Red Arrow Holdings atf the Brentnall Family Trust v Diza Pty Ltd atf the Diza Trust

1. [1]

   By summons filed 7 April 2025, the plaintiff sought an order pursuant to s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale of a property at Flinders Street, Surry Hills, NSW (the Property).

2. [2]

   The ownership of the Property is held as tenants in common in the following shares:

3. [3]

   A director of the first defendant, Ms Dene Gambotto (Ms Gambotto), is the sister of the director of the plaintiff, Mr Marshall Brentnall (Mr Brentnall). The second defendant is a company jointly owned and controlled by Ms Gambotto and Mr Brentnall. This ownership structure arose out of giving effect to the will of Ms Gambotto’s and Mr Brentnall’s father.

4. [4]

   On 20 June 2025, the proceedings were listed before me for directions in the Real Property List. The parties advised me that they were close to reaching agreement as to the orders for the appointment of trustees for sale and requested that I resolve certain disputes between them. A brief argument then took place on the afternoon of 20 June 2025, the outcome of which was that I made final orders, in large part by consent, providing for the appointment of trustees for sale of the Property.

5. [5]

   The parties were, however, unable to agree as to who should pay the costs of the proceedings.

6. [6]

   Each party has provided written submissions in chief and in reply and the parties have jointly requested that I determine the issue of costs on the papers. This judgment concerns the issue of costs.

Overview of the competing positions

1. [7]

   The plaintiff contends that the appropriate costs order is that its costs of the proceedings should be paid out of the proceeds of sale, prior to the distribution of the net proceeds of sale in accordance with their legal interests in the Property, and that the first defendant should bear its own costs of the proceedings. Further, the plaintiff contends that the first defendant should pay the costs of and associated with the argument before me on 20 June 2025.

2. [8]

   The defendant contends that the appropriate costs order is the usual costs order in s 66G proceedings, namely that the costs of all parties come out of the proceeds.

3. [9]

   There was no suggestion that any costs order should be made in relation to the second defendant. In any event, it appears that they played no role at all in the proceedings.

4. [10]

   In relation to the plaintiff’s submission that its costs should be paid out of the proceeds prior to their distribution, the plaintiff contended that this was one of those cases where the Court should conclude that the first defendant had engaged in unreasonable conduct prior to the commencement of the proceedings such that the Court should make the costs order sought.

5. [11]

   The matters relied upon by the plaintiff as constituting unreasonable conduct by the first defendant are set out in detail in the written submissions filed by the plaintiff and need not be repeated in full. They include:

6. [12]

   In relation to the costs of the argument on 20 June 2025, it was contended that the plaintiff had been largely successful, and the first defendant largely unsuccessful, in the matters argued on that day.

7. [13]

   The first defendant contended that there was no reason to depart from the general costs position in s 66G proceedings and in any event, it had not engaged in unreasonable conduct. In relation to the costs of 20 June 2025, there was no clear winner.

Determination

1. [14]

   There was no dispute between the parties as to the relevant principles on costs in matters such as the present. Those principles are neatly encapsulated by Williams J in Eva Joy Ambrus v Lee Ellen Buchanan (No 2) [2023] NSWSC 5 at [4]-[6] which provide as follows:

2. [15]

   I am not satisfied that there is a basis in the present case for departing from the usual order that the costs of the parties be paid out of the proceeds of sale. I am not satisfied that it has been demonstrated that the first defendant behaved unreasonably, such that the costs order contended for by the plaintiff should be made.

3. [16]

   It is clear that there is no obligation on a party to negotiate the dissolution of the co-ownership relationship without the need for the commencement of proceedings under s 66G. In any event, I do not regard the offers made by either party prior to the commencement of the proceedings as demonstrating, relevantly, any unreasonableness. It is difficult, if not impossible, for the Court to assess the reasonableness of positions taken against limited valuation evidence. It also seems clear in the present case that the Property was in need of some repair.

4. [17]

   As regards what occurred on 20 June 2025, I do not regard it as accurate to contend that the first defendant was the unsuccessful party on that occasion. As set out above, the parties indicated when the matter was listed for directions on the morning of 20 June 2025 that they were close to agreeing terms and simply requested that I determine a few issues that remained outstanding between them. I did that. The position ultimately reached was not one that was clearly advocated by one party but involved an element of compromise. The hearing was, in any event, quite brief. The position adopted by the first defendant on the outstanding issues was not so unreasonable as to warrant a costs order against it.

5. [18]

   In my view, the appropriate costs order is that the parties’ costs of the proceedings, as assessed or agreed are to be paid from the proceeds of sale of the Property. I so order.