Gleeson (Trustee), in the matter of Coster v Eggleton (No 2)
[2024] FedCFamC2G 873
•12 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Gleeson (Trustee), in the matter of Coster v Eggleton (No 2) [2024] FedCFamC2G 873
File number(s): SYG 887 of 2023 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 12 September 2024 Catchwords: BANKRUPTCY – costs – where trustee in bankruptcy of co-owner of two properties commenced an application against the other co-owner for orders under s 66G of the Conveyancing Act 1919 (NSW) (Conveyancing Act) on the basis that the trustee in bankruptcy held a 50% legal and equitable interest in both properties – where after a hearing the other co-owner was held to have successfully contended that in relation to one of the two properties she held an equitable interest greater than her 50% legal interest in that property – whether the usual order for costs made in applications under s 66G of the Conveyancing Act should be made in circumstances where the trustee in bankruptcy had no choice but to apply for an order under s 66G of the Conveyancing Act, where offers to settle had been made, but where nevertheless the trustee in bankruptcy failed on a dominant and separable issue – order made that the trustee in bankruptcy is entitled to 50% of his costs assessed on a party and party basis to be paid out of the proceeds of sale of the properties the subject of the s 66G application.
Legislation: Federal Court Rules 2011 (Cth), Part 40
Conveyancing Act 1919 (NSW), s 66G
Cases cited: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304
Gleeson (Trustee), in the matter of Coster v Eggleton [2024] FedCFamC2G 11
Kardos v Sarbutt (No 2) [2006] NSWCA 206
Spathis v Nanos (No 2) [2008] NSWSC 470
Division: General Number of paragraphs: 13 Date of last submission/s: 9 February 2024 Date of hearing: Decided on the papers Place: Sydney Counsel for the Applicant: Mr J Parrish Solicitor for the Applicant: Kerrs Law Pty Ltd The Respondents: Appeared in person ORDERS
SYG 887 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF DAMIEN CRAIG COSTER
BETWEEN: BRUCE GLEESON IN HIS CAPACITY AS TRUSTEE OF THE PROPERTY OF DAMIEN CRAIG COSTER, A REGULATED DEBTOR (DISCHARGED
ApplicantAND: NICOLE EGGLETON
First RespondentDAMIEN CRAIG COSTER
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
12 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.Unless the parties agree otherwise, the applicant be paid 50% of his costs of the proceeding assessed on a party and party basis pursuant to Part 40 of the Federal Court Rules 2011 (Cth), such costs to be paid out of the proceeds of sale of the “Properties” as identified in declaration 2 of the declarations made on 12 January 2024.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
On 12 January 2024 I delivered reasons for judgment (earlier reasons) on the basis of which I made a number of declarations and orders in relation to two properties which, in the earlier reasons, I identified as the GP Property and the Forest Hill Property (collectively Properties).[1] I also ordered that the parties file written submissions on the question of costs by 9 February 2024, noting that, unless by 16 February 2024 any of the parties were to notify the Court that he or she wishes there to be oral argument on costs, I would be at liberty to determine the question of costs on the papers. No party informed the Court that they wished there to be oral argument on costs.
[1] Gleeson (Trustee), in the matter of Coster v Eggleton [2024] FedCFamC2G 11
In these reasons for judgment, therefore, which assume familiarity with the earlier reasons, I consider the question of costs.
PARTIES’ SUBMISSIONS
The applicant (Trustee) submits that the respondents pay his costs, or, in the alternative, such portion of his costs as the Court may determine, out of the proceeds of sale of the Properties or, in the alternative, first out of the proceeds of sale of the Forest Hill Property and, to the extent the proceeds are insufficient to pay the Trustee’s costs, out of the proceeds of sale of the GP Property.
The Trustee makes the following submissions:
(a)In cases brought under s 66G of the Conveyancing Act 1919 (NSW) (Conveyancing Act), the usual order as to the costs of the proceeding is that they be paid on an ordinary basis, and that they be paid out of the net proceeds of sale prior to any distribution amongst the co-owners.[2]
[2] Applicant’s Submissions on Costs, [5] referring to Kardos v Sarbutt (No 2) [2006] NSWCA 206, at [28]-[31]
(b)A court might depart from making the usual order; and that may occur “where the matter is contested and issues of equitable entitlement fall to be decided”.[3] In those circumstances, the court will properly have regard to the principles stated by the New South Wales Court of Appeal in Bostik Australia Pty Ltd v Liddiard (No 2).[4] Under those principles, where issues of equitable entitlement have been contested, the question of costs will be determined not only by reference to whether those issues are “dominant and separable”, but also by reference to all of the circumstances of the case, including the conduct of the parties.[5] The conduct of the parties extends to making offers to resolve the subject matter of the proceedings.
[3] Applicant’s Submissions on Costs, [7], the quote being from McKay v McKay (Costs) [2008] NSWSC 256, at [7]
[4] Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, at [38]
[5] Applicant’s Submissions on Costs, [8]
(c)The Trustee had little choice but to commence the proceeding to obtain finality about his interest in the Properties, particularly given that the first respondent, Ms Eggleton, claimed she had an equitable interest that was greater than her legal interest in the Properties.
(d)The Trustee had endeavoured on six occasions to reach a reasonable settlement with Ms Eggleton. These consisted of the following offers for Ms Eggleton to purchase the Trustee’s interest in the Properties:
(i)on 26 September 2019 for $40,000;[6]
(ii)on 2 April 2020, the Trustee informed Ms Eggleton that the offer to accept $40,000 made on 26 September 2019 remained open;[7]
(iii)on 24 July 2020 for $12,000;[8]
(iv)on 31 July 2020 for $10,000 on the condition that Ms Eggleton incurred the legal costs of preparing a satisfactory deed to evidence the transaction;[9]
(v)on 6 April 2023 for $200,000;[10] and
(vi)on 29 June 2023 for $185,000.[11]
(e)Although there are no formal valuations of the Properties, there is evidence (to which I refer in the earlier reasons) from which the value of the Properties may be estimated.[12] On the basis of that evidence, and the mortgage debt that is secured on the Properties, the net value of the Trustee’s interest in the Properties is likely to be in the range of $109,500 to $559,500.[13]
(f)In those circumstances, the fairest outcome is to make the usual order as to costs.
[6] Earlier reasons, [37]
[7] Earlier reasons, [38]
[8] Earlier reasons, [41]
[9] Earlier reason, [41]
[10] Earlier reasons, [45]
[11] Earlier reasons, [47]. At [113] of the earlier reasons I incorrectly stated the Trustee’s offer was for $170,000
[12] The material is identified in the Applicant’s Submissions on Costs, [20], and [21]
[13] Applicant’s Submissions on Costs, [20]-[22]
Ms Eggleton, on the other hand, submits as follows.
(a)The matter went to court because the Trustee refused to look at Ms Eggleton’s claim that she had a greater than 50% equity in the GP Property “and this was most of the trustee’s argument that was brought to court”. Ms Eggleton could not negotiate fairly because she had no alternative but to argue that she had a greater equity, and this she succeeded in doing.[14]
[14] Respondent’s Submission About Costs, [1]
(b)Ms Eggleton truly believes she did everything she could to avoid the matter being before the courts. Ms Eggleton believes her offers were reasonable, noting she made the following offers:[15]
[15] Respondent’s Submission About Costs, [2]
(i)on 24 April 2019 for $5,000;
(ii)on 17 July 2020 for $7,000;
(iii)on 29 July 2020 for $9,000;
(iv)on 14 August 2020 for $10,000 (including costs);
(v)on 26 October 2022 for $15,000;
(vi)on 17 February 2023 for $70,000;
(vii)on 5 June 2023 for $98,918.44;
(viii)on 22 June 2023 for $105,000; and
(ix)on 10 July 2023 for $108,000.
(c)Ms Eggleton’s offers were based “on [her] actual valuation [she] obtained at the time due to the Trustee refusing to supply their valuations during these negotiations”.[16]
[16] Respondent’s Submission About Costs, [3]
PRINCIPLES
For the purposes of these reasons it will be sufficient if I refer to two authorities. The first is the judgment of Jagot AJ (as her Honour then was) in Spathis v Nanos (No 2):[17]
There is no disagreement between the parties with respect to principle. They have taken me to the decision of Kardos v Sarbutt (No 2) [2006] NSWCA 206, in particular, [28] to [31]. In [28] the Court observed that in proceedings under the Conveyancing Act, s 66G, costs were usually paid out of the proceeds of sale, the rationale being that the costs of such an application are incidental to ownership. And in [31] the Court observed that the substantial success of proceedings was “not to be judged merely by the circumstance that a plaintiff obtains an adjustment in his or her favour. It involves an evaluation of the outcome, in the light of the forensic and negotiating positions of the parties, such that it can be said that one party has been clearly more successful than the other…”.
To similar effect in Mckay v Mckay (Costs) [2008] NSWSC 256 at [7], Brereton J observed that in “straightforward s 66G applications, the prima facie rule is that the costs come out of the proceeds of sale, although that is not necessarily so where the matter is contested and issues of equitable entitlement fall to be decided.” In that matter his Honour drew an analogy between s 66G and partnership arrangements. To similar effect is the observation in Vollmer v Hauber Davidson (2007) DFC 95-400, specifically at [21] through to [23].
[17] Spathis v Nanos (No 2) [2008] NSWSC 470, at [2]and [3]
The second authority is the following passage from Bostik, which sets out the principles relevant to awarding costs in relation to the determination of particular issues in which the successful party did not succeed:[18]
The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows:
ŸWhere there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).
ŸIn relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.
ŸIf the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].
ŸWhether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).
ŸA separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].
ŸWhere there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.
[18] Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, [38]
DETERMINATION
Most of the hearing was taken up by a particular set of issues, namely, whether Ms Eggleton had contributed $63,000 out of a compensation amount she received towards the purchase price of $133,000 for the GP Property and, if so, whether those facts gave rise to a resulting trust. This set of issues was clearly dominant and separable from the other issue litigated in the hearing, namely, whether Ms Eggleton and the second respondent, Mr Coster, held their beneficial interests in the Forest Hill Property in the same proportion as they held their beneficial interests in the GP property. The litigation of the first set of issues, as reflected in the earlier reasons, involved extensive cross-examination, and extensive submissions on both the evidence and the law.
The determination of the second issue, on the other hand, turned on whether the sole proposition on which Ms Eggleton relied for claiming she had a greater than 50% equitable ownership in the Forest Hill Property was correct. That proposition was that Ms Eggleton and the second respondent, Mr Coster, held their beneficial interests in the Forest Hill Property in the same proportion as they hold their beneficial interests in the GP property (only) because Ms Eggleton and Mr Coster mortgaged the GP property as security for the loan they used to purchase the FH property. I held that the facts on which this proposition was based “are incapable of giving rise to a purchase money resulting trust”.[19]
[19] Earlier reasons, [104]
Considered alone, the Trustee’s having failed on a set of issues that occupied most of the time and effort in the proceeding would be a powerful factor in favour of departing from the usual rule that the costs on an application made under s 66G of the Conveyancing Act would be paid out of the proceeds of sale. It is necessary, however, to take into account the offers the parties had made to settle the matter; and here the following matters are relevant:
(a)First, had Ms Eggleton accepted any of the first four of the six offers the Trustee made, Ms Eggleton is likely to have been better off than the position she now finds herself in. In the absence of evidence of the value of the Properties at the time the offers were made, however, it is not open to me to find that Ms Eggleton acted unreasonably in not accepting the offers at the time she refused to accept them.
(b)Second, in the earlier reasons I found that, given the market appraisals that were available to the Trustee, the offers the Trustee made to sell to Ms Eggleton his interest in the Properties for $200,000, and then for $185,000, were not unreasonable.[20] That necessarily means that the Trustee did not act unreasonably in not accepting the offers Ms Eggleton made on 5 June, 22 June, and 10 July 2023.
(c)Third, there are no valuations of the Properties in evidence; and, for that reason, it is not possible to determine with any degree of certainty whether the Trustee would have been better off, had he accepted Ms Eggleton’s offers, or whether Ms Eggleton would have been better off had she accepted the last of the six offers the Trustee made.
(d)Fourth, given the matters I identify in (c), the history of the offers the parties made is a neutral factor when considering whether I should or should not make the usual order in applications under s 66G of the Conveyancing Act.
[20] Earlier reasons, [113]. I there incorrectly stated the Trustee’s offer was for $170,000 when, as I note at [47] of the earlier reasons, the Trustee’s offer was for $185,000.
There is a further matter that is relevant to whether I should or should not make the usual order; and that is that, for whatever reason, the Trustee and Ms Eagleton could not reach agreement about the severing of the co-ownership of the Properties; and, to that extent, the Trustee had little choice but to apply for orders under s 66G of the Conveyancing Act in relation to his interest in the Properties. That the Trustee had no choice but to apply for orders under s 66G, however, does not mean the Trustee is entitled to recover his costs in relation to a dominant and separable set of issues on which he did not succeed.
In the light of these matters, I consider it to be just that the Trustee recover from the proceeds of sale of the Properties 50% of his costs assessed on the ordinary basis, that is, on a party and party basis.
DISPOSITION
I propose to order that, unless the parties otherwise agree, the Trustee be paid 50% of his costs assessed on a party and party basis pursuant to Part 40 of the Federal Court Rules 2011 (Cth), such costs to be paid out of the proceeds of sale of the Properties.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 12 September 2024
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