Stone v Stone

Does s 66G have application in this case? 20Section 66G(1) provides: "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." 21The sub-section applies where any property (other than chattels) is held in co-ownership. "Co-ownership" is defined in s 66F(1) to mean ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common. 22The defendant, for whom Mr M F Newton of Counsel appeared, submitted that the Land was an asset of the partnership and that in those circumstances, s 22(1) of the Partnership Act 1892 (NSW) operates so that the land is not treated as real estate as between the partners and (as I understood the submission) is not "property (other than chattels)" within the meaning of s 66G. It was further submitted, relying upon certain statements made by Gibbs CJ in Watson v Ralph [1982] HCA 35; (1982) 148 CLR 646 at 650, that as the Land was partnership land, the plaintiff and the defendant should not be regarded as legal owners. The defendant also submitted that the equitable interests of the partners in relation to the Land do not answer the description of ownership in equity in possession by two or more persons as joint tenants or as tenants in common. Reliance was here placed upon the decision of Brereton J in Beale v Trinkler [2007] NSWSC 1058. It was submitted that it followed that s 66G was not applicable in the case of land belonging to a partnership as the partners are not co-owners of the land, whether at law or in equity. 23In my view, and as submitted by Ms S Clemmett of Counsel for the plaintiff, the Land is held in co-ownership for the purposes of s 66G. The plaintiff and the defendant are the registered proprietors as joint tenants of the land under the provisions of the Real Property Act (1900) (NSW). Together they have the right to possession of the whole of the land. At law, the plaintiff and the defendant together have ownership in possession of the property. The definition of "co-ownership" is thus satisfied. It is my opinion that the above conclusion holds even if the land is an asset of a partnership. 24Section 22(1) of the Partnership Act provides: "Where land or any heritable interest therein has become partnership property, it shall, unless the contrary intention appears, be treated as between the partners (including the representatives of a deceased partner), and also as between the heirs of a deceased partner and the deceased partner's executors or administrators as personal or movable and not real or heritable estate." 25I do not think that s 22(1) has the effect that partnership land must be regarded as falling outside the concept of "property (other than chattels)" within the meaning of s 66G. The provision has a more limited operation. It reflects the position in equity as between the partners. In McCaughey v Commissioner of Stamp Duties (NSW) [1914] HCA 45; (1914) 18 CLR 475, Isaacs J stated at 488-489: "It is a fundamental principle in partnership law that in equity land held for partnership purposes is regarded as personal property, being affected with an eventual trust for sale: Waterer v Waterer. The reasons are clearly stated by Bowen LJ in Attorney General v Hubbuck. That may be altered by an agreement to the contrary: In re Wilson; Wilson v Holloway. This rule is now Statute law (Partnership Act 1892 (NSW), sec. 22)." 26In R P Meagher, J D Heydon and M J Leeming's Equity, Doctrines and Remedies, 4th edition (2002) at 38-025, it is succinctly stated that the reason underpinning s 22 is that upon the dissolution of a partnership, the partnership land will have to be sold for the purpose of division among the partners. I note that such a reason hardly affords a rationale to treat partnership land as outside the concept of "property (other than chattels)" for the purposes of s 66G and thus outside the purview of the section. 27The conclusion I have reached is consistent with the approach taken by Young J (as his Honour then was) in Bush v Hanlon (Supreme Court (NSW), Young J, 4 August 1998, unrep) at 10-11. His Honour described s 22 as putting the equitable doctrine of conversion into statutory form. More importantly, after referring to authority, including the decision of the High Court in Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321 at 327, to the effect that a partner has an interest in each and every asset of the partnership, his Honour held that even an equitable interest in a parcel of partnership land would be land within the meaning of the Conveyancing Act, such that the disposition of the interest would need to comply with s 54A of that Act. 28I also do not think that anything said by Gibbs CJ in Watson v Ralph (supra) leads to the conclusion, assuming the Land is partnership land, that the plaintiff and the defendant should not be regarded as legal owners. The High Court was there concerned with the question whether the testatrix was at the date of her death "the owner" of certain freehold property at Whittlesea. The testatrix was at that date (and at the date of the will) the registered proprietor of the property with her husband. The defendant in the present case relied upon the following passage from the judgment of Gibbs CJ (with whom Mason, Wilson and Brennan JJ agreed) at 650: "The testatrix, at the time of her death, was neither the legal owner, nor the sole beneficial owner, of the freehold property at Whittlesea. The land was then part of the property of the partnership of which the testatrix and her husband were the members [...]" 29However, I do not read the passage as a statement that, because the property was an asset of the partnership, the testatrix could not be regarded as a legal owner; rather, I read it as a statement that, as a registered proprietor with her husband, she could not be regarded as the legal owner. Chief Justice Gibbs also stated (at 650): "The words of the condition, literally construed, were not satisfied. The testatrix was not "the owner" of the land at the time of her death." 30Later (at 652) his Honour referred to the fact that the words "the owner" are inapt to refer to one of the two partners, and (at 654) stated that "the intention revealed by the words of the will themselves is that the trust in favour of the appellants shall only come into effect if at the time of her death the testatrix is the sole beneficial owner of the freehold property situated at Whittlesea, an event which did not occur." 31Beale v Trinkler (supra) is a case concerning s 36A of the Conveyancing Act. That section applies in respect of chattels that "belong to persons jointly or in undivided shares". The chattels in question in that case were cattle. The cattle were assets of a partnership that had been dissolved but not yet wound up. Brereton J, after considering the nature of the interests of a partner in the property of such a partnership, held that s 36A did not authorise an order for the division of the chattels because they were not owned by the partners jointly or in undivided shares (see at [4], [14] and [21]). His Honour stated (at [5]-[8]): "[5] For present purposes, the nature of a partner's interest in partnership property may be taken to have been adequately and sufficiently summarised in Lindley & Banks on Partnership, 18th ed (in particular at [19-03], [19-09] and [19-10]). The authors refer at (at [19-03]) to Gray v Inland Revenue Commissioners [1994] STC 360, 377, in which Hoffmann LJ said: As between themselves, partners are not entitled individually to exercise proprietary rights over any of the partnership assets. This is because they have subjected their proprietary interests to the terms of the partnership deed which provides that the assets shall be employed in the partnership business, and on dissolution realised for the purposes of paying debts and distributing surplus. As regards the outside world, however, the partnership deed is irrelevant. The partners are collectively entitled to each and every asset of the partnership, in which each of them therefore has an undivided share. [6] As the authors point out (at [19-09]), the precise nature of each partner's beneficial interest depends on the terms of the partnership agreement, but commonly, if not invariably, has two characteristics: first, that it is in the nature of an interest taking effect in possession on and not before the determination of the partnership; and secondly, that on determination of the partnership, when the beneficial interest falls into possession, it takes effect subject to the right of the other partners to have the assets applied towards the payment of the firm's debts and liabilities and any surplus divided between the partners in the manner prescribed by the Partnership Act. This normally involves a sale of the partnership property, except where the partners otherwise agree. In the absence of agreement to the contrary, the share of a partner represents a proportionate share in the net proceeds of the partnership assets after all the firm's debts and liabilities have been discharged. The authors of Lindley point out that this analysis has apparently been accepted by the Privy Council in Hadlee v Commissioner of Inland Revenue (NZ) [1933] AC 524, 532G, and by the Court of Appeal in Popat v Shonchhatra [1997] 1 WLR 1367, 1372C-E. [7] At [19-10], the authors describe the position in the event of a general dissolution of a partnership - namely, that each partner is entitled to insist on the partnership assets being applied towards payment of the firm's debts and liabilities, and any surplus proceeds divided, and that until such time as the assets are either sold, or divided in specie - and division in specie can only take place with the agreement of the partners - each partner's share has the same proprietary character as it had prior to the dissolution. [8] It is also worth observing that, in respect of shares in partnership land, the authors of the current edition refer to what Lord Lindley wrote prior to the Partnership Act, namely that it followed, from the principle that a share of a partner is nothing more than his or her proportion of the partnership assets after they are liquidated, that in equity a share in a partnership, whether its property consisted of land or not, must be viewed as personal and not real estate, unless that were inconsistent with the agreement between the parties. This indicates that, absent agreement to the contrary, if partners held interests in land in the same proportions as their interests in the partnership, and that land was an asset of the partnership, then their interests in that land would not be as joint tenants or tenants-in-common in real estate, but a personal interest which arose from the operation of the contract of partnership on the legal interests in the land." 32The defendant submitted, by parity of reasoning, that in the case of land belonging to a partnership that has been dissolved but not yet wound up, s 66G is not applicable because the partners are not co-owners of the Land. However, I do not think that the observations made by Brereton J concerning the position in equity between partners in respect of partnership land lead to the conclusion that s 66G is not applicable. In my view, it remains the position that, at law, the plaintiff and the defendant own the Land as joint tenants. That is sufficient to satisfy the definition of "co-ownership". 33Counsel were not able to find any decision in which this point was raised or considered. I note, however, that this Court has on numerous occasions made orders under s 66G of the Conveyancing Act in relation to land that is partnership property: Joseph v Agrey [2011] NSWSC 1601 (White J) and Reynolds v Medway [2013] NSWSC 206 (Sackar J) are but two examples. 34In any event, I do not think that in the circumstances of this case it is appropriate to regard the Land as property of a partnership that has been dissolved but not wound up. The Land was undoubtedly the property of the partnership which was dissolved on 22 April 1999. However, as noted earlier, it seems that the parties subsequently embarked upon a winding up of the partnership. It is true that there is a lack of clarity concerning the position ultimately reached in the winding up. Nonetheless, the time for any partner to seek an account appears to have passed long ago (see Faitrouni v El Omar [1999] NSWSC 1984 (at [5]-[6]) per Windeyer J; Short v Crawley (No. 30) [2007] NSWSC 1322 (at [742]-[745]) per White J). I favour the view that by dealing with the assets of the partnership following the dissolution, and not seeking any account, the parties should be taken to have agreed or at least accepted that the partnership has been satisfactorily wound up. 35Of course, if it was the case that the Land was the property of a partnership that had been dissolved but not wound up, there would be much to be said for the view that a receiver ought be appointed with power to sell the Land. This possibility was discussed in the course of submissions, and the parties filed further written submissions on the question. Ms Clemmett indicated that the plaintiff would, if necessary, seek leave to amend the Summons to claim such relief. However, it is not necessary to further consider this issue.

Should the Court decline on discretionary grounds to make orders under s 66G? 36The conclusion expressed above removes the basis for the argument that relief should be declined because the Land is property of a partnership that has been dissolved but not wound up. I therefore turn to the argument based upon equitable estoppel. 37A co-owner of land is not entitled to relief under s 66G as a matter of right. There are circumstances in which an application by a co-owner for such relief can, as a matter of discretion, be refused by the Court (see Williams v Legg (1993) 29 NSWLR 687 at 691-693). It is well established that an equitable estoppel may afford a good ground to refuse an order under s 66G of the Conveyancing Act (see, for example, Tory v Tory [2007] NSWSC 1078 at [42] per White J; Pascoe v Dyason [2011] NSWSC 1217 at [8] per Black J). In the present case, the defendant submitted that the representations made by the plaintiff in May 1999 about the Land (referred to above at [7], [8] and [10]) gave rise to an estoppel such that it would be inequitable for the plaintiff to now seek the sale of the Land. It was submitted that the representations carried with them an implied representation that the plaintiff would not bring about a sale of the Land before she died. 38I am prepared to accept the defendant's evidence that in May 1999, conversations occurred broadly to the effect of those set out at [7], [8] and [10] above. I accept that on about 17 May 1999 the plaintiff told the defendant that if he looked after her and the farm, she would see to it that he got the property in the end; and, after having signed a new will on 27 May 1999, she told him that she had taken care of everything and he would get her share of the farm when she died. It may be inferred, from the terms of clause 3 of the will, that the references to "the farm" were intended as references to the Land. I further accept that the defendant said something to the effect of needing to have "something behind me" if he was to give up his job and come home. 39The statements made by the plaintiff can be construed as including a promise to leave particular property to the defendant by will if he would come and look after her and the Land. Such a promise can of course be the subject of a binding contract. The defendant did not suggest that any contract was made here. Rather, a proprietary estoppel of the type described by Handley JA (with whom Allsop P and Giles JA agreed) in Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483 at [21] was propounded. His Honour there said: "The proprietary estoppel upheld by the judge was an estoppel by encouragement. Such an estoppel comes into existence when an owner of property has encouraged another to alter his or her position in the expectation of obtaining a proprietary interest and that other, in reliance on the expectation created or encouraged by the property owner, has changed his or her position to their detriment. If these matters are established equity may compel the owner to give effect to that expectation in whole or in part. The general principles governing this form of estoppel were not in dispute, here or below." 40A major difficulty facing the defendant in establishing the estoppel is the paucity of evidence to show that his conduct in moving to Peak Hill to live with, and look after his mother, and look after the Land, and in later relinquishing his employment in Dubbo, was done in reliance upon expectations about the land created by his mother's statements to him. 41The defendant's affidavit includes no statements to the effect that any such conduct was undertaken due to such expectations. He gave no evidence about the details of the employment he ceased, or the particular circumstances in which he left the employment in early 2000. The only direct evidence which supports the notion that the defendant's conduct was undertaken in reliance upon such expectations is the defendant's statement, during the conversation on about 17 May 1999, that he would need "to have something behind me". 42The defendant was cross-examined on the subject. A number of his answers left the firm impression that he would have moved to Peak Hill to look after his mother and the Land in any event. Although the defendant stated that he was looking for some sort of security because he would have to leave his employment, and he "more or less" wanted something behind him, he also stated that "it's always going to happen because dad had left and my mother could not live on her own, so I had to make decisions what I was going to have to do." At another point, he said that he "had to move home" to look after his mother. 43In relation to the Land, the defendant stated that there was no-one else to look after the farm, that the stock could not be left, and that "you've got to do maintenance, repair and maintenance on the farm" to keep it operational. He seemed to concede that he needed to do those things to preserve his own asset as well. 44The High Court has recently reaffirmed that it is for the party asserting an equitable estoppel to prove detrimental reliance. In Sidhu v Van Dyke [2014] HCA 19, French CJ, Kiefel, Bell and Keane JJ stated (at [58]): "In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract. It is not the breach of promise, but the promisor's responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise. In Giumelli v Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ approved the statement of McPherson J in Riches v Hogben that: "It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise."" 45In the same case, Gageler J stated (at [90]-[93]): "Paraphrasing Dixon J in Thompson v Palmer, the respondent bore the onus of establishing that she believed the appellant's representations and that, on the faith of that belief, she took a course of action or inaction which would turn out to be to her detriment were the appellant to be permitted to depart from those representations. The respondent did not need to establish that the belief to which she was induced by the appellant's representations was the sole or predominant cause of the course of action or inaction she took but, in the language of Rich, Dixon and Evatt JJ in Newbon v City Mutual Life Assurance Society Ltd, she did need to establish that the belief was a "contributing cause". To establish that the belief to which she was induced by the appellant's representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief. The need for the respondent to establish such a difference stems from what Dixon J described in Grundt v Great Boulder Pty Gold Mines Ltd as the "indispensable" condition that a party asserting an estoppel "must have so acted or abstained from acting upon the footing of the state of affairs assumed" that the party asserting the estoppel "would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption". That is to say, "the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted". There can be no real detriment if the party asserting the estoppel would have been in the same position in any event. The question of causation is therefore ordinarily appropriately framed, as it was implicitly framed by the primary judge in the present case, as being: "Despite any other contributing factors, would the party seeking to establish the estoppel have adopted a different course (of either action or refraining from action) to that which [the party] did had the relevant assumption not been induced?"" 46I do not think that the defendant has discharged his onus of proof on this issue. The defendant has not shown that, based on what his mother said to him, he held particular beliefs or expectations in relation to the Land, and that such beliefs or expectations made a difference to the manner in which he conducted himself. Put another way, the defendant has not shown that he would have adopted a different course had such beliefs or expectations not been induced in him. 47The defendant's evidence suggested to me that, in the very difficult circumstances that presented themselves in May 1999 when his father decided to leave, he saw little choice but to move to Peak Hill and undertake the tasks of looking after his mother and the Land. He no doubt had concerns about his own future in those circumstances, including on his existing employment in Dubbo, and I accept that he said something about wanting to have something behind him, and that his mother gave an assurance about him getting the land after her death. However, I am not satisfied on the evidence that those assurances gave rise to any belief or expectation in relation to the Land that relevantly made a difference to the defendant's conduct. The likelihood is that he would have come home to look after his mother and the Land in any event. Accordingly, the defendant's estoppel case has not been made out. 48It should also be noted that the estoppel case faced the further complication that in about June 2000 the plaintiff purchased a unit in Dubbo for $125,000 and placed the title in the defendant's name. She gave evidence in the Family Provision Act proceedings that she did so because "I intended him to have the benefit of the unit on my death as he was looking after me". There was also evidence that the defendant attended with his mother upon a solicitor in May 2000 to discuss the purchase of the property, and it had been decided that the property would be held on trust for her (see Stone v Stone [2001] NSWSC 138 at [31]-[33]). The defendant did not mention this matter in his affidavit. There was no evidence about the terms of any trust. In the witness box, the defendant did not accept that his mother purchased the unit as something in return for his looking after her. He seemed to suggest that the unit had been purchased in case it became necessary for her to move to Dubbo and "retire". He further suggested that he wasn't with his mother when she dealt with the purchase with the solicitor. Had the defendant been able to establish detrimental reliance, it would have become necessary to further consider this issue in the context of the extent of the detriment and whether it would in all the circumstances be unconscionable for the plaintiff to dispose of her share in the Land. Those matters would need to be considered in the light of all the events that have happened, including that the plaintiff has become in need of full time care in a nursing home (cf Thorner v Major [2009] UKHL 18 at [19] per Lord Scott). 49As the defendant has not made out the alleged estoppel, I can see no reason why the Court should not proceed to make orders under s 66G in relation to the Land. An affidavit of fitness of the proposed trustees has been read, and consents to act as trustees have been filed. 50The plaintiff also seeks an order that the defendant give vacant possession of the Land to the trustees. The defendant opposed such an order on the basis that it was not necessary, there being nothing to suggest that the defendant would not vacate. That may be so, but in the interests of certainty for all parties, and finality, I think that such an order should be made. Having regard to the evidence that giving vacant possession could take some months, I will give the defendant about three months to give up possession.

Costs 51The plaintiff has succeeded, and prima facie costs should follow the event (see UCPR r 42.1). The plaintiff does not seek an order that her costs be paid by the defendant. Instead, she seeks an order that her costs be paid out of the proceeds of the sale of the Land. Orders of that nature are commonly made in matters under s 66G of the Conveyancing Act. However, the plaintiff submitted that no such order should be made in respect of the defendant's costs, having regard to the fact that the defendant could have consented to the making of the orders under s 66G. In response, the defendant submitted that in proceedings under s 66G the usual costs order is that the costs of the parties be paid out of the proceeds of sale, "the rationale being that the costs of such an application are an incident of joint ownership" (see, for example, Kardos v Sarbutt (No.2) [2006] NSWCA 206 at [28]). 52I accept that the costs of proceedings for orders under s 66G may commonly be regarded as an incident of joint ownership. In the present case, whilst the defendant's opposition to the sale was ultimately not successful, he properly advanced a substantial argument in support of an estoppel which may have afforded a good reason to decline to appoint trustees for sale. In all the circumstances I think that it would be appropriate for the defendant's costs to also be paid out of the proceeds of sale. 53The Court will make orders in accordance with paragraphs 1 and 2 of the Summons. The Court will further order: (1)that the defendant give vacant possession of the Land to the trustees by 27 February 2015; (2)that upon the sale of the Land the proceeds are to be applied in the following order of priority: (a)in payment of any agent's commission and other costs of sale; (b)in payment of the trustees' fees in such amount as the parties agree or as the Court may determine; (c)in payment of the plaintiff's costs of these proceedings as agreed by the parties or as assessed, and the defendant's costs of these proceedings as agreed by the parties or as assessed; and (d)in payment of the balance remaining, to the plaintiff as to one half, and to the defendant as to one half; and (3)that the trustees have liberty to seek directions or further orders from the Court as may be necessary.

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: 21 November 2014