Martin v Walker HC Auckland CIV-2011-404-3942 [2011] NZHC 1533 (29 September 2011)

Last Updated: 17 November 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2011-404-3942}

BETWEEN WENDY MARTIN Plaintiff

AND CAROLINE R WALKER Defendant

Hearing: 19 September 2011

Appearances: J Gandy for plaintiff

No appearance for defendant

Judgment: 29 September 2011

_{JUDGMENT OF ALLAN J}

In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 11.30am on Thursday 29 September 2011

Solicitors:

Thomas & Co, Auckland: [e-mail]

MARTIN V WALKER HC AK CIV-2011-404-3942 29 September 2011

[1] The parties to this proceeding are mother and daughter. In 2009 they purchased together a property at 6 Madigan Place, Glendene, Auckland. The plaintiff, (Wendy), was to occupy an auxiliary building, and the defendant (Caroline) would live with her young baby in the main house. But the relationship deteriorated and the living arrangements became untenable. Wendy left the property and has not returned.

[2] After a significant period of debate, Wendy now makes this application under ss 339 and 343 of the Property Law Act 2007 (the Act) for an order directing the sale of the property and the disbursement of the net proceeds of sale to the parties. She also seeks an adjustment for occupation rent.

[3] Caroline has taken no step in the proceeding and so the orders sought by Wendy are unopposed. But some indication of Caroline’s position can be gleaned from a recent e-mail exchange, the detail of which was put in evidence.

Factual background

[4] In January and February 2009, the parties discussed buying a house together. They found a property at 6 Madigan Place, Glendene which seemed to be suitable. The property comprised both the principal dwelling and an auxiliary building, which at the time of purchase was partially developed. It was originally a double garage, half of which had been converted into living accommodation by the provision of wall linings, a toilet, a shower and sink bench. The remaining half was still used as a garage. Wendy considered that there were further renovation opportunities.

[5] There was tentative agreement that the parties would contribute in unequal shares to the purchase, in order to reflect the joint intention of the parties that Caroline would live in the house and Wendy in the auxiliary unit. Wendy had no money of her own, but intended to borrow from her brother. He suggested, and indeed seems to have required, that the parties enter into a deed to record their arrangement. A deed was executed on 27 May 2009 (the Deed).

[6] Wendy contributed $50,000 towards the purchase price of $350,000. The remaining $300,000 was raised by Caroline by way of a mortgage from the ANZ National Bank Ltd (as to $270,000), and a loan of a further $30,000 from her father.

[7] The property was registered in Caroline’s sole name, and remains in her name. But the deed provides that, notwithstanding the state of the title, Caroline is declared to have a beneficial interest as tenant in common in 86% of the equity in the property, and Wendy 14%.

[8] These figures reflect the financial contributions made to the purchase. Those contributions in turn reflect to some extent the advantages Caroline derived from living in the house while Wendy was to live in the auxiliary unit. Clause 1 of the deed provided that Wendy would be entitled to call for a transfer of the property into the joint names of the parties as tenants in common in unequal shares when she deemed it appropriate to do so. I am satisfied that no question arises as to Wendy’s entitlement to make the application.

[9] The purchase of the property was settled on or about 28 May 2009. At that time Caroline moved into the house. Wendy says that she asked for a copy of the key to the house but Caroline refused. Caroline did, however, retain a key to the auxiliary unit.

[10] Wendy did not move immediately into the auxiliary unit because there was a need for renovations to be undertaken. Caroline offered Wendy a room in the main house, but Wendy declined to take up that offer because arguments had already developed between the pair. Renovation work was undertaken by a third party on Wendy’s instructions. The refurbishment was intended to create a separate bedroom, kitchen and dining room, and also to effect improvements to the exterior of the auxiliary unit.

[11] The relationship between the parties further deteriorated over succeeding months. There were arguments about the incidence of responsibility for the rates, utility payments and legal fees. At the end of August 2009, Caroline cut off the power to the auxiliary unit because she considered that Wendy ought to be making a

greater contribution to the electric power account. That prevented the builder from undertaking further renovations to the auxiliary unit. By that time, the interior was ready for painting, but drainage work was required outside the unit and the toilet, kitchen area and interior plumbing were not complete.

[12] A long correspondence began between the parties, partly by personal e-mail and partly through their respective solicitors. Wendy became troubled when she found that Caroline had cancelled the insurance policy over the property in November 2009. Earlier, in September, Wendy’s solicitor had lodged a caveat against the title, in order to protect her interest as a co-owner.

[13] From August 2009 to June 2010, Wendy rented living accommodation in Henderson at a cost of $110 per week. She then moved to Massey, where she now resides, paying $150 per week in rent plus certain expenses. She has been unable to reside in the unit since the purchase of the property. Wendy ceased making any payments towards household expenses in respect of the Glendene property in February 2010.

The Deed

[14] The Deed makes detailed provision for the sale of the property:

4. Any party wanting to sell their interest in the family home must first give the other party the first option to purchase the family home.

5. Should the parties agree to sell the family home, should either of them die, or should either of them wish to realise their respective interests in the family home, or in the absence of agreement, between the parties on the giving of not less than three months written notice by one to the other of that party’s wish to realise their interest in the family home, (the first of such events to be ‘the date of realisation’), the interests of the parties in the family home shall be determined in accordance with the following provisions:

6. The then market value of the family home shall be its sale price should the parties agree to sell it, or otherwise shall be fixed as at the date of realisation either by agreement or by a registered valuer nominated for the purpose by the President of the Auckland District Law Society (Inc).

7. The proceeds of sale if the family home is sold, or the interests of the parties if the home is not sold, shall be divided or apportioned as the case may be between the parties as follows:

a) In payment of the costs and expenses of sale (if the family home is sold) or valuation;

b) In crediting Caroline with the sum of 86%, or such adjusted share as takes account of any capital improvements effected by either party, Caroline to be responsible for paying out of her share any mortgage or other liability of hers secured against it;

c) In crediting Wendy with the sum of 14%, or such adjusted share as takes account of any capital improvements effected by either party, Wendy to be responsible for paying out of her share any mortgage or other liability of hers secured against it.

[15] During the lengthy e-mail correspondence between the parties, Wendy has indicated to Caroline her desire to realise her interest in the property so the notice requirements of cl 5 of the Deed have been complied with.

Jurisdiction

[16] Section 339(1) of the Act gives the court the power to make orders for the sale of the property owned by co-owners and the division of proceeds. Under s

341(1) a co-owner can make such an application. Section 342 provides:

342 Relevant considerations

A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:

(a) the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:

(b) the nature and location of the property:

(c) the number of other co-owners and the extent of their shares:

(d) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:

(e) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:

(f) any other matters the court considers relevant.

Discussion

[17] Although the parties have maintained a dialogue (at least by e-mail) over the past few months, nevertheless there appears to be a deep seated difference over the utilisation of the property. In particular, they appear unable to implement the costs sharing arrangements envisaged by the Deed.

[18] Recently, Caroline has arranged for further work to be done on the auxiliary unit, although the renovations are not yet complete. Wendy says she is unable to take up occupation while Caroline is in the house, and there is no suggestion in the e- mail correspondence that Caroline contemplates that course. In the meantime, Wendy must pay for accommodation elsewhere and her financial contribution to the property is effectively locked up.

[19] Although there have been periods during which Caroline seems not to have responded to Wendy’s attempts to resolve the impasse, it is fair to say that at times Caroline has engaged with her mother. In particular, Caroline took the trouble to write a long e-mail to Wendy on 11 May 2011, in the course of which she set out in some considerable detail some of the issues surrounding the development of the property and prospects for sale. The e-mail is preceded by a note which appears to have been appended at a later point (but prior to transmission), in which she suggested to Wendy that Wendy should buy her out at the end of the year, and take possession and responsibility for the mortgage, so enabling Caroline to move out. If at that time the market was favourable, then the house might be sold at that point. That is not a solution that Wendy can accommodate, but it does show that Caroline was adopting a responsible approach to resolution of the current impasse.

[20] There seems to have been no further communication from Wendy and no further progress. Ultimately, Wendy filed this proceeding.

[21] At times over the past few years, Caroline has been represented by a solicitor. I infer that her decision to refrain from participating in this proceeding reflects her

acceptance that a sale of the property is unavoidable. I am satisfied that it is appropriate to order a sale on the terms set out below. I have considered the various factors set out in s 342. While I appreciate that the grant of the application will result in the sale of a property in which Caroline has a far greater interest than Wendy, nevertheless refusal to order a sale would result in Wendy being unable to realise her investment. She is effectively locked in without being able to enjoy any form of occupation. On the other hand, Caroline has had the convenience and comfort of continuing to live in the property since purchase.

[22] I accept there will be a degree of inconvenience for Caroline, exacerbated to some degree because she has a young child and relocation will represent something of an upheaval for her. Wendy has not been able to obtain access to the property for more than two years. Despite correspondence between solicitors and a series of e- mails no solution has been achieved. A sale by order of the court seems to me to represent a proper solution to what has become an intractable problem.

Occupation rent and renovation expenses

[23] Wendy has spent $9,826.10 on renovations to the unit up to the point at which she was effectively locked out and prevented from doing any further work. She has produced to the court copies of receipts and invoices detailing the renovations undertaken by her.

[24] The financial consequences of improvements effected by either party are dealt with in cl 8 of the Deed which provides:

8. The family home comprises a principal dwelling and a subsidiary building the parties intend converting to a secondary dwelling. Caroline is to have the exclusive right of occupation of the principal dwelling. Wendy is to have the exclusive occupation of the secondary dwelling. Any improvements to (or depreciation of) the capital value of the property arising through the improvement or depreciation in the condition of either dwelling shall be taken into account in effecting the respective party’s shares under clause 7 of this agreement.

[25] On the face of it therefore, the Deed authorises an adjustment to the respective shares of the parties by reference to capital expenditure which has a positive impact upon the capital value of the property.

[26] Mr Gandy submits that it would be proper to adjust the shares for the purposes of the proposed sale by crediting Wendy with 17% of the equity and Caroline with 83%. That represents a net transfer of 3% of the equity in the property from Caroline to Wendy.

[27] There is some evidence that Caroline herself has expended money upon the renovations, but there is no evidence as to the precise form of that expenditure or the amount paid. The adjustment in the interests of the parties is, I consider, appropriate in all the circumstances. I accept that the calculation is somewhat rough and ready. It is necessary to bear in mind the fact that not all the expenditure will have had the effect of increasing the capital value of the property on a dollar for dollar basis. On the other hand, the equity in the property is relatively limited and so the adjustment of the parties’ shares is not likely to recoup for Wendy the whole of her expenditure in dollar terms.

[28] I turn to the question of occupation rent. The court is authorised by s 343(f) of the Act to make an order requiring the payment by any person of a fair occupation rent for all or any part of the property. In Dyas v Elliott,[1] Asher J reviewed certain of the authorities and concluded that:

[18] The court’s discretion under s 343(f) is wide and unfettered, but these cases assist in applying it. Under that section an absent co-owner may obtain occupation rent from the co-owner in possession. It is not every absent co-owner who can obtain occupation rent from the other. While it would be unwise to endeavour to set out parameters for the exercise of the discretion, where one co-owner chooses to stay in possession and this makes it not reasonably practicable for the other co-owner to continue to cohabit, occupation rent will usually be ordered. The position will be different where a co-owner leaves voluntarily, would be welcome back, and it is reasonably practicable for that co-owner to live there.

[29] Wendy claims $14,888 for rent paid by her for alternative accommodation following what she says was effectively her eviction. For a period she was paying

$110 per week; more recently she is paying $150 per week. She has calculated the sum concerned by totalling all of the rental payments made by her.

[30] I am not sure that represents the correct approach. The focus ought to be on the rent which could be obtained for the auxiliary unit if let to a third party. There is a suggestion in the e-mail correspondence from Caroline that $150 per week would be the upper limit of what could be achieved by way of rental for the auxiliary unit. In the light of that figure, I consider the amount claimed by Wendy for occupation rent is fair and reasonable. Averaged out it produces a figure of something significantly less than $150 per week, and so in a broad sense might be thought to represent a fair figure for occupation rent. I note that Wendy was paying $110 per week for rent until June 2010. Thereafter she has paid $150 per week, so her average rental payment would be something like $130 per week, a figure that might fairly be thought to represent proper occupation rent for the auxiliary unit.

Court orders

[31] There will be an order directing that the property at 6 Madigan Place, Glendene, Auckland, being lot 29 on certificate of title NA77A/934 be sold under the supervision of the Registrar of the court.

[32] The following conditions are imposed:

a) Caroline is to vacate the property and hand the keys to the Registrar of the court or any authorised agent of the court on or before 31 October

2011;

b) Reasonable costs for tidying and preparing the property for sale are to be approved in advance by the Registrar and ultimately paid for out of the proceeds of sale of the property. For the avoidance of doubt, Wendy is authorised to enter onto the property for the purpose of undertaking or assisting the task of preparing the property for sale;

c) The proceeds of sale are to be distributed as follows:

i) In payment of the costs and expenses of sale, including the costs of the Registrar;

ii) In discharging any mortgage secured over the property;

iii) By distributing the net balance as to 83% to Caroline and as to

17% to Wendy;

iv) Caroline is to pay to Wendy out of her share of the proceeds of sale of the property, the sum of $14,888 representing occupation rent payable to Wendy arising from her exclusion from the property;

v) The Registrar of the court is authorised to execute all documents necessary to effect the sale of the property and/or the transfer of title to any purchaser in the event that either party fails or refuses to sign any such document.

[33] There will be an order for costs in favour of Wendy against Caroline; such costs to be calculated in accordance with category 2B and to include reasonable disbursements as approved by the Registrar.

[34] Leave is reserved generally to either party or the Registrar to make such application as may be appropriate in order to give effect to this judgment.

C J Allan J

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[1] Dyas v Elliott HC Auckland CIV 2008-404-1021, 16 April 2010.