Thorpe v Hannam HC Auckland CIV 2009-485-2168

[2010] NZHC 647

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2009-485-2168

BETWEEN  CHRISTINE ANN THORPE, ALLAN BRIAN LEO JACKSON AND MICHAEL JOHN HAY AS TRUSTEES OF THE CHRISTINE THORPE FAMILY TRUST Plaintiffs

ANDMURRAY RONALD HANNAM Defendant

Hearing:         31 March 2010

Appearances: J.J. Delany - Counsel for the plaintiffs

A.J. Douglass - Counsel for the Defendant

Judgment:      29 April 2010 at 3.00 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 29 April 2010 at 3.00 pm pursuant to r 11.5 of the High Court Rules.

Solicitors:           Michael J Hay, Solicitors, PO Box 2275, Wellington

Chapman Tong Law, Solicitors, PO Box 10614, Wellington

CA THORPE, ABL JACKSON AND MJ HAY AS TRUSTEES OF THE CHRISTINE THORPE FAMILY TRUST V MURRAY RONALD HANNAM HC WN CIV-2009-485-2168  29 April 2010

Introduction

[1]       Before  the  Court  are  concurrent  applications  by  the  plaintiffs  and  the defendant for summary judgment seeking orders for the sale and purchase of the parties’ interests in a residential property at 24 and 26 Heke Street, Ngaio (the property).

[2]       The property was previously the family home of the defendant and the first named plaintiff Christine Ann Thorpe (Ms Thorpe) who until about mid 2008 shared a de facto relationship.

[3]       The plaintiffs seek an order for summary judgment pursuant to s 339(1)(a) of the Property Law Act 2007 that the  property jointly owned with the defendant be sold. Additional orders are sought under s 343 of the Property Law Act 2007 for occupation rental as the property has been occupied solely by the defendant since about August 2008.

[4]       That application is opposed by the defendant, who has filed a counterclaim seeking by way of summary judgment an order for specific performance of what he maintains  is  a  binding  Property  Agreement  entered  into  by  the  parties  on  21

September 2006 (the Property Agreement).  He contends the plaintiffs are in breach of the procedure outlined in the Property Agreement for the sale of their share in the property to the defendant, a procedure which he says has been properly invoked here by the actions of the parties.

Background

[5]       The plaintiffs are the trustees of the Christine Thorpe Family Trust.  Ms Thorpe, who is one of the trustees, as I have noted, is the former de facto partner of the defendant.

[6]       The plaintiffs and the defendant each own a one half share in the property which was previously the family home of Ms Thorpe and the defendant, having been acquired by the plaintiffs and defendant in September 2006. The defendant has had occupation of the property since late August 2008, when Ms Thorpe moved out and she and the defendant started to live apart.

[7]       On 21 September 2006, around the time of the joint purchase, the defendant and the plaintiffs entered into the Property Agreement which set out the terms of

joint ownership of the property, and recorded the defendant’s and Ms Thorpe’s intention to live in the property.  That agreement was signed by the defendant as one party and all three plaintiffs as trustees of the Christine Thorpe Family Trust as the other party.   And importantly, the Property Agreement included a mechanism for sale and purchase in the event that one party wished to end the agreement.  On this, clause 4 provided as follows:

4. Termination of this Agreement

4.1   If either Party wishes to end this Agreement at any time, that Party (the Offeror) shall give written notice to the other Party (the Offeree) of an intention to end this Agreement. The notice shall state whether or not the Offeror wishes to purchase the Offeree’s interest in the Property. Within 21 days of receiving the notice the Offeree shall give written notice to the Offeror stating either:

(a) the Offeree wishes to sell its interest to the Offeror; or

(b) the Offeree wishes to purchase the Offeror’s interest.

4.2   If:

(a) the Parties agree that one of them shall purchase the interest of the other a sale shall proceed accordingly;

(b) the Offeree gives no reply to the Offeror’s notice within 30 days and the Offeror wishes to purchase the other Party’s interest, then the Offeree shall sell their interest in the Property to the Offeror as provided in this clause;

(c) the Offeree gives no reply to the Offeror’s notice within 30 days and the Offeror does not wish to purchase the other Party’s interest, then the Property shall forthwith be sold on the open market at a price and on terms agreed by the Parties and failing agreement at a price and on terms determined by a registered public valuer agreed upon by the Parties at the joint cost of the Parties or if there is no agreement then a registered valuer appointed by the President for the time being of the New Zealand Law Society;

(d) both Parties wish to purchase the Property then the Property shall be sold by public auction without reserve forthwith.

4.3   Where the Parties wish to ascertain the value of the Property or are unable to agree on the value of the Property for the purposes of this Agreement, that value shall be determined by a valuation carried out by a registered public valuer agreed upon by the Parties at the joint cost of the Parties or if there is no such agreement then a registered public valuer appointed by the President for the time being of the New Zealand Law Society.

4.4   Unless agreed in writing as a variation to this Agreement to the contrary, upon the sale of the Property to a third Party, the proceeds of sale shall be dealt with in accordance with clause 2.4 of this Agreement.

4.5   The sale price between the Parties (where one Party is purchasing the other Party’s  share)  shall  be  calculated  by  reference  to  the  market  value  of  the Property determined in accordance with clause 4.3. On any such sale there shall be  the  necessary  adjustments  to  reflect  the  respective  entitlements  and obligations set out in clause 2.4 of this Agreement.

4.6   Where one Party is purchasing the other Party’s share it shall be a condition of the purchase that the Party who is selling is released from any obligation under any mortgage or encumbrance secured against the Property. Both Parties shall take all reasonable steps to obtain this release.

4.7   On a sale between the Parties, the date of settlement and possession shall be 56 days after the giving of the first notice unless mutually agreed otherwise and such sale shall in all other respects be on the usual terms and conditions contained  in  the  prevailing  ADLS  standard  form  agreement  for  sale  and purchase of similar properties at that time.

[8]       Also  on  21  September  2006,  the  defendant  entered  into  a  Property Relationship Agreement with Ms Thorpe in a personal capacity, which provided that their respective interests in the property were not relationship property.

[9]       Some  three  months  after  Ms  Thorpe  moved  out  of  the  property,  on  25

November 2008, her solicitor, Ms Kate Lash (Ms Lash), wrote to the defendant and advised him that Ms Thorpe did not wish to retain her interest in the property and that it would have to be sold unless he wished to purchase her share. The letter was marked “[w]ithout prejudice save as to costs”. The defendant claims that this constituted notice of the plaintiffs’ intention to end the Property Agreement pursuant to cl 4.1.

[10]      The defendant’s solicitor, Mr Jeffrey Tong (Mr Tong), replied to Ms Lash’s letter on 16 December 2008.  In that reply, he confirmed that the defendant wished to purchase the plaintiffs’ interest in the property and wished to invoke the sale and purchase procedures in cl 4 of the Property Agreement.  His reply took the following form:

We have been instructed by Mr Hannam to advise (pursuant to clause 4.1 of the

Property Agreement) that he wishes to purchase Ms Thorpe’s interest in the Property.

The parties will now need to reach agreement on the value of Ms Thorpe’s interest in the Property. We understand that Ms Thorpe and Mr Hannam obtained a valuation for the property from Lockwood & Associates about two years ago. Because that firm will have existing details about this property on file Mr Hannam suggests, as a cost saving measure, that Lockwood & Associates be appointed the valuer to determine the value of the property in accordance with clause 4.3 of the Agreement. Please confirm your client’s agreement.

[11]      On  12  February  2009,  Mr  Tong  drafted  a  joint  letter  of  instruction  to Lockwood & Associates, Registered Valuers to determine the value of the property, as previously suggested by Ms Lash on 28 January 2009. Ms Thorpe, however, rejected the draft letter and instructed the valuers by email dated 13 February 2009, noting that the defendant had “agreed that a valuation be performed” on the property. A copy of this email was sent to Mr Tong and Ms Lash. On 16 February 2009, Ms Lash wrote to Mr Tong suggesting that he contact the valuer to make arrangements

for the valuation to be carried out “on the basis of a joint instruction”. The valuation, provided on 23 February 2009, assessed a total value for the property of $835,000.

[12]      On 6 April 2009, Mr Tong wrote to Ms Lash proposing a settlement date for the sale of the plaintiffs’ interest in the property to the defendant of 30 April 2009 or earlier by mutual agreement. The purchase price was to be 50 per cent of this valuation of $835,000. In an email dated 9 April 2009, however, Ms Lash suggested that the Government Valuation of the property of $980,000 be adopted instead of the Lockwood & Associates valuation. This proposal was rejected by the defendant.

[13]      Again  on  27  April  2009  Mr  Tong  contacted  Ms  Lash  advising  that  the defendant had received an offer of finance based upon settlement of a sale of the plaintiffs’ interest taking place on 30 April 2009. The plaintiffs, however, refused to sell the property to the defendant at the valuation price of $835,000. On 18 June

2009,  they obtained  a  further  valuation  of  the  property from  a  Mr  Gordon  for

$885,000.

[14]      As I have noted above, the plaintiffs now apply for an order for sale of the property as a whole pursuant to s 339(1)(a), and for additional orders for occupation rental under s 343. It is their position that the parties’ negotiations concerning cl 4 of the Property Agreement were settlement negotiations conducted on a without prejudice basis which did not end in agreement, and that the defendant failed to invoke the mandatory requirements of the Property Agreement to enable him to purchase their interest. While it appears that the plaintiffs would still be prepared to sell the property to the defendant, any such transaction would have to be based on Mr Gordon’s later valuation at $885,000 and take into account an occupation rental.

[15]      The defendant, on the other hand, claims that the plaintiffs are in breach of the terms of the Property Agreement and seeks an order for specific performance of the agreement for sale and purchase of the plaintiffs’ interest in the property in the sum of $417,500. The defendant also seeks compensation for the cost of improvements the defendant says he made to the property and which were incurred since Ms Thorpe’s departure in August 2008.

Principles

[16]     Rule  12.2(1)  of  the  High  Court  Rules  addresses  summary  judgment applications made by a plaintiff (or in situations such as the present by a defendant claiming as a counter-claim plaintiff) and  provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1)   The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[17]     The  principles  of  summary  judgment  on  these  applications  have  been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187:

[26]    The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ

183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve  material  conflicts  of  evidence  or  assess  the  credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3

WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1

PRNZ 84 (CA).

Is There an Agreement for the Sale and Purchase of the Plaintiff’s Interest in the

Property under Clause 4 of the Property Agreement?

[18]     A preliminary, but important issue arising from the parties’ applications is whether the communications concerning cl 4 of the Property Agreement and the notices allegedly given pursuant to that clause, are capable of binding the plaintiff trustees, given that the only trustee that was apparently involved in these communications was Ms Thorpe. There is no evidence from the two other trustees of the trust, Mr Allan Jackson or Mr Michael Hay, and it is entirely unclear on the evidence what their intentions may have been with respect to termination of the Agreement and sale of the property.

[19]      On this, the plaintiffs seek to rely on the principle outlined in Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 that decisions of trustees must be made unanimously. The plaintiffs contend that no notice was ever given pursuant to cl 4.1, as the letter from Ms Lash dated 25 November 2008 was not sent on behalf of the plaintiffs, but solely for Ms Thorpe. Similarly, it is contended that Mr Tong’s response dated 16 December 2008 was a letter addressed not to the plaintiffs, but to Ms Lash in her capacity as Ms Thorpe’s solicitor.

[20]     The defendant in response claims that Ms Thorpe had authority to act on behalf of and to bind the trustees of the trust, and that there is no evidence to the contrary that can be inferred by the parties’ conduct here. He submits that Ms Thorpe made representations on behalf of the plaintiffs through her solicitor that she had authority to end the Property Agreement and invoke the sale and purchase procedure on their behalf. He further argues that the plaintiffs are now estopped from denying these representations  to  avoid  compliance with  the Property Agreement,  as  this would be unconscionable, relying on Krukziener at [39].

[21]     It is clearly established that, unless the trust instrument provides otherwise (and that is not the case here) actions or decisions by one trustee taken independently of co-trustees are beyond the trustee’s powers – Luke v South Kensington Hotel Co (1879) 11 ChD 121 (CA); and see Andrew Butler Equity and Trusts in New Zealand (2nd ed. Brookers, 2009) at 5.3.1(10).  In Rodney Aero Club Inc v Moore at 195, the Court described this principle as follows:

The starting point is that a trustee must not delegate her powers or duties, whether to a stranger or to a co-trustee, unless authorised by the trust instrument itself or by the law. An example of the latter kind is the power to employ agents conferred by s 29 of the Trustee Act 1956. There is also a very limited power of delegation in s 31 of the Act.

Authority for this  fundamental principle of non-delegation is to  be found, at an appellate level, in Luke v South Kensington Hotel Co (1879) 11 Ch D 121 (CA). That was a case relating to a mortgage foreclosure. The then Master of the Rolls, Sir George Jessel, and James and Bramwell LJJ were quite clear that the act of (even) a majority of a group of trustees cannot bind a dissenting minority, or the trust estate. To bind a trust estate, the particular act must be the act of all of the trustees.

This view of the law appears also to be the view of contemporary treatise writers: see Petitt, Equity and  the  Law of  Trusts (1993) p  359;  Underhill and  Hayton,  Law Relating to Trusts and Trustees (15th ed, 1995) p 634.

The unanimity rule is a corollary to the non-delegation principle. For, if trustees cannot delegate, it must follow that they must all perform the duties attendant upon the execution of the trust. There is no such thing in trustee law – at least absent a provision in the trust instrument – for some such concept as a ``managing trustee'', or suchlike. Both in theory and in practice, the settlor requires several persons to execute the office, and to watch over each other.

[22]      In Niak v MacDonald [2001] 3 NZLR 334, the Court of Appeal commented at [16] that:

It is an established rule of trust law that a trustee must not delegate his or her duties or powers, not even to co-trustees. Delegation is, however, allowed where such delegation is specifically permitted by the trust instrument, is specifically permitted by statute, or is practically unavoidable and is usual in the ordinary course of business and the particular agent is employed in the ordinary scope of his or her business — see Garrow and Kelly’s Law of Trust and Trustees (5th ed, 1982) at p 256. A trustee

has a duty to act personally and this duty requires trustees to be unanimous in any

decision they make. In Duncan v McDonald [1997] 3 NZLR 669, this Court said at p

679:

It can be accepted that the power of attorney was legally ineffective in so far as it purported to authorise someone to exercise a co-trustee’s powers, for a trustee may not make a general delegation of powers and duties; and, as Mr Simmonds gave no authority for the carrying into effect of the specific transaction, Mr Duncan was not acting in terms of s 29(1) of the Trustee Act 1956.

[23]      And,  so  far  as  the  sale  of  a  trust’s  assets  and  property  in  particular  is concerned, Butler & Ors in Equity and Trusts in New Zealand at 5.3.1(10) note in part:

.... if one of a number of trustees enters contracts to sell trust assets, the sale cannot be enforced against the trust estate – Naylor v Goodall (1877) 47LJ Ch 53; Re Flower and Metropolitan Board of Works (1884) 27 Ch D 592; Turner v Turner (1984) Ch. 100; Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 at 195.

[24]      A corollary of the unanimity principle noted above is that the act of one co- trustee, which has the sanction and approval of the other, is binding upon both: Lang v Southen HC Christchurch AP15/01, 24 July 2001at [9]. In Boys v Calderwood HC Auckland CIV-2004-404-290, 14 June 2005, Ronald Young J observed that many private trusts function by giving approval to one trustee to act, on specific occasions, for all trustees (at [125]). However, the Court continued that it was also clear that, given the admonition against delegation of responsibility by trustees, any claimed approval by one trustee to act in a particular way by all trustees must be clearly established. In that particular case, there was no evidence that the trustees agreed to the defendant’s promise to the plaintiff, and the plaintiff did not assert that she believed that the defendant was acting with the approval of all the trustees. For these reasons, the Court could not find that the defendant had any ostensible authority to bind the trust.

[25]      As in Boys v Calderwood, in the present case there is no evidence before the Court that Ms Thorpe was invoking cl 4 of the Property Agreement with the ostensible authority of her co-trustees. Any such ostensible authority is to be inferred from the circumstances, and must be given by the other trustees, not the agent trustee. The defendant’s submission before me that Ms Thorpe made representations that she acted with the authority of the other trustees is of little assistance in these circumstances.   The only material before the Court with respect to this issue is a letter somewhat late in the piece dated 26 August 2009 from counsel for the defendant, Ms Douglass, to counsel for the plaintiff, asking him to advise whether he was acting for Ms Thorpe personally or for all the trustees.  Specifically, this letter states:

There appears to have been no representation of the Christine Thorpe Family Trust in relation to the Property Agreement as you have indicated that you act for Ms Thorpe personally.  As you are aware Ms Thorpe has a beneficial interest only in respect of the Christine Thorpe Family Trust who are tenants in common in equal shares with Murray Hannam of the property at 24 and 26 Heke Street, Ngaio.  If you do not represent the trustees of this Trust, then please advise an address for service.

[26]      No effective response to these queries was provided by counsel.  It would be necessary, therefore, to adduce further evidence to show whether the trustees had given their approval to the cl 4 procedure being invoked, or whether Ms Thorpe had acted with the trustees’ apparent authority. Factors that may work in favour of such a conclusion are that Ms Thorpe and her children appear to be the beneficiaries of the trust, and that one of the trustees, Mr Michael Hay, seems to be a professional trustee. Mr Allan Jackson, the third trustee, is Ms Thorpe’s father.   But it would seem that from her questions in this 26 August 2009 letter, Ms Douglass as counsel and the defendant were at that point still somewhat uncertain as to the involvement here of all the plaintiff trustees.

[27]      The same reasoning applies to the defendant’s promissory estoppel argument, pleaded by way of his counter claim.  This argument is to the effect that Ms Thorpe the first-named plaintiff through her solicitor represented that she had authority on behalf of all plaintiffs (the Trustees of the Christine Thorpe Family Trust) to end the Property Agreement and invoke the sale and purchase procedures.  On this it is clear the defendant cannot rely on a belief or expectation created by Ms Thorpe to succeed in an estoppel claim against the plaintiffs - Rodney Aero Club Inc v Moore at 198. In that case at 198 Hammond J noted:

The plaintiff can point to no promise, either by words or conduct by the trustees themselves.  And, even if it could point to such a promise by one trustee, it cannot be  the  case  that  one  trustee  could  bind  the  other  trustee  (who  took  no  part whatsoever in the process), for the very reasons given earlier in this judgment.

[28]      Based on these considerations, it follows that for the purposes of the present summary judgment applications, it is at least arguable that notice to terminate the Property Agreement was never properly given, and that no agreement could have been  reached  between  the  parties  in  accordance  with  cl  4.     There  must  be considerable doubt as to whether a key element of the cl. 4 procedure has been satisfied here.   In these circumstances, neither of the parties’ summary judgment applications can succeed. The defendant may meet the initial threshold to succeed at a full substantive hearing when all the available evidence can be properly tested but only if it can be shown that Ms Thorpe acted with the approval of – or with the apparent authority of - the other trustees. Similarly, the plaintiffs here cannot rely on s 339 Property Law Act 2007 to obtain a summary judgment order for sale of the

property, given that this would arguably constitute a breach of cl 4 of the Property Agreement.   The real intentions and obligations of the parties as expressed in the Property Agreement between them need to be honoured.  If the plaintiffs’ contention is accepted that they cannot be bound by Ms Thorpe’s actions, they would at least be obliged to properly terminate the Property Agreement in accordance with cl 4 and enable the defendant to purchase the plaintiffs’ interest in the property at a price determined in accordance with cl 4.3.

[29]      That effectively disposes of both summary judgment applications which are before me.  For the reasons I have outlined at [18] to [28] above, they must fail.

[30]       Whilst some might see as purely “technical” my finding that there is a real preliminary question to be tried in this case which is whether the plaintiff trustees are bound in terms of cl. 4 of the Property Agreement to the communications between Ms Thorpe and the defendant (and their respective lawyers), this cannot affect the outcome here for summary judgment purposes.  It might also be suggested that, in resisting the defendant’s present application on this basis, the plaintiffs are taking advantage of Ms Thorpe’s own error in this whole matter, particularly as her co- trustee plaintiffs are her father and her previous lawyer.  Be that as it may, I remind myself that the applications before me are for summary judgment and summary judgment is not appropriate here as the Court cannot be satisfied this is a clear-cut situation where there are no arguable defences to the claims of either party.

[31] Orders dismissing the summary judgment applications will follow. But, in case I may be wrong on these aspects and for the sake of completeness, I will turn now to briefly consider the other arguments of counsel advanced before me. None of this however, affects the outcome in this case noted at [29] above.

[32]      Notwithstanding those conclusions, before me the defendant submitted that all key elements of the procedure set out in cl 4 of the Property Agreement were in fact carried out. In particular, the defendant contends first, that the plaintiffs gave proper notice to end the Property Agreement and advised that they did not wish to buy the property, secondly, that the parties commissioned a joint valuation which set a market price, and thirdly that the defendant is now ready, willing and able to settle at this valuation figure.

[33]      Having regard to the communications here between Ms Lash and Mr Tong, if it is accepted that those communications were properly made with the authority of all the plaintiff trustees, then in my view there is some substance in this principal

submission advanced for the defendant.   Assuming that the plaintiffs did give adequate written notice to the defendant here of their intention to end the Property Agreement as required by cl 4.1, and this notice confirmed the plaintiffs did not wish to purchase the defendant’s interest, then I am satisfied the defendant did reply within  21  days  of  receiving  the  notice  stating  that  he  wished  to  purchase  the plaintiffs’ interest. On this basis, in my view, it is arguable there was an agreement between the parties “that one of them shall purchase the interest of the other” in terms of cl 4.2(a).   Significantly, that clause goes on to provide that “a sale shall proceed  accordingly”.  Given  that  at  this point there  was  obviously no  apparent agreement on the purchase price, the parties then appeared to accept that the price would be determined by valuation carried out by Lockwood & Associates, as provided for in cl 4.3. Apart from any price adjustments in accordance with cl 2.4, the plaintiffs would then be bound to sell their interest in the property for half of the overall value of the property as determined by that valuation.

[34]      It is convenient at this point to note that the plaintiffs claim privilege over a number of documents relied upon by the defendant to establish that the requirements of cl 4 were complied with, thus entitling him to purchase the plaintiffs’ interest in the property at the Lockwood & Associates valuation. This objection is based on the argument  that  the  documents  formed  part  of  settlement  negotiations  and  were marked “without prejudice except as to costs”. Material documents affected by this claim of privilege are:

•   the letter by Ms Lash to the defendant on 25 November 2008 advising him that Ms Thorpe wished to end the Agreement;

•   the letter in reply by Mr Tong to Ms Lash dated 16 December 2008, advising of the defendant’s intention to purchase the plaintiffs’ interest in the property;

•   the letter by Mr Tong to Ms Lash dated 12 February 2009, including a draft joint letter of instruction to Lockwood & Associates;

•   the letter from Ms Lash to Mr Tong dated 16 February 2009, suggesting that Mr Tong contact Lockwood & Associates;

•    the valuation by Lockwood & Associates dated 23 February 2009;

•   the  letter  by  Mr  Tong  to  Ms  Lash  dated  6  April  2009  proposing  a settlement date of 30 April 2009 or earlier;

•   the letter from Ms Lash to Mr Tong, dated 9 April 2009 suggesting that the Government valuation be adopted instead, and Mr Tong’s letter in reply;

•   the letter from Mr Tong to Ms Lash dated 27 April 2009 advising that the defendant had obtained an offer of finance based upon a settlement date of 30 April 2009.

[35]      The plaintiffs submit that these documents are privileged under s 53(3) and (4) and s 57 of the Evidence Act 2006. They argue that there was in existence a “dispute” and that, under s 57(1)(b), the communications were made in attempts to settle that dispute. On that basis, it is contended that both parties are entitled to claim privilege over the communications made in terms of s 57(1). It is further submitted that the fact that the documents were marked “without prejudice” indicates that the plaintiffs intended the communications to be protected under s 57.

[36]      In response, the defendant submits that the evidence is admissible, relevant, necessary and reliable. It is argued that there has been no disclosure of without prejudice communications by the plaintiffs’ solicitor, but only of open letters by the defendant’s solicitor relevant to invoking the procedures under the Property Agreement. The defendant contends that Ms Lash’s “without prejudice” communications were concerned with issues arising from the Relationship Property Agreement, but not the notice provisions under the Property Agreement. He argues that  there  is  no  evidence  that  the  plaintiffs  intended  that  the  communications regarding the procedures under the Property Agreement were to be confidential, or that they were made in connection with an attempt to settle or mediate a dispute.

[37]      In my view, for present purposes there is no merit in the plaintiffs’ claim of privilege under s 57(1). None of the communications referred to in [34] were made in connection with an attempt to settle or mediate a dispute. There was no dispute at this stage that involved the Property Agreement. The parties simply purported to invoke and follow the procedures set out in cl 4. The dispute only arose when the plaintiffs refused to settle at the price assessed  by the  Lockwood & Associates valuation, but there is nothing before me that in any way resembles an attempt to settle or mediate that dispute.

[38]      The  plaintiffs  further  contend  that  the  settlement  date  of  30  April  2009 proposed by the defendant did not comply with cl 4.7 of the Property Agreement, which prescribes a date of settlement and possession “56 days after the giving of the first notice”. Even if it was assumed that notice was given on 16 December 2008, a proposed settlement date in April would still fall outside the 56-day period.

[39]      The defendant argues however that it would be reasonable to infer here that there was a mutual waiver of the 56 day timeframe and says that the timeframe was

not adhered to because of the Christmas holiday break, and the delays caused by Ms Thorpe herself in finalising the joint appointment of Lockwood & Associates and by her dissatisfaction with the result of the valuation. Nevertheless, the plaintiffs reject the defendant’s argument that there was an agreement for later settlement between the parties.

[40]     Considering the limited evidence that is before me, it would be difficult to infer at this stage whether there was a mutual agreement to extend the settlement date timeframe. It should be noted, however, that there is no evidence that suggests that the plaintiffs insisted on settlement within the stipulated timeframe. There is also nothing to indicate that  the plaintiffs are to blame for the delay.  In  any event, however,  none  of  this  appears  to  me  to  be  of  relevance  in  this  context.  The Agreement merely stipulated that the settlement date would be 56 days after the giving of the first notice. Non-compliance with this term does not mean that the cl 4 procedure otherwise was never properly invoked, or that an agreement for sale and purchase  never  came  into  existence,  but  simply that  there  would  be  a  possible remedy available against the defaulting party. This might be in the form of interest payments under cl 3.12 or 3.13, or the remedies on default outlined in cl 9, of the ADLS standard form agreement for sale and purchase.   And here the plaintiffs obviously never served a settlement notice on the defendant, nor did they purport to cancel any Agreement that had arisen.

[41]      Moreover, the plaintiffs endeavour to raise a further argument here that there is no evidence that the valuation was jointly agreed upon as required by cl 4.3. On this, reliance is placed on Ms Thorpe’s rejection of the draft instruction letter to the valuer, and the fact that the defendant is named as the client on the valuation. Although it seems to be accepted that Ms Thorpe wanted Lockwood & Associates to conduct a revaluation of the property (they having carried out a valuation some time earlier), as she wanted to assess its value, Ms Thorpe asserts that the valuation was not a jointly commissioned one in terms of the Property Agreement. In my view, there is no merit in this submission, however, given particularly Ms Lash’s letter to Mr Tong on 16 February 2009 referring to the Lockwood & Associates valuation being carried out “on the basis of a joint instruction”.

[42]     Lastly, the plaintiffs endeavoured to argue here that the defendant did not agree to purchase the property on the strict terms required by cl 4, which provides only that the sale price is to be set by an agreed valuer with necessary adjustments to reflect real estate agent’s commission, other selling costs and any amount owing under a revolving credit facility and nothing more. In a letter dated 12 February

2009, Mr Tong clearly indicated that the defendant would seek a reduction in the purchase price for repair and maintenance costs pursuant to cl 3 of the Property Agreement.  This cl 3 provides that the parties will receive any income and meet all outgoings relating to the property in equal shares. This is to include costs for improvements and repairs and maintenance.

[43]     Leaving aside the issue of whether the defendant is in fact entitled to be compensated for the particular expenses claimed pursuant to cl 3, it is my view that any  disagreement  as  to  the  defendant’s  entitlements  under  this  cl  3  cannot  be properly construed as a failure to reach an agreement under cl 4 of the Property Agreement. Clearly there was a contractual basis for any such entitlements in cl 3 and, assuming that the defendant’s claims are valid, it would have been convenient to make an adjustment to take account of the plaintiffs’ liability on settlement.  (As an aside on this, I simply note at this point that it would seem the cost of any improvements to the property carried out by the defendant should only be taken into account if they were carried out before the date of the valuation).

[44]      The  material  considerations  argued  by the  defendant  with  respect  to  his application for specific performance under his counter claim are that he is now ready, willing and able to settle the agreement for sale and purchase of the plaintiffs’ interest in the property at the agreed valuation price under cl 4.3 of the Agreement. He contends that the plaintiffs have not shown that there is an arguable defence to this application. Both parties received independent legal advice upon entering into the Property Agreement, the terms of that Agreement are clear, and both parties also received independent legal advice around the process for terminating the Property Agreement and activating the sale process.

[45] Clearly, I need make no decision here on these particular aspects, given the conclusion I have reached at [29] above to dismiss both summary judgment applications before the Court. If matters were otherwise, however, I simply note my view at this point that, on the basis of the material presently before the Court, there is some merit in these arguments advanced by the defendant that the sale process under cl 4 of the Property Agreement had been properly activated here and needs to be concluded.

Occupation rental

[46]      One  final  matter  needs  to  be  mentioned.    The  plaintiffs  claim  that  the defendant has had sole use and occupation of the property since Ms Thorpe moved

out in August 2008, and that they are therefore entitled to occupation rental under s

343(f) Property Law Act 2007. It seems to be accepted here that Ms Thorpe left after a “domestic incident”. The defendant submits that any order for occupation rental here would require an assessment of disputed facts, such as the extent of the defendant’s claimed improvements to the property, to determine the relative hardship caused to the respective parties, and that this is inappropriate in the context of a summary judgment application. The defendant further contends (although in my view on the facts before the Court there is little in this) that he has not had sole and exclusive occupation of the property, as Ms Thorpe’s father stayed at the property for one night, and in any event Ms Thorpe has not been prevented from accessing the property.

[47]     It is clear that there would be jurisdiction for an order for occupation rental under s 343(f) (see, for example, Jacobson v Guo HC Auckland CIV-2008-404-526,

2 September 2008), but that such an order could only be made in addition to an order under s 339(1) for the sale or division of property owned by co-owners. Given that the plaintiffs’ application here under s 339(1) is unsuccessful, there is no jurisdiction under s 343(f) for an award of occupation rental.

[48]      It appears to be a basic principle that a tenant in common in occupation is not liable to pay an occupation rent merely because the other tenant chooses not to occupy the property, but that equity provides for compensatory adjustment where one party causes the other to be excluded from the property: Surridge v Quinn HC Wellington CP No 830/91, 13 May 1993 at 13. This principle is inapplicable were the party’s own conduct causes that party’s exclusion: Berkett v Dempsey HC Wellington AP53/02, 30 September 2002 at [36]. The break-down of a relationship may constitute sufficient grounds, however, to cause “exclusion” from the property: Surridge v Quinn at 14.

[49]      All in all, I am of the view in the present case that it would be difficult to come to a conclusion on this issue on the basis of the evidence presently available. Although strongly disputed by Ms Thorpe, the defendant’s argument is that Ms Thorpe’s own conduct caused her exclusion from the property and, as she was a beneficiary under the trust which had entered into the Property Agreement, he should not be liable for occupation rent to the plaintiffs. Moreover, the Property Agreement is a reasonably comprehensive record of the parties’ rights and obligations in relation to their co-ownership of the property, and it may well be a relevant factor that this Agreement did not provide for occupation rental in a situation such as the present. On  the  other  hand,  this  may  well  be  a  case  where,  following  a  relationship

breakdown, the defendant and Ms Thorpe could not be expected to continue in joint occupation of the property and thus an occupational rent is fairly payable here.  All these matters would require further evidence and exploration.

Conclusion

[50] For the reasons I have outlined at [18]-[28] above, orders are now made dismissing both summary judgment applications before me.

[51]      As to costs, neither party here has succeeded.  There is to be no order as to costs.  They are to lie where they fall.

[52]      As a next event this matter is to be the subject of a call in the List at 10.00 am on 25 May 2010.

‘Associate Judge D.I. Gendall’