Capolingua v Da Silva

Supreme Court of NSW|2017-04-24|Before: Darke J

Introduction

This is the second judgment delivered in these proceedings between co-owners of a property near Mullumbimby. The plaintiff, who owns a two-thirds share in the property, seeks the appointment of trustees for sale pursuant to s 66G of the Conveyancing Act 1919 (NSW). In the first judgment (Capolingua v Da Silva [2016] NSWSC 1212), the Court declined to make orders under s 66G in circumstances where the plaintiff had not yet complied with cl 5(b) of a Deed that had been entered into between the parties.
Clause 5(b) of the Deed requires that a party wishing to exercise rights under s 66G must first market their interest in the property conscientiously and with all due diligence for one year. The Court was satisfied that the plaintiff's interest had been marketed in accordance with cl 5(b) from about April 2016, but that was a period of only about four months (see the first judgment at [48]-[49]). That factor, considered as part of the overall circumstances of the case, led the Court to conclude (at first judgment [56]-[57]) that it would be inequitable to the defendant to appoint trustees for sale at that time. Accordingly, the proceedings were adjourned for further hearing in April 2017.
On that occasion, further evidence was adduced concerning the marketing of the plaintiff's interest in the property, and the current state of the property. An affidavit sworn by Mr Cochrane, the selling agent in charge of the marketing campaign, was read by the plaintiff. Two further affidavits affirmed by the defendant, and an affidavit affirmed by Mr John Walker, were read by the defendant. All three witnesses were cross-examined.
The defendant resists the appointment of trustees for sale, primarily on the basis that the plaintiff has still not complied with cl 5(b) of the Deed.

Submissions

The plaintiff commenced by referring to the finding made in the first judgment (at [48]), that the marketing of the plaintiff's interest in the property from about April 2016 satisfied the requirements of cl 5(b) of the Deed that the interest be marketed conscientiously and with all due diligence. The plaintiff then submitted that the further evidence established that the marketing has continued for 12 months at that standard. It was submitted that in those circumstances, and taking into account the other matters raised by the plaintiff at the first hearing, the Court should proceed to appoint trustees for sale.
The defendant submitted that the marketing requirements set out in cl 5(b) have still not been satisfied. It was submitted that the marketing has not been conducted conscientiously and with all due diligence in circumstances where statements of the kind referred to in Mr Cochrane's email to sales staff on 1 September 2016 are made to prospective purchasers, and statements are made by Mr Cochrane of the type deposed to by Mr Walker. The defendant submitted that if the various disclosures made by Mr Cochrane had not been made, a sale could have been achieved.
It was further submitted by the defendant that Mr Cochrane should have communicated with her about inspections of the property and in relation to prospective purchasers. It was also suggested that Mr Cochrane should have spoken to her following the incident which occurred during the inspection by Mr Mester and his wife.
No complaint was made about the advertising of the property on the internet, and it was accepted that the absence for a period of a "For Sale" sign at the front of the property was of little moment.
Finally, the defendant submitted that the damage recently sustained to the property afforded a reason not to proceed to appoint trustees for sale.

Determination

I do not think that Mr Cochrane should be criticised for speaking to potential purchasers about the three matters referred to in the 1 September 2016 email. It is true that there is a history of disputation between the co-owners, which involved the making of apprehended violence orders. That is a matter which a potential purchaser would likely be interested in when considering entering into co-ownership with the defendant, who was living in the other dwelling located not far away. Moreover, it is a matter which an interested purchaser is likely to discover in any event. As Mr Walker said in cross-examination, it was a matter of common knowledge "up and down the valley" that there had been animosity.
It is also true that there is a mortgage over the property, and that once the plaintiff had discharged his loan to the mortgagee, a loan of about $43,000 owed by the defendant would remain, secured by the mortgage. The existence of the mortgage is a matter likely to be of some importance to a potential purchaser. It is a matter which would almost certainly be discovered in any event.
It is evident from the disclosure form completed in early April 2016 after the plaintiff retained Mr Cochrane, that the plaintiff informed Mr Cochrane that there was no Occupation Certificate in relation to the dwelling the plaintiff had lived in. I accept that the plaintiff understood that to be the position. It has not been shown to be incorrect. The evidence given by Mr Walker in cross-examination to the effect that he was told by an officer of the Council that the plaintiff had an approval would not, even if accepted, establish that an Occupation Certificate had issued. In any case, for the reasons which are set out below, I would not accept that evidence as accurate or reliable.
The existence of relevant Council approvals, including an Occupation Certificate in respect of the main dwelling, is also a matter which a potential purchaser would likely be interested in. If so, the true position could be ascertained by making enquiries of the Council.
In my opinion, the disclosure of these various issues by the selling agent is not indicative of a failure to market the plaintiff's interest conscientiously and with all due diligence. Mr Cochrane explained that disclosure of these matters was ethical, in the interests of the firm's professional reputation, and a protection against being sued. To act in that way is consistent with conscientious and diligent marketing. I do not accept that if the various disclosures had not been made by the selling agent a sale could have been achieved.
I was favourably impressed by Mr Cochrane as a witness. He is clearly possessed of great experience in the sale of property in the area, and evidently had a good understanding of the attributes of the property, including in relation to its co-ownership. He gave his evidence in a clear and forthright manner. I accept his evidence as truthful and reliable.
To the extent that Mr Cochrane's evidence differs from that of Mr Walker in relation to their dealings, I prefer Mr Cochrane's evidence. I found Mr Walker's evidence, particularly on those contentious matters, to be problematic. His answers were often rather imprecise, or confused (e.g. as to what was said about the defendant's residence), and I gained the impression that his recollection of the events was not good. Mr Cochrane's statement, in his email to the plaintiff on 12 January 2017, that Mr Walker and Panda "were very quick and didn't seem to take in too much" is likely to be an accurate assessment. Mr Walker also made some curious statements in the course of his cross-examination (e.g. about "a secret little clan"), and seemed eager to impugn Mr Cochrane's reputation. I am not prepared to accept Mr Walker's evidence as accurate or reliable, particularly where it is not corroborated by reliable evidence.
Mr Cochrane should not be criticised for what he said to Mr Walker during their initial conversation and during the inspection. Insofar as Mr Cochrane provided information about the property, it was essentially accurate. I do not regard the reference to a $50,000 debt, when the debt may have only been about $43,000, to be a material inaccuracy in the context of making disclosure of an issue which would need to be investigated by an interested purchaser. To the extent that Mr Cochrane spoke about the mortgage and the lack of a final Council inspection, he was doing no more than raising pertinent matters which an interested purchaser would, or would likely, discover in any event.
Neither should Mr Cochrane be criticised for not communicating with the defendant, who was not his client. There was no need to speak to her (as opposed to the tenant in the plaintiff's former residence) in order to arrange inspections. Only three inspections occurred throughout the entire marketing campaign. Two of them (Mr and Mrs Mester, and Mr Urquart) were not fruitful. The other inspection (Mr Walker and Panda) was followed up with an email to Panda on 16 January 2017 in which Mr Cochrane offered to arrange a second inspection or a meeting with "the other shareholder". It seems that the offer was not taken up. Mr Cochrane was apparently willing to involve the defendant in the selling process at a time he judged to be appropriate. It was not shown that his approach in respect of the defendant was in any way unreasonable, or incompatible with a conscientious and diligent marketing of the plaintiff's interest in the property. Finally, I can see no good reason why Mr Cochrane ought to have spoken to the defendant about the incident which occurred during the inspection by Mr and Mrs Mester. His failure to do so does not lead to the conclusion that the marketing was not being undertaken conscientiously and with all due diligence.
I accept Mr Cochrane's evidence (which was not directly challenged) that he used his best endeavours to achieve a sale of the plaintiff's interest in the property. I have concluded that the marketing of that interest has continued since the first judgment to satisfy the requirement of cl 5(b) of the Deed that it be conducted conscientiously and with all due diligence. The marketing has now satisfied the further requirement of cl 5(b) that it be undertaken for a period of one year. The defendant has now had the benefit of the clause, and the making of orders under s 66G would no longer be inconsistent with cl 5 of the Deed. The circumstance which earlier caused the Court to withhold relief under s 66G is no longer present.
I do not regard the unfortunate fact that the property was recently damaged as a reason to withhold the appointment of trustees for sale. That fact will likely have an impact upon any attempt to sell the property, including the timing of any sale. Decisions about timing and how to best present the property for sale will need to be made. Given the acrimonious relationship that seems to persist between the co-owners, it is preferable that such decisions be made by trustees (taking into account the views of the parties as envisaged by s 66H of the Conveyancing Act).
In all the circumstances, it seems to me that the Court should now accede to the plaintiff's application for the appointment of trustees for sale of the property.
By cl 5(c) of the Deed, the parties agreed that in the event that the property is sold by trustees appointed under s 66G of the Conveyancing Act, the trustees would be entitled to distribute the net proceeds of sale by "applying the formula embodied in cl 3.8" of the Deed. It seems that the parties are now in agreement as to how that formula should be applied, in the event that trustees are appointed (see the Joint Supplementary Submissions dated 1 May 2017). The Court will make orders in a form that encapsulates this agreed position. The parties will be invited to submit a Consent Order accordingly.
No submissions were made by the defendant in support of the only remaining aspect of her cross-claim, namely, the claim for damages for breach of cl 5 of the Deed. The damages claimed are in the nature of legal costs, being the defendant's costs of the proceedings brought against her by the plaintiff. No attempt was made to explain why those costs would be recoverable as damages in light of the principles discussed in cases such as Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 and Gray v Sirtex Medical Ltd (2011) 193 FCR 1; [2011] FCAFC 40. In any case, no evidence was adduced of the quantum of the costs claimed as damages. In these circumstances, it is appropriate that the Cross-Claim be dismissed, and that the defendant's costs be dealt with as part of the determination to be made by the Court of the appropriate order for costs pursuant to s 98 of the Civil Procedure Act 2005 (NSW). The parties agree that all questions of costs may be dealt with on the papers. Directions will therefore be made for the provision of written submissions on costs.

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: 04 May 2017

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Judgment (5 paragraphs)

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