Kapuka Holdings Limited v D J Harrison Limited
[2019] NZHC 1462
•26 June 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-115
[2019] NZHC 1462
UNDER the Property Law Act 2007 IN THE MATTER
of an application under s 339 of the Act for the sale of property and division of sale proceeds among co-owners
BETWEEN
KAPUKA HOLDINGS LIMITED
Plaintiff
AND
D J HARRISON LIMITED
Defendant
Hearing: 19 June 2019 Appearances:
D R Tobin for the Plaintiff
A N Riches and J L Manson for the Defendant
Judgment:
26 June 2019
INTERIM JUDGMENT OF ASSOCIATE JUDGE LESTER
Background
[1] Two brothers through their respective companies purchased a block of rural land in North Canterbury in late 2007.
[2] At the time of purchase, it is common ground that it was intended that the plaintiff would retain, following a subdivision, a block of five hectares known as “the Vineyard Lot” containing a small vineyard area and a house. The balance of the land (of some 49 hectares), which was farmland, would be retained by the defendant company and farmed as part of the defendant’s existing farming operation.
KAPUKA HOLDINGS LIMITED v D J HARRISON LIMITED [2019] NZHC 1462 [26 June 2019].
[3] Unfortunately, the relationship between the brothers has broken down. The subdivision did not proceed, and the plaintiff has applied under s 339(1)(a) of the Property Law Act 2007 (“the Act”), for an order requiring the entire property to be sold.
[4] The order for sale was opposed by the defendant. The defendant company pointed to a brief agreement that was reached shortly after the completion of the original purchase (“the agreement”). The solicitors acting on the purchase provided a copy of the agreement to the plaintiff under cover of a letter dated 20 December 2007. The plaintiff signed the agreement. The director of the defendant company separately signed a copy of the agreement and had his signature witnessed. It does not seem to be in dispute that both parties signed the agreement in early 2008, but neither communicated to the other that they had done so. Despite the passage of time, both counsel accepted that the agreement remained binding.
[5] Notwithstanding that the agreement required both parties to advance the subdivision of the land “as soon as practical after settlement”, little happened for a number of years. In late 2014, the plaintiff instructed a local surveyor to prepare survey drawings of a subdivision.
[6] The first subdivision drawings created a Lot of a little over seven hectares. This was apparently rejected by the defendant on the ground that the agreement had contemplated a Lot of approximately five hectares. I need not dwell on this point. The agreement contemplated that the Lot could be larger than five hectares as cl 7 of the agreement provided that the plaintiff would make a payment to the defendant should the area of the Vineyard Lot be greater than five hectares.
[7] Upon the first plan being rejected, an alternative plan was presented that reduced the area to a little over six hectares. Finally, another plan was presented dated 29 June 2017 with a Lot of exactly five hectares.
[8] There is no evidence that the defendant responded to the June 2019 subdivision plan and given the breakdown in the relationship between the parties, communication on completing the subdivision was not what it should have been.
Plaintiff’s position at hearing
[9] Mr Tobin for the plaintiff, summarised his case as follows. He said that no agreement had been reached as to the completion of the subdivision over a long period of time. He said the disagreement concerned the area to be included in the Vineyard Lot created by the subdivision, the treatment of an electricity easement that was installed to supply power directly to the Vineyard Lot, and water supply to the Vineyard Lot. He said there was no mechanism in the subdivision agreement to allow those matters to be resolved and given the breakdown in the relationship between the parties, sale was the only option.
[10] The reference to the electricity easement is to the fact that at the time the land was purchased, the house on the Vineyard Lot was off the main grid and self-contained with solar panels and generators. The plaintiff wanted to have an independent power supply and the defendant agreed to the local electricity supplier connecting the house to the power supply. That agreement was required as the necessary power cable would have to pass over the defendant’s land, or at least land that would become the defendants upon the subdivision being completed. To that end, the parties executed an easement agreement with the power company and that agreement included a diagram as to where the power cable was to be laid. However, it appears that the power cable was not laid in the correct position. Exactly why that is the case is unclear, but the defendant says its location presents practical difficulties for him in his farming operation. The defendant wants the cable relocated. The current subdivision plan dated 29 June 2017 shows the electricity easement as being placed in the area where the cable has already been laid, as opposed to the area shown on the easement plan.
[11] The water issue is that at the time of the purchase, the house was supplied from a waterline that connected to a supply on the Vineyard Lot which, following subdivision, would become the defendant’s property. Accordingly, the status quo at purchase was that the Lot to be taken by the plaintiff already had a water supply, albeit sourced from land which following subdivision would become the property of the defendant. No easement was in place for the water supply because at the time of purchase all the land was in the same ownership. The defendant refuses to grant an easement. He says the plaintiff can connect to the existing water supply which is also
available on the plaintiff’s Lot and recognises that the cost of doing so would be a cost of subdivision to be shared by the parties in the subdivision.
[12] Accordingly, at the close of the plaintiff’s case, the position was that from the plaintiff’s point of view there was disagreement on those three issues, that is:
(i)the area of the subdivision;
(ii)electricity; and
(iii)water.
Defendant’s submissions
[13] To counter this argument, Mr Riches for the defendant advised that the subdivision plan dated 29 June 2017 was in fact acceptable to his client once the electrical easement was amended to reflect where the cable should be correctly placed. That this was the defendant’s position was not evident before the hearing.
[14] The defendant, with a view to taking a practical approach to the impasse between the two parties, advised that he would agree to the power cable being relocated on his land to the area shown on the original easement plan, and that once that was done, the location of the electricity easement on the 29 June 2017 plan would be amended accordingly.
[15] As to the water supply, the defendant remained unwilling to give an easement, but confirmed that the cost of connecting to the water supply system on the plaintiff’s land would be a cost of subdivision and given that the defendant owns more than half the land, the defendant would bear more than half the cost.
[16] Mr Riches made an oral application for an order under s 339(1)(b) of the Act, that there be an order that the property be subdivided taking into account the position advised by his client during the hearing.
Plaintiff’s reply
[17] Mr Tobin, unsurprisingly, said that the position he was now confronted with was different from that represented by the defendant’s pleadings.
[18] While not abandoning his primary submission, Mr Tobin recognised that the effect of the concessions made by the defendant changed the complexion of the case.
Discussion
[19] The fact is that the plaintiff, when the plaintiff tabled the plan dated 29 June 2017, was (albeit reluctantly) prepared to agree to a subdivision as shown on that plan. If that plan had been accepted by the defendant at the time and the subdivision proceeded, then that is the Lot that the plaintiff would now hold.
[20] The issue with the location of the electricity cable appears to be one beyond the control of the parties. The defendant’s preparedness to take a practical approach to that issue was also recognised by Mr Tobin in terms of the discretionary factors in this context. Indeed, if the responsibility for the power cable being in the wrong place lies with the electrical supplier, it may be that the costs of relocating the cable will fall on the electrical supplier. In any event, as I have said, the defendant is prepared to treat the cost of relocating the cable as a cost of the subdivision to be shared as set out in the subdivision agreement.
[21] As to the water supply, again adopting a pragmatic approach, Mr Tobin maintained that while his client was not obliged to accept a change in the status quo that existed at the time of purchase, there would be costs involved in putting in place a water easement and there were benefits in the property having a water supply that the subdivided Lot had control over.
[22] Mr Tobin in the alternative, also made an oral application for subdivision under s 339(1)(b). Once the Vineyard Lot is subdivided the plaintiff can sell its Lot as it thinks fit.
Outcome
[23] Given the position that developed during the hearing with both counsel seeking an order for subdivision (albeit such was Mr Tobin’s client’s fall-back position), in my view the circumstances call for an order of division under s 339(1)(b).
[24] Had the arrangement between the parties proceeded as it should have, then the plaintiff would have its subdivided Lot now.
[25] The subdivision agreement that the parties accept, binds the sale of the entire Lot as being a last resort. The agreement recognises that subdivision will require the Council’s consent. It provides that in the event consent is not given, a boundary adjustment should occur whereby the 49 hectares or so to be retained by the defendant would be amalgamated with the defendant’s existing farm land, leaving the Vineyard Lot for the plaintiff. It is only in the event that the fall-back position of the boundary adjustment is not available that sale of the entire block is provided for in the subdivision agreement.
[26] With what at the outset of the hearing appeared to be insurmountable barriers to subdivision, these cleared away during the course of the hearing and I consider Mr Tobin’s recognition that a division order was likely was realistic and it was appropriate for him to make, albeit as a backup position, an oral application for division.
[27] Accordingly, the orders that will be made will be under the joint oral applications for division of the land.
[28] Given the position reached, that joint oral applications were made at the hearing, counsel agreed to confer on the form of orders that they would ask the Court to be made.
[29]The orders were to address the following:
(i)That the subdivision would occur in accordance with the plan dated 29 June 2017.
(ii)That Lot 1 to be created by that plan will cease to take water from the supply which it presently sources from Lot 2. Instead, it would connect to the water supply on Lot 1.
(iii)The cost of connecting to the water supply on Lot 1 to be a cost of subdivision as that is treated under the subdivision agreement.
(iv)The location of the power cable is to be relocated to the area shown on the easement plan, part of the Mainpower agreement to grant an easement dated 11 February 2014.
(v)Once the cable is physically relocated, the location of the electrical easement shown on the plan of 29 June 2017 is to be amended to reflect the new position of the cable.
(vi)Any costs associated with the work in relation to the electrical cable are also to be costs in the subdivision.
(vii)The subdivision is to be otherwise governed by the provisions of the subdivision agreement meaning the subdivision is conditional on Council consent.
[30]Costs of this application reserved.
[31] Also reserved are the treatment of costs incurred by the plaintiff in trying to advance the subdivision process. I make the observation that had the parties been co-operating at the time then there would have been at least one set of surveyor’s costs in respect of preparing the subdivision plan and I would expect at least those costs to be subdivision costs.
[32] The exact order to be made will be determined once counsel have conferred as set out at [28] above. If any issue arises in determining the form of the order, then
leave is reserved for either party to seek directions. It is my intention that once orders are made, that leave will be reserved to apply further should issues with implementation arise.
Associate Judge Lester
Solicitors:
Sumpter Moore, Balclutha
Copy to counsel: D R Tobin, Barrister, Dunedin
Saunders & Co., Christchurch
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