Taylor v Papantoniou

Jurisdiction under s 66G:

1. Section 66G(1) reads: 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.
2. Section 66F(1) reads: "Co-ownership" means ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common; and "co-owner" has a corresponding meaning and includes an incumbrancer of the interest of a joint tenant or tenant in common.
3. For the Carlingford Property, there is no doubt the first and second defendants (who are joint tenants in a one-third share), the third defendant, and the fourth defendant, hold the property in co-ownership, as defined in s 66F(1), being tenants in common. The same is true of the Darlinghurst Property, save as to the way the shares are held.
4. There is a question, however, as to whether the plaintiff is a "co-owner", within the meaning of ss 66G(1) and 66F(1), so as to enliven the jurisdiction of the court to make an order for a statutory trust for sale of the properties.
5. While previous orders of the Court have appointed the plaintiff as receiver and vested him with all powers as indicated in those orders, I do not accept that any orders involve a vesting of property in the plaintiff.
6. I am not satisfied that the plaintiff, by virtue of being a court-appointed receiver of the assets of the J & S Fund, is a co-owner of the properties in question, as relevantly defined.
7. The learned authors of Meagher, Gummow & Lehane's Equity Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) observe at [29-140] that "[t]he appointment of a receiver by the court does not vest any property in the receiver and, in particular, does not vest in the receiver any rights of action" (citing Bolton v Darling Downs Building Society [1935] St R Qd 237 and Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 at 450-1). I also note that Needham J observed in Re Scottish Properties Pty Ltd (1977) 2 ACLR 264 at 271 that "[i]t is clear that no property of the company vests in the receiver, either at law or in equity, by virtue of his appointment".
8. It follows that the plaintiff is not an owner at law or in equity in possession of the two properties.
9. Nor is the plaintiff an "incumbrancer of the interest of a joint tenant or tenant in common" of the two properties. The meaning of this phrase was considered in passing by Macfarlan JA in Boyd v Thorn (2017) 96 NSWLR 390 at [20]: [T]he definition of "co-owner" in s 66F(1) is stated to include "an incumbrancer of the interest of a joint tenant or tenant in common". To give this aspect of the definition a sensible meaning, this must be read as a reference to an "incumbrancee", a word which is not otherwise mentioned in that definition. "Incumbrancee" is defined in s 7 of the Act to include "every person entitled to the benefit of an incumbrance, or to require payment or satisfaction thereof". It is plainly to such a person that the definition of "co-ownership" in s 66F(1) is intended to refer … An intended reference to "incumbrancer" would be redundant as a person giving a mortgage, charge or other incumbrance over the property must, of necessity, be the owner of an interest in it and therefore already within the concept of a co-owner.
10. I do not consider the appointment of the plaintiff as receiver rendered him an "incumbrancee". It did not confer upon him any benefit of a mortgage, charge or other incumbrance over the "interest of a joint tenant or tenant in common" of either property.
11. I note the recent decision of this Court in Sampson v Lorebray Pty Ltd [2023] NSWSC 1650 (Sampson) involved facts somewhat similar to the present case. There, the plaintiff was the receiver and manager of the assets of the McNamee Property Trust. Lorebray Pty Ltd was the trustee of the McNamee Property Trust and, in that capacity, was a co-owner of what was referred to in the judgment as the Brooklyn properties and the Kellyville properties. For both sets of properties, the plaintiffs were ordered pursuant to s 66G as an alternative to orders conferring upon him the power to sell the properties.
12. Richmond J did not see any obstacle preventing the making of orders under s 66G: see [109]-[113] and [122] (although I note that subsequently, his Honour ordered that the plaintiff be appointed as receiver of the relevant properties with a power to sell them instead of making orders under s 66G: see Re Lorebray Pty Ltd (No 2) [2024] NSWSC 105). However, it does not appear that his Honour had the benefit of submissions addressing the question of whether the plaintiff receiver was a co-owner, as required by s 66G.
13. I find that this Court lacks jurisdiction to make orders under s 66G for the sale of the properties as sought by the plaintiff, because the plaintiff is not a "co-owner" within the meaning of ss 66G(1) and 66F(1) Conveyancing Act.
14. However, because all the defendants seek, or do not oppose, a trustee sale pursuant to s 66G, and the defendants satisfy the definition of "co-owner", for the following reasons, I consider it appropriate to make orders for a trustee sale, rather than requiring the defendants to bring a new application.

Exercise of discretion

1. No party suggested that there were any grounds for the Court to refuse to make an order under s 66G, as referred to for example in Foundas v Arambatzis [2020] NSWCA 47 at [6] (White JA, Bell P and Basten JA agreeing). Nor do I consider any such grounds exist on the evidence. I therefore consider that orders under s 66G ought to be made.
2. The further issues to be determined are who the appropriate trustees are, and whether there ought to be any order delaying the sale of the Carlingford Property.

Trustees

1. The appointment of trustees, for the purposes of s 66G, is a matter for the Court's discretion: Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 at [88] (Young CJ in Eq). Some of the relevant considerations which inform the exercise of that discretion were summarised in by Young CJ in Eq in Arrow Custodians Pty Limited v Pine Forests of Australia Pty Ltd (2007) 18 BPR 35,209; [2006] NSWSC 341 (Arrow Custodians) at [21], including: 1. The general preference for the trustees of the person with the greater interest in the land; 2. The requirement that the trustees be independent and free from conflicts of interest; 3. The skills, expertise and experience of the trustees where they have active duties beyond selling a piece of real estate; and 4. The value for money involved in the trustees' work which includes the pace of work and charge out rates.
2. The plaintiff's initial submission was that he should be appointed as the sole trustees for the sale of the properties. However, the day before the hearing, the plaintiff indicated he was proposing that another person, his partner, Mr Todd Gammel, be appointed as a trustee in addition to himself, in compliance with s 66G(3).
3. The second defendant does not make any submission that the plaintiff and Mr Gammel are not fit and proper persons, but opposes their appointment, and instead, submits that Mr Jason Lloyd Porter and Mr Hugh Armenis, liquidators, ought to be appointed.
4. As noted, the third defendant supports the orders sought by the fourth defendant. The fourth defendant supports the appointment of the plaintiff and Mr Gammel as trustees for sale, and does not support the appointment of the second defendant's alternative proposed trustees.
5. In respect of the first factor from Arrow Custodians, I accept the plaintiff's submission that those with the greatest interest in the properties favour the plaintiff and Mr Gammel being appointed as trustees. The real issue in dispute is the submission from the second defendant that Mr Taylor, in particular, is insufficiently independent.
6. The plaintiff's view is that, as a court-appointed receiver, he is an Officer of the Court. There is no evidence to impeach his independence, integrity or professionalism. The possibility of appointing a receiver as trustee for sale was contemplated in Sampson, where Richmond J held at [109] that: By way of analogy, it is not uncommon for a trustee in bankruptcy of one co-owner to be appointed as a trustee for sale of the property under s 66G (and its equivalent provisions in other jurisdictions): Scott, in the matter of Le [2019] FCA 1661 at [9] … I do not see any conflict of interest, apparent or real, in the Receiver performing this role.
7. The plaintiff also points to Van Oosterum v Van Oosterum [2011] NSWSC 663 at [17], where Davies J considered that "[i]t is entirely appropriate that the same persons should be appointed as receivers of the partnership property and as trustees for the sale of the land".
8. In contrast, the second defendant's view is that the plaintiff lacks independence as he would be both a co-owner of the properties and a trustee for sale. He points to Coshott at [129]-[131], where although it was "unnecessary … to decide the issue", Siopis, Katzmann and Perry JJ considered that "the primary judge may well consider it prudent not to appoint the trustee in bankruptcy [who was seeking orders for the sale of the property] as one of the trustees for sale". On remittal, the trustee in bankruptcy was not appointed as the trustee for sale: see Coshott v Coshott [2016] FCA 966 at [1] and [8] (Bromwich J).
9. The second defendant also referred to Starr-Diamond v Talus Diamond (No 3) [2013] NSWSC 351 at [4], where Slattery J said: The defendant also seeks in her motion to have herself appointed to sell the properties. This is not acceptable. Although it might save expense, such a course is unlikely to engender the confidence of both parties and it is likely to risk further conflict between them. The law is clear that the trustees appointed for sale must be impartial as between the co-owners, so much so that it is even regarded as inadvisable for the trustees to engage the same solicitor to act for them as may act for one of the co-owners: Dixon v Roy (1991) 5 BPR 11,655. I will therefore not appoint the defendant to sell the Tasmanian properties.
10. For the reasons already given, I do not accept that the plaintiff, as receiver, is a co-owner and so this is not a situation as in Starr-Diamond where one co-owner is seeking to be appointed as the trustee of the property.
11. I accept that historically there may have been some disagreement between the defendants and the plaintiff concerning various matters relating to the management of the properties. However, I do not accept that that the historical disagreement demonstrates, as the second defendant submits, that there is a risk of conflict that the plaintiff, as the receiver and manager of the J & S Fund, will not be able to discharge his duties as trustee for sale. No submission was made that Mr Gammel falls into the same position.
12. I do not accept, as a general proposition, that a receiver of a co-owner, who has responsibilities as a receiver, will face an inevitable conflict if appointed as the trustee to sell a property, part of which is subject to his or her receivership. Mr Taylor and Mr Gammel have acted as trustees for sale previously and can be taken to understand the responsibilities involved in that position. There is no reason to expect that they would misuse their powers. In any event, the trustees will be granted liberty to apply, should any such conflict, which I consider unlikely, arise.
13. There is no dispute that Mr Gammel and the plaintiff have the requisite expertise to act as trustees, having conducted the sale of commercial properties over decades. I also accept that Mr Taylor has obtained some specific knowledge about the particular properties, which will likely assist in the efficient sale of the properties.
14. In relation to the fees of the plaintiff and Mr Gammel compared to the second defendant's proposed trustees, I note that the former's fees are slightly lower. However, as noted, I also consider there would be certain efficiencies if Mr Taylor were to be appointed as trustee, because of his knowledge and experience with the properties.
15. Taking into account all of those considerations and the submissions made by the parties, I consider it is appropriate to appoint the plaintiff and Mr Gammel as trustees for the sale of the properties.

Ought the sale of Carlingford be delayed?

1. In the evidence and written submissions, there was some suggestion that it would be appropriate to delay the sale of the Carlingford Property until a development consent has been obtained, or until 30 September 2025.
2. However, at the hearing, the parties agreed that no specific order is required in relation to that matter and, instead, s 66H Conveyancing Act, which requires consultation between the trustees and the co-owners, provides sufficient protection of the parties' interests.
3. I also note the decision of Young J (as his Honour then was) in Goldberg v Goldberg [2000] NSWSC 399 at [8], where his Honour indicated: … The trustees have a duty to get the best price. They also have a duty to make appropriate enquiries and take expert advice and to act on it if they consider that appropriate. Furthermore, under s 66H, the trustees have a duty, so far as consistent with the general interest of the trust, to consult the co-owners …
4. I note for completeness that I was referred to no authority where a court has made an order suspending the operation of a s 66G order for the length of time contemplated. However, for the reasons mentioned, it is unnecessary to consider that matter further.

Orders

1. Therefore, I consider it appropriate to make the following orders: 1. Orders pursuant to s 66G Conveyancing Act 1919 (NSW) that: 1. Barry Taylor and Todd Gammel of HLB Mann Judd (Trustees) be appointed as trustees for the sale of the property known as 322-324 Pennant Hills Road, Carlingford NSW (Folio ID 101/806685) (Carlingford Property) owned by Eugenia Papantoniou (in a one-third share), Peter Papantoniou and Christodoulos Papantoniou (as joint tenants in a one-third share), and A & E Papantoniou Super Holdings Pty Ltd (in a one-third share) as tenants in common; 2. the Carlingford Property be vested in the Trustees subject to any encumbrances affecting the entirety of the Carlingford Property but free from any encumbrances affecting any undivided shares, to be held by the Trustees upon the statutory trust for sale pursuant to Part 4 Division 6 Conveyancing Act 1919 (NSW). 1. Orders pursuant to s 66G Conveyancing Act 1919 (NSW) that: 1. The Trustees be appointed as trustees for the sale of the property known as 177 Oxford Street, Darlinghurst (Folio ID 1/59870) (Darlinghurst Property) owned by A & E Papantoniou Super Holdings Pty Ltd (in a one-half share) and Peter Papantoniou and Christodoulos Papantoniou (as joint tenants in a one-half share) as tenants in common; 2. the Darlinghurst Property be vested in the Trustees subject to any encumbrances affecting the entirety of the Darlinghurst Property but free from any encumbrances affecting any undivided shares, to be held by the Trustees upon the statutory trust for sale pursuant to Part 4 Division 6 Conveyancing Act 1919 (NSW). 1. Orders that the Trustees are authorised to do all such acts and things and sign all such documents as may be necessary to place the Carlingford Property and the Darlinghurst Property on the market and cause the Carlingford Property and the Darlinghurst Property to be sold. 2. An order that the proceeds of sale of the Carlingford Property be applied in the following priority: 1. first, in payment of the costs of the sale of the Carlingford Property, including Council rates, water rates, statutory duties and charges, legal/conveyancing costs, the Trustees' reasonable remuneration on the sale, and real estate agent commission/marketing fees; 2. second, in payment of 50% of the plaintiff's costs of this proceeding, and then 50% of the second and fourth defendant's costs of the proceedings; 3. third, in payment to the plaintiff (in his capacity as Court-appointed receiver and manager in respect of the assets, properties and liabilities of the J & S Papantoniou Super Fund) and the third defendant and the fourth defendant in equal shares of any net sale proceeds remaining after satisfaction of orders 4(a) and 4(b) above. 1. An order that the proceeds of sale of the Darlinghurst Property be applied in the following priority: 1. first, in payment of the costs of the sale of the Darlinghurst Property, including Council rates, water rates, statutory duties and charges, legal / conveyancing costs, the Trustees' reasonable remuneration on the sale, and real estate agent commission/marketing fees; 2. second, in payment of 50% of the plaintiff's costs of this proceeding, and then 50% of the second and fourth defendant's costs of the proceedings; 3. third, in payment to the plaintiff (in his capacity as Court-appointed receiver and manager in respect of the assets, properties and liabilities of the J & S Papantoniou Super Fund) and the fourth defendant in equal shares of any net sale proceeds remaining after satisfaction of orders 5(a) and 5(b) above. 1. The plaintiff's costs be paid from the net proceeds of sale of the Carlingford Property and the Darlinghurst Property in the manner provided by orders 4(c) and 5(c) above. 2. Grant liberty to the trustees to apply in relation to the operation of these orders. 3. Grant liberty to the defendants to apply to seek any additional order pursuant to s 66I Conveyancing Act 1919 (NSW).

Amendments 20 September 2024 - Orders amended pursuant to r 36.17 Uniform Civil Procedure Rules 2005 (NSW) 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: 20 September 2024