ANZ National Bank Ltd v Long HC Auckland CIV-2011-404-2741 [2011] NZHC 1075 (4 October 2011)

Last Updated: 13 October 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2011-404-2741}

BETWEEN ANZ NATIONAL BANK LTD Plaintiff

AND REGINALD ROBERT LONG Defendant

Hearing: 21 September 2011

Counsel: D D Watterson for Plaintiff

P A Craighead for Defendant

Judgment: 4 October 2011

_{JUDGMENT OF BREWER J}

This judgment was delivered by me on 4 October 2011 at 4:00 pm pursuant to Rule 11.5 High Court Rules.

_{Registrar/Deputy Registrar}

SOLICITORS

Minter Ellison Rudd Watts (Wellington) for Plaintiff

Alistaire Hall (Manukau City) for Defendant

COUNSEL Peter Craighead

ANZ NATIONAL BANK LTD V LONG HC AK CIV-2011-404-2741 4 October 2011

[1] The plaintiff seeks summary judgment against the defendant in the sum of

$433,944.63 plus interest thereon as set out in the statement of claim.

[2] The defendant guaranteed financial obligations owed by Bob Long Contracting Ltd (“the company”) to the plaintiff. The company defaulted on its obligations and the plaintiff exercised its right as mortgagee to sell the company’s property. The property was sold on 23 December 2010 for $415,000 including GST. The amount for which summary judgment is sought is the defendant’s remaining obligation to the plaintiff following deduction of the net proceeds of the sale.

Submissions

[3] The defendant resists summary judgment on the following grounds:[1]

(a) The plaintiff has not advised the Court or the defendant nor any of the entities involved in the loan or guarantees the details of:

The sale process

The deductions made from the sale price

The means of locating and the negotiations including as to the payment of GST with the purchaser. Such information is necessary to enable the Court to assess whether the plaintiff as mortgagee has complied with its duties of care to the mortgagor and correspondingly the defendant as guarantor.

(b) This proceeding requires the parties to have access to interlocutory processes including discovery and the ability to request particulars of the claim and to bring interrogatories. It is not suitable for the summary judgment procedure.

(c) The Court cannot be sure that there is no genuine defence.

(d) Appearing in the affidavit of the defendant sworn and filed herein.

[4] The defendant deposes that he had a registered valuation for the property of

$650,000. He seeks full details of the matters contended above. In short, the defendant’s submission is that the plaintiff has supplied insufficient material to allow the defendant to assess whether or not there is a ground for defence. The defendant submits that the evidence currently available indicates that the plaintiff was deficient

_{in complying with its duty of care to obtain the best price reasonably obtainable as at}

the time of sale. For instance, the defendant says that, because the company was registered for GST, the plaintiff should not have included GST in the sale price. Accordingly, this is an inappropriate case to go to summary judgment and in fairness the defendant should have access to the interlocutory processes of the Court in order to ascertain the existence or otherwise of a ground of defence.

[5] The plaintiff submits that the affidavits filed in support of its application show that it has properly complied with all of its statutory obligations.

The law

[6] The Court may give summary judgment where it is satisfied that the defendant has no defence to the plaintiff’s cause of action outlined in the statement of claim.[2] In Tilialo v Contractors Bonding Ltd, the Court of Appeal held:[3]

Where an arguable defence cannot be pointed to in the material placed before the Court by the plaintiff there is an evidential burden on the defendant to lay a proper foundation for arguable defences. That does not displace the onus on the plaintiff to satisfy the court that all defences when so presented are unarguable any more than does the added burden that inevitably falls upon an unsuccessful defendant on appeal ....

[7] A plaintiff exercising its power of mortgagee sale has a duty to use reasonable care to obtain the best price reasonably obtainable as at the time of sale.[4]

_{In Public Trust v Ottow, Asher J summarised the mortgagee’s duty as follows:}[5]

(a) A mortgagee has no duty at any time to exercise the powers of sale or possession. In default of any provision to the contrary in the mortgage, the power of sale is for the benefit of the mortgagee, who can sell at any time in accordance with the mortgagee’s convenience.

(b) The mortgagee’s duty of care is to take reasonable care to obtain the

best price reasonably obtainable at the time of sale.

(c) It does not matter that the time may be unpropitious and that by waiting a higher price could be obtained.

(d) A mortgagee is under no obligation to improve the property or increase its value.

(e) A mortgagee sale for a price less than the current market value assessed by valuers does not, of itself, establish a breach of duty, although a large discrepancy may indicate a failure to take reasonable care.

(f) A mortgagee does not have any general duty to maintain properties prior to sale.

(g) Following the service of a Property Law Act Notice there is no duty on a mortgagee to keep a guarantor informed of sales activities.

(h) The mortgagee is not entitled to sell in a hasty way at a knock-down price sufficient to pay the debt, which because of the speed of sale leads to a lower price than could otherwise be obtained.

(i) Proper care must be taken to expose the property to the market and to obtain the best price reasonably obtainable.

[8] Asher J then set out steps that a mortgagee should take as reasonable efforts to obtain the best reasonably obtainable price:[6]

(a) The appointment of a reputable real estate agent to market the property.

(b) Obtaining a valuation report from an experienced valuer as a guide to what could reasonably be expected for the property.

(c) Marketing over a reasonably long period of time.

(d) An extensive advertising and promotional campaign. (e) A properly conducted auction.

(f) A sale price that, given all the circumstances, can be reconciled with expert opinion as to value.

[9] I agree with Asher J’s analysis and approach my evaluation of the factual background accordingly.

Application

[10] The plaintiff appointed a reputable real estate agent, Barfoot & Thompson, to market the property.

[11] The plaintiff obtained valuations contemporaneously with its decision to market and sell the property. The valuations initially estimated the likely forced sale price as between $450,000 and $525,000. The plaintiff received further advice from Barfoot & Thompson during the process as to price expectations.

[12] The property was marketed over a reasonable period of time. The agent was appointed two months prior to the auction and the marketing campaign was active over six-and-a-half weeks. Advertising took place over a four week period prior to a public auction.

[13] Barfoot & Thompson’s marketing reports show that it advertised the property for four weeks in three newspapers, erected a sign board at the property, printed brochures, and made contact with its existing client base and with neighbours to the property. Barfoot & Thompson also advertised that the property would be open to view on four occasions. The property was listed with its 62 branches and exhibited on four real estate websites. The marketing campaign generated interest in the property.

[14] An auction was conducted but the property did not sell, the highest bid (of

$340,000) being well below the reserve set by the plaintiff. That reserve was higher than the reserve recommended by Barfoot & Thompson.

[15] Negotiations with the highest bidder were unsuccessful, as were attempts to gain offers from others who had expressed interest in the property prior to the auction. Accordingly, the plaintiff agreed with Barfoot & Thompson that a further marketing campaign would take place in the New Year. However, unexpectedly it would seem, another purchaser put in an unconditional offer of $400,000, which included a prompt settlement prior to Christmas. Barfoot & Thompson negotiated with the purchaser and obtained an increase to $415,000 including GST. The purchaser refused to increase that price further, rejecting a counteroffer by the plaintiff of $425,000 including GST. The plaintiff then accepted the price of

$415,000 including GST. The agreement for sale and purchase shows that the parties turned their minds to GST and explicitly made the purchase price inclusive of GST if any.

[16] The defendant points to the following aspects as discharging its evidential burden on the possible ground of defence that the plaintiff did not exercise due care as mortgagee:

(a) The plaintiff did not follow the advice given by Barfoot & Thompson as to the full extent of the marketing campaign;

(b) The plaintiff ought to have held off marketing the property until after the New Year;

(c) The plaintiff did not properly consider the GST position and should have known that the mortgagor was registered for GST. Thus, making the purchase price GST inclusive would reduce the credit to the defendant for the sale price;

(d) There is no information as to how the purchaser was located (which could be relevant to what was appropriate to negotiations in the circumstances).

[17] I am satisfied that there is no merit in these submissions. The plaintiff has shown a careful and proper approach to the mortgagee sale. (I note that on several occasions the plaintiff contacted the defendant to enquire about the GST position of the company but received no response.) The matters raised by the defendant cannot realistically establish an evidential basis that would serve to overturn what are careful and considered actions by the plaintiff.

Judgment

[18] Accordingly, summary judgment is given on the statement of claim in the sum of $433,944.63.

[19] The plaintiff is entitled to interest calculated in accordance with the claim referenced (b)(i) and (ii) in the statement of claim.

[20] The plaintiff seeks indemnity costs under r 14.6 in accordance with the defendant’s contractual obligations set out in a number of instruments and documents.[7] In my view the most convenient expression of the defendant’s obligations is set out in clause 1 of the cross guarantee executed on 3 September

2004 by which the defendant’s guarantee extended to:

... all Bank charges or commissions and all costs and expenses in or for which the Bank is or may become liable or may charge against the Customer including all costs and expenses (computed as between Solicitor and own client) of or incidental to obtaining or enforcing or attempting to obtain or enforce payment of all or any of such moneys as aforesaid under or by virtue of this Guarantee or otherwise ...[8]

[21] I award (reasonable) indemnity costs accordingly. Leave is reserved for the parties to file memoranda as to quantum if no agreement can be reached.

_{Brewer J}

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[1] Notice of opposition to application for summary judgment, dated 4 July 2011, at [3].
[2] _{High Court Rules, r 12.2(1).}
[3] _{Tilialo v Contractors Bonding Ltd CA50/93, 15 April 1994 at 6.}
[4] _{Property Law Act 2007, s 176.}
[5] Public Trust v Ottow [2009] NZHC 2904; (2010) 10 NZCPR 879 (HC) at [17].

[6] Ibid, at [31].

[7] _{See ANZ Banking Group (NZ) Ltd v Gibson [1986] 1 NZLR 556 (CA) at 565–566.}

[8] Emphasis added.