Williams J, Brereton J, Basten JA, White JA, Darke J
Source
Original judgment source is linked above.
Judgment (2 paragraphs)
[1]
Judgment
These reasons concern the costs of these proceedings, which were heard on 21-23 November 2022 and determined on 29 November 2022. The plaintiff succeeded in her application for an order under s 66G of the Conveyancing Act 1919 (NSW) appointing trustees to hold on statutory trust for sale certain land at Mount Warning, New South Wales which is co-owned by the plaintiff and the defendants (the Land). All of the defendants' grounds of opposition to the application failed, but the Court appointed the trustees nominated by the defendants rather than the trustees nominated by the plaintiff. All nominees were fit to act but the experience of the defendants' nominees and their closer geographic proximity to the Land made their appointment preferable to the appointment of the plaintiff's nominees: Eva Joy Ambrus v Lee Ellen Buchanan [2022] NSWSC 1628 (the principal judgment).
Familiarity with the principal judgment is assumed and terms defined in the principal judgment have the same meaning in these reasons.
The question of costs has been the subject of written submissions served by both parties [1] and a short affidavit from each of the plaintiff's solicitor [2] and the defendants' solicitor. [3] Those affidavits are taken as read.
The Court has a discretion under s 98 of the Civil Procedure Act 2005 (NSW) to make an order for costs determining by whom, to whom and to what extent costs are to be paid. In proceedings under s 66G of the Conveyancing Act, that discretion is usually exercised by ordering that the parties' costs to be paid out of the proceeds of sale of the land, the rationale being that the costs of the proceedings are an incident of joint ownership: Kardos v Sarbutt (No. 2) [2006] NSWCA 206 at [28] (Brereton J (as his Honour then was), Basten JA and Hunt AJA agreeing); Chow v Chow (No 2) (2015) 18 BPR 35,385; [2015] NSWSC 1348 at [7]-[8] (Young AJA); Chetwynd v Rose [2021] NSWCA 193 at [120] (White JA, Meagher and Leeming JJA agreeing).
The usual rule generally extends to the costs of an unsuccessful defendant who has properly advanced substantial arguments in support of an estoppel or contractual or fiduciary obligation which may have afforded a good reason to decline to appoint trustees for sale, although the arguments ultimately failed: Stone v Stone (2014) 17 BPR 33,443; [2014] NSWSC 1655 at [51]-[52] (Darke J); Norris v Norris [2021] NSWSC 1676 at [25]-[26] (Robb J).
Eva Joy Ambrus v Lee Ellen Buchanan [2023] NSWSC 5 | Case summary | Zoe
However, unreasonable conduct on the part of a party that results in costs being incurred unnecessarily may warrant a departure from the usual rule. As Darke J explained in Stibbard-Leaver v Leaver [2021] NSWSC 65 at [5]:
"I observe at this point that in litigation of this type under s 66G of the Conveyancing Act, it is usual to order that the costs of the proceedings be paid out of the proceeds of sale. The rationale for this approach is that the costs of such an application are an incident of joint ownership (see Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]). It remains the case of course that unreasonable conduct by a party may be a basis to conclude that some other order is appropriate in a s 66G case. Lewin v Lewin [2019] NSWSC 380 is an example. In that case, it was held that certain unreasonable conduct led to an unnecessary incurring of costs. However, as I noted in that case (at [41]), a co-owner is ordinarily under no obligation to seek to avoid a need to bring a s 66G application (see also Chow v Chow (No 2) [2015] NSWSC 1348 at [12] where it was stated by Young AJA that co-owners have no obligation to negotiate their dissolution)."
The plaintiff submits that the defendants engaged in unreasonable conduct by opposing the plaintiff's application without advancing any substantial argument against the appointment of trustees for sale, by their unmeritorious application made during the final hearing for leave to amend their Grounds of Defence document to raise new grounds and to introduce certain claims for relief, and by abandoning several pleaded grounds of defence during the final hearing. The plaintiff submits that this conduct resulted in costs being incurred unnecessarily and that the Court should depart from the usual costs order and make orders to the effect that:
1. the plaintiff's costs of the proceedings (including her costs relating to the defendants' Grounds of Defence) be paid from the proceeds of sale of the Land;
2. that the defendants' costs of preparing the affidavits of nominated trustees John Maxwell dated 23 August 2021 and David Keep dated 2 September 2021 and the affidavit of referee Geoffrey Radburn dated 23 March 2022 be paid from the proceeds of sale of the Land; and
3. that the defendants otherwise bear their own costs of the proceedings.
The defendants submit that the Court should make the usual costs order that all of the parties' costs be paid out of the proceeds of sale of the Land.
For the reasons already explained in the principal judgment, [4] I accept the plaintiff's submission that the defendants failed to advance any substantial argument against the appointment of trustees for sale of the Land. The defendants' grounds of defence and submissions made during the hearing urged the Court to depart from the established approach to the application of s 66G without articulating any rationale for such a departure, failed to meaningfully address the fundamental elements of the legal and equitable doctrines and principles on which they purported to rely and also failed to grapple with the facts of the case, most of which were established by the defendants' own evidence.
The defendants submitted that, although their grounds of defence were unsuccessful, "it cannot fairly be said that they were improperly raised and pressed". I disagree. To raise grounds of defence without addressing the relevant principles and without applying those principles to the findings of fact for which a party contends is a waste of the time and resources of the Court and causes costs to be incurred by all parties unnecessarily. That is what the defendants did in this case, as I have explained in the principal judgment. The defendants' approach to the proceedings was premised on the baseless assertion that the Court need not apply established principles because the plaintiff owned only a 1/56th share of the Land and the defendants will suffer what they consider to be "hardship" if the whole of the Land is sold. The defendants' endeavours to justify that approach now in the context of their costs submissions is premised on the same baseless assertion, which is unprincipled and contrary to authority as explained in the principal judgment.
In relation to the defendants' abandonment of certain grounds of defence during the proceedings, I accept the evidence of the defendants' solicitor that the plaintiff was notified of the abandonment of all abandoned grounds on 7 February 2022, with the exception of proprietary estoppel which was first abandoned during the final hearing. The plaintiff had served all of her evidence prior to being notified of the defendants' abandonment of any grounds of defence on 7 February 2022. The plaintiff had prepared for the final hearing on the basis that the defendants were pressing the proprietary estoppel ground of defence. Up until its abandonment during the final hearing, the proprietary estoppel ground suffered from the difficulties referred to above.
With the exception of the formal abandonment of the grounds of defence referred to above, the defendants' application for leave to amend their defence made on the second day of the hearing was wholly unmeritorious. The proposed amendments would have introduced conventional estoppel as a ground of defence and a claim (proposed to be made in the amended defence rather than in a cross-claim) for orders compelling the plaintiff to sell her interest in the Land to the seventh defendant for a sum of $18,000 (or alternatively at market value as determined by a valuer nominated by the defendants from a panel selected by the plaintiff) or orders appointing trustees for the sale of the plaintiff's interest in the Land only. I delivered an ex tempore judgment refusing the defendants' application for leave to make those amendments and allowing the abandonment of the grounds of defence (which was not opposed by the plaintiff). As stated in those reasons for judgment, the defendants had not pleaded or particularised the specific matters to be relied on as meeting the elements of conventional estoppel and counsel for the defendants was unable to identify any power of the Court to make the proposed orders for the compulsory sale of the plaintiff's interest in the Land. The amendment application should never have been made. It occupied approximately one and a half hours of hearing time (including delivery of the ex tempore judgment) and most likely caused the parties to incur additional time and costs outside of court hours.
The defendants' conduct described at [9]-[12] above was unreasonable and caused costs to be incurred unnecessarily.
I reject the defendants' submission that the plaintiff failed to adopt "a realistic position" when she rejected various settlement offers made by the defendants prior to the final hearing. That submission was founded on an assertion that the Court had accepted an appraisal undertaken by Mr Paul Stobbie of the value of an unimproved 1/7th interest in the Land. The defendants relied on that appraisal in characterising their offers as realistic and the plaintiff's rejection of them as unrealistic. However, the defendants' assertion that the Court accepted Mr Stobbie's appraisal is wrong. The Court accepted Mr Stobbie's evidence of a particular conversation and rejected the seventh defendant's contrary evidence of that conversation. The Court made no finding based on Mr Stobbie's evidence or otherwise about the value of the Land or a particular share in the Land from which an estimate of the value of the plaintiff's share could be extrapolated and compared with the amount of the defendants' settlement offers. [5]
More importantly, as Darke J explained in Stibbard-Leaver v Leaver [2021] NSWSC 65, the plaintiff was perfectly entitled to exercise her statutory right to seek an order for the appointment of trustees under s 66G and was under no obligation to negotiate the dissolution of the co-ownership relationship or to adopt what the defendants contend is a "realistic position" in any such negotiations. In submitting to the contrary, the defendants relied on a quotation from the headnote of the judgment of the Court of Appeal in Kardos v Sarbutt (No. 2) [2006] NSWCA 206 (not the judgment itself) and have failed to acknowledge that the case turned on its own peculiar facts which were very different from the facts of the present case. The Court of Appeal was concerned with the costs of property adjustment proceedings between former de facto partners in which one partner had been ordered to pay the other an amount of money by way of property adjustment that was less than the jurisdictional limit of the Local Court of New South Wales and, in those circumstances, the relevant rules of court provided that the plaintiff was not entitled to an order for costs unless the Court ordered otherwise. No order was made under s 66G of the Conveyancing Act. In the present case, the defendants' contentions about whether the plaintiff adopted a "realistic position" in settlement negotiations have no bearing on the exercise of the Court's discretion in relation to costs.
For all of the reasons above, the appropriate exercise of the discretion under s 98 of the Civil Procedure Act in this case is to depart from the usual costs order and make orders in the terms proposed by the plaintiff set out at [7] above. The orders of the Court are:
1. Order that the plaintiff's costs of the proceedings (including her costs incurred in relation to the defendants' Grounds of Defence) be paid from the proceeds of sale of the land at 193 Hidden Valley Road in Mount Warning, New South Wales, being the land in folio identifier 38/755754, which the Registry has subdivided into sub-folios 38/755754B, C and D; (the Land).
2. Order that the defendants' costs of preparing the affidavits of John Maxwell dated 23 August 2021, David Keep dated 2 September 2021 and Geoffrey Radburn dated 23 March 2022 be paid from the proceeds of sale of the Land; and
3. Order that the defendants pay their own costs of the proceedings, save for those costs that are to be paid out of the proceeds of sale of the Land in accordance with order 2 above.
[2]
Endnotes
Plaintiff's written submissions dated 5 December 2022; defendants' written submissions dated 12 December 2022.
Affidavit of Wrothwell Garth Wall affirmed on 5 December 2022.
Affidavit of Peter Shane Dehlsen affirmed on 12 December 2022.
I refer in particular to the principal judgment at [83]-[122].
Principal judgment at [73]-[81].
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Decision last updated: 24 January 2023