Nakhle v Nadin-Harvey
[2023] NZHC 1904
•25 July 2023
ORDER SUPPRESSING THE RESERVE PRICE SPECIFIED IN PARAGRAPH 26 PENDING AN UNCONDITIONAL SALE AND PURCHASE AGREEMENT IN RESPECT OF THE SUBJECT PROPERTY. IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000376
[2023] NZHC 1904
UNDER Part 12 of the High Court Rules and
Sections 339–343 of the Property Law Act 2007
IN THE MATTER OF
an application for an order for the sale of a property
BETWEEN
DAVID ELIAS NAKHLE
Plaintiff
AND
JOEL MICHAEL NADIN-HARVEY
Defendant
Hearing: 19 July 2023 Appearances:
M Singh and P S Kim for Plaintiff M T R Campbell for Defendant
Judgment:
25 July 2023
REDACTED JUDGMENT OF MUIR J
This judgment was delivered by me on 25 July 2023 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
NAKHLE v NADIN-HARVEY [2023] NZHC 1904 [25 July 2023]
Introduction
[1] Mr David Nakhle and Mr Joel Nadin-Harvey are tenants in common in equal shares in a Campbells Bay property, which they purchased as an investment in July 2021. They planned to live in the property for a period of time before selling it for an expected profit.
[2] Approximately a year after the purchase, personal differences resulted in Mr Nakhle moving out the property, and subsequent attempts to negotiate a sale to Mr Nadin-Harvey were unsuccessful. In February 2022, Mr Nakhle applied by way of summary judgment for orders under s 342 et seq of the Property Law Act 2007 (PLA).
[3] The written submissions filed by the parties indicated substantial agreement in relation to the necessity for a sale and in respect of proposed methodology. During the course of discussions on the day of the hearing, all further terms were agreed but for two relatively minor matters relating to the quantum of occupation rent payable by Mr Nadin-Harvey over two defined periods. The parties asked me to adjudicate on these reserved issues. Mr Nakhle also seeks an award of costs on the application which Mr Nadin-Harvey opposes, and again my decision is required in that respect.
[4] Against this background, it is not necessary for me to embark on a substantive s 342 analysis. The orders that I make are by consent except in the very limited areas identified.
Quantum of occupation rent
[5] Mr Nakhle vacated the property on 16 July 2022. From 28 September 2022, Mr Nadin-Harvey commenced paying an occupation rent premised on a rental value for the property of $1,150 per week, which was the sum agreed by the parties. The accounting was handled “internally” in the sense that Mr Nakhle’s half share of this sum was credited against his liability for outgoings (primarily mortgage interest but also rates and insurance).
[6] During the course of discussions on the day of hearing, Mr Nadin-Harvey, responsibly in my view, agreed to backdate his rental liability to the date on which he assumed sole occupation (16 July 2022). The relevant sum is quantified in order 10(b)(i) of this judgment.
[7] The outstanding issues relate to the occupation rent properly payable for two defined periods:
(a)1 February 2023 to 19 July 2023 (the first period); and
(b)20 July 2023 to the date of which Mr Nadin-Harvey ultimately vacates the property (the second period).
[8] As to the first period, the adopted commencement date of 1 February 2023 is approximately five weeks after Mr Nakhle signalled through his solicitors a requirement that the rent be increased. The parties are agreed that any increase should occur from that date but disagree on the appropriateness of the same and the quantum of any increase. Mr Singh, counsel for Mr Nakhle, says the rental should be fixed at
$1,375 per week. Ms Campbell, counsel for Mr Nadin-Harvey, says it should remain at $1,150.
[9] In the email seeking the increase, solicitors for Mr Nakhle identified $1,250 as the appropriate rental rate moving forward having regard to “[the rapid increase of interest rates] which means that the discounted rate being paid by your client is no longer sustainable”. That proposal was not accepted by Mr Nadin-Harvey.
[10] In terms of evidence, the only material before the Court is an appraisal by the rental portfolio manager of Cooper & Co Limited, trading as Harcourts, dated 15 February 2023 (the February 2023 appraisal). This describes the property as comprising five bedrooms, four living areas and a double garage. It estimates market rent as between $1,350 and $1,400 per week.
[11] It is common ground that the Residential Tenancies Act 1986 is not engaged and that pursuant to s 343(f) of the PLA, I am empowered to fix a “fair occupation
rent” for any relevant period. In my view a fair rent for the first period (1 February 2023 to 19 July 2023) is $1,250 per week. I reach that conclusion having regard to the fact that Mr Nakhle is an experienced man of business who can be anticipated to have been well informed about rental rates at the time of his December 2022 offer, and the fact that continued occupation by Mr Nadin-Harvey facilitated a continuity of rent in the context of a private arrangement without agency fees, promotional costs and related expenses.
[12] I accept that a modest increase in that sum is justified for the second period (20 July 2023 to date the property is vacated). I take into account:
(a)the February 2023 appraisal;
(b)the continuing inflationary environment with consequent upward pressure on rental prices; and
(c)the same discounts which I consider appropriate for continuity of rent in the context of a private agreement.
[13] I assess the appropriate rental rate for the second period at $1,300 per week. My respective calculations are reflected in orders 7 and 10(b)(ii) below.
Costs
[14] Mr Nakhle seeks 2B costs on the proceedings for all attendances down to but not including the date of hearing.
[15] Mr Nadin-Harvey submits the Court should either decline an award of costs or at least reduce the quantum thereof having regard, particularly, to the course of negotiations which preceded the filing of the statement of claim. Within the context of the High Court Rules 2016, Mr Nadin-Harvey’s position is in substance an invocation of r 14.7(f)(v) which provides for a refusal or reduction in costs where the party claiming costs “[fails], without reasonable justification, to accept an offer of settlement”.
[16] I have, in that context, reviewed all the correspondence which passed between solicitors for the parties prior to the issue of proceedings. Throughout that period, Mr Nadin-Harvey was consistent in his desire to purchase the property from what was effectively the joint venture. Price was ultimately agreed but Mr Nadin-Harvey sought the introduction of a number of conditions in the agreement for sale and purchase which were unacceptable to Mr Nakhle. Principal among these was a condition relating to release of funds from another entity, HNP Consortium Limited, in which the parties similarly held a joint interest. Access to these funds was necessary if Mr Nadin-Harvey was realistically to be in a position to purchase the Campbells Bay property. Regrettably, however, there were also disputes between the parties about how such funds were properly attributed.
[17] In my view, what occurred in the period November 2022 through to the date on which proceedings were issued was unremarkable in the sense that two relatively sophisticated parties were, despite reasonable mutual efforts, simply unable to reach a satisfactory agreement. It follows that it would be inappropriate to invoke r 14.7(f)(v) against Mr Nakhle. He was reasonably justified in rejecting an offer to purchase which was as heavily qualified as that advanced by Mr Nadin-Harvey. In turn, he was in my view, justified in issuing proceedings. I have no doubt that only by doing so, has the requisite focus been brought to resolution of the parties’ differences. That conclusion is reinforced by the fact that no settlement initiatives were advanced by Mr Nadin- Harvey between the date of filing the proceedings and the call before Gault J on 16 May 2023, and although apparently at that call there were intimations from his counsel that a settlement was possible, no material progress was made in that respect until immediately before the scheduled hearing date.
[18] However, although I consider r 14.7(f)(v) inapplicable, I need to take into account the fact that this is a proceeding that has been substantially resolved not by trial, but by settlement.
[19]As Toogood J observed in Wheeldon v Body Corporate 342525:1
Usually, where a proceeding is discontinued, the costs are presumed to lie with the plaintiff. That does not apply, however, where the parties have settled. In those circumstances, the usual rules as to the fixing of costs apply. This requires some determination of the parties’ relative success, even though a final determination about the merits is not possible.
[20] In this case the substantive relief sought by Mr Nakhle (sale of the property and division of the proceeds) is recognised in the settlement agreement. The agreement also recognises a liability on the part of Mr Nadin-Harvey to pay occupation rent from the point in July 2022 when he assumed sole occupancy of the property. However, the settlement was not one-way traffic. In February 2023, Mr Nakhle suspended all payments towards the (substantial) mortgage on the property. He initially sought to be relieved of any liability for such payment on the basis the property should have been earlier sold, but ultimately conceded the point. Other less significant concessions were also made, including the identity of the real estate agent in respect of the sale and the commencement date for the revised occupation rental rate.
[21] What is required of me is a reasonably robust assessment of swings and roundabouts. In my view, a 30 per cent reduction in the sum otherwise payable to Mr Nakhle appropriately recognises the parties’ relative successes.
[22] I accordingly award costs against Mr Nadin-Harvey in favour of Mr Nakhle in the amount of $11,711 in accordance with the schedule annexed hereto. In respect of disbursements, I award:
(a)$1,350 for filing fees; and
(b)$690, being half of the property valuation fee incurred by Mr Nakhle.
[23] I decline to award the full valuation fee. Any resolution of the parties’ differences from the point at which the proposed sale to Mr Nadin-Harvey foundered realistically necessitated valuation evidence for the purpose of assessing reserve price
1 Wheeldon v Body Corporate 342525 [2016] NZHC 862 at [12] (footnotes omitted).
in any auction context. In my view, it is therefore a cost appropriately shared by the parties.
[24] For the avoidance of doubt, the award of costs in favour of Mr Nakhle is not (other than by further agreement of the parties) a matter governed by the distribution provisions of my orders, as I do not consider myself compelled to either by authority or principle to elevate Mr Nakhle’s costs claim to one, effectively, of secured creditor.
Suppression
[25] For obvious commercial reasons, I suppress, pending an unconditional sale of the property, the auction reserve price identified in order 4(e) below. Any interim publication of the decision is to substitute “[redacted]” for the sum so identified.
Orders
[26]The following orders are by consent accept where emphasised in italics:
1.The Court’s orders shall be held in the Registry until 2 August 2023, to facilitate a possible private sale of the property at 10A Aberdeen Road, Campbells Bay (Property) to one another. If such agreement is reached, the parties are to advise the Court by way of joint memorandum on or before 1 August 2023.
2.If there is no agreement on a private sale by 2 August 2023, the parties shall within five working days thereafter, jointly:
a)enter into an agency agreement with a real estate agent appointed by the Principal of Harcourts Cooper & Co Limited (with the exception of Semira Arabi and Steve McCulloch) for the sale of the property; and
b)jointly instruct Henderson Reeves Lawyers, of Auckland, to act for both parties in respect of the conveyance of the property.
3.The parties shall share equally in the costs of 2(a) and 2(b), including where necessary, payment in advance of all costs and disbursements that are reasonably necessary to affect a sale of the Property.
4.The Property shall be marketed and sold on the following terms:
a)the Property shall be sold by auction after a marketing campaign of four weeks with the auction to occur within five days either side of 13 September 2023 (to be fixed by the appointed real estate agent);
b)the parties shall equally contribute to a marketing budget of up to $5,000 (inclusive of GST);
c)the Property shall be marketed and sold with vacant possession;
d)no later than five working days before marketing of the Property commences the Defendant is to arrange and pay (at his own cost) a cleaning company to prepare the Property for sale;
e)the reserve price of the auction shall be [redacted] (inclusive of GST) or such other price as deemed appropriate by this Court;
f)both Plaintiff and Defendant may place bids at the auction of the Property;
g)both the Plaintiff and the Defendant shall co-operate in all aspects of the marketing and sale of the Property in order to achieve the best price for the Property, including signing all necessary documents;
h)in the event that either party fails to sign any documents considered reasonably necessary to give effect to the sale of the Property within three working days of such a request being made, the Registrar of the High Court at Auckland is authorised
to execute on behalf of the defaulting party any legal documents that may be necessary to sell the Property.
5.In the event that the Property does not sell at or immediately after auction for a sum equivalent to or in excess of the reserve price, it is to be listed for sale negotiation for a period of one month. In the further event that an offer is received within that period which is acceptable to one party and not the other, either may exercise the liberty to apply in order 13 hereof and the Court shall make such further orders as it considers appropriate.
6.In the event the Property is not sold within the one month stipulated and the parties are otherwise unable to agree a further sales process, either may again exercise the liberty to apply order 13 hereof.
7.The Defendant shall pay occupation rent at the rate of $1,300 per week from 20 July 2023 until he vacates the Property (half share to be credited to the plaintiff).
8.Both parties shall contribute equally to the sum of the mortgage interest payments and other outgoings for the Property (after deducting the rental received) until the date of settlement.
9.Henderson Reeves Lawyers is directed to receive the proceeds from the sale of the Property and in the following priority:
a)pay all sums owing to ASB Bank Limited in discharge of the mortgage on the Property;
b)pay all commission and other sums contractually payable to the real estate agent;
c)pay all other costs relating to the Property on sale, including but not limited to water charges, rates arrears and/or other apportionments;
d)pay the reasonable costs of Henderson Reeves in connection with the sale of the Property;
e)pay any tax payable by the parties pursuant to the application of the bright-line property rule to the sale of the Property.
10.The net sum after deduction of such costs shall be divided into two equal portions:
a)from the Plaintiff’s 50 per cent share:
1.the sum of $27,950 is to be paid to the Defendant (unpaid interest and outgoings);
b)from the Defendant’s 50 per cent share the following sums are to be paid to the Plaintiff:
1.$6,078.73 (being 50 per cent of unpaid rent from 16 July 2022 to 28 September 2022);2
2.the sum of $1,207.51 (being 50 per cent of increased rent from 1 February 2023 to 19 July 2023).3
11.The balance held to the Plaintiff and Defendant’s respective accounts is to then be paid to them or at their discretion.4
12.The Plaintiff will confirm the amount held in the trust account of Henderson Reeves in the name of HNP Consortium Limited within five working days of 19 April 2023.
2 A half share of $1,150 per week from 16 July 2022 to 28 September 2022 (74 days).
3 A half share of $100 per week from 1 February 2023 to 19 July 2023 (169 days). For the avoidance of doubt this sum is additional to the defendant’s pre-existing liability to pay occupation rent calculated by reference to a rental rate of $1,150 per week.
4 This is the original wording of the parties proposed consent orders. I order on the basis that the net sum held to the amount of each party is payable to them on demand.
13.Leave is reserved for either party to apply to the Court on short notice for further directions or a variation of these orders.
[27] Mr Nadin-Harvey is to pay $11,711 in costs and $2,040 in disbursements to Mr Nakhle.
Muir J
Solicitors:
Glaister Ennor, Auckland
Campbell Law Limited, Hamilton
Schedule
Item Description Days 1 Commencement of proceeding by plaintiff 3 10 Preparation for case management conference 0.4 11 Filing memorandum for first conference 0.4 13 Appearance at first conference 0.3 22 Filing interlocutory application 0.6 24 Preparation of submissions 1.5 25 Preparation of bundle 0.6 29 Sealing order 0.2 Total days 7 $2,390 daily rate $16,730 30 per cent reduction $11,711
0