In NSW s66G of the Conveyancing Act 1919 titled ‘Statutory trusts of property held in co-ownership’. It is a legal tool for resolving co-ownership disputes by application to the Supreme Court. Essentially, it forces the sale when one or more owners are uncooperative – and where they’re fighting between themselves.
Under Section 66G, a co-owner can apply to the Court to appoint a trustee to hold the property on trust for
- sale or
- partition to force the sale
even when one or more parties may object to it.
Trust for sale: A trust for sale directs the trustees to sell the property and hold the money in trust until the trustee can distribute the proceeds to the parties following any court orders.
Trust for partition: A trust for partition essentially ends co-ownership by subdividing a jointly owned property, converting property titles from joint ownership into separate ownership.
While some may view the sale as the best option, the partition is sensible where the value of two parts would be more than the value of both sold together. The co-owners may also choose based on non-financial reasons, such as emotional investment.
What power does the Court have under Section 66G?
Section 66G has broad application, meaning the Court can compel a party to agree to the sale even when they object.
Notably, the Court’s power under Section 66G is discretionary, meaning they hear each application on a case-by-case basis. Typically, however, the Court will only make an order if it would be inequitable.
For an order to be considered inequitable, it must be inconsistent with a property (proprietary) right or a contractual or legal trust obligation. However, proving this inconsistency requires a great deal of evidence.
It is complicated to establish inequitable grounds, and there are only a handful of cases in which the respondent has successfully defended the s66G application. Some of the grounds may include where a proprietary or contractual right exists. For example, where a co-ownership deed exists, and the parties have contracted out of the application of section 66G.
Hardship or unfairness are insufficient reasons for the Court to refuse a Section 66G joint property application.
What’s the role of a 66G trustee?
Once the Court appoints a trustee, the trustee holds legal power. They must sell the property to the best of their ability at the best possible price. This process typically involves engaging other parties, including:
- Real estate agents
- Valuers
- Lawyers
Following the joint property’s sale, distribution of the proceeds to the co-owners in line with their interests in the property, minus any mortgage or charge present on the Certificate of Title, occurs.
What are the conditions for a Section 66G application?
The party applying under s66G must be able to prove the following:
Recognised co-ownership – the common forms of co-ownership recognised in Australia are:
- Joint tenancy –Under joint tenancy co-ownership, co-owners have a right of survivorship; when one dies, the property passes through survivorship to the remaining tenant/s.
- Tenancy in common –Tenants in common have separate but undivided shares in the property; they possess the property simultaneously in the proportion noted on the title register. In this instance, when one dies, their interest passes to the beneficiaries in their will.
In addition, to apply for 66G, the party must own at least 50 per cent of the real property.
Section 66G, as a legal tool, only applies to co-owned real property – property consisting of land or buildings (real estate). It doesn’t apply to other types of co-owned property, including other tangible goods (shares, yachts) or intangible goods (intellectual property, trademarks).
What costs are involved with a 66G?
Taking advantage of the 66G mechanism has significant costs, including the initial application’s legal costs and the trustee’s fees and disbursements.
Fees are paid from the proceeds from the sale that each co-owner will receive. This amount depends on each co-owner’s contributions to the property.
Background
In Bailey v Bailey [2024] NSWSC 101, Mr Bruce Bailey ( “the plaintiff”) and his sisters, Ms Glenice Bailey ( “first defendant”) and the late Annette Bailey, became equal property owners on or about 19 November 1982. Following the death of Annette Bailey in 2020, Glenice claims to be the executrix of her estate ( “the second defendant”). However, there has been no application for probate. The NSW Trustee and Guardian have been notified of the proceedings and expressed that it will only act as a nominal defendant and not take further action.
In the mid-1990s, there was a dispute over the Will of the parties’ father, which led to family provision proceedings that they settled without a judgment. Although the settlement document is not in evidence, The plaintiff does not deny that he agreed to transfer his share of the property to the defendants upon request.
In 2017, the defendants entered into a loan agreement with the Commonwealth Bank of Australia, with the plaintiff acting as a guarantor. The Bank registered a mortgage over the property to secure the loan obligations. However, the defendants stopped making regular payments on the loan from around June 2020.
In February 2022, a letter of default was issued to the first defendant by the Bank.
On 11 April 2022, the plaintiff, as guarantor, was notified of the default by the Bank.
On 12 July 2022, the Bank issued a notice of demand to the plaintiff.
On 25 July 2022, the Bank initiated legal proceedings against all parties to enforce the mortgage, including seeking vacant possession of the property for a mortgagee sale. The first defendant did not agree to sell the property at any point.
On 18 October 2022, the plaintiff paid all the arrears on the loan instalments and agreed to make regular repayments to prevent the Bank from continuing enforcement action. As of 18 January 2024, the plaintiff had paid $73,387.00 for the amounts due under the loan and mortgage.
The first defendant has been unwilling to indemnify the plaintiff for the payments made or agree to the sale of the property to discharge the Bank mortgage.
On 16 May 2023, the plaintiff began these proceedings through a summons seeking the appointment of trustees to sell the property under s 66G and the distribution of the proceeds, including distribution to him referable to his payments made towards the mortgage.The Bank agreed to a trustee sale and a set of orders regarding the distribution of the sale proceeds and did not seek to be heard or appear at the hearing.
The decision
The Court held that, on the face of the register, the parties were co-owners as defined in s66F(1) of the Conveyancing Act, being equal tenants in common. Although an order under s66G is discretionary, such an order is almost as of right, unless on settled principles, it would be inequitable to make the order. The Court may refuse an order if the appointment of trustees for sale is inconsistent with a proprietary right, or the applicant for the order is acting in breach of contract or fiduciary duty or is estopped from seeking or obtaining the order.
However, because of the agreement accepted by both parties, the plaintiff was bound as a matter of contract not to deal with his interest in the property other than to transfer his interest to the defendants upon request. Inherent in the promise to transfer his interest upon request was a promise not to deal with his interest as a beneficial owner. Despite the later transactions, it did not entitle the plaintiff to the beneficial ownership evidenced in the register.
Further, the plaintiff’s earlier conduct gave rise to a proprietary estoppel to the effect that it would be unconscionable for him to assert his legal rights as a registered co-owner under s66G. Deciding whether the plaintiff held his proprietary interest by express or resulting trust was unnecessary; neither was it an appropriate case to exercise discretion under s66G. The plaintiff’s potential right to subrogation was not relevant to this discretion.
In NSW, a right of subrogation only arises when a guarantor has discharged all of the principal’s obligations to a creditor. However, the defendant had raised no defence to the right to indemnity of the plaintiff, and the Court gave judgment for the plaintiff in the amount he had paid. The plaintiff was also entitled to his costs.