Jones v Tuhakaraina

[2023] NZHC 1462

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2022-470-139

[2023] NZHC 1462

UNDER

Rule 19.5 of the High Court Rules 2016 and under s 339 of the Property Law Act 2007

IN THE MATTER

of a property at 41 Walker Road West, Aongatete

BETWEEN

IVAN WALTER CHARLES JONES and

ANDREW ROSS WARES as trustees of the IWC TRUST
Applicants

AND

ROSINA ANNE TUHAKARAINA

Respondent

Hearing:	7 June 2023
Appearances:	L Blomfield for Applicants (via VMR) R Tuhakaraina in Person (via VMR)
Judgment:	13 June 2023

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Tuesday, 13 June 2023 at 2:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Sainsbury Logan & Williams, Napier Copy to: R Tuhakaraina

JONES v TUHAKARAINA [2023] NZHC 1462 [13 June 2023]

[1]On 4 November 2022, the plaintiffs filed:

(a)An interlocutory application on notice for leave to commence proceedings by originating application;

(b)An originating application for orders under ss 339 – 343 of the Property Law Act 2007 (the Act);

(c)An affidavit of Ivan Walter Charles Jones in support of the application for leave to commence proceedings by originating application; and

(d)A memorandum of counsel in support of the originating application under r 19.5 of the High Court Rules.

[2]        The above documents, together with a letter addressed to the respondent from the Tauranga High Court dated 21 November 2022 advising her that this matter would be called in the Associate Judge’s list on Monday 5 December 2022, were served personally on the respondent on 29 November 2022.

[3]No formal steps have been taken by the respondent to oppose the applications.

Background

[4]        The applicants seek an order for the sale of the property at 41 Walker Road West, Aongatete (the Property). The Property is owned by Ivan Walter Charles Jones and Andrew Ross Wares as trustees of the IWC Trust (the Trust) as to a three-fifths share and Rosina Anne Tuhakaraina as to a two-fifths share.

[5]The issues are straightforward.

[6]The facts are not disputed.

[7]        The Property was purchased by the parties pursuant to a Separation and Relationship Property Agreement (the Agreement) dated 20 November 2018. The respondent’s share of the purchase price was funded by a term loan from the Trust on

agreed terms. In that Agreement, the respondent agreed that if she defaulted in payment of the mortgage and that default remained unremedied for two or more months:

(a)She would vacate the Property upon receiving four weeks’ written notice from the Trust to do so (Clause 3.1.4).

(b)The Property would then be listed for sale (Clause 3.1.4).

(c)The sale proceeds were to be applied as to 60 per cent to the Trust and the balance applied to the respondent’s mortgage, before payment to her (Clause 3.1.12).

[8]        The respondent defaulted in payment of the mortgage and that default remained unremedied for more than two months. The respondent’s last mortgage payment was made on 20 March 2020.

[9]        Despite notice twice being served on the respondent, on 24 March 2022 and 16 September 2022, she has not vacated the Property.

[10]      The applicants cannot sell the Property without the respondent’s agreement and the respondent has not engaged with any correspondence sent to her since May 2022.

Procedural history

[11]      At the hearing on 5 December 2022, Associate Judge Sussock directed the respondent to file any notice of opposition to the application for leave to proceed by way of originating application 10 working days following service (by the applicants’ calculation 13 December 2022).

[12]      At a hearing on 3 February 2023, there was no appearance by or on behalf of the respondent. Associate Judge Sussock granted leave to commence the proceeding by way of originating application under Part 19 of the High Court Rules. She also directed that the applicants were to file and serve the originating application by        8 February 2023 by way of email to the respondent’s email address. The respondent

was directed to file and serve any notice of opposition to the originating application together with any supporting affidavits by 24 February 2023.

[13]      The respondent then filed a memorandum seeking an extension of time for filing of her notice of opposition and supporting affidavits in these proceedings. By minute dated 8 March 2023, Associate Judge Sussock extended the date for the filing of the respondent’s documents to 6 April 2023.

[14]      On 4 May 2023, Associate Judge Sussock noted in a minute that since she granted an extension of time to the respondent, no notice of opposition or affidavit in support had been filed by the respondent, nor any further documents. Associate Judge Sussock accordingly allocated a two-hour formal proof hearing in the Hamilton High Court on 7 June 2023 at 2:15 pm.

[15]      The respondent then contacted the Tauranga Registry to advise the Court that she wished to take part in the proceedings. Associate Judge Sussock recorded in a minute dated 22 May 2023 that the respondent may attend the hearing on 7 June 2023, but it would be up to the presiding Judge whether they heard from her or not.

[16]      At the hearing on 7 June 2023, the respondent appeared by way of VMR and made application for leave to defend out of time. She also sought an order that the applicants pay her legal costs to defend the application although she had not yet instructed a lawyer to act for her. The three considerations in deciding whether to grant leave to defend out of time are set out in Neumayer v Kapiti Coast District Council:1

(a)whether the respondent has a substantial ground of defence;

(b)whether the delay is reasonably explained; and

(c)whether the plaintiff will suffer irreparable injury if leave to defend is belatedly granted.

1      Neumayer v Kapiti Coast District Council [2014] NZHC 417, [2015] NZAR 1185 at [8].

[17]      Two of these factors count against the respondent. First, the respondent did not advise the Court of any substantial ground of defence. She said that if she was to negotiate the Agreement now, it would be in a very different form. She was neither as strident nor strong as she is now. The respondent also said Mr Jones was a very wealthy man who could afford to gift her the house. By comparison, she was on a benefit. Moreover, she and her whanau had nowhere else to go and would end up on the street if an order for sale of the house was made by the Court.

[18]      Secondly, the delay was not reasonably explained. The respondent said that her 88-year-old mother and 10-year-old grandson lived with her. They were her priority, together with an adult son who had health issues who was also staying with them at present. The legal proceedings had been difficult to deal with, although she did say that she had worked as a tax lawyer in Australia. She said she had just stuck “her head in the sand”.

[19]      The one factor in favour of granting leave to defend out of time is that the application will not suffer irreparable injury if leave to defend is belatedly granted.

[20]      Looking at the overall circumstances, however, I am of the view that leave to defend out of time should not be granted primarily because no defence has been identified. There is also no basis for an order that the applicants pay the respondent’s legal costs.

Discussion

[21]      Under s 339 of the Act the Court may, in respect of property owned by co- owners, make an order for the sale of the property and the division of the proceeds amongst the co-owners.

[22]      Orders may be sought under s 341 of the Act. The mandatory criteria which the Court must consider in the exercise of its discretion to make orders under s 339 are set out in s 342, which provides:

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.

[23]In Bayly v Hicks,2 Wylie J stated:

The words “must have regard to” are not synonymous with “shall take into account”. Nor do they mean “give effect to”. The Court cannot ignore the listed factors. They must be given genuine thought and consideration and such weight as the Court considers appropriate. However, they will not necessarily be decisive in determining whether an order should be made.

(footnotes omitted)

[24]      If an order for the sale of the property is made, the Court may make further orders specified in s 343, which provides power to the Court to direct how the proceeds of sale of the property are to be applied.

Extent of applicants’ share in the Property

[25]      The applicants own 60 per cent of the Property. That is, they are the majority owners.

Nature and location of the Property

[26]      The Property is in Aongatete and was purchased for $545,000. It was chosen by the respondent after she and Mr Jones separated. Mr Jones agreed that the trustees of the Trust would assist the respondent in the purchase of the Property by agreeing to

2      Bayly v Hicks [2011] 13 NZCPR 568 at [33].

pay 60 per cent ($327,000) of the purchase price and providing the respondent with a loan for the remainder of the purchase price ($218,000). In return, the respondent was to make the loan repayments and pay the outgoings on the Property. Mortgage repayments were not to exceed $350 per week.

Number of co-owners and the extent of their shares

[27]      The applicants own a three-fifths share of the Property. The respondent owns a two-fifths share.

Hardship

[28]      Hardship is not limited to severe privation or suffering, but it is more than mere inconvenience or disappointment.3 In Bayly v Hicks, Wylie J observed that hardship needed to be considered both “in the round and by reference to the proposals advanced by the parties”.4 If the house is sold by Court order, the respondent and her whanau will be forced to relocate, which will no doubt be stressful. Against that, by failing to make her mortgage payments, the respondent has effectively been living in the Property for free for the past three years. She has made just 18 mortgage payments totalling $6,304.00, the last on 20 March 2020.

Value of any contributions

[29]      The applicants have no knowledge of whether the respondent has made any other improvements to the Property.

Other relevant matters

[30]      The Agreement ought to be considered in determining the application under  s 339. An order for sale of the Property is consistent with the outcome that the parties agreed would occur if the respondent defaulted in payment of the mortgage for a period longer than two months. In the Agreement, the respondent agreed to vacate the Property after being giving written notice to do so. Since this proceeding was filed,

3      Coffey v Coffey [2012] NZHC 1765 at [155].

4      Bayly v Hicks [2011] 13 NZCPR 568 at [61].

the respondent has sought to delay its progress by seeking extensions of time to file opposition documents and then not filing any such documents.

Should the order be made?

[31]      Section 339 conveys a broad discretion, even enabling an outcome not advanced by either party, so long as statutory limitations and natural justice are observed.5 I am of the view that it is just that the Court makes the sale order sought by the applicants. If the order for sale is not made, the effect will be to condone a breach of the Agreement in circumstances where the respondent:

(a)has not the made the mortgage payments she agreed to make;

(b)given no reasonable explanation for that failure;

(c)has been warned of the consequences of the continuing breach; and

(d)has failed to put into place any financial arrangements which would enable her to pay the outstanding balance currently owed on the loan or to purchase her share of the Property from the applicants despite having been given time to do so.

[32]      Prior to service of the notice to vacate the Property, the respondent had been given numerous opportunities to remedy her default. Promises of continued payment were made, but later broken. Requests for time to arrange payment of the outstanding balance have been made and granted, but nothing further has been heard from the respondent.

[33]      The applicants have given the respondent time to approach a bank regarding her securing a loan to buy the applicants’ share of the Property. When those timeframes expired, the respondent refused to engage or respond to correspondence sent to her (then) solicitors, her personal email address or postal address.

5      Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [27] and [46].

Result

[34]There will be following orders:

(a)The Property at 41 Walker Road West, Aongatete, is to be sold.

(b)The respondent is required to vacate the Property by 1 October 2023 so the applicants can assess what work needs to be done before the Property can be properly marketed and then to undertake that work;

(c)The sale expenses are to be paid from the sale proceeds before those proceeds are applied in the manner set out below:

(i)The net proceeds shall be applied as to 60 per cent to the applicants and the balance applied to the respondent’s mortgage before payment to her. If there has been any damage to the Property caused by or during the respondent’s occupation of the Property, the costs of those repairs shall be deducted from the respondent’s share of any sale proceeds.

(ii)Costs are to be on a 2B basis. Such costs are to be deducted from the respondent’s share of the net sale proceeds.

[35]      There may need to be supplementary orders under s 343 of the Act. If that is the case, a memorandum needs to be filed with a draft order which contains details of the orders sought with reference to the factors set out in s 343 of the Act. Matters which may be covered by supplementary orders include:

(a)the proposed method of sale of the Property;

(b)the price and/or reserve proposed and details of the method by which that has been arrived at;

(c)whether it is proposed that the Registrar of the Court should be authorised to execute documents on behalf of the defendant; and

(d)the quantification of any expenses of which the applicants seek reimbursement, such as work done on the Property so that it can be properly marketed, supported by affidavit evidence as to the amount of compensation sought.

[36]      There may well be other orders which are necessary to enable the sale of the Property. Accordingly, the Court expects a draft order to be filed, supported by an explanatory memorandum and affidavit evidence as to factual matters to be considered in the supplementary orders.

Woolford J