Farrer v Australian Securities and Investment Commission
[2011] NSWSC 425
•13 May 2011
Supreme Court
New South Wales
Medium Neutral Citation: Farrer v Australian Securities and Investment Commission [2011] NSWSC 425 Hearing dates: 13 May 2011 Decision date: 13 May 2011 Jurisdiction: Equity Division Before: Biscoe AJ Decision: Orders pursuant to ss 66G, 66I Conveyancing Act 1919
Catchwords: REAL PROPERTY:- appointment of trustees on statutory trusts for sale - allowing co-owner to purchase - costs. Legislation Cited: Civil Procedure Act 2005, ss 98(1), 12.1(1), 42.19, 42.20,
Conveyancing Act 1919, s 66G
Corporations Act 2001, s 601AD
Real Property Act 1900, s 138
Uniform Civil Procedure Rules 2005, rr 12.1, 42.19, 42.20Cases Cited: Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365
Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32
Callahan v O'Neill [2002] NSWSC 877
Hogan v Baseden (1997) 8 BPR 15, 723
Johnson v Clancy [2010] NSWSC 1301
Penny Nominees Pty Ltd v Fountain (No 3), (1990) 5 BPR 11, 284
Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6, 186 CLR 622Category: Principal judgment Parties: Nicholas Alexander William Farrer (First Plaintiff)
Angela Kathleen Farrer (Second Plaintiff)
Australian Securities and Investments Commission (First Defendant)
William Henry Haggard (Second Defendant)
Janet Ada Haggard (Third Defendant)
Wooli Investments Pty Ltd (Fourth Defendant)Representation: Mr P O' Loughlin (Plaintiffs)
Mr S Robertson (Defendants)
Proctor Willaws (Plaintiffs)
Lillas and Loel Lawyers Pty Ltd (2nd - 4th Defendants)
File Number(s): 2010/00422043
Judgment
This is a claim under s 66G of the Conveyancing Act 1919 by a co - owner of land for the appointment of trustees of the land on the statutory trusts for sale and for orders under s 66I.
The second plaintiff, Angela Kathleen Farrer, and the fourth defendant, Wooli Investments Pty Ltd (formerly Sophocles Investments Pty Ltd) ( Wooli ) are the registered proprietors of land at 47 Riverside Drive, Wooli, as tenants in common in equal shares.
The other defendants are:
(a) The Australian Securities and Investment Commission ( ASIC ) is the first defendant. It was joined at a time when Wooli was de - registered and the ownership of the property was vested in ASIC: s 601AD Corporations Act 2001. Wooli was reinstated after this proceeding commenced.
(b) William Haggard, one of the directors of Wooli, is the second defendant;
(c) Janet Ada Haggard, the third defendant, is the ex or estranged of William Haggard.
Section 66G of the Conveyancing Act relevantly provides:
66G Statutory trusts for sale or partition of property held in co - ownership
(1) Where any property (other than chattels) is held in co - ownership the court may, on the application of any one or more of the co - owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.
(1A) Subject to this section, on the death of a co - owner, any proceedings by or against the co - owner under subsection (1) (whether instituted before or after the commencement of this subsection) survive against or for the benefit of the estate of the deceased co - owner despite, in the case of a joint tenancy, the rule of survivorship.
...
(4) If, on an application for the appointment of trustees on the statutory trust for sale, any of the co - owners satisfies the court that partition of the property would be more beneficial for the co - owners interested to the extent of upwards of a moiety in value than sale, the court may, with the consent of the incumbrancers of the entirety (if any), appoint trustees of the property on the statutory trust for partition, or as to part of the property on the statutory trust for sale, and as to part on the statutory trust for partition, but a purchaser shall not be concerned to see or inquire whether any such consent as aforesaid has been given.
...
(6) In relation to the sale or partition of property held in co - ownership, the court may alter such statutory trusts, and the trust so altered shall be deemed to be the statutory trust in relation to that property.
(7) Where property becomes subject to such statutory trust for sale:
(a) in the case of joint tenancy, a sale under the trust shall not of itself effect a severance of that tenancy,
(b) in any case land shall be deemed to be converted upon the appointment of trustees for sale unless the court otherwise directs.
(8) This section applies to property held in co - ownership at the commencement of the Conveyancing (Amendment) Act 1930 and to property which becomes so held after such commencement.
"Co - ownership" means ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common: s 66F(1). Whilst the word "may" indicates a discretion, a co - owner is entitled to an order for sale "almost as of right": Callahan v O'Neill [2002] NSWSC 877 at [8]; Hogan v Baseden (1997) 8 BPR 15, 723.
That being so, the parties have agreed to consent orders appointing statutory trustees for sale and vesting the property in those trustees.
In addition, the parties have agreed that an order should be made under s 66I permitting Wooli to purchase the property on the basis that it be permitted to set - off its entitlement to the net proceeds of sale instead of paying the same and on the basis that Wooli be relieved from paying a substantial deposit. Section 66I provides:
66I Right of co - owners to bid at sale under statutory power of sale
(1) On any sale under a statutory trust for sale the court may allow any of the co - owners of the property to purchase whether at auction or otherwise on such terms as to non - payment of deposit, or as to setting off or accounting for the purchase money or any part thereof instead of paying the same, or as to any other matters as to the court seems reasonable.
(2) A co - owner, with a right to purchase shall not, without the leave of the court, be entitled to act as trustee in connection with the sale.
The evidence satisfies me that the discretion under those sections should be exercised.
Only two matters remain in contest.
(a) the amount of the deposit that Wooli should be ordered to pay under s 66I on its purchase of the property;
(b) costs as between the plaintiffs and the second defendant, Mr Haggard.
THE DEPOSIT
The plaintiffs propose that the deposit should be five per cent of the total purchase price. Wooli proposes that the deposit should be $10,000.
Section 66I empowers the Court to allow a co - owner of the property to purchase it on such terms "as to non - payment of deposit" as to the Court seems reasonable.
In Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11, 284 Young J fixed the deposit under s 66I at $5,000. His Honour said:
Mrs Fountain should be relieved from the necessity of paying any deposit if she were the successful purchaser over and above the sum of, say, $5,000.00. I think that this is the appropriate order to make because if no deposit at all were taken then there would be no impetus on Mrs Fountain to complete and the trustees would not be protected against the loss that they might suffer if Mrs Fountain did not complete the contract. If, however, she does complete, that $5,000.00 must be taken into account when working out 60% of the total purchase price.
Following Penny , but allowing for inflation since it was decided in 1990, I think that it is reasonable to fix the deposit in the present case at $10,000.
COSTS AS BETWEEN PLAINTIFF AND SECOND DEFENDANT
The plaintiffs submit that there should be no order for costs as between the plaintiffs and the second defendant, Mr Haggard. He submits that the plaintiffs should pay his costs. Since the first to fourth defendants were represented by the same lawyers it is unclear how significant this issue is.
The consent orders attached to this judgment provide at [8] for this proceeding to be dismissed as against the first and second defendants.
The relief sought in the Summons and Amended Summons against the second defendant was as follows:
8. An order that the second, third and fourth defendants join with the plaintiff in making application for a replacement Folio Identifier and do all things necessary to obtain the same.
9. An order that the second defendant provide an affidavit setting out his dealings with the interest of the fourth defendant in the property since 2 September 1987.
...
11. An order that the second defendant provide an affidavit setting out his knowledge of the location of the duplicate of folio identifier 3/4/759114.
Orders were also sought against the third defendant in terms identical with prayers 9 and 11.
The background to that relief was the following exchange of correspondence prior to the commencement of the proceeding in December 2009 relating to the whereabouts of the Folio Identifier.
By letter dated 29 June 2009 Mr Haggard, the fourth defendant, in response to an enquiry, said that his ex wife and he had possession of the title deed in 1989 or thereabouts but that in the subsequent disruption caused by the break - up of their marriage, it had been lost. He said they had conducted an extensive search for it to no avail.
An email of 7 October 2009 from the plaintiff's solicitors to Mr Haggard sought certain information so that they could complete the draft of a statutory declaration for an application for a replacement certificate of title. There was no response.
By letter dated 3 August 2010, the plaintiff's solicitors wrote to Mr Haggard indicating that although Ms Farrer was now registered as a proprietor of the property it was necessary for the physical certificate parchment to be produced so that it could be reissued with the current owners identified or an application made for its replacement. The letter stated that Mr Haggard's options were:
(a) produce a certificate of title within 28 days so that the solicitors might have Ms Farrer registered as joint owner with Sophocles;
(b) supply answers to the questions emailed to him on 7 October 2009 within 28 days and be prepared to execute the statutory declaration within a reasonable time; or
(c) Ms Farrer would approach the Court and pursuant to s 138 of the Real Property Act 1900 seek an order as to the reissue of the certificate and obtain a costs order against Sophocles for doing that.
On 7 September 2010 Mr Haggard's solicitor sent an email to the plaintiff's solicitors stating:
My client will co - operate fully with yours however he has some issues to resolve with his wife before he can do so.
For example Sophocles has been de - registered. It will need to be re - registered and I am instructed to attend to this.
I am awaiting fulsome instructions regarding those issues.
The Title has been lost and a replacement will need to be applied for.
I will revert to you as soon as I have the instructions that I need.
On 23 September 2010 Mr Haggard replied to the plaintiff's solicitor's email.
On 28 October 2010 the plaintiff's solicitors wrote to Mr Haggard's solicitors stating that, pursuant to Mr Haggard's suggestion, they had had contact with Mrs Janet Haggard, who confirmed that she did not hold the certificate of title and complaining that he had not adequately answered the questions which they had posed in the timeframe that they had set.
By email dated 1 November 2010 to the plaintiffs' solicitors, Mr Haggard's solicitor said that he had received instructions to have Sophocles reinstated and was communicating with ASIC to achieve that result. He suggested that until reinstatement occurred that their threatened action may be "premature".
The proceedings commenced in December 2010.
The Court's general costs discretion is found in s 98(1) of the Civil Procedure Act 2005:
98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
Rule 42.20(1) of the Uniform Civil Procedure Rules 2005 ( UCPR ) governs the costs discretion in the case of dismissal of proceedings:
42.20 Dismissal of proceedings etc
(1) If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.
There is a similar provision in relation to discontinuance of proceedings in r 42.19 of the UCPR.
Those provisions were considered in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54] per Hodgson JA (Tobias JA agreeing):
However, like UCPR 42.20, UCPR 42.19 states what the order for costs is to be unless there is a discretionary decision to order otherwise: Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 at [53]. This means there is an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties: Foukkare at [65]. In my opinion, it also means that there must be `some sound positive ground or good reason for departing from the ordinary course': Australiawide Airlines at [54].
In Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6, 186 CLR 622 at 624 - 625, McHugh J held in a passage that has often been quoted:
When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra - curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action...
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried...
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution becomes futile, the proper exercise of the costs discretion will usually be that the court will make no order as to the costs of the proceedings. This approach has been adopted in a large number of cases...
McHugh J's observations as to the usual outcome were directed to an unchained discretion in the High Court Rules. In contrast, UCPR 42.20 and 42.19 create a starting point by requiring that the plaintiff must pay the defendant's costs of the proceedings unless that outcome is displaced by a discretionary decision. Consequently, observance of the starting point under UCPR 42.20 "will make this outcome less usual than it earlier was": Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [48] per Bryson JA (McColl JA agreeing). That also appears to have been the view of Basten JA at [64]. See also Johnson v Clancy [2010] NSWSC 1301.
Thus, where proceedings against a defendant are dismissed, as in the present case, the starting point under r 42.20 is that the plaintiffs are to pay the defendant's costs and the onus is on the plaintiffs to displace that starting point.
The plaintiffs submit that no order as to costs should be made because the second defendant did not cooperate in providing information as to the missing Folio Identifier before the proceedings commenced: see the pre - litigation correspondence reviewed above. The plaintiffs submit that the orders sought in the Summons against the second defendant were in the nature of mandatory injunctions in furtherance of the legal right to have trustees for sale appointed. Once they were appointed, they would need the Folio Identifier.
The second defendant submits that there was no juridical basis for the relief sought against him. He concedes, however, that the trustees, once appointed, could have sought such orders.
I think that such orders could be sought in these proceedings consequential upon the appointment of trustees for sale. The Civil Procedure Act aims to avoid multiplicity of proceedings: eg see s 64(3).
However, the parties have consented to the proceedings being dismissed against the second defendant. The starting point therefore is that the plaintiffs must pay the second defendant's costs. There has been no determination of the question whether those orders would have been made against the second defendant if they had been pressed. In those circumstances, I do not consider that the plaintiffs have discharged their onus of establishing that no order for costs should be made as between them and the second defendant.
ORDERS
The orders of the Court are annexed hereto.
Decision last updated: 19 May 2011
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