Harrison v Frieswijk [2013] NZHC 3267 (9 December 2013)

Last Updated: 10 February 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-004089 [2013] NZHC 3267

UNDER the Property Law Act 2007

IN THE MATTER OF an application for an order for sale of property

BETWEEN DONALD ALEXANDER HARRISON Plaintiff

AND WILHELMUS JOHANNES FRIESWIJK Defendant

Hearing: 6 December 2013

Appearances: B P Molloy and N T C Batts for the Plaintiff

R D Butler for the Defendant

Judgment: 9 December 2013

_{JUDGMENT OF GILBERT J}

This judgment was delivered by me on 9 December 2013 at 12.00pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:

HARRISON v FRIESWIJK [2013] NZHC 3267 [9 December 2013]

Introduction

[1] The plaintiff, Mr Harrison is the sole executor of the estate of John Frieswijk, who died in August 2009. The defendant, Wilhelmus (Bill) Frieswijk, is John’s father. They own, as tenants in common in equal shares, an unencumbered

6.7 hectare coastal property at Johnson’s Bay on Great Barrier Island. Mr Harrison seeks summary judgment on his claim for an order pursuant to s 339 of the Property Law Act 2007 directing an immediate sale of this property. The sale is sought to enable payment of debts due by the estate, particularly a debt to Westpac secured by a mortgage over the estate’s nearby 63 hectare property at

329 Cape Barrier Road.

[2] John’s widow, Kim Frieswijk, has a life interest in the house and curtilage on the Cape Barrier Road property. Mr Harrison is concerned that if an immediate order for sale is not made in respect of the Johnson’s Bay property, Westpac will proceed with a mortgagee sale of Cape Barrier Road, defeating the life interest. Westpac has served a Property Law Act notice which has now expired.

[3] Mr Harrison claims that the estate does not have any other assets that could be realised readily to satisfy the amount owed to Westpac, approximately $73,000. Although plant and chattels with a depreciated value of $140,000 form part of the estate, Mr Harrison has not been able to realise these items because he says they were taken without his consent by John’s two adult sons, Andre and Clinton, who are the residuary beneficiaries. He contends that a sale of the estate’s undivided half share in the Johnson’s Bay property is not a practical option and that the other options that have been identified are not feasible because they would require Westpac’s consent. Mr Harrison recognises that Bill has a long association with the property and a sentimental attachment to it but contends that his interests must be sacrificed in favour of the interests of John’s widow who wishes to preserve her life interest and remain living at the Cape Barrier Road property.

[4] Bill is strongly opposed to the property being sold. The land has been in family ownership since he purchased it over 57 years ago and he wants to preserve it for the future benefit of the family. He is also concerned that the market is currently

depressed for properties of this nature. He claims that there are other options which should be considered and he wants the opportunity of testing these through evidence and submissions at trial.

[5] The issue to be determined on this application is whether the plaintiff ’s claim is so overwhelming that an order directing an immediate sale of the Johnson’s Bay property is inevitable and there would be no injustice in denying Bill the opportunity to test at trial whether there are other reasonable alternatives.

Statutory provisions

[6] Section 339(1) of the Property Law Act 2007 provides:

A court may make, in respect of property owned by co-owners, an order –

(a) for the sale of the property and 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.

[7] The Court is required to have regard to the matters specified in s 342 before making any order. Section 342 provides:

A court considering whether to make an order under section 339(1) (and any related order under 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 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.

[8] The Court has further powers under s 343, including requiring the payment of compensation, fixing a reserve price, directing how expenses of the sale are to be borne, directing how the proceeds of sale are to be divided and making provision for a co-owner to make an offer to purchase on such terms as the Court considers reasonable.

Is an order for sale of the Johnson’s Bay property inevitable?

[9] I now consider whether an order for sale of the Johnson’s Bay property is inevitable such that there would be no point in allowing this matter to progress to trial. It is appropriate to consider this issue with reference to the relevant considerations set out in s 342 of the Act.

Share in the property

[10] The estate owns a half share of the land. This is a factor favouring an order for sale but it is not determinative. Under s 140 of the Property Law Act 1952, an owner having at least a half share interest in the land was entitled to an order for sale unless the Court considered there was good reason not to make such an order. This entitlement, albeit qualified, has not been carried over into s 339 of the 2007 Act. The Court now has a wider discretion to consider the appropriate response having regard to the particular circumstances of each case.

The nature and location of the property

[11] The property is located at the south end of Great Barrier Island, south east of Tryphena Harbour. It has significant coastal frontage on its south western side and and backs onto Cape Barrier Road to the north. Bill, who is now 85 years of age, moved to Great Barrier Island in 1956. He purchased the Johnson’s Bay property at that time as part of a much larger block comprising some 480 acres. This block also incorporated the Cape Barrier Road property. Bill cleared and farmed the land and, over time, gifted a number of parts of the property to his children:

(a) 16 acres to his elder daughter, in 1973;

(b) 140 acres to his elder son, in 1976; (c) 240 acres to John, in 1979; and

(d) 16 acres to his younger daughter, in 1983 (the Johnson’s Bay

property).

[12] Not long after gifting the Johnson’s Bay property to her, his younger daughter moved to Auckland. She wanted to sell the property so that she could buy a house in Auckland. John wanted the property to remain in family ownership so he approached Bill and they purchased it for that reason.

[13] The Johnson’s Bay property was valued at $500,000 in June 2013. The valuer had difficulty establishing the value because there have been so few sales of such properties on Great Barrier Island since late 2007. He was aware of only three broadly comparable sales. These were in June 2008, early 2011, and February 2013. For that reason, he also took into account a recent sale on Waiheke Island. The valuer noted that market conditions on Great Barrier Island remain weak and that properties invariably take a considerable period of time to sell.

[14] This opinion is reinforced by the evidence of an experienced real estate agent who says that it is currently extremely difficult to sell property on Great Barrier Island, let alone at a reasonable price. He says that there has been a significant downturn in prices for properties on the island since the global financial crisis in

2008 and there have been almost no enquiries for lifestyle properties. He advises that there has been only one “acreage sale” in the last 12 months, an 11 hectare block in Tryphena with a three bedroom house which sold for $225,000. The few properties that have sold have all been heavily discounted.

[15] This is plainly not a good market in which to sell this property. Even if an order for sale is made, it is likely to take quite some time before the property sells.

Co-owners

[16] The Johnson’s Bay property forms part of the residue of John’s estate which was left to Andre and Clinton under the terms of his Will. Andre and Clinton are opposed to any sale of the property.

Relative hardship

[17] The Court is required to compare the hardship that would be caused to the plaintiff by refusing any order under s 339(1) with the hardship that would be caused to any other person by making such an order. While the plaintiff is seeking an order for sale under s 339(1)(a), the Court is not limited to making such an order. It could, instead, make an order for partition or an order requiring Bill to purchase the estate’s half share in the property. Although Bill would prefer that no order is made, he has stated through counsel that he would be prepared to consider orders under s 339(1)(b) or (c) if there is no other way of avoiding a sale of the entire property through an order under s 339(1)(a). These options are therefore all in prospect on the present application and the relative hardship must be assessed with reference to each of them.

[18] The valuation evidence indicates that a forced sale of this property in the current market is likely to destroy considerable value. This loss may exceed the amount owed to Westpac on the Cape Barrier Road property. The amount required to service this mortgage is approximately $4,000 per annum.

[19] Bill, Andre and Clinton may well suffer hardship as a result of a sale of the property but no one else will. The plaintiff will not suffer hardship either way. His only interest is in carrying out his obligations as executor of the Will to protect Kim’s life interest in the Cape Barrier Road property. However, he must also protect the interests of Andre and Clinton who are the residuary beneficiaries entitled to John’s interest in the Johnson’s Bay property.

[20] Bill has a strong sentimental attachment to the land. He purchased it in 1956 and it has remained in family ownership ever since. Having gifted it to his younger

daughter, he then re-purchased it with John’s help to ensure that it remained in family ownership for the benefit of future generations. The proposed order would defeat Bill’s long-standing intentions for this property, which were shared by John.

[21] The property has more than sentimental value for Bill. He says that he depends on it to support himself. He lives nearby in what is a remote location with few, if any, services. He sources timber from the property to meet his heating requirements. He also needs access to it so that he can fish from Johnson’s Bay. This is an important source of food for him.

[22] An illustration of just how important this property is to Bill can be seen from the fact that he offered $160,000 for the estate’s half share in 2009. This offer was declined, apparently because Andre and Clinton did not support it. Had it been accepted, the estate would have no debts, Kim’s life interest would be secure and Bill would not be facing a Court ordered sale of a property that is obviously greatly valued by him and which he originally purchased 57 years ago.

[23] The balancing exercise that the Court is required to undertake cannot be completed satisfactorily on the basis of the limited information available in the affidavits that have been filed. There is an affidavit from Bill but nothing from Kim, Andre or Clinton. The alternatives to an order for sale need to be fully explored. This cannot be done in the context of this application for summary judgment.

Value of any contribution to the property

[24] The order proposed by Mr Harrison makes no allowance for any compensation to be paid to Bill for improvements he has made to the property.

[25] Bill says that he has cleared and fenced some of the land to allow grazing and access, constructed a habitable shed complete with water tanks, installed a septic tank and a fire place, paid rates and maintained the driveway, all without any assistance from other family members.

[26] No valuation evidence has been supplied in relation to these improvements. There is no evidence of the costs incurred or when these improvements were carried out. The Court is therefore not able to determine whether compensation should be ordered, and if so, to what extent.

[27] Mr Molloy concedes that the prospect of Bill being entitled to some compensation cannot be excluded at this stage. However, he submits that this issue can be addressed by requiring that any proceeds of sale remaining after payment of the debts due by the estate should be retained pending determination of the compensation issue. While I accept that this is an available option, it would be better if this issue was considered at the same time as all other issues relating to the sale.

Conclusion

[28] The plaintiff has failed to establish that he is unarguably entitled to an order for sale of the Johnson’s Bay property. There are other options that will need to be explored. Bill, Andre and Clinton should be given the opportunity of resisting an order for sale of the property and proposing alternative options, including possible orders under s 339(1)(b) or (c). This matter is not suitable for disposition in an application for summary judgment and must be allowed to proceed to trial.

[29] The Civil List Judge has indicated that a priority fixture could be allocated for this matter if the parties agree to this and can give an assurance that the trial can be completed in three days or less. If the parties wish to take advantage of this opportunity, a joint memorandum with proposed timetable directions should be filed.

Result

[30] The application for summary judgment is dismissed. [31] Costs are reserved.

M A Gilbert J