Westpac New Zealand Limited v Singh HC Auckland CIV-2011-404-2434 [2011] NZHC 1868 (22 December 2011)

Last Updated: 25 January 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2011-404-2434}

BETWEEN WESTPAC NEW ZEALAND LIMITED Plaintiff

AND GURINDER SINGH First Defendant

AND NARENDER KAUR Second Defendant

Hearing: 25 August 2011

Counsel: M Sandelin and G Church for Plaintiff

A Ram for Defendants

Judgment: 22 December 2011 at 3:30 PM

JUDGMENT FOR ASSOCIATE JUDGE SARGISSON (Summary judgment application)

This judgment was delivered by me on 22 December 2011 at 3.30 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Minter Ellison Rudd Watts, Auckland

Lucy Chu Lawyers, Auckland

WESTPAC NEW ZEALAND LIMITED V SINGH HC AK CIV-2011-404-2434 22 December 2011

Introduction

[1] Westpac New Zealand Ltd applies for summary judgment on its claim against the defendants, Mr Singh and his wife, Ms Kaur. Westpac claims the outstanding balance that it says the defendants owe following their default under a mortgage and mortgagee sale of the secured property.

[2] Mr Singh and Ms Kaur oppose the application.

[3] They also seek leave to oppose out of time. It is common ground that such leave should be given if an arguable defence to summary judgment exists. Whether or not such a defence exists is in dispute.

Background

[4] On 15 May 2007, Westpac agreed to lend Mr Singh and Ms Kaur $596,700 under a Choices Home Loan Agreement that was secured by a registered mortgage over the defendants’ property at 31 Boyce Avenue, Lynfield, Auckland.

[5] On 4 December 2008, Westpac sent letters to Mr Singh and Ms Kaur explaining that they were in arrears under the mortgage and demanding payment of the arrears of $15,534.61 by 18 December 2008.

[6] When no payments were made by 12 January 2009, Westpac issued a s 119

Property Law Act 2007 notice requiring payment of $19,121.88, the ever-increasing outstanding amount plus interest, to be paid by 5 March 2009.

[7] Mr Singh and Ms Kaur failed to comply with a payment plan that they had proposed and that Westpac accepted on 23 February 2009.

[8] Accordingly, Westpac appointed a valuer and real estate agent to conduct a mortgagee sale by auction of the property on 20 May 2009. After it received letters from Ms Kaur on 17 and 27 July 2009, outlining their intention to subdivide the property and Ms Kaur’s illness, Westpac cancelled the auction on 30 July 2009.

[9] Mr Singh and Ms Kaur then obtained their own valuation from of the property (including chattels) on 4 August 2009 of $690,000, assuming that the proposed subdivision of the property was carried out.

[10] On 24 August 2009, Jewel Finance Ltd, from whom Mr Singh borrowed

$70,000, lodged a caveat against the title to the property, presumably as security.

[11] Westpac served a further s 119 notice on 26 January 2010 demanding that the arrears be remedied. The notice stipulated that, should Mr Singh and Ms Kaur fail to pay the outstanding sum before the notice expired on 10 March 2010, all money secured by the mortgage would become payable and Westpac would exercise its right as mortgagee to sell the property.

[12] The notice expired without compliance.

[13] In April 2010, Westpac obtained a valuation report from Seagar & Partners who valued the property at $615,000 including chattels.

[14] Westpac appointed Crocker Realty Limited to sell the property in September

2010. Four weeks’ marketing commenced.

[15] A prospective sale in June 2010, which was subject to the proposed subdivision, fell through. The subdivision could not be completed while Jewel Finance’s caveat remained on the title to the property.

[16] On 2 November 2010, Westpac sold the property for $530,000 to Mr Gulani, said to be an agent for Jewel Finance. Settlement took place on 6 December 2010. Costs of conducting the sale, amounting to $27,299.60, were deducted, leaving the net proceeds of the sale of $503,101.12.

[17] Prior to settlement, Mr Singh and Ms Kaur owed Westpac $696,637.08. After deducting the net proceeds of the sale, $193,535.96 remained outstanding.

[18] By 24 December 2010, this outstanding amount had increased to $194,358.81 through the addition of interest. Demands made on 29 December 2010 and 26

January 2011, went unheeded.

[19] On 3 May 2011, Westpac made application for summary judgment to recover

$194,358.81, plus interest at the applicable default rates of 13.29% per annum, totalling $210,352.83, the amount owing as at that date, and indemnity costs. The application was listed for further hearing on 14 June 2011, to allow Mr Singh and Ms Kaur to take legal advice. An adjournment was granted to 21 July 2011.

Legal principles on summary judgment

[20] Relevantly, 12.2(1) of the High Court Rules outlines when the court may grant summary judgment. It states:

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to [a cause of action in the statement of claim or to a particular part of any such cause of action].

[21] The legal principles relating to the grant of summary judgment are well established. They may be summarised as follows:

(a) The question on summary judgment application is whether the defendant has no defence to the claim, that is, that there is no real question to be tried1. The Court must be left without any real doubt or uncertainty.

(b) The onus is on the plaintiff, but where the plaintiff’s evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.2

(c) The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically

1 Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA).

evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable.3

(d) In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.4

Mortgagee’s duty of sale

[22] Section 176 of the Property Law Act 2007 imposes a duty on mortgagees to obtain the best price reasonably obtainable at the time of sale.

[23] In Public Trust v Ottow, Asher J summarised the applicable principles as: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: Raja (Administratrix of the Estate of Raja (Dcd)) v Austin Gray (A Firm) [2002] EWCA Civ 1965 at [55], per Peter Gibson LJ; Silven Properties v Royal Bank of Scotland [2004] 1 WLR 997 at [14].

(b) The mortgagee’s duty of care is to take reasonable care to obtain the best price reasonably obtainable at the time of sale: Agio Trustees Co. Ltd v Harts Contributory Mortgages Nominee Co. Ltd (2001) 4

NZ ConvC 193,480 (HC).

(c) It does not matter that the time may be unpropitious and that by waiting a higher price could be obtained: Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 at 1355B; Silven Properties v Royal Bank of Scotland at [14].

(d) A mortgagee is under no obligation to improve the property or increase its value: Silven Properties v Royal Bank of Scotland at [16].

(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

3 Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC).

4 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

5 Public Trust v Ottow HC Auckland CIV-2009-404-3825, 4 November 2009 at [17].

reasonable care: Moritzson Properties Ltd v McLachlan (2001) 9

NZCLC 262,448 at [61].

(f) A mortgagee does not have any general duty to maintain properties prior to sale: Silven Properties v Royal Bank of Scotland at [16].

(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: G Merel & Co. Ltd v Barclays Bank (1963) 1 SJ 542.

(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: see Palk v Mortgage Services Funding Plc [1993] 1 Ch 330 at 337-8.

(i) Proper care must be taken to expose the property to the market and to obtain the best price reasonably obtainable: Harts Contributory Mortgages Nominee Co. Ltd v Bryers HC AK CP403-IM00 19

December 2001 at [43](d) and (f).

[24] Asher J went onto state that the following steps indicate that the mortgagee has taken reasonable steps to obtain the best 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.}

6 At [31].

The case for Mr Singh and Ms Kaur

[25] Counsel for Mr Singh and Ms Kaur do not contest that Westpac has established a prima facie case. The issue is whether Mr Singh and Ms Kaur have raised an arguable defence by way of a set-off which at least equals the judgment debt. This alleged defence is advanced on four grounds.

[26] First, counsel for Mr Singh and Ms Kaur submit that Westpac entirely disregarded their interests in exercising its power of sale. Westpac should be held liable for the amount which would have been realised if it had taken into account Mr Singh and Ms Kaur’s interests.

[27] Second, Westpac failed to advertise the property in a way to attract the best buyer, causing the purchase price to be lower than it should have been.

[28] Third, Westpac did not sell the property with a genuine desire to achieve the best price obtainable. Rather, it sold to an interested party whose business is to on- sell such properties for a profit.

[29] Fourth, Westpac’s claim includes an incorrect GST amount given that Boyce

Street is a development site.

Discussion

[30] I accept counsel for Westpac is right in his submission that Mr Singh and Ms

Kaur do not have an arguable defence.

[31] First, there is no substance in the contention that Westpac disregarded the defendants’ interests in exerting the power of sale. As counsel for Westpac submits, following ASB Bank Limited v Anderson, Westpac made a commercial decision to exercise of its power of sale.7 Mr Singh and Ms Kaur’s interests are irrelevant to this decision. But in any event, the undisputed evidence clearly shows that Westpac had been reasonable in accommodating Mr Singh and Ms Kaur’s requests for more time

to make repayments, before eventually proceeding to exercise its power of sale in the face of on-going default.

[32] Secondly, Westpac fully discharged its obligations under s 176. The evidence shows that it obtained a market valuation that estimated a forced sale value of between $490,000 and $540,000, and obtained two consistent marketing appraisals. Westpac also authorised a four-week marketing campaign worth $2,441.72 that included advertisements in the Herald leading up to the auction, a marketing sign outside the property and listings on four websites. Further, market activity reports demonstrate a strong interest in the property.

[33] While Mr Singh repeatedly alleges that the valuations that Westpac relied on were incorrect, he provides no evidence to support this. Rather, his proposed valuations rely on the subdivision being complete, which it was not.

[34] Third, Mr Singh provides no evidence to support his contention that Jewel Finance buys property and on-sells it at a profit. Materially, however, the sale was to the highest bidder for a price that was within the range indicated by Seagars. I find that to be dispositive of the contention.

[35] Fourth, it is clear on the evidence that GST was accounted for in the sale of the property as the sale was made GST inclusive, as set in the agreement for sale and purchase. The point was not pursued at the hearing.

[36] In short, there is no real evidential foundation for Mr Singh and Ms Kaur’s assertions that Westpac breached its duties in exercising the mortgagee’s power of sale.

Result

[37] For the above reasons, I am satisfied that Westpac has established its entitlement to summary judgment of its claim. There is no tenable defence to the claim.

[38] I give judgment on the claim against the defendants for $210,352.83, being the amount claimed.

[39] Costs follow the event. Westpac is entitled to indemnity costs under cl 2.2 of the mortgage. If agreement cannot be reached as to the amount to which Westpac is entitled, memoranda may be filed as follows:

(a) Westpac – within 10 working days of the date of judgment;

_{(b) Defendants – within a further 10 working days.}

Associate Judge Sargisson