Freeman v Dijksma

[2019] NZHC 1815

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-296

[2019] NZHC 1815

UNDER THE

Property Law Act 2007

IN THE MATTER OF

an application under section 339 of the Property Law Act 2007

BETWEEN

DANIEL GEORGE FREEMAN

Plaintiff

AND

PIETER DIJKSMA

Defendant

Hearing:	25 July 2019
Counsel:	D M Jackson for the Plaintiff
Judgment:	30 July 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 30 July 2019 at 2.30pm pursuant to rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 30 July 2019

FREEMAN v DIJKSMA [2019] NZHC 1815 [30 July 2019].

[1]                 The plaintiff has sought by way of summary judgment an order under s 339 of the Property Law Act 2007 (“the Act”) in relation to a property at 23 Medway Street, Richmond, Christchurch (“the property”), purchased by the plaintiff and the defendant as tenants in common.

[2]                 The parties purchased the property in 2015 for $370,000, contributing $27,500 each with the balance financed by mortgage.

[3]                 The plaintiff and defendant were friends who decided to purchase the property as a means of entering the property market. The intention was that they would live in the property and have flatmates to help to pay the mortgage costs.

[4]                 The arrangement worked well for a couple of years. However, the defendant moved overseas in 2018 and began to miss his contributions towards mortgage payments and the relationship between the parties soured.

[5]                 Unfortunately, despite efforts of the plaintiff to reach an agreement over the property, these proceedings followed because the plaintiff says the defendant essentially “put his head in the sand”.

[6]                 That has left the plaintiff having to meet all the costs associated with the property.

[7]                 The plaintiff has arranged for a mortgage to pay out the defendant at an independent valuation that has been obtained.

[8]                 The defendant has been served with the proceedings, including a copy of the registered valuation which records the value of the property at $510,000.

[9]                 As noted, the application is unopposed, and when the matter was called in the summary judgment list on 25 July 2019, Mr Jackson made submissions in support of the application. He had filed a memorandum in support on the basis that no opposition had been filed.

[10]             The Court  has  the power to  direct  one co-owner to  sell  their interest in     a property to another co-owner.1 That is what the plaintiff seeks in this case, that he buys out the defendant’s share at valuation, with the amount to be paid to the defendant to be subject to adjustments which I address below. The defendant would also be released from his obligations under the mortgage.

[11]             Under s 342 of the Act, the Court is directed when considering an application under s 339 to have regard to the following factors:

(a)the shares held by the co-owner bringing the application;

(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 by the refusal of the order;

(e)the value of contributions; and

(f)any other matters that the Court considers relevant.

[12]             The Court also has power under s 343 to direct how the proceeds of sale of the property are to be applied.

Analysis of the criteria

(1)The extent of the share

[13]             The parties own the property as tenants in common in equal shares. The evidence is that there were discussions about one buying the other out, but agreement in that regard could not be reached.

1      Keery v Thomas [2015] NZHC 113, (2015) 16 NZCPR 117.

(2)The nature and location of the property

[14]             The property is a four-bedroom residential property in Christchurch  on  1,212 m2. There is nothing in particular in relation to the nature and location of the property that stands against the making of the order.

(3)Number of co-owners

[15]             As noted, there are only two owners of the property, being the parties to this proceeding,

(4)Hardship

[16]             Hardship to the plaintiff is that unless the property is sold to him, he will be forced to carry the risks and limitations of co-ownership with a co-owner who has gone to ground. In short, the plaintiff will be locked into a dysfunctional arrangement. The defendant is not making financial contributions to the joint venture but will retain the benefits of ownership.

[17]             Mr Jackson’s characterisation is as follows. He refers to the present situation as “an unintended or unforeseen stalemate or deadlock borne perhaps of naive enthusiasm to get on the property ladder without legal advice”. There was no written agreement between the parties in respect of the property.

[18]             I consider that there would be hardship to the plaintiff in allowing the present situation to continue. I do not consider there is any significant hardship to the defendant. He has not lived at the property for some time. He will recover his investment and his share of the capital gain – his liability under the mortgage will come to an end.

(5)Value of contributions

[19]             Initially the parties contributed equally to the property, although of late there has been a difference between them following the defendant leaving the property, meaning he has not matched the plaintiff on a like-for-like basis as was intended.

(6)Other relevant matters

[20]             Mr Jackson submits that in the absence of any agreement, the relative youth and inexperience of the co-owners and the fact that there is no relationship by blood or other relationship are relevant. As he submits, “they have no business or need to be in this property sharing agreement any longer”.

[21]             In simple terms, these were two friends who entered a joint venture to enjoy capital gain in respect of property ownership but who have unfortunately fallen out.

[22]             I note that the distribution proposed by the plaintiff (on which I comment on more below) does not attempt to adjust the purchase price for a real estate agent’s commission which would be incurred if the property was to be sold to a third party.

[23]Finally, I note the defendant has been served and has taken no steps.

[24]             An application under s 339 involves the Court exercising a discretion having regard to all the circumstances of the case.2 In my view, the present impasse has to be resolved. That the application is not opposed is telling. I consider that it is appropriate that there be an order in terms of the draft order filed by Mr Jackson (attached). The terms of that order set out the plaintiff’s proposal as to how the sale proceeds are to be distributed.

[25]             Both the plaintiff and the defendant took advantage of the capital gain of the property to draw down personal loans (in different amounts) secured against the property. The distribution statement sees those amounts repaid from the share each would otherwise receive from the equity in the property. There are also a number of adjustments to reflect the uneven contributions to the property and a deduction for the costs of these proceedings.

[26]             The order requires that proposed distribution be served on the defendant for his response. A copy of this judgment will also need to be served.

2      Ramsey v Mercer [2013] NZHC 2659.

[27]             The reason for this step is that while many of the components that make up the proposed distribution are referred to in the original affidavit served on the defendant, the final proposed distribution is contained in a subsequent updating affidavit. It is appropriate that the defendant have an opportunity to comment on the proper distribution. The sale order is not subject to any comment by the defendant which is reflected in the fact that the attached order may be sealed now.

Costs

[28]The  plaintiff  seeks  costs  on  a  2B  basis  and  disbursements  which  total

$10,376.97.

[29]             An order for costs is appropriate. The defendant did not engage with the process of sorting out the breakdown in the relationship between him and the plaintiff. The plaintiff had to bring this application in order to advance matters. The costs claimed are reasonable. Counsel has responsibly advised that his actual costs are less than scale.

[30]             Accordingly, costs are fixed as incurred together with disbursements of $1,400 being the filing fee and sealing fee totalling $10,376.97.

[31]             In the event the defendant disputes the distribution proposed by the plaintiff, he is to file a memorandum with details of the basis of the dispute within five working days of being served. That is also to be served on the plaintiff.

[32]             In the event that issues in that regard cannot be resolved by way of agreement, I will give directions as to how the dispute in relation to the distribution is to be resolved.

Associate Judge Lester

Solicitors:

Layburn Hodgins, Christchurch

Copy to counsel: D Jackson, Barrister, Christchurch

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA OTAUTAHI ROHE

No.CIV-2019-409-000296

UNDER THE Property Law Act 2007

IN THE MATTER OF an Application under Section 339 of the Property Law Act 2007

BETWEEN	DANIEL GEORGE FREEMAN, of Christchurch, Electrician
Plaintiff
A N D	PIETER DIJKSMA, of Christchurch, Civil Engineer
Defendant

JUDGMENT AFTER HEARING

Next Event Date: 25 July 2019

Judicial Officer: Lester AJ

Instructing Solicitors:

Kylie Dawson, Solicitor Layburn Hodgins

Barristers & Solicitors Level 1/205 Durham Street South Christchurch 8031

Phone: [phone] Fax: [phone],

E: [email protected]

Counsel Acting:

David Jackson Barrister

Canterbury Chambers

148 Victoria Street Christchurch P O Box 9344 Christchurch 8013

Telephone: [phone]

E: [email protected]

JUDGMENT AFTER HEARING BEFORE ASSOCIATE JUDGE LESTER

To:     Peter Dijksma, the defendant named in these proceedings

(a)   Upon reading the statement of claim and the interlocutory application of the plaintiff for summary judgment and for orders under section 339 of the Property Law Act 2007 and the first and second affidavits of Daniel George Freeman and upon hearing David Michael Jackson, counsel for the plaintiff, and there being no opposition filed or appearance for the defendant this Honourable Court gives judgment in favour of the plaintiff against the defendant on the following terms:An order pursuant to s339(1) of the Property Law Act 2007 directing the sale of the property at 23 Medway Street, Richmond, Christchurch being all of that parcel of land comprised and described in Certificate of Title CB446/12 (Canterbury Registry) (“the property”).

(b)   The order for sale made herein requires the plaintiff to purchase the defendant’s half-share in the property as tenant in common at a fair and reasonable price as determined by the Court.

(c)   Upon the valuation evidence available to the Court, the fair and reasonable price of the property is fixed at $510,000.00.

(d)   The Registrar of the Court is authorised to sign all documents necessary to effect the sale including the Agreement for Sale and Purchase, if any, and all authorities and instructions that may be necessary in order to discharge the parties’ existing mortgage obligations in respect of the property and otherwise to transfer title in the whole of the property to the plaintiff (including any land transfer tax statement).

(e)   The proceeds of sale are to be applied to the repayment of the parties’

joint loan drawn down as part of their original purchase of the property.

(f)    Thereafter, the balance available shall then be applied to:

(i)the repayment of parties’ respective loans (also secured by joint

mortgage), namely:

a.The plaintiff’s loan (being that left owing following his initial draw down of $15,000);

b.The defendant’s loan (being that left owing following his

initial draw down of $40,000;

(ii)The repayment to the plaintiff of $2,068.95 for repayments made over and above the defendant;

(iii)The repayment to the plaintiff of his half share of the $668.10 valuation fee cost incurred by him;

(iv)The payment to the plaintiff of the defendant’s half share of the

$668.10 valuation fee incurred by the plaintiff;

(v)The payment of the plaintiff’s legal costs incurred in these

proceedings as ordered herein;

(vi)The payment of the costs of conveyancing attendant on the sale (to be shared by the parties);

(vii)The reasonable fees of the Registrar, for the process required by this Order, if any (to be shared by the parties).

2.Upon the application of the balance to the payments or repayments referred to in (f) above and the accounting between the parties as described therein, the defendant shall be paid his share of the net proceeds as fixed by the Court upon the filing of a memorandum annexing a settlement statement and such other statement recording the accounting between the parties as fixed by this Order.

3.Before settlement of the sale ordered herein, the plaintiff is to seal and serve a copy of this judgment together with draft or indicative settlement statements reflecting the accounting between the parties as fixed by this Order on the defendant, who is directed to notify the Registry within 5 working days of service if he objects to the accounting between the parties and with full particulars of his objection.

4.If no objection is received within the 5 working day period then settlement shall proceed as ordered herein. If an objection is received the Court will invite submissions from the plaintiff in reply and will thereafter determine the objection on the papers.

5.Leave is reserved to the plaintiff and the Registrar of the Court to apply for such further orders as may be thought necessary to give effect to the judgment on this application.

6.The defendant will pay to the plaintiff costs and disbursements which are fixed in amount of $10,376.97.

Date:

……………………………..

(Deputy) Registrar