Gregory v Simpson [2014] NZHC 818 (17 April 2014)

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UNDER	Sections 339 to 343 of the Property Law Act 2007
IN THE MATTER	of an application for an order for the sale of a property owned by co-owners
BETWEEN	TREVOR PATRICK GREGORY and SUSAN KATHLEEN GREGORY and QTL TRUSTEES (NO 19) LIMITED as trustees of the CHEVALIER TRUST Plaintiffs
AND	BRENDON ANTHONY SIMPSON and QTL TRUSTEES (NO 42) LIMITED as trustees of the KOURA BAY TRUST Defendants

Hearing:	2 April 2014 Further submissions 9 and 11 April 2014
Appearances:	K McDonald for Plaintiffs R Hucker and AK Prasad for Defendants
_Judgment:	_{17 April 2014}

[1] In this proceeding the underlying dispute is essentially one between parents, Ted and Sue Gregory, and their adult son Michael Gregory and his wife, Simone. It concerns the proposed sale of a property at 44 Wright Road, Point Chevalier, Auckland.

[2] The property is held in partnership by the trustees of two family trusts, the Chevalier Trust and the Koura Bay Trust, which are effectively tenants-in-common in equal shares. The Chevalier Trust was settled by Ted and Sue Gregory who are also beneficiaries with Michael Gregory and his three children; the trustees of that trust are the plaintiffs. The Koura Bay Trust was settled by Michael; the beneficiaries are Michael and Simone Gregory and their children. The trustees of the Koura Bay Trust are the defendants.

[3] The partnership has not been harmonious and there have been disputes about a number of issues related to the property, including the proper contributions to the maintenance and other outgoings to be made by the partners respectively, and rental to be paid by Michael and Simone for their occupation of the dwelling, or part of it, from time to time.

[4] Michael and Simone Gregory currently live at the property with their children and they are willing to buy it. Regrettably, the high level of mistrust between Ted and Sue Gregory on the one hand and Michael and Simone Gregory on the other has meant that the parties cannot agree on a purchase price, but they have agreed that the property should be placed on the market for sale by auction, with the parties being at liberty to bid for it. They disagree about certain aspects of the proposed sale, including the reserve price, and about what should happen if the property is passed in at auction.

[5] The parties have asked the Court to resolve the impasse by making orders under ss 339 and 343 of the Property Law Act 2007 (“the Act”). As will become apparent from the discussion below, it is desirable that the property should be placed on the market for auction as soon as is reasonably possible. It became important, therefore, for this judgment to be delivered without further delay. For that reason, it is necessarily less fully reasoned that might otherwise have been the case.

[6] The registration of the title to the property in the joint names of the trusts (or, more properly, the respective trustees) as tenants-in-common in equal shares makes them co-owners for the purposes of the Act.¹The Act provides that the Court may make an order for the sale of the property and the division of the proceeds between the co-owners²or an order requiring one of the co-owners to purchase the share in

_{the property of the other co-owner at a fair and reasonable
price.}³_{When making one}

of the orders available under s 339(1) of the Act, the Court may also make an additional order that does any or all of the following:⁴

[c] directs how the expenses of any sale or division of the property are to be borne;

[d] directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied;

[e] allows a co-owner, on a sale of the property, to make an offer for it, on any terms the Court considers reasonable concerning the non- payment of a deposit, or the setting-off or accounting for all or part of the purchase price instead of paying it in cash;

[f] provides for, or requires, any other matters or steps the Court considers necessary or desirable as a consequence of the making of the order under s 339(1).

[7] Thus, the Court is given a broad discretion and some flexibility to make a just determination of a dispute between co-owners.⁵In exercising its discretion as to the

nature of the orders which it makes under ss 339 and 343, the Court is required by s 342 of the Act to have regard to the following considerations:⁶

[a] the extent of the share in the property of the co-owner by whom the application for the order is made;

[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 the co-owners respectively as to the cost of improvements to, or the maintenance of, the property; and

[8] In the present case, the considerations in paragraphs (a) to (e) of s 342 are neutral in effect; the issues which have been left to the Court for decision fall to be determined, therefore, by reference to “other matters” considered relevant in terms of s 342(f).

[9] The hearing proceeded on the basis of the affidavits filed by or on behalf of the parties. I had the benefit of helpful submissions from Mr McDonald for the plaintiffs and Mr Hucker for the defendants as a result of which it was clear that there was a substantial measure of agreement. After identifying what was agreed, counsel addressed their submissions to the matters which remained in dispute.

[10] Following the hearing, therefore, I issued a minute summarising my understanding of those arrangements which had been agreed between the parties and those issues which remained in contention. I provided an opportunity for counsel to

_{take further instructions so that they could correct any errors in my
understanding of}

what had been agreed and file memoranda supplementing the written and oral submissions which the Court had already received.

[11] On 7 April 2014, I issued a further minute to which I attached a revised statement of the agreed arrangements and the remaining issues, which incorporated representations made by Mr Hucker on behalf of the defendants. Counsel then filed memoranda containing further submissions and a supplementary affidavit was also filed on behalf of the plaintiffs.

[12] Mr McDonald indicated in his supplementary submissions that what I had previously understood to be the plaintiffs’ position concerning the fixing of a reserve price had altered and that the plaintiffs were seeking a further valuation of the property. He also indicated that the parties had agreed on appropriate adjustments to be made, following the disposition of the property, to equalise the partnership accounts.

[13] A further affidavit by Sue Gregory, attaching an updated valuation prepared by Sheldon & Partners Limited as at 11 April 2014, was filed. Counsel indicated during a subsequent telephone conference that the parties agreed that the reserve should be set by agreement between them, not less than five working days before the auction, and that in the absence of agreement the reserve price should be

$2.3 million. I record that this sum is close to the Sheldon & Partners valuation, less the allowance for chattels.

[14] Mr McDonald also informed me that the plaintiffs considered that a date should be set by which the property should be prepared for sale and suggested

28 April 2014, with a view to photographs then being taken in time for commencement of advertising and marketing of the property on 5 May 2014. Mr Hucker’s memorandum on behalf of the defendants did not respond to this proposal. There was also a request on behalf of the plaintiffs to alter what had previously been the agreed arrangements as to the date on which Ted and Sue Gregory could inspect the property. That proposal also was not responded to by the defendants.

[15] I include those issues, therefore, in the matters which are required to be determined by the Court.

[16] Before addressing the issues which remain for determination, I set out the matters which are agreed, as follows:

[a] Pidgeon Law shall be appointed as the solicitors to act on behalf of the plaintiffs and the defendants on the sale of the property.

[b] The property is to be listed for auction and sold by way of public auction with a settlement date eight weeks after the date of the auction.

[c] Any clause in the Particulars of Sale warranting that no unauthorised building work has been undertaken and that all necessary permits have been obtained shall be deleted.

[d] The auctioneer conducting the sale is to be authorised to sign an Agreement for Sale and Purchase on behalf of the plaintiffs and defendants for any amount above the reserve price.

[e] The plaintiffs and the defendants shall each contribute $3,500 towards marketing costs.

[f] A gardener is to be employed by the parties to tidy up the grounds of the property and to keep them in tidy condition during the marketing campaign and leading up to the auction date. A maximum of $500 is to be spent on the gardener.

[g] The property shall be photographed;⁷the wording of advertisements for the property shall be set by the agent, after consultation with the parties, not less than six weeks before the auction date.

⁷The parties’ agreement that the photographs shall be taken six weeks before the proposed auction

date is inconsistent with my conclusion at [23] that the photographs should be taken after 28

April 2014 and with the agreement that the marketing period should be four weeks.

[i] The first advertisements for the property are to be placed four weeks before the auction date but not before 5 May 2014, and no prospective purchaser is to be shown the property prior to 5 May 2014.

[j] After 5 May 2014, open homes for the property are to be held on Thursdays, Saturdays and Sundays between 12 noon and 1 pm. The open homes are to last an hour.

[k] On or after 5 May 2014, a sign is to be erected on the outside of the property with colour photographs describing the characteristics of the property.

[n] The parties shall use their best endeavours to agree upon the reserve price not less than five working days before the auction. If the parties are unable to agree upon a reserve, the reserve price shall be the sum of $2.3 million. The agent and auctioneer shall be instructed to seek the best possible price.

[o] The plaintiffs and defendants shall each be at liberty to bid for the property at auction.

[p] The partnership accounts shall be equalised by making appropriate adjustments.

[q] The parties shall have leave to bring the proceedings back before the Court on 48 hours’ notice to deal with any issues arising out of the marketing and sale of the property.

[17] These arrangements (except the arrangement at [16][p]) are incorporated, with necessary adjustments, into the orders at [31] of this judgment.

[18] The matters which currently remain unresolved, and which the Court has been asked to decide within its jurisdiction under ss 339 to 343 of the Act, are:

[a] The appointment of an agent or agents to list and conduct the sale of the property.

[b] The arrangements for completing the preparation of the property for marketing and for one inspection by Ted and Sue Gregory.

[c] Whether an order should be made vesting the property in the defendants, in the event of the property being passed in at auction, for a consideration of $2.3 million, plus or minus any adjustments for rates and insurance.

[19] Sue Gregory is a former real estate agent and she has a close association with the firm Barfoot & Thompson. She considers Paul Donovan of Barfoot & Thompson, Mt Eden, to be the best person to be responsible for the marketing of the property. The plaintiffs’ second choice is another agent known to Mrs Gregory: Tracy Johnson of Ray White, Mt Albert.

[20] The defendants’ preferred choice is Unlimited Potential. Mr Hucker informed me in his memorandum of 11 April 2014, however, that the defendants were willing to accept the compromise appointment of Barfoot & Thompson to have responsibility for marketing the property through its Point Chevalier office. In Mr Hucker’s submission, the local office has the agents who are primarily interested in the Point Chevalier market and knowledgeable about it. The defendants note that the wider Barfoot & Thompson network, including agents such as Mr Donovan, would be available to encourage interest in the property.

[21] There appear to be reciprocal concerns that the plaintiffs and the defendants will each interfere with the sales process. The defendants suggest that the plaintiffs are motivated to delay the sale of the property on the open market, hence their opposition to a vesting order. The plaintiffs appear to be concerned that the

defendants will undermine the auction so as to discourage third-party buyers and obtain it, by a vesting order, at a default price of $2.3 million.

[22] I am not persuaded that the parties’ concerns are well-founded. Any agent who is appointed will be under an obligation to seek the best possible price: see the condition agreed at [16][n] above. Such a condition limits the opportunities for any of the parties to undermine the sale process. Other appropriate conditions can further mitigate the concerns expressed.

[23] I will return to the question of the appointment of an agent or agents after addressing the issue of a vesting order.

Preparation of the property for sale and inspection on behalf of the plaintiffs

[24] There is merit in Mr McDonald’s suggestion that the property should be prepared for sale a week before advertising and marketing commences on

5 May 2014. Such a deadline will enable photographs to be taken when the property is in the best condition. I propose, therefore, to order that preparation shall be completed by 28 April 2014. It follows that the plaintiffs’ concern that they should inspect the property once it has been prepared for sale can be met by permitting them to have access to the property on one occasion between 28 April 2014 and

[25] Because of the serious breakdown in the relationships between the members of the Gregory family, I consider it to be desirable that the arrangements for the sale of the property should result in certainty of outcome. Only in that way will the continuing dispute between the family factions be brought to an end, at least so far as this jointly owned property is concerned. In addition to the disharmony that will likely result from any failure of the auction process to resolve the dispute, the administration of justice will not be served by continuing uncertainty which is likely to result in further litigation. Accordingly, I do not favour making orders which would leave the disposition of the property unresolved in the event that it should be passed in at auction.

[26] In those circumstances, I consider it appropriate to make an order which will result in the automatic vesting of the property in the names of the defendants, but upon terms which do not result in any unfair advantage to them, in the event that the auction does not otherwise result in the sale of the property at or above the reserve.

[27] As agreed by the parties, the auctioneer and the agent will be under an obligation to obtain the best possible price. That means that the property will either sell at the auction to the highest bidder at or above the reserve price, or be passed in. I intend to direct that the agent shall not negotiate with the highest or any other bidder if the property is passed in. The property would instead vest automatically in the names of the defendants or their nominee upon payment to the vendors of

[28] The result of a passing-in would be that the defendants or their nominee would become the sole owners of the property; the plaintiffs would receive a cash sum equivalent to half of the net value of the property as determined by their valuer; and the dispute between the parties would be brought to an end. This default arrangement would meet the defendants’ concerns that the plaintiffs may try to undermine the auction process. It also guarantees the plaintiffs a minimum price, irrespective of the highest bid at the auction.

[29] I return to the plaintiffs’ concerns that, if an automatic vesting order is made in the event of the property being passed in, the appointment of an agent preferred by the defendants may result in the under-marketing of the property so that the defendants will obtain the property at a fixed price of $2.3 million. Such concerns can be met by appointing the plaintiffs’ preferred agents to conduct the marketing and sale of the property.

[30] I intend, therefore, to make an order that Paul Donovan of Barfoot & Thompson be appointed the listing agent for the property, upon the condition that he engages the assistance of the Point Chevalier office of the company. I shall also direct that the agent’s commission and fees shall be those reflected in the letter marked “A” attached to Sue Gregory’s affidavit of 9 April 2014. I have come to these conclusions on the basis of my view that the agent and the auctioneer can be

relied upon to honour the obligation to achieve the best possible sale price for the property.

[31] For the reasons given, I make the following orders under ss 339 and 343 of the Property Law Act 2007 in relation to the property at 44 Wright Road, Point Chevalier, Auckland:

[a] Pidgeon Law shall be appointed as the solicitors to act on behalf of the plaintiffs and the defendants on the sale of the property.

[b] Paul Donovan of Barfoot & Thompson shall be appointed the listing agent for the property, upon the condition that he engages the assistance of the Point Chevalier office of the company.

[d] The property is to be listed for auction and sold by way of public auction with a settlement date eight weeks after the date of the auction.

[e] Any clause in the Particulars of Sale warranting that no unauthorised building work has been undertaken and that all necessary permits have been obtained shall be deleted.

[f] The auctioneer conducting the sale is to be authorised to sign an Agreement for Sale and Purchase on behalf of the plaintiffs and defendants for any amount above the reserve price.

[g] The plaintiffs and the defendants shall each contribute $3,500 towards marketing costs.

[h] A gardener is to be employed by the parties to tidy up the grounds of the property and to keep them in tidy condition during the marketing campaign and leading up to the auction date. A maximum of $500 is to be spent on the gardener.

[i] The property shall be prepared for sale by 28 April 2014, and photographs shall then be taken under the direction of the listing agent in time for commencement of advertising and marketing of the property on 5 May 2014.

[j] Ted and Sue Gregory, or any one of them, shall be permitted to inspect the property on one occasion between 28 April 2014 and

[k] The wording of advertisements for the property shall be set by the agent, after consultation with the parties, not less than six weeks before the auction date.

[l] The property is to be advertised in the Property Press, the New Zealand Herald, and Look Local, and listed for sale on the agents’ websites.

[m] The first advertisements for the property are to be placed four weeks before the auction date but not before 5 May 2014, and no prospective purchaser is to be shown the property prior to 5 May 2014.

[n] After 5 May 2014, open homes for the property are to be held on Thursdays, Saturdays and Sundays between 12 noon and 1 pm. The open homes are to last an hour.

[o] On or after 5 May 2014, a sign is to be erected on the outside of the property with colour photographs describing the characteristics of the property.

[r] The parties shall use their best endeavours to agree upon the reserve price not less than five working days before the auction. If the parties are unable to agree upon a reserve, the reserve price shall be the sum

of $2.3 million. The agent and auctioneer shall be instructed to seek the best possible price.

[s] The plaintiffs and defendants shall each be at liberty to bid for the property at auction.

[t] In the event that the highest bid at the auction does not equal or exceed the reserve price, the property shall be passed in and the agent shall not negotiate with the highest or any other bidder.

[u] If the property is passed in, it shall vest automatically in the names of the defendants or their nominee upon payment to the vendors of

[v] After either the sale of the property to the highest bidder, or the vesting of the property in the names of the defendants or their nominee, whichever the case may be, the plaintiffs and the defendants shall share equally in the net proceeds, subject to any further adjustments necessary to balance the partnership accounts.

[w] Leave is reserved for any party to make any further application to the Court, on 48 hours’ notice, to deal with any issues arising out these orders or any other matter related to the marketing and sale of the

[32] I consider that the parties should each bear their own legal costs in the proceeding. The matter of costs not having been addressed by counsel, however, I reserve any question of costs to be dealt with by the filing of memoranda if necessary.

High Court of New Zealand Decisions

Gregory v Simpson [2014] NZHC 818 (17 April 2014)

High Court of New Zealand

Gregory v Simpson [2014] NZHC 818 (17 April 2014)