Supreme Court New South Wales Medium Neutral Citation: David v Baker [2015] NSWSC 393 Hearing dates: 25 March 2015 Date of orders: 25 March 2015 Decision date: 25 March 2015 Before: Young AJA Decision: The plaintiff is entitled to the orders he seeks. I make orders 1, 2 and 6 of the Amended Summons filed today, Wednesday 25 March 2015. 1. An order pursuant to section 66G of the Conveyancing Act 1919 (NSW) ('the Act") that James White and Atle Crowe-Maxwell ("the Trustees") be appointed trustees of the whole of the land comprised in certificate of title folio identifier 6/SP41334, known as Unit 6, 10-14 Whiting Avenue, Terrigal NSW 2260 ("the Property"). 2. An order that the property be vested in the Trustees subject to any incumbrances affecting the entirety of the Property, but free from incumbrances, if any, affecting any undivided share or shares in the Property, to be held by the Trustees upon the statutory trust for sale under Division 6 of Part 4 of the Act. 6. A direction that the net proceeds of sale of the Property be applied in the following priority: a. in payment of such agent's commission and costs of sale, including advertising expenses and legal expenses, as the Trustee may determine; b. in payment of the Trustees' reasonable fees; c. in payment of such debts secured on the title of the property, including the liability to Permanent Custodians Limited secured by mortgage registered no. AB530741V; d. in payment of any amount expended by the plaintiff in improving the Property between the date of these orders and the date of the sale; and e. as to any balance, if any, ("Net Proceeds Following Expenses"), it be distributed as follows: iA. The Net Proceeds Following Expenses to be distributed first to the plaintiff up to an amount of $252,743.84, with the balance of the Net Proceeds Following Expenses, if any, to be distributed equally between the parties. Catchwords: REAL PROPERTY – s 66G of the Conveyancing Act 1919 (NSW) – whether this is a case where the court should exercise its discretion not to make an order under s 66G Legislation Cited: Conveyancing Act 1919 (NSW), s66G Cases Cited: Beaton v McDivitt (1987) 13 NSWLR 162 Hogan v Baseden (1997) 8 BPR 15,723 Hogan v Baseden [1997] NSWCA 150; (unreported, NSW CA, 24 November 1997) Muschinski v Dodds [1985] HCA 78; 160 CLR 583 Ngatoa v Ford (1990) 19 NSWLR 72 Re Buchanan-Wollaston's Conveyance [1939] Ch 217 and on appeal [1939] Ch 738 Re Fettell (1952) 52 SR (NSW) 221 Re McNamara (1961) 78 WN (NSW) 1068 Stephens v Debney (1959) 60 SR (NSW) 468 Williams v Legg (1993) 29 NSWLR 687 Texts Cited: Grant Gilmore, The Death of Contract (Ohio State University Press, 1974) Category: Principal judgment Parties: Bernard David (Plaintiff) Geoffrey Charles Baker (Defendant) Representation: Counsel: Mr D Neggo (Plaintiff) Mr AG Rogers (Defendant) Solicitors: Macpherson & Kelley Lawyers (Plaintiff) Brennan Tipple Partners (Defendant) File Number(s): 2014/00279597 Judgment – EX TEMPORE 1. HIS HONOUR: The plaintiff and the defendant are the proprietors as joint tenants of residential property in Terrigal. The property is mortgaged to the Permanent Custodians Limited. The Terrigal property was purchased in September 2003 for $600,000 subject to a mortgage for $510,000. This mortgage was replaced in May 2005 for $571,412.12 and it would seem as at 7 October 2014 $562,767.65 was still owing, even though the plaintiff has from 20 July 2005 to 4 September 2014 paid $505,487.68 to the mortgagee. 2. The plaintiff has asked to sell the property and to discharge the mortgage. The defendant, who lives in the property with his wife and family, resists that application. The facts are unusual. The parties seem to have met somewhere about 1994. In 1999 the parties made an arrangement that the defendant would carry on development of what he calls the electro med electronic device, a project on which he appears to have been working for a previous company. The defendant says that the plaintiff told him, "I won't pay you but I will become your patron and will pay you the costs of establishing a place for you to carry out your research and to accommodate your family". 3. In 1999 a property at Mardi was purchased. It was purchased in the joint names of the plaintiff and the defendant. A rather peculiar document was generated, how exactly is not clear. The document contains recitals which I don't need to set out and then says: PROVISIONS 1. THE AGREEMENT The parties agree and acknowledge as follows: 1.1 Bernard David will continue to make all Mortgage repayments to the Mortgagee until the Mortgage is discharged. Bernard David must, from the date of this agreement, put in place arrangements to ensure that the Mortgage is promptly discharged if he dies. 1.2 Geoffrey Charles Baker will have the right of exclusive possession of the Property, both while the Mortgage repayments are being made by or on behalf of Bernard David, and after the Mortgage or any other mortgage over the Property has been discharged. 1.3 If either of the Parties dies, the effect of the joint tenancy at law will be that the Property will automatically pass to the surviving party. 1.4 Bernard David, Geoffrey Charles Baker and any spouse or child of Geoffrey Charles Baker has a caveatable interest in the Property and may register a caveat over the title to protect their respective interests under this agreement. 1. The document was merely signed. It was not a deed, nor did it purport to be a deed. There are clearly a large number of problems with the document, which I will come to shortly. It is said that it was drafted by a solicitor, I hope it was not. 2. In 2003 the defendant said that he did not want to live in the Mardi property for health reasons. The property was sold and the present property at Terrigal was bought as a replacement and the mortgage, in loose terms, was transferred across. The parties then entered into a fresh agreement, which has been called in submissions "the 2004 agreement", which is almost exactly the same as the 2001 agreement, to which I have already referred. 3. The 2004 agreement for some reason or other deals with what should happen on the death of either of the parties, which is rather strange when the parties were holding as joint tenants. It is only really appropriate if they had been holding as tenants in common. I do not need to refer to those provisions because, in any event, both are still alive. The terms of clause 1 of the 2004 agreement are much the same as they were in the 2001 agreement. 4. The actual research work that the defendant was doing is unclear, for whose benefit it was being done is unclear. It would seem that when the defendant found that he could no longer continue with the work because of his health, he attempted to sell the project and there is no suggestion that the plaintiff was to have any part of the proceeds. Thus it would not appear that any of the work done by the defendant was actually to benefit the plaintiff. Indeed, the use of the word "patron" reinforces that view because a patron in a traditional sense is a wealthy person who smiles upon a poor researcher and allows that person to have resources, even though it is of no benefit to the patron. It appears, accordingly, that there was never any consideration for the promises in the agreement. That probably means that in law there was no contractual rights generated by it. 5. Grant Gilmore in his book "The Death of Contract" points out that it is probably too facile to speak about the law of contract. What, in fact, has happened, historically, is that the common law has preserved the old action on the covenant so far as deeds are concerned and the old action of assumpsit which deals with promises which are supported by consideration (the concept of what constitutes consideration has changed from time to time). But in addition we now have proprietary estoppel; conventional estoppel; we have actions in tort for negligent misstatement causing economic loss, so that when one is looking at one's legal or equitable rights, which are centred on an agreement or arrangement, are not necessarily confined to the principles that flow from the old action of assumpsit requiring, offering acceptance and consideration in the traditional sense. When I say traditional sense I mean the way in which the Court of Appeal approached the concept of consideration in a case relevantly similar to the present one, Beaton v McDivitt (1987) 13 NSWLR 162. 6. The only other facts I think I need mention are that it is clear that the defendant has never paid rent. He has paid some outgoings but, as I have already mentioned, the plaintiff paid $500,000 out towards the mortgage, so that if the defendant paid anything it was relatively little. Although under the various Local Government Acts from time to time each joint tenant was liable to pay a moiety of the rates, it would seem that the plaintiff again paid the substantial part of them. The last research that the defendant did was in 2009 and in 2013 his health deteriorated to such an extent that he had to go on the disability pension. 7. The exact state of the plaintiff's financial situation has not been explored. The plaintiff himself did not give evidence. It would seem that the family organised his niece who gave evidence, Ms Seisun, to deal with the problem on his behalf. It is relatively clear that the plaintiff has no intention, unless compelled by law, to continue to subsidise the defendant or to pay the mortgage monies and it would seem that, unless the defendant does it and there is no evidence that he has got the means to do so (although on the other hand there is no evidence that he has not), the mortgage will sell to realise the $562,767 still owing. Accordingly, it is a hard cold fact that, in any event, the defendant is not going to be residing in this house for very much longer. 8. The plaintiff seeks relief under s 66G of the Conveyancing Act 1919 (NSW). Subsection (1) provides, in essence, that when property is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety. The learning on that section is that basically the plaintiff has a right to the order: See Re Fettell (1952) 52 SR (NSW) 221. However, subsequent cases have shown that is too wide a statement and that whether the court makes an order under s 66G is, to a great degree, discretionary. Counsel have cited a number of authorities on the point and I think I need only refer to Williams v Legg (1993) 29 NSWLR 687 at 692 and following. The key question is whether this is a case where the court should exercise its discretion not to make an order. 9. Earlier this morning I heard evidence from both Ms Seisun and also Mr Baker and I have had heard very helpful submissions, both in writing and orally, from Mr D Neggo of counsel who appeared for the plaintiff, and Mr AG Rogers of counsel who appeared for the defendant. In his written submissions Mr Neggo put that under s 66G each co-owner has the right to approach the court for partition or sale and although the word "may" is used with respect to the court's powers under the section, except in very special cases any applicant is entitled to an order under the section almost as of right. He quotes authority and continues "In particular, it would not be a proper exercise of the discretion to refuse an order on the ground of hardship." He quotes Hogan v Baseden (1997) 8 BPR 15,723 and that authority is authority for that proposition. He then, however, concedes that "an order may be refused if it would be inconsistent with a proprietary right or contractual or fiduciary obligation, such as an agreement or understanding not to sever". 10. In one sense that was very generous because there is authority from Mason P in the NSWCA in Hogan v Baseden [1997] NSWCA 150; (unreported, NSW CA, 24 November 1997) that there must be a contractual right before it would be appropriate for the court to exercise its discretion against making an order. If that is so, and as I will indicate shortly it is not in accordance with the overwhelming weight of authority, the 2004 agreement needs to be construed to see what right it actually confers. 11. Mr Neggo says that it was a situation where the agreement was principally to give the defendant a place to carry on his research and that when the research ceased in 2009 the purpose of the agreement had come to an end. He says further that it could not be a proper construction of the agreement that Mr Baker could inhabit the property with his family indefinitely in the sense of forever or until his death and that the proper construction of the agreement must be that it is terminable at will or terminable when the research is finished. Putting the same thing another way, only for the period of the patronage, all of which ceased by 2008 and 2009. In my view that is a fair construction of the agreement, especially as there was no obligation on Mr Baker to pay anything. If that is so, then there was no contractual rights. If the point about there being no consideration is correct, there was also no contractual rights. 12. The case could have been put, but was not presumably because counsel did not think it could be made, that there was some sort of proprietary estoppel. That cannot be made on the evidence before me because there was no evidence of any reliance and, indeed, proprietary estoppel was not put as part of the plaintiff's case. I have not overlooked the fact that had the plaintiff died, Mr Baker would at law have become the sole proprietor at law. This event did not happen. I do not consider this factor sufficient to affect the right of the parties inter vivos. 13. The case was, however, that in the rather peculiar circumstances of the present case, even if there was no actual contractual right, the court should exercise its discretion in favour of the defendant. In making that case Mr Rogers put that the defendant and his family have lived continuously and uninterrupted in the Terrigal property since it was purchased in 2003 and "it appears … that the plaintiff now has tax difficulties and wishes to renege on the agreement". Even though there may not be a contract that was enforceable in a court of law, there was an agreement, an agreement that was made and possibly relied on by each party, put together by a solicitor and that one should not just cast that aside as meaningless as both parties considered that they were bound by it and that is attested by their signature. A hint of estoppel by convention sort of filters through the evidence. 14. Then Mr Rogers put that the court would not assist a co-owner to do an act which is directly contrary to arrangements with other co-owners and quoted the leading English case from which a lot of the New South Wales law has flowed Re Buchanan-Wollaston's Conveyance [1939] Ch 217 and on appeal [1939] Ch 738. The Court of Appeal in Williams v Legg suggests that one can look when exercising the court's discretion beyond strict contractual rights, in the sense of rights that would support an action in assumpsit or an action in covenant. The Court said at page 693 in Williams v Legg: For present purposes in describing the ambit of the discretion it is sufficient to say that it enables the court to refuse an order for sale where the order would be inconsistent with some proprietary right, or some contractual or fiduciary obligation. 1. The Court affirmed what Myers J had said in Re McNamara (1961) 78 WN (NSW) 1068 and one should also note Stephens v Debney (1959) 60 SR (NSW) 468. 2. A problem for a Judge at first instance is to know exactly what is the ambit of the discretion. In quite another context in Muschinski v Dodds [1985] HCA 78; 160 CLR 583 at 615 Dean J said of what is conscionable it does not represent "a medium for the indulgence of idiosyncratic notions of fairness and justice". His Honour then, from 615 onwards, indicated that when working out what is unconscionable or unfair one must look at the decisions of equity courts over the ages and see what guidance can be obtained as to the exercise of the discretion. Unfortunately, for the exercise of the discretion under s 66G there are no precedents to which one can resort and so one must try to look at the matters objectively, rather than any subjective thoughts one may have but, of course, bearing in mind that each case is different and must be decided on its merits and one must look at the particular facts. (See Needham J in Ngatoa v Ford (1990) 19 NSWLR 72). 3. In the present case the defendant has lived in the property with his family rent free for approximately 10 years. Under the authorities that I have already referred to mere hardship is not a sufficient reason for denying the plaintiff an order. He has lived there virtually rent free. The plaintiff, for no benefit at all, has paid out at least $500,000 on the mortgage. If no order is made in this case and the plaintiff (and the defendant) do not pay the mortgage the inevitable result is that the mortgagee will sell the property and the defendant will have to vacate. To my mind when one adds those facts to the prima facie right of the plaintiff to an order, it is not a case where I should exercise my discretion in favour of the defendant. Accordingly, the plaintiff is entitled to the order he seeks. 4. An Amended Summons was filed today and I make orders 1, 2 and 6 of the Amended Summons. ********** 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: 09 April 2015