Capolingua v Da Silva (No 2)

[2017] NSWSC 527

Supreme Court

New South Wales

Medium Neutral Citation:	Capolingua v Da Silva (No 2) [2017] NSWSC 527
Hearing dates:	24 April 2017
Date of orders:	04 May 2017
Decision date:	04 May 2017
Jurisdiction:	Equity
Before:	Darke J
Decision:	Trustees for sale appointed pursuant to s 66G of the Conveyancing Act.
Catchwords:	CONVEYANCING – sales by court order or direction – appointment of trustees for sale – contractual limitations upon seeking appointment of trustees – where court previously adjourned proceedings due to non-compliance with contractual pre-conditions for sale – whether pre-conditions now satisfied – trustees for sale appointed
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 98 Conveyancing Act 1919 (NSW), ss 66G, 66H
Cases Cited:	Capolingua v Da Silva [2016] NSWSC 1212 Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40 Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100
Category:	Principal judgment
Parties:	Nick Jason Carl Capolingua (Plaintiff) Janine Da Silva (Defendant)
Representation:	Counsel: Mr R Alkadamani (Plaintiff) Mr H Jewell (Defendant)   Solicitors: Wall and Company (Plaintiff) Craig Milne and Company (Defendant)
File Number(s):	2014/292818
Publication restriction:	None

Judgment

Introduction

1. This is the second judgment delivered in these proceedings between co-owners of a property near Mullumbimby. The plaintiff, who owns a two-thirds share in the property, seeks the appointment of trustees for sale pursuant to s 66G of the Conveyancing Act 1919 (NSW). In the first judgment (Capolingua v Da Silva [2016] NSWSC 1212), the Court declined to make orders under s 66G in circumstances where the plaintiff had not yet complied with cl 5(b) of a Deed that had been entered into between the parties.

2. Clause 5(b) of the Deed requires that a party wishing to exercise rights under s 66G must first market their interest in the property conscientiously and with all due diligence for one year. The Court was satisfied that the plaintiff’s interest had been marketed in accordance with cl 5(b) from about April 2016, but that was a period of only about four months (see the first judgment at [48]-[49]). That factor, considered as part of the overall circumstances of the case, led the Court to conclude (at first judgment [56]-[57]) that it would be inequitable to the defendant to appoint trustees for sale at that time. Accordingly, the proceedings were adjourned for further hearing in April 2017.

3. On that occasion, further evidence was adduced concerning the marketing of the plaintiff’s interest in the property, and the current state of the property. An affidavit sworn by Mr Cochrane, the selling agent in charge of the marketing campaign, was read by the plaintiff. Two further affidavits affirmed by the defendant, and an affidavit affirmed by Mr John Walker, were read by the defendant. All three witnesses were cross-examined.

4. The defendant resists the appointment of trustees for sale, primarily on the basis that the plaintiff has still not complied with cl 5(b) of the Deed.

Summary of further evidence

5. Mr Cochrane gave evidence that since 23 August 2016 (the date of the first judgment) the property has remained listed with The Professionals of Mullumbimby. On 1 September 2016 Mr Cochrane sent an email to members of his sales team that was in the following terms:

I have forwarded the judgment of Darke J to you in the matter Capolingua ats de Silva as it materially affects the sale of Nick Capolingua’s 2/3 share in the subject property.

We are instructed to continue our efforts to sell NC’s share. We will keep it on Domain.com at our expense, continue to keep it on our own website with updated copy. Continue to keep it our window and office brochure, as well as make sure the sign remains insitu.

I’ll take you all out again to have another look at all the attributes of the share so you are all totally aufait with everything concerning it’s marketability.

As a matter of office ethics as well as to protect the seller and ourselves it will of course be essential that, as always, we are totally open and transparent with potential buyers in that we must inform them of the following:

# There is a history of disputation between the shareholders which has resulted in several AVO’s being issued

# There is an existing mortgage of approximately $50,000 over the property which will require the attention of the buyer as it will be a joint and several liability

# The council approved dwelling forming part of NC’s share has no occupation certificate and the property is within a high hazard fire zone which no doubt means council will require compliance of the existing structure. This could be quite expensive and buyers should know the implications

On the positive side, as you know, Ms de Silva has indicated that she is prepared to sign off on a further mortgage to assist any potential purchaser. Clearly this will be subject to valuation and bank approval.

Please do your very best to secure an informed buyer to help NC in his efforts to dispose of this share.

6. Mr Cochrane deposed that a photograph of the property remained in the window of the office of The Professionals, that details of the listing were on the firm’s website, and that the property was also listed on various websites including the Domain site. Mr Cochrane deposed that since August 2016 fifteen “specific enquiries” had been received from prospective purchasers, three of whom had inspected the property. In cross-examination he explained that there were also many enquiries made over the telephone that were not diarised.

7. Mr Cochrane showed the property to Mr Walker, and Mr Walker’s friend Panda, on 12 January 2017. Mr Cochrane sent an email to the plaintiff on that day which referred to the inspection. The accounts given by Mr Cochrane and Mr Walker as to what was said between them during that inspection (and in an earlier conversation) diverge considerably.

8. Mr Walker deposed that during the inspection Mr Cochrane had said words to the effect:

1. that Nick (the plaintiff) had taken out a $50,000 loan “which he (Mr Walker) would be liable for” and was a risk;

2. that there was a tenant living at the property who would be difficult to get out, and the responsibility for getting her out would fall on the new owner; and

3. that the dwelling the subject of the sale had not passed the Council inspection.

Mr Walker deposed that it was his impression that Mr Cochrane was attempting to dissuade him from buying the property.

9. Mr Cochrane agreed that he spoke about a $50,000 loan. He deposed that he said words to the following effect:

The co-owner owes $50,000 to the bank which has a mortgage over the property. Any purchaser will need to sign documents with the bank agreeing to be liable for this debt. The debt is a joint and several liability.

10. Mr Cochrane denied that he spoke about the tenant in the terms alleged. Mr Cochrane deposed that he spoke about a lack of a Council inspection. He deposed that he said words to the following effect:

There is no final inspection of the two bedroom dwelling from Byron Shire Council.

11. Mr Cochrane showed the property to Mr John Mester and Mr Mester’s wife on 19 January 2017. Mr Cochrane gave evidence that on that occasion a domestic dispute involving Mr Tony Vargas and the defendant, which featured aggressive and obscene language, was overheard. The defendant said in cross-examination that Mr Cochrane’s account was exaggerated. However, an email sent by Mr Mester to Mr Cochrane on 20 January 2017 includes the following:

Thanks very much for showing Victoria and I over 557 Middle Pocket Rd yesterday.

We were disturbed by the loud and crude language coming from a dispute at the neighbouring residence and have decided against pursuing further enquiries in regard to this property. Being able to peacefully enjoy our home is a very important consideration for us.

Thanks again and please contact us if you come across anything you think may be of interest to us.

12. Mr Cochrane showed the property to Mr Willis Urquart on 9 March 2017. Mr Cochrane gave evidence that Mr Urquart said that the property was “too run-down”.

13. Mr Cochrane deposed that he has used his best endeavours to achieve a sale of the plaintiff’s interest in the property.

14. The defendant deposed that the “For Sale” sign at the front of the property had been removed in about November 2016 and not replaced. However, Mr Walker gave evidence that there was a “For Sale” sign out the front when he went to the property in January 2017. Mr Cochrane gave evidence that the only time he noticed that the sign was gone was when he went to the property on 13 April 2017.

15. The defendant also deposed that the property was damaged on 30 March 2017 in weather associated with cyclone Debbie. She gave evidence (including photographic evidence) of landslips, a fallen tree, damage to water tanks, and damage that impedes access to the property. Mr Cochrane also gave evidence (including photographic evidence) about the damage. He said that the property was taken off the market for one day (on 5 April 2017) due to a concern about whether it was safe to conduct inspections.

Submissions

16. The plaintiff commenced by referring to the finding made in the first judgment (at [48]), that the marketing of the plaintiff’s interest in the property from about April 2016 satisfied the requirements of cl 5(b) of the Deed that the interest be marketed conscientiously and with all due diligence. The plaintiff then submitted that the further evidence established that the marketing has continued for 12 months at that standard. It was submitted that in those circumstances, and taking into account the other matters raised by the plaintiff at the first hearing, the Court should proceed to appoint trustees for sale.

17. The defendant submitted that the marketing requirements set out in cl 5(b) have still not been satisfied. It was submitted that the marketing has not been conducted conscientiously and with all due diligence in circumstances where statements of the kind referred to in Mr Cochrane’s email to sales staff on 1 September 2016 are made to prospective purchasers, and statements are made by Mr Cochrane of the type deposed to by Mr Walker. The defendant submitted that if the various disclosures made by Mr Cochrane had not been made, a sale could have been achieved.

18. It was further submitted by the defendant that Mr Cochrane should have communicated with her about inspections of the property and in relation to prospective purchasers. It was also suggested that Mr Cochrane should have spoken to her following the incident which occurred during the inspection by Mr Mester and his wife.

19. No complaint was made about the advertising of the property on the internet, and it was accepted that the absence for a period of a “For Sale” sign at the front of the property was of little moment.

20. Finally, the defendant submitted that the damage recently sustained to the property afforded a reason not to proceed to appoint trustees for sale.

Determination

21. I do not think that Mr Cochrane should be criticised for speaking to potential purchasers about the three matters referred to in the 1 September 2016 email. It is true that there is a history of disputation between the co-owners, which involved the making of apprehended violence orders. That is a matter which a potential purchaser would likely be interested in when considering entering into co-ownership with the defendant, who was living in the other dwelling located not far away. Moreover, it is a matter which an interested purchaser is likely to discover in any event. As Mr Walker said in cross-examination, it was a matter of common knowledge “up and down the valley” that there had been animosity.

22. It is also true that there is a mortgage over the property, and that once the plaintiff had discharged his loan to the mortgagee, a loan of about $43,000 owed by the defendant would remain, secured by the mortgage. The existence of the mortgage is a matter likely to be of some importance to a potential purchaser. It is a matter which would almost certainly be discovered in any event.

23. It is evident from the disclosure form completed in early April 2016 after the plaintiff retained Mr Cochrane, that the plaintiff informed Mr Cochrane that there was no Occupation Certificate in relation to the dwelling the plaintiff had lived in. I accept that the plaintiff understood that to be the position. It has not been shown to be incorrect. The evidence given by Mr Walker in cross-examination to the effect that he was told by an officer of the Council that the plaintiff had an approval would not, even if accepted, establish that an Occupation Certificate had issued. In any case, for the reasons which are set out below, I would not accept that evidence as accurate or reliable.

24. The existence of relevant Council approvals, including an Occupation Certificate in respect of the main dwelling, is also a matter which a potential purchaser would likely be interested in. If so, the true position could be ascertained by making enquiries of the Council.

25. In my opinion, the disclosure of these various issues by the selling agent is not indicative of a failure to market the plaintiff’s interest conscientiously and with all due diligence. Mr Cochrane explained that disclosure of these matters was ethical, in the interests of the firm’s professional reputation, and a protection against being sued. To act in that way is consistent with conscientious and diligent marketing. I do not accept that if the various disclosures had not been made by the selling agent a sale could have been achieved.

26. I was favourably impressed by Mr Cochrane as a witness. He is clearly possessed of great experience in the sale of property in the area, and evidently had a good understanding of the attributes of the property, including in relation to its co-ownership. He gave his evidence in a clear and forthright manner. I accept his evidence as truthful and reliable.

27. To the extent that Mr Cochrane’s evidence differs from that of Mr Walker in relation to their dealings, I prefer Mr Cochrane’s evidence. I found Mr Walker’s evidence, particularly on those contentious matters, to be problematic. His answers were often rather imprecise, or confused (e.g. as to what was said about the defendant’s residence), and I gained the impression that his recollection of the events was not good. Mr Cochrane’s statement, in his email to the plaintiff on 12 January 2017, that Mr Walker and Panda “were very quick and didn’t seem to take in too much” is likely to be an accurate assessment. Mr Walker also made some curious statements in the course of his cross-examination (e.g. about “a secret little clan”), and seemed eager to impugn Mr Cochrane’s reputation. I am not prepared to accept Mr Walker’s evidence as accurate or reliable, particularly where it is not corroborated by reliable evidence.

28. Mr Cochrane should not be criticised for what he said to Mr Walker during their initial conversation and during the inspection. Insofar as Mr Cochrane provided information about the property, it was essentially accurate. I do not regard the reference to a $50,000 debt, when the debt may have only been about $43,000, to be a material inaccuracy in the context of making disclosure of an issue which would need to be investigated by an interested purchaser. To the extent that Mr Cochrane spoke about the mortgage and the lack of a final Council inspection, he was doing no more than raising pertinent matters which an interested purchaser would, or would likely, discover in any event.

29. Neither should Mr Cochrane be criticised for not communicating with the defendant, who was not his client. There was no need to speak to her (as opposed to the tenant in the plaintiff’s former residence) in order to arrange inspections. Only three inspections occurred throughout the entire marketing campaign. Two of them (Mr and Mrs Mester, and Mr Urquart) were not fruitful. The other inspection (Mr Walker and Panda) was followed up with an email to Panda on 16 January 2017 in which Mr Cochrane offered to arrange a second inspection or a meeting with “the other shareholder”. It seems that the offer was not taken up. Mr Cochrane was apparently willing to involve the defendant in the selling process at a time he judged to be appropriate. It was not shown that his approach in respect of the defendant was in any way unreasonable, or incompatible with a conscientious and diligent marketing of the plaintiff’s interest in the property. Finally, I can see no good reason why Mr Cochrane ought to have spoken to the defendant about the incident which occurred during the inspection by Mr and Mrs Mester. His failure to do so does not lead to the conclusion that the marketing was not being undertaken conscientiously and with all due diligence.

30. I accept Mr Cochrane’s evidence (which was not directly challenged) that he used his best endeavours to achieve a sale of the plaintiff’s interest in the property. I have concluded that the marketing of that interest has continued since the first judgment to satisfy the requirement of cl 5(b) of the Deed that it be conducted conscientiously and with all due diligence. The marketing has now satisfied the further requirement of cl 5(b) that it be undertaken for a period of one year. The defendant has now had the benefit of the clause, and the making of orders under s 66G would no longer be inconsistent with cl 5 of the Deed. The circumstance which earlier caused the Court to withhold relief under s 66G is no longer present.

31. I do not regard the unfortunate fact that the property was recently damaged as a reason to withhold the appointment of trustees for sale. That fact will likely have an impact upon any attempt to sell the property, including the timing of any sale. Decisions about timing and how to best present the property for sale will need to be made. Given the acrimonious relationship that seems to persist between the co-owners, it is preferable that such decisions be made by trustees (taking into account the views of the parties as envisaged by s 66H of the Conveyancing Act).

32. In all the circumstances, it seems to me that the Court should now accede to the plaintiff’s application for the appointment of trustees for sale of the property.

33. By cl 5(c) of the Deed, the parties agreed that in the event that the property is sold by trustees appointed under s 66G of the Conveyancing Act, the trustees would be entitled to distribute the net proceeds of sale by “applying the formula embodied in cl 3.8” of the Deed. It seems that the parties are now in agreement as to how that formula should be applied, in the event that trustees are appointed (see the Joint Supplementary Submissions dated 1 May 2017). The Court will make orders in a form that encapsulates this agreed position. The parties will be invited to submit a Consent Order accordingly.

34. No submissions were made by the defendant in support of the only remaining aspect of her cross-claim, namely, the claim for damages for breach of cl 5 of the Deed. The damages claimed are in the nature of legal costs, being the defendant’s costs of the proceedings brought against her by the plaintiff. No attempt was made to explain why those costs would be recoverable as damages in light of the principles discussed in cases such as Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 and Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40. In any case, no evidence was adduced of the quantum of the costs claimed as damages. In these circumstances, it is appropriate that the Cross-Claim be dismissed, and that the defendant’s costs be dealt with as part of the determination to be made by the Court of the appropriate order for costs pursuant to s 98 of the Civil Procedure Act 2005 (NSW). The parties agree that all questions of costs may be dealt with on the papers. Directions will therefore be made for the provision of written submissions on costs.

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Decision last updated: 04 May 2017