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High Court of New Zealand Decisions |
Last Updated: 19 December 2018
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IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
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CIV-2018-419-127
[2018] NZHC 3140 |
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IN THE MATTER
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Of an application for sale of a property
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UNDER
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Section 339 of the Property Law Act 2007
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BETWEEN
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SYRINA EVE PENE
Plaintiff
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AND
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MARYANNE PENE
Defendant
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Hearing:
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22 November 2018
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Appearances:
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T Burtenshaw and E M Thomson-Learmonth for the Plaintiff
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Judgment:
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3 December 2018
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Reissued:
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4 December 2018
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JUDGMENT OF MUIR J
This judgment was delivered by me on Monday 3 December 2018 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules.
This judgment was recalled and reissued by me on Tuesday 4 December 2018 pursuant to Rule 11.9 of the High Court Rules.
Registrar/Deputy Registrar Date:...............................
Solicitors:
Norris Ward McKinnon, Hamilton.
PENE v PENE [2018] NZHC 3140 [3 December 2018]
Introduction
[1] The plaintiff, Ms Syrina Pene, seeks an order for sale of a property located at 11 Cadman Street, Waharoa, under s 339 of the Property Law Act 2007 (the Act). She also seeks supplementary orders under s 343 of the Act. Syrina owns the property as tenant in common in equal shares with her sister, the defendant, Ms Maryanne Pene. For convenience I will refer to the sisters respectively as Syrina and Maryanne.
[2] Syrina’s statement of claim was filed on 16 May 2018 and Maryanne was served shortly thereafter. Maryanne has not filed a statement of defence nor taken any other step in the proceeding. Syrina’s application therefore proceeds by way of formal proof.
Background
[3] The Cadman Street property was previously owned by the parties’ mother, the late Ms Karen Kaukau. On her death the property was transferred to Syrina and Maryanne in equal shares. This occurred in December 2017. Although there was no mortgage on the property there were a number of outstanding accounts in respect of it, including unpaid rates and various maintenance bills.
[4] Between 2 June 2016 and October 2016 Syrina and Maryanne rented the property to a third party at $250.00 per week, with the income applied to these accounts. In December 2016 Maryanne indicated a desire to move into the property herself. On 4 February 2017 the parties entered into a five-year fixed term residential tenancy in terms of which Maryanne agreed to pay $300 a week into the joint account of the parties. Maryanne continues to reside in the property. She is said to be living with up to nine other people and a dog, which Syrina says she never agreed to.
[5] For the first six months of the tenancy rental payments were often late, and on 7 November Maryanne advised that she did not intend to pay any further sum, inviting Syrina to “take me to Court, you have more to lose than I do”.
[6] Syrina’s lengthy affidavit in support of her formal proof application recounts a long history of uncooperative behaviour on the part of Maryanne who, in response to
seemingly reasonable requirements that she meet her financial responsibilities in respect of the property, has accused Syrina of being “money hungry”.
[7] There have been various discussions between the sisters about the prospect of one buying the other out. In May 2016, shortly after the grant of probate, the parties arranged to meet to discuss this issue. Syrina asked Maryanne what price she had in mind for the sale of her half share. Syrina deposes that Maryanne said she did not have one, which Syrina found to be disappointing as the whole reason for the meeting was to discuss a possible sale. In the result, Syrina offered half of the then Government Valuation of $148,000, namely $74,000. This was not acceptable to Maryanne.
[8] At the point Maryanne advised that she would no longer be paying rent, she in turn presented an ultimatum that one or other needed to buy the other out. She offered to purchase Syrina’s share for $85,000. Syrina then obtained a market appraisal from L J Hooker which recommended a listing price of $250,000 and a sales range of between $230,000 and $240,000. The appraisal also noted the property required work before being put to market. The appraisal was broadly consistent with an earlier one obtained from Harcourt’s in the amount of $249,000.
[9] On 22 January 2018 Syrina’s solicitor wrote to Maryanne confirming a desire to sell the property. The letter noted that Syrina’s half share was worth approximately
$125,000 and identified an additional sum of $10,104 as payable by Maryanne for rent and maintenance contributions. The letter suggested therefore a fair sale price was
$135,104, but proposed a sale at $125,000 to bring matters to a conclusion.
[10] That offer was not accepted by Maryanne. Through her solicitor she indicated that she was obtaining her own registered valuation of the property. Such occurred on 17 February 2017 but Maryanne has never provided Syrina with a copy of the report.
[11] The relationship between the parties has now broken down irretrievably. Maryanne continues to be in default of her rental obligations. Meanwhile accounts accrue in respect of the property, including insurance, rates and water rates. Because of her concern about the insurance status of the property, Syrina has personally made a payment of $821.40 to the insurance company, but there are further sums now due.
[12] In addition, the property requires repairs and maintenance including to its deck and linoleum in the toilet and bathroom.
[13] Syrina states that her position is one of considerable hardship. She lives in a Housing New Zealand rental property in Nawton, Hamilton and supports a sick daughter and two grandchildren on what she states to be “a very limited income”. She seeks a sale of the property in order to be able to discharge the mounting accounts now outstanding in respect of it and with the hope that her share of the nett proceeds may be sufficient for her to place a deposit on a small home for herself and her family.
[14] Syrina identifies a number of significant contributions made by her with respect to the property. These in fact commenced before her mother’s death because there was at that stage a mortgage on the property, which her mother had been unable to service. Indeed she was at risk of losing the house to a mortgagee sale. As a result, Syrina loaned her mother the sum of $8,658 to discharge the mortgage. This was a debt in the estate. However, because the estate’s only asset was the house, the estate could not repay her. Within the last few years of her mother’s life she also funded a number of improvements to the property including the installation of a heat pump, shower dome, water filter and new blinds to a total value of $4,189.
[15] In the memorandum filed by counsel in support of Syrina’s application for formal proof, compensation was sought in respect of those sums. However, during the course of oral argument I raised with counsel whether such claims could be sustained, because it seemed to me arguable whether contributions to the property prior to co-ownership by the plaintiff and defendant (at least in equity) were matters that could be appropriately compensated for under the Act.1 In response, Mr Burtenshaw advised that it was not Syrina’s intention to proceed with this aspect of her relief. Nevertheless, I will take into account, in terms of the overall discretion I am required to exercise, the fact that the plaintiff has made contributions to the property prior to co-ownership, for which she is now unlikely to be compensated.
[16] Since the property has been transferred to the parties, Syrina has made the following additional contributions to or in respect of it:
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(a)
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Legal fees
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$1,018.00
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(b)
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Insurance
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$ 821.40
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Total
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$1,839.40
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I am satisfied with the evidence produced in respect of such expenditure.
The law
[17] The Court’s powers to order the sale or division of a property are identified in ss 339 and 343 of the Act:
339 Court may order division of property
(1) A court may make, in respect of property owned by co-owners, an order—
(a) for the sale of the property and the 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.
(2) An order under subsection (1) (and any related order under subsection (4)) may be made—
(a) despite anything to the contrary in the Land Transfer Act 2017; but
(b) only if it does not contravene section 340(1); and
(c) only on an application made and served in the manner required by or under section 341; and
(d) only after having regard to the matters specified in section 342.
(3) Before determining whether to make an order under this section, the court may order the property to be valued and may direct how the cost of the valuation is to be borne.
(4) A court making an order under subsection (1) may, in addition, make a further order specified in section 343.
(5) Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).
...
343 Further powers of court
A further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:
(a) requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:
(b) fixes a reserve price on any sale of the property:
(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—
(i) the non-payment of a deposit; or
(ii) the setting-off or accounting for all or part of the purchase price instead of paying it in cash:
(f) requires the payment by any person of a fair occupation rent for all or any part of the property:
(g) 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 section 339(1).
[18] An order under s 339(1) can only be made after the Court has had regard to the matters specified in s 342. This provides:2
342 Relevant considerations
A court considering whether to make an order under section 339(1) (and any related order under section 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;
2 Section 339(2)(d).
(b) the nature and location of the property
(c) the number of other co-owners and the 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; and
(f) any other matters the court considers relevant.
[19] Subject to the mandatory considerations in s 342, the Court has a broad discretion under the relevant sections to make such orders as are necessary to bring to a practical conclusion any impasse between co-owners.3
Discussion
[20] With regard to the considerations identified in s 342(1) of the Act, I make the following observations:
Section 343(1)(a) and (c), number of co-owners, extent of their shares and shareholding applicant
[21] The plaintiff and the defendant each own 50 per cent of the property.
[22] The plaintiff’s share is therefore substantial. She has legitimate entitlement either to an income from that share or to redeployment of the capital if required for other purposes. She should certainly not be expected to continue to meet outgoings and maintenance in respect of the property while receiving no benefit from it.
Section 342(1)(b) the nature and location of the property
[23] The property is located in Waharoa, a short distance north of Matamata. From the marketing appraisal it presents as a modest dwelling for which comparable properties can be expected to be available in the market. That said, however, I acknowledge the sentimental considerations attaching to its former ownership.
3 Bayly v Hicks [2012] NZA 589[2012] NZCA 589; , [2013] 2 NZLR 401 at [32].
Section 341(1)(d) hardship caused to the applicant
[24] I accept that the plaintiff’s position is one of hardship, compounded by what appears to be a wholly unreasonable refusal on the part of the defendant to meet her financial obligations in respect of the property. The plaintiff has an entitlement to move on with her life for which realisation of her capital in the property is necessary. Because the matter has proceeded by way of formal proof I have no evidence as to the defendant’s circumstances. Nevertheless, I accept that if the property is sold and the defendant’s share is paid to her she will be in a position either to secure alternative rental accommodation, or place a deposit on a similarly modest dwelling.
Section 342(1)(e) the value of any contribution made by any co-owner
[25] I accept that Syrina has made significant contributions to or in respect of the property.
Section 342(1)(f) other matters
[26] I take into account also the fact that the relationship between Syrina and Maryanne appears to have broken down irretrievably and Maryanne’s failure meaningfully to engage in a process by which she might purchase the plaintiff’s share (as evidenced by her refusal to provide a copy of the valuation report commissioned by her). I note also her ongoing refusal to pay rent in circumstances that can only be interpreted as trying to place maximum pressure on Syrina to settle with her on uncommercial terms.
[27] I am satisfied therefore that orders are appropriately made under s 339(1)(a) of the Act for a sale of the property and division of the proceeds among the co-owners.
[28] In terms of s 343 of the Act I am further invited to:
(a) make orders requiring payment of compensation by the defendant to the plaintiff;
(b) fix a reserve price on any sale; and
(c) make directions in relation to application of the sale proceeds.
[29] In the submissions filed in support of the application for formal proof, counsel also sought orders:
(a) terminating the tenancy in favour of Maryanne; and
(b) granting possession to Syrina on the basis of her undertaking to exercise possessory rights only to the extent required to ready the property for sale.
[30] By Minute dated 22 November 2018 I pointed out to counsel that I did not consider the High Court had jurisdiction in this respect having regard to the provisions of ss 50, 77(2)(g) and 82 of the Residential Tenancies Act 1986. That position is now accepted by counsel who advises that application will imminently be made to the Tenancy Tribunal to terminate the tenancy.
[31] In my Minute I further inquired whether Syrina sought to have her present application adjourned pending such order from the Tribunal. In response, counsel submits that a sale order should be made now because it is possible that the Tenancy Tribunal proceedings will result in arrears being brought up to date and that no order terminating the tenancy will then be made. In that event Syrina would seek to have the property sold as an investment property with a fixed term tenancy expiring 20 December 2021.
[32] I consider such proposals fairly balance what I have concluded is Syrina’s entitlement to orders under s 343 of the Act and Maryanne’s rights under her residential tenancy agreement. However, because there is some uncertainty as to how precisely matters will unfold before the Tenancy Tribunal it is appropriate to reserve leave to Syrina to apply for such variation and/or any additional orders as may be necessary to effect the “clean break” the parties, in my view, require.
Compensation
[33] In my view Syrina is appropriately compensated from Maryanne’s share of the sale proceeds for half of the contributions identified in para [16] above. The total of such compensation is $919.70.
[34] In addition she is, in my view, also appropriately compensated for Maryanne’s occupation of the premises.4 I assess the value of that compensation as $7,850.00, as of 31 July 2018, plus an additional sum of $150.00 per week for every week thereafter until the defendant vacates the property. This equates to Maryanne’s unpaid rent under the tenancy agreement. Such obligations may, however, be made good in the context of Syrina’s intended Tenancy Tribunal proceedings, in which case this aspect of compensation is to be limited to such additional rental (if any) as has not been paid at the point the proceeds of sale are split.
Reserve
[35] As indicated, the current valuation of the property for rating purposes is
$148,000, and the most recent real estate agent’s appraisal recommends a listing price of $250,000 and sale within the range of 92–96 per cent of that sum. To allow for any adjustments in the market since that time I consider an appropriate reserve price in respect of the sale to be $225,000. However, in terms of the leave which I am reserving to Syrina, she may seek a variation to this reserve price if, after reasonable endeavours to sell the property, the reserve I have fixed is considered unachievable. I accept that latitude should be allowed in terms of whether the sale is conducted by private treaty or auction process.
Disposition of sale proceeds
[36] The submissions of counsel propose that the sale proceeds be applied in the following order:
4 Section 343(f) of the Act.
(a) The relevant costs of sale, including legal conveyancing fees, advertising, auctioneer and real estate agent’s costs and any costs associated with representation of the property for sale.
(b) Reimbursement to Syrina of the sum of $8,769.70 in respect of contributions and unpaid occupation rent together with the sum of $150 per week for every week after 31 July 2018 until the defendant ceases occupation.
(c) The balance to be paid to Syrina and Maryanne’s nominated bank accounts in equal shares subject to the order as to any order as to costs in the present proceedings.
[37] There is in my view an illogic in that proposal in that to compensate Syrina properly for Maryanne’s unpaid contributions and Syrina’s entitlement to an allowance under s 343(f), compensation needs to be paid from Maryanne’s half share, not the nett sale proceeds prior to division. In Bayly v Hicks the Court of Appeal observed that the Court’s broad discretion on a s 339 application could include orders and directions different from those sought by the parties.5 Ordinarily there would need to be an opportunity to comment on the Judge’s own proposals,6 but I consider that unnecessary in the context of the error I have identified because the change is to Syrina’s benefit and Maryanne has taken no steps in this proceeding.
[38] The orders made out at the conclusion of the judgment reflect what I consider to be the correct approach to reimbursement.
Costs
[39] Syrina seeks costs on her application. In her counsel’s initial memorandum, these included costs of $1,878 on an unsuccessful earlier application to commence the proceedings by way of originating application. However, after discussions between counsel and the Bench during the course of the formal proof hearing this aspect of the application was abandoned.
5 Bayly v Hicks [2012] NZA 589[2012] NZCA 589; , [2013] 2 NZLR 401 at [27].
6 At [34].
[40] I accept, however, the balance of the plaintiff’s costs calculations totalling
$12,427 including disbursements. These are particularised in the schedule attached to this judgment.
[41] In addition, the plaintiff claims an uplift of 30 per cent on this costs award under r 14.6.7 Because the matter proceeds by way of formal proof and therefore none of the factors in r 14.6(3)(b)(i)–(iv) are engaged, the plaintiff relies on r 14.6(3)(b)(v), which permits an uplift where the party against whom costs are sought has failed:
... to accept an offer of settlement under r 14.10 or some other offer to settle or dispose of the proceeding.
[42] I do not consider such an increased costs award appropriate. Syrina has made two offers to purchase the property. The first was at a level of half the current Council rating valuation. Significantly, when Maryanne made an offer to purchase the property for a broadly similar amount it was unacceptable to Syrina. So Syrina cannot be heard to say therefore that Maryanne’s rejection of her offer was unreasonable.
[43] The second offer was that Maryanne purchase her share for $125,000 (which included allowance for Maryanne’s various contribution and arrears). That appears to have been a reasonable offer but I do not have any information from which I can safely conclude that Maryanne had the financial resources to purchase on these terms. Again therefore I cannot be satisfied that the offer was declined “without reasonable justification”.
[44] I accept that the defendant’s conduct has, since she obtained occupation of the property, been obdurate but increased costs awards are, apart from their role in relation to settlement offers, primarily focused on obduracy in the conduct of proceedings. Such is not the case here.
[45] I therefore decline the application for increased costs.
7 High Court Rules 2016, r 14.6.
Result
[46] I make the following orders:
(a) That the plaintiff is authorised to sell the property situated at 11 Cadman Street, Waharoa, being Lot 3, Deposited Plan SA 21C/1176 South Auckland 3024 on the following terms:
(i) The plaintiff is to appoint L J Hooker Matamata as real estate agent to act on the sale.
(ii) The property is to be sold by either auction or by private treaty and in either case at a minimum sale price of $225,000.
(iii) In the absence of orders by the Tenancy Tribunal terminating the residential tenancy in favour of the defendant (or the tenancy being otherwise lawfully terminated), the property is to be sold subject to the existing residential tenancy agreement dated 4 February 2017.
(iv) No sale may be made to the plaintiff or interests associated with her without further application to the Court.
(v) The plaintiff is authorised to engage Norris Ward McKinnon Solicitors to act in respect of the sale.
(vi) The plaintiff is authorised to sign all such documents as are necessary to effect a transfer of the property.
(vii) Norris Ward McKinnon are authorised to act on the sale, transfer and subsequent division of the sale proceeds.
(b) That the proceeds of sale be applied as follows:
- (i) To the plaintiff by way of reimbursement (or by way of direct payment to relevant third parties) of the costs and expenses associated with the sale including legal, conveyancing fees, advertising, auctioneer and real estate agent’s costs, payment of arrears of rates, water rates and insurances, and any required maintenance to the property.
(ii) The nett sum after deduction of such costs to be divided into two equal portions.
(iii) From the defendant’s 50 per cent share, the following sums to be paid to the plaintiff:
(iv) The balance held to the plaintiff and defendant’s respective accounts is to be then paid to them or at their direction.
[47] I reserve leave to the plaintiff to apply to the Court for a variation of these orders to the extent necessary to give practical effect to the sale and to subsequent division of the proceeds thereof.
Muir J
Schedule of Costs and Disbursements
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Step
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Description
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Days
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Daily
Rate
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Total
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Statement of Claim
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1
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Commencement of proceedings by
plaintiff
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3
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$2,230
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$6,690
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40
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Preparation of written submissions
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1.5
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$2,230
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$3,345
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41
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Preparation by applicant of bundle for
hearing
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0.6
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$2,230
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$1,338
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42
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Appearance at hearing for sole or
principal counsel
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0.25
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$2,230
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$5S8
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29
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Sealing order or judgment
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0.2
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$2,230
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$446
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Sealing fee
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$50
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Costs and disbursements
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$12,427
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