De Leon v Bank of New Zealand

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2012-442-462 [2012] NZHC 2984

UNDER the Criminal Proceeds (Recovery) Act 2009
AND UNDER the Property Law Act 2007

IN THE MATTER OF an application for injunction to stay sale of land pending completion of Court of Appeal proceedings

BETWEEN CATALINA GUINTO DE LEON Applicant

ANDBANK OF NEW ZEALAND Respondent

Hearing: On Papers

Counsel: R Ord for Applicant
S A Barker and E Ritchie for Respondent

Judgment: 24 October 2012

JUDGMENT OF SIMON FRANCE J

[1] Ms de Leon makes an originating application without notice for an injunction stopping the Bank of New Zealand proceeding with a mortgagee sale tomorrow. The papers have been served on the respondent. A telephone conference was arranged and I heard from counsel.

[2] Ms de Leon’s partner was convicted of drug offending. Miller J ruled that the couple’s interest in the property be subject to forfeiture. That decision is subject to an appeal which is to be heard in February next year. The forfeiture order recognised
the Bank’s interest in the property as mortgagee.

CATALINA GUINTO DE LEON V BANK OF NEW ZEALAND HC NEL CIV 2012-442-462 [24 October
2012]

[3] It appears that Ms de Leon has not made payments on the mortgage for more than a year. The bank has followed the proper processes to exercise its mortgage rights and the sale is to take place tomorrow.

[4] The applicant seeks to have the Court injunct the sale until such time as the appeal is heard. The theory is that if the appeal is successful, “title will revert to [Ms de Leon] and she would hope to restart payments”. Ms de Leon says she can start to make payments of $750 now. Mr Ord refers to the inequity involved in Ms de Leon succeeding on her forfeiture but the property would be already sold.

[5] The application cannot succeed. The Bank is exercising its rights independent of any forfeiture issue. Even if the appeal succeeded, there is no reason why the Bank could not exercise its rights under the mortgage. The two matters are unconnected. I also observe that an unsigned undertaking as to damages cannot be given weight in such circumstances. There would at least need to be evidence that the equity in the house (itself currently forfeit to the Crown) clearly outweighed the money owing to the Bank if the property were sold. However, it is not necessary to
consider that further since no basis exists for the Court to interfere.

Simon France J

Solicitors:
R Ord, Barrister & Solicitor, Nelson, email: rwol@xtra.co.nz
S A Barker, Partner, Buddle Findlay, Wellington, email: scott.barker@buddlefindlay.com

CaseChat Overview and Summary

In the case of De Leon v Bank of New Zealand, the applicant, Catalina Guinto De Leon, sought an injunction to halt the sale of her property by the Bank of New Zealand. This application was made without prior notice and was based on the applicant's partner's conviction for drug-related offences, which had led to a ruling for the forfeiture of the couple’s interest in the property. The case involved an appeal against this forfeiture ruling, which was scheduled for February of the following year. The Bank of New Zealand, the respondent, was set to proceed with the mortgagee sale due to the applicant's failure to make mortgage payments for over a year.

The primary legal issue before the court was whether the applicant's right to appeal the forfeiture order entitled her to an injunction preventing the mortgagee sale. The applicant argued that if the appeal were successful, she would be able to resume mortgage payments and potentially retain the property. Counsel for the applicant also highlighted the inequity of the situation, suggesting that if the appeal were successful, the property would already be sold. However, the court found that the Bank of New Zealand was exercising its rights independently of the forfeiture issue, and the two matters were distinct. Additionally, the court noted that an unsigned undertaking regarding damages could not be considered in the circumstances, and there was no evidence to suggest that the equity in the property outweighed the amount owed to the bank.

The High Court ruled that the application could not succeed, as the bank was exercising its rights under the mortgage independently of the forfeiture issue. Even if the appeal were successful, there was no legal basis for the court to interfere with the bank's right to exercise its mortgagee sale rights. Consequently, the court denied the application for an injunction. The decision underscored the importance of distinguishing between the rights of a mortgagee and the legal consequences of a forfeiture order, particularly when an appeal is pending.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established