Foundas v Arambatzis (No. 3)

The Court of Appeal (Bell P, Basten and White JJA) unanimously rejected the application:

1. [1]

   BELL P: I agree with White JA.

2. [2]

   BASTEN JA: I agree with White JA.

3. [3]

   WHITE JA: The principal judgment in these proceedings was delivered on 24 March 2020 (Foundas v Arambatzis [2020] NSWCA 47). The orders of 24 March 2020 confirmed the appointment of trustees for sale of the property in Magee Street, Ashcroft. As noted in a further decision on 26 March 2020 (Foundas v Arambatzis (No. 2) [2020] NSWCA 51), the appellant sought the variation or setting aside of an order for possession. It appeared that she might also have sought the variation or setting aside of order 8 made on 24 March 2020. Order 8 provided that in accounting for the balance of the net proceeds of sale between the appellant and the first respondent, the second respondents, being the trustees for sale, should charge the appellant with a reasonable market rent for occupation of the property from 29 October 2018 to the date of her delivering vacant possession.

4. [4]

   Submissions subsequently made by the appellant make it clear that she does seek the setting aside of that order. Pursuant to orders made on 26 March 2020 the parties have provided written submissions on that application.

5. [5]

   The appellant submits that as a general rule a co-owner (in this case the first respondent) who has chosen not to exercise his right of possession, that is, to live on the property, cannot seek any compensation from the other co-owner because each co-owner has the right to occupy the entire property and does not have to pay for that right.

6. [6]

   That principle is correct so far as it goes. But as I observed in my reasons for judgment of 24 March 2020:

7. [7]

   In Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; [1993] HCA 45 Deane, Dawson and Gaudron JJ said (at 657) that:

8. [8]

   That conclusion follows from the terms of s 66G(1) and (7) of the Conveyancing Act 1919 (NSW). Section 66G(1) provides:

9. [9]

   In the present case the primary judge made an order that the property be vested in the trustees on the statutory trust for sale. The vesting order divested each of the appellant and the first respondent of their beneficial interests in the land. After the making of the vesting order their interests were in the proceeds of sale. Section 66G(7)(b) provides:

10. [10]

    In Abbott v Pegler (1980) 1 BPR 9267 Powell J said (at 9270) that:

11. [11]

    Following the making of the orders appointing trustees for sale neither the appellant nor the first respondent had a beneficial interest in the land. Their rights were transformed into the right to see the trust for sale performed and to a share of the net proceeds of sale in accordance with their beneficial interests and subject to an account in equity (Application of Richard Albarran; Harb v Harb [2010] NSWSC 125 at [15]-[19] (Brereton J)).

12. [12]

    Section 86(1) and (2) of the Real Property Act provides:

13. [13]

    It appears that the trustees for sale did not serve a copy of the order appointing them as trustees for sale on the Registrar-General so as to become registered proprietors of the land. A title search dated 12 July 2019 shows the appellant and first respondent as still being the registered proprietors. There is no obvious reason for the trustees not to have done so. Ms Foundas had lodged a caveat that the primary judge ordered to be removed on 6 September 2019. The caveat prohibited the registration of any dealing. That caveat would not have precluded the recording of the trustees for sale as registered proprietors.

14. [14]

    Nonetheless, it appears that when, on 29 October 2018, Mr Wengel, one of the trustees for sale, made a demand for the payment of a market rent for the property, he and his co-trustee had not become registered proprietors of the property.

15. [15]

    However, the effect of s 66G(7)(b) of the Conveyancing Act is that Ms Foundas’ interest was converted from an interest in the land to an interest in its proceeds of sale. Her legal title to the land as co-owner, preserved by s 86(2) of the Real Property Act, no longer supported a right to possession as against the trustees for sale.

16. [16]

    Whatever the position might be at law because, after the appointment of trustees for sale, Ms Foundas no longer had a beneficial interest in the land, on the taking of an account in equity she could not insist on her legal right as co-owner to occupy the property without accounting to her co-owner for an occupation fee once demand for possession was made.

17. [17]

    Ms Foundas relied upon Luke v Luke (1936) 36 SR(NSW) 310, at 312 for the proposition that a co-owner in sole occupation is not liable at law nor in equity to pay an occupation rent to the non-occupying co-owners because each co-owner has a right to possession of the whole property and by exercising that right, it would be unfair for a co-owner to be burdened by a claim for compensation at the suit of the other who had failed to exercise his or her same right.

18. [18]

    That principle is not in question. But in Luke v Luke the issue was whether, at the time of making an order for sale, an occupying co-owner could be charged with an occupation rent for the period of her occupation when the other co-owner (now deceased) had not been ousted. That is not the present issue. No order has been made for the payment of an occupation fee by Ms Foundas before the trustees for sale made a demand for rent. The rights of Ms Foundas and Mr Arambatzis changed fundamentally on the order appointing trustees for sale in that their rights ceased to be beneficial interests in the land and were converted to a right to the proceeds of sale. Ms Foundas ceased to be entitled as against the trustees for sale to possession of the land, except with the trustees’ consent.

19. [19]

    The second respondents submitted that Ms Foundas had ousted Mr Arambatzis from the property and is liable to account for an occupation fee when seeking contribution for her expenditure. The claim for expenditure has been dealt with (Foundas v Arambatzis at [90]-[93]). Mr Arambatzis did not claim an adjustment on distribution of the net proceeds of sale on the basis that he had been ousted from possession.

20. [20]

    For these reasons order 8 made on 24 March 2020 should not be set aside nor varied. Ms Foundas’ application to set aside order 8 made on 24 March 2020 should be dismissed with costs.

21. [21]

    The second respondents agreed that they would not seek to enforce the order for possession (order 6) and the order granting liberty to the second respondents to obtain a writ of possession (order 7) prior to 28 May 2020. The first respondent opposes any further extension. The second respondents also oppose any further extension.

22. [22]

    If the appellant seeks a stay of those orders after 28 May 2020 then the following orders apply:

    1. (1)

       by 14 May 2020, the appellant is to file and serve any affidavit and submissions in support of any application that orders 6 and 7 made on 24 March 2020 be stayed beyond 28 May 2020;

    2. (2)

       any further affidavits or further submissions in response by the respondents be filed and served by 21 May 2020;

    3. (3)

       any affidavit or submissions in reply by the appellant be filed and served by 25 May 2020.

23. [23]

    The application, if made, will be dealt with on the papers.