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Middlemiss v Middlemiss [2023] NZHC 2051 (3 August 2023)

Last Updated: 14 August 2023

JUDGMENT OF CHURCHMAN J

Introduction

[1] In this proceeding the plaintiff seeks an order for the sale of the property at 88 Main Street, Blenheim (the property) and other related orders.

[2] Proceedings were filed in December 2022 and service on the defendant finally effected in April 2023. The defendant has not filed a statement of defence nor a notice of appearance.

[3] The plaintiff has consequently applied for judgment by way of formal proof against the defendant in terms of r 15.9 of the High Court Rules 2016 (the Rules).

MIDDLEMISS v MIDDLEMISS [2023] NZHC 2051 [3 August 2023]

The plaintiff’s substantive claim

Background

[4] The plaintiff, Stephen Middlemiss (Stephen), and the defendant, Richard Middlemiss (Richard), together with their brothers Paul Middlemiss (Paul) and Christopher Middlemiss (Chris), own the property as tenants in common in equal shares. They inherited the property from their mother, Joyce Middlemiss (Joyce), who died on 30 May 2002.

[5] The defendant has been in occupation of the property since Joyce died. The plaintiff says the defendant has not paid rent to the other co-owners, has refused or ignored suggestions that the property be sold, and has not maintained the property, with the result that the property is now in a state of disrepair.

Relief sought

[6] The plaintiff is facing financial hardship, and seeks orders under ss 339(1)(a) and 343 of the Property Law Act 2007 for the property to be sold and for his share of the proceeds to be distributed to him.

[7] Initially, he had also claimed in the alternative that the defendant and/or the co- owners purchase the plaintiff’s share of the property on terms including compensation from the defendant by way of occupation rent (plus interest) as well as compensation for any loss he had suffered as a result of the defendant’s failure to maintain the property. However these alternative claims are no longer being pursued.

Rule 15.9 formal proof application

[8] The plaintiff seeks formal proof judgment under r 15.9 of the Rules, which relevantly states:

15.9 Formal proof for other claims

• (1) This rule applies if, or to the extent that, the defendant does not file a statement of defence within the number of working days required by the notice of proceeding, and the plaintiff seeks judgment by default for other than a liquidated demand.
• (2) The proceeding must be listed for formal proof and no notice is required to be given to the defendant.

(3) ...

(4) The plaintiff must, before or at the formal proof hearing, file affidavit evidence establishing, to a Judge’s satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the Judge to calculate and fix the damages.

(5) ...

[9] “Satisfaction” means the Judge makes up their mind – it does not import notions of the burden of proof and of setting a particular standard of proof.¹

Discussion

Eligibility for formal proof judgment

[10] The proceedings were filed on 20 December 2022. The defendant was finally served with the notice of proceeding and statement of claim on 12 April 2023, after 13 unsuccessful attempts to do so. The court has received an affidavit from the process server, Mr Philip Welch, dated 2 May 2023, to this effect.

[11] The defendant was required to file a statement of defence within 25 working days of service, that is in this case by 18 May 2023. The defendant has not done so, nor has he filed a notice of appearance.

[12] Rule 15.9(1) is therefore met and formal proof judgment is available, if, pursuant to r 15.9(4), I am satisfied on the affidavit evidence before me of each cause of action.

[13] There is now only one cause of action before me, that is relief under ss 339(1)(a) and 343 authorising the plaintiff to sell the property.

Relief under ss 339(1)(a) and 343 of the Property Law Act 2007

[14] Section 339(1)(a) provides that a Court may make, in respect of property owned by co-owners, an order for the sale of the property and the division of the

¹ R v Leitch [1998] 1 NZLR 420 (CA).

proceeds among the co-owners. Every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subs 1 or any related order under subs (4), unless the Court orders otherwise.² Under subs (4), a Court making an order under subs (1) may, in addition, make a further order specified in s 343.

[15] Section 343 provides in full:

343 Further powers of court

A 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:

(a) requires the payment of compensation by 1 or more co- owners of the property to 1 or more other co-owners:

(b) fixes a reserve price on any sale of the property:

(c) directs how the expenses of any sale or division of the property are to be borne:

(d) directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied:

(e) allows a co-owner, on a sale of the property, to make an offer for it, on any terms the court considers reasonable concerning—

(i) the non-payment of a deposit; or

(ii) the setting-off or accounting for all or part of the purchase price instead of paying it in cash:

(f) requires the payment by any person of a fair occupation rent for all or any part of the property:

(g) provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1).

[16] A plaintiff must have a certain specified interest in relation to the property to have standing to make an application for an order under s 339(1).³ As a co-owner, the plaintiff has standing.

² Property Law Act 2007, s 339(5).

³ Section 341(1).

[17] The relevant considerations to which a court must have regard in considering whether to make an order under s 339(1) are listed in s 342, which provides:

(a) Relevant considerations

A 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:

(i) 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:

(ii) the nature and location of the property:

(iii) the number of other co-owners and the extent of their shares:

(iv) 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:

(v) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:

(vi) any other matters the court considers relevant.

[18] I turn to consider these factors in determining whether to make an order under s 339(1)(a) and any further orders under s 343.

Analysis

[19] In terms of factor (b), the property is a three-bedroom home with one bathroom and a land area of 1,007m². It has a rateable valuation of $375,000 and a OneRoof estimate of $485,000. The photographic and other evidence indicates that the defendant has not maintained the property, so that the property is now in a state of disrepair and the grounds unkempt. The property is said to have been in an increasingly poor state of repair for some years, dating at least from 2013. It is zoned urban residential. The most likely purchaser is said to be a developer. This may mean no or minimal work is required to put the property into a saleable state as it will likely be knocked down and subdivided by any purchaser.

[20] In terms of factors (a) and (c), there are four co-owners, each of whom has a one-quarter share in the property. The plaintiff’s share is neither greater nor lesser

than the shares of the other co-owners, including the defendant. Each has an equal interest in the property.

[21] In terms of factor (d), the plaintiff has now withdrawn his initial claims for occupation rent (plus interest) and compensation for any loss suffered from the defendant’s failure to maintain the property. He also no longer seeks for his share of the property to be purchased by the defendant and/or the other co-owners, Paul and Chris. On this basis, Paul and Chris have stated they will abide the decision of the Court regarding the sale of the property. I am satisfied there would be no hardship to the co-owners Paul and Chris if the property were to be sold.

[22] The plaintiff states he requires the property to be sold on account of his state of financial hardship. The plaintiff is 69 years old and lives alone. He is retired and his only source of income is his superannuation payment each week, which includes a winter energy subsidy and disability allowance. The plaintiff was made redundant in 2020 and has ongoing back problems which have made it difficult to find new employment. His savings have run out. After rent, the plaintiff has $248.58 per week remaining to meet his other expenses, and he has no assets other than a 2008 Toyota RAV4.

[23] There is no accurate information as to the defendant’s financial situation. The plaintiff says the defendant has lived in the property rent-free for over 20 years and as far as the plaintiff knows, the defendant is retired and does not have any dependants. The plaintiff says he has tried many times over the years to convince the defendant that the property needs to be sold and has tried to give him as much notice as possible before filing proceedings with the Court, which he says he has had to do as he has otherwise run out of options.

[24] It is impossible to determine on the evidence before the Court what hardship would be occasioned on the defendant if an order were to be made under s 339(1)(a) for the property to be sold. However, the evidence of hardship that would be caused to the plaintiff if the order is refused is clear. The plaintiff is in a precarious financial situation.

[25] The defendant has had ample opportunity to respond to the plaintiff’s communications and eventual Court proceedings and has chosen not to do so. The lack of engagement by the defendant is the direct cause of the necessity for these proceedings.

[26] In terms of factor (e), the evidence does not support any contributions having been made to the property by way of improvements or maintenance by any of the co- owners.

[27] Finally, with respect to factor (f), the defendant’s failure to engage with the plaintiff over many years in relation to the need for the sale of the property is relevant. The plaintiff has refused to pay rent for occupying the property and has refused to have the property sold for the purposes of distributing the assets of the estate.

[28] The plaintiff’s failure or refusal to engage is also relevant to the question of costs. These proceedings could, and should, have been able to be easily avoided. Particularly given the plaintiff’s limited financial means, it is not appropriate that he should have to bear the cost of bringing proceedings which should not have been necessary. The approach of awarding indemnity costs in these circumstances is well established.⁴ In response to my request for details as to the plaintiff’s actual costs, Ms McDonald has provided me with details. Inclusive of GST and disbursements, the costs are $26,580.83, and I approve those costs.

Conclusion

[29] The plaintiff is entitled to his share of the property and has now awaited the realisation of that share for over 20 years, without receiving any part of, or income from, that share. In view of this and the other factors I have considered above, as well as the defendant’s failure to engage with or respond to the plaintiff’s efforts, culminating finally in bringing (it seems reluctantly) these proceedings, I am satisfied on the evidence before me, it is appropriate to grant the formal proof application and

⁴ See Thomas v Thomas [2016[ NZHC 1117 at [13] and Calian v Cassidy [2021] NZHC 3413 at

[105] and [108].

make an order under ss 339(1)(a) and (to the extent necessary) 343 of the Property Law Act for the sale of the property and division of the proceeds among the co-owners.

Result and orders

[30] The formal proof application is granted.

[31] I make an order under ss 339(1)(a) and (to the extent necessary) 343 of the Property Law Act for the sale of the property and division of the proceeds among the co-owners, in terms of Appendix A annexed to this decision.

Churchman J

Solicitors:

Kelly Flavell Law, Auckland for Plaintiff

Appendix A

Terms of sale under section 339(1)(a) Property Law Act 2007

1. The defendant and any other occupier of the Property must vacate the Property no later than 21 September 2023.

2. Any chattels or other property left at the Property after the date for vacant possession will be disposed of at the discretion of the plaintiff.

3. Prior to or after the defendant and any other occupier of the Property vacating the Property, the defendant is to allow real estate agents from Harcourts and/or Ray White Real Estate Ltd or such other reputable real estate agent, on 3 clear working days written notice, access to the Property for the purposes of providing recommendations as to:

1. the mode of sale;

2. how the property will be presented at its best to achieve sale.

4. The plaintiff is to appoint Harcourts, Ray White Real Estate Ltd or such other reputable real estate agent as real estate agents to act on the sale.

5. The Property is to be sold either by auction, private treaty or such other method of sale as recommended by the appointed real estate agent.

6. The plaintiff and the other co-owners, namely Paul Middlemiss and Chris Middlemiss are authorised to sign on behalf of the defendant any contracts or documents that he would otherwise be required to sign as co-owner and that are necessary to:

1. progress the marketing and sale of the Property; and

2. affect the sale and transfer of ownership of the Property to any purchaser.

7. The plaintiff will appoint a reputable Blenheim firm of solicitors to act as the conveyancing solicitors in relation to the sale of the Property.

8. From the proceeds of sale the plaintiff is to be reimbursed (or third parties paid directly), the costs and expenses associated with the sale including legal, conveyancing, valuation fees, advertising, auctioneer, real estate agent’s costs, payment of arrears of rates, water rates and insurances (if any), and the costs of any required maintenance or preparation of the Property for sale.

9. Thereafter the net sum is to be divided into four equal portions (the plaintiff's share, the respective shares of Christopher Middlemiss and Paul Middlemiss and the defendant's share). The shares of Christopher Middlemiss and Paul Middlemiss are to be paid to them at their direction.
10. From the defendant's share, the plaintiff is to be paid the actual and reasonable legal costs of this proceeding in the sum of $26,580.83 including GST and disbursements.

11. Thereafter the adjusted shares payable to the plaintiff and the defendant are to be so paid to them at their direction.