del la Varis-Woodcock v Thomaes
[2017] NZHC 1041
•19 May 2017
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2015-488-130 [2017] NZHC 1041
BETWEEN VICTORIA JULIETTA VERA DEL LA VARIS-WOODCOCK
First Plaintiff
JANETTE ANN AJANI Second Plaintiff
KEVEN BARTLEY SCHEURICH AND D.G. TRUST CO LIMITED
Third Plaintiffs
Contʼd: …/2
Hearing: 20-21 and 23-24 March 2017 Appearances:
First Plaintiff in person
A P Holgate for Second Plaintiff
G J Warren for Third, Fifth and Sixth Plaintiffs
First, Second and Third Defendants in personJudgment:
19 May 2017
JUDGMENT OF PALMER J
This judgment is delivered by me on 19 May 2017 at 3 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Counsel and self-represented parties:
A Holgate, Barrister, Pukekohe
G J Warren, Barrister, AucklandFirst Plaintiff
First, Second and Third Defendants
DEL LA VARIS-WOODCOCK & ORS v THOMAES & ORS [2017] NZHC 1041 [19 May 2017]
ATNA OKAN and SHANTIMURTI OKAN
Fourth Plaintiffs (withdrawn)
CHRISTOPHER ANDREW GRAHAM and TEREMOANA EMILY JONES Fifth Plaintiffs
GAYHE PATRICIA MARTIN Sixth Plaintiff
ANDLIEF THOMAES First Defendant
JULIA ALABASTER Second Defendant
HAROLD JOHN VAN BLOMMESTEIN
and KATHLEEN JOY LEE Third Defendants
Summary
[1] Kiwi call across the 60 hectare property at 1632 Matapouri Rd, on the hills above Sandy Bay, north of Whangarei. The human interactions are less harmonious. The co-owners are tenants in common – all of them own shares in all of the property. The property was purchased to establish a yoga centre. But there are now many complaints and grievances amongst the co-owners, dating back years, over actions taken and words said. There are allegations of lock outs, physical altercations, unauthorised renting out and construction of buildings. Police have been called. Court orders have been sought.
[2] The co-owners had intended to subdivide the property. They allocated lots between themselves, and some have built dwellings, consented and un-consented. But subdivision has never happened. Furthermore there is a proposal to change the Whangarei District Plan later this year, after which subdivision may become more difficult. There are currently eight sets of co-owners who agree the current ownership and use of the property is not sustainable but do not agree on the solution:
(a) the first and second plaintiffs, holding a 25 per cent share of the property, want the whole property sold;
(b)the third, fifth and sixth plaintiffs, holding a 50 per cent share of the property, want orders requiring they buy out the defendants or, alternatively, the property be divided into three blocks with the defendants at the front, the third plaintiff in the middle and the fifth and sixth plaintiffs having the back block; and
(c) the three defendants, holding a 25 per cent share, want the property divided into two 30 hectare blocks, with them buying out the first and second plaintiffs’ shares, or alternatively three 20 hectare blocks with the front block being owned by the first and second defendants, the middle block by the third plaintiff and second defendant and the back block by the third, fifth and sixth defendants.
[3] I consider it would not be fair to the plaintiffs who wish to stay or to the defendants, who together own 75 per cent of the property, to require them to sell their shares, if a reasonable alternative option is available. I order the shares of the first and second plaintiffs to be bought by the remaining co-owners, in proportion to their existing shares, on the basis of a new independent valuation of the whole property.
[4] I do not consider it would be sustainable to divide the property in such a way that the dysfunctional relationships I identify would continue between co-owners. I propose a division into three blocks of at least 20 hectares allocated to:
(a) the fifth and sixth plaintiffs (the back block); (b) the third plaintiff (the middle block); and
(c) the defendants (the front block).
[5] I consider that division and allocation of the property would best mitigate the prospect of dysfunction between future co-owners, recognise the extent of their shareholding and recognise (most) of their historical attachments to different parts of the property. I also make other orders regarding specific issues raised by the parties regarding rates and the costs of a previous subdivision application.
[6] My proposal to divide the property is an interim one. It depends on planning consents being obtained and other necessary preparatory steps being undertaken relatively quickly. If any of the new proposed owners do not wish to be involved in the proposed division of the property, or wish to comment on the details of the proposed subdivision, they need to file a memorandum with the court and serve it on the other parties as soon as possible and, at the latest, within 15 working days of the date of this judgment, i.e. by 5 pm 12 June 2017.
The Law
[7] In Bayly v Hicks the Court of Appeal noted the remarkable legal fact that, until the Property Law Act 2007 (the Act) was passed, the New Zealand courts’ jurisdiction to make orders in respect of deadlocked co-owners of land was limited to the power to partition under the Partition Acts, passed in England in 1539 and 1540.1
[8] Part 6 of the Act now outlines special powers of the Court. Subpart 5 empowers the Court to make decisions about co-owned property. Under s 341 any co-owner may apply for a court order. Section 339 empowers the Court with “a broad discretion”, in the words of the Court of Appeal,2 to order the sale, division or purchase of a co-owned property:
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
1952; 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.
1 Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [23], citing the Partition Act 1539 (Eng)
31 Hen 8 c1 and the Partition Act 1540 (Eng) 32 Hen 8 c 32.
2 At [25].
(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)).
(6) An order under subsection (1)(b) (and any related order under subsection (4)) may be registered as an instrument under—
(a) the Land Transfer Act 1952; or
(b) the Deeds Registration Act 1908; or
(c) the Crown Minerals Act 1991.
[9] Sections 340 and 339(2)(b) make clear an order to divide the land does not override the Resource Management Act 1991 (RMA) regime regulating subdivisions. But this does not require all RMA issues to be resolved before a hearing. A court may make an interim order “setting out the court’s interim view as to the appropriate division, giving the parties an opportunity to obtain the necessary consents or provide evidence as to whether such consents could be obtained”.3
[10] Section 343 empowers the Court to make further orders:
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
3 At [30].
(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).
[11] Section 342 sets out the considerations to which a court must have regard in making orders under ss 339 and 343:
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:
(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:
(f) any other matters the court considers relevant.
[12] In Bayly v Hicks the Court of Appeal stated “there is no requirement that the orders made can only be those that were specifically sought by a party”.4 Of course, a court must act in accordance with the principles of natural justice and fairness. As the Court stated:5
Under this new broad discretionary regime it is appropriate for a judge to stand back from the submissions and proposals of the parties, and consider what, on an overview, taking into account the relevant considerations, is the most just and practical way through the impasse before the court, even if the answer may not reflect the orders sought by the parties. By definition the
4 At [27].
5 At [32] and [34].
cases that come before the court arise where parties are locked into an ownership position which they cannot resolve because of the positions they have taken, and where a way out may be by a path neither has to that point contemplated.
…
Of course, any consideration on the part of a judge of orders that are different from those actually sought and argued by the parties must be clearly notified to the parties and then, after they have had suitable time to prepare, they must be heard on the new proposal.
[13] The sorts of judgements required of courts in exercising the power to order the sale or division of a property can involve finely balanced competing interests.6
Sometimes, all options will be disliked by at least one of the parties. The court is to strive to reach the most just solution it can.
The property and the parties
The property
[14] Legally, the property at 1632 Matapouri Rd, Matapouri, in the Whangarei
District, comprises 61.8684 hectares in Lot 1 DP195966, Lot 3 DP192111 and Lot 6
DP181362 in Certificate of Title NA 122A/360 in the North Auckland Land Registration District. There is a photograph with a superimposed map at Figure 1 at the end of the judgment. It shows the property, divided into 15 “lots”, has a rough U shape.7 It adjoins other properties with other deposited plan numbers as shown on that map – notably Lot 1 DP 203515 and Lot 1 DP 199565, both owned by the second plaintiff, which the property at issue encircles on three sides.
[15] The 15 “lots” marked on the map have no legal status. They were prepared as part of a subdivision proposal that was abandoned. But they provide a useful means of referring to different parts of the property to which co-owners feel particular attachment. At the front of the property, from Matapouri Rd, are lots 1 to
5 along a roadway, marked on the map. The roadway deteriorates above that. The property contains a relatively deep gully in lot 11 and a number of ridges with
excellent views of the surrounding countryside and out to sea from lots 6 to 10 at the
6 Gonsalves v Williams [2014] NZHC 2376.
7 The map was attached as exhibit J to the affidavit of the first defendant dated 7 March 2017. It was used by consent to provide orientation during the site visit.
back of the property. The property is mostly native bush, with approximately 13 hectares in rough grazing. The site visit I undertook with the litigants on 21 March
2017 was invaluable to me understanding the nature of the property.
[16] The 2015 rating valuation was $690,000. Mr Alistair Nicholls, of Telfer Young, was instructed by the third plaintiff to provide an independent valuation of the property. As at 17 March 2016 his valuation was $925,000 (GST incl), with land at $750,000 and improvements at $175,000. This was an estimated market valuation of the whole property. By comparison, his valuation based on a hypothetical subdivision came to $922,500. By way of affidavit, Mr Nicholls updated the valuation on 17 March 2017 on the basis the market may have risen by five per cent but no more than eight per cent. On that basis the current market valuation of the property would be around $971,250 to $999,000.
[17] I gave leave for the first plaintiff also to provide a valuation, after the trial. She instructed Mr Russell Garton, of Garton and Associates Ltd. His valuation, as at
10 April 2017, was $1,090,000 (GST incl) based on a sales comparison, with land at
$890,000 and improvements at $200,000.
Co-ownership
[18] The property was originally owned by the second plaintiff and her former husband. In 1989 the property was sold as part of a matrimonial property settlement to a yoga company associated with the fourth plaintiffs (70 per cent), as well as the third plaintiff (20 per cent), and to another person (10 per cent). They intended to establish a yoga retreat and teaching centre. They named the property Mana Aroha. They offered investors the opportunity to purchase 10 per cent shares in the property.
[19] The property is now owned by the plaintiffs and defendants as tenants in common – each owns a specified share of all of the property. At law, they are equally entitled to enjoy all of the property and may not exclude the other co-owners from it. But contributions made by one co-owner that enhance the value of the
property may be taken into account on sale or purchase by one co-owner of another’s
share.8
[20] The co-owners’ original intention was to subdivide the property. In 1992 two versions of a Co-Owners’ Deed, dated 10 May 1992 and 29 November 1992 set out how the co-owners intended to use the property.9 Relevantly, in summary, the Deeds provide:
(a) those executing the Deed will hold their interest in the land subject to its terms and conditions provided that it only comes into effect if all intended co-owners execute the Deed by either 14 April 1992 (in the May Deed) or an unspecified date (in the November Deed);
(b)each co-owner’s share carries the right to build one dwelling on the property and to become the individual owner of a area of land of 0.61 of a hectare (in the May Deed) or 0.80938 of a hectare (in the November Deed);
(c) the allocation of the building sites and freehold areas will be agreed by a 70 per cent vote or, failing that, by ballot;
(d)the top of the “knoll” near the centre of the west boundary will not be fenced and no structures are to be built there so it may be accessible to all co-owners;
(e) the costs of subdivision of an area will be borne by the co-owner to which it is allocated;
(f) the co-owners shall contribute equally to the rates and other outgoings required by law with decisions being made by a 70 per cent majority
vote of the co-owners (one vote per share); and
8 Bunyan v Parish [2016] NZHC 2225 at [32]-[33].
9 The primary substantive difference is in the size of the freehold parcel to be allocated to each owner, apparently as a result of changes in planning requirements.
(g)a co-owner who wishes to sell his or her share must give written notice to the other co-owners who will have first option to purchase and if no co-owner wishes to purchase at market valuation within 30 days, the share may be sold to any other party subject to them agreeing to the Deed and subject to approval by 70 per cent of the other co-owners, which will not be unreasonably withheld.
[21] Consistent with the Deeds, there is evidence the co-owners selected sites to which they intended to obtain individual freehold titles on subdivision. It seems the intention to subdivide may have been contractually linked to some of the sale and purchase agreements by which co-owners acquired their interest in the property. But enforcement of such terms is not at issue in this proceeding.
[22] All current co-owners signed one of the Deeds except the first plaintiff who never signed either. The Deeds are not legally valid because not all of the co-owners signed them meaning, according to their terms, they did not come into effect. Also, the date by which the November Deed required signatures appears never to have been specified. And, in any case, the formal requirements for creation of a Deed under s 9(7)(a) of the Act have not been complied with since several co-owners witnessed each others’ signatures.
[23] In my decision, I take into account the terms of the Deeds, including the intended allocation of proposed sites for the purpose of future subdivision. That is because there is a reasonably consistent view amongst co-owners that the Deeds provide guidance on how they should deal with the property:
(a) The first plaintiff says she did not sign either version of the Deed, it was improperly executed and it has never been consistently respected or upheld.10 But her evidence is she “respected the spirit of cooperation represented by the Deed and abided by it”.11 She cites the
Deed in support of her arguments.12
10 First plaintiff ’s affidavits of 27 July 2016 at [3] and 15 December 2016 at [11].
11 First plaintiff ’s affidavit of 27 July 2016 at [3].
12 For example, first plaintiff ’s affidavit of 15 December 2016 at [8].
(b)The second plaintiff notes the November Deed was flawed in its execution since parties witnessed other parties’ signatures and no dates were inserted so the terms could not be fulfilled.13 She signed the Deed and considers the vast majority of owners “respected the basic model” of the Deed.
(c) The third plaintiff ’s evidence is the Deeds “have either directly or through conduct been acknowledged as the overarching method of governance for the Property”.14
(d)The fifth plaintiffs consider their understanding of the Deeds “was what drew [them] to consider this place as a backdrop for [their] family’s upbringing”.15
(e) The sixth plaintiff agrees the Deeds are unclear and have been
inadequate but characterises them as “our working agreement”.16
(f) The first defendant says condition 15 of her purchase agreement of the property incorporates the “co-owners agreement” to be executed contemporaneously. She cites the Deeds in support of her May 2016 preferred outcome.17
(g) The second defendant supports the evidence of the first defendant.
(h)The third defendant suggests the Deed provides the framework all co- owners agree would guide their dealings with the property.18
The parties and the property
[24] In accordance with the Deeds, the co-owners each associate their ownership shares with particular “lots” they chose. For convenience, one version of these lots
13 Second plaintiff ’s affidavit of 25 August 2016 at [13].
14 Third plaintiff ’s affidavit of 7 February 2017 at [15(1)].
15 Fifth plaintiffs’ affidavit of 1 September 2016 at [2].
16 Sixth plaintiff ’s affidavit of 23 August 2016 at [24].
17 First defendant’s statement of preferred outcome dated 30 May 2016 at Facts [2].
18 Third defendant’s affidavit dated 15 March 2017 at [32].
is marked in Figure 1. Each of the co-owners hold the following undivided shares and associate their ownership with the following lots:
(a) The first plaintiff has a 20 per cent share which she acquired in two 10 per cent shares in 1993 and in 2004. It is associated with lot 9. She put an ex-dental clinic on lot 9 but it was rendered uninhabitable by a tornado in 2008 and is not currently used or consented.
(b)The second plaintiff was the original owner of the property. She bought a five per cent share (half of a 10 per cent share with the second defendant) which, in 1992, became associated with lot 7. She also remains the owner of the adjoining, partly encircled, land (Lot 1
DP 203515).
(c) The third plaintiff was one of the original purchasers and now owns a
30 per cent share of the property associated with lots 2, 5 and 8.19 He selected lots 2 and 5 in 1992. He sold the share associated with lot 2 but bought it back in 2001. He also bought another 10 per cent share from the fourth plaintiffs in January 2017, associated with lot 8.
(d) The fourth plaintiffs were involved with the original purchase as well.
They sold their 10 per cent share, associated with lot 8, to the third plaintiff in January 2017, after these proceedings began. They have withdrawn from the proceedings.
(e) The fifth plaintiffs have a 10 per cent share, associated with lot 6.
They bought it in 1996 and lived on the property for some eight years. They are tangata whenua, with whakapapa to Ngati Wai. They have an un-consented two storey hut, a temporary dwelling and a building in which they originally intended to home school their children (now
adults).
19 I refer to the third plaintiff in the singular. However, Mr Scheurich and the DG Trustee Co Ltd are trustees of the Yoga Dhari Trust. They own shares in the land, and are parties to the proceeding, in that capacity.
(f) The sixth plaintiff has a 10 per cent share, associated with lot 10. She lives and works in New York in the United States and bought her share intending to build a retirement home.
(g)The first defendant has a 10 per cent share which she bought in 1992, associated with lot 3. She and her late husband moved onto the property in 1997. She has the only consented dwelling on the property, where she lives, which was erected in 2005. The second and fourth plaintiffs objected at the time, and the third, fifth and sixth plaintiffs still maintain, that the consent was obtained fraudulently or deceitfully. She also has an accommodation space attached to a double garage, and a re-locatable cottage she has been letting out (in the face of unhappiness by other co-owners).
(h)The second defendant has a five per cent share (half of a 10 per cent share with the second plaintiff) which she bought in 1992, associated with lot 4.
(i) The third defendants have a 10 per cent share, associated with lot 1.
They bought it in February 2015. They have a transportable building on lot 1, where they live in retirement.
[25] There was some dispute about the status of lot 5, known as “the knoll”. The first and third defendants object to the third plaintiff claiming exclusive use of the knoll. The first plaintiff’s evidence is that the knoll was supposed to be communal and protected from subdivision, citing the Deed.20 The third plaintiff’s evidence is that, as one of the original purchasers, he was given the choice of sites and he chose lots 2 and 5. He acknowledges that during 1989 to 1992 it was used for yogic
meditation but objects that it was never common land. This account is consistent with the evidence of the second plaintiff and the Minutes of a meeting of co-owners of 17 June 2001, as well as with a memorandum by the fourth plaintiffs.21 It is also
consistent with the statement of preferred outcome filed by the second to sixth
20 First plaintiff ’s affidavit of 6 March 2017 at [10].
21 Second plaintiff ’s affidavit of 25 August 2016 at [15]; fourth plaintiffs’ memorandum of 18
March 2017 at [9]-[10].
plaintiffs. On this basis I find the third plaintiff’s share was associated with lot 5, the
knoll.
Dysfunctional relationships
[26] One thing the plaintiffs and defendants appear to agree on is that relationships among many of them are now dysfunctional. As the first plaintiff says, the co- owners are “locked into a dysfunctional, at times violent relationship”.22 As the second plaintiff submitted, “[t]he deterioration in the relationships between the co- owners has been a slow-motion disaster that has moved towards the current deadlock
1 inexorable step at a time”.23 The first, second, and third plaintiffs do not get on
with the defendants and the feeling appears mutual, with each group accusing the other of various malicious behaviours.
[27] In particular, the second and third plaintiffs and the first and third defendants do not get on. This is illustrated by the first defendant’s successful application for a harassment order for 18 months against the second plaintiff, based on offensive emails, coming onto “her property” to write down information and refusing to leave when asked, in the context of abusive messages, and driving into “her property” to
check these proceedings had been served.24 There are additional accounts of
altercations between the second plaintiff and one of the third defendants. The third plaintiff and the first and third defendants each level detailed and strident accusations of improper and underhanded conduct at each other. The first plaintiff also appears to be isolated from the other parties.
The planning context
[28] Mr Nicholls’ independent valuation is based on the current Whangarei District Plan. The property is zoned as “Countryside Environment” by the Plan. Subdivision to a minimum of 20 hectares is a controlled activity and public notification is unlikely for that. Subdivision to a minimum of 10 hectares is a discretionary activity. Only one residential unit may be located on each subdivided
site though additional units may be the subject of application, particularly if native
22 First plaintiff ’s closing statement of 24 March 2017 at [20].
23 Second plaintiff ’s opening synopsis of 19 March 2017 at [8].
24 Thomaes v Ajani [2016] NZDC 3687.
bush on the property is covenanted. Most of the property is considered to be a
Notable Landscape Area under the current Plan.
[29] The evidence given by Ms Katie Martin, the Team Leader Resource Consents at the Whangarei District Council (the Council), suggests upgrading the access to comply with the rules under the current Plan may not be easy, particularly if there are eight users or more. Mr Brett Hood, a planning consultant from Reyburn Bryant, was confident the area of the property was sufficient, “comfortably”, to yield three
20 hectare blocks and still leave enough land for access. Mr Hood considered there was “100 per cent certainty” that subdivision into blocks of 20 hectares or more, qualifying as a controlled activity, would get consent if the application were lodged before the Council changes the plan. He considered it would likely take one month to prepare an application and another one to two months for consent to be granted. He considered an application may cost around $15,000.
[30] Plan changes have been proposed by the Council. Submissions were due by an extended deadline in December 2016. A hearing is likely in mid-2017, possibly around July. The new plan is expected be approved by Council later in 2017 – possibly by October, according to Mr Hood. Under the proposed plan change, if it is adopted, the property would be zoned Rural Production Environment. The discretionary subdivision option would be removed. Most of the property is currently proposed to be zoned as Outstanding Natural Landscape, under which any
subdivision would be discretionary.25 It would be likely subject to public
notification and consent may well be difficult to obtain. The proposed Rural Productive Environment zone is not designed to support an increased level of rural living development. The proposed objectives include “minimis[ing] fragmentation of rural land and promot[ing] allotment sizes that facilitate productive rural land
use”.26
25 More of the property is proposed to be Outstanding Natural Landscape than is currently Notable
Landscape Area.
26 Whangarei District Council PC85A – Proposed District Plan Text (June 2016) at RPE.1.2.5.
The proceeding
[31] This proceeding was commenced by the six plaintiffs jointly filing a statement of claim in October 2015. The defendants individually filed statements of defence. Due to the confusing and vague nature of the statement of claim, and the fact different parties subsequently sought different outcomes, the Court directed an amended statement of claim be filed and served.27 In March and April 2016, two amended statements of claim were filed, one by the first plaintiff and one by the second to sixth plaintiffs. The first defendant filed a statement of defence to the first plaintiff’s amended statement of claim but there appears to be dispute over whether
the statement of claim by the second to sixth plaintiffs was served on the first defendant.
[32] In order to identify exactly what was in issue in this “forward-looking application”, Associate Judge Bell wisely required each of the parties to file a Statement of Preferred Outcome.28 They all did so in mid-2016 and the case management of the proceeding, and the hearing, treated those statements (as updated) as identifying the outcomes sought by the parties. However, much of the evidence subsequently filed in affidavits concerned who had said or done what to whom in the past.
[33] At the hearing I made clear that what was most relevant to my decision was what should happen to the property in the future rather than attempts to rake over the coals of previous disputes between the parties. I invited the parties each to give an opening statement about what orders they sought and why – what was important to them and what was not, what they could live with and what they thought they could not, and what compromises they thought might be fair to everyone. They each did so.
[34] The evidence was admitted by way of affidavit. With one exception, no one sought to cross-examine the other co-owners about their affidavits. I ruled the
27 Minute of Associate Judge Christiansen of 22 February 2016.
28 Minute of Associate Judge Bell of 27 April 2016.
exception concerned a matter of law rather than of evidence.29 We had a site visit on
21 March 2017. I heard evidence from:
(a) a valuer, Mr Brad Sworn of Telfer Young who assisted Mr Nicholls to prepare the valuation in evidence;
(b) the leader of the relevant team at the Council, Ms Katie Martin; and
(c) a planning consultant, Mr Brett Hood of Reyburn Bryant.
[35] The parties gave closing statements and I gave them leave to file and serve final closing written submissions, which they each did.
What the parties want
[36] All of the parties appear to agree the current situation regarding ownership and use of the property is not sustainable. But they do not agree on the solution. Understandably, the positions some of the parties have taken have changed since their original statements were filed. They also changed during the hearing, as more information and views became available.
[37] During the hearing I articulated the key options as I understood them, based on the positions of the parties in their opening submissions:30
(a) sale of the whole property (which I associated with the first and second plaintiffs);
(b) purchase of all the others’ shares by the third, fifth and sixth plaintiffs
(their preferred position);
(c) subdivision into two blocks, front and back (which I associated with the third, fifth and sixth plaintiffs);
29 Minute No 2 of 20 March 2017 at [7]-[9].
30 Minute No 2 of 20 March 2017 at [4]-[6] and Minute No 3 of 21 March 2017 at [2] and [3].
(d) subdivision into three blocks (which I associated with the defendants);
and
(e) purchase by the defendants of all the plaintiffs’ shares (which I associated with the first defendant, though she preferred this less than the three block option).
[38] I also identified an additional possible option: division into two blocks but with the third plaintiff as part of the back block, not the front block.
[39] In closing submissions the parties’ positions had evolved somewhat. The first and second plaintiffs still hold positions that largely coincide, though they were not presented together, favouring sale of the property:
(a) The first plaintiff, holding 20 per cent of the property, wants the whole block sold. She wants to be out of the current entanglements with the property which have caused her financial and emotional hardship. But she considers sale of her share only would not realise the full value of the property which is why she wants the whole property sold. Alternatively, in an option she acknowledges is impossible, she seeks subdivision amongst all co-owners.
(b)In her final written submissions, the second plaintiff, holding five per cent of the property, prefers sale of the whole block and transfer of one and a half hectares of the property as a boundary adjustment to her other property which it encircles on three sides, set-off against the value of her share. Alternatively she wants her share in the property to be purchased by those retaining the property, and the boundary adjustment made. In her closing oral submissions, she indicated she would be happy for the plaintiffs to buy out the defendants so she could do a land swap regarding part of her adjoining property.
[40] Mr Warren represented the third, fifth and sixth plaintiffs who took a common position. In closing, their preference was to buy out the defendants and the
first and second plaintiffs. They would then subdivide the land three ways between themselves. Instead of a two block compromise, by the end of the hearing Mr Warren advised the third, fifth and sixth plaintiffs would accept (though, the written submissions say, “begrudgingly”)31 subdivision into three blocks, with the defendants at the front, the third plaintiff holding the middle block, and the fifth and sixth plaintiffs having the back block. Mr Warren stated that if the property were
split into two 30 hectare blocks, these plaintiffs would want the front block.
[41] The defendants presented separately but their positions also generally coincide. They favour division into either two 30 hectare blocks or three 20 hectare blocks:
(a) The first and third defendants prefer two blocks in order to retain their bush access, with the defendants holding the front block, having bought the first and second plaintiffs’ shares. The third defendants also consider a three block division would be a “workable solution” if the third plaintiff is associated with the back two blocks and the
defendants get the knoll.32
(b)The second defendant prefers three blocks with the front block being owned by the first and second defendants, the middle block by the third plaintiff and second defendant, and the back block by the third, fifth and sixth plaintiffs.
[42] The defendants are also concerned that the outstanding accounts should be paid and they seek advice from the Court on how to resolve other outstanding matters.
Should I order sale, purchase or division of the property?
[43] As the parties all agree, the current dysfunctional situation is unsustainable. I
must order either:
31 Third, fifth and sixth plaintiffs written submissions of 19 April 2017 at [202].
32 Third plaintiffs’ closing submissions of 31 March 2017 at Summary [4].
(a) sale of the whole property;
(b) sale of shares in the property by some co-owners to others;
(c) division of the property amongst some or all of the co-owners; or
(d) a mixture of these options.
[44] I am guided by the purpose of the Act and the considerations it identifies as relevant in s 342. In particular, the need to avoid future dysfunction between co- owners, and the relative extent of shareholdings of the parties, are relevant. As noted above, I also consider the intentions expressed in the Deed, including the allocation of proposed sites and the attachment of each party to particular sites on the property. I take into account the current planning requirements, including the difficulty in subdividing into blocks of less than 20 hectares. And I take into account the proposed changes to planning requirements.
Should the whole property be sold?
[45] The first and second plaintiffs would prefer orders that the whole property be sold. However, together, they only own a 25 per cent share of the property. The remaining plaintiffs and the defendants, together owning 75 per cent, want to remain. The third plaintiff is one of the original owners since the yogic enterprise began and he now owns 30 per cent of the property. The first and third defendants reside on the property and the defendants collectively have a 25 per cent share of the property. As long as a reasonable alternative solution is available regarding the remaining co- owners, I consider it would not be fair and just to the plaintiffs who wish to stay, or to the defendants, to require sale of the whole property.
What should happen to the first and second plaintiffs’ shares?
[46] As far as the shares of the first and second plaintiffs are concerned, I consider the fairest alternative is to order sale of their shares to the remaining co-owners. That is consistent with the second plaintiff’s position. The first plaintiff is concerned she would lose out in terms of value if the property is not sold as a block. I consider
that concern can be addressed by basing the sale and purchase on a new independent valuation, of the whole property, commissioned by the Court. I will ask the Registry to liaise with the parties about the identity of the independent valuer.
[47] The costs of the sales of the first and second plaintiffs’ shares will be borne
by all existing co-owners, in proportion to their current shares.
[48] I do not propose to make any orders regarding the boundary adjustment sought by the second plaintiff. That arises from her interest as an adjoining owner, not as a co-owner of the property. It is something she can pursue with the relevant owners following any division of the property based on this judgment.
Should any of the remaining co-owners’ shares be sold?
[49] For the same reasons as for my conclusions above, if there is a reasonable alternative solution available, I consider it would not be fair to require either the plaintiffs who wish to stay, or the defendants, to sell to the others. That would create an unjustified imbalance in hardship, would be felt to be unjust by the losers and should be a last resort.
What shares should the remaining co-owners acquire?
[50] I consider the shares of the first and second plaintiffs should be bought in proportion to the remaining owners’ shares. I cannot see any reason why the defendants, and not the other plaintiffs, should have preference in being able to buy the first and second plaintiffs’ shares. Sale and purchase in proportion to the existing shares would maintain the relative equity in the property between the remaining co- owners. That would mean the third, fifth and sixth plaintiffs’ share would, collectively, rise from a half share to a two thirds share of the property. The third plaintiff’s share would be 40 per cent. The fifth and sixth plaintiffs’ share together would be just over a quarter of the property. The defendants’ shares would rise from a quarter to a third of the property.
How many blocks?
[51] The trickiest question is how to configure the division of the property, taking into account the relationships between the remaining co-owners. How many blocks should there be? To whom should they be allocated? Where should the boundaries be drawn?
[52] I do not consider it would be sustainable to divide the property in such a way that those involved in the dysfunctional relationships identified above would continue to own land in common with each other.
[53] Sale of the first and second plaintiffs’ shares means they will not continue to be co-owners with anyone. Of those remaining, the third plaintiff and the defendants clearly need to be separated. I asked counsel for the third, fifth and sixth plaintiffs, and each of the defendants personally, whether they could get on with each other in the groups they proposed. They assured me they could. In particular, the defendants assure me they are happy to continue as tenants in common with each other – even though the first defendant already has the only consented dwelling that would be ordinarily allowed on a block. And there seems to be no reason why the fifth and sixth plaintiffs could not continue as tenants in common with each other, possibly with the third plaintiff.
[54] Planning requirements mean subdivision into blocks under 20 hectares is unlikely to be feasible. So division must be into two blocks or into three blocks. Mr Hood, the planning witness, was sure division into three blocks of just over 20 hectares each would be possible, even taking into account the need for access. A division into two blocks would be less expensive in terms of access requirements. But it may also exacerbate the potential for future conflict – over access to sites within the upper block and because of the number of co-owners. Division into three blocks is the solution favoured by all the remaining plaintiffs. The defendants say they proposed division into three blocks two years ago but it was rejected. The second defendant still favours it. The third defendants consider a three block solution would be workable.
[55] Having regard to the defendants having a third share in the property and the remaining plaintiffs a two thirds share, and the nature of the relationships between them, I consider the property is most fairly divided into three blocks with the defendants on one block and the plaintiffs having the other two, in some combination.
[56] I have considered the points made by several parties that even being owners of adjoining properties may mean the dysfunctional relationships between some of the parties would continue. I acknowledge that is possible. The law cannot fix bad relationships. But the relative certainty of property rights that comes with division will remove potential flashpoints that are inherent in co-ownership.
[57] Legally, being a tenant in common means you own an undivided share of all of the property. If a co-owner wishes to build separately they will need to comply with Council requirements, which is likely to require further subdivision for most purposes. Each potential future co-owner needs to understand that further subdivision is not guaranteed or, even, necessarily likely. If they wish to have other legal rights against each other, involving exclusive access to parts of their new property, they will need to negotiate those rights and have them recorded with the assistance of competent legal advice to ensure they are enforceable against the other co-owners. These are all matters for the parties. If they do not attend to them, they can expect a future court to be disposed to solve any further disputes between them by sale of the co-owned property.
Who should get which block with what boundaries?
[58] This leads to the difficult question of where the boundaries should be. I consider that, as far as possible given the considerations I have already identified, the attachment of the co-owners to particular lots under the Deeds should be given weight. That has been the basis for each co-owner’s use and development of the property.
[59] The lots to which the defendants are attached are at the front of the property. The lots to which the fifth and sixth plaintiffs are attached are at the back of the property. The third plaintiff is associated with lots at the front, the middle and the
back. I consider the third plaintiff should have ownership of lot 5, to which I have found he has had an ongoing attachment since the beginning of co-ownership of the property. I do not agree with the third defendants’ submission that lot 5, “the knoll”, must be included in the defendants’ front block in order to facilitate further subdivision of the front block or to maintain “bush access”. Although they are able to apply for further subdivision the parties should not presume the Council will necessarily grant any further subdivision application. And maintaining “bush access” is not a consideration I consider should be accorded significant weight.
[60] The division proposed by the third, fifth and sixth plaintiffs in Annex E to their final written submissions is consistent with my reasoning. It would give the fifth and sixth plaintiffs, with just over a quarter share of the property, the same area as the defendants, with a third. But the defendants’ front block is significantly more developed than the fifth and sixth plaintiffs’ back block which I consider roughly compensates for that. The third plaintiff, with a 40 per cent share, would get the same area as the defendants, with a 30 per cent share, but the third plaintiff would retain the apparently desirable knoll and would have the advantage, compared to all the others, of exclusive possession of his block.
[61] I propose to order division according to the boundaries and easements proposed by the third, fifth and sixth plaintiffs (though not in relation to the accompanying submissions about road quality, which need only be that required by the Council).
[62] Relevant experts will need to prepare a subdivision plan and proposal for consideration by the Council. I am inclined to think that Reyburn and Bryan should undertake this work, because of their previous experience with the property. Time is of the essence if the subdivision is to proceed under the existing plan.
[63] My proposal is an interim one. It depends upon planning consents and the other necessary preparatory steps. I consider the costs of obtaining those consents, and of the other work necessary to divide the property as I have proposed should be borne by the new proposed owners (the third, fifth and sixth plaintiffs and the defendants) in proportion to their shares after the sales of the first and second
plaintiffs’ shares have been effected. If any of the new proposed owners do not wish to be involved in my proposed division of the property, or wish to comment on the details of the proposed subdivision, they need to file a memorandum with the Court and serve it on the other parties as soon as possible and, at the latest, within 15 working days of the date of this judgment, i.e. by 5 pm 12 June 2017. In the same time period they may also make submissions as to who else should undertake the subdivision planning work if they oppose Reyburn and Bryant doing it.
Other issues
[64] My directions above are based on standing back from the situation and arriving at a broad view of what fairness and justice demands. As foreshadowed at the hearing I do not address specifically the myriad of grievances that have arisen between the co-owners over the last twenty five years.
[65] A variety of other issues have been raised by the parties in their evidence and in closing submissions. Additional orders are sought by some parties. Guidance by the Court as to how to resolve the issues is sought by others. I have the power to require payment of compensation by one or more co-owners to others under s 343(a) of the Act and to direct how the expenses of sale or division are to be borne under s
343(c). I do provide directions in relation to several sets of specific issues which I consider require resolution in the context of this proceeding. Hopefully, this will help the co-owners move on.
[66] First, the co-owners are jointly and severally liable for unpaid rates and may have recourse against each other for non-payment. I consider the outstanding rates should be paid by all owners in proportion to their shares in the property. That should be done now. Otherwise, on application by any co-owner at the time of sale or division of the property, I would consider making any specific orders necessary.
[67] Second, legal commitments entered into voluntarily by an individual co- owner are his or her own personal commitment. Here, I consider the costs of previous applications for subdivisions should be met by those who made the application. Those who commissioned the previous Reyburn and Bryant subdivision plans are liable for the costs outstanding to Reyburn and Bryant. Those who initially
applied to the Council are liable for the fees charged by it. The applicants would have benefited in proportion to their shares in the property so they should contribute to the costs in proportion to their shares.
[68] There is dispute over whether the first plaintiff should meet a 10 per cent or a
20 per cent share of ownership costs. She says that, from a meeting of co-owners on
12 January 2006 she had “amalgamated my two sites as one site” for the purposes of
future subdivision and that meant she would only pay one levy and have one vote.33
However, that did not change the 20 per cent share of the property she held. And, as she acknowledges, the minutes of the co-owners’ meeting of 12 January 2006 noted agreement about that issue was left to be further discussed and finalised at the next meeting.34 The subdivision proposal then under discussion has been overtaken by events. I consider the first plaintiff should pay 20 per cent of the property’s ownership costs. That includes the Reyburn and Bryant and Council costs of the aborted subdivision application, until the point at which the first plaintiff withdrew her interest from the application, when it was to go to public hearing. Again, these
payments should be made now. Otherwise, on application by any co-owner at the time of sale or division of the property, I would consider making any specific orders necessary.
[69] There are disputes about the accounts of the co-owners’ collective organisation, the Mana Aroha Co-Owners Association. I do not have the information required to resolve those disputes and my powers under s 343 do not easily apply to them. As I understand it, apart from the issues concerning the first plaintiff dealt with above, the amounts of the outstanding debts are relatively negligible. They should be the subject of an overall agreement between the parties. The easiest course might simply be to divide all the current debts amongst all co-owners on the basis of their ownership shares. That would require agreement on what current debts are. Perhaps that will be easier in light of resolution of the future of the property in this judgment. If resolution is not possible, the parties should take advantage of the
jurisdiction of the Disputes Tribunal.
33 First plaintiff ’s affidavit of 27 July 2016 at [14].
34 Minutes of Mana Aroha Meeting of 12 January 2006, Exhibit N to the first plaintiff ’s affidavit of
27 July 2016.
[70] Finally, there is dispute about the position of the first defendant. Mr Warren, for the third, fifth and sixth plaintiffs, submits the first defendant unconscionably reneged on her commitments regarding subdivision and obstructed other co-owners’ attempts to subdivide. The first defendant rejects the allegations. Mr Warren submitted she should be estopped in equity from retaining any benefit from the unauthorised construction of her dwelling, should be subject to an award of damages for obstructing her co-owners and any rental income should be held on constructive trust for the other co-owners.
[71] I do not propose to make orders about these questions. The rights to any rental income received by the first defendant would need to be the subject of detailed legal argument about the application of the general law of co-ownership and the effect in law and in equity of the Deeds and any other agreements between the co- owners. These allegations were not the focus of oral argument and the first defendant has not developed a response to them since the defendants’ closing submissions were filed before those of the plaintiffs. I do not consider I need to dig further into these allegations for the just resolution of the dispute over the future of the property. The solution I propose in this judgment does not expose the plaintiffs to any further detriment from the first defendant’s consented building. Her fellow defendants are aware of it and have sought to continue to be co-owners with her. If the plaintiffs want to take these allegations further they should be the subject of separate proceedings.
Orders
[72] Under s 339(1) of the Act I order the shares of the first and second plaintiffs in the property to be bought by all the remaining co-owners proportionately to their existing shares on the basis of a new independent valuation of the whole property commissioned by the Court:
(a) The valuation will be commissioned by the Court and it and any other costs of sale will be paid for by all current co-owners proportionately to their existing shares. The Registry will liaise with all parties
regarding the identity of the valuer, who will also be provided with the two valuations I have seen.
(b)The valuation will be of the land and improvements on the whole property. All co-owners must provide the valuer with access to all buildings for the purpose of conducting the valuation.
[73] My power to order division of the property is subject to resource consents being obtained. Under s 339(1) of the Act I propose to make interim orders that the property should be divided into three separate lots, of at least 20 hectares each:
(a) The block at the back will be co-owned by the fifth and sixth plaintiffs and will include lots 6 and 10.
(b)The middle block will be owned by the third plaintiff and will include lot 5.
(c) The block at the front will be co-owned by the three defendants and will include lots 1, 2, 3 and 4.
(d)The boundaries and easements will be those proposed by the third, fifth and sixth plaintiffs in Annex E of their final written submissions (though not in relation to the accompanying submissions about road quality, which need only be that required by the Council);
(e) The costs of subdivision, including creating access, will be borne by those co-owners in proportion to their shares after the transfers ordered in [72].
(f) If any of the new proposed owners do not wish to be involved in my proposed division of the property, or wish to comment on the details of the proposed division, they need to file a memorandum with the Court, and serve it on the other parties, as soon as possible and, at the latest, within 15 working days of the date of this judgment (i.e. by 5 pm 12 June 2017).
(g)After that date I propose to appoint Reyburn and Bryant to prepare a subdivision plan and proposal for consideration by the Council. If any of the proposed new owners oppose the appointment of Reyburn and Bryant they should file a memorandum before 5 pm 12 June
2017 with their reasons and their alternative proposal as to who should prepare the plan and proposal.
(h)I reserve leave for parties to revert to the Court if further orders are required.
[74] In addition:
(a) the outstanding rates should be paid now by all existing co-owners in proportion to their shares in the property;
(b)the costs of previous applications for subdivisions (to Reyburn and Bryant and to the Council) should be met now by those who made the applications in proportion to their ownership shares; and
(c) if those commitments are not met by the time of sale or division I
grant leave for any parties to apply for specific orders necessary.
[75] All litigants have contributed to the current dysfunction in one way or another. There is no doubt the court’s intervention was required. Moreover all litigants benefit from the orders obtained. In these circumstances I consider the costs of this proceeding should lie where they have fallen.
..................................................................
Palmer J
4
3
1