Supreme Court New South Wales Medium Neutral Citation: Jo Maree Payne v Helen Mary Rowe & Anor (No 2) [2012] NSWSC 1406 Hearing dates: 16 November 2012 Decision date: 23 November 2012 Jurisdiction: Equity Division Before: Ball J Decision: See paragraph 28 of this judgment. Catchwords: COSTS - UCPR r 42.1 - determining who in substance has won the proceedings - where proceedings initiated by application for order under s 66G of the Conveyancing Act 1919 but majority of evidence focused on respective interests of each party in the property - where neither party has succeeded - where plaintiff alleged to have given deliberately false evidence - held parties should bear their own costs. Legislation Cited: Conveyancing Act 1919 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 Baumgartner v Baumgartner (1987) 164 CLR 137 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 Jo Maree Payne v Helen Mary Rowe & Anor [2012] NSWSC 685 Kardos v Sarbutt (No 2) [2006] NSWCA 206 Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Limited (No 2) [1999] 1 Qd R 518 Roache v News Group Newspaper Ltd [1992] TLR 551 Timms v Clift [1998] 2 Qd R 100 Category: Costs Parties: Jo Maree Payne (Plaintiff) Helen Mary Rowe (First Defendant) Jeremy Richard Dawson Rowe (Second Defendant) Representation: DF Villa (Plaintiff) KG Oliver (Defendants) Thomsons Lawyers (Plaintiff) Reuben George Lawyers (Defendants) File Number(s): 2011/157795 Judgment 1I delivered judgment in this matter on 25 June 2012 (Jo Maree Payne v Helen Mary Rowe & Anor [2012] NSWSC 685) and subsequently, on 17 August 2012, made orders which gave effect to that judgment. The only outstanding issue is costs. Background 2The proceedings concern a property at Ourimbah which is owned by the plaintiff, first defendant and second defendant as joint tenants in equal shares. The second defendant is the plaintiff's brother and the first defendant their mother. They bought the property in 2000 and lived there for a number of years. However, they fell out and eventually the plaintiff moved out of the property in September 2009. On a number of occasions after moving out, the plaintiff raised with her mother when her mother and the second defendant were going to buy out the plaintiff's interest in the property. Eventually, on 22 March 2011, the plaintiff's solicitors wrote to the defendants stating that they had instructions to make an application under s 66G of the Conveyancing Act 1919 (NSW) (the Act) for the appointment of judicial trustees for the sale of the property and also stating that agreement would need to be reached on how the proceeds of sale were to be divided having regard to the "unequal contributions towards the costs incurred for the property, particularly relating to the purchase price and loan repayments". The letter attached a schedule which purported to set out the contributions that each party had made to the purchase price and loan repayments. The purchase price of the property was $450,000 plus stamp duty and legal fees. The plaintiff's position was that, of the $110,000 that the parties had themselves contributed to the purchase price (including stamp duties and legal fees), she had paid $100,000 and the first and second defendant had contributed the balance. In addition, the plaintiff claimed that she had contributed significant amounts to the mortgage repayments up until January 2009. The letter went on to say: At this stage, however, we simply invite your agreement, in principle, to the equal sharing of these expenses [that is the purchase price and loan repayments] which, ultimately, can be determined and the owners' proportions calculated by the trustees appointed for sale. The letter also indicated that, if agreement could be reached, the plaintiff did not propose to make any claim for an occupation fee. 3The defendants did not respond to the letter and, on 13 May 2011, the plaintiff commenced these proceedings. The proceedings were originally commenced by way of summons, but orders were made by Hallen AsJ on 6 December 2011 that they continue on pleadings. There were a number of other interlocutory applications concerning amendments to the pleadings and the failure by the defendants (on occasions) to comply with timetables set by the court. Some of the interlocutory applications have been the subject of separate costs orders. However, the history of those interlocutory applications is not important to the outstanding question of costs. 4By her statement of claim, the plaintiff sought various declarations and orders. One order was for the appointment of judicial trustees under s 66G of the Act. The plaintiff also sought declarations that the parties held the property on a resulting or constructive trust for the plaintiff and the first and second defendants in proportion to their respective contributions to the purchase price (in the case of a resulting trust) or in proportion to their respective contributions to the purchase price, mortgage repayments and improvements to the property (in the case of a constructive trust). The precise interest claimed by the plaintiff varied depending on the basis of the claim and the findings the court made concerning the contributions each party had made to the costs of improvements to the property. It is sufficient for present purposes to observe that, however the claim was put, the plaintiff maintained that she was entitled to substantially more than a one third interest in the property. 5Initially, the first and second defendants resisted an order under s 66G of the Act on the basis that the parties had agreed at the time the property was purchased that, while all the co-owners lived, the property would not be sold except with the consent of all of them. However, on 28 September 2011, the solicitors for the defendants served on the solicitor for the plaintiff an unsealed copy of a cross-summons. That cross-summons sought the appointment of different trustees pursuant to s 66G of the Act from those proposed by the plaintiff. It also sought a number of ancillary orders including an order that an account be taken of the parties' respective contributions to the property. It was apparent from that time, as the solicitors for the plaintiff acknowledged in their letter dated 17 October 2011 to the solicitors for the defendants, that the only issue between the parties was their respective entitlements to the proceeds of sale. There were also ancillary issues concerning how those entitlements should be determined and whether and on what conditions the defendants should be given an opportunity to buy the plaintiff's interest in the property. 6Following the order that the case proceed on pleadings, the defendants filed defences and cross-claims. It is apparent from those pleadings that the defendants resisted the plaintiff's claims that the parties held the property on a resulting or constructive trust. Their position was that each party was entitled to a one-third interest in the property and was liable to contribute one-third of the costs. To the extent that the plaintiff had contributed more than her one-third share at the time the property was bought, she was entitled in theory to claim contribution. However, the defendants maintained that any such claim was subject to a 6 year limitation period and that consequently, to a large extent, any such claim was now statute barred. On the other hand, the defendants maintained that, to the extent that they had contributed more than their respective one-third shares to the mortgage payments, they were entitled to claim contribution from the plaintiff. In addition, the second defendant claimed, incidentally to any sale of the property, a rateable contribution equal to the lower of the cost or present value of improvements made to the property at his expense to the extent that those costs had not otherwise been brought to account such as by way of set-off against a claim for occupation rent. 7Two things are clear from this description of the parties' respective claims. 8First, a critical issue in the case was the respective contributions that each party had made to the purchase of and improvements to the property. 9Second, both defendants maintained that the plaintiff was entitled to a less than one-third share of the proceeds of sale of the property, although the amounts claimed by each of the defendants from the plaintiff's share differed. 10In the judgment delivered on 25 June 2012, I concluded that: (a) In principle, the plaintiff had satisfied the requirements for the imposition of a remedial constructive trust in accordance with the principles set out in Baumgartner v Baumgartner (1987) 164 CLR 137; (b) Having regard to the parties' respective contributions to the purchase price and mortgage payments, the plaintiff's beneficial interest in the property was 34.9 percent; (c) A further adjustment needed to be made to take account of the improvements made to the property by the plaintiff and second defendant and an occupation rent payable to the plaintiff that could be set off against the value of improvements made to the property by the second defendant; (d) There was a real question whether, having regard to the findings that I had made, there would be a significant difference between the parties' legal interests in the property and their beneficial interests once all appropriate adjustments had been made; (e) In those circumstances, there was a real question whether any declaration should be made to the effect that the parties' beneficial interests were different from their legal interests, but I would hear further submissions on that issue. 11Having regard to the conclusions that I reached, the defendants proposed orders the effect of which was to appoint the trustees nominated by the plaintiff to sell the property and to permit the parties to purchase the property without having to pay a deposit and by setting off his or her entitlement to the proceeds of sale against the money bid or offered. In addition, order 8 provided: The proceeds of sale of the property to be distributed as follows: a. The outstanding balance of the loan from the Commonwealth Bank of Australia (Account Number xxxxxxxx) (the "loan") be repaid; b. All other amounts necessary to discharge Registered Mortgage Number AE322549X be paid; c. All costs, charges and expenses relating to the Property including, but not limited to, all Council rates, water and sewerage charges and insurance, be paid; d. All costs associated with the obtaining of any valuation, costs of marketing and sale of the property and conveyancing costs be paid; e. The Trustees' charges be paid; f. The proceeds of sale thereafter remaining be divided into two funds consisting respectively of one-third thereof (the "first fund") and two-thirds thereof (the "second fund"); g. There be deducted from the first fund, and added to the second fund, a sum corresponding to one third of the amounts of principal and interest paid by the first and second defendants in respect of the loan from and after 25 June 2012; h. The balance of the first fund thereafter be paid to the Plaintiff and the balance of the second fund be paid to the First and Second Defendants, or as they direct. The plaintiff offered no argument against the orders proposed by the defendants and, as I have said, they were made on 17 August 2012. Relevant principles 12The general principle in relation to costs is set out in Uniform Civil Procedure Rules 2005 (NSW) r.42.1: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 13In determining what "the event" is the court must look at the substance of what has occurred: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22 per Young J. 14One way of answering that question of substance is to ask: ... Who, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win? See Roache v News Group Newspaper Ltd [1992] TLR 551, cited with approval by the Queensland Court of Appeal in Timms v Clift [1998] 2 Qd R 100 at 107 and by Ward J in Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 at [26]. 15Where it is necessary for a joint owner to seek relief under s 66G of the Act because the joint owners cannot agree on how the proceeds of sale should be divided, it is not normally possible to say that, in substance, one party or the other has succeeded so that costs ought to be awarded in favour of the joint owner who brought the application. As Brereton J (with whom Basten JA and Hunt AJA agreed) explained in Kardos v Sarbutt (No 2) [2006] NSWCA 206: [28] ... [I]n 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. ... 16These principles do not apply, however, where there is an issue concerning whether relief should be granted at all under s 66G. In that case, there is no accident about who is the plaintiff and who is the defendant. Rather, in such a case, it is necessary for the plaintiff to commence the proceedings because the defendant resists any order at all for the sale of the property. If the defendant is unsuccessful, there is no reason why he or she should not pay the plaintiff's costs in those circumstances. Decision 17Originally, there were in substance two issues in the case. One was whether an order should be made under s 66G of the Act. The other was the parties' respective interests in the property. However, shortly after the proceedings were commenced, the defendants conceded that the property should be sold, although there remained some issues concerning precisely how that should be done - who, for example, the trustees for sale should be. In substance, however, the real issue between the parties and the one that was the subject of most of the evidence and took up almost all of the hearing time was the parties' respective interests in the property. 18As to the first issue, and subject to what I say below, there is no reason not to apply the approach taken by the Court of Appeal in Kardos. Having regard to the position each party took, an application under s 66G of the Act was unavoidable. However, in circumstances where both the plaintiff and the defendants accepted from an early stage that the property had to be sold, the case falls squarely within the principle stated in Kardos. In the normal course of events, the costs of the application should be borne out of the sale proceeds. 19As to the second issue, both the plaintiff and the defendants claimed that the court should make a costs order in their favour. Mr Villa, who appeared for the plaintiff, submitted that the plaintiff had succeeded in her claim for the imposition of a remedial constructive trust and had succeeded in her claim that she was entitled to a substantial proportion of the proceeds of sale of the property where that entitlement had been resisted by the defendants. On the other hand, Mr Oliver, who appeared for the defendants, submitted that the plaintiff had claimed a substantially greater interest in the property than was reflected by her legal interest. Since she had failed in that claim, she was liable to pay the defendants' costs. 20I do not accept either of these submissions. In my opinion, neither the plaintiff nor the defendants succeeded in their respective claims. The plaintiff sought an interest in the property which was greater than her legal interest. She failed in that claim. The defendants, while acknowledging that each party held a one-third interest in the property, sought to make adjustments based on contributions that each party was said to have made to the acquisition of the property with the result that the plaintiff was liable to pay them substantial amounts by way of a claim for contribution. They failed in that claim. In those circumstances, in my opinion, it is appropriate that each party should bear his or her own costs in relation to the second issue. 21Mr Oliver advanced two additional reasons for why the plaintiff should pay some of or all of the defendants' costs. 22First, he submitted that, on the findings I made, the plaintiff gave deliberately false evidence and in those circumstances it was appropriate that she be ordered to pay the defendants' costs on an indemnity basis. Second, Mr Oliver submitted that the first defendant never sought more than a one-third interest in the property and that consequently she should have her costs. I do not accept either of those submissions. 23In my opinion, it is incorrect to describe the present case as one in which the plaintiff unnecessarily prolonged the case by making deliberately false allegations: cf Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Limited (No 2) [1999] 1 Qd R 518 at 533-7. The second defendant gave evidence that he gave the plaintiff approximately one-third of the deposit for the property in cash and also made contributions to the mortgage payments by paying the plaintiff cash. The plaintiff accepted that the second defendant had made some contributions towards the mortgage payments, but denied that the second defendant had made any contribution towards the deposit and denied that the first defendant had regularly paid her cash in respect of the mortgage payments. On the evidence available, I was not satisfied that the second defendant had made any contribution towards the deposit. On the other hand, I was satisfied that he had made substantial contributions to the mortgage payments beyond those admitted by the plaintiff. In my earlier judgment (at [55]) I concluded that one of the plaintiff or the second defendant must have given deliberately false evidence in relation to that issue and I concluded, for the reasons set out in my judgment, that on the balance of probabilities I did not accept the evidence given by the plaintiff. However, even accepting that, there was a genuine dispute about precisely how much the second defendant had contributed. That dispute arose because the second defendant had kept no records at all. It was a dispute that was only partially resolved in the second defendant's favour. Moreover, a substantial amount of the information that I relied on in reaching the conclusion that I did was only produced by the second defendant shortly before or at the hearing. In those circumstances, I do not think the plaintiff's conduct justifies any different cost order in this case. 24As to Mr Oliver's second point, I do not accept it for two reasons. 25First, it is not correct to say that the first defendant did not seek more than the amount reflected by her legal interest. She sought an account from the plaintiff for contributions that the first defendant had made after the plaintiff left the property. 26Secondly, in my opinion, it is unrealistic to separate the position of the first and second defendants in this case. Both were represented by the same lawyers and both made the same submissions to the court. Both sought to resist the plaintiff's claim and both maintained that, in large part, any claim for contribution the plaintiff had was statute barred. In those circumstances, no different costs order should be made in relation to the first defendant. 27In the normal course of events, on the conclusions I have reached, the costs referrable to the application under s 66G of the Act would be paid for out of the sale proceeds of the property and there would be no order for costs in relation to the balance of the proceedings. However, in this case, very few of the costs are referable to the claim under s 66G rather than the claims concerning the way in which the sale proceeds should be divided. Moreover, there would be considerable difficulty and costs involved in separating out those costs. In my opinion, the difficulties and costs of doing so would not be justified having regard to the small difference that such an exercise would make to the practical outcome for the parties. 28As a result, the appropriate order is that each party should bear her or his own costs of the proceedings. However, this order is not intended to affect any order for costs already made in the proceedings. ********** 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: 27 November 2012