Russo v Russo (No 2)

1. [1]

   These reasons deal with the outstanding issues following my decision in Russo v Russo [2026] NSWSC 4 (Judgment). Abbreviations in the Judgment will be adopted in these reasons.

2. [2]

   In the Judgment, I decided that (a) the plaintiff had succeeded in his application for the appointment of trustees for sale under s 66G but final orders could not be made until the parties provided further submissions and evidence regarding the trustees to be appointed, the method to be adopted to determine the amount of the allowances referred to in the Judgment at [102]-[104] and costs in relation to that application; (b) the cross-claim was dismissed with costs.

3. [3]

   The parties each provided a proposed form of final orders and submissions in support of the orders sought and have made oral submissions. The parties are in agreement as to the trustees to be appointed. The remaining areas of dispute concern the manner of dealing with the question of allowances and costs.

The proposed trustees

1. [4]

   The plaintiff now proposes that the trustees to be appointed are Mr Warwick Williams, who is a real estate agent; and Mr Peter Krejci, who is a chartered accountant, registered liquidator and a principal of BRI Ferrier. Mr Krejci has provided an affidavit stating his consent to act and that he will charge for his services as trustee at his hourly rate of $750 per hour plus GST which I accept is reasonable.

2. [5]

   The plaintiff has filed an affidavit from Mr Williams which clarifies the ambiguity in his earlier affidavit evidence and confirms that he has offered his services to act as trustee and sales agent at the rate of 1.5% (plus GST) of the selling price of each property. He does not intend to charge for any additional time incurred in acting as trustee, the intention being that Mr Williams will focus on the marketing of the two properties and Mr Krejci on the other responsibilities of the trustees for sale. The defendant does not dispute that the rate of remuneration proposed to be charged by Mr Williams, effectively for his role as sales agent, is reasonable.

3. [6]

   I am satisfied that it is appropriate to appoint Mr Krejci and Mr Williams as the trustees for sale, and note that the defendant does not oppose their appointment.

Allowances

1. [7]

   In the Judgment at [102]-[104], I concluded that while the defendant had failed on the cross-claim, he was entitled to make a claim for an allowance for: (a) expenditure incurred by him on improvements which have increased the value of the land for which he has a right of contribution in equity; and (b) any payment in respect of a debt for which he is jointly liable with the plaintiff (such as mortgage instalments, rates or land tax). The plaintiff is also, of course, entitled to the same allowances as against the defendant. It may be that the second category will not be relevant because the joint obligations were generally paid out of the ANZ Joint Account, but I consider it preferable to allow the second category in the account in case that is not correct.

2. [8]

   The parties have proposed different draft orders to deal with these allowances.

3. [9]

   The plaintiff proposed a regime which involves the trustees for sale determining any proper claim that the defendant may have in the following terms:

4. [10]

   Proposed orders 13 and 14 then give the parties and the trustees liberty to apply to the Court. The plaintiff’s submission is that if any accounting issue were to arise, the affected party could exercise their liberty to apply.

5. [11]

   The defendant’s proposed regime involves the accounting being undertaken by the Registrar, as follows:

6. [12]

   In my view, there are difficulties with both proposals.

7. [13]

   In relation to the plaintiff’s proposed orders, it is apparent from the evidence at the original hearing that the defendant will seek to substantiate some of his expenditure through lay evidence which is not supported by documents. In my view the defendant is entitled to do this. Generally, on a taking of accounts the parties are required to detail individual receipts and payments together with available supporting records, but the Court will nevertheless permit oral evidence of disbursements in the absence of supporting documents: see White v Lady Lincoln (1803) 8 Ves Jun 363; 32 ER 395; Christensen v Christensen [1954] QWN 37; Ford v Princehorn; Re Estate of Ford [2012] NSWSC 1165 at [31]; Hancock v Rinehart [2015] NSWSC 646; (2015) 106 ACSR 207 at [353]; P Taylor et al, Ritchie’s Uniform Civil Procedure New South Wales, LexisNexis, Sydney (online at 1 April 2026) at [46.4.35].

8. [14]

   I see no reason in principle why the accounting process to determine the proper allowance for improvements in the present case should not permit oral evidence of disbursements by each party. In practical terms, this means that relevant lay witnesses would give evidence by affidavit and then be cross-examined if the other party chose to do so. That presents some difficulties with the plaintiff’s proposal for the trustees for sale to determine the accounting, bearing in mind, as Mr Young frankly accepted in oral submissions, that it is likely that the parties will be unable to resolve consensually their dispute as to what improvements each has made to the land.

9. [15]

   The defendant’s proposed orders provide for the determination to be made by the Registrar and contemplates that expert evidence may be relied on. The defendant also put forward an alternative in which the accounting would proceed by way of a reference pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 20.14 and provided the name of another accountant to act as the referee. I was referred to Iacullo v Iacullo [2012] NSWSC 189 where Black J treated a determination by trustees for sale on a taking of accounts as a referee’s report under UCPR Pt 20 Div 3, which his Honour described as involving an ‘assessment of complex financial issues between the parties’ by the expert accountants who had been appointed as trustees for sale using their specialist expertise. In my opinion, the account in the present case does not involve such complex financial issues, and because it will require the assessment of oral evidence, the most efficient and just way for the account be taken is under the direct supervision of the Court rather than by a referee or the trustees for sale.

10. [16]

    In so far as expert evidence is concerned, the defendant is not entitled to rely on expert evidence without leave: see r 31.19 of the UCPR and Practice Note SC Eq 5, paragraph 12. It is possible that expert evidence will be required to show that the relevant expenditure has increased the value of the land. However, whether that is so will depend on whether the plaintiff disputes that it has had that effect and prima facie there should be no dispute that much of the expenditure, being for the construction of a house on the land, did improve the value of the land. Hence, the question whether expert evidence is necessary should be deferred until it is clear that such evidence is required, at which time the relevant party can exercise the liberty to apply.

11. [17]

    The orders I propose to make set out at the conclusion of these reasons are consistent with the form of orders made in other cases of a similar kind reflecting the fact that what is involved is the taking of an account, albeit for a limited purpose: see eg Parkas v Shankar [2025] NSWSC 1140 at [2]. The orders provide for each party to serve on the other an account in respect of their claimed expenditure, as this is necessary to ensure that any difference in their respective contributions to the cost of improvements to each property is recognised.

Costs

1. [18]

   In the Judgment at [133] and [136] I concluded that the defendant should pay the plaintiff’s costs of the cross-claim. I further indicated at [134] that my preliminary view was that the costs of the parties in relation to the application under s 66G should be borne by the parties equally, but nonetheless gave the parties an opportunity to make submissions for a different order.

2. [19]

   Both parties proposed differing costs orders under which amounts in respect of their costs would be payable out of the net proceeds of sale.

3. [20]

   The plaintiff seeks the following orders:

4. [21]

   The defendant seeks the following order:

5. [22]

   The plaintiff said in his written submissions that he does not seek different orders to those stated in the Judgment at [134] and [136], but rather submitted that the dismissal of the cross-claim with costs means that the proportion of costs relating to the plaintiff’s application under s 66G needs to be determined so that they can be paid out of the proceeds of sale. The plaintiff submitted that it is appropriate to apportion costs when a particular issue is clearly ‘dominant or separable’: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6]-[9], and the defendant’s cross-claim was clearly the ‘dominant’ issue in the present case. This was indicated, it was said, by the fact that the parties were not in dispute regarding the evidence of the conversations relevant to the terms of the ‘development agreement’ which was at the heart of the s 66G application, and both the cross examination of all witnesses and the parties’ closing submissions were directed primarily to the cross-claim.

6. [23]

   The premise on which the plaintiff has framed his proposed orders 6 and 7 is that (a) the Court should apportion costs on the basis that 25% of each party’s costs of the proceedings are attributable to the ASOC and 75% to the cross-claim, and (b) the appropriate exercise of the discretion as to costs under s 98(1) of the Civil Procedure Act 2005 (NSW) is that 25% of each party’s costs of the proceedings (being the costs referable to the ASOC) should be paid out of the proceeds of sale, and the defendant should pay the balance of the plaintiff’s costs (being the costs referable to the cross-claim) out of his share of the proceeds of sale.

7. [24]

   In my opinion, the plaintiff’s proposed apportionment of costs is not the appropriate approach to costs in this case. There was no overlap between the issues arising under the ASOC and the cross-claim and neither party suggested that there were any costs incurred which were common to both claims. The costs payable under order 1 referred to in the Judgment at [136(1)] are payable on the ordinary basis and hence, if the parties are unable to agree, they will need to be assessed in the ordinary way. The absence of any overlap between the issues on the cross-claim and the ASOC means that the assessment of the costs of the cross-claim will not be complicated, and it seems to me that it is in the interests of justice that the identification of the plaintiff’s costs of the cross-claim, if agreement cannot be reached, be dealt with by the assessment process.

8. [25]

   The defendant supported his proposed order 7 on the basis that rather than each party’s costs of the ASOC being paid out of the proceeds of sale (with the effect that each party shares the other’s costs of the ASOC) the defendant seeks that half of the plaintiff’s costs be borne solely by him. This is for essentially two reasons. First, under the ASOC the plaintiff sought damages for breach of contract in the amount of $1,041,532.33. It is said that the late abandonment of this claim meant that (a) most of the pleaded paragraphs of the ASOC became irrelevant; (b) all of the evidence in paragraphs [46]-[49] of the plaintiff’s affidavit dated 18 December 2024 and the documents exhibited in support of those paragraphs became irrelevant; and (c) substantial costs of preparation on both sides were wasted. Secondly, it is said that the plaintiff had raised various ‘unpleaded issues’ in his written and oral submissions in support of his claim for relief under s 66G, in addition to having ‘shifted’ his case during oral closing submissions: see Defendant’s Submissions on Orders dated 25 February 2026, [14]-[18].

9. [26]

   I do not accept that either of these matters bears on the exercise of the Court’s discretion as to costs. As to the first, the plaintiff’s claim for damages was dropped in his written submissions filed before commencement of the hearing and the plaintiff’s evidence going to that issue was limited to only four paragraphs of his 18 December 2024 affidavit, to which the defendant responded by a bare denial. In light of this, I accept the plaintiff’s submission that the wasted costs attributable to the damages claim were negligible.

10. [27]

    As to the second matter, the defendant’s submission fails to recognise that, as I pointed out in the Judgment at [97]-[98], he bore the onus of proof as to why the plaintiff’s application for an order under s 66G should be refused and the plaintiff was not required to plead and prove that he was entitled to that relief. Accordingly, it is irrelevant on the question of costs (just as it was to the question whether relief under s 66G should be granted) that some of the arguments put by the plaintiff in submissions may have been ‘unpleaded’. Ultimately, considerable time was spent at the hearing on the question whether the defendant had discharged his onus of establishing that the plaintiff was subject to an obligation which precluded the making of an order under s 66G. Notwithstanding this and the defendant’s lack of success on that issue, I have concluded that the appropriate order as to costs of the application under the ASOC for an order under s 66G is that stated in the Judgment at [134] (rather than that costs should follow the event). I still consider that to be the fair way for the costs of the ASOC to be borne as between the parties.

11. [28]

    Both parties accepted that the relevant costs should be paid out of the net proceeds of sale. In my opinion, the appropriate approach is that (a) the parties’ costs of the ASOC, on the ordinary basis as agreed or assessed, be paid out of the net proceeds of sale of the two properties; and (b) the plaintiff’s costs of the cross-claim, on the ordinary basis as agreed or assessed, be paid out of the defendant’s share of the net proceeds of sale. This is reflected in the final orders set out below.

Conclusion

1. [29]

   For the above reasons, the Court makes the following orders:

   1. (1)

      Orders, pursuant to section 66G of the Conveyancing Act 1919 (NSW), that Warwick Williams and Peter Krejci be appointed as the trustees to sell the property with folio identifier 1/1265230 at 3A Neptune Street, Revesby NSW 2212 (First Property).

   2. (2)

      Orders, pursuant to section 66G of the Conveyancing Act 1919 (NSW), that Warwick Williams and Peter Krejci be appointed as the trustees to sell the property with folio identifier 2/1265230 at 3 Neptune Street, Revesby NSW 2212 (Second Property).

   3. (3)

      An order that each of the First Property and the Second Property vests in the trustees subject to any encumbrances affecting the entirety of the First Property and the Second Property therein to be held by the trustees upon the statutory trusts for sale under Division 6 of Part IV of the Conveyancing Act 1919 (NSW).

   4. (4)

      Orders that the trustees be empowered to offer the First Property and the Second Property for sale by way of public auction with power to fix reserve prices for the First Property and for the Second Property or by private treaty, as the trustees think fit.

   5. (5)

      Orders, pursuant to section 66I of the Conveyancing Act, that the defendant may bid and purchase the First Property at auction or otherwise purchase the First Property by private treaty, and may do so without payment of a deposit, without providing the trustees with vacant possession before completion and by setting off his share of the net proceeds of sale of the First Property and the Second Property on completion.

   6. (6)

      Orders that the trustees shall distribute the proceeds of sale of the First Property and the Second Property on completion and after adjustments for council rates and water rates, in the following order of priority:

   7. (7)

      Order that the trustees be at liberty to invest the said net proceeds of sale pending distribution with a licensed bank.

   8. (8)

      Order that the trustees shall be at liberty to execute any and all conveyancing or other documents as may be necessary to effect the sale of the First Property and the Second Property, and to do all such things as are necessary to give effect to these orders.

   9. (9)

      Orders that the Plaintiff's legal costs and the Defendants' legal costs of the Amended Statement of Claim, on the ordinary basis as agreed or assessed, be paid out of the net proceeds of sale of the First Property and the Second Property.

   10. (10)

       Orders that the Plaintiff's costs of the Defendant's Cross Claim, on the ordinary basis as agreed or assessed, be paid out of the Defendant's share of the net proceeds of the sale of the First Property and the Second Property.

   11. (11)

       In respect of any claim by the Defendant for any sums incurred on improvements which have increased the value of the First Property and/or the Second Property and/or a payment in respect of a debt for which he is jointly liable with the Plaintiff ("Defendant’s claimed expenditure"):

   12. (12)

       In respect of any claim by the Plaintiff for any sums incurred on improvements which have increased the value of the First Property and/or the Second Property and/or a payment in respect of a debt for which he is jointly liable with the Defendant ("Plaintiff’s claimed expenditure"):

   13. (13)

       Direct any party to make any written request to any other party for clarification of any matter in the accounts provided within 14 days from receipt of the relevant account.

   14. (14)

       Direct the recipient of the request to provide a written response to any such written request within 14 days from receipt.

   15. (15)

       Direct the parties to identify any surcharges or falsifications that any party wishes to make within 14 days from the date of receipt of the response pursuant to Order 14 above.

   16. (16)

       Grant liberty to any party to apply to the Court in respect of these orders on 2 days' notice by email to the Associate to Richmond J, such notice to include the reason for the exercise of the liberty.

   17. (17)

       Notes that the trustees have liberty to apply in relation to the effect of these orders, by email to the Associate to Richmond J, such notice to include the reason for the exercise of the liberty.

   18. (18)

       Reserve for further consideration.