Segal v Barel [2013] NSWCA 92

Two co-owners sought different remedies to terminate their co-ownership, one sale and one partition. A section 66G order was made by the Supreme Court to partition the land and to require one co-owner to pay the other a sum to take account of expenditure in relation to the land to achieve equality between them. The co-owner wanting sale appealed on 3 bases:

1. The judge wrongly took into account factors other than financial factors;

2. The judge wrongly took into account irrelevant considerations and ignored certain material considerations;

3. Strata subdivision into two lots is not a partition at all because it does not involve a clean break.

The party seeking partition rather than sale must satisfy the court that partition would be more beneficial for the co-owners in a financial sense than sale. If court is not satisfied that partition is the more beneficial remedy, sale remains the only remedy available. The legislation makes no attempt to define “partition”. The case law is that if possible, the two parts must conform, as to value, to the proportions in which the parties hold in co-ownership and make allowance for any increase in value brought about by means of expenditure by one or both of the co-owners. If division of parts is impracticable, financial adjustment will be necessary by way of equality money to redress the inequality.

The Court of Appeal found that “more beneficial” is confined to financial matters and held that the lower court misdirected itself by taking account of non-financial matters and irrelevant considerations such as allowing one of the co-owners to remain living in his house on one of the lots and the effect it would give to the co-owners’ initial objective concerning development of the land. Also some of the financial matters such as the ability to refinance or clear the mortgage debt applied equally to sale. The Court of Appeal also found that the court’s finding that a subdivision would result in a value for the lots that would exceed the value of the undivided whole had no evidence to support it and other financial matters that should have been taken into account had not been considered.

Further the court noted that while strata plan lots are vested in the lot proprietors severally, the common property is vested in the owner’s body corporate as trustee for the lot proprietors in proportion to their unit entitlements. The owners are equitable tenants in common of that common property and so this does not achieve partition at all.

The appeal was allowed and an order for the appointment of trustees for sale was made. 

The court did not upset the lower’s court’s orders as to payment of the balance owed to one of the co-owners to take account of their contribution.

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