Ruling sees no breach of duty of reasonable care to get best price reasonably obtainable
The High Court has found a mortgagee bank entitled to summary judgment upon ruling that the guarantor lacked an arguable defence that the bank breached its duty under s. 176 of the Property Law Act 2007 (PLA) when selling properties.
The case of Bank of India (New Zealand) Limited v Gupta, [2025] NZHC 998, arose when the debtor entered a loan agreement with the plaintiff bank in October 2021. The defendant guaranteed the debtor’s obligations under the loan.
In connection with this transaction, the bank held a registered mortgage over townhouses in Takanini, Auckland. Later, acting as mortgagee, the bank sold the partially constructed townhouses. After the sale, the bank claimed the balance owing to it from the guarantor.
The bank applied to the court for summary judgment. The guarantor filed a statement of defence, notice of opposition, and affidavit. He said the bank breached its duty under s. 176 to take reasonable care to obtain the best price reasonably obtainable when selling the properties.
Specifically, the guarantor alleged that the bank violated s. 176 when it hastily sold the properties at a knockdown price and when it failed to:
take proper care to expose the townhouses to the market
act fairly and equitably
consider the properties’ nature to get a fair price
advertise the mortgagee sale with an adequate description of the properties’ attributes
market the properties for a reasonably long period of time
The guarantor argued that the bank would have received a full repayment of the amount owed to it if it had not breached its duty.
On 28 April, the guarantor’s counsel applied to withdraw as solicitor on the record. The lawyer alleged he tried to contact the guarantor and his family members but received no recent instructions.
The guarantor’s counsel said he emailed the guarantor to inform him of his intention to withdraw and to send the application seeking the court’s permission to do so. The guarantor, whose whereabouts were unknown, did not respond.
The High Court granted leave for the guarantor’s counsel to withdraw and issued summary judgment amounting to $2,166,491.63, plus interest, in the bank’s favour.
The court found that the guarantor’s defence included broad allegations. The court ruled that his evidence was insufficient to support these allegations, was inadmissible as opinion evidence, was irrelevant, and was hearsay.
On the other hand, the court held that the bank provided detailed evidence of the steps it took to market and sell the properties, including expert evidence from a licensed real estate agent with more than 25 years of experience in mortgagee sales.
The court accepted the agent’s evidence that the mortgagee sale included a consideration of the properties’ attributes and location and a five-week marketing campaign, which was deemed standard practice. The court also accepted that the marketing of the properties:
was thorough
aligned with the bank’s duty of reasonable care to get the best price reasonably obtainable
used various platforms
extensively exposed the properties to the market
led to a competitive and well-attended auction in a difficult market
The court concluded that the bank properly tested the market. The court noted that a mortgagee would not necessarily achieve the best price obtainable even if it properly tested the market.
The court said the relevant case law clarified that a property is only worth what the buyer is prepared to pay for it at the time of the sale.
In this case, the court saw a good deal of evidence explaining why the price that the bank obtained did not meet the guarantor’s expectations. The court noted that the agent’s evidence provided that:
Partly complete development sites are hard to sell via mortgagee sale
The properties in this case had been vandalised
It was challenging to obtain insurance before settlement
The market conditions were difficult, and the official cash rate was high
