Supreme Court Orders Partition of Jointly-Owned Land

The court ordered the partition of jointly-owned land and the appointment of receivers to manage the sale or division of the property, resolving a dispute among co-owners. Davies J presided over the case in the Supreme Court of New South Wales.

Supreme Court New South Wales

Medium Neutral Citation: [NAME] v [NAME] [2011] NSWSC 663 Hearing dates: 13 April 2011 Decision date: 28 July 2011 Jurisdiction: Equity Division Before: Davies J Decision: The parties should bring in Short Minutes to reflect these reasons. Catchwords: REAL PROPERTY - partition of land - statutory trust for sale or partition - dispute as to [NAME] - appropriate principles - costs - whether circumstances displaced usual approach to costs of both parties as proceeds of sale. Cases Cited: [COMPANY] v [NAME] [2006] NSWSC 341 [NAME] v [NAME] [2007] NSWSC 623 [NAME] v [COMPANY] (2005) 219 ALR 692 [NAME] v [NAME] (No. 2) [2006] NSWCA 206 [NAME] v [NAME] (No 2) [2008] NSWSC 470 [NAME] v Hauber Davidson [2006] NSWCA 79 Category: Principal judgment Parties: [NAME] (First Plaintiff) [NAME] (Second Plaintiff) [NAME] (Third Plaintiff) [NAME] (First Defendant) [NAME] (Second Defendant) Representation: [NAME] ([NAME]) [NAME] ([NAME]) [NAME] ([NAME]) [NAME] ([NAME]) File Number(s): 2010/314342

Judgment 1The [NAME] and the First Defendant are co-owners of the property known as "[NAME]", 1410 Maloney's Road, Lue, which is about halfway between [NAME]. 2The First Defendant owns 50% of the land and each of [NAME] owns one sixth of the land. 3The First Plaintiff, [NAME] and the Second Plaintiff [NAME] are the son and daughter of the First Defendant [NAME]. The Third Plaintiff, [NAME], is [NAME]'s husband. The Second Defendant, [NAME], is [NAME]'s de-facto partner. 4The property comprises about 343 hectares of grazing property. There are 2 houses and various outbuildings and farm improvements erected upon the land. One of the houses is occupied by [NAME] and, until earlier this year, the other house was occupied by [NAME]. He has subsequently moved off the property as a result, it would seem, of an altercation between him and his father that led to the making of an Apprehended Violence Order. 5Until 15 January 2010 [NAME] and the First Defendant had carried on a partnership on the land known as [NAME]. The partnership was dissolved on 15 January 2010. It seems to be acknowledged amongst all the parties that the existing arrangements in relation to the farm cannot continue. 6The [NAME] had wanted to sell the whole of the land from about 2009 and certainly in 2010, but negotiations to do so had broken down. By 2010, when [NAME] through their solicitors put forward a proposal to sell the whole of the land, the First Defendant indicated that he thought that partition of the land would be more appropriate. 7The Plaintiff brought proceedings seeking the appointment of [NAME] for sale of the whole of the land. [NAME] cross-claimed in the proceedings seeking partition of the land in the first instance. 8The First Defendant's proposal was (and this was reflected in the orders sought in the cross-claim) that the landholding should be divided into 2 blocks which have been called in these proceedings the Front Block and the Back Block. The First Defendant proposed that he would retain the Back Block, and the Front Block would be sold. The Front Block contains both the dwelling houses. The First Defendant thought that the Front Block was the more valuable and his proposal involved an appropriate accounting on the sale of the Front Block. I am told that a sub-division is not necessary for the partition because the land is held on about 10 separate titles. The proposed partition would involve simply grouping the titles to constitute the Front Block and the Back Block. 9By the time the proceedings came before me for hearing [NAME] were agreeable to a partition of the land in the manner proposed by the First Defendant. That meant that the remaining issues for determination by me were these: (1) Who should be appointed [NAME] for the partition? (2) The appointment of receivers for the partnership. (3) Whether an order should be made that the First Defendant give up possession of the land pending the partition. (4) Costs of the proceedings.

(1) Who should be [NAME]? 10The [NAME] have proposed as [NAME] and [NAME] who are both chartered accountants at [NAME] in [NAME] as [NAME]. There can be no doubt from the Affidavits of Fitness that they are appropriate persons to be appointed. 11The [NAME] are content for [NAME] to be appointed but say that the other trustee should be [NAME] who is a solicitor in Singleton. There can be no doubt, again, that [NAME] is an appropriate person to be appointed and, indeed, [NAME] do not dispute that he is an appropriate person. 12The [NAME] ask for [NAME]'s appointment in place of [NAME] because they say that there is the perception of potential bias by virtue of his relationship with [NAME]. That is said to arise because [NAME] is a small town, the Second Plaintiff is an accountant, and she is professionally and personally known to both those persons proposed by the Plaintiff as [NAME]. In addition, [NAME] say that [NAME], who is a solicitor, will bring the skills of a solicitor to bear, and they are relevant skills because [NAME] are required to partition the land. 13In [NAME] v [COMPANY] (2005) 219 ALR 692 Young CJ in Eq (as his Honour then was) said at [88]: A procedure has grown up in connection with sales ordered by the Court. [ADDRESS] has a complete discretion as to who it will appoint to conduct a sale, being guided by how the Court considers it most beneficial to the estate, though ordinarily the conduct of the sale is given to the plaintiff even though the plaintiff may not have the greatest interest in the property; see eg Dixon v Pyner (1850) 7 Hare 331; 68 ER 135; Dale v Hamilton (1853) 10 Hare Appendix 1 vii; 68 ER 1116 and Murray v Geoffroy (1918) 18 SR (NSW) 259. 14The following year in [COMPANY] v [NAME] [2006] NSWSC 341 in a similar application by different [NAME] against [NAME] his Honour said this at [21]: When deciding upon [NAME] for sale, where there is no consent, four factors usually need to be considered by the court. These are, in no particular order of importance; (1) the principle that the court tends to prefer the preference of the person with the greater interest in the land. That factor in the present case does not get us anywhere because it is hard to see who really does have the greater interest. (2) [NAME] should be independent and as free from conflict of interests as possible. I will come back to that. (3) [NAME], particularly where they have more active duties than merely to sell a piece of real estate, should have the appropriate skill, expertise and experience; and (4) the court should endeavour to get the best value for the parties' money and see that as between two equally alternative proposals the cheaper is preferred. 15In my opinion, it is appropriate to appoint [NAME] sought by the Plaintiff. If one has regard to the factors set out by Young CJ in Eq in [NAME]: (1) The share owned by [NAME] as a group (and they are acting as a group) is equal to the share owned by the First Defendant, (2) All parties accept that their common desire is to achieve the best purchase price for the sale of the land and all agree that [NAME] would be endeavouring to do that. [NAME] say, however, that although there is no evidence of the matter there is a perception and concern that somehow, in the accounting exercise that follows the sale, [NAME]' [NAME] will exhibit a bias towards [NAME] because the Second Plaintiff in particular is known to those [NAME]. This perception by [NAME] is a perception with no evidential basis in the case. In the light of the Affidavits of Fitness of the proposed [NAME] I cannot assume that, merely because the Second Plaintiff is known or well known to those [NAME], they would not act with complete integrity and professionalism. I therefore do not see that perception as a matter to be taken into account. What those [NAME] do in any accounting exercise will be objectively verifiable. (3) [NAME] point to the fact that a solicitor will need to be involved in the sale of the land. For that reason they say it is appropriate to appoint one solicitor and one accountant as [NAME]. It may be accepted that a solicitor will need to be engaged. However, that factor must be taken into account along with the other considerations. (4) It is likely to be the case that engaging 2 [NAME] within the one firm is likely to prove a cheaper exercise in the first instance. Although they may need to engage a solicitor in relation to the actual sale, the extra cost of doing so needs to be balanced against the cost that would undoubtedly be involved by having [NAME] engaged along with [NAME]. All of the material will need to be duplicated if [NAME] is appointed. He works in Singleton, a not inconsiderable distance from [NAME], and there would be the added cost of communication between the 2 [NAME]. It is likely to involve some travelling on [NAME]'s part that would be avoided if [NAME] were both in [NAME] and at the same firm. 16The principle mentioned by Young CJ in [NAME], a principle that has a long pedigree, should also not be ignored. 17The other matter of significance is that there is a consent by [NAME] and [NAME] to be appointed receivers. There is no consent by [NAME] to be appointed a receiver. It is entirely appropriate that the same persons should be appointed as receivers of the partnership property and as [NAME] for the sale of the land. 18For all of these reasons, and noting that the Court has a complete discretion, I consider the most efficient and economical outcome is to appoint [NAME] seek.

(2) Appointment of receivers 19The [NAME] accept that where agreement has not been reached in relation to the partnership property it will be necessary to appoint receivers. [NAME] say that it is necessary only to appoint one person as a receiver because of the size of the estate being dealt with. Whilst that submission may carry some weight if the application was for the appointment of receivers only, in the present case where it is necessary to appoint 2 [NAME] for sale, and where I have determined that it is appropriate to appoint [NAME] and [NAME] from the same firm in [NAME] as [NAME], I think it is entirely appropriate to appoint both of those persons as receivers. It does not seem likely that costs will thereby be increased in those circumstances where both are appointed.

(3) Possession of the land 20The [NAME] seek an order that [NAME] be required to vacate the land and give possession to [NAME] within 14 days of the making of the order appointing [NAME]. They say that if an order is not now made they fear that [NAME] will refuse to vacate the land and that it will be necessary for [NAME] to bring fresh proceedings seeking possession. [NAME] say that their apprehension is based on the fact that the First Defendant has shown a reluctance to leave the land made particularly clear by the statements made by him that it was always agreed he would be entitled to remain on the land for the rest of his life. 21The [NAME] have not resisted the present claim based on any agreement that the First Defendant (at least) had a right to remain on the land. If the First Defendant had established a contractual or equitable right, or an estoppel which bound [NAME] in that regard, he may have been able to resist the Plaintiff's claim: [NAME] v [NAME] [2007] NSWSC 623 at [10] and the cases referred to therein. 22As the case has developed, it seems to me that all parties have accepted that the present arrangement cannot continue and that partition of the land is in the best interests of all. In the absence of some case by the First Defendant suggesting an entitlement to resist the orders sought by [NAME], either a sale or a partition would be inevitable. The First Defendant has been put on notice that any failure to vacate the land when required to do so by [NAME] would result in proceedings being brought by [NAME] and dealt with expeditiously by the Court, and that the costs of such proceedings would be payable by [NAME]. 23The First Defendant says he wishes to remain on the land in the short term to maintain the farm pending the sale of the Front Block. He is the only person (with the Second Defendant) living at the farm at the present time. Certainly, [NAME] are anxious to do what has to be done to maintain and improve the farm to get the best price for sale, but [NAME] of counsel who appeared for [NAME] has accepted that the presence of the AVO could provide a difficulty in that regard. 24It seems to me that it is not necessary to make an order for possession against [NAME] at the present time. It will be up to [NAME] to decide when it is appropriate to require [NAME] to vacate the land.

(4) Costs 25The [NAME] seek costs of these proceedings from [NAME]. On the other hand, [NAME] seek costs from 27 October 2010 (when [NAME]' Notice of Motion for a sale under s 66G was argued before Macready ASJ) to 3 March 2011 when [NAME] agreed to partition the land. 26The principles are set out in [NAME] v [NAME] (No. 2) [2006] NSWCA 206 at [28]-[31] and [NAME] v [NAME] (No 2) [2008] NSWSC 470 at [2]-[3]. 27In [NAME] J (with whom Basten JA and Hunt AJA agreed) said: [28] However, the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct [ [NAME] (1862) 8 Jur (NS) 452; [NAME] (1862) 4 De GF&J 474]. The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary [ [NAME] (1879) 11 Ch D 942], except where the action is one which in substance is to try some disputed right, in which case the unsuccessful party will be ordered to pay the costs [ [NAME]; [NAME] (1863) 9 Jur (NS) 169]. The costs of taking accounts, although disputed, are usually defrayed out of the partnership assets [ [NAME] (1883) 24 Ch D 273; [NAME] (1827) 19 Eq 14]. Similarly, in proceedings under Conveyancing Act , s 66G, for the appointment of [NAME] of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership. [29] In this type of litigation, it is artificial to resolve liability for costs according to the accident of who is plaintiff and who is defendant, so as to leave a plaintiff free to litigate confident that he will receive costs however unreasonable his claim, unless the defendant betters her offer. There is no reason why the defendant should bear the risk of costs to the exclusion of the plaintiff where neither makes a realistic offer. Similar views have been expressed by Hislop J, with whom Mason P and Ipp JA agreed, in [NAME] v Hauber Davidson [2006] NSWCA 79, as follows (at [21]):- a) In the absence of agreement between the parties it was necessary for them to resort to the courts, whether pursuant to the Act, the Conveyancing Act 1919 s 66G or general equitable principles to obtain finality in respect of their property interests. b) The parties were unable to reach agreement in respect of the adjustment of their interests, neither being prepared to make a realistic settlement offer to the other. c) In these circumstances the commencement of the court proceedings was necessary from the perspective of each party, not just the respondent. d) The fact that the respondent issued a Statement of Claim and the appellant a Cross-Claim, rather than vice versa, was a chance event. Accordingly it should not be regarded as a relevant factor in determining the costs issue, a proposition which counsel accepted on the appeal. e) The effect of the Master's adjustment of the parties' interests was that the appellant's share of the property was valued at approximately $220,000, the respondent's at approximately $520,000. As is apparent from a comparison of the Master's orders and the pleadings, each party was unsuccessful in that he or she failed to obtain the adjustment that he or she sought, though each was successful in exceeding the adjustment that the other party offered. These were material considerations which were not taken into account by the Master. [30] Subsequently, in [NAME] v [NAME] (No 2) [2006] NSWCA 179, Hodgson JA, with the concurrence of Bryson JA and Hunt AJA, said that [NAME] did not tell against the award of costs to a plaintiff on the basis of "substantial success", where the plaintiff, on appeal, obtained a result which bettered the defendant's offer by $60,000. Hodgson JA said (at [6]):- In my opinion, although the proceedings achieved less than the appellant claimed, the result is substantially better than the appellant could have obtained without court proceedings and counts as substantial success. I do not think that [NAME] counts against costs being awarded on the basis of that substantial success. [31] For this purpose, "substantial success" is 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 the extent that the costs of the proceedings can be seen to be attributable to the unsuccessful party's opposition, rather than to the matters referred to by Hislop J in [NAME] - including, in particular, the necessity for both parties that their property interests be separated, and the failure of both parties to adopt a realistic position. 28In the present case I do not think I should depart from the ordinary rule that the costs should be paid from the sale price achieved for the land which will be subject to the appropriate accounting referred to in para [8] above. My reasons can be briefly stated. First, the Plaintiff wished to sell the whole of the land and sought orders under s 66G for that purpose. [NAME] proposed by October 2010 that the land be partitioned. Ultimately the Plaintiff accepted in the following year that partition was appropriate. 29Secondly, [NAME] were unsuccessful in obtaining the sale which they sought by Notice of Motion before Macready ASJ in November 2010. One reason at least for their failure was that they did not have Affidavits of Fitness in respect of the proposed [NAME]. 30Thirdly, although [NAME] may in the first instance have been required to commence proceedings because [NAME] failed to respond to correspondence that proposed what should happen to the land and the partnership, [NAME] have not achieved exactly what they sought in the pre-litigation correspondence. Fourthly, [NAME] have not been successful in the present proceedings in obtaining an order for possession against the First Defendant. 31On the other hand, [NAME] were unsuccessful in resisting the appointment of [NAME] and receivers proposed by [NAME]. These matters tend only to highlight the reason for the usual rule and raise the same considerations set out in paras (a)-(d) in [NAME] v Hauber Davidson [2006] NSWCA 79 at [21], quoted with approval in [NAME] at [29]. 32I therefore consider it appropriate that the costs that should be paid from the proceeds of sale should include the costs of the valuation obtained by [NAME]. That valuation seems to have been significant in achieving agreement on partition.

Consent of the mortgagee 33The land is mortgaged to [COMPANY], a Division of [NAME]. Section 66G(4) requires the consent of any incumbrancers of the land. There was no evidence at the hearing of any such consent. I reserved my judgment at the conclusion of the hearing on 13 April 2011 and I informed the parties that if the consent of [COMPANY] was obtained I would be prepared to make the order for partition. The consent of the Bank was provided to me on 6 July 2011. I am satisfied that the material provided shows that the Bank consents to the partition as proposed.

Conclusion 34The parties should bring in Short Minutes to reflect these reasons.

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