Stillianesis v Stillianesis

Background

1. The parties formed a business partnership in late 2013. In November of that year the partnership purchased the first of the properties with a loan from the Commonwealth Bank secured by a registered mortgage. The partnership purchased the second of the properties in approximately August 2014, and in March 2015 took out a further loan from the Commonwealth Bank secured against the second property. All parties signed the loan and mortgage documentation for both properties.
2. As previously noted, the plaintiff and the first defendant separated in late 2014. The first defendant commenced proceedings in the Family Court in June 2015. The orders sought by the first defendant in his Initiating Application included the following: That within 42 days from the date of the making of these Orders the Respondent Wife transfer all of her right title and interest in [the properties] … to the Applicant Husband and the Applicant Husband shall be responsible for any and all debts attaching to the Respondent Wife's interest and indemnify and keep indemnified the Respondent Wife from any and all liability attaching thereto.
3. In her Response to Initiating Application the plaintiff also sought an order that she transfer all of her right, title and interest in the properties to the first defendant. In addition she sought the following order: That simultaneous with the transfer referred to in order 8 hereto, the husband shall do all acts and sign all documents necessary to cause the discharge or refinance of any loan secured by way of first mortgage on [the properties] and the husband shall obtain a release from any obligation the Wife may have in respect of the said loans and indemnify her thereto and he shall be liable for the payment of any amount required to cause the discharge, release or refinance of the said loans.
4. The loan facility over the first property expired in November 2016. It appears that the defendants wished to renew the loan, but the plaintiff did not want to enter into further business dealings in connection with the partnership, and on that basis declined to execute documents that would permit the loan to be renewed. It seems that penalty interest has been accruing on the outstanding loan balance as a result.
5. The plaintiff filed an application in the Family Court in April 2017 seeking orders for interim property distribution and spousal maintenance. By his response to that application, the first defendant sought orders requiring the plaintiff to execute lease and mortgage documents in relation to the properties.
6. On 4 May 2017 the solicitor for the second and third defendants wrote to the plaintiff's solicitor. That letter included the following: If your client will not sign the CBA documents and she wants to exit her ownership of the property (as indicated in your letter), then a solution may be for her to transfer/sell her interest in the … properties to her husband. If a basis on which this would occur cannot be agreed, then my clients would consider purchasing your client's share of the property if a price could be agreed. However, my clients have no desire to sell their share of the properties.
7. On 15 May 2017 the plaintiff's solicitor, Ms Fiona Hoad, wrote to the second and third defendants. Ms Hoad stated that any ongoing relationship between the parties as co-owners of the properties was "no longer tenable" and put the second and third defendants on notice that the plaintiff intended to bring proceedings pursuant to s 66G of the Conveyancing Act.
8. Ms Hoad also wrote to the first defendant's solicitor on the same day. She stated that by reason of the parties' marriage breakdown, co-ownership of the properties with the second and third defendants was no longer viable, and indicated that those defendants had been notified of the plaintiff's intention to commence proceedings for the appointment of trustees for sale.
9. The plaintiff's interlocutory application was listed before the Family Court on 13 June 2017 and was fixed for hearing on 16 June 2017. The plaintiff filed her Summons in the proceedings before this Court in the afternoon of 15 June, the day before the hearing of her application in the Family Court. Judgment was reserved at the conclusion of the Family Court hearing on 16 June 2017.
10. It appears that on 28 June 2017 the first defendant filed an application in the Family Court to restrain the plaintiff from taking any further steps in the proceedings before this Court. That application was heard on 17 July 2017, and judgment was reserved.
11. On 21 July 2017 judgment on both the plaintiff's interlocutory application of April 2017 and the first defendant's restraint application was delivered in the Family Court. Although the final orders sought by the plaintiff in the Family Court were that she transfer her interest in the properties to the first defendant, it appears that her position at the hearing was that she wished to have the properties sold. The Family Court declined to order the plaintiff to execute the mortgage documents as sought by the first defendant, and instead ordered that the plaintiff transfer her interest in the properties to the first defendant within 14 days of the date of judgment. The plaintiff received an interim property distribution of $400,000 and the first defendant was ordered to indemnify her against all liabilities arising from the partnership. The order requiring the plaintiff to transfer her interest in the properties to the first defendant made it unnecessary to determine the first defendant's restraint application.
12. The Family Court described the relief sought in this Court as "misguided", and the filing of the Summons as "precipitate". The Family Court concluded that its orders left "no utility" in the continuation of the s 66G proceedings.
13. As it happened, the s 66G proceedings were listed for directions in this Court on 21 July 2017, the same day that judgment was delivered in the Family Court. The proceedings were stood over to 18 August 2017 to allow the parties to consider their positions. On that occasion the proceedings were dismissed by consent and directions made for the determination of costs on the papers.

Submissions

1. The plaintiff submitted that she acted reasonably in commencing proceedings in this Court notwithstanding the existence of the Family Court proceedings, and that these proceedings were in their infancy when they were dismissed. The plaintiff referred to Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 in which McHugh J held (at 624-5) that where there has been no determination of proceedings on the merits and both parties have acted reasonably, the usual approach of the Court will be to make no order as to costs with the intent that each party bear its own costs.
2. In submitting that the plaintiff acted reasonably in commencing proceedings for the appointment of trustees in this Court, the plaintiff referred to a letter sent by the second and third defendants in April 2017 which stated that they would claim damages from the plaintiff for her failure to sign mortgage documents in relation to the properties. The plaintiff submitted that "in light of the threat by the second and third defendants to recover a contended loss, the plaintiff validly invoked the jurisdiction of the Supreme Court." The plaintiff submitted that any determinations made by this Court would not conflict with findings of fact that might be made by the Family Court. It was further said that neither the subject matter nor the parties in each proceeding were the same. The plaintiff adverted to the possibility that these proceedings would be determined with greater expedition than the Family Court proceedings. It was said that the conduct of the second and third defendants in relation to the partnership was "oppressive and unconscionable".
3. The plaintiff also submitted that because there had been no determination on the merits, "the Court would have to conduct an enquiry into the evidence that would be akin to a final hearing" to determine whether the plaintiff was justified in commencing the proceedings. The plaintiff relied upon Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 in which Hill J stated (at 201) that it is not appropriate for the Court to determine a hypothetical action between the parties in order to determine which party should bear the costs of the proceedings. On this basis, the plaintiff contended that the Court would be unable to determine whether the plaintiff had acted reasonably in commencing the proceedings without conducting such a hypothetical action.
4. The first defendant submitted that the plaintiff should pay its costs of the proceedings on the basis that they were instituted vexatiously and without a proper purpose, or, in the alternative, that the plaintiff pay its costs after 11 July 2017 as it had failed to accept an open offer of settlement. The first defendant referred to Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 in which Brereton J stated at [76] that it is usually inappropriate, if not vexatious, that the same issue be litigated in two different courts, and the fact that one Court can resolve the whole of a controversy and the other cannot will usually indicate that the former is the more appropriate Court. The first defendant also relied upon observations to similar effect by White J (as his Honour then was) in Vaughan v Frost [2010] NSWSC 492.
5. The first defendant submitted that the Family Court proceedings had been on foot for almost two years at the time the Summons was filed, and that orders concerning the properties had been sought by both parties from the outset of those proceedings. It was said that the properties "were being dealt with directly by the Family Court". The first defendant contended that the filing of the Summons in the midst of extant applications in the Family Court concerning the same subject matter was an attempt by her to thwart the first defendant's applications in that jurisdiction and to subvert valuations obtained in those proceedings with which the plaintiff disagreed. The first defendant submitted that, in those circumstances, the institution of proceedings in this Court in which orders were sought that were inconsistent with the relief sought by the plaintiff in the Family Court was vexatious.
6. The first defendant submitted that he had made an offer on 11 July 2017 for the proceedings to be transferred to the Family Court and that each party pay its own costs of the proceedings. It was submitted that it should have been obvious to a reasonable legal practitioner that, in light of Valceski v Valceski (supra), these proceedings were a subset of the Family Court proceedings and would almost certainly be transferred to that Court. The first defendant submitted that the plaintiff should at least pay its costs after 11 July 2017 as its resistance to the transfer application was unreasonable.
7. The second and third defendants largely adopted the submissions of the first defendant. They also referred to their solicitor's letter of 4 May 2017 which stated that they had no desire to sell their share of the properties, and that if an agreement could not be reached between the plaintiff and the first defendant, the second and third defendants would consider purchasing her share. They submitted that the plaintiff did not seek to enter into any negotiations for a possible sale of her share prior to commencing proceedings for the appointment of trustees, and that in those circumstances the plaintiff should pay their costs of the proceedings.

Determination

1. The usual costs order in proceedings for the appointment for trustees under s 66G of the Conveyancing Act is that the costs of the proceedings come out of the proceeds of sale (see McKay v McKay [2008] NSWSC 256 at [7]; Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]). As the proceedings have been dismissed, no such order can be made.
2. Uniform Civil Procedure Rules 2005 (NSW), r 42.20(1) provides: If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.
3. Accordingly, the starting point is that the plaintiff must pay the defendants' costs of the proceedings, unless the Court orders otherwise. This default rule is not a presumption, but a relevant consideration to take into account in the exercise of the Court's costs discretion pursuant to s 98 of the Civil Procedure Act 2005 (NSW) (see Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [78] and [84]).
4. The Court of Appeal also considered r 42.20(1) in Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365. The Court confirmed that r 42.20 does not create a presumption, and that the rule applies where proceedings are dismissed by consent. Bryson JA stated at [53]-[54] (McColl and Basten JJA agreeing): Rule 42.20(1) would be overstated if described as creating a presumption about the disposition of costs. It goes no further than to state the first point of consideration; there is no presumption which must be outweighed; what the rule says is what the order for costs is to be unless there is a discretionary decision to order otherwise. At the discretionary stage the matters to be considered are little altered: cf Fordyce v Fordham [2006] NSWCA 274 at [87] (McColl JA): [87] Once it is recognised, however, that the costs discretion conferred by UCPR 42.19 and 42.20 is unconfined, the matters referred to in the Lai Qin line of authority are plainly pertinent, although, again, not necessarily determinative. Although in the law before r 42.20 was made the Court would have approached the question of costs where proceedings had been discontinued or dismissed with the consent of the moving party with an initial disposition towards ordering that costs follow the event, as provided by r 42.1 and earlier by Pt 52A r 11, the decision was discretionary and the outcome of exercise of that discretion was not closely controlled by judicial authority. The provisions of r 42.20, which appear to operate to the exclusion of r 42.1 in the case with which r 42.20(1) deals, enhance the initial disposition towards ordering the plaintiff to pay the defendant's costs; but there is no close control over the discretion of the Court to order otherwise. As is generally the case with discretionary powers, the power must be exercised in good faith for a purpose relevant to the purpose for which power to make orders for costs is conferred, and there must be some sound positive ground or good reason for departing from the ordinary course.
5. In Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 McHugh J stated (at 625): If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
6. The plaintiff's interim application was listed in the Family Court on 13 June 2017, and on that day was fixed for hearing on 16 June. The first defendant's solicitor deposed that the plaintiff's legal representatives made no mention of a s 66G application at the listing on 13 June. The plaintiff then filed the Summons on the afternoon of 15 June, the day before the hearing. It appears that her legal representatives stated at the hearing that she now wished to sell the property, notwithstanding that she had sought transfer of her interests to the first defendant during the proceedings until that point.
7. In my opinion, the plaintiff did not act reasonably in commencing proceedings in this Court the day before a hearing in the Family Court which concerned, amongst other things, the very same properties. The Family Court proceedings had been on foot for close to two years when the plaintiff filed her Summons seeking the appointment of trustees for sale. Since the outset of the Family Court proceedings, the plaintiff and first defendant had both sought final orders that she transfer her share in the properties to the first defendant in return for indemnification and a payment of money from the first defendant. Moreover, the first defendant's response to the plaintiff's interim application in the Family Court directly raised the issue concerning the plaintiff's refusal to execute certain lease and mortgage documents in relation to the properties.
8. It may be accepted that the plaintiff wished to dissociate herself from the parties' business partnership, and on that basis had declined to execute the lease and mortgage documents. Nonetheless, the first defendant's application for her to execute those documents was before the Family Court for hearing the next day. The Family Court was capable of dealing with that matter, and, in my opinion, was the appropriate forum for that issue to be ventilated and determined.
9. I am of the same view in respect of the second and third defendants' stated intention to claim damages against the plaintiff for loss caused by her refusal to sign the lease and mortgage documents. Although those defendants were not parties to the Family Court proceedings, it was open to the plaintiff to seek to have them joined or for them to seek leave to intervene (see Family Law Act 1975 (Cth), s 92). The threat of a damages claim by those defendants does not provide a justification for seeking the appointment of trustees for sale in this Court the day before orders, including in relation to the properties, were to be sought in the Family Court.
10. It is generally undesirable that there be concurrent proceedings in different courts dealing with the same, or similar, subject matter. In Vaughan v Frost [2010] NSWSC 492 White J stated (at [11]-[13]): It is almost always preferable that a controversy be determined in a single proceeding to avoid potentially conflicting findings and ultimately to reduce the costs for all parties. The plaintiffs say that their costs will be increased if they are compelled to participate in the wider matrimonial cause in the Family Court. That is so partly because the proceedings between the defendants will raise issues with which the plaintiffs are not concerned, and also because even issues concerning the property of which they claim beneficial ownership will be dealt with in ways which the plaintiffs say will increase costs. In particular, valuations of the properties in question will be required in the Family Court, whereas such valuations would be irrelevant to their claim to be the beneficial owner of the property. However, when the position of all parties is taken into account the general principle is, and experience teaches, that a single proceeding dealing with all issues is likely to minimise the overall burden of costs for all parties. If proceedings continue separately the defendants will be required to incur costs on matters of which there will be duplication.
11. The observations of Brereton J in Song v Shi [2011] NSWSC 1207 are also germane. His Honour stated (at [7]-[10]): The jurisdiction of the Family Court in respect of matrimonial causes was made exclusive, so that such proceedings could not be instituted in a State Supreme Court, by declarations made pursuant to Family Law Act, s 39. Subsequently, (CTH) Jurisdiction of Courts (Cross-Vesting) Act 1987 had the effect of returning, by way of cross-vested jurisdiction, jurisdiction under the Family Law Act to the Supreme Courts of the States and Territories. The history of legislative reform and amendment and a synopsis of the impact of the cross-vesting legislation is set out in my judgment in Young v Lalic and Another (2006) 197 FLR 27; [2006] NSWSC 18, [32]-[50]. However, the position remains that the Family Court of Australia or the Federal Magistrates' Court are ordinarily the courts in which matrimonial causes should be instituted. It follows that ordinarily applications in connection with matrimonial property, including applications for injunctions restraining one spouse from dealing with that property pending the hearing of matrimonial proceedings, should be brought in the same court in which those proceedings are to be determined, namely, the Family Court or Federal Magistrates' Court. In the present case, there were already on foot proceedings for property adjustment pursuant to the Family Law Act , s 78 and s 79, in the Family Court, and those proceedings have been set down for hearing in October. In those proceedings, the Family Court has granted injunctive relief restraining the defendant - the wife in those proceedings - from dealing with the subject property to a certain extent. In my view, it is quite inappropriate in that context for there to be parallel proceedings in this Court in which, by way of statutory injunction in the form of a caveat, a more extensive restraint is sought. If the plaintiff wishes to have the defendant restrained from dealing with the property, and in the outcome of the hearing in the Family Court, the appropriate place in which to make that application is the Family Court. For those reasons, in my opinion, it is quite inappropriate to consider granting further relief in these proceedings.
12. The Family Court has jurisdiction to make such orders as it considers appropriate in property settlement proceedings (which includes the sale of property): Family Law Act 1975 (Cth), s 79. In my opinion, it was not appropriate or reasonable for the plaintiff to commence proceedings in this Court seeking sale of the properties when the same relief could be sought in the Family Court, and an application in relation to the properties was about to be heard in that Court. I do not accept the plaintiff's submission that this Court would need to conduct a hypothetical action in order to determine whether the plaintiff acted reasonably in commencing the proceedings. The circumstances in which the proceedings were commenced provide an ample basis for the conclusion that the plaintiff did not act reasonably in commencing the proceedings, irrespective of the merits of her claim for the appointment of trustees.
13. The Court will order that the plaintiff pay the defendants' costs of the proceedings.

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. Decision last updated: 05 September 2017