Dennis Bartulovic and sister Winnie rented out three shops in Auckland suburb Ellerslie, a commercial holding built up from the profits of their late father’s fish and chip shop. On Winnie’s death, Dennis tried to get these assets on the cheap, unsuccessfully disputing the value of their rental business.
Dennis and Winnie ran the rental business as a partnership, sharing equally in profits. Its major asset was real estate: the three Ellerslie shops. After Winnie died in 2019, Dennis gave three months’ notice to close down their partnership, as required by the partnership agreement. Winding down the partnership brought Dennis into conflict with Winnie’s son Paul, acting as executor of his late mother’s estate. They could not agree on a price for Dennis to buy out his sister’s half share.
Dennis demanded partnership real estate be valued on the basis of its current use only, future development potential should be ignored. The shops were let on long leases and there was no demolition clause allowing eviction to enable redevelopment. He offered $795,000 for Winnie’s half share. The High Court was to later order payment of $1.25 million.
Associate judge Bell said their partnership agreement required Dennis pay half the ‘net value’ of the partnership. Valuation required assessment of the land’s market value at the date their partnership ended. Several valuers were approached. Their assessments valued the land at some $2.44 million.
Dennis argued the rental business lost value after Winnie’s death because her son Paul interfered with business operations. As executor of Winnie’s estate, Paul had no legal authority to meddle in partnership business. Actions taken by Paul did not reduce partnership value, Judge Bell ruled. In particular, Dennis complained Paul entered into discussions with tenants about rent relief during covid-19 quarantine lockdown. Paul made no unilateral decisions on rent relief, Judge Bell said. Tenants’ leases specifically excused payment of rent should access be prevented by pandemic restrictions.
Since the partnership ended, Dennis has received all shop rentals. The partnership agreement specifies he must pay interest on the $1.25 million owed, calculated at bank corporate loan rates plus a margin of two per cent from date the partnership terminated in 2019.
Groom v. Bartulovic – High Court (8.09.21)
21.151