Saheb v Ismail

[2018] NZHC 1953

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1

[2018] NZHC 1953

BETWEEN

MUHAMMAD NADEEM SAHEB and FARZANA SOPHINA SAHEB

Applicants

AND

MOHAMMED ISMAIL

Respondent

Hearing:	1 August 2018
Appearances:	Richard Thompson for the Applicants Andrew Seton for the Respondent
Judgment:	1 August 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Thomas & Co, New Lynn, Auckland, for the Applicants Andrew Seton, Mt Albert, Auckland, for the Respondent

Copy for:

Richard Thompson, Auckland, for the Applicants

SAHEB and SAHEB v ISMAIL [2018] NZHC 1953 [1 August 2018]

[1]    The hearing today is to decide whether Mr Ismail has unreasonably withheld his consent to the sale of the trust property at 2A Golf Road, Epsom, and whether his caveat  should  be  removed.  The  background  is  set  out  in  minutes  I  gave  on  14 May 2018, 15 May 2018 and 26 July 2018. At the conference on 26 July 2018, I gave directions for the hearing today. There is urgency because Mr and Mrs Saheb have negotiated an agreement for sale of the property for $1 million to Mr Wimsett. In accordance with the settlement agreement the parties made on 15 May 2018, the agreement with Mr Wimsett is subject to a condition for the removal of the caveat. Notice of the condition was given to Mr Seton on 23 July 2018. The condition needs to be satisfied by 6 August 2018. I have no further time available before 6 August 2018 in which to deal with the matter. Mr Ismail swore an affidavit yesterday. This morning I was given an affidavit in reply by Mrs Saheb.

[2]    Mr and Mrs Saheb are the registered proprietors of 2A Golf Road, Epsom. They hold the property on trust for Mr Ismail. To protect his interest in the property he lodged a caveat. Initially he applied for an order to sustain the caveat but came to grief on procedural grounds. Edwards J gave him leave to lodge a new caveat. He did so. Mr and Mrs Saheb applied for the caveat to be removed so that they could sell the property. I was to hear that application on 14 May 2018. At that hearing counsel for Mr Ismail advised that he no longer opposed the sale of the property.

[3]    On 15 May 2018 the parties signed an agreement. It provided for steps to be taken to sell the property. Mr and Mrs Saheb were to list the property with Barfoot and Thompson. They were to obtain a valuation of the property. Mr Ismail promised to co-operate in helping with marketing and selling the property. Any agreement was subject to a condition as to removal of Mr Ismail's caveat. Clauses 5, 6, 7, 8, 9 and 16 of the agreement say:

5.Any agreement for sale and purchase of the property will be expressed to be conditional on the agreement of the respondent as caveator to withdrawal of the respondent’s caveat, such condition to allow 14 days within which it is to be satisfied.

6.A copy of any such agreement will immediately be provided to the respondent’s solicitor to seek the respondent’s agreement to withdrawal of the caveat.

7.The respondent shall advise in writing whether he agrees to withdrawal of his caveat within 7 days of his solicitor receiving a copy of any such agreement.

8.The respondent will not withhold any such approval where the sale is a reasonable and arm’s-length sale to a bona fide purchaser and for a value consistent with the registered valuation to be obtained as aforesaid.

9.The withdrawal of the caveat will be provided by the respondent’s solicitor at the time settlement is carried out through LINZ, or otherwise as may be agreed between the applicants’ solicitor and the respondent’s solicitor.

…

16.Following sale the proceedings will be discontinued without

prejudice to either party’s right in-

(a)to bring costs issues back before the court; or

(b)to bring any claim for any sum claimed by either party back before the court in the proceedings; or

(c)to make any new application in the proceedings, or to take any further step in the proceedings; or

(d)to issue new proceedings regarding the dispute as to any sum payable in accordance with the foregoing.

[4]    In my minute of 26 July 2018, I referred to earlier agreements that Mr and Mrs Saheb had entered into: an agreement with Mr Wimsett and a back-up agreement. The caveat condition for the first Wimsett agreement could not be satisfied because of opposition by Mr Ismail. The back-up agreement fell over when the purchaser invoked the due diligence clause. I was advised at the hearing on 26 July 2018 that Mr Wimsett had entered into a fresh agreement on 20 July 2018. That is the agreement I referred to at the start of this decision.

[5]    In opposition to the sale of the property Mr Ismail contends that Mr and    Mrs Saheb misappropriated funds which they ought properly to have accounted to him for. He says that he found out about this only after the agreement of 15 May 2018.

He says that through his lawyer he had pressed for Mr and Mrs Saheb to provide him with their bank statements, but they became available only after 15 May 2018. He says when he examined the statements he found that, while they had drawn down funds from the mortgagee and while they had accounted to him in part, there was a net amount of $21,600 owing to him. That related to transactions in 2016. Mrs Saheb has given an affidavit in response. She gives an explanation which turns on their having paid Mr Ismail in cash.

[6]    Mr Ismail indicated on 26 July 2018 that he did not accept that the property was worth only $1 million. He has not, however, adduced any evidence to suggest that the property at Golf Road is worth more than $1 million. He has not contested the price obtained by Mr Saheb for the sale of the property to Mr Wimsett.

[7]    In my judgment, the matters raised by Mr Ismail do not provide grounds for Mr Ismail to withhold his consent to the sale negotiated by Mr and Mrs Saheb or for leaving the caveat lodged against the title to the property.

[8]    Mr Seton accepted that the agreement made on 15 May 2018 remains in full force and effect. That was a responsible concession. I can see no grounds on which Mr Ismail could cancel the agreement. There is no evidence of any breach of the agreement by Mr and Mrs Saheb, so the agreement could not be cancelled for breach. There is no suggestion that in entering into the agreement Mr and Mrs Saheb made any misrepresentation. I can see no arguable basis for cancellation on the ground of misrepresentation. Instead, Mr Ismail's complaint is that they may have breached their duties as trustee in 2016. That is entirely separate from the contract of 15 May 2018.

[9]    The agreement contemplates that there may be ongoing differences between Mr Ismail and Mr and Mrs Saheb. It expressly reserves the parties' rights to contest those matters. That is clearly stated in clause 16 of the agreement. Mr Ismail keeps all his rights to say that Mr and Mrs Saheb are indebted to him for the $21,600 which he claims is outstanding. I am required today to deal only with the caveat and terms on which the caveat can be removed, but I cannot determine the substantive issues as to payments between Mr Ismail and Mr and Mrs Saheb referred to in Mr Ismail's affidavit of 31 July 2018.

[10]   The sums involved are relatively small. The parties may be able to co-operate to have the dispute heard in the Disputes Tribunal. I can understand that both sides may be keen not to run up more legal expenses. If the dispute cannot be heard in the Disputes Tribunal, the amount falls comfortably within the jurisdiction of the District Court.

[11]   I am satisfied that the agreement that Mr and Mrs Saheb have negotiated for the sale of the property at Golf Road comes within clause 8 of the agreement of 15 May 2018. The sale was brought about through marketing by Barfoot & Thompson, the land agents appointed under the agreement. It is an arm's length transaction to a person not known to Mr and Mrs Saheb. The purchaser appears to be bona fide. The purchase price of $1 million is the value found by the registered valuer, Mr Gardner. Mr Ismail could have no dispute with the agreement that Mr and Mrs Saheb have negotiated. His counsel did not suggest that there was any ground for arguing against it.

[12]   Accordingly the caveat is to be removed. I make that order in time for the caveat condition in the agreement for sale and purchase with Mr Wimsett to be satisfied.

[13]   As to costs, as trustees of the property, Mr and Mrs Saheb have power to sell the property. Expenses incurred in obtaining a sale of a property are properly incurred in their trusteeship. Mr and Mrs Saheb have the normal right of trustees to have recourse to the trust fund for reimbursement of expenses. To obtain a sale of the property they needed to remove the caveat lodged by Mr Ismail. That required them to incur expenses for this proceeding. Accordingly, they are entitled to reimburse themselves from the trust fund for the actual and reasonable expenses incurred by them in having the caveat removed. Mr and Mrs Saheb's lawyers have not advised what the actual costs incurred are. I trust that that can be agreed between the parties. Mr and Mrs Saheb's lawyers will be expected to provide the usual records required to establish the reasonableness of the legal fees incurred.

[14]   It is uncertain whether the proceeds of sale will be taxable in the hands of   Mr and Mrs Saheb. Approaches are to be made to the Inland Revenue Department. Clearly while that matter remains unresolved, the net proceeds of sale could not be

distributed to Mr Ismail. The parties contemplated that the funds would be held in a solicitors' trust account until those issues can be determined. That is an appropriate arrangement and I direct accordingly. I reserve leave to the parties to come back to the court for further directions.

[15]   It is possible that after other expenses are paid (for example, income tax on the sale of the property), the trust fund may not be enough to meet Mr and Mrs Saheb's expenses in having the caveat removed. In case the issue arises, Mr and Mrs Saheb are also entitled to an order for costs against Mr Ismail. I do not fix the amount of costs but reserve leave for the parties to come back to the court for costs if required.

[16]In summary, I make these orders:

[a]caveat 10951959.1 lodged against identifier NA52B/929 is to be removed forthwith;

[b]Mr and Mrs Saheb may recover their actual and reasonable costs of this proceeding from the proceeds of sale as part of their costs of obtaining a sale of the property;

[c]the proceeds of sale are to be held in the trust account of Mr and Mrs Saheb's lawyers pending agreement of the parties or pending further order of this court or any other court or tribunal of competent jurisdiction; and

[d]leave is reserved to apply for further directions.

……………………………….

Associate Judge R M Bell