DYAS V ELLIOTT HC AK CIV-2008-404-001021

DYAS V ELLIOTT HC AK CIV-2008-404-001021 16 April 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2008-404-001021IN THE MATTER OF of Sections 339 and 343 of the Property Law Act 2007 BETWEEN CAROLE ANN DYAS AND TOBY BRUCE JONES AS TRUSTEES OF THE CAROLE ANN FAMILY TRUST Plaintiffs AND COLIN JOHN ELLIOTT AND HORROBIN NOMINEES LIMITED AS TRUSTEES OF CEEJAY INVESTMENT TRUST Defendants Hearing: 28 October 2009 and 31 March 2010 Appearances: J Cox for Plaintiffs C Elliott acting in Person Judgment: 16 April 2010 at 4:30 pmJUDGMENT OF ASHER JThis judgment was delivered by me on 16 April 2010 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules .. Registrar/Deputy Registrar .. DateSolicitors: J Cox, Rennie Cox, PO Box 6647, Auckland (jcox@renniecox.co.nz ) C Elliott (colin.elliott@raywhite.com )[1] Carole Dyas and Colin Elliott lived together in a de facto relationship between 2000 and 2006. Ms Dyas and the co-trustee of her family trust seek occupation rental for 78 Rame Road, Greenhithe, for the period that Mr Elliott occupied it following their separation. She relies on s 343(f) of the Property Law Act 2007.Background[2] Ms Dyas and Mr Elliott began their de facto relationship in approximately February 2000. In late 2002 they decided to purchase a coastal property at 78 Rame Road, Greenhithe, ("78 Rame Road"). They would acquire the property as tenants in common in the names of their respective family trusts, which were formed specifically for this purpose. On settlement 78 Rame Road was acquired by the two trusts as tenants in common in equal shares. The two trusts were Ms Dyas' family trust, the Carole Ann Family Trust, and Mr Elliott's family trust, the CEEJAY Investment Trust. [3] Ms Dyas and Mr Elliott were both working and had children by previous relationships. Both had been married earlier and Mr Elliott has deposed without contradiction that they wished to keep their personal relationship separate from their business relationship, with no property being purchased in their own names. [4] The same two trusts also purchased a commercial property at Kilham Avenue, College Road, Northcote. That property was also purchased by the two trusts as tenants in common. There were securities held over both properties, and there was significant debt. Another trust controlled by Mr Elliott, the Boyd Rhys Trust, loaned a considerable amount towards the purchase of the properties. [5] The relationship between Ms Dyas and Mr Elliott came to an end in October 2006. In December 2006 Ms Dyas left the Rame Road property. She has deposed that she found it impossible to stay there, given the breakdown of their relationship. There was a cottage on the property. A month later in January 2007, Ms Dyas returned to the Rame Road property and endeavoured to set up house in thecottage. However, there was an immediate scene between Ms Dyas and Mr Elliott and the police were called. Ms Dyas left and has not lived on the property since. Since December 2006 she has been living with family members or in rented accommodation. [6] On 26 February 2008, the trustees of the Carole Ann Family Trust issued proceedings against the trustees of the CEEJAY Investment Trust, seeking orders in a summary judgment application for the sale of the Rame Road property, distribution of the proceeds, and for a fair occupation rent under s 343 of the Property Law Act 2007. A statement of defence was filed. The parties eventually agreed to cooperate in selling the Rame Road property, and it was sold in May 2009. The sale price was $1,456,000, all of which went to repay the existing bank mortgage that was secured over the Rame Road property and the Kilham Avenue property. [7] The summary judgment application was not proceeded with by the Carole Ann Family Trust. However, it sought a fixture for the claim for occupation rent. That is the issue presently before the court. The occupation rent in question runs from the time when Ms Dyas left the property in December 2006, to the time of sale in May 2009. [8] Ms Dyas filed an affidavit from a real estate agent, a Debbie Murray, who deposed that the rental value of the property during the relevant period was in the vicinity of $1,400 - $1,500 per week. Mr Elliott strongly contests that assessment, asserting that the actual rental value is far less. He submits that he has paid rates, insurance and maintenance, and done certain improvements to the property which would have to be taken into account. He opposes paying any occupation rental, asserting that his affairs and those of Ms Dyas are best considered in the round, taking into account other property and investments. He submits he has contributed far more than her.Can the Carole Ann Family Trust claim under s 343?[9] Section 339(1) of the Act gives the court the power to make orders for the sale of a property owned by co-owners, and the division of proceeds. Under s 341(1) a co-owner can make any such application. Section 342 provides:342 Relevant considerationsA 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] Section 343 which gives further powers to the court, provides:343 Further powers of courtA further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following: (f) requires the payment by any person of a fair occupation rent for all or any part of the property:Under s 343 a further order "referred to" in s 339(4) is an order made in addition to an order under s 339(1). Therefore the relevant considerations under s 342 apply under s 339(1) and s 339(4) to s 343(f). [11] Sections 339 - 343 of the Act replaced s 140 of the Property Law Act 1952, which provided for an action for partition in which a court could direct land ownedby more than one person to be sold. Section 140 had given the court the power to direct a distribution of the proceeds of sale and to make other orders. It did not, however, contain any specific provision for the payment of a fair occupation rental. [12] Given the lack of any specific guidelines for the awarding of occupation rental, it is fruitful to consider the previous legal position. The position at common law is discussed in Hyne McMorland and Sim, Land Law in New Zealand Vol 2 at para 13.002. The general proposition stated by Salmond J in McCormick v McCormick 1 is quoted:Considerations of justice and convenience have led to the recognition of a general principle that one co-owner cannot by failing to exercise his right of use and occupation establish a claim for compensation against another co- owner for the lawful exercise of his own equal right.Section 343(f) does, therefore, give the court a general power it did not previously have. The specific considerations set out at s 342 appear to be directed more to the court's general discretion to order a sale. None of the s 342 considerations specifically address issues relating to the occupation of property. However, circumstances referred to in that section, including the respective shares of the co- owners, the comparative hardship arising from the grant or refusal of an order, and the value of contributions by the co-owners, may be relevant. [13] Relying on a number of authorities it is stated by the learned authors of Land Law in New Zealand at 13.002(a):Therefore, no co-owner who has failed to exercise his or her right of possession is entitled to claim an occupation fee from another co-owner even though that other occupies the whole of the land. There are, however, three situations in which one co-owner may recover an occupation fee from another who has the sole use and enjoyment of the land: (1) Where one co- owner has actually evicted the other and wrongfully prevented him or her from having the use of the land, the ousted co-owner can either bring an action of trespass or an action for recovery of possession and for mesne profits; (2) Where one co-owner occupies and uses the land under some agreement with the other under which the occupying co-owner becomes the bailiff or agent of the other so that he or she must account to the other for the latter's share of the profits; (3) Where one co-owner occupies the land as tenant of the other's share and owes rent accordingly.1 McCormick v McCormick [1921] NZLR 384 at 385.[14] Mr Cox for the Carole Ann Family Trust submitted that under the previous common law the Carole Ann Family Trust would have in any event been entitled to recover an occupation fee. [15] In Dennis v McDonald 2 Purchas J reviewed the authorities in England relating to the ordering of occupation rent between co-owners. There a de facto co- owner successfully obtained occupation rent from her de facto partner, when she had left him because of his violence or threatened violence, taking her children with her. She was granted occupational rental, despite the absence of any specific act of ouster. He stated at pg 638:Counsel for the plaintiff submitted, I think correctly, that when one looks at the judgment in M'Mahon v Burchell together with the extract from the judgment of Stirling J in Hill v Hickin the true position under the old authorities was that the Court of Chancery and Chancery Division would always be ready to inquire into the position as between co-owners being tenants in common either at law or in equity to see whether a tenant in common in occupation of the premises was doing so to the exclusion of one or more of the other tenants in common for whatever purpose or by whatever means. If this was found to be the case, then if in order to do equity between the parties an occupation rent should be paid, this would be declared and the appropriate inquiry ordered. Only in cases where the tenants in common not in occupation were in a position to enjoy their right to occupy but chose not to do so voluntarily, and were not excluded by any relevant factor, would the tenant in common in occupation be entitled to do so free of liability to pay an occupation rent.His decision was approved on appeal: Dennis v McDonald. 3[16] In Re Pavlou (a bankrupt), 4 Millet J quoted from that decision and observed at pg 637 that the word "ouster" in the old cases had a wider meaning than today. He observed at pg 959:I take the law to be to the following effect. First, a court of equity will order an inquiry and payment of occupational rent, not only in the case where the co-owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity between the parties that an occupation rent should be paid. The fact that there has not been an ouster, or forceful exclusion, therefore, is far from conclusive. Secondly, where it is a matrimonial home and the marriage has broken down, the party who leaves the property will, in most cases, be regarded as excluded from the family2 Dennis v McDonald [1981] 1 WLR 810; [1981] 2 All ER 632.3 Dennis v McDonald [1982] 2 WLR 275.4 Re Pavlau (a bankrupt) [1993] 1 WLR 1046; [1993] 3 All ER 955.home, so that an occupation rent should be paid by the co-owner who remains. But, that is not a rule of law, that is merely a statement of the prima facie conclusion to be drawn from the facts. The true position is that if a tenant in common leaves the property voluntarily, but would be welcomed back, and would be in a position to enjoy his or her right to occupy, it would normally not be fair or equitable to the remaining tenant in common to charge him or her with an occupation rent which he or she never expected to pay.Millet J ordered a wife who was a co-owner to pay occupation rent to her husband, who had left the home after the breakdown of the relationship. [17] In Surridge v Quinn, 5 Neazor J relied on the decision of Dennis v MacDonaldand concluded that a de facto partner could obtain occupation rent from her de facto partner who was a co-owner at fair market rent. He rejected the rationale of the claim being akin to a claim for mesne profits, as in the absence of a forceful exclusion the remaining co-owner in occupation was not trespassing. However, he held that such rent could be ordered, as it was not "reasonably practicable for him to live in the property whilst the defendant did." In that case the parties' interests were equitable and not legal interests in the land, and occupation rent on a fair market basis was ordered. [18] The court's discretion under s 343(f) is wide and unfettered, but these cases assist in applying it. Under that section an absent co-owner may obtain occupation rent from the co-owner in possession. It is not every absent co-owner who can obtain occupation rent from the other. While it would be unwise to endeavour to set out parameters for the exercise of the discretion, where one co-owner chooses to stay in possession and this makes it not reasonably practicable for the other co-owner to continue to cohabit, occupation rent will usually be ordered. The position will be different where a co-owner leaves voluntarily, would be welcome back, and it is reasonably practicable for that co-owner to live there. [19] The position of Ms Dyas and Mr Elliott has similarities to Re Pavlou andSurridge v Quinn. The details of Ms Dyas' departure from the home in December 2006 are rather spare, but there is enough evidence before me to satisfy me that the relationship had broken down to such an extent that she could not5 Surridge v Quinn HC Wellington 13 May 1993, Neazor J.reasonably be expected to stay on the property. Her attempt to move into the cottage a month later resulted in the police being called. Both parties have different views on what caused the blow-up and it is not necessary to form a view on this. The incident demonstrates that it was not reasonably practicable for Ms Dyas to live in the same property with her former partner. Mr Elliott chose to say on. He did not initially cooperate in the sale of the property. A friend and her children moved in and lived in the property with him. He had the benefit of living in the property while his co-owner was obliged to seek alternative accommodation, which had to be paid for. In such circumstances occupation rent would usually be payable. [20] Mr Elliott who represented himself, however, has argued vigorously that to make orders for occupation rent would be unfair, as the CEEJAY Investment Trust will receive significantly more money when its joint affairs with the Carole Ann Family Trust are wound up. He says that the matter is best approached as a relationship property issue, where all matters are considered in relationship property proceedings. It is necessary to consider this submission.The effect of this being a relationship property dispute[21] There is no doubt that Mr Elliott and Ms Dyas were de facto partners, and that the Property (Relationships) Act 1976 applied to their affairs. However, the property was purpose-owned by two family trusts set up by each of them, the Carole Ann Family Trust and the CEEJAY Investment Trust. Neither party has issued any proceedings in relation to the Kilham Avenue property. There are no relationship property proceedings. [22] It is necessary to consider the provisions of s 4(1) of the Property (Relationships) Act 1976. Section 4(1) provides:4 Act a code(1) This Act applies instead of the rules and presumptions of the common law and of equity to the extent that they apply— (a) to transactions between spouses or partners in respect of property; and (b) in cases for which this Act provides, to transactions—(i) between both spouses or partners and third persons; and (ii) between either spouse or partner and third persons. (4) Where, in proceedings that are not proceedings under this Act, any question relating to relationship property arises between spouses or partners, or between either or both of them and any other person, the question must be decided as if it had been raised in proceedings under this Act.[23] There is no doubt that these provisions preclude a party from applying the rules and presumptions of common law and equity when the property in question is owned by the spouses or partners: Belcher v Belcher. 6 Thus, if Ms Dyas and Mr Elliott owned the property personally, the Property (Relationships) Act would apply rather than the Property Law Act. [24] The Property (Relationships) Act could be applied to issues in relation to the Rame Road property in at least two respects. First, the Court of Appeal has in at least two judgments appeared to assume that a party's interest in a trust, whether as settlor, trustee, appointer, or beneficiary may be relationship property: Walker v Walker 7 and Harrison v Harrison.8 Further, the Rame Road property is the "family home" as defined in s 2 of the Property (Relationships) Act 1976. Given that the family home is not owned by either of the partners to the de facto relationship, s 11B(1) of that Act may apply, and there is the possibility of orders under s 11B(2) to compensate for the lack of a house owned by the partners in their own names. [25] Despite these possibilities, I do not read these provisions as excluding the operation of the application of the Property Law Act to trust assets, just because the settlors or beneficiaries of those trusts are spouses or partners. The fact that the property at Rame Road falls within the definition of family home does not mean that issues as to its ownership should be determined under the Property (Relationships) Act, any more than if the property was tenanted by the parties and owned by a third party landlord. The fact that there might be interests in the trust which could be6 Belcher v Belcher [1977] 1 NZLR 590.7 Walker v Walker [2007] NZCA 30; [2007] 2 NZLR 261; [2007] NZFLR 772 at para [38].8 Harrison v Harrison [2009] NZCA 68; [2009] NZFLR 687 at para [10].regarded as relationship property is, at the very least, speculative. The making of an order under s 343(f) of the Property Law Act does not pre-empt the making of an order under s 11B(2) of the Property (Relationships) Act at a later date. [26] If the Property (Relationships) Act had been specifically invoked by the parties in relation to trust property the position would have been different. However, it has not been. It would be unjust to refuse to exercise a discretion under s 343 simply because the plaintiff has an option, which he has not exercised, to seek compensation or other orders under the Property (Relationships) Act. [27] I note in this regard the statement in Fisher on Matrimonial and Relationship Property, which has been present in that work since the first Edition and accepted by the courts, (Wilson v Wilson 9 and Crouth v Crouth 10), at para 1.26:The result is that the law as to relationship property in New Zealand may be regarded as consisting of two largely autonomous systems. One is that body of substantive law which might be conveniently referred to as "conventional property" (para 1.28) from which the parties' existing and perfected rights may at any time be ascertained. The other is the statutory property regime instituted by the 1976 Act, which comes into operation only if positively invoked by court order or agreement. It follows that unperfected rights under the Property (Relationships) Act while valuable rights, do not constitute existing equitable estates or interests in property. [emphasis added][28] I am satisfied that any inchoate rights that Mr Elliott might have in relation to the former family home do not preclude the court from making orders on conventional property law principles for occupation rent under the Property Law Act. [29] Mr Elliott gave evidence about how his interests contributed far more to the initial purchase than the interests of Ms Dyas. This may be so, but it would seem that if, as he asserts, another of his family trusts, the Boyd Rhys Trust, advanced significant sums towards the purchase of that property and the Kilham Avenue property, then that debt should be recoverable from the co-owner trusts. There9 Wilson v Wilson [1981] 4 MPC 215.10 Crouth v Crouth (1977) 1 MPC 47 at 48.should be funds available to meet these debts, at least in part, when the property at Kilham Avenue is ultimately sold. [30] In the circumstances, I conclude that the Carole Ann Family Trust is entitled to have this proceeding determined on its merits at this time on orthodox property law principles without waiting for the possible issue of relationship property proceedings. [31] I note that a similar approach was adopted by Associate Judge Robinson inJacobson v Guo 11 where one de facto partner through his family trust was ordered to pay occupation rent to the other de facto partner, following their separation and his continued occupation of the home.The actual orders to be made[32] In Jacobson v Guo Associate Judge Robinson noted the importance of the property being maintained to a good standard and took this into account in assessing occupation rent. It was also noted that the occupying co-owner should have time to organise her or his affairs following the other partner leaving the property, and two months was allowed for that re-arrangement. I am not inclined to make such deductions. Accepting that it will take time for parties who separate to re-arrange their affairs, the fact is that when parties can no longer live together in a co-owned property they both face the costs of paying for their separate accommodation from the time of the split. If one is able to enjoy the rent- free jointly owned property from that moment but not the other, it is fair for compensation to be calculated from that moment. As to maintenance, there will be specific allowance made in the orders for sums spent on maintenance, and to make a further allowance would be double- counting the deduction. [33] The expert called by the Carole Ann Family Trust, Ms Murray, suggested occupation rental of $1,400 - $1,500 per week. Mr Elliott in his evidence suggested $800 - $1,000 per week. An earlier assessment obtained by Ms Dyas from Property Management Specialities Limited had suggested a figure of $1,200 - $1,500 per11 Jacobson v Guo (2008) 9 NZCPR 850.week unfurnished, with a recommended allowance for vacancy per year of up to five weeks. [34] Ms Murray did not actually go inside the property. I am mindful of its sale price, which was far below the original estimate of Ms Dyas of $2 million, and more in line with the estimate of Mr Elliott. Both Ms Dyas and Mr Elliott can claim expertise in the area of real estate, although they do not have specific expertise in rental properties. [35] Having considered the rental evidence as a whole I am left with the overwhelming impression that Ms Murray's estimate is too generous, while Mr Elliott's is rather conservative. In all the circumstances I consider that a fair rental is $1,200 per week for the period in question, which is the lowest point of the estimate previously obtained by Ms Dyas. [36] This leaves the next question of an allowance for the amounts paid by the CEEJAY Investment Trust during its period of exclusive occupation. The issue is vexed because Mr Elliott's evidence on the topic was very general and unsubstantiated by detailed invoices or calculations. He was cross-examined by Mr Cox. [37] I accept Mr Cox's submission that Mr Elliott contributed an extra $3,600 towards rates over the relevant period, and an extra $600 towards insurance, but no more. The most difficult area is assessing what Mr Elliott spent on specific works on the property. He claimed to have spent $18,000. He broke this down as being $5,000 for tiling, $4,000 for outside seating, about $6,000 in general maintenance, and about $6,000 for "some work" underneath the deck and to an old septic tank. The figures he gave did not compute arithmetically. There were no invoices or other independent evidence. I have no doubt that Mr Elliott has done some maintenance and effected some improvements. His general claims in this regard were not challenged in a significant way. I conclude that they cost more than the rough assessment put forward by Mr Cox. Equally, however, I am not satisfied that they come to the amount put forward by Mr Elliott. While I found him to be an honest witness (as I did Ms Dyas), I do not consider that he had approached the assessmentof the work he did in a disciplined way, and that he considerably over-estimated the extent of what he did. Indeed, his general assessment of what he spent came to a total of $15,000 when broken down, and not $18,000. [38] Mr Cox suggested a global sum of $1,500 per annum for these items, which would be a total of $3,750 for the period in question. That seems to me to be too modest. In the end it is necessary to decide on a figure. I conclude that Mr Elliott has spent in the round the amount of $8,000 during the period in question. Thus, the sum of $12,200 must be deducted, calculated as follows: Rates $3,600.00 Insurance $600.00 Maintenance $8,000.00Total $12,200.00[39] Rent is payable for the period from December 2006 to 1 May 2009, a period of 124 weeks. At $1,200 a week, the total rental value was $148,800. From this the $12,200 must be deducted leaving a net total rental of $136,600. Half of that is $68,300.Result[40] The CEEJAY Investment Trust is to pay the Carole Ann Family Trust occupation rent in the sum of $68,300.Costs[41] The plaintiff has been largely successful, and I order that the defendant pay the plaintiff's costs and reasonable disbursements on a 2B basis, and on the basis that there was a half-day hearing. Asher J