National Australia Bank Limited v Pasupati

Judgment Introduction 1This is an application brought pursuant to s 66G of the Conveyancing Act 1919 seeking an order for the appointment of trustees for the sale of land in Strathfield ('the property'). The proceedings are brought by Lukshmi Astrid King ('the applicant') against her former husband, Kumareshwara Pasupati, ('the respondent') in respect of the property which is their former matrimonial home. In fact, the present proceedings were described in the initiating process, which was filed on 8 October 2010, as either a cross-summons or a cross-claim. That claim was made in the context of proceedings which were already on foot in respect of the property. Those proceedings were instituted in May 2009 by the National Australia Bank Limited (NAB) with the respondent being named as the first defendant and the applicant as the second defendant. The property which is mortgaged to NAB is held by the applicant and the respondent as joint tenants. 2In its action NAB seeks orders for possession of the property. When the matter was initially called on for hearing, Mr Price of counsel appeared on behalf of NAB. He informed the court that NAB supported the present application and that his client did not wish to be further heard in these proceedings. At that stage, the respondent was unrepresented. In due course he sought, and was granted an adjournment, in order that he could obtain legal representation. When the matter came on for hearing, Mr Young appeared on his behalf to oppose the application. 3Professor Butt, a well-respected academic commentator, has observed that the purpose of the legislation "is to provide a mechanism for terminating the co-ownership [of property] where the co-owners themselves cannot agree on how the co-ownership should be determined" Land Law (6 th Edition, 2010) (at 265). Professor Butt relies upon the observations of Brennan J in Nullagine Investments Pty Limited v The Western Australian Club Incorporated (1993) 177 CLR 635 at 650 as providing support for that proposition. The evidence 4The following affidavits were read in the applicant's case: (a) Affidavit of Lukshmi Astrid King sworn 13 October 2010; (b) Affidavit of Lukshmi Astrid King sworn 28 February 2011; (c) Affidavit of Miranda Thompson sworn 1 March 2011; (d) Affidavit of Miranda Thompson sworn 22 March 2011; (e) Affidavit of Patrick Christopher See sworn 1 March 2011; (f) Affidavit of Patrick Christopher See sworn 31 March 2011; (g) Affidavit of Christopher John Boyd sworn 10 March 2011; (h) Affidavit of Adrian Van Dam sworn 16 March 2011. 5Mr Boyd and Mr Dam have each consented to being appointed as a trustee for the sale of the property. Ms Thompson certifies that each of the proposed trustees are fit and proper persons to discharge the office of trustee. It is common ground that that evidence satisfies the formal requirements in relation to the appointment of Mr Boyd and Mr Dam as trustees. 6The only evidence relied upon by the respondent was his affidavit, which was described as an amended affidavit, sworn 28 February 2011. None of the deponents to the affidavits were required for cross-examination. Objection was however taken to large parts of the respondent's affidavit. It is apparent that it was prepared without the assistance of a lawyer. Objection was taken largely upon the basis that the affidavit contains irrelevant material and/or material that is in the nature of a submission rather than evidence. I have had due regard to those considerations in assessing the contents of that affidavit. 7Much of the background material is uncontroversial. The applicant and the respondent married in Sri Lanka in 1981. They migrated to Australia in 1985. There are two children of the marriage. The couple separated in March 2004 and were divorced on 1 July 2005. 8In 2001 the applicant and the respondent purchased the property for $670,000. In order to do so, they borrowed $800,000 from NAB which was secured with loans over the property and another property. In due course, the other property was sold. In about November 2002 the applicant and the respondent entered into a contract with a building company to build a new house on the property. That venture was financed with a loan of $850,000 from NAB. A dispute then arose with the building company. Shortly thereafter the couple separated. Ultimately the building company was placed into liquidation. The respondent subsequently instituted proceedings against the building company's insurer, Vero Insurance, in the Consumer Trade and Tenancy Tribunal. Those proceedings remain unresolved. 9It would appear that the respondent then contracted with another building company, Vallone Constructions, to complete the renovations. Whilst there is a disagreement between the parties concerning various aspects of the renovation works, it seems to be clear that Vallone Constructions was instructed to cease work some time towards the end of 2006 with the result that the renovations have never been completed. 10The evidence reveals that three separate caveats have been lodged in respect of the property. The first was lodged by Print Management Australia Pty Limited (PMA) with whom the respondent was employed for more than five years. He commenced employment with PMA in July 2002. He was appointed its Chief Financial Officer in September 2002 and a director of the company in December 2002. His employment was terminated in December 2007. 11As I have said, PMA lodged a caveat over the property. PMA's solicitors indicated in an email to the applicant's instructing solicitors that it did not object to the present application. The email went on to say that PMA "wishes at this stage to reserve its right in respect of any surplus funds which may be realised from the sale of the property. In this regard, we would request that any trustee for sale that may be appointed by the Court keep us fully informed in relation to the sale of the property and completion thereof." 12In March 2008 PMA instituted proceedings in this court in which it seeks, according to the email to which reference has just been made, "to recover more than $2 million which [PMA] alleges that [the respondent] misappropriated whilst employed by PMA." The respondent has brought a cross-claim upon the basis, as I understand it, that he was oppressed as a minority shareholder in PMA. 13Of the other two caveats, the first is in favour of a firm of solicitors who have acted on the respondent's behalf in the proceedings against Vero Insurance whilst the other is in favour of a different firm of solicitors which was, at one stage, acting on his behalf in the proceedings instituted by NAB. The debt which is owed to the first firm of solicitors is $75,000, whilst the debt to the second firm is in the order of $125,000. The consequence is that he owes those two firms a total of $200,000 in legal fees. 14As I have said, NAB instituted proceedings against the applicant and the respondent for possession of the property upon the basis that the parties have defaulted in respect of the mortgage. Indeed, no repayments have been made since some time in 2007 or 2008. Nevertheless the respondent has continued to live in the premises since that time at no cost to himself. Apparently his parents also live in the house. As at 25 February 2011 the balance due to NAB under the mortgage was $2,036,171.50 to which figure should be added its enforcement costs of $88,182.03. The indebtedness to NAB is said to be increasing at the rate of $7,500 per month. NAB arranged for a "kerbside valuation" of the property on 6 September 2010. The "market value mid-point" was fixed at $1,800,000. The evidence reveals that since at least June 2007, the applicant has been urging the respondent to agree to sell the property, but it appears that the respondent has consistently refused to do so. 15It is quite clear that the applicant is not defending the proceedings brought against her by NAB. On the other hand, the respondent is defending them. Indeed he has brought a cross-claim against NAB, although the nature of that claim and the state of those proceedings are not in evidence in this application. 16In May 2006 the applicant commenced proceedings in the Family Court in an attempt to resolve the property issues which existed between the parties. It would appear from a chronology, with which the court was provided, that the respondent did not thereafter comply with a number of directions from that Court to file affidavit material. Be that as it may, PMA obtained leave to intervene in those proceedings. On 16 June 2008 the following order was then made by consent: No property be transferred or disposed of by the Husband or Wife pursuant to these proceedings or any settlement of them except upon terms that the moneys claimed by the Applicant intervenor as the Plaintiff in the Supreme Court proceedings number 2059 of 2008 are secured by payment into the Court or such other means as ordered by the Court except upon 14 days written notice by each of the parties to the solicitors for PMA ...(emphasis added) 17That order explains the significance of the email, to which I referred earlier, that the applicant's solicitor received from PMA's current solicitors. 18On 4 August 2008 the following order was also made by consent: That the proceedings be stood over until the conclusion of the Supreme Court proceedings between PMA and the Husband and Ors and/or the claim in the CTTT against Vero Insurance is completed whichever is the later. That the Husband keep the Wife informed as to the progress of the Supreme Court proceedings and the CTTT proceedings, including serving the Wife with any documents filed in either of those proceedings whether by way of settlement or Judgment. The Husband's solicitor advise the Family Court of Australia by way of letter to the Associate to Justice Le Poer Trench of any final Orders in the Supreme Court proceedings or the CTTT proceedings whichever is the later within seven days of such final Orders being made. 19It is apparent that the Family Court proceedings remain in limbo. The applicant says that she is unaware of the current status of the respondent's proceedings against Vero Insurance "as [the respondent] directed his lawyers not to disclose and has not complied with orders to disclose". She also says that it is her understanding that it is presently anticipated that PMA's proceedings against the respondent will receive a hearing date "later in 2011". The relevant legal principles 20The principles which govern the present application are uncontroversial. It is common ground that an order appointing trustees for sale will normally be made. Indeed, it has been said that the right to an order is regarded as 'an incident of co-ownership': Ranger v Ranger [2009] QCA 226 at 14. The section confers a discretion upon the court as to whether or not to make the order: Forgeard v Shanahan (1994) 35 NSWLR 206 at 213-4. Nevertheless the grounds upon which a court will ordinarily refuse to make such an order are very limited. In Callahan v O'Neill [2002] NSWSC 877, Young CJ in Eq (as his Honour then was) observed: It is fairly clear that, as a general rule, any co-owner holding at least 50% of a parcel of real property is entitled almost as of right to an order for partition or sale under s 66G of the Conveyancing Act. It is only in situations where it would, under settled principles, be inequitable to permit such an application, including cases where there has been a contract not to make an application that the order may be refused. This appears from cases such as Ngatoa v Ford (1990) 19 NSWLR 72 and Williams v Legg (1993) 29 NSWLR 687. Accordingly, the forensic onus is on the defendant to show why the order which the plaintiff seeks should be refused. [at paras 8-9] 21See also Chalhoub v Chalhoub [2005] NSWSC 572 [at paras 18-19]; Cain v Cain [2007] NSWSC 623 [at paras 9-10]; Tory v Tory [2007] NSWSC 1078 at [42]; Spathis v Nanos [2008] NSWSC 418 [at paras 19-20]; Ross v Ross [2010] NSWCA 301 [at para 36]. 22In Matsen v Matsen [2008] NSWSC 135 Hamilton J, in the course of reviewing the authorities, observed: In Hogan v Baseden (1997) 8 BPR 15,723, Mason P said at 15,723 that it "would not be a proper exercise of discretion of the power to decline relief under s 66G ... to refuse an application on grounds of hardship or general unfairness", citing Re McNamara and the Conveyancing Act and Ngatoa v Ford . Mason P added that: "in the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect". [at para 59] The submissions 23The applicant's position can be stated very simply. She wishes for the property to be sold in order to stop the liability, which she has incurred to the NAB under the loans secured against the property by way of registered mortgage, from increasing any further. Moreover, upon her assessment of the situation, there is no equity in the property. All that remains, so it is contended, is a debt rather than an asset. Accordingly, she has concerns that NAB will look to her, rather than to the respondent, for any shortfall that may exist after the indebtedness to it is made good. That is because, apart from 170,000 shares in PMA which the respondent acquired between October 2002 and January 2004, he has no other tangible assets. Certainly there is only a nominal amount in his bank accounts. On the other hand, the respondent contended that a valuation of the shares revealed them to be worth in excess of $6 million as at 30 June 2008. I observe in passing that there is no evidence before the court as to their current worth. 24Counsel for the respondent conceded that the bases upon which such an application may be resisted are very limited. Moreover, it was specifically acknowledged that the respondent's opposition to the order was not advanced "on the basis of hardship or unfairness". The contention was that the present application amounted to an abuse of process. By way of elaboration, it was submitted that given that property proceedings between the applicant and the respondent have been on foot since 2006 in the Family Court, that this court "has an inherent jurisdiction to stay the s 66G proceedings to prevent an abuse of process which may otherwise occur by taking the matter out of the hands of the Family Court". Counsel for the respondent relied upon Williams v Williams [1979] 1 NSWLR 376 as providing support for that submission. The fact that the applicant had not sought to overturn the orders which had been made by consent in 2008 in the Family Court proceedings provided a further reason, so it was contended, why a stay should be granted. It was also submitted that the application was an attempt to "pre-empt" the hearing of the proceedings in the Family Court which had "made orders restricting the disposal of property". Furthermore, it was submitted that the present case provided a more meritorious basis upon which to grant a stay than in Williams (supra) in which the wife obtained a stay despite the fact that she had not then commenced proceedings in the Family Court in respect of the disputed property. 25Counsel for the respondent also submitted that the value of the property had the potential to increase substantially in the event that the renovation work, to which I referred earlier, was completed. The present cost of that work is estimated to be $137,820. That work, I was informed, related to landscaping, the installation of security gates and enhancements to a swimming pool. A real estate agent has provided a letter, the effect of which that he is of the opinion that whereas the sale of the property in its present state would realise $1.8 - $1.9m, it could realise $2.4 - $2.5 million if the renovation work was to be done. Upon that basis, the respondent contends that the completion of the renovation work has the potential to increase the asset value of the property by more than $460,000 (being the difference between the estimated increased value of the property after the renovation work and the cost of the work itself). Consideration 26It is convenient to deal with that submission immediately. In my view it should be rejected because it paints an unrealistic scenario. That is because it assumes that the respondent is in a position to raise the money which is necessary in order to complete the building work. There is no evidence before the court that he has worked since PMA terminated his employment at the end of 2007. I am not aware that he has any other regular source of income, although it appears that he is in receipt of disability payments under an insurance policy. On the other side of the coin, apart from not meeting his apparent obligations to NAB, he has been, and remains, involved in expensive litigation on a number of fronts which has served to further increase his liabilities. Those liabilities include the unpaid legal fees of $200,000 to which reference was made earlier. The respondent in his affidavit deposes to having also incurred in excess of $570,000 in legal fees in the PMA proceedings. As I have said, his only tangible assets are his shares in PMA (with whom he is also in dispute). He has held those shares since 2004. The respondent did not lead any evidence that he was in a position to liquidate his shareholding (or any part thereof) in order to be able to pay for the renovation work, or indeed that he would even be willing to do so. Nor is there any evidence to suggest that he could obtain a loan in order to finance the renovations. 27Given the state of the evidence it seems highly unlikely, as matters presently stand, that the respondent will be able to meet the substantial additional costs which would need to be incurred in order to complete the renovation work. In those circumstances, it would seem almost inevitable that all that the respondent's proposal would achieve is yet further delay without any tangible benefit to either the applicant or the respondent. 28Moreover, the respondent's analysis of the likely increase in the value of the property depends upon a number of assumptions. First, that the cost of the proposed renovations will not increase. Secondly, that a purchaser can be found for the property once the renovations have been completed. Thirdly, that the property is then sold at the price which the respondent is hoping to fetch. I should also observe that no timeframe was suggested for the completion of the work. Meanwhile, of course, the liability to NAB continues to increase. 29So far as the submission concerning the Family Court proceedings are concerned, it is convenient to first consider the order made on 16 June 2008. The evident purpose of the order was to provide PMA with a measure of protection in light of its proceedings against the respondent. It is tolerably clear from the terms of the order that it was not, and could not have been, intended to operate as a general restriction which would prevent the parties from otherwise lawfully disposing of the property. Insofar as the respondent submits that the order does operate as a general restriction upon the disposal of the property, such a submission should be rejected. Furthermore, in the light of the stance adopted by PMA in respect of the current application, it is clear that its interests can be adequately protected. 30I note in passing from the chronology, with which I have been provided, that the respondent has not been complying with that part of the order which requires him to keep the applicant and the Family Court informed of the progress of his other sets of proceedings. Nor has the respondent, who is in the best position to know, put on any evidence as to the current status of the proceedings in either the PMA case or the Vero Insurance case. Had it been the case that either, or indeed both sets of proceedings, were likely to be finalised in the near future, one would have expected to have evidence to that effect. That is a not unimportant consideration, given that the Family Court proceedings are not due to even commence until after each of those sets of proceedings are finalised. When that may be must remain a matter of speculation because it will depend upon a number of variables, concerning which there is simply no evidence. There is nothing, for example, to indicate the stage which the PMA and Vero Insurance proceedings have reached, let alone evidence as to the estimated length of those proceedings. In short, there is no real basis, in those circumstances, for any optimism that the Family Court proceedings will be resolved in the foreseeable future. 31In Williams (supra) the parties acquired a property as joint tenants in 1958. It remained the matrimonial home until the husband moved out in April 1978, although the wife continued to live there. In November 1978 the husband sought an order pursuant to s 66G of the Conveyancing Act . In March 1979 the wife filed an application for dissolution of the marriage. That application was set down for hearing in May 1979. At that stage, she had made no application in the Family Court in respect of the property. Rath J said: The question is capable of resolution only by reference to the circumstances as they exist from time to time. The problems involved would seem to be much the same, whatever the order of the institution of the proceedings might be. But I do not myself see "an unseemly conflict of jurisdictions or a gaping hiatus", if the jurisdiction of the State court continues in its own field until such time as the Family Court is called upon to deal with the same property: see Tansell v Tansell . To hold otherwise might well work an indefinite suspension of rights in the subject property . In the present case, the wife may never move in the Family Court for an order in respect of the subject property; and the husband may move in that Court only for ancillary relief, which is not, and may never be, his object. For these reasons, I am of the opinion that the Court has jurisdiction to appoint trustees for sale under s. 66 G . However, in the circumstances, I consider that there should be a stay of proceedings. The Court has inherent jurisdiction to stay its proceedings to prevent an abuse of its process. Though the jurisdiction should be exercised sparingly, the Court has a wide discretion, and will stay proceedings in its own jurisdiction for the purpose of the prosecution of proceedings in another jurisdiction if serious injustice would otherwise be occasioned : Maritime Insurance Co. Ltd. v. Geelong Harbor Trust Commissioners ; Rockware Glass Ltd.v. MacShannon ; Tansell v. Tansell . If the wife's proceedings for divorce have been instituted in good faith, and if there is a genuine case for the alteration of property rights, it would be unjust not to permit the wife to pursue her remedies in the Family Court. In the absence of satisfactory evidence on this aspect of the case, the stay to be granted at this stage should be for a comparatively short period only, and be subject to the plaintiff's right to apply on short notice for the lifting of the stay. I propose to make an order similar to that made by McLelland J. in Re Fettel. The appropriate order is that the proceedings be stayed for twenty-eight days to enable the defendant to make an application under the Family Law Act in respect of the subject property. If within that time, the defendant makes an appropriate application to the Family Court, then I think she will probably be entitled to a further stay until the determination of that application, subject to her expeditious prosecution of the proceedings. If an appropriate application is not made within twenty-eight days, I shall make the order for the appointment of statutory trustees for sale, as asked by the plaintiff. Even if the appropriate application is made, I shall reserve liberty to the plaintiff to apply for the lifting of the stay on the ground that the proceedings in the Family Court are not being diligently prosecuted by the defendant. [at 382 - 383] (footnotes omitted). (emphasis added) 32In due course his Honour extended the stay until the wife's property application in the Family Court was determined. 33Whilst the decision in Williams clearly establishes that there is power in this Court to grant a stay of these proceedings in order to prevent an abuse of its process, it is equally apparent that no obligation is cast upon the court to do so simply because there are also proceedings on foot in the Family Court. 34In my view, it has not been demonstrated that a "serious injustice would otherwise be occasioned" if I were not to grant a stay in the present case. Indeed, as counsel for the applicant contended, there would be no utility in staying these proceedings because, as matters presently stand, there is only a debt in respect of the property. In my view, the fact that the applicant has not sought to vacate the Family Court orders should not operate as an impediment to her present claim. Since then, the NAB has instituted its own proceeding in respect of the property. Plainly enough the applicant realises that she has no basis for resisting that claim and her stance in these proceedings is a recognition that it is inevitable that the property will have to be sold in order to discharge her liability to it. Furthermore, it would appear that circumstances may well have changed since 2008. Indeed, the applicant deposes to a conversation that she had with the respondent, in about February 2008, in which he said that "within six months the PMA proceedings will be finalised". Clearly enough the respondent's expectation, assuming that it was a realistic at that time, has not been realised. 35Moreover, the circumstances in the present case are well removed from those which occurred in Williams . Whatever else may be said about the Family Court proceedings in the present case, it is clear that notwithstanding the fact that they have been on foot since 2006, they remain unresolved. As I have said, it is quite impossible to predict when they will even resume, let alone when they may be resolved. The consequence of refusing the order sought would, as matters presently stand, be that the present proceedings would be stayed almost indefinitely. To adopt the language employed in Williams , to refuse the order "might well work an indefinite suspension of rights in the subject property". Furthermore, unlike the present case, it appears that in Williams there was some equity in the property which was the subject of the dispute. 36Finally, the respondent submitted that the amount owing to NAB under the mortgage could not be determined until the proceedings between it and the respondent had been resolved. That, it was submitted, would create a difficulty for the trustees for sale because until then, they would not be able to ascertain the correct amount to pay to NAB. I was not provided with any information as to when those proceedings would be completed. In any event, even if the respondent achieved success in those proceedings, it appears to be common ground that the remedy is likely to be an award of damages. That would not, of itself, provide a basis upon which to refuse to grant the relief which is sought. Order 37In conclusion, I have come to the view that the applicant is entitled to the relief which is sought. Accordingly, pursuant to s 66G of the Conveyancing Act 1919 , I order that trustees be appointed for the sale of the subject property. 38After judgment was reserved, I received by email a draft of the proposed terms of the orders which the applicant is seeking. I was also informed at the same time that NAB consented to the orders being made in those terms. I am presently minded to proceed upon that basis. Nevertheless, in the circumstances, I will give the parties 7 days within which to bring in short minutes to give effect to these reasons.