Doyle v Doyle HC Auckland CP 331-Im/99

[2001] NZHC 432

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP 331-IM/99

BETWEEN ROLAND MICHAEL DOYLE
Plaintiff

AND BARBARA FLORENCE DOYLE
First Defendant

AND THE BODY CLINIC LIMITED
Second Defendant

Hearing: 21-23 May 2001

Counsel: K F Gould for Plaintiff B M Stainton for First Defendant D J Clark for Second Defendant

Judgment: 1 June 2001

(RESERVED) JUDGMENT OF MORRIS J

[1] A dispute between members of the Doyle family over the future ownership and possession of a property known as 21 The Esplanade, Whitianga lies at the heart of these proceedings. The present registered proprietors are the plaintiff Mr Doyle and the Second Defendant The Body Clinic Limited. They are registered as tenants in common in equal shares. The Body Clinic is a company controlled by Mrs Daniels. Mrs Daniels is Mr Doyle’s sister. The property was originally purchased in 1983 by Mr Doyle and the First Defendant, who is his mother. Mrs Doyle sold her interest to the Body Clinic in August 2000.

[2] Mr Doyle seeks an order under s 140 of the Property Law Act 1952 (“the Act”) for the sale of this property at public auction. This is opposed by Mrs Doyle. She claims when the property was purchased by her and her son in 1983 the purchase was made on the basis they would hold it in trust for her use and the use of family members during her lifetime. She further claims the property may be suitable for partition. The application is also opposed by The Body Clinic. Mrs Daniels agrees the property should be sold in the event of her mother’s claim being disallowed but asks me to direct it to be sold to The Body Clinic or herself pursuant to the provisions of s 140 (3) of the Act. This proposed course is not acceptable to Mr Doyle, who claims whatever be the value of the property as fixed by valuers at the present time, a public auction has the possibility of realising the true market value, particularly as it will be of interest to expatriate New Zealanders or a foreign investor.

[3] Mr Doyle also seeks rental from both Mrs Doyle and Mrs Daniels from 28 May 1996.

BACKGROUND

[4] The property originally belonged to Mrs Doyle’s parents. It was her childhood home. It has been used as a family home, a family run boarding establishment and a family run restaurant. Over the years Mrs Doyle, and to a limited extent Mrs Daniels, has spent considerable money on its maintenance and upkeep. Today it is in a somewhat rundown state. Mrs Daniels’ former husband runs a restaurant on the top floor and there are two flats on the bottom storey, one of which he occupies. The Body clinic occupies the other. The property is valued between $550,000 - $560,000. Mrs Doyle and Mrs Daniels have strong meaningful ties to the property. Mr Doyle has none. Mrs Doyle and Mrs Daniels want the property to remain in the family and they wish to maintain their contacts with the Whitianga area. Mr Doyle has no such desire.

[5] Mr Doyle and his mother bought the property from Mrs Doyle’s mother, Mrs Smith. This followed an unsuccessful attempt to auction it. They paid $75,000. This was financed by:

[a] a mortgage of $40,000, nominally from a Mr Michael Brent Smith. Mr Smith in fact was Mr Doyle;

[b] a $10,000 deposit;

[c] $25,000 vendor’s second mortgage.

Subsequently Mrs Doyle paid off $20,000 of the second mortgage from an inheritance. Mr Doyle paid off the balance of the second mortgage and also “repaid” the first mortgage. Mr Doyle claims to have paid all interest on both mortgages. The legal side of the transaction was handled by Mrs Smith’s solicitors. This included a standard form of sale and purchase agreement executed by the parties followed by the necessary conveyancing documents required for registration of the transfer etc.

[6] Mr Doyle claims to have purchased this property “to enable his mother to reconstruct her life and earn an income from the property due to her previous unsuccessful business ventures”. He claims it was agreed between them she would run the property as a business upon the following terms:

“(a) That the First Defendant would manage the property on behalf of the Partnership and account to me for the profits earned from the land, including an occupation rent.

(b) That the First Defendant would have exclusive possession of the land from the date of purchase.

(c) That the First Defendant would pay all rates and insurances with respect to the land.”

Mrs Doyle, as I have earlier indicated, claims it was purchased by them to be held in trust for the use of family members and herself during her lifetime. She denies there was any form of a partnership or intention to run the property for profit.

[7] I have considered these competing claims. I have heard from both Mr Doyle and Mrs Doyle of the circumstances surrounding the purchase of the property. There is no contemporaneous document or writing of any nature which supports either of these quite extensive and particularised alleged arrangements. Specifically, nothing appears in the Agreement for Sale and Purchase although it was drawn up by a solicitor. Both Mrs Doyle and her son were experienced in business, even in 1983, particularly Mr Doyle. In my view it defies belief neither made any record whatsoever of what they now claim were important and quite specific arrangements. Even accepting in 1982 the mother and son were on good terms, I find this lack of record particularly significant. I accept the actions of the parties may be evidence of a reasonable expectation and sufficient to establish a constructive trust Lankow v Rose (1995) 1 NZLR 277. In the present case, however, I find no such sufficient evidence here, despite Mr Doyle’s “inactivity” for many years subsequent to the purchase. Mrs Doyle’s claim is therefore rejected.

[8] Likewise I do not accept in the light of the dealings between the parties, both at the time and subsequently, there was any agreement in the nature of a partnership between mother and son. Certainly not an agreement the property would be run for profit and with the intention any such profit would be divided. I accept Mrs Doyle’s evidence in this regard. I do so with some caution because both mother and son are now certainly embellishing the situation to suit their aims in this present litigation. Mr Doyle’s claim, I am convinced, is an afterthought, brought about no doubt in part by the subsequent falling out with his mother over other business ventures. His claim therefore as to the basis on which this property was purchased is also rejected.

[9] On the evidence before me I find the buying of the property was simply a joint purchase by Mr Doyle and his mother with no real thought given as to what was going to happen to it through the years.

[10] In 1993 Mr Doyle was adjudged bankrupt. His indebtedness exceeded 13 million New Zealand dollars. He had mortgaged his half-share in the property to the ANZ Bank. The BNZ had registered a charging order over it. In May 1996 Mr Doyle was discharged from his bankruptcy. As the Official Assignee had abandoned any interest in the property, being worthless property having regard to his indebtedness, his equity in the property “reverted” to him. Attempts by Mrs Doyle to purchase his share around this period proved fruitless.

[11] In March 1994 Mrs Doyle obtained her own title for her half interest. She mortgaged this first in 1995 and subsequently in 1998. Her financial situation, which has never appeared to be strong, worsened, and in August 2000 she sold her share to The Body Clinic for nominally $255,000. I say nominally because I gather no moneys changed hands but The Body Clinic effectively took over Mrs Doyle’s obligations under her existing mortgages and undertook to pay outstanding rates and other charges.

[12] Mrs Daniels has offered to purchase her brother’s share at the value fixed by the valuers engaged by the parties. The difference between them is slight, the higher is $560,000 and she is prepared to purchase his half-share for $280,000. She has further undertaken, should I order a valuation of his share, to pay the value of her brother’s share as fixed by such valuation. She submits an auction will not necessarily produce anything more than the present valuations suggest. She submits further substantial costs will be involved and there is a real risk if the property is auctioned her brother will manipulate the auction process, specifically by the use of dummy bids to push the price up. Mr Doyle will not accept his sister’s suggestion. As I have indicated he feels an auction could well obtain a price above the present valuation evidence because of interest from overseas or expatriate New Zealanders. He asks that the auction be held following a marketing campaign undertaken by a real estate agency with international connections and that conditions of the auction be:

“[i] he and The Body Clinic share equally in the costs of the marketing of the auction;

[ii] I fix a reserve price;

[iii] both he and The Body Clinic be able to bid but Mrs Doyle be prohibited from doing so.

[13] Having reviewed the evidence and particularly the evidence from the valuers called, I am satisfied Mr Doyle is acting completely unreasonably. While I cannot totally exclude the possibility of some bid being received from an overseas purchaser above the present valuations, on the evidence before me I think it extremely unlikely. Furthermore, without doubt substantial further costs will be incurred and overall the present and unsatisfactory state between the parties will continue for some further time. Mrs Daniels’ suggestion appears to me to be commercially reasonable although I have some reservations as to whether in fact she will be able to raise the funds sufficient to buy out her brother’s share. I turn therefore to consider whether I am bound to make the order for sale and if I am, whether I am able to make an order which she seeks.

[14] I reject immediately any suggestion this property is suitable for partition. It is clearly not. It follows, therefore, as I have rejected the claims made by Mrs Doyle and supported by Mrs Daniels, that this property was purchased in 1982 and was to be held in trust on the terms alleged Mr Doyle is entitled to the order he seeks under s 140(1) unless I see good reasons to the contrary. See Cook v Hitchens (1982) 1 NZCPR 438 and Fleming v Hargreaves [1976] 1 NZLR 123.

[15] Mr Clark has submitted, notwithstanding the trend of authorities to date, I can direct a valuation of Mr Doyle’s share and I can order he sell his share in the property to The Body Clinic at the value of such share.

[16] Mr Clark submitted that for the last 120 years, the Courts have applied an interpretation of s 140(3) of the Act which fails to recognise and apply the literal and plain meaning of this section. The authorities have not, in Mr Clark’s view, accepted the Court has a discretion under s 140(3) of the Act to compel a party wanting to sell a property to have a sale by way of valuation imposed upon him or her. Further, Mr Clark submits the reasoning behind the decision Pitt v Jones [1874-80] All ER 1367 (House of Lords) was wrong and there is nothing within the subsequent New Zealand cases which would necessarily bind this Court to either that reasoning or, be bound byway of precedent.

[17] I am not convinced by that submission. In the Fleming case, the Court of Appeal was faced with submissions almost identical to the ones put before me, alleging these were sufficient reasons for the refusal of an order directing sale. I accept the reasoning of the Court of Appeal and I am satisfied no good reasons exist within the meaning of s 140(1) of the Act for me to refuse the orders sought by Mr Doyle.

The Claims for Rental

[18] It is not disputed Mrs Doyle had possession of the property until August 2000. Possession then passed to The Body Clinic. Originally Mrs Doyle had possession with Mr Doyle’s express approval. This is clear from the evidence to which I have earlier referred. No financial basis for her occupation has been established and certainly nothing subsequent to his discharge from bankruptcy suggests any agreement between the two under which Mrs Doyle would pay some form of rent to Mr Doyle. Essentially what occurred is the parties carried on as they had before Mr Doyle’s bankruptcy, Mrs Doyle occupying the property and Mr Doyle evincing little or no interest in it.

[19] Mr Gould has submitted Mrs Doyle has been either a licensee or a tenant and as such was required to account for any profits she may have made from the property and to pay a fair occupational rental. The evidence in my view does not justify any such finding in relation to Mrs Doyle. I am not satisfied she has ever made any profit whatsoever from her running of the property. Indeed the contrary is more likely to be the position, particularly if one is to take into account the moneys which she clearly has spent on the maintenance and upkeep of it. There is no evidence whatsoever Mr Doyle has ever spent a cent on the property subsequent to the original purchase. He has not been refused occupation. He has never sought it. He has taken no real steps whatsoever to exercise any rights he may have in the property, until, so far as I can see, the issue of these proceedings in 1999. Pursuant to my order the property will now be sold and Mr Doyle will receive as part of the sale price moneys, which effectively have been put into the property by Mrs Doyle, for necessary upkeep and improvements. I have heard evidence of what rentals could have been obtained from the property. I accept these as possibilities but the true position is there is no evidence to show Mrs Doyle made anything at all out of this property while she was in possession of it. I can see no basis for a payment of rental by her simply on the basis she holds the property as a tenant in common with the plaintiff.

[20] The same comments apply to the claim against The Body Clinic. I note Mrs Daniels is prepared to pay a reasonable rental. The basis of such a payment I cannot ascertain and really this is something which the parties should be able to work out for themselves. I am not prepared to make an order against her for some nominal rental or for a rental based on the valuations. I think this would be quite unfair hearing in mind she has attempted to speak to her brother about the position and he simply refused to have anything to do with her.

[21] The claims for rental are accordingly dismissed. There will be an order for sale of the property. I fix the reserve price at $560,000. Any of the parties and Mrs Daniels may themselves bid at the auction. No party nor Mrs Daniels is permitted to bid through an agent. This condition will overcome the possibility of any dishonest action by any of the parties or Mrs Daniels. In view of Mr Doyle’s unreasonableness he is to bear the costs of the marketing and the sale of the property. Each party is to bear their own costs in these proceedings.