Taylor v Conroy
[2024] NZHC 1467
•5 June 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1361
[2024] NZHC 1467
UNDER Section 339 of the Property Law Act 2007 and Part 19 of the High Court Rules 2016 BETWEEN
CHRISTOPHER GEORGE TAYLOR AND MGH TAYLOR LIMITED AS TRUSTEES OF THE LE ROY TRUST
Applicants
AND
HELEN MIRIAM CONROY AND MGH CONROY LIMITED AS TRUSTEES OF THE HAWKRIDGE DOOLITTLE TRUST
Respondents
Hearing: 14 March 2024 Appearances:
W E Andrews for applicants A ME Parlane for respondents
Judgment:
5 June 2024
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 5 June 2024 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Pidgeon Judd, Auckland Parlane Law, Auckland
TAYLOR v CONROY [2024] NZHC 1467 [5 June 2024]
[1] Helen Conroy and Simon Taylor lived together from around 1992. They decided jointly to buy a property at Wilson Road, South Head (Property) in around 2006. Their solicitors assisted them to establish trusts, and the trustees of each trust to purchase the Property as tenants in common: the Conroy Trust taking a three-twentieths share, and the Taylor Trust taking a seventeen-twentieth share.
[2]Mr Taylor died in 2010. Ms Conroy continued to live at the Property.
[3] The Taylor trustees now seek an order under s 339(1) of the Property Law Act 2007, for the sale of the Property, and the division of the net proceeds between the trusts in proportion to their interests.
When should the Court make a sale order under s 339(1)?
[4] Section 339(1) provides the Court with a “broad discretion”,1 to order the sale of property owned by co-owners, and the division of the proceeds among the co-owners. Relevantly under s 339(2), an order under s 339(1) may be made:
(a)only on an application made and served in the manner required by or under s 341(2); and
(b)only after having regard to the matters specified in s 342.
Section 341(2) compliance
[5] Section 341(2) requires applications for s 339(1) orders to be served on all co- owners, all persons who have an estate or interest that may be affected by the application being granted, and all persons claiming to be a party to, or entitled to a benefit under, an instrument relating to the property, other than persons already a party to the proceeding, except where such service is changed or dispensed with by the court to which the application is made.
[6] In this case, the applicants — Mr Taylor’s brother, Christopher Taylor, and MGH Taylor Ltd — are co-owners of the Property, as trustees of what I have described
1 Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [25].
as the Taylor Trust. And Ms Conroy and MGH Conroy Ltd are similarly co-owners of the Property, as trustees of what I have described as the Conroy Trust.
[7] An encumbrance in favour of Robert Grierson, Reginald Webber and Desmond Grinter was registered against the title to the Property in 1979. However, I am prepared to consider the application for sale and proceeds division orders on the basis that any sale would be subject to that encumbrance and the rights of way marked on the title remaining in place. No other person claims to be a party to an instrument relating to the Property.
[8]The requirements of s 341(2) have been met.
Section 342 considerations
[9]Section 342 provides as follows:
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.
[10]I turn to consider these matters in the order I think appropriate.
Nature and location of the property
[11] The Property is comprised of two hectares of remote, rural land in South Head, Auckland, upon which a residential dwelling and an adjacent shed have been set
largely in bush. The dwelling, of wood and weatherboard construction, is in poor condition.
Extent of applicant co-owners’ share, and number of other co-owners and extent of their share
Taylor Trust
[12] Simon Taylor settled the trust which I have described for the sake of clarity, and will continue to describe, as the Taylor Trust, on 10 July 2016. Its name as stated in the trust deed is the Le Roy Trust.
[13] Mr Taylor appointed himself and MGH Taylor Ltd, a trustee company established by Malloy Goodwin Harford, solicitors, as trustees. Under Mr Taylor’s will, he appointed his brother, Christopher Taylor, to be an additional trustee upon his death.
[14] The beneficiaries include Mr Taylor’s two children, and (subject to limitations which are not relevant) any person the trustees might appoint as a beneficiary. Ms Conroy has been, or will be, appointed a beneficiary in accordance with Mr Taylor’s letter of intent dated 3 December 2007, which provides for her to receive 25 per cent of the trust’s property.
Conroy Trust
[15] Ms Conroy settled the trust I have described as the Conroy Trust by deed dated 7 August 2007. Its name as stated in the trust deed is the Hawkridge Doolittle Trust.
[16] Ms Conroy appointed herself and another Malloy Goodwin Harford trustee company, MGH Conroy Ltd, as trustees. Various partners of Malloy Goodwin Harford have since become directors of MGH Conroy Ltd, including David Ruck, whose involvement in this proceeding is discussed further, below. The beneficiaries include Ms Conroy.
[17] The Conroy Trust’s deed provided Ms Conroy with power to appoint and remove trustees. Further, it provided that the trustees should be entitled to act as such, exercising their powers notwithstanding a range of prescribed potential situations of conflict of interest.
Registered ownership
[18] The Property is held in the registered ownership of the Taylor Trust trustees as to a seventeen-twentieths share, and in the registered ownership of the Conroy Trust trustees as to a three-twentieths share.
Property sharing agreement
[19] On 7 August 2007, the day the Conroy Trust was formed and the two trusts’ purchase of the Property was settled, the trustees entered a property sharing agreement and a licence to occupy, in combination providing amongst other things for:
(a)the trusts to meet maintenance costs and outgoings in proportion to their ownership shares;
(b)the trusts to make the Property available for Ms Conroy’s occupation, subject to her reimbursing the Conroy Trust’s share of maintenance costs and outgoings;
(c)the other trust having first right or option to purchase in the event of a trust wishing to sell its interest;
(d)the trusts to bear all legal and other costs incurred in any subsequent transfer or sale under the agreement, in proportion to their shares;
(e)Ms Conroy to be entitled to occupy the Property until, following Mr Taylor’s death, the licence is terminated by:
(i)the parties’ mutual agreement; or
(ii)Ms Conroy ceasing to occupy the Property, or her remarrying, or her death; and
(f)Ms Conroy, while she is the sole occupier, reimbursing all of the trusts’ expenditure under the property sharing agreement.
Summary
[20] In summary, the applicants are co-owners as trustees of an 85 per cent share in the Property, in which they are obliged under the licence to permit her to live, subject to her reimbursing them for all maintenance costs and outgoings expended by the Taylor Trust.
[21] Ms Conroy and MGH Conroy Ltd are co-owners as trustees of a 15 per cent share in the Property.
[22] Ms Conroy is a beneficiary under both trusts, and from the net proceeds of sale of the Property may expect to receive:
(a)25 per cent of the Taylor Trust’s 85 per cent share; and
(b)100 per cent of the Conroy Trust’s 15 per cent share (subject to the exercise of discretion by herself and by MGH Conroy Ltd as trustees).
Hardship caused to applicants in comparison with hardship caused to “any other person”
[23] The question of hardship caused to the Taylor trustees compared to the Conroy trustees requires exploration of the reason the proceeding has been brought.
[24] David Ruck, a solicitor and partner of Malloy Goodwin Harford, is a director of MGH Taylor Ltd, one of the Taylor trustees. On 15 November 2022, Mr Ruck received a telephone call from Dean Serjeant of the Auckland Council Compliance Response and Investigations team. Mr Serjeant advised that on 9 November 2022 he had visited the Property following complaints from a neighbour.
[25] Mr Serjeant has provided an affidavit, in which he says that Ms Conroy was present for his visit on 9 November 2022, and that on that occasion the dwelling at the Property was found to be an insanitary building. He visited the Property again on 28 November 2022, and personally served Ms Conroy with a copy of the Insanitary Building Notice which he then affixed to the dwelling.
[26] The Notice was issued with reference to s 124 of the Building Act 2004, which applies if a territorial authority such as the Council is satisfied that a building in its district is a dangerous, affected, or insanitary building. It required Ms Conroy immediately to either:
(a)vacate the dwelling and hoard the doors and windows to prevent unauthorised entry; or
(b)have an extensive array of repair work undertaken, including reconnection of its electrical supply, wastewater and effluent disposal, potable water and hot water systems.
[27] And it required Ms Conroy to undertake maintenance and repairs to prevent the ingress of moisture, or to demolish the building.
[28] Under s 128 of the Building Act, no person may use or occupy a building to which an insanitary building notice has been affixed, except where permitted pursuant to the notice. The Notice did not permit entry to the Property’s dwelling, except perhaps by implication to the extent necessary to undertake the remedial action outlined at [26] above.
[29] The Notice contained a warning that under s 128A(2), a person occupying or permitting another person to occupy the dwelling would commit an offence punishable by a fine of up to $200,000, plus $20,000 for every day during which the offence continues.
[30] On 22 November 2022, Mr Ruck sought on behalf of the Taylor trustees to give notice to the Conroy trustees of the former’s intention to sell their interest in the
property, offering a first option to purchase. He did so by writing to Ms Conroy. Ms Conroy did not respond. Mr Ruck wrote again on 9 December 2022, this time advising that the option to purchase had expired, and the Taylor Trust intended to market the Property for sale. He again asked Ms Conroy to contact him.
[31] In 2023, having formed the understanding that Ms Conroy no longer resided at the Property, the Taylor trustees applied to this Court for:
(a)removal of the Conroy trustees, and their replacement by the Public Trust and
(b)orders for substituted service on Ms Conroy.
[32] The application for trustee removal was advertised locally in accordance with directions for substituted service. Ms Conroy became aware of it, instructed counsel, and contacted the Taylor trustees. The application was abandoned once contact with Ms Conroy was established.
[33] Ms Conroy is a sickness beneficiary who has been living at the Property alone. She received Mr Ruck’s letters of November and December 2022, but says she was unsure of what to do. Ms Conroy was upset to receive the letters, and again to receive notice of the application for trustee removal. She says Mr Ruck should have realised she continued to live at the Property despite the Notice making it an offence for her to do so.
[34] Ms Conroy complains about Mr Ruck and Malloy Goodwin Harford acting for the Taylor Trust in this proceeding. She points out that the firm acted for both Mr Taylor and herself when establishing their respective trusts. She asserts she has been disadvantaged and badly served as a result of the trusts, and that if she had not entered her trust, she would have been entitled to more than 15 per cent of the Property.
[35] Mr Ruck says that MGH Conroy Ltd was appointed as a passive trustee of the Conroy Trust. Ms Conroy engaged Fiona Matheson, solicitor of Boyle Matheson, in 2010. Since then, MGH Conroy Ltd has taken no steps to administer the Conroy Trust,
other than to sign authorities to pay bank funds to Ms Conroy, clearing the entire balance of the trust’s bank account by 12 June 2012. Since receiving contact from Ms Conroy’s counsel in this proceeding, MGH Conroy Ltd has sought to retire as trustee of the Conroy Trust, but the trust deed requires at least two trustees or one corporate trustee, so the trustee company remains a party to the present proceeding in name only, until Ms Conroy uses her power to appoint another trustee. Mr Ruck points out that Ms Conroy stands to receive 36.25 per cent of the net proceeds of sale of the Property. He adds that the Taylor Trust has no assets other than its share in the Property.
[36] On 17 November 2023, David van Dam of the Auckland Council Compliance Response and Investigations team visited the Property. Ms Conroy was present and appeared still to be living there. The Notice was still affixed to the Property. Ms Conroy confirmed she was aware of it.
[37] Ms Conroy says that little of the remedial work mentioned in the Notice remains outstanding. The electrical supply has been reconnected, and the hot water system has been fixed. Ms Conroy says that the wastewater and effluent disposal and potable water systems function adequately, and that a working bee has substantially tidied the Property. She recognises that weathertightness issues remain. She points out that neither trust has contributed recently to maintenance of the Property.
Summary
[38] In summary, the trustees of both trusts — the legal owners of the Property — cannot afford to keep it in their ownership. The dwelling on the Property has for well in excess of a year been the subject of an insanitary building notice, exposing the trustees to a risk of prosecution should they permit any person to remain in occupation. In my view, this risk represents a “hardship” faced by all legal co-owners, amounting in itself to an “adverse effect which is of [significance]”.2 The absence of any trust assets beyond the Property itself, and Ms Conroy’s expressed financial inability to remediate the Notice, means that this unsatisfactory position is likely to continue until such time as the Property is disposed of.
2 Holster v Grafton (2008) 9 NZCPR 314 (HC) at [50].
[39] While Ms Conroy has signalled proceedings seeking to contest the extent of her beneficial interest in the Property, no such proceedings are before the Court. I must address the respective positions of the parties in accordance with such interests as are disclosed pursuant to the evidence that has been advanced. That evidence establishes that the trustees of both trusts, were they acting responsibly in the best interests of each of the trusts, would be united in their plans to sell the Property so as to avoid their joint and ongoing liabilities.
Value of co-owner contribution to cost of property improvements or maintenance
[40] All parties have contributed little to improving or maintaining the Property throughout the period it has been in their ownership. Hence, the difficulties now being faced.
[41] It does not appear to me that the result Mr Ruck anticipates to come from sale of the Property, 37.5 per cent flowing to Ms Conroy, is at odds with her contribution towards it.
Any other relevant matter
[42] I acknowledge the apprehension Ms Conroy is likely to feel about her lack of means requiring her to sell the property she jointly owns as trustee, and to find alternate accommodation. However, sale of the Property should lead to her recovering a considerable sum, at least approximating the value of her lost licence to occupy it. In my view, the more pressing risk is that she will be exposed to additional liability, whether to meet a fine or further legal costs, which might overwhelm the sum to be recovered upon the Property’s eventual, inevitable sale.
Conclusion/result
[43] Overall, it is plain that the Property requires to be sold. I make an order under s 339(1) of the Property Law Act for the Property to be sold.
[44] Comprehensive directions to implement that order for sale, if made by the Court, should be capable of overcoming the trusts’ current lack of funds and facilitating sale by providing for costs of specific required steps and of service
providers to be met from the proceeds of sale, which can be held in accordance with such directions under appropriate undertakings of conveyancing solicitors. It is likely that such directions will first need the input of real estate agents, experienced in the South Head market.
[45] I direct the parties to confer with a view to agreeing comprehensive directions for sale. If such directions cannot be agreed:
(a)the applicants are to file and serve a memorandum setting out their draft directions no later than 5 pm on 20 June 2024; and
(b)the respondents are to file and serve a memorandum setting out their alternate proposed wording of such directions no later than 5 pm on 9 July 2024.
[46]I would determine and issue directions for sale thereafter, on the papers.
[47] I understand Ms Conroy is legally aided. If nevertheless any issue of costs in this proceeding remains outstanding, it is to be addressed by the filing and service of memoranda in accordance with the above timetable.
Johnstone J
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