Gregory v Simpson

[2014] NZHC 2124

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4418 [2014] NZHC 2124

BETWEEN

TREVOR PATRICK GREGORY, SUSAN

KATHLEEN GREGORY AND QTL TRUSTEES (NO 19) LIMITED

as the trustees of the CHEVALIER TRUST

Plaintiffs

AND

BRENDON ANTHONY SIMPSON AND QTL TRUSTEES (NO 42) LIMITED

as trustees of the KOURA BAY TRUST Defendants

Hearing:	3 September 2014
Counsel:	K McDonald for Plaintiffs R Hucker and DL Siu for Defendants
Judgment:	4 September 2014

JUDGMENT OF FOGARTY J

This judgment was delivered by me on 4 September 2014 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Kevin McDonald and Associates, Auckland

Hucker & Associates, Auckland

TP GREGORY, SK GREGORY AND QTL TRUSTEES (NO 19) LTD v BA SIMPSON AND QTL TRUSTEES (NO 42) LTD [2014] NZHC 2124 [4 September 2014]

[1]      On 17 April last, Toogood J made orders under ss 339 to 343 of the Property Law Act 2007 to facilitate the sale of a property owned by co-owners.   The proceedings concerned a dispute between trustees of two family trusts.  One settled by parents and the other settled by their son and his wife who hold the property as tenants in common in equal shares.

[2]      The parties had agreed to the sale of the property but could not agree on the terms of sale.  The judgment in [31] set out, provided for 22 terms of sale [a]  [v] and by subpara [w]:

Leave is reserved for any party to make any further application to the Court, on 48 hours notice, to deal with any issues arising out of these orders and any other matter relating to the marketing and sale of the property.

[3]      It was originally intended that the sale would have taken place on 5 May, order (i).  For one reason or another, but by agreement, the sale of the property is to be on 1 November.

[4]      Purporting to exercise a reservation of leave, the plaintiff (the trustees of the Chevalier Trust) sought to vary para 31[u].   Paragraph 31[u] of the judgment provides:

If the property is passed in, it shall vest automatically in the names of the  defendants  or  their  nominee  upon  payment  to  the  vendors  of
$2.3m less necessary adjustments for the sale, costs, rates and insurances.  The defendants being the trustees of the Koura Bay Trust, the trust of the son and his wife.

[5]      The judgment separates the sale from winding up the co-ownership accounts. The later task is provided for in order [v]:

[v]       After either the sale of the property to the highest bidder, or the vesting of the property in the names of the defendants or their nominee,  whichever  the  case  may  be,  the  plaintiffs  and  the defendants shall share equally in the net proceeds, subject to any further adjustments necessary to balance the partnership accounts.

[6]      The  application  sought  to  replace  cl  [a]  with  a  formula  whereby  the defendants would pay the plaintiff’s solicitors $1.15m less $22,450.50 (required to equalise the current accounts of the partnership) on or before 15 January etc.

[7]      Having heard argument, I was not displaced from my initial assessment that the function of cl 31[w] was to resolve issues consequential or arising out of the particular orders [a] – [v].   This issue has to be resolved by exercising the leave reserved in [w] by not altering at all [u].   The parties are proposing to sell on 1

November but with settlement on 15 January.  There is obviously plenty of time to prepare to execute order [v] on the date of settlement.  Assuming cl 31[u] triggers, then an agreement for sale and purchase will be executed in the normal way between the two trusts as co-owners and the defendant trust.  That will provide for a deposit which will be paid  straight away in the usual way and  the balance  will be on settlement on 15 January.

[8]      However, the property is sold.  Counsel for both parties are confident that the accountants will be able to settle the final accounts relating to the co-ownership of the property by 1 December.  If they cannot, leave is reserved to apply to the Court to resolve any accounting issues.  The expectation then is:

That  on  or  before  15  January  2015,  the  day  of  settlement,  there  will, alongside the payment for the purchase.  A winding up of the joint accounts of what is effectively a partnership, giving effect to cl [v].

[9]      The parties have not been able to agree on the terms and particulars of the conditions of sale.

[10]     Clause [f] provides:

[f]       The auctioneer conducting the sale is to be authorised to sign an Agreement for Sale and Purchase on behalf of the plaintiffs and defendants for any amount above the reserve price.

[11]     It  is  agreed  that  the  auctioneer  should  sign  the  agreement  for  sale  and purchase with the highest bidder of the auction, if the property is not passed in pursuant to 31[t], in which case cl [u] applies.

[12]     Order [s] of 31 provides:

[s]       The plaintiffs and defendants shall each be at liberty to bid for the property at the auction.

[13]     The parties are in disagreement as to whether or not any one of them has the usual right at an auction to bid via an agent, thus concealing their identity at the time the bids  are  made.    Barfoot  and  Thompson  are naturally concerned  to  avoid  a situation where the co-owners, having placed a reserve of $2.3m, a bid after the reserve is reached.  But if individual plaintiffs and defendants, each of the trusts or any one of the trustees, should bid, they are not bidding as the vendors.  They are bidding  in  their  own  right  to  buy  the  property  from  the  vendors,  being  the partnership of the co-owners.

[14]     Mr Hucker argued that the bidding of one family member could well be affected by knowing whether or not another family member was bidding.  He gave the illustration that the son might bid more than he would otherwise bid to ensure that  his  father  did  not  buy  the  property.    He  argued  that  for  a  standard  of transparency, so that the family members should know if any one of them was bidding more than $2.3m.

[15]     The  relationship  between  the  two  trusts  as  co-owners  is  essentially  a partnership.   The common law is long used to partnerships breaking up and the assets having to be realised.  The standard principle is that the best value possible has to be obtained from the assets unless the parties agree otherwise by sale of the assets in the marketplace.

[16]     It is a normal market practice for buyers to be able to bid at auctions via agents in order not to disclose their identity.   There is nothing in the judgment of Toogood J which suggests that normal market practice would not apply.  Indeed, all his reasoning is the other way.  Mr Hucker was not able to advance any principled argument as to why any one of the trusts or trustees should not be able to bid, as has

been provided for in order [s] in the judgment.1

[17]     For these reasons, the plaintiffs and defendants shall be at liberty to bid for the property at auction, using agents to bid on their behalf.

[18]     I leave it to Barfoot and Thompson and the auctioneer to adjust their standard terms to reflect the distinction between the vendors, being the two trusts, not being able to bid past their reserve but enabling any one of the plaintiffs and the defendants to bid for the property at the auction.

[19]     There was a dispute as to the term of the agency.  Order [b] appoints Paul Donovan of Barfoot and Thompson as the listing agent.  The parties were at odds as to the term of the agency.  The context of order [b] is that Barfoot and Thompson are appointed as listing agents to sell the property by auction.  As noted,2 c; [f] provides that the auctioneer is to be authorised to sign an agreement for sale and purchase on behalf of the plaintiffs and the defendants for any amount above the reserve price. Barfoot and Thompson sought a 90 day agency.

[20]     As this is an agency for the purpose only of sale by auction, there is no need for the agency to be extended significantly past the date of the auction.  It is part of the task of the real estate agency to secure collection of the deposit and this can be an exercise that goes past the day of the auction into the next couple of days for banking reasons.  It is a matter to be negotiated with the auctioneers, but I suggest that the parties negotiate with the auctioneers either for a finite date some days past the auction date or an agency to list the property and market it for the auction.  Then to hold  that  agency through  the process  of obtaining the buyer’s  execution  of the agreement for sale and purchase and payment of the deposit.

[21]     The  leave  to  apply  contained  in  para  [w]  of  para  31  of  the  judgment continues so that further applications can be made on issues consequent up the preceding orders in that paragraph and in this judgment.

[22]     Costs are reserved.