Reasons for judgment in these proceedings were delivered on 19 April 2018: Lay v Pech [2018] NSWSC 460.
The first plaintiff, Ms Lay, is the mother of the defendant, Mr Pech. She was for a time the partner of the second plaintiff, Mr Tai.
By their amended summons, the plaintiffs sought by prayer 2 a declaration that the first plaintiff has an equitable interest in the property the subject of these proceedings, which was called the "Property" in the primary judgment. However, by prayer 3, they sought the somewhat inconsistent relief that it be declared that the Property is held on trust by Mr Pech for Mr Tai. By prayer 4, the plaintiffs sought an order that Mr Pech transfer the property to Mr Tai.
In the manner described in the principal judgment, the Property was originally acquired by Mr Tai to be used as the home for Ms Lay and her children.
As I observed in par 5 of the principal judgment: "The plaintiffs' case was not specific as to whether the circumstances in which Mr Tai acquired the Property had the result that he held the title to the Property on trust for Ms Lay. That uncertainty in the plaintiffs' case does not matter as the Court has not been called upon to decide whether or not Mr Tai held the title to the Property on trust for Ms Lay".
The reality is that the plaintiffs have joined in proceedings in which they sought to recover the title to the Property from Mr Pech, which had been transferred to him in the circumstances described in the principal judgment.
I made the following observations in pars 80 and 81 of the principal judgment concerning the orders that should be made as to the beneficial ownership of the property:
80. I am therefore satisfied that the plaintiffs have established their entitlement to the relief claimed in relation to the beneficial ownership of the Property. I understand that the plaintiffs seek an order that Mr Pech transfer the title to the Property to Mr Tai. As I understand it, that course is proposed because no order for the transfer of the Property could be performed until such time as Mr Tai has been able to secure a new mortgage to pay out the mortgage that is presently secured on the Property in Mr Pech's name.
81. The best course will be for the Court to give to the plaintiffs an opportunity to consider these reasons for judgment, and to propose appropriate short minutes of order to deal with the issue of the title to the Property.
As a practical matter, because Mr Pech had granted a mortgage to Westpac over the title to the Property, the Property could not be transferred to either of the plaintiffs on an unencumbered basis unless the plaintiffs could first procure funds to pay out Westpac.
In the manner discussed in the principal judgment, Ms Lay had paid some monies towards the acquisition of the Property, but most of the funds had been provided by Mr Tai. It was my understanding that Mr Tai was content to allow Ms Lay to continue to live in the property as her home, as the plaintiffs intended that the equity in the Property would be owned by Ms Lay following their separation, but whether or not that was achievable would depend upon the ability of the plaintiffs between them to raise finance to pay out Westpac.
I also found in par 84 of the principal judgment that Mr Pech should be ordered to pay to the plaintiffs the costs of the proceedings.
I directed the parties to prepare short minutes of order to give effect to the principal judgment. The short minutes of order were, as I stated in par 85, to include "appropriate orders concerning the beneficial ownership of the Property, and the transfer of title to the property in conjunction with the refinancing of the present mortgage".
Following the publication of the principal judgment, the plaintiffs delivered to the Court draft short minutes of order and an affidavit of Mr Tai affirmed on 23 August 2018.
The affidavit was brief, and explained that Mr Tai had tried to obtain a loan from various banks to pay out the Westpac mortgage, but he was not successful because of the amount of legal costs expended in these proceedings. Mr Tai requested the Court to allow him to conduct the sale of the property on the basis that the net proceeds of sale would be payable to Mr Tai.
The plaintiffs sought the following orders in the short minutes of order:
1. That the parties forthwith do all things and sign all documents necessary to cause the property situated at, and known as, 14 Prout St, Cabramatta, NSW 2166 to be sold by public auction at the earliest possible date and to disburse the proceeds of the said sale in the following manner and priority:
1.1. Payment of Agent's commission and advertising expenses and legal expenses of the sale;
1.2. Discharge of the mortgage held in the name of the Defendant; and
1.3. The balance then remaining to the 2nd Plaintiff.
2. The Defendant shall sign and execute the discharge of mortgage and transfer pursuant to the sale and all other documents, at the necessary times, at the request of the Plaintiffs, in order to enable Order 1.
3. The Plaintiffs' solicitors have the authority to conduct the sale of the property on behalf of the Defendant.
4. The 2nd Plaintiff is at liberty to determine the reserve price for the auction at his discretion save that it must be above the amount owed on the mortgage.
5. The Defendant pay the sum of $19,220, with interest calculated from 16 July 2016, to the 2nd Plaintiff forthwith.
6. The Defendant pay the Plaintiffs Costs of these proceedings as agreed or assessed.
Note:
A. The Court notes that the property is to be sold, as the 2nd Defendant [read Plaintiff] is presently unable to obtain Finance to enable him to enter into the required mortgage over the property.
I observe that if I were to make these orders, I would amend order 2 to require Mr Pech to sign the necessary discharge of mortgage at the same time as he signs the contract for sale in accordance with order 1. It will be important for the discharge of mortgage to be available before the contract of sale becomes binding. I would also add an order allowing the parties to relist the matter before me on 2 days' notice for the purpose of seeking further orders to give effect to the orders that will be made.
The plaintiffs continue to appear in these proceedings by the same solicitor, and the Court must accept that the request that is embodied in the draft short minutes of order has been made by them jointly. This is an important consideration, because the interests of Ms Lay and Mr Tai are not necessarily consistent, and it was the professional obligation of their solicitor to ensure that each had been properly advised, and he was satisfied that it was proper for him to request the Court to make the orders sought in the short minutes of order.
The Court does not know what Mr Tai proposes to do with any net balance of the proceeds of sale of the Property, and it is not clear whether he will continue to support the accommodation needs of Ms Lay and her daughters.
It will be a most unfortunate outcome if the conduct of Mr Pech and the consequent need for the plaintiffs to expend legal costs in obtaining the relief that will be granted by the Court in these proceedings has the result that Ms Lay and her daughters will lose their secure accommodation.
Mr Pech responded to the plaintiffs' draft short minutes of order by submitting a revised version of those short minutes of order, together with a brief written submission by his counsel.
The submissions made on behalf of Mr Pech are based on the fact that in prayer 1 of the amended summons the plaintiffs sought an order that Ms Lay has an equitable interest in the Property. The submissions also rely upon a submission made by the plaintiffs that the reason why the property was purchased in Mr Tai's name was the inability of Ms Lay to obtain a mortgage over the property. The submissions rely upon an observation made by the Court at par 56 of the principal judgment "that Mr Pech would hold the 'equity' in the property on trust for Ms Lay".
In the light of these submissions, Mr Pech suggested the following amendments to the plaintiffs' short minutes of order.
The main change was that the net balance of the proceeds of sale of the Property should be paid to Ms Lay rather than Mr Tai (order 1.3), and Ms Lay rather than Mr Tai should be at liberty to determine the reserve price for the auction (order 4). Further, Mr Pech suggested that the money payable under order 5 should be paid to Ms Lay rather than Mr Tai.
Notwithstanding the observation that I made at par 56 of the principal judgment, in my view it is appropriate for the Court to accept and act upon the request jointly made by the plaintiffs concerning the orders that should be made as to the title to the Property, its method of sale, as to the payment of the net proceeds of sale, and the sum payable by Mr Pech under order 5.
I have already noted the inconsistency between prayers 1 and 2 of the amended summons. In par 80 of the principal judgment I stated my satisfaction that "the plaintiffs have established their entitlement to the relief claimed in relation to the beneficial ownership of the Property, and my understanding that the plaintiffs sought an order that Mr Pech transfer the title to Mr Tai".
It seems to me that the question of the beneficial ownership of the Property as between Ms Lay and Mr Tai was not made an issue in the proceedings, and has not been determined by anything said in the principal judgment. It remains a matter for agreement between Ms Lay and Mr Tai. As I have noted, it will be unfortunate if the expense of these proceedings has prevented them from proceeding in the manner intended by them.
That reasoning extends to the amount payable by Mr Pech under order 5. It is a matter for the plaintiffs as to which of them that money should be paid.
Secondly, Mr Pech suggested that order 3 should be deleted, so that the plaintiffs' solicitors would not have the authority to conduct the sale of the property on behalf of Mr Pech. He did not suggest an alternative mechanism for the conduct of the sale. I would make the orders sought by the plaintiffs, as the only alternative is the appointment of trustees for sale under s 66G of the Conveyancing Act 1919 (NSW). The plaintiffs have already suffered significant disadvantage as a result of the costs imposed in prosecuting these proceedings. I can see no reason why they should suffer the additional costs of the trustees in conducting a sale. As the sale will be a simple conveyancing transaction, Mr Pech should be adequately protected by the right to apply to the Court on 2 days' notice if he considers his interests are not being adequately protected.
Thirdly, Mr Pech suggested the following order in lieu of the order 3 suggested by the plaintiffs: "To the extent that the costs identified in orders 1.1 and 1.2 are not paid out of the proceeds of sale they be paid by the Plaintiffs". That suggestion contemplates that the price at which the Property can be sold will not be sufficient to cover the costs of sale and the mortgage. I do not accept that the evidence justifies the Court in making the orders sought by Mr Pech. In any event, it is not clear why such an order could be necessary as order 4 would only permit Mr Tai to determine a reserve price that was above the amount owed on the mortgage (and the costs of sale should not be significantly greater than that amount).
As I found at par 9 of the primary judgment, notwithstanding that after the title to the Property was transferred to Mr Pech, and he had agreed to pay the mortgage to provide a home for his mother, he only paid the interest for a couple of months, and thereafter the mortgage payments were made by Mr Tai, even though he had not expected to have to carry that burden. The evidence does not establish what the present amount of the mortgage debt is, or in precise terms who will be responsible for any increase in the mortgage debt, if that has occurred. The Court in these circumstances should not make the substitute order sought by Mr Pech, or any alternative order at this stage to deal with the problem of the price for the Property not being sufficient to pay out the costs of sale and the mortgage debt. If a problem arises because the price is not sufficient to pay out the costs and the debt, the parties will have to avail themselves of their leave to relist the matter before the Court.
The fourth change suggested by Mr Pech is that in par 5 of the short minutes of order Mr Pech should only be required to pay the sum of $19,220, without any additional interest from 16 July 2016 up to the date of judgment. The written submissions provided by counsel for the plaintiffs accept this change, as the plaintiffs had not sought interest in conformity with rule 6.12 (6) of the Uniform Civil Procedure Rules 2005 (NSW).
The fifth change to the draft short minutes of order proposed by the plaintiffs that was suggested by Mr Pech was the deletion of order 6, which provided that Mr Pech pay the plaintiffs' costs of the proceedings. There is a request in Mr Pech's counsel's submissions that he be heard on costs.
Notwithstanding that I said in par 84 of the principal judgment that Mr Pech should be ordered to pay to the plaintiffs the costs of the proceedings, I will give Mr Pech 7 days from the receipt of this judgment to deliver written submissions on the issue of costs (limited to 2 pages) to the plaintiffs' solicitor and to my associate, and if those submissions are delivered, the plaintiffs will have 7 days to reply (also limited to 2 pages).
Mr Pech, finally, has suggested that the Note requested by the plaintiffs should be deleted. I can see no reason for the Court to adopt that suggestion. The Note will be useful to make it clear why in the orders that can actually be made by the Court it has departed from what was contemplated in the principal judgment.
I will defer making any orders until after the Court is in a position to deal with the issue of costs, and will then make all appropriate orders at the one time.
I will consider any final suggestions that the parties wish to make concerning the precise form of the orders to be made by the Court, in the light of the observations that I have made above.
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Decision last updated: 28 September 2018