Western v Abdoelrahman HC Auckland CIV-2010-404-2998 [2011] NZHC 206 (11 March 2011)

Last Updated: 29 May 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2010-404-2998}

BETWEEN LAMBERTUS WESTERN Applicant

AND SHAHIDA QUEREISHI ABDOELRAHMAN AND ADAM RASHAAD JAMES KERR Defendants

Hearing: 7 March 2011

Appearances: Ms A E Hansen for plaintiff

Ms E N McCable for first-named defendant

No appearance for second-named defendant

Judgment: 11 March 2011 at 3:30 PM

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

This judgment was delivered by me on 16 March 2011 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

WESTERN V ABDOELRAHMAN AND ANOR HC AK CIV-2010-404-2998 11 March 2011

Introduction

[1] The plaintiff seeks orders for the sale of a property at 29 English Oak Drive, Albany that he co-owns with the defendants, and division of the proceeds under s

339 Property Law Act 2007 and consequential orders.

[2] The plaintiff has a 1419/2500 share, the first-named defendant an 811/2500 share and the second-named defendant a 27/250 share. Ownership of the property in these shares stems from a former relationship between the plaintiff and the first- named defendant. The second-named defendant is an adult son of the first-named defendant.

[3] The first-named defendant opposes the making of such an order.

[4] The second-named defendant has taken no steps to defend the proceeding.

[5] Prior to the relationship the first-named defendant owned the land in an undeveloped state. The plaintiff contributed $430,000 to the cost of building a house on the land, in which it was intended that he and the defendants would live. The relationship ended, either in November 2007, according to the plaintiff, or February

2008, according to the first-named defendant. Since then the defendants have lived in the property along with an adult daughter of the first-named defendant. The plaintiff moved out of the house in November 2007. The first-named defendant, in her notice of opposition, opposes the making of orders as sought in the application for summary judgment on the ground of the hardship that would be caused to her, in comparison to the hardship that would be caused to the plaintiff by refusing the order, and a dispute in relation to the value of the contribution made by the first defendant to the property.

Principles relating to summary judgment

[6] The principles to be applied in considering an application for summary judgment are well-established, fully set out in standard texts on the High Court

Rules, and need not be repeated here. Counsel for each party referred to these in argument without disagreement.

The Property Law Act 2007

[7] Section 339 of the Act states:

339 Court may order division of property

(1) A court may make, in respect of property owned by co-owners, an order—

(a) for the sale of the property and the division of the proceeds among the co-owners; or

(b) for the division of the property in kind among the co-owners; or

(c) requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.

(2) An order under subsection (1) (and any related order under subsection

(4)) may be made—

(a) despite anything to the contrary in the Land Transfer Act 1952;

but

(b) only if it does not contravene section 340(1); and

(c) only on an application made and served in the manner required by or under section 341; and

(d) only after having regard to the matters specified in section 342. (3) Before determining whether to make an order under this section, the

court may order the property to be valued and may direct how the cost

of the valuation is to be borne.

(4) A court making an order under subsection (1) may, in addition, make a further order specified in section 343.

(5) Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).

(6) An order under subsection (1)(b) (and any related order under subsection (4)) may be registered as an instrument under—

(a) the Land Transfer Act 1952; or

(b) the Deeds Registration Act 1908; or

(c) Part 1 of the Crown Minerals Act 1991.

[8] The plaintiff is entitled to bring the application under s 341(1) of the Act. Making an order would not contravene s 340(1).

[9] Section 342 of the Act sets out a number of matters to which the Court must have regard when considering an application under s 339. These are:

(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 plaintiff 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.

[10] Section 343 grants the Court further powers to make orders in addition to an order under s 339(1). Under this section the plaintiff specifically sought an order requiring the defendants to pay a fair occupation rent, and various orders on the mechanical aspects of the sale.

Protest to jurisdiction

[11] At an earlier point in this proceeding the first-named defendant filed an appearance under protest. The protest, in essence, was that the High Court does not have jurisdiction because this proceeding relates to a dispute in respect of relationship property and should therefore be determined in the Family Court pursuant to the Property (Relationships) Act 1976, s 21. That application was dismissed by the Court on 11 October 2010. It is not, therefore, directly relevant to the application before me. However, issues concerning division of the property assets of the plaintiff and the first-named defendant were raised in argument. These were described by Ms Hansen as being the same points that had been raised in

respect of the protest. I am satisfied that nothing in the former application prevents me from considering the relevance of the Property (Relationships) Act 1976.

The Property (Relationships) Act 1976

[12] Neither party has brought an application for determination of relationship property rights. In addition to the English Oak Drive property in question in this proceeding there are other items of property, including the proceeds of sale of a property in Lomond Street which are deposited in a trust account of a firm of solicitors and cannot be uplifted without mutual consent or a Court order, and shares in a company called Rajjab Investments Limited all of which are owned by the plaintiff (part having been transferred to him by the first-named defendant after their separation). Given that on either version of the date of termination of the relationship, over three years has passed since it occurred, and that there is a three year time limit for the filing of proceedings to determine the relationship property issues, it is surprising that neither party has taken any steps. Leave would now be required. Unless the plaintiff and the first-named defendant reach agreement as to division of property, there seems little doubt that an application for an extension of time will be sought and proceedings will duly be lodged to determine all outstanding issues.

[13] Counsel for the first-named defendant raised a number of issues about relationship property matters. She said that her client was entitled to the majority of the proceeds of sale of the Lomond Street property, that the shares recorded on the title to the English Oak Drive property do not properly reflect the contributions made at the time and that the value of the land which was placed into the arithmetical equation used to assess the shares on the title recording the tenancy in common, was incorrect. Thus it was submitted that there are real issues to be determined on how the proceeds of sale should be divided, and that I should not direct a division in accordance with the shares on the title.

[14] Both Ms McCabe and Ms Hansen agreed that if the English Oak Drive property is relationship property (and there did not appear to be any debate about that) then so also, the proceeds of sale would remain relationship property. Thus,

were sale and division of proceeds to be ordered in accordance with the title shares, the sum held by each party would itself be an item of relationship property which would be placed into the overall assessment of relationship property division by a court of competent jurisdiction on proceedings brought for that purpose.

[15] In my view, that is the correct position. Consequently, an argument that the proceeds of sale of the English Oak Drive property should not be divided in accordance with the title (and therefore sale should not be ordered) fall away because the parties’ rights in relation to relationship property remain exactly the same. The English Oak Drive property would simply be converted into an equivalent monetary sum.

[16] Ms McCabe argued that paying out proceeds of sale to the plaintiff may result in difficulties in recovering funds for her client in the event a Court were later to find that he had received more than he was entitled to. There is no foundation for that proposition, on the evidence before me. The first-named defendant is in no worse position than other parties to a former relationship where assets are held by the other partner.

[17] For these reasons I am satisfied that issues relating to the correctness or otherwise of the ownership shares shown on the title, and the risk of recovery were the proceeds divided and paid out, are not a sufficient defence to the application for summary judgment, nor a sufficient ground for me to exercise the discretion I have to decline to enter summary judgment.

Hardship

[18] Both parties argued that hardship issues were weighted in their clients’

favour. Counsel for the plaintiff referred me to Holster v Grafton[1], a decision of

_{Fogarty J:}

“Hardship” is a value laden criterion. It suggests an adverse effect which is of significant impact to the plaintiff. It has to be read consistent with the policy of the statute which respects property rights of tenants in common but seeks to resolve conflicts fairly.

[19] Given that hardship is assessed also in relation to the respondent, the term equally suggests an adverse effect which is of significant impact on that party.

[20] In support of her client’s position, counsel for the plaintiff referred to a number of factors:

(a) The plaintiff is the majority owner of the property. On the title he has

56.76 per cent, and the first defendant 32.44 per cent.

(b) He made additional contributions to the property after separation for loan repayments, rates and property maintenance which he said amounted to over $36,000.00.

(c) The parties have been separated for over three years and his interest in the property has been tied up during that period, without any rental being paid to him for his share in the meantime.

(d) He has significant debts secured against other properties for which he is solely responsible. He needs his share of the sale proceeds to repay these debts.

(e) Although he owns his own business, providing him with an income, he is 63 years old and nearing retirement.

(f) The plaintiff is responsible for the financial support of his sick wife.

[21] Counsel for the first-named defendant referred to the following matters in support of her argument on hardship.

(a) The property was owned by her as bare land prior to meeting the plaintiff.

(b) She continues to reside at the property with at least one of her children.

(c) She wishes to remain in the property.

(d) She cannot currently purchase the plaintiff’s share of the property from him as she cannot access the proceeds of sale from her Lomond Street property which are held by a firm of solicitors, as noted above. Counsel said this gave her no choice but to remain at the English Oak Drive property until such time as the issues surrounding the Lomond Street proceeds of sale could be resolved.

(e) The stated shares on the title are not an accurate reflection of either initial or subsequent contributions towards the property by the parties.

(f) Any order made under the Property Law Act would leave the defendant and her children residing with her, homeless.

[22] Section 342 requires me to balance the respective matters raised with me on this issue. In my opinion, the hardship to the plaintiff by refusing to make an order for sale of the property exceeds the hardship that would be caused to the first-named defendant, and to her children, if the order were made. I note at this point that the children referred to by the first-named defendant are in fact aged in their 20s.

[23] My reasons are these. First, the shares of the property which the plaintiff owns is considerably greater than the share owned by the first-named defendant and therefore the impact on him of his funds being tied up is commensurately greater than the equivalent impact on the first-named defendant.

[24] Secondly, the relationship has been at an end for a period exceeding three years, on either version of its termination date. The first-named defendant has had the convenience and comfort of continuing to live in the home since the separation. The plaintiff left the home and has not received that benefit. Unless an order is made this element of hardship will continue for him.

[25] Remaining arguments put forward by the plaintiff amount to a wish, if not a need, on his part to have access to his funds at this stage of his life. His other financial means are being drawn upon to provide for his living expenses while a very substantial sum of money of his is tied up without a return. Whilst the first-named defendant’s funds are also tied up in the home she has been deriving the benefits of occupation throughout the period since separation. Thus she is not being required to meet accommodation expenses whilst that situation continues.

[26] Counsel explained that the first-named defendant owned the section before the relationship started, likes living at this address which she selected herself at the time of buying the bare land, and wishes to continue to reside in the property in the long-term by buying out the plaintiff’s share. Whilst the making of a sale order may result in this being impossible (it is not possible on the information before me to make a definitive finding on the point), and that may be regarded as an element of hardship, I note that it has been open to the first-named defendant to bring proceedings in the Family Court for resolution of these issues for at least three years and she has elected not to do so. It is late in the piece for her now to be saying that she wishes to stay in the property when she has had an opportunity to have that issue properly assessed under the Property (Relationships) Act for some years and has not done so.

[27] In relation to the allegation that the shares recorded on the tenancy in common do not accurately reflect initial or subsequent contributions, selling the home and dividing the proceeds in accordance with the title shares does not prevent this view being aired in the proper forum later, as I have discussed.

[28] Finally, the first-named defendant said that an order on this proceeding would leave her and her children homeless. Whilst on the evidence before me the income of the household is meagre at $500 per week, selling the property would release to the first-named defendant a sum approaching $400,000. The first-named defendant and her children are all adult. I see little hardship in this aspect of the facts.

[29] Weighing up all the issues relating to hardship I am satisfied that the balance between the parties favours the plaintiff.

Other relevant considerations

[30] As noted earlier, s 342 directs the Court to have regard to a number of matters. I refer to these briefly as they have been discussed already in relation to the arguments advanced on the issue of hardship.

[31] The first is the extent of the shares in the property of the co-owners; as noted the share of the plaintiff considerably exceeds the share of the first-named defendant.

[32] The second is the nature and location of the property. This is a residence on a section previously owned by the first-named defendant in a residential area. It is, however, a former home of the plaintiff and the first-named defendant. I was referred to cases where it has been found that the rules of the Property (Relationships) Act should prevail over those of the Property Law Act: Shorter v Shorter[2] and McLean v Cheyne[3]. I am satisfied that making the orders sought would have no adverse effects on the rights of the parties under the Property (Relationships) Act for the reasons stated.

[33] Next I am required to consider the number of other co-owners and the extent of their shares. There is one, the second-named defendant who is the first-named defendant’s son. He did not participate in the proceeding so his views are not known. Even if I were to assume that his position is the same as his mother’s, still their combined share is not as great as that of the plaintiff.

[34] Next I am required to consider the value of any contribution made by any co- owner to the costs of improvements to, or the maintenance of, the property. In this case the evidence on these issues is not sufficiently detailed to allow me to make a conclusive assessment on an arithmetical basis of these values. It is clear that both parties made contributions of substance to both the cost of improvements and the

_{maintenance of the property. Since separation the plaintiff has paid over $36,000.}

The first-named defendant has paid the rates and paid for maintenance for the last two years but there is no detail given in evidence on the extent of any maintenance undertaken, nor any quantification of the cost of these items.

[35] Ms McCabe analysed the figures before the Court to show that all in all there had been total payments by both parties of $1,017,719 of which, on her assessment, the plaintiff had paid 48 per cent and the defendant 46 per cent. The analysis did not account for the remaining six per cent. Broadly, however, the contributions were equal and this factor does not dictate one way or the other whether an order for sale and division should be made.

[36] Finally, the Court is directed to take into account any other matter it considers relevant. I take into account the length of time the property has continued to be co- owned, when it was in fact built for the purpose of domestic use by both parties during a relationship which was no doubt intended to be long-lasting, and the fact that, viewed objectively, it is in my opinion in the interests of both parties that there should be final resolution of their mutual financial affairs, and this is a first step in that direction.

Conclusion on application for sale and division of proceeds

[37] Weighing up all matters as I am directed to do by s 342 and directing myself to resolve the conflict fairly, whilst respecting the property rights of tenants in common (Holster v Grafton) I am satisfied that this property should be sold and the proceeds of sale should be divided in accordance with the shares recorded on the title. For reasons stated it is unnecessary to revisit those shares in this proceeding or to require payment of compensation one way or the other.

The method of sale

[38] In the notice of application for summary judgment the plaintiff sought the following orders in relation to the sale process:

(a) An order appointing a valuer who is to be instructed by, or on behalf of, the parties jointly to undertake a valuation for the purpose of assisting the parties with all aspects of the proposed sale including setting the asking, selling and reserve prices.

(b) An order fixing a reserve price on any sale of the property and the terms upon which the sale is to take place including the minimum sale price and timeframes within which a sale must be achieved before the property is sold at auction.

(c) An order requiring the defendants to keep the property clean and presented at its best for sale at their cost.

(d) An order directing how all expenses associated with any sale or division of the property are to be borne.

(e) An order directing how the proceeds of any sale of the property and any interest on the purchase amount are to be divided or applied.

(f) Such other matter or steps the Court considers necessary or desirable as a consequence of making the order under s 339(1) of the Property Law Act.

[39] Counsel were scant in their attention to the finer points of these proposals, in their submissions. The plaintiff set out his preferences in his affidavit in support o the application and the first-named defendant did not express any contrary views on this aspect of the matter. The plaintiff produced a letter from a Mr Kerr, a real estate agent with Barfoot and Thompson in Albany which analysed comparative sales and estimated a selling price within a range of $870,000-$925,000. Based on that the plaintiff said he would like to list the property at $950,000, but if this were not agreed a valuer appointed by the Valuer’s Registration Board should set a price.

[40] I note that Mr Kerr also recommended that the property be sold by auction first, but both parties prefer to try a period of private sale through an agent. In this

case it is appropriate to make orders to proceed as the parties wish, but given the slightly loose approach to the practicalities of securing a sale I think it is best to reserve leave to the parties to apply to the Court for supplementary orders on matters of process.

Occupation rent

[41] The plaintiff sought occupation rent for the period during which the defendants have occupied the property since the separation. I have power to direct such a payment under s 343(f). There was some evidence before me of a fair rental assessment, within a band of market rentals. I consider, however, that there should not be an order. The sale, and division of the proceeds, of this property are but one step in an overall resolution of the financial affairs of the plaintiff and the first- named defendant. It is inevitable that a Court will be required to determine further outstanding issues as discussed earlier in this judgment, unless agreement is reached. That Court will have power to determine matters of occupation rent as part of an overall assessment. This is the preferable course of action in my view.

Outcome

[42] Except as noted in relation to occupation rental, I am satisfied the defendants do not have a defence to the application for summary judgment. I enter summary judgment in the following terms:

(a) An order pursuant to s 339(1) of the Property Law Act 2007 directing the sale of the property at 29 English Oak Drive, Albany and the division of the proceeds of sale in accordance with the shares recorded on the title to the property, subject only to the deductions referred to in this order.

(b) The parties are to confer with a view to agreeing an asking price for the property by private sale. If agreement has not been reached within

21 days of this judgment, I direct that a request is to be made by both

parties to the Valuer’s Registration Board for the appointment of a valuer to fix an asking price and an acceptable sale price for a private sale of the property. The plaintiff will pay the valuer’s fees in the first instance.

(c) The property is to be offered by private sale at the asking price thus set, and is to be listed with Barfoot and Thompson at Albany. The recommendations of that firm in relation to advertising, signage and promotion of the sale of the property are to be accepted and the cost is to be borne by the plaintiff in the first instance.

(d) If an offer is received below the asking price, and the parties are unable to agree within two days of its presentation to them whether to accept it or not, the Registrar of the Court at Auckland is empowered to decide, after taking advice from the valuer if he thinks it necessary, and to sell the property accordingly.

(e) Pending sale, the defendants will keep the property clean, tidy and presentable for sale, and make reasonable access available for viewing, as the agent requires.

(f) If the property has not sold unconditionally at the expiration of six months from the date of this judgment it is to be offered for sale by public auction, to be conducted by Barfoot and Thompson, Albany, in accordance with that firm’s usual procedures. The costs of advertising, signage and promotion, and expenses of auction, are to be paid by the plaintiff in the first instance. The Registrar at Auckland is empowered to decide all issues arising in relation to the sale and to sell the property at, before or after the auction, as he sees fit.

(g) If an auction ensues, I direct that the same valuer nominated by the

Valuer’s Registration Board fix a reserve price for the auction.

(h) A firm of solicitors independent of each party is to be engaged to act for them both in relation to the sale. If they are unable to agree which firm is to act, the Auckland Branch of the New Zealand Law Society is to be asked to nominate a solicitor who will then act for both parties. Any charges by the Society for this service will be paid by the plaintiff in the first instance.

(i) From the proceeds of sale the following deductions are to be made:

(i) Real estate agents’ commission, valuation fees and sale expenses that have not, at that time, already been paid by the plaintiff.

(ii) All sums paid by the plaintiff as directed in this judgment, which are to be refunded to him.

(iii) Any outstanding rates or insurance premiums on the property. (iv) Legal fees and disbursements attendant on the sale.

(j) The net proceeds of sale thus derived are to be paid out to the plaintiff and each of the defendants in accordance with their respective shares in the property recorded on its certificate of title.

[43] For the avoidance of doubt I decline to enter summary judgment in relation to occupation rent.

Costs

[44] The plaintiff is entitled to costs on the summary judgment application on a

2B basis.

Procedure

[45] I adjourn the substantive proceeding to a Chambers List on 8 April 2011 at

2.15 pm for review. Memoranda are to be filed by counsel two days prior to this hearing.

J G Matthews

Associate Judge

Solicitors:

Turner Hopkins, Auckland

Heimsath Alexander, Auckland

---

[1] (2008) 9 NZCPR 314 at [50]
[2] [1991] NZFLR 286
[3] (2003) 22FRNZ 954