Allerby v ASB Bank Limited [2014] NZHC 807 (15 April 2014)

Last Updated: 14 May 2014

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2014-485-4577 [2014] NZHC 807

BETWEEN	MURRAY BRENT ALLERBY First Plaintiff TONY REX ALLERBY and MICHAEL LEE ALLERBY Second Plaintiffs
AND	ASB BANK LIMITED Defendant

Hearing:	15 April 2014
Counsel:	K P Sullivan for Plaintiffs B J Upton and D M A Wiseman for Defendant
Judgment:	15 April 2014

_{ORAL JUDGMENT OF MACKENZIE J}

[1] The plaintiffs apply for an interim injunction to prevent the settlement of a contract which has been entered into between the mortgagee exercising its power of sale and Mr McCauley who is the purchaser at auction.

[2] The property was sold at auction on 14 March and was due for settlement on

11 April. The proceedings were commenced on 10 April and have been set down for hearing on an urgent basis today. The defendant, ASB Bank Ltd (ASB) was served on a Pickwick basis and has appeared today and has had an opportunity to file affidavits and to appear by counsel, so that I have heard today the application on an opposed basis. Mr McCauley who is the purchaser at auction has also appeared today. Because the matter is urgent, I deliver my decision now.

[3] The second plaintiffs sue as the trustees of a trust which own the property at

_{113 Breaker Bay Road in Wellington. The property is registered in the name of a}

ALLERBY v ASB BANK LIMITED [2014] NZHC 807 [15 April 2014]

Mr Davidson and a Ms Wilton, as the trustees of the trust. The second plaintiffs however assert in this proceeding that they are currently the trustees. The property is subject to a mortgage to ASB and the first plaintiff, Mr Allerby, is a guarantor of the mortgage. The mortgage was in default and, as I have already said, ASB has exercised its power of sale. The plaintiffs seek to prevent settlement of that sale.

[4] The claim is advanced on a number of legal grounds. In essence there are three issues which the plaintiffs raise as to the way the process of exercising the power of sale was carried out. The first is that it alleges that the bank, in its dealings, improperly dealt with the old trustees who were no longer the trustees of the trust. The second is that the process adopted for the sale of the property was not properly carried out. The third is that the bank failed to agree to halt the auction and to delay it from the date to which it had been rescheduled.

[5] All of those three matters need to be considered and they. in terms of the legal framework, need to be considered under both whether there was a breach of the bank’s obligations under s 176 of the Property Law Act 2007 or, alternatively whether the bank’s conduct has been oppressive in a way which permits the granting of relief under s 127 of the Credit Contracts and Consumer Finance Act 2003.

[6] The issues on this interim injunction application are those which apply to such applications. The first question is whether there is a serious question to be tried, and the second is where does the balance of convenience lie.

[7] I deal first with whether there is a serious question to be tried. In doing so I take into account that the issue is not just whether the plaintiffs may have a claim which may give rise to some relief, but whether there is a serious question that they have a claim which gives rise to the relief which is now sought. That relief is in essence the cancellation of the sale to Mr McCauley and restoring to ASB the ability to deal with the plaintiffs, essentially so that the plaintiffs will be able to redeem their mortgage.

[8] The first issue is the claim that the bank has improperly dealt with the wrong persons in its dealings with the property. The property is registered in the name of

Mr Davidson and Ms Wilton. They were registered in their capacity as the trustees for the Seadog and Barnacle Trust which is a trust apparently established by Mr Murray Allerby the first plaintiff and of which he is a discretionary beneficiary. Mr Allerby’s evidence is that Mr Davidson and Ms Wilton had been replaced as trustees, by the plaintiffs.

[9] The position as it appears from the correspondence is that ASB’s consent to a transfer to new trustees had been sought. ASB had agreed to consent to a transfer to the new trustees, on condition that the existing mortgage was discharged and a new mortgage was taken out. None of that was done, and at the time when ASB commenced its recovery proceedings, and indeed up until now, Mr Davidson and Ms Wilton remain the registered proprietors. Mr Sullivan, on Mr Allerby’s behalf, contends that Mr Davidson should not have been communicated with in the way that he was by ASB and that ASB should have communicated as necessary with Mr Allerby.

[10] Mr Allerby was served with the notice of default, the Property Law Act notice, in September 2013 and that Property Law Act notice specifically recorded that the notice had been directed to Mr Davidson and Ms Wilton as trustees. Mr Allerby made no contact with ASB subsequent to that, until sometime considerably later. I do not propose to traverse the evidence on this issue. It is sufficient at this stage to say that I am not satisfied that there is a serious question to be tried over the conduct of ASB in dealing, as it did, with the registered proprietors throughout the sale process. Mr Sullivan has said all that could be said, on Mr Allerby’s behalf, in relation to that matter. Having carefully considered his submissions I am not taken to a point where I consider that there is a serious question to be tried on that issue.

[11] The second issue is as to the process which was adopted to sell the property. A land agent in Lower Hutt was appointed to conduct the sale. It was advertised and the auction was attended by four bidders. One of the complaints, and the principal complaint, relates to the question of whether the possibility that the property might be subdivided was sufficiently drawn to the attention of potential buyers. The property is on two titles, but the ability to sell those titles separately is restricted

because the house that is on one of the titles encroaches on the other title and a boundary adjustment would be necessary before the two properties could be separately sold. Again, I do not propose to traverse the evidence or submissions in detail because I am conscious that the issue with which I am concerned is only one of the potential forms of relief that could be sought, and it is not desirable that I say anything which might affect the continuation of the proceedings for other relief if that were how the plaintiffs chose to proceed.

[12] The duty of a mortgagee conducting a power of sale is to take reasonable care under s 176 of the Property Law Act to obtain the best price reasonably obtainable. Generally that will involve: appointing a reputable real estate agent to market the property; marketing it over a reasonably long period to ensure that interest can be obtained; obtaining a valuation of the likely value of the property; conducting a proper advertising and promotional campaign; and conducting the auction in an appropriate manner.

[13] Mr Allerby challenges the steps that were taken in a number of respects. He says the agent chosen was not an appropriate agent with knowledge of the area and he submits that the property was not properly marketed. There was no internet advertising and the possibility of additional value from subdivision was not adequately emphasised.

[14] The evidence in support of that relies entirely on Mr Allerby’s own assertions and I consider it on that basis. Having viewed the steps which were taken I am not satisfied that there is a serious question to be tried over the issue of whether appropriate steps were taken. Mr Upton has referred to the decisions in Harts

Contributory Mortgages Nominee Co Ltd v Bryers,¹ ANZ National Bank v Taylor,²

Westpac New Zealand Ltd v Golian.³ Mr Allerby’s evidence does not lead me to the

view that there is a serious question to be tried over the adequacy of the steps that were taken to market the property.

¹ Harts Contributory Mortgages Nominee Co Ltd v Bryers HC Auckland CP 403-IM00,

_{19 December 2001.}

² _{ANZ National Bank v Taylor HC Auckland CIV-2010-404-201, 17 December 2010.}

³ Westpac New Zealand Ltd v Golian HC Auckland CIV-2010-404-7556, 21 September 2011.

[15] The third issue is the bank’s actions in relation to the sale and the

non-postponement of the sale. The auction was due to take place on

28 February 2014. On 27 February, the plaintiffs’ solicitors requested that the sale be delayed and that they be given a period of six months to sell the property or repay the debt in full. They offered an immediate payment of $25,000. ASB responded to that by agreeing to defer the auction for one week until 7 March, subject to payment of the $25,000. That was paid and the auction was deferred, in fact for two weeks until 14 March 2014.

[16] On 13 March, the plaintiffs’ solicitors advised the mortgagee that they expected to be able to complete a refinancing but would be unable to do that before the auction then scheduled for the following day, 14 March. They asked for further time to do so. On 14 March the plaintiffs’ lawyers advised that they had entered into a contract to sell the property to Ms Moss, who is Mr Murray Allerby’s partner, for

$850,000 with settlement four weeks from that date. It appears that they advised that finance could be arranged but at that stage there was no formal offer from a financier. ASB was not prepared to defer the auction further and proceeded on

14 March. Subsequently a loan offer from Southern Cross Financial was received. It is dated 13 March but was not made available to ASB before the auction whereby they agreed to lend $675,000 for a period of 12 months. There were to be a number of deductions from that amount which would have reduced the amount actually to be advanced to an amount which it does seem would have covered the full amount of the ASB mortgage.

[17] Again, Mr Sullivan has said all that could possibly be said on the plaintiffs’ behalf as to the reasons which might have persuaded ASB that they should agree to a further deferral of the sale. It is again not appropriate to go into detail, but I simply observe that I do not consider that ASB’s decision not to grant a further deferral, having regard to the somewhat tenuous state of the proposal as at the time the auction commenced on 14 March, provides a basis for the grant of relief. I do not think there is a serious question that the conduct was oppressive or in breach of an obligation on the part of ASB. So again I am not satisfied that there is a serious question to be tried on that issue.

[18] However I emphasise that my conclusion has been expressed shortly without a full review of the evidence, because the possibility that the claimants may wish to pursue the claim for another remedy remains open.

[19] A particular concern that I had, which I raised with Mr Sullivan at the outset, is as to the ability of the Court to grant relief in circumstances where there is now a contract for the sale of the property which is unconditional, save for a condition in the contract which enables the vendor to defer settlement or ultimately cancel the agreement if any injunction was ordered preventing the sale and the registration of a transfer. Apart from that protection to the vendor, the contract is unconditional.

[20] It is clear that where a mortgagor seeks to redeem a mortgage prior to mortgagee sale the right of redemption continues up until the point at which the sale takes place. It does not however continue beyond the point at which there is an unconditional contract in place. I consider that the stage has been reached where there would be no right to redeem the mortgage. There remains the ability to grant relief under s 127 of the Credit Contracts and Consumer Finance Act 2003 or as a means of enforcing the duty under s 176 of the Property Law Act. Mr Sullivan was not able to refer me to any contested case in which the Court has intervened at such a late stage as to disturb the contractual arrangements which have been entered into between the vendor at mortgagee auction and the purchaser. Mr Sullivan referred to

Adams v ASB Bank Ltd.⁴ In that case, an application for an injunction had been

made when “the sale had (or was about to) become unconditional”.⁵ In that case, the bank did not oppose the grant of an injunction. I do not regard that decision as considered authority on the point. While I would not go so far as to say that the Court does not have the ability to grant relief, the circumstances in which it would be appropriate to grant such relief would be, in my view, extreme ones.

[21] That is another way, in essence, of saying that one factor which weighs in the balance of convenience (if it were necessary for me to consider that) is that the rights of the purchaser under that contract need to be taken into account. Mr Sullivan

_{submits, on the question of the balance of convenience, that the bank loses nothing if}

⁴ _{Adams v ASB Bank Ltd [2013] NZHC 1117.}

⁵ At [1].

it allows the plaintiffs the final opportunity to buy out the mortgage because they have the ability under the contract to do so. He submits that the purchaser loses nothing if the contract is cancelled because the bank has that right and he would receive a refund of his deposit.

[22] The legitimate expectations of the purchaser that the contract would be completed and the benefit he saw in entering into it would be lost is, in my view, a very powerful and persuasive factor weighing in the scale on the balance of convenience.

[23] Against that there is, as Mr Sullivan put it, the rights of the Allerby family to stay in their home of 17 years, which they say the remedy they seek would enable them to do. Mr Allerby says that the consequences of a sale for him would be very severe; that he is involved in other litigation and would need additional funds to achieve a favourable outcome in that litigation both criminal and civil and that his only hope of doing so is to retain the property and sell off the section. How realistic that is in terms of the value of the property is another question. It is of course not Mr Allerby’s property but that of the trustees.

[24] I am not persuaded that the consequences that Mr Allerby will suffer are entitled to significant weight in the exercise. The chronology which Mr Upton puts forward suggests to me that efforts by Mr Allerby to redress the serious situation which he was in as a result of the default under the mortgage were not taken until a very late stage and it would not be right to transfer the consequences of that from Mr Allerby to the purchaser of the property.

[25] For these reasons, if it were necessary to consider the balance of convenience, I consider that the balance of convenience weighs heavily in favour of the refusal of relief.

[26] The application is accordingly dismissed. Mr Upton advises that enforcement costs will be payable in terms of the mortgage and no cost order is therefore sought.

“A D MacKenzie J”

Solicitors: Wilson & Co, Wellington for Plaintiffs

Simpson Grierson, Auckland for Defendant