Redwood Group No.2 Limited v Gapes [2012] NZHC 3246 (3 December 2012)

Last Updated: 12 December 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-6912 [2012] NZHC 3246

BETWEEN REDWOOD GROUP NO. 2 LIMITED Applicant

AND NICOLA-JANE GAPES Respondent

Hearing: 3 December 2012

Counsel: D Hollings QC for Applicant

C T Patterson and A Scott for Respondent

Judgment: 3 December 2012

(ORAL) JUDGMENT OF LANG J

_{[on summary application for possession of land]}

REDWOOD GROUP NO. 2 LIMITED V NICOLA-JANE GAPES HC AK CIV-2012-404-6912 [3 December

2012]

[1] The applicant, Redwood Group No. 2 Limited (“Redwood”), is the owner of a house property situated at 5 Fenton Circus, Orakei. The sole shareholder and director of Redwood is Mr Tony Gapes. He holds the shares in the company as trustee for a trust known as the Omaha Beach Trust.

[2] The property was used by Mr and Mrs Gapes as their family home until they separated in February 2010. After Mr and Mrs Gapes separated, Mrs Gapes and the three children of the marriage remained living in the property.

[3] Redwood has entered into an agreement to sell the property, and settlement is set down for 6 December 2012. Redwood now seeks an order requiring Mrs Gapes to leave the property so that it can provide vacant possession to the purchaser.

Approach

[4] This proceeding began as an originating application seeking removal of a caveat that Mrs Gapes had registered against the titles to the property. That aspect of the proceeding was resolved when Mrs Gapes removed the caveat. It was then revived, because Mrs Gapes lodged a notice of claim against the titles under the Property (Relationships) Act 1976. Before the Court could deal with that aspect of the application, however, she agreed to withdraw the notices.

[5] At that point Redwood became concerned that Mrs Gapes would refuse to leave the property prior to the date of settlement. Redwood’s counsel therefore obtained leave from Heath J on 27 November 2012 to amend the proceeding so as to enable it to continue as an application for an order granting Redwood possession of the property. Heath J then set a timetable for the filing of an amended application and documents in support of and in opposition to it.

[6] I therefore proceed on the basis that, in effect, the present proceeding is a summary application for recovery of possession of land under Part 13 of the High Court Rules. Although Part 13 prescribes a specific procedure for such applications, I take the directions given by Heath J on 27 November 2012 to override the procedural requirements prescribed by the High Court Rules.

The parties’ positions

[7] Redwood seeks an order requiring Mrs Gapes to deliver up vacant possession of the property no later than 5 pm on 4 December 2012. This will give Redwood sufficient time to complete certain repairs it has undertaken to carry out under the agreement for sale and purchase. It would also enable Redwood to return the property to a clean and tidy state in the event that Mrs Gapes does not leave it in such a state.

[8] Mrs Gapes resists the application. She accepts she will inevitably be required to deliver up vacant possession of the property, but she asks for further time within which to do so. She asks the Court to make an order requiring her to deliver up vacant possession of the property no earlier than 27 December 2012. Mrs Gapes seeks such an order for two reasons. First, she wants the three children of the marriage to be able to remain in the family home until the end of the school year. Secondly, she wants her children to be able to enjoy one last Christmas in the home in which they have lived for the last two and a half years.

Mrs Gapes’ current status

[9] It is important for present purposes to determine, in a preliminary way, Mrs

Gapes’ current status in relation to the property.

[10] After Redwood built the property, it entered into a written tenancy agreement with Mr Gapes in August 2009. Thereafter, Mr Gapes remained in the property pursuant to that tenancy agreement. The Omaha Beach Trust met the rental payments to Redwood.

[11] On 27 November 2012, Redwood terminated Mr Gapes’ tenancy. On the same date, it served a trespass notice on Mrs Gapes. Redwood proceeds on the basis that Mrs Gapes became a trespasser after she failed to comply with the trespass notice that it served on her on that date.

[12] I consider the correct analysis of Mrs Gapes’ status to be that she and the children occupied the property with Mr Gapes pursuant to the provisions of the tenancy agreement until such time as he moved out after the parties separated. Thereafter, and without finally deciding the point, I consider it likely that she remained in the property either as Redwood’s licensee, or as Mr Gapes’ licensee. Redwood was obviously aware that she remained in the property, because Mr Gapes has always been the sole shareholder and director of the company. It took no steps to ask her to leave the property until after it entered into the agreement to sell the property in November 2012.

[13] It is also likely that Mrs Gapes was a bare licensee, because she and Mr Gapes never reached any concluded agreement regarding the precise terms on which she was to occupy the property after they separated. Mr Gapes did, however, agree to pay the outgoings on the property. These included the rental payable to Redwood and, I infer, the mortgage payments and insurance payable in respect of the property. It is possible, however, that the Omaha Beach Trust actually met those payments.

[14] If Mrs Gapes occupied the property as a bare licensee, I consider that Redwood was required to provide her with a reasonable period of time within which to vacate the property once it terminated the licence. I draw this conclusion from the statements of principle contained in the following passage from Laws of New

Zealand:[1]

196. Remaining on land after expiry of authority or licence to enter.

Where a person has the right or authority to be on land, and this right or authority terminates or is validly withdrawn, the person concerned must leave; he or she becomes a trespasser on failing to do so. So if entry was made pursuant to a licence for a fixed period of time, a licensee who remains after the expiry of that period is liable in trespass. In the case of a bare licence with no time limit the licensor must establish that he or she gave notice or otherwise made it clear to the licensee that the licence had been withdrawn; the licensor must also establish that after the withdrawal the licensee was allowed a reasonable period in which to leave.

...

_{(Emphasis added)}

[15] I reject the submission for Mrs Gapes that she remained in the property after she and her husband separated as the assignee of Mr Gapes’ interest as lessee under the tenancy agreement. There is nothing in the evidence to suggest that either party ever considered Mrs Gapes to be the tenant of the property after Mr Gapes ceased to live there. In particular, there is nothing to suggest that Mrs Gapes agreed to accept any of the obligations imposed on the tenant pursuant to the tenancy agreement.

[16] Similarly, there is no need for me to consider the possibility that Mrs Gapes might be entitled to apply to the Family Court for an occupation order. To date she has not taken that step despite the fact that she and her husband have now been living apart for more than two years. That being the case, there is no reason why her potential ability to apply for such an order should impact on the present application.

Decision

[17] The real issue, then, is the length of notice that Redwood must give to Mrs

Gapes to require her to deliver up vacant possession of the property.

[18] Redwood points out that Mrs Gapes has known since at least 2010 that the property would need to be sold. She was also clearly aware that Redwood had entered into an agreement as early as 3 November 2012, because she sent an email to Mr Gapes on that date indicating she had learned of the sale through the real estate agent. The email demonstrates that Mrs Gapes also knew that settlement of the sale was set down for 6 December 2012. Her email indicates, however, that she was “in the dark” regarding the remaining details of the proposed sale.

[19] At the latest, I consider Mrs Gapes must have been aware of the terms of the sale at some point around 19 November 2012. That is the date on which Redwood filed the present proceeding. The documents filed at that time contain detailed information about the terms upon which the property was being sold. Mrs Gapes must therefore be taken to have been on notice from that point as to the fact that she would be required to deliver up vacant possession of the property to enable the sale to proceed. The issue, therefore, is whether she has already had reasonable notice in terms of the principles set out above.

[20] Redwood points to the fact that it is now in default of its obligations to its mortgagee. This has prompted the mortgagee to serve a notice of demand on Redwood pursuant to s 119 of the Property Law Act 2007 requiring it to remedy the default by 27 December 2012. If Redwood has not remedied the default by that date, the mortgagee will be entitled to exercise its powers of sale under the mortgage. Redwood is concerned that this could lead to the mortgagee selling the property at a lower price than that which Redwood has obtained under the existing agreement.

[21] Redwood is also concerned that the purchaser under the existing agreement may cancel the contract if it is unable to obtain vacant possession of the property on

6 December 2012. It points out that the purchaser has indicated it wants to take possession of the property before the Christmas break. Redwood is therefore concerned that the purchaser may attempt to walk away from the contract if it is unable to obtain possession of the property prior to Christmas.

[22] Counsel agree, however, that the purchaser would have no right to cancel the agreement immediately if Redwood is unable to provide vacant possession on 6

December 2012. Before it could take that step, the purchaser would first be obliged under the agreement to serve a settlement notice on Redwood requiring it to meet its contractual obligations. Redwood would then have until 7 January 2013 to provide the purchaser with vacant possession of the property.

[23] I accept that these are both valid concerns, but they can be met provided Mrs Gapes vacates the property prior to Christmas. It is also unlikely, in my view, that the mortgagee and the purchaser will take steps to jeopardise the existing agreement provided they know that Redwood will be in a position to deliver up vacant possession of the property within a reasonably short period after 6 December 2012.

[24] Next, Redwood points out that it will incur significant financial costs in the event that settlement does not proceed on 6 December 2012. It will be liable to pay the purchaser the sum of approximately $1,000 per day for late settlement in terms of the agreement for sale and purchase. It will also be obliged to continue to pay interest to its mortgagee at the penalty rate of approximately $1,500 per day. This

means that, for every day on which settlement does not proceed, Redwood will have to pay the sum of approximately $2,500.

[25] I accept this is a matter of concern for Redwood, but two factors persuade me it should not of itself justify an immediate order for possession. First, Redwood elected to enter into an agreement that was not conditional upon Mrs Gapes delivering up vacant possession of the property by 6 December 2012. In doing so, it took the risk that Mrs Gapes might not vacate the property by that date.

[26] Secondly, the ongoing interest to the bank has not arisen through any fault or act on the part of Mrs Gapes. It represents the indebtedness Redwood has incurred to its financier through its various business activities. I do not consider Mrs Gapes should be penalised as a result of the fact that Redwood’s financial activities have left it substantially indebted to its bank.

[27] In addition, as counsel for Mrs Gapes points out, the sale price of $6,650,000 will not be sufficient in any event to enable Redwood to repay the debt owing to its mortgagee in full. Once GST and the costs of sale have been paid, there will be a shortfall owing to the mortgagee.

[28] I take the view that the issue of notice must be determined having some regard to the circumstances in which Mrs Gapes was living in the property. This is not a straightforward case of a landlord owning a property, and requiring a bare licensee to leave. Rather, Mrs Gapes has been living in the property and using it as the family home for herself and her children for some considerable period. That has occurred with the knowledge and consent of Mr Gapes, and therefore Redwood, up until a short time ago.

[29] Mrs Gapes and the children have alternative accommodation available with Mrs Gapes’ parents. Presumably, therefore, they are in a position to move out of the property reasonably quickly. I consider, however, that some allowance must be made for the interests of the children. Bearing those issues in mind, I consider a reasonable period of notice to be approximately three weeks from 19 November

2012. I therefore direct that Mrs Gapes is to vacate the property no later than 4 pm on Saturday 15 December 2012.

Ancillary orders

Access to the property prior to settlement

[30] Mr Gapes has offered Mrs Gapes assistance with cleaning and tidying up the property to ready it for settlement. The parties should endeavour to reach agreement regarding the terms upon which he can provide this assistance on 13 or

14 December, or on such other date as may be suitable to both parties. If they cannot reach agreement, Mr Gapes is under no obligation to assist.

[31] Mr Gapes also wishes to obtain access to the property in order to carry out repairs that the agreement for sale and purchase requires Redwood to effect prior to settlement. Counsel are to reach agreement regarding the dates upon which Redwood’s contractors (but not Mr Gapes) shall be entitled to be at the property to attend to these matters. They should then file a joint memorandum, and I will make orders granting Mr Gapes’ contractors access to the property on the agreed dates for the purpose of carrying out this work.

[32] The purchaser has also exercised its right under the agreement to carry out a pre-settlement inspection of the property. Counsel are also to reach agreement as to the date upon which this is to occur so that Mrs Gapes will be aware when the purchaser’s representatives will be visiting the property if that is to occur prior to 15

December 2012.

Chattels

[33] Finally, there is an issue about chattels. The agreement for sale and purchase provides for specified chattels to be sold with the property. The evidence does not permit me to determine whether these amount to fixtures so that they run with the land, or whether they can truly be classified as chattels.

[34] So that there is no issue with the sale, however, I direct that Mrs Gapes is to leave all the chattels named in the agreement for sale and purchase in place, and is not to remove any of them from the property when she departs. If necessary, the parties can arrange to have the chattels valued so that their value can be taken into account in the relationship property proceedings that are currently before the Family Court.

Obligation to leave the property in a clean and tidy condition

[35] Finally, Mrs Gapes is, as I have found, currently a licensee. She should properly be subject to a condition requiring her to leave the property in a clean and tidy state. I therefore direct that she leave the property in such a state when she vacates it.

Next event

[36] The proceeding is to be listed for further review in the Duty Judge List on

17 December 2012 at 10 am. In the event that Mrs Gapes has vacated the property in accordance with the Court’s directions and there are no ancillary matters to be resolved, counsel should file a joint memorandum and their attendances will be excused on that date. The proceeding will then be at an end other than in relation to the issue of costs.

Costs

[37] At this stage I prefer to reserve the issue of costs and, if necessary, to determine it once the outcome of the next call of this matter is known. As matters presently stand, I am inclined to the view that costs should lie where they fall because neither party completely succeeded or failed.

[38] My attitude towards costs, however, is likely to be coloured to some extent by the manner in which Mrs Gapes responds to the orders I have made today. In the event that the issue of costs needs to be addressed after 17 December, counsel should file memoranda at 14 day intervals and I will determine that issue on the papers.

Leave reserved

[39] I reserve leave to both parties to ask the Registrar to arrange a telephone conference before me at any stage prior to 17 December 2012 should any further

_{issue arise that requires the assistance or intervention of the Court.}

Lang J

Solicitors:

Burton & Co, Auckland

Graeme Skeates Law, Auckland

Counsel:

D Hollings QC, Auckland

C T Patterson, Auckland

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[1] Laws of New Zealand Tort (online ed) at [196]