S 66G of the NSW Conveyancing Act 1919 provides a legal mechanism to resolve disputes between property co-owners. While co-ownership can make a lot of sense, it can also lead to conflict when the relationship between the co-owners changes or they cannot agree on the sale of the property.
The NSW legislature implemented s 66G to resolve disputes between co-owners of property where one owner wants to sell and the other does not agree. Any owner can use s 66G to force a sale or partition of the property.
This article discusses s 66G of the Conveyancing Act – what it is, when it can be used, and how it works in practice, by reference to a few cases, to illustrate the application of s 66G. We will also look at the orders the court can make under a s 66G application and provide practical tips when dealing with such an application.
We will discuss what happens to the property after it is placed in trust for sale or partition, and how s 66G application costs are covered.
What is a section 66G application?
S 66G(1) stipulates that:
“Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.”
S 66F(1) defines "co-ownership" as follows:
"Co-ownership" means ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common.”
S 66G, therefore, allows one owner to ask the court to appoint trustees to sell the property if the co-owners cannot agree on the sale, or to hold the property on a trust for partition.
When will a section 66G order be used?
Properties are often co-owned by spouses, siblings, friends, business partners, parents, and children.
Unfortunately, these partnerships or family relationships sometimes deteriorate, and co-owners don't always agree on what to do with the co-owned property. S 66G provides a formal, impartial process for dealing with the sale or partition of the co-owned property through a court-appointed trustee.
If the property is owned by tenants in common, survivorship does not apply, and the interest in the property is passed on to the deceased's beneficiaries in their will. If the beneficiary refuses to sell or partition the property, the surviving owner can use s 66G to force the beneficiary’s hand to sell or partition the property.
If the property is owned in joint tenancy, survivorship applies, and the surviving joint tenant is then entitled to the whole property.
The threat of as 66G application can often motivate the co-owners to resolve the dispute and agree to sell the property, since the appointment of trustees for sale or partition is a costly endeavour and relinquishes control of the sale process to a third party. One co-owner can also make a fair offer to buy the other one out.
S 66G is also handy when one co-owner becomes bankrupt, and the bankrupt’s share of the property vests in the bankruptcy trustee.
Who can apply for a section 66G order?
If we look at the definition of co-ownership, it is clear that any tenant in common can apply.
In a recent case of Ambrus v Buchanan [2022] NSWSC 1628, the court stated explicitly,
"It matters not whether a tenant in common applying for an order appointing trustees for sale owns a majority interest, an equal interest, a minority interest somewhat less than 50 percent or a minority interest significantly less than 50 percent of the property in question."
In Ambrus, the plaintiff only had a 1/56th share in the land, which amounted to a 1.79% interest. The land was owned by 13 co-owners, who collectively owned 100% of it.
The court granted the s 66G application but included a term requiring the trustees to determine any claims in respect of improvements to the land made by co-owners.
What orders can the court make under section 66G?
S 66G gives the court the power to appoint a trustee to hold the property on trust for sale. The court may also appoint trustees to hold the property in trust for partition.
S 66G(3)(a) stipulates:
Where the entirety of the property is vested at law in co-owners the court may appoint a trust corporation either alone or with one or two individuals (whether or not being co-owners), or two or more individuals, not exceeding four (whether or not including one or more of the co-owners), to be trustees of the property on either of such statutory trusts.
If the application is to sell the property, any of the co-owners can apply to the court to instead appoint trustees on a statutory trust for the partition of the property.
If the application is to partition the property, and there is no counter-claim for sale, then no question of sale will arise. The only question for the court to consider then is whether or not the property should be partitioned.
Where competing claims for sale and partition arise, the applicant seeking partition must satisfy the court that partition of the property would be more financially beneficial than sale. In that case, the court may instead order a statutory trust for partition.
A trust for partition effectively ends the co-ownership of the property by dividing the property.
Partitioning is often appropriate where the value of the divided parts if sold separately, would be more than the value of the single entity, or where one owner has an emotional interest in a part of the property.
The court’s power under section 66G
The wording of s 66G grants the court discretionary powers to appoint trustees for the sale or partitioning of the property.
Discretionary power means the court will assess each case on its own merits.
In Myers v Clark [2018] NSWSC 1029, the court confirmed that the power is discretionary. However, it also pointed out that, as a general rule, such an order will be made unless it would be inequitable to allow the application.
The court referred to Tory v Tory [2007] NSWSC 1078, where White J summarised the position as follows:
“Whilst an order under s 66G of the Conveyancing Act is discretionary and the courts have declined to define the matters which are [a] bar to a successful application (Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068), such an order is almost as of right unless on settled principles it would be inequitable to allow the application (Callahan v O’Neill [2002] NSWSC 877 at [8]).”
In practice, this means the court will make the order unless it is inequitable to do so.
Myers v Clark
In Myers v Clark, Ms Myers applied to the Supreme Court to appoint trustees to sell two jointly owned properties.
The plaintiff (Ms Myers) and the defendant (Mr Clark) were previously married. After the divorce, the couple remained tenants in common of the two properties. Mr Clark lived in a house with his second wife on one of the properties that was subdivided as part of a property development.
Mr Clark opposed the order. He argued that it would be “unconscionable” for the plaintiff to seek such relief and take 50% of the net proceeds based on her co-ownership, at least without making proper allowances to the defendant for his expenditures on the properties, e.g., rates, mortgage payments, insurance, etc.
Ms Myers argued that, as a joint owner of the subject properties, she had a prima facie right to an order to appoint trustees for sale and the division of the proceeds between the parties. She also argued that Mr Clark was not entitled to any adjustments in his favour.
The parties disputed various aspects of their financial agreements, including an agreement that Mr Clark would pay the mortgage payments in lieu of child support. It also appeared that Mr Clark improperly used funds from the mortgage account.
On whether it would be unconscionable for the court to make such an order, the court confirmed that there is no general jurisdiction to refuse to grant an order under s 66G(1) based on mere hardship or unfairness.
The court referred to Hogan v Baseden [1997] NSWCA 150 and confirmed that while s 66(G) does not give rise to an absolute entitlement to an order, the circumstances where relief has been refused have been limited.
Based on the specific facts in Myers, the court granted the application to appoint trustees to sell the properties and decided that the proceeds should be divided equally.
What happens after an order for sale is made?
S 66G (3)(b) states:
On such appointment the property shall, subject to the provisions of section 78 of the Trustee Act 1925, vest in the trustees.
S 66F(2)(a) states:
Property held upon the “statutory trust for sale” shall be held upon trust to sell the same and to stand possessed of the net proceeds of sale, after payment of costs and expenses, and of the net income until sale after payment of costs, expenses, and outgoings, and in the case of land of rates, taxes, costs of insurance, repairs properly payable out of income, and other outgoings upon such trusts, and subject to such powers and provisions as may be requisite for giving effect to the rights of the co-owners.
In practice, this means that when trustees are appointed to sell the property, the property vests in the trustees and their primary obligation is to sell the property. The sale of the property is taken out of the co-owners’ hands.
The trustees will appoint a sales agent, and the sale often happens through public auction.
Once sold, the proceeds are placed in trust. After deducting any expenses and loans, the money is divided between the co-owners in accordance with their ownership and contributions to the property.
If one party’s contribution increased the property’s value, the court may consider the contribution in distributing the sale proceeds amongst the parties. A party who enhanced the property’s value should be reimbursed accordingly.
When will the court refuse a section 66G application?
The court summarised the position as follows in Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411:
… “[A] although the court has a discretion whether or not to make an order under the section, the grounds on which it will ordinarily refuse to make one are limited. In particular, there is no general jurisdiction to refuse to grant such an order [under s 66G(1)] on the basis of hardship or unfairness. An example of when the limited discretion to refuse to make an order can be exercised is where such an order would be inconsistent with a proprietary right or a contractual or fiduciary obligation: Grizonic v Suttor [2004] NSWSC 137.”
So, the court will not make the order if it is inconsistent with a proprietary right or a contractual or fiduciary obligation.
For example, suppose there is a contract between the co-owners limiting their ability to dispose of the property or their interest in the property. The court will likely refuse a s 66G application in that case.
In Capolingua v Da Silva [2016] NSWSC 1212, the court also refused to make an order under s 66G where there was a contract between the parties, stating that a party would only exercise their right of sale under s 66G after the property was “conscientiously” marketed for a year. The court refused to make an order until that requirement was fulfilled.
Recently, in Hodgen v Hodgen [2023] NSWSC 1149, the court implied that where a common intention constructive trust is made out, the court may refuse to make a s 66G trustee sale order.
However, as the law stands, there is no definitive list of circumstances where the court will refuse to make an order for sale.
In the absence of a specific agreement, contractual or fiduciary obligations or circumstances making an order inconsistent with a proprietary right, a respondent must satisfy the court that making an order for sale or partition would be inequitable.
In Cain v Cain [2007] NSWSC 623, the court noted that it would usually consider an order under s 66G of the Conveyancing Act appropriate unless persuaded by cogent arguments from those who oppose it.
This position was confirmed in Ambrus v Buchanan, where the court stated:
“It is well established that the grounds on which the court will ordinarily decline to make an order are limited. Those grounds include where the order would be inconsistent with a proprietary right, or a contractual or fiduciary obligation or an equitable or conventional estoppel against the application. There is no general jurisdiction to refuse to grant an order under s 66G on the basis of hardship or unfairness.”
In Ambrus, the court referred to the court’s discretion as a “limited discretion”.
A co-owner who opposes making an order under s 66G must establish a reason why the order should not be made.
Establishing inequitable grounds is not easy. As mentioned, the court will not generally refuse to make an order on the grounds of hardship or general unfairness. This principle has been quoted and followed in many cases.
Hodgen v Hodgen
Hodgen v Hodgen provides a good example of how a defendant may oppose a s 66G application and illustrates how difficult it is to persuade the court not to grant the application.
This case involved a property co-owned by a father and son. They were tenants in common in equal shares. The father passed away, and the executrix of his estate (his daughter) applied for a s 66G order. She wanted to sell the father’s portion of the property to provide funds for distribution under the will.
After initially negotiating to buy his father’s share, the son subsequently refused to sell the property.
In opposing the application, the son argued that a “common intention constructive trust” existed because he and his father had a common intention that the property was held in joint tenancy.
If that were the case, survivorship would apply, and the son would receive his father’s 50% interest in the property upon the father’s death.
The court rejected the son’s argument on the basis that there was no evidence of a common intention constructive trust. The court also noted that the son never asked for a delay of the sale process to allow him to obtain the funds to buy his father’s 50% of the property.
The defendant accepted that if the court is not satisfied that there was a common intention between the father and son, a trustee sale ought to be ordered.
The court granted a s 66G order.
Who to appoint as trustees
When applying for a s 66G application, the applicant must include the names of proposed trustees and the trustees’ consent to act. You also need an affidavit of the trustees’ good character.
Deciding on the type of trustee to appoint can be complicated. Some clients favour insolvency practitioners, while others might favour property experts.
Ultimately, you want to appoint someone who will deliver the best outcome for your situation and that may be circumstance specific.
So, besides considering the cost, you need to consider the person’s skills, experience, and expertise. In some cases, proximity to the property may also be a factor to consider.
What about costs in a section 66G application?
The legal costs of the plaintiff making the s 66G application would generally be covered by the proceeds of the sale of the property.
In Stibbard-Leaver v Leaver [2021] NSWSC 65, the court explained the principles concerning cost orders in s 66G orders.
"…it is usual to order that the costs of the proceedings be paid out of the proceeds of sale. The rationale for this approach is that the costs of such an application are an incident of joint ownership… It remains the case of course that unreasonable conduct by a party may be a basis to conclude that some other order is appropriate…"
In Hodgen’s case, the brother first indicated wanting to buy his father’s share at an agreed price. However, the court held that his subsequent behaviour and refusal to buy the property amounted to unreasonable conduct that caused his sister, as executrix of the will, to incur extra legal costs.
As such, the court considered it appropriate that the plaintiff’s costs be paid on an indemnity basis out of the proceeds of the sale of the property.
Benefits of a section 66G application
In a s 66G application, the focus is selling or partitioning the property. The process is usually quicker and more cost-effective than some alternatives, such as appointing a receiver to manage assets in a partnership.
The outcome is also fairly certain since s 66G applications are seldom declined.
S 66G can be useful in circumstances where the relationship between co-owners has deteriorated to the extent that they cannot agree on even minor matters, such as the advertising of the property. Since trustees are responsible for handling the sale or partition, this will, among other things, reduce the likelihood of inactivity due to an inability to agree.
In summary
- S 66G is an excellent tool for a party wanting to sell a property where the co-owner does not want to cooperate.
- In most cases, the application will be granted unless the court deems it "inequitable" to do so.
- Establishing inequitable grounds is difficult; mere hardship or unfairness is not grounds for refusal.
- Once the order is granted, the property vests with the trustees, whose primary focus is to sell the property.
- Proceeds are divided between the parties according to ownership or contribution towards the property.
- The costs are usually covered from the proceeds of the sale.
The aim of s 66G is to resolve these disputes between co-owners.
Author - Simone Rees, Co-Founder and Principal
Contributor - Melanie Ling, Graduate at Law