Stillianesis v Stillianesis

By Summons filed on 15 June 2017 the plaintiff sought an order for the appointment of trustees for sale pursuant to s 66G of the Conveyancing Act 1919 (NSW) in respect of two properties in Sydney (“the properties”). The plaintiff and first defendant jointly hold a half share of each property as tenants in common with the second and third defendants who jointly hold the other half share of each property. The plaintiff and the first defendant married in 2004 but separated in late 2014. The second defendant is the brother of the first defendant, and the third defendant is his wife.

The plaintiff and the first defendant are currently parties to proceedings in the Family Court of Australia. Those proceedings were commenced by the first defendant in June 2015 seeking property adjustment and parenting orders pursuant to the Family Law Act 1975 (Cth).

The proceedings before this Court were dismissed by consent on 18 August 2017 following orders made in the Family Court on 21 July 2017 which required the plaintiff to transfer her interests in the properties to the first defendant. Directions were made to enable the question of costs to be determined on the papers. Written submissions and further affidavits have been provided in accordance with those orders. No party has submitted that an oral hearing is necessary so the Court will proceed to determine the question of costs on the papers.

The parties formed a business partnership in late 2013. In November of that year the partnership purchased the first of the properties with a loan from the Commonwealth Bank secured by a registered mortgage. The partnership purchased the second of the properties in approximately August 2014, and in March 2015 took out a further loan from the Commonwealth Bank secured against the second property. All parties signed the loan and mortgage documentation for both properties.

As previously noted, the plaintiff and the first defendant separated in late 2014. The first defendant commenced proceedings in the Family Court in June 2015. The orders sought by the first defendant in his Initiating Application included the following:

In her Response to Initiating Application the plaintiff also sought an order that she transfer all of her right, title and interest in the properties to the first defendant. In addition she sought the following order:

The loan facility over the first property expired in November 2016. It appears that the defendants wished to renew the loan, but the plaintiff did not want to enter into further business dealings in connection with the partnership, and on that basis declined to execute documents that would permit the loan to be renewed. It seems that penalty interest has been accruing on the outstanding loan balance as a result.

The plaintiff filed an application in the Family Court in April 2017 seeking orders for interim property distribution and spousal maintenance. By his response to that application, the first defendant sought orders requiring the plaintiff to execute lease and mortgage documents in relation to the properties.

On 4 May 2017 the solicitor for the second and third defendants wrote to the plaintiff’s solicitor. That letter included the following:

On 15 May 2017 the plaintiff’s solicitor, Ms Fiona Hoad, wrote to the second and third defendants. Ms Hoad stated that any ongoing relationship between the parties as co-owners of the properties was “no longer tenable” and put the second and third defendants on notice that the plaintiff intended to bring proceedings pursuant to s 66G of the Conveyancing Act.

Ms Hoad also wrote to the first defendant’s solicitor on the same day. She stated that by reason of the parties’ marriage breakdown, co-ownership of the properties with the second and third defendants was no longer viable, and indicated that those defendants had been notified of the plaintiff’s intention to commence proceedings for the appointment of trustees for sale.

The plaintiff’s interlocutory application was listed before the Family Court on 13 June 2017 and was fixed for hearing on 16 June 2017. The plaintiff filed her Summons in the proceedings before this Court in the afternoon of 15 June, the day before the hearing of her application in the Family Court. Judgment was reserved at the conclusion of the Family Court hearing on 16 June 2017.

It appears that on 28 June 2017 the first defendant filed an application in the Family Court to restrain the plaintiff from taking any further steps in the proceedings before this Court. That application was heard on 17 July 2017, and judgment was reserved.

On 21 July 2017 judgment on both the plaintiff’s interlocutory application of April 2017 and the first defendant’s restraint application was delivered in the Family Court. Although the final orders sought by the plaintiff in the Family Court were that she transfer her interest in the properties to the first defendant, it appears that her position at the hearing was that she wished to have the properties sold. The Family Court declined to order the plaintiff to execute the mortgage documents as sought by the first defendant, and instead ordered that the plaintiff transfer her interest in the properties to the first defendant within 14 days of the date of judgment. The plaintiff received an interim property distribution of $400,000 and the first defendant was ordered to indemnify her against all liabilities arising from the partnership. The order requiring the plaintiff to transfer her interest in the properties to the first defendant made it unnecessary to determine the first defendant’s restraint application.

The Family Court described the relief sought in this Court as “misguided”, and the filing of the Summons as “precipitate”. The Family Court concluded that its orders left “no utility” in the continuation of the s 66G proceedings.

As it happened, the s 66G proceedings were listed for directions in this Court on 21 July 2017, the same day that judgment was delivered in the Family Court. The proceedings were stood over to 18 August 2017 to allow the parties to consider their positions. On that occasion the proceedings were dismissed by consent and directions made for the determination of costs on the papers.

The plaintiff submitted that she acted reasonably in commencing proceedings in this Court notwithstanding the existence of the Family Court proceedings, and that these proceedings were in their infancy when they were dismissed. The plaintiff referred to Re Minister for Immigration & Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 in which McHugh J held (at 624-5) that where there has been no determination of proceedings on the merits and both parties have acted reasonably, the usual approach of the Court will be to make no order as to costs with the intent that each party bear its own costs.

In submitting that the plaintiff acted reasonably in commencing proceedings for the appointment of trustees in this Court, the plaintiff referred to a letter sent by the second and third defendants in April 2017 which stated that they would claim damages from the plaintiff for her failure to sign mortgage documents in relation to the properties. The plaintiff submitted that “in light of the threat by the second and third defendants to recover a contended loss, the plaintiff validly invoked the jurisdiction of the Supreme Court.” The plaintiff submitted that any determinations made by this Court would not conflict with findings of fact that might be made by the Family Court. It was further said that neither the subject matter nor the parties in each proceeding were the same. The plaintiff adverted to the possibility that these proceedings would be determined with greater expedition than the Family Court proceedings. It was said that the conduct of the second and third defendants in relation to the partnership was “oppressive and unconscionable”.

The plaintiff also submitted that because there had been no determination on the merits, “the Court would have to conduct an enquiry into the evidence that would be akin to a final hearing” to determine whether the plaintiff was justified in commencing the proceedings. The plaintiff relied upon Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 in which Hill J stated (at 201) that it is not appropriate for the Court to determine a hypothetical action between the parties in order to determine which party should bear the costs of the proceedings. On this basis, the plaintiff contended that the Court would be unable to determine whether the plaintiff had acted reasonably in commencing the proceedings without conducting such a hypothetical action.

The first defendant submitted that the plaintiff should pay its costs of the proceedings on the basis that they were instituted vexatiously and without a proper purpose, or, in the alternative, that the plaintiff pay its costs after 11 July 2017 as it had failed to accept an open offer of settlement. The first defendant referred to Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 in which Brereton J stated at [76] that it is usually inappropriate, if not vexatious, that the same issue be litigated in two different courts, and the fact that one Court can resolve the whole of a controversy and the other cannot will usually indicate that the former is the more appropriate Court. The first defendant also relied upon observations to similar effect by White J (as his Honour then was) in Vaughan v Frost [2010] NSWSC 492.

The first defendant submitted that the Family Court proceedings had been on foot for almost two years at the time the Summons was filed, and that orders concerning the properties had been sought by both parties from the outset of those proceedings. It was said that the properties “were being dealt with directly by the Family Court”. The first defendant contended that the filing of the Summons in the midst of extant applications in the Family Court concerning the same subject matter was an attempt by her to thwart the first defendant’s applications in that jurisdiction and to subvert valuations obtained in those proceedings with which the plaintiff disagreed. The first defendant submitted that, in those circumstances, the institution of proceedings in this Court in which orders were sought that were inconsistent with the relief sought by the plaintiff in the Family Court was vexatious.

The first defendant submitted that he had made an offer on 11 July 2017 for the proceedings to be transferred to the Family Court and that each party pay its own costs of the proceedings. It was submitted that it should have been obvious to a reasonable legal practitioner that, in light of Valceski v Valceski (supra), these proceedings were a subset of the Family Court proceedings and would almost certainly be transferred to that Court. The first defendant submitted that the plaintiff should at least pay its costs after 11 July 2017 as its resistance to the transfer application was unreasonable.

The second and third defendants largely adopted the submissions of the first defendant. They also referred to their solicitor’s letter of 4 May 2017 which stated that they had no desire to sell their share of the properties, and that if an agreement could not be reached between the plaintiff and the first defendant, the second and third defendants would consider purchasing her share. They submitted that the plaintiff did not seek to enter into any negotiations for a possible sale of her share prior to commencing proceedings for the appointment of trustees, and that in those circumstances the plaintiff should pay their costs of the proceedings.

The usual costs order in proceedings for the appointment for trustees under s 66G of the Conveyancing Act is that the costs of the proceedings come out of the proceeds of sale (see McKay v McKay [2008] NSWSC 256 at [7]; Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]). As the proceedings have been dismissed, no such order can be made.

Uniform Civil Procedure Rules 2005 (NSW), r 42.20(1) provides:

Accordingly, the starting point is that the plaintiff must pay the defendants’ costs of the proceedings, unless the Court orders otherwise. This default rule is not a presumption, but a relevant consideration to take into account in the exercise of the Court’s costs discretion pursuant to s 98 of the Civil Procedure Act 2005 (NSW) (see Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [78] and [84]).

The Court of Appeal also considered r 42.20(1) in Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365. The Court confirmed that r 42.20 does not create a presumption, and that the rule applies where proceedings are dismissed by consent. Bryson JA stated at [53]-[54] (McColl and Basten JJA agreeing):

In Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 McHugh J stated (at 625):

The plaintiff’s interim application was listed in the Family Court on 13 June 2017, and on that day was fixed for hearing on 16 June. The first defendant’s solicitor deposed that the plaintiff’s legal representatives made no mention of a s 66G application at the listing on 13 June. The plaintiff then filed the Summons on the afternoon of 15 June, the day before the hearing. It appears that her legal representatives stated at the hearing that she now wished to sell the property, notwithstanding that she had sought transfer of her interests to the first defendant during the proceedings until that point.

In my opinion, the plaintiff did not act reasonably in commencing proceedings in this Court the day before a hearing in the Family Court which concerned, amongst other things, the very same properties. The Family Court proceedings had been on foot for close to two years when the plaintiff filed her Summons seeking the appointment of trustees for sale. Since the outset of the Family Court proceedings, the plaintiff and first defendant had both sought final orders that she transfer her share in the properties to the first defendant in return for indemnification and a payment of money from the first defendant. Moreover, the first defendant’s response to the plaintiff’s interim application in the Family Court directly raised the issue concerning the plaintiff’s refusal to execute certain lease and mortgage documents in relation to the properties.

It may be accepted that the plaintiff wished to dissociate herself from the parties’ business partnership, and on that basis had declined to execute the lease and mortgage documents. Nonetheless, the first defendant’s application for her to execute those documents was before the Family Court for hearing the next day. The Family Court was capable of dealing with that matter, and, in my opinion, was the appropriate forum for that issue to be ventilated and determined.

I am of the same view in respect of the second and third defendants’ stated intention to claim damages against the plaintiff for loss caused by her refusal to sign the lease and mortgage documents. Although those defendants were not parties to the Family Court proceedings, it was open to the plaintiff to seek to have them joined or for them to seek leave to intervene (see Family Law Act 1975 (Cth), s 92). The threat of a damages claim by those defendants does not provide a justification for seeking the appointment of trustees for sale in this Court the day before orders, including in relation to the properties, were to be sought in the Family Court.

It is generally undesirable that there be concurrent proceedings in different courts dealing with the same, or similar, subject matter. In Vaughan v Frost [2010] NSWSC 492 White J stated (at [11]-[13]):

The observations of Brereton J in Song v Shi [2011] NSWSC 1207 are also germane. His Honour stated (at [7]-[10]):

The Family Court has jurisdiction to make such orders as it considers appropriate in property settlement proceedings (which includes the sale of property): Family Law Act 1975 (Cth), s 79. In my opinion, it was not appropriate or reasonable for the plaintiff to commence proceedings in this Court seeking sale of the properties when the same relief could be sought in the Family Court, and an application in relation to the properties was about to be heard in that Court. I do not accept the plaintiff’s submission that this Court would need to conduct a hypothetical action in order to determine whether the plaintiff acted reasonably in commencing the proceedings. The circumstances in which the proceedings were commenced provide an ample basis for the conclusion that the plaintiff did not act reasonably in commencing the proceedings, irrespective of the merits of her claim for the appointment of trustees.

The Court will order that the plaintiff pay the defendants’ costs of the proceedings.