Weber v Henderson
[2019] NZHC 964
•3 May 2019
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2017-054-637
[2019] NZHC 964
BETWEEN SHARRYN EVELYN WEBER
Applicant
AND
DEBRA LEE HENDERSON
Respondent
Teleconference: 5 March 2019 Counsel:
T S D Gilchrist for the Applicant
Judgment:
3 May 2019
JUDGMENT OF CULL J
[on division of proceeds of sale]
[1] The residential property belonging to Ms Weber and Mrs Henderson was sold on 4 May 2018 for $603,500.00, following my judgment of 21 March 2018 in which I granted Ms Weber’s application for an order for sale under s 339(1)(a) of the Property Law Act 2007 (the Act). 1 Ms Weber now seeks an order for an appropriate division of the net proceeds of sale under ss 339 and 343 of the Act.
[2] Ms Weber has filed and served a memorandum dated 22 November 2018 and an affidavit in support of her claim, seeking a distribution of the entirety of the net sale proceeds. Mrs Henderson took no steps. As Ms Henderson did not respond, I directed Ms Weber to serve Mrs Henderson with her memorandum and affidavit and gave timetabling directions for Mrs Henderson to reply.2 Mrs Henderson did not comply
1 Weber v Henderson [2018] NZHC 490.
2 Weber v Henderson HC Palmerston North CIV-2017-054-637, 11 December 2018 (Minute of Cull J).
WEBER v HENDERSON [2019] NZHC 964 [3 May 2019]
with the timetabling directions and instead filed a memorandum seeking an extension of time, which was opposed by Ms Weber.
[3] I directed a telephone conference to assist resolution of this matter,3 and Mrs Henderson advised that she was in the process of instructing a solicitor to finalise her response to Ms Weber’s memorandum and affidavit. I made further directions for Mrs Henderson to file her response by Friday, 22 March 2019 and for Ms Weber to file her reply by Friday, 5 April 2019.4
[4] At the time of delivering this decision, no further steps have been taken and the timetable has now expired. In the absence of further steps being taken by Mrs Henderson, I will now determine the appropriate division of the net sale proceeds of their residential property.
Factual background
[5] The background to Ms Weber’s application for the sale of the property is contained in my substantive judgment dated 21 March 2018.5 Ms Weber and Mrs Henderson each owned a half-share of the property, and the substantive judgment dealt with the order for sale, with the distribution of the net sale proceeds to be determined by the Court at a later date. Costs were also reserved.
[6] On 10 April 2018, an unconditional cash offer was made to purchase the property for $603,500.00 with an initial settlement date of 20 April 2018. This settlement date was extended after Mrs Henderson negotiated a short extension to 4 May 2018. Both parties signed the offer for sale.
[7] On 4 May 2018, the property was sold for $603,500.00 and the net proceeds of sale were paid to Ms Weber’s solicitors’ trust account, as ordered,6 pending further directions from the Court.
3 Weber v Henderson HC Palmerston North CIV-2017-054-637, 15 February 2019 (Minute of Cull J).
4 Weber v Henderson HC Palmerston North CIV-2017-054-637, 6 March 2019 (Minute of Cull J).
5 Weber v Henderson, above n 1, at [3]-[29].
6 Weber v Henderson, above n 1, at [48](a) and (e).
The net sale proceeds
[8] The net sale proceeds, following deduction of the parties’ costs and repayment of the loans secured against the property, are $102,165.10. Ms Weber deposed that the parties’ costs totalled $501,334.90, which comprised the following:
(a)$483,648.78 – the repayment of the loan secured against the property to ANZ Bank, plus an early repayment fee as a result of repaying the loan early during a fixed rate period;
(b)$15,000.00 – the real estate agent’s commission;
(c)$1,394.12 – the payment of Palmerston North City Council and Horizons Regional Council rates to 30 June 2018 (with a reimbursement of $552.23 from the purchaser for their share of the rates from 5 May 2018 – 30 June 2018); and
(d)$1,292.00 – the conveyancing fees (Brittens Lawyers).
[9] With the deduction of $501,334.90 from the sale price of $603,500.00, the net sale proceeds are $102,165.10. This amount does not include any deduction for legal fees and the proceeds are still held in Ms Weber’s solicitors’ trust account.
Statutory powers under the Act
[10] Under s 339(1)(a) of the Act, the court may make an order for the sale of property owned by co-owners and an order for the division of the proceeds among the co-owners. In exercising its discretion under s 339 of the Act, a court must have regard to the relevant considerations contained in s 342. Those mandatory considerations are:
(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.
[11] Section 342 applies to a court making orders under s 339(1) and any related order under s 339(4). Section 339(4) empowers a court, making an order under s 339(1), to make a further order specified in s 343. Section 343 empowers a court to make an order that:
(a)requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:
...
(f)requires the payment by any person of a fair occupation rent for all or any part of the property:
…
Ms Weber’s application
[12] Ms Weber seeks an order under s 339(1)(a) of the Act distributing the entirety of the net sale proceeds to her. She also seeks an order under s 343 that Mrs Henderson pay her compensation of $43,721.74 and costs either in full or on a 2B basis.
[13] For Ms Weber, Mr Gilchrist submits that the net sale proceeds are significantly less than they otherwise would have been as a direct result of Mrs Henderson’s actions. Those actions, he says, have also resulted in Ms Weber suffering a number of other direct losses. These include an increase in the bank loan, no occupation rent from Mrs Henderson, unequal contributions to the joint bank account for the property, a reduction in property value, rates and insurance costs, sale costs, damage to chattels, and an outstanding GE Money loan. The cumulative additional loss from those items, he submits, amounts to $53,529.59.
Discussion
[14] Each of the parties owned a half-share in the property, as tenants in common in equal shares. The starting point in these circumstances would normally be an equal division of sale proceeds.7 However, in cases such as this where there are no property relationship considerations and the parties both occupied the property but made unequal contributions to its purchase, the division of net sale proceeds should reflect each of the parties’ initial contribution to the property.
[15] I will consider first the parties’ contributions in relation to the division of the sale proceeds under s 339(1). Second, I will deal with the further claim for compensation under s 343 and the factors relating to that claim.
The division of the sale proceeds - parties’ contributions
[16] Ms Weber contributed $108,176.40 to the property compared to Mrs Henderson’s contribution of $11,482.23. The respective contributions are 90.4 per cent by Ms Weber which, on a division of the net sale proceeds, would amount to
$92,357.25, and 9.6 per cent by Mrs Henderson, which amounts to $9,807.85.
[17] If the division of sale proceeds were made on the basis of contributions, Mr Gilchrist submits that such a division would be unjust because Ms Weber would receive approximately $16,000.00 less than her initial contribution (with her legal costs yet to be paid). In contrast, Mrs Henderson would receive $1,674.38 less than her initial contribution. Mr Gilchrist submits that Ms Weber would be disproportionately penalised and seeks the entirety of the net sale proceeds to reflect Ms Weber’s greater contribution and the additional losses sustained by Mrs Henderson’s conduct.
[18] In my view, the starting point is the percentage contributions made by the parties. Ms Weber contributed 90.4 per cent to the purchase of the property. On that basis, Ms Weber should receive $92,357.25 of the sale proceeds. I note that her initial contribution was $108,176.40. The division, however, should follow the contribution
7 DW McMorland (ed), Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at [13.018].
percentage of the sale proceeds, whether they are more or less than the original purchase price. I reach this conclusion having had regard to the factors listed in s 342 of the Act.
[19]I turn, then, to consider the additional losses.
The further claim for compensation
[20] There are a number of factors that I must have regard to under s 342 of the Act in considering whether to make an order under s 343. What follows is an assessment of those considerations.
Increase in loan/occupation rent
[21] Ms Weber claims that Mrs Henderson was the sole occupant of the property from 21 December 2017 to the date of sale on 4 May 2018. During that time, neither party made any repayments towards the ANZ loans secured against the property. In December 2017, the loan was $474,062.24 but because of non-payment penalties the sum outstanding increased to $483,648.78, which was repaid on settlement.
[22] Ms Weber claims that because Mrs Henderson did not make any loan repayments between 21 December 2017 and 4 May 2018, despite receiving the sole benefit of the property, Ms Weber should receive compensation in lieu. As the sole occupier of the property, Ms Weber also claims that Mrs Henderson should have paid occupation rent. Further, Mrs Henderson should have continued to meet the outgoings in respect of the property, which she did not do.
[23] Ms Weber claims that occupation rent is directly linked to the increase in the loan and the reduction in net sale proceeds, because if Mrs Henderson had paid occupation rent it would have covered the entirety of the loan repayments. This in turn will have stopped the accrual of interest-reduced principal. From an industry estimate obtained by Ms Weber, a market rental would be in the vicinity of $530.00 per week. For 20 weeks of occupation by Mrs Henderson, Ms Weber claims she would have received occupation rent in the vicinity of $10,600.00. The total debt increase of
$10,600.00, she claims, is a direct result of Mrs Henderson failing to pay occupation rent.
[24] The increase in the ANZ loan from $474,062.24 to $483,648.78 was $9,586.54, being the difference in the loan balance and the amount of the non-payment penalties in respect of Mrs Henderson’s sole occupancy from 21 December 2017 to 4 May 2018. Because Mrs Henderson received the sole benefit of the property and did not pay occupation rent, I consider the difference in the outstanding loan in December 2017 of
$474,062.24 and the sum that was required to be paid on settlement is a fair reflection of the loss to Ms Weber. $9,586.54 is the sum which Ms Weber can properly claim as compensation in this regard.
Unequal contributions to joint account
[25] The parties had a joint account to meet the payment of outgoings on the property. These were mortgage repayments, regional and city council rates, and bin collection fees. It was the intention of the parties that they would contribute equally to the joint account. At the time that both parties ceased making payments into the joint account in December 2017, Ms Weber had contributed approximately $4,531.00 more than Mrs Henderson. If Mrs Henderson had paid the same amount as Ms Weber into the joint account, as was intended by the parties, the net proceeds would have been increased by approximately $4,531.00.
[26] Ms Weber claims she should be compensated for the sum of $4,531.00 and I uphold that claim.
Reduction in property value
[27] Ms Weber submits the sale price of the property ultimately achieved was significantly diminished as a direct consequence of Mrs Henderson’s actions. The parties originally purchased the property for $598,867.90 on 14 July 2017 and owned it for 10 months, before it was sold on 4 May 2018. Ms Weber submits the Real Estate Institute of New Zealand estimates the median house price in the Manawatu increased by 7.1 per cent between June 2017 and June 2018. By extension the median increase over a 10 month period is somewhere in the vicinity of 5.9 per cent. If the property
had increased in accordance with the Manawatu average, the property should have sold for approximately $635,400.00 in May 2018.
[28] The real estate agent appointed to sell the property initially appraised the property as being likely to sell in the range of $640,000.00 - $690,000.00. The estimated sale price (based on recent sales activity in the area) on Homes.co.nz was
$625,000.00. Ultimately the property was sold for $603,500.00 on 4 May 2018, reflecting an increase of just $4,500.00 or 0.75 per cent in a 10 month period.
[29] Ms Weber says that Mrs Henderson’s conduct directly contributed towards the low purchase price, which was significantly less than what was reasonably expected. This, she says, occurred because Mrs Henderson and the other occupiers of the property failed to maintain the interior and exterior of the property in a state of good repair, and contributed towards adverse publicity in the form of a front page article in the newspaper which was a summary of the substantive High Court decision ordering the sale of the property. Ms Weber submits that these actions resulted in the property devaluing, with a reduction conservatively estimated in the sum of $20,000.00
[30] I do not upheld Ms Weber’s claim for the reduction in property value. Although the parties originally purchased the property for close to $599,000.00, owning it for 10 months before it was sold for $603,500.00, I do not consider Mrs Henderson’s conduct or those of her tenants are causative of a lower market value of the property. There is insufficient evidence to justify the $20,000.00 claimed, and I reject that part of Ms Weber’s claim.
Rates and insurance
[31] The parties agreed when they purchased the property that all outgoings would be shared equally between them. The insurance premium for the property was $690.00 per annum. Ms Weber met those costs throughout the period Mrs Henderson had sole occupation. The insurance costs during this period were $251.00.
[32] I accept that Mrs Henderson should meet half of these costs in accordance with the parties’ agreement, which equate to $125.50.
Sale costs
[33] The costs associated with the sale of the property total $17,046.17. These costs include early repayment fees (owing to repayment of the loan early during a fixed rate period), real estate agent commission and conveyancing costs. As these were costs that resulted from the dispute between the parties, they were properly deducted from the sale proceeds, and I do not uphold Ms Weber’s claim for these costs of sale.
Damage to chattels
[34] Ms Weber’s television and piano were damaged by Mrs Henderson and/or the other occupiers of the property by virtue of Mrs Henderson’s authority. The value of these items is conservatively estimated to be approximately $7,500.00.
[35] I uphold Mrs Weber’s claim that an adjustment of $7,500.00 be made in her favour to compensate her for the damage to her chattels.
GE Money loan
[36] Ms Weber remains liable for the $4,500.00 GE Money Loan that had to be taken to purchase the property, $2,250.00 of which should be paid by Mrs Henderson. I consider the amount is payable by Mrs Henderson and the distribution of funds should be adjusted accordingly. Ms Weber’s claim for $2,250.00 is upheld.
Legal costs
[37] Mr Gilchrist submits that when Ms Weber’s legal costs are paid, the net sale proceeds will be further reduced by approximately $22,000.00. He seeks an order that Ms Weber’s solicitor/client costs be paid in full. Alternatively, Ms Weber seeks costs calculated on a scale 2B basis, and disbursements.
[38] I do not uphold Ms Weber’s claim for full legal costs, which in the circumstances amount to indemnity costs. Costs are payable, however, as sought, on a scale basis. I consider that is the most appropriate measure of costs in this case.
Conclusion
[39] Ms Weber is to receive $92,357.25 of the sale proceeds under s 399(1) of the Act. In addition, a further compensatory order under s 343 of the Act, in the total sum of $23,993.04, is made up as follows:
(a)The amount of the loan non-payment penalties of $9,586.54.
(b)The unequal contribution to the joint account in the sum of $4,531.00.
(c)Rates and insurance costs of $125.50.
(d)Damage to chattels of $7,500.00.
(e)GE Money loan of $2,250.00, being Mrs Henderson’s share of the outstanding loan.
[40] The total payable to Ms Weber, by way of distribution of the sale proceeds and the compensatory order is, therefore, $116,350.29. It follows that the net sale proceeds are payable to Ms Weber with an additional sum still payable by Mrs Henderson to meet this award.
Result
[41]I therefore make the following orders:
(a)under s 399(1) of the Act, I order that, of the proceeds of the sale of the parties’ former residential property, $92,357.25 are to be paid to Ms Weber;
(b)under s 343 of the Act, I order Mrs Henderson to pay to Ms Weber compensation in the sum of $23,993.04; and
(c)in order to facilitate the orders in (a) and (b) above, I order that any residual proceeds of the sale of the parties’ former residential property that remain after the payment of the $92,357.25 referred to in (a) above,
up to the sum of $23,993.04 referred to in (b) above, are also to be paid to Ms Weber.
[42] I make no award in favour of Mrs Henderson having regard to the fact that the entire proceeds of the sale are to be paid to Ms Weber pursuant to the above orders.
Costs
[43] Ms Weber is entitled to 2B costs and disbursements, as approved by the Registrar.
Cull J
Solicitors:
Cooper Rapley Lawyers, Palmerston North
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