Thomas v Thomas
[2016] NZHC 1117
•26 May 2016
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV 2014-454-82 [2016] NZHC 1117
BETWEEN ARTHUR GRAEME THOMAS
Plaintiff
AND
ALISTAIR JOHN SAMUEL THOMAS Defendant
Hearing: 23 May 2016 Counsel:
T C Montague for Plaintiff
Judgment:
26 May 2016
JUDGMENT OF BROWN J
[1] The background to this proceeding is recorded in the judgment of Associate Judge Smith dated 13 November 2014.1 In that judgment an order was made removing Alistair Thomas as an administrator of the estate of the late Arthur Walter Thomas (the deceased) for the reason that he had neglected or refused to perform his duties as executor and trustee.
[2] The plaintiff, who is now the sole executor and trustee of the estate of the deceased, seeks an order under the Property Law Act 2007 for the sale of a farm property at 388 Spur Road, Eketahuna and other orders.
[3] The residue of the deceased’s estate consists of the following assets:
(a) An undivided one half share in all of the land contained in the following Certificates of Title
1 Thomas v Thomas [2014] NZHC 2828.
THOMAS v THOMAS [2016] NZHC 1117 [26 May 2016]
WN25C/849 WN22B/501
WN24C/436 WN192/215
WN24C/434 WN22B/503
WN252/73 WN23B/954
WN23B/780 WN24B/710WN18D/1083
(b)A one half share in the equity of a farming partnership trading under the name of A W Thomas & Son.
[4] The defendant is the beneficial owner of the other one half share of the assets described in [3] above. Subsequent to the death of the deceased the defendant has continued to farm that land in partnership with the deceased’s estate under the name A W Thomas & Son.
[5] Other than the defendant, none of the residuary beneficiaries has received any benefit from the deceased’s estate. On various occasions the plaintiff has invited the defendant to join with him in the sale of the land and the division of the proceeds of sale but, despite the plaintiff’s endeavours to negotiate a resolution of the respective property interests of the defendant and the plaintiff in the land, the defendant has refused to discuss the issue with the plaintiff or to communicate with the plaintiff in any manner other than expressing a wish for the continuation of the status quo.
[6] Hence the plaintiff has brought this proceeding seeking an order for sale of the land in order that there may be a distribution from the proceeds of sale to the residuary beneficiaries. The defendant has not filed a statement of defence or taken any steps in relation to the proceeding. Consequently the application proceeds by way of formal proof under r 15.9 of the High Court Rules.
[7] The affidavit of the plaintiff filed in accordance with the requirement in r 15.9(4) materially states:
15.On Wednesday 13 April this year, I visited Alistair again in a final attempt to engage with him short of having to proceed with this case through Court, and to avoid the expense, stress and inconvenience involved. I asked Alistair whether he would be interested in leasing the farm to my son Brendon. As usual Alistair’s only response was that he does not want anything to change. I cautioned him about these proceedings and the expense involved and emphasised the
possibility that the cost of it could come out of his pocket. It made no difference. When confronted he says nothing.
16.I have lost count of the number of times Mervyn and I tried to engage with Alistair. I have invited him to agree to the sale of some or all of the land, to allow a surveyor on to the land to investigate the possibility of partition, to join with me in having the land valued. His response has never gone beyond his saying he wants to leave things as they are.
17.I have used every reasonable endeavour to resolve the interests of Alistair and the estate but he has been and remains totally unresponsive.
18.The farm is almost all hill country. It is well described as “hard country”. To farm it successfully requires a farmer who is physically and mentally “at the top of his game” which is something Alistair is not. The farm is in a state of serious disrepair. Much of the fencing is neglected and internal electric fencing does not work. Alistair refuses to do a budget and instead he tries to work off diaries kept by our father over 30 years ago. I seriously doubt whether Alistair would not (sic) even know how many head of stock are run on the farm because physically he is unable to count them. For the annual accounts our Accountant applies a certain amount of guesswork. Alistair has made no improvements to the farm. In fact any improvements on the farm have deteriorated due to Alistair’s neglect or physical inability to do the work required. From time to time I have even had to come down from Opotiki to repair fences and carry out other basic maintenance work.
19.Because the farm is on separate titles it could possibly be divided up between Alistair and the estate according to value but Alistair refuses to join with me in having the land valued or even discussing the idea.
20.What I propose is for the Court to appoint a registered valuer to value the property and then to authorise me with the assistance of my solicitors and under the supervision of the Registrar to manage the sale of the farm by public auction or by private sale depending on the advice of a real estate agent instructed for the purpose.
21.I also ask that the Court authorise the Registrar to execute any documents that are necessary either to sell, partition or otherwise deal with the farm because it is most unlikely that Alistair will sign anything voluntarily.
22.In 2012 part of the farm had to be sold off to realise capital to continue. The business was in debt and the bank refused to provide financial support because of its concerns about Alistair’s inability to farm the land profitably. Mr Wayne McDonagh, a real estate agent at Dannevirke assisted with the sale. He knows the farm very well. He was a stock agent for my father for many years. He also knows Alistair and gets on well with him. I propose instructing Mr McDonagh to market the farm. I have asked him to provide me with a marketing plan which I will produce in Court. He will be able
to provide very useful advice and guidance as to whether the farm should be sold as a whole or in its parts to neighbours or other persons who may be interested in buying it. For example there is a
400 acre block of Manuka in which a beekeeper is interested. Mr McDonagh is every knowledgeable about the area and an
experienced rural real estate agent.
[8] I am satisfied from the evidence adduced that it is appropriate and necessary for an order for sale to be made under s 339(1)(a) of the Act. It is only by that means that the residuary beneficiaries will be able to receive any benefit from the deceased’s estate. Indeed for the reasons explained in the plaintiff ’s affidavit it is likely that a sale is also in the interests of the defendant. As Mr Arthur Thomas explained:
26.I realise and understand that Alistair is attached to the farm but that takes no account of the fact that the farm is a losing proposition and it has been for years. On any rational assessment sale is the most realistic option. It does not concern me whether it is sold as a whole or in separate blocks. I would be guided at all times by Mr McDonagh. If the farm were valued I would be willing to accept as executor, part of the farm equal in value to what the estate would be entitled to receive, not that I think Alistair will co-operate.
27.Assessed objectively I do not consider sale would impose any hardship on Alistair. He would receive not only his one half share of the net proceeds of sale, he would also receive a one third share of the balance. That would release more than sufficient capital to enable him, should he wish, to purchase a smaller block of land more manageable and consistent with his age and physical limitations. There is in reality no benefit in the continuation of this enterprise for anyone involved including Alistair but no amount of talking will persuade him of that. Without orders the estate would continue to suffer hardship in the loss of value of the land and assets of the business.
…
29.I do not consider it is feasible for Alistair to purchase the estate’s interests in the land because there is absolutely no realistic prospect that he would ever be able to borrow the money necessary, and, because I think it would be seriously adverse to his welfare and best interests, even though he may think otherwise. Farming this land or any part of it is physically beyond him, and he lacks basic farm management and administration skills and to make matters worse will not accept professional advice. For example he has always refused to engage a farm consultant.
…
33.Finally I wish to emphasize to the Court that I bear Alistair no ill will. The opposite is the case. I want only what is best for him. Our sister Anne and I are Alistair’s only family and we care for him and worry about what will happen with him. Whatever happens I will always be there for him. Anne and I will always do everything we can to protect him.
[9] The marketing plan referred to at para 22 of the affidavit only became available to Mr Montague on 20 May and it was provided to the Court under cover of a memorandum of that day. Mr McDonagh advised that the property has a current rateable valuation of $1,660,000. He recommended marketing it without a price by tender in order to eliminate any risk of underselling the property.
[10] So far as additional orders are concerned, the plaintiff deposed:
30.If the Court makes an Order for sale I request that the sale price be fixed at the price determined by a valuer and for the expenses for the sale or the division of the property be borne equally between Alistair and the estate, and for the net proceeds of sale to be divided equally between Alistair and the estate, but subject to any Order for costs and expenses the Court might make and in this I include the Order for costs made in the proceedings to have Alistair removed as an executor of Arthur’s estate.
…
32.I am also seeking an Order for indemnity costs out of Alistair’s share of the proceeds of sale in respect of this proceeding because the estate would never have had to make and pursue this application had Alistair approached the issue in a commonsense and practical manner.
[11] The orders sought in the amended statement of claim dated 9 October 2015 did not include an order under s 343(a) for the payment of compensation by one co-owner to others. In order to obtain from Alistair Thomas the compensation described in para 31 of the plaintiff’s affidavit (being compensation for the estate for the loss of its share of the proceeds of the sale of part of the farm in 2012 in order to keep the farm going) it would have been necessary to amend the claim. I discussed with Mr Montague the implications of an application to amend the pleading to include such an order. After brief consideration he advised that the plaintiff did not wish to pursue that course.
[12] The plaintiff seeks an order for indemnity costs. The principal reason for that request is that the defendant has unreasonably refused to engage in any form of constructive dialogue so as to achieve some form of resolution short of a further court proceeding. That stance was adhered to despite the threat that he might be required to meet all the costs and the recognition by Associate Judge Smith in his judgment that if no agreement was reached then there would need to be a separate application made to the court for the sale of the farm property. The plaintiff submits that the defendant’s stance has caused the maximum amount of inconvenience and expense.
[13] I accept that in the circumstances described an order for costs on an indemnity basis is warranted. In response to my request for details of the plaintiff’s costs, Mr Montague provided details of those costs in the sum of $15,154.70 including GST and disbursements. Those costs are approved.
[14] Having regard to the proposal in paras 20–21 of the plaintiff’s affidavit and the marketing plan provided by Mr McDonagh, I make the following orders:
(a) an order under s 339(1)(a) of the Property Law Act 2007 for the sale of the land in para [3] above and the division of the proceeds of sale thereof in equal shares between the Plaintiff and the Defendant;
(b) an order under s 343(g) of the Property Law Act 2007:
(i)directing a valuation of the land by a registered valuer instructed by the plaintiff;
(ii)directing that the land be sold either at auction or by tender, at the plaintiff’s election.
(c) an order under s 343(b) of the Property Law Act 2007 fixing the reserve price for the sale of the land for the sum specified in the valuation;
(d)an order under s 343(c) of the Property Law Act 2007 directing that the expenses of the valuation and the sale of the land and all other associated realisation costs and expenses be paid from the proceeds of sale;
(e) an order under s 343(g) of the Property Law Act 2007 appointing the Registrar of the High Court at Palmerston North as the defendant’s agent to execute any documentation to be given effect the sale of the land should the defendant refuse to do so;
(f) an order directing the defendant to pay the plaintiff’s costs of and incidental to this proceeding on an indemnity basis in the sum of
$15,154.70;
(g) leave is reserved to apply to amend or supplement the above orders.
Brown J