Divan v White HC Timaru CP2/101

[2001] NZHC 341

IN THE HIGH COURT OF NEW ZEALAND
TIMARU REGISTRY CP2/101

BETWEEN HEATHER JEAN DIVAN
Plaintiff

AND LIONEL WILLIAM WHITE
Defendant

Date of Hearing: 26 April 2001

Judgment Released: 7 May 2001

Counsel: D M Lester for Plaintiff
T J Jackson for Defendant

JUDGMENT OF MASTER VENNING
On Application For Summary Judgment

APPLICATION

[1] The Plaintiff seeks an order directing the sale of a property owned by the Defendant. The application is made in reliance upon s140 of the Property Law Act 1952.

BACKGROUND

[2] The Plaintiff and the Defendant were formerly in a de facto relationship. They were also partners in a partnership pursuant to an agreement dated 30 March 1994. Their domestic and business partnerships have both come to an end. The Plaintiff says the parties separated in June 1996. The Defendant says they finally separated in March 2000.

[3] The property in question is situated at Pleasant Valley Road, Geraldine. It is more particularly described in Certificate of Title 20F/1070 Canterbury District Land Registry. It is in the sole name of the Defendant. It was transferred into the Defendant’s name on 17 January 1991. The property was purchased for $125,000. The Defendant accepts that at the time the property was purchased the Plaintiff contributed $70,000 towards its purchase price. He has acknowledged her interest in the property. The Defendant has signed a handwritten document that acknowledges the property in question is:

“. . . held in trust as to a one 1/2 share to myself and a one 1/2 share for Heather Jean Tarrant of Temuka married woman as tenants in common in the said shares.”

The Heather Jean Tarrant referred to is the Plaintiff.

[4] The Defendant has also acknowledged in his affidavit that:

“13. I accept and always have accepted the plaintiff was entitled to a one-half share of the Geraldine property. However I do not accept she was entitled to a share in the milk run business or its proceeds.”

[5] The milk run is the business referred to in the partnership agreement. It was sold in December 1998 for $120,000. The money went into a joint account. The Plaintiff withdrew $50,000 and applied it to the purchase of a residence in Temuka. The Defendant has himself withdrawn $54,000 from that account for purchase of a motor vehicle.

[6] The Defendant remains in occupation of the property at Pleasant Valley Road.

[7] Against that background the Plaintiff now seeks an order for the sale of the property.

NOTICE OF OPPOSITION

[8] In the notice of opposition the Defendant says:

• “the Plaintiff’s interest in the property may be less than one moiety;

• there is good reason not to direct a sale of the property as the Defendant will purchase the Plaintiff’s share in the property when all issues of de facto property are resolved; and

• the Defendant has a cross-claim that affects the Plaintiff’s claim.”

THE LAW

[9] The application is made under s140 of the Property Law Act 1952. Section 140 reads:

“(1) Where in an action for partition the party or parties interested, individually or collectively, to the extent of one moiety or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly.

(2) The Court may, if it thinks fit, on the request of any party interested, and notwithstanding the dissent or disability of any other party, direct a sale in any case where it appears to the Court that, by reason of the nature of the land, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of any of those parties, or of any other circumstance, a sale of the land would be for the benefit of the parties interested.

(3) The Court may also, if it thinks fit, on the request of any party interested, direct that the land be sold, unless the other parties interested, or some of them, undertake to purchase the share of the party requesting a sale; and, on such an undertaking being given, may direct a valuation of the share of the party requesting a sale.

(4) On directing any such sale or valuation to be made, the Court may give also all necessary or proper consequential directions.

. . .
(6) On any sale under this section the Court may allow any of the parties interested in the land to bid at the sale, on such terms as the Court deems reasonable as to non-payment of deposit, or as to setting off or accounting for the purchase money or any part thereof instead of paying the same, or as to any other matters.”

[10] In Wallace v Cottingham (1999) 4 NZ ConvC 192,890 Blanchard J described the Court’s approach as:

“Where a co-owner with a 50% or greater interest in land applies to the Court under s140 requesting a sale rather than a partition order, the statute requires that the Court is to direct a sale unless it sees good reason to the contrary. The burden of showing reason to the contrary necessarily falls on the party seeking partition rather than sale. What has to be shown, however, by that party is ‘good reason’. There do not have to be exceptional circumstances. If the interests of one party are promoted to a significant extent by partition and the interests of the other party are not seriously prejudiced, good reason may have been shown.” P192,895

[11] In the present case neither the Plaintiff nor the Defendant suggest that an order for partition is appropriate. The Court is directed, unless it sees good reason to the contrary, to order a sale.

[12] Applications for a sale under s140 of the Act may be brought by summary judgment. The Court has little, if any, residual discretion once it has established the party has one moiety and partition is either not sought or not appropriate: McMahon v McMahon [1997] NZFLR 145.

DOES THE PLAINTIFF HAVE AN INTEREST OF ONE MOIETY IN THE PROPERTY?

[13] The first issue for the Court is whether the Plaintiff has an interest of one moiety in the property in respect of which the application is made. Although the land is registered in the Defendant’s sole name, the written declaration of trust recognises that it is held by him for the Plaintiff and him as tenants in common as to a one half share each. Further, in his own evidence the Defendant accepts that the Plaintiff is entitled to a one half share in the property.

[14] The Plaintiff has a sufficient interest in the property for the purposes of s140. The evidence before the Court is that the Plaintiff has an interest in the land at Pleasant Valley Road, to the extent of one moiety.

[15] I accept Mr Lester’s submission that the Defendant’s suggestion otherwise confuses the Plaintiff’s interest in the property with the Plaintiff’s and Defendant’s rights in relation to de facto property and the business partnership generally.

DOES THE DEFENDANT HAVE A CROSS-CLAIM THAT AFFECTS THE PLAINTIFF’S CLAIM?

[16] A significant part of the Defendant’s affidavit and the Defendant’s counsel’s submissions were directed at establishing that the Plaintiff had no interest in the milk run business, and that on a “wash up” of all property issues the Plaintiff may have to repay the $50,000 taken from the joint account which in turn was sourced from the proceeds of sale of the milk run business.

[17] There may need to be an accounting between the Plaintiff and Defendant arising out of the partnership business and also their de facto relationship as a whole. It may be appropriate for the proceeds of sale of the Pleasant Valley Road property to be held in trust pending resolution of those other issues, either by agreement between the parties or by determination by the Court. The possibility that there may need to be an adjustment between the parties from the proceeds of sale is not, however, itself a reason not to order a sale of the property.

IS THERE ANY OTHER GOOD REASON NOT TO DIRECT A SALE?

[18] Mr Jackson submitted that there was a good reason not to direct a sale at this time as the Defendant may wish to buy out the Plaintiff’s interest in the property. However, he did acknowledge that the property itself had no particular attachment or significance to the Defendant. He simply indicated that the Defendant was of the view that when the parties’ financial affairs were ultimately resolved the Defendant would be in a position to buy out the Plaintiff’s share in the property.

[19] If the Defendant wishes to buy out the Plaintiff’s interest in the property then s140(6) contemplates that directions for sale may be made that would allow the Defendant to buy the property. To the extent the Defendant may not be in a position to buy out the Plaintiff’s interest because the parties’ final rights in the de facto property and business partnership have not been determined, the Defendant must accept some responsibility. The parties separated, on the Defendant’s view, by March 2000. More than twelve months has passed since then. The milk run partnership was determined some years ago when the business was sold. Both parties have withdrawn monies from the bank account following the sale of the business. The Defendant has had ample time to resolve financial matters between himself and the Plaintiff.

OTHER ISSUES - THE PARTNERSHIP

[20] There is one matter that Mr Lester properly drew the Court’s attention to. It appears from the accounts of the milk run partnership that the property at Pleasant Valley Road was recorded as an asset of the partnership. Section 25 of the Partnership Act 1908 provides:

“Where land has become partnership property it shall, unless the contrary intention appears, be treated as between the partners (including the representatives of a deceased partner), and also as between the heirs of a deceased partner and his executors or administrators, as personal and not real estate.”

[21] In Moleta v Moleta [1977] NZ Recent Law 18 Ongley J considered the effect of s25 of the Partnership Act 1908:

“. . . where land has become partnership property, unless a contrary intention appears, it is to be treated as between the partners as personal and not real estate. As between the partners it takes on the characteristics of personal property and is subject to the same incidents as the personal property of the partnership. All property of the partnership is held by the partners on trust for sale so that upon dissolution, whatever may be the incidents which would otherwise attach to land being property of the partnership, in default of agreement to the contrary it is to be sold and the proceeds applied in accordance with s42 of the Act: Lindley on Partnership 13 Ed p370.

This was the conclusion reached by Cooper J in Redwood v Redwood [1909] NZLR 260.”

[22] His Honour dismissed the application for a partition order. The case is noted at Butterworths Commercial Law at para 26.11.2 as authority for the proposition that:

“. . . in the absence of agreement to the contrary partnership land is deemed as between the partners to have been converted into personal estate and will devolve as such on dissolution of the partnership. On dissolution partnership land, as personalty, may not be partitioned under s140 Property Law Act 1952 which applies only to land”

[23] However s25 only applies subject to a contrary intention of the parties. There is such contrary intention in the present case. First, there is the clear intention of the parties recorded in the deed of trust document. While that document predated the milk run partnership, the Plaintiff clearly regards the Pleasant Valley Road property as real property rather than personal estate. The Defendant also regards the Pleasant Valley Road property as real estate rather than personalty to be dealt with under the milk run partnership. That is apparent from his evidence at paragraph 13 referred to above. He makes a clear distinction between the Plaintiff’s interest in the property and her rights under the partnership.

[24] Next it is not apparent how the property came to be included in the assets of the milk run partnership as capital. The Plaintiff’s advance to the Defendant to purchase the property was treated as capital introduced to the partnership by her. The Defendant says that the milk run was purchased out of the proceeds of his logging business. The logging business was sold for $255,500. From that figure the sum of approximately $19,000 was used to repay the balance of a mortgage then owing over the Pleasant Valley Road property. However, his capital as at 31 March 1995 is shown as $127,239. It is difficult to reconcile that sum with the Defendant’s evidence that he introduced capital to the partnership from the proceeds of sale of the logging business if the property was also introduced as capital.

[25] More importantly, however, the Defendant clearly does not regard the Pleasant Valley Road property as an asset of the milk run partnership. He makes a clear distinction between the two in his own evidence. The milk run has been sold. The Pleasant Valley Road property was not sold as part of the business. It has been retained and occupied by the Defendant personally. In other circumstances s25 of the Partnership Act does not apply to the Pleasant Valley Road property.

SUMMARY

[26] The Plaintiff satisfies the Court that she is entitled to a one moiety in the Pleasant Valley Road. Neither the Plaintiff nor the Defendant seek partition of the property.

[27] While there may still be issues between the Plaintiff and Defendant that require resolution as a result of their de facto relationship and the milk run partnership, those are issues that the parties can determine independently of the sale of the property. That affects the distribution of the proceeds of sale, however, rather than the order for sale itself.

[28] I record that Mr Lester acknowledged that in the first instance at least the Plaintiff merely sought the order for sale. He accepted the order for sale could lie in Court for a period to enable the parties to discuss the precise terms upon which the property might be sold and also to enable the parties to discuss overall resolution of the issues between them. Mr Jackson accepted that if an order for sale was made it ought to lie in Court for a period but submitted that to do so would place undue pressure on the Defendant to settle outstanding issues on terms more favourable to the Plaintiff than him. That is not necessarily the case. In any event, as noted the parties have been apart for some time now. The remaining property issues between them ought to be resolved.

ORDER

[29] There will be an order for the sale of the property described in the application and more particularly described in Certificate of Title 20F/1070.

[30] The application insofar as it relates to terms of sale is adjourned through to 12 noon on 28 June 2001. If the parties are unable to agree upon terms of sale then the precise terms of sale will be settled at a resumed hearing on that date.

COSTS

[31] The Plaintiff is entitled to costs on this application. Costs are fixed in the Plaintiff’s favour on a 2B basis together with disbursements as fixed by the Registrar.