Crosby v Levin Mall Limited HC Palmerston North CIV-2011-454-301

[2011] NZHC 1287

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2011-454-301

UNDER  the Land Transfer Act 1952

IN THE MATTER OF     an application that a caveat not lapse under section 145A Land Transfer Act 1952

BETWEEN  SOPHIA CROSBY Applicant

ANDLEVIN MALL LIMITED Respondent

Judgment:      12 October 2011 at 11:00 AM

DECISION OF ASSOCIATE JUDGE D.I. GENDALL

This Decision of Associate Judge Gendall is delivered on 12 October 2011 at 11.00 am under r 11.5 of the High Court Rules.

Solicitors:           GCA Lawyers, PO Box 3241, Christchurch

Sainsbury Logan & Williams, Solicitors, PO Box 41, Napier

S CROSBY V LEVIN MALL LIMITED HC PMN CIV-2011-454-301 12 October 2011

[1]      In  a  decision  I  gave  in  this  matter  on  2  June  2011  on  the  plaintiff’s application for an order pursuant to s 145A Land Transfer Act 1952 that a caveat not lapse, I dismissed the application and ordered that the caveat was to lapse forthwith.

[2]      At para [69] (b), (c) and (d) of that 2 June 2011 judgment I made further orders in addition to the order made at [69] (a) lapsing the caveat as follows:

[69]       That said, the following orders are now made in this proceeding, given that the application by the applicant to sustain the caveat has effectively failed:

(a)      An order is now made that Caveat 8724905 affecting certificates of title 26C/119, 26C/120, 8C/1236, 8C/1237, 8C/1238, 8C/1239,

8C1240, 8C1241 is to lapse forthwith.

(b)       A further order is made that following settlement of the sale of the Levin Mall property to Armagh Investments over which the caveat has been registered, the “net sale proceeds” as defined below are to be paid into this Court and are to be held undisbursed until further order of this Court is made.

(c)       As to the “net sale proceeds” referred to above, this is to represent the amount agreed between the applicant and the respondent as the true available net sale proceeds equity from the sale of the Levin Mall property following settlement with Armagh Investments after repayment of outstanding mortgages and proper charges secured against  the  property  together  with  all  reasonable  costs  and expenses on such sale and on properly preparing the property for sale.  In the event that the parties are unable to reach agreement upon this “net sale proceeds” figure, then on 24 hours notice they are to file (sequentially) memoranda in this Court on the issue and in the absence of either party indicating they wish to be heard on the matter this Court will decide what is to represent the “net sale proceeds” figure to be retained.

(d)       A further order is made that, once the “net sale proceeds” figure is paid into this Court, then the applicant is with all reasonable speed to take proceedings to establish what claim she may have with respect to those “net sale proceeds”.   Leave is reserved to any party to approach the Court further or on 48 hours notice if further directions on that aspect are required.

[3]      An issue now appears  to have arisen  over what  represents the “net sale proceeds” figure for the Levin Mall property to be paid into Court.

[4]      Counsel for the parties have filed Memoranda on this issue which indicate that they have been unable to agree on the “net sale proceeds” figure.  They now turn to the Court to determine this issue.

[5]      The sale of the Levin Mall to Armagh Investments Limited it seems was settled on 3 June 2011.   A “trust statement” from Sainsbury Logan & Williams, solicitors to the vendor company, Levin Mall Limited, has been attached to the Memorandum from Mr Gray, counsel for the respondent dated 9 June 2011.  This trust  statement  purports  to  show  a  very  modest  net  sale  equity  figure  balance available of $3,673.90.  The statement does show with respect to the total sale price for the Levin Mall property of $5,275,000.00 a number of matters.  First it notes that

$400,000.00 by way of initial sale deposit was paid directly by the real estate agents concerned to the company Levin Mall Limited and secondly, following final settlement of the sale of the property and payment of certain amounts (being real estate agent’s commission of $106,734.37, legal costs on sale, repayment of a first mortgage to New Zealand Guardian Trust of $4,506,520.40 and a second mortgage repayment to Central Mortgage of $111,578.95), a net sale proceeds figure of only

$3,673.90 was available from the sale.

[6]      This, of course, ignored the fact that the $400,000.00 deposit amount had been paid directly to Levin Mall Limited from the real estate agents earlier.  The fate of this deposit is not known it seems, although Mr Gray for the respondent states at [10] of his 9 June 2011 memorandum filed in this proceeding:

Our instructions are the monies have been spent on or in connection with the property.

[7] The question now arises for determination what amount by way of “net sale proceeds” should be paid into this Court pursuant to the order made at para [69] (b) of my 2 June 2011 judgment, noted at [2] above?

[8]      That “net sale proceeds” figure was defined at para [69] (c) of my 2 June

2011 judgment where I stated that it was to represent:

.... the amount agreed between the applicant and the respondent as the true available net sale proceeds equity from the sale of the Levin Mall property following settlement with Armagh Investments after repayment of outstanding mortgages and proper charges secured against the property together with all reasonable costs and expenses on such sale and on properly preparing the property for sale.

[9]      The  expression  “net  proceeds”  is  specifically  defined  in  Blacks  Law

Dictionary (Ninth Edition) at p. 1325 to mean:

The amount received in a transaction minus the costs of the transaction (such as expenses and commission).

And Blacks Law Dictionary (Ninth Edition) goes on to define “proceeds”

(also at p. 1325) as:

1.          The value of land, goods or investments when converted into money; the amount of money received from a sale.

[10]     This tends to suggest that the “net sale proceeds” of the company’s Levin property here are represented by the total sale price/value of the property itself, minus mortgages and other charges secured against the property, and minus the real estate agents, legal and other costs of the sale transaction.

[11] This is reinforced in the present case as I see it by my definition of “net sale proceeds” at [69] (c) of my 2 June 2011 judgment noted at [2] above. This definition adds that, as this is to be “the true available net sale proceeds equity from the sale of the Levin Mall property” it is effectively the total gross sale price received for the property, less repayment of the outstanding mortgages (to New Zealand Guardian Trust and Central Mortgage) and real estate agents commission on the sale together with proper and reasonable legal costs and expenses regarding the sale. One final point however is important to consider here. Para [69] (c) does go on to note that “reasonable costs and expenses ... on properly preparing the property for sale” are also to be deducted from the gross sale price figure. There is nothing before the Court of any detailed kind, however, to address this final aspect.

[12]     What is before the Court, as I have noted above, is the company’s solicitors trust statement which outlines as the expenses and repayments deducted only the following real estate agent’s sale commission, the first and second mortgage repayments, an amount for outstanding rates and penalties on the property, and a suggested deduction for legal fees and disbursements on the sale.

[13]     What  is  omitted  from  these  figures  however,  as  I  have  noted  is  any unrecovered  amount  claimed  for “reasonable costs  and  expenses ...  on  properly preparing the property for sale.”

[14]     As I understand the position, a significant sum has been suggested by the company as representing these costs.  There is no information or verification before the Court however, either independent or otherwise, of these specific unrecovered costs of “preparing the property for sale”.

[15]     In my view this is an important omission here.  These unrecovered amounts should  be disclosed as  they clearly go  to  a proper assessment  of the  “net  sale proceeds” figure.  The Court must have this information before it can make a proper assessment of what is the appropriate “net sale proceeds” figure here.

Directions

[16]     A direction is made therefore that, within 15 working days of this decision, the respondent, Levin Mall Limited, is to provide to the Court by way of Memorandum or affidavit (filed at the Court and served on the applicant via the Official Assignee) a detailed assessment of the unrecovered “reasonable costs and expenses .... on properly preparing the property for sale” claimed by the respondent here, together with any independent verification of such costs which may exist.  This is also to take into account any net rental revenue received by the respondent for the property prior to settlement of the sale, over and above mortgage interest and other outgoing expenses properly paid and deducted from that revenue, which net rental would have been available to apply towards those costs of “preparing the property for sale”.

[17]     The applicant is then to have a period of a further 15 working days from that date  to  file  and  serve  any  response  Memorandum  or  affidavit  she  may  wish regarding these aspects.

[18]     The respondent is then to have a further 5 working days from that date to file and serve any reply.

[19]     All that material is then to be referred to me for further consideration of what is truly the “net sale proceeds” figure which should be paid into Court in terms of para [69] (b) of my 2 June 2011 judgment.

‘Associate Judge D.I. Gendall’