74 ALBERT STREET LIMITED (FORMERLY KNOWN AS GREENSTONE BARCLAY TRUSTEES LIMITED) V JONES HC TAU CIV-2011-470-292

74 ALBERT STREET LIMITED (FORMERLY KNOWN AS GREENSTONE BARCLAY TRUSTEES LIMITED) V JONES HC TAU CIV-2011-470-292 23 August 2011IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2011-470-292UNDER Section 143 of the Land Transfer Act 1952and Section 42(1) of the Property(Relationships) Act 1976BETWEEN 74 ALBERT STREET LIMITED(FORMERLY KNOWN ASGREENSTONE BARCLAY TRUSTEESLIMITED)ApplicantAND CECELIA ELIZABETH JONESRespondentHearing: 16 August 2011Appearances: Mr S J Corlett for ApplicantMr W T Nabney for RespondentJudgment: 23 August 2011 at 3:00 PMJUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on23.08.11 at 3 p.m. pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateCounsel:Brookfields, P O Box 240, Auckland – corlett@brookfields.co.nzLyon O'Neale Arnold, P O Box 5236, Mount Maunganui – Michaela@lyon-oneale.co.nz(Counsel: Mr W T Nabney, P O Box 13007, Tauranga – bill@tgachambers.co.nz)Background[1] The respondent ("Mrs Jones") was married to Bryan Desmond Jones ("Mr Jones")in 1977. Mrs Jones was then working as a community nurse and later became a registered nurse, retiring about four years ago. Mr Jones has always been a farmer. Throughout their marriage Mr and Mrs Jones have lived on a property at Kaiate Falls Road, Tauranga ("theproperty"). Mr Jones is the proprietor of the property in an estate fee simple. He inherited the property from his parents.[2] The three children of Mr and Mrs Jones' marriage and also children by whangai adoption have lived on the property from birth until the present. Mr and Mrs Jones both live on the property. There is more than one dwelling on the property.[3] Mrs Jones has a property of her own at Whakamarama that once belonged to her mother. The value of that property has not been established in evidence. Mr Nabney told me that it was estimated to be valued at about $350,000 and I do not understand Mr Corlett to disagree with this.[4] In 2006 the applicant, which is a property developer, and Mr Jones entered into agreements for sale and purchase of three apartments in the Barclay Development with the price of each property being $426,000. Mrs Jones says that he entered into these transactions after being approached to do so by a representative of the Bluechip organisation. He failed to settle the agreements and in due course the apartments were re-sold at a loss. The applicant obtained summary judgment against Mr Jones in the sum of $584,446.56 on 10 December 2010. That judgment is unsatisfied. On 22 December 2010, the applicant obtained final charging orders over several properties in which Mr Jones held a legal interest including the property at Kaiate Falls Road. On 3 September 2010 Mrs Jones registered a notice of claim under the Property (Relationships) Act 1976 ("the Act"). The amount charged is$610,246.95.[5] A valuation of the property was obtained for Mrs Jones dated 18 February 2011 which estimated the value of the property at $820,000. The capital value forrating purposes is apparently $1.085 million. On 3 September 2010, the applicant lodged a notice of claim under s 42 of the Act. The notice of claim stated:Under the Property (Relationships) Act 1976, an interest is claimed by virtue of the marriage with the above spouse or partner.[6] In March of 2011 Mrs Jones filed an application under the Act in the Family Court at Tauranga. In that application she seeks a number of orders including anorder for the division of the parties' relationship property "so as to achieve a justdivision of their property" in accordance with the Act. She also sought an orderdeeming certain debts to be the personal debt of Mr Jones as defined by s 20 of the Act. She also sought an order that she occupy the family home at Kaiate Falls Road. She apparently seeks designation of the Whakamarama property as a separate property.[7] Mr Nabney told me that Mrs Jones did not accept any responsibility for the debt to the applicant. Nor did she accept responsibility for the mortgage which secures a debt of $450,000 over the property, although she agreed that $74,000 of that had been obtained for the purposes of additions to the property.Issues[8] Mr Nabney's submissions raised the following issues:a) While he accepted that the High Court had jurisdiction to determine the present application, he said that there are substantive issues that will have to be resolved in the Family Court;b) Mrs Jones wishes to "retain the family home" and for that reason theCourt ought not to make an order removing the notice of application, in circumstances where the applicant is minded to press for the sale of the property to satisfy the debt owed to it; andc) The interests of the family members residing in various dwellings on the property as well as those of the respondent ought to be taken into account.[9] Mr Nabney submitted that the issue of whether or not Mrs Jones should be granted possession of the property is central to resolving the present application and that I should not embark upon dealing with the present application until the FamilyCourt had resolved Mrs Jones' application for possession.[10] Mr Corlett for the applicant submitted that the starting point is that an application for removal of a notice of claim is to be dealt with in the same way as removal of a caveat. Mr Corlett pointed out that the High Court has jurisdiction to consider these matters under s 42(3) of the Act. He also drew my attention to s 4(4) of the Act which provides that where, in proceedings that are not proceedings under the Act, any question relating to relationship property arises between spouses, the question must be decided as if it had been raised in proceedings under the Act. Therefore this Court, when approaching the application for removal of notice of claim, must decide it, to the extent relevant, as if it had been raised in proceedings under the Property (Relationships) Act.Discussion[11] It is of course understandable that Mrs Jones should seek an order to ensure that she continues living in what has been her home for a good part of her adult life. She also wants to ensure that the property remains available for the children to live on if desired. The question though in the case before me is whether in pursuing that objective, she is entitled to maintain the notice of claim in the face of oppositionfrom her husband's creditor.[12] This case lies at the intersection between the property rights of creditors against debtors and the provisions of the Act which were enacted to protect the interests of spouses in matrimonial property. By s 20A of the Act, rights of creditors are preserved and creditors such as the applicant in this case have the same rights against the husband, Mr Jones, as if the Act had not been passed. However, there is one derogation from that main principle which is that the rights of creditors against a spouse such as Mr Jones must respect the protected interest in the family home which is guaranteed by s 20B of the Act. That section provides as far as relevant that each spouse has a protected interest in the family home and the protected interest of the other spouse is not liable for the unsecured debts of the spouse exceptin circumstances which do not apply in this case. It is agreed that the extent of the protected interest in this case is one half of the equity of the spouse in the family home: s 20B(3)(a)(ii).[13] In practical terms, the protected interest in this case equates to one half of the difference between the value of the matrimonial home and the debt secured by the mortgage over the property.[14] I assume for the purposes of the present application that it is open to Mrs Jones to seek an order for possession of the property. However, whether there would be any utility in making such an order will depend upon whether she has any long term prospect of securing the property. That is because whether she will be able to do that or not must take into account the need to meet the amount of the judgment which the applicant has obtained against her husband.[15] The position in practical terms is as follows when calculating what interest Mrs Jones has in the property.Value of property as per Middleton Report $820,000Westpac mortgage Approximately $450,000Equity $370,000One half of equity (value of Mrs Jones' protectedinterest)$185,000Balance $185,000In monetary terms, in order to acquire the property Mrs Jones would have to:Pay Westpac by re-financing or other means: $450,000Pay out applicant to extent of Mr Jones interest: $185,000Total funding required $635,000[16] On the basis of the evidence before the Court I would be doubtful that Mrs Jones as a retired superannuitant would be able to arrange that level of funding and thereafter service the required borrowings.[17] However, on the basis of the evidence which she has given about the circumstances in which her husband entered into the agreement to buy apartments, about which she says she was never told, Mrs Jones has considerable merit on her side.[18] Mr Nabney told me that one possibility is that Mrs Jones will be able to realise her property at Whakamarama and apply the funds towards the acquisition of the Kaiate Falls Road property.[19] I consider that the correct approach in determining an application for removal of a notice of claim is that the claimant must show an arguable case for retention of the notice of claim and must therefore present some evidence that the claim has merit: Yeoh v Xu.1 I also accept that Mr Corlett was correct in submitting that where there is no practical advantage in maintaining a notice of claim lodged by someone who could properly claim an interest, the Court retains a discretion to remove the notice of claim: Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd.2 I also accept his submission that where it is established that the retention of land is unnecessary for protection of the alleged interest, the Court retains a discretion to remove a notice of claim: Church v Church.31 Yeoh v Xu HC Auckland M1252/02, 3 December 2003 at [18].2 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.3 Church v Church [1999] NZFLR 500 (HC).[20] It is unlikely that, assuming the Court follows authorities such as Lawrey v Lawrey,4 that the rights of a creditor in a case like this can be defeated by a claimant bringing an application for possession of the property. In Lawrey, the Family Courtdismissed a wife's application seeking that the family home be vested in her solely, where to do so would deny access by the husband's creditor to assets which s 20 contemplated would remain available to it. Judge Carruthers concluded:5Whilst, therefore, the Court must have the power to make the orders sought, I consider that it would be wrong on this view of the law to do so since that would deny access by a creditor to assets which s 20 contemplates should remain available to it.I respectfully agree with that observation.[21] I accept that a creditor-initiated sale will be difficult to achieve at all or at a reasonable price if the property is subject to a possession order. That factor is relevant here because if there is no practical likelihood that Mrs Jones would obtain possession of the property by order made in the Family Court proceedings, no useful purpose would be achieved by sustaining her notice of claim against the property. The applicant, as holder of a charging order absolute over the property, will inevitably move to sell the property and if that were to occur, the division ofproceeds, subject of course to Mrs Jones' protected interest, would be along the lines that I have set out earlier in this judgment. It is implicit in the submissions which the applicant made to me that it will not seek a distribution of the net proceeds on anybasis other than that Mrs Jones' protected interest will be paid out to her, to theextent that it can be. In any case, I have no doubt that Mrs Jones' interest will beproperly protected if the registrar sells the property. Of course, if matters reach the stage where the property is sold by the sheriff, there is no assurance that the priceachieved will be that estimated in the valuer's report.[22] The only way that Mrs Jones could ensure that she does not lose possession would be to become the successful purchaser of the property upon steps being taken by the applicants to sell it or, alternatively, arranging to pay out the applicant before matters reached that point.4 Lawrey v Lawrey, [1990] NZFLR 496 (FC).5 Ibid, at 506.[23] Mr Nabney's submission was that all matters should be deferred until theFamily Court had made its decision on distribution of the matrimonial property. I do not agree. That is because the outcome of the Family Court proceedings will not influence the rights of the Joneses vis-à-vis the applicant. This is properly a matter that this Court can and should decide and there is no merit in the suggestion that resolving the present application should be deferred until the Family Court decision is known or alternatively left to the Family Court, although of course, it is clear that the Family Court would have power to make orders affecting the interest of the applicant as a creditor if it chose to do so.[24] Mr Nabney alternatively suggests that I should grant Mrs Jones an opportunity to file further evidence concerning her potential ability to acquire ownership of the matrimonial home. No special reason has been advanced as to why I should take that course. As I told Mr Nabney at the hearing, this proceeding is no different from any other in that the parties are to be expected to be ready to proceed and to have all of their evidence before the Court on the fixture date. Of course there will be exceptional circumstances in which the Court might take a different view but I cannot see that this case is one where a different approach should be taken.[25] My decision is that to allow the notice of claim to remain on the title would be of no practical utility and that it should be removed.[26] It is my further conclusion, though, that it would not be unreasonable to defer execution of this matter for the time being to give Mrs Jones an opportunity to arrange matters so that her prospects of obtaining possession of the property can be explored.[27] I consider that the best way forward is for the Court to make the order which the applicant seeks but directing that the order of the Court is not to be sealed until a later date.[28] I therefore make an order in terms of paragraph 1 of the notice of application dated 21 April 2011 but direct that that order is not to be sealed before 18 November 2011.[29] The parties should confer on costs and if they are unable to agree that issue they should file memoranda not exceeding four pages on each side within 14 days._____________J.P. DoogueAssociate Judge