Spathis v Nanos

Supreme Court of NSW|2008-05-05|Before: Jagot AJ

CITATION : Spathis v Nanos [2008] NSWSC 418

CATCHWORDS : REAL PROPERTY - co-owner seeking sale under s 66G of Conveyancing Act 1919 - defendant keen to purchase plaintiff's share of property - whether orders should be made appointing trustees for sale - if orders made whether orders should be moulded to accommodate defendant's wish to purchase following valuation - orders under s 66G made

LEGISLATION CITED : Conveyancing Act 1919 Property, Stock and Business Agents Act 2002

PLAINTIFF Gerasimos Spathis PARTIES : DEFENDANT Amalia Nanos

COUNSEL : Mr I E Davidson - plaintiff Mr S W Climpson - defendant

SOLICITORS : JSM Lawyers - plaintiff James Lawyers - defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4498 of 2007 GERASIMOS SPATHIS v AMALIA NANOS JUDGMENT 1 HER HONOUR: This is an application under s 66G of the Conveyancing Act 1919 for an order appointing trustees for the sale of land known as 39 - 45 Tickner Street, Castlereagh.

2 The plaintiff and defendant are co-owners of the property in equal shares. The plaintiff and the defendant's father purchased the property as an investment. The defendant's father transferred his share to the defendant in September 1997. The plaintiff wishes to access his share of the property due to declining health (he has Parkinson's disease and is building another residence on his land with wheelchair access and additional accommodation).

3 The defendant opposed the making of an order under s 66G on four grounds: - (i) the desire of the defendant to purchase the plaintiff's share of the property at a fair market value, her open offers to do so, and willingness to give undertakings as necessary to secure this purchase, (ii) an alleged unreasonable change in the plaintiff's position from a willingness to sell his share to the defendant at a fair market value to an insistence on a sale by trustees (although the defendant accepted that no equitable estoppel could arise on the facts), (iii) the defendant's belief that a sale to her will involve substantial savings compared to the expense of a sale by trustees, and (iv) a concern arising from the background to this matter that if the property is sold by public auction there might be dummy bids in circumstances where the defendant's desire to buy the property is well known to the plaintiff and the plaintiff (at one time) insisted the property was worth $1.2 million. The defendant relied on the same matters to support a submission that, if an order is to be made under s 66G, it be moulded to the circumstances of the case, similar to the orders made in Cain v Cain [2007] NSWSC 623.

4 The facts were not in dispute other than to the extent discussed below.

5 The plaintiff first indicated to the defendant his desire to sell his share of the property some time in 2005. The defendant says they had a conversation in which the plaintiff indicated the value of the property to be $1.2 million. The defendant's wife, who was present during this conversation, said this sum was based on a rezoning and subdivision. In any event, the conversation prompted the defendant to get three appraisals from local real estate agents in September 2005. These appraisals suggested a property value of between $550,000 and $689,000, with one agent recommending a sale by public auction. Another agent gave a verbal appraisal of about $650,000 at most, whereas one other said the property was worth about $400,000 to $450,000. In October 2005 the defendant requested the appraisals the plaintiff held and said the plaintiff reiterated the value of $1.2 million. The defendant did not provide the plaintiff with the appraisals she held.

6 In June 2006 the plaintiff again told the defendant he wanted to sell the property but the defendant said she wanted to keep it as an investment and suggested they each get valuations and then negotiate a price for the defendant to buy out the plaintiff's share. According to the defendant the plaintiff still insisted that the property was worth over $1 million.

7 The defendant alleged that in June 2006 the plaintiff's wife asked her to place a dummy bid at an auction of a property the plaintiff's wife owned in Ultimo. The plaintiff's wife denied this and says that she was advised by the agent that she could make a vendor's bid at the auction either personally or though an agent and asked the defendant to make the vendor's bid on her behalf. When the defendant refused to do so the plaintiff's wife arranged for another person to make the vendor's bid for her. The agent said that he had advised the plaintiff's wife about her right to make a vendor's bid. He also confirmed that the plaintiff's wife had arranged for someone to make a vendor's bid at the auction of the Ultimo property, which was disclosed as vendor's bid by the auctioneer. The agent said there were no dummy bids at the auction of the Ultimo property (which I accept must be limited to his knowledge).

8 The defendant obtained a valuation from Australian Proval Services valuing the property at $440,000 in June 2006.

9 The plaintiff again raised his desire to sell his share in the property around December 2006. The defendant said she would have to speak with her father. After the plaintiff raised the issue yet again without receiving a response he considered satisfactory he referred the matter to solicitors.

10 On 18 January 2007 the plaintiff's solicitors wrote to the defendant noting that the defendant had refused to sell the property despite the plaintiff's requests and rejected the plaintiff's offer to purchase his share after having the property valued. The letter concluded that, unless the defendant would undertake to market the property for sale in co-operation with the plaintiff or purchase his share at market value to be determined by a valuer, the plaintiff would commence proceedings under s 66G for a sale by trustees (who may then sell the land by way of public auction). The defendant said this letter was incorrect as she had made it clear to the plaintiff that she was interested in buying the property but wanted him to present a valuation she could compare with her own. The defendant took steps with her partner to obtain finance for the purchase of the plaintiff's share and construction of a home on the property. Her partner was told that the bank would lend $220,000 to buy out the plaintiff's share. The defendant obtained a quote for building a home on the land.

11 The plaintiff's solicitor sent the defendant another letter on 23 February 2007 noting that they had not received any reply and intended commencing proceedings. The defendant engaged solicitors to respond. Solicitors' correspondence then continued for many months until the plaintiff commenced these proceedings on 12 September 2007.

12 Important steps in that correspondence included the defendant's solicitor, on 28 February 2007, identifying the defendant's preparedness to purchase the plaintiff's share of the property. The defendant's solicitor requested deferral of the commencement of the Supreme Court proceedings to allow the valuation to be obtained. The plaintiff's solicitor agreed to deferral for 21 days and asked whether the defendant would agree to purchase at a price representing the average of three valuations. The defendant's solicitor instead responded on 14 March 2007 with an offer to purchase the plaintiff's share for $185,000. It is not apparent that this was based on any valuation as the defendant had received the valuation of $440,000 from Australian Proval Services in June 2006. The next day the plaintiff's solicitor said the plaintiff would accept $350,000 as the price for the transfer of his share to the defendant. The defendant's solicitor then disclosed the Australian Proval Services valuation of June 2006 for $440,000 and made an offer for the defendant to purchase the plaintiff's share for $220,000. The defendant's solicitor followed up that offer on 16 April 2007. On the same day the plaintiff's solicitor responded to the effect that the plaintiff considered the offer below market value, with market value being in excess of $700,000. The plaintiff's solicitor said that unless the defendant was prepared to increase her offer significantly then the plaintiff would have no choice other than to commence proceedings. Also on the same day the defendant's solicitor said they had been given no basis for the claimed value of in excess of $700,000 and could not be expected to accept it without a valuation. The defendant's solicitor left the defendant's offer of $220,000 open for seven days.

13 On 12 May 2007 the plaintiff's solicitor provided the defendant's solicitor with a valuation from Field and City Valuations dated 8 May 2007 valuing the property at $650,000. On 29 May 2007 the defendant's solicitor responded with a report from Australian Proval Services critical of the Field and City Valuations report and estimating the current value of the property as between $520,000 and $530,000 (noting the Valuer-General's value was $531,000). The defendant's solicitor sought a response on the basis that the defendant's offer was appropriate. On 22 May 2007 the plaintiff's solicitor sought a response to their offer of 12 May 2007 (that is, $325,000 or 50% of the value reported by Field and City Valuations).

14 On 12 June 2007 the plaintiff's solicitor said that the plaintiff wished to obtain orders as previously foreshadowed but considered the costs of doing so unnecessary if the defendant would purchase the plaintiff's share at market value as evidenced by the plaintiff's valuation or agree to list the property for sale by public auction with the agent to be appointed by agreement. The plaintiff's solicitor confirmed that the plaintiff's offer to accept $325,000 (as per the Field and City Valuations' report) remained open until 15 June 2007. The defendant's solicitor requested an extension to consider the offer until 21 June 2007 (that I infer must have been granted). In the event, on 12 July 2007, the defendant obtained another valuation, from Residential Consultancy Services, at $420,000 and offered to pay $235,000 to bring the matter to an end (being the half way point between that valuation and the valuation of Australian Proval Services on 15 May 2007). The plaintiff then commenced the proceedings on 12 September 2007.

15 On 31 October 2007 the defendant's solicitor reiterated the defendant's desire to buy the plaintiff's share and the offer to pay $235,000. In this letter the defendant made a further offer to buy the plaintiff's share for $265,000 and, in the alternative, offered that a valuer be appointed by the Australian Valuers Institute, the valuer to act as an expert with the parties to have an opportunity to make submissions and then be bound by the valuation, the costs of the valuer to be shared equally, and the defendant to purchase the plaintiff's share at 50% of the valuation within 42 days of its receipt. As a further alternative the defendant's solicitor said that any appointment under s 66G should be on terms including that the trustees obtain a valuation, the valuation be provided to the Court in a sealed envelope, no sale occur until the trustees had consulted the defendant in accordance with s 66H, leave be granted to the defendant to bid for or buy the property and set off the purchase price against her 50% interest, and each party pay its own costs (or that the Court reserve costs until a later date).

16 The plaintiff's solicitor responded on 7 November 2007 to the effect that the obvious disparity in valuations meant that the sale should be by way of public auction at which the defendant could bid, and noting other concerns about the defendant's alternatives (including delay). The defendant's solicitor wrote again on 16 November 2007 and said that the plaintiff had not responded to the criticisms of his valuation by Australian Proval Services on 15 May 2007, disputed the issue of delay, and claimed that the process suggested on behalf of the defendant would be quicker and cheaper. The defendant's solicitor also alleged that the plaintiff's position about public auction was inconsistent with the letter of 18 January 2007. The purchaser's solicitor responded on 26 November 2007 and, amongst other things, denied any inconsistency on the plaintiff's part noting that the plaintiff had not rejected the prospect of selling to the defendant but had formed the view (based on independent advice and inquiries of local agents) that the defendant's value was substantially inaccurate and had been so for the entire period before and during the proceedings, with the consequence that purchase of his share by the defendant was improbable. The plaintiff's solicitors offered to enter into consent orders on 9 January 2008 under which trustees would be appointed and the property would be sold by public auction, with costs to be argued. In two letters on 18 February 2008 the defendant's solicitor rejected that offer and repeated that an independent market valuation would be the same as the value achieved at auction but without all the associated costs and sought a response to the defendant's alternative suggested orders in the letter of 31 October 2007.

17 At the commencement of the hearing the defendant repeated the offers contained in the letter of 31 October 2007 and her preparedness to give undertakings to secure her performance if need be. The defendant also relied on an affidavit from Vicki Tzortzis, solicitor, to the effect that the costs of a sale by trustees under s 66G would be in the order of $20,300 to $27,300 plus GST whereas the costs by a transfer to the defendant based on an independent valuation would be about $2000 to $3000 plus GST.

18 The defendant submitted that: - (i) the Court has a discretion under s 66G whether to make any order and, if so, with respect to its terms, (ii) the four matters identified in [3] above provided grounds for refusing to make an order, (iii) while the defendant could not point to any similar case where an order had been refused, the categories of case warranting an exercise of discretion against making an order were not closed, and (iv) if orders were made then the type of orders in Cain v Cain would be appropriate in the circumstances, having regard to the same factors identified in that decision.

19 The plaintiff submitted that: - (i) in the ordinary course, a co-owner is entitled "almost as of right" to an order under s 66G (Callahan v O'Neill [2002] NSWSC 877 at [8] and Tory v Tory [2007] NSWSC 1078 at [42]), (ii) the defendant's submissions about the circumstances were inconsistent with the settled principles guiding the exercise of discretion under s 66G, (iii) the plaintiff did not oppose either leave under s 66I or the alternative trustee proposed by the defendant, but should not be deprived of the opportunity of achieving the highest price at auction (which might be the bid of the defendant), (iv) Cain v Cain involved different facts bearing no relationship to the present case, and (v) the alternative orders sought by the defendant did not bring the matter to any conclusion and could not be assumed to involve less expense overall and, in any event, given the plaintiff's firm view that the defendant's valuations were too low, the Court should accept that sometimes money had to be spent in order to be made.

20 I accept the plaintiff's submissions. The fact that applications must be determined on a case-by-case basis (Ngatoa v Ford (1990) 19 NSWLR 72 at 77C - D, confirmed in Williams v Legg (1993) 29 NSWLR 687 at 691G to 692A) provides no real support for the defendant given the facts in this case. The discretion is not at large and is not to be exercised by reference to personal views about hardship or unfairness (Hogan v Baseden (1997) 8 BPR 15,723 and Grizonic v Suttor (2004) 12 BPR 22,797 at [8] - [9]).

21 The factors relied on by the defendant to oppose the making of an order are unpersuasive.

22 Leaving aside the seriousness of the allegation made by the defendant against the plaintiff's wife (as making a dummy bid at an auction is an offence under s 66 of the Property, Stock and Business Agents Act 2002) it is also relevant that the defendant's evidence disclosed that she had never bid at an auction. She was not familiar with the requirements for registration of bidders and nor, presumably, the obligations of auctioneers under Div 2 of Pt 5 of the Property, Stock and Business Agents Act. It is not necessary that I resolve this issue other than to record that, given all of these factors (and particularly the prohibition of dummy bids by the statutory provisions and other legislative measures to ensure that bids are genuine), the defendant's concern that any auction of the property may be subject to dummy bids is not well founded. Accordingly, insofar as her opposition to the making of an order under s 66G was based on this concern it cannot be sustained.

23 The defendant's offers to purchase and willingness to give undertakings to secure her obligations if the offers are accepted have to be seen in the light of all of the dealings between the parties. Those dealings show the inability of the parties to agree on market value by reference to valuations. Valuations are a representation or opinion about the amount a property would sell for on a particular day in an arm's length transaction between a buyer and seller. They are open to dispute (as the history of this matter shows). In contrast, an actual arm's length transaction by which a property is sold establishes the market value of a property on the day. The valuations in this case, moreover, show a considerable range ($420,000 to $650,000) with the range of appraisals being even wider.

24 The history of the matter does not bear out the submission of any unreasonable change of position on the plaintiff's part. His solicitor's original offer in the letter of 18 January 2007 cannot be looked at in isolation from what then occurred. Contrary to the defendant's submissions the plaintiff did not simply agree to proceed by way of obtaining valuations. In fact, the plaintiff asked whether the defendant would agree to be bound by the average of three valuations. There was no reply to this suggestion but, instead, a request for time to obtain a valuation, and a subsequent offer to pay $185,000. The plaintiff counter offered at $350,000 and, after obtaining a valuation at $650,000, reduced his offer to 50% of that amount. The plaintiff thereafter maintained that value to which the defendant has never agreed. In these circumstances the plaintiff's rejection of the defendant's proposals in the letter of 31 October 2007 cannot fairly be described as a change of some stated position, let alone an unreasonable change.

25 The issue of cost saving appears to relate more to the form of any order and I deal with it in that context.

26 In summary, the defendant has not pointed to any circumstance that would make it inequitable for an order to be made under s 66G. An order would not be inconsistent with any right or obligation of the parties. The defendant's reasons for opposing the making of an order under s 66G, when analysed, are not cogent. Contrary to the defendant's position, the making of orders would fulfil the purpose the statutory provisions are intended to perform.

27 With respect to the form of orders, the defendant's reliance on Cain v Cain is misplaced for the reasons given by the plaintiff. The facts of that case bear no resemblance to the present matter. In Cain v Cain the relevant defendant had lived in the property for many years and the other defendants were content for him to continue to do so (at [5] and [7]). The plaintiff arguably had obligations under a partnership deed inconsistent with the relief being sought (at [11]). The parties had agreed on the identity of the valuer (at [20]). In these circumstances the Court tailored orders suitable to the exigencies of the case. In this case the plaintiff and the defendant's father bought the property as an investment for retirement. Ill health means the plaintiff needs the capital tied up in the property. He has been unable to reach agreement with the defendant about market value over a long period. A valuer has not been agreed and the history of the matter shows significant value ranges in circumstances where the plaintiff's interest is to achieve the best possible selling price.

28 Further, and as the plaintiff pointed out, the defendant's proposed orders (a further variant of the orders suggested on 31 October 2007) would involve a single trustee thereby causing a potential problem under s 66B(2) (which requires two trustees for payment of the proceeds of sale, an issue referred to in Cain v Cain at [15]). Those orders also contemplate the prospect of further involvement of the Court. This suggests that the cost saving associated with the defendant's proposal assumes no need to return to the Court for further orders when this might not be the case. In any event, the issue of cost saving does not weigh materially against the making of the orders as sought by the plaintiff when considered with all the other factors to which I have referred. Moreover, any agreement precluding the need to return to the Court would be based on the further valuation to be obtained by the trustees when the history of this matter shows the potential for disputes about valuations. Contrary to the defendant's submission, and as noted above, there is a difference between a valuation as evidence of market value and a transaction at arm's length establishing market value. Finally, no separate order is required relating to the trustees' obligations under s 66H to consult with the parties as that obligation is imposed by the statutory provision.

29 The plaintiff requested that my findings make apparent that the trustees are not precluded from proceeding by way of sale at public auction. The parties both recognised that the method of sale was a matter for the trustees. They may decide that sale by auction is the most appropriate course, at which the defendant may bid in accordance with the leave to be granted under s 66I. The method of sale is a matter for the trustees subject to their obligations under s 66H and otherwise.

30 For these reasons I make the following orders: (1) Order pursuant to section 66G of the Conveyancing Act 1919 ("the Act") that Constantine Dion Vertzayias and Harry Danalis be appointed Trustees of the Property comprised in Certificate of Title Folio Identifier 12/236008 together with all improvements erected thereon and being the property known as 39-45 Tickner Street, Castlereagh in the State of New South Wales ("the Property").

(2) Order that the Property be vested in the Trustees subject to any encumbrances affecting the entirety thereof to be held by the Trustees upon statutory trust for sale under Division 6 of Part IV of the Act.

(3) Order that the defendant delivers to the Trustees all the documents of title within her possession for the Property within seven (7) days from the date of these Orders.

(4) Give leave under s 66I of the Act for the defendant to bid for or buy the Property setting off or accounting for the purchase money instead of paying the same so far as appropriate.

(5) Order that the Trustees on completion of the sale shall distribute the proceeds of sale of the Property in the following manner: (a) In payment and discharge of all mortgages and other encumbrances registered on the title to the Property; (b) In payment of the Trustees' commission and costs for time in attendance up to completion of the sale; (c) In payment of the other costs of sale including, but not limited to, legal costs, advertising costs and agent's commission; (d) In payment of expenses incurred by the Trustees for the purpose of bringing the Property up to a condition which would facilitate sale; (e) In payment of all rates, taxes and insurance and other outgoings on the Property; (f) In payment of the balance in equal shares to each of the plaintiffs and the defendant. (6) Order that the Trustees shall be at liberty to execute any and all necessary conveyance or other documents and to do all such things as are necessary in relation to the performance of these Orders.

(7) Grant the parties, and to the Trustees, liberty to restore on seven (7) days notice to obtain such further or other relief to enable effect to be given to these Orders or the discharge thereof.

31 The plaintiff has obtained orders under s 66G in the form sought over the defendant's opposition. Nevertheless, I will hear the parties on costs. To that end, I have deleted from the orders the proposed payment of the plaintiff's costs out of the proceeds of sale pending giving the parties that opportunity.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

At a glance

Court

Decision date

Before

Source

Judgment (45 paragraphs)

Parties

Cases Cited (5)

Cited By (9)