Pender v Pender
[2021] NZHC 256
•23 February 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000264
[2021] NZHC 256
BETWEEN DESMOND ANTHONY PENDER, KATHLEEN MARIE PENDER and RICHARD JOHN SISSONS
Plaintiffs
AND
VINCENT GRAHAM PENDER and COLLEEN PENDER
First Defendants
AND
SIMON LEONARD PRICE and MAREE CATHERINE KHOURI
Second Defendants
Hearing: 3 February 2021 Counsel:
G M Brodie for the Plaintiffs
J E Bayley for the First Defendants P R Allan for the Second Defendants
Judgment:
23 February 2021
JUDGMENT OF NATION J
Background
[1] Because it is likely this Court will be required to deal with further issues in these proceedings, I set this out in some detail.
[2] The plaintiffs are the trustees of a family trust for the benefit of Desmond Anthony Pender’s (Tony) family (I refer to them collectively as “Tony’s trustees”). The first defendants are trustees of a family trust for the benefit of Vincent Graham Pender’s (Vincent) family (I refer to them collectively as “Vincent’s trustees”).
PENDER v PENDER [2021] NZHC 256 [23 February 2021]
[3] The second defendants in these proceedings were originally Vincent, Tony and Maree Catherine Khouri (Maree) as trustees in the estate of their father, the late Graham Thomas Pender. In accordance with a settlement and orders recording the terms of that settlement made on 7 December 2018, Tony and Vincent retired as trustees of their father’s estate and were replaced by Simon Leonard Price. Mr Price and Maree are now the trustees of that trust established through the father’s will (the Will Trust).
[4] Tony, Vincent and Maree are siblings. They have another brother. He is not a party to these proceedings and is no longer a beneficiary of the Will Trust. That was because, in consideration of his receiving a benefit from the Will Trust, his interest in the properties through the Will Trust was transferred to the Will Trust, Tony’s trustees and Vincent’s trustees.
[5] The father survived his wife, the mother of the parties, but died on 10 May 2006. Through his will, he left a share in commercial properties at 250 to 254 Barrington Street, Christchurch (the properties) to his three sons. A capital sum was to be set aside and the income from it available for Maree for life with a power to resort to capital if required. By 2018, the Will Trust’s share in the properties was the entire capital fund set aside for Maree.
[6] The father’s will provided for certain charities to receive parts of the capital, that was to be held for the benefit of Maree during her life, upon her death.
[7] Through the provision made for them in the father’s will and through the arrangements made for the benefit of the other brother, Tony’s trustees have approximately 34.85 per cent share in the properties. Vincent’s trustees have approximately 34.85 per cent share in the properties. The Will Trust has approximately 30.30 per cent share in the properties.
[8] In April 2018, Tony’s trustees filed proceedings seeking an order pursuant to s 339(1)(a) Property Law Act 2007 for the sale of the properties by public auction and the division of the proceeds amongst the co-owners. The claim was made on the basis that disagreements had arisen in the ownership and management of the properties and
Tony’s trustees wished to realise their investment in the properties through ordering a sale of them. Maree filed a statement of defence in which she admitted disagreements had arisen between the registered proprietors of the properties and, in her capacity as a beneficiary of the Will Trust, consented to the orders sought in the statement of claim.
[9] In their statement of defence, Vincent’s trustees admitted Tony’s trustees wished to realise their investment in the properties but asserted the assistance of the Court was not necessary to achieve this because Vincent’s trustees would be willing to purchase the interest of Tony’s trustees in the properties. Vincent’s trustees indicated they did not wish to sell or otherwise dispose of their interest in the properties, nor did they wish to see the Will Trust’s share in the properties sold. They pleaded that Tony’s trustees’ desire to realise their investment could be accommodated by an order under s 339(1)(c) Property Law Act that Vincent’s trustees purchase the share of Tony’s trustees at a fair and reasonable price.
[10] By direction of the Court of 9 August 2018, Vincent, Tony and Maree, as trustees of the Will Trust, took advice from an independent solicitor.
[11] There was a settlement conference before Associate Judge Matthews in December 2018. Tony’s trustees, Vincent’s trustees and Maree were each separately represented.
[12] A settlement was reached through that conference. Orders, approved by counsel for each of the parties, were submitted for sealing along with Mr Price’s consent for appointment as a trustee of the Will Trust. With approval from Associate Judge Matthews, orders were sealed on 7 December 2018.
[13]The orders provided for:
(a) the substitution of Mr Price as a trustee of the Will Trust in place of Tony and Vincent, on certain terms;
(b) a variation to the terms of the Will Trust to provide for income from the Will Trust capital being held for Maree in her life to be paid to her husband during his lifetime after her death, subject to payment of the legacies for
charities provided for in the will, and capital if, in the opinion of the trustees, the income was insufficient for his needs;
(c) the properties were to be sold by public tender during the period of four months following the making of the orders;
(d) Colliers International Ltd (Colliers) were to be engaged by the parties and the trustees of the Will Trust to arrange for the properties to be sold by public tender and the parties were to accept Colliers’ recommendations as to advertising, signage and promotion of the sale;
(e) Mr Price’s legal firm, Malley & Co, were to act on the sale;
(f) the properties were to be sold at a price not less than an agreed memorandum recorded in a separate contemporaneous document;
(g) any of the parties, whether jointly or severally, were to be at liberty to tender for and become the purchaser of the properties in accordance with the terms of sale;
(h) certain specified costs were to be paid from the proceeds of sale;
(i) the parties were to sign all documents required to give effect to the sale; and
(j) the net proceeds of sale then remaining were to be paid to the parties in accordance with their respective shares in the properties.
[14]The orders included:
15. Leave is reserved to apply to the Court on 48 hours’ notice for any issue arising out of the sale process to be determined by the Court.
16. The parties hereto accept the terms of this order in settlement of all claims including costs each may have against the other arising out of and incidental to these proceedings.
[15] It is clear from affidavits sworn by both Tony and Vincent that the properties were not marketed for sale within the timeframe anticipated with the Court orders. Consistent with the information in those affidavits, as permitted, Mr Price, in a
memorandum to the Court of 11 December 2020, said the delay in getting to the point of trying to sell the properties in late 2020 or early 2021 included:
(a) A reluctance by [Vincent’s trustees] and [Vincent] to sign sale related documents;
(b) a desire by [Vincent] and [Tony] to lease the property fully, ensure the leases were all up to date and a vacant premise was leased prior to a sale so as to present the property as a good investment;
(c) a requirement a [sic] obtain a code compliance certificate for works done in the Property;
(d) a requirement to obtain a current building warrant of fitness (this and the matters in (b) and (c) above were to minimise queries that might arise from potential purchasers carrying out due diligence);
(e) timing the sale to the market situation in that a sale just prior to Christmas 2019 would have been impractical;
(f) I also delayed on occasion sending information requested by [Vincent’s trustees]; and
(g) Covid-19 and the economic impact of Covid-19 on investment prospects in that the market was devoid buyers [sic].
[16] The properties were marketed for sale in February and March 2020 but the marketing process was brought to a halt by the COVID-19 crisis.
[17]On 16 November 2020, Tony’s trustees filed an application for orders:
(a) granting Tony’s trustees leave to make the application by way of originating application under Pt 19 High Court Rules 2016;
(b) substituting Mr Price of Christchurch, solicitor, as trustee in the Will Trust as a second defendant in substitution for Tony and Vincent;
(c) varying the sale order made on 7 December 2018 to direct the sale be by way of public auction conducted by Colliers; and
(d) for specified directions as to the reserve or the manner of fixing the reserve.
[18] The application was made in reliance on r 19.5(1) High Court Rules, s 343 Property Law Act and the leave reserved under para [15] of the orders of the High
Court made on 7 December 2018. The application was supported by an affidavit from the Colliers real estate agent dealing with the sale, William Franks, and an affidavit of Tony. In his affidavit, Tony confirmed both he and Maree were determined to achieve a sale of the properties and did not wish to remain in business with Vincent.
[19] In his affidavit of 19 August 2020, William Franks expressed a view as to the market conditions and the desirability of sale by auction rather than tender. He confirmed Vincent had signed a fresh listing agreement and Mr Franks was in a position to resume the sale process.
[20] On 18 August 2020, Maree filed a memorandum of consent advising she was aware of the application made by Tony and, in her personal capacity and as a trustee in the Will Trust, she consented to the making of the orders sought by him.
[21] On 25 September 2020, new counsel for Vincent and Vincent’s trustees, Mr Bayley, filed a memorandum for Vincent’s trustees and Vincent. He indicated it was Vincent’s position the Court did not have jurisdiction to vary the orders in the manner sought by Tony’s trustees, the agreement reached as to a minimum sale price could not be severed from other rights and concessions in the agreement, there was no basis for Tony’s trustees to obtain the directions they sought and the consent orders now appeared incapable of settlement if implemented, so the consent orders should be set aside in their entirety and the proceedings progressed to a substantive trial.
[22] On 12 October 2020, Ms Allan of Malley & Co filed a memorandum advising that she and Malley & Co were now solicitors for Maree in the proceeding on 15 October 2020.
[23] In a minute of 15 October 2020, Associate Judge Lester made timetabling directions. Shortly after that, the application was set down for a half-day hearing on 3 February 2021.
[24] In a memorandum of 1 December 2020, Mr Brodie for Tony’s trustees advised, in light of Vincent’s opposition to the application, Tony had decided steps should be made to sell the properties in accordance with the terms of the settlement sale order.
[25] In his memorandum, counsel said Mr Franks had confirmed he was ready and willing to offer the properties for sale by tender but had suggested the marketing of the properties would begin after the summer vacation. Counsel said Mr Price and Maree supported this. On that basis, he asked that the hearing scheduled for 3 February 2021 be adjourned.
[26] In a memorandum to the Court of 2 December 2020, Mr Bayley indicated Vincent’s trustees were opposed to the orders sought, had instructed Mr Franks not to remarket the properties and said, if Tony’s trustees wished to obtain an order from the Court sanctioning any remarketing of the properties on terms, they should seek those orders at the hearing scheduled for 3 February 2021. He opposed the adjournment of that hearing.
[27] On 11 December 2019, with leave from the Court, Mr Price filed a memorandum. He said, Vincent had first wished to adhere to the terms of the agreement/consent orders and proceed with sale by tender, despite Colliers’ expert advice that sale by auction would be most likely to obtain the best possible price. In his memorandum he said he had advised counsel for Vincent on 30 November 2020 that the sale should proceed in accordance with the consent order, being sale by tender.
[28] In a minute of 15 December 2020, I summarised what appeared to be the position of the various parties. In that minute, I noted the Court needed to deal with the impasse to the extent this was possible within its jurisdiction. The hearing scheduled for 3 February 2021 provided an opportunity to do this. I declined to adjourn that hearing.
[29] On 25 January 2021, counsel for Tony filed submissions. Counsel advised that Tony and Maree were asking the Court for whatever assistance might be required to bring about a sale of the properties. In the first instance, they were asking the Court to direct a sale process in accordance with the terms of the 7 December 2018 order, that is by way of public tender at the agreed reserve.
[30] In detailed submissions filed for Vincent’s trustees on 1 February 2021, Mr Bayley indicated Vincent’s trustees were opposed to the change of method of sale from
public tender to a public auction and any actual or potential variation to the agreed reserve. Counsel also presented detailed submissions arguing that the Court did not have jurisdiction to vary the terms of the consent orders in the manner sought with the interlocutory application. It was also suggested in the submissions that, in the current circumstances, “the logical course was for the consent orders to be set aside in their entirety” and the substantive proceedings to progress to a substantive trial.
Submissions
[31] At the hearing on 3 February 2021, Ms Allan appeared for Maree and the Will Trust trustees. She confirmed that the Will trustees and Maree, in her personal capacity, supported the application as it was to be advanced by counsel for Tony’s trustees. She was excused from further involvement in the hearing.
[32] In his submissions, Mr Brodie said Tony’s trustees were now seeking a direction that the properties be put up for sale in accordance with the consent orders, namely, for sale by tender, with the agreed reserve. He asked the Court to reserve leave for the parties to seek further directions on 24 hours’ notice because of the potential for delays to occur in the completion of documentation that might be required to advance the sale and because of the potential for disagreement over whether any tender should be accepted. He submitted the tender process would test the market and could achieve a sale in accordance with all parties’ expectations. He acknowledged there is potential for the Court to have to determine whether a particular tender should be accepted but submitted it would be of assistance to the Court to know what had happened with the marketing of the properties if it is required to resolve any such dispute.
[33] Mr Brodie indicated that, in the days prior to the hearing, a hairdresser who leased one of the properties had vacated her premises but another tenant had been found for those premises. He advised, without evidence, it appeared the new tenant would be suitable but this and the terms of the lease would sensibly have to be confirmed before the properties are marketed for sale.
[34] Mr Bayley, for Vincent’s trustees, argued that the evidence before the Court primarily from William Franks is that sale by public tender is not likely to obtain the
best price and marketing by public tender may not achieve a sale in accordance with all parties’ expectations. He suggested the Court should now accept this is the reality and deal with the current application on that basis. He argued that the application is one to vary the consent orders in a fundamental way and wished to argue the Court did not have jurisdiction to do this. He accepted that, if the Court were to direct there should be a sale by tender, it would be appropriate for Colliers to be appointed as agents in terms of the listing agreement previously signed by all parties including Vincent.
Determination
[35] Counsel for all parties agreed it was appropriate to make an order substituting the abovenamed second defendants as the second defendants in the proceedings. I make such an order. The intituling in the proceedings is to be amended accordingly. This has happened with the intituling to this judgment.
[36] I am satisfied the Court has jurisdiction to make an order with directions requiring the parties to proceed with a sale of the properties by tender as originally anticipated with the consent orders. The need for such orders relates to an issue arising out of the sale process. Leave for a party to seek such a direction was specifically reserved by order 15 of the consent orders.
[37] The particular orders now sought were not as set out in the interlocutory application filed on 16 November 2020. The appropriateness of the orders sought became apparent through Vincent’s response to the application made. All parties have been on notice that, at the hearing held on 3 February 2021, Tony’s trustees would be seeking directions as to a sale by tender, consistent with the original consent orders.
[38] The Court has the power to amend the application on its own initiative.1 I amend the application accordingly, so it seeks directions in terms of the orders I make below.
1 High Court Rules, r 1.9(2).
[39] Tony’s trustees do not seek any change to the existing order as to the reserve which is to apply on the sale process so the Court need not, at this point, consider whether it has the jurisdiction to make such a variation.
[40] I am mindful of the evidence from William Franks as to his preference for a sale by auction and the reasons for that as expressed in his affidavit of 19 August 2020. I weigh in the balance however that, in December 2018, all parties were agreed that, with these properties, the sale should be by way of a tender process. The properties were to be marketed on that basis in early 2020, before the COVID-19 lockdown and Vincent had signed a listing agreement for the sale to proceed, presumably on that basis, before Tony’s trustees filed their interlocutory application seeking a direction that the sale be by auction.
[41] There is very limited information available to the Court as to what price might be obtained for the properties. The Court should not therefore proceed on the basis that the sale process will not achieve a sale that meets all parties’ expectations. On the evidence currently before the Court, it cannot be said that sale by tender will not achieve what all parties want.
[42] It is possible that the parties’ expectations, or at least the expectations of Vincent’s trustees, will not be met. In that event, the Court is likely to be asked to determine whether a particular tender should be accepted. In such circumstances, Vincent has given notice he will argue that the Court has no jurisdiction to approve or direct a sale on such terms. Whether or not the Court will need to address this issue is, at this stage, hypothetical. If it turns out the issue has to be addressed, then there will be an opportunity to do so.
[43] I am not persuaded that, if the properties are put to the market through a public tender process but not sold on terms acceptable to all parties or as might be approved by the Court if there is jurisdiction to do so, this will detrimentally affect the value of the properties with further attempts to sell them by whatever process might then be appropriate. Mr Franks had particular reasons for believing that sale by auction might result in a better price being obtained. I cannot see why those reasons would not apply if a tender process were to be adopted.
[44] The evidence before the Court at this stage indicates the Court may well be required to consider whether there should be a sale of the properties on terms that might be offered. With that being likely, it will be relevant and of assistance to the Court to know how the properties have been marketed for sale and just what has been achieved through that process.
[45] The orders I make are largely consistent with the orders that all parties agreed to through the settlement conference. In making the timing of the sale consistent upon completion of the lease documentation, I am replicating what happened when the properties were earlier to be marketed for sale.
[46] It was not argued that the earlier consent orders were conditional upon a sale being achieved within four months. The parties acted accordingly in agreeing to the properties being marketed for sale in 2020 before the COVID-19 lockdown.
[47] Vincent also objected to sale by tender on the basis this was not likely to obtain the best price for the properties and the costs of marketing the properties in such a manner would then be wasted. For the reasons just referred to, I consider, even if the tender process does not achieve the price all parties want, the cost of marketing the properties in such a manner will not be wasted. It may well be of value to the Court and the parties if there are, as may well be necessary, further issues arising out of the sale process which the Court has to deal with. Importantly, given the particular location of the properties, the tender process will identify who would be interested in purchasing the properties and thus provide potential for negotiation with one or more such parties beyond the tender process.
[48]I accordingly order:
(a) the properties are to be sold by public tender during the period of four months from the time there are in place leases for all the properties;
(b) Colliers shall be engaged by the parties and the trustees of the Will Trust to prepare a proposal for the sale of the properties by public tender, to include a detailed marketing proposal;
(c) the recommendations of Colliers in relation to advertising, signage and promotion of the sale are to be accepted by the parties;
(d) Colliers are to market the properties for sale by public tender in accordance with their marketing proposal;
(e) all other orders made on 7 December 2018, as sealed, including order 8 as to an agreed minimum price, are to remain in effect but in the sale documentation it is to be a condition that the period between tenders closing and tenders being accepted or rejected be no less than 15 working days; and
(f) leave is reserved to any party to make an application on 24 hours’ notice for directions that may be considered necessary to deal with any issue arising out of the sale process, including any issue that might arise in relation to the leasing of the premises which were recently vacated.
[49] The interlocutory application also sought leave of the Court to proceed with the application as an originating application under s 343 Property Law Act. The application arises out of consent orders made in proceedings where Tony’s trustees originally sought orders under s 339(1)(a) Property Law Act. I consider it appropriate for the application to proceed as an originating application but that is to be without prejudice to any party’s right to oppose the making of any orders on that basis on the grounds that the Court has no jurisdiction to do so or that, in the particular circumstances of this case, the making of such orders would not be appropriate.
[50] Leave was reserved to the parties to seek further directions from the Court pursuant to order 15 of the original consent orders. Such leave has also been expressly reserved to the parties in terms of order [48](f).2 I direct that, if it becomes apparent that further directions will be sought from the Court, the party seeking such directions is to notify the Court forthwith so that a telephone conference can be convened immediately to timetable the steps the parties must take to deal with what will then be at issue between the parties.
2 Above at [48].
[51] In the particular circumstances of this case, I reserve the issue of costs until such time as the sale process now directed by the Court to take place has been completed. If at that time there is an issue over costs, counsel are to seek directions, by memorandum, as to the timetabling for the filing of memoranda as to costs.
Solicitors:
G M Brodie, Barrister, Christchurch Malley & Co., Christchurch
Rhodes & Co., Christchurch.
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