By a Summons filed on 8 December 2016 the plaintiff sought the appointment of trustees for the sale of land in Agnes Banks, New South Wales pursuant to s 66G of the Conveyancing Act 1919 (NSW). The plaintiff and the defendants are registered proprietors of the land as tenants in common in equal shares. The plaintiff is the mother of the defendant.
The parties advised the Court in March 2017 that they were close to settling the proceedings. The proceedings were subsequently adjourned a number of times to allow that process to occur. The parties entered into a deed on 5 May 2017 which provided for sale of the property and a procedure to resolve the dispute between the parties as to their respective entitlements to the proceeds. The deed did not make any provision for the costs of the proceedings.
An auction of the property occurred on 17 June 2017. It appears that there were no bidders at the auction. The Court has been informed that the parties then agreed to sell the property by private treaty. It is unclear whether the property has in fact been sold. In any event, the parties indicated in August 2017 that the principal relief sought by the plaintiff had been "resolved", but the question of costs had not. Orders were made with the consent of the parties for the question of costs to be determined on the papers. Submissions have been received from both parties in accordance with those orders.
The plaintiff submits that the defendant should pay her costs of the proceedings. The plaintiff says that she was justified in commencing the proceedings and that, although there was no determination on the merits, she would have been successful in obtaining an order for the appointment of trustees. The plaintiff also alleges that the defendant avoided service of the Summons, necessitating the filing of an application for substituted service which was abandoned after the defendant's solicitor agreed to accept service. She contends that the defendant acted unreasonably in only consenting to sale of the property once the proceedings were already on foot, thereby causing the plaintiff to incur the "unnecessary expense of prosecuting the litigation". The plaintiff further submits that the defendant's unreasonable conduct warrants a departure from the usual approach where there is no determination on the merits, which is that there is no order as to costs (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622).
The defendant submits that there should be no order as to costs, or alternatively that each party's costs should be paid out of the net proceeds of sale before any final division between the parties. The defendant submits that there was no "event" within the meaning of Uniform Civil Procedure Rules 2005 (NSW), r 42.1, such that the Court ought not "amend the settlement" by requiring the defendant to pay the plaintiff's costs. It is further said that each party "should be dealt with equally" in relation to costs because such costs are an incident of the parties' joint ownership and the defendant behaved reasonably and co-operatively in settling the proceedings at an early stage.
The usual costs order in proceedings for the appointment of trustees for sale is that the costs of both parties be paid out of the proceeds of sale, as they are regarded as an incident of the parties' joint ownership (see McKay v McKay [2008] NSWSC 256 at [7]; Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]). As noted above, the plaintiff relied upon Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (supra) in which McHugh J stated (at 624-5):
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.
…
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 … 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 costs of the proceedings.
It may be accepted that the plaintiff was likely to have obtained an order for the appointment of trustees for sale if the proceedings had not settled. A co-owner is entitled to such an order "almost as of right" unless on settled principles it would be inequitable to allow the application: Tory v Tory [2007] NSWSC 1078 at [42]. In my opinion, even if it can be said that the plaintiff was "almost certain to have succeeded", that does not mean that the defendant should be required to pay the plaintiff's costs in the circumstances of this case. Because the usual approach in s 66G proceedings is that the costs are paid out of the proceeds of sale, a plaintiff who successfully obtains orders for the appointment of trustees does not ordinarily obtain an order that the defendant pay its costs. To do so, the plaintiff must establish a reason to depart from the normal approach, such as unreasonable conduct by the defendant (see Botros v Frank [2013] NSWSC 712 at [24]; Spathis v Nanos (No 2) [2008] NSWSC 470 at [13]). Section 66G proceedings are thus different in nature to proceedings where costs ordinarily follow the event (see Uniform Civil Procedure Rules 2005 (NSW), r 42.1). As a result, even if the plaintiff was almost certain to have succeeded, that does not lead to the conclusion that the defendant should pay her costs.
I am unable to accept the plaintiff's submission that the defendant acted unreasonably in only agreeing to a sale of the property after proceedings had been commenced. Section 66G exists to enable one co-owner to bring about the sale of property where another co-owner does not consent. The plaintiff triggered that process, causing the defendant to agree to a sale at a very early stage in order to avoid the costs of a final hearing and the costs of the trustees. There may be many reasons for the defendant's initial resistance to a sale. In my view, it cannot be regarded as unreasonable for the defendant to reconsider his position shortly after the proceedings commenced and to decide that consenting to a sale was the best course of action. That decision avoided costs that would have reduced the proceeds of sale available to both himself and the plaintiff. An order requiring the defendant to pay the plaintiff's costs would not promote the sensible resolution of proceedings of the kind that occurred in this case. It would also not recognise that the costs of s 66G proceedings are an incident of co-ownership, and may be unavoidably incurred where the parties cannot agree.
A suggestion was made that the defendant had avoided service. However, there is no evidence before the Court that would enable it to reach a conclusion to that effect.
In my opinion, the appropriate order is that the costs of the proceedings be paid out of the proceeds of sale. I do not see any reason to depart from the usual approach in s 66G cases. In circumstances where the parties did not deal with costs in their settlement deed or their subsequent agreement for a sale by private treaty, an order that the costs of the proceedings be paid out of the proceeds of sale does not undermine or rewrite the agreements and is capable of operating in combination with them. The Court will order that the parties' costs of the proceedings be paid out of the proceeds of sale of the property at 61 Kooringal Drive, Agnes Banks, after payment of the amounts described in clause 1(e) of the deed made on 5 May 2017 between the plaintiff and the defendant.
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Amendments
06 September 2017 - Coversheet amended
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Decision last updated: 06 September 2017