Michael Charles Littlely as executor of the estate of the late Elspeth Mary Littlely v Leslie Raymond Gard [No 6] - [2023] WASC 106

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   MICHAEL CHARLES LITTLELY as executor of the estate of the late ELSPETH MARY LITTLELY -v- LESLIE RAYMOND GARD [No 6] [2023] WASC 106
CORAM:   TOTTLE J
HEARD:   30 MARCH 2023
DELIVERED          :   30 MARCH 2023
FILE NO/S:   CIV 2145 of 1990
BETWEEN:   MICHAEL CHARLES LITTLELY as executor of the estate of the late ELSPETH MARY LITTLELY
Applicant
AND
LESLIE RAYMOND GARD
Respondent

Catchwords:

Practice and procedure - Application for suspension order - Where application granted for the sale of the property - Section 15 Civil Judgments Enforcement Act 2004 (WA) - Whether special circumstances existed justifying a suspension of the order for the sale of the property - Turns on own facts

Legislation:

Civil Judgments Enforcement Act 2004 (WA), s 15

Result:

Application for suspension order dismissed
Order for the sale of the property be varied

Category: B

Representation:

Counsel:

Applicant	:	M Rogers
Respondent	:	A Sidhu

Solicitors:

Applicant	:	Michael Rogers & Associates
Respondent	:	Rekhraj Legal

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

Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Gard v Littlely (Unreported, WASCFC, Library No 8884, 21 May 1991)
Littlely v Gard (Unreported, WASC, Library No 8693, 29 January 1991)
Littlely v Gard [No 5] [2022] WASC 394
Sims v Suda Ltd [No 2] [2015] WASC 180
Stefanovski v Digital Central Australia (Assets) Pty Ltd [2017] FCA 1121
Tomcsanyi v National Australia Bank Ltd [2019] WASCA 154

TOTTLE J:

Introduction

On 22 November 2022 an order was made that 30 Thorne Road, Hacketts Gully (the Property) be sold and the net proceeds of sale be paid into court pending further order. The defendant, a tenant in common with a one-half interest in the Property, has applied for a stay of the order pursuant to s 15 of the Civil Judgments Enforcement Act 2004 (WA). The plaintiff is the tenant in common who holds the other one-half interest. He holds that interest in his capacity as the executor of the estate of his late mother, Ms Elsbeth Littlely, and he opposes the application.
The defendant is 87 years of age. He has lived on the Property for over 40 years. He contends that when the remaining issues in the present proceedings are determined by the taking of accounts it will be established that Ms Littlely's estate owes him a sum greater than the value of the estate's interest in the Property and the sale may be unnecessary. The defendant contends that the order for sale will have the effect of rendering him homeless and thus, selling the Property before the accounts are settled, would be unjust.
At the conclusion of the hearing I gave brief reasons for concluding that the order for sale should not be suspended but that the order that the net proceeds of sale be paid into court should be varied to provide that the net proceeds of sale be divided between the parties and paid to them. I said that I would publish more detailed written reasons and these are those reasons.

Factual and procedural background

The tortuous procedural background is set out in the reasons published by Curthoys J for ordering the sale of the Property and I gratefully adopt his Honour's account and incorporate it in these reasons.[1]
[1] Littlely v Gard[No 5] [2022] WASC 394.
The background to the original dispute may be summarised as follows. In about 1976 Ms Littlely and the defendant began living together in a de facto relationship. In 1977 they agreed to buy the Property which had been developed as an orchard but was somewhat run down. The vendor was Ms Littlely's brother-in-law. The purchase contract was a terms contract and title to the Property was not transferred to Ms Littlely and the defendant until 1987 when it was transferred to them as tenants in common in equal shares.
The defendant was a tool maker by trade. Ms Littlely had experience in the management and operation of orchards. It was agreed between them that Ms Littlely would manage the orchard and the defendant would continue to work as a tool maker. It is common ground that this arrangement formed the basis of a partnership between Ms Littlely and the defendant.
For each financial year ending 30 June 1978 to 30 June 1989 financial statements were prepared in respect of the partnership by a firm of accountants. A partnership bank account was opened into which both income from the orchard and the defendant's wages were paid.
In about 1980 a house was built on the Property and it became Ms Littlely's and the defendant's home.
In 1989 the personal relationship between Ms Littlely and the defendant broke down completely. Ms Littlely moved out of the house on the Property. She also stopped working the orchard. The circumstances in which this occurred are contentious. For present purposes it is sufficient to record that it has been found in these proceedings that there was an equal partnership between Ms Littlely and the defendant and it was dissolved with effect from 1 October 1989.
Ms Littlely commenced proceedings in 1990. She sought declaratory relief to the effect that since about 1977 she and the defendant had been partners in equal shares in the business of orchardists and sought orders that the partnership be wound up and that all necessary accounts and inquiries be taken.
Ms Littlely applied for summary judgment and she succeeded in her application before Master Bredmeyer,[2] and the substantive judgment was upheld on appeal,[3] though some of the orders made by the Master were set aside.
[2] Littlely v Gard (Unreported, WASC, Library No 8693, 29 January 1991).
[3] Gard v Littlely (Unreported, WASCFC, Library No 8884, 21 May 1991).
The defendant's position is that the partnership financial statements did not reflect the financial position of the partnership and, in particular, did not accurately record the financial contributions made by each of the partners. I set out some of the defendant's affidavit evidence in which he summarises his concerns later. One of his primary concerns is that the contributions he made to the capital of the partnership by the payment of his wages into the partnership bank account were understated and, on the other hand, Ms Littlely's contribution of capital was overstated. Further, the defendant alleges that Ms Littlely failed to account for partnership funds and for various partnership assets.
The defendant has remained in exclusive possession of the Property since October 1989. Ms Littlely alleged the defendant had failed to account for income derived from what was formerly the partnership business from October 1989 onwards. The defendant made no payments to Ms Littlely in respect of his use and enjoyment of the Property until 2001 when, as explained below, he started to pay $500 per month.
Ultimately, from a procedural perspective, the issues raised by the defendant fell to be determined in the context of the taking of partnership accounts. In June 1993 the defendant made an application for directions for the taking of accounts. The directions sought by the defendant made it clear that what he sought was a re‑opening of the financial arrangements between him and Ms Littlely over the 11 years of their partnership. Directions were made that required the defendant, in effect, to file and serve a statement setting out his complaints in relation to the partnership's financial statements and identify the respects in which Ms Littlely had failed to account properly and for Ms Littlely to file and serve an answer. These directions were complied with and subsequently each side filed and served witness statements in support of their respective positions.
In April 1996 there was a hearing at which evidence was given by one of the accountants who had prepared the financial statements of the partnership. The hearing was adjourned after two days because another accountant who had been involved in the preparation of the financial statements was not available to give evidence. It was left to the parties to organise the relisting of the hearing but neither side appear to have taken any steps to do so or, indeed, to take any other steps to advance the resolution of the issues between them until 2000.
In August 2000, Ms Littlely brought an application for the appointment of a receiver or for the sale or the partition of the Property. The application was heard on 29 January 2001 and a springing order was made in the following terms:
1. Unless within three (3) months of the date of this order the defendant pays into an interest bearing account in the joint names of the solicitors for the plaintiff and the solicitors for the defendant the sum of $100,000.00 the freehold property known as Hackett's Gully (Lot 10 the subject of diagram 51932 and being the whole of the land in Certificate of Title volume 1489 Folio 339) be sold under the direction of the Court.
2. If the monies are paid in accordance with paragraph 1 they are to be held pending the final resolution of the partnership dispute between the parties or until further order.
3. If the monies are not paid in accordance with paragraph 1 there be liberty to apply on 7 days' notice for orders concerning the terms and conditions on which the property is to be sold.
The springing order was not enforced because an agreement was reached between the parties on terms set out in a letter from Ms Littlely's solicitor dated 8 May 2001. The agreement was expressed as follows:
I confirm that as an interim measure pending the final determination of this matter, my client will be agreeable to accept non-refundable rent payments from your client at the rate of $500.00 per month commencing on the 1st May 2001.
If any rent payment is not received within 7 days of due date (apart from the first rent payment which you have advised is already in your Trust Account which we hope will be forward to ourselves shortly), my client will be entitled to immediately proceed with an application for sale of the Hackett's Gully property.
Under no circumstances will the rent payments which your client is agreeable to make be refundable by my client.
I enclose a duplicate copy of this letter for your client or your firm to sign on your client's behalf and return to me to indicate acceptance of the interim arrangement.
Ms Littlely died on 3 March 2020. In May 2020 the defendant stopped making the monthly payments of $500. The plaintiff made a claim in the Magistrates Court for the outstanding monthly payments but the claim was dismissed on the ground that the court did not have jurisdiction to entertain the claim under the Residential Tenancies Act 1987 (WA).
The plaintiff's application for sale of the Property was made by chamber summons filed on 15 December 2021. The defendant filed an affidavit in opposition to the application on 8 March 2022 and the application was heard in May 2022.
On 1 February 2023 a real estate agent appointed by the plaintiff to sell the Property received an offer to purchase the Property for the price of $910,000.
On 15 March 2023 the defendant filed and served a notice of intention to proceed with the hearing that was adjourned part heard in April 1996. The defendant had taken no other steps to progress the taking of the partnership accounts.

The statutory provision and guiding principles

Section 15 of the Civil Judgments Enforcement Act permits a person against whom a judgment is given to apply for an order to suspend part or the whole of the enforcement of a judgment. Section 15(1) is as follows:
(1)A person against whom a judgment is given may apply for an order suspending the enforcement of all or part of the judgment to -
(a)the court that gave the judgment; or
(b) a court that is dealing with an appeal against the judgment.
Section 15(3) provides that the court may only make such an order under s 15(1) if 'there are special circumstances that justify doing so'.
The general principles which apply to an application for a stay are not materially different from those which apply to an application for a suspension order under s 15. Expressed by reference to their application to a stay pending an appeal, the principles are as follows:[4]
(a)The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.
(b)It is for the applicant for a stay to move the court to a favourable exercise of its discretion.
(c)It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.
(d)The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.
(e)If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.
(f)If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
[4] See Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308; Sims v Suda Ltd [No 2] [2015] WASC 180; Tomcsanyi v National Australia Bank Ltd [2019] WASCA 154.

Outline of the opposing contentions

Outline of the defendant's primary contentions

First, the foundational proposition on which the defendant's application rests is that when the process of the taking of the partnership accounts is completed it will be found that Ms Littlely's estate owes him more than the value of her interest in the Property. The defendant contends because the plaintiff has not joined issue with his affidavit evidence the court should accept that Ms Littlely was indebted to him in a sum far exceeding the value of her interest in the Property.
In an affidavit affirmed by the defendant on 29 December 2022 he summarised his position in relation to the accounts as follows:
32.Without going into further detail of the inconsistencies apparent from the accounts of the partnership, mentioned above (which are not exhaustive), I believe the deceased Plaintiff (or her estate) would have to account for and provide to my credit the following sums:
i.Half of the salary of $53,660.00 wrongfully drawn over the years, this figure would be $26,830.00.
ii.A full account of the entire wages I paid to the deceased Plaintiff from 1977-1988 amounting to $127,047.00.
iii.Half the value of the Toyota car ($11,000.00) kept by the deceased Plaintiff after dissolution of the partnership - $5,500.00.
iv.Half the sum of $49,000.00 as admitted by the deceased Plaintiff as standing to the credit of our joint account in 1989 - $24,500.00.
v.Half the sum of $3,000.00 received from the deceased Plaintiff's son as a repayment of a loan - $1,500.00.
vi.The sum of $6,000.00 the deceased admits owing me.
33.I reiterate that the figures quoted above are not exhaustive but are used to indicate the potential minimum quantum involved as far as the amount I ought to be credited with is concerned. This amount will have to be set off against the deceased Plaintiff's half share as a tenant-in-common from the proceeds of sale of The Property in question.
34.However, it must be appreciated that the figures quoted above are figures for the years 1977-1989. The issue of inflation would have to be taken into account in making adjustments to those figures to bring them in line with current values, especially when they are being applied to the present-day valuation of The Property in question.
Current Valuation of the Disputed Sums
35.The total sum of the figures set out in paragraph 32 above is $191,377.00.
36.The value of this 1989 sum in 2022 (after taking inflation into account), would be $458,289.61. This figure is derived from an inflation calculator available online.
37.As my house has been valued at $200,970.00, the total sum due to me from the proceeds of sale and set off against the Plaintiff's half share would be $659,259.61 ($458,289.61 + $200,970.00).
38.The Property in question has been valued at a reserve price of $870,000.00 for the purposes of an auction. The Plaintiff's half share as a tenant-in-common of the proceeds of sale of The Property would theoretically be half of that sum (minus the $200,970.00 due to me as the value of my house), leaving approximately $669,030.00 for equal division.
39.The resultant half share the Plaintiff is legally entitled to from the sale of The Property would be $334,515.00. (After deducting the costs of the house).
40.Against the above figure, a sum of $458,289.61 representing what is owed to me from the partnership and/or the deceased Plaintiff personally, would have to be set off. Even after this set off is applied against the deceased Plaintiff's share in the proceeds of sale of The Property, the Plaintiff would be indebted to me in the sum of approximately $123,774.61. ($458,289.61 - $334,515.00), over and above his share in the proceeds of sale.
Secondly, as is apparent from the extract from his affidavit of 29 December 2022 the defendant contends that he is solely entitled to the value of the house on the Property.
Thirdly, the defendant contends that selling the Property and paying the proceeds of sale into court serves only to disadvantage him and provides the plaintiff with no advantage because the plaintiff will still be in the position of having to wait for the taking of accounts to be completed before he would be in a position to have access to the proceeds of sale of the Property. Putting the point in a slightly different way, the defendant says that there is no reason to sell the Property before the taking of accounts is completed because no advantage will accrue to the plaintiff by so doing.
Fourthly, relying on the decision of Derrington J in Stefanovski v Digital Central Australia (Assets) Pty Ltd[5] the defendant contends that special circumstances are no longer a prerequisite for a stay, though he contends that there are, in fact, special circumstances.
[5] Stefanovski v Digital Central Australia (Assets) Pty Ltd [2017] FCA 1121 [4].
Fifthly, if a stay is not ordered and the outcome of the taking of accounts is as he contends it will be, it would be impossible for the status quo to be restored. The defendant will have lost his home - to which he has a deep sentimental attachment - with no prospect of it being restored to him.
Sixthly, as a condition of the stay the defendant offers to reinstate the monthly payments of $500 to the plaintiff pending the final determination of the taking of accounts.

Outline of the plaintiff's primary contentions

First, the plaintiff characterises the defendant's application as one based on compassionate grounds and counters that he, the plaintiff, has offered the defendant approximately $425,000 (half of the net proceeds of the sale of the Property) to settle the matter.
Secondly, the plaintiff contends that the defendant's personal circumstances do not constitute special circumstances because they are no different from the defendant's circumstances at the time he opposed the application for the sale of the Property.

Thirdly, the plaintiff points to the fact that the amounts of capital introduced into the partnership and the equity held by the partners were modest. Any adjustments that might be made on the taking of accounts are unlikely to have the consequences the defendant asserts, that is, it is unlikely that the defendant will be found to be entitled to the whole of the proceeds of sale.
Fourthly, the plaintiff contends that it is wrong to say that he will not suffer detriment if the Property is not sold. He says that the selling agent may claim the sales commission. He says that he will lose the income that might be derived from interest on the monies paid into court and he would be liable to pay half the rates and taxes in respect of the Property.
Fifthly, the plaintiff casts doubt on the bona fides of the defendant's offer to resume paying $500 per month in respect of his occupation of the Property and points out that the defendant has not paid anything since May 2020.

Consideration and disposition

A number of observations may be made.
First, the defendant's reliance on the decision in Stefanovski v Digital Central Australia (Assets) Pty Ltd is misplaced. The application for a stay in that case was based on r 36.08(1) of the Federal Court Rules 2011 (Cth) which, unlike s 15(3) of the Civil Judgments Enforcement Act, does not require special circumstances to be shown.
Secondly, that the defendant took no steps to progress the taking of the partnership accounts until the filing of the notice of intention to proceed on 15 March 2023 weighs heavily against suspending the order for sale. The defendant has had many years to advance his claims against Ms Littlely's estate and chose not to do so. It may be inferred that this was a deliberate decision because it suited his interests for the action to be left in abeyance. The situation in which the defendant finds himself is one of his own making and could have been avoided had he adopted a different approach.
Thirdly, the defendant's contention that he owns the house on the Property as a result of an agreement made between him and Ms Littlely was rejected by Master Bredmeyer. The Full Court upheld the Master's conclusion in this respect. Curthoys J described the distinction the defendant sought to draw between the land and the house as 'untenable'. That one of the critical contentions on which the defendant relies has been rejected on three occasions by different members of this court highlights the difficulties faced by the defendant.
Fourthly, Curthoys J rejected the defendant's attempts to rely on his concerns about the partnership accounts as a ground for resisting the order for sale. His Honour held that the defendant was precluded from raising those allegations. Granting a stay on the basis that the defendant might be able to establish that Ms Littlely's estate owes him more than the value of the estate's interest in the Property would be to permit a collateral attack on the decision to order a sale.
Fifthly, objectively, as a matter of impression, it seems unlikely that the defendant would be able to establish that any debt due by Ms Littlely's estate to him arising from the partnership exceeds half of the net proceeds in the present value of the Property. A number of difficulties confront the defendant. First, he did not challenge the accuracy of the financial statements until the relationship with Ms Littlely broke down. Secondly, the accounts were prepared by a firm of accountants. In essence, the defendant is alleging that the accountants who prepared the financial statements prepared them in a manner that was inconsistent with accounting standards and practices to advantage Ms Littlely and disadvantage him. There is a heavy evidentiary onus on him. Thirdly, both the profits from the partnership and the partners' capital were relatively modest and it seems unlikely that the irregularities alleged by the defendant would have the ultimate financial consequence which the defendant contends. Relatedly, there is no basis in legal principle for the defendant to apply an 'inflation calendar' to any amounts that may be found due to him. Fourthly, the defendant will be obliged to bring into account the income he derived from the partnership assets after the dissolution of the partnership and an allowance will have to be made for his use and enjoyment of the Property. Finally, I have already referred to the difficulties with the defendant's contention that he is solely entitled to the house on the Property.
Sixthly, the defendant's failure to take any step to advance the taking of the accounts, coupled with the difficulties inherent in determining issues between three to four decades after the events in question does not engender any confidence that the defendant will, in fact, be able to advance the process of taking accounts either at all or with any degree of expedition. Based on how matters have proceeded in the past I fear that there is a real danger that the process of the taking of accounts will stall because of the difficulties inherent in the process.
Seventhly, although I accept that the plaintiff will press for allowances to be made against the claims made by the defendant, it does not appear from the evidence advanced on this application that the plaintiff has claims that he wishes to advance against the defendant on behalf of Ms Littlely's estate.
Eighthly, given his age it may be accepted that it will be difficult both practically and emotionally for the defendant to vacate the Property. I accept that if the net proceeds of sale are paid into court there is a risk that this may create difficulties for the defendant in finding alternative accommodation. There does not, however, appear to be any compelling reason why the proceeds of sale of the Property should be paid into court. There is no evidence to suggest that if the estate's share of the net proceeds is paid to the plaintiff and the defendant is ultimately successful in establishing monies are due to him by the estate that the plaintiff will not be able to meet that liability. Conversely, the plaintiff does not advance any claim against the defendant other than (potentially) for the allowances to which I have referred so the capacity of the defendant to repay monies for which he might be found liable is not a significant matter In my judgment ordering that the net proceeds of sale be divided equally between the parties and paid to them would not only mitigate the risk of hardship to the defendant but it would be a positive step to bringing this dispute to an end.
Having regard to the matters to which I have referred I am not satisfied that the defendant has established special circumstances warranting a suspension of the order for sale. Had I been satisfied that special circumstances existed, the combined effect of the matters to which I have referred is such that, as a matter of discretion, I would have refused to grant a suspension of the order for the sale.

Conclusion

For the reasons set out above I dismissed the defendant's application for a stay of the orders of this court dated 22 November 2022 and varied order 3 of the 22 November 2022 orders to provide for the payment to the parties of the net proceeds of sale in equal shares subject to an adjustment for costs as follows. The plaintiff's share of the net proceeds of sale is to be increased by the costs of the application before Curthoys J which have been taxed in the sum of $17,500 and by the costs of the application for a suspension order that I fixed in the sum of $5,000.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OK
Associate to the Honourable Justice Tottle
30 MARCH 2023