Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor

Supreme Court of NSW|2013-10-29|Before: Slattery J, Mr P

Judgment 1Western Land Developments Pty Limited ("Western") and Maganic Brothers and Sister Pty Limited ("Maganic") are the registered proprietors as tenants in common in equal shares of a property of 8.12 hectares in St Marys ("the St Marys property"). The family interests associated with each of Western and Maganic have been in dispute about the St Marys property for a long time. Western and Mr Edmond Brendan Kelly ("Kelly") are plaintiffs in these proceedings brought in 2007 for partition of the St Marys property against Maganic and its controlling shareholder, Mr Anton Maganic. Those parties settled the proceedings on 21 February 2011 in short minutes of order which were made by consent and without admissions providing for the partition of the St Marys property. 2But the February 2011 orders have not been implemented by either side. The property remains undivided. Now by motion filed in July 2013 the plaintiffs, Western and Mr Kelly, seek further orders for partitioning of the St Marys property, essentially by way of enforcement of the February 2011 settlement. The plaintiffs also claim that the defendants, Maganic and Mr Anton Maganic, should account for their dealings with certain rents and profits they are said to have earned from the St Marys property since entry into the February 2011 settlement. 3Maganic and Mr Anton Maganic, the defendants, resist this further relief. They submit it is too late to appoint trustees to partition of the land, relief which was sought in the original pleadings, but the claim to which relief was compromised in February 2011. In substance the defendants say that the parties should be left to work through the implementation of the February 2011 Agreement themselves. Neither side seeks to set aside the settlement made in February 2011. 4The plaintiffs' Motion for the appointment of trustees for partition was listed before me and argued over one day on 28 October 2013. Mr G Rundle of counsel appeared for the plaintiffs. Mr M Sneddon and Mr P Kondic appear for the defendants.

The February 2011 Settlement 5The February 2011 settlement is a closely crafted document which clearly had the input of counsel on both sides to resolve what was already a complex dispute. Western and Maganic were the original parties to these proceedings. The pleadings developed after 2007 adding parties and issues. In May 2008 Maganic cross claimed against Western and Mr Kelly and Mrs Sheila Kelly. By early 2009 Western and Mr Kelly were plaintiffs in an Amended Statement of Claim. By the time the proceedings settled a Further Amended Statement of Claim had been filed so that the final parties at the time of settlement were Western and Mr Kelly, as plaintiffs/ cross-defendants. At that time Maganic and Mr Anton Maganic were both defendants/cross-claimants. 6The agreement was structured to effect: a subdivision of the land together with various boundary adjustments; a regime for cost sharing the burden of the subdivision; adjustments for the fact that the resulting subdivided lots would have different market values; and arrangements by which each would continue to receive rent from tenants. The parties also agreed to mutual releases. 7The detailed machinery provisions of the agreement were contained in clause 5 of the February 2011 settlement, which provides: "5. Note the agreement between the plaintiffs Wester Land Developments pty Limited ('WLD') and Edmond Brendan Kelly ('Kelly') and the defendant and Cross-Claimants Maganic Brothers and Sister Pty Limited ('MB & S') and Ante Maganic ('Maganic') as follows: (a)The land the subject of these proceedings, being the land comprised in Folio Identifiers 14, 15, 16 & 207/31908 having an area of approximately 8.12 hectares and known as [property not published] Dunheved Circuit, St Marys ('the Land') shall be divided to the intent and in the manner set out at (b) - (n) below. (b)The division of the Land shall be carried out by way of subdivision or lot boundary adjustment so as to achieve as nearly as may be practicably possible two lots each of approximately 4.051 hectares in the manner depicted in the survey plan prepared by Michael Shannon dated 24 August 2007 a copy of which is annexed hereto marked 'A' ('the Plan'). (c)The subdivision or boundary adjustment shall be effected for the parties by a Surveyor and/or Town Planner to be nominated and agreed by the parties within 14 days, in default of which agreement the parties agree to appoint the Surveyor and/or Town Planner nominated by the President for the time being of the Institution of Surveyors NSW Inc, in the manner determined by such Surveyor and/or Town Planner to be the most practicable and cost efficient. (d)The boundary between Lot 1 and Lot 2 shall upon subdivision or boundary adjustment be located so as to ensure that the present carriageway and means of vehicular access to the Dutch Rembrandt Club from Dunheved Circuit is wholly contained within Lot 1. (e)WLD and MB & S shall each pay and contribute to one-half of the costs associated with the subdivision or boundary adjustment, and Kelly agrees to be jointly and severally liable with WLD for its one-half share of such costs, and Maganic agrees to be jointly and severally liable with MB & S for its one half share of such costs. (f)Upon registration of the plan of subdivision or finalisation of the boundary adjustment envisaged by the Plan, MB & S shall become the registered proprietor of the proposed 'Lot 1' shown in the Plan (upon which are situated the improvements as shown in the Plan) and WLD do all things necessary to transfer to MB & S all right, title and interest in the proposed Lot 1 exclusively. (g)Upon registration of the plan of subdivision or finalisation of the boundary adjustment envisaged by the Plan, WLD shall become the registered proprietor of the proposed 'Lot 2' shown in the Plan and MB & S will do all things necessary to transfer to WLD all right, title and interest in the proposed Lot 2 exclusively. (h)Upon registration of the plan of subdivision or finalisation of the boundary adjustment envisaged by the Plan, there shall be erected a dividing fence between Lots 1 and 2 of the same or similar type and construction as the fence currently erected on the Land adjacent to Dunheved Circuit, such fence to be erected by a contractor agreed upon between the parties within 14 days hereof or in default of such agreement by a contractor or contractors nominated by the Surveyor or Town Planner specified above; the cost of erecting such fence shall be borne as to one-half by WLD and Kelly (who shall be jointly and severally responsible therefore) and as to one-half by MB & S and Maganic (who shall be jointly and severally responsible therefore). (i)The transfers of the interests of MB & S and WLD respectively in the Land, referred to sub-paragraphs (f) and (g) above ('the time of settlement'), shall be effected within 21 days of registration of the Plan of Subdivision or finalisation of the boundary adjustment described above, at which time:- (i)MB & S will provide to WLD discharges in registrable form of all mortgages granted to MB & S by WLD and/or Kelly. (ii)MB & S will provide all such documents duly executed and in registrable form as are necessary to enable Mortgagee registered number 6857697 given by MB & S and WLD to Westpac Banking Corporation to be discharged. (iii)WLD will deliver to MB & S a Withdrawal duly executed and in registrable form of Caveat AD259266 lodged by WLD against the Land. (iv)MB & S shall pay to WLD the sum of $400,000 in recognition of the fact that proposed Lot 1 contains improvements which result in Lot 1 having a value greater than that of Lot 2 of approximately $800,000. (v)WLD and Kelly, and MB & S and Maganic, shall provide to the other a copy of all reports, certificates, validations and other documents which are in their possession or control and which record or refer to the compaction, constituency, contamination or other feature of the fill deposited on the land. (j)MB & S and WLD agree that up to the time of settlement they will: (i) each pay and continue to pay one-half of all rates, taxes, outgoings and expenses due or falling due with respect to the Land; (ii)each continue to receive rental from the tenants of premises on the land in accordance with the arrangements currently in place. (k)WLD and MB & S agree that: (i) MB & S will be responsible for the payment of any GST associated with the transfer of Lot 1 to MB & S. (ii)WLD will be responsible for the payment of any GST associated with the transfer of Lot 2 to MB & S." 8The parties also agreed on mutual releases which were provided for in clause 6 of the February 2011 agreement: "6. Note the agreement of all of the parties that, save as is necessary to give effect to the provisions hereof, WLD, Kelly and the Third Cross-Defendant ('Mrs Kelly') hereby jointly and severally release MB & S and Maganic, and MB & S and Maganic hereby jointly and severally release WLD, Kelly and Mrs Kelly, from all claims and demands whatsoever and howsoever arising out of the subject matter of the proceedings and all dealings between the parties." 9The February 2011 settlement provided for the circumstances in which the parties might re-list the proceedings and to dispose of costs as follows: "7. Grant liberty to the parties to apply on three days' notice with respect to the matters set out in paragraphs 5 and 6 above. 8. Save for the grant of liberty referred to in paragraph 7 above, dismiss the plaintiffs' claims in the Further Amended Statement of Claim and the cross-claimants' claims in the Amended Cross-Claim. 9. Make no order as to costs, to the intent that each party shall bear its, his and her own costs of the proceedings" 10The parties had structured the Agreement in a way which invited further court intervention if the Agreement was not able to be performed. The February 2011 consent orders only noted the parties' agreement and did not involve any orders being made by the Court. In the course of argument the parties accepted that the Court now had jurisdiction in these proceedings to make supplementary orders to give effect to their agreement to ensure that it was performed. But the parties could not agree on what orders should be made. 11This situation was brought about events not wholly anticipated in the February 2011 Agreement. Before the February 2011 settlement the proceedings had in part been concerned with which of the two parties had responsibility for removing certain earth and fill which had been added to parts of the property, the removal of which was anticipated to be expensive. The parties gave mutual releases in respect of past events in February 2011. But they did not anticipate that the Council would refuse to accept partition of the land in accordance with their planned subdivision, unless prior conditions of development consent, including removal of the fill, were complied with by the parties. Thus as events have turned out, the parties cannot partition the land without dealing with the problem and expense of removing the fill. 12Also there are tenants on the part of the land which is proposed to be partitioned to Maganic. The local council, the Penrith City Council, says that these tenants are using the land without authority and beyond the conditions of development consent. The Council has issued two notices under Environmental Planning and Assessment Act 1979, s121B to Maganic on 12 February 2013 requiring it to comply with existing development consents in respect with the land. All of these requirements are referred to in these reasons as "the Council requirements". 13The parties have reached stalemate. Partition cannot proceed without compliance with the Council's requirements. Maganic is unwilling to pay for the whole of the excavation costs necessary to achieve compliance with the Council requirements. Western is unwilling to bear any of those costs, as it takes the view that responsibility for removing the fill, or complying with Council requirements, was to be left with Maganic upon partition. 14But despite these areas of substantial disagreement the parties accepted in argument that they both had a strong common interest in having the February 2011 Agreement performed. Both sides accepted that it would be necessary to remove the tenants from Maganic's part of the land to comply with Council requirements. Both sides wanted partition to proceed in accordance with the Agreement. In the end the parties read their evidence on both sides and asked the Court to make appropriate orders to give effect to their Agreement. There is largely consensus about these orders, other than one important respect dealt with below, about which they could not agree. In the result therefore the orders have not been made by consent, to understand the area of dispute between the parties it is necessary to understand a little more of the issues raised on Western's Motion.

The Issues Arising on the Notice of Motion 15The plaintiffs' Notice of Motion seeks the following orders: (1) an order for partition under Conveyancing Act, s 66G; (2) an order that the St Marys property vest in trustees for partition; (3) that the Maganic parties pay the costs of the trustees for the partition; (4) an account of all monies received and disbursed by the Maganic parties in respect of their dealings with the St Marys property; (5) an order that there be an enquiry as to damages arising from the defendants' non compliance with the February 2011 settlement; and (6) an order that the defendants pay the plaintiffs' costs of the Motion on an indemnity basis. 16The parties were at issue on the Notice of Motion in five principal areas. 17(a) Releases and Issue Estoppels. Certain accounting and financial claims between the parties in part related to events prior to 21 February 2011. Western sought to bring these matters to present account. But Maganic submitted that releases of claims prior to February 2011 are effective and the Court can only look past that date. Western accepted in the end that the receipt of rent and the incurring of expenses in relation to the property before 21 February 2011 were caught by the releases of that date. But the parties are still in contention about the wider effect of the releases. 18(b) Depositing of Fill. Western submits that the Maganic parties had deposited fill on the property before and after 21 February 2011 which has jeopardised the obtaining of present approvals for subdivision of the land. The Maganic parties deny depositing fill that has interfered with the approval of the subdivision, and say that Western was responsible for the fill deposited before 21 February 2011. 19(c) Rental payments. Western submits that the Maganic parties have been receiving rental payments from four tenants, Theiss Services Pty Limited, BMD Construction Pty Limited, Rembrandt Dutch Club St Marys Pty Limited and Jarrah Transport since February 2011 and must account to Western for these receipts under the February 2011 Agreement. The Maganic parties say that Western was well aware of this rent when the February 2011 Agreement was made, and that they do not have to account to Western for rent receipts under that agreement. 20(d) Failure to Pay Expenses. The Maganic parties allege that the plaintiffs have not paid one half of the expenses in relation to the St Marys property contemplated by the agreement. Western says that any failure on its part to pay for expenses is because the Maganic parties have failed to account for rental receipts in respect of the property. The Maganic parties say that they can set off their obligation under cl 5(vi) to pay Western $400,000 against the monies on account of expenses said to be payable by the plaintiff. 21(e) The Appropriate Remedy. Western says that it should now have an order for the appointment of trustees for partition under Conveyancing Act, s 66G. The Maganic parties wish to enforce the February 2011 Agreement. By the end of the argument though it was common ground that if the February 2011 Agreement could not be performed the parties may yet have to appoint trustees for partition. So this part of the plaintiffs' motion fell away for now. It was therefore not necessary to decide a separate question to deal with this issue. That part of the plaintiffs' motion will be adjourned to 10 December 2013.

The Remaining Areas of Dispute 22The parties could not agree upon a number of machinery orders to give effect to their agreement. And in some cases the parties have not provided for circumstances that the Court regards as requiring to be covered by some kind of order to ensure the removal of obstacles to their joint co-operation in giving effect to the February 2011 Agreement. 23The parties could not agree upon an excavator to remove fill from the St Marys property. The Court has provided a mechanism for the parties to endeavour to agree upon an excavator. If they cannot agree the Registrar in Equity will choose between four nominees, two from each side. 24The agreed priority for the parties was effecting the subdivision. The development consent for the subdivision expires on 14 March 2014. Issues about accounting for rent receipts and who should bear expenses associated with the subdivision can be deferred for subsequent determination, probably by a referee. But in the meantime the Court will order those issues to be mediated, by a Court annexed mediation. 25Western denies any responsibility to comply with the Council's s 121B Notices. Western is correct: those Notices have only been issued to Maganic. The orders have been crafted to ensure that Western must co-operate with Maganic in Maganic's discharge of its obligation to comply with the Notices. But the orders do not impose any liability on Western under the Notices. 26The final issue is who should bear the costs of complying with the Council requirements. To the extent those requirements involving giving notices to quit to tenants and corresponding with Council, as the tenants are on Maganic's part of the property and as Maganic is the subject of the s 121B Notices, the cost of dealing with the Council should be borne by Maganic, in the first instance. 27The Court is not making final orders with respect to the burden of these expenses. The parties wish to debate the final incidence of expenses. Their rights to do so will be preserved. But a regime for bearing expenses in the short term must be created so that the partition can occur, with the parties reserving their rights to argue later on about who should bear the costs and expenses of complying with Council requirements on a final basis. 28Paying for the removal of land fill is the single largest anticipated expense in complying with the Council requirements. How this cost should be borne in the short term to give effect to the Agreement, pending final determination of who should bear such costs, is a major issue. Western says that: it should not have to bear any of this cost in the short term; and that all the fill since February 2011 has been placed there by Maganic. Western refers the Court to evidence to support this contention. Maganic says that only small amounts of surface fill and bitumen has been placed on its part of the property since February 2011 and that is not the major reason for the relevant Council requirements. Maganic says that the fill now required to be moved is covered by the release of February 2011. There is strong dispute between the parties as to who was responsible for putting in the land fill in various parts of the property before February 2011. Maganic proposes that the cost of removal be borne equally in the short term. 29No interim solution to this problem will be satisfactory to the parties. The Court is not making a decision on a final basis. Each party has an arguable case for maintaining that the other party should bear these costs on a final basis. 30But these costs should be shared, to give both parties a degree of responsibility for the payment of the excavator. And to ensure payment of the excavator each party's interest in the St Marys property should be charged with its obligation to pay the excavator, to ensure the excavator is able to do its work. 31But the question is in what proportions should this interim costs sharing occur. A number of factors incline me to the view that Maganic should bear a somewhat greater share of these expenses on an interim basis. First, $400,000 is soon to be due from Maganic to Western pursuant to cl 5(i)(vi) of the Agreement. Second, much of what has happened to the land since February 2011 has been the addition of substantial quantities of spoil and finishes by Maganic for its own benefit. Thirdly, what happened before February 2011 is too difficult to untangle at this stage. Considering the evidence and these factors, in my view, the appropriate portion is that Maganic pays 65 per cent of these costs on an interim basis and Western 35 per cent. 32The parties will not be left out-of-pocket at the end of the day in relation to these expenses. When final orders are made to apportion these expenses each party's partitioned land will be charged with the obligation to indemnify the other party so the parties pay their correct final proportions of this expenditure.

Conclusions and Orders 33The Court therefore makes the following orders in the proceedings. The orders with respect to specific performance (orders 1-8) are final orders. But all the other orders in relation to varying of expenses and the determination of the parties' differences are interim or procedural orders. 34The Court: (1)Orders that the agreement contained in the short minutes of orders of 11th of February 2011 ("the February 2011 Agreement") for the subdivision of the land at St Marys owned by the first plaintiffs and first defendant as tenants-in-common in equal shares ("the subject land") be specifically performed and carried into effect. (2)Orders that the plaintiffs and defendants respectively do all things and execute all documents on each of their parts as are necessary to perform the February 2011 Agreement in accordance with Order 1. (3)Without limiting the effect or application of Orders 1 and 2, the Court orders the plaintiffs and the defendants respectively to do all things necessary and execute all documents necessary on each of their parts as may be required to satisfy the Penrith City Council's conditions of development consent 11/1321 and for the first defendant to satisfy each of the two notices issued by Council to it under the Environmental Planning and Assessment Act 1979, s 121B to it on 12 February 2013 ("the Council requirements"), so as to achieve Council's grant of the development consent and the registration of the proposed subdivision in accordance with the February 2011 Agreement. (4)Direct that the solicitors for the parties shall each nominate by 5.00pm on 31 October, 2013 no more than two independent and appropriately qualified excavators to undertake the necessary excavation work to satisfy the Council requirements. (5)Direct that the solicitors for the parties shall obtain and exchange by 8 November, 2013 quotations from their nominated excavators to satisfy the Council requirements. (6)Direct that the solicitors for the parties endeavour to agree by 5.00pm on 12 November, 2013 upon their mutually preferred excavator, and in default of agreement, the excavator to be engaged to do the work will be chosen for the parties by the Registrar in Equity, upon the submission to the Registrar of the quotations ordered pursuant to Order 5 and the submission of a description of the experience of each excavator in no more than 100 words. (7)The parties agree that the chosen excavator will be engaged by them on terms that: (1) the chosen excavator will complete the excavation works by no later than 16 December, 2013, and (2) the parties will charge their respective interests in the subject land with their liability to pay the chosen excavator for completion of the excavation works. (8)In the event that Council does not by 6th of December 2013 indicate to the parties that the Council requirements have been satisfied with respect to the unauthorised use of the subject land, then the defendants shall: (l)cause by 9th of December 2013 the issue of suitable notices to quit to any tenants then occupying the subject land to require them to vacate the subject land by 12 January 2014; (m)take all such steps and do all such things as may be necessary, so as to cause any such tenants to vacate the subject land by 12 January 2014. (9)Orders that (a) the costs and expenses of any dealings with Council to satisfy the Council requirements or otherwise to comply with Order 3 hereof shall, in the first instance, be borne by the defendants, (b) that the costs and expenses of engaging any excavator in accordance with order 7 shall be borne and shared between the parties as to 65 per cent by the first defendant and as to 35 per cent by the first plaintiff, and (c) each party's liability to pay the excavator and liability to indemnify the other party so that each party pays its correct proportion of this expenditure in accordance with the Court's final orders, will be a charge on the parties' respective interests in the subject land, and on any separate parcels created by the parties' subdivision. (10)Prayers 1-3 of the plaintiffs' notice of motion dated 30th of July 2013 be adjourned for further hearing before Slattery J at 9.30am on 10 December 2013. (11)Orders that pursuant to Civil Procedure Act, s 26 the questions of: (a) the parties' respective entitlements to rental income received after 11th of February 2011 concerning the subject land; and (b) expenses incurred (if any) after 11th of February 2011 to which a party claims a 50% reimbursement of another party; and (c)whether the defendants' are entitled to set off such monies (if any) determined by the referee to be owing by the plaintiff(s) to the defendant(s) against the sum of $400,000 referred to in the February 2011 Agreement; be referred to mediation before a Registrar of the Court in Equity. (12)List the proceedings before the Registrar in Equity at 9.00am on 8 November 2013 for the allocation of a date for Court annexed mediation. (13)Direct that these proceedings be stood over for directions before Slattery J on 10 December2013 at 9:30am. (14)Costs of the respective plaintiffs' and defendants' notices of motion be reserved. (15)Liberty to apply on 3 days' notice in relation to performance of these orders.

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: 29 October 2013

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