Van Oosterum v Van Oosterum

(1) Who should be the trustees? 10The Plaintiffs have proposed as the trustees Lindy Druitt and Matthew Dean who are both chartered accountants at Norton Business Advisors Chartered Accountants in Mudgee as the trustees. There can be no doubt from the Affidavits of Fitness that they are appropriate persons to be appointed. 11The Defendants are content for Lindy Druitt to be appointed but say that the other trustee should be Michael Bestic who is a solicitor in Singleton. There can be no doubt, again, that Mr Bestic is an appropriate person to be appointed and, indeed, the Plaintiffs do not dispute that he is an appropriate person. 12The Defendants ask for Mr Bestic's appointment in place of Mr Dean because they say that there is the perception of potential bias by virtue of his relationship with the Plaintiffs. That is said to arise because Mudgee is a small town, the Second Plaintiff is an accountant, and she is professionally and personally known to both those persons proposed by the Plaintiff as trustees. In addition, the Defendants say that Mr Bestic, who is a solicitor, will bring the skills of a solicitor to bear, and they are relevant skills because the trustees are required to partition the land. 13In Crocombe v Pine Forests of Australia Pty Limited (2005) 219 ALR 692 Young CJ in Eq (as his Honour then was) said at [88]: A procedure has grown up in connection with sales ordered by the Court. The Court has a complete discretion as to who it will appoint to conduct a sale, being guided by how the Court considers it most beneficial to the estate, though ordinarily the conduct of the sale is given to the plaintiff even though the plaintiff may not have the greatest interest in the property; see eg Dixon v Pyner (1850) 7 Hare 331; 68 ER 135; Dale v Hamilton (1853) 10 Hare Appendix 1 vii; 68 ER 1116 and Murray v Geoffroy (1918) 18 SR (NSW) 259. 14The following year in Arrow Custodians Pty Ltd v Pine Forests of Australia Pty Ltd [2006] NSWSC 341 in a similar application by different plaintiffs against Pine Forests of Australia his Honour said this at [21]: When deciding upon trustees for sale, where there is no consent, four factors usually need to be considered by the court. These are, in no particular order of importance; (1) the principle that the court tends to prefer the preference of the person with the greater interest in the land. That factor in the present case does not get us anywhere because it is hard to see who really does have the greater interest. (2) the trustees should be independent and as free from conflict of interests as possible. I will come back to that. (3) the trustees, particularly where they have more active duties than merely to sell a piece of real estate, should have the appropriate skill, expertise and experience; and (4) the court should endeavour to get the best value for the parties' money and see that as between two equally alternative proposals the cheaper is preferred. 15In my opinion, it is appropriate to appoint the trustees sought by the Plaintiff. If one has regard to the factors set out by Young CJ in Eq in Arrow Custodians: (1) The share owned by the Plaintiffs as a group (and they are acting as a group) is equal to the share owned by the First Defendant, (2) All parties accept that their common desire is to achieve the best purchase price for the sale of the land and all agree that the trustees would be endeavouring to do that. The Defendants say, however, that although there is no evidence of the matter there is a perception and concern that somehow, in the accounting exercise that follows the sale, the Plaintiffs' trustees will exhibit a bias towards the Plaintiffs because the Second Plaintiff in particular is known to those trustees. This perception by the Defendants is a perception with no evidential basis in the case. In the light of the Affidavits of Fitness of the proposed trustees I cannot assume that, merely because the Second Plaintiff is known or well known to those trustees, they would not act with complete integrity and professionalism. I therefore do not see that perception as a matter to be taken into account. What those trustees do in any accounting exercise will be objectively verifiable. (3) The Defendants point to the fact that a solicitor will need to be involved in the sale of the land. For that reason they say it is appropriate to appoint one solicitor and one accountant as the trustees. It may be accepted that a solicitor will need to be engaged. However, that factor must be taken into account along with the other considerations. (4) It is likely to be the case that engaging 2 trustees within the one firm is likely to prove a cheaper exercise in the first instance. Although they may need to engage a solicitor in relation to the actual sale, the extra cost of doing so needs to be balanced against the cost that would undoubtedly be involved by having Mr Bestic engaged along with Ms Druitt. All of the material will need to be duplicated if Mr Bestic is appointed. He works in Singleton, a not inconsiderable distance from Mudgee, and there would be the added cost of communication between the 2 trustees. It is likely to involve some travelling on Mr Bestic's part that would be avoided if the trustees were both in Mudgee and at the same firm. 16The principle mentioned by Young CJ in Crocombe, a principle that has a long pedigree, should also not be ignored. 17The other matter of significance is that there is a consent by Mr Dean and Ms Druitt to be appointed receivers. There is no consent by Mr Bestic to be appointed a receiver. It 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. 18For all of these reasons, and noting that the Court has a complete discretion, I consider the most efficient and economical outcome is to appoint the trustees the Plaintiffs seek.

(2) Appointment of receivers 19The Defendants accept that where agreement has not been reached in relation to the partnership property it will be necessary to appoint receivers. The Defendants say that it is necessary only to appoint one person as a receiver because of the size of the estate being dealt with. Whilst that submission may carry some weight if the application was for the appointment of receivers only, in the present case where it is necessary to appoint 2 trustees for sale, and where I have determined that it is appropriate to appoint Ms Druitt and Mr Dean from the same firm in Mudgee as trustees, I think it is entirely appropriate to appoint both of those persons as receivers. It does not seem likely that costs will thereby be increased in those circumstances where both are appointed.

(3) Possession of the land 20The Plaintiffs seek an order that the Defendants be required to vacate the land and give possession to the Trustees within 14 days of the making of the order appointing trustees. They say that if an order is not now made they fear that the Defendants will refuse to vacate the land and that it will be necessary for the trustees to bring fresh proceedings seeking possession. The Plaintiffs say that their apprehension is based on the fact that the First Defendant has shown a reluctance to leave the land made particularly clear by the statements made by him that it was always agreed he would be entitled to remain on the land for the rest of his life. 21The Defendants have not resisted the present claim based on any agreement that the First Defendant (at least) had a right to remain on the land. If the First Defendant had established a contractual or equitable right, or an estoppel which bound the Plaintiffs in that regard, he may have been able to resist the Plaintiff's claim: Cain v Cain [2007] NSWSC 623 at [10] and the cases referred to therein. 22As the case has developed, it seems to me that all parties have accepted that the present arrangement cannot continue and that partition of the land is in the best interests of all. In the absence of some case by the First Defendant suggesting an entitlement to resist the orders sought by the Plaintiffs, either a sale or a partition would be inevitable. The First Defendant has been put on notice that any failure to vacate the land when required to do so by the trustees would result in proceedings being brought by the trustees and dealt with expeditiously by the Court, and that the costs of such proceedings would be payable by the Defendants. 23The First Defendant says he wishes to remain on the land in the short term to maintain the farm pending the sale of the Front Block. He is the only person (with the Second Defendant) living at the farm at the present time. Certainly, the Plaintiffs are anxious to do what has to be done to maintain and improve the farm to get the best price for sale, but Ms Cohen of counsel who appeared for the Plaintiffs has accepted that the presence of the AVO could provide a difficulty in that regard. 24It seems to me that it is not necessary to make an order for possession against the Defendants at the present time. It will be up to the trustees to decide when it is appropriate to require the Defendants to vacate the land.

(4) Costs 25The Plaintiffs seek costs of these proceedings from the Defendants. On the other hand, the Defendants seek costs from 27 October 2010 (when the Plaintiffs' Notice of Motion for a sale under s 66G was argued before Macready ASJ) to 3 March 2011 when the Plaintiffs agreed to partition the land. 26The principles are set out in Kardos v Sarbutt (No. 2) [2006] NSWCA 206 at [28]-[31] and Spathis v Nanos (No 2) [2008] NSWSC 470 at [2]-[3]. 27In Kardos Brereton J (with whom Basten JA and Hunt AJA agreed) said: [28] However, the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct [ Hawkins v Parsons (1862) 8 Jur (NS) 452; Parsons v Hayward (1862) 4 De GF&J 474]. The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary [ Hamer v Giles (1879) 11 Ch D 942], except where the action is one which in substance is to try some disputed right, in which case the unsuccessful party will be ordered to pay the costs [ Hamer v Giles; Warner v Smith (1863) 9 Jur (NS) 169]. The costs of taking accounts, although disputed, are usually defrayed out of the partnership assets [ Butcher v Pooler (1883) 24 Ch D 273; Newton v Taylor (1827) 19 Eq 14]. Similarly, in proceedings under Conveyancing Act , s 66G, for the appointment of trustees of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership. [29] In this type of litigation, it is artificial to resolve liability for costs according to the accident of who is plaintiff and who is defendant, so as to leave a plaintiff free to litigate confident that he will receive costs however unreasonable his claim, unless the defendant betters her offer. There is no reason why the defendant should bear the risk of costs to the exclusion of the plaintiff where neither makes a realistic offer. Similar views have been expressed by Hislop J, with whom Mason P and Ipp JA agreed, in Vollmer v Hauber Davidson [2006] NSWCA 79, as follows (at [21]):- a) In the absence of agreement between the parties it was necessary for them to resort to the courts, whether pursuant to the Act, the Conveyancing Act 1919 s 66G or general equitable principles to obtain finality in respect of their property interests. b) The parties were unable to reach agreement in respect of the adjustment of their interests, neither being prepared to make a realistic settlement offer to the other. c) In these circumstances the commencement of the court proceedings was necessary from the perspective of each party, not just the respondent. d) The fact that the respondent issued a Statement of Claim and the appellant a Cross-Claim, rather than vice versa, was a chance event. Accordingly it should not be regarded as a relevant factor in determining the costs issue, a proposition which counsel accepted on the appeal. e) The effect of the Master's adjustment of the parties' interests was that the appellant's share of the property was valued at approximately $220,000, the respondent's at approximately $520,000. As is apparent from a comparison of the Master's orders and the pleadings, each party was unsuccessful in that he or she failed to obtain the adjustment that he or she sought, though each was successful in exceeding the adjustment that the other party offered. These were material considerations which were not taken into account by the Master. [30] Subsequently, in Chanter v Catts (No 2) [2006] NSWCA 179, Hodgson JA, with the concurrence of Bryson JA and Hunt AJA, said that Vollmer did not tell against the award of costs to a plaintiff on the basis of "substantial success", where the plaintiff, on appeal, obtained a result which bettered the defendant's offer by $60,000. Hodgson JA said (at [6]):- In my opinion, although the proceedings achieved less than the appellant claimed, the result is substantially better than the appellant could have obtained without court proceedings and counts as substantial success. I do not think that Vollmer counts against costs being awarded on the basis of that substantial success. [31] For this purpose, "substantial success" is not to be judged merely by the circumstance that a plaintiff obtains an adjustment in his or her favour. It involves an evaluation of the outcome, in the light of the forensic and negotiating positions of the parties, such that it can be said that one party has been clearly more successful than the other, to the extent that the costs of the proceedings can be seen to be attributable to the unsuccessful party's opposition, rather than to the matters referred to by Hislop J in Vollmer - including, in particular, the necessity for both parties that their property interests be separated, and the failure of both parties to adopt a realistic position. 28In the present case I do not think I should depart from the ordinary rule that the costs should be paid from the sale price achieved for the land which will be subject to the appropriate accounting referred to in para [8] above. My reasons can be briefly stated. First, the Plaintiff wished to sell the whole of the land and sought orders under s 66G for that purpose. The Defendants proposed by October 2010 that the land be partitioned. Ultimately the Plaintiff accepted in the following year that partition was appropriate. 29Secondly, the Plaintiffs were unsuccessful in obtaining the sale which they sought by Notice of Motion before Macready ASJ in November 2010. One reason at least for their failure was that they did not have Affidavits of Fitness in respect of the proposed trustees. 30Thirdly, although the Plaintiffs may in the first instance have been required to commence proceedings because the Defendants failed to respond to correspondence that proposed what should happen to the land and the partnership, the Plaintiffs have not achieved exactly what they sought in the pre-litigation correspondence. Fourthly, the Plaintiffs have not been successful in the present proceedings in obtaining an order for possession against the First Defendant. 31On the other hand, the Defendants were unsuccessful in resisting the appointment of the trustees and receivers proposed by the Plaintiffs. These matters tend only to highlight the reason for the usual rule and raise the same considerations set out in paras (a)-(d) in Vollmer v Hauber Davidson [2006] NSWCA 79 at [21], quoted with approval in Kardos at [29]. 32I therefore consider it appropriate that the costs that should be paid from the proceeds of sale should include the costs of the valuation obtained by the Defendants. That valuation seems to have been significant in achieving agreement on partition.

Consent of the mortgagee 33The land is mortgaged to St George Bank, a Division of Westpac Banking Corporation. Section 66G(4) requires the consent of any incumbrancers of the land. There was no evidence at the hearing of any such consent. I reserved my judgment at the conclusion of the hearing on 13 April 2011 and I informed the parties that if the consent of St George Bank was obtained I would be prepared to make the order for partition. The consent of the Bank was provided to me on 6 July 2011. I am satisfied that the material provided shows that the Bank consents to the partition as proposed.

Conclusion 34The parties should bring in Short Minutes to reflect these reasons.

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