Taufa v Makapa [2014] NZHC 1820 (4 August 2014)

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UNDER	Property Law Act 2007
IN THE MATTER	Section 339 Property Law Act 2007
BETWEEN	JOSEPHINE TAUFA Plaintiff
AND	PETER MAKAPA First Defendant _Continued...

Hearing:	21July 2014 (final submission received 25 July 2014)
Counsel:	P N Teei for Plaintiff Second Defendant in person (and also appearing on behalf of First, Third and Fourth defendants). PA Fuscic for Fifth Defendant
_Judgment:	_{4 August 2014}

Solicitors: Teei & Associates, Henderson Presland & Co, Auckland McVeagh Fleming, Auckland

TOMMY MAKAPA Second Defendant ISATINA MAKAPA Third Defendant SANTEALE MAKAPA Fourth Defendant

[1] Salemisa Makapa died on 19 December 2006. His will was very straightforward. He left his entire estate to his six children equally. His main asset was his home at 28 First Avenue, Kingsland, Auckland.

[2] Unfortunately, however, Salemisa Makapa did not name an executor in his will. It was therefore necessary for application to be made to the High Court for letters of administration, with will annexed. The other five siblings agreed to their sister, Josephine Taufa (née Makapa) being appointed as administrator of the estate.

[3] Soon after her father died, Ms Taufa and her daughter moved into the First Avenue property, with the consent of the other five siblings. Another sibling, Peter Makapa, also moved into the property. Both agreed to pay rent of $100 per week to the estate. From the estate account payments were made for land rates, insurance, maintenance and other outgoings.

[4] A dispute arose between the parties as to whether the property should be sold and, if so, on what terms. The parties were unable to resolve their differences and, as a result, Ms Taufa filed these proceedings, seeking orders under s 339 of the Property

	(a)	for the sale of the property and the division of the proceeds among the co-owners of the property; or
	(b)	requiring one or more of the co-owners to purchase Ms Taufa’s share in the property at a fair and reasonable price.
[5]	The	first four defendants are Ms Taufa’s siblings Peter Makapa,

Tommy Makapa, Isatina Makapa and Santeale Makapa. The fifth defendant, Angela Makiru, is the executor of the estate of the fifth sibling, Geoffery Makapa, who is now deceased. Ms Makiru has counterclaimed against Ms Taufa, seeking orders, in effect, Ms Taufa, pay outstanding rent she owes to the estate and reimburse the estate in respect of any estate funds she has spent for personal purposes.

[6] By the conclusion of the hearing it was more or less common ground that Ms Taufa and Ms Makiru¹were entitled to receive their share of the estate in cash. Further, there was no serious objection to the proposition that the four remaining siblings should be given a window of opportunity to purchase Ms Taufa’s and Ms Makiru’s interests in the property. Rather, the remaining issues for resolution are:

(b) What adjustments (if any) should be made to reflect money Ms Taufa owes the estate?

(d) Are there any other assets of the estate, apart from the property? [7] I will address each issue in turn.

[8] The first four defendants should clearly be given a window of opportunity to purchase the interests of Ms Taufa and Ms Makiru in the property (as Ms Taufa and Ms Makiru accepted). I must decide what a fair and reasonable price is for such a sale.

[9] Tommy Makapa has commissioned two valuations of the property by Edwards Valuations Limited, registered valuers and property consultants.²The first was prepared in July 2011 and gives the current market valuation of the property as

$550,000, inclusive of chattels. An updated valuation was undertaken on 22 October

2013. It noted that the dwelling exhibits considerable signs of deferred maintenance. There had, however, been a considerable increase in sale prices during 2012 and

_{2013. Further, the market sector enjoying the strongest demand
“can generally be}

categorised as family homes close the City centre, particularly in the sub $1.5 million category”. The First Avenue property falls within this category. It was accordingly valued at $650,000 as at 22 October 2013. The statutory valuation at the time was $550,000.

[10] Ms Taufa did not provide any valuation evidence as, she said, she was unable to afford the expense of commissioning a valuation report. Ms Makiru endeavoured to have a further independent valuation undertaken of the property, but Tommy Makapa would not give the valuer she engaged access to the property, so this could not be completed.

[11] Against this background, Tommy Makapa submits on behalf of the first to fourth defendants that the valuation the Court should adopt for the purposes of fixing a fair and reasonable “buy out” price was the 2011 valuation of $550,000. His reasoning is, in essence, that the delays in the matter being resolved were not the fault of the first to fourth defendants and they should not have to bear the consequences of the property increasing in value in the meantime.

[12] I do not accept that argument. First, it is far from clear that the blame for the delay in resolving matters lies exclusively with any one party. However, even if it did, the legal position is that all parties to these proceedings currently have a one-sixth interest in the deceased’s estate. They are entitled to be “paid out” that interest in cash. There is no legal basis to value the relevant interest as at 2011. To the extent that the property has increased in value since that time all of the beneficiaries are equally entitled to share in that value.

[13] If Ms Makiru had wished to obtain a further valuation I would have directed accordingly, given that she has to date been prevented from undertaking her own valuation of the property. She advised through her counsel, however, that she was willing to accept the 2013 valuation of $650,000, in the interests of resolving matters. Ms Taufa on the other hand indicated, through her counsel, that she now wished to obtain her own valuation for the property. I am not prepared to defer matters to enable that to occur. The evidence has closed and the matter has proceeded to a substantive hearing. Barring exceptional circumstances

(which existed in Ms Makiru’s case) the filing of further evidence, post hearing, is not appropriate.

[14] I accordingly find that a fair and reasonable price for the purposes of the first four defendants buying out the interests of the plaintiff and fifth defendant in the property is $650,000.

What adjustments should be made to Ms Taufa’s share of the estate to reflect money she owes the estate?

[15] Following Salemisa Makapa’s death a number of disputes arose between Ms Taufa and her siblings. One of the disputes related to whether Ms Taufa was properly administering the estate. It is clear from the evidence before the Court that she was not. On the contrary, Ms Taufa only paid rent to the estate intermittently and, further, used estate funds for her own personal purposes.

[16] Ms Taufa accepts in evidence that her administration of her father’s estate was substandard. She accepts that the estate funds she used for personal purposes must be reimbursed to the estate. There was a dispute, however, as to precisely how much Ms Taufa owes the estate.

[17] Ms Taufa provided a handwritten reconciliation of income and expenditure on behalf of the estate during her administration, together with some supporting documentation. Unfortunately, however, the supporting documentation was somewhat lacking. There is some dispute in the evidence as to the reasons for this. Ms Taufa asserts that she had previously given the relevant bank statements to her brother, Tommy Makapa. He denies that that is the case. No effort appears to have been made by Ms Taufa (or any other party) to obtain further copies of the missing statements from the bank.

[18] On the basis of Ms Taufa’s handwritten reconciliation, she calculates that she owes the estate $27,742.86. This comprises a rent shortfall of $10,975.00 and an additional “loan” repayment of $16,262.42 in respect of estate funds used for personal expenses. Finally, Ms Taufa accepts that she owes an additional $300.38 for telephone expenses and $205.00 for water.

[19] Tommy Makapa, on behalf of the first to fourth defendants, conducted his own analysis of the relevant documents, concluding that the total shortfall owing by Ms Taufa to the estate is $29,350.00, if Ms Taufa’s handwritten reconciliation can be relied upon.

[20] Ms Makiru accepts Ms Taufa’s calculation of $27,742.86 as correct, but says that interest should be paid on the amounts owing until the date of final distribution. In respect of the rent shortfall simple interest for each year’s rental shortfall is sought, from 31 December of each year.³Simple interest is also sought in respect of the amounts owing for telephone and water.

[21] Ms Makiru submits that the “loans” fall into a different category to the unpaid rent. Ms Taufa, without the consent of the other beneficiaries, took money that was held in trust for all of them and spent it for her own purposes. As a result the trust has lost accumulated interest on those funds which could have been added to capital and employed to increase the estate. Ms Makiru accordingly seeks an order which brings into the value of the estate the moneys somewhat generously described as “loans” to Ms Taufa, together with interest compounding annually until the date of final distribution of the estate. In support of the submission that compounding interest is appropriate, counsel for Ms Makiru relies on Eden Refuge

[22] In my view, on the balance of probabilities, the amount that Ms Taufa owes the estate is $27,742.86. I accept Ms Makiru’s submissions that interest is properly payable on this sum. Simple interest should be paid on the rental shortfall and amounts spent on water and telephone.

[23] In respect of the “loans” Ms Taufa took from the estate I accept that compound interest is appropriate. While compound interest cannot be awarded

_{under s 87, it can be awarded in equity in particular
circumstances.}⁶_{Ms Taufa took}

⁶Equiticorp Industries Group Ltd (in stat man) v The Crown (No 3) (Judgment No 51) [1996] 3

money from the estate and used it for her own purposes. If the estate had not wrongfully been deprived of those funds then interest would have accumulated on them, on a compounding basis, over the relevant period. The estate should be put back in the position it would have been if Ms Taufa had not wrongfully taken estate funds and used them for her own purposes.

[24] For completeness I also note that there was some dispute as to what had happened to Salemisa Makapa’s chattels and personal effects. Ms Taufa’s evidence is, in effect, that these were disposed of as they were old and borer ridden and had no second hand retail value. Tommy Makapa accepts that the monetary value of the items is likely to have been negligible. His primary concern is that a number of items had sentimental value.

[25] Although it is unfortunate that Ms Taufa does not seem to have consulted her siblings regarding the disposal of her father’s chattels and personal effects, in light of the undisputed evidence I am not able to attach a monetary value to those assets.

Should any adjustments be made to reflect money owing by other parties to the estate?

[26] In addition to counterclaiming against Ms Taufa in respect of any funds that she owed the estate, Ms Makiru also filed a cross claim against the first to fourth defendants. The orders sought included payment of a sum to compensate the beneficiaries not only for any money owing to the estate by Ms Taufa, but also in respect of occupation rent owing to the estate by any other party who had occupied the property.

28 October 2010. It was agreed that he would pay rent of $100 per week. An analysis of Ms Taufa’s handwritten reconciliation of the estate account suggests that there may be a rental shortfall owing by Peter Makapa of $7,775.00, together with a further sum owing to the estate of $300.38 in respect of telephone charges and

[28] Ms Makiru carries the burden of proving, on the balance of probabilities, that Peter Makapa owes that money to the estate. After careful consideration I have concluded that that burden has not been discharged. In particular, some caution has to be exercised in assuming, as against Peter Makapa, that Ms Taufa’s handwritten reconciliation is necessarily correct. While the evidence certainly suggests that Peter Makapa did not always pay his rent, and therefore must owe some money to the estate, it is not possible to confidently quantify the relevant sum on the evidence before the Court. The relevant bank statements should have been produced to support Ms Taufa’s calculations. If necessary, discovery should have been sought in respect of these, or a court order sought requiring the bank to provide copies.

[29] Peter Makapa’s position is somewhat different to that of Ms Taufa. She prepared the handwritten reconciliation herself and acknowledges she owes rent in the sum of $10,975.00. Peter Makapa has made no similar acknowledgement. Accordingly, although in my view it is likely that Peter Makapa owes money to the estate in respect of unpaid rent, Ms Makiru has failed to discharge the burden on her, as cross claim plaintiff, of proving precisely what the relevant amount is.

[30] Finally, I note that, on the evidence before the Court it appears that the estate may owe Santeale Makapa the sum of $1,955.00. Neither the statement of claim nor the cross claim seek orders that the estate repay such sum to Santeale Makapa and I therefore make no directions in relation to that matter. Of course, if all parties are agreed that that sum is owing, they can agree between themselves that Santeale Makapa be repaid by the estate, independent of any orders that I make addressing the matters before the Court.

[31] After Ms Taufa moved out of the property Peter Makapa moved back in at an agreed rental of $100 per week. Mr Makapa’s evidence is that, as a result, there is currently about $10,000 held in an account on behalf of the estate. That sum is clearly estate property.

[32] To give effect to the various findings I have made above, I order as follows:

(a) Ms Taufa owes the estate the following sums (together “Ms Taufa’s debt”):

(i) $1,425.00 rent shortfall, plus simple interest on that sum at the applicable prescribed rates⁷from 31 December 2007 until settlement date;

(ii) $1,950.00 rent shortfall, plus simple interest on that sum at the applicable prescribed rates from 31 December 2008 until settlement date;

(iii) $3,200.00 rent shortfall, plus simple interest on that sum at the applicable prescribed rates from 31 December 2009 until settlement date;

(iv) $205.06 in respect of water, plus simple interest at the applicable prescribed rates from 6 August 2008 until settlement date;

(v) $300.58 in respect of telephone, plus simple interest at the applicable prescribed rates from 1 April 2008 until settlement date;

(vi) $4,400 rent shortfall, plus simple interest on that sum at the applicable prescribed rates from 31 December 2010 until settlement date;

(vii) 2007 “loan” of $1,861.00 plus interest at the applicable prescribed rates on that sum from 31 December 2007 until

(viii) 2008 “loan” of $4,193.00 plus interest at the applicable prescribed rates on that sum from 31 December 2008 until settlement date, compounding annually;

(ix) 2009 “loan” of $7,608.42 plus interest at the applicable prescribed rates on that sum from 31 December 2009 until settlement date, compounding annually;

(x) 2010 “loan” of $2,600.00 plus interest at the applicable prescribed rates on that sum from 31 December 2010 until settlement date, compounding annually.

2014, with details of the amount currently held in a bank account (“the rent account”) on behalf of the estate, together with a copy of the most recent two bank statements for that account and details of any transactions that have occurred since the date of the most recent bank statement.

(c) Tommy Makapa is to be forthwith reimbursed (regardless of whether the settlement referred to at (h) below proceeds) out of the rent account for any fees he has paid to Edwards Valuations Limited for the two valuations that have been undertaken in respect of the property.

(ii) the rent account balance as at the date of settlement referred to at (h) below, less any amount of rates or water charges owing

(iii) Ms Taufa’s debt (calculated in accordance with (a) above). (the total of these amounts is referred to as the “estate value”).

(e) Ms Taufa is entitled to be paid her one-sixth share of the estate value in cash on settlement date, less Ms Taufa’s debt (calculated in accordance with (a) above).

(f) Ms Makiru (as administrator of the estate of Geoffery Makapa) is entitled to be paid her one-sixth share of the estate value in cash.

(g) The first to fourth defendants are to have until 29 August 2014 to raise the necessary finance to pay out Ms Taufa and Ms Makiru for their respective one-sixth interests in the estate.

(h) Upon the first to fourth defendants advising that the funds have been obtained to pay out Ms Taufa and Ms Makiru, then settlement is to occur within 14 days thereafter (“settlement date”) at which time the property shall be transferred to the first to fourth defendants as tenants in common in equal shares, in consideration of the first four defendants paying out Ms Taufa and Ms Makiru for their respective shares of the estate value.

(i) If the necessary finance cannot be arranged by 29 August 2014, then the property is to be sold at auction. The parties are to confer and endeavour to agree all relevant details of the sales and marketing process, with the aim of achieving the best possible sale price for the property. If agreement on such a process cannot be reached then leave is reserved to the parties to seek further directions from the Court.

[33] Finally, I reserve the issue of the costs of these proceedings. If agreement cannot be reached between the parties, leave is reserved to file memoranda. Any memorandum on behalf of the plaintiff is to be filed within 10 working days of settlement of the sale of the First Avenue property occurring. Any memoranda on

High Court of New Zealand Decisions

Taufa v Makapa [2014] NZHC 1820 (4 August 2014)