ELANEL Pty Ltd as trustee for the MARVELLOUS Property Trust v MJK Properties Pty Ltd as trustee of the MJK Investment Trust

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ELANEL PTY LTD as trustee for the MARVELLOUS PROPERTY TRUST -v- MJK PROPERTIES PTY LTD as trustee of the MJK INVESTMENT TRUST [2013] WASC 292

CORAM: McKECHNIE J

HEARD: 7 AUGUST 2013

DELIVERED : 7 AUGUST 2013

FILE NO/S: CIV 1487 of 2013

MATTER :IN THE MATTER of s 126(1) of the Property Law Act 1969 (WA)
AND
IN THE MATTER of Lot 13 on Strata Plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 185
AND
IN THE MATTER of Lot 14 on Strata Plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 186
AND
IN THE MATTER of Lot 15 on Strata Plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 187
AND
IN THE MATTER of Lots 405, 406, 407, 498, 499, 500, 501 and 511 on Strata Plan 2505 being the whole of the land contained in Certificate of Title Volume 2165 Folio 648

BETWEEN: ELANEL PTY LTD as trustee for the MARVELLOUS PROPERTY TRUST
Plaintiff
AND
MJK PROPERTIES PTY LTD as trustee of the MJK INVESTMENT TRUST
Defendant

Catchwords:

Sale in lieu of partition - Both parties agree to sale - Dispute as to who should conduct sale - Ordinary course is the plaintiff - Whether good reason to the contrary - No new principles

Legislation:

Property Law Act 1969 (WA), s 126

Result:

Real estate agent appointed to sell properties

Category: B

Representation:

Counsel:

Plaintiff: Mr M N Blandford
Defendant: Mr K L Christensen

Solicitors:

Plaintiff: Allen & Overy
Defendant: Gadens Lawyers

Case(s) referred to in judgment(s):

Northwest Capital Management v Westate Capital Ltd [2012] WASC 121
McKECHNIE J:

The background to the proceedings

The plaintiff is a company wholly owned and controlled by Mr Paul Berresford. The defendant is a company wholly owned and controlled by Mr Mark Keene.
The two men were in a business relationship from about 1994 and together operated various accounting and financial advisory firms under numerous trading entities. In recent years differences of opinion have arisen between them to the point where the relationship is now unsustainable. The business relationship finally broke down with a notice of dissolution of partnership dated 8 February 2012.
In 2004, they decided to purchase for their respective superannuation funds, premises known as level 2, 41 ‑ 43 Ord Street West Perth, one entire floor of a commercial office building. The land is more particularly described as:
(a)Lot 13 on strata plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 185;
(b)Lot 14 on strata plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 186; and
(c)Lot 15 on strata plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 187.
In 2007, they purchased for their respective superannuation trust a hotel property at 49 Blackburn Street Bellevue, more particularly described as:
(a)Lots 405, 406, 407, 498, 499, 500, 501 and 511 on plan 2505 being the whole of the land contained in Certificate of Title Volume 2165 Folio 648.
The plaintiff and defendant hold their interests as tenants in common in equal shares.
Until recently there were two tenants occupying part of the West Perth property, one of which was Optimus Financial Group Pty Ltd, a company of which Mr Keene is director.
The other tenant has gone. Optimus continues to occupy the premises.

How this matter comes to court

The plaintiff seeks an order for sale (in lieu of partition) of all the jointly owned properties.
The defendant does not oppose the sales but objects to the plaintiff having the conduct of the matter. The defendant proposes that a real estate agent be appointed.
A matter with so little in dispute has generated an enormous amount of paper.
The plaintiff's two volumes of affidavit material total 439 pages almost matched by the defendant's 404 page affidavit. However, when the defendant's solicitor's 49 page affidavit is included, the parties are evenly weighted. I mention this because it seems that considerable expense has been incurred in what, with respect to the parties, should have been a pragmatic commercial decision.

The legal principles

It is common ground that the court has a complete discretion as to who it will appoint to conduct a sale. Ordinarily the conduct of the sale is given to the plaintiff. But good reasons might be shown to displace the ordinary course.

The parties' positions

(a) Plaintiff

The plaintiff says the defendant threatened sale proceedings then sat on its hands forcing the plaintiff to act. The ordinary course should follow and it be granted the power to sell.

(b) Defendant

The defendant asserts there are good reasons why the plaintiff should not have the conduct of the sale. It nominates a real estate agent to conduct the sale.

Resolution

Counsel for the plaintiff concedes there is an ongoing dispute between the parties.
This concession is appropriate as a perusal of the affidavits indicates. It is unnecessary (even if possible) to make judgments about some matters raised, such as the cost of fitout of 41 ‑ 42 Ord Street and who should be responsible, or whether offers to purchase by the defendant were unfairly rejected or were too conditional to be accepted.
It is sufficient to note there are intractable differences between the parties. Of itself this would not lift the case out of the ordinary. Almost inevitably Property Law Act 1969 (WA) s 126 applications arise because parties are at loggerheads.
There is one matter of significance which does take this case out of the ordinary.
Northwest Capital Management v Westate Capital Ltd [2012] WASC 121 was an action which involved entities related to Mr Berresford and Mr Keene.
Mr Berresford's conduct was subject to adverse findings by the trial judge [239] ‑ [262].
Despite Mr Blandford's submission on behalf of the plaintiff, those findings are of considerable weight. First they demonstrate an aspect of unsatisfactory behaviour when Mr Berresford was required to take into account interests other than his own.
Second, and of lesser importance, Mr Keene's perception of the trustworthiness of Mr Berresford to act fairly on his behalf following the earlier proceedings is such that there is greater than usual potential for conflict.
On balance, I conclude that the findings indicate Mr Berresford is not a suitable person to control the sales based on his conduct, even though in different circumstances. The findings cannot be ignored or given little weight in circumstances such as the present.
The parties have so far displayed little ability to compromise and it is a forlorn hope that it will change. However, placing the sale out of the hands of Mr Berresford and into the hands of an independent person gives some possibility that disputes might be lessened.

Who should conduct the sale

The ideal appointment would be a receiver, especially as the sale is ultimately under court supervision.
However, neither party asked for a receiver for reasons of cost.
The defendant proposes Mr Delich of commercial real estate agents, Knight Frank. He has been involved with both parties as to their property interests.
Although the plaintiff objected to the principle of the appointment, Mr Blandford did not make any submissions opposing the suitability of Mr Delich or Knight Frank.
I do not wish to appoint a company. The person responsible for carrying out the court orders should be a natural person. Subject to his formal agreement to appointment in accordance with the orders I would make, I will appoint Mr Delich to sell the properties and distribute the proceeds.

The form of Order

As might be expected, the parties could not even reach an agreement on an appropriate form of orders.
Each made submissions as to the form for which they contend.
Rather than traverse the submissions, annexed to these reasons are the orders I will make. They demonstrate the submissions which did and did not find favour.

PROPOSED ORDERS FOR SALE

The following properties owned by the plaintiff and defendant as tenants in common in equal shares, be sold:
(a)The following properties with a street address of Level 2, 41 ‑ 43 Ord Street, West Perth ('the West Perth properties'):
(i)Lot 13 on Strata Plan 7771 being the whole of the land contained in Certificate of Title Volume 2555 Folio 185;
(ii)Lot 14 on Strata Plan 7771 being the whole of the land comprised in Certificate of Title Volume 2555 Folio 186;
(iii)Lot 15 on Strata Plan 7771 being the whole of the land comprised in Certificate of Title Volume 2555 Folio 187.
(b)The property with a street address of 49 Blackburn Street, Bellevue ('the Bellevue Property'), comprising Lots 405, 406, 407, 498, 499, 500, 501 and 511 on Plan 2505 being the whole of the land contained in Certificate of Title Volume 2165 Folio 648
(together referred to as 'the properties').
The West Perth properties are to be sold on the basis of unencumbered vacant possession.
Upon the sale of any one of the West Perth properties, the plaintiff and the defendant are to take all reasonable steps to effect vacant possession of the West Perth properties including but not limited to jointly executing Notices to Quit to current tenants, giving them 1 month to vacate the premises unless the purchaser of the premises consents for the current tenants to remain at the premises.
The Bellevue Property is to be sold subject to the existing tenancies.
Mr Tony Delich of Knight Frank Australia ('the Real Estate Agent') be appointed by the plaintiff and the defendant to sell the properties.
Both parties must sign the standard REIWA agency agreement which specifies the selling fees and estimate of marketing costs (Agency Agreement).
The plaintiff and the defendant each to pay 50% of the estimated marketing costs referred to in the Agency Agreement to the Real Estate Agent upon the execution of the Agency Agreement to be held on trust by the Real Estate Agent on account of future cost for marketing the properties for sale.
The Real Estate Agent be authorised to sell the properties by whichever of the methods of private treaty, auction or tender, that the Real Estate Agent, acting reasonably, advises will achieve a reasonable price with a view to completion of the sale process as expeditiously as possible.
Subject to these orders, the Real Estate Agent has the authority to execute any contracts for the sale of the properties on behalf of the plaintiff and the defendant.
The Real Estate Agent is to set the reserve prices for the properties (which may be amended from time to time in writing) by notice to the plaintiff and the defendant. The reserve prices may be amended from time to time in writing by the Real Estate Agent.
The Real Estate Agent must amend the reserve prices to a particular amount if the Real Estate Agent receives notices from both the plaintiff and the defendant to amend the reserve prices and the plaintiff and the defendant are in agreement as to the amount. If the plaintiff and the defendant cannot agree between them the reserve price, the Real Estate Agent at his discretion may engage an independent valuer to determine the reserve price of the properties.
The plaintiff and the defendant have liberty to apply to the court on 48 hours' notice in respect of the reserve prices or any amended reserve prices within 3 business days after being notified of them.
The plaintiff and the defendant are to co-operate fully with the Real Estate Agent in the sale process, and is to make the properties available for inspections on not less than 1 business day's notice (to the extent that its co-operation is required for such inspections).
The defendant have leave to tender, bid or make offers for the properties.
If any of the properties are proposed to be sold by private treaty:
(a)The Real Estate Agent by notice, must provide a copy of any written offer received which is over the reserve price, to the plaintiff and the defendant by 5 pm on the next business day after the offer is received;
(b)The plaintiff and the defendant may within 24 hours of receipt of the above notice provide written notice to the Real Estate Agent indicating that:
(i)the offer is acceptable; or
(ii)the offer is not acceptable; or
(iii)a counter-offer is to be made and the terms of that counter-offer.
(c)The Real Estate Agent must:
(i)Accept an offer if both the plaintiff and the defendant provide written notice that the offer is acceptable or no notice is received from both the plaintiff and the defendant;
(ii)must reject an offer if both the plaintiff and the defendant provided written notice that the offer is not acceptable.
(d)Unless the Real Estate Agent receives written notices from both the plaintiff and the defendant to accept an offer that is below the reserve price, the Real Estate Agent must reject that offer;
(e)Other than accepting an offer in accordance with Order 15(c)(i), if the Real Estate Agent wishes to accept an offer, the Real Estate Agent must provide written notice to the plaintiff and the defendant of his decision;
(f)The plaintiff and the defendant have liberty to apply to the court on 48 hours' notice to stop the sale within 3 business days after being notified of the Real Estate Agent's intention to accept an offer;
(g)The Real Estate Agent must not accept an offer if an application has been made to the court to stop the sale.
If any of the properties are proposed to be sold by auction:
(a)the Real Estate Agent, by notice, must advise the plaintiff and the defendant of the terms and conditions of the auction at least 21 days before the date of the auction; and
(b)the Real Estate Agent must amend the terms and conditions of the auction if notice is received from both the plaintiff and the defendant and they are in agreement as to the terms and conditions of the auction to be amended;
(c)if the plaintiff or the defendant wishes to amend the terms and conditions, it must apply to the court on 48 hours' notice within 3 business days after being notified of those terms and conditions, unless the other party has agreed to the amendments sought;
(d)The plaintiff or the defendant cannot on the day of the auction:
(i)stop any of the property to be sold by auction;
(ii)change the reserve price; and/or
(iii)amend any terms and conditions of the auction;
If any of the properties are proposed to be sold by tender:
(a)the Real Estate Agent, by notice, must advise the plaintiff and the defendant of the terms and conditions of the tender at least 5 business days before the date that the properties or any of them are put out to tender; and
(b)The Real Estate Agent must amend the terms and conditions of the tender if notice is received from both the plaintiff and the defendant and they are in agreement as to the terms and conditions of the tender to be amended;
(c)if the plaintiff or the defendant wishes to amend the terms and conditions, it must apply to the court on 48 hours' notice within 3 business days after being notified of those terms and conditions, unless the other party has agreed to the amendments sought;
(d)The plaintiff or the defendant cannot on the day of the tender:
(i)stop the property to be sold by tender;
(ii)change the reserve price; and/or
(iii)amend any terms and conditions of the tender.
Unless the plaintiff or the defendant brings an application under the preceding orders or order 24 hereof, within the times specified therein, the parties shall do all that is necessary on its part to effect the sale of the properties and it shall cause to be signed on its behalf all necessary documents for that purpose, including Transfers of Land. If the parties fail or refuse to cause all such documents to be signed on their behalf, a Registrar of this court is hereby authorised to do so upon application made by any of the parties or the Real Estate Agent.
The marketing costs as estimated in the Agency Agreement are payable irrespective of whether the properties are sold and are to be paid from time to time from the monies held by the Real Estate Agent in accordance with Order 7.
The Real Estate Agent's fees are to be paid in accordance with the Agency Agreement. Any costs incurred by the Real Estate Agent in relation to these orders which are not covered by the Agency Agreement are to be agreed by the plaintiff and the defendant or otherwise be fixed by the court and paid out of the proceeds of sale.
The loans owed to Westpac Banking Corporation secured by the West Perth properties and the Bellevue Property are to be paid out of the proceeds of sale.
The net proceeds of sale of any of the properties, after repayment of what is due to Westpac Banking Corporation, and after payment of costs of sale, tax and duties are to be divided equally between the parties.
Any notices required by these orders are to be notices in writing and served on each of the required parties by email to an address nominated by them:
(a)notices to the plaintiff to be emailed to [email Address];
(b)notices to the defendant to be emailed to [email Address];
(c)notices to the Real Estate Agent to be emailed to [email Address].
The parties have liberty to apply generally on short notice.

[2013] WASC 292

7 AUGUST 2013

Key Legal Topics

Areas of Law

Property Law

Legal Concepts

Sale in Lieu of Partition

Dispute Resolution

Ordinary Course