GLW Group Limited v Lepionka and Company Investments Limited [2016] NZHC 3109 (16 December 2016)

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BETWEEN	GLW GROUP LIMITED First Plaintiff GARTH BOWKETT PATERSON Second Plaintiff
AND	LEPIONKA AND COMPANY INVESTMENTS LIMITED First Defendant LEPIONKA AND COMPANY LIMITED Second Defendant STEFAN JOZEF JOHN LEPIONKA AND NIGEL WARRANT HUGHES AS TRUSTEES OF THE SJ LEPIONKA FAMILY TRUST _{Third Defendants}

Hearing:	On the papers
Counsel:	D W Grove for the First Plaintiff M G Colson and J H Stevens for the Defendants
Judgment:	14 December 2016
_Reasons:	_{16 December 2016}

Mr G Halse (plaintiffs’ instructing solicitor), Foy & Halse, Solicitors, Auckland

GLW GROUP LTD v LEPIONKA AND COMPANY INVESTMENTS LTD [2016] NZHC 3109 [16 December

[1] On 12 December 2016 the first defendant (LCIL) applied for the following orders:

(a) An order allowing these proceedings to be continued against the second plaintiff (Mr Paterson), who is bankrupt, for the purpose of the present interlocutory application.

(b) An order restraining both plaintiffs from continuing an application made by Mr Paterson to the Tenancy Tribunal, under application number 4057525, until after determination of an application already before this Court and for hearing on 10 February 2016.

[2] On 15 December 2016 a results judgment was delivered, dismissing the application with reasons to follow. These are my reasons.

[3] The second plaintiff, Mr Paterson, was adjudicated bankrupt, on an application by LCIL, on 5 March 2016. A subsequent application by Mr Paterson to annul the bankruptcy was successfully opposed by LCIL. It is because of the bankruptcy that LCIL sought the first order – to proceed against Mr Paterson in this proceeding, on the current interlocutory application.

[4] The claim of the first plaintiff (GLW) against LCIL and the two other defendants remains before the Court. In very broad terms it arises out of LCIL’s purchase of a first mortgage over land owned by GLW. In this proceeding GLW contends that various steps taken by LCIL, and some in conjunction with the second and third defendants, were in breach of duties owed by LCIL as a mortgagee and rights of one or both of the plaintiffs.

[5] On 2 April 2015, two days after assignment of the first mortgage to LCIL, LCIL gave notice that it had entered into possession of the property as mortgagee. Its right to do so is in issue.

[6] Mr Paterson has been living in a house on the property for an extended period of time. He claims that he is occupying the house as a tenant of GLW. LCIL contests any right of GLW to grant a tenancy to Mr Paterson and, it seems, otherwise claims that Mr Paterson’s occupation of the house, and of the property to that extent, was unlawful as against LCIL as mortgagee in possession.

[7] In an affidavit affirmed on 2 December 2016, Mr Paterson states that LCIL issued proceedings for vacant possession in July 2015, but withdrew those proceedings in August 2015, with costs awarded against LCIL. This is an affidavit in support of an application made by GLW in this proceeding on 2 December 2016 seeking urgent orders, which I discuss further below. I will refer to this as “the 2

[8] On 17 November 2016 LCIL’s solicitors gave notice to GLW that LCIL required vacant possession of the property for the purposes of a sale, and that if it was not provided by 18 November 2016 proceedings for possession would be issued. Possession was not given on 18 November. On 22 November LCIL’s solicitors were advised that any application for possession would be opposed. On 25 November

2016 Mr Paterson was absent from the property. He had travelled to Australia on 22

November 2016. On 25 November 2016 agents of LCIL took possession of the house. Chattels of Mr Paterson were removed and retained by LCIL agents, and security guards were said to have been posted in or around the house to prevent Mr Paterson’s re-entering.

[9] GLW’s 2 December application was an interlocutory application for eleven orders, generally of an injunctive nature. The application of most relevance was for an order directing the defendants and its agents or employees forthwith to vacate the property and to give possession of the house back to Mr Paterson.

December for timetable orders. For convenience I reproduce the minute I issued as appendix 1 to this judgment, to form part of this judgment for the purpose of the background summary. All orders sought by GLW, for reasons recorded in the minute, were adjourned for hearing on 10 February 2016. As noted at [5] of the

minute, a one day fixture was available on Friday, 9 December 2016. Counsel for the defendants opposed a hearing at such short notice, although GLW was willing to confine the hearing to the application for the order giving possession back to Mr Paterson.

[10] In terms of urgency, I am satisfied that the most pressing matter would be Mr Paterson’s personal position. Although at one level those aspects are understandable, the reality is that there is no application by Mr Paterson. It is an application by GLW for possession founded on its contention that there is some form of tenancy, or occupation agreement, between GLW and Mr Paterson which, if not enforced, will cause loss to GLW. I am, of course, not in a position to make any determination on the relative merit of the argument one way or the other, but the substance of it is one which in my judgment does not warrant the urgency that is sought given the submissions I have heard of the difficulties that would be faced by the defendants in properly putting their position before the Court.

[12] On 6 December 2016 Mr Paterson applied to the Tenancy Tribunal (the Tribunal) for an order granting him possession to the property. A hearing of the application was granted for Friday, 16 December 2016.

[13] LCIL applied to the Tribunal for an adjournment on 6 December and, having not heard from the Tribunal, again on 9 December. The second letter, seeking an adjournment, recorded:

If the Tribunal cannot or will not deal with the application for adjournment before 3:00 pm Monday 12 December then [LCIL] will be forced to seek interim orders from the High Court to prevent the further re-litigation of issues the High Court has already considered or is to consider on 10

[15] I note that on 14 December the Tribunal issued a decision in writing, declining the application for an adjournment, and provided reasons. For convenience I also attach a copy of the order of the Tribunal, as appendix 2.

[16] The principal grounds in support of the second order sought by LCIL, staying the Tribunal hearing, were summarised in counsel’s memorandum as follows:

(a) It will prevent unnecessary expense caused by the duplicate litigation of the same issues. At the Tribunal Hearing, the Tribunal will need to assess whether GLW had the right to possession of the Property (such that it could enter into any further agreements in relation to the Property including an alleged residential tenancy agreement with Mr Paterson). That issue will be front and centre in the High Court Hearing.

(b) It will prevent the risk of inconsistent outcomes between competent New Zealand courts. There is a prospect the Tribunal and the High Court may reach different conclusions as to whether GLW had rights to possession.

(c) The decision this Court has already taken (to decline GLW’s request for interim, interim orders giving Mr Paterson repossession of the property) already gives rise to an issue estoppel before the Tribunal should it seek to address Mr Paterson’s claims urgently. Further, the outcome of the 10 February 2017 hearing may give rise to further estoppel claims that would limit the issues for the Tribunal Hearing.

[17] The following reasons for my dismissing LCIL’s application take account of

[18] Central to LCIL’s application for the order staying the Tribunal proceeding are points (a) and (b) at [16] above. LCIL submitted that this Court has jurisdiction to stay a proceeding in an inferior tribunal. Alternative sources of jurisdiction were advanced. It is unnecessary to consider the question of jurisdiction. I proceed on the basis that this Court does have inherent jurisdiction, as submitted. But it is not a jurisdiction properly exercised in the circumstances of this case.

[19] The first, and perhaps primary, reason for not exercising the jurisdiction to stay the Tribunal proceeding, is that the legislature has given the Tribunal exclusive jurisdiction to determine the claim that Mr Paterson seeks to advance in the

_Tribunal.¹_{Given these statutory provisions, it
is also for the Tribunal to determine,}

¹Residential Tenancies Act 1986, ss 77 and 82. See Auckland City Apartments Ltd v Stars and

in the first instance, whether, as a matter of law and fact, the application brought by

[20] The first two of the main grounds advanced by LCIL are to the broad effect that there is overlap between the issues brought before this Court by GLW’s 2

December application, and Mr Paterson’s application to the Tribunal. There is a degree of overlap, in a broad sense, but I was not persuaded that the matters referred to by LCIL justified the order sought. Although GLW and Mr Paterson have common interests, and the 2 December application sought, amongst other things, an order granting possession back to Mr Paterson, the 2 December application was not an application by Mr Paterson. Indeed, if the Official Assignee had given consent for Mr Paterson to join in the 2 December application, and Mr Paterson had then sought an order to enforce rights as a tenant, that part of the application could not have proceeded because of the exclusive jurisdiction of the Tribunal.

[21] LCIL in its third main ground in support, contended that Mr Paterson is estopped from bringing the Tribunal application because of a decision said to have been made by me on the 2 December application. That is not correct. Mr Paterson was not a party and cannot be estopped, and notwithstanding his active involvement in support of the 2 December application, and some common interests shared by GLW and Mr Paterson. In addition, and just as importantly, I did not make any decision, even of an interim nature, determining rights of any party. This is quite clear from my minute of 5 December 2016. That minute records directions of a procedural nature.

[22] If the Tribunal concludes that it has jurisdiction, and makes orders, and these orders in some way have a bearing on the issues for determination in this Court on the 2 December application, that is a matter that can be addressed then. Speculation of the possibility of inconsistent outcomes is not a basis for preventing the Tribunal from considering matters in respect of which the legislature has granted it exclusive jurisdiction (assuming, as before, that the Tribunal concludes that Mr Paterson’s claim is within the Tribunal’s jurisdiction).

[23] The order for stay sought by LCIL was also based on a proposition that the action taken by Mr Paterson, in applying to the Tribunal, amounts to an abuse of process, given the 2 December application. In essence, the submission appears to be that this amounts to a collateral attack. I do not agree, and for the reasons already recorded in respect of the Tribunal’s exclusive jurisdiction and the fact that Mr Paterson was not a party.

[24] A further consideration is that the relief sought by LCIL requires exercise of a discretion. If I am wrong on the questions of jurisdiction, and the consequence of the fact that Mr Paterson is not a party to the 2 December application, I would not exercise a discretion in favour of LCIL to grant the injunctive relief sought to stay the Tribunal proceeding. The principal matters bearing on the exercise of my discretion in that way are the following.

[25] There is a decision of the Court of Appeal which indicates that it is seriously arguable that LCIL’s acquisition of the first mortgage, and subsequent steps taken pursuant to powers under the mortgage, and in particular, in the present context, the taking of possession, are acts in breach of LCIL’s obligations as first mortgagee and contrary to rights of both plaintiffs.²Although the Court of Appeal’s decision was on a caveat dispute between LCIL and a third party, findings of law of the Court of Appeal, and conclusions as to the caveator’s arguable case against LCIL, do have application in the present proceeding.

[26] Further, on the question of discretion, there is some evidence supporting an argument that LCIL’s taking of possession on 25 November 2016 was heavy handed and, possibly, contrary to law. I do not have to make any findings on this and I am not purporting to do so. But I do take account of the evidence that Mr Paterson had been in possession for an extended period and that LCIL, through its solicitors, had given notice that an application for a court order for possession would be made. An application to the Court is the usual course. And that is what Mr Paterson has done in going to the Tribunal. I am aware of contrary arguments for LCIL as to how Mr Paterson came into possession, but these do not outweigh the matters I have just

_{referred to. The reality is that Mr Paterson was living in the house,
as his home, for}

²Coltart v Lepionka and Company Investments Ltd [2016] NZCA 102, [2012] 3 NZLR 36.

a reasonable period of time. LCIL had earlier sought a court order and then discontinued that application. LCIL, on the face of it, has had ample time to bring a new application for an order for possession. Instead it resorted to self-help.

[28] There was also the application for an order permitting LCIL to bring its application against Mr Paterson, notwithstanding that he is an undischarged bankrupt. Given my conclusion on the principal order sought, staying the Tribunal proceeding, it is unnecessary to consider the question of leave to proceed against Mr Paterson. I nevertheless note that I did not hear from the Official Assignee, and there does not appear to be an affidavit of service of the application on the Official

STEFAN JOZEF JOHN LEPIONKA and NIGEL WARREN HUGHES as trustees of the SJ Lepionka Family Trust

[1] The first plaintiff is seeking injunctive relief in respect of three matters which in broad terms can be described as follows:

(a) The granting of possession back to the second plaintiff who is said to be a tenant of the first plaintiff. This follows steps taken by one of the defendants as mortgagee to take possession.

(b) Orders of the Court enabling an agreement for sale and purchase of all of the land between the first plaintiff as vendor and W J Ladbrook as trustee of The Bamboo Trust as purchaser.

(c) An order restraining sale of Lot 4. There is an agreement for sale of Lot 4 being an agreement that was entered into by the first plaintiff and since adopted by the mortgagee. Settlement apparently is scheduled for January or February 2017. It is dependent on resource management issues.

[3] When this matter was first called I heard submissions from both counsel on questions of urgency and dictated a draft minute with a timetable which was dependent upon whether a fixture was available before or after Christmas. That was a timetable to deal with all matters. Because it is relevant I attach a copy of the draft to this minute.

[5] Later in the morning counsel returned and advised that a one day fixture is available this coming Friday for a day, but otherwise not before 10 February 2017. Mr Tingey expressed concern about seeking to deal with all matters this coming Friday for reasons that had already been outlined in the hearing earlier in the morning. Mr Tingey then advised that he would nevertheless seek instructions from the defendants as to whether an undertaking could be given not to proceed with settlement of the sale of Lot 4 pending determination of the plaintiff’s current applications.

[6] When the matter resumed Mr Tingey advised that the defendants were willing to give the undertaking provided all matters were dealt with at the fixture which is available for one day on 10 February 2017.

[7] Mr Grove accepted that the applications (b) and (c) in paragraph [1] could be deferred but his client wished to have the possession application heard this Friday and notwithstanding that the defendants’ undertaking would not be available.

[8] I heard further submissions from both counsel directed to the substantive issues designed to persuade me that there is or there is not urgency justifying a fixture this coming Friday.

[9] For the record I note that Mr Grove took me to the following, referring to the page numbers in the annexures to Mr Paterson’s affidavit, in this order: page 66; page 56 at paragraph 8; page 46; and page 44, being Mr Grove’s advice that any application for an order for possession by the defendants would be opposed. I was also referred to the affidavit of Ms O’Neil, although it is reasonably apparent from the way in which it is expressed that Ms O’Neil was simply stating information that she had received in respect of the background.

[11] One particular aspect of prejudice to Mr Paterson (and I emphasise that this is not prejudice to GLW, being the applicant for the injunctions) is possession of his chattels which were in the house. In that regard there is an undertaking from the defendants to ensure that the defendants’ agents who have possession of Mr Paterson’s chattels will make those chattels available to Mr Paterson provided he collects them from those agents, who are in Hastings, no later than 4:00 pm this coming Friday, 9 December 2016. That undertaking includes an undertaking to

ensure that they will be made freely available to Mr Paterson, which means that the security agents will not seek to recover any payment from Mr Paterson or any other person on behalf of Mr Paterson. That undertaking is without prejudice to the defendants’ right to seek in the end to recover those costs from the plaintiff.

[12] Another factor which persuades me that urgency should not be given, resulting in a fixture on Friday, is that in the end, if the actions of the defendants are found to have been unlawful in some way (referring to lawfulness as between the parties in a civil sense) any loss that may have been incurred by a party should be capable of being assessed in damages and an appropriate order made. I apprehend that if damages are sustained by the plaintiff they will be capable of being met by the defendants.

[13] The final point is that the original timetable was agreed without any certainty that the first plaintiff could get a fixture before Christmas and the likelihood being, as advised, that it could not.

[14] There is a fixture available, as I have noted, on 10 February 2016. For the purposes of that fixture there are the following timetable directions:

(b) Any notice of opposition and affidavits in support of that opposition for the defendants are to be filed and served by 14 December 2016.

(f) The first plaintiff shall on filing and serving its submissions also serve on the defendants’ solicitors a draft bundle of documents.

(g) The defendants on filing and serving their submissions will notify the first plaintiff’s solicitors or counsel of any additional documents to be added to the draft bundle. The first plaintiff will then compile a final agreed bundle of documents to be prepared in the usual way.

(h) Further copies of submissions should be provided to the Court at the hearing date including cross-references to the bundle.

[15] These directions are made on the two undertakings of the defendants recorded in [5]-[6] and [11].

[1] The first plaintiff is seeking injunctive relief in respect of three matters which in broad terms can be described as follows:

(a) The granting of possession back to the second plaintiff who is said to be a tenant of the first plaintiff. This follows steps taken by one of the defendants as mortgagee to take possession.

(b) Orders of the Court enabling an agreement for sale and purchase of all of the land between the first plaintiff as vendor and W J Ladbrook as trustee of The Bamboo Trust as purchaser.

(c) An order restraining sale of Lot 4. There is an agreement for sale of Lot 4 being an agreement that was entered into by the first plaintiff having now being adopted by the mortgage. Settlement apparently is scheduled for January or February 2017. It is dependent on resource management issues.

[3] I accept Mr Grove’s submission that this matter is urgent. That arises in several respects. One is the question of possession of premises on part of the land being the second plaintiff’s home. The second matter is increasing costs which are put at approximately $100,000 per month in interest and other costs. That relates in particular to the proposed sale to The Bamboo Trust which the plaintiff says will clear at least a substantial part of the debt and reduce ongoing interest. The third matter of urgency has already been noted in respect of the proposed completion of the sale of Lot 4.

[4] Timetables were discussed. Mr Grove was seeking a very truncated timetable, with any documents for the defendants to be filed by this Friday, 9

December. Mr Tingey sought until 12 December for the defendants’ documents. I do recognise the urgency, but on the other hand the defendants do need a proper opportunity to file documents bearing in mind, in particular, the advice from Mr Tingey that there will be need for affidavits from third parties. For the record, I note that that will include, apparently, affidavits relating to the manner in which Mr Paterson came to occupy the premises in December 2015 and the manner in which possession was taken for the mortgagee approximately two weeks ago.

December. Mr Grove accepted a responsibility to file any further reply and submissions for the plaintiff by 14 December 2016, although that date can be extended out by seven days if there is no prospect of getting a fixture this side of Christmas (which seems fairly likely).

(a) Any notice of opposition and affidavits in support of that opposition for the defendants are to be filed and served by 12 December 2016.

2016 except that, if there is to be no fixture before Christmas of this year, those affidavits and submissions may be filed and served on 21

(c) An urgent fixture is to be allocated for one day. If at all possible this fixture will need to take account of the possibility of sale of Lot 4 in January 2017.

(d) Submissions for the defendants in opposition can be tendered at the hearing if the fixture is before Christmas but otherwise are to be filed and served five working days before the fixture.

High Court of New Zealand Decisions

GLW Group Limited v Lepionka and Company Investments Limited [2016] NZHC 3109 (16 December 2016)