PropertyFinance Securities Limited HC Christchurch CIV-2011-409-000163

[2011] NZHC 471

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-000163

IN THE MATTER OF     section 200 of the Property Law Act 2007

AND IN THE MATTER OF an application by PROPERTYFINANCE SECURITIES LIMITED

Hearing:         11 May 2011

Appearances: K Patterson for Applicant

Judgment:      11 May 2011

ORAL JUDGMENT OF JUDGMENT OF HON JUSTICE FRENCH

Introduction

[1]      The applicant, Propertyfinance Securities Limited, has a registered mortgage against a leasehold interest owned by Market Place Building Limited.

[2]      Market Place has defaulted on its obligations under the mortgagee and sale agreement.   PSL seeks an order under s 200(3)(d) of the Property Law Act 2007 permitting it to purchase the leasehold interest.

[3]      The application has been served on all parties likely to be affected.  No notice of opposition has been filed.

Factual background

[4]      The affidavit evidence sworn in support of the application establishes the following.

[5]      In or about June 2006 PSL advanced money to Market Place to assist it to purchase a leasehold interest in the property situated at 32 Market Place, Auckland.

The loan was secured by a first registered mortgage against the leasehold’s interest.

RE PROPERTYFINANCE SECURITIES LIMITED HC CHCH CIV-2011-409-000163 11 May 2011

[6]      In late July 2010 Market Place went into default of its payment obligations and, after serving the requisite formal notices, PSL decided to exercise its powers of sale.

[7]      PSL says it has had no payments at all from Market Place since June 2010, and  as  at  10   January  2011  the  indebtedness  including  costs   amounted  to

$4,687,405.92.  Interest continues to accrue at a daily rate of $1268.62.

[8]      In September 2010 PSL obtained a valuation of the leasehold interest.  The valuer determined the market value at the date of valuation was $2.5m plus GST and the forced sale value was $2m plus GST.

[9]      In November 2010 PSL instructed Cam Paterson of Barfoot & Thompson to sell the leasehold interest.  Mr Paterson recommended the best method of sale for this  particular  property  would  be  by  tender  and  accordingly  that  process  was adopted.  Tenders closed on 15 December 2010 but failed to produce any offers that were acceptable.  None of the offers or expressions of interest were above the $1m mark, and all fell well short of the asking price of $2m.

[10]     The proposal made by the applicant is to purchase the leasehold interest for

$2m plus GST if any.  As noted in the affidavit, while a sale at this price will still result in a considerable shortfall, it is a significant improvement on the offers made during the tender process.

Discussion

[11]     The power conferred on the Court by s 200 is new.  The legislation does not set out any criteria to which the Court is to have regard.   However as noted in previous decisions (Re Canterbury Building Society; Condon v Southland Building Society)[1], it would seem axiomatic that applications such as this one must be considered  in  the  context  of  the  mortgagee’s  obligations  when  conducting  a

mortgagee sale, namely the duty to exercise the power of sale in good faith and to

obtain the best price reasonably obtainable.   I am satisfied PSL has discharged its obligations.

[1] Re Canterbury Building Society (2009) 10 NZCPR 370; Condon v Southland Building Society

HC Invercargill CIV-2010-425-000020, 13 April 2010.

[12]     Further, as also noted in the affidavit, there are no subsequent mortgagees or charge holders that would be prejudiced should PSL be permitted to purchase the leasehold interest.

[13]     In  taking  the  leasehold  interest,  PSL  has  also  undertaken  to  meet  the obligation to pay rent and observe all other covenants under the lease.

[14]     In all the circumstances I am satisfied the application should be granted. There will therefore be orders as per the application permitting the applicant to become the purchaser at the sale of a leasehold interest as comprised in computer interest register Identifier 100656 (North Auckland Land Registration District) relating  to  a property at 32  Market  Place,  Auckland as  comprised in  computer freehold register Identifier 67135 (North Auckland Land Registration District) for the sum of $2,000,000 (plus GST if any).

Solicitors:

Buddle Findlay, Christchurch