Ball v Chesmar HC Christchurch CIV 2009-409-109

[2010] NZHC 1859

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2009-409-00109

BETWEEN  JOHN GORDON BALL Plaintiff

ANDELIZABETH ROSE CHESMAR Defendant

Hearing:         18 October 2010

Counsel:         G M Brodie for Plaintiff

M M Bell for Defendant

Judgment:      20 October 2010

JUDGMENT OF FOGARTY J

[1]      The plaintiff and the defendant are brother and sister.   They are both the executors and trustees of the estate of their mother, Mrs Mary Ball, together with a third trustee, Mr David Riley, a Christchurch solicitor.

[2]      Subject to the payment of her debts and funeral expenses, Mrs Ball left her estate to the plaintiff and the defendant as tenants in common in equal shares.

[3]      The principal asset in the estate was a house in Bishopdale.  Mrs Ball owned a half share of that house with her daughter, Ms Chesmar, being the other co-owner.

[4]      The plaintiff is entitled to half of the net value of the estate of his mother, and in approximate terms that is broadly equivalent to one-quarter of the net value of the

Bishopdale property.

BALL V CHESMAR  HC CHCH CIV 2009-409-00109  20 October 2010

[5]      Mrs Ball died on 30 June 1998.  Since then her daughter, Ms Chesmar, has been residing in that property, and over some considerable period of time with her husband.  Over the period of 13 years or so her brother has been endeavouring to be paid out his share of the house.  He has now brought these proceedings in the High Court to achieve that end.

[6]      The parties agree that immediately prior to the earthquake, for September, the house was worth about $280,000.  (His valuer says $279,000, but in the round, both valuations being opinions, there is no material difference between a valuation of

$279,000 versus $280,000.  I adopt the latter figure.)

[7]      Both parties agree that at the date of death there was a mortgage owed by Mrs Ball and her daughter, the defendant, to Westpac in the sum of $117,161.  The interest on this mortgage has, over the years, been paid by the defendant.  Down to

1 October 2010 she has made interest payments of $129,712.98.  She has also paid rates totalling $16,110.45 and insurance of $3,194.02.     She has spent money on repairs and maintenance collected at $3,582.66.

[8]      The parties’ valuers differ on the rental value of the property.  It is inherently difficult to assess the income stream capable of being collected from the property had it been rented over the last 13 years.  The plaintiff’s valuer has approached the exercise by looking at the range of rentals recovered in Bishopdale/Brydnwr/Papanui over the period of time identifying a lower quartile and an upper quartile and a median range and then set about deriving a mean.  That it seems to me carries within it the assumption that this is a property that fits somewhere in the middle.  But on that assumption the mean rental from 1 March to 31 August 2010 would be $324 per week.  On the other hand, the defendant’s valuer inspected the property and is of the view that the rent recoverable for the property in 2010 is somewhere between $270 and $290 per week.

[9]      Mr Brodie argued for a total lost annual rental over the last 12 years three months of $180,000 of which one-quarter amounts to $45,000.  But that calculation is based upon the mean calculations of his valuer and produces a higher figure than that derived by Mr Bell for the defendant who came to a figure of $41,052.72.

Mr Brodie argued that from any lost rental income there should be credit for one- quarter of the money paid by Elizabeth over the years.  Accepting Mr Bell’s figures (which were more up to date) but not including a management fee of 8%, the total paid by Ms Chesmar is $152,600 of which one-quarter is $38,150.

[10]     Both parties agreed that it was appropriate to derive the estate’s share in the equity of the property by taking current valuation less the sum owed at the date of death.  That is $280,000 less $117,161 which is $162,879, of which a quarter share is

$40,709, which I round to $41,000.

[11]     Mr Bell argued that in round terms the payments made by Ms Chesmar over the years offset any entitlement by Mr Ball for a share of lost income by way of a share of rent.

[12]     Mr Bell relied upon the recent decision of Asher J:   Dyas v   Elliott HC Auckland CIV 2008-404-001021 16 April 2010.  That case involved a couple who had lived together in a de facto relationship, the man occupying the property for a period following their separation.   The case was argued in the context of an application for an order of sale and for a fair occupation rent under s 343(f) of the Property Law Act 2007.  Asher J said at paragraph [18]:

[18]      The court’s discretion under s 343(f) is wide and unfettered, but these cases assist in applying it.  Under that section an absent co-owner may obtain occupation rent from the co-owner in possession.   It is not every absent co-owner who can obtain occupation rent from the other.   While it would be unwise to endeavour to set out parameters for the exercise of the discretion, where one co-owner chooses to stay in possession and this makes it not reasonably practicable for the other co-owner to continue to cohabit, occupation rent will usually be ordered.  The position will be different where a co-owner leaves voluntarily, would be welcome back, and it is reasonably practicable for that co-owner to live there.

[13]     Here the statement of claim is likewise lodged under the Property Law Act. There is a procedural difficulty as s 399 is premised on applications by co-owners, defined as a tenant in common or a joint tenant.  There has been no transmission of the title.   But both counsel agree it can also be approached as a claim in equity against Ms Chesmar as a trustee.  As a fiduciary she cannot obtain a benefit from the trust assets to the detriment of the co-beneficiary, her brother.

[14]     Upon either approach, under the Property Law Act or in equity, it is not possible to work out with any precision the financial obligation of Ms Chesmar to Mr Ball.  This is for two sets of reasons.  Firstly, the market value of the house at

$280,000  and  the  rental  values  are  expressions  of  opinion  only,  albeit  by  two experts.  While one can, and I do, have confidence in the expertise of both experts, their views remain at bottom a matter of opinion.  They are agreed on the market value of the property prior to the earthquake, but are in disagreement over the rental capacity.

[15]     The property has been damaged by the earthquake and there has to be a question mark over its market value at the present time.  In the long run its market value ought not to be disturbed by the damage from the earthquake as Ms Chesmar kept the property insured.     Whether or not, however, there will be any residual change in the market value of the property, allowing for the repairs to be done, is conjecture at this stage.  We simply do not know how property values will resettle in Christchurch in the near future.

[16]     It  is  appropriate,  however,  that  I  follow  the  parties  acceptance  that  the property is worth about $280,000 on the basis it can be made good, and accept the justice  of  deriving  25%  of  the  equity  value  at  $41,000,  for  the  purposes  of identifying Ms Chesmar’s obligations to Mr Ball.

[17]     The critical question then is the one posed by Mr Bell as to whether or not the money paid by his client on interest rates, insurance and maintenance should be regarded in the round, as being offset by any share of rental lost by Mr Ball.

[18]     Mr Brodie approached this issue by deducting from his analysis of the annual rental lost by John a sum of $45,000, his calculation of a quarter share of the monies paid by Elizabeth of about $27,000, deriving a balance of $17,000.  But his figures were out of date.  When last year’s payments are taken into account the more reliable

25% figure is $38,000, not $27,000.  Bringing those figures up to date substantially bridges the gap, particularly if the lost rental is reduced from $45,000 closer to the amount argued for by Mr Bell in his calculations of $41,000.  A compromise figure of lost rental would be $43,000.  I think that is fair given the variables.  I then net off

25% of the reasonably reliable figure of monies paid by Ms Chesmar ($38,150) showing a difference of $5,000 approximately, in favour of Ms Chesmar.   In the round, I am satisfied that a fair figure for ms Chesmar to pay Mr Ball as at the date of trial is $46,000.

[19]     In reaching that judgment I have not ignored  the fact that Ms Chesmar will continue in enjoyment of the property subject to the pending relationship property dispute between herself and her husband.  But that is a complication which cannot in justice be brought into account in addressing her relationship with her brother.

[20]     I base Mr Ball’s entitlement to judgment on Ms Chesmar’s obligation as a fiduciary to account to Mr Ball as the co-beneficiary under the trust for the benefits that she has enjoyed since the death of her mother by continual residence and her de facto acquisition of the quarter share of the property which he inherited.   I am reinforced in this approach by the fact that the litigation in the Court proceeded not on whether or not she had any duty to account and/or purchase his share of the estate but rather as to how much she owed him.

[21]     Mr Brodie opened the case pursuing not a judgment sum but rather orders requiring a sale of the property and a distribution of the net proceeds of sale.  He altered his position, quite appropriately, after oral argument.   However, his initial concern, that a cost judgment would not be satisfied and that his client would be forced to additional expense to enforce the judgment by charging orders against the house and obtaining a writ of sale are justified.

[22]     As the oral argument demonstrated, these are difficult times to fairly order an immediate sale of the property.  It is public knowledge that the real estate market is at a standstill in Christchurch post the earthquake.   Counsel before me were of agreement that in theory the benefit of the insurance claim is assignable from the vendor to the purchaser.   However, they equally acknowledge that the fact of assignability might  not  mean  that  the  value  of  a  property would  be  unaffected because it has yet to be repaired albeit it from insurance monies that ought in the normal course of business to become available.

[23]     For these reasons I am satisfied that it would be unfair on the defendant for this Court to make orders immediately forcing a disposal of the property in order to fund the payment due to Mr Ball.

[24]     My response to these concerns is to reserve leave to the plaintiff to apply for an order for sale, either as an application in equity against a co-trustee or for division and sale under the Property Law Act as a remedy complementary to the judgment sum, which application can be made in these proceedings.  They are, to that extent, unresolved.

[25]     There is judgment for the plaintiff in the sum of $45,000.  Leave is reserved to the plaintiff to seek further remedies in these proceedings for an order of sale, and incidental orders thereto.

[26]     I turn to the question of costs.  Mr Bell argued that costs should lie where they fall.  Mr Brodie sought costs emphasising the limited means of his client, who had travelled from Australia for the hearing.  The parties have made offers but have been far apart.  I do not know the figures.  Both parties are of limited means.  They have tried to settle.     I am also of the view that having balanced Ms Chesmar’s contributions to the property over the years against her benefits received as occupier there is a risk of double counting by awarding costs against her on the grounds that she has delayed these proceedings coming to fruition.  I take also into account there has been considerable capital gain over the years.  This has been to the advantage of both of them.  For all these reasons I think costs should lie where they fall.

Solicitors:

Hill Lee & Scott, Christchurch, for Plaintiff (Counsel: G M Brodie) Corcoran French, Christchurch, for Defendant (Counsel: M M Bell)