Yat Kit Jong and Man Chun So – the Trustees of the Property of Ho Wah Au, a Bankrupt v Chow

1. [1]

   Since 17 July 2019, Mr Ho Wah Au has been bankrupt. He owns a property in East Killara as identified by Folio Identifier B/381023 (the Property) with the defendant, Ms Pui Ling Chow, as tenants in common in equal shares. Mr Au’s trustees in bankruptcy have sought orders under s 66G Conveyancing Act 1919 (NSW) in respect of the Property.

2. [2]

   Ms Chow, who currently resides at the Property, does not oppose the sale of the Property. While the Court retains a discretion whether to make orders under s 66G, such orders will generally be made where a defendant does not raise any legitimate reason for the Court not to do so: see eg Pascoe v Dyason [2011] NSWSC 1217 at [5]-[8] (Black J).

3. [3]

   Based on the evidence before me, I am prepared to make s 66G orders appointing trustees for the sale of the Property. However, the following matters are not agreed:

   1. (1)

      Who should be the trustees for sale?

   2. (2)

      Who should bear the costs of the proceedings?

   3. (3)

      Should the plaintiff be granted leave to file an amended summons sometime in the future to agitate that Ms Chow might pay the costs of any repair work carried out by the trustees before sale, and a claim for an occupation fee?

Who should be appointed as trustees?

1. [4]

   The plaintiff proposed that Messrs Andrew John Scott and William Honner of PricewaterhouseCoopers (PWC) be appointed. Ms Chow proposed that Mr Alan Hayes and Wayne Marshall of Hayes Advisory be appointed.

2. [5]

   The question of a trustees’ appointment is a matter of the Court’s discretion: Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 at [88] (Young CJ in Eq).

3. [6]

   The relevant considerations are set out by Young CJ in Eq in Arrow Custodians Pty Limited v Pine Forests of Australia Pty Ltd [2006] NSWSC 341 at [21]:

4. [7]

   Having regard to those matters:

   1. (1)

      It was accepted that there was no difference in the parties’ size of interest in land.

   2. (2)

      It was accepted by both parties that all persons nominated have the requisite qualifications and are fit and proper persons and are willing to accept an appointment: see eg Re Estate of Henry Herbert Stricker & Karl Heinz Lindner [2011] NSWSC 428 at [15]- [16] (Brereton J, as his Honour then was). This is therefore a neutral factor.

   3. (3)

      It was submitted by both parties that, while all the trustees had the necessary skill, expertise and experience, their respective trustees were more experienced than the others. I consider it is difficult to distinguish between the proposed trustees as to experience and consider this a neutral factor:

   4. (4)

      The likely cost is an important consideration, and I accept that the hourly rates charged by the plaintiff’s proposed trustees are higher than Ms Chow’s proposed trustees. However, both sets of accountants expect to charge exactly the same sum for the sale of a residential property in circumstances where there is no evidence that the sale will be particularly complex. Logically, that suggests the plaintiff’s trustees will spend less time but operate at a higher rate and Ms Chow’s trustees will spend more time but at a lower rate: see comments by Young CJ in Eq in Arrow Custodians Pty Ltd v Pine Forests of Australia Pty Ltd [2006] NSWSC 341 at [23]. Mr Blackman for the defendant accepted the plaintiff’s trustees’ estimate was honest. I therefore consider this a neutral factor.

   5. (5)

      Ms Chow submitted in writing that that there was a conflict of interest between the plaintiff, being trustees in bankruptcy who work for PWC in China, as that is the same international firm as the proposed trustees for sale. However, that submission was withdrawn at the hearing; Mr Blackman stated, “there is no conflict”, but nevertheless indicated that I ought somehow take the matter into account. I do not accept there is any conflict impacting on the plaintiff’s trustees carrying out their duties.

5. [8]

   I will appoint the trustees proposed by the plaintiff, who has been put to the cost and trouble of bringing the proceedings. Ordinarily the plaintiff’s trustees will be appointed: see eg Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151; (2005) 219 ALR 692 at [88] (Young CJ in Eq, as his Honour then was).

Who should bear the costs of the proceedings?

1. [9]

   The plaintiff sought an order that Ms Chow pay for the costs leading up to, and of, the proceedings up to the first directions hearing on 15 July 2022.

2. [10]

   Ms Chow opposed such an order and instead agitated for the costs to be paid out of the proceeds of sale in accordance with the “usual orders” on a s 66G application, referring to Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28] (Brereton J, as his Honour then was, and with whom Basten JA and Hunt AJA agreed).

3. [11]

   The plaintiff submitted this case falls under an exception to the usual rule because Ms Chow has acted unreasonably prior to and subsequent to the commencement of the proceedings, relying on, for example, Stibbard-Leaver v Leaver [2021] NSWSC 65 at [5], where Darke J stated:

4. [12]

   In Lewin v Lewin, Darke J considered the defendant had engaged in conduct that was relevantly “unreasonable” by making serious allegations against the plaintiff that she was not a co-owner, and then capitulating 12 months later.

5. [13]

   Here, the plaintiff submitted that Ms Chow has acted “unreasonably” because she had “strung the plaintiff along” in the following ways:

   1. (1)

      From November 2021, she engaged in negotiations with the plaintiff to purchase the Property.

   2. (2)

      She delayed in obtaining a valuation and making an offer to purchase the Property.

   3. (3)

      After the summons had been filed on 9 June 2022, the parties agreed on an acceptable price, but Ms Chow put forward Ms Au as the purchaser.

   4. (4)

      Ms Au signed the contract for sale of land and a s 66W certificate, but failed to provide the deposit.

   5. (5)

      Had Ms Chow acted more expeditiously, the plaintiff would have obtained s 66G orders earlier.

6. [14]

   I do not accept that Ms Chow’s conduct can be properly characterised as unreasonable, such that she must pay the plaintiff’s costs from her portion of the proceeds of sale.

7. [15]

   For example, I do not accept that Ms Au’s failure to complete the purchase demonstrates Ms Chow’s unreasonable conduct. The correspondence from the plaintiff evidences continuing negotiation between the parties as to price, even after the summons was filed. Further, the correspondence indicated that Ms Chow consistently agreed to cooperate with the sale of the Property, should the parties not agree on a sale.

8. [16]

   The ordinary order ought to apply; those costs are an ordinary incident of joint ownership.

Should the plaintiff be granted leave to later agitate for costs of repair or occupation fee?

1. [17]

   The plaintiff seeks leave to file an amended summons and evidence, should they wish, to seek orders that Ms Chow be responsible for:

   1. (1)

      costs of repairs and maintenance of the Property; and

   2. (2)

      an occupation fee;

   3. (3)

      with both to be paid from her share of the sale proceeds.

2. [18]

   I will not make such an order for the following reasons.

3. [19]

   First, there has been no compliance with the usual requirements for leave to amend the summons. Mr Elliott moved on the original summons and sought the relief in that summons. No motion has been filed seeking leave to amend; no order has been granted separating any further aspect of the proceedings; no evidence has been filed or served to demonstrate any basis for such leave being granted or the orders that would be sought.

4. [20]

   Secondly, there has been no prior indication from the plaintiff that such a part of the hearing would be postponed, and further evidence would be filed. Instead, the relief sought by the plaintiff in the summons included a prayer that Ms Chow pay, from her share of the proceeds of sale, the costs of those repairs and maintenance of the Property deemed appropriate by the Trustees. However, that relief was no longer sought at the hearing. Instead, the plaintiff sought leave to file an amended summons later if such relief was sought.

5. [21]

   Otherwise, orders were sought in the summons as to how the trustees were to pay out the proceeds of sale. No reservation of any entitlement to an “occupation fee” or any form of accounting was included. Usually, a dispute concerning such an entitlement would have been brought at the same time as the application under s 66G, so that appropriate orders could be made at the one time.

6. [22]

   Ms Chow was entitled to proceed on the basis that the whole of the case was being heard and resolved today on the evidence served.

7. [23]

   Thirdly, I accept that the creation of a statutory trust under s 66G does not affect the co-owners’ legal and equitable interests. For example, in Re Fettel (1952) 52 SR (NSW) 221 at 228 McLelland J (as his Honour then was) said that the phrase in s 66F(2)(a) “for giving effect to the rights of the co-owners” means “for giving effect to the rights of the co-owners as co-owners”. His Honour went on in relation to s 66G(6):

8. [24]

   In Arrow Custodians Pty Ltd v Pine Forests of Australia Pty Ltd [2008] NSWSC 839; (2008) 14 BPR 149 at [34]-[35], Bryson AJ stated:

9. [25]

   Therefore, while s 66G orders do not impact on the parties’ rights in the Property, it is necessary to seek orders for the adjustment of the use of the proceeds of sale.

10. [26]

    The law in NSW appears settled that an occupation fee will only be appropriate in rare circumstances:

    1. (1)

       Where a co-owner claims costs of improving the property: see eg Forgeard v Shanahan (1994) 35 NSWLR 206 (Mahoney and Meagher JJA). That has not occurred here; Ms Chow makes no such claim.

    2. (2)

       Where one co-owner has ousted the other. There is no evidence of that here. In any event, in situations where a domestic relationship has broken down, the occupation fee will likely be “notional”: see eg Callow v Rupchev [2009] NSWCA 148.

11. [27]

    Nevertheless, Mr Elliott submitted that a claim for the cost of repairs or an occupation fee might arise if it could be established that an agreement existed between the bankrupt and Ms Chow, or if Ms Chow had prevented the bankrupt from occupation. However, he conceded he had no evidence of any such alleged agreement or ouster, nor was there any evidence that the plaintiff had even made any enquiries as to the existence of such an alleged agreement or ouster. This is despite the length of time since the plaintiff has been appointed and responsible for the realisation of the Property.

12. [28]

    I note that the plaintiff appears previously to have accepted that there would not be any adjustment for repairs and occupation fee. On 21 June 2022, the plaintiff’s solicitor wrote to Ms Chow’s solicitor with the plaintiff’s position:

13. [29]

    I am not prepared to make an order granting the plaintiff leave as sought.

Orders

1. [30]

   I make the following orders:

   1. (1)

      That Andrew John Scott and William Honner both located at One International Towers Sydney, Watermans Quay, Barrangaroo NSW 2000, chartered accountants and registered liquidators at accountancy firm PricewaterhouseCoopers be appointed trustees for the sale of the land comprised in Certificate of Title Folio Identifier B/381023 known as 8 Saiala Road, East Killara 2071 NSW (Property) registered in the names of Pui Ling Chow in ½ share and Man Chun So and Yat Kit Jong as joint tenants in ½ share, as tenants in common.

   2. (2)

      That the Property vest in Andrew John Scott and William Honner the (Trustees) subject to any encumbrances affecting the entirety of the Property, and free any encumbrances affecting any undivided shares in the Property, upon the Statutory Trust for Sale created pursuant to Division 6 of Part IV of the Conveyancing Act 1919.

   3. (3)

      That the Trustees be empowered and authorised to obtain a valuation of the Property by engaging a registered valuer.

   4. (4)

      That the Trustees be empowered to offer the Property for sale and to sell the Property.

   5. (5)

      That the Trustees be empowered and authorised to engage any contractors necessary to undertake repairs and maintenance of the Property that are, in the Trustees’ view, necessary to repair any damage or defect in the Property which is likely to impede, hamper or delay the sale of the Property.

   6. (6)

      That the Defendant provide to the Trustees (including their agents and appointed contractors) unimpeded access to the Property.

   7. (7)

      That out of the proceeds of sale of the Property, the Trustees deduct:

   8. (8)

      After deduction of the costs and expenses in paragraph 7 above, order that the Trustees pay the net sale proceeds in the following order of priority:

   9. (9)

      Leave be granted to the Defendant under s 66I of the Conveyancing Act 1919 (NSW) to bid for or buy the Property whether at auction or by private treaty, and settling off or accounting for the purchase money (but only at completion of any sale) instead of paying the same so far as appropriate, and on the basis that a 10% deposit (of the whole of the purchase price) is paid upon exchange of contracts and on the basis that the date for completion is 42 days after the contract date.

   10. (10)

       In the event that the defendant enters into a contract for purchase of the Property whether at auction or by private treaty but fails to complete the contract for purchase of the Property, in accordance with the terms of the contract for purchase, the 10% deposit (of the whole of the purchase price) is forfeited to the Plaintiff.

   11. (11)

       Order that the Trustee be paid for their services and are authorised to charge remuneration at their usual professional rates and for their services as identified in Annexure A of the Affidavit of William Honner sworn 18 October 2022, and that the trustees be authorised to deduct such remuneration from the proceeds of sale of the Property in accordance with order 7(b) above.

   12. (12)

       Liberty to the Trustees to apply on 3 days’ notice.