Hosseini v Hosseini

[2021] NZHC 2317

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1170

[2021] NZHC 2317

UNDER

Section 339(1) Property Law Act 2007

BETWEEN

MAHSA HOSSEINI and MAHYA HOSSEINI

Applicants

AND

MONA HOSSEINI and MEHDI SHIRASEB

Respondents

Remote hearing:	2 September 2021
Appearances:	C A Murphy for the applicants J D Noble for the respondents
Judgment:	6 September 2021

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 6 September 2021 at 3.30pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

C A Murphy, Barrister, Auckland Gregory Simon Law, Auckland Boyle Mathieson, Auckland

HOSSEINI v HOSSEINI [2021] NZHC 2317 [6 September 2021]

[1]                 The applicants (“Mahsa” and “Mahya”) and the first-named respondent (“Mona”) are sisters (and the second-named respondent (“Mehdi”) Mona’s husband). Given the commonality (although not universality) of their Hosseini surnames, I mean no disrespect by referring to the parties by their distinguishing given names.

[2]                 The parties are the registered owners of a property in Auckland’s Three Kings. The property was acquired in September 2017, with the assistance of a bank loan secured by a mortgage over it. The property served as Mona and Mehdi’s family home.

[3]                 The parties agree I may make orders for the property’s sale and division of the proceeds between them. Predominantly at issue is reconciliation of that division equally between them, to account for their contended unequal contributions during the period of their ownership of it.

Background

[4]                 The parties acquired the property on 8 September 2017 for $1.210 million. Mona and Mehdi paid the $120,000 deposit. The balance of the purchase was funded from a $968,000 loan advance from the ANZ Bank, secured by a first charge mortgage over the property, and the rest from Mahsa and Mahya. That ‘rest’ was $122,000 toward the purchase price, and $1,307.50 in conveyancing expenses.

[5]                 In principle, the parties took the benefits and burdens of the property’s ownership in equal shares. In fact, Mahsa’s and Mahya’s contributions included a loan from Mona and Mehdi of $30,000 or more, without express provision for either principal repayment or interest payment or accrual. Rental obtained from the property contributed to the bank loan repayments, any shortfall being borne equally by the parties (except for a period from October 2017 to June 2018, when Mahsa and Mahya subsidised Mona’s and Mehdi’s contributions by a total of $1,700). And Mona and Mehdi spent $10,396.15 on maintenance and improvements to the property.

The law

[6]The Property Law Act 2007 Act provides:

339 Court may order division of property

(1)    A court may make, in respect of property owned by co-owners, an order—

(a)for the sale of the property and the division of the proceeds among the co-owners; or

(b)for the division of the property in kind among the co-owners; or

(c)requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.

(2)    An order under subsection (1) (and any related order under subsection (4)) may be made—

(a)despite anything to the contrary in the Land Transfer Act 1952; but

(b)only if it does not contravene section 340(1); and

(c)only on an application made and served in the manner required by or under section 341; and

(d)only after having regard to the matters specified in section 342.

(3)    Before determining whether to make an order under this section, the court may order the property to be valued and may direct how the cost of the valuation is to be borne.

(4)    A court making an order under subsection (1) may, in addition, make a further order specified in section 343.

(5)    Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).

(6)    An order under subsection (1)(b) (and any related order under subsection (4)) may be registered as an instrument under—

(a)the Land Transfer Act 1952; or

(b)the Deeds Registration Act 1908; or

(c)the Crown Minerals Act 1991.

[7]                 Such orders may be sought under s 341. Section 342 then sets out mandatory relevant considerations on making orders under s 339(1):

342 Relevant considerations

A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:

(a)    the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:

(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 to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:

(e)    the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:

(f)     any other matters the court considers relevant.

[8]Section 339(4)’s “related order[s]” are specified at s 343:

343 Further powers of court

A further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:

(a)      requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:

(b)      fixes a reserve price on any sale of the property:

(c)      directs how the expenses of any sale or division of the property are to be borne:

(d)      directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied:

(e)      allows a co-owner, on a sale of the property, to make an offer for it, on any terms the court considers reasonable concerning—

(i)the non-payment of a deposit; or

(ii)the setting-off or accounting for all or part of the purchase price instead of paying it in cash:

(f)       requires the payment by any person of a fair occupation rent for all or any part of the property:

(g)      provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1).

[9]                 The provisions’ history recently has been recounted by the Court of Appeal.1 Earlier, the Court of Appeal considered:2

Under this new broad discretionary regime it is appropriate for a judge to stand back from the submissions and proposals of the parties, and consider what, on an overview, taking into account the relevant considerations, is the most just and practical way through the impasse before the court, even if the answer may not reflect the orders sought by the parties. By definition the cases that come before the court arise where parties are locked into an ownership position which they cannot resolve because of the positions they have taken, and where a way out may be by a path neither has to that point contemplated.

1      Yozin v New Zealand Guardian Trust Company Ltd [2019] NZCA 202 at [45]–[60]. See also Thomas Gibbons “Section 339 of the Property Law Act 2007: A Tragedy of the Commonly Owned?” (2017) 25 Waikato L Rev 59.

2      Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [32].

Assessment

[10]             Section 342’s mandatory considerations largely are rendered superfluous by the parties’ agreement I may make orders under s 339. There is nothing in those considerations justifying the sale proceeds’ division here otherwise than in accordance with the owners’ equal shares in the property.

[11]             Section 343(f) enables an order requiring “the payment by any person of a fair occupation rent for all or any part of the property”, expressly “in addition” to an order under s 339(1). Thus fair occupation rent is not a factor going to division. Neither    is s 343(a) “compensation”.

[12]             The fundamental issue between the parties is if  they should have recovered   a fair occupation rent from the property for the period of their ownership of it. For Mahsa and Mahya, Cathy Murphy argued that “loss” is required first to be taken into account in reconciling the parties’ positions during the term of their joint ownership. Ms Murphy proposes the imbalance is approximately $13,000 to Mahsa’s and Mahya’s collective detriment. For Mona and Mehdi, Jerry Noble asserted I am not able to revisit the level of rent paid by them unless unconscionable, and argued from analogy with relationship property principles such could not be done without also taking into account Mahsa’s and Mahya’s rental outgoings. He proposes instead initial repayment to each party of their direct capital contributions to the property, calculating that to be

$75,000 in Mona’s and Mehdi’s favour.3

[13]             There is no evidence the parties expected to recover market rental from the property, or their purchase of it was for such purposes. The terms of their joint ownership appear largely to have been only such as was implicit in that joint proprietorship, as requiring the parties’ equal contributions to the property’s net expenses. Possibly the parties initially anticipated living together at the property, but that is not what occurred. And perhaps the seemingly inexorable rise in Auckland property values was contemplated as offering sufficient ultimate return.

3      On my observation of and intention to adopt the operation of the s 339 jurisdiction as explained in Bayly v Hicks, above n 2, to which neither party referred, Mr Noble sought an adjournment to read the judgment, with which he said he was unfamiliar. Given its foundational nature, I declined the adjournment.

[14]A subsidiary issue is if Mona and Mehdi lent Mahsa and Mahya $30,000 or

$34,000 toward their half-share of the balance of the purchase price. There is evidence of $33,000 withdrawn from Mona’s ASB bank account, and $34,000 received into Mahsa’s BNZ bank account (annotated “ET”, presumably meaning ‘electronic transfer’), on 7 September 2017. There also is evidence the sisters’ father lent Mahsa and Mahya $4,000 to complete the transaction. It is unclear why Mahsa’s and Mahya’s “half” share of capital for the purchase price should include the $2,000 shortfall on Mona’s and Mehdi’s $120,000 contribution or the conveyancing expenses. The source of the $34,000 electronic transfer also is unclear. The various explanations in evidence are not specific as to the extent the source(s) were in cash, rather than transfer, and then how those were compiled for ultimate electronic transfer (if that is what it was) to Mahsa’s bank account.

[15]             Mona and Mehdi (and their two daughters) have lived in the four-bedroom house on the property at a $300 weekly rental for the past four years. The only evidence of market rentals before me suggests weekly rental for a four-bedroom property in the vicinity increasing from just under $700 in 2017 to slightly over $800 in 2021. Rental also was obtained from the two-bedroom sleep-out on the property (including by Mahsa and her boyfriend for ten months from 1 September 2019). The logic of market rental is it should cover a property’s reasonable expenses (including the cost of capital) for the period at issue. Here, over time, that would be to cover the parties’ expenses in the property’s acquisition and ownership. Thus there should be no persistent requirement to ‘top-up’ mortgage payments and other expenses.

[16]             Rather than to conclude Mona and Mehdi had the benefit of concessionary rental over the period at issue, an alternative characterisation is they bore a $300 weekly premium over the parties’ equal share of the net mortgage payments (after application of rental from the sleep-out). Also relevant is, in actual capital contributions, Mona and Mehdi paid at least $150,000 in total toward the property’s purchase price (and some $10,400 toward its improvement and maintenance), while Mahsa and Mahya paid at most $92,000 (but also subsidised Mona’s and Mahdi’s premia by $1,700). Although the parties have not considered the transaction from that perspective, those facts provide a foundation for considering any unequal benefit

obtained by Mona’s and Mehdi’s occupation of the property is offset at least to some degree by their additional outgoings on it.

[17]             The evidence does not permit me to bring all those benefits and burdens into precise calculation for reconciliation on division of the sale’s proceeds between the parties. Actual capital contributions to the purchase price were made approximately 60 per cent by Mona and Mehdi and 40 per cent by Mahsa and Mahya. The bank loan repayments appear to have been made at a rate of $2,352.56 a fortnight, thus $518.14 each. The contribution of Mona’s and Mehdi’s weekly $300 rent reduces each owner’s equal fortnightly repayments to $438.14, Mona’s and Mehdi’s gross fortnightly payments of loan repayment and rent thus being $738.14 each. Mona’s and Mehdi’s combined fortnightly payments of $1,476.28 therefore are approximately also 60 per cent of the fortnightly $2,352.56 bank loan repayments.

[18]             That seems a reasonable basis on which to find the parties’ equal treatment overall is restored, offsetting any benefit Mona and Mehdi may have obtained in occupation of the property. Any other rental received reduced each party’s contribution equally, without affecting proportionality. The parties’ other contributions (respectively, of $10,400 and $1700) only are at that proportionality’s margin. I see no reason to award either compensation or fair occupation rent as between the parties.

[19]             Standing back, the most just and practical way through the impasse then is to divide the sale’s proceeds, after discharge of the mortgage and payment of the costs of sale, precisely equally between the four owners. Given my previous paragraph’s assessment of the parties’ contributions, no allowance is required for any perceived inequality during the period of their joint ownership.

Result

[20]I order:4

4      Subparagraphs (a)–(e) below essentially are agreed between the parties, Mr Noble proposing a

$1.65 million reserve and either parties’ solicitors to act as lawyer on the transaction. But his reason for the higher reserve was that is what the property’s sale should obtain, rather than a price below which sale should not occur. And the parties’ relationship means either solicitor risks conflict. Mr Noble then sought the appointed lawyer not charge a rate greater than his firm, but professional rules regulate reasonable fees.

(a)the property be listed immediately with Jared Hards of Ray White Mangere Bridge for sale by public auction, at a reserve price of $1.5 million;

(b)Josh Muir of Auckland’s Lockhart Legal is appointed the parties’ lawyer on the transaction, with authority to make payments out of the sale proceeds as agreed in writing by all parties, and otherwise only pursuant to orders of this Court;

(c)sale is to be completed within 8 weeks after execution of the sale and purchase agreement, any application for extension to be supported by evidence of an executed sale and purchase agreement subject only to such extension;

(d)the parties to co-operate with all aspects of the sale process including (without limitation) by signing any necessary authorisations, keeping the property clean, tidy and presentable for sale, and making reasonable access available for viewing as may be required by agents. Failing such co-operation, the Registrar of this Court is authorised to sign any documents required to list the property for sale and to facilitate its transfer to the purchaser on sale;

(e)sale proceeds are to be disbursed in the following priority:

(i)in discharge of the amount due and owing under the mortgage at the date of payment;

(ii)payment of any outgoings including any rates;

(iii)payment of any real estate agent’s commission, marketing costs (including new valuations, if any), auction costs and legal fees incurred in connection with the sale and transfer of the property;

(iv)the balance to be divided equally between the four owners; and

(f)each party has leave to seek on notice any variation or clarification of my preceding orders.

[21]             Finally, I record the parties’ agreement to contribute equally to the cost of waterblasting the house in preparation for its sale.

Costs

[22]             In my preliminary view, no party can claim comprehensively to be successful in this proceeding necessarily brought to achieve its outcome, and the family context of the proceeding also justifies avoiding continued grounds for dispute, such that costs should lie where they fell — that is, legal costs be borne by the party incurring them.

[23]             If that is not accepted, or the parties cannot otherwise agree, I reserve costs for determination on short memoranda of no more than five pages — annexing a single- page table setting out any contended allowable steps, time allocation, and daily recovery rate — to be filed and served by any claiming party within 10 working days of the date of this judgment, with any response and reply to be filed within five working day intervals after service.

—Jagose J