Denton by her tutor NSW Trustee and Guardian v Denton

Supreme Court of NSW|2019-06-05|Before: Darke J

Judgment

On 12 October 2018 the plaintiff, by her tutor the NSW Trustee and Guardian ("NSW Trustee"), filed a Summons seeking relief under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale of land situated at Koola Avenue, East Killara NSW ("the Property"). The plaintiff was a co-owner of the Property with the defendant, who is the plaintiff's son. At all material times, the dispute has been between the defendant and the NSW Trustee acting in its capacity as the financial manager of the plaintiff's estate.
The proceedings were initially contested by the defendant. However, on 22 March 2019, the parties reached an in-principle settlement. On 2 April 2019, the Court approved the settlement. Orders were made appointing trustees for sale and disposing of the proceedings (save as to costs). Orders were made on the same day for the parties to file and serve any evidence in relation to the question of costs and to file and serve any written submissions on costs. It was noted that the issue of costs was to be dealt with on the papers.
In summary, the plaintiff contends that the "usual" costs order made in cases under s 66G of the Conveyancing Act namely, that the parties' costs of the proceedings be paid out of the proceeds of sale, should be displaced in the circumstances of this case. Instead, the plaintiff seeks an order that the defendant pay the plaintiff's costs of the proceedings on an indemnity basis. The basis of such order is said to arise from the defendant's unreasonable conduct in resisting the order for the appointment of trustees for sale. The defendant essentially opposes the orders on the ground that his conduct was reasonable in the circumstances.
In support of the application, the plaintiff relies on the affidavit of Jarrad McCarthy sworn 26 March 2019. In opposition, the defendant relies on parts of the affidavits of Rana Khoreiche dated 13 March 2019 and Gary Patterson sworn 12 October 2018. The Court has considered the entirety of each of those affidavits.

Summary of the salient evidence

The plaintiff is an elderly woman. She originally owned the Property as tenant in common with her late husband Robert Denton who died in May 2009. Following his death, the defendant was appointed executor of the estate. The defendant subsequently became registered proprietor of the deceased's share in the Property, pursuant to a transmission application.
The NSW Trustee was appointed as the plaintiff's financial manager by order of the NSW Civil and Administrative Tribunal ("NCAT") in March 2015. In February 2016, the plaintiff was moved into an aged care facility in Woy Woy run by HammondCare. A Refundable Accommodation Deposit of approximately $540,000 was paid to HammondCare. It seems that the costs of staying at that facility were high, with fees accruing at a monthly rate of $7,305.60. As at August 2018, the plaintiff was in debt to HammondCare in the amount of $132,099.35.
Sometime in early-to-mid 2018, the NSW Trustee made a decision to move to sell the Property in order to pay the debt owing to HammondCare and to provide for the costs of the plaintiff's future and ongoing needs. This decision was opposed by the defendant who sought to find alternative sources of funding to pay the debt and those ongoing costs. According to Mr McCarthy, a solicitor employed by the NSW Trustee, he instructed external solicitors in August 2018 to draft a Summons seeking orders for the appointment of trustees for sale of the Property. However, before the Summons was filed, the NSW Trustee learned of the defendant's application to NCAT seeking orders to review the NSW Trustee's decision to sell the Property. On 14 August 2018, Mr McCarthy made a decision not to take any further action with respect to the sale of the Property until the NCAT proceedings were determined.
The NCAT proceedings were determined in September 2018. In those proceedings, the defendant made submissions that there were various other means available to effect the repayment of the debt to HammondCare. However, it appears the defendant accepted during the course of the hearing that the only realistic method to pay the debt in the short term was to obtain a loan in the amount of $140,000. The NSW Trustee submitted that it had given the defendant a reasonable opportunity to provide alternative means to pay out the plaintiff's debts as well as to find ways to provide for the plaintiff's future care but the defendant was unable to produce any alternative. The Tribunal affirmed the NSW Trustee's decision to sell the Property, noting it was the correct and preferable decision. The Tribunal was clearly influenced by the fact that the defendant was unable to provide any evidence as to his assets or income to show that he was in a position to obtain a loan to pay out the debt to HammondCare.
On 11 September 2018, Mr McCarthy wrote to the defendant. In that letter, Mr McCarthy noted NCAT's decision to affirm the NSW Trustee's decision to sell the Property and requested that he consent to such a sale, or otherwise the NSW Trustee would be forced to commence proceedings to seek the appointment of trustees for sale.
The defendant's solicitors replied to Mr McCarthy on 20 September 2018 indicating that the defendant agreed to the sale of the Property. Following this, Mr McCarthy instructed his solicitors to cease any further preparation for an application under s 66G. Further emails were sent by employees of the NSW Trustee to the defendant's solicitors in late September and early October 2018 asking about the location of the keys to the Property. No response to those emails appears to have been received by the NSW Trustee.
On 11 October 2018, the defendant's solicitors sent an email to Mr McCarthy noting that the defendant now opposed the sale of the Property and that the NSW Trustee "ought to consider an alternative to avoid further money being spent unnecessarily by way of Supreme Court application and continued legal engagement". The email went on to explain that it was the defendant's position that the Property did not need to be sold and that alternatives were available to pay out the debt to HammondCare. The defendant's solicitors further noted that they expected to receive documentation from the defendant in support of his position within 14 days.
The following day, on 12 October 2018, the NSW Trustee commenced the present proceedings seeking relief under s 66G.
Sometime after this date, the defendant made a decision to move the plaintiff out of the age care facility in Woy Woy to another facility in Erina. In December 2018, HammondCare repaid the Refundable Accommodation Deposit after deducting a debt owing to it of $137,495.10. The amount repaid was thus almost $403,000. It seems that a Refundable Accommodation Deposit of $350,000 is needed in respect of the facility in Erina.
The NSW Trustee considers that without the sale of the Property, the remainder of the Plaintiff's funds will be depleted within about two years. That does not seem to be disputed by the defendant.
I note for completeness that following the commencement of proceedings in October 2018, orders were made for the parties to file and serve evidence in the matter. On 14 December 2018, the Court set the matter down for hearing in May 2019 with a two day estimate, and made the usual order for hearing.

Disposition

The plaintiff advances a narrow submission in support of its application for indemnity costs. It submits that in seeking to review the NSW Trustee's decision to sell the Property, later agreeing to a sale and then refusing to join in the sale of the Property, the defendant has acted unreasonably, resulting in the commencement of the present proceedings and the incurring of legal costs and expenses that could have been avoided.
The defendant submits that the plaintiff has not shown any good reason to depart from the usual order for costs in applications under s 66G. The defendant submits that opposing the sale was properly based on the belief that the defendant could raise the necessary funds to pay the debt to HammondCare. Although moving the plaintiff out of the facility in Woy Woy and into the new facility in Erina did not resolve the issue of providing for the long term care of the plaintiff, it was submitted that such conduct was not unreasonable in the circumstances of the case.
In my opinion, contrary to the defendant's submissions, the defendant's conduct justifies an order that the plaintiff's costs of the proceedings be paid by the defendant on an indemnity basis. The defendant's application to NCAT to review the NSW Trustee's decision to sell the Property was made on the express basis that there were alternative means to pay the debt associated with the plaintiff's care which did not involve selling the Property. The defendant, having been given a reasonable opportunity, did not (or could not) provide evidence or any suitable explanation demonstrating he was in a position to meet the debt either himself or through some other means. It is apparent from the email sent by his solicitor on 20 September 2018, stating that he agreed to the sale of the Property, that the defendant came to accept that the sale was necessary.
From that point, I do not think that there was any reasonable basis for the defendant to resist a sale of the Property. No such basis has been shown. The change in the plaintiff's accommodation did not remove the need for the Property to be sold. The NSW Trustee was entitled to realise the plaintiff's assets, including the Property, in any way it sought fit to discharge its responsibilities as the financial manager of the plaintiff's estate.
Counsel for the defendant did not suggest there was any discretionary reason to refuse an order under s 66G, such as an inconsistent contractual or proprietary right or fiduciary obligation (see Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411 at [36]). The only reason for opposing the orders seems to have been the defendant's erroneous belief that a sale of the Property was not necessary. That is not a sufficient justification to oppose the NSW Trustee's application to appoint trustees for sale.
The plaintiff was required to bring the proceedings as a result of the defendant's unreasonable opposition to a sale. The defendant maintained his opposition until after the matter had been set down for hearing. The plaintiff's costs of the proceedings can be seen as costs that were unnecessarily incurred.
For these reasons, the Court will order that the defendant pay the costs of the proceedings on an indemnity basis. I note the defendant's submission to the effect that any costs he is ordered to pay will be paid out of the estate of Robert Denton, and the plaintiff is the residuary beneficiary of that estate. These matters do not materially affect the position in relation to costs this case. I express no view about whether the defendant would be entitled to be indemnified out of the estate for the costs he will be ordered to pay in these 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: 05 June 2019

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