Reported Decision : (2007) DFC 95-400 New South Wales Court of Appeal CITATION: Vollmer v Hauber Davidson [2006] NSWCA 79 HEARING DATE(S): 07/03/2006 JUDGMENT DATE: 12 April 2006 JUDGMENT OF: Mason P at 1; Ipp JA at 2; Hislop J at 3 DECISION: 1. Appeal allowed; 2. Each party to pay his or her costs of the proceedings before Master Macready and in this Court. CATCHWORDS: Adjustment of property interests - Costs. Civil Procedure Act 2005 - s 98(1) Conveyancing Act 1919 - s 66G LEGISLATION CITED: Property (Relationships) Act 1984 - s 20 Supreme Court Act 1970 - s 76 Supreme Court Rules - Pt 52A r 11 Uniform Civil Procedure Rules 2005 - Pt 42 r 1) CASES CITED: House v King (1936) 55 CLR 499 PARTIES: Applicant - Gisella Vollmer Respondent - Guenter Hauber Davidson FILE NUMBER(S): CA 40860/04 COUNSEL: Applicant - Mr D.J. Lloyd Respondent - Mr R. Harper SOLICITORS: Applicant - Stuart Fowler & Partners Respondent - Watts McCray LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 2637/02 LOWER COURT JUDICIAL OFFICER: Macready M - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40860/04 MASON P IPP JA HISLOP J 12 April 2006 Gisella VOLLMER v Guenter HAUBER DAVIDSON JUDGMENT 1 MASON P: I agree with Hislop J. 2 IPP JA: I agree with Hislop J. HISLOP J: Introduction 3 The parties lived in a de facto relationship from April 1994 to January 2001. They had a daughter born on 24 March 1997. After separating they continued to reside under the same roof until the respondent left in January 2002. 4 In December 1997 the parties purchased a property at Putney for $440,000. The property was registered in their joint names in equal shares as tenants in common. It was subject to a bank mortgage for $160,000. The respondent provided additional funds for the purchase which he obtained from his relatives. Each party made payments in reduction of the mortgage. Although the parties had other assets, the property was their place of residence and their major asset. 5 On 10 May 2002 the respondent commenced proceedings for orders pursuant to the Property (Relationships) Act 1984 ('the Act'). 6 The proceedings were heard by Master Macready (as he then was) on 2 and 3 August 2004. The agreed value of the property at the time of hearing was $875,000. It was subject to the mortgage upon which $135,000 remained outstanding. 7 The Master gave judgment on 24 August 2004. He held: …an appropriate adjustment of the parties' interests would be achieved by an order for sale of the Putney property and a split between the plaintiff and the defendant of the net proceeds after discharge of the mortgage and expenses of 70 percent to the plaintiff and 30 percent to the defendant … The parties are to retain the property in their present possession… 8 On 9 September 2004 the Master heard argument as to costs. He concluded the appellant should pay the respondent's costs of the proceedings. 9 The appellant appeals, by leave, from the costs order. There is no appeal from the substantive decision. Discussion 10 Section 20 of the Act gives the Court power, on application by a party to a de facto relationship, to make an order adjusting the property interests of the parties to that relationship in such manner as to the Court seems just and equitable having regard to considerations prescribed in the section. 11 The section thus provides a mechanism whereby property interests can be adjusted on the break up of a relationship where the parties are unable to adjust those interests by agreement among themselves. 12 In his Statement of Claim the respondent sought an order that the appellant transfer the property to him upon payment of $47,000 on the basis he would indemnify her against liability under the mortgage. 13 On 12 July 2002 the appellant filed a defence and cross-claim. In the cross-claim she sought an order that the respondent transfer the property to her upon payment by her to him of $200,000 on the basis she would indemnify him against liability under the mortgage. 14 It was apparent from the pleadings that each party recognised that some adjustment of the legal interests in the property was probable. Although there were separate claims made by each party there was but one issue to be determined, namely how should the interests of the parties in their assets be adjusted? 15 The respondent made offers of settlement to the appellant. The Master, in his judgment on costs, said of these: There were a number of offers made. On 28 March 2002 the plaintiff offered a settlement of $57,000 on the then value of the property and certainly the defendant has done better than that. On 10 March 2004 there was an offer of twenty percent to the defendant and the defendant has done better than that. Accordingly they can be put to one side. It should be observed that the first of these offers was made before the commencement of the litigation and the second during its currency. It was well open to the Master to disregard the second offer, for the reasons he gave. But the first was in a different category for the reasons set out in paragraph 21 below. 16 On the first day of the hearing in the court below the appellant offered to settle her entitlement for a cash payment of $250,000. As she did not achieve this result and the offer was very late, it too, in my opinion, should be put to one side. 17 At the time of the Master's determination of the costs issue the Supreme Court Act 1970 s 76 provided: (1) Subject to this Act and the rules and subject to any other Act - (a) costs shall be in the discretion of the Court; … and the Supreme Court Rules Part 52A r 11 provided: If the Court makes any order as to costs, the Court shall, subject to this Part, order that the costs follow the event, except where it appears to the Court that some other order should be made as to the whole or any part of the costs. 18 Usually the application of these costs provisions (now essentially reproduced in the Civil Procedure Act 2005 s 98(1) and Uniform Civil Procedure Rules 2005 Part 42 r 1) results in a costs order in favour of the successful party. 19 The Master, having put to one side the respondent's settlement offers, concluded on the costs issue: Ultimately the most likely resolution has been that which has been achieved in the matter. The plaintiff had to commence the proceedings. Unless he did so he would not have obtained the settlement of the matter. The defendant was in occupation of the premises and so he was forced to commence the proceedings. Ultimately it seems to me I should regard the proceedings as a whole rather than just as a cross claim. The order I make is that the defendant pay the plaintiff's costs of the proceedings. 20 It thus appears the determinants of the costs application were that the respondent commenced the proceedings and that it was necessary for him to do so. 21 In my opinion this conclusion involved error on the part of the Master (see House v King (1936) 55 CLR 499 at 504-5) in that: 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. 22 Accordingly it is necessary that the cost discretion be re-exercised by this Court. 23 In my opinion, having regard to the above considerations, the appropriate order is that each party should pay his or her own costs of the proceedings in the Court below. 24 The appellant in her Notice of Appeal sought an order that the respondent pay all of her costs. At the hearing of the appeal the order sought was amended to seek an order that no costs be awarded to either party save that the respondent should pay the costs of the second day of hearing. It may be that had this amendment been made at a more appropriate time it would have lead to resolution of the appeal. In all of the circumstances it appears to me appropriate that each party should pay his or her own costs of the appeal. Orders 25 I propose the following orders: 1. Appeal allowed. 2. Each party to pay his or her costs of the proceedings before Master Macready and in this Court. ********** 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.