Pierce v Spargo [2013] NZHC 2055 (14 August 2013)

Last Updated: 22 August 2013

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-001021 [2013] NZHC 2055

UNDER the Property Law Act 2007

IN THE MATTER of an Application for Order of Division of Property pursuant to s 339 of the Property Law Act 2007

BETWEEN STEVEN EVAN PIERCE Plaintiff

AND JENNIFER ANN SPARGO First Defendant

IAN JAMES EDWARD SPARGO and

HELEN MELVA SPARGO Second Defendants

Hearing: 5-7 August 2013

Counsel: L C Ord for Plaintiff

M L Greenhough for First Defendant

L H Pratley for Second Defendants

Judgment: 14 August 2013

_{JUDGMENT OF COLLINS J}

Introduction

[1] The question I have to decide is what, if any, interest Steven Pierce has in a property located at 24 Hiwi Crescent, Titahi Bay (the property).1

1. This judgment concerns both 24 and 24A Hiwi Crescent, Titahi Bay. The description “the property” is used only in relation to 24 Hiwi Crescent.
   

PIERCE v SPARGO [2013] NZHC 2055 [14 August 2013]

Context

[2] This question arises in the context of an application by Steven Pierce for orders under s 339(1)(b) of the Property Law Act 2007 (the Act) which provides that an order can be made dividing property that is owned by co-owners among those co- owners.2

[3] Steven Pierce and his former wife Jennifer Spargo are jointly registered as proprietors of a half-share of the property. Jennifer Spargo’s parents, Ian and Helen Spargo are also jointly registered as proprietors of a half-share of the property. Ian and Helen Spargo live in the property.

[4] Steven Pierce asks that I declare that he owns approximately 12 per cent3 of the property which equates to approximately $33,000.4 Jennifer Spargo and her parents say that neither Steven Pierce or Jennifer Spargo have any legitimate interest in the property and that the property is owned only by Ian and Helen Spargo.

[5] Steven Pierce does not seek an order for the immediate sale of the property. Instead he seeks a declaration as to his interest in the property. Section 339(1)(b) of the Act enables me to make an order for the division of property, but I do not think that extends to the making of a declaration of respective interests. However, I propose to determine whether or not I should exercise my jurisdiction to order division of the property. In doing so one of the factors that I will take into account is the extent, if any, of Steven Pierce’s interest in the property. In approaching my task in this way I will effectively determine the issue that divides the parties.

[6] In deciding whether or not to make any order under s 339(1)(b) of the Act, I

am required to consider the following:

_{(1) The extent of Steven Pierce’s share in the property.}5

2. Initially Steven Pierce sought orders under s 339(1)(c) of the Act which enables the Court to order a co-owner to purchase another co-owner’s share in the property.

3 _{His figures range from 11-13 per cent.}

4 _{The property was valued at $272,000 in 2010.}

5 Property Law Act 2007, s 342(a).

(2) The nature and location of the property.6

(3) The number of other co-owners to the property and the extent of their shares.7

(4) The comparative hardship that would be caused to the parties if I

make the order or do not make the order.8

(5) The value of the contributions made by any of the co-owners to the costs of improvement or maintenance of the property.9

(6) Any other matters I consider relevant.10

[7] In determining Steven Pierce’s application I start from the presumption that

he has a joint share in half the property from the date of registration of his interest.11

However, this presumption of the paramountcy12 of the title may be rebutted if I am satisfied on the balance of probabilities that Steven Pierce’s interest in the property is not as shown on the title. This can be done when exercising the discretion conferred by s 339(1)(b) of the Act.13 This approach is consistent with what the Privy Council said in Frazer v Walker where Lord Wilberforce said:14

... their Lordships have accepted the general principle, that registration under the Land Transfer Act 1952 confers upon a registered proprietor a title to the interest in respect of which he is registered which is ... immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam15, founded in law or in equity, for such relief as a Court acting in personam may grant.

6 _{Section 342(b).}

7 _{Section 342(c).}

8 _{Section 342(d).}

9 _{Section 342(e).}

10 _{Section 342(f).}

11 _{Land Transfer Act 1953, ss 35, 41 and 62.}

12 _{Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433.}

13 Relief under s 339(1) is discretionary. This compares to the Partition Acts of 1539 and 1540 under which a Court had to order partition and s 142 of the Property Law Act 1952 under which a Court had to either order partition or sale: see Fleming v Hargreaves [1976] 1 NZLR 123 (CA) at 127.

14 _{Frazer v Walker [1967] NZLR 1069 (PC) at 1078.}

15 A judgment in personam determines a dispute only between the parties to the proceeding.

Background

[8] Steven Pierce and Jennifer Spargo met in 2000. They were married on

20 October 2001 and ultimately had three children who were born in 2003, 2004 and

2006. Steven Pierce and Jennifer Spargo separated on 5 October 2008.

[9] When Steven Pierce and Jennifer Spargo married they lived in a flat in Kingston next to a property occupied by Ian and Helen Spargo. There was a high level of interdependency between the two couples. The reasons for this were:

(1) Jennifer Spargo had suffered a serious accident in 1996 which resulted in her having a high level of reliance on her parents. Jennifer Spargo received earnings-related ACC payments until June 2006 when her entitlements changed to an independence allowance.

(2) Ian and Helen Spargo were Majors in the Salvation Army. They had dedicated a large portion of their lives to serving others through the Salvation Army and as a consequence they had few material possessions. The property they occupied in Kingston was owned by the Salvation Army as were most of the chattels in that property. Ian and Helen Spargo were nearing the end of their working lives and their health was beginning to deteriorate.

(3) Steven Pierce and Jennifer Spargo had little income and relied on Ian and Helen Spargo for some of their day-to-day needs.

[10] In 2004 the parties began to discuss their future living arrangements. In [22]- [26] I examine in closer detail what the parties discussed and planned about their future ownership of property. For present purposes it is sufficient to note that in August 2004 Ian and Helen Spargo located the property in Titahi Bay. It was a

752 m2 section with a very modest run-down home. However, the section was large

enough to accommodate a second home. The general plan was that Ian and Helen Spargo would renovate and live in the existing home while Steven Pierce and Jennifer Spargo would build a new home on the vacant subdivisible portion of the section.

[11] The property was purchased for $165,000. Settlement was on 1 October

2004. The property was registered with Ian and Helen Spargo as jointly owning a half-share and Steven Pierce and Jennifer Spargo jointly owning a half-share.

[12] Ian and Helen Spargo paid a deposit of $45,000 for the property from funds that were available from their superannuation entitlements from the Salvation Army. The balance of the purchase price ($120,000) came from a loan from the National Bank. That loan was supplemented with an agreement for a second stage loan from the same bank for $125,000 to enable Steven Pierce and Jennifer Spargo to build the second home on the site. Both loans were in the names of all four parties.

[13] Ian and Helen Spargo began the task of renovating the existing home. They were assisted by Steven Pierce and Jennifer Spargo as well as other members of the Spargo family and their friends.

[14] Within a few months Ian and Helen Spargo moved into the property. In March 2006 Steven Pierce and Jennifer Spargo began constructing what was to become 24A Hiwi Crescent. However, the $125,000 that had been agreed to with the National Bank proved to be significantly less than was required to build the new home for Steven Pierce and Jennifer Spargo.

[15] It is now very difficult to calculate exactly how much was spent in constructing and developing 24A Hiwi Crescent. Suffice to say that by

29 November 2006 when the parties refinanced with Kiwibank the mortgage on the property had increased to $298,901.55. By this stage Steven Pierce and Jennifer Spargo had been living in 24A Hiwi Crescent with their children for over a year.

[16] After Steven Pierce and Jennifer Spargo separated on 5 October 2008 they became entangled in a number of disputes in the Family Court.

[17] The subdivision of the property which created 24A Hiwi Crescent occurred on 18 May 2010. Steven Pierce and Jennifer Spargo remained registered on the title to the property even after 24A Hiwi Crescent was created as a separate title.

[18] Steven Pierce continued to contribute to mortgage repayments until February

2010 when he reached the end of his abilities to be able to continue contributing to the mortgage repayments.

[19] As at 3 August 2010:

(1) 24 Hiwi Crescent was valued at $272,000; (2) 24A Hiwi Crescent was valued at $322,000.

[20] On 22 December 2011 24A Hiwi Crescent was sold for $340,000. By this stage the debts to Kiwibank had increased by a further $30,780 so that the total owed to Kiwibank was $330,550.20. When other expenses were deducted, just $4,511.65 equity remained from the sale of 24A Hiwi Crescent. However, the repayment of the mortgage to Kiwibank meant that 24 Hiwi Crescent was mortgage free.

[21] It is against this background that Steven Pierce says that he has a legitimate interest in the property and that Ian and Helen Spargo should not have the benefit of a mortgage free property at his partial expense.

What did the parties agree to when the property was purchased?

[22] Unfortunately, when the parties purchased the property they did not record in writing their agreement about their respective financial contributions, liabilities and entitlements to the property. The reasons for this were:

(1) At the time the property was purchased Steven Pierce and Jennifer Spargo were happily married and enjoyed an excellent relationship with Ian and Helen Spargo. No one foresaw the financial challenges that lay ahead or the end of Steven Pierce and Jennifer Spargo’s marriage.

(2) While Ian Spargo made enquiries of the parties’ lawyer about recording an agreement in writing, it appears this was not pursued either by the parties or their lawyer.16

[23] Despite the absence of a written agreement covering the matters in dispute, I am able to determine what the parties in fact agreed to. I am able to do this for the following three key reasons:

(1) Ian Spargo has kept meticulous financial records and has been able to explain most of the financial arrangements that occurred.

(2) Steven Pierce’s evidence was often based upon broad conceptual views and recollections that were not supported by the details that characterised Ian Spargo’s evidence.17 Helen Spargo and Jennifer Spargo’s evidence substantially mirrored Ian Spargo’s account of events.

(3) The conclusions I am able to reach are consistent with what the parties are most likely to have agreed to at the time given the circumstances that they were in.

[24] Although I have generally preferred the evidence of Ian Spargo to that of Steven Pierce, I am equally satisfied that all witnesses were honest. No one deliberately tried to misrepresent the facts. However, with the passage of time, I believe Steven Pierce’s understanding of events has become less than reliable. I am also satisfied Steven Pierce was only motivated by a misguided belief as to his

_{entitlements.}

16 Ian Spargo sent an email to the parties’ lawyer on 26 November 2004. That communication (and an earlier letter) were produced in evidence without objection from counsel. However, when he gave evidence Ian Spargo strongly objected to those documents having been produced. It appears that Steven Pierce and Jennifer Spargo did not know about these communications at the time they were sent. I am satisfied the email (and earlier letter) were sent by Ian Spargo on behalf of himself and his wife only. Their consent was required before those documents could be produced in evidence. I cannot consider the contents of those documents in the absence of Ian and Helen Spargo’s waiver of their privilege in those documents.

17 It was significant that Steven Pierce did not fully explain his claim and the relief he was seeking until well into the hearing.

[25] I am satisfied that when the property was purchased Ian and Helen Spargo had the ability to purchase the property outright if they wished to do so from funds they could access from the Salvation Army superannuation scheme. Both Ian and Helen Spargo were adamant that they had the ability to purchase the property by themselves if they had wished to do so. However, rather than purchase the property themselves Ian and Helen Spargo agreed to purchase the property with Steven Pierce and Jennifer Spargo so as to give the younger couple an opportunity to acquire a property of their own. The agreement which they reached was that the property would be divided into two. Ian and Helen Spargo would acquire the existing home

and approximately 352 m2 of land for $100,000. Steven Pierce and Helen Spargo

would acquire the remaining vacant piece of the property (400 m2) for $65,000 and have full responsibility for the financing and building of their home.

[26] The conclusions I have reached about what the parties agreed to are consistent with what I believe the parties would logically have agreed to at the time. It is highly unlikely Ian and Helen Spargo would have agreed to accept any liability for the debt that was to be incurred building Steve Pierce and Jennifer Spargo’s home. Both Ian and Helen Spargo were nearing retirement. Their only asset of any significance was their superannuation entitlement. They had minimal income and were in no position to incur long term liabilities. On the other hand, although Steven Pierce and Jennifer Spargo had a modest income, they had at least 30 years in which to pay off the mortgage that was required to purchase the land associated with, and construct 24A Hiwi Crescent.

[27] It is also clear that Ian and Helen Spargo paid far more than $100,000 to acquire the property.

[28] Ms Ord, counsel for Steven Pierce submitted Ian and Helen Spargo had spent

$51,830 in addition to the deposit of $45,000 which they paid when the property was purchased.

[29] Ian Spargo’s records demonstrate however that he and Helen Spargo spent significantly more than the $100,000 they had agreed to spend when the property was acquired. The evidence demonstrates Ian and Helen Spargo made three

categories of payment towards purchasing the property and by way of contributions towards 24A Hiwi Crescent, namely:

(1) Initial payment of $45,000.

(2) Payment of the balance of the $100,000 they agreed to spend. (3) Further payments.

Initial payment of $45,000

[30] Ian Spargo explained that when the property was purchased a bank account was opened with the National Bank in the joint names of all four parties. On

30 August 2004 Ian and Helen Spargo transferred $60,000 of their money to the joint cheque account. The joint account was used to pay the initial deposit comprising two payments (one for $16,500 on 1 September 2004 and the other for $29,536.25 on 30 September 2004).

Payment of the balance of the $100,000 Ian and Helen Spargo agreed to pay

[31] Ian Spargo explained that the initial drawdown of the loan from the National

Bank of $120,000 passed into the joint cheque account on 1 October 2004. The

$15,000 balance of the $60,000 paid by Ian and Helen Spargo on 30 August was applied towards repaying the $120,000 National Bank loan. Ian and Helen Spargo explained that the balance of their share of the purchase of the property ($40,000) was to be paid by instalments. They applied those instalments towards repaying their portion of the $120,000 loan from the National Bank and on renovating the existing property. Thus, by about the time Ian and Helen Spargo moved into the property they had spent $100,000 on the land and home they lived in.

Further payments

[32] By 15 December 2010 Ian and Helen Spargo had spent more money on the property and 24A Hiwi Crescent. Ian Spargo explained that the following money was paid by him and his wife into the parties’ joint cheque account:

(1) Mortgage repayments $18,517.00 (2) Rates $11,455.58 (3) Property projects $ 7,274.22

(4) Additonal payments to Steven Pierce

and Jennifer Spargo $ 5,703.91 (5) Subdivision costs $ 2,952.09 (6) Improvements to 24A Hiwi Crescent $ 6,330.00

_{(7) Rates on 24A Hiwi Crescent $ 1,321.43}

_{Total $43,554.23}

[33] From this evidence I am able to conclude that Ian and Helen Spargo paid more than they needed to under the agreement with Steven Pierce and Jennifer Spargo. It is possible there may be some duplication in accounting for the $15,000 referred to in paragraph [31]. Even if that is so Ian and Helen Spargo spent at least

$125,000 on the property and assisting Steven Pierce and Jennifer Spargo in relation to 24A Hiwi Crescent. In these circumstances there is nothing unfair or unreasonable about the fact Ian and Helen Spargo now have a mortgage-free home.

[34] I recognise that Steven Pierce made significant contributions towards the mortgage rates and general maintenance of 24A Hiwi Crescent. I accept that Steven Pierce made mortgage repayments of $80,683.27 from 1 October 2004 to

15 December 2010 and that on one level Ian and Helen Spargo benefited from his contributions. However, the reality is that Steven Pierce and Jennifer Spargo overextended themselves. At the time 24A Hiwi Crescent was sold they had virtually no equity in their house. Their financial misfortune was due to their circumstances, and not in any way attributable to Ian and Helen Spargo.

[35] I shall summarise my conclusion by reference to the factors set out in s 342 of the Act.

Extent of Steven Pierce’s share in the property

[36] While the title to the property suggests Steven Pierce has a joint share of half the property, he himself suggested his share was in the vicinity of 12 per cent. However, as I have established, Ian and Helen Spargo more than fulfilled their part of the agreement which the parties made at the time the property was purchased. As a consequence neither Steven Pierce or Jennifer Spargo have any lawful interest in the property.

Nature and location of the property

[37] The parties set out to acquire two separate properties and homes. It was the parties’ intention that the land at 24 Hiwi Crescent would be subdivided. Steven Pierce and Jennifer Spargo would build a new home on the vacant portion of the land while Ian and Helen Spargo would have the existing dwelling as their home. It was agreed Ian and Helen Spargo would pay $100,000 for their home and that Steven Pierce and Jennifer Spargo would pay $65,000 for the vacant piece of land that they would acquire. Ian and Helen Spargo entered this arrangement to enable Steven Pierce and Jennifer Spargo to “get their feet on the first rung of the property

ladder”.18

Number of co-owners

[38] I have determined that there are only two lawful co-owners of the property, namely Ian and Helen Spargo.

Comparative hardship

[39] It would be unconscionable to now conclude that Ian and Helen Spargo are indebted to Steven Pierce. They paid more than they agreed to. While it is unfortunate Steven Pierce and Jennifer Spargo have nothing to show for their efforts in developing and selling 24A Hiwi Crescent, their circumstances were such that in many respects it is also fortunate they were able to fully repay their debt to

_Kiwibank.

18 Affidavit of I Spargo, 15 July 2011 at [115].

Value of contributions

[40] I have determined that Ian and Helen Spargo contributed more than they agreed to in order to acquire the property. The extensive contributions made by Steven Pierce and Jennifer Spargo were required because they made the mistake of overextending themselves financially.

Disposition

[41] I decline Steven Pierce’s application under s 339(1)(b) of the Act because he has no interest in the property. Similarly, Jennifer Spargo has no interest in the property. The property is owned only by Ian and Helen Spargo.

[42] Costs should follow the event. I propose to award the defendants costs on a scale 2B basis. If any party objects to this assessment they should file memoranda

_{explaining their position within five working days of this judgment.}

_{D B Collins J}

Solicitors:

Ord Legal, Wellington for Appellant

Lance Pratley Law, Wellington for Second Respondents