Grizonic v Suttor

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

6141/03 CLAUDIO GRIZONIC v SUZANNE RANKEN SUTTOR & ANOR JUDGMENT - Ex Tempore (Revised 5 March 2004) 1 HIS HONOUR: It is undisputed that the plaintiff and the first defendant were in partnership in a restaurant business until that partnership was dissolved by the serving of a summons on 8 December 2003. Orders have been made declaring that the partnership has been so dissolved and receivers of the partnership business have been appointed. 2 The matter came before me this morning in circumstances where the plaintiff was seeking orders that would restrain the receivers of the business from selling it to anyone other than the plaintiff. As a result of evidence which was given in the course of the day that application has not been persisted in. In consequence, it is to be expected that the receivers will enter into a contract to sell the partnership business for a little over $100,000 and that settlement of that sale will be able to take place soon. Today the plaintiff also sought orders requiring the sale under s.66G of the Conveyancing Act 1919 of a house in which the plaintiff and the first defendant have lived over a period from 1984 to September 2003. 3 The title to that house is held by the plaintiff and the first defendant as tenants in common in equal shares. The first defendant has foreshadowed the bringing of proceedings under the Property (Relationships) Act 1984 to seek a larger share in the equity in that house. The first defendant concedes that the outcome of any such application under the Property (Relationships) Act would not be an awarding of the entire beneficial interest in the house to her. No proceedings under the Property (Relationships) Act have yet been commenced. 4 The parties agree that at one time they had a de facto relationship. The plaintiff asserts that it ended many years ago and that they continued to live in the same house as a matter of convenience and, so far as he was concerned, financial necessity. The first defendant says that the relationship continued until last year. 5 The time when the relationship ended is a matter of some significance, because of the time limit for making applications under s.18 of the Property (Relationships) Act. Under s.18, an application to the Court for an order can only be made within two years after the date on which the relationship ceased, except where the Court is satisfied that for the reasons set out in s.18, it is appropriate to grant leave to extend the time period. 6 The basis upon which any order is made under the Property (Relationships) Act depends upon s.20 of that Act, whereby the Court makes orders adjusting the interests of the parties, as to it seem just and equitable, having regard to contributions of certain types which are identified in s.20. 7 Mr Tyson, counsel for the first defendant, submitted to me that, because the Property (Relationships) Act was a later statute than s.66G (which was introduced into the Conveyancing Act in 1930) it should be regarded as a special provision, which cuts down the scope of s.66G. It does this, he submits, by effecting what amounts to a partial repeal of it, or the engrafting onto it of a statutory exception. He also relied on the fact that s.66G is a general provision while the Property (Relationship) Act s.20 is a more specific provision, and that usually, as a matter of statutory construction, general provisions give way to specific provisions. From this, he submitted that the filing of an application under the Property (Relationships) Act ought result, without more, in the stay of an application under s.66G, so that the later statute could be given time, and room, to do its work. I do not accept those submissions. Rather, in my view, the provisions of s.66G and of the Property (Relationships) Act ought to be applied so that they can run together. 8 Granting a stay of the application under s.66G pending the hearing of the Property (Relationships) Act claim involves exercising, on a temporary basis, a discretion not to make an order under s.66G. It is now well established that the Court has a limited discretion to refuse to make an order under s.66G, e.g. if it is inconsistent with a proprietary right or a contractual or fiduciary obligation, but there is no general jurisdiction to refuse to grant an order under s.66G on the basis of hardship or unfairness: Stephens and Another v Debney (1959) 60 SR (NSW) 468; McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068; Ngatoa and Another v Ford and Another (1990) 19 NSWLR 72; Williams v Legg; Williams v Legg and Another (1993) 29 NSWLR 687 (special leave to appeal refused (High Court of Australia, Brennan, Dawson and Toohey JJ, 17 September 1993, unreported)); Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790; Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685; Hogan v Baseden (1997) 8 BPR 15,723. 9 In the circumstances of the present case, there is no contractual or fiduciary relationship asserted to exist between the plaintiff and the first defendant concerning the house. Nor does the first defendant have, today, any proprietary right to more than a half share in the house - making an application under the Property (Relationships) Act involves invoking a jurisdiction of the court to change the property rights of the parties, but until such time as the court actually makes an order under the Property (Relationships) Act the first defendant has no proprietary right to anything more than a half share in the house. Thus, the present case is one which is outside the examples of circumstances where it would be appropriate to grant a stay of application under s.66G, which are recognised in the line of cases, starting with Stephens v Debney, that I have just referred to. However, as Needham J recognised in Ngatoa v Ford, the categories of circumstances where it is appropriate to grant a stay of an application under s.66G. are not closed. 10 There are cases where an application has been made in the Family Court of Australia under the Family Law Act 1975 (Cth) by a married co-owner of land for an adjustment of property interests in that land, and the Supreme Court has stayed proceedings brought in the Supreme Court under s.66G pending the hearing of the application for adjustment of property rights, even though the case was one where the Supreme Court retained jurisdiction to hear the s.66G application: Reynolds v Reynolds [1977] 2 NSWLR 295; Williams v Williams [1979] 1 NSWLR 376. Those cases did not discuss the principles by reference to which the Court decided to grant the stay. The existence of the cases suggests, however, that in some circumstances it might be proper to stay a s.66G application pending the determination of a claim under the Property (Relationships) Act. 11 Concerning other statutes where courts have a power to change the property rights of parties, it is recognised that the court can grant an interlocutory injunction to protect the subject matter of the suit. When a claim is made under the Family Provision Act 1982 the Court has power to grant an interlocutory injunction requiring property that might be the subject of an order to not be disposed of until the suit is heard. This is a particular example of the Court's jurisdiction to preserve the subject matter of a suit pending the hearing: In the Estate of Gough, Deceased; Gough v Fletcher (1973) 5 SASR 559; Rayner v Schuttler (Supreme Court of New South Wales, McLelland J, 29 January 1985, unreported); Packo and Another v Packo (1989) 17 NSWLR 316; Moon v Gordon (Supreme Court of New South Wales, Young J, 30 April 1996, unreported); Lo Surdo v Public Trustee [2003] NSWSC 837 (Gzell J). In Deguara v Mercieca (Supreme Court of New South Wales, 23 August 1988, unreported) Powell J expressed doubts about the existence of such a jurisdiction, but Deguara was not followed in Packo. The Family Court of Australia can grant an interlocutory injunction under s.114 Family Law Act restraining a party from disposing of the property of the parties pending the institution of proceedings seeking a property settlement under s.79: In the Marriage of Sieling (1979) 4 Fam LR 713; (1979) 24 ALR 357; In the Marriage of C A Rennie and J Higgon (1981) 7 Fam LR 715. As well, the Family Court can grant an injunction to restrain a party from instituting proceedings in another court which would adversely affect the right of a party to seek a property settlement under the Family Law Act: In the Marriage of Esmore (1979) 5 Fam LR 762; In the Marriage of Bak (1979) 6 Fam LR 411; In the Marriage of Smith and Saywell (1980) 6 Fam LR 245; Dembitzer v Mills [1980] 2 NSWLR 697 at 702. All these cases are examples of interlocutory injunctions to preserve the subject matter of the suit. On a similar basis, it would be possible for a plaintiff seeking orders under s.20 Property (Relationships) Act to obtain an interlocutory injunction, in appropriate circumstances, to prevent an application under s.66G from being made or proceeded with concerning property over which orders were sought under s.20 Property (Relationships) Act.

12 In my view, where there is a s.66G application, and there is also an application for an adjustment under the Property (Relationships) Act of interests in the property concerning which the s.66G order is sought, whether the Court ought grant a stay of the s.66G application pending the hearing of the Property (Relationships) Act claim depends on tests the same as those which are used in deciding whether to grant an interlocutory injunction. An application to stay a s.66G application pending the determination of a claim under the Property (Relationships) Act is, in its practical effect, no different to an interlocutory injunction restraining the applicant for the s.66G order from pursuing that application pending the hearing. Thus, the Court would look to whether there was a serious question to be tried about whether the application under the Property (Relationships) Act would succeed and, if there was a serious question to be tried, the Court would then look to the balance of convenience. 13 In the present case, there is a conflict of evidence over the time that the relationship ended. However, because of the evidence of the first defendant that the relationship ended only last year, there is a serious question to be tried about whether the relationship was on foot within the two-year period to which s.18 refers. 14 There is evidence from the first defendant about the relationship lasting nineteen years. There is evidence to the effect that it was the partnership business which provided at least one of the sources of money from which the payments for the house were made, and evidence of the first defendant making non-monetary contributions. 15 The plaintiff says he made by far the larger contribution to the running of the restaurant business and hence to the income of that business which was used to buy the house. The first defendant contests that. 16 Before the first defendant would be able to succeed in obtaining an order under the Property (Relationships) Act, which gave her more than the fifty per cent equity in the property to which she is entitled in consequence of being a tenant in common, it would be necessary for her to establish that she had made contributions of a type referred to in s.20, which outweighed contributions which had been made by the plaintiff. The evidence establishes clearly enough, that there is a serious question to be tried about the extent of contributions which each of them have made. In all the circumstances, it seems to me, that there is a serious question to be tried about whether the first defendant will succeed in an application for a greater than fifty percent share in the property. 17 I, therefore, turn to the balance of convenience. The first defendant has been living in the house since 1984. That is a significant factor. However she has not, on the evidence before me, showed that she has a strong case for the making of an order under s.20, nor that if she were to succeed in obtaining an order it was likely to be for significantly more than 50% of the equity. There is, moreover, no evidence that, if, on an application under the Property (Relationships) Act, the first defendant were to receive an interest only somewhat greater than fifty percent, she would have the means to pay out the plaintiff's share and thereby avoid a sale. 18 Another matter which is of considerable weight is that on 19 December 2003, the parties signed a document, which was presented to Barrett J sitting as Duty Judge, entitled Heads of Agreement. That document contains various clauses, one of which is that the property is to be sold by auction and that the parties will use their best endeavours to have such auction occur within eight weeks of the date of the agreement. That has not happened. The agreement had numerous other terms, including that the net proceeds of sale of both the restaurant business and the house would be divided equally between them, that the parties would release each other from claims under the Partnership Act 1892 and the Property (Relationships) Act and the Family Provision Act, and that the plaintiff would be permitted to draw $1000 a week from the takings of the business and the first defendant would be permitted to draw $450 a week from the takings of the business. 19 It appears that the first defendant has received few, if any, of those payments of $450 per week. However, the failure to make payments of $450 per week for a few weeks is something which would create only a small counterpoise to the agreement for the parties to sell the property by auction, and to split the proceeds after payment of mortgages and outstanding charges 50/50. As well, the first defendant has failed to take any steps to carry out her agreement to have the property auctioned. A significant indication of the first defendant's assessment of her own claim under the Property (Relationships) Act is, it seems to me, this Heads of Agreement document. 20 It is uncontested that the plaintiff is in severe financial difficulties. The first defendant's submission was that the plaintiff was "living off an American Express Card that is going to be cancelled soon." He will be entitled to receive some money when the affairs of the partnership are wound up. However, the partnership is a restaurant which has been in receivership since 5 February 2004. The receiver's fees are bound to be significant. As well, the evidence suggests that there are disputes between the plaintiff and the first defendant about the accounts of the partnership, which may delay an eventual distribution of the partnership assets. For that reason, the plaintiff may be delayed in receiving any distribution of money from the partnership, and its quantum is uncertain. The first defendant offers no way of alleviating the plaintiff's cash crisis. She does not offer to pay an occupation rent while she remains in the house. No undertaking as to damages was proffered. 21 In these circumstances, in my view, the balance of convenience favours not granting a stay of the order under s.66G. 22 I appoint Geoffrey McDonald and Paul Leroy as trustees of the property known as 9 Magdala Road, East Ryde and being the whole of the land contained in Certificate of Title Folio Identifier 21/19636. I order that the said land be vested in such trustees subject to any encumbrances affecting the entirety of the said land but free from encumbrances (if any) affecting any undivided share or shares thereof to be held by the said trustees upon the statutory trust for sale under Div 6 of Pt 4 of the Conveyancing Act. 23 I authorise the said trustees to charge at a rate not exceeding $450 per hour, and in the total sum not exceeding $7500, and I authorise them to deduct all such expenses from the proceeds of sale. I should say that the hourly rate which was quoted of $450 per hour seems high, and I would not have allowed it without either the cap on total fees which I have imposed, or evidence it was a proper market rate for the type of work involved in being trustees for sale. 24 I note that the first defendant foreshadows that an application might be made to have part of the proceeds of sale, when received, placed in a secure account pending determination of any application under the Property (Relationships) Act. If any such application is to be made, it would in substance be an interlocutory application to preserve the subject matter of the Property (Relationships) Act proceedings, and so would properly be made in the Property (Relationships) Act proceedings, when and if started. Nothing in these reasons for judgment, or my orders, prevents the making of any such application. 25 The first defendant makes an application for costs. The matter has been argued over a period of one and a half days, before Windeyer J (who was not able to continue the hearing) and then myself. The greater bulk of the time was involved in the application concerning an injunction to restrain the receivers from selling the business, an application which was ultimately withdrawn. Nonetheless, the plaintiff has succeeded in obtaining, over opposition, orders under s.66G of the Conveyancing Act. The time involved in that application was less than the time which was involved in the application for an injunction. 26 An alternative which the first defendant puts is that I should reserve the costs of the s.66G application, because they might be affected by what happens in any Property (Relationships) Act application. I do not accept that that is an appropriate approach to take. The s.66G application has succeeded and has the effect that if any orders are made in a Property (Relationships) Act case they will be orders which bite upon a fund of money rather than upon a piece of real estate. In those circumstances, the s.66G application and the order made pursuant to it have achieved an effect which will not be undone by the Property (Relationships) Act claim. 27 Nonetheless, given the different lengths of time involved in the arguments concerning the two issues, it is appropriate to make an order which reflects the principle that the plaintiff should pay the costs of the application which he withdrew and the first defendant should pay the costs of the application which she opposed unsuccessfully. 28 I make an order which reflects that principle but which is easier to administer. The order I make is that the plaintiff pay one half of the costs of the first defendant of yesterday and today. **********

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