Phillipps v Phillipps

[2019] NZHC 15

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-002381

[2019] NZHC 15

UNDER

the Property Law Act 2007

IN THE MATTER OF

an application under s 339 of the Act for the sale of property and the division of sale proceeds among co-owners and for orders under s 343 of the Act

BETWEEN

DEAN LIONEL PHILLIPPS

First Plaintiff

TODD RAYMOND PHILLIPPS
Second Plaintiff

AND

LORNA JUNE PHILLIPPS

Defendant

Hearing:

11 December 2018

Appearances:

K L Wendt for the Plaintiffs

No Appearance of, or for the Defendant

Judgment:

21 January 2019

JUDGMENT OF EDWARDS J

This judgment was delivered by Justice Edwards on 21 January 2019 at 11.00 am, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Counsel:     K L Wendt, Auckland

Solicitors:    GM Legal Ltd, Auckland

PHILLIPPS v PHILLIPPS [2019] NZHC 15 [21 January 2019]

[1]                  The parties to this proceeding are three siblings who are registered owners of a property at 42 Parakai Avenue, Parakai (Property). The plaintiffs seek an order of sale of the Property, and supplementary orders, by way of summary judgment.

[2]                  The defendant, Lorna Phillipps, is currently occupying the Property with five of her children.   She was served with the application for summary judgment on       5 November 2018 but has taken no steps in the proceeding, and did not appear when the application was called on 11 December 2018.

[3]                  The parties’ fourth sibling, Cindy Phillipps, is not a registered owner of the Property but has an equitable interest in it. Each of the siblings is entitled to an equal quarter-share of the sale proceeds of the Property. Cindy supports the sale of the Property.

Background

[4]                  The Property was previously owned by the parties’ father. It was left to his four children equally when he died in October 2008. Todd Phillipps, the second plaintiff, lived in the Property for approximately seven-and-a-half years, paying all outgoings and maintaining the Property.

[5]                  In March 2015, Cindy agreed to sell her quarter-share in the Property to the other three siblings in return for a quarter-share of the net proceeds of sale of the Property when it was eventually sold.

[6]                  Lorna moved into the Property with her children in 2016. Although she did not seek the consent of her siblings before doing this, neither of them objected at the time. In an affidavit in support of the application, the first plaintiff, Dean Phillipps, says that Lorna agreed to pay all the outgoings, maintain the Property and to vacate it if the other siblings wanted it to be sold.

[7]                  In 2018, the plaintiffs decided to sell the property. This was discussed with Lorna in February 2018. Dean says that Lorna initially agreed to sell the property but subsequently avoided signing a listing authority with a real estate agent.

[8]                  On 20 February 2018, the plaintiffs’ lawyers sent Lorna a letter asking her to confirm her agreement to the sale, and putting her on notice that if no agreement could be reached then application would be made to the Court for a sale order. Dean says that Lorna verbally reassured him that she would progress the sale of the Property, but she still did not sign and return the listing authority.

[9]                  In May 2018, a second letter from the plaintiffs’ lawyers was sent to Lorna. That letter also explained that if a sale could not be progressed with her agreement, then a court application would be filed and court costs would be sought against her.

[10]              Further attempts to secure Lorna’s signature on a listing authority were unsuccessful. In July and August 2018, Lorna texted Dean offering to purchase the property for $450,000. The plaintiffs believe that is well below the market value of the property, which is $635,000. They have produced a copy of an appraisal to substantiate that sum.

[11]              Proceedings  were  filed  on  23  October  2018  and  served  on  Lorna  on    5 November 2018.

Legal framework

[12]              The plaintiffs’ application for sale and supplementary orders is made under   s 339 of the Property Law Act 2007 (Act). Before making a sale order under that section, a court must have regard to the matters set out in s 342. That section provides:

342     Relevant considerations

A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to 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.

[13]              If, having considered the factors in s 342, a court is satisfied that a sale order should be made, then s 339(4) provides for further orders that the court may make to facilitate a sale and the distribution of sale proceeds. The further orders that the court may make are set out in s 343 of the Act.

[14]              The correct approach to an application for summary judgment was summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd.1 In essence, what the plaintiffs must establish is that the defendant has no defence to the claim (i.e. that there is no real question to be tried). The Court must be left without any real doubt or uncertainty.2

[15]              Because an application under s 339 requires the court to exercise a discretion, taking into account a variety of factors, the Court of Appeal has observed that the summary judgment procedure is not well-suited to the s 339 procedure.3 Nevertheless, this Court has entered summary judgment in respect of applications under s 339 on numerous occasions. In Carey-Venable v Carey, Associate Judge Bell said:4

[6]     Because the court’s powers to grant relief under s 339 require a range of matters to be considered and because there is a range of potential outcomes, to grant summary judgment the court has to be satisfied on the information provided on the summary judgment application that there can be only one possible outcome. If other possible outcomes remain arguable, the court cannot grant summary judgment. The plaintiff must therefore negate all outcomes except that sought in the statement of claim.

[16]I follow that approach.

1      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.

2 At [26].

3      Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [31].

4      Carey-Venable v Carey [2016] NZHC 2646, (2016) 18 NZCPR 289.

Sale order

[17]              Whether a sale order should be made turns on an evaluation of the s 342 criteria. Each of the relevant considerations under s 342 is considered as follows:

(a)Two of the three registered owners support the sale of the Property. Although not a registered owner, the other sibling who has an interest in the Property also supports the sale.

(b)The Property is 1,464 m2 and has a 1980s three-bedroom house on it. A valuation dated 18 January 2018 suggests it has subdivision/ development potential. The house appears to be in poor condition due to the lack of maintenance. A formal valuation of the property, dated January 2018, values it at between $640,000–$650,000. An informal valuation, dated 2 July 2018, values the Property at $635,000.

(c)There is no opposition by Lorna to the application. However, it must be assumed that her reluctance to sign the listing authority and her efforts to purchase the Property herself indicate an opposition to the Property being sold to a third party.

(d)The issue of hardship is considered separately below.

(e)The Property appears to have deteriorated due to the lack of maintenance during Lorna’s occupation. The rates are in arrears and Lorna has not paid any rent.

(f)Lorna has been on notice since at least February 2018 that her siblings wish to sell the property. She has been living in the property rent-free and has had ample opportunity to raise the necessary finance to purchase the Property herself.

[18]              The issue of hardship requires further consideration. Lorna is a beneficiary. She has six children and is living in the Property with five of those children, aged between five and 14. Although there is no evidence of the impact of moving out of

the home, I infer that finding alternative accommodation for herself and her children may be difficult. In addition, Todd lived at the house rent-free for a period of seven years. Lorna may consider that she too is entitled to live in the Property rent-free for at least that period of time. However, any hardship needs to be considered in context. Lorna has lived in the house rent-free for two-and-a-half years. Although Todd lived in the house rent-free, he paid all outgoings on the house and maintained the Property at his own expense. Lorna appears to have done neither. As to the financial hardship that Lorna may suffer as a result of having to find alternative accommodation, it is relevant that she will get her share of the sale proceeds which may be used to assist her in that.

[19]              Weighed against the hardship to Lorna is the hardship suffered by her siblings. They have had not had any financial benefit from the Property for at least two-and-a- half years. The Property is rundown and may deteriorate even further if Lorna remains in occupation. Both plaintiffs are equally liable to Auckland Council if rates are outstanding. Ultimately, and in the absence of any evidence from Lorna to the contrary, I consider the hardship to the plaintiffs of not selling the property outweighs any hardship to Lorna and her children.

[20]              Overall, I am persuaded that the only possible outcome is sale of the Property. An order under s 339 of the Act should be made accordingly.

Ancillary orders

[21]              The plaintiffs seek a number of ancillary orders under s 343 of the Act. Insofar as the orders are sought to facilitate the sale of the Property by auction, and the transfer of ownership to the successful bidder, I am satisfied that they are appropriate. In addition, I intend to make it clear that all the siblings are entitled to bid at the auction for the Property.

[22]              The orders seek a distribution of sale proceeds in accordance with the agreement reached with Cindy. This will result in each sibling sharing one-quarter of the sale proceeds. That division is fair and reasonable in the circumstances.

[23]              The plaintiffs also seek an order that Lorna pay their actual legal fees and disbursements in connection with this proceeding, and that those sums be deducted from her share of the sale proceeds. Counsel for the plaintiffs submits that the proceeding has only been made necessary by Lorna’s failure to engage voluntarily with the sale process.

[24]              Costs awards are governed by part 14 of the High Court Rules 2016. Rule 14.6 sets out the circumstances in which increased or indemnity costs may be awarded. I am not persuaded that any of the grounds set out in that rule apply in this case. Nor am I persuaded that any costs order should be enforced by way of deduction from the sale proceeds of the Property. The award may be enforced in the ordinary course. Accordingly, I award costs on a schedule 2B basis.

Result

[25]              I enter summary judgment in favour of the plaintiffs against the defendant and make the following orders:

(a)The property at 42 Parakai Avenue, Parakai, Auckland, Identifier NA10B/1121 (Property) shall be sold by auction. For the sake of clarification, I confirm that  the  parties  to  this  proceeding  and Cindy Phillipps are entitled to bid at that auction.

(b)The first plaintiff, Dean Lionel Phillipps, is authorised to sign on behalf of the defendant any contracts or documents that she would otherwise be required to sign as co-owner and that are necessary to:

(i)progress the marketing and auctioning of the Property for sale; and

(ii)transfer ownership to any purchaser of the Property.

(c)The plaintiffs shall give the defendant 14 days’ notice in writing to vacate the Property. Upon the 14-day period expiring, the plaintiffs shall be granted full and vacant possession of the Property.

(d)Once the Property has been sold, GM Legal will, on behalf of the parties, act as the conveyancing solicitors for the Property.

(e)On settlement of the sale of the Property, the sale proceeds will be paid to GM Legal’s trust account and GM Legal shall, on behalf of the registered owners, pay the sale proceeds as follows and in the following priority:

(i)GM Legal will pay or reimburse any amounts legally required to be paid in connection with the sale of the Property (e.g. council rates);

(ii)GM Legal will, with the consent in writing from both plaintiffs, pay or reimburse costs and expenses reasonably incurred in connection with the marketing and sale of the Property (e.g. legal conveyancing fees and sale and marketing fees);

(iii)GM Legal will pay a one-quarter share of the balance of the sale proceeds to Cindy Renee Phillipps, Dean Lionel Phillipps, Todd Raymond Phillipps and Lorna June Phillipps.

(f)Leave is granted to the parties to seek any further orders from the Court that are reasonably necessary in connection with the orders made in this proceeding.

(g)The plaintiffs are awarded costs on a schedule 2B basis and disbursements.

Edwards J