Westpac New Zealand Limited v Law [2012] NZHC 1065 (10 May 2012)

Last Updated: 25 September 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-991 [2012] NZHC 1065

UNDER Section 143 of the Land Transfer Act 1952

IN THE MATTER OF an application for the removal of caveats

BETWEEN WESTPAC NEW ZEALAND LIMITED Applicant

AND SET KIEN LAW Respondent

Hearing: 10 May 2012

Counsel: M Sandelin and N Maday for Applicant

No appearance for Respondent

Judgment: 10 May 2012

_{ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL}

Solicitors:

Minter Ellison Rudd Watts, P O Box 3798 Auckland 1140 for Applicant

_Email: [e-mail] / [e-mail]

Copy for:

Augustine Law:

Email: [e-mail]

Shean Singh, P O Box 10018 Dominion Road, Aucklnad 1446

_Email: [e-mail]

WESTPAC NEW ZEALAND LIMITED V LAW HC AK CIV-2012-404-991 [10 May 2012]

[1] This application concerns caveats said to have been lodged by Set Kien Law. The caveats were lodged through the office of an Auckland lawyer, but it is apparent that there is a person who has been responsible for the lodging and maintaining of the caveats. That person is Mr Augustine Lau. Mr Lau is responsible for lodging the notice of opposition to the present application. He swore an affidavit. He intended, originally, to appear at the hearing and represent the respondent because he held a power of attorney for her.

[2] When I saw that Mr Lau was involved in this case, I arranged for a case management conference on 8 May 2012 because I wanted the matter of the respondent’s representation cleared up. My concern is that Mr Lau is not a lawyer. While he is entitled to appear in court on his own behalf where he is a party to a proceeding, he does not have the right of audience before this court to appear on behalf of other people.

[3] It appears that in other cases he has been able to appear in court on behalf of other people, saying that he is entitled to do so under a power of attorney that he holds. I am presently case-managing a proceeding brought against him by his former wife who is suing him for his mismanagement of proceedings in which he represented her. He has appeared before Associate Judge Christiansen in a similar

proceeding to this: Westpac New Zealand Ltd v Set Kien Law.[1] Associate Judge

Christiansen allowed him to represent Ms Law in that proceeding.

[4] Today, counsel for Westpac has referred me to another decision of Associate Judge Christiansen: Westpac New Zealand Ltd v Set Kien Law.[2] In all of those proceedings Mr Lau has appeared on behalf of caveators and registered proprietors of property and has been given a right of audience – apparently because he possesses a power of attorney. I have seen Mr Lau appear in other proceedings as well. He is Chinese. He has qualifications as an engineer. He does not have legal

qualifications. In my view it is inappropriate that he should appear to represent other people. The decision of Associate Judge Christiansen given on 3 May 2012 in the

_{[2012] NZHC 890 decision simply bears out the misgivings I have about Mr Lau.}

[5] While I directed on 8 May 2012 that Mr Lau could not appear on behalf of Ms Law, I have left it open to Ms Law to instruct counsel to appear today. Mr Sandelin advised that in the intervening days he had had contact with the lawyer through whose office the caveats were initially lodged. However, that lawyer did not appear today. Enquiries were made whether he was going to appear. That lawyer advised this court that he did not have instructions to appear today.

[6] This matter has, accordingly, proceeded without any appearance for the respondent to oppose the application by Westpac but I record that an opportunity has been given to the respondent to arrange for representation if she intended to oppose the bank’s application.

[7] Westpac has mortgages over three properties. Those properties are:

(a) 1/10 Penion Drive, Flat Bush, described in Identifier NA79D/331.

The owners of that property are Jian Liu and Ying Ying Liu.

(b) 1/12 Trimdon Street, Manurewa, described in Identifier NA87B/817.

The registered proprietor of that property is Jian Liu; and

(c) 43 Bellville Drive, Clendon, Auckland, described in Identifier NA122D/855. Jian Liu is the registered proprietor of that property.

[8] Westpac has mortgages over all three properties. The Trimdon Street and the Bellville Drive mortgages were registered on 28 June 2007. The Penion Drive mortgage was registered on 13 August 2007.

[9] The loans which are secured by the mortgages are all in default. Westpac served notices under s 119 of the Property Law Act on the mortgagors, apparently in some cases by substituted service. The powers of sale under the mortgages accrued. In December 2011 Westpac held auctions for the sale of the three properties. They were passed in at the auction but Westpac later negotiated sales for the three properties during January 2012.

[10] All the agreements for the sale of the three properties were due for settlement apparently during March 2012. Those sales have not been able to be completed because caveats have been lodged against the titles of each of those three properties by Set Kien Law. Westpac has asked her to remove the caveats. She refused to do so, and this application has followed.

[11] Ms Law lodged her caveats against all three titles on 8 August 2011. Caveat

8793026.1 is lodged against the Trimdon Street and Bellville Drive properties owned by Jian Liu. Caveat 8793026.2 was lodged against the Penion Drive property owned by Jian Liu and Ying Ying Liu. Both caveats protect similar interests. The interest claimed in each caveats is:

as purchaser and lessee pursuant to an agreement dated 3 March 2011

between the registered proprietor and the caveator.

[12] The affidavit in opposition to the present application has extracts from documents that appear to be agreements for sale and purchase. In all cases the agreements for sale and purchase are dated 3 March 2011. The Penion Drive property shows a sale price of $168,000 with a deposit of $36,000 and the balance of the purchase price to be paid on 1 October 2011, but with possession to take place on

15 March 2011.

[13] For the Trimdon Street property, there is a purchase price of $168,000 with a deposit of $38,000. Possession was to take place on 15 March 2011 and the balance of the purchase price was to be paid on 30 October 2011.

[14] For the Bellville Drive property the purchase price was for $68,000 with a deposit of $30,000. Possession was to be given on 30 October 2011 and the balance of the purchase price was to be paid on 30 September 2011.

[15] In all cases the agreements are private sales. Each of the extracts from the agreements contain an unusual provision - that the paid deposit can be converted to a five years’ rent if the vendor cannot clear title on settlement date. I comment that the only barrier to the vendor giving clear title on settlement date would have been the bank’s mortgage. If the purchaser had tendered the full purchase price then the

vendor would have been able to give clear title. The caveator is claiming that she was entitled to occupation under a lease, which has arisen under these provisions in the agreements for sale and purchase. But at present I am puzzled as to how this leasehold interest has arisen when the condition which had to be satisfied to give rise to this interest does not seem to have been triggered.

[16] What seems to be the case is that sums have allegedly been paid towards payment for the purchase of the property, the dates for settlement have passed, and no further sums have been paid. The purchaser seems to be in default. I cannot infer anything more than that. I cannot find that the agreements have been cancelled.

[17] The original mortgagors remain as registered proprietors but their interests

are subject to the bank’s registered first mortgage.

[18] These agreements for sale and purchase may give the caveator a caveatable interest in the properties as purchaser, but in the absence of further evidence, I cannot find an arguable case for an interest as lessee. The more significant issue in this case is whether Westpac’s interests under its mortgages prevail over any interest which Ms Law might be able to claim under these agreements with the mortgagors.

[19] Westpac’s case is that it is entitled to exercise its powers of sale under its mortgages and convey a title, free of any interest claimed by Ms Law, because it did not know about the arrangements which the mortgagors had made with Ms Law. It did not find out about those arrangements until the caveats were lodged. It did not know about the agreements for sale and purchase until it saw the opposition to the present application. It never consented to the transactions which are the subject of the caveat. The bank relies on s 105 of the Land Transfer Act:

105 Transfer by mortgagee

Upon the registration of any transfer executed by a mortgagee for the purpose of exercising a power of sale over any land, the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any

instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.

[20] There are some parallel provisions that are also of relevance. Section 119 of the Land Transfer Act says:

No lease of mortgaged or encumbered land shall be binding upon the mortgagee except so far as the mortgagee has consented thereto.

And also s 138(1) of the Property Law Act 2007 which provides:

138(1) If a mortgagor who has consented to a lease of all or part of the mortgaged land or goods, the mortgagee may not, in accordance with section 137(1)(a), enter into or take physical possession of any land or goods that are subject to the lease, except in the exercise of a power conferred by s 147 [which allows a mortgagee in possession to exercise the powers of a lessor].

[21] As to what constitutes “consent”, there is guidance from the decisions of the Court of Appeal and the Supreme Court in Cashmere Capital Ltd v Crossdale Properties Ltd.[3] In the Supreme Court McGrath J referred to earlier authorities and said:[4]

These decisions indicate that a consent which, under ss 105 and 119, binds a mortgagee to the competing estate or interest in another instrument, requires conduct which affirms the lease. A mortgagee who is aware of a third party’s interest, and passively stands by, making no objection, has not consented. For there to be a valid consent the mortgagee must either have been aware of the essential terms of the lease or be shown to have consented to the lease whatever its terms may be. Only then does the mortgagee consent to the terms of the other instrument, in the sense of agreeing to be bound by it. Making an advance as mortgagee, while being aware of the other instrument and another party’s interest in it, of itself, does not amount to consent.

[22] Ms Law does not allege that the bank consented to the agreements that she entered into. I accept the evidence for the bank that it never gave consent in terms of the test laid down by McGrath J in Cashmere Capital Ltd and that it did not find out about the agreements for sale and purchase until 7 December 2011. I accept that it

_{cannot be held to have, in any sense, given consent to these agreements.}

[23] Ms Law claims that she was not told by the mortgagee’s lawyer that a mortgagor’s consent was required before her agreements could go unconditional. Ms Law apparently entered into these transactions when Westpac’s mortgages were registered against the titles. She would have had the opportunity to inspect the titles and ascertain what interests were registered against the titles. If she did not do that, then that was a risk that she took. The simple legal position is that her interest in the property is subject to the rights of the bank. The bank’s mortgages were already registered against the titles. The bank was entitled to exercise its rights under mortgage including exercising its power of sale.

[24] The fact that a third party has entered into an agreement to purchase the property or to lease the property does not stand in the way of the bank exercising its powers of sale, unless the bank has consented either to the sale or to the lease, and the bank were to exercise its rights in a manner inconsistent with that consent.

[25] Ms Law also seems to complain that she was not told of the amounts owing to the bank. Again, I do not see that that does anything to give her priority over the bank. The bank continued to market the properties after it became aware of Ms Law’s interest claimed under the agreements. It is quite clear that the bank was entitled to do so. Ms Law alleges that the documentation for the bank’s sales shows that the properties were sold subject to existing tenancies or occupations, including any holding over by a mortgagor, and points to the position that the vendor is not required to give vacant possession. It is clear that those provisions were inserted by the bank to protect its own position vis-a-vis any purchaser, so that difficulties in removing mortgagors, or people holding under mortgagors, would not place Westpac in breach of any agreement for the sale of the property. But it does not provide any mortgagor, or any person claiming through a mortgagor, with any rights against Westpac that could prevent Westpac exercising its power of sale.

[26] For this case I assume that Ms Law may have a caveatable interest in each of the properties as a purchaser under the agreements for sale and purchase, which may not have been cancelled yet, even though the complete purchase price has not been paid.

[27] Notwithstanding that she may have a caveatable interest, it is still appropriate to order the removal of the caveats. That is because it is clear that no useful purpose would be served by allowing the caveats to stay on the title. In doing this, I am applying the test laid down by the Court of Appeal in Pacific Homes Ltd (In

Receivership v Consolidated Joineries Ltd.[5] In addressing the case where there is no

practical advantage in maintaining the caveat, the court said at 656:

In such circumstances, the court retains a discretion to make an order removing the caveat, though it will be exercised cautiously. An order will be made for removal only where the court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of the case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of recovery of money secured over the land or specific performance of an agreement or if the caveator’s interest can be reasonably accommodated in some other way, such as by substituting a fund with money under the control of the court, then it may be appropriate for the caveat to be removed notwithstanding the right to the claimed interest is undoubted.

[28] Here, it is perfectly clear that Ms Law’s interest is subordinate to the bank’s interest and the interests claimed by Ms Law cannot prevent the bank exercising its powers of sale.

[29] The usual practice in these cases is to provide that the caveat will be removed upon a mortgagee lodging a transfer by e-dealing in the exercise of its power of sale as mortgagee. I therefore make orders for the removal of both the caveats upon the bank lodging e-dealing for transfer in the exercise of its power of sale.

[30] I refer to Associate Judge Christiansen’s decision of 3 May 2012 in Westpac New Zealand Ltd v Set Kien Law.[6] In that case, Associate Judge Christiansen dealt with a number of cases where mortgagees sought the removal of caveats. The opposing parties included Set Kien Law and others. In all cases, Mr Lau appeared to oppose the mortgagees and to try to sustain the caveats. It is clear from the decision of Associate Judge Christiansen that Mr Lau had orchestrated the caveats in that

case. There is a clear pattern of conduct of Mr Lau actively taking steps to lodge

_{caveats which have the effect of impeding and delaying mortgagees enforcing their}

powers under their mortgages. That pattern of conduct has been repeated in this case.

[31] The bank says that in the light of that conduct it wishes to pursue Mr Lau. It wishes to do so by way of an order for costs against a non-party. It may also have remedies against him under s 146 of the Land Transfer Act for unreasonably lodging a caveat and being a party to that. Mr Lau is not here today, and he does not have notice that such orders might be sought against him. What I propose to do is to adjourn this matter to a caveat list where I will be presiding, to allow the bank to present an application for costs against Mr Lau. The bank is to file any submissions within 10 working days from today, and Mr Lau will be required to present any submissions in opposition 5 working days before the hearing. A copy of this decision is to be sent to Mr Lau. The case is to be called in the caveat list on 26 July

2012 at 2.15 pm to hear argument as to costs.

[32] Westpac also applies for costs against Ms Law. There is an order for costs against Ms Law on a 2B basis, together with disbursements as approved by the Registrar.

......................................................

R M Bell

Associate Judge

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[1] Westpac New Zealand Ltd v Set Kien Law HC Auckland CIV-2011-404-7989, 19 December

_2011.

[2] Westpac New Zealand Ltd v Set Kien Law [2012] NZHC 890.

[3] _{Cashmere Capital Ltd v Crossdale Properties Ltd [2010] 1 NZLR 577 (SC) at [70].}

[4] Ibid, at [79].

[5] _{Pacific Homes Ltd (In Receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 656.}

[6] Above, n 2.