Scott Darren Pascoe as trustee of the property of Arthur Linden Dyason, a bankrupt v Lindsey Jane Dyason & Ors

Judgment 1In these proceedings, the First Plaintiff (as trustee of the property of Arthur Linden Dyason, a bankrupt ("Mr Dyason")) and Second Plaintiff (formerly also a trustee of Mr Dyason's property, who was joined as second plaintiff by orders made nunc pro tunc during the proceedings) seek orders under s 66G of the Conveyancing Act 1919 for a trustee to be appointed for the sale of a property situated at Martells Road, Brierfield and identified as Lot 31 in Deposited Plan 707896 ("the Property"). The Property is presently registered as tenants in common in the names of Lindsey Jane Dyason, the First Defendant ("Mrs Dyason") on the one hand and the Plaintiffs on the other. The Plaintiffs also seeks various ancillary orders. 2The Second Defendant, Mr Dyason, appeared in person before me. He sought leave to represent Mrs Dyason, which I declined on the basis that there were no exceptional circumstances justifying departing from the usual position that a person not holding a current practising certificate should not be permitted to represent a litigant: Damjanovic v Maley (2002) 55 NSWLR 149. In the particular circumstances, it is likely that any submissions which could have made for Mrs Dyason were able to be made by Mr Dyason on his own behalf. 3The Plaintiffs rely on affidavits of Mr Pascoe dated 28 September 2011 and 10 March 2011 and an affidavit of Mr Robinson dated 9 March 2011. Mr Dyason relied on his affidavit sworn 13 September 2011. 4Section 66G of the Conveyancing Act 1919 (NSW) relevantly provides that: (1) Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition. 5The purpose of this section 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": P Butt, Land Law , 6 th ed, 2010 at 265. In Callahan v O'Neill [2002] NSWSC 877, Young CJ in Eq 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." 6Although the Court has a discretion whether or not to make an order under this section, the grounds on which the Court will ordinarily refuse to make it are limited. For example, if it is inconsistent with a proprietary right or a contractual or fiduciary obligation, and there is no general jurisdiction to refuse to grant such an order on the basis of hardship or unfairness: Stephens v Debney (1960) 60 SR (NSW) 468; Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068; Ngatoa & Anor v Ford & Anor (1990) 19 NSWLR 72; Williams v Legg (1993) 29 NSWLR 687; Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790; Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685. In Hogan v Baseden (1997) 8 BPR 15,723 at 15,723, Mason P observed 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." His Honour also noted that: "[I]n 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 [59]). 7In Chalhoub v Chalhoub [2005] NSWSC 572 at [17]-[18], McLaughlin AsJ observed that, where a plaintiff and defendant are registered as tenants in common in equal shares, then prima facie the plaintiff is entitled to relief by way of an order under s 66G of the Conveyancing Act for sale of the relevant property and for the division of the net proceeds of such sale between the plaintiff and the defendant in equal shares. It was for the defendant, who denied the plaintiff's entitlement to such relief, to establish that the legal rights of the parties consequent upon their status as registered proprietors as tenants in common in equal shares were in some way altered by the invocation of equitable rights recognised by a Court of Equity or that there was some other reason why the Court should, in the exercise of the limited discretion reposed in it by s 66G of the Conveyancing Act , decline to make an appointment of statutory trustees or sale of the subject property. 8In Cain v Cain [2007] NSWSC 623 at [9]-[10], Young CJ in Eq noted that the Court will usually consider it appropriate to make an order under s 66G of the Conveyancing Act unless persuaded by cogent arguments from those who oppose. His Honour then noted Counsel's summary of the categories of cases in which the Court has declined to grant such an order as including: where the legal title is held by trustees and the trust instrument contains its own procedure for sale; where the plaintiff's conduct rates as an estoppel against the sale; and where an order would be incompatible with a contractual or equitable duty binding the applicant. In Tory v Tory [2007] NSWSC 1078 at [42], White J noted that an order under s 66G of the Conveyancing Act "is almost as of right unless on settled principles it would be inequitable to allow the application", and observed that an application would be refused if making the order would be inconsistent with a proprietary right or contractual or fiduciary obligation or on the basis of conventional estoppel or equitable estoppel. In Spathis v Nanos [2008] NSWSC 418 at [19]-[20], Jagot AJ observed that the discretion was not at large and is not to be exercised by reference to personal views about hardship or unfairness. The Court of Appeal also noted that the discretion to refuse relief under s 66G of the Conveyancing Act was a "limited one" in Ross v Ross [2010] NSWCA 301 at [36]; see also National Australia Bank Ltd v Pasupati [2011] NSWSC 540 at [20]. 9The first ground of the Defence filed by Mr and Mrs Dyason is that: "The subject property has no equity available to the trustee having a value of $370,000 and there is an existing mortgage of $331,000 plus outstanding interest since 2008 to IIB Global N.V. which company purchased the Mortgage No. AC403968 from Permanent Trustee Australia Limited on 9 May 2008 but such transfer of mortgage has been stamped and lodged for registration but not registered due to the Caveat lodged by the Plaintiff in 2011." 10Mr Dyason's affidavit, dated 13 September 2011, refers to a "transfer" of a mortgage held by Permanent Trustee Australia Limited ("PTAL") to IIB Global NV ("IIB Global") on 9 May 2008. However, the proposition that there is no equity in the property available to the Plaintiffs is not established on the evidence before me. There is no evidence before me as to the current value of the property although it was valued on 23 September 2008 at $435,000 and on a forced sale valued at $370,000, the figure adopted in the Defence filed by the Defendants. There is also no evidence before me as to the terms of any agreement between the Defendants and IIB Global as to the repayment of the amount secured by such a mortgage or as to any obligation to pay interest on it or the amount of any such interest. 11There is also real uncertainty as to the status of such a mortgage, since, prior to the purported transfer of the mortgage by PTAL to IIB Global on 9 May 2008, a discharge of that mortgage had already been executed by PTAL and lodged for registration. It is, however, not necessary for me to reach any finding as to that matter, since the absence of evidence as to the current value of the property on the one hand and any amount due to IIB Global on the other means that I could not in any event conclude that there is no equity available to the Plaintiffs on a sale of the property. Moreover, even if the possibility or probability that a sale of the property would not realise value for the Plaintiffs were established, I do not consider that this would provide a basis for declining to appoint trustees for sale on a co-owners' application under s 66G of the Conveyancing Act on the basis of the principles to which I have referred above. 12The second ground of the Defence filed by Mr and Mrs Dyason is that: "The subject property purchased in 1999 is an asset of the partnership between the Defendants established in 1997. No partnership accounts as at the date of bankruptcy have been prepared and the assets of the partnership have not been distributed as required by Section 44 of the Partnership Act. The property is operated by the Defendants as a primary producer but due to the weather conditions has operated at a loss for the past 3 years and tax returns have been lodged on behalf of the partnership." 13Mr Dyason gives evidence that he and his wife entered into a written partnership in England in 1997 and a copy of a partnership agreement is annexed to his affidavit. He refers to the purchase of the Property in 1999 and annexes a document which he describes as a list of partnership assets when the partnership was registered with the Australian Tax Office in September 2000 which includes the Property. I admitted that list subject to a limiting order under s 136 of the Evidence Act 1995 (NSW) that the description of the list did not prove that any particular asset was an asset of the partnership. The evidence before me is not sufficient to support a finding that the Property is an asset of the partnership. A Statement of Affairs dated 15 May 2007 provided by Mr Dyason under the Bankruptcy Act 1966 (Cth) refers to the Property as land owned by Mr Dyason, together with his wife. There is evidence that the Property was purchased in October 1999, but the Statement of Affairs refers to a partnership which conducts a business of manufacture of portable sawmills which started operating in September 2000. It will immediately be noted that the Property was acquired prior to the date of establishment of the partnership indicated in the Statement of Affairs; it is not listed as an asset of that partnership in the Statement of Affairs; and Mr Dyason also indicates in the Statement of Affairs that he had not transferred any assets to a trust in the last five years, negativing the possibility that the Property was held on trust by Mr and Mrs Dyason for that partnership. 14It is likely that the Statement of Affairs would have been accurate, since s 267(2) of the Bankruptcy Act provides that a person must not sign a declaration that he or she knows to be false and a note to that effect was included immediately above Mr Dyason's signature in the Statement of Affairs. I note that Mr Dyason gave oral evidence in narrative form, by leave, in which he outlined the circumstances in which the Statement of Affairs was signed and emphasised that he signed it in anticipation of an early annulment of the bankruptcy, which ultimately did not occur. However, I do not consider that Mr Dyason's evidence of the circumstances in which the Statement of Affairs was signed should lead me to find that he did not seek to provide an accurate account of ownership of his assets at the relevant time, at least in respect of the ownership of significant assets. Accordingly, I do not find that the Property was in fact an asset of the partnership. 15Even if the Property was an asset of the partnership, it is not apparent that there was any default by the Plaintiffs in respect of the requirements of s 44 of the Partnership Act 1892 (NSW). There is in evidence a letter dated 14 June 2007 from Mr Pascoe to Mrs Dyason which requests a copy of the relevant partnership agreement and confirmation that Mrs Dyason was in the process of winding-up the partnership and would forward an accounting for the same in due course. There is no evidence of any response by Mrs Dyason to that letter and no reason to assume that it was the obligation of Mr Pascoe, to the exclusion of Mrs Dyason as a solvent partner in the partnership, to attend to the matters associated with the dissolution of the partnership. 16In any event, Mr Dyason relied on the proposition that the Property was an asset of the partnership as a matter relevant to the exercise of the Court's discretion whether to make an order under s 66G of the Conveyancing Act , and I have referred above to the limited character of that direction. Mr Dyason contended that, if the Plaintiffs had previously distributed assets of the partnership in accordance with s 44 of the Partnership Act , then costs which have subsequently been incurred in the bankruptcy would not have been incurred. It is by no means self-evident that such costs would not have been incurred, particularly where there is little evidence before me as to the nature of the costs which have in fact been incurred by the Plaintiffs in the course of the bankruptcy. In any event, even if that were the case, it would not establish a basis for declining to make an order under s 66G of the Conveyancing Act having regard to the authorities to which I referred above. 17The third ground of the Defence filed by Mr and Mrs Dyason is that: "The Defendants do not wish to sell their home of the Defendants and their 3 children (Adam 18, Natasha 16 and Edward 14 years of age). A farm worker lives in the shed on the subject property." It is, of course, always regrettable if a family home needs to be sold as a consequence of bankruptcy. However, the case law makes clear that this does not provide a basis for declining to make orders under s 66G of the Conveyancing Act . 18Accordingly, I consider that I am bound to appoint trustees of the Property, being the whole of the land identified as Lot 31 in Deposited Plan 707896, and to order that that land be vested in them subject to any encumbrances affecting the entirety of that land, but free from encumbrances (if any) affecting any undivided share or shares thereof to be held by the said trustees upon the statutory trust for sale under Div 6 of Pt 4 of the Conveyancing Act . When the matter was listed before me, the parties agreed to discuss further the identity of the trustees to be appointed, if I considered that such an order should be made, and I will hear the parties further as to the form of the orders which are now to be made in that regard. 19At the opening of the hearing before me, Mr Dyason foreshadowed the commencement of proceedings in the Federal Court of Australia to seek to remove Mr Pascoe as his trustee in bankruptcy and sought an adjournment of these proceedings to allow him to do so. I suggested, and both parties accepted, that the more cost-effective approach would be to hear the substantive issues in dispute when the parties were already present before me, deliver my judgment and stay that judgment for a period to allow Mr Dyason to commence any such proceedings and seek such further orders, from the Federal Court or this Court, as he may be advised. Subject to hearing from the parties, I will stay my orders for 21 days on that basis. 20The Plaintiffs have been successful in the proceedings and the Defendants should jointly and severally pay their costs of the proceedings. It is appropriate that this order be extended to Mrs Dyason since, although she did not appear at the hearing, she also did not submit to any order of the Court and the Plaintiffs were therefore required to pursue their claim against her. 21I direct the parties to bring in short minutes of order to give effect to this judgment.