These proceedings for relief pursuant to s 66G of the Conveyancing Act 1919 (NSW), in respect of a property in Cessnock, were commenced by Summons filed on 26 October 2020. The parties to the proceedings are four siblings who held the relevant property as tenants in common in equal shares. The Summons was returnable on 26 November 2020. On that day, various orders were agreed between the parties, including orders for the appointment of a trustee for sale and orders concerning the manner in which the proceeds of sale were to be dealt with and distributed. The orders were made by the Court on 27 November 2020. Regrettably, there was no agreement as to the costs of the proceedings. The consent orders included directions for the filing of evidence and submissions on that matter, with a view to it being dealt with on the papers.
In accordance with the directions made by the Court, submissions have been filed by the plaintiff and the first defendant. An affidavit of the first defendant sworn on 15 December 2020 has also been filed. The Court has considered that material, together with other evidence that has been filed and referred to in the submissions. I should note that the second and third defendants each instructed the plaintiff's solicitor to file submitting appearances (save as to costs) on their behalf. These submitting appearances are annexed to an affidavit that has been filed. The appearances themselves do not seem to have been formally filed. I do not think that anything turns on this irregularity.
The plaintiff contends that the Court should order that the first defendant pay the plaintiff's costs of the proceedings on an indemnity basis. In brief, the plaintiff submits that such an order is warranted because the first defendant has acted unreasonably in: (a) failing to agree to, or in seeking to undermine, a consensual sale of the property; and (b) by rejecting an offer made concerning a sale and distribution of proceeds made shortly prior to the commencement of the proceedings.
The first defendant disputes that he has acted unreasonably such as would justify an order for costs against him. He notes that this is not a case where there has been any hearing on the merits where one party has succeeded and another has failed.
Stibbard-Leaver v Leaver [2021] NSWSC 65 | Case summary | Zoe
I observe at this point that in litigation of this type under s 66G of the Conveyancing Act, it is usual to order that the costs of the proceedings be paid out of the proceeds of sale. The rationale for this approach is that the costs of such an application are an incident of joint ownership (see Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]). It remains the case of course that unreasonable conduct by a party may be a basis to conclude that some other order is appropriate in a s 66G case. Lewin v Lewin [2019] NSWSC 380 is an example. In that case, it was held that certain unreasonable conduct led to an unnecessary incurring of costs. However, as I noted in that case (at [41]), a co-owner is ordinarily under no obligation to seek to avoid a need to bring a s 66G application (see also Chow v Chow (No 2) [2015] NSWSC 1348 at [12] where it was stated by Young AJA that co-owners have no obligation to negotiate their dissolution).
The evidence shows that since the four siblings became the owners of the property in April 2019, various efforts were made, principally by the plaintiff, to bring about an agreement amongst them to enable the property to be sold. These efforts proved to be unsuccessful.
In August 2019, the siblings agreed to appoint solicitors and an agent for a sale. The siblings other than the first defendant accordingly signed an agency agreement with a selling agent. The first defendant also signed the agreement but unilaterally added an instruction that the proceeds be placed into a trust account. The first defendant deposed that he did this on the advice of a solicitor in circumstances where there was a legal dispute between himself and the second defendant, and he was concerned about the second defendant spending the proceeds of a sale.
In about September 2019, a purchaser offered to buy the property at a price of $317,500. The purchaser later reduced his offer to $313,500. It seems that the other siblings were prepared to sell at that price but the first defendant was unwilling to do so.
However, on 4 November 2019, the first defendant's then solicitor (Mr Ziade) indicated that the first defendant would consent to the sale of the property on condition that the proceeds be retained in a trust account until a dispute (involving the first and second defendants and the siblings' mother) was resolved.
On 18 December 2019 Mr Ziade, who had earlier acted on a family provision claim in respect of the estate of the siblings' late father, and claimed to a have a lien over the property in respect of costs, indicated that the first defendant would agree to a sale on a certain basis, including that Mr Ziade's costs be paid out of the proceeds. It seems that there was no agreement from the other siblings to a sale on that basis, at least at that time.
In March 2020 the purchaser withdrew his offer to purchase. By that time, the siblings' mother had commenced proceedings in this Court against the second defendant. The second defendant, the plaintiff, the third defendant and a company (Roseville Joinery Pty Ltd) filed a Cross-Claim on 30 March 2020 against the first defendant, Mr Ziade, the siblings' mother and another company (Landmark Operations Ltd). The interim relief sought on the Cross-Claim included an order under s 66G in relation to the Cessnock property. On 29 September 2020 the Cross-Claim was ordered to be struck out, although it appears that the claims, or some of them, have since been maintained.
On 21 October 2020 the solicitor for the siblings other than the first defendant sent a letter of offer to the first defendant's current solicitor. The letter is detailed, and concerns various intra-family disputes. The letter contained an offer by the plaintiff for "the orderly sale of the Cessnock property". The offer was open for acceptance until 4:00pm on 23 October 2020. The letter also contained an offer in relation to the ongoing dispute between the first defendant and the second defendant. This offer, which was open for acceptance until 4:00pm on 26 October 2020, was made conditional upon acceptance of the plaintiff's offer.
The plaintiff's offer was not accepted within the stipulated time. On 26 October 2020, a letter was sent by the first defendant's solicitor formally rejecting both offers. The first defendant deposed that he rejected the plaintiff's offer:
…because the offer was in the context of additional proceedings between my siblings and my mother, involving a very broad and complex series of allegations over other land, moneys from a partnership, the conduct of Mr Ziade and outstanding invoices. I did not consider it was appropriate to resolve only one issue while all the other issues were in dispute.
As noted earlier, these proceedings were commenced on 26 October 2020.
I have considered the detailed submissions of the plaintiff as to why the conduct of the first defendant in relation to a sale of the property was unreasonable. I am not satisfied that the first defendant has engaged in unreasonable conduct such as would justify a costs order against him, much less a costs order made on an indemnity basis. In my opinion, this is not a case where it is manifest from known circumstances that unreasonable conduct on the part of the first defendant has resulted in the incurring of unnecessary costs (see Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [8] per Basten JA). On the material before the Court it is not clear that the positions taken by the first defendant in the negotiations with his siblings about a sale were unreasonable or irrational.
In the context of various intra-family disputes, the first defendant's suggestions that the proceeds of sale be held in a trust account is not of that character. The first defendant later indicated a willingness to sell on a basis that would involve the payment of Mr Ziade's costs. That may not have been (at least initially) acceptable to his siblings, but the proposal was in my view not unreasonable. Even the first defendant's unwillingness to accept the lower offer of $313,500 is not manifestly unreasonable. As I have said, a co-owner is ordinarily not obliged to seek to avoid a s 66G application, including by making an agreement with other co-owners. It remained open throughout for any of the siblings to abandon negotiations and instead seek relief from the Court. This was actually sought to be done by way of the Cross-Claim filed in the other proceedings in the Court.
I am also not convinced that the failure of the first defendant to accept the plaintiff's offer made on 21 October 2020 was unreasonable. Although that offer could be accepted on its own, the offer was made in the context of other disputes within the family, including as between the first defendant and the second defendant. The first defendant's explanation for his rejection of the offer seems to me to be reasonable, or at least not unreasonable, when viewed in that context. The first defendant was evidently hoping to be able to resolve a number of matters together. It is true that the terms of the offer are similar to the terms of the consent orders later made. However, once these proceedings were commenced the first defendant was faced with a different situation, and his readiness to join in a consensual resolution of the proceedings should be commended rather than punished.
For the above reasons, I decline to make the costs order as sought by the plaintiff. I am also not persuaded that it would be appropriate to order that each party bear its own costs, as submitted by the first defendant. The bulk of the costs of the proceedings would have been incurred by the plaintiff. In my view it would not be just for the plaintiff to have to bear those costs alone. I therefore consider that the usual position in respect of costs in s 66G applications should be adopted in this case. Accordingly, the Court will order that the costs of the proceedings of each party be paid out of the proceeds of sale before the distribution of the balance of the proceeds to the parties.
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Decision last updated: 09 February 2021