Brand v Brand

Supreme Court of NSW|2019-12-09|Before: Darke J, Centre J

Introduction

By a Summons filed on 24 July 2019, the plaintiff sought orders pursuant to s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale in respect of a property in Bensville, of which the plaintiff and defendant were registered proprietors. The property was the matrimonial home of the parties who were married at the time of the acquisition of the property. The parties have since divorced. The defendant remains in sole occupation of the property.
The plaintiff sought relief under s 66G in part to extricate herself from a mortgage which was registered on the title to the property. Relief was also sought in part due to an alleged failure by the defendant to make full and final payment pursuant to an agreement made in January 2017 whereby the defendant agreed to pay a sum in exchange for the plaintiff's interest in the property. Throughout the proceedings, the plaintiff was represented by solicitors. Although the defendant was represented by solicitors for a time, he has appeared for himself for much of the proceedings.
On 1 November 2019, the Court was informed that the matter had resolved. The parties, however, disagreed on the question of costs. Both parties contend that the other should pay their costs of the proceedings. The Court subsequently made orders for the parties to serve and provide affidavits in support of their respective applications as well as written submissions, with a view to the matter being determined on the papers.
The plaintiff relies upon the affidavit of her instructing solicitor affirmed on 10 November 2019 and parts of defendant's affidavit affirmed on 3 September 2019. The defendant relies upon his affidavits affirmed on 3 September and 25 November 2019. The Court has read and considered each of these affidavits.

Summary of the salient evidence

The property was purchased by the plaintiff and defendant as joint tenants in around January 2016. The purchase price allegedly comprised a deposit paid equally by the parties (which seemingly included contributions by both parties' parents) with the balance raised by a loan from Newcastle Permanent Building Society in the amount of $480,755.46 taken out in the parties' joint names. That loan was secured by a registered mortgage over the property.
Later that year, the parties separated. It seems that following the separation the defendant remained in the property and the plaintiff moved out.
On 18 January 2017, the parties attended a mediation session conducted by the Community Justice Centre. On that occasion, the parties reached an agreement in respect of the question of ownership of the property. The terms of the agreement relevantly provided: Christopher and Matilda agree that: 1. In the event that Christopher is not able to make mortgage repayments on the house, Matilda will purchase the house from him for the total cost of mortgage repayments he has made, plus his mother's $50,000 gifted deposit, plus the cost of the solar installation. 2. If Christopher can maintain the mortgage repayments, he will purchase the house from Matilda by repaying her contribution of $10,000 and her parents' gifted deposit of $50,000. 3. The purchaser of the house will bear the cost of removing the other from the title deeds. … 5. Christopher will be responsible for all costs associated with the property while he resides there. 6. If Christopher purchases the property he will pay Matilda $10,000 by 31st December 2017 and the remaining $50,000 by 31st December 2018. 7. If Matilda purchases the property she will pay the mortgage repayments that Christopher has made up to that date in total within 10 months of her purchasing the property and the remaining $50,000 plus the cost of the solar installation within the following 12 months.
Sometime after making this agreement, the parties agreed that the defendant would purchase the property.
For reasons not readily apparent, it seems that at some point the parties made another agreement in which the defendant agreed to pay a further $6,000 in addition to the $60,000 amount specified in the written agreement. It also appears that the parties agreed that the defendant would have until 18 January 2019 to pay to the plaintiff the total amount of $66,000. The evidence does not reveal whether this subsequent agreement was intended to vary the January 2017 agreement or constitute a separate agreement. As will become apparent, the parties disputed the character of this additional $6,000 payment.
While the defendant resided in the property, he took over sole responsibility for the mortgage repayments.
The parties' divorce was finalised on 14 January 2018. According to the plaintiff, the property remained the only asset in the parties' joint names.
The defendant subsequently made payments amounting to $63,000 to the plaintiff. However, by 18 January 2019, the defendant had not made the final $3,000 payment. At around this time, the defendant was experiencing difficulty in servicing the mortgage repayments as a result of an injury. The defendant broke his right hand, rendering him unfit to work for a period of time. The evidence indicates that the defendant took steps to apply for financial hardship relief with Newcastle Permanent Building Society and sent forms to the plaintiff for her to sign.
On 1 April 2019, the defendant received an email from Jana-Marie, a solicitor and conveyancer, who noted that the "EDR" (presumably a reference to Electronic Duties Return) had accepted the "separation agreement" for the transfer of property. It is clear from the chain of correspondence attached to this email that this referred to the process undertaken by the defendant applying for an exemption from the payment of stamp duty in respect of the transfer of title to the property. Jana-Marie asked for the details of the plaintiff and defendant to start the process of the transfer, and asked the defendant whether she was going to be acting for both the plaintiff and defendant on the transfer.
The defendant forwarded this email to the plaintiff on the same day and the plaintiff responded shortly thereafter. The plaintiff stated that she did not agree to take her name off the title to the property without taking her name off the mortgage at the same time. The defendant responded to this email shortly afterwards. The defendant noted that he was unsure whether this could be done but invited the plaintiff to discuss the matter with Jana-Marie. The defendant stated that he was told that the transfer of title was required if he was to refinance the mortgage solely in his name.
It seems likely that after receiving and responding to these emails, the plaintiff instructed her solicitor. On 10 April 2019, the plaintiff's solicitor wrote to the defendant in respect of the financial settlement of the property. The plaintiff's solicitor noted that the defendant had sent financial hardship relief forms to the plaintiff for her to sign. The plaintiff's solicitor requested that the defendant send further documents for the plaintiff to consider before agreeing to sign the paperwork.
On 11 April 2019, the defendant sent an email to the plaintiff's solicitor. In the email, the defendant raised a number of issues with respect to the mortgage and the outstanding $3,000 payment. Notably, the defendant stated that due to his injury he had difficulty making the mortgage repayments with respect to the property. The defendant acknowledged that he had paid $63,000 of the total $66,000 owing to the plaintiff, such that $3,000 remained to be paid. The defendant also stated that the property was purchased using the parties' joint incomes and that the defendant's income alone did not qualify him to undertake sole responsibility for the mortgage so as to be able to remove the plaintiff from the title of the property. The defendant noted, however, that he would be in a position to earn over the required amount to be so qualified in November 2019 "once [the defendant's] ABN has been active for 2 years and thus allowing [the ABN] to be considered on top of [the defendant's] full time employment". The email concluded by asking the plaintiff to wait until November 2019 to get off the title to the property and mortgage if she wished to avoid spending money on legal fees.
On 13 April 2019, the plaintiff's solicitor contacted Jana-Marie and asked whether she had instructions to act on the defendant's behalf. Jana-Marie responded by email on 17 April 2019 noting that she had instructions to act on the defendant's behalf in respect of the property only. Jana-Marie noted that she had spoken to the defendant who advised her that the plaintiff was reluctant to sign the financial hardship paperwork. Jana-Marie stated that the defendant "did not agree to sell the property, especially in the current market". She advised the plaintiff's solicitor to contact the defendant directly if he wished to take matters further.
On 23 April 2019, the plaintiff's solicitor responded to the defendant's email of 11 April 2019 (as well as an email dated 15 April 2019 which is not in evidence). The plaintiff's solicitor stated that the plaintiff understood that once the parties' divorce was finalised the defendant would refinance the property and have the plaintiff removed from the title of the property, and that the plaintiff had not yet been removed from the title or mortgage. The plaintiff's solicitor referred to Jana-Marie's email dated 17 April 2019 in which it was stated that the defendant refused to sell the property. The plaintiff's solicitor then stated that the plaintiff had provided the defendant with sufficient time to refinance the property and that the defendant should now list the property for auction on or before 30 August 2019 with the auction itself to be scheduled within 30 days of the listing date. Failing this, the plaintiff's solicitor stated that the plaintiff would commence proceedings seeking orders for the appointment of trustees under s 66G of the Conveyancing Act.
The defendant responded to this email by way of two emails sent later that day. In the first email, the defendant noted that the 30 April 2019 deadline imposed by the plaintiff was in three business days and that he required more time to obtain legal advice given he was away from home. In a second email sent shortly afterwards, the defendant added that an auction cannot be organised within the requested time and would cost thousands of dollars.
On 29 April 2019, the defendant sent a further email in which he stated that he had instructed a solicitor to act on his behalf and that he would be discussing a formal response to the plaintiff's solicitor's email dated 23 April 2019. The defendant also asked the plaintiff's solicitor to confirm whether the plaintiff would be abiding by "our previous agreement" in that "she will not be requesting any further money or financial gain from the sale of the property if that was to proceed to sale and is solely seeking to be removed from the title at the soonest available date".
On 17 May 2019, the defendant sent another email to the plaintiff's solicitor in which he stated that he had spoken with his solicitor who had informed him that following discussions with the plaintiff's solicitor the plaintiff did not wish to finance the listing of the property for sale at an auction. The defendant noted that he did not have funds to finance the auction process by himself. The defendant also noted that he had consulted with his broker about refinancing the mortgage and removing the plaintiff from the mortgage and title at the soonest possible time. The defendant noted that, on the advice of his solicitor, this could occur by August 2019, and asked whether the plaintiff would be agreeable to this timeframe. If the plaintiff was unwilling to wait until August 2019, the defendant asked the plaintiff's solicitor to let him know so that the parties could then discuss the terms of listing the property for sale.
There are no contemporaneous records of any further discussions or communications prior to the plaintiff commencing proceedings. In her affidavit filed on 24 July 2019, however, the plaintiff states that her solicitor engaged in substantial correspondence with the defendant over May and July 2019 in order to come to an agreement with respect to the property but that no such agreement could be reached. The plaintiff acknowledged that the defendant had sought an additional six to nine months to refinance the property and to transfer the property into his sole name, but the plaintiff stated that there is no certainty that the defendant would be in such a position to refinance if such an extension were granted. The plaintiff stated that she did not wish to wait that long in order to move on with her life.
The next email in evidence is from the plaintiff's solicitor dated 26 August 2019 in response to an email from the defendant dated 24 August 2019 which is not in evidence. The email addresses two separate points apparently raised by the defendant in his previous email. It seems that the defendant raised a question about settling the matter without needing to make formal orders. This was met by a response from the plaintiff's solicitor that the proceedings could only be settled by way of consent orders. The email then sets out proposed consent orders which in terms required the property to be listed for auction with the costs associated with the sale as well as the plaintiff's legal costs to be deducted from the proceeds. The plaintiff's legal costs were said to be estimated at $30,000. In relation to an issue raised by the defendant about when the proceedings would be concluded, the plaintiff's solicitor noted that the proceedings "will not be stopped" until the proposed consent orders were signed by the parties and filed in Court.
The matter first came before the Court for directions on 6 September 2019. On that occasion, the Court stood the matter over for further directions on 13 September 2019. On that day, the defendant served on the plaintiff's legal representatives a document styled "Reply" and an affidavit affirmed by the defendant on 3 September 2019. The Reply document appears to be drafted in the form of a Statement of Cross-Claim or Notice of Motion. It contains a section headed "Seeking Orders" in which the defendant seeks a number of orders, including an order "that the Court allow the defendant adequate time being a maximum period of 6 months from…30 August 2019" to refinance the property. In his affidavit, the defendant asserted that $6,000 of the total $66,000 said to be owed by the defendant was paid to the plaintiff under a separate oral agreement made contemporaneously with the written January 2017 agreement. The defendant claimed that he has otherwise made all payments owing to the plaintiff under the January 2017 agreement.
On 9 September 2019, the defendant sent an email to the plaintiff's solicitor. The defendant noted that the Court had made observations that the matter was capable of being resolved outside of Court. The defendant accordingly made an offer to refinance the mortgage in respect of the property. Such refinance was said to be able to occur by 13 September 2019.
On 13 September 2019, the Court made orders by consent adjourning the proceedings to 4 October 2019 to enable the defendant time to refinance the mortgage.
On 4 October 2019, the Court again adjourned the matter to 1 November 2019. Also on 4 October 2019, the defendant sent an email to the plaintiff's solicitor in which the defendant offered to settle the proceedings on terms that each party bear their own legal costs. The email itself, however, is not in evidence.
Meanwhile, it appears that the defendant engaged a conveyancer (presumably Jana-Marie, the same conveyancer referred to above) who created a workspace on the PEXA platform in order to facilitate the transfer of title of the property from the plaintiff and defendant's joint names into the defendant's sole name. It seems that 30 October 2019 was agreed as the transfer date.
On 23 October 2019, the plaintiff's solicitor sent an email in response to the defendant's email dated 4 October 2019. The email recited the history of the proceedings up until the date of the letter. It was stated that were it not for the plaintiff commencing the proceedings, the refinancing endeavours by the defendant would not have occurred. It was stated that the plaintiff had incurred $14,256 in legal costs since the commencement of proceedings. The email then made an offer, expressed to be made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93, that in satisfaction of the plaintiff's claim, the defendant pay to the plaintiff the $3,000 owing under the January 2017 agreement and the $14,256 in legal costs incurred by the plaintiff. The offer was expressed to be open for 14 days.
On 25 October 2019, the defendant responded to the plaintiff's solicitor's email. In terms, the defendant rejected the offer. The defendant noted that the plaintiff's solicitor had been inconsistent with his statements of the amount of legal costs incurred by the plaintiff since the commencement of proceedings. The defendant claimed that he had paid to the plaintiff the full amount owing under January 2017 agreement. The defendant noted that the January 2017 agreement did not state that defendant was obliged to pay in excess of $60,000 for settling the property. The defendant alleged that the plaintiff had refused to "sign the necessary paperwork" prior to the commencement of proceedings which had the effect of delaying the settlement of the proceedings.
On 1 November 2019, the parties informed the Court that the matter had settled, subject to argument in respect of the costs of the proceedings.

Submissions

The plaintiff acknowledged that the proceedings resolved without a determination on the merits and that this would ordinarily mean that the proper exercise of the Court's discretion would be to make no order as to costs. However, it was submitted that the defendant acted so unreasonably prior to the commencement and during the course of the proceedings that the defendant should pay the plaintiff's costs of the proceedings.
It was submitted that the defendant refused to sell the property after being requested to do so by the plaintiff's solicitor in his email dated 23 April 2019. Following further failed negotiations between the parties, and noting that the parties had been separated for three years and divorced for a year and a half, it was submitted that the plaintiff was left with no alternative but to commence proceedings to remove herself from the title to the property and the mortgage.
The plaintiff submitted that the defendant only informed the plaintiff that he had sought refinancing after proceedings had been commenced, and only after the plaintiff had incurred additional legal costs. It was noted by reference to the "Reply" document that the defendant sought until March 2020 to finalise the refinancing process. The plaintiff submitted that it was unlikely that the defendant would have sought refinancing without the plaintiff commencing and taking steps in the proceedings. The plaintiff stated that she had achieved "practical success" as a result of the proceedings.
The plaintiff submitted that the plaintiff had taken steps to resolve the proceedings by the making of offers, including by way of the Calderbank letter dated 23 October 2019. It was put that the defendant acted unreasonably in failing to accept any of the offers.
I note for completion that the plaintiff made various submissions in respect of the usual order for costs in relation to proceedings brought pursuant to s 66G of the Conveyancing Act. However, in circumstances where the Court has not made any orders pursuant to s 66G, it is not necessary to further canvass or address those submissions.
The defendant contended that the plaintiff acted unreasonably prior to the commencement of the proceedings. It was submitted that the plaintiff was unhappy with the $60,000 amount she agreed to receive for the property pursuant to the January 2017 agreement. The defendant submitted that the commencement of proceedings was in direct contradiction of the terms of the January 2017 agreement because he had paid all the money due under the agreement.
The defendant further submitted that the proceedings were never necessary in the first place because the defendant made various overtures prior to the commencement of proceedings that he would be in a position to refinance the mortgage if the defendant would "simply sign the Transfer of Title". The defendant complained that the plaintiff refused to sign such paperwork, and also refused to sign paperwork to support his financial hardship application to the mortgagee. The defendant also pointed out, by reference to the email dated 11 April 2019 in particular, that he had informed the plaintiff's solicitor that he could refinance by November 2019 which, as events turned out, is what actually occurred. The defendant noted that he did not seek further time or engage in any delaying tactics that unnecessarily prolonged the proceedings.

Determination

As both parties recognise, the proceedings have resolved without a determination on the merits. In those circumstances, the proper exercise of the Court's discretion will usually be to make no order as to the costs of the proceedings unless it can be said that one party has acted so unreasonably in the commencement or the maintenance of the proceedings that the other party should have its costs (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-5; Luo v Carbone [2019] NSWSC 830 at [44]).
As a co-owner of the Bensville property, the plaintiff was entitled to commence the proceedings seeking the appointment of trustees under s 66G of the Conveyancing Act. To that extent, it was not unreasonable for the plaintiff to seek such orders in circumstances where, following the separation and the subsequent divorce, the plaintiff wished to finalise her financial separation from the defendant.
But the Court is not in a position to determine the rights or wrongs of each party's contention that the other acted unreasonably in prosecuting or defending the s 66G relief. Although it does not appear to be disputed that the defendant became bound to pay to the plaintiff the sum of $66,000, nor did it appear to have been disputed that $63,000 had been paid by the defendant, there remained a controversy over the extent to which the additional $6,000 component was referable to the agreement reached between the parties on 18 January 2017. On the plaintiff's account, the $6,000 was part of the consideration under that agreement, so $3,000 remained to be paid before she was obliged to transfer her interest in the property. On the defendant's account, the $6,000 was referrable to a separate oral agreement that was made at around the same time. If the defendant was correct in his contention, then he would have discharged his obligations under the January 2017 agreement, and the plaintiff would have been obliged to transfer the title to the property. This would have provided a complete answer to the plaintiff's solicitor's request to sell the property, and provided an arguable defence to the plaintiff's claim as it would amount to a contractual obligation inconsistent with the seeking of the appointment of trustees for sale (see Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411 at [38]). It is of course not appropriate to conduct a hypothetical trial of this issue for the purpose of deciding a question of costs (Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (supra) at 624-5; Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [31]-[32] and [47]).
To the extent that the plaintiff otherwise submits that the defendant has engaged in unreasonable conduct which necessitated the commencement of proceedings, I reject those submissions. There was no dispute that the defendant paid the vast bulk of the amount agreed to be paid to the plaintiff. The evidence indicates that at least by early April 2019 the defendant was taking active steps to remove the plaintiff from the title of the property, including by engaging a conveyancer. These steps were apparently taken before the plaintiff had appointed solicitors in respect of the current proceedings (or at least before the defendant was aware that solicitors had been appointed). Even after the plaintiff's solicitor made contact with the defendant on 10 April 2019, the defendant made several overtures to the effect that he would be in a position to take over the mortgage in due course. This was eventually borne out by the resolution of the proceedings in November 2019 on the basis that the mortgage was refinanced into the defendant's sole name. In those circumstances, it cannot be suggested that the defendant's conduct was unduly dilatory in nature.
It seems to me that, after the commencement of proceedings, both parties acted reasonably in continuing to negotiate in respect of bringing about the resolution of the matter. Insofar as the plaintiff relies upon the terms of the Calderbank letter, it was not unreasonable for the defendant to fail to accept those terms. In my view, there was no element of compromise involved. The offer required the defendant to pay not only the disputed $3,000 payment (which was at the heart of the dispute between the parties), but also the plaintiff's legal costs. In essence, the offer can only be characterised as an invitation to capitulate as opposed to a genuine offer to compromise the proceedings. It was not shown that the defendant unreasonably failed to accept any other offer.
For the above reasons, I have concluded that it is appropriate to exercise the Court's discretion as to costs by ordering that each party bear their own costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 December 2019

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (5 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (5)