Foris v Sanctuary One Trustees Limited as Trustee of Sanctuary One Trust

[2018] NZHC 139

IN THE HIGH COURT OF NEW ZEALAND

TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TAURANGA MOANA ROHE

CIV-2017-470-121 [2018] NZHC 139

BETWEEN

STEPHEN PAUL FORIS

First Plaintiff

JEREMY RICHARD MORRISON Second Plaintiff

AND

SANCTUARY ONE TRUSTEES LIMITED AS TRUSTEE OF SANCTUARY ONE TRUST

First Defendant

MELANIE DEBORAH CALDWELL Second Defendant

Hearing:	14 February 2018
Appearances:	Mr Hakaria for Plaintiffs/Applicants Mr M P Ward-Johnson for Defendants/Respondents
Judgment:	14 February 2018

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

14.02.18 at 4.00 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

FORIS & Anor v SANCTUARY ONE TRUSTEES LIMITED AS TRUSTEE OF SANCTUARY ONE TRUST

& Anor[2018] NZHC 139 [14 February 2018]

Background

[1]      The plaintiffs and the first defendants are co-owners of a property at Oropi

Road, Tauranga.  It was purchased in February 2016 with settlement due mid-May

2016. It had a horticultural business operating from it growing raspberries, blueberries and tomatoes (the horticultural business).   The property also had a two-bedroom cottage as well as other buildings located on it.

[2]      The plaintiffs took occupation in February 2016 and the second defendant around May 2016. On 11 May they signed a property sharing agreement by which the plaintiffs and first defendant owned the property as tenants in common in 1/3 shares.

[3]      The property was run by a partnership of the plaintiffs and first defendant known as the JSM Partnership. It operated a horticultural business through a separate company, Nut-Berry Knoll Limited (the company). The company leased the property from the partnership.

[4]      In May/June 2016 a dispute arose between the plaintiffs and the second defendant concerning the horticulture business and tenants on the property.  On 13

September 2016 they signed a Settlement Agreement to resolve the dispute.  By that agreement the plaintiffs agreed to vacate the property and to grant the second defendant possession of it for six months during which, inter alia:

(a)      She would pay all loan repayments due by the partnership, pay rates as they fell due and, outgoings associated with the property;

(b)      The plaintiffs would remain on the title;

(c)      If the second defendant failed to meet payment obligations undertaken by her the plaintiffs may provide notice requiring the property to be sold within five days or less those due payments were made;

(d)If the second defendant fulfilled her obligations during the trial period, and obtained finance for the value of the mortgage then she shall be entitled to purchase the property and the company’s business assets but

if she did not obtain finance at the expiry of the trial period then the property should be marketed for sale;

(e)      If a third party sale was required then the property shall be marketed for sale at the best price reasonably obtainable;

(f)      If there was to be a third party sale then all full cooperation was required to allow inspections of property and to sign all documents requested by the sales agent.

[5]      It was agreed the takeover date would be 23 September 2016 i.e. from which time the second defendant would assume responsibility for loan repayments.   The plaintiffs say it was agreed that 23 September 2016 would be the takeover date.

[6]      The six months’ trial period expired on 23 March 2017 and on or about 5 April

2017 the plaintiffs say the second defendant advised she was in the process of applying for finance and only required a registered valuation.  The plaintiffs then agreed to extend the trial period until 30 May 2017 and on 6 May 2017 they engaged a real estate agent to carry out an appraisal of the property.

[7]      The second defendant failed to obtain finance by 30 May 2017. Rates fell into arrears.  The defendants say their agreement required a sale process and they wished to instruct an agent to market the property for sale.

[8]      The defendants did not respond to the plaintiffs’ solicitors letter regarding the proposal to engage a sales agent. The plaintiff then signed an agency agreement with an agent but the second defendant failed or refused to do so.

[9]      On 19 June 2017 a ‘Notice of Breach’ was served.  Claims of breaches were detailed. Demand was made that the defendants pay outstanding rates and contact the defendant sales agent to sign all necessary documents to market the property.

[10]     The plaintiffs seek an order for the sale of the property under s 339(1)(a) of the

Property Law Act 2007.  They want a reserve price to be fixed by a registered valuer

and for sale and any expenses, outstanding rates and mortgage arrears to be paid by the defendants. They also seek an order to vacate the property.

[11]     The second defendant filed her own notice of opposition and statement of defence and swore an affidavit in opposition. She is now represented by counsel who represents both defendants.  In essence it is the defendants’ position that there is a reasonably argument defence because of disputed factual position giving rise to challenge the plaintiffs’ claims of a right to obtain the orders they seek.

[12]     It is agreed that the trial period was extended to a final date to 30 May 2017 and the plaintiffs then  advised that the sale process described in the  settlement agreement had to commence.  However the defendants say the plaintiffs unilaterally stated that the Trademe process agreed to in the settlement agreement was no longer appropriate and they dictated the terms of how the sale process was to proceed.

[13]     The defendants claim the plaintiffs attempt to by-pass the agreed Trademe close tender process was invalid and therefore it was arguable the sale process had not been initiated.   Regarding unpaid rates the defendants’ position is that those were already in arrears prior to the commencement of the trial period whereas the defendants’ obligation were to meet rates, mortgage payments and outgoings during the trial period only.

[14]     The  plaintiffs  say  the  defendants  breached  the  settlement  agreement  by refusing to engage in the sale process and/or frustrating the same.  Counsel submits and the Court agrees that there is clear evidence to dispute that claim.

[15]     The defendants say they were not frustrating the sale process without good cause and the plaintiffs had not provided satisfactory confirmation as to contributing to loan, insurance, rates and other outgoings and therefore she would not sign an agency agreement.

[16]     Claims of a failure to cooperate with a sale process overlooks, counsel submits, the fact that the plaintiffs invalidly initiated the sale process in breach of the agreement itself.

[17]     In summary it is the defendants’ position that there is sufficient evidential dispute such that an application for summary judgment is inappropriate.  Also the defendants have finance to purchase the property.

Summary judgment application

[18]     The Court agrees there is sufficient evidence in dispute to make summary judgment inappropriate and therefore the application will be dismissed.  The remedy sought by the proceeding is not suitable for this case, much less than by engaging the summary judgment process.    Arguably the Court is without jurisdiction because the mortgagee has not been served with the proceeding.

[19]     The application relies on inferences being drawn rather than actual evidence of matters invited for consideration.

[20]     The evidence indicates the parties “fell out” within a month or so of occupying the property together.  The plaintiffs did nothing to add to the property’s value.  The evidence suggests at best a total of $5,000 was paid on behalf of the plaintiffs in consideration of not paying rent.

[21]     Since the plaintiffs departed the property the defendants have borne all of the responsibility for its cost and care.

[22]     The plaintiffs’ primary concerns are about their liability for the mortgage obtained to purchase the property.   The defendants have now obtained their own funding to replace that for which the plaintiffs nominally bear responsibility.

[23]     The plaintiffs’ claim the defendants breached the settlement agreement sale process. In the Court’s view the plaintiffs chose not to observe the process agreed but by the process they adopted they did not comply with the parties’ agreement. Also it seems the defendants reasons for not engaging the plaintiffs’ sale process changes, were understandable – due to the plaintiffs unwillingness to contribute to ongoing property costs.

Judgment

[24]     The summary judgment application is dismissed.

[25]     The plaintiff shall pay the defendants’ costs on a 2B basis, together with disbursements.

Associate Judge Christiansen