Harris v Harris

Judgment 1By Notice of Motion filed 10 November 2014, the defendant Michael Harris ("Michael") seeks the appointment of trustees for sale of the property at 290 Belmont Street, Alexandria ("the Property"), pursuant to s 66G of the Conveyancing Act 1919 (NSW). 2I will briefly outline the background to the broader dispute, to provide context to Michael's application.

Background 3Lesley Anne Harris ("Lesley") is Michael's sister. On 2 August 1985, Lesley and her former de facto partner, Frank de Silva ("Frank"), purchased the Property for the sum of $58,000. The purchase price was comprised of $50,000 borrowed from Advance Bank, and a deposit of $8,000 contributed directly by Lesley and Frank. 4Lesley and Frank had a child together ("Shaun"), but terminated their relationship shortly thereafter, in or about October 1985. Frank left the property and Lesley and Shaun continued to live there and still do. 5Frank insisted on selling the property, or being removed from the title. It is common ground that Lesley did not meet the lending criteria for a new loan from Advance Bank on her single income. 6Lesley and Michael reached an agreement in which, by transfer dated 8 September 1986, Lesley and Michael became the registered proprietors of the Property as tenants in common in equal shares. I think it is agreed that Michael paid the legal fees incurred by the solicitors acting on the transfer in the sum of $967.30, although Lesley sent a cheque to those solicitors which was returned: see MAH1, p 21. 7Frank was paid the sum of $3,700 being one half share of the equity contribution by Frank to the original purchase price not borrowed from Advance Bank, less $300 in child maintenance. 8The terms of the agreement by which Michael became a registered proprietor of the Property are in dispute. Both Michael and Lesley claim to have paid the $3,700 to Frank, out of their own resources. 9Michael lived in the Property for several periods and during those periods contributed to the mortgage and household outgoings. The amounts paid by Michael, and the purpose to which those payments went (rent or mortgage repayments) are also in dispute. 10It should be noted that the land was not Torrens System land at the time of the purchase but it was subsequently converted to Torrens title. 11Lesley commenced proceedings in the Supreme Court and seeks, by her Amended Summons filed 1 July 2014: (1)a declaration that Michael holds his interest in the Property wholly on trust for her; and (2)an order that Michael transfer his interest in the Property to her. In the alternative, Lesley seeks a declaration that she and Michael hold the Property in trust for each other in the proportions as determined by the Court. 12By the Defence filed 5 September 2014, Michael denies that he holds his one half interest on trust for Lesley. By the Cross-Claim filed 5 September 2014 Michael seeks: (1)the appointment of a trustee for sale of the Property pursuant to s 66G; and (2)an enquiry and determination by the Court as to the parties' respective contributions to purchase price, to the mortgage and other outgoings connected to the Property, to improvements to the Property, and any liability to pay an occupation fee, if due. 13The proceedings, including the Cross-Claim, have been listed for hearing before Lindsay J on 31 March 2015. 14Mr J S Drummond of counsel appears for Michael, and Mr R W Tregenza of counsel appears for Lesley. I received helpful written submissions from both of them prior to the hearing of the motion, and heard oral submissions on 28 November 2014. 15In support of his Motion, the defendant relied on the following affidavits: (1)Michael Anthony Harris dated 23 September 2014; (2)Michael Anthony Harris dated 27 November 2014; (3)Graeme Keith John Heckenberg dated 13 November 2014; and (4)Exhibit A (MAH1). 16In opposing the Motion, the plaintiff relies on the following affidavits filed by her in the proceedings: (1)Lesley Anne Harris dated 10 December 2014; (2)Lesley Anne Harris dated 20 June 2014; (3)Lesley Anne Harris dated 24 November 2014; (4)Lesley Anne Harris dated 24 November 2014; (5)Frank de Silva dated 23 November 2014; and (6)Exhibit 1. 17Mr Drummond submitted that in circumstances where partition is not sought (or, as in this case where the Property is not capable of division being a single dwelling,), a co-owner who holds property as a tenant in common in equal shares is entitled to an order for the appointment of trustees for sale "as of right", citing Re Fettell (1952) 52 SR (NSW) 227; Segal v Barel [2013] NSWCA 92; 84 NSWLR 193 per Barrett JA at [59]; Pascoe v Dyason [2011] NSWSC 1217 per Black J at [5]; Callaghan v O'Neill [2002] NSWSC 877 per Young CJ in Eq and Tory v Tory [2007] NSWSC 1078 per White J at [42]. 18It is Michael's case that it would be prudent for the Court to now make an order pursuant to s 66G prior to the hearing of all other issues so that the proceeds of sale can be paid into Court. The logic is that, if upon final determination, an order is made for payment of an amount to Michael (or indeed, for the distribution of funds to the parties in accordance with the findings of the Court), that payment can be made expeditiously from the funds held by the Court whereas if the property is sold only after the hearing there will be further delay. 19Mr Tregenza contends that the Court ought not order sale of a property pursuant to s 66G of the Act where the party resisting sale contends that the co-owner in fact holds his share of the property on trust for the party resisting sale. He relies on Stone v Stone [2014] NSWSC 1655 per Darke J and the statement by his Honour at [37] that a co-owner of land is not entitled to relief as a matter of right, also on Williams v Legg (1993) 29 NSWLR 678; Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 per Myers J, and Juratowitch v Quitlong [2012] NSWSC 1374. The Court of Appeal in Williams v Legg (Handley, Sheller and Cripps JJA) made clear that the Court can as a matter of discretion refuse to make an order under s 66G, see pp 691-693, preferring the approach taken in Re Fettell. Mr Tregenza also contends that the defendant is seeking to obtain in effect some final relief by requiring sale of the property when, if the plaintiff is entirely successful, the defendant would have no right to call for sale of the property but would have to act on instructions of Lesley as the beneficiary. Mr Drummond contended that Ms Harris had no evidence capable of establishing a declaration of trust whereby the defendant disposed or parted with his interest in the land and that the Court could not be satisfied there are cogent reasons for not ordering sale. 20I accept that where there is no dispute that a property is owned jointly the Court will generally grant an order for sale and will order sale rather than partition unless partition is shown to be more beneficial: see Segal v Barel at [25]-[29]. I accept that hardship or unfairness is not generally a reason for refusing an application for sale: see Pascoe v Dyason at [6] per Black J and the cases there cited. 21The plaintiff's principal contention is not that the defendant has parted with or alienated his beneficial interest or that there was a promise to create a trust in the future, but rather that Michael never did have a beneficial interest. Lesley resists Michael's contention that because his name appeared on Advance Bank bank statements he has made himself liable to repaying the loan made by Advance Bank, and even if he did, she relies on Trustees of the Property of Zoltan Sandor, a bankrupt v Ramirez [1999] NSWCA 261 at [69], in support of the proposition that borrowing does not necessarily establish an interest in the property. Lesley accepts that some payments were made by the defendant that enabled the mortgage to be reduced but asserts that that was in effect rent, and those payments were made only whilst he resided at the property. I accept that there is an issue as to whether statements made by Lesley might constitute an admission of beneficial ownership and as to its effect but there is some material which rather supports Lesley's contention that the 'purchase' of the half interest by Michael was designed to assist Lesley maintain the loan and help her to avoid sale of the house, in particular the very small amount paid by Michael for a half interest in a home apparently worth approximately $60,000. 22The short answer to Mr Drummond's contention is, as Mr Tregenza submitted, that it is not appropriate for the defendant to seek to obtain by way of Notice of Motion the relief that he seeks by his Cross-Claim which has together with Lesley's claim been fixed for hearing in March. 23Until Lesley's claim that Michael holds his half interest in trust for her is heard and determined it is premature to order that there be a sale of the property. 24If the plaintiff succeeds in establishing the trust it would clearly be "inequitable" (to use the description used by Young CJ in Eq (as his Honour then was) in Callahan v O'Neill in dealing with exceptions to the general rule) to order sale, hence the need for Lesley's claim to be determined presents a cogent reason why sale should not be forced upon the plaintiff particularly where no hardship to the defendant (such as a continued significant obligation to meet mortgage repayments) is demonstrated in awaiting the outcome of the case. If the plaintiff is unsuccessful in making out her claims the defendant will be compensated for any increased rental adjustment due on the basis of Ryan v Dries [2002] NSWCA 3 and all other claims for adjustment: see Payne v Rowe [2012] NSWSC 685. Even if the plaintiff is unsuccessful in her principal claim there will be a need to determine what in fact Michael's interest is. 25Mr Drummond in his submissions argues that the plaintiff's case is weak. I accept that the plaintiff has, in her affidavits, been particularly vague as to the key conversation with Michael. I agree with Mr Tregenza that in the absence of in effect a strike out motion (which this is not) it is not appropriate to venture into the merits or strength of the plaintiff's case particularly where several key elements of it depend on the resolution of factual matters such as whether Michael paid the $3,700 he claims he paid and what such of the payments as are found to have been made by Michael entitle him to by way of percentage share of the property.