Gunn v Gunn

Supreme Court of NSW|2017-06-21|Before: Davies J

Solicitors: Conroy Stewart Spagnolo (Plaintiff) Slater & Gordon (Defendants) File Number(s): 2014/366036

Background

These proceedings commenced by the filing of a Statement of Claim on 12 December 2014 seeking possession of land at 25-27 Olivedale Road, Waterview Heights. The Plaintiffs were the registered proprietors of the land. The First Defendant was the son of the Plaintiffs and the Second Defendant was the First Defendant's partner.
The land consisted of 100 acres in a rural setting. The Plaintiffs resided in the original homestead on the land. The Defendants lived in a kit home erected on part of the land since 2002. The Defendants alleged that the kit home was erected pursuant to an agreement made with the Plaintiffs that 25 acres of the land would be given to the First Defendant, but the Plaintiffs say that any discussion of a gift of the 25 acres only took place after the kit home was erected.
In any event, the parties wrongly believed that the land would be able to be subdivided so that the Defendants would have 25 acres of the land where their kit home was situated. At some point it was ascertained that the land was not able to be subdivided.

The proceedings

In October 2014 the Plaintiffs desired to sell the land because, the Statement of Claim said, of their increasing age and infirmity, and their inability to look after the property. The Plaintiffs requested that the Defendants vacate the property but they did not do so. That led to the commencement of the proceedings.
The defence ultimately filed on 27 January 2016 apart from not admitting generally a large number of matters that ought to have been admitted raised as a substantive defence that representations were made to the First Defendant by the Plaintiffs in 2002 that he would be given 25 acres of the land and could construct a dwelling on it, that he acted on the basis of those representations by building on the land and paying a third of the council rates in respect of the whole land and carrying out other improvements to the land. In those circumstances, the defence pleaded that it would be unconscionable for the First and Second Plaintiffs to resile from the assumed state of affairs. Although the defence pleaded that both Defendants would suffer detriment if the Plaintiffs' representations were not fulfilled, the defence did not make clear what if any defence the Second Defendant had to the claim for possession.
On 24 February 2016 the First Defendant filed a cross-claim seeking a declaration that the Plaintiffs held 25% of their interest in the whole property on trust for the First Defendant and an order vesting that 25% of the property in him. In the alternative the First Defendant sought equitable compensation.
The cross-claim pleaded in more detail what amounted to the constructive trust that the First Defendant alleged in the defence. In particular the improvements carried out by the First Defendant were said to have increased the value of the property by $70,000.
The defence to the cross-claim pleaded that the First Defendant knew from August 2004 that the land was not able to be subdivided but that he nevertheless continued expending money on the land. The Plaintiffs said that the agreement regarding the gift of 25 acres of the land had a number of conditions which were not fulfilled by the First Defendant. The defence to the cross-claim also said that the Plaintiffs were prepared to pay the First Defendant the net proceeds of sale representing the value of 70/460ths or 15.2% improvements representing the First Defendant's interest.

Settlement and the claim for costs

Relations between the Plaintiffs and the Defendants deteriorated during the course of the proceedings and that resulted in Apprehended Violence Orders being taken out by each of the parties against the others. I mention that matter, not because I consider it relevant to what I have to decide, but because it was put forward by the Defendants to suggest that they were not able to access the property because of the AVO against them.
More significantly, on 5 July 2016 a fire destroyed the kit home that had been built by the First Defendant. That fire is still being investigated by the police and the insurance company. At the present time there is no certainty that the insurance company will pay out under the policy.
The Plaintiffs' claim for possession was settled on 13 October 2016 with the Plaintiffs being given possession of the property. It was ultimately sold on 17 February 2017.
The First Defendant's cross-claim seeking a constructive trust or equitable compensation, is still to be determined. That cannot take place until a decision has been made by the insurance company whether payment will be made under the policy.
In the meantime, the Plaintiffs seek costs associated with the claim for possession.
In the Plaintiff's written submission a chronology was provided which included entries for various offers and rejection of those offers made between the parties from 8 July 2014 until just before consent orders were settled on 13 October 2016. Counsel for the Defendants objected to that information being taken into account on the basis, it was said, that those offers should be regarded as without prejudice offers. Although I do not think that that submission is correct, partly because some of the offers made were open offers (for example, paragraph 6 of the defence to the cross-claim) and because offers made between the parties are relevant as to costs in any event, I do not consider that the making of those is of much relevance in determining whether costs should now be ordered in relation to the Plaintiffs' claim.
The Plaintiffs submit that the possession proceedings have come to an end by a consent judgment and that the costs associated with that claim are separate from those that might be incurred in relation to the cross-claim. There is no indication at the present when the cross-claim will be able to be heard. The Plaintiffs are elderly and are anxious to obtain the costs which they say they are entitled to as a result of the possession judgment.
The Defendants submitted that they had a proper defence to the claim for possession based on the constructive trust the First Defendant claims. The Defendants consented to the judgment for possession after the fire for reasons of expediency. They were not able any longer to remain living on the land except perhaps in some sort of caravan and there was a risk that in traversing the land to get to the caravan they would be in breach of the AVO.
The First Defendant submitted that if a constructive trust was declared then he, as a co-owner in equity, was entitled to be in possession of the land and could not be excluded by the Plaintiffs. The Plaintiffs had not sought orders under s 66G of the Conveyancing Act 1919 (NSW). The Defendants submitted that they should not be penalised by a costs order now being made when events outside the control of both parties, namely, the fire, changed the landscape with the result that there was no good reason not to consent to possession so that the land could be sold. Although the Second Defendant was not a cross-claimant, the Defendants submitted that her position should be seen in the same way as the First Defendant's position because she was the First Defendant's partner and was occupying the land with his consent. The Defendants submitted that even if a costs orders was made it should not be payable prior to the completion of the proceedings on the cross-claim.

Determination

These proceedings are very unfortunate for a number of reasons. First, they arise out of serious breakdown in the relation between the Plaintiffs and their son, the First Defendant to the point where AVOs are in place. Secondly, the agreement that had been reached between the parties was not able to be effected because the parties were under a common mistake that subdivision of the property was available to enable the agreement to be put into effect. Finally, the destruction of the Defendants' house by a fire added to the complications in the proceedings. The fire has resulted in unfortunate delays in the proceedings to the point where at the present time it is not known when the cross-claim will be able to be heard.
The issue of the approach to costs where a matter has settled was discussed by McHugh J in Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622. McHugh J said (at 624-625): In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
In the present matter a few things seem to me to be clear.
First, the matters raised in the defence and the cross-claim provided, prima facie, a defence to the claim for possession. Summary judgment would not have been available to the Plaintiffs whilst that defence and cross-claim remained. If the cross-claim was successful in demonstrating a constructive trust the First Defendant would, with the Plaintiffs, be entitled to possession of the land: Forgeard v Shanahan (1994) 35 NSWLR 206 at 221 (per Meagher JA, agreed by Mahoney JA at 219). The defence to the cross-claim gave some credence to the allegations by the First Defendant that enable him to argue for a constructive trust. I express no view about the likely outcome of that argument.
Secondly, the Plaintiffs did not amend the Statement of Claim after the pleadings on the cross-claim were filed to seek an order under s 66G of the Conveyancing Act. Had they done so they may have been successful in having trustees for sale appointed notwithstanding the claim for a constructive trust: Juratowitch v Quitlong [2012] NSWSC 1374 at [4]; Harris v Harris [2014] NSWSC 1766 at [20]-[24]. In the present case the First Defendant does not claim a constructive trust in the whole of the land but only part thereof: cf Harris v Harris at [19]. Nevertheless, an order under s 66G would not entitle the Plaintiffs to obtain possession of the land as against the Defendants - that would be an order that the trustees for sale would be obliged to seek.
Thirdly, the position of the Defendants was altered significantly by the fire on 5 July 2016. Whether because they chose to live elsewhere or felt the need to live elsewhere because of the fire and/or restrictions in the AVO taken out against them, there was then little point in resisting the possession claim which gave to the Plaintiffs the right to sell the land.
Fourthly, contrary to the submissions of the Plaintiff, the Second Defendant did not intrude herself into the proceedings. She was named as a defendant by the Plaintiffs for the entirely appropriate reason that she was undoubtedly an occupier of the premises. However, if the First Defendant's claim for a constructive trust was made out the Second Defendant would have been occupying the premises with the leave and licence of a co-owner. In any event, it is difficult to see what extra costs have been incurred by the Plaintiffs as a result of the Second Defendant being a party to the proceedings.
The matters that I have enumerated above demonstrate that the Plaintiffs' claim for possession and the defence and cross-claim by the First Defendant are not easily separated. It is true that an order for possession was made which required the Defendants to vacate the land but that principally occurred because the fire transformed the rights of the First Defendant into a monetary claim whether based on his expenditure or a calculation based on the proportion of the land he might be held to have owned by reason of the constructive trust. Clearly, all the First Defendant can now hope to achieve is a monetary judgment. Nevertheless, his cross-claim relies upon the same matters to achieve that judgment as would have been relied upon to seek the declaration of his interest in the land.
In agreeing to an order for possession after the fire I consider that the Defendants acted reasonably especially as they knew the Plaintiffs were desirous of selling the land. Nor do I consider, for the reasons I have given, that it was unreasonable for the Defendants not to have consented to possession before the fire when the issue of the constructive trust was not determined. However, a final view cannot be reached on that matter until the cross-claim is determined.
I do not consider that it is appropriate to make a costs order in relation to the claim for possession until the cross-claim is determined. The likely success of the resistance to the claim for possession until after the fire seems to me to be bound up with the determination of the cross-claim. Similarly, the reasonableness of the resistance to the claim for possession can only be determined after the success or otherwise of the claim for a constructive trust has been determined.
Further, I consider that it would be highly inappropriate to make a costs order in relation to the Plaintiffs' claim that enabled those costs to be paid forthwith or after assessment. That is because there is a prospect that costs orders will be made in relation to the cross-claim when it is heard and determined that will impact on any costs order made now. In other words, if costs are sent for assessment at the conclusion of the cross-claim proceedings there will either be one set of costs in favour of the Plaintiffs (on the assumption that they are successful in resisting the cross-claim) or there will be an offsetting of costs (on the assumption that the First Defendant is successful).
There seems little point in making an order for costs on the possession claim if those costs are not payable until the conclusion of the cross-claim. Moreover, although I do not wish to prejudge any assessment made by a costs assessor, it is likely that there will be a significant crossover and intermingling of the costs referable to the possession claim and the cross-claim bearing in mind that the cross-claim was the only substantive defence to the possession claim.
In those circumstances, I do not see any benefit in making a costs order at the present time in relation to the possession proceedings.
Whilst I accept that the Second Defendant's involvement in the proceedings has come to an end, because costs associated with her involvement are inextricably linked with the claim made against the First Defendant (at the very least), I see no point in making a separate costs order against her at the present time nor ordering such costs to be paid.
I have not overlooked the advanced ages of the Plaintiffs nor any infirmity or health issues that they may have. I accept that they are strongly desirous of a final determination of all matters between the parties. That matter is being held up by matters outside the control of, and unrelated to any acts or omissions of, the parties putting to one side any allegations that may have been made by or on behalf of the Defendants. The fact is that a fire occurred on 5 July 2016. Neither the police nor the insurance company has concluded their investigations to determine whether any amount will be payable by the insurer. The furtherance of those enquiries by the police and the insurer must take their course.
Accordingly, no costs order should be made until the determination of the 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: 27 June 2017

At a glance

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Judgment (6 paragraphs)

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Legislation Cited (1)

Cases Cited (4)