Touma v Touma

Summary of the salient evidence

1. During 1994 and 1995, the plaintiff and his wife resided in the McGraths Hill property along with the defendant and his wife. It seems that the plaintiff (and perhaps his wife) agreed to stay in the property to look after the defendant who, at the time, was experiencing health problems and having difficulty servicing a mortgage over the property.
2. It seems that sometime in around 1995, the parties (and their respective partners) reached an agreement to the effect that the defendant and his wife would transfer a one-half interest in the property to the plaintiff and his wife. The agreement contemplated that the plaintiff and his wife would become co-owners of the property with the defendant and his wife.
3. On 7 April 1995, the parties signed a transfer which recorded the plaintiff and his wife as tenants in common of the property with the defendant and his wife. The transfer, however, was never registered. The consideration stated on the transfer form was $110,000. It seems that the transfer remained in the possession of the defendant for the next 24 years.
4. The defendant deposed that the consideration for the transfer was $120,000, being an amount that represented half the value of the property at the time of the agreement. The defendant deposed that the sum was to be paid in two instalments: an $80,000 instalment and a $40,000 instalment. The $80,000 instalment was apparently intended to cover the amount outstanding in respect of the mortgage over the property. It is not clear how much of the agreed amount was actually paid by the plaintiff, although the evidence suggests the plaintiff may have borrowed about $110,000 from an unspecified financial institution, and at least made the $80,000 payment.
5. The defendant alleged that a term of the agreement was that the transfer would not be effected until after the death of the defendant and the plaintiff's mother. This term appears to be disputed by the plaintiff.
6. Following the making of the agreement, the plaintiff and his wife continued to reside in the property for a time. During this time the plaintiff apparently made contributions toward repaying the amount secured by the mortgage. However, according to the defendant, the plaintiff and his wife moved out of the property shortly afterwards.
7. On 20 February 2017, the solicitors acting for the plaintiff and his wife sent a letter to the defendant requesting that the defendant register the transfer form. There was no response to this letter. On 16 March 2017 the plaintiff's solicitors sent another letter in similar terms. The letter also noted that if no reply was received within 21 days then proceedings would be commenced in the Supreme Court.
8. On 4 April 2017, the solicitors acting for the defendant responded to the 16 March 2017 letter. The letter stated that the transfer was signed in 1995 and since that time was presumably held by the plaintiff and his wife. The letter went on to query why they had chosen this time "to request production of the Certificate of Title". It also queried whether it was intended to force the sale of the property.
9. On 15 May 2017, the plaintiff's solicitor responded, stating that the plaintiff and his wife wished only to secure registration of the transfer and not force a sale of the property.
10. On 21 July 2017, the defendant's solicitor responded to the 15 May 2017 letter. The letter noted that the defendant consented to producing the Certificate of Title to the property on terms that the plaintiff pay certain fees and expenses associated with registering the transfer and that the Certificate of Title be returned to the defendant's solicitors afterwards. The letter also noted that the defendant's wife had passed away and that if the plaintiff required a Notice of Death for the purposes of registering the transfer, the plaintiff would be required to pay an additional fee for the defendant's solicitor to draft such notice.
11. On 1 August 2017, the plaintiff's solicitors responded. The letter noted that the terms were acceptable to the plaintiff, and instructed the defendant's solicitor to prepare a Notice of Death. The letter noted, however, that the plaintiff's solicitors were unable to locate the original transfer form signed in 1995 and, because of this, a new transfer form had been prepared. The letter requested that the defendant provide the Notice of Death and Death Certificate so that the new transfer form could be lodged with the Office of State Revenue for stamping.
12. There was no response from the defendant's solicitor until 25 January 2018. The defendant's solicitor forwarded the Notice of Death. It was noted that the name of the defendant's wife was spelled differently on the Death Certificate and on the Certificate of Title. The defendant's solicitor enquired how the plaintiff intended to overcome this problem.
13. On 26 June 2018, the defendant's solicitor sent a further letter. That letter (which seems to be a response to previous communications from the plaintiff's solicitors, including a letter dated 23 April 2018 which is not in evidence) described the circumstances in which the original transfer was signed and then noted that a term of the agreement reached in 1995 was that the transfer would be held in escrow and not registered until the defendant's death. The letter went on to state that the defendant was concerned that if a new transfer form was registered the plaintiff would force a sale of the property against the defendant's wishes. The letter concluded by stating that it was the defendant's opinion that the plaintiff's interest in the property was adequately protected by a caveat that had been lodged on the title, and that the defendant would not sign a new transfer form.
14. On 15 August 2018, the plaintiff's solicitor responded to the 26 June 2018 letter. The letter stated that the plaintiff disputed the allegations contained in the 26 June 2018 letter and restated the plaintiff's position that he only sought to register the transfer (and not force a sale of the property).
15. On 24 August 2018, the defendant's solicitor responded to the 15 August 2018. The letter stated that "some form of agreement" can be reached between the parties and suggested, in the meantime, that a discharge of mortgage and the Notice of Death be registered.
16. On 3 September 2018, the plaintiff's solicitor sent a letter to the defendant's solicitor stating that it was agreed that the defendant's solicitor should attend to registration of the Notice of Death and discharge of mortgage.
17. On 19 September 2018, the plaintiff's solicitors sent another letter in response to the 24 August 2018 letter. It noted that the defendant's solicitor's letter did not advise what the defendant's instructions were in relation to an agreement to lodge the transfer for registration. The letter advised that proceedings would be commenced if the defendant failed to so agree by 28 September 2018.
18. On 27 September 2018, the defendant's solicitor responded to the plaintiff's solicitor's letter dated 19 September 2018, noting that the defendant's instructions remained the same as those reflected in the 26 June 2018 letter.
19. As noted above, the present proceedings were commenced by Summons on 22 January 2019. The proceedings came before the Court on a number of occasions where directions were made for the parties to file and serve evidence in the proceedings. In accordance with those directions, an affidavit of the defendant sworn on 16 April 2019 was filed on 17 April 2019. Annexure "A" to that affidavit is a copy of the original transfer form signed in 1995. It seems that the plaintiff may not have previously been made aware that the defendant retained the original 1995 transfer.
20. On 24 June 2019, the parties were referred to Court-annexed mediation by consent. The proceedings settled shortly after the mediation which took place on 31 July 2019. Consent orders were handed up on 9 August 2019 which disposed of the proceedings, save as to costs.

Submissions

1. The plaintiff advanced a narrow submission in support of his contention that the defendant pay his costs of the proceedings. The plaintiff submitted that since February 2017 the defendant had engaged in delaying tactics in relation to the registration of the transfer. It was submitted that these delaying tactics amounted to a failure on the part of the defendant to comply with the terms of the 1995 agreement, and meant that the only way for the plaintiff to become the registered co-owner of the McGraths Hill property was to commence the proceedings.
2. The defendant made three distinct categories of submissions in support of his contention that the plaintiff pay his costs of the proceedings. Firstly, the defendant contended that the orders sought by the plaintiff in the Summons either could not have been made or would not have had the effect of putting the plaintiff in the position of a registered co-owner of the property. The defendant pointed to the fact that the Summons sought orders compelling the defendant to execute a transfer but not orders requiring such transfer to be registered. It was submitted that the orders would not "amount to a registered interest". It was pointed out that no facilitative orders were sought in the Summons, such as orders compelling the defendant to produce the certificate of title to the property, which would be necessary for the plaintiff to become the registered proprietor. The defendant also submitted that the orders sought the execution of a transfer which could only be registered through the PEXA platform. This required the participants to undertake a "Verification of Identity" process which, it was submitted, was not provided for in the Summons. Further, the defendant submitted that the plaintiff was not relevantly a "co-owner" of the property for the purposes of seeking orders for the appointment of trustees for sale under s 66G of the Conveyancing Act. It was said that only the defendant was "in possession" of the property for the purposes of the definition of "co-ownership" in s 66F of the Act.
3. Secondly, the defendant stated that he had made a Calderbank offer on 4 July 2019 which the plaintiff refused to accept. The Calderbank letter was not itself in evidence. In those circumstances, it would be inappropriate to entertain this aspect of the defendant's application. In any case, I do not accept that the asserted terms of the Calderbank offer would have provided an outcome for the plaintiff more favourable than that which he achieved by the consent orders made on 9 August 2019. The offer provided for a life estate to be granted to the defendant, but the consent orders did not so provide. It has not been shown that it would have been unreasonable for the plaintiff to not accept the Calderbank offer.
4. Thirdly, the defendant made submissions in relation to "proposed consent orders" prepared by the plaintiff which proposed that the "Summons be dismissed". It was submitted that seeking an order that the Summons be dismissed triggered Uniform Civil Procedure Rules 2005 (NSW) r 42.20 which provides that in any case where a court makes an order for the dismissal of proceedings, a plaintiff must pay the defendant's costs of the proceedings unless the Court orders otherwise. It was submitted that a situation in which the Court might order otherwise is where the defendant acted unreasonably in the proceedings (referring to Ralph Lauren 57 Pty Limited v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424). It was submitted that the plaintiff would not be able to satisfy the Court that the defendant has acted unreasonably in circumstances where the defendant had made a genuine offer of compromise and that orders sought in the plaintiff's Summons could not have been made in any event.

Determination

1. Turning first to the plaintiff's submission, it is unclear why such a substantial period of time was allowed to pass from the making of the alleged agreement in 1995 up to the time when the parties' solicitors began to exchange correspondence in relation to the property in early 2017. The evidence does not reveal why it took the plaintiff so long to take steps enforce his rights in respect of the alleged agreement. Neither does the evidence explain the defendant's change of position from being initially prepared to agree to facilitate the registration of the transfer in April 2017 only then to refuse in June 2018 by raising (seemingly for the first time) an alleged term that the transfer was to be held in escrow until after the defendant's death.
2. The Court is not in a position to make findings as to the terms of the agreement that had been made, and whether the defendant acted unreasonably in relation to the registration of the transfer. It is implicit in the plaintiff's submission that there was no controversy as to the existence of the agreement in 1995, including its terms, such that the defendant's failure to facilitate the transfer was a wrongful failure to comply with his contractual obligations. Accepting that an agreement was made in 1995, the parties nonetheless disagreed as to existence of a critical term that the defendant was to hold the transfer form in escrow until his death. If the defendant was correct in proving the existence of this term, the "delay" in effecting the registration of the transfer would be explained, and indeed justified. It is of course not appropriate to conduct a hypothetical trial of this issue for the purposes of determining a question of costs (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-5; Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [31]-[32] and [47]). In those circumstances, the plaintiff has not made good its contention that it would be appropriate that the defendant pay his costs of the proceedings.
3. Turning next to the first category of submissions made by the defendant, it may be accepted that certain amendments to the Summons might have been required in due course had the proceedings progressed further. The joinder of the plaintiff's wife to the proceedings would likely have been necessary. However, the proceedings resolved before the defendant raised objections to the form of the Summons. In any event, the principal relief sought by the plaintiff was a declaration that the plaintiff was entitled to a one-half share in the property and orders in the nature of specific performance to give effect to the terms of the alleged agreement. The evidence adduced on this application shows that the claim to relief of that character was plainly arguable. The same can be said about the claim for relief under s 66G of the Conveyancing Act, at least as consequential relief. I note further that co-ownership for the purposes of s 66G requires ownership in possession, not physical possession as suggested by the defendant's submission (see Lewin v Lewin (2019) 19 BPR 39225; [2019] NSWSC 380 at [26]-[27]). It cannot be suggested that the proceedings were commenced or maintained on hopeless or baseless grounds. That reality is reflected in the terms of the consent orders made on 9 August 2019.
4. Finally, I turn to the third category of submissions made by the defendant. Rule 42.20 of the UCPR has been interpreted to apply to proceedings dismissed by consent (Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [48], [53]). I do not think that any "proposed consent orders" can engage the rule. However, the consent orders actually made by the Court on 9 August 2019 granted substantive relief to the plaintiff and provided that the Summons otherwise be dismissed. The rule may be applicable to the extent that the proceedings were so dismissed (see Watton v Whitton as Trustee in Bankruptcy Estate of Steven Leonard Watton [2017] NSWSC 1598 at [26]). Assuming that it applies, it is clear that the rule does not create a presumption; rather, it is something in the nature of a default position (Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [78] and [84]; Australiawide Airlines Ltd t/as Regional Express v Aspirion Pty Ltd (supra) at [53]-[54]).
5. The making of the consent orders, which included the order that the Summons otherwise be dismissed, should be viewed in light of the settlement reached between the parties following the Court-annexed mediation on 31 July 2019. There was no dismissal of any part of the proceedings on the merits. In these circumstances, the factors set out by McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (supra) at 624-5 are plainly relevant when considering whether to depart from the default position set out in UCPR r 42.20. The defendant does not allege that the plaintiff has acted so unreasonably in the commencement or maintenance of the proceedings that the defendant should have his costs, and for reasons similar to those referred to above at [31], neither can it be said that the defendant has acted unreasonably in the proceedings. In all the circumstances of the case, it would be appropriate to depart from the default position set out in UCPR r 42.20 (assuming it applies) and make no order as to the costs of that part of the proceedings that was dismissed.
6. In my opinion, neither party has established a sound reason to justify an award of costs in their favour. The proceedings were disposed of by consent and without any determination of the merits. Neither party has been shown to have acted unreasonably. It is appropriate to exercise the Court's discretion as to costs to order that each party pay their own costs of the proceedings.

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