KAPUKA HOLDINGS LIMITED v D J HARRISON LIMITED [2019] NZHC 1462 .

KAPUKA HOLDINGS LIMITED v D J HARRISON LIMITED [2019] NZHC 1462 [26 June 2019].IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2019-409-115[2019] NZHC 1462UNDER the Property Law Act 2007IN THE MATTER of an application under s 339 of the Act forthe sale of property and division of saleproceeds among co-ownersBETWEEN KAPUKA HOLDINGS LIMITEDPlaintiffAND D J HARRISON LIMITEDDefendantHearing: 19 June 2019Appearances: D R Tobin for the PlaintiffA N Riches and J L Manson for the DefendantJudgment: 26 June 2019INTERIM JUDGMENT OF ASSOCIATE JUDGE LESTERBackground[1] Two brothers through their respective companies purchased a block of ruralland in North Canterbury in late 2007.[2] At the time of purchase, it is common ground that it was intended that theplaintiff would retain, following a subdivision, a block of five hectares known as"the Vineyard Lot" containing a small vineyard area and a house. The balance of theland (of some 49 hectares), which was farmland, would be retained by the defendantcompany and farmed as part of the defendant's existing farming operation.[3] Unfortunately, the relationship between the brothers has broken down. Thesubdivision did not proceed, and the plaintiff has applied under s 339(1)(a) ofthe Property Law Act 2007 ("the Act"), for an order requiring the entire property to besold.[4] The order for sale was opposed by the defendant. The defendant companypointed to a brief agreement that was reached shortly after the completion of theoriginal purchase ("the agreement"). The solicitors acting on the purchase provideda copy of the agreement to the plaintiff under cover of a letter dated20 December 2007. The plaintiff signed the agreement. The director of the defendantcompany separately signed a copy of the agreement and had his signature witnessed.It does not seem to be in dispute that both parties signed the agreement in early 2008,but neither communicated to the other that they had done so. Despite the passage oftime, both counsel accepted that the agreement remained binding.[5] Notwithstanding that the agreement required both parties to advance thesubdivision of the land "as soon as practical after settlement", little happened fora number of years. In late 2014, the plaintiff instructed a local surveyor to preparesurvey drawings of a subdivision.[6] The first subdivision drawings created a Lot of a little over seven hectares.This was apparently rejected by the defendant on the ground that the agreement hadcontemplated a Lot of approximately five hectares. I need not dwell on this point.The agreement contemplated that the Lot could be larger than five hectares as cl 7 ofthe agreement provided that the plaintiff would make a payment to the defendantshould the area of the Vineyard Lot be greater than five hectares.[7] Upon the first plan being rejected, an alternative plan was presented thatreduced the area to a little over six hectares. Finally, another plan was presented dated29 June 2017 with a Lot of exactly five hectares.[8] There is no evidence that the defendant responded to the June 2019 subdivisionplan and given the breakdown in the relationship between the parties, communicationon completing the subdivision was not what it should have been.Plaintiff's position at hearing[9] Mr Tobin for the plaintiff, summarised his case as follows. He said that noagreement had been reached as to the completion of the subdivision over a long periodof time. He said the disagreement concerned the area to be included in theVineyard Lot created by the subdivision, the treatment of an electricity easement thatwas installed to supply power directly to the Vineyard Lot, and water supply to theVineyard Lot. He said there was no mechanism in the subdivision agreement to allowthose matters to be resolved and given the breakdown in the relationship between theparties, sale was the only option.[10] The reference to the electricity easement is to the fact that at the time the landwas purchased, the house on the Vineyard Lot was off the main grid and self-containedwith solar panels and generators. The plaintiff wanted to have an independent powersupply and the defendant agreed to the local electricity supplier connecting the houseto the power supply. That agreement was required as the necessary power cable wouldhave to pass over the defendant's land, or at least land that would become thedefendants upon the subdivision being completed. To that end, the parties executedan easement agreement with the power company and that agreement includeda diagram as to where the power cable was to be laid. However, it appears that thepower cable was not laid in the correct position. Exactly why that is the case is unclear,but the defendant says its location presents practical difficulties for him in his farmingoperation. The defendant wants the cable relocated. The current subdivision plandated 29 June 2017 shows the electricity easement as being placed in the area wherethe cable has already been laid, as opposed to the area shown on the easement plan.[11] The water issue is that at the time of the purchase, the house was supplied froma waterline that connected to a supply on the Vineyard Lot which, followingsubdivision, would become the defendant's property. Accordingly, the status quo atpurchase was that the Lot to be taken by the plaintiff already had a water supply, albeitsourced from land which following subdivision would become the property of thedefendant. No easement was in place for the water supply because at the time ofpurchase all the land was in the same ownership. The defendant refuses to grant aneasement. He says the plaintiff can connect to the existing water supply which is alsoavailable on the plaintiff's Lot and recognises that the cost of doing so would be a costof subdivision to be shared by the parties in the subdivision.[12] Accordingly, at the close of the plaintiff's case, the position was that from theplaintiff's point of view there was disagreement on those three issues, that is:(i) the area of the subdivision;(ii) electricity; and(iii) water.Defendant's submissions[13] To counter this argument, Mr Riches for the defendant advised that thesubdivision plan dated 29 June 2017 was in fact acceptable to his client once theelectrical easement was amended to reflect where the cable should be correctly placed.That this was the defendant's position was not evident before the hearing.[14] The defendant, with a view to taking a practical approach to the impassebetween the two parties, advised that he would agree to the power cable beingrelocated on his land to the area shown on the original easement plan, and that oncethat was done, the location of the electricity easement on the 29 June 2017 plan wouldbe amended accordingly.[15] As to the water supply, the defendant remained unwilling to give an easement,but confirmed that the cost of connecting to the water supply system on the plaintiff'sland would be a cost of subdivision and given that the defendant owns more than halfthe land, the defendant would bear more than half the cost.[16] Mr Riches made an oral application for an order under s 339(1)(b) of the Act,that there be an order that the property be subdivided taking into account the positionadvised by his client during the hearing.Plaintiff's reply[17] Mr Tobin, unsurprisingly, said that the position he was now confronted withwas different from that represented by the defendant's pleadings.[18] While not abandoning his primary submission, Mr Tobin recognised that theeffect of the concessions made by the defendant changed the complexion of the case.Discussion[19] The fact is that the plaintiff, when the plaintiff tabled the plan dated29 June 2017, was (albeit reluctantly) prepared to agree to a subdivision as shown onthat plan. If that plan had been accepted by the defendant at the time and thesubdivision proceeded, then that is the Lot that the plaintiff would now hold.[20] The issue with the location of the electricity cable appears to be one beyondthe control of the parties. The defendant's preparedness to take a practical approachto that issue was also recognised by Mr Tobin in terms of the discretionary factors inthis context. Indeed, if the responsibility for the power cable being in the wrong placelies with the electrical supplier, it may be that the costs of relocating the cable will fallon the electrical supplier. In any event, as I have said, the defendant is prepared totreat the cost of relocating the cable as a cost of the subdivision to be shared as set outin the subdivision agreement.[21] As to the water supply, again adopting a pragmatic approach, Mr Tobinmaintained that while his client was not obliged to accept a change in the status quothat existed at the time of purchase, there would be costs involved in putting in placea water easement and there were benefits in the property having a water supply thatthe subdivided Lot had control over.[22] Mr Tobin in the alternative, also made an oral application for subdivision unders 339(1)(b). Once the Vineyard Lot is subdivided the plaintiff can sell its Lot as itthinks fit.Outcome[23] Given the position that developed during the hearing with both counsel seekingan order for subdivision (albeit such was Mr Tobin's client's fall-back position), in myview the circumstances call for an order of division under s 339(1)(b).[24] Had the arrangement between the parties proceeded as it should have, then theplaintiff would have its subdivided Lot now.[25] The subdivision agreement that the parties accept, binds the sale of the entireLot as being a last resort. The agreement recognises that subdivision will require theCouncil's consent. It provides that in the event consent is not given, a boundaryadjustment should occur whereby the 49 hectares or so to be retained by the defendantwould be amalgamated with the defendant's existing farm land, leaving the VineyardLot for the plaintiff. It is only in the event that the fall-back position of the boundaryadjustment is not available that sale of the entire block is provided for in thesubdivision agreement.[26] With what at the outset of the hearing appeared to be insurmountable barriersto subdivision, these cleared away during the course of the hearing and I considerMr Tobin's recognition that a division order was likely was realistic and it wasappropriate for him to make, albeit as a backup position, an oral application fordivision.[27] Accordingly, the orders that will be made will be under the joint oralapplications for division of the land.[28] Given the position reached, that joint oral applications were made at thehearing, counsel agreed to confer on the form of orders that they would ask the Courtto be made.[29] The orders were to address the following:(i) That the subdivision would occur in accordance with the plan dated29 June 2017.(ii) That Lot 1 to be created by that plan will cease to take water from thesupply which it presently sources from Lot 2. Instead, it would connectto the water supply on Lot 1.(iii) The cost of connecting to the water supply on Lot 1 to be a cost ofsubdivision as that is treated under the subdivision agreement.(iv) The location of the power cable is to be relocated to the area shown onthe easement plan, part of the Mainpower agreement to grant aneasement dated 11 February 2014.(v) Once the cable is physically relocated, the location of the electricaleasement shown on the plan of 29 June 2017 is to be amended to reflectthe new position of the cable.(vi) Any costs associated with the work in relation to the electrical cable arealso to be costs in the subdivision.(vii) The subdivision is to be otherwise governed by the provisions of thesubdivision agreement meaning the subdivision is conditional onCouncil consent.[30] Costs of this application reserved.[31] Also reserved are the treatment of costs incurred by the plaintiff in trying toadvance the subdivision process. I make the observation that had the parties beenco-operating at the time then there would have been at least one set of surveyor's costsin respect of preparing the subdivision plan and I would expect at least those costs tobe subdivision costs.[32] The exact order to be made will be determined once counsel have conferred asset out at [28] above. If any issue arises in determining the form of the order, thenleave is reserved for either party to seek directions. It is my intention that once ordersare made, that leave will be reserved to apply further should issues withimplementation arise._________________________________Associate Judge LesterSolicitors:Sumpter Moore, BalcluthaCopy to counsel: D R Tobin, Barrister, DunedinSaunders & Co., Christchurch