Tarzia v W and R Burns Corporation Pty Ltd

[2017] NSWSC 877

Supreme Court

New South Wales

Medium Neutral Citation:	Tarzia v W & R Burns Corporation Pty Ltd [2017] NSWSC 877
Hearing dates:	On the papers
Date of orders:	30 June 2017
Decision date:	30 June 2017
Jurisdiction:	Equity
Before:	Darke J
Decision:	Order that there be no orders as to costs of the proceedings save that the defendant should pay the plaintiff’s costs of the present application.
Catchwords:	COSTS – proceedings for appointment of trustees for sale of co-owned property – agreement reached for one co-owner to purchase interest of other co-owner – removal of basis for proceedings – appropriate that no order for costs be made to the intent that each party bear its own costs
Legislation Cited:	Conveyancing Act 1919 (NSW), s 66G
Category:	Costs
Parties:	Antonio Tarzia (Plaintiff) W & R Burns Corporation Pty Ltd (Defendant)
Representation:	Counsel: Mr M Lawson (Plaintiff) Mr K Ginges (Defendant)   Solicitors: Andriano & Associates (Plaintiff) Regency Lawyers (Defendant)
File Number(s):	2016/333226
Publication restriction:	None

Judgment

1. The plaintiff commenced these proceedings seeking an order for the appointment of trustees for sale pursuant to s 66G of the Conveyancing Act 1919 (NSW) in respect of certain property in Wetherill Park which he co-owned with the defendant. The defendant has since acquired the plaintiff’s interest in the property by agreement, so the underlying basis of the proceedings has been removed. There remains an issue concerning the costs of the proceedings.

2. At the suggestion of the Court, directions were made to facilitate the determination of the issue on the papers. The parties have provided written submissions and further affidavits. Neither party has suggested that an oral hearing is necessary, so the Court will proceed to deal with the issue on the papers. The Court has considered the written submissions and the affidavit evidence, including those parts which are referred to in the submissions.

3. The plaintiff contends that there should be no order as to costs to the intent that each party bear its own costs, save that the defendant should pay the costs of the present application.

4. The defendant contends that there should be an order that the plaintiff pay the defendant’s costs “on a party/party basis as agreed or assessed”. An affidavit earlier affirmed by the defendant’s solicitor suggests that the defendant seeks an order for costs on an indemnity basis. That seems to be no longer pressed. In any event, I can see no basis for such an order in this case.

5. The plaintiff submits, correctly in my view, that in circumstances where the plaintiff’s interest in the property has been purchased by the defendant it would not be appropriate to make an order of the type usually made in s 66G cases, namely, an order that the parties’ costs be paid out of the proceeds of sale. The plaintiff submitted that in this case an order to the effect that each party bear its own costs would reflect the rationale of the usual order that the costs of a s 66G application are regarded as an incident of co-ownership. The plaintiff submitted that such an order would:

1. spread the cost of the proceedings equally between the parties in accordance with their initial position as equal co-owners of the property;

2. reflect what appears to be an agreement of the parties with respect to the costs of the proceedings;

3. take cognizance of the fact that s 66G applications such as this will, absent extraordinary circumstances, result in the appointment of trustees for sale; and

4. reflect the fact that the proceedings were resolved at an early stage by the parties.

6. The plaintiff further submitted that the plaintiff was not guilty of any unreasonable conduct such as would warrant the making of a costs order against him.

7. The defendant submitted that the plaintiff should pay the defendant’s costs because the proceedings should never have been brought. The defendant submitted that the proceedings were instituted in breach of an agreement that each party had a “first right of refusal” should the other decide to sell, and in circumstances where steps had been taken to effect a sale of the plaintiff’s interest to the defendant. The defendant further submitted that it acted reasonably in seeking to acquire the plaintiff’s interest and thereby avoid the costs of litigation and the costs of trustees for sale.

8. It appears to be common ground that at about the time the parties acquired the property there was a conversation between the plaintiff and Mr Burns, a director of the defendant, to the following effect:

Mr Burns:   “If you wish to sell your half, please allow me to purchase your share first because I would be willing to purchase the entire premises in the event that you need to sell for whatever reason, I shall offer you the same courtesy.”

Mr Tarzia:   “Sure, no worries.”

9. However, even if that conversation gave rise to a binding agreement, it did not in my opinion impose upon the party wishing to sell its interest an obligation to do more than give the other party a genuine opportunity to negotiate a purchase before taking action to effect a disposition of the interest elsewhere.

10. The evidence suggests that after the relationship between the parties became fraught by about mid-2016 there were negotiations between the parties that included the plaintiff offering, on 17 September 2016, to sell his half interest in the property to the defendant for $1.185 million with a six to eight week settlement period. According to Mr Burns, negotiations, including over the price and the time for completion, followed in about mid-October 2016, at which time a verbal consensus was reached at a price of $1.18 million with a “delayed settlement”. Mr Burns deposed that he considered that an agreement had been reached for a six month settlement period, but the evidence does not seem to bear that out. In any event, no enforceable contract for sale was made at that stage.

11. On about 4 November 2016 the plaintiff’s Summons was sent to the Court for filing. The filing occurred on 8 November 2016. In the meantime, on 7 November 2016 the defendant’s solicitor sent a letter to the plaintiff’s solicitor which included the following:

As part of the arrangement at the time of purchase of the property by our respective clients we are instructed that the parties agreed that in the event that either party in the future wished to sell their share in the property, then the other would first offer their share for sale to the remaining owner.

In accordance with the agreement between the parties, our client or his associated entities or persons wish to buy out your client based on a valuation of the property by a registered valuer who can be appointed jointly by the parties, so that your client can be given his value of the property. Our client we are instructed has also offered your client the sum of $1,185,000.00 for his share of the Property which we are instructed was agreed to by your client payable in 6-8 weeks. Our client has written records of such matters. Please confirm if this offer is still acceptable to your client or otherwise if your client wishes to proceed by way of valuation and we can submit the names of 3 registered valuers for your client to choose one and joint letter of instructions can be prepared.

In the event that your client commences proceedings in the Supreme Court (which we assume would be an application to appoint a trustee), such will be vigorously contested and we will make application for the costs of same to be borne by your client and we will tender this letter on the question of costs and reserve all rights pertaining thereto.

The letter also contained a number of allegations concerning the conduct of the plaintiff which it is not necessary to recite.

12. On 30 November 2016 the defendant’s solicitor sent a letter to the plaintiff’s solicitor which contained the following:

Our client is desirous of purchasing your client’s interest. There was an agreement between the parties that our client would be given a first-option to purchase your client’s share, which your client has not observed.

13. I note in passing that I do not agree that the evidence establishes that the plaintiff was in breach of any such agreement. At that stage, the parties’ negotiations were continuing, albeit in the context of the institution of the proceedings. The letter of 30 November 2016 proceeded to set out the terms of an “open offer” to purchase the plaintiff’s interest.

14. The negotiations, and the proceedings, continued into 2017. The negotiations were evidently afflicted by various issues that generated conflict between the parties. In any event, by 17 February 2017 it seems that agreement had been reached on numerous matters, including the price ($1.325 million). It further appears that the defendant’s solicitor (by agreeing with the matters outlined in the plaintiff’s solicitor’s letter of 13 February 2017) acceded to the suggestion that the proceedings would be discontinued with no order as to costs. A Deed of Release containing such a term was later drafted, but the deed was for some reason never executed.

15. Further issues then arose, including in relation to certain damage to the property, and in relation to the rental income of the property. Nevertheless, it appears that the contract for sale was entered into on about 10 March 2017. Completion of the contract occurred on 3 May 2017, but not before numerous disputes arose concerning matters such as liability for works, a claim by the defendant in respect of rental income, adjustments, and the procedure for the handing over of keys.

16. I am unable to accept the defendant’s submission that the proceedings should never have been brought. The commencement of the proceedings did not involve a breach of any agreement with the defendant. Further, I do not consider it an unreasonable step to take, given that the obviously difficult relationship between the parties (evident by November 2016) meant that reaching agreement concerning a sale of the plaintiff’s interest to the defendant was hardly an assured outcome, let alone one likely to be reached within a reasonably short time. Equally, I consider that it was reasonable of both parties to attempt to reach an agreement so as to obviate the need for the eventual appointment of trustees for sale. Ultimately, that event was avoided.

17. I generally accept the submissions of the plaintiff as to the appropriateness of making no order as to costs, to the intent that each party bear its own costs. In particular, I agree that such an order would reflect what appears to have been agreed in February 2017, and that such an order is consistent with the notion that the costs of a s 66G application are usually regarded as an incident of co-ownership.

18. The plaintiff seems to have maintained the position since February 2017 that there should be no order as to costs. As the defendant has sought a different order, and has not been successful, the defendant should pay the plaintiff’s costs of this application.

19. For the above reasons, the Court will make an order that there be no order as to costs of the proceedings, save that the defendant should pay the plaintiff’s costs of the present application.

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Decision last updated: 30 June 2017