New South Wales Supreme Court CITATION : Cain v Cain [2007] NSWSC 623 HEARING DATE(S) : 08/06/07 JURISDICTION : Equity Division JUDGMENT OF : Young CJ in Eq EX TEMPORE JUDGMENT DATE : 8 June 2007 DECISION : Plaintiff appointed trustee for sale under s 66G of Conveyancing Act. CATCHWORDS : REAL PROPERTY [310]- Sale or partition- Plaintiff equitable co-owner seeking sale under s 66G of Conveyancing Act- Fifth defendant claims that sale incompatible with partnership deed- Fifth defendant not a party to the partnership deed- Other co-owners opposing plaintiff's proposed method of sale- Order for sale made on basis to accommodate all parties. Civil Procedure Act 2005, s 56 LEGISLATION CITED : Conveyancing Act 1919, ss 36C, 66B(2), 66G, 66H, 66I Partition Act 1893 (India), s 3 Western Lands Act 1901, s 18K Callahan v O'Neill [2002] NSWSC 877 Hogan v Baseden (1997) 8 BPR 15,723 Hordern v Hordern [1910] AC 645; 10 SR (NSW) 677 Rollo v Minister of Town and Country Planning [1948] 1 All ER 13 CASES CITED : Stephens v Debney (1959) 60 SR (NSW) 468 Subal Chandra v Gostha (1956) 60 CWN 829 Vyse v Foster (1874) LR 7 HL 318 Williams v Legg (1993) 29 NSWLR 687 Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 George Julius Cain (P) Brigitte Cain (D1) PARTIES : James Edward Cain (D2) Raymond Eric Cain (D3) Kenneth Lee Cain (D4) John Henry Cain (D5) FILE NUMBER(S) : SC 3396/06 COUNSEL : M W Sneddon (P) R C A Higgins (D5) SOLICITORS : J A Hennessey & Co (P) M J Duffy & Son (D5) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Friday 8 June 2007 3396/06 – CAIN v CAIN JUDGMENT 1 HIS HONOUR: The plaintiff seeks (1) an order that he holds various parcels of land at Cobar on trust for himself and the defendants as tenants in common so that he would have a one-seventh interest and the fifth defendant a one-seventh interest; and (2) an order under s 66G of the Conveyancing Act 1919 that the land be vested in trustees for sale. The land concerned consists of a number of freehold parcels plus one perpetual lease under the Western Lands Act 1901. 2 The lands the subject of these proceedings were originally purchased because they joined or were close to other lands in the Cobar district which were owned and operated by members of the Cain family and their associated companies. There was a deed of partnership of 1 January 1976, though the fifth defendant, J H Cain, was not a party to that deed, which allowed inter alia the partners to use each others' lands for partnership purposes without the lands becoming a partnership asset. 3 The subject land was purchased by the plaintiff in 1978 for $100,000, but, by deed of declaration of trust of 5 February 1979, he acknowledged that he held the land on trust for the Cain Pastoral Company, which actually paid the purchase price therefor. The Cain Pastoral Company has ceased as a partnership, at least with the death of the plaintiff's father. Before the plaintiff's father died the family diversified into other businesses. One of those businesses failed and a company, Cain Pastoral Co Pty Ltd, which had been formed to operate some of those businesses, was deregistered in 2004 after being wound up. The partnership deed also refers to Koolmurri Pty Ltd, which appears to have been a trustee for various trusts in favour of the second, third, fourth and fifth defendants. This company, together with the plaintiff and the plaintiff's parents, were said to be the partners of the Cain Pastoral Company. 4 There must be a little doubt as to exactly who the beneficiaries are of the declaration of trust, however, it is more likely than not that they are the parties to these proceedings and that so much time has gone by without anybody else making a claim that it would be inappropriate to make a further search for possible claimants. 5 On that basis, the plaintiff has a one-seventh equitable interest in the property; the first defendant, the plaintiff's mother, two-sevenths and each of the second through to fifth defendants one-seventh. As they are equitable owners they do not have any actual right to possession. However, for probably the last 13 years the fifth defendant has been in occupation. It would appear that he has not paid any occupation fee, but has made some improvements and has paid the rates. As he is not making a formal claim for compensation for improvements, he would not normally be charged with any occupation fee. 6 He and his life partner, Melissa Lawrence, have placed caveat 6073492 over the titles claiming "occupancy rights granted to the caveators by the registered proprietor in 1994." This would not seem to constitute an interest in land. It would seem that the claim is for a licence determinable on reasonable notice rather than there being squatters' rights or a grant of interest in land. The plaintiff wishes that caveat to be removed and, during debate with counsel, an agreement was made that it be removed if an order under s 66G were made in the form which I contemplated. 7 It would seem from the evidence that the majority of the people interested in the property are content for the existing situation to continue with the fifth defendant in occupation, however, the plaintiff wishes to realise the capital value of his interest in the land and does not wish the current situation to continue. Today the question as to whether an order should be made under s 66G has been strongly debated, with Mr Mark Sneddon appearing for the plaintiff and Ms Ruth Higgins appearing for the fifth defendant, the other parties either filing appearances or making their wishes known in evidence. 8 Today the fifth defendant suggested that he would be willing to give an undertaking to the court to have a valuation made, then to buy out the plaintiff and anyone else who wishes to be bought out at a pro rata price of the valuation. This was not acceptable to the plaintiff, who said that there would be other people interested in the land and that the sale should go to auction. 9 However, before one gets to the mode of sale one must look to see whether this is an appropriate case for making an order under s 66G at all. There is no doubt that the facts of this case give the court jurisdiction to make an order. There is also no doubt that whilst the section affords a discretion to the court as to whether it will make an order, the court will usually consider it appropriate to make an order unless persuaded by cogent arguments from those who oppose. 10 Ms Higgins puts that the categories of cases in which the court has declined to grant an order include: (1) Where the legal title is held by trustees and the trust instrument contains its own procedure for sale: see Stephens v Debney (1959) 60 SR (NSW) 468; (2) Where the plaintiff's conduct rates as an estoppel against the sale: see Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685; and (3) Where an order would be incompatible with a contractual or equitable duty binding the applicant: see Williams v Legg (1993) 29 NSWLR 687; Woodson supra; Callahan v O'Neill [2002] NSWSC 877 and Hogan v Baseden (1997) 8 BPR 15,723. 11 Ms Higgins says that in the present case the making of an order would be incompatible with the partnership deed and with the equitable obligations under which the plaintiff acknowledged his trust. She also says that the plaintiff has a conflict between his duty qua trustee and interest qua beneficiary, which means that approaching the court for sale to protect his interest as a beneficiary should not be countenanced by the court. She also says that this matter goes to the suitability of the trustee, if a trustee is to be appointed. 12 The partnership deed to which I have referred was not one in which the fifth defendant was a party. It does not seem to me that s 36C of the Conveyancing Act allows the fifth defendant to enforce it; nor is there sufficient material to show that: (a) he is a beneficiary under the John Henry Cain trust for which Koolmurri Pty Ltd is the trustee (and one might infer that he is); or (b) that he has any right under that agreement to have disputes between partners arbitrated. 13 Accordingly, I do not consider that the submissions that these matters should go to arbitration and be stayed in the meantime can succeed. 14 Where there is a family situation or a partnership and the parties nominate a particular member of the family as a trustee, then the court does not strictly apply the fiduciary obligations to avoid conflict that might otherwise happen: see Vyse v Foster (1874) LR 7 HL 318 and Hordern v Hordern [1910] AC 645; 10 SR (NSW) 677. The parties, by choosing to present with a conflict, must be taken to have acknowledged that that was not to be a disqualifying factor. Those observations apply in the instant case. 15 Today the fifth defendant offered to obtain a valuation and to buy out his brothers. I think that acknowledges that he too realises that the existing situation cannot continue and accordingly, its seems to me that some order must be made putting an end to the present co-ownership. Having given the matter considerable thought and bearing in mind the strictures of s 56 of the Civil Procedure Act 2005 and bearing in mind the obligations under section 66H of the Conveyancing Act, I think that the following is the way forward: that the court should make an order under s 66G for sale but under s 66G(6), and its inherent power, it should modify the trust for sale or direct that trustee in accordance with what follows. 16 Under s 66G(2), where the entirety of the property is vested in trustees, those trustees are usually, unless the court otherwise determines, appointed trustees of the statutory trust. Now, normally the singular includes the plural, however, s 66B(2) means that normally the purchaser cannot get an acquittance unless there are two trustees. 17 The plaintiff has indeed not suggested that he be the trustee, though he was amenable to the suggestion. When his counsel was reminded of section 66G(2) he put forward two chartered accountants. Those chartered accountants would be eminently suitable but, unfortunately, their fees would be fairly high and it would be best to avoid incurring those costs if at all possible. However, it may be that later on one would have to appoint, say, the fifth defendant as well as a trustee to give a receipt under section 66B. 18 A valuation will need to be obtained for the purpose of setting a reserve. The New South Wales Act does, compared with the Partition Act 1893 (India), provide for the purchase by a party on a valuation: cf s 3 of the above Act, set out in the standard reference book on this sort of case Mitras Co-ownership and Partition, 7th ed (Eastern Law House, Calcutta, 1994) p 421. 19 Under the Partition Act (India) the court has a valuation made so that co-owners may get the property at the price fixed. The price is to be ascertained as at the date of the order and then there are provisions for objections to be made and it is made clear in the authorities in India that there is a difference in a valuation for that purpose as opposed to a valuation for the purpose of a reserve: see Subal Chandra v Gostha (1956) 60 Calcutta Weekly Notes 829, noted Mitra p 380. 20 In the present case counsel have agreed that both parties would accept the valuation by David Sullivan of Herron Todd White, Valuers of Dubbo. Mr Sullivan should be asked for a valuation on the basis of a fair, current market valuation. However, I think he also should be asked to suggest a reserve price but not put that in the formal valuation but instead send it in a sealed envelope to the Registrar in Equity to be placed in file 3396/06. 21 When the valuation is obtained it may be, and hopefully it will be, the parties can agree that the best way of progressing the matter is for there to be a sale to the fifth defendant. The costs of all parties to the application can be deducted from the proceedings and a distribution can be made. The court will make an order under s 66I, which is not opposed, to set off the purchase price against the fifth defendant's entitlement to the proceeds. 22 If the parties cannot agree, then one must consider whether the costs of the auction are worthwhile being incurred for the chance that there might be any higher bidder if the property went to auction. I am not at the moment able to make that determination because I do not have the evidence. The sort of evidence that the court would need would be some fair estimate of the costs of the auction – that at least would be some evidence rather than the suggestion that was made from the bar table that other persons might be interested. 23 However, s 66H would mean that before the property went to auction rather than a private sale the plaintiff as proposed trustee would be obliged to consult the other persons. "Consult" means putting propositions, listening to propositions and listening to the reply. It means more than mere notification. Sufficient information must be given by each side to the other and there must be sufficient time for an evaluation of the proposals and listening to the response: see Rollo v Minister of Town and Country Planning [1948] 1 All ER 13, 17 and the other cases referred to in [31218.5] in the notes to s 66H in my Conveyancing and Real Property Legislation, 2nd edition. 24 I must also note that as part of the lands consist of perpetual leasehold under the Western Lands Act, it needs to be borne in mind that s 18K of that Act requires the Minister's consent to any transfer. 25 The orders that I make today are: (1) An order that the plaintiff be appointed trustee for sale under s 66G of the Conveyancing Act of the land in Schedule A to the amended summons subject to encumbrances affecting the entirety but free from encumbrances affecting any undivided shares. (2) That the caveat 6073492 be removed by 4.00 pm on 15 June 2007. (3) That the parties approach Mr David Sullivan of Herron Todd White, Valuers of Dubbo: (a) to obtain the fair market valuation as at June 2007 of the property in Schedule A to the amended summons; and (b) to advise the court in a sealed envelope as to his opinion as to the proper reserve price should the property go to auction. (4) I direct that there be no sale carried out prior to 8 September 2007 and that in the meantime there be consultation between the parties as contemplated by s 66H of the Conveyancing Act . (5) I give leave under s 66I of the Conveyancing Act for any party other than the plaintiff to bid for or buy the property setting off or accounting for the purchase money instead of paying the same so far as appropriate. (6) I order that the costs to date of all parties be paid out of the proceeds of sale. (7) I reserve further consideration as to costs. (8) I stand the matter over for mention to my list at 9.50 am on 16 August 2007 on the basis that that date can be adjusted to suit the convenience of counsel. (9) Liberty to apply on three days' notice. ****************** 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.