Harding v Harding HC Whangarei CIV 2010-488-218

[2010] NZHC 1292

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2010-488-000218

UNDER  the Property Law Act 2007 s 339 Property

Identifier NA121D/449

BETWEEN  C A HARDING Plaintiff

ANDA R HARDING First Defendant

ANDC J BLAKE Second Defendant

Hearing:         17 May 2010

Appearances: D James for Plaintiff

T Savage for First Defendant
Second Defendant not present

Judgment:      17 May 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors:

Palmer Macauley, PO Box 576, Kerikeri

Egan & Kite (J Bunbury), PO Box 146, Whangarei

Urlich McNab Kilpatrick, PO Box 633, Whangarei

Copy e-mailed to:

A R Harding, Second Defendant in person

C A HARDING V A R HARDING AND ANOR HC WHA CIV-2010-488-000218 17 May 2010

[1]      This  proceeding  concerns  a  property  at  36  Tasman  Heights,  Ahipara, Identifier  NA121D/449.    The  certificate  of  title  to  the  property  shows  that  the plaintiff  and  the  second  defendant  are  the  owners  of  the  property and  the  first defendant  is  a  second  mortgagee.    The  first  mortgagee  is  the  National  Bank. However, the rights of the parties to this proceeding are governed by an agreement dated 4 June 2004.  Under this agreement, the plaintiff and the second defendant, a married couple, agreed to sell the first defendant an undivided one-half interest in the land for the price of $260,000, inclusive of GST, if any.

[2]      The agreement provided that the vendors, that is the plaintiff and the second defendant, should remain in occupation, and there was a provision for sale.   The deadline for the property to be sold was four years from the effective date.   The effective date was 1 July 2004.

[3]      Clause 6 of the agreement provided:

The vendors land shall be offered for sale on the open market not earlier than two years but not in any event later than four years from the Effective Date by agreement between the parties as to:

a)        the time at which the property is offered for sale;

b)        the price at which the property is to be offered for sale;

c)        the minimum price at which the property is to be sold;

d)the  means  by  which  the  property  is  to  be  sold,  including  the appointment of an agent, the payment of a commission, advertising costs and other matters relating to the sale process.

[4]      Clause 6 goes on to say how the proceeds of sale are to be applied.   It provides for, firstly, the payment of the real estate agent and appropriate advertising costs;  next, payment of legal expenses incurred on the sale with the balance to be divided equally between the vendors and purchaser with the vendors assuming sole liability for repayment of the National Bank mortgage.

[5]      Clause 10 deals with matters in dispute.  It says:

If any dispute shall arise between the parties concerning this agreement:

a)        the parties shall first meet in the spirit of mutual co-operation to endeavour to resolve that dispute;

b)if the dispute has not been resolved within 14 days, then either party may call for the dispute to be resolved with the assistance of an independent mediator;

c)If  within  a  further  14  days  mediation  does  not  take  place  or mediation does not resolve the dispute, then the dispute shall be submitted to arbitration before a sole arbitrator to be approved by the parties or failing agreement nominated by the President of the Northland District Law Society.

[6]      I pause to note that clause 10(c) is ambiguous in that there is no such body as the Northland District Law Society.   There is a body called the Auckland District Law Society but its functions have been divided in two, part of them taken over by the now New Zealand Law Society, and part of it taken over by another body, the Auckland District  Law  Society, which provides  services  but does not  have any disciplinary or administrative functions.  There is also a body called the Northland Bar  Association  but  that  is  an  informal  body.    It  is  uncertain  whether  there  is presently an office of president which is currently filled.

[7]      In any event, 1 July 2008 passed without the parties putting the property on the market for sale.

[8]      The first defendant says that in March, an agreement was negotiated which allowed for him to have a certain amount from the proceeds of sale.  That agreement was not recorded in writing and the plaintiff takes the point that the agreement provided that any variation had to be recorded in writing and signed by the parties, as provided in clause 9.    The plaintiff and the first defendant are at odds over this agreement alleged by the first defendant.   In the meantime, there has been a considerable amount of correspondence with a view to try and resolve matters but no solution has been satisfactorily arranged.

[9]      The parties face real problems in whether any of them can get a proper return from the sale of the property.  The National Bank is owed approximately $330,000 and it is clear that that will have to come out of the proceeds of sale before any distribution to the parties.  It is simply a matter of law that the National Bank, as first mortgagee, takes priority.

[10]     The  valuation  evidence  suggests  that  the  property  might  have  a  current market value of $640,000.   I note, however, that the land agents who have been consulted have suggested an asking price for the property which would be considerably less than that.   In other words, in today’s current market, the parties face a very clear risk that on sale they could see less than what has been indicated by the registered valuer.   It is a depressed market with a surplus of properties on the market for sale in the Doubless Bay, Ahipara areas and areas to the north of Awanui. This is an attractive coastal property but there are also of plenty of other attractive coastal properties on the market.

[11]     Faced with that, the parties need to consider carefully what stance they take and I suggest to all parties that they must face the reality that they stand the real possibility of taking a loss on this property.   All of them have invested in the property and each of them may end up taking a loss.

[12]     To bring matters to a head, the plaintiff brought this application under the Property Law Act seeking orders for sale under s 339.   The first defendant has opposed and has pointed to the arbitration clause and alternative dispute provisions in the agreement between the parties and has applied for a stay of the proceedings, saying that everything ought to be referred off to arbitration.

[13]     I note here that arbitration in this situation will involve the parties in lengthy delay and heavy expense and will not give the parties a ready resolution to the matters in issue.  Having said that, it must be recognised that Article 8 of the First Schedule of the Arbitration Act does not give the courts any discretion.  As long as a party seeking a stay shows that there are matters properly in dispute, that is, that the party seeking a stay may have an arguable defence to the plaintiff’s claim, then the court must refer the matter to arbitration.   Counsel accepted responsibly that that could be undesirable and that alternatives to arbitration should be fully explored before that step is taken.

[14]     Counsel all agreed that it would be appropriate to make a declaration as between the plaintiff and the first defendant that the property should be sold.  That declaration does not bind the second defendant.  He has been served but he was not

served within sufficient time for any orders to be made against him by default.  So his right to oppose any orders being made is reserved.   Informally, there are indications that he will not oppose the matter and it is likely, when this matter comes before the Court, a declaration can be made in respect of him as well.

[15]     I have said that there will be a declaration.   It is not appropriate for me to make an order for sale because such an order would be effectively toothless.  For an order to be made, it must be certain to be enforceable.  A bare order for sale lacks teeth because there is an absence of directions as to how the property should be sold. Effectively, it could not be enforced even if it were made.

[16]     The parties are agreed that directions need to be given for the conduct of the sale.  If those matters are bona fide disputed, then they are not matters that can be the subject of argument before this Court and would have to be the subject of a stay application.  But again I point out to the parties that referring off to arbitration the matter of giving directions for a sale is, in short, to use a sledge hammer to crack a walnut.   It is an over the top remedy.   It is far better that the parties be given the opportunity to resolve these matters informally themselves so they can reach agreement. To that end, counsel were agreed that the matter should be adjourned until 19 July 2010 at 10:45 am with a view to agreement being made to resolve the manner of sale of the property.

[17]     In  giving  those  directions,  I  make  it  clear  that  I  have  not  made  any determination on the stay application and the first defendant remains free to maintain his application for a stay at the next hearing.  I have simply made directions to the extent that the parties have agreed, reserving all the parties’ rights.  I have reserved the parties’ arguments as to the agreement alleged by the first defendant said to have been agreed in March 2008 and all issues about the distribution of any sale once a sale does take place.

[18]     Mr Savage has advised that he is going to be absent from 18 July 2010 until

16 August 2010.  He is to arrange representation by other counsel.

[19]     I direct also that the second defendant, Mr Harding, is to be given a copy of this judgment as well so that he is aware of the directions being made and, if need be, he can arrange his own representation or appear at court on 19 July 2010 to advise his position in relation to this proceeding.  I direct that Mr Harding may be served with a copy by e-mail.

[20]     Costs for today are reserved.

R M Bell

Associate Judge