Philip Campbell Brownlee Thompson and Parin Rafiei Thompson; s; and; Graham Allan Milne, Rex Bruce Swensen, Jennifer Marie Milne; and Tony Roy Milne, as trustees of the Great Chelsea Garden Trust; s
[2024] NZHC 2826
•30 September 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-044-325
[2024] NZHC 2826
BETWEEN PHILIP CAMPBELL BROWNLEE THOMPSON AND PARIN RAFIEI THOMPSON
Plaintiffs
AND
GRAHAM ALLAN MILNE, REX BRUCE SWENSEN, JENNIFER MARIE MILNE
AND TONY ROY MILNE, as trustees of the GREAT CHELSEA GARDEN TRUST
Defendants
Hearing: 29, 30, 31 July, 1, 2 August 2024 Counsel:
R J Latton for plaintiffs P H Thorp for defendants
Judgment:
30 September 2024
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 30 September 2024 at 3pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Pidgeon Judd, Auckland
Alexandra Dorrington Limited, Auckland
THOMPSON v MILNE [2024] NZHC 2826 [30 September 2024]
[1] The plaintiffs (the Thompsons) are the registered owners of a property at 4/45 Rawene Road, Birkenhead (the Property). The defendants, as trustees of the Great Chelsea Garden Trust, claim an interest in the Property, which they have sought to protect by registered caveat.
[2] The Thompsons brought proceedings seeking summary removal of the caveat, but they were unsuccessful. Associate Judge Andrew (as he then was) found the trustees to have an arguable interest in the Property under an agreement for sale and purchase.1
[3] The Thompsons now sue by way of ordinary proceedings, alleging that the Trustees’ claim to an interest cannot be made out. Amongst other things, they say that the agreement was void and of no effect, as it was contrary to s 10(1) of the Unit Titles Act 1972.
[4] The Trustees defend the Thompsons’ proceedings, saying that the agreement complied with s 10(1). And they counterclaim, seeking relief based upon alleged breaches of fiduciary duties owed to them by the Thompsons, or an order requiring the Thompsons to transfer the Property to them upon payment of a sum slightly less than the amount the Thompsons paid for its purchase.
The Property
[5] The property at 45 Rawene Road, of which 4/45 Rawene Road forms a part, extends west from the road, down and across a gully, to properties on Huka Road. To the north, is the Rawene Road Reserve, which itself sits behind the Highbury shops. To the south, are the rear parts of other properties, and beyond that the Chelsea Estate Heritage Park in the grounds of the Chelsea Sugar Refinery.
[6] In the late 1980s, four residential dwellings were built at 45 Rawene Road, in a row, extending west from Rawene Road short of the gully.
1 Milne (as trustees of the Great Chelsea Garden Trust) v Thompson [2022] NZHC 937, (2022) 23 NZCPR 207 (reported under the name Milne (as trustees of the Great Chelsea Garden Trust) v Brownlee).
[7]The dwellings were put into unit titles under the Unit Titles Act 1972.
Establishing a unit title development under the Unit Titles Act 1972
[8] It is necessary to describe how the Property was established under the Unit Titles Act 1972 (the 1972 Act), and some of the consequences. On 1 October 2012, the 1972 Act was repealed and replaced by the Unit Titles Act 2010 (the 2010 Act).2 The 1972 Act remains relevant.
[9] Under both Acts, parcels of land in fee simple might be subdivided into two or more principal units, accessory units and common property.3 Accessory units are units “designed for use with any principal unit (whether as a garden, garage, car parking space, storage space, swimming pool, laundry, stairway, passage, or other like purpose) and … shown on a unit plan as an accessory unit”.4 Broadly speaking, common property is the remainder of the subdivided parcel.5
[10] Such subdivisions were/are effected by the deposit under the Land Transfer Act of a unit plan “specifying the units in their relation to” buildings on the land.6 The deposit of such a unit plan created/creates a stratum estate in each unit, comprised of:7
(a)the fee simple estate — which can be described as the “underlying estate”;
(b)an interest in the common property — the “beneficial interest”;8 and
2 Unit Titles Act 2010, s 218 [2010 Act].
3 Unit Titles Act 1972, s 3(1) [1972 Act]; and 2010 Act, s 16(1). Estates under registered leases, or registered Crown leases or licences, may also be put into unit titles. For the sake of simplicity, such estates are not addressed here.
4 1972 Act, s 2. See also 2010 Act, s 5(1).
5 Refer 1972 Act, s 3(1)(b); and 2010 Act, s 5(1).
6 1972 Act, s 4(1); and 2010 Act, s 17(1).
7 1972 Act, s 4(2); and 2010 Act, s 18. The descriptions are taken from Thomas Gibbons Unit Titles Law and Practice (2nd ed, LexisNexis, Wellington, 2015) at 2.5.
8 Under the 1972 Act, this interest was described as an undivided share in the fee simple estate in the common property to which the unit proprietor was entitled by virtue of s 9, which in turn provided for the common property to be held by unit proprietors as tenants in common in shares proportional to the unit entitlement in respect of that unit. Under the 2010 Act, the interest became a proportionate beneficial interest, the common property being owned by the body corporate: see ss 18(b) and 54.
(c)an undivided share in the fee simple estate in the units to which the relevant unit proprietor/owner9 is contingently entitled — the “contingent interest”.
[11] Each such stratum estate might “devolve or be transferred, leased, mortgaged, or settled” as if it were an estate in fee simple in land.10 But the fee simple estate “shall not be capable of devolving or being dealt with in any way, and none of the component parts of a stratum estate shall, except as provided [elsewhere in the Act], be capable of devolving or being dealt with independently of the others”.11
[12] Upon the deposit of a unit plan, the existing certificate of title is cancelled, and a new certificate of title is issued for the stratum estate in all of the units shown on the unit plan.12
[13] The 1972 Act thus introduced, and the 2010 Act maintains, a statutory mechanism by which real property might be held, and dealt with, in a novel, fragmented form of registered ownership.
Unit entitlements under the 1972 Act
[14] Before any unit plan could be deposited under the 1972 Act, a “unit entitlement” required to be assigned to every principal unit and accessory unit. Each unit’s unit entitlement was fixed by a registered valuer on the basis of the relative value of the unit “in relation to each of the other units on the unit plan”.13
[15] Unit entitlements were important as they established, in essence, the extent of the unit proprietor’s rights and liabilities as owners, in relative terms compared to other unit owners.14 With only two exceptions, “no change [could] be made in the unit
9 “Proprietor” is used in the 1972 Act to mean the person registered as the proprietor of the stratum estate in that unit (s 2); and “owner” is used in the 2010 Act to mean the unit’s registered owner.
10 1972 Act, s 4(3); and 2010 Act, s 50(a).
11 1972 Act, s 4(3). See also 2010 Act, s 50.
12 1972 Act, s 8(1); and 2010 Act, s 43(1).
13 Section 6(1). Sections 38(1) and (2) of the 2010 Act provides for assignment, similarly, of an “ownership interest”.
14 Section 6(3). Section 38(3) of the 2010 Act provides likewise.
entitlement of any unit after the unit plan [was] deposited”.15 Those exceptions were where:
(a)an existing unit was passing into common property, in which case the transfer was registered so as to record that the unit entitlement had been cancelled, and the aggregate unit entitlement reduced accordingly to preserve relativity;16 or
(b)a redevelopment was being undertaken by the sole proprietor of all units, or upon the unanimous resolution of all proprietors, in which case additions to units, or an increase in unit numbers, required re-assessment of relative values.17
The unit titles at 45 Rawene Road
[16] The four dwellings at 45 Rawene Road were put into unit titles under the 1972 Act by the deposit, on 11 July 1988, of a unit plan labelled UP 123976. This unit plan is reproduced as Annexure A to this judgment. As can be seen:
(a)The four dwellings are depicted in the centre of UP 123976. The entire property is depicted at the bottom left.
(b)The land at 45 Rawene Road spans Lot 3 of Deposited Plan (DP) 8991 and Part Lots 36 and 50 of DP 415. The four dwellings sit on Lot 3 of DP 8991 and were each made principal units. The rear dwelling was made Unit D. The land to the west from Unit D, down and across the gully towards Huka Road, is an accessory unit (Accessory Unit 4 or AU4), associated with Unit D. It is a large piece of land, comprised of the westernmost part of Lot 3 DP 8991, and all of Part Lots 36 and 50 of DP 415.
15 Section 6(2).
16 Section 19(5)(d).
17 Section 44(3).
(c)The approximate area of each of the units is recorded in the schedule on the right side of the plan. The four principal units, including Unit D, each occupy 60 square metres. The area of Accessory Unit 4 is 5550 square metres.
(d)The units’ respective unit entitlements are also recorded in the schedule. Out of a total of 10,000, Unit D has 2,281 and Accessory Unit 4 has 701.
The agreements giving rise to this proceeding
[17] On 31 March 2010, the Property at 4/45 Rawene Road went to auction. The parties in this proceeding18 wanted to buy it, but they had different reasons for doing so:
(a)The Thompsons were living in Melbourne at the time and were looking to relocate. When they could, they would live in the dwelling at the Property.
(b)The Great Chelsea Garden Trust had been formed in 2009, to establish a garden of international significance in the Rawene Road Reserve, and to purchase or secure tenure of other land to further that purpose. The Trust’s most active trustee, Graham Milne, saw the Property as “the key” to the Trust’s aspirations, since it adjoined the reserve. He had in mind the gardens eventually extending from the reserve, across the land in private ownership between Rawene Road and Huka Road, to the Chelsea Estate Heritage Park.
[18] The Trust won the auction, with a bid of $502,000. Mr Milne and one of his then fellow trustees entered a sale and purchase agreement dated 31 March 2010, naming the Trust or its nominee as purchaser (the Auction Agreement).
18 The defendants are the current trustees of the Great Chelsea Garden Trust. I am referring here to the defendants’ antecedents as trustees. On 2 August 2024, prior to the delivery of the parties’ closing submissions, the plaintiffs obtained leave to amend their third amended statement of claim dated 30 May 2022, so as to name the current trustees as defendants, without opposition, Mr Thorp having been acting throughout in this proceeding for the Trust.
[19] When agreeing to buy the Property, the Trust intended (following the purchase) to subdivide the part that spanned the gully from the land on which the house sat, and to sell the house. Mr Milne commenced discussions with Dr Thompson, to that end, that very day.
[20]The discussions led to two further written agreements:
(a)Mr Milne and his fellow trustee agreed to nominate the Thompsons as purchasers under the Auction Agreement. And the Thompsons agreed to meet the trustees’ obligations as purchasers under the Auction Agreement. I will refer to the document recording this agreement, dated 21 May 2010, as the Nomination Agreement.
(b)The Thompsons agreed, upon settling the Auction Agreement as the Trust’s nominee, to sell “part” of the Property to Mr Milne and his fellow trustee. While there is consensus between the parties that a subdivision was in contemplation, the nature of the subdivision, and therefore just which “part” of the Property would be sold, is in dispute. I refer to this agreement as the Partial Sale Agreement.
[21] The Trust duly nominated the Thompsons as purchasers. On 8 July 2010, the Thompsons settled the purchase.
[22] However, the Property has not been subdivided, and the Partial Sale Agreement has not been completed. The entire Property remains in the Thompsons’ registered ownership.
The Thompsons’ primary claim
[23] The Thompsons’ primary claim is that the part of the Property to be sold under the Partial Sale Agreement was bounded entirely within Accessory Unit 4. They say that the Partial Sale Agreement was accordingly contrary to s 10(1) of the 1972 Act,19
19 The claim was first brought in reliance on s 53(1) of the 2010 Act. On 2 August 2024, the Thompsons sought and obtained leave to amend their statement of claim to refer to the 1972 Act, the defendants not consenting but acknowledging that the hearing had been conducted with reference to the 1972 Act and they would not suffer prejudice by the amendment.
and therefore, in terms of s 10(6), was “void and of no effect”.20 They say that the Court should issue a declaration to that effect, and grant associated relief.
Section 10 of the Unit Titles Act 1972
[24]Section 10 of the 1972 Act provided as follows:
10 Independent dealings with accessory units restricted
(1)Except where it is transferred to the proprietor of a principal unit shown on the same unit plan, no accessory unit or any interest in it may be sold, leased, mortgaged, or otherwise disposed of or dealt with except as part of a sale, lease, mortgage, disposition, or other dealing which includes a principal unit or a corresponding interest in a principal unit:
provided that the proprietor of a principal unit included in the same certificate of title as an accessory unit may let the accessory unit on a weekly tenancy or on a tenancy determinable at the will of either of the parties by 1 month's notice in writing.
(2)No certificate of title relating to an accessory unit shall be issued except as part of a certificate of title relating to a principal unit.
(3)No principal unit which is for the time being included in the same certificate of title as an accessory unit (not being a certificate of title issued under paragraph (a) of section 8(1)), and no interest in any such principal unit may be sold, leased, mortgaged, or otherwise disposed of or dealt with except as part of a sale, lease, mortgage, disposition, or dealing which includes the accessory unit or a corresponding interest in the accessory unit, as the case may be, or where there is a concurrent sale of the accessory unit in accordance with subsection (1).
(4)Where any accessory unit is being transferred independently of a principal unit to a person who is the proprietor of a principal unit shown on the same unit plan, the instrument of transfer in respect of the accessory unit shall contain a request to the Registrar for the accessory unit to be included in the certificate of title for the principal unit; and upon registration of the instrument of transfer the accessory unit shall become subject to all mortgages and charges then affecting the principal unit.
(5)Where an accessory unit is for the time being included in the same certificate of title as a principal unit the accessory unit may not be transferred apart from the principal unit while it remains subject to any mortgage or charge.
(6)Notwithstanding anything to the contrary in the Land Transfer Act 1952, any purported sale, lease, mortgage, disposition, or dealing with
20 Their first cause of action.
any unit in contravention of subsection (1) or subsection (3) shall be void and of no effect:
provided that nothing in this subsection shall affect the devolution of any unit upon the death of the proprietor thereof to the administrator of that proprietor.
[25] Associate Judge Andrew referred, aptly, to the equivalent provisions in the 2010 Act as “the decoupling prohibition”.21 Their obvious purpose has been to maintain the overall integrity of each unit title development. Permitting dealings of the sort prohibited would undermine the validity of the constituent units’ respective unit entitlements, and the ban upon amending unit entitlements except via transfer into common property or redevelopment (see [15] above).
[26] In summary, they provide that a principal unit and an accessory unit comprised in the same title may not be dealt with separately, except where the accessory unit is being transferred to the owner of a principal unit in the same development. A dealing that contravenes the prohibition is void.22
The Trustees’ response to the Thompsons’ primary claim
[27] The Trustees respond to the Thompsons’ primary claim by saying that the Partial Sale Agreement provided for flexibility as to the nature of the contemplated subdivision, so that the part of the Property being sold might be adjusted to avoid breach of s 10(1) of the 1972 Act. They say that, properly interpreted, the Partial Sale Agreement is not void. Instead, they remain entitled to undertake a compliant subdivision, and therefore entitled to a beneficial interest in the Property.
The issue for determination of the Thompsons’ primary claim
[28] In light of the above, it can now be seen why the proceeding turns on the correct interpretation of the Partial Sale Agreement. If the Partial Sale Agreement amounted, in terms of s 10(1), to a sale, other disposition or dealing with Accessory Unit 4 or any interest in Accessory Unit 4, other than as part of a sale, other disposition or dealing with Unit D or a corresponding interest in Unit D, it was indeed void and of no effect.
21 Milne (as trustees of the Great Chelsea Garden Trust) v Thompson, above n 1, at [6(a)].
22 Gibbons, above n 7, at 32.
Interpreting the Partial Sale Agreement
The proper approach to interpretation
[29] The proper approach to interpretation of the Partial Sale Agreement is that confirmed by the Supreme Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd:23
… the proper approach [to contractual interpretation] is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.
The terms of the Partial Sale Agreement upon which the Thompsons rely
[30] The Partial Sale Agreement, dated 24 May 2010, is in the then-standard form approved by the Real Estate Institute of New Zealand Inc and the Auckland District Law Society, subject to amendment and “further terms of sale”. The Thompsons are named as the vendor, Mr Milne and another trustee, as trustees of the Trust, are named as the purchaser. The essential agreement of the parties is set out, at the foot of the first page, as follows:
It is agreed that the vendor sells and the purchaser purchases the property, and the chattels listed in Schedule 1, on the terms set out above and in the General Terms of Sale and any Further Terms of Sale.
[31] In the first of six boxes appearing on that first page, the “property” is described as “[t]hat part of the property at 45 Rawene Road, Birkenhead more particularly described in the further terms of sale”.
[32] The further terms of sale, set out under a heading in those terms, are comprised of additional clauses numbered 15 to 25. Clause 15, headed “Legal Description of Property” reads:
The property is the area shown on the attached plan as 5299 square metres more or less shown as Lot 1 and being a portion of AU4 on Unit Plan 123976.
23 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60] (footnotes omitted).
[33] The attached plan referred to in clause 15 is reproduced as Annexure B to this judgment. As can be seen:
(a)The Attached Plan describes itself as a “plan showing severance of part AU4 UP123976”.
(b)It indicates precise dimensions for both the part of AU4 to be severed, labelled Lot 1, and the remaining part, containing principal units A to D, labelled Lot 2, with a note that those units are “to be re-surveyed and a new unit plan to be prepared”.
[34] These terms plainly support the Thompsons’ proposition that, in breach of s 10(1) of the 1972 Act, the Partial Sale Agreement provided for the sale of a part of Accessory Unit 4, separately from its principal unit, Unit D, and other than to the owner of another principal unit.
The terms upon which the Trustees rely
[35] The Trustees’ argument, that the Partial Sale Agreement reserved sufficient flexibility around the nature of the contemplated subdivision as to avoid breach, derives from clauses 21 and 24 of the further terms of sale.
[36]Clauses 21 and 24 provide as follows:
21.0The purchasers at the purchasers' cost in all things undertake to obtain from the North Shore City Council any approval or consent necessary under the Resource Management Act 1991 or any other Act or Rule upon terms and conditions which are satisfactory to the purchasers in their sole judgement, for the subdivision of the property to proceed in accordance with the plan attached to this Agreement. The vendors hereby grant to the purchasers a Power of Attorney to enable the purchasers to sign all documents and do all things on behalf of the vendors that are necessary to enable the subdivision to be undertaken and new titles issued. This condition is inserted for the sole benefit of the purchaser.
…
24.0 The parties agree that there will be no time period within which the purchasers must complete the subdivision and that the completion of the subdivision will be at the discretion of the purchasers, having
regard to prevailing legislative requirements and any other considerations that the purchasers deem fit.
[37] In essence, clause 21 grants the Trustees a power of attorney, to exercise on behalf of the Thompsons in obtaining any legislatively necessary “approval or consent” for the subdivision. And clause 24 grants the Trustees a discretion to complete the subdivision whenever they deem fit, “having regard to prevailing legislative requirements”.
[38] The Trustees say that these clauses reserved, for their benefit alone, a discretion to formulate a subdivision that would comply with all legislative requirements. If legislative compliance required amendment of the dimensions of the subdivision set out on the Attached Plan, then so be it. Thus, the “part” of the Property to be sold was simply the part that would be produced following a compliant subdivision similar to that indicated by the boundary lines drawn on the Attached Plan.
[39] Further, the Trustees submit that the background relevant to the Partial Sale Agreement supports this purposive or contextual interpretation:
(a)They point to pre-contract correspondence indicating that the precise boundaries of the land to be subdivided and sold to the Trust were not a particular sticking point between the parties. For example, there was reference to agreements being drawn up to include a map “showing approx[imately] where the subdivision boundary should be”, and to a “proposed boundary adjustment”.
(b)Also, they submit that emails exchanged between Mr Milne and Dr Thompson on 27 April 2010 confirm the parties’ intention to take advantage of a more liberal approach to subdivision under the 2010 Act than that applicable at the time under the 1972 Act. In this regard, they point out that the 2010 Act introduced the prospect of property held by way of unit title being further subdivided into subsidiary unit titles.
Decision
[40] The Trustees’ argument overlooks that clause 21 expressly contemplates them obtaining approval or consent “for the subdivision of the property to proceed in accordance with the plan attached to [the] Agreement”. It does not contemplate approval or consent for the subdivision to proceed in accordance with some other plan.
[41] Turning to clause 24, I note that it refers to completion of “the subdivision”. The reference does not continue in the way clause 21 does, expressly describing the subdivision to be completed as a subdivision in accordance with the attached plan. But given that the context to clause 24 includes clause 21, the plan and the other terms upon which the Thompsons rely (set out at [30]–[33] above), it is apparent that the clause 24 reference to completing the “subdivision” should be taken as a reference to completing a subdivision the precise dimensions of which are set out on the plan.
[42] On this basis, considering the terms of the Partial Sale Agreement as a whole, clauses 21 and 24 do not adjust the dimensions of the property to be sold, plainly stated in the terms described at [30]–[33] above, and in particular clause 15 and the Attached Plan. Instead, they contemplate the Trustees taking time and action to obtain the consents and approvals necessary for such a subdivision. The property to be sold remains comprised solely of property coming within the pre-agreement boundaries of Accessory Unit 4.
[43] In this regard, I observe that the background to the Partial Sale Agreement, disclosed by the parties’ correspondence, does not assist the Trustees.
[44] First, notwithstanding the pre-contractual references to approximate boundaries of a proposed subdivision, the plan that ended up being attached to the agreement was precise. The vagueness in the pre-contractual references is consistent with the parties anticipating precision in the final written agreement.
[45] Second, the email exchange of 27 April 2010 does not assist the Trustees. This is because:
(a)During the exchange, Mr Milne responded to the Thompsons’ suggestion of deferring their purchase of the dwelling and immediately surrounding land until the Trust had purchased the Property, and completed its subdivision, with new titles being issued. Mr Milne did so by observing that this would raise problems for the Trust. Amongst other things, the Trust’s deed might restrict its capacity to purchase the Property (despite Mr Milne and his co-trustee having agreed for the Trust that it would do just that). Mr Milne added that:
Under the Unit Titles Act which applies to this property now, the process that we have to go through is very long winded and expensive it will take probably the best part of 1 year before we would be in a position to issue new titles. The Act is being reviewed at the moment and is likely to be replaced later this year making it much easier and financially a better proposition for us to undertake the subdivision then. We should also by then have acquired a number of other properties which could all be processed at the same time.
The process that we had discussed is
1You being nominated as the purchaser of the whole property under our agreement.
2You in turn agreeing to sell the trust the subdivided piece of land as per the suggested scheme plan of subdivision (copy of which has been sent to your lawyer) for the sum of $17,000 which we would pay to you at the time of settlement of the head agreement. (effectively paying you in advance for the subdivided land and making your net purchase price
$485,000)
3The trust would pay for and do all things necessary to effect the subdivision.
4The trust would be carrying all of the risks and its only protection would [be] by way of caveat.
Mr Milne concluded his email by confirming that the Trust would not undertake a sale to the Thompsons by completing the subdivision and selling them the dwelling and immediately surrounding land. He invited the Thompsons to suggest some other method of purchase.
Dr Thompson then responded to Mr Milne’s email, accepting his explanation, and writing:
I’d be happy to proceed in any way that minimises cost for both of us, and expedites our purchase as agreed: to this end I have just contacted my lawyer and have asked him if he can help us go ahead in the way you propose.
(b)An objective reader of this exchange would understand that:
(i)The Trustees insisted on the Thompsons buying the Property, and on them agreeing to sell to the Trust the “subdivided piece of land as per the suggested scheme plan of subdivision”.
In this sense, the background to the Partial Sale Agreement serves to confirm that the Attached Plan would literally set the boundaries of the subdivision the subject of any sale agreement that might be reached.
(ii)The Trustees had it in mind to take advantage of a more liberal approach to subdivision, than that applicable at the time of the email exchange on 27 April 2010 under the 1972 Act, which would come into force under the 2010 Act. The 2010 Act had received Royal assent eight days earlier, on 19 April 2010. It was due to come into force by Order in Council, and eventually did so on 20 June 2011.
This, too, does not assist the Trustees. They may have had in mind the possibility of subsidiary subdivision under s 20 of the 2010 Act. But there can be no subsidiary subdivision of Accessory Unit 4 under that provision. Section 20 permits principal unit owners only to subdivide their principal unit. If their principal unit has an accessory unit on the same record of title, both the principal unit and the whole accessory unit must be subdivided, to create a single subsidiary unit title development. This provision aside, the 2010 Act is no more
liberal in its approach to subdivision of property held by way of unit title than the 1972 Act. Similarly to s 10(1) of the 1972 Act, the 2010 Act prohibits dealings with accessory units separately from their principal unit, except by transfer to another principal unit owner in the same development.24
Awareness on the part of the reasonable reader of this part of the email exchange, of the possibility of the Trustees being mistaken about their ability to subdivide Accessory Unit 4, as called for by the Attached Plan, would not lead that reader to re-cast their interpretation of the Partial Sale Agreement. It would serve only to confirm that the parties may have been unaware they were about to enter an illegal, and void, agreement.
(iii)Relatedly to that last point, the Trustees were prepared to assume total responsibility for undertaking the subdivision, carrying “all of the risks”.
Thus, the objective reader would understand that the Trustees were prepared to bear the risk, not only of whether such a subdivision could lawfully be carried out, but also of whether an agreement to sell the specified portion of Accessory Unit 4 to a person other than another principal unit owner might breach s 10(1) of the 1972 Act.
[46] In summary, then, interpretation of the terms of the Partial Sale Agreement discussed above, in light of the background to that agreement, suggests that entry into the Partial Sale Agreement amounted to “dispos[al] of or deal[ing] with” an interest in Accessory Unit 4 separately from its principal unit, Unit 4, other than by way of transfer to the proprietor of another principal unit shown on Unit Plan 123976 (Units A to C).
24 2010 Act, s 53(1).
[47] Indeed, I consider that another of the further terms of the Partial Sale Agreement — clause 18 — confirms this interpretation. Clause 18 provides that “[s]ettlement of this transaction is in all respects contemporaneous with and interdependent with [the Nomination Agreement]”. The Partial Sale Agreement thus provided for “settlement” at the time the Thompsons accepted their nomination as purchasers of the Property: well in advance of the subsequent completion of the subdivision referred to in its other terms. Yet the Partial Sale Agreement could not settle in advance of the subdivision being completed if there was any scope for the subdivision to alter the extent of the property the subject of the settlement.
[48] In short, the property the subject of disposition by way of Partial Sale Agreement was that specified in the Attached Plan: a part of Accessory Unit 4 only. As entry into the Partial Sale Agreement amounted to a disposal of, or dealing with, an interest in Accessory Unit 4 except as part of a disposition or dealing with a corresponding interest in Unit D, and except by transfer to the proprietor of any of Units A to C, the Partial Sale Agreement was indeed void and of no effect.
Consequential matters
[49] Having made that finding, I decline to consider the Thompsons’ alternative claims: that the Partial Sale Agreement might, if not void, be cancelled, or have been frustrated. To do so would require me to examine events subsequent to entry into the Partial Sale Agreement, upon the artificial assumption that a subdivision different to the one I have found to be agreed might be formulated, so as then to test whether its lack of completion justifies repudiation or a finding of frustration. Indeed, Mr Milne has formulated various alternative subdivisions over many years, with no success as yet in their implementation. To my mind, these efforts only serve to confirm that the Partial Sale Agreement could never have been implemented.
[50] Turning to the Trustees’ counterclaim, it can be addressed briefly. The Trustees allege that:
(a)The Thompsons have breached fiduciary duties not to deal with the Property inconsistently with the trustees’ rights as beneficial owners, and should be ordered not to do so in future.
(b)Alternatively, if the Partial Sale Agreement were to come to an end, its provisions require the Court to order that the entire Property be transferred to the trustees, upon payment to the Thompsons of the amount they paid for its purchase.
[51] Neither of these claims can succeed. They each depend upon the Partial Sale Agreement having taken effect, at least to some extent. Since it did not take effect, fiduciary duties are not owed as between the parties in respect of it, and its provisions addressing what might happen should it come to an end have no relevance.
[52] That said, the Thompsons observe, and I agree, that they owe the Trustees a sum of money. When they accepted their nomination as purchaser of the Property under the Nomination Agreement, they acknowledged that the Trustees had paid a deposit under the Auction Agreement of $52,000, and they promised to pay the Trustees $35,000 by way of partial reimbursement. In light of those things, when the parties entered the ineffective Partial Sale Agreement, they did so contemplating that the Trustees would obtain the part of Accessory Unit 4 shown on the Attached Plan at an effective cost of the difference between the two figures — $17,000. Indeed, the sum of $17,000 appeared in the Partial Sale Agreement as the price of that sale.
[53] The upshot is that the Trustees paid the Thompsons $17,000 under an ineffective agreement. They have been entitled to its return since 27 May 2010, the day the Thompsons signed the Attached Plan, binding themselves to the Partial Sale Agreement they had signed the day before.
[54] I note for the sake of thoroughness that it is impossible to unwind the Nomination Agreement because of the failure of the Partial Sale Agreement. The Thompsons paid the then Trustees $35,000, in accordance with the Nomination Agreement, on 1 June 2010. And they proceeded to accept their nomination as purchasers under the Auction Agreement, by settling that purchase, becoming registered owners of the Property on 9 July 2010.
Result
[55]The Thompsons are granted judgment against the Trustees. In particular:
(a)I declare that the agreement for sale and purchase dated 24 May 2010 between the Thompsons as vendor, and the trustees of the Great Chelsea Garden Trust as purchaser, (but signed by the Thompsons on 26 and 27 May 2010) was void from its inception and of no effect.
(b)I order that Caveat 8601076.1 on Certificate of Title NA72B/529 shall lapse.
(c)I order the Thompsons to pay the Trustees, as trustees of the Great Chelsea Garden Trust:
(i)the sum of $17,000; together with
(ii)interest on that amount, awarded under s 10 of the Interest on Money Claims Act 2016, for the period beginning on 27 May 2010 and ending on the day this judgment debt (including all interest payable under that Act) is paid in full.
[56] The Thompsons appear entitled to costs, calculated at scale 2B. If costs cannot be agreed, the Thompsons are to file and serve by 5 pm on 25 October 2024 a memorandum, no more than four pages in length, setting out the desired basis and quantum of an award. And the Trustees are to respond in kind by 5 pm on 8 November 2024. I will determine the issue thereafter on the papers.
Johnstone J
Annexure A
Annexure B
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