Kanak & Anor v Villamere Pty Ltd & Anor No. Scciv-02-1804

KANAK AND ANOR v VILLAMERE PTY LTD AND ANOR
[2004] SASC 108
Land and Valuation Division

BESANKO J: The plaintiffs and the first defendant Villamere Pty Ltd (“Villamere”) were joint owners of two pieces of real property. The property is the land and buildings at 67 and 69 Beach Road, Coobowie, in the State of South Australia. There were units on the properties and they were let to members of the public. By late 2001, the commercial relationship between the two plaintiffs on the one hand, and Villamere on the other hand, had soured and there was a desire on the part of the plaintiffs and it seems Villamere to sever the relationship and sell the properties. The second defendant, Ms Raymond, is the sole director and secretary of Villamere. The plaintiffs instituted an action in the Land and Valuation Court in early December 2002 seeking orders for the partition or sale of the properties. Shortly after the action was instituted, the property at 67 Beach Road was sold by the joint owners to Villamere or Ms Raymond (the evidence does not make clear which) by agreement and without the need for an order of the court. However, an order of the court under Part 8 of the Law of Property Act 1936 (“LPA”) for the sale of 69 Beach Road was necessary, and that property was recently sold to a purchaser independent of the parties. The proceeds of sale were paid into court and part of the monies have been paid to the plaintiffs and Villamere in accordance with their respective interests in the property. A sum of $40,750.86 remains in court, and the plaintiffs and the defendants each make claims against the other which they say should be satisfied from the monies held in Court. The claims made by the respective parties came on for hearing before me. The claims are for relatively small amounts, and it is regrettable that a commercial resolution of the claims could not be reached.
Two issues arise in relation to most of the claims. First, is it within the jurisdiction of the Land and Valuation Court as established by Part 3A of the Supreme Court Act 1935 (“SCA”) to entertain the claim, and secondly (assuming it is within jurisdiction), is the claim made out on the facts. The defendants were unrepresented and, surprisingly, made no submissions on the question of jurisdiction. The plaintiffs’ submissions on the question of jurisdiction were very brief. In those circumstances, I have gone no further in terms of formulating the relevant principles than is necessary for the purposes of deciding this case.
Before considering the claims, I need to set out the relevant background facts. Unfortunately, some background matters were not the subject of evidence, and I am not able to make findings in relation to those matters.
Background
It was common ground between the parties that there was a partnership between the plaintiffs and Villamere, and that the partnership commenced in late 2000. It was said by the plaintiffs that the partnership had been dissolved, although precisely when this occurred and by what means was not the subject of evidence. As I understand it, there has been no settling of accounts between the partners. The business of the partnership was the letting of a number of units at 67 Beach Road and 69 Beach Road. Villamere appears to have had an interest in both properties before the commencement of the partnership, but the precise nature of its interest is unclear. At all events, at the establishment of the partnership, the plaintiff, Mrs Kanak, owned 50 undivided 150^th parts of each property, the plaintiff, Mr Mitchell, owned 37 undivided 150^th parts of each property and the first defendant, Villamere, owned 63 undivided 150^th parts of each property. It is not clear whether the properties became partnership property and there was no evidence or submissions directed to that question.
By late 2001 relations between the plaintiffs on the one hand and the defendants on the other, had soured and it became clear that the partnership would need to be dissolved.
The plaintiffs took steps to sell the property at 67 Beach Road and a contract was executed by the plaintiffs and by a third party. Villamere did not execute the contract. The plaintiffs brought proceedings for orders for the sale of the two properties and the distribution of the proceeds of sale. They also sought an order that Villamere and Mrs Raymond account for rent apparently received from a tenant of one of the units. As I have said, shortly after the action was commenced, one of the defendants purchased 67 Beach Road, Coobowie, and there was an accounting between the owners in accordance with their respective interests in the property. In due course this Court made an order for the sale of 69 Beach Road, Coobowie, and that property was recently sold.
As I have said, the parties make various claims against each other. I raised with the parties the question of the Land and Valuation Court’s jurisdiction to entertain the claims, or at least some of them. At the hearing, I was able to rule that some of the claims were beyond jurisdiction without the need to take evidence in relation to those claims. In relation to others, I was not able to rule at the time, and it was more efficient to take the evidence and defer my ruling until the exact nature of the claim was made clear, and I had had time to consider the question.
The Jurisdiction of this Court
This action was commenced in the Land and Valuation Court which is a division of the Supreme Court of South Australia (s 62C of the SCA). I am a judge of the Court. The Court is given the jurisdiction conferred on it under the various Acts listed in s 62D, including the LPA. Part 8 of the LPA contains the power to order the partition or sale of land or other property. Before an amendment in 1991 the “court” for the purposes of Part 8 of the LPA was defined in that Act to mean the Land and Valuation Court. By the amendment to the LPA in 1991 the Court was defined to mean the Supreme Court or a Judge of that Court, and by a later amendment the definition was extended to include the District Court and, in certain circumstances, the Magistrates Court. The effect of the amendment in 1991 is that it is possible to institute an action under Part 8 of the LPA in the general jurisdiction of this Court (s 17 SCA), and subject to the Rules of Court, to include in the action under Part 8 any other claims properly within the general jurisdiction of the Supreme Court. However, if the action is commenced in the Land and Valuation Court, as this action was, there is a limitation on the jurisdiction of that Court. Section 62D(5) provides:
“(5) The Court [the Land and Valuation Court] shall have the full jurisdiction exercisable by a single judge of the Supreme Court, but that jurisdiction shall be exercised by the Court only in respect of any cause, matter or proceeding that is before the Court in pursuance of this Part, or any other Act or any regulation under an Act.”
I think that the effect of s 62D is that the Land and Valuation Court has the jurisdiction conferred by the Act in question (in this case Part 8 LPA), but it does not have any wider or more general jurisdiction. The question then becomes, what is the scope of the jurisdiction under Part 8 and, in particular, what money or other claims may be entertained in an action under Part 8 claiming an order for partition or sale. An examination of the statutory provisions in Part 8 and the cases provides the answer to that question. Under the statutory provisions in Part 8 of the LPA, the Court is given the power to make various orders and directions. Relevantly for present purposes, the Court can make orders for the partition or sale of land or other property and a distribution of the proceeds, and may make all necessary or proper consequential directions.
The question of what is properly included within an action claiming an order for partition or sale was considered by Jacobs J in Chatterton v Chatterton (1989) 52 SASR 337. One of the tenants in common of a property sought an order for the partition or sale of the property. The tenants in common were also partners, and there were separate proceedings on foot for the dissolution of the partnership. At that time by reason of the definition of “court” in the LPA, the action claiming an order for partition or sale had to be brought in the Land and Valuation Court. In addition to the claim for an order for partition or sale, one of the co-tenants claimed from the other, occupation rent, losses caused by the management of the land following the exclusion of a co-tenant and compensation for damage caused to a residence on the property. The question was whether those claims were within the jurisdiction of the Land and Valuation Court hearing an application for an order for partition or sale. Jacobs J referred to the following two paragraphs from Story, Equity Jurisprudence (14^th ed, 1918, Ch xiv) pp 661 – 663:
“654. In regard to partitions there is also another distinct ground upon which the jurisdiction of Courts of Equity is maintainable, as it constitutes a part of its appropriate and peculiar remedial justice. It is that Courts of Equity are not restrained, as Courts of Law are, to a mere partition or allotment of the lands and other real estate between the parties according to their respective interests in the same and having a regard to the true value thereof. But Courts of Equity may, with a view to the more convenient and perfect partition or allotment of the premises, decree a pecuniary compensation to one of the parties for or equality of partition, so as to prevent any injustice or unavoidable inequality. This a Court of Common Law is not at liberty to do; for when a partition is awarded by such a court, the exigency of the writ is that the sheriff do cause, by a jury of twelve men, the partition to be made of the premises between the parties, regard being had to the true value thereof, without any authority to make any compensation for any inequality in any other manner.
655. Cases of a different nature involving equitable compensation to which a Court of Law is utterly inadequate may easily be put; such for instance as cases where one party has laid out large sums in improvements on the estate. For although under such circumstances the money so laid out does not in strictness constitute a lien on the estate, yet a Court of Equity will not grant a partition without first directing an account and compelling the party applying for partition to make due compensation. So where one tenant in common has been in the exclusive perception of the rents and profits on a bill for a partition and account, the latter will also be decreed. So where one tenant in common, supposing himself to be legally entitled to an equitable partition of the premises, so as to give him the benefit of his improvements; or if that cannot be done, he will be entitled to a compensation for those improvements. Equity will incidentally settle an account between, and charge one who occupies to the exclusion of the rest with occupation rent. (Pascoe v Swan (1859) 27 Beav 508; 54 ER 201)”
A Court of Equity hearing a suit for partition had the power to order that an account between the co-owners of property be taken, and that on the taking of the account, claims for occupation rent, the value of improvements and the receipt of rents and profits should be taken into account. In Scapinello v Scapinello [1968] SASR 316, Bright J considered claims for principal and interest paid under a mortgage over the property, rates and taxes, fire insurance premiums, improvements and occupation rent in an action for partition or sale, although the case was decided before the establishment of the Land and Valuation Court by Part 3A of the SCA.
In Croghan v Grosvenor (1991) 57 SASR 545, Debelle J held that the Land and Valuation Court, hearing a claim for an order for partition or sale, could hear and determine a claim by the defendant that he was entitled to a 75 per cent interest in the property, rather than the 50 per cent interest shown on the certificate of title. Debelle J referred to s 62D(5) of the SCA and said (at 550):
“The effect of s 62d(5) is that for the purpose of determining the issues which arise in respect of matters within its jurisdiction, the Land and Valuation Court is invested with all of the jurisdiction and powers both in law and in equity which are vested in the Supreme Court by Pt II of the Supreme Court Act. The effect of the proviso to s 62d(5) is that the exercise of those powers must be ancillary to the relief which invokes the jurisdiction of the Court. Thus, say, if in an action for partition, there is a claim for other ancillary relief of any kind, the Court can hear and determine the claim for ancillary relief in addition to the principal claim.”
In a claim for partition or sale under Part 8 of the LPA, the Land and Valuation Court may entertain claims for ancillary relief. A claim for ancillary relief includes the types of claim traditionally entertained by a Court of Equity in a suit for partition as identified in Chatterton v Chatterton (supra), and a claim for a greater interest in property than is shown on the certificate of title (Croghan v Grosvenor (supra)).
In a case where joint owners of property also conduct a business in partnership on the property there are likely to be claims properly characterised as claims for ancillary relief in a claim for an order for partition or sale which might otherwise have formed part of a settling of accounts between partners ordered by the court in the exercise of its general jurisdiction (s 17 SCA). However, not all claims related to the partnership are claims for ancillary relief. At the very least, to be a claim for ancillary relief the claim must relate to an issue as to the ownership of the property, its use by one of the joint owners, damage to the property by one of the joint owners or improvements to the property by one of the joint owners. In this case, I do not have to state the principle with any greater precision than I have because I think the claims which are beyond jurisdiction are clearly beyond jurisdiction.
I will deal with the plaintiffs’ claims first, and I will deal with them in the order in which they were put forward.
The Plaintiffs’ Claims
1 The Claim for Costs
The plaintiffs seek an order for costs against the defendants to be taxed on a solicitor and client basis. Clearly, there is no issue as to jurisdiction in relation to this claim.
I have read the affidavit material and I have considered the evidence. The plaintiffs are entitled to an order for costs in their favour for two reasons. First, the plaintiffs had no choice but to institute the action. The defendants did not act reasonably or expeditiously in the period from early October to early December 2002 in the sense that the sale of 67 Beach Road could have been effected without the need for Court action but for their attitude. Secondly, I am satisfied that the delay in resolving the action once instituted is largely, if not entirely, due to the conduct of the defendants. Had the defendants adopted a more sensible approach, the sale of 69 Beach Road might have been effected without the need for the various attendances before this Court.
In addition to these considerations, I take into account the fact that the defendants have been substantially unsuccessful on the applications I am presently dealing with. Those applications have occupied a full day in terms of hearing time.
Although the defendants should pay the plaintiffs’ costs, I see no reason to order that that be done other than on the usual party and party basis. No doubt the defendants might have acted in a way which would have facilitated an earlier resolution of the plaintiffs’ claim, but I do not think that any of the factors which usually support an order for costs on a solicitor and client basis are present in this case.
I will make an order that the defendants pay the plaintiffs’ costs of action on a party and party basis.
2 The Claim for Rent in relation to Unit 8
The parties are agreed that before Villamere or Ms Raymond purchased 67 Beach Road, the defendants received $4,108.00 in relation to the letting of Unit 8, 67 Beach Road, and of that amount there is an obligation on the defendants to account to the plaintiffs in the sum of $2,424.40. The claim by the plaintiffs for this amount is properly described as a claim for ancillary relief and is within jurisdiction of this Court. It should be brought to account in relation to the monies standing in Court.
3 The Claim for Hot Water Heaters supplied to the Properties
Two hot water heaters were purchased from Adelaide Plumbing and Building Centre in November 2000 and May 2003 respectively, and installed on the properties. The two accounts from Adelaide Plumbing and Building Centre are for $538.51 and $718.30 respectively. The manager of Adelaide Plumbing and Building Centre, Mr Manuel Dimourtzidis, gave evidence, which I accept, that these accounts have not been paid.
Ms Raymond’s evidence on the question of these accounts was very confusing. She told me that at one time Villamere had an interest in Adelaide Plumbing and Building Centre. She did not challenge the account for $718.30. She told me that Villamere had obtained the first hot water heater free of charge. She also said that if any party was liable for the account for $538.51, it is Villamere. At the same time, she said that if Villamere paid the account, it would seek a contribution from the plaintiffs.
I find that the two hot water heaters were purchased and placed in the units. They represent improvements to the properties and are partnership liabilities. The claim in relation to them is a claim for ancillary relief and within the jurisdiction of this Court. The two amounts are outstanding and I will hear from the parties as to the precise order which should be made so as to ensure that each partner makes the appropriate contribution.
4 An amount paid from the Partnership Account to Ms Raymond in relation to an account of Adelaide Plumbing and Building Centre
In December 2000 a cheque was drawn on the partnership account in the sum of $688.50 and made payable to Villamere. The cheque was given to Ms Raymond. It was understood that Ms Raymond would use the money to pay the first account from Adelaide Plumbing and Building Centre, although why the amounts are different was never made clear in the evidence. Ms Raymond did not pay the money to Adelaide Plumbing and Building Centre. I do not think the claim for this amount is a claim for ancillary relief and it is not within the jurisdiction of the Land and Valuation Court. It is a claim for an accounting between partners in relation to money entrusted to a partner for a particular purpose, but not used for that purpose.
5 Amounts paid by the Plaintiffs to SA Water, AGL and QBE Insurance
The plaintiffs paid amounts to SA Water, AGL and QBE Insurance which amounts were expenses of the partnership business and for which they claim a contribution from Villamere. There is no dispute about the contribution due in relation to the accounts from SA Water and AGL. The account from QBE Insurance relates to insurance effected in 2003 over the property at 69 Beach Road. The claim in relation to the insurance policy is disputed by the defendants who say that Villamere was not included as an insured in the policy. I accept the evidence of Ms Mitchell-Smith in relation to this claim. I find that the account from QBE Insurance relates to insurance over the property which the plaintiffs had to arrange because Ms Raymond did not attend to a renewal notice. I find that it is a liability of the partnership and it relates to the property at 69 Beach Road. It is properly described as a claim for ancillary relief as are the claims in relation to the accounts from SA Water and AGL. The claims should be brought to account in terms of the monies standing in Court.

I should mention that there is a possibility of a refund in relation to the premium and that should be recognised in the proposed orders to be brought forward by the plaintiffs.
6 Cleaning account from Mr Gibbs
Mr Gibbs carried out maintenance and clean up work on the property at 69 Beach Road as part of the preparation of the property for the auction which was the subject of the order of the Court. I am satisfied that the work was necessary and appropriate and that Mr Gibbs’ account should be paid from the monies in Court. An order to this effect is clearly within the jurisdiction of the Land and Valuation Court.
I turn now to consider the defendants’ claims.
The Defendants’ Claims
The defendants made nine claims. As I have said, I was able to rule that three of the claims were not within the jurisdiction of the Land and Valuation Court and no evidence was called in relation to those claims. A fourth claim was agreed and there was no need to call evidence with respect to it. As to the remaining five claims I was not in a position to rule on whether they were within jurisdiction until I had heard evidence which explained the nature of the claims and I had time to consider the question.
1 The Three Claims which I ruled are not within the jurisdiction of the Land and Valuation Court
First, the defendants claim that they were wrongfully refused access to the partnership records by the plaintiffs, and that this has caused considerable delay in the filing of their respective taxation returns. The defendants anticipate suffering loss in the form of an obligation to pay penalties as a result of the delay. They wish to claim that anticipated loss from the plaintiffs. This claim involves the rights of partners to gain access to partnership records. It has nothing to do with the properties, and is not ancillary to the claim for an order for the partition or sale of the properties. It is not within the jurisdiction of the Land and Valuation Court.
Secondly, the defendants claim that Coobowie Lodge Pty Ltd owned some furniture and fittings which were kept in, or are part of, the buildings and improvements of 69 Beach Road, Coobowie, and that the items of furniture and fittings were wrongfully transferred to the third party purchaser of 69 Beach Road. This claim must fail because Coobowie Lodge Pty Ltd is not a party to this action. Even if it was a party, it was never a joint owner with the plaintiffs of either property, and in those circumstances its claim for relief is not ancillary to the claim for an order for partition or sale.
Third, the defendants claim that certain invoices for advertising and other expenses which were presented to the partnership and paid from the partnership bank account were fraudulent and should not have been paid. This claim may be included in a settling of accounts between partners. However, it is not a claim which is ancillary to a claim for an order for the partition or sale of the properties.
2 The Agreed Claim
Mrs Rhody Short was the parties’ caretaker in relation to the properties. She received certain monies representing deposits and payments in relation to units 1, 2 and 3, 67 Beach Road, Coobowie, after 20^th December 2002, that is to say, the date upon which Villamere or Ms Raymond settled on the purchase of that property. The plaintiffs agree that the monies held by Mrs Short are monies to which Villamere or Ms Raymond is entitled. I am not convinced that it is a claim for ancillary relief, and therefore within the jurisdiction of the Land and Valuation Court, but I will give the parties an opportunity to carry out their agreement.
3 The Other Five Claims
(1) Claim for Missing Items in relation to the Purchase of 67 Beach Road, Coobowie by Villamere or Ms Raymond
Villamere or Ms Raymond settled on the purchase of the property at 67 Beach Road, Coobowie, on 20^th December 2002. They claim that certain items of personal property listed in the contract as forming part of the sale were missing on settlement. In other words, they were not transferred on settlement as required by the contract of sale and purchase.
I do not think that this is a claim for ancillary relief. The property at 67 Beach Road, Coobowie, was not sold pursuant to an order of the Court under Part 8 of the LPA but even if it had been, this is a claim that arises after settlement and is based on the contract for sale and purchase, and not on or arising out of the joint ownership of property.
(2) Claim for changing the locks at 67 Beach Road, Coobowie
Villamere or Ms Raymond will be required to change the locks at 67 Beach Road because (it is said) a master key for the units on both 67 and 69 Beach Road was given to the purchaser of 69 Beach Road. It was never made clear what obligation formed the basis of this claim, and in those circumstances, I am not satisfied that I have jurisdiction to entertain it. On the face of it, it is not a claim which is ancillary to a claim for an order for partition or sale.
(3) Claim for Loss resulting from the failure to let Unit 7, 69 Beach Road, Coobowie
The defendants claim that the plaintiffs wrongfully failed to let Unit 7, 69 Beach Road, for about two years (November 2000 – November 2002) and that the partnership suffered a loss as a result of this failure. She claimed $4,804.80 being her calculation of Villamere’s share of the loss. The calculation was two years rent at $110 per week giving a total of $11,440.00.
There is no evidence that Villamere or Ms Raymond were excluded from Unit 7, 69 Beach Road. The claim is not a claim for occupation rent, nor is it a claim for rent received by one co-owner who has an obligation to account to another co-owner. The basis of the claim is that two members of a three member partnership failed to carry out properly an obligation to manage the business of the partnership. It is not a claim which is ancillary to a claim for an order for partition or sale.
In any event, I think the claim fails on the facts. Ms Raymond’s evidence was quite imprecise, and I am satisfied from Ms Mitchell-Smith’s evidence (which I accept) that Unit 7 was, through no fault of the plaintiffs, uninhabitable during the relevant period.
(4) Contribution Towards Expenses
Villamere paid certain invoices in relation to improvements to the properties (ie., water service ($538.59), vanity unit ($418.00) and washing machine ($100.00)). Villamere claims a contribution from the plaintiffs in relation to these expenses. The incurring of the expenses was not seriously challenged and I find that they were incurred by Villamere. They are within the jurisdiction of this Court, and they are similar to the plaintiffs’ claims in relation to the two accounts of Adelaide Plumbing and Building Centre. They should be dealt with in the same way. The claim in relation to bedsheets is not within the jurisdiction of this Court. It is not a claim for ancillary relief. In any event, some allowance would have to be made for the fact that the bedsheets were later returned to the defendants.
(5) Claim for Funds received by Elders
It seems that Elders received a payment for rent in relation to one of the units which the parties agree is payable to Villamere or Ms Raymond because the rent related to a period after Villamere or Ms Raymond had become the owner of 67 Beach Road. It is not clear who presently holds the monies. This claim falls into the same category as the deposits and other monies held by Mrs Rhody Short and should be dealt with in the same way.
Conclusions
My conclusions are as follows:
1There will be an order that the defendants pay the plaintiffs’ costs of action on a party and party basis to be taxed in default of agreement. Such costs are to be paid from the defendants’ share of the monies standing in Court.
2The defendants are to pay from their share of the monies standing in Court the sum of $2,424.40 being the plaintiffs’ share of the rent received for unit 8, 67 Beach Road.
3The invoices from Adelaide Plumbing and Building Centre and Mr Gibbs respectively are to be paid from the monies standing in Court in proportion to the respective interests of the plaintiffs and Villamere.
4The defendants’ share of the liabilities to SA Water, AGL and QBE Insurance are to be paid from the defendants’ share of the monies in Court.
5The following claims are not within the jurisdiction of the Land and Valuation Court.
5.1The plaintiffs’ claim in relation to the sum of $688.50 paid to Villamere.
5.2The defendants’ claim in relation to the alleged refusal by the plaintiffs to provide access to the partnership records.
5.3The claim by Coobowie Lodge Pty Ltd in relation to furniture and fittings.
5.4 The defendants’ claim in relation to the alleged fraudulent invoices.
5.5The defendants’ claim in relation to the alleged missing items on the settlement of 67 Beach Road.
5.6The defendants’ claim in relation to the changing of the locks at 67 Beach Road.
5.7The defendants’ claim in relation to the alleged failure to let unit 7, 69 Beach Road.
6The plaintiffs’ share of the liabilities for the water service, vanity unit and washing machine are to be paid from the plaintiffs’ share of the monies standing in court.
7I will give the parties the opportunity to resolve the claims relating to the monies held by Mrs Short and the cheque for rent paid to Elders.
The plaintiff must bring in minutes of order which reflect these conclusions.

[2004] SASC 108

30 April 2004