New South Wales Supreme Court CITATION : McKay & anor v McKay (Costs) [2008] NSWSC 256 HEARING DATE(S) : 28 February 2008 JURISDICTION : Equity Division Expedition List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 28 February 2008 DECISION : Plaintiffs to pay 60% of defendant's costs CATCHWORDS : COSTS – upon failure of joint venture between family members – analogy with partnership and s 66G Conveyancing Act proceedings – where plaintiffs fail on main contested issues LEGISLATION CITED : (NSW) Conveyancing Act 1919, s 66G CATEGORY : Consequential orders CASES CITED : McKay & anor v McKay [2008] NSWSC 177 Carolyn Suzanne McKay (first plaintiff) PARTIES : Ferdinando Schiavo (second plaintiff) David McKay (defendant) FILE NUMBER(S) : SC 4043/05 COUNSEL : M W Sneddon (plaintiffs) M B Evans (defendant) SOLICITORS : Bull Son & Schmidt (plaintiffs) Whitfields Solicitors (defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST BRERETON J Thursday 28 February 2008 4043/05 Carolyn Suzanne McKay & anor v David McKay JUDGMENT (ex tempore) 1 HIS HONOUR: On 21 February 2008 I gave judgment in these proceedings [McKay & anor v McKay [2008] NSWSC 177], expressing the view that trustees should be appointed to sell the property; to pay from the proceeds of sale, the costs of sale; to divide the balance into two shares, called the plaintiffs' share and the defendant's share; from the plaintiffs' share to deduct the amount required to discharge the mortgage and to pay the balance to the plaintiffs; and from the defendant's share to deduct and pay to the plaintiffs an occupation fee calculated as indicated in the judgment, the amount of rates and outgoings to which I found the plaintiffs were entitled, and then to pay the balance remaining of the defendant's share to the defendant. I concluded that there should be judgment that the defendant pay the plaintiffs the sum of $20,000 together with interest at the appropriate rate, and that all the consolidated proceedings should otherwise be dismissed. I directed the parties to bring in short minutes to give effect to the judgment, and indicated that I would hear them on the question of costs. 2 So far as orders to give effect to the judgment are concerned, the commendable sense which resulted in the substantial reduction of issues at the hearing continued to produce a comprehensive set of short minutes on which, except for one minor matter, the parties were agreed. That one minor matter was whether the occupation fee should continue until the date of judgment or thereafter until the defendant vacated the property. Although it is true that in my oral reasons I referred to an occupation fee "to date", in principle there is no reason why it should not, and every reason why it should, continue so long as the defendant has occupation of the property to the effective exclusion of the plaintiffs, and my revised reasons reflect that position. 3 Accordingly, I will add to paragraph 17(c)(iii) of the short minutes the words, "until the defendant vacates the property". I have already indicated that in paragraph 17(c)(iv) I will substitute, for the matter "payable to the plaintiffs in respect of the proceedings formerly commenced in the North Sydney Local Court", the matter "contained in paragraph 20". I have also added to paragraph 17(c)(vi) the matter, "to the extent that they have not already been paid". Subject to those amendments and the other handwritten amendments which also appear in the short minutes and which I have initialled, I make orders in accordance with the document entitled Short Minutes of Order initialled by me, dated this day and placed with the papers. 4 The question of costs is not by any means straightforward. 5 The plaintiffs commenced proceedings seeking the appointment of trustees for sale pursuant to (NSW) Conveyancing Act 1919, s 66G. At the eleventh hour, the defendant consented to a sale of the property, indicating, however, that he did so without any admission that the plaintiffs were ever entitled to an order for sale, under s 66G or otherwise. He maintained his cross-claim – in substance, for a return of his contribution, namely, what was formerly his half share in the property. The plaintiffs unsuccessfully resisted that, ultimately offering to pay out the value of the defendant's life estate but not to return the half share to him. The plaintiffs succeeded in obtaining, ultimately by consent, a judgment for $20,000 plus interest in respect of the proceedings they had commenced in the Local Court. Both parties abandoned their claims for return of personal property. It might also be said that although the defendant succeeded on the cross-claim, the plaintiffs succeeded to the extent that they obtained an occupation fee and some other allowances which were not hotly in dispute to be made from the proceeds. 6 If one looks at the matter unaffected by any offer of compromise, on the cross-claim the defendant has substantially but not entirely succeeded. The fact that the plaintiffs obtained an order for sale, in circumstances where it was conceded at the last minute by the defendant, but without any concession that the plaintiffs were entitled to it, does not advance the plaintiffs' case. On the findings that I made in the substantive judgment, the plaintiffs would not have obtained a s 66G order had it been opposed. The circumstance that, for his own reasons, the defendant at the last minute agrees to a sale does not mean that he was not reasonably entitled to leave the matter in issue so long as he liked when he had a good defence to the application. 7 In straightforward 66G applications the prima facie rule is that the costs come out of the proceeds of sale, although that is not necessarily so where the matter is contested and issues of equitable entitlement fall to be decided. In suits for dissolution of a partnership, the prima facie rule is that the costs come out of the assets of the partnership. 8 The salient features of the present case include that the defendant substantially though not entirely succeeded on the cross-claim; that the plaintiffs succeeded on the claim for $20,000 (on which no time was spent at the hearing, although, no doubt, some had been earlier); and the plaintiffs also succeeded to the extent of obtaining an allowance for the occupation fee. All that is in the context of the failure of a joint venture between members of a family in respect of which it was necessary that their positions be worked out and resolved, much as is the case on the failure of the partnership. 9 Were the matter unaffected by any offers, it would be my view that the plaintiffs ought to pay a significant portion, but not all, of the defendant's costs. The reason for that is essentially that on the main issue litigated, the defendant succeeded; and that was an issue which involved restoring contributions, the retention of which would have been unconscionable. The circumstance that I would reduce the plaintiffs' costs liability from 100 percent to some lesser figure reflects the plaintiffs' success on some minor issues; coupled with the fact that the litigation arises in the context of the winding up of a quasi partnership, so that some costs were either unavoidable or attributable to the need for a separation and dissolution of the affairs of the parties. 10 Should this result be affected and, if so, how, by the various offers that have been made and are now in evidence? 11 The first offer was made in 2001, by the plaintiffs, some four years before proceedings were instituted. It is true that in principle it might well have produced for the defendant a better result than the proceedings have ultimately produced, but it is impossible to say so with certainty, because it was simply not an offer capable of immediate acceptance. There remained terms which had to be worked out, in particular as to the adjustments which were referred to in the offer and had to be made. Accordingly, I cannot be satisfied that, in fact, the defendant failed to better that offer. In any event, having been made four years before proceedings were commenced, and not in the context of the proceedings, I would give it very little weight. 12 In respect of the subsequent offers made on both sides of the record, I think it can be said that neither party has been shown to have bettered an offer made by or on behalf of that party. In some cases the offers came fairly close to the mark, but none were shown to have offered a result better than the offeree ultimately achieved. The fact that the offers came close to the mark reinforces the significance in my mind in the circumstance that these proceedings arise in the context of the breakdown of a partnership-like relationship – in which the parties were negotiating to buy out each other's interest – ultimately, unhappily, without success. If anything, that confirms me in the view that significant weight should be given to the circumstance that this was the winding up of a quasi-partnership, in which a rule other than a prima facie "costs follow the event" rule would often apply. 13 Those considerations have led me to the conclusion that 60 percent is an appropriate share of the defendant's costs that should be borne by the plaintiffs. That is intended to take into account all the proceedings, including those in the Local Court and the District Court, and reflects an offsetting of the various prima facie costs entitlements in respect of different issues, and that a significant portion of the costs were the inevitable concomitant of dissolution of the relationship. 14 Accordingly, I order that the plaintiffs pay 60 percent of the defendant's costs of the consolidated proceedings. I order that the exhibits be returned. ********** 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.