Breust v Anderson [2024] ACTSC 182

Case Title: Breust v Anderson Citation: [2024] ACTSC 182 Hearing Date: 6 June 2024 Decision Date: 12 June 2024 Before: Mossop J Decision: See [46] Catchwords: REAL PROPERTY – PARTITION – Sale in lieu of partition – property jointly owned by plaintiff and defendant from previous relationship – failure by defendant to remove plaintiff as joint owner – joint owner incurring rates and water charge liabilities – plaintiff unaware she was still a registered proprietor until receiving notice of legal proceedings brought by Icon Water – significant debts to Icon Water and ACT Revenue Office attached to property – failure by defendant to address issue – no appearance by defendant at any stage of proceedings – order for sale of property – appointment of independent trustee to undertake sale Legislation Cited: Civil Law (Property) Act 2006 (ACT), ss 243, 244, 245 Conveyancing Act 1919 (NSW), s 66G Court Procedures Rules 2006 (ACT), rr 781, 782, 783, 784, 785, 2015, 2451, 2452 Supreme Court Rules 1937 (ACT), O 53 r 2(1) Trustee Act 1925 (ACT), ss 70, 76(1), 77, 79 Cases Cited: Hillman v Box and Others as Executors of the will of Box (No 2) [2011] ACTSC 10 Parties: Renee Breust (Plaintiff) Matthew Anderson (Defendant) Representation: Counsel G Blank (Plaintiff) No appearance (Defendant) Solicitors RMB Lawyers (Plaintiff) No appearance (Defendant) File Number: SC 475 of 2023 MOSSOP J: Introduction

1. This is an unusual application in which the plaintiff seeks to have a property in which she is a joint tenant sold in order to discharge liabilities that the defendant has allowed to be incurred by the plaintiff and defendant as joint owners of the property. It is more unusual because, despite considerable effort to serve the defendant and have him respond to the plaintiff’s claim, he has not appeared or otherwise responded to the claim.

Background

2. The plaintiff and the defendant were in a de facto relationship from about 1988. In 1997, the couple purchased a house at [redacted], Holt in the ACT. The two owned the property as joint tenants.

3. In early 1998, the relationship broke down. The plaintiff moved out of the property while the defendant continued to live there. There was a verbal agreement between the two that the defendant would be responsible for the mortgage and would own the property in exchange for a payment to the plaintiff representing her equity in the property. The defendant paid the plaintiff this sum and the plaintiff moved out, under the assumption that her connection with the property had been terminated.

4. In April 2023, the plaintiff received a phone call from a law firm who told her that they acted for Icon Water and that they were contacting her in relation to a debt owed to Icon Water of approximately $12,000. They told the plaintiff that she was still a registered proprietor of the property.

5. The plaintiff left notes on two occasions at the property, asking the defendant to contact her. She had no response from the defendant.

6. The plaintiff sought legal advice. Her lawyers confirmed that she was still on the title of the property as a joint tenant with the defendant. She instructed her lawyers to write to the defendant, which they did on 8 June 2023.

7. On 16 June 2023, the plaintiff’s lawyers provided the plaintiff with the following documents: (a) a statement of account from Icon Water dated 22 February 2021; (b) a Civil Dispute Application filed in the ACT Civil and Administrative Tribunal by Icon Water against the plaintiff and the defendant in relation to the debt, dated 17 June 2021; and (c) a default judgment of the Tribunal in the proceedings brought by Icon Water against the plaintiff and the defendant, dated 30 May 2022, for $12,019.60.

8. The plaintiff’s lawyers wrote again to the defendant on 11 August 2023. There is an affidavit of service indicating that the letter was personally served on the defendant on 20 August 2023. No reply was received to either the letter of 8 June 2023 or the letter of 11 August 2023.

9. In August 2023, the plaintiff’s lawyer made inquiries of the ACT Revenue Office and discovered that there were arrears of general rates in relation to the property of $54,372.45 as at 29 August 2023, which are secured by an Overriding First Charge in favour of the Commissioner for Revenue registered over the property on 10 August 2022.

10. The proceedings were commenced on 16 November 2023.

11. Service of the Originating Application and affidavit was unable to be effected on 23 November 2023, as nobody was home. The process server asked a neighbour whether the defendant resided next door. The neighbour said that he did.

12. Service was also unable to be effected on 25 November 2023. The process server noted a vehicle parked in the driveway. The process server spoke to someone near the vehicle, who said that he was not the defendant but did say that the defendant lived in the property. A report of a large dog deterred further attempts to knock on the door. On 15 March 2024, an order for substituted service was made, allowing the Originating Application and supporting affidavit to be served on the defendant by having them placed in the letterbox of the property.

13. The proceedings were before me on 3 May 2024. Sheriffs called the defendant outside the courtroom. There was no appearance by the defendant. As a result of the Originating Application referring to the wrong part of the Civil Law (Property) Act 2006 (ACT), the plaintiff needed to file an Amended Originating Application. I made an order for substituted service requiring the Amended Originating Application and the terms of the orders made on that day to be served on the defendant.

14. On 28 May 2024, the proceedings were before me again. Sheriffs again called the defendant outside the courtroom. Again, there was no appearance by the defendant. I then listed the matter for hearing on 6 June 2024. I required notice to be given of that order personally or by placing the documents in the letterbox of the property.

15. When the matter was called on 6 June 2024, while there was proof of service in accordance with the orders made on 28 May 2024, the defendant did not appear.

16. The result is that the defendant has not responded to any of the communications made by the plaintiff or the lawyer representing the plaintiff. He has not responded to service of any of the court documents. There is evidence of non-payment of water charges and government rates over many years. In the case of Icon Water, the non-payment dates from prior to 2015, at which time the charges and interest owing was in excess of $4000. In the case of government rates, the records available indicated that, as at 2018, the amount of rates and interest owing was $24,648.42. That would be consistent with non-payment of rates since approximately 2010.

Statutory provisions

17. Section 243 of the Civil Law (Property) Act allows the Supreme Court to make an order partitioning the interest of an applicant who holds an interest in land as a joint tenant or tenant in common.

18. Section 244 provides that, in proceedings for partition of property, instead of ordering partition, the Supreme Court may order the sale and distribution of the proceeds if that would be more beneficial than partition. If interested people, with a collective interest of at least a half share, make the application, then the court “must (unless it sees good reason not to)” order the sale of the property.

19. Section 244(3) allows the Supreme Court to appoint trustees to receive and apply the proceeds of the sale and give consequential directions, including directions about the valuation of an interested person’s share and the application of the proceeds of the sale. Section 244(4) provides that, in proceedings for partition of property, it is sufficient to make a claim for sale and distribution of the proceeds and it is not necessary to make the claim for partition.

20. Section 245 provides that, where a sale of property is ordered, the Supreme Court may allow a person to bid at the sale of the property on conditions that it considers to be appropriate, including conditions about the non-payment of a deposit or the setting off or accounting for the purchase money or any part of it instead of paying it.

21. In summary, the relevant powers granted by the Civil Law (Property) Act are to: (a) order the sale of the property: s 244(1)(b); (b) appoint trustees to receive and apply the proceeds of the sale: s 244(3)(a); (c) give consequential directions that the court considers appropriate, including directions about the application and distribution of the proceeds of the sale: s 244(3)(b)(ii); and (d) make orders allowing the defendant to bid at the sale of the property on conditions that the court considers appropriate, including conditions about the non-payment of the deposit or setting off or accounting for the purchase money instead of paying it: s 245.

22. Rules 781-785 of the Court Procedures Rules 2006 (ACT) contain rules relating to sales of land by court order. They include rules permitting the court to appoint a party or someone else to have conduct of the sale. There is a power to direct a party to join in the sale and conveyance or transfer or in another matter relating to the sale: r 783(2).The court may permit the person having the conduct of the sale to sell the land in a way the person considers appropriate or give directions about conducting the sale: r 783(3), including the various matters set out in r 783(4).

23. It is notable that r 782 only applies before the proceedings are decided. However, r 783 applies, as well as where an order under r 782 is made, where a court “by a judgment, orders the sale of land”. Thus, it empowers orders under the rules in order to give effect to a final judgment. That is made clear by r 785, which applies the rules in cases of mortgage, exchange or partition of land. The predecessor of that provision (Order 53 rule 2(1) of the Supreme Court Rules 1937 (ACT) (repealed)) applied to “sale, mortgage, partition or exchange”. It is clear that although there is no reference to sale in r 785, that is because the reference to sale is now within r 783. The rules would be useful in a case where both parties had appeared but are less useful where there may be an issue as to the possession of the property rather than merely the conduct of the sale. As a consequence, they are not useful in the present case.

24. Section 76(1) of the Trustee Act 1925 (ACT) provides that if the Supreme Court makes an order directing the sale of land, the court may make an order vesting the land in the purchaser, the mortgagee or anyone else.

25. Section 77(1) of the Trustee Act provides that where the Supreme Court makes an order for the sale instead of partition of any land, the court may make a vesting order. The court may declare that any of the parties to the proceedings are trustees of the land: s 77(2). Subsection (2) does not appear to limit subs (1).

26. Section 79 provides that where a vesting order can be made by the Supreme Court, the court may appoint a person to convey the property.

Consideration

27. The position of the plaintiff is that she is a joint tenant with the defendant in the property. She holds her interest in the property on trust for the defendant. Because she remains one of the legal owners of the property, she has become liable for the water charges, which prompted her to act. That, in turn, led her to discover the outstanding rates liability which is secured by the charge over the property.

28. Why this situation has arisen is not clear. Why the defendant has not responded to the attempts by the plaintiff to address the issue is not clear. Having regard to the actual service upon the defendant of the documents in August 2023, the evidence that he resides at the property and the implementation of the orders for substituted service, the prospect that he is not on notice of the proceedings is minimal. The circumstances are consistent with poverty, mental illness, or some other cause of difficulty with addressing an obvious and pressing aspect of ordinary life.

29. The problem for the plaintiff would have been able to be resolved if the defendant had taken steps to remove the plaintiff from the title to the property. Had that occurred, the plaintiff would not have incurred the liabilities which she now has. The problem could still readily be resolved if the defendant paid the Icon Water liability and the outstanding rates so as to extinguish any liability on the part of the plaintiff. It would also be necessary to get the consent of the mortgagee to remove the plaintiff from the title to the premises. That may involve refinancing.

30. These things have not occurred and, because of the lack of response by the defendant, it is not possible to say that they will occur in the immediate future. In those circumstances, the plaintiff, being the legal owner of at least a half share of the property, is entitled to, unless the court sees good reason not to make one, an order for the sale of the property. There certainly would have been a good reason not to order the sale of the property had the defendant demonstrated an alternative path by which the plaintiff could be removed from the title of the property and have any liabilities that she has accrued by reason of being on the title extinguished. However, as a result of the defendant not appearing, there is no such alternative path and, as a consequence, no good reason to not order the sale. Plainly, the sale will involve a significant interference with the defendant but, in the absence of any alternative, that is not a good reason to avoid an order for the sale of the property.

31. Where both parties have appeared, the usual approach would be to make an order that one or other of them be given conduct of the sale. In Hillman v Box and Others as Executors of the will of Box (No 2) [2011] ACTSC 10 at [52]-[53], Refshauge J pointed to authorities which indicated that ordinarily the plaintiff is given conduct of the sale but the decision as to which party is given conduct of the sale may be influenced by the question of which party’s interest it was in to obtain the best price and which party is more likely to achieve a successful sale.

32. The present case is complicated by the failure of the defendant to appear in the proceedings and the fact that, so far as the evidence discloses, he remains in possession of the property. In those circumstances, it is not possible to give the defendant the responsibility of conducting the sale. Further, the plaintiff does not seek to be made responsible for the sale in circumstances where the defendant remains in possession of the property and has not responded in any way to the underlying issues or the proceedings themselves.

33. In order for a sale to be conducted effectively, it will be necessary to give a third party possession of the property.

34. Plainly enough, giving possession of the property to someone else and permitting it to be sold will be a fundamental interference with the defendant’s entitlement to enjoy the property registered jointly in his name. It involves a significant interference with what appears to be his privacy and home. However, in the circumstances that he has allowed to arise and in light of his failure to respond in any way to any of the attempts to get him to solve the problem, the only reasonably available option is to make the orders to the effect of those sought. There is no other way by which, in the absence of some action on the part of the defendant, the plaintiff can be relieved of the financial burdens that have been imposed as a result of her legal ownership of the property and be removed from the title to the property.

35. The orders proposed by the plaintiff are set out as a schedule to these reasons.

36. I will make orders which are to similar effect as the orders sought. I will explain the rationale behind the orders.

37. First (orders 2-5), I will require the orders to be served on the defendant or at least prominently notified at the property prior to the balance of the orders coming into effect. The intention behind that order is to make a final effort to prompt some constructive engagement by the defendant. The operation of the substantive orders will be deferred. Prior to those orders coming into effect, there will be liberty to apply for their discharge or variation. This will give the defendant a final opportunity to take urgent action to avoid the order for sale. In addition to the orders, a notice will need to be served. The formulation of that notice is set out in the orders. Unfortunately, the standard notice required to be served pursuant to r 2015 (approved form 2.49 AF2007-63) is both in inappropriate terms for the circumstances of this case and outdated in its references to organisations and addresses which may be able to assist the defendant.

38. Second (order 8), I will make an order for sale pursuant to s 244 of the Civil Law (Property) Act, which is reasonably self-explanatory.

39. Third (orders 9-12), the issue as to how to appoint a third party to conduct the sale is not straightforward. There is no equivalent to s 66G of the Conveyancing Act 1919 (NSW) which would make the process relatively straightforward. Section 244 of the Civil Law (Property) Act contemplates that one or other or both of the parties will conduct the sale. Section 244(3) contemplates the appointment of trustees “to receive and apply proceeds of the sale” but not to conduct the sale itself. The specific and limited scope for the appointment of the trustee in s 244(3)(a) qualifies the scope of “any consequential directions it considers appropriate” in a way that excludes using the consequential directions power to appoint a third party trustee to conduct the sale. Section 77 of the Trustee Act permits the making of a vesting order where an order is made by the court “for the partition or sale instead of partition of any land”. It also provides “For this section, the Supreme Court may declare … that any of the parties to the proceedings are trustees of the land”. This section allows one of the parties to be declared to be a trustee and vested with the property but does not permit the appointment of a third party trustee. In order to fit within the scope of the power it will be necessary either to join the proposed trustee as a party to the proceedings or, alternatively, to declare a party to the proceedings to be a trustee of the land and then make an order pursuant to s 70 of the Trustee Act replacing the trustee with the third party trustee and a vesting order vesting the property in the new trustee. I will adopt the latter course. That rather circuitous approach appears to be sufficient to permit an order vesting the land in a trustee for the purposes of carrying out the sale that has been ordered.

40. Fourth (order 13(a)), an order that the defendant must give vacant possession of the property to the trustee is made. Given the general terms of the language used in s 244(3)(b) (“any consequential directions [the court] considers appropriate”), that power is sufficient to permit an order for possession. I did not consider it appropriate to extend the order to persons other than the defendant as contemplated by the plaintiff’s proposed orders because they are not parties to the proceedings and there is no evidence as to their existence or nonexistence or possible interest in the property.

41. Fifth (order 13(b)), there is then an order relating to an application for an order for delivery of possession under r 2451. I consider it appropriate to dispense with the requirement of r 2015 because of the notice given at the time of the orders and because of the difficulties with using form 2.49. I do not consider it appropriate to dispense with the requirement for leave that arises from r 2452 in relation to persons other than the defendant. If there are other persons present upon, or with an interest in, the property, then that is a matter which will have to be dealt with if or when it arises, and I do not consider it appropriate to predetermine the issue of leave under r 2452.

42. Sixth (orders 14-15), the orders made either pursuant to s 244(3)(b) or pursuant to s 245 relate to the conditions of sale and the entitlement of the defendant to purchase the property.

43. Seventh (orders 16-17), there are orders dealing with the proceeds of sale allowing payment of certain expenses necessary to permit the sale to occur and discharge the liabilities to the Territory and Icon Water. They also permit payment of other expenses relating to the sale as well as the fees of the third party trustee and his staff. Finally, they permit the reimbursement of the plaintiff for amounts that she has had, in recent times, to pay to Icon Water arising from the accrued liability. The balance of the proceeds of the sale are to be held by the trustee pending agreement between the parties or further order of the court.

44. Eighth (order 18), there is a costs order in favour of the plaintiff. There is liberty to seek a more favourable or lump sum costs order. Those issues are not appropriate to be dealt with at this stage because there remains the prospect that the defendant will, at some stage, appear.

45. Ninth (order 19), liberty to apply is granted in relation to the working out of the orders in order to give effect to the sale.

Orders

46. The orders of the Court are: Preliminary 1. These orders are to be drawn up and entered in the Registry forthwith. 2. Orders 8 to 19 do not take effect until 6 July 2024. 3. Liberty is granted to either party to apply for variation or discharge of orders 8 to 19 prior to them coming into effect. 4. The plaintiff must serve a copy of these orders and the notice referred to in order 5 on the defendant no later than 14 June 2024: (a) by serving them personally on the defendant; or (b) by affixing a copy of these orders and the notice to the door of the residence at [redacted] and placing a further copy of the orders and the notice in the letterbox at that address. 5. The notice referred to in order 4 comprises an A4 sheet of paper with: (a) the writing “IMPORTANT COURT ORDERS – PROPERTY TO BE SOLD. YOU SHOULD URGENTLY OBTAIN LEGAL ADVICE” in no smaller than 48 point text; and (b) the writing “You may be able to obtain legal or financial advice and assistance in relation to the orders from: Legal Aid ACT 2 Allsop Street CANBERRA CITY ACT 2601 Tel: (02) 6243 3411/1300 654 314 CARE Financial Counselling Level 4 219 London Circuit CANBERRA CITY ACT 2601 Tel: (02) 6257 1788” in no smaller than 14 point text; and (c) contact details for the solicitor for the plaintiff in no smaller than 14 point text. 6. Service in accordance with orders 4 and 5 shall be taken to be effective service for the purposes of the Court Procedures Rules 2006 (ACT). 7. The plaintiff is to file no later than 28 June 2024 an affidavit of service demonstrating compliance with orders 4 and 5, including, if the orders and notice are not personally served, colour photographs demonstrating service in accordance with the orders. Order for sale 8. Pursuant to section 244 of the Civil Law (Property) Act 2006 (ACT), the plaintiff’s and the defendant’s interests in the land situated at [redacted] in the ACT and also known as [redacted] (the Property) be sold. Vesting in trustee 9. Pursuant to section 77(2) of the Trustee Act 1925 (ACT), the plaintiff is declared to be trustee of the Property. 10. Pursuant to sections 77(1) and 71 of the Trustee Act 1925 (ACT), the Property is vested in the plaintiff. 11. Pursuant to section 70 of the Trustee Act 1925 (ACT), the plaintiff is replaced as trustee by Aaron Boyd Torline (the Trustee), for the purposes of the sale of the Property pursuant to these orders. 12. Pursuant to section 71 of the Trustee Act 1925 (ACT) the Property is vested in the Trustee. Possession of the property 13. Pursuant to section 244(3)(b) of the Civil Law (Property) Act 2006 (ACT): (a) The defendant must give vacant possession of the Property to the Trustee by 28 July 2024. (b) If the defendant fails to give vacant possession of the Property by 28 July 2024, the plaintiff and the Trustee are each permitted, without compliance with rule 2015 of the Court Procedures Rules 2006 (ACT), to apply for an order for delivery of possession of land under rule 2451 of the Court Procedures Rules 2006 (ACT). Conditions of sale 14. Pursuant to section 244(3)(b) of the Civil Law (Property) Act 2006 (ACT), the Trustee may undertake such cleaning, rubbish removal, repairs and improvements as may reasonably be required and recommended by any agent for sale to enable the Property to be sold. 15. Pursuant to section 245 of the Civil Law (Property) Act 2006 (ACT): (a) the defendant is entitled to purchase the Property, whether at auction or otherwise, without the payment of a deposit; and (b) the defendant is entitled to purchase the Property, whether at auction or otherwise, by setting off that party's entitlement to the net proceeds against the money bid or offered. Proceeds of sale 16. Pursuant to section 244(3) of the Civil Law (Property) Act 2006 (ACT), the Trustee is to receive the proceeds of the sale and apply them, in accordance with these orders, to payment of the following amounts: (a) any amount secured by a registered mortgage over the property; (b) any outstanding rates, water charges and other costs connected with the Property, together with any accrued interest and legal costs on those amounts; (c) real estate agent’s fees incurred by the Trustee relating to the sale; (d) conveyancing fees incurred by the Trustee relating to the sale; (e) insurance expenses incurred by the Trustee relating to the Property; (f) valuation expenses incurred by the Trustee relating to the sale; (g) marketing expenses incurred by the Trustee relating to the sale; (h) the costs of cleaning, rubbish removal, repairs and improvements undertaken in accordance with order 14; (i) charges for the time of the Trustee and the time of his staff in accordance with the schedule of rates annexed to the affidavit of Aaron Boyd Torline dated 5 June 2024 plus GST, but not exceeding (without a further order of the Court) $20,000 plus GST; and (j) amounts paid by the plaintiff to Icon Water since 1 April 2023 in relation to the supply of water to the property together with interest. 17. The balance of the proceeds of the sale shall be held by the Trustee and dealt with as agreed by the parties or in accordance with an order of the Supreme Court. Costs 18. The plaintiff's costs of and incidental to this application be paid by the defendant on a party and party basis and the plaintiff is granted liberty to apply to seek costs on a more favourable basis and/or to seek a lump sum costs order. Liberty to apply 19. The parties and the Trustee have liberty to apply on 2 days’ notice and, pending the filing of a notice of intention to respond by the defendant, notice may be given to the defendant by letter placed in the letterbox of the Property. Schedule: Plaintiff’s proposed orders 1. Pursuant to section 244 of the Civil Law (Property) Act 2006 (ACT) (the Act), the land situated at [redacted] in the ACT and also known as [redacted] (the Property) be sold. 2. Pursuant to section 244(3) of the Act Aaron Torline be appointed as trustee for the sale of the Property (the Trustee). 3. The Property be vested in the Trustee subject to any encumbrances affecting the entirety of the lands but free from any encumbrance (if any) affecting any undivided share or shares therein to be held by the Trustee upon statutory trust for sale under part 2.5 of [the Act]. 4. Alternatively, the trustee is to take possession of, hold and manage the Property until it is sold. 5. The Trustee undertake such repairs and improvements as may reasonably be required and recommended by any agent for sale to enable the Property to be sold. 6. The Trustee stand possessed of the net proceeds of sale, after payment of costs and expenses of the sale. 7. The Trustee is authorised to pay from the net proceeds of sale any outstanding rates, water charges and other costs connected with the Property together with any accrued interest and legal costs on those amounts. 8. The defendant is entitled to purchase the Property whether at auction or otherwise without the payment of a deposit. 9. The defendant is entitled to purchase the Property whether at auction or otherwise by setting off that party's entitlement to the net proceeds against the money bid or offered. 10. The Trustee is authorised to: a. charge for his time and the time of his staff in accordance with the schedule of rates annexed to these orders up to a maximum of $20,000 plus GST; b. incur reasonable expenses and disbursements to effect the sale. 11. The [Trustee’s] costs, expenses and disbursements as set out above are payable from the net sale proceeds of sale. 12. The Trustee has liberty to apply for approval to incur further fees and expenses. Vacant possession 13. [The defendant] and any other person in occupation of the Property give vacant possession to the Trustee within 14 days of serving these orders on the defendant. 14. If the defendant or any other occupants of the Property fail to give vacant possession of the Property within 14 days of service of these orders, an order that the plaintiff and the [Trustee] are each granted leave to the extent necessary to file a further affidavit attaching a draft order sought in accordance with rule 2451 of the Court Procedures Rules 2006 [(ACT)] to obtain orders for delivery of possession of the Property. Costs 15. The plaintiff's costs of and incidental to this application be paid on an indemnity basis. 16. Alternatively, the plaintiff's costs of and incidental to this application be paid on a party and party basis and the plaintiff is granted liberty to apply to seek a lump sum costs order. 17. The requirement to serve the defendant with any application pursuant to order [16] is dispensed with unless the first defendant has submitted notice of intention to defend or a defence in these proceedings prior to the application for costs being filed.

I certify that the preceding forty-six [46] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 25 June 2024