David Ian Mansfield, the Trustee of the Property of Thi Ngoc Hahn Son, A Bankrupt v Tia

Resolution of Issues

1. The Deed of Sale and Agreement between the parties and the subsequent sale of the property has removed the utility of these proceedings. It is therefore appropriate that the Court dismiss the proceedings. Such an order will be made.
2. An order for dismissal engages the starting position provided for in r 42.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"); this is an order for the plaintiff to pay the defendant's costs of the proceedings. However, in an application for statutory sale of co-owned property, this starting position is unlikely to take the analysis very far. That is because, in applications such as these, the Court usually orders that the costs of the application are to be taken from the co-owners' proceeds of sale; the rationale for this approach is that the costs of such applications are regarded as an incident of co-ownership: Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]; see also Chow v Chow (No 2) [2015] NSWSC 1348 at [17]. By this means, the costs are thus shared between the co-owners. In my opinion, this justifies a departure from the starting position referred to in r 42.20(1) of the UCPR. Whilst the usual way costs are shared is no longer available here, I consider that a sharing of the costs remains appropriate. I think that the costs ought prima facie be equally shared between the plaintiff and defendant co-owners.
3. This position can of course yield to the particular facts of the case. Here, the plaintiff seeks his costs. The plaintiff submits that the defendant was aware of the communications sent to him, and the defendant failed, refused, or neglected to respond to the plaintiff. The plaintiff submits that he was required to commence these proceedings, in which he ultimately incurred legal costs of $42,511.72. I note here that it seems unlikely that the defendant would have incurred any substantial costs aside from those associated with the Deed.
4. The plaintiff's submissions are hindered by authority. In Chow v Chow (No 2) (supra), the facts were somewhat similar to this case, in that the plaintiff sought costs due to the defendants' delay in negotiating with the plaintiff. At [11]-[12], Young AJA stated: The alleged misconduct on the part of the defendants, particularly the first defendant, is in failing to negotiate; failing to answer a large number of communications made by the plaintiff's solicitors over a period of four years; and prevaricating by deliberately putting up suggestions contrary to the plaintiff which he knew would not be accepted. Accepting for the moment that I share the plaintiff's view of the classification of the first defendant's conduct, it would still not amount to misconduct in the same sense as is used in partnership cases. The co-owners have no obligation to negotiate their dissolution. As Mr Walton SC for the second defendant submitted, not only is there no duty to negotiate, even if there were, there is no breach of the duty involved in failing to reach an agreement.
5. Young AJA's view that co-owners have no duty to negotiate has been applied subsequently by this Court (see, for example, Stibbard-Leaver v Leaver [2021] NSWSC 65 at [5]). His Honour observed, however, that the position changes after the commencement of proceedings. Once that occurs, the demands of section 56 of the Civil Procedure Act then apply, and the parties are faced with obligations to assist the Court and participate in its processes (see Chow v Chow (No 2) (supra) at [25]-[26]). Despite the defendants' delay in that case, Young AJA ordered that the costs of all parties be taken out of the proceeds of sale. This conclusion was made, in part, because any delay in negotiations happened before the plaintiff commenced proceedings.
6. Here, any alleged refusal to negotiate is of no real consequence before 20 September 2019, when the plaintiff filed his Summons. After that time, the defendant may have had some obligation to negotiate with the plaintiff. The difficulty for the plaintiff, however, is that by Court order the defendant is only taken to have been aware of the proceedings from 25 June 2020, and after that point, the parties negotiated a successful resolution.
7. It is correct to say that the earlier absence of response from the defendant caused the plaintiff to incur legal expenses in the proceedings. However, the plaintiff's evidence fails to identify with sufficient clarity when the defendant became aware of the bankruptcy and thus the potential sale of the Cabramatta property. It is therefore unclear to what extent the defendant was consciously refusing to contact the plaintiff. Further, although the plaintiff attempted to contact the defendant, those attempts were made intermittently over a period of years, and it was only in July 2020 that the plaintiff sought an order for deemed service on the defendant.
8. In summary, the defendant lacked any obligation to negotiate with the plaintiff before the commencement of the proceedings, and once the proceedings began, the delays have not been shown to be entirely the defendant's fault. For these reasons, the plaintiff has failed to demonstrate that the defendant's conduct warrants the order for costs the plaintiff seeks.
9. The defendant submits that no orders should be made as to costs. His primary submission is that the Deed dated 17 February 2021 disposed of all questions raised by the Amended Summons, including costs. Particular emphasis is placed on clauses 5.5 and 5.6 of the Deed. Clause 5.5 provides for the proceeds of sale to be divided equally between the plaintiff and defendant (after certain payments and fees are made). Clause 5.5 lacks any reference to the parties' costs. Clause 5.6 states that if the property is not sold within 90 days from the date of the Deed, the defendant would consent to final orders being made consistent with those in the Summons, except those orders relating to the plaintiff's costs being paid out of the proceeds of sale.
10. The plaintiff submits that the Deed governed the sale of the property, but it did not govern the costs of the Supreme Court proceedings. In my opinion, the plaintiff's submission should be preferred. The absence of express terms in the Deed directed towards the costs of the proceedings should not be taken as signalling that the parties agreed to bear their own costs, or that no order for costs should be made. Rather, it indicates that the parties reached no concluded agreement as to costs. Even clause 5.6, which provides that in certain circumstances the defendant would consent to the relief in the Summons, but not an order that the plaintiff's costs be paid out of the proceeds of sale, suggests that the parties made no agreement concerning the costs of the proceedings. Had it been intended that the costs of the proceedings were to be dealt with in a particular way, it would have been a simple matter to include suitable words in the Deed to that effect. In my view, the Deed does not stand in the way of this Court making an order as to costs.
11. In my opinion, the circumstances do not justify a departure from the usual position that costs of the section 66G application are shared between the co-owners. As already mentioned, the Court cannot now order that costs be taken out of the proceeds of sale. However, it is appropriate in my opinion to order the defendant to pay half of the plaintiff's costs. I now turn the question whether, instead of assessed costs, the costs should be ordered on a gross sum basis.
12. In Harrison v Schipp (2002) 54 NSWLR 738, Giles JA stated at [22] that "the gross sum can only be fixed broadly having regard to the information before the Court" and that "the power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available".
13. The plaintiff has produced a schedule of fees incurred in these proceedings, totalling $42,511.72. Of this figure, $39,999.00 are solicitor's fees, and $2,512.72 are disbursements. The defendant takes issue with a number of the solicitor's fees, noting that some work is apparently repetitious in nature, and that certain fees seem to relate to a Deed that is presumably the Deed formed between the parties on 17 February 2021. I note, for example, a charge for $1,485 on 6 October 2020 described as "Attendance - drafting Deed", and a similar charge on 17 December 2020 for $1,395. The defendant rightly observes that clause 9.7 of the Deed provided that each party agreed to bear their own costs of and associated with the negotiation, preparation, execution and delivery of the Deed.
14. It seems to me that in these circumstances a departure from assessed costs is not warranted. I have some doubt that the Court can fix an appropriate sum that is fair between the parties. Whilst it would be desirable for these proceedings to be concluded without further delay, particularly where the plaintiff is acting as trustee for a bankrupt's estate, the desire for finality should not overwhelm the need for a fair outcome between the parties. In my opinion, the defendant should not be deprived of the benefit of a costs assessment. Accordingly, a gross sum order should not be made instead of assessed costs.
15. The Court orders that: 1. the proceedings be dismissed, and 2. the defendant pay half of the plaintiff's costs of the proceedings.

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