Ngui v Ngui
[2020] NZHC 160
•13 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-001970
[2020] NZHC 160
UNDER The Property Law Act 2007 BETWEEN
MERLISA SHIOW CHING NGUI
First Plaintiff
AND
MERLYNDA SHIOW MIN NGUI
Second Plaintiff
AND
MERLYNA SHIOW SZE NGUI
Third Plaintiff
AND
JOSEPH SHIOW SEN NGUI
Defendant
Hearing: 3 February, 7 February & 12 February 2020 Appearances:
A Gilchrist for the Plaintiffs J A Wickes for the Defendant
Judgment:
13 February 2020
Reissued:
20 February 2020
JUDGMENT OF VAN BOHEMEN J
Re-delivered on 20 February 2020 at 3pm as per minute of Justice van Bohemen of 20 February 2020
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
Vlatkovich & McGowan, Auckland Southern Cross Chambers, Auckland Loo & Koo, Auckland
NGUI v NGUI [2020] NZHC 160 [13 February 2020]
[1] This proceeding concerns a dispute among four siblings over a property which had been the family home and which was left to them by their mother when she died in August 2015.
[2] The plaintiffs are three sisters, Merlisa, Merlyna and Merlynda Ngui. The defendant, Joseph Ngui, is their brother. The property in dispute is at 476 Herd Road, Hillsborough, Auckland and comprises 1,108 square metres of a land with a single residential dwelling. After some delay, the four children have been registered on the title of the property as owners as to a quarter share each. Joseph, his wife and two children, and his wife’s mother have been the only occupants of the property for most of the period since the mother died.
[3] The sisters seek orders under s 339(1)(a) and (3) of the Property Law Act 2007 (the Act) directing the valuation and sale of the property. Joseph opposes these orders on the grounds they are not appropriate in the circumstances. He says the Court should make an order under s 339(1)(c) of the Act allowing him time to buy the property at an appropriate price. He also says the Court should take into account an asserted agreement giving him the right to subdivide the property and to occupy one of the resulting lots. He also says the Court should order performance of that agreement or should make an order under s 49(1)(a) of the Administration Act 1969 in respect of his interests under that agreement.
Relevant background
[4] The three sisters, Merlisa, Merlyna and Merlynda, aged 49, 51 and 43 respectively, and their brother, Joseph, aged 46, are the only children of Theodore Soon Tieng and Regina Mee Hoon who, with their four children, emigrated to New Zealand from Malaysia in 1989. The father bought the property in December 1989 with the help of his sister, and the family lived there as they settled into life in New Zealand.
Title to the property
[5] The property was initially purchased in the name of the father and one of his sisters. However, the father became sole owner of the property in May 1992.
[6] In 1998, the father died, and the property passed to the mother in accordance with the father’s will. On 5 January 2000, the mother was registered on the title as the owner.
[7] On 11 January 2000, the mother made a will which appointed Merlisa and Joseph her executors and trustees, gave the whole of her estate to her trustees on trust and directed that, following payment of debts, funeral and administration expenses, and any taxes and duties, the residue of her estate was to go to the four children as tenants in common in equal shares.
[8] On 9 September 2015, the mother died. On 24 February 2016, probate of the mother’s will was granted. The property was the only significant asset in the estate.
[9] On 8 September 2017, the property was transferred to Merlisa and Joseph as executors. On 29 June 2018, the property was transferred to the four children as to their quarter shares. The delays in effecting these transfers following the grant of probate were due to disagreements between Joseph and his sisters over the property and issues concerning a property in Malaysia that their parents had left Joseph.
[10] Joseph says he was pressured into signing the documents transferring the property to the executors and then to the four siblings and that he did so without the benefit of legal advice. He also says that he believed that once the property was transferred to the four siblings, he and his sisters would continue to negotiate to find a solution to honour both his mother’s will and an agreement he says he made with his mother for the subdivision of the property.
[11] Joseph’s claim to have been pressured unfairly into signing the transfer documents does not square with the clear advice he received from the sisters’ counsel that he should take legal advice, which he declined to follow. In any event, Ms Wickes, Joseph’s counsel, confirmed that Joseph accepts that the property has transferred to the four siblings in accordance with the mother’s will.
Occupation of the property
[12] The father and mother lived at the property from 1990 until their deaths in 1998 and 2005 respectively. Initially, the four children all lived at the property with their parents.
[13] Merlyna left the property after she had graduated from university in 1991 and married and moved to Singapore.
[14] Merlisa moved out of the property in mid-2004 when she bought a one- bedroom apartment. She returned for a few months in 2009 when her apartment was found to have leaky building issues and required repair. She returned again in December 2010 and stayed until 2016 to care for their mother and then for a further five months following their mother’s death.
[15] Merlynda left the property in 2007. She says she was finding it increasingly difficult to tolerate Joseph’s behaviour towards her. Joseph says as the older brother he had a responsibility to talk to Melynda about her overspending and not managing her finances.
[16] Joseph has lived in the house continuously since 1980. From 2000, he has been joined by his wife and then their two children, now aged 14 and 11. From 2004, Joseph’s mother-in-law has also lived at the house.
Joseph’s claimed right to subdivide the property
[17] Joseph says that before his father died his father told him, his mother and his sisters that Joseph could have the back part of the property as his own to build a house for his family and that he could subdivide the property to achieve that.
[18] Merlisa denies that their parents ever told Joseph he could have the back part of the property. The sisters all say their parents told all of them they could build a house or even two houses on the back part of the property if they had the interest and means to do so.
[19] In cross examination, Joseph accepted that the parents had told all four children they could have part of the property if they wanted it. However, he drew a distinction between his position and that of his sisters on the basis that he was the only son and had agreed to stay at home close to the family. He also said he did not know whether his father had told the sisters they could build on the back land if they wanted.
[20] Joseph has produced a document headed “An Agreement to Subdivide” which was signed and dated by his mother on 22 December 2009. The document says that the mother hereby agrees that Joseph:
… has the right to subdivide the land of the above property, with approximately two equal land size for building house(s) on the vacant land at the back of the current house, subject to Auckland City Council’s approval. He will also have the right of ownership to the subdivided land.
[21] Joseph says the document was typed up by his wife who witnessed the mother’s signature. He also says he took steps about 10 years ago to subdivide the back part of the property by widening the driveway to enable access to the rear of the property, but that his family’s finances did not enable him to take the subdivision any further.
[22] Merlisa and Merlynda do not dispute that their mother signed the document but say they did not see the document, at least in typed form, until after their mother had died. They question whether their mother knew what she was signing since she had been diagnosed with Alzheimer’s disease in October 2009. Joseph acknowledges that his mother had memory issues in 2009 and that she had been diagnosed as being in the early stages of dementia before she signed the document. However, he says their mother was still able to drive and function independently at the time and that he asked her to sign the document to remind his sisters of his mother’s promise to him.
Payments for rent
[23] It appears that none of the children paid rent when living in the house when it was owned by the parents. Nor has Joseph paid rent since his mother died and the house was transferred to the four siblings.
[24] The sisters say Joseph should be required to account to them for a fair rental from the time the property passed to their mother’s estate and they became equitable owners of the property. Joseph says he should not be required to pay rent. He also says the property is in a state of some disrepair and could not be rented out at commercial rates.
Contributions to household expenses, maintenance and repair;
[25] As the children became adults, they contributed to the costs of food and other household expenses, including rates, according to their means. Merlisa says that as she took on the role of caregiver to their mother, she met many of her mother’s expenses from her own income and from the rental she received from her apartment. Merlisa also took responsibility for repaying her mother’s student loan. Joseph also says he has contributed to the costs of the house hold and, as their mother became older and less well, took responsibility for managing the property and its upkeep.
[26] It is common ground that the property is in some need of repair but the sisters do not dispute that Joseph has paid for the costs of some repairs and maintenance. Joseph has produced a schedule of expenses, without supporting invoices, according to which he has spent $52,859.00 on repairs, $37,051.00 for rates and insurance, and
$6,079.00 for lawnmowing. Joseph says it had been agreed by the siblings and by his mother that he would be reimbursed for these costs if and when the house was sold. The sisters dispute a considerable proportion of the costs claimed by Joseph but say they are willing to pay for maintenance provided that is offset against the rental they say is due them.
The Malaysian inheritance
[27] The father and mother owned various properties in Malaysia. The mother made a separate will dealing with those properties. That will is not before the Court. Joseph says that the Malaysian will gave him the mother’s half share in a property in Kuching on the island of Borneo which she had owned jointly with her husband. As a result, Joseph became the sole owner of that property, having received the father’s half share of the property under the father’s Malaysian will when the father died.
Joseph says the transfer of this property to himself alone was in recognition of his rights as the only son under Chinese tradition.
[28] The mother’s Malaysian will divided two other Malaysian properties among the four children. One property was divided equally. Merlisa obtained a greater share of the other property in recognition of her role as caregiver to her mother and her contributions to the family.
[29] Joseph says he would be able to purchase the Herd Road property from his sisters if he was able to sell the Kuching property for an appropriate price. He says the Kuching property is worth approximately NZ$700,000. He also says he was prevented from putting up the Kuching property for sale for a number of years because the ownership papers for the property were mislaid, for which he holds Merlisa responsible. He says he was also delayed in putting the Kuching property up for sale because Merlyna had been interested in buying the property from him. Merlyna confirms that she did explore the possibility of buying the Kuching property as a means of resolving the sisters’ issues with Joseph and enabling her sisters to obtain the value of their shares of the Herd Road property but that she was not prepared to pay the price Joseph was seeking which she considered to be in excess of market value.
Value of the property
[30] In a valuation dated 8 November 2019, Mr Bates of Bates Valuation Evidence Ltd has valued the property, inclusive of fixed chattels, as being $1,350.000 as at 2 November 2019, the date of Mr Bates’s inspection of the property.
[31] Mr Bates’s valuation also provided his opinion as to the market rental for the property from the date of the mother’s death.
The Act
[32] As co-owners of the property, the sisters have the right under s 341 of the Act to apply for an order for sale under s 339(1). All co-owners are party to the proceeding and have been served with the application as required by s 341(2).
[33] Under s 339(3), before determining whether to make an order under s 339, the Court may order the property to be valued and may direct how the costs of the valuation is to be borne.
[34]Under ss 339(4) and 343, when making an order under s 339(1), the Court may:
(a)Require the payment of compensation by one or more co-owners to other co-owners;
(b)Fix a reserve price;
(c)Direct how the expenses of any sale are to be borne;
(d)Direct how the proceeds of sale are to be divided;
(e)Allow a co-owner to make an offer for the property on any terms the court considers reasonable concerning the non-payment of a deposit or the setting off or accounting for all or part of the purchase price;
(f)Require the payment by any person of a fair occupation rent;
(g)Provide for other matters the court considers necessary or desirable.
[35] Under s 342(1), when considering whether to make an order under s 339(1), the Court must have regard to:
(a)the extent of the share in the property of the sisters;
(b)the nature and location of the property;
(c)the extent of Joseph’s share;
(d)the hardship that would be caused to the sisters by refusing the order in comparison with the hardship that would be caused to Joseph by making 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.
Issues
[36]The issues in the proceeding are:
(a)Does Joseph have a right to subdivide the property and to own and occupy the subdivided land, and if so, what are the consequences of that right?
(b)Should the Court make an order for sale of the property, having regard to the considerations in s 342(1) of the Act?
(c)If the Court makes an order under s339(1), should it:
(i)Allow Joseph an opportunity to purchase the property and, if so, on what conditions?
(ii)Require Joseph to account to his sisters for rent?
(iii)Require the sisters to account to Joseph for the costs of repair?
(iv)Make any other order?
Does Joseph have a right to subdivide and to own the subdivided land?
[37] Ms Wickes for Joseph says the document signed by the mother on 22 December 2009 amounts to an agreement because it is in writing, it was witnessed and there was part performance of its terms by Joseph widening the driveway.
[38] Mr Gilchrist for the sisters says the document is not an enforceable agreement: it was signed by only one party, the mother, who had been diagnosed with Alzheimer’s
prior to signature. He also says it does not comply with s 24 of the Act and is not certain as to its effect.
[39] I do not accept Mr Gilchrist’s submission that the document does not comply with s 24 of the Act. Its terms are in writing and it was signed by the mother – the party against which the contract would have been enforced if the mother was still alive. However, I do not consider that the document amounts to an enforceable contract for a more fundamental reason.
[40] While I accept that it can be inferred that Joseph was the other party to the document even if he did not sign it, the document is clearly not a deed and no consideration is stated in the document. The question is whether consideration can be inferred from the surrounding circumstances.
[41] When asked in cross examination why he was not providing anything for the agreement, Joseph said:
It was just gifted to me, so, I just needed to put it on paper and then if I build a house Mum would stay with me.
[42] A little later in the cross examination, when Mr Gilchrist put it to Joseph that he had been trying to grab an advantage for himself in getting his mother to sign the document, Joseph said:
I mean that’s for me, yes, because, just to protect me, just to, you know, ask evidence for my sisters to mum’s promise and they know about it.
[43] There are two significant aspects about those answers: first, the acknowledgements by Joseph that his mother was making a gift or a promise to him; and, secondly, the proposition that if Joseph built a house, his mother would live with him. Arguably, an understanding that Joseph would provide a home for his mother in any new house on the subdivided land would amount to consideration, although Ms Wickes did not make that submission.
[44] In any event, I do not consider that Joseph’s assertion that his mother would live with him if he built a house on the back land amounts to consideration for his receiving a right to subdivide the back land. First, Joseph has said that the reason why
he stayed in the current house was that it was expected of him under Chinese custom that he would stay at home and look after the parents. To the extent that Joseph was giving effect that custom, it applied to the current house so no additional value would have been provided by Joseph providing accommodation for his mother at any new house that he might build on the subdivided land.
[45] Secondly, while Joseph has claimed that his situation was different from his sisters because he was the only son and had agreed to stay home to look after his parents, the evidence is that when his mother really needed looking after that was carried out by Merlisa who moved back into the family home for that purpose and whose efforts in that regard were recognised in the mother’s Malaysian will.
[46] Thirdly, irrespective of Chinese custom, the fact that Joseph stayed at home while his sisters left can just as easily be explained by the fact that he was the third youngest child and it suited him to stay at home. In addition, the fact that the mother’s will left her estate – of which the property was the only significant asset – to all four children is strong evidence that the mother saw no distinction between Joseph’s situation and that of his sisters, at least as far as the Herd Road property was concerned.
[47] For these reasons, to the extent that the document of 22 December 2009 purports to be an agreement between Joseph and his mother, I am satisfied there was no consideration to support the agreement.
[48] My conclusion in this respect is reinforced by the other aspect of Joseph’s answers noted at [41] and [42] above – that the document was intended to record a gift or a promise from his mother. I consider that description to be consistent with the terms of document itself (leaving aside the heading) and with the evidence of the sisters and that of Joseph that the parents promised all of the children they could build homes on the back land.
[49] The document does nothing more than confirm that, subject to Auckland City Council approval, Joseph had the right to subdivide the property and that if he did so “he will have the right of ownership to the subdivided vacant land.” In substance, the document amounts to little more than a written articulation of the oral promise that the
parents had made to all four children – that you have the right to build a home on the vacant back land and, if you do so, that will be your home.
[50] If the document is evidence of a gift, the question arises as to whether the mother intended to give the right to subdivide the land exclusively to Joseph, thereby negating the oral promises the parents had made to the sisters or whether she saw the document as sitting alongside those oral promises. There is no evidence on this point apart from Joseph’s assertion that this was his intention in getting his mother to sign the document and his claim that his father told him that he could have the back land as his own. However, Joseph’s assertion is not evidence of the mother’s intention. As for Joseph’s claim about what his father told him, it is relevant to recall the admonition of Salmond J in Harper v Whittaker that it is very easy to tell a story of a gift by a dying [or dead] man and very difficult to contradict it after he is dead.1 There is the further complication of not knowing whether, because of her dementia, the mother appreciated what she was signing.
[51] However, whether or not the mother knew what she was signing and regardless of what Joseph’s father might or might not have told Joseph, the father’s will left the whole of the property to the mother and the mother’s will left the whole of the property to the four children in equal shares. I consider, therefore, that if the document of 22 December 2009 amounts to a gift of the right to subdivide and occupy the back land, it was implicit in the gift that the right to subdivide the property had to be exercised while the mother was still alive, given the terms of the mother’s will which left her estate equally to all four children.
[52] Joseph did not subdivide the land. He did not build a house. He did not even apply to the Auckland City Council for a subdivision consent or a building consent. All he did was to widen the driveway to enable access to the back land. That was 10 years ago, and nothing more has happened since. I do not consider that that preliminary work amounts to fulfilment or even part performance of the condition on which the gift was made. At best, it amounts to confirmation of an intention to take up the mother’s gift, but nothing more.
1 Harper v Whittaker [1921] NZLR 783 at 785.
[53] I am satisfied that Joseph’s right, and indeed the sisters’ rights, to build and own a house on the back land on the basis of the parents’ promises ended when the mother died and the property was disposed of in accordance with her will. Joseph effectively confirmed his understanding of this reality, when in response to Mr Gilchrist’s questions about whether he had challenged his parents’ wills, he said:
No, I accepted the share into four, the house into four shares, yeah.
[54]Later, in response to questions from the Court, Joseph said:
Okay, so initially we agreed that, I mean they all know that I couldn’t, you know, build the house and of course this will says that we share equally so which means that, you know, we are happy to share if we sell the house, we all split quarter share.
[55] For these reasons, I do not accept that Joseph has a current right to subdivide the land and to own the back land. I reach that conclusion without deciding whether the mother was capable of entering into a legal agreement in December 2009 or whether Joseph may have exercised undue influence over his mother. I do not consider there is enough evidence on the mother’s mental capacity at the time she signed the document to reach findings on either issue.
[56] Accordingly, I decline Joseph’s application for specific performance of the document of 22 December 2009 and his application for an order under s 49 of the Administration Act.
Should the Court order the sale of the property?
Extent of shares
[57] The sisters together own 75 per cent of the property. They have no wish to live there and they want access to their shares of the inheritance. Joseph’s share is 25 per cent of the property. That should not entitle him to block sale of the property, particularly when he has refused to pay rent to his fellow co-owners. I consider this factor militates strongly in favour of an order for sale.
Nature and location of property
[58] The property is a residential freehold property in the suburbs of Auckland. Such properties are readily bought and sold. It is the home for Joseph and his family but that is the consequence of time and the children’s own choices. It was equally the home of the sisters as well, particularly for Merlynda who, as the youngest child, would have spent more of her formative years at the property than any of the four children. Apart from considerations of hardship, which I consider below, there is nothing in the nature or location of the property that suggests the property should not be sold.
Hardship to sisters and to Joseph
[59]As Fogarty J said in Holster v Grafton:2
“Hardship” is a value-laden criterion. It suggests an adverse effect which is of significant impact to the applicant. It has to be read consistent with the policy of the act which respects property rights of tenants in common, but seeks to resolve conflicts fairly.
[60] The sisters say that to refuse an order for sale would cause them significant hardship. Joseph denies this and says that Merlisa’s two-bedroom unit is “spacious” and that Merlynda is at fault for not managing her affairs better. His evidence on these and other matters was tendentious and contrasted with the dignity in the evidence of the sisters who did not seek to impugn the character of their brother.
[61] Merlisa lives in a small two-bedroom unit in Waiuku and while she does not have mortgage, she has a low income and little ability to raise funds. She works part- time for health reasons and earns approximately $13,000 per annum. She is also on what she described as a “job support” benefit from Work and Income New Zealand. She said in evidence that she drives a 21-year-old car that frequently breaks down but which she cannot afford to replace. She has had to seek help from friends and family to pay for the costs of car repairs and dental bills. Merlyna confirms that Merlisa is dependent on her, Merlynda and friends for such financial support. There is little
2 Holster v Grafton (2008) 9 NZCPR 334 at [50].
doubt that Merlisa would suffer real hardship if she is not able to access her share of the capital in the property.
[62] Merlynda earns approximately $60,000 per annum, lives in rented accommodation and has a student loan to pay off. She says she has almost nothing left over after paying the loan, rent and normal living expenses and that deriving an income from her share of the property or from the proceeds of sale would have a significant impact on her life. I accept that evidence and I accept that not having access to her share of the capital would cause Merlynda hardship, even if not to the same degree as Merlisa.
[63] As Mr Gilchrist acknowledges, Merlyna is in the best financial position of all the siblings because she has a husband who supports her. However, she and her husband have three children to support and a mortgage to pay. Merlyna says she would not be able to help her husband reduce that mortgage or help her family meet their various financial commitments and expenses if she is not able to access her share of the capital in the property.
[64] I do not consider that Merlyna would suffer actual hardship if the property were not sold but her lack of hardship does not reduce that which would be experienced by her sisters.
[65] Joseph earns approximately $80,000 per year – although he says he has only recently started receiving that level of salary. His wife also earns approximately
$30,000 per annum. In addition, Joseph has the benefit of the Kuching property and says he has the means to buy out his sisters provided he can sell that property. It is apparent, therefore, that an order for sale would not cause Joseph significant hardship, although it may cause him inconvenience if he is not able to sell the Kuching property and has to move out of the Herd Road property.
[66] For these reasons, the balance of hardship considerations lies firmly with the sisters and in favour of sale.
Value of contributions to the cost of improvements or maintenance
[67] As already noted, Joseph has produced a schedule of expenses showing amounts he says he has spent on repairs, rates and insurance, and lawnmowing.
[68] Rates and insurance do not relate to repairs and maintenance and so are not relevant to this consideration. Nor do I consider the costs of lawnmowing relevant in this context. Lawnmowing does not usually come under repairs and maintenance.
[69] Most of the costs of repair and maintenance, however, related to periods before the mother died and before the property was transferred to the four siblings. $39,347 or almost 75 per cent of the claimed total for repairs were incurred between April 2006 and March 2015. There is a question whether payment of those costs, which were incurred when none of the parties owned the property, should be taken into account when considering whether to make an order for sale. However, even if those costs are taken into account, such advantage as Joseph may claim from having met those costs is negated by his insistence that these costs be shared by all four siblings. Accordingly, I regard this factor as neutral when considering whether to order sale of the property.
Any other matters the Court considers relevant
[70] Neither Mr Gilchrist nor Ms Wickes raised any other matters for the Court’s consideration.
Conclusion after taking into account s 342(1) considerations
[71] Having taken into account all of the considerations identified in s 342(1), I am satisfied that the balance lies firmly in favour of making an order for sale of the property. The sisters own 75 per cent of the property and want to sell and they are currently deriving no benefit from the property. Refusing an order for sale would cause significant hardship to Merlisa and, albeit to a lesser extent, Merlynda. On the other hand, an order for sale would not cause hardship to Joseph in the sense described by Fogarty J in Holster v Grafton.
Should the Court allow Joseph an opportunity to purchase the property?
[72] Ms Wickes submits that rather than ordering the sale of the property the Court should allow Joseph time to buy the property at a fair and reasonable price. As to what constitutes a fair and reasonable price, Joseph says, through Ms Wickes, that he accepts the valuation prepared by Mr Bates on 8 November 2019. However, Joseph says he needs time to sell the Kuching property if he to be able to pay that price.
[73] The sisters, through Mr Gilchrist, have said they are prepared to allow Joseph up to six months buy out their shares in the property, but the price must reflect the market at the time of sale and cannot be limited to the valuation carried out in November last year. Ms Wickes has advised that Joseph accepts that the price must be agreed by all parties and should take into account both the valuation prepared by Mr Bates on 8 November 2019 and any updated valuation.
[74] To that extent, there has been some narrowing of the differences between Joseph and the sisters. However, they continue to disagree on some of the modalities to provide for Joseph to exercise this opportunity to purchase and their counsel have each provided the Court with draft orders reflecting their different approaches.
[75] I am grateful to counsel for their assistance and am satisfied that the Court should provide Joseph the opportunity to purchase the sisters’ shares in the property within a defined period and at a price reflecting the market value of the property at the time of sale. I am also satisfied the Court should provide the sisters certainty that if Joseph does not buy out their shares within that defined period, the property will be sold.
Should the Court require Joseph to account to his sisters for rent?
[76] The sisters say it is unfair that they have received nothing of their inheritance for what has turned out to be a considerable period while Joseph has been able to occupy the property rent free. They say Joseph should account to them for rental from the date of their mother’s death when they became equitable owners of the property. However, through their counsel, Mr Gilchrist, they accept that Joseph may be given a grace period, not exceeding a year after their mother’s death.
[77] Joseph says he should not be required to pay rent. The property has always been his home and there is no evidence of a demand that he should pay rent until this proceeding was commenced. He says his sisters could also live at the property if they wished and that they chose to leave of their own accord. He also says that he is not responsible for the delay in finalising the estate and says his sisters had made it difficult for him to buy them out because they changed their mind after the four of them had agreed a purchase price. Joseph also says the property is in a state of some disrepair and could not be rented out at commercial rates.
[78] In his valuation, Mr Bates provided his opinion that the market rent for the property was as follows:
(a) 2015: $700 per week;
(b) 2016: $725 per week;
(c) 2017: $750 per week;
(d) 2018: $775 per week;
(e) 2019: $800 per week.
[79] Mr Bates also said the market rent for the property for the 12 months from the date of valuation, 2 November 2020, would be $800 per week.
[80] Ms Wickes sought to cast doubt on Mr Bates’ figures by highlighting the state of disrepair of the property, the repairs that Joseph had undertaken, including the roof renovation in September 2015, and the fact no repairs had been carried out for a number of years at the insistence of the sisters. Mr Bates acknowledged that he was not in a position to assess the structural integrity of the house but said he had taken the visual state of disrepair and the apparent nature of the renovations into account when setting his estimate of market rental. It was because of these considerations that he had set the rental at the lower end of the spectrum for rentals for houses of an equivalent size, some of which, Mr Bates noted, would no doubt also need repairs.
[81] I am satisfied that Mr Bates established that his opinion as to the market rental of the property, which is the only valuation evidence regarding market rental before the Court, was soundly based and took proper account of the state of the property.
[82] I am also satisfied that Joseph should pay an appropriate rental to his sisters. It is one thing to live rent free at a mother’s home. It is another for Joseph to have free accommodation at a property that is 75 per cent owned by his sisters, especially when two of the sisters are in a significantly worse financial position than he.
[83] I do not accept Ms Wickes’ submission that rental should be payable only from the date that the property was transferred to the four siblings. Whether Joseph was responsible for the delays in reaching agreement on what to do with the property as the sisters allege, or whether the sisters were responsible as Joseph alleges, the reality is that Joseph has had the use of their jointly owned asset and they have not. It is only fair and appropriate that he should pay them rent in respect of their 75 per cent interest in the property once they became equitable owners.
[84] I agree that a grace period is appropriate, however, bearing in mind that it would have taken any family time to adjust to the new realities following a mother’s death. I consider that rental should be payable as from 1 May 2016 or just under nine months from their mother’s death. That grace period also removes from consideration any concern that the house would not have been tenantable in September 2015 when the roof was being repaired.
[85] It follows that Joseph is accountable to each sister for 25 per cent of rental up to the date of the orders that I will make following this judgment based on the market rentals as set in Mr Bates’s evidence. As I explain below, I intend to make those orders on 17 February 2020, once counsel have had an opportunity to consider the terms of the orders. On that basis, the rental would be calculated on the following basis:
(a) 2016: 35 weeks @ $725 per week: $25,375.00
(b) 2017: full year @ $750 per week: $39,107.14
(c) 2018: full year @ $775 per week: $40,410.71
(d) 2019: full year @ 800 per week: $41,714.28
(e) 2020: 6 weeks and 5 days @ $800 per week: $5,371.43
$151,978.56
[86] It follows that Joseph must pay each sister $37,994.64 for rental from 1 May 2016 to 17 February 2020. It also follows that Joseph must pay each sister $200 per week in rental from 18 February 2020 to the date that Joseph buys out his sisters’ shares in the property or vacates the property prior to sale.
Should the Court require the sisters to compensate Joseph for the cost of repairs and other household expenses?
[87] I do not consider that the sisters have any responsibility for rates and insurance when the house was owned by their mother and occupied by Joseph and his family. While the evidence on the point is spare, it appears that the practice was that adult members resident at the property contributed to payment of rates and insurance while they were living there. That may not have been the case when Merlisa was living in the house while looking after the mother. However, she says in her evidence that she “contributed to the board” and met many of her mother’s expenses.
[88] In any event, I do not consider the sisters should reimburse Joseph for rates and insurance before their mother’s death. In addition, if Joseph is to have rent free accommodation for a grace period after the mother’s death, the corollary should be that the sisters should not be responsible for rates and insurance during the grace period. However, once Joseph starts paying rent, I consider that the sisters should pay their shares of rates and house insurance.
[89] I also do not consider that the sisters should have any responsibility for the costs of lawnmowing. Lawnmowing is usually the responsibility of the occupant.
[90] I consider the costs of house repairs and maintenance to be in a different category. Joseph says that it was agreed with his mother and his sisters that these costs would be recovered when the property was sold. When giving evidence, Merlisa was
asked by Ms Wickes whether about the issues between Joseph and the sisters. The exchange proceeded as follows:3
Q.And the issues between Joseph on the one hand and you sisters relate to money he has put into the house?
A.Not so much that, we are quite willing to pay for maintenance and offset the rental.
Q.Okay, so you accept that he has paid to repair certain things in the house?
A. Yes.
Q. That’s not one of the issues in dispute.
A. The issue is that he wants us to pay a ridiculous amount.
[91] I take from that exchange that the sisters do not dispute that Joseph has paid for repairs and maintenance and are willing to pay those costs, subject to the amount being sought. The reference to offsetting those costs against the rental might suggest that the sisters consider they should be responsible only for costs incurred while Joseph is paying rent; i.e. from 1 August 2017, as Mr Gilchrist submitted should be the case. However, I accept Joseph’s evidence that it was generally understood that he should be reimbursed for the costs of maintenance and repair to what was the key family asset. All of those costs were incurred prior to their mother’s death and could have been charged to her estate as they were costs incurred in maintaining and repairing the mother’s property. In that case, they would have had to be shared by the four siblings in any event.
[92] Joseph’s schedule puts the total costs of repairs and maintenance at $54,859.00. However, in cross examination, Joseph accepted that some of the costs claimed, such as repairing the washing machine and the oven, are not usually regarded as house maintenance. Once those items are excluded, Joseph’s contribution to repairs and maintenance, not including the cost of his own time and effort, comes to $52,604.00. Each sister’s share of those costs is $13,151.
3 Subject to a minor judicial correction to Merlisa’s last response.
[93] As recorded at [88], once Joseph starts paying rent the sisters should pay their shares of rates and house insurance. Based on Joseph’s schedule, each sister’s share of the rates and insurance is:
Insurance
Year paid
Amount paid
Each sister’s share
2016
$1081.00
$180.90 (for year from 1/5/16)4
2017
$992.00
$248.00
2018
$1181.00
$295.25
Rates
2015-16
$3501.00
$145.87 (for May/June 2016) 5
2016-17
$3592.00
$898.00
2017-18
$3659.00
$914.75
2018-19
$3641.00
$910.25
$3,593.02
[94] Those figures do not take into account, however, any payments Joseph has paid or may pay before settlement for insurance in 2019 and 2020 and for rates for the 2019-20 and 2020-21 rating years. If Joseph has paid and continues to pay all of the costs of house insurance and rates, and produces evidence of such payments, the sisters will each have to account for a quarter share of those payments.
Result
[95]For all the above reasons I have concluded that:
4 Bearing in mind 2016 was a leap year.
5 Bearing in mind that under the Local Government (Rating) Act 2002 the financial year begins on 1 July.
(a)The property shall be sold and, unless Joseph buys out his sisters as set out below, the proceeds of sale are to be shared equally among the four siblings;
(b)Joseph shall be afforded an opportunity to buy out his sisters’ combined
75 per cent interest in the property but that opportunity must be exercised within five months of the orders giving effect to this decision, that is by 17 July 2020 and the purchase must be completed by 17 August 2020;
(c)The purchase price for Joseph’s acquisition of each sister’s 25 per cent interest in the property shall be based on an updated valuation of the property by Mr Bates that the four siblings shall jointly commission no later than 17 June 2020 and, unless the four siblings agree otherwise, shall be one quarter of the updated valuation figure.
(d)At settlement of the purchase, Joseph shall also pay each sister:
(i)$37,994.64 (being the amount owed to each sister by way of rental for the period 1 May 2016 to 17 February 2020) minus the following amounts:
1. $13,151.00 (the amount by which each sister must compensate Joseph for repairs and maintenance)
2. $3,593.02 (for house insurance from 1 May 2016 to 31 December 2019 and for rates for the 2015-16, 2016-17 2017-18 and 2018-19 rating years);
3. Upon production of evidence of payment by Joseph, a quarter share of the amounts Joseph has paid for house insurance in 2019 and 2020 and for rates for the 2019-20 and 2020-21 rating years.
(ii)Rent payable by Joseph to each sister at the rate of $200 per week from 18 February 2020 to the date of settlement.
(e)If Joseph has not notified the sisters by 17 June 2020 of his intention to purchase their combined shares or has not reached agreement with the sisters on the terms of the purchase by 17 July 2020:
(i)The property is to be put on the market for sale;
(ii)At the date of settlement, Joseph is to pay each sister the amounts set out in paragraph (d) above.
(f)The four siblings shall share equally the costs of any division or sale of the property.
Orders
[96]To give effect to this result, I make the orders annexed to this judgment.
Costs
[97] The sisters are entitled to costs on a 2B basis. If the parties cannot agree costs, the sisters may apply by memorandum of no more than four pages filed and served no later than 16 March 2020. Joseph may reply by memorandum of no more than four pages filed and served no later than 30 March 2019.
G J van Bohemen J
Annexure Orders
[1] In accordance with his judgment of 20 February 2020, the Honourable Justice van Bohemen makes the following orders under ss 339 to 343 of the Property Law Act 2007:
(a)The defendant shall have the opportunity to purchase the plaintiffs’ combined 75 per cent interest in the property at 47 Herd Road, Hillsborough, Auckland (being all that parcel of land containing 1,108m2 more or less being contained in Lot 1, Deposited Plan 92677, and being contained in Identifier NA 49B/397 (North Auckland Registry)) on the terms set out below:
(i)The defendant shall notify the plaintiffs by 17 June 2020 if he is willing and able to purchase the plaintiffs’ combined 75 per cent interest in the property;
(ii)If the defendant notifies the plaintiffs in accordance with paragraph (i) above, the plaintiffs and the defendant shall, no later than 24 June 2020, jointly instruct Mr Peter Bates of Bates Valuation Evidence Ltd, to prepare an undated valuation of the property;
(iii)Mr Bates shall use his best endeavours to provide the updated valuation to the parties by 8 July 2020;
(iv)Unless the parties agree otherwise, the purchase price for the plaintiffs’ combined interest in the property shall be 75 per cent of the updated valuation prepared by Mr Bates;
(v)If the defendant notifies the plaintiffs by 17 July 2020 that he wishes to proceed with the purchase of the plaintiffs’ combined
interest in the property, settlement shall take place no later than 17 August 2020 unless the parties agree otherwise;
(vi)At settlement, the defendant shall pay each plaintiff:
1. One quarter of the purchase price in accordance with sub- paragraph (iv) above;
2. $37,994.64 (being the amount owed to each sister by way of rental for the period 1 May 2016 to 17 February 2020) minus the following amounts:
a.$13,151.00 (the amount by which each sister must compensate the defendant for repairs and maintenance)
b.$3,593.02 (the amount by which each sister must compensate the defendant for insurance from 1 May 2016 to 31 December 2019 and for rates for the 2015- 16, 2016-17 2017-18 and 2018-19 rating years);
c.Upon production of evidence of payment by the defendant, a quarter share of amounts the defendant has paid prior to settlement for house insurance in 2019 and 2020 and for rates for the 2019-20 and 2020-21 rating years.
3. Rental for the period 18 February 2020 to the date of settlement calculated at the rate of $200 per week;
4. One third of the plaintiffs’ costs and disbursements in this proceeding as agreed by the parties or ordered by the Court.
(b)If the defendant fails to give notice in accordance with either subparagraphs (i) or (v) of paragraph (a) above:
(i)The property shall be put on the market for sale through the agency of LJ Hooker Ponsonby (Dee McDade);
(ii)Upon settlement:
1. The parties shall each receive one quarter of the proceeds of the sale (after deduction of the costs of marketing and sale of the property);
2. The defendant shall pay each plaintiff:
a.$37,994.64 (being the amount owed to each sister by way of rental for the period 1 May 2016 to 17 February 2020) minus the following amounts:
i. $13,151.00 (the amount by which each sister must compensate the defendant for repairs and maintenance)
ii. $3,593.02 (the amount by which each sister must compensate the defendant for house insurance from 1 May 2016 to 31 December 2019 and for rates for the 2015-16, 2016-17 2017-18 and 2018-19 rating years);
iii. Upon production of evidence of payment by the defendant, a quarter share of amounts the defendant has paid prior to settlement for house insurance in 2019 and 2020 and for rates for the 2019-20 and 2020-21 rating years.
b.Rental for the period 18 February 2020 to the date the defendant vacates the property calculated at the rate of
$200 per week;
c.One third of the plaintiffs’ costs and disbursements in this proceeding as agreed by the parties or ordered by the Court.
(c)The three plaintiffs and the defendant shall share equally the costs of giving effect to paragraphs (a) and (b) above.
(d)The parties have leave to apply for further orders as necessary.
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