points out that the guarantors did not claim that they did not understand the guarantee, lacked capacity or were under undue influence. Lack of independent legal advice is not sufficient on its own to impugn the guarantee,[2] particularly given that the guarantors signed an acknowledgment that they declined to take independent advice. HBS had no obligation to ensure that the guarantors received independent advice[3] and was entitled to rely on the solicitor’s certificate.[4]
[12] On the quantum point, Southland says:

Our assessment

[13] Mr Austin has provided a satisfactory explanation for the delay in filing the appeal. Nevertheless, as Mr Austin is now seeking an indulgence, the merits of the proposed appeal require consideration.[6]
[14] In terms of the attack on the validity of the guarantee, and assuming for these purposes that the solicitor was not present when the guarantee was signed by the guarantors, the result would be that the guarantee is not a valid deed because the witnessing requirements in s 4(1) of the Property Law Act 1952 are not met.[7]
[15] But, even if that is the case, it does not mean that the guarantee is unenforceable. It is only necessary for a guarantee to be in deed form if no consideration is given for the guarantee (which may be the case, for example, where the guarantee is of an existing debt and the creditor gives no forbearance). If consideration is given for a guarantee, it is only required to be recorded in writing.[8]
[16] The consideration given by HBS (currently Southland) in this case was that it agreed to provide further loans to Good Start and to forebear from requiring immediate repayment of existing loans. The guarantee, in addition to being given for consideration, was recorded in writing and signed by the guarantors as required by s 2 of the Contracts Enforcement Act 1956. Accordingly, the guarantee is a valid and enforceable contract even if it is not valid as a deed.
[17] As to the independent advice aspect, lack of independent advice cannot in itself render the guarantee invalid. Rather, lack of independent advice is generally raised in the context of determining whether a party’s consent was obtained through undue influence or unconscionable bargain, which is not alleged here.[9] Associate Judge Bell was therefore correct to reject this as a ground of opposition to the summary judgment application. Indeed, in this case, Mr Austin and his fellow guarantors signed an acknowledgment that they had declined to take independent advice.
[18] That leaves the issue of quantum. Mr Austin accepted before us that this ground was unlikely to stand alone if he did not succeed on his first ground. We deal with it briefly only.
[19] The duty owed by a mortgagee exercising a power of sale under s 176 of the Property Law Act 2007 is to take reasonable care to obtain the best price reasonably obtainable at the time of sale. It therefore does not follow that the best price reasonably obtainable will necessarily be achieved.[10] There is no obligation on the mortgagee to postpone the sale in the hope of obtaining a better price later, and a sale for less than the current market value does not in itself establish a breach of duty.[11] What constitutes reasonable care will always turn on the facts of the case.[12] Putting the sale in the hands of a competent agent, obtaining a valuation from an experienced valuer, marketing the property effectively for a sufficient period and selling at a properly conducted auction will go a long way towards discharging the duty.[13]
[20] In this case we accept Southland’s submissions that it did those things. We also accept its answers to the specific points made by Mr Austin.[14] It seems that the low prices obtained were a result of a slow market at the time.[15]

Result

[21] We accept Southland’s submission that the proposed appeal could not succeed. The application for an extension of time is therefore declined.
[22] The applicant must pay the respondent costs for a standard application on a band A basis and usual disbursements.

Solicitors:
Carlile Dowling Lawyers, Napier for Respondent


[1] Southland Building Society v Austin [2012] NZHC 497 [Summary judgment decision].
[2] Citing McCaw v McCaw HC Napier CIV-2010-441-342, 7 September 2010.
[3] Citing Clarke v Westpac Banking Corp (1996) 7 TCLR 436 (HC) at 445.
[4] Citing GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [48]–[50] and [53].
[5] Citing Public Trust v Ottow [2009] NZHC 2904; (2009) 10 NZCPR 879 (HC) at [31].
[6] See Angus Properties (HB) Ltd v Walker [2008] NZCA 551 at [13].

[7] See Dixon v Laurie McGoverne Ltd HC Christchurch M 254-00, 8 September 2000 at [9] and [22]–[26]. Section 4(1) of the Property Law Act 1952 applied to deeds at the time the guarantee in this case was signed. It has now been repealed and replaced by s 9 of the Property Law Act 2007, which is to similar effect.

[8] Section 2 of the Contracts Enforcement Act 1956 was the applicable provision in this case. It has now been repealed and replaced by s 27 of the Property Law Act 2007.

[9] See McCaw v McCaw HC Napier CIV-2010-441-342, 7 September 2010 at [32].

[10] See Long v ANZ National Bank Ltd [2012] NZCA at [21(a)] (leave refused in Long v ANZ National Bank Ltd [2012] NZSC 51).
[11] Public Trust v Ottow [2009] NZHC 2904; (2009) 10 NZCPR 879 (HC) at [17] and [33].
[12] Long v ANZ National Bank Ltd at [21(d)].
[13] Public Trust v Ottow at [31].
[14] See at [12] above.
[15] Summary judgment decision at [36].


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