Ross v Ross

Court of Appeal (NSW)|2010-08-23|Before: Campbell JA, Macfarlan JA, Ward J, Windeyer J, MacFarlan JA

The application under s 41(c) of the Act 37 As noted earlier (see [23] above), the primary judge did not reach a final conclusion as to whether the application under s 41(c) should be granted. On appeal, the respondent however sought by way of Notice of Contention to support the property adjustment order made by her Honour as a proper exercise of the discretion conferred by s 41(c) of the Act notwithstanding that her Honour purported to act instead under s 66G(6) of the Conveyancing Act. The respondent submitted that her Honour implied that the discretionary matters she saw as justifying an order under s 66G(6) would also in her view have justified a like order under s 41(c) (subject to the need to revisit the decision of Windeyer J: see [23] above). In these circumstances, it is appropriate to examine those matters to see whether they would in fact have justified an order being made under s 41(c). 38 The operation of s 41(c) is conditioned upon the existence of a default in the carrying out of an obligation imposed on a person by the original order. The respondent defaulted in complying with the 1992 orders by failing to pay or tender to the appellant the sum of $45,800 within three months of the making of the orders. However as these orders provided for what was to occur in the event of that default occurring and, in particular, provided by Order 6 for the parties to take steps to have the property listed for sale by private treaty for a further period of three months there was no basis for concluding that, as a result of that default, it was just and equitable to vary the orders of Windeyer J. If, as here, orders provide for what is to happen in the case of default, it will rarely, if ever, be necessary or appropriate to make an order under s 41(c) varying the orders to deal differently with the consequences of the default. 39 There was however further default. Both parties defaulted in complying with Order 6 which became applicable once the respondent did not pay the sum of $45,800 as required. They also defaulted in complying with the consequential orders following Order 6. 40 "[T]he circumstances that have arisen as a result of" those defaults (see s 41(c)) are that the property has not been sold and has continued to be occupied by the respondent. In my view it is implicit in s 41(c) that, before an adjustment order can be made, a chain of causation must be established between the default, the circumstances that have arisen as a result of that default and the need (from the point of view of justice and equity) to vary the original orders. Thus I do not consider that once a default has been proved the Court hearing an application for variation may vary the orders for any reason it considers well-founded in justice and equity. Rather, the need for variation has to arise out of the circumstances caused by the default. 41 As a result, in the present case, it would have to have been shown that the fact that the property had not been sold and had remained in the possession of the respondent (which were the circumstances arising from the default of the parties in compliance with the original orders) made it just and equitable that the original orders be varied. It is thus necessary to consider whether the matters that her Honour impliedly identified as warranting an order under s 41(c) were, as required, ones that arose out of the fact that the property had not been sold and remained in the possession of the respondent. 42 The first matter to which the primary judge referred to was that the respondent was the primary carer of the children (see [22(a)] above). Although, as the appellant pointed out, the respondent was not the sole carer of the children throughout their childhood, the respondent's description of himself as the prime carer was undoubtedly correct. Significantly, the respondent cared for their son Geordie "on a twenty four hour per day, seven days per week basis" (Combined Appeal Book p 49) after Geordie had a serious accident. The appellant was only minimally involved in his care. The evidence did not however suggest that this role that the respondent assumed was a circumstance that arose out of the fact that the property was not sold in accordance with the orders of Windeyer J, that is, that it arose out of the default in compliance with those orders. It was accordingly not in my view a relevant matter to take into account in considering whether an order should be made under s 41(c). 43 The second matter to which the primary judge referred was that since 1992 the respondent had improved the property (see [22(b)] above). Whilst it is clear that since 1992 the respondent had incurred significant expenditure in relation to the property it is by no means clear that that expenditure added to the property's value and therefore amounted to more than expenditure on maintenance and repair of the property. This doubt arises from the fact that the valuation report in evidence concluded with the following statements: "The property is in poor order and would have 'limitations' in the market place. The land is appealing and so would be met with reasonable to good acceptance in the market place. However, the buildings (house and shed) are in poor order and so would have limited value in the market place" (Combined Appeal Book p 122). 44 Nevertheless if the respondent is able to establish that he made lasting improvements to the property, he is entitled, subject to any order made for an occupation fee, to an allowance out of the proceeds of a sale effected pursuant to an order under s 66G (Forgeard v Shanahan (1994) 35 NSWLR 206 at 223, 224). 45 Further, any expenditure by the respondent by way of maintenance or repairs should be relevant in assessing the benefit that the respondent obtained from occupation and therefore the amount of any occupation fee for which the respondent might be held to be liable: see Professor Butt, Land Law, 6th ed (2010) Lawbook Co at [14 40]. 46 Account may be taken of these matters in formulating an order under s 66G (see [32] - [33] above). In my view the fact that the respondent may have made improvements to the property is not a factor supporting the making of a variation order under s 41(c) of the Act as, to the extent that the facts support his claim, he already has an equitable right which the Court is able to protect through the exercise of its powers under s 66G of the Conveyancing Act. There is thus no occasion, in this respect at least, to adjust the property interests of the parties by making an order under s 41(c) of the Act. 47 The third matter to which her Honour referred was the fact that the respondent had made the whole of the mortgage payments (see [22(c)] above). In light of the parties' 60 per cent/40 per cent co-ownership of the property, the respondent had an equitable right to contribution from the appellant to the extent of 40 per cent of the payments that he made (Forgeard v Shanahan at 224F), other than in respect of the first 3 months after the orders were made, for which period he was to bear the burden of the whole of the payments. Whilst this right is not a property right and is thus something to which effect is not able to be given under the statutory trusts for sale under s 66G of the Conveyancing Act, as Bryson J pointed out in Arrow Custodians v Pine Forests (see [33] above), it is "usual and appropriate" for the Court to take such legal or equitable claims into account when "directing how funds under its control are to be distributed" (at [35]). As put by Professor Butt in Land Law, "… for pragmatic reasons and to facilitate speedy resolution of disputes, the court hearing a case involving the application of the proceeds of sale will calculate any adjustment to which the parties are entitled in equity" (at [14 106]). 48 Therefore in respect of this factor also, a relevant equitable right exists and is adequately protected in the s 66G proceedings. Accordingly this factor does not support the making here of an order under s 41(c) of the Act. 49 The fourth matter that her Honour relied upon was the making by the respondent of an offer in 1994 and its rejection by the appellant (see [22(d)] above). This also was not in my view a factor supporting the making of an order under s 41(c). Section 41(c) authorises the variation in certain circumstances of an order made under s 20 of the Act. Section 20 of the Act authorises such adjustment of property rights as to the Court seems "just and equitable", "having regard to" contributions of the following type: "(a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and

(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:

(i) a child of the parties, (ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties".

Implicitly, a court making an adjustment order under s 41(c) must do so "having regard to" contributions of the type described in s 20. 50 Neither the respondent's offer nor the appellant's rejection of the offer was a "contribution" of this character. Whilst circumstances other than contributions may be of relevance to the justice and equity of making an order, a s 20 order (and any varied order made in reliance on s 41(c)) must at least primarily be founded upon consideration of the contributions described in s 20(1). Section 20 orders having been made here, of necessity, upon the basis of an assessment of the parties' relevant contributions as described in that section, matters such as the making and rejection of the 1994 offer unallied with evidence of subsequent additional or changed contributions or any submission that default in compliance with the s 20 orders has required a reassessment of the contributions earlier made do not in my view support the making of a variation order under s 41(c). 51 Similarly, I do not consider that the matters fifthly considered by her Honour (see [22(e)] above) were in the circumstances capable of supporting a s 41(c) order. The property rights of the parties were established by the 1992 orders. Any further legal or equitable rights acquired by the parties as a result of occupation of the property, improvements to the property or mortgage payments were adequately protected in the manner described above (see [44] - [48]). In some circumstances, for example by application of the equitable principle of proprietary estoppel (see generally R Meagher, D Heydon and M Leeming, Meagher Gummow and Lehane's Equity: Doctrines and Remedies, 4th ed (2002) Butterworths LexisNexis Australia at [17-075] - [17-115]), a beneficial owner such as the appellant might lose his or her property rights by application of general law principles. However, in the absence, as here, of such a result being established or even alleged, it would not be appropriate to use s 41(c) of the Act to deprive a person of a property right where that deprivation was not based upon the making by the other party concerned of contributions of the nature described in s 20. 52 The same comments apply to the matters referred to in [27] which her Honour described as amounting to "laches, acquiescence and delay" on the part of the appellant (see [26] above). As pointed out above (see [51] above), it was neither established nor even contended by the respondent, that under some applicable general law doctrine the appellant had lost the whole or part of her beneficial interest in the property. In these circumstances, evidence of "laches, acquiescence and delay" on the part of the appellant could not of itself, and in particular in the absence of evidence of contributions that had not given rise to general law rights, provide the foundation for an order under s 41(c) depriving the appellant of the whole or a part of her property rights. 53 In these circumstances, the respondent's contention that the primary judge's order, although based upon s 66G of the Conveyancing Act, should be found to have been justified by s 41(c) of the Act should be rejected.

Section 18 of the Act 54 Before concluding consideration of the Act, I should refer to the appellant's contention that the respondent faced an additional difficulty in his contention that the primary judge's order could be justified under s 41(c). The appellant submitted that an order under s 41(c) could, by reason of s 18(1) of the Act, only be made if application for such an order was made within two years after the date on which the relationship between the parties ceased or if the court granted leave to apply outside the two year period, taking into account the criteria specified in s 18(2) of the Act. The present application was made well after the expiration of the two year period. 55 The issue does not appear to have been raised before Ward J, who made no finding as to whether the respondent needed leave to apply outside the two year period or whether, if he did, leave would be granted. As I have decided that on other grounds an order under s 41(c) was not justified, it is not necessary to consider these questions.

Conclusion and orders 56 The effect of the order that the primary judge made under s 66G of the Conveyancing Act was to deprive the appellant of her 40 per cent interest in the proceeds of sale of the subject property save to the extent that the sum of $20,913.80 was to be paid out of those proceeds to the Legal Aid Commission. For the reasons I have given this order was not justified by s 66G nor, on the alternative basis upon which the respondent sought to uphold it, by s 41(c) of the Act. 57 The result is that the s 66G order made by the judge should be reformulated to reflect the principles to which I have referred in this judgment. Depending upon the parties' contentions, the form of order may need to deal with claims for an occupation fee, the expenses of improvement and contribution to mortgage payments. Based on what the Court was told at the hearing, it may be that the parties can agree as to these matters. The parties should bring in appropriate short minutes of order. 58 As discussed at the hearing of the appeal, it will be necessary for the parties to provide to the Court evidence of the agreement of the Legal Aid Commission to limit its claim to the amount referred to in the primary judge's order (that is, $20,913.80). If that is not forthcoming, steps will have to be taken to join the Commission as a party because it appears that the Commission has, or may have, a proper claim to portion of the proceeds of sale of the property. 59 I note in conclusion that the evidence indicated that the respondent's application to the Family Court remains unresolved and that there was no evidence that the appellant has been discharged from the undertaking that she gave to that Court concerning the disposition of her share of the proceeds of sale of the subject land (see [13] above). This Court is not in a position to express a view as to whether it is still open to the respondent to proceed with that application but I note that the substantial burden that the respondent undertook in caring for the parties' children would appear to be relevant to that application if it were still able to be pursued. 60 I propose the following orders:

(2) Set aside the orders made by Ward J on 31 August 2009;

(3) Order the respondent to pay the appellant's costs of the appeal;

(4) Direct the parties to attempt to reach agreement as to the appropriate form of orders to give effect to this judgment, including an order as to the costs at first instance;

(5) If the parties are able to reach such agreement, direct that a signed form of consent order be lodged with the Court within 14 days of the date of this judgment; and

(6) If the parties cannot reach such agreement, direct: (a) the appellant within 14 days of the date of this judgment to file and serve the form of orders proposed by her together with brief written submissions in support, including as to the appropriate order concerning costs at first instance; (b) within 14 days' thereafter, the respondent to file and serve his proposed form of orders and written submissions in support; (c) within a further 7 days, the appellant to file and serve any response; and (d) the resolution of any issue as to the form of orders to be made is to be determined by the Court upon the basis of the parties' written submissions without any further oral hearing. 61 SACKVILLE AJA: I agree with the orders proposed by Macfarlan JA and with his Honour's reasons. **********

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Arrow Custodians Pty Ltd v Pine Forests of Australia Pty Ltd [2008] NSWSC 839; (2008) 14 BPR 149 Callow v Rupchev [2009] NSWCA 148 Forgeard v Shanahan (1994) 35 NSWLR 206 Hogan v Baseden (1997) 8 BPR 15,723 CASES CITED: In the Marriage of Simpson and Hamlin (1984) 9 Fam LR 1040 Re Fettel (1952) 52 SR (NSW) 221 Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068 Stephens v Debney (1960) SR (NSW) 468 Williams v Legg (1993) 29 NSWLR 687 Williams v Williams [1979] 1 NSWLR 376

35 It often happens that the Court decides on entitlements between co-owners in proceedings in which property has been or is to be sold under s 66G and the Court is in control of funds in which the co-owners have interests. Where there are two or three co-owners it is usual and appropriate for the Court to decide on any equitable or legal claims between them without paying close regard to whether the Court has gone past enforcement of the statutory trust for sale under ss 66F and 66G and is using its control over funds to enforce rights of other kinds; abridging processes of accounting and execution by directing how funds under its control are to be distributed. If there are enough funds it matters little whether in requiring discharge of a liability out of what would otherwise be distributable entitlement under s 66G the Court is giving effect to an interest in land, or to a personal claim; or to a constructive trust". 34 The making of a s 66G order in the present case gave rise to a statutory trust for sale under which, prima facie, the appellant should have been entitled to 40 per cent of the net proceeds of sale and the respondent to 60 per cent. In formulating the form of order to be made it would have been appropriate to provide for determination of any claim by the appellant that the respondent pay an occupation fee (as to which, in circumstances where as here there has been a breakdown of a domestic relationship, see Callow v Rupchev [2009] NSWCA 148), for any claim by the respondent for the value of improvements made by him to the property and for payment of any amount to which the Legal Aid Commission was entitled and for which the property was security. 35 It was not permissible however to provide in reliance upon s 66G(6) Conveyancing Act for an adjustment of the legal and equitable rights of the parties upon the basis of what the Court considered to be just and equitable. In the context of the present case, such an adjustment could only have been made by the Court under s 41(c) of the Act. The application under s 41(c) for the variation of the parties' property interests should therefore have been determined prior to the Court considering the making of an order under s 66G to give effect to the property interests of the parties. 36 I should mention at this point that by his Notice of Contention the respondent contended that the primary judge should have declined to make an order under s 66G by reason of the appellant's "laches, acquiescence or delay". This contention must be rejected as the reasons that the primary judge gave (see [28] above) for proceeding to make a s 66G order, notwithstanding the conduct of the appellant that she found, were perfectly appropriate. In any event, the discretion to refuse relief under s 66G is a limited one (Re Fettel at 227 - 228; Stephens v Debney (1960) SR (NSW) 468; Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068; Williams v Williams [1979] 1 NSWLR 376 at 378 - 379; Williams v Legg (1993) 29 NSWLR 687 at 693; Hogan v Baseden (1997) 8 BPR 15,723 at 15,726).

(1984) 9 Fam LR 1040

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