Supreme Court New South Wales Medium Neutral Citation: Neilan v Neilan [2019] NSWSC 66 Hearing dates: 6 February 2019 Decision date: 06 February 2019 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Pursuant to s 36A of the Conveyancing Act 1919 (NSW), order that the shares in Avelona Flats Pty Ltd being Share Group C No 2281 to 3420 in the name of the plaintiff as to 75% and the defendant as to 25% as tenants in common be sold. 2. Order that the plaintiff and the defendant do all things necessary to give effect to O 1. 3. Order that the defendant vacate the premises known as Flat 3, 35 Arcadia St, Coogee within 42 days of the date of these orders. 4. Order that the plaintiff have authority to conduct the said sale either by public auction or by private treaty and the transfer of the shares to the purchaser thereof and to receive the purchase moneys. 5. Order that the plaintiff hold the proceeds of such sale to be paid as follows: (a) outstanding Council rates, water rates, company levies, agent's commission and legal costs of the sale; (b) costs of these proceedings on a solicitor/client basis; (c) 25% of the net balance to the defendant; (d) $180,000 to the defendant, such payment to be in discharge of the loan made by the defendant to the estate of the late Michelle Anne Waldon pursuant to the agreement made 14 June 2013 between the executrix of the estate and the defendant; and (e) the balance remaining of the proceeds of sale to the plaintiff. 6. Liberty to both parties to apply on three days' notice for any application to vary or implement the above orders. 7. These orders be entered forthwith. 8. Direct the plaintiff to notify the defendant by email to the defendant's email address as soon as practicable after entry of these orders of the making of these orders and thereafter serve a sealed copy of the orders on the defendant as soon as practicable. Catchwords: PERSONAL PROPERTY — Co-ownership — Direction by court to divide co-owned chattels — plaintiff seeking order for sale of shares held by the parties as co-tenants in common pursuant to s 36A of the Conveyancing Act 1919 (NSW) — sale of shares ordered and defendant to vacate the premises Legislation Cited: Conveyancing Act 1919 (NSW), s 36A Cases Cited: Capogreco v Rogerson [2015] NSWSC 1371 Ferrari v Beccaris [1979] 2 NSWLR 181 Naziridis v Rimis (1985) 9 BPR 16 Re Gillie, ex parte Cornell (1996) 150 ALR 110; (1996) 70 FCR 254 Category: Principal judgment Parties: Emily Kate Neilan (Plaintiff) Steven Neilan (Defendant) Representation: Counsel: S Southwick (Plaintiff) Solicitors: File Number(s): 2018/00278295 Publication restriction: Nil Judgment 1. HER HONOUR: This is an application by the plaintiff, pursuant to an amended summons filed 10 December 2018, for an order pursuant to s 36A of the Conveyancing Act 1919 (NSW) ("Conveyancing Act") that the shares in Avelona Flats Pty Ltd held in the names of the plaintiff and the defendant as co-tenants in common (being Share Group C numbered 2281 - 3420) be sold and for consequential relief in relation thereto. The plaintiff is the defendant's daughter. 2. There was no appearance by the defendant on the hearing of this application. The plaintiff relies on an affidavit of service sworn 14 December 2018 by Andrew Khee Tuan Ng Saad deposing to service of the amended summons on the defendant and there is in evidence (see Exhibit A) a copy of email communications between the defendant and the plaintiff's solicitor in relation to the proceedings (being emails of the 14 January 2019 and 24 January 2019, from the solicitor, Mr Howe, to the defendant), in which Mr Howe notified the defendant that if he did not appear on the return date of the amended summons the plaintiff would seek to have the matter determined by the court in his absence. There was a response to the first of those emails from the defendant in which, among other things, the defendant conveys that he is "sick of being told this" and that he is unable to go to court and unable to do anything for three months due to a back operation on the 21 December. In that email he asserts that amounts are owing to him by the plaintiff. I note that the 14 January email incorrectly stated the return date for the summons, but that this was corrected in the email of 24 January 2019 and, although there was no response to that email, it is reasonable to infer that it was received by the defendant (as the earlier email was clearly received having regard to the defendant's response, as I have noted). 3. I am satisfied that the defendant is on notice of the claims for relief made in the amended summons and has been notified of the hearing date of the amended summons and of the intention of the plaintiff to proceed if there be no appearance on today's date. I am satisfied that it is appropriate for me to proceed to hear the matter in the absence of the defendant. 4. The plaintiff relies upon three affidavits that have been filed in the proceedings: an affidavit sworn 26 August 2018 of the plaintiff, Emily Kate Neilan ("Ms Neilan"; "Emily"); an affidavit sworn 26 August 2018 of the plaintiff's solicitor, Grahame William Howe; and an affidavit sworn 26 August 2018 of Lauren Waldon ("Ms Waldon"), an accountant who is the plaintiff's aunt and the executrix of the estate of the plaintiff's mother (Ms Waldon's late sister), Michelle Anne Waldon. 5. The late Michelle Anne Waldon died on 28 October 2010. Probate of her estate was granted to Ms Lauren Waldon on 7 January 2011. Ms Waldon deposes that the estate included a 75% interest in the group C numbered shares. 6. I interpose to note that the company, Avelona Flats Pty Ltd, ACN 000 225 687, was incorporated on 10 September 1960 for the purpose of acquiring a property in Coogee. Annexed to Ms Waldon's affidavit is a copy of the relevant article of the company's Articles of Association dealing with the capital of a company, Art 4, which was amended by special resolution on 10 September 1960. That amended Article discloses that the owner of the shares in group C numbered 2281 - 3420 has an entitlement to occupy flat number 3 in the building at Coogee. Also annexed to Ms Waldon's affidavit is a copy of the share certificate certifying that the plaintiff, as to 75%, and the defendant as to 25%, as tenants in common, are the holders of the said group C numbered shares. 7. At the time of the death of Michelle Anne Waldon, the deceased held a 75% interest in those shares and, as at 7 January 2010, her sister, Ms Waldon, held the other 25% of the shares. Under the will of the late Michelle Anne Waldon, the whole of her estate was left to her daughter, Emily, the plaintiff in these proceedings, upon Emily attaining the age of 21 years. 8. Ms Waldon has deposed that, as at 7 January 2010, St George Bank held a mortgage over the 75% shareholding in an amount of $180,000. (Elsewhere it appears that the bank's mortgage was secured over the whole of the Group C shares). In June 2013, Ms Waldon sold her 25% interest in the said shares to the defendant. Annexed to Ms Waldon's affidavit is a copy of the agreement made 14 June 2013 pursuant to which Ms Waldon sold that 25% shareholding to the defendant ("the agreement"). 9. Under the terms of that agreement, the purchase price was a sum of $160,000 but, in addition, the defendant agreed, pursuant to cl 23 of the agreement, on settlement to pay the outstanding mortgage to St George Bank which the defendant there acknowledged was over the whole of the shares and which stood at about $198,000 by way of a loan for that amount to the estate, such loan to be interest free. In addition, it was agreed that, after completion, the defendant would pay all the municipal and water rates and company levies up to the time that the plaintiff, Emily Neilan, attained the age of 21 years, at which time it was stated that the vendor, Ms Waldon, would transfer to Emily Neilan the estate's three-quarter interest in the shares. 10. From about 14 June 2013, the plaintiff and her father occupied the unit at Coogee (see Ms Neilan's affidavit at [6]). Ms Neilan has deposed that she moved out of the Coogee unit at some time around May 2015. The circumstances in which she did so are not necessary to be here dealt with but are deposed to in Ms Neilan's affidavit. 11. Ms Neilan turned 21 in October 2015. The 75% shareholding in the shares was not transferred into her name immediately, in circumstances to which Ms Waldon deposes. Briefly, Ms Waldon deposes that, on or around 5 June 2013, the defendant transferred $160,000 (which I interpose to note was the purchase price for the 25% shareholding in the shares) to her personal account and $180,000 to the deceased's St George loan account; but that no further payments were received from the defendant into or on account of the St George loan agreement (see [10]). Ms Waldon has also deposed (at [13]) that from the commencement of, and pursuant to, the agreement reached with the defendant, the defendant paid Council rates and company levies "more or less on time but did occasionally fall in to arrears". 12. On 26 November 2015 (see Ms Waldon's affidavit at [17]), Ms Waldon deposes that it became apparent to her that the defendant "had no intention of paying the balance of the St George loan" and Ms Waldon deposes that, by way of interest free loan to the plaintiff, she paid out the balance of the St George loan of $19,300 and arranged the release of the share certificate for the Avelona shares. 13. At [18] of her affidavit, Ms Waldon deposes that on or around 7 February 2016 she delivered the share certificate, signed share transfer of the mortgage and a copy of probate to the company secretary of Avelona Flats Pty Ltd in order to register the change of ownership to the plaintiff of 75% and the defendant 25%. There is in evidence (Exhibit B), a copy of a recent company search which discloses that as being the shareholding of the company. 14. Ms Waldon deposes that to the best of her knowledge the defendant resides at the Coogee unit. Ms Neilan has deposed to attempts having been made to obtain her father's agreement to sell the Coogee unit and to the existence of outstanding Council rates and company levies in relation to the unit. 15. Although initially commenced as a summons seeking relief pursuant to s 66G of the Conveyancing Act, the plaintiff accepts that this provision is not applicable in circumstances where the application relates to shares in the company and not to the property (albeit that the shares in question give rise to a right to occupation of the property). Instead, the claim for relief is now made pursuant to s 36A of the Conveyancing Act which provides as follows: 36A Power to direct division of chattels Where any chattels belong to persons jointly or in undivided shares, the persons interested to the extent of a moiety or upwards may apply to the court for an order for division of the chattels or any of them, according to a valuation or otherwise, and the court may make such order and give any consequential directions as it thinks fit. 1. I have been referred to a number of authorities in relation to the application of s 36A of the Conveyancing Act, the first being the decision of McLelland J, as his Honour then was, in Ferrari v Beccaris [1979] 2 NSWLR 181 ("Ferrari"). That case related to the application for sale of a racehorse owned by the parties as co-owners as tenants in common in equal shares. (I note that Counsel appearing for the plaintiff on the present application informed me that he has been unable to locate any authority dealing with chattels in the nature of shares, as is the subject of the present application). 2. In Ferrari, his Honour (at p. 183) said: This section is open to two interpretations, namely, that it does not apply to a case where the chattel or chattels in question are not susceptible to physical division or, alternatively, that in its application to such a case and, indeed, in any case, the expression "division" embraces, where appropriate, a division by conversion into money and distribution of that money, being in many cases the only method of carrying out a division. I am assisted in determining which of these is the true meaning of the section by a decision of the Supreme Court of Victoria, in relation to s. 187 of the Property Law Act 1928 (Vic.) which is in substantially similar terms to s. 36A of the Conveyancing Act. In Tillack v Tillack [[1941] VLR 151] Lowe J. made an order for the sale of a motor car and it seems clear, especially having regard to the comment on that case in Jacobsen v Jacobsen [1953] V.L.R 177], that his Honour must be taken to have been exercising the power conferred by s.187 of the Property Law Act. In my opinion, the better view is that s. 36A of the Conveyancing Act does authorize the sale of a chattel in appropriate cases, and I consider that the present is an appropriate case for that course to be taken. The horse in question is not permitted to race while the current dispute subsists between the parties, and it is incurring continuing expense for its maintenance. Its sale would seem to me to be in the interests of both parties. I, therefore, propose to make an appropriate order for sale. For the reasons I have expressed, I do not consider it appropriate to permit any of the plaintiff's expenses in relation to the horse to be retained out of the proceeds of sale. 1. I was also referred to the judgment of Finn J in the Federal Court of Australia in Re Gillie, ex parte Cornell (1996) 150 ALR 110; (1996) 70 FCR 254. There, his Honour, dealing with a claim in respect of a herd of dairy cattle said (at 114): I am of the view that the appropriate rule to be applied, because it accords with principle, is that stated in "Cotenancy and Joint Ownership", 20 American Jurist and Law Magazine 2d, para 40. It both reflects, and is reflected in, judicial decisions in the United States: see eg Kelly v Lang 62 NW 2d 770 (1954); Deutscher v Broadhurst 12 NW 2d 807 (1944): The general rule of the common law is that property held in common can be divided only by the consent of the owners or by a proceeding in a court of equity; and it appears that this rule still prevails where the common property embraces several things of different qualities or values, or consists of but a single object that cannot be divided without destroying its character or identity. But where personal property is severable in its nature, in common bulk, and of the same quality, each tenant may sever and appropriate his share, if it can be determined by measurement or weight, without the consent of the others. 1. I note that Re Gillie was cited with approval by Bergin, CJ in Eq, in Capogreco v Rogerson [2015] NSWSC 1371 at [184]. 2. Finally, reference was made to the decision of Young J, as his Honour then was, in Naziridis v Rimis (1985) 9 BPR 16. There, the application related to a motor vehicle. His Honour found that the plaintiff had failed to establish any interest in the vehicle to the extent of a moiety and that, accordingly, the summons should be dismissed; but considered that the provisions of s 36A did apply to a motor vehicle and that the Court would have power to make an order for sale. His Honour was of the view that, where the plaintiff establishes an interest in a chattel to the extent of a moiety, the Court has no discretion and should make an order (under s 36A). 3. It is acknowledged by the plaintiff that, in a technical sense it might be argued that shares are capable of physical division. Nevertheless, it is submitted that the true value of the shares lies in the right of occupation of the particular unit derived from the ownership of the full parcel of shares and that any attempt to sell 75% of the shares without a sale of the unit would be impractical. It is submitted that, insofar as there is any discretion in relation to the making of an order pursuant to s 36A, where the existence of an interest to the extent of a moiety is established, the discretion would be satisfied in this case where there is evidence as to the ongoing failure of the defendant to pay Council rates or company levies. 4. I am satisfied that it is appropriate to make the order sought for the sale of the shares as sought by the plaintiff in circumstances where the plaintiff has established an interest in the shares. 5. The plaintiff has put forward various orders for the consequential exercise of the order for sale. I consider that amendment to those draft orders is necessary to the proposed O 5(c) which contemplates the repayment out of the net proceeds of sale to the defendant of the sum of $180,000 (that being the amount that the defendant paid by way of interest free loan to the estate in relation to the then outstanding amount owing to St George Bank pursuant to its mortgage over the shares). It is appropriate to make clear in the orders that payment of that amount to the defendant is to be taken to be in discharge of the loan made by the defendant to the estate since, strictly speaking, this is a liability of the estate. 6. Amendment will also be made to provide for the payment of 25% of the balance of the proceeds of sale (after payment of the sums in O 5(a) and O 5(b)) to the defendant before the repayment of the loan made by him to the estate, with the remaining balance to the plaintiff. 7. I make the following orders: 1. Pursuant to s 36A of the Conveyancing Act 1919 (NSW) order that the shares in Avelona Flats Pty Ltd, being share group C, numbered 2281-3420, in the name of the plaintiff as to 75% and the defendant as to 25%, as tenants in common be sold. 2. Order that the plaintiff and the defendant do all things necessary to give effect to O 1. 3. Order that the defendant vacate the premises known as flat 3, 35 Arcadia Street, Coogee within 42 days of the date of these orders. 4. Order that the plaintiff have authority to conduct the said sale, either by public auction or by private treaty and to transfer the said shares to the purchaser thereof and to receive the purchase moneys. 5. Order that the plaintiff hold the proceeds of such sale to be paid as follows: 1. outstanding Council rates, water rates, company levies, agent's commission and legal costs of the sale; 2. costs of these proceedings on a solicitor/client basis; 3. 25% of the net balance to the defendant; 4. $180,000 to the defendant, such payment to be in discharge of the loan made by the defendant to the estate of the late Michelle Anne Waldron, pursuant to the agreement made 14 June 2013 between the executrix of the estate and the defendant; and 5. the balance remaining of the proceeds of sale to the plaintiff. 1. Liberty to both parties to apply on three days' notice for any application to vary or implement the above orders. 2. These orders to be entered forthwith. 3. I direct the plaintiff to notify the defendant by email to the defendant's email address, as soon as practicable after entry of these orders, of the making of these orders, and thereafter serve a sealed copy of the orders on the defendant. ********** 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: 12 February 2019