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Young v Radford [2005] CKHC 18; OA3.2005 (13 September 2005)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)


O.A. No.3/2005


BETWEEN:


GARTH TINDALL YOUNG
of Arorangi, Rarotonga, entertainer
and
MAURINE HINEWAI YOUNG
his wife (as Mortgagors)
Applicants


AND:


HEDLEY RADFORD
of Titikaveka,Rarotonga (as Mortgagee)
Respondent


Counsel: Mr. J McFadzien for Applicants
Respondent In person


Hearing (by telephone):
Saturday 10 September 2005 (New Zealand time) 9.00 am
Friday , 9 September 2005 (Cook Islands time) 11.00am


Introduction

  1. The Respondent, Mr Radford, is the mortgagee under a Deed of Mortgage made in 1996 in respect of the leasehold interest of a property at Arorangi, Rarotonga upon which two houses are built. Leasehold estate exists by virtue of a Deed of Lease dated 9 October 1976.
  2. The Applicants on 8 June 2005 signed a conditional agreement to sell their leasehold interest to Magic Reef Limited for NZ$375,000. That agreement has since become unconditional and I was told at the hearing that it will be possible, upon this Court's decision as to the amount owing to the mortgagee, to settle that transaction next week.
  3. In anticipation of the sale proceeding the Applicants' solicitors wrote to Mr Radford on 14 June 2005 enquiring as to the amount required to settle the Deed of Mortgage as at 1 August 2005.
  4. Mr Radford claimed in a facsimile dated 17 June 2005 to have re-entered the leasehold property as a mortgagee in possession and to have taken steps to realise his security. In subsequent correspondence thereafter, all of this was said by Mr Radford to have occurred in 2002/2003. It was also said that Mr Radford's agent, Development Holdings Limited, had arranged a sale to another local company for $275,000.
  5. On 22 July 2005 the Applicants' solicitors again sent a facsimile to the Respondent asking for the amount required to repay the Respondent's Deed of Mortgage. On the same day, the Applicants' solicitors received from the Respondent an invoice purporting to be from Robati Real Estate.
  6. On 27 July 2005, the Respondent sent to the Applicant's solicitors a settlement statement along with a copy of the invoice from Development Holdings. The settlement statement claimed inter alia the following amounts
3 months interest @ 15% pa (Property Law Act 81 (3))
$7,402.50
Plus Robati Real Estate Inv (faxed to you)
$2,682.50
Plus Development Holdings Ltd (faxed to you)
$915.47
Plus my indemnity costs (less 50% to the Young's)
$500.00
Plus Dev. Holdings Ltd letters re interest default
$26.00
Plus Advertising costs C.I. News
$47.60

These amounts, which totaled $11,524.07, were said to be owing by the Applicants to the Respondent.
  1. On 1 August the Applicants' solicitors wrote to the Respondent denying liability for those six items claimed in the settlement statement.
  2. There were further discussions between the parties but there was no agreement. Accordingly, on 2 August 2005, the Applicants applied to this Court for declarations to determine whether or not they were liable to pay the disputed sums. An injunction was also sought to restrain any action on the part of the Respondent in the meantime, including any action by the Respondent to sell the leasehold interest pursuant to his rights as mortgagee.
  3. The declaration sought orders that the following sums were not clue and payable:

The Hearing on 30 August 2005 and the Court's Directions

  1. The matter was referred to me during a callover in the High Court on 30 August 2006 because of its urgency. Mr McFadzien appeared for the Applicants. There was no appearance for the Respondent but I was satisfied that the application and supporting papers had been personally served on Mr Radford in the Cook Islands by a member of the staff of McFadzien PC on the same date that they were filed, namely 2 August 2005. I was made aware that, thereafter, Mr Tapaitau, Barrister and Solicitor, had represented Mr Radford and that there had been some discussions between the parties and a number of letters were written by the Respondent.
  2. I was further informed that on 22 August Mr Tapaitau had withdrawn from his representation for Mr Radford and had so advised both Mr McFadzien, Miss Harvey who was acting for the purchaser of the property and the Registrar. However, it was clear that Mr Tapaitau, before his representation terminated, advised the Respondent that the application was to come before the Court on 22 August. Additionally, Mr McFadzien's letter to Mr Tapaitau of 22 August, which amongst other things advised of the hearing, was also sent by Mr Tapaitau to Mr Radford. In short, Mr Radford had had full notice of the hearing and the Court felt able to consider the matter. In its judgment on that day at paragraph 7-9, the Court said:
  3. Mr Radford filed a comprehensive affidavit in accordance with these directions. The Court is indebted to him for his prompt compliance. The Applicants did not do so because Mr Young had since been obliged to travel to New Zealand for medical treatment and it was not possible for him to file a further affidavit, Instead lengthy submissions were filed by Mr McFadzien who advised that all the evidentiary material upon which he relied was already before the Court in the affidavit by Mr Young.
  4. Mr McFadzien also filed for the Applicants an amended application for declaratory orders dated 5 September 2005. The effect was to amend the disputed amounts, in respect of which the declaration was sought, to read as follows:
It will be noted that the Amended Application dropped reference to the amounts of $26.00 and $47.60 which had been included in the original Application. The Court therefore has no need to consider those items. The amended application took into account additional amounts claimed recently by Mr. Radford. It also sought a continuation of the interim injunction.

The Substantive Hearing on 9 September 2005

  1. When the matter came before me by way of a telephone hearing on Friday, 9 September (Cook Islands time), Mr McFadzien appeared for the Applicants and Mr Radford appeared in person. At the outset Mr McFadzien sought leave to amend the application. In this respect, it was said on behalf of the Applicants in the written submissions of 7 September 2005 at paragraph 22:
  2. This application for amendment was discussed between the Court and Mr Radford. Since Mr Radford was going to be able to present his views on all of the amounts he claimed, there was no prejudice to him in allowing the amendment. I accordingly allowed the Applicants to add to the list of disputed items the $915.47 being fees billed to the Respondent by Development Holdings Limited and claimed by the Respondent from the Applicants.
  3. It was agreed between the parties at the hearing that there was no dispute about the principal sum owing $197,400.00 nor were any interest calculations in issue. Interest will be payable down to the date of settlement.
  4. In the course of the hearing there was produced to the Registrar a letter from Mr Tapaitau enclosing an account for his fees in acting for Mr Radford from 3 August to 22 August in the sum of $2,812.50. This account has since been faxed to me. Therefore in considering the amounts which are subject to the application I amend item (d) from $2,000 to $2,812.50.
  5. The Court asked Mr Radford whether there are any changes which he wished to make to the list of amounts which he contended the Applicants were responsible for as set out in his letter of 17 August 2005 (which amounts were largely replicated in the amended application). He said that in item (c), which referred to a sum of $2,000 claimed by the Respondent as his costs after becoming mortgagee in possession and attempting to cover the bad debt, should now be amended to a claim for $4,000. Mr Radford also offered the comment that he thought Mr Robati's bill was "a bit on the high side".
  6. Thus the final amounts in dispute became the following:
Submissions of the Parties - Applicants
  1. The written submissions for the Applicants contained the following:
  2. Mr McFadzien added the following comments to his written submissions. As to the 3 July 2003 letter he claimed that, to the extent it was being suggested that that might have been a valid section 92 notice, it was not such. It was a demand for rent, not a section 92 notice.
  3. Mr McFadzien emphasised that his principal argument was that contained in his written submissions, namely that there had been a waiver. He also said that his clients did not recall receiving service of the section 92 notice allegedly issued 3 ½ years ago.
  4. He said that document RD5, a letter from Mr Radford to McFadzien PC dated 6 September 2005 clearly established that Mr Radford had accepted interest during 2003 but also after July 2003. Payments of $10,000 or more had been made in 2004. In short, whatever may have happened in July 2003, it was subject to the same arguments about waiver and estoppel contained in the written submissions.
  5. In general submissions Mr Radford added the following comments to the extensive material contained in his affidavit of 5 September. First, he said referred to and relied upon a letter dated 3 July 2003 which Development Holdings Limited had drafted for the purpose of sending to the Applicants. Mr Radford said this supported his claim that in July 2003 he had become mortgagee in possession.
  6. Mr Radford produced to the Registrar a copy of that letter which also showed some handwritten amendments written by Mr Radford wherein he sought to increase the amount which was going to be claimed by Development Holdings from the Youngs. The Court asked Mr Radford whether this amended letter had ever been sent to the Youngs. He answered that he could not be sure because the amended letter could not be found, although Mr Tansley of Development Holdings apparently said that it had been sent.
  7. Mr Radford in claiming the disputed amounts relied primarily on sections 8, 10, and 11 of the mortgage document, These provide as follows:
As noted earlier, Mr Radford has said that the Robati Real Estate agents was a bit high but he had paid half of it, whether or not he recovered it from the Applicants.
  1. The Court has carefully considered the extensive materials Mr Radford placed before it as well as his oral submissions. The Court has re-read the Applicants' written submissions. The Court upholds the submissions of the Applicants as set out in paragraph [20] above, for two reasons. First, on the evidence it has not been established that at any stage Mr Radford became the mortgagee in possession. This is because service of a Section 92 Notice in 2002 (or for that matter in 2003) on the Applicants has not been established on the evidence before the Court. Secondly, assuming for the purpose of discussion such a notice had been served, the Court finds on the evidence that there has been a clear waiver by the restructuring of the loan to the Applicants in June 2002 and the subsequent acceptance of interest by Mr Radford on the new basis in 2002 — 2004: see Applicant's Submissions at paragraph 7-11 referred to paragraph 20 above.
  2. It follows from this that the sums claimed by Mr Radford and listed under (b) and (o) in paragraph 19 above as his costs prior to and following becoming mortgagee in possession are not recoverable. Nor is the amount claimed under (e) for the Development Holdings fees. That amount should have been brought into the restructuring of the loan in June 2002. It is too late to claim it now.
  3. As to the Robati account, I have examined this account. It purports to relate to attempts to sell the property on behalf of Mr Radford and lists the people shown the property from 4 April 2005 until 22 August 2005. However, it follows from the Court's findings in paragraph [27] above that Mr Radford never became mortgagee in possession and therefore had no right to be trying to sell the property during this period. It equally follows that there is no basis for recovery of the costs of such selling endeavours.
  4. There are other reasons for this conclusion. First, in terms of the Robati fee so far as it relates to periods in August 2005, Mr Radford conceded that at least since 2 August 2005, he had known that the sale to Magic Reef had been concluded. It was not prudent to be spending money trying to sell the property at least until it was known whether that agreement would become unconditional. Secondly, even if there had been a right to sell, clause 11 of the mortgage provides only that the mortgagors are liable for commission if there is a mortgagee sale. What has been claimed here is not a commission for an actual sale but the costs of showing possible purchasers the property. It is not a commission and is therefore not recoverable. In this respect I refer to an affidavit which was filed by the Applicants which was sworn by Mr J F McElhinney, a registered valuer and real estate agent in Rarotonga who has been practising in Rarotonga for 7 years. His practice includes the letting and sale of leasehold property. He deposes that he is unaware of any real estate firm in the Cook Islands that charges fees on an hourly basis. He confirmed that the standard practice in the Cook Islands was to charge on a commission basis only if and when a sale resulted. He further deposed that he had so advised Mr Radford about 6 months ago. For all of the foregoing reasons, the Court finds that the Applicants are not responsible for any part of any fees, which may be owing to Robati Real Estate, and which were listed in paragraph (a) in paragraph [19] above.
  5. This leaves for consideration the claim for Mr Tapaitau's fees referred to in paragraph (d) of paragraph [19] above. In this respect, clause 8 is relied upon. (Clause 8 has already been set out above at paragraph [26].) It is noted that the mortgagors are liable to pay "all costs, charges and expenses of and incidental to ... any discharge of the mortgage". The latter part of the clause which provides for solicitor and client indemnity costs only applies where the mortgagors are in default and steps are taken of and incidental to the enforcement or attempted enforcement by the mortgagee of his rights, remedies and powers. In view of my rulings in paragraphs [27] — [29] above, the default provision cannot be relied upon at this later stage. It should have been invoked in 2002 as part of the restructuring.
  6. There can be no doubt that Mr Radford is entitled to recover all reasonable costs, charges and expenses involved in preparing the discharge of mortgage which will be produced on settlement of the sale to Magic Reef and to legal advice in respect thereof I have examined Mr Tapaitau's account. It does not refer directly to matters relating to the preparation of discharge of mortgage but is rather concerned with advice on the question of whether Mr Radford should pursue his claims for the disputed items and whether he should settle. Doubtless, the Applicants would contend that but for Mr Radford's pursuit of amounts not recoverable there would not have been any need for Mr Tapaitau's advice. I would accept such a submission up to a point. However, I think it is reasonable to allow part of Mr Tapaitau's account and also to provide that a modest additional amount which may be incurred in relation to the settlement itself. The Court considers that a fair and reasonable sum for which the Applicants should bear responsibility in relation to Mr Tapaitau's account would be $500. In making this finding, the Court passes no judgment on the reasonableness or otherwise of Mr Tapaitau's account. That is a matter which will have to be settled directly between Mr Radford and Mr Tapaitau. I allow a further $250 for any costs which may be incurred of and incidental to the actual settlement including the release of the mortgage.
DECISION
  1. For the foregoing reasons the Court finds and declares that none of the items claimed by the Respondent and listed in (a) — (c) and (e) of paragraph [19] above are recoverable. In respect of item (d), Mr Tapaitau's fees, the Court finds that the sum of $500.00 is recoverable by Mr Radford. In addition, the Applicants must pay the Respondent $250.00 as his costs on settlement in respect of the discharge of the mortgage.
  2. As long as the total sum of $750.00 is paid to Mr Radford on settlement of the Magic Reef sale plus all principal and interest owing, Mr Radford cannot legally refuse to discharge the mortgage.
  3. To put the matter another way, the Court finds that Mr Radford as mortgagor is obliged to provide a discharge of mortgage in the appropriate form and hand it over at settlement on payment of the principal and interest owing plus the sum of $750.00.
  4. The Court requires that settlement be completed as a matter of urgency on the foregoing basis because it is in the interests of all concerned that this matter be concluded and the parties move on. Until the Court is advised that settlement has occurred, the interim injunction will remain in force. However, it is to be taken to be discharged automatically once the settlement has been completed.
  5. Costs are reserved.

......................
David Williams CJ
Signed on 13 September 2005
at 4.00pm NZ time

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