Nicholson v Dunick
[2017] NZHC 2126
•1 September 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-000066 [2017] NZHC 2126
UNDER s 339 of the Property Law Act 2007 BETWEEN
LEIGH IRVING NICHOLSON Plaintiff
AND
MARLENE MARIE DUNICK Defendant
Hearing: 2 June 2017 Appearances:
S Barker and O Gascoigne for the Plaintiff
R O Parmenter for the DefendantJudgment:
1 September 2017
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 1 September 2017 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors / Counsel: Buddle Findlay, Auckland
Daniel Overton & Goulding, Auckland
R Parmenter, Auckland
NICHOLSON v DUNICK [2017] NZHC 2126 [1 September 2017]
The Issue
[1] Leigh Nicholson and Marlene Dunick are co-owners, in equal shares, of the fee simple at 10 Rogers Avenue. On the land there is a single-storey building that has been has been divided into two properties. The land is situated in a quiet cul-de-sac, one block back from the beachfront at Eastern Beach in Auckland.
[2] Ms Nicholson and Ms Dunick are parties to registered cross-leases: the former leases 10A; the latter, 10B. At issue is Ms Nicholson’s application for an order partitioning 10 Rogers Avenue into two fee simple titles. She seeks summary judgment on the application and says there is no tenable defence to the application. Ms Dunick disagrees. She opposes summary judgment. Ms Nicholson has the onus.
History of the dispute
[3] The original house at 10 Rogers Avenue was built in 1965. In the early
1980s, it was divided into two flats of equal size, sharing a common wall and a continuous roof. The original 999 year cross-lease was entered into at this time.
[4] The original lease still applies to 10B. A new lease applying to 10A was entered into between the parties in 2012 after Ms Nicholson undertook renovations to her flat.
[5] There are no material differences between the cross-leases relevant to this application. They are standard-form cross-leases. Both parties enjoy an undivided half share of the fee simple of the property. Both parties also have a
999 year lease over part of the building erected on the property (10A or 10B respectively), and exclusive use of an area adjacent to that part of the building. There are no common use areas.
[6] Much of the parties’ dispute arises out of the application of a contractual term identical in both cross-leases that covers the issue of structural alterations. Lessees must obtain the prior consent of the lessors to any structural alterations to the
building, which may not be unreasonably withheld. The cross-leases also provide that any dispute relating to this term (or the cross-lease arrangement generally) must be referred to arbitration.
[7] Ms Dunick moved into 10 Rogers Avenue first. She purchased 10B in January 2006, and lived there for seven years. At this time, she moved out of 10B, apparently due to the stress of her dispute with Ms Nicholson. 10B is therefore currently tenanted, but Ms Dunick hopes to return.
[8] Ms Nicholson purchased into 10A in late 2009. It appears she initially intended it as an investment property. After undertaking repair work, she saw potential for converting the flat into a home for herself and her mother. At this point, the relationship began to sour.
[9] The parties’ dispute is by now both long and complex. For simplicity, I divide it into three key stages. The first two stages each culminated in arbitral awards. The third leads into this present application.
Stage 1: the disputes leading up to the first arbitration
[10] Ms Nicholson had plans drawn up for major renovation work to her flat, including extending her side of the building and adding a second floor. In December
2009, she sought consent from Ms Dunick.
[11] Consent was not given. Nor did Ms Dunick consent in February 2010, when Ms Nicholson came back with more detailed plans. Ms Dunick’s most pressing concern, it would appear, was that the renovations would interfere with her privacy.
[12] Ms Nicholson considered Ms Dunick unreasonable. She proceeded with her renovations without Ms Dunick’s consent – that is, until 19 August 2010 when Ms Dunick was granted an interim injunction to halt the renovations. Around the same time, Ms Nicholson began to accuse Ms Dunick of various breaches of the lease agreement.
[13] Their dispute was referred to arbitration pursuant to the cross-leases. The arbitrator, Mr Carden, gave four arbitral awards relating to this first dispute. He found more or less in Ms Dunick’s favour:
(a) Ms Nicholson’s claim for relief for the alleged breaches of the lease
agreement was rejected.
(b) Ms Dunick was granted $6,000 for the stress caused by
Ms Nicholson’s behaviour.
(c) Most significantly, the substantive award on 5 October 2010 found that Ms Dunick was not unreasonable in refusing consent to the proposed plans.
[14] However, as Ms Nicholson is at pains to stress, there is some nuance to Mr Carden’s findings. First, Mr Carden candidly observed the context-specific limitations of his arbitral findings:
… I cannot decide things for the future. Life will move on and indeed the parties may move on. There may [sic] in the future be some proposal by some party for further development of 10A and that will need to be considered by the then owner of 10B in the total context that then applies … The considerations that have been taken into account in this arbitration may be relevant but will have to be considered in their context at the time.
[15] Second, Mr Carden did consider it unreasonable for Ms Dunick to refuse to consent to a revised, limited one-story extension. On the basis of this finding, Ms Nicholson proceeded with the extension in January 2011.
[16] In August 2011, after a defended hearing between the parties, these arbitral awards were sealed in the High Court.
Stage 2: the disputes leading up to the second arbitration
[17] This second stage of the dispute involved proposed development plans from both parties. Neither party gave consent.
[18] In February 2011, Ms Nicholson presented Ms Dunick with further proposed alterations. Consent was, once again, withheld. Meanwhile, Ms Nicholson continued to make allegations of alleged breaches of the lease. Also around this time Ms Nicholson began pushing for a further arbitration. Ms Dunick, in a stressful period of her personal life, sought to avoid this. She successfully proved that the arbitrator recommended by Ms Nicholson lacked jurisdiction.
[19] There was a further exchange about the possibility of extending both flats, but Ms Nicholson (who wished to extend her flat) was unwilling to agree to the same for Ms Dunick. The exchange came to nothing and the relationship continued to sour to such an extent that on 5 June 2012, Ms Dunick obtained a restraining order against Ms Nicholson. According to Ms Nicholson, the order only exacerbated communication issues between the parties. (A year later, when the order was extended, it was also varied by consent to allow Ms Nicholson to contact Ms Dunick regarding lease related issues).
[20] Ms Dunick presented her own development plans for a one-story outwards extension in September 2013. Ms Nicholson declined consent. Shortly after, another arbitrator (Mr Lowish) was engaged to determine whether consent had been unreasonably withheld in either case, as well as other issues concerning alleged breaches of the cross-lease.
[21] Mr Lowish’s substantive arbitral award of 27 February 2015 was favourable
to Ms Dunick:
(a) Ms Dunick was permitted to proceed with her development, on the basis that it was equivalent to the level of development completed by Ms Nicholson in 2011. Ms Nicholson, by contrast, was not allowed to proceed with her plans.
(b)No breach of any item of the lease was found. The only expectation placed on Mr Dunick was that if her roof was not evaluated within three years, then another report should be conducted to re-evaluate its condition at that time.
[22] In May 2015, Ms Nicholson was unsuccessful in attempting to have Mr Lowish’s award recalled. All three of Mr Lowish’s awards were sealed in the High Court without defence in December that year.
Stage 3: events leading up to the present application
[23] Mr Lowish’s arbitration has not brought an end to the issues between the
parties.
[24] Ms Dunick’s proposed development has been stalled by resource consent issues – issues which Ms Nicholson brought to the attention of Auckland Council. Ms Dunick’s present hope is to begin development next year.
[25] In the case of Ms Nicholson’s proposals, she does not consider the arbitration decision the final word. She sought Ms Dunick’s agreement in principle to partition the property along the division between the current exclusive use areas. Ms Dunick declined; and so Ms Nicholson began to prepare for this application. She engaged Envivo Ltd, an engineering, surveying, and planning company, to assist with surveying and assessing the feasibility of a partition. Its feasibility report is part of the evidence in this application.
The application – sensible, simple, and singularly beneficial?
[26] Ms Nicholson seeks a partition. The primary focus of the partition application is for a partition specifically in the form recommended by Envivo’s scheme plan of subdivision.
[27] The fall-back position in Ms Nicholson’s application is for any such partition “as the Court deems appropriate”; or else, for a bare partition with the form of that partition to be determined at a later stage. These alternative proposals received little attention in the submissions, and I put them to one side for the purpose of the present application. They are too sketchy to warrant summary judgment.
[28] The key aspects of the Envivo scheme plan are as follows. The proposed partition would be along the current fenced boundary between 10A and 10B Rogers
Avenue. After the division, the two flats would continue to share a common wall and roof, and such common elements would be managed through the use of easements. The easements would allow a party to extend the shared wall upwards, physically dividing the roof and limiting the relationship.
[29] Ms Nicholson argues these proposals would remove the potential for friction between the parties. She adds however that Ms Dunick should bear half the cost of raising the common wall, because the roof issues have resulted (she says) from Ms Dunick’s failure to maintain the roof; and she seeks orders that each party contributes half the costs of the partition, resource consent, and any costs associated with obtaining relevant resource consent and raising the common wall. These costs include those already expended by Ms Nicholson in engaging Envivo to prepare the scheme plan and prepare and file the resource consent application; and legal fees for drafting the easements and other documents required for lodgement with Land Information New Zealand.
[30] Ms Nicholson considers this application beyond serious reproach – sensible, simple, and singularly beneficial:
(a) Sensible: the division reflects a legal change of status, rather than any physical or geographical change. The title is merely divided in line with the parties’ existing exclusive use areas.
(b)Simple: the partition is easily implemented. The Envivo feasibility report indicates “the property is generally suitable for free-hold subdivision”.
(c) Singularly beneficial: valuation evidence from a registered valuer indicates that the partition will increase the value of both properties. Further, it will ease tensions between the embittered neighbours, allowing them to go about their lives independently of any contractual ties.
[31] Ms Dunick says this presents a very one-sided view of the situation.
[32] At first blush, there is much to commend in Ms Nicholson’s partition application. The difficulty afflicting the application, however, is that it is somewhat “myopic” in that Ms Nicholson invites the court to focus in on a few apparently clear-cut factors favouring her application. The Court must however consider the wider landscape of the case, and there the picture becomes more blurred and uncertain. Ms Dunick argues with some force that it is too unsafe for the Court to grant summary judgment on Ms Nicholson’s application without the benefit of a closer look at the overall case at trial.
Legal framework
[33] In assessing this application the court looks through two lenses. In other words, the legal framework applicable to this case involves both the provisions in the Property Law Act 2007 (the Act) governing partitions, and the principles guiding the court’s discretion in summary judgment procedures.
Property Law Act 2007: the law governing partitions
[34] I begin with the Act. Ms Nicholson invokes s 339(1) which provides:
339 Court may order division of property
(1) A court may make, in respect of property owned by co-owners, an order—
a)for the sale of the property and the division of the proceeds among the co-owners; or
b) for the division of the property in kind among the co-owners; or
c)requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.
[35] Ms Nicholson applies for a division of property under subs (b). As a co-owner of the property, Ms Nicholson has standing to make this application pursuant to s 341(1)(a).
[36] Section 342 sets out various “relevant considerations” to which the Court must have regard in considering whether to exercise its discretion to make an order under 339(1). Those considerations are 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.
[37] When making an order for partition under s 339, the Court may also make additional orders under s 343. These include requiring the payment of compensation, and any other matters which the Court considers necessary or desirable as a consequence of making an order under s 339(1).1
Summary judgment principles
[38] The principles governing summary judgment are well settled. The onus is Ms Nicholson as plaintiff to show that there is no arguable defence to the proposition that the property must be partitioned.2 The court will be guided by commonsense,
flexibility and a sense of justice.3
[39] The relationship between s 339 and the court’s summary judgment jurisdiction was considered in Coffey v Coffey.4 Associate Judge Osborne contrasted s 339 with its processor, s 140(1) of the (now repealed) Property Law Act 1952. Under the 1952 Act, if certain basic facts were proved the court had no choice but to order sale or partition. Summary judgment was often granted.
[40] But where the 1951 Act was directory, the 2007 Act is discretionary. The factors listed in s 399 are wide-ranging and non-exhaustive. The discretion is
1 Section 343(a) and (g).
2 Pemberton v Chappell [1987] 1 NZLR at 3 (CA).
3 Haines v Carter [2011] 2 NZLR 167 (CA) at 187.
4 Coffey v Coffey [2012] NZHC 1765 at [34]-[35].
remedial in nature,5 and the court is required to listen attentively to the overall justice of the case. Naturally, both parties will ordinarily want to raise full and detailed argument as to all the matters bearing on that discretion.
Policy considerations
[41] Brief comment on the wider policy backdrop to this case is warranted. Ms Nicholson says there is currently a housing crisis in Auckland, and this should bear on the court’s analysis. She also makes much of the fact that cross-leases have fallen out of favour. She cites a 1999 Law Commission report on shared ownership of land, which strongly recommends that cross-leases should be phased out and replaced with either fee simple subdivisions, or unit title ownership. It details the
shortcomings of cross-lease titles as follows:6
Common sense suggests ... that with the passing of time and as buildings age or uses permitted in particular neighbourhoods change, the essentially unsatisfactory nature of this form of tenure will become more and more apparent.
[42] I do not consider these policy considerations especially pertinent to the decision at hand; if anything, there is a risk that they might distract from a proper focus on the specific property and the specific co-owners in this case. It is also to be borne in mind that the requirement for consent of co-owners to alterations of ‘shared’ buildings is not unusual. Unit title developments are a case in point. Some consideration of that form of ownership may have been useful in this case but it was not explored in the application.
The section 399 factors
[43] I turn now to “have regard to” the factors listed in s 342. They are neither determinative nor exhaustive. The court must “have regard to” them; but though weighed in the overall mix, they will not necessarily be decisive.7 Subsection (f)
makes clear that the court is not limited by the factors listed in subs (a)-(e). Finally,
5 Holster v Grafton (2008) 9 NZCPR 314 (HC) at [43].
6 Law Commission Shared Ownership of Land (NZLC R59, 1999) at [8].
7 Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [33].
all the factors must be considered ‘in the round’ and also with respect to
Ms Nicholson’s specific partition proposal.8
[44] A number of the s 342 factors can be dealt with shortly:
(a) Location of property (subs (b)): 10 Rogers Avenue is a residential address. Both parties want to live there. I do not consider anything turns on this factor.
(b)Number of co-owners (subs (c)): The parties are the only owners. So the physical impacts of any partition are fairly manageable and self- contained. This in itself does not point to partition as the inevitable outcome; but it does negate one common consideration weighing against a partition.
(c) The value of any contribution to improvements or maintenance of property (subs (e)): Ms Nicholson has extensively renovated her flat. It is now larger, newer and higher valued than Ms Dunick’s flat. She also raises concerns about the state of Ms Dunick’s roof. These matters do not bear so much on the suitability of a partition order, as on the form such an order (if made) might take and, in that case, whether additional orders might be called for under s 343.
[45] Of the listed factors, three are especially influential in my reasoning: the extent of the shares in sub (a), the nature of the property in sub (b), and the hardship factor in subs (d). The first two weigh in Ms Nicholson’s favour; Ms Dunick finds support in the latter.
The extent of the shares
[46] Ms Nicholson has a half-share in the undivided fee simple of the property.
Her ‘area’ (that is, the part of the building she leases plus her exclusive use area)
8 At [61].
amounts to approximately 60 percent of the overall area, compared with
Ms Dunick’s 40 percent.
[47] Under the old 1951 Act, a court had no choice but to make an order (for partition or sale) where an applicant had a one half or greater share in the land. Now the court has considerable discretion, and it is important that the new found discretion is not exercised mechanically. The court is motivated to resolve conflicts fairly, and that of course involves respecting the parties’ relative property rights.9 On a principled approach the greater preponderance of the plaintiff’s share, the more weight will be afforded to this factor (and vice versa).
[48] Ms Nicholson’s ownership rights can be compared with the situation in MacKenzie v Smythe. This can be compared with the situation in MacKenzie v Smythe, where the plaintiff’s application for partition was successful. Counsel for Ms Nicholson relies heavily on MacKenzie, but in that case the plaintiff had a two-
thirds share.10 While Ms Nicholson’s share invites a sympathetic hearing from the
Court, it is far from decisive.
The nature of the property
[49] As stated earlier, the property is well suited for a partition in many respects. Both flats have their own separate driveway and off-street parking. The two areas of exclusive use are distinct and already fenced along the border. There are no common use areas. Each flat also has its own power supply, water supply, and storm water drains.
[50] The only complicating factors are the location of services and the shared roof. There appear to be practical solutions to each of them. The former is dealt with by Envivo’s plan which provides for a new separate connection to the public waste water line in lieu of using the existing shared wastewater connection. The shared roof wall could be managed through the use of easements (though I note that Ms Dunick worries the easements will not provide adequate protection).
[51] However, despite the fact that the flats are substantially separate, they are not in fact “separate residential buildings” as was the case in MacKenzie. This dovetails into the issue of hardship.
Hardship
[52] “Hardship”, Fogarty J has observed, is a value-laden criterion.11
Semantically, hardship suggests an adverse effect which is of significant impact to the applicant; something more than mere inconvenience or disappointment is required.12 Both parties emphasise and seek to rely on hardship. I begin with Ms Nicholson’s submissions.
Hardship to Ms Nicholson
[53] Ms Nicholson’s complains that if the partition is refused, the parties will remain stuck in their current deadlock. This deadlock, she continues, brings with it three adverse consequences. The first is that the neighbourly friction will continue to negatively affect her health and well-being. Second, this friction will most likely result in future arbitrations, which are expensive, time-consuming and stressful. And then, third, Ms Nicholson may be prevented from developing her flat further as she would like to do, without resorting to arbitration.
[54] I am not persuaded these arguments are sufficient to warrant partition by summary judgment. As I discuss more fully below, there are good reasons to think Ms Nicholson may be responsible for much of the parties’ state of deadlock. But even putting this to one side, the alleged ‘hardship’ here is, in large measure, simply a product of the contractual terms voluntarily entered into by Ms Nicholson. Arguably, it cannot be a hardship for Ms Nicholson for Ms Dunick to stand on her contractual rights, tempered as those rights are by the right to invoke arbitration. Moreover, to the extent there is any hardship, it applies to both parties equally. It thus adds little value to the analysis under subsection (d) which explicitly calls for comparison between the parties.
Hardship to Ms Dunick
[55] In essence, Ms Dunick’s submissions on hardship boil down to the fact that she would lose important rights as against Ms Nicholson that she currently enjoys under the terms of the cross-lease. They relate substantially (if not wholly) to the inescapable fact that these parties’ flats form two parts of a single building. Some of these pertinent covenants in the lease currently allow her to:
(a) restrict Ms Nicholson’s inappropriate use of her part of the property; (b) require Ms Nicholson to maintain her flat;
(c) prevent structural alterations by Ms Nicholson which would be unreasonable as against Ms Dunick (a tangible example of this loss of control is that Ms Nicholson will be allowed to continue with her proposed development);
(d)control the colour scheme of the entire building (she is concerned, for instance, that Ms Nicholson could paint her house in colours that jar aesthetically with hers).
(e) resolve disputes over such matters efficiently and fairly by way of the dispute resolution provisions;
[56] Ms Nicholson’s main response, at core, is that those rights are already adequately protected independent of the cross-lease agreements. She argues that Ms Dunick will still have the benefit of the development restrictions afforded by Auckland Unitary Plan operative in part (15 November 2016), as well as by other bylaws, including nuisance and noise control laws. For instance:
(a) 10 Rogers Avenue is zoned as ‘Mixed Housing Residential Suburban’ under the Auckland Unitary Plan. The plan puts in place site coverage restrictions, height restrictions, daylight protection provisions, and requirements as to the distance of buildings from site boundaries;
(b)Under the Building Act 2004 process, Ms Nicholson is still required to obtain consent for any structural alterations that affect Ms Dunick’s property.
(c) Section 327 of the Resource Management Act 1991 provides for measures in response to “excessive noise”.
[57] I do not propose to dig any deeper into whether the existing legislative regulatory framework adequately replaces the cross-lease. That a measure of protection is afforded by that framework or legislation is indisputable. But equally clear, in my view, is that Ms Dunick stands to lose at least some important rights directly conferred on her under the cross-lease.
[58] Stepping back for a moment, this could not be otherwise. The partition is attractive to Ms Nicholson precisely because it removes some of the contractual restrictions. At the very least, Ms Nicholson will be allowed to undertake her proposed upwards developments – which Ms Dunick objects to, and which the arbitrator considered unreasonable as against Ms Dunick.
‘Benefit’ to Ms Dunick
[59] Ms Nicholson considers the partition a benefit, not hardship, for Ms Dunick. She says, first, that the partition would be to Ms Dunick’s financial advantage. A registered valuer, Mr Bates, has filed an affidavit and a complete valuation report in support of this contention. His valuation reaches the following conclusions (with all prices set at as 9 November 2015):
(a) 10A is currently worth $1 million. After conversion of the cross-leases into separate freehold titles, the market value would be $1,275,000 with no further developments; or $1,600,000 with a two-dwelling house developed in accordance with Ms Nicholson’s proposals.
(b)10B is currently worth $700,000. After conversion to freehold, the market value would be $825,000 with no further developments; or
$1,175,000 with Ms Dunick’s proposals.
[60] Ms Nicholson adds that the planning advice from Envivo is that Ms Dunick will be able to proceed with her proposals and would not be prevented from building upwards if she later decided to do so. This is also said to be to her benefit.
[61] These supposed benefits to Ms Dunick do not fall for consideration under subs (d), which focuses exclusively on hardship. But it remains a relevant consideration. I stress, however, that it is not for Ms Nicholson to define Ms Dunick’s priorities and interests. These benefits are factors to have regard to, but they do not negate the hardship Ms Dunick relies upon, nor undermine her position that the partition is all things considered contrary to her interest. All are matters to weigh in the Court’s assessment.
Deadlock
[62] Cross-leases, by their very nature, require a degree of collaboration or at least communication between the co-lessors. Yet as things currently stand, there is no denying that the relationship between Ms Nicholson and Ms Dunick has reached a point where communications are strained and collaboration is all but out of the question.
[63] According to Ms Nicholson, the parties are in such a state of deadlock that court intervention is required to put an end to the cross-lease that lies at the root of their problems. Her submission relies on MacKenzie. In that case, Associate Judge Gendall identified “rare cases” where “acrimonious dispute and deadlock” makes a termination of co-ownership through partition the most appropriate response. Ms Dunick considers that case distinguishable, and I pick up this issue again shortly.
[64] For now, I turn to Ms Dunick’s main response to the deadlock argument,
which is to challenge that characterisation of the parties’ relationship. She suggests,
in essence, that the term ‘deadlock’ is both too strong and too neutral to accurately reflect the facts of this case.
Deadlock or contract?
[65] There is reason to question whether the parties are in a state of intractable stalemate. The parties do not get along; yet the same could be said of many neighbours. Development plans have been rejected and personal dreams thwarted; that is but part and parcel of the cross-lease arrangement. The parties have been forced into multiple arbitrations; this too is what the cross-lease contemplates. Indeed, the arbitrations have done their prescribed task of resolving specific and immediate disputes. Where, then, is the deadlock? So Ms Dunick’s submission runs.
[66] The submission deserves careful consideration. It is bolstered by focussing in on the parties’ contractual relationship. The state of so-called deadlock is arguably nothing more than just the operation of the terms of the cross-lease. Co-ownership has not been thrust upon the parties. Rather, they willingly entered into a contractual arrangement that limits their ability to use the land, offers reciprocal protections and defines a process for resolving disputes. Ms Nicholson’s appeal to deadlock should not coax the court into prematurely disturbing the parties’ contractual arrangement.
Clean-hands
[67] According to Ms Dunick, the term ‘deadlock’ is not only too strong but also too neutral to describe a dispute that is, in her opinion, entirely Ms Nicholson’s fault. She wants the court to look behind this application into the underlying equities of the case. Section 339 provides, in my view, ample discretion to undertake such an analysis; and the imperative to resolve conflicts fairly offers strong encouragement to do so. I consider the law of equity is right at home in this setting.
[68] Unsurprisingly, the parties bring two very different stories about the wrongs and rights of their actions. Expressed bluntly, Ms Dunick considers her neighbour a
bully. She says Ms Nicholson has from the very beginning pressured her and threatened her with court proceedings to drive her into giving consent to Ms Nicholson’s development proposals. She sees the current application is just another iteration of this narrative.
[69] On Ms Dunick’s version of events, granting a partition would allow Ms Nicholson to benefit from a situation that arises from her own wrongdoing. Equity is of course loath to permit such an outcome. Ms Dunick suggests that the application is merely an attempt to wear her down and circumvent the plain findings of the arbitrators. If so, equity will not tolerate giving justice into Ms Nicholson’s unclean hands.
[70] But it would be premature to make findings on the cleanliness or otherwise of either parties’ hands. Ms Nicholson, I hasten to add, does not think she is at fault. She asserts that she has done nothing but present her plans to Ms Dunick, and attempt to persuade her of their reasonableness. Ms Dunick has behaved irrationally in her view. She has refused to cooperate with reasonable requests for development, and appears willing to spend considerable time and money fighting to prevent any development whatsoever. As to the allegations of Ms Dunick breaching her lease, Ms Nicholson says these concerns were genuinely held, even if the arbitrator eventually found against her.
[71] I am not willing on the evidence before me to determinatively pronounce Ms Nicholson the bully and Ms Dunick the victim. There appears to be merit to Ms Dunick’s account; yet she makes strong allegations, and without the benefit of trial it would be unsafe to jump to a hasty conclusion about the equities of the case.
[72] Nonetheless, I agree with the Ms Dunick that the term ‘deadlock’ risks flattening out the underlying equities of the case. And given the seeming plausibility of Ms Dunick’s account, I am reluctant, in the context of this summary judgment, to call the parties’ predicament a ‘deadlock’, or a deadlock that points inevitably to Ms Nicholson’s proposal as the just and fair outcome.
Mackenzie v Nicolson
[73] Unsurprisingly, there are very few cases where summary judgment is granted on an application for partition. Most of these involve residential properties – once intended and used as a joint residence for the parties – which are now exclusively occupied by only one party.13 These cases offer little assistance in my view.
[74] The only case that offers real assistance, and which is heavily relied upon by Ms Nicholson, is Mackenzie. The facts in that case are materially similar in many respects. The cross-lease neighbours had fallen out.14 The plaintiffs wanted the freedom to deal with and potentially develop the land as they wished; the defendant feared losing the protections afforded by the cross-lease.15
[75] The arguments raised by both parties are also strikingly familiar. The plaintiffs argued the partition order was uncontroversial, and also a necessary and pragmatic response to the deepening acrimony between the parties.16 The Judge remarked, in fact, that it had “become impossible as neighbours sharing a cross-lease property to reach agreement on any issue no matter how small”.17 The defendant sought to rely on her contractual rights and said that any conflict was the of the plaintiffs’ making.18
[76] Associate Judge Gendall granted the partition (subject to later determination of form and compensation).19 The key paragraph in his reasoning reads as follows:
[69] It is clear that a fundamental principle underlying the right to partition a property is the need to terminate co-ownership in cases of deadlock between the co-owners. Although the defendant is correct when she submits that at the time the parties purchased their individual properties they willingly entered into the cross-lease and contractual arrangements attaching to their respective titles, in my view this is one of those rare cases where matters between the plaintiffs and the defendant have reached a stage of
13 Jacobsen v Guo (2008) 9 NZCPR 850 (HC); Wilson v Ougen HC Wanganui CIV-2010-483-
000246, 14 December 2010; and Western v Abdoelrahman HC Auckland CIV-2010-404-002298,
11 March 2011. See also the discussion of the cases in Coffey v Coffey, above n 4, at [21]-[45].
14 Mackenzie v Smythe, above n 10, at [1].
15 At [3]-[4].
16 At [1] and [25].
17 At [20-[21].
18 At [20-[21], [55].
19 At [78].
acrimonious dispute and deadlock such that partition to terminate their co- ownership is appropriate.
[Emphasis added].
[77] There is no absolute ‘right’ to an order for partition, and His Honour’s comments must be viewed in that light. Each case must of course be carefully assessed on its own facts. Ms Nicholson contends this is one of those “rare cases” of deadlock where a partition is the only pragmatic response. But as I have noted, there are serious and unanswered questions here about the use of the term ‘deadlock’.
[78] Even putting these factors to one side, Ms Nicholson skips over one critical step in the Judge’s reasoning that deals with a key difference on the facts of that case with this one. The defendant in MacKenzie, after much prior discussion and negotiation, agreed to a voluntary partition subject to confirming the final location of the boundary between the properties.20 Indeed, surveyors were instructed jointly and plans outlining various subdivision options were prepared to resolve this final detail. And then, six months down the track of collaborative work on the partition plans, the defendant pulled out.21
[79] Judge Gendall did not question that the defendant was legally entitled to withdraw. Yet he considered the defendant’s agreement and then sudden withdrawal highly pertinent to his analysis, and in particular his ultimate rejection of the defendant’s submission that she was entitled to rely on the parties’ contract.22 The position in this case is markedly different: Ms Dunick has never agreed to a voluntary partition. The most that can be said is that she was open to the possibility
that each party might extend their own flats by mutual consent – but that proposal is entirely consistent with the parties’ contractual relationship.
[80] In the later decision of Coffey v Coffey, Associate Judge Osborne summarises the import of the unique facts in Mackenzie as follows:23
20 At [58].
21 At [22], [61].
22 At [56].
23 Coffey v Coffey, above n 4, at [44].
.. the objective impression that the deadlock between the parties over their joint leases called for partition was reinforced (to the point that it was beyond argument) by the defendant’s erstwhile agreement to that very process.
[81] I would put it differently. If one party denies there is a deadlock, and is prepared to carry on with the contractual relationship, the court must be very slow to intervene. To that extent, the term ‘deadlock’ is indeed too strong to describe the current state of the parties’ relationship.
Bringing the strands together
[82] Since the enactment of the new, highly discretionary provisions governing partition, summary judgment has become far more uncommon.24 Summary judgment may still be appropriate on occasion. Sometimes the facts or justice of the case create a certain inevitability that calls for a quick and efficacious judgment.25
[83] Still, there is no question that the summary judgment procedure “will often be inapt for the making of an order of division” and a full hearing will generally be more appropriate.26 That is certainly the case here. I consider it is impossible to avoid the risk of an unjust and unsafe outcome if summary judgment is granted on this application. Without the in-depth analysis than can be undertaken on the evidence at trial, I remain unconvinced that the application is “sensible, simple and singularly beneficial”.
[84] Ms Dunick has her own priorities and interests; and it is not for Ms Nicholson to dictate those for her. Nor can Ms Nicholson’s interests run roughshod over the parties’ contractual relationship – and there is no indication that Ms Dunick would tolerate let alone approve of the court severing those contractual ties. There also remains considerable uncertainty as to the risk of unfairness or detriment to Ms Dunick if the partition is granted, and the extent to which the
existing regulatory framework provides adequate protection.
24 For that reason, the authorities pre-dating the 2007 Act should therefore be treated with caution: David Brown “Co-ownership” in Tom Bennion, David Brown, Rod Thomas and Elizabeth Toomey (eds) New Zealand Land Law (Brookers, Wellington, 2009) 393 at [6.7.08].
25 Coffey v Coffey, above n 4, at [45].
26 Bayly v Hicks, above n 7, at [35].
[85] Finally, the ‘deadlock’ argument is no ace in the deck for Ms Nicholson. She has not persuaded me that there is a situation of deadlock that is not merely the operation of the contractual terms or the result of her own wrongdoing. On the evidence before me, I am not willing to characterise the parties’ relationship as in a state of deadlock sufficient to justify summary judgment.
[86] If this proceeding is to go further, then the dispute requires the more in depth assessment that is possible only at trial. The alternative is for the parties to invoke their contractual rights to arbitration. Otherwise, mediation might provide a sustainable and cost-effective solution to their predicament. All this is of course a matter for the parties, not the court.
Result
[87] The application for summary judgment is declined. Costs are reserved
in accordance with the Court of Appeal’s decision in NZI v Philpott [1990]
2 NZLR 403. The proceeding is to be allocated a case management conference if the plaintiff wishes to proceed with her claim.
Associate Judge Sargisson
2
2
1