Robertson v Robertson

[2021] NZHC 3251

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002655

[2021] NZHC 3251

UNDER

Section 339 of the Property Law Act 2007

BETWEEN

CONRAD CHRISTIAN ROBERTSON

Plaintiff

AND

MARTIN JAMES ROBERTSON

Defendant

Hearing:	19 November 2021
Appearances:	R Hollyman QC and K Dillon for the Plaintiff G Kohler QC for the Defendant
Judgment:	1 December 2021

JUDGMENT OF WALKER J

This judgment was delivered by me on 1 December 2021 at 10 am Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

ROBERTSON v ROBERTSON [2021] NZHC 3251 [1 December 2021]

Introduction

[1]                This judgment is the sequel to an interim judgment delivered on 2 September 2020, and a decision of the Court of Appeal dismissing an appeal against the interim judgment.1

[2]                Three matters arise for determination before the judgment may be finalised. Further affidavits have been filed along with written submissions. A further hearing was also convened.

[3]                The full background is set out in the interim judgment. All three judgments should be read together. By way of brief summary to provide context, the parties are brothers who jointly own a property at 51 Alnwick Street, Warkworth (the Property).2 They have fallen out. Conrad operates his boat building business from the property and has done so for over 40 years, the last 25 years without his brother. Spurred by a desire to expand and modernise his business, Conrad wishes to own the property outright to ensure security of tenure. Martin wishes to develop the residential potential of the property as part of a joint venture.

[4]                As their intentions for the property not only diverge but are essentially incompatible, Conrad applied to the Court by originating application for an order for sale under s 339 of the Property Law Act 2007 (the Act) subject to a one year lease in favour of his business in the event he is not the successful bidder on sale. He then amended his application. He sought orders for sale (on different terms). In the alternative, he sought partition of that part of the Property occupied by his business which he could purchase at a fair market value fixed by the Court with the balance of the Property sold to either party on the same basis. By the time of the first hearing, his preference was for partition rather than sale. Various permutations of partition, with differing degrees of complexity, were presented to the Court.

[5]                Conrad’s position was not the only one which evolved. Initially opposing sale by auction, Martin’s preference by the time of the first hearing was for sale by auction

1      Robertson v Robertson [2020] NZHC 2272, (2020) 21 NZCPR 875 [Interim judgment]; Robertson v Robertson [2021] NZCA 295 [Appeal judgment].

2      In view of the shared surname, I refer to the parties by their first names to avoid confusion.

subject to a nine month deferred settlement to enable him to liquidate some assets to enable him to bid at the auction.

[6]                Driving Conrad’s position is the critical importance of his boat building business. It is a well-established business in the Warkworth area with 20 employees, most of whom live locally. It services local industry. A sale to a third party which forces his business to relocate represents hardship. There is a prospect of closure if an alternative site is not found. Conrad pitches this as a virtual certainty in his supplementary evidence.

Interim judgment

[7]                In his primary affidavit evidence sworn in support of his originating application Conrad had said:

After discussing these concepts with David Heaney QC, I came to the conclusion that the only realistic solution was to put the property up for sale by way of auction which would allow either Martin or me to bid at the auction if we did not think the price was sufficiently high. For my part, if the price obtained at auction is extraordinarily high, I would probably let it be sold to a third party and move my boat building business.

(emphasis added)

[8]And:

I would still be prepared to do something like that [partition into two parts] but if that does not happen then for me to carry on in the future with my business, I need to see the property put up for auction. If the price achieved at auction is such that I can afford to buy it, then I will do so. If the price is vastly greater than I can justify then I will accept the property being sold to a third party and move my boat building business.

(emphasis added)

[9]                I determined that sale by auction was necessary, after having regard to the mandatory considerations in s 342 of the Act. I said:3

[82]   In my view, both parties have legitimate concerns in respect of each proposal. There are disadvantages and hardships to both. The fact neither party can design a mutually advantageous partition proposal, despite years of attempted negotiations, indicates to me that partition is not a practical option.

3      Interim judgment, above n 1, (footnotes omitted).

While I acknowledge this has not been a roadblock in other cases, it needs to also be viewed in light of other insurmountable practical hurdles. The brothers are unable to work productively together. It would take significant time and effort to reach agreement, obtain resource consents, and decide on and resolve questions such as roading and easements. Any final plan would require resource consents and possibly further court hearings.

[83]   A sale has advantages. For example, as recognised by Conrad in his earlier affidavits to the Court, before he changed his position on the orders sought, if the Property sold for a higher price than he was willing to pay, he will be left with a large sum of money and time to relocate his business. These earlier affidavits indicated it could be possible for him to relocate.

[10]            I considered sale by auction to be the most equitable and just solution. I recorded in my interim judgment that I intended to order sale on the terms already agreed.

[11]I set out the material part of my judgment for present purposes:

[92]     On a provisional basis, and subject to hearing further from the parties, I am minded to order that settlement take place either within six months (with sale subject to a six-month lease to Robertson Boats on commercial terms and at market rent) or within nine months (with sale subject to a three-month lease to Robertson Boats on commercial terms and at market rent) at the purchaser’s election.

[93]   Now that the only focus is on sale, I expect the parties should have a further opportunity to resolve all outstanding sale mechanism details including selection of the most appropriate agent. I provisionally indicate that, if the parties are unable to agree on the agency, I intend to include in my final orders a direction to the effect that the party who elects an agent with a higher commission rate is liable to bear a greater portion of the additional commission cost.

[94]   I direct the parties to confer with a view to agreeing the outstanding details for sale by auction and responding to my indication in Error! Reference source not found. above. They are to file a joint memorandum within 14 working days of the date of this judgment recording the additional areas of agreement accordingly. The memorandum is to include a form of draft order based on the guidance above. I will then direct a telephone conference or a further hearing in relation to these issues if necessary before making final orders.

Court of Appeal decision

[12]            Conrad filed an appeal. In his notice of appeal, Conrad challenged, among other things, the order for sale rather than partition. He argued that an order for sale failed to give sufficient weight to the hardship he would face on termination of his

business and that there is no other land currently for sale or lease zoned “industrial- boat-building”.

[13]            The Court of Appeal records in its judgment that, at the hearing of the appeal, Conrad conceded that partition was unlikely to work. Instead, he sought an order that he be allowed to buy out Martin’s share. The Court said “[i]n a kaleidoscopic catalogue of changing proposals, Conrad now opens an entirely new page.”4 And:

[24] … the underlying premise for the appeal is that Conrad cannot now move his business, should he fail to be the successful bidder at auction. This is said to constitute extreme hardship such that the Judge should have disregarded Conrad’s own contrary application for a sale by auction, or partition (which he now accepts is unworkable) and dreamed up something else entirely. Not only is that unsupported by the evidence, but it is in fact contrary to his earlier affidavit evidence, as set out in the preceding paragraph. The new arguments as to difficulty based on zoning were exactly that: arguments in submissions, not evidence. Mr Hollyman rightly avoided them. It would be quite unjust to Martin to permit a 90-degree turn now to be made in Conrad’s case, without pleading or evidence, and without Martin having the opportunity to adduce contrary evidence.

Further developments

[14]            In late 2020/early 2021, Auckland Council/Watercare offered back to the parties some 1.8113 ha of Watercare land at its current value. This had originally formed part of the Property. It had been requisitioned by Watercare under the Public Works Act 1981, along with a further 1.3530 ha which Watercare still owns. Martin purchased this land as nominee for a joint venture third party who funded the acquisition. I understand from counsel that the land purchased by Martin from Watercare is a 50/50 split of marine industrial (boat building zoned land) and residential land. The residual requisitioned land still owned by Watercare is marine industrial (boat building zoned).

[15]            Both Conrad and Martin reference this buy back by Watercare in further affidavits filed. Their description of the buy-back process appears inconsistent on its face. Conrad deposes:

Part of the Watercare land was offered back to Martin and I earlier this year and both Martin and I made offers to purchase it. Martin was successful with his higher tender and he is able to develop it as he sees fit.

4 Appeal judgment, above n 1, at [23].

The residual Watercare land that is yet to be offered back by Watercare is zoned Boatbuilding. Realistically this is the only plot of land available in the greater Warkworth area that has the appropriate zone for my business. If I was able to purchase this land from Watercare I could move my business, Robertson Boatbuilders, to this location.

[16]Martin on the other hand deposes:

Negotiations took place in early 2021. The negotiations involved Conrad and myself, both separately and collectively. Financially my position was supported by my joint venture partner. Ultimately Conrad was not prepared to purchase the land at the price and on the terms required by Watercare. I purchased the land and nominated my joint venture partner’s company as the purchaser. The land was acquired with the hope that it can ultimately be amalgamated with the land at issue in this case.

[17]            It is common ground that, at some time in the future, the residual Watercare land of about 1.3530 ha may also be declared surplus and offered back to Conrad and Martin. When this might occur, if it does, is not known. Conrad says this is the only available option now for his business. Martin says that he and his joint venture partner wish to buy it if offered. This is yet another touchstone for conflict between the brothers.

[18]            A further development since the first hearing is that Martin has leased some land “along the river”. He operates his own boat building yard from this premises. There is a dispute about whether Martin’s business competes with Conrad’s business. No detail is provided. No explanation is given as to whether or why Conrad did not pursue this lease. It is unclear precisely when this occurred or whether the land might have been suitable for Robertson Boatbuilders.

Issues

[19]            The first interim judgment invited the parties to attempt to resolve the sale mechanism details. They have largely done so. There are three issues on which the brothers remain at odds (subject to a post-hearing development discussed below):

(a)Martin seeks a direction from the Court that the parties jointly commission a soil characterisation report from independent experts, Cato Bolam, to provide to prospective purchasers.

(b)Conrad seeks a two year right of renewal of the lease in favour of his business in the event he is not the successful bidder at auction to mitigate the risk of losing his business.

(c)Conrad seeks an order restraining Martin from buying back the residual Watercare land in the event it is surplus to Watercare/Auckland Council’s requirements and consequently offered back to the parties under the Public Works Act.

[20]I turn first to the issue of commissioning a report.

[21]            It is common ground that some site contamination is inevitable given the nature of Conrad’s business and the period of use. The extent and materiality are not presently known.

[22]            Martin’s initial position was that a joint report should be obtained (with the costs shared) and disclosed to protect the vendors from later claims by a purchaser. He is not comfortable progressing this on his own because of the potential for Conrad to claim that provision of a report affected the market price.

[23]            Martin’s solicitor, Heugh Kelly, opines that the report “should be obtained in order to avoid potential purchasers being left with no information on the issue”. In correspondence with Conrad’s solicitor Mr Kelly expresses the view that:

If we adopt the approach proposed by you that it is up to the purchaser to make their own enquiry (and couple that with an exclusion clause) the presumption will be made by those purchasers that there is a good possibility of severe contamination and that presumption of risk will be priced into any offers. On the other hand, if we carry out a reasonable sampling approach and provide a report the potential purchasers have a basis for assessing risk. The provision of the report can be made on the basis that the vendors have no good reason to suspect that the report is inadequate but in any event disclaim any responsibility for the [report’s] content and do not accept any liability for any inadequacy in the report and any remediation work found to be necessary for development of the property.

[24]            Conrad opposes commissioning a report. Relying on the advice of his conveyancing solicitor, he argues that conveyancing practice is not to supply building

reports or any reports as to the condition of the property so as to avoid any assumption of risk about the accuracy of that report.

[25]            Mr Hollyman QC further points out that the proposed report is not comprehensive as to possible contamination because it proposes to sample identified areas only. He submits it would be much safer to invite any interested purchaser to conduct their own investigation.

[26]            There is no independent expert evidence about current conveyancing practice. Two experienced property lawyers express a different view on the matter. It is clear that some disclosure about the inevitability of contamination in respect of that part of the land occupied by the boatbuilding yard is required. Ultimately, how much and in what form is a commercial decision the parties must resolve rather than the Court. On the one hand the parties must weigh their legal duties to prospective purchasers. On the other, they must weigh their own appetite for risk. Asking the Court to solve the impasse is akin to asking the Court for legal advice about risk mitigation in an abstract sense. That is not the Court’s role.

[27]            I indicated that view to counsel and invited the parties to consider jointly engaging a senior property solicitor to break the impasse. The parties filed a joint memorandum in response indicating that they had reached agreement on an appropriate term in the proposed agreement for sale and purchase. Martin consequently no longer seeks a direction that a soil characterisation report be obtained.

[28]            While I would have declined to make a direction as to whether a report should or should not be commissioned, the issue thus falls away.

[29]            Before turning now to the second and third issues, it is necessary to address a threshold question in respect of both. That is, whether and the extent to which it is open to the parties to seek further orders of this type following my interim judgment. Conrad’s position is that only the signalled order for sale cannot be revisited but all other ancillary  or  consequential orders needed to avoid injustice may be sought.   Mr Hollyman points to two key developments: the first being that Martin purchased part of the Watercare land offered back as surplus so that this is no longer available to

Conrad’s business and the second that the market has moved on due to effluxion of time. As Mr Hollyman put it, this is not evidence which could have been available previously. On the contrary, it is new and updating and debunks the previous assumption that there would be property including Watercare land available.

[30]            Martin’s position is diametrically opposed. He argues that the judgment was provisional only in respect of prescribed and limited aspects with no opportunity to effectively have a second bite at fundamental matters, only to address the mechanism of sale. The direction sought in respect of a soil characterisation report falls within the category of a sale mechanism. A two year option for the lease in favour of Conrad’s business and an order restraining Martin from buying the residual Watercare land are fundamental matters on which the Court is functus officio.

[31]            I have concluded that Martin’s position is the correct one. While I am attracted to the approach of imposing further conditions to enhance the prospect of saving Conrad’s business, it would be unprincipled. As Mr Kohler QC submits, the provisional aspects of my judgment are limited to the election between settlement date and the term of the lease and the mechanics of sale by auction. This is notwithstanding the interim label affixed to the judgment. The reason for inviting a response from the parties on the former issue is straightforward. I indicated I would direct either a six month settlement period with a six month lease, or a nine month settlement with a three month lease at the election of the purchaser. This approach was not one proposed by either party and in the interest of natural justice, both needed the opportunity to comment. Thus, while expressed as an interim judgment, it was, to adopt the phraseology of Cooke J in Mainzeal Property and Construction Ltd (in liq) v Yan (No 2), an “interim judgment of a limited kind”.5

[32]            The mechanical provisions which the judgment anticipated further submissions on are limited to the consequential, practical steps to facilitate sale by auction. These can be contrasted with the fundamental matters already decided, namely the conditions on which I determined that sale by auction produced the most just outcome. My earlier judgment already balanced the respective interests of the

5      Mainzeal Property and Construction Ltd (in liq) v Yan (No 2) [2019] NZHC 1637 at [7].

parties, providing Conrad with a 12 month grace period to find somewhere to relocate the business if he was unsuccessful at auction. Conrad is effectively now asking the Court to revisit that exercise of discretion. I consider it is not open to the Court to do so as it would be to relitigate the fundamental issues contrary to the strong policy rationale sitting behind the doctrines of res judicata and issue estoppel.

[33]            I pause to interpolate that the proposed right of renewal, if granted, would triple the occupation period with a potentially significant effect on market value of the land. By dint of the appeal, Conrad has effectively extended that grace period by a further 12 month period, giving him more than two years to find an alternative location for the boatyard.6

[34]            Even if I am wrong on the threshold question, I am not persuaded by the current evidence that no relocation site exists apart from the residual Watercare land. Conrad relies on two letters dated 15 July 2021 and 11 August 2021 from planners he engaged.

[35]On 11 August 2021, Ms Brooke of The Planning Collective wrote:

To allow for future expansion of the business and buffering from containment of effects; a potential size (for relocation) would need to be about 4 ha.

…

As of today’s date, based on an online search, no such site(s) are listed for sale.

[36]            The stated requirements are set out in the letter dated 22 June 2021 which states:

The site needs to be a minimum of 4 ha in size to allow sufficient hardstand for the service yard and reasonable room for expansion.

…

[The land] needs to be up for sale, or the owners need to be willing to consider selling. We have not contacted owners, so have based this on whether the site is currently publicly listed for sale.

6      In saying so, I do not ignore the fact that on appeal Conrad sought to overturn the order for sale.

[37]            Thus, while The Planning Collective’s conclusion is that there are “few, if any, realistic opportunities for Robertson Boats to relocate their boat yard activity”, the scope of the investigation, including the approach, criteria and requirements, means that the conclusion has significant limitations.

[38]            As with the attempt to attach further conditions around the order for sale, an order seeking to restrain Martin from buying the residual Watercare land also falters because it is an attempt to relitigate fundamental matters already determined. It was raised at the first hearing in the context of a partition (rather than sale) order. It was not advanced in connection with sale by auction. It is not open to impose further substantive conditions of sale which cut across the orders already made. Aside from that threshold question, there are numerous practical problems associated with restraining Martin from buying the land. It affects third party interests. It would also involve a complex assessment of proportionality, contingencies, duration and impact on third party rights. There are simply too many permutations. Conrad has an unfettered opportunity to purchase the residual Watercare land if and when it becomes available. It is not appropriate in all the circumstances to interfere with the market by restricting Martin’s ability to make an offer.

Ancillary orders

[39]            The parties helpfully reached agreement on the mechanics of sale by auction. By consent I make the following orders/directions:

(a)Formal marketing is to commence on 24 January 2022.

(b)The auction is to take place in the week of 14 March 2022.

(c)The form of agreement for sale and purchase by auction (ASP) is that identified as exhibit B but with no right of renewal of lease in clause 24 and with the addition of the agreed clause as to remediation of land set out in the joint memorandum dated 26 November 2021.

(d)The list of improvements/fixtures to be attached to the ASP are those identified in schedule 5 (exhibit C), save that the following items are to be excluded and may be removed by Conrad:

(i)The small moveable building described as the “dangerous good store”;

(ii)The moveable round barns; and

(iii)The floating dock and the piles in the river (excluded from foreshore improvements).

(e)The additional clauses to be included in the ASP are those numbered 26 through to 27.1 referred to in exhibit D excluding 26.2 (the soil characterisation report).

(f)The form of deed of lease is that identified as exhibit E. The plan to be attached to the lease is identified as exhibit F but remains subject to Conrad’s confirmation.

(g)Copies of all documents referred to above are to be provided to prospective purchasers as part of the marketing information pack, by the real estate agents engaged.

(h)The parties are to engage Bayleys Real Estate to market the property in terms of the marketing proposal from that firm dated September 2020 on the basis that their commission on the sale has been agreed as 1 per cent plus GST.

(i)The cost of marketing is to be shared equally between Martin and Conrad.

(j)Each of Martin and Conrad are to deposit the sum of $5,000 into their respective solicitors’ trust accounts to cover agreed disbursements.

(k)Conrad is to pay to Martin the sum of $16,552.50 being half the cost of the process to remove the limitation of parcels in respect of the property title.

(l)Martin and Conrad are to sign and execute all documentation reasonably necessary or required to implement the above orders including all documents required to settle any sale resulting from the marketing of the property and the auction of the property.

(m)The reserve set for the auction of the property has been agreed between Martin and Conrad as recorded in item 12 of the synopsis of submissions by plaintiff, dated 5 November 2021.

[40]            In the event that any matter set out in [39] requires clarification, the parties have leave to apply.

[41]            I reserve costs. My provisional view is that costs should lie where they fall but I invite the parties to confer. If agreement can be reached, a joint memorandum should be filed within 20 working days of the date of this judgment. If the costs of the proceeding are not agreed, the parties may file memoranda no longer than five pages.

............................................................

Walker J