Hughes v Sangster (No 3)
[2020] ACTSC 58
•4 March 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Hughes v Sangster (No 3) |
Citation: | [2020] ACTSC 58 |
Hearing Dates: | 20 and 25 February 2020 |
DecisionDate: | 4 March 2020 |
Before: | Mossop J |
Decision: | See [28] |
Catchwords: | EQUITY – SALE OF PROPERTY – Registrar appointed to sell property after the parties’ equitable interests had been determined – request for judicial advice pursuant to previous court orders – whether the Registrar can sell the property to the plaintiff – where the plaintiff makes no appearance on mental health grounds – where the plaintiff’s costs liabilities exceed the value of their equitable interest – Registrar may sell the property to the plaintiff |
Legislation Cited: | Civil Law (Property) Act 2006 (ACT), ss 244, 245 Conveyancing Act 1919 (NSW), s 66G Trustee Act 1925 (ACT), ss 63, 76, 79 |
Cases Cited: | Abbott v Pegler (1980) 1 BPR 9267 Hughes v Sangster [2019] ACTSC 178 ReDella Franca’s Caveat [1993] 1 Qd R 382 |
Parties: | Christina Hughes by her Guardian and Manager Warwick Samuel Hughes (Plaintiff) Martell Sangster (Defendant) |
Representation: | Counsel I Meagher (Plaintiff) No appearance (Defendant) A Nuttall (Registrar) |
| Solicitors Bradley Allen Love Lawyers (Plaintiff) No appearance (Defendant) Self-represented (Registrar) | |
File Number: | SC 478 of 2017 |
MOSSOP J:
Introduction
Following a trial in which there was a contest over the respective equitable interests held in a residential property by the plaintiff and the defendant, on 26 July 2019 I published my reasons and invited the parties to bring in orders to give effect to the conclusions that I reached: Hughes v Sangster [2019] ACTSC 178. On 1 August 2019 I made orders requiring the sale of the property and the distribution of the proceeds and orders in relation to costs: Hughes v Sangster (No 2) [2019] ACTSC 202.
At all times during the proceedings the sale of the property had been uncontroversial. The contest was over how the proceeds of the sale should be distributed and whether, prior to sale, the property should be held as a joint tenancy or as a tenancy in common.
The orders required the sale of the property and the distribution of the proceeds in the following order:
(a)towards the expenses associated with the sale;
(b)payment of 50% of the balance to the plaintiff;
(c)payment of 89.47% of the balance to the plaintiff;
(d)to payment of the plaintiff’s costs;
(e)to the payment of the defendant’s 10.53% interest.
Following the making of final orders and while the defendant remained represented by solicitors, the quantum of the plaintiff’s costs were agreed at $215,000, although there is also an agreement to which I will refer later in these reasons, to accept a lesser sum in certain circumstances. The result of the structure of the orders and the quantum of the plaintiff’s costs is that the defendant will receive no amount for her interest in the property as any proceeds she might otherwise have received will go towards the plaintiff’s costs.
Attempted sale of the property
The Registrar of the court was given the task of selling the property. Following the making of final orders, the Registrar took appropriate steps to market and sell the property. That process was delayed somewhat by the need to tidy up the property and the fact that the plaintiff and her husband continued to reside in the property. Both are elderly. The plaintiff has dementia. Her husband, Mr Warwick Hughes, has acted as her litigation guardian for the purposes of the proceedings.
The property was auctioned on 8 February 2020. It did not sell. Prior to the auction the Registrar had obtained a valuation of the property at $775,000. Mr Hughes considered that valuation to be low. The defendant indicated that the reserve price should be “at least mid $850,00 [sic] to be fair”. She also referred to a previous appraisal by a real estate agent of $900,000 to $1 million, or as high as $1.1 million if the property was maintained and cleaned up. Ultimately the Registrar set a reserve price of $825,000 for the auction. Only one bidder bid and the highest bid was $720,000. Mr Hughes behaved in a disruptive manner at the auction because of his dissatisfaction with the valuation of the property. Subsequently, an offer of $770,000 was made. That offer is no longer open.
The Registrar’s application
By Application in Proceeding dated 14 February 2020, the Registrar sought advice on a number of issues, including the price at which she should sell the property, whether it might be sold to the plaintiff, whether she was required to re-auction the property and what other steps she should take to sell it. I will refer to the specific issues later.
The application is framed as an application for judicial advice by a trustee under s 63 of the Trustee Act 1925 (ACT). That does not appear to be the appropriate source of power for reasons which I will explain. The application was amended so that it also invoked the power of the court under order 13 of the orders made on 1 August 2019. That order permitted, inter alia, the Registrar or the parties to apply to the court to obtain further relief to permit effect to be given to the orders. In my view, that extends to the giving of additional directions to the Registrar concerning the sale of the property.
The plaintiff’s application
Following an initial hearing for the purposes of the application by the Registrar, the plaintiff reengaged her lawyers and made an application to vary the final orders. The capacity to discharge the final orders was incorporated into those orders. They included (in order 13) the capacity to apply so as, inter alia, to “enable effect to be given to these Orders or the discharge thereof as are considered necessary or appropriate”. Thus, notwithstanding that the orders made were final, they incorporated within them the capacity for their discharge.
The orders sought by the plaintiff are that the plaintiff be able to acquire the defendant’s interest in the property by paying an amount of $44,752.50. Given that the defendant’s interest is a 10.53% interest in half of the property this reflects a value for the whole of the property of $850,000, that is, an amount significantly higher than the valuation of the property and an amount higher than the reserve price that the Registrar had set at the auction or any offer received to date.
The orders would avoid the need for the whole of the property to be sold to a third party and instead authorise, in substance, the sale of the defendant’s interest in the property to the plaintiff. Because the payment of the plaintiff’s costs are, under both existing and proposed orders, to be paid in preference to any payment out to the defendant, under both existing and proposed orders the defendant would receive nothing.
The elements of plaintiff’s proposal are:
(a)she pays or provides security to the Registrar in relation to the Registrar’s costs incurred to date in attempting to sell the property;
(b)she pays or is taken to pay $44,752.50 for the defendant’s 10.53% interest in a half share of the property (equivalent to 5.265% of the whole) which attributes a value of $850,000 to the property; and
(c)that amount is taken to be paid to her in partial satisfaction of the costs order in her favour.
The proposal to acquire the defendant’s interest based upon a valuation of $850,000 is a favourable one in that the property has been valued at $775,000. The proposed orders shift the costs of further marketing of the property and any further work to be done on the property prior to sale and the risks associated with any further sale to the plaintiff. Clearly if the valuation of the property obtained by the Registrar was too low, it also provides to the plaintiff any benefit of the sale above $850,000.
In addition to adopting a higher value for the property than it would sell at pursuant to the existing valuation, the effect of the orders proposed is to require that the plaintiff pay the costs incurred in the marketing and attempts to sell the property. That would mean that they would not be deducted from the sale proceeds and hence the defendant would not be required to bear any portion of them.
As I have indicated, because of the magnitude of the costs order in the plaintiff’s favour and the payment of those costs in preference to the payment of the defendant, no amount is to be paid to the defendant. Subject to one matter to which I will come in a moment, the defendant’s only interest in the outcome is in maximising the value of the property so that her entitlement to the proceeds is maximised and hence, because of its set off against her costs liability, her outstanding costs liability is minimised.
The one qualification upon this statement relates to the terms of the costs order that were made by consent. That order agreed costs at $215,000. However it permitted the defendant to pay, and required the plaintiff to accept in full satisfaction of the defendant’s costs liability, the amount of $150,000 if that amount was paid “within 7 days of the completed sale of the land… being conveyed by the Registrar of the Supreme Court pursuant to the order of Justice Mossop dated 1 August 2019”. That order was obviously agreed to in the context of the then existing final orders which required a sale of the property by the Registrar. The amendment of the final orders would have the effect of at least creating uncertainty as to whether order 2 might operate and more probably, preventing it from operating. The alteration of the orders as proposed by the plaintiff therefore may have the effect of denying to the defendant an opportunity of discharging her liability to the plaintiff for the reduced amount specified in order 2.
The plaintiff indicated a willingness to give certain undertakings so as to reduce or eliminate any prejudice to the defendant from the amendment to the orders.
The position of the defendant
Following the conclusion of the hearing it appears that the defendant terminated the retainer of her solicitors. The solicitors appeared at the various hearings as an interested party as they held a caveat over the property as security for their fees. Notwithstanding that she had terminated the retainer of her solicitors, no Notice of Intention to Act in Person was filed: see form 2.74, r 2802 of the Court Procedures Rules 2006 (ACT).
The defendant was not represented and did not appear at the hearings on 20 February 2020 or 25 February 2020 or today (4 March 2020). The Registrar has had some communication from her. The evidence of the communications between the Registrar and the defendant are consistent with her being mentally unwell. The defendant also provided, following the hearing on 25 February 2020, a letter from a treating consultant psychiatrist who indicates that she is being treated for major depressive disorder, generalised anxiety disorder, panic disorder and complex post-traumatic stress disorder. She is unable to focus to read relevant documentation and does not understand the content of them or what is being asked of her. As a consequence, the psychiatrist expressed the opinion that she does not currently have the capacity to deal with court proceedings. It indicates that she is making an application to the Queensland Civil and Administrative Tribunal in relation to the appointment of a guardian. The letter requests that the court case be deferred until there is someone in place to represent her.
Because the final orders incorporated a requirement for seven days’ notice I considered it appropriate to vary the orders made at the hearing on 25 February 2020, so as to ensure that no orders or directions were made until not less than seven days had passed from the service of the sealed copy of the plaintiff’s application and affidavit in support.
Consistent with the information received by the court, no submissions were received from her during this period and she did not appear.
Consideration
The submissions made by the Registrar and the plaintiff were not sufficient to permit a proper analysis of the position of the Registrar under the orders previously made by the court. In particular, while the Registrar was expressly appointed as trustee to “receive and apply the proceeds of sale” (order 11), she was not appointed as a statutory trustee for sale as for example would be the case under the specific statutory language in s 66G of the Conveyancing Act 1919 (NSW). Instead, in this case she was appointed to convey the property under s 79 of the Trustee Act. That is an alternative to the making of a vesting order and is appropriate to pick up the language of s 76 which does not require that there be a trustee for sale appointed. In the absence of proper submissions on the point it is not appropriate to determine whether or not the appointment of the Registrar pursuant to the present orders has the effect of terminating the interests of the plaintiff and the defendant. In particular, it is not appropriate to determine whether the making of the orders extinguished the equitable interests of the co-tenants at the point where the order was made: see Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 at 657-658 (and the cases referred to at footnotes 98 and 99 therein) and ReDella Franca’s Caveat [1993] 1 Qd R 382 and converts those rights into merely a right to their “rightful share of the proceeds”: Abbott v Pegler (1980) 1 BPR 9267 at 9270. It is for that reason that I refer simply to the Registrar rather than, as the Registrar’s application does, refer to the “Trustee for Sale”.
In summary, the position is that the property has been marketed for sale but not sold at what, according to the only formal valuation available, is its market price. The proposal put forward by the plaintiff is one which is more favourable than any previously identified offer. In my view, it is in the interests of the defendant that it be accepted unless, contrary to the probabilities, a better offer is forthcoming from the defendant or a third party. The issue is whether or not that should be done within the framework of the existing orders or whether it should be done by way of a variation of the orders previously made. The benefit of proceeding by way of a variation of the final orders previously made is that it produces a marginally more favourable outcome to the defendant because the plaintiff would bear 100% of the burden of the Registrar’s expenses rather than only approximately 95% of them. However, this difference is a marginal one.
In my view it is more appropriate to proceed by giving further direction to the Registrar pursuant to order 13 of the existing orders, rather than wholesale amendment of those orders. That is for four reasons. First, the defendant has not effectively participated in the Registrar’s application or the plaintiff’s application to amend the orders. Notwithstanding that proceeding by either route will be to the benefit of the defendant, it is safer to proceed within the framework of the existing orders and to avoid any question as to the capacity of the court to make such an amendment to final orders and to do so in circumstances where the defendant has not participated in the application. Second, it is not clear (based on the limited submissions received) that a compulsory sale of a part interest in the property may be achieved under s 244 of the Civil Law (Property) Act 2006 (ACT), although it is clear that a sale of the whole of the property to an existing part owner is contemplated by s 245. Third, proceedings in the framework of the existing orders avoids any of the complications associated with the terms of the costs order agreed between the plaintiff and the defendant. Fourth, proceeding within the framework of the existing orders maintains the flexibility of the Registrar to sell the property if for some reason a sale to the plaintiff does not proceed.
I do not consider it appropriate to adjourn the applications until the defendant appears. That is because:
(a)any directions will not adversely affect her interests;
(b)there is no certainty as to when she may be in a position to, or choose to, appear; and
(c)it is important to finalise the execution of the court’s orders promptly.
The matters upon which the Registrar has sought advice and direction, and the advice and direction are as follows. I have amended the terms of the request so that it refers to the Registrar rather than a trustee for sale.
(a)Whether the [Registrar] may sell the property at less than the valuation provided by Colliers dated 20 January 2020.
The Registrar may not sell the property at less than the valuation provided by Colliers unless another valuation is obtained by the Registrar which would indicate that the value of the property is less than that in the Colliers’ valuation.
(b)If not, whether the [Registrar] is required to seek a further valuation of the property.
The Registrar is not required to seek a further valuation of the property but may do so.
(c)Whether the [Registrar] may accept offers on the property through private treaty.
Yes.
(d)If so, whether the property may be sold to Mrs Christine Hughes. If so, on what terms.
So long as the total expenses of the Registrar (determined under order 12(a) of the orders dated 1 August 2019) do not exceed the sum of $44,752.50, the property may be sold to Mrs Christine Hughes on the following conditions:
(i)that the purchase price shall be $850,000;
(ii)that the purchaser may set off against the purchase price her entitlement to the proceeds of sale except for the sum of $44,752.50.
For the purposes of s 245 of the Civil Law (Property) Act 2006 (ACT) the court allows the plaintiff to purchase the property on those conditions.
(e)If not, whether the [Registrar] is required to re-auction the property.
If the property is not sold to the plaintiff, the Registrar is not required to but may re-auction the property.
(f)What, if any, directions the [Registrar] may give to Mrs Christine Hughes and Mr Warwick Hughes in respect of marketing the property, including but not limited to, repairs to the home, their attendance at open homes and any further auctions.
The submissions made were not sufficient to permit advice to be given on this subject. The powers of the Registrar are subject to order 10 made on 1 August 2019.
Given that the sale has not proceeded smoothly to date, I will not dismiss the plaintiff’s application for wholesale amendment of the orders and will simply adjourn that application with liberty to relist it on seven days’ notice.
The orders of the Court are:
1. Directions are given to the Registrar as set out in the answers to questions (a)-(f) of the reasons which I have just given.
2. The plaintiff’s Application in Proceedings dated 24 February 2020 is adjourned with liberty to have it relisted on seven days’ notice.
3. For the purposes of order 2, unless a Notice of Intention to Act in Person or a Notice of Appointment of Solicitor is filed by the defendant, notice may be given to the defendant by email to the following address [redacted].
| I certify that the preceding twenty-eight [28] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: |
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