Charbord Investments Pty Ltd v Szwarcbord (No 2)
[2023] VCC 2270
•7 December 2023
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-21-05601
| CHARBORD INVESTMENTS PTY LTD (ACN 104 932 532) AS TRUSTEE OF CHARBORD FAMILY TRUST & ORS ACCORDING TO THE ATTACHED SCHEDULE | Plaintiff |
| v | |
| ISABELLE SZWARCBORD | Defendant |
---
JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers (parties provided written submissions on 1 December 2023) | |
DATE OF JUDGMENT: | 7 December 2023 | |
CASE MAY BE CITED AS: | Charbord Investments Pty Ltd & Ors v Szwarcbord (No 2) | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 2270 | |
REASONS FOR JUDGMENT (No 2)
---
Subject: COSTS
Catchwords: Indemnity costs – form of final order – charge – judicial sale
Legislation Cited: County Court Civil Procedure Rules 2018 - Courts (Case Transfer) Act 1991 - Courts (Case Transfer) Rules 2021 - Property Law Act 1958 - Transfer of Land Act 1958
Cases Cited:BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414 - Hycenko v VHY Enterprise Pty Ltd [2020] VSC 834
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T North KC & Mr E Kelly | CIE Legal |
| For the Defendant | Ms N Obrart | Atticus Lawyers |
| For the Fourth Defendant by Counterclaim | Ms C van Proctor | HWL Ebsworth Lawyers |
HIS HONOUR:
1I handed down reasons for judgment in this matter on 23 November 2023 (“the principal reasons”). These reasons employ the same terminology as that used in the principal reasons and assume familiarity with those reasons. This judgment should be read in conjunction with the principal reasons. At the conclusion of the judgment, I directed the parties to file submissions regarding the orders, including orders about costs, giving effect to the judgment. On 1 December 2023, the parties filed and served written submissions in relation to the question of costs and the form of final orders.
2The parties submitted proposed orders. They agreed that there should be a declaration that the defendant held Unit 2 on constructive trust for CI and CI6 and that, accordingly, the defendant has no beneficial interest in the property.
3They also agreed that there should be a declaration that in 2017, 2018 and 2020 the defendant signed or made false statutory declarations which she gave to the ANZ. Isabelle acknowledged that the statutory declarations were false to the extent that she claimed to have obtained independent legal advice when she had not.
4The defendant also appeared to accept that her counterclaim was dismissed.
5The defendant accepted that she should pay:
(a) the plaintiffs’ costs of the proceeding on a standard basis up to 4.00pm on 6 October 2022 and thereafter on an indemnity basis;
(b) the ANZ’s costs of the proceeding on a standard basis.
The orders sought
6The plaintiffs seek the following orders:
(1) Declares that the property situated at Unit 2, 4 Trawalla Avenue, Toorak, Victoria, being the land more particularly described in folio of the Register Volume 11868 Folio 896 (Unit 2):
a. is, and has at all relevant times, been held by the defendant on constructive trust for the benefit of the first and second plaintiffs;
b. is charged with repayment of the sum owing to the first plaintiff under the loan deed executed on or around 2 July 2018.
(2) Declares that the defendant has no beneficial interest in Unit 2.
(3) Declares that the defendant:
a. made false statutory declarations on 28 July 2017, 21 December 2018 and 10 July 2020; and
b. indemnifies the fourth defendant by counterclaim for all its losses arising from the false statutory declarations
(4) There be judgment for the plaintiffs against the defendant, as specified in paragraphs 1 and 2 of these orders
(5) There be judgment for the fourth defendant by counterclaim against the defendant, as specified in paragraph 3 of these orders.
(6) The defendant’s further amended counterclaim be dismissed.
(7) The plaintiffs have the powers in relation to the selling of Unit 2 of a mortgagee in exercising a mortgagee's power of sale pursuant to section 77 of the Transfer of Land Act 1958 (Vic).
(8) Upon sale of Unit 2, the plaintiffs pay the proceeds of sale in the following order:
a. first, to the plaintiffs for all proper costs and expenses relating to the sale of Unit 2;
b. secondly, to the relevant entities for such sum as is due in respect of any duties or taxes payable in relation to Unit 2;
c. thirdly, to the fourth defendant by counterclaim in payment of any amount owing under the mortgage over Unit 2, including any unpaid legal costs on an indemnity basis; and
d. fourthly, to the plaintiffs, for such sum as is due in respect of its charge over Unit 2;
e. fifthly, to the plaintiffs, the balance.
(9) The defendant pay, on an indemnity basis, to be taxed in default of agreement:
a. The plaintiffs’ costs of the proceeding, including any of the fourth defendant by counterclaim's costs of the proceeding which the Plaintiffs' have paid on an indemnity basis; and
b. the fourth defendant by counterclaim’s costs of the proceeding.
(10) The plaintiffs have leave to file and serve, by 15 December 2023:
a. any application for third party costs orders; and
b. any related application under the Courts (Case Transfer) Act 1991 and the Courts (Case Transfer) Rules 2021.
7Isabelle submitted the following proposed orders:
(1) Declares that the Defendant holds her interest in the property situated at Unit 2, 4 Trawalla Avenue, Toorak, Victoria, being the land more particularly described in folio of the Register Volume 11868 Folio 896 (Unit 2) on constructive trust for the First Plaintiff (CI) and/or Second Plaintiff (CI6) and has done so since 11 August 2017, being the date on which she became registered proprietor of Unit 2.
(2) The Defendant effect a transfer of Unit 2 to CI and/or CI6 forthwith.
(3) A copy of the Judgment delivered by the Court on 23 November 2023 in these proceedings be sent to the Victorian State Revenue Office within seven (7) days of these Orders.
(4) Declare that the statement made by the Defendant in each of the statutory declarations signed by her in connection with the 2017, 2018, 2020 facilities (Facilities) offered to the Plaintiffs by the Fourth Defendant by Counterclaim was, to the extent that it declared that she had obtained independent legal advice in respect of signing the documents connected with the Facilities, false.
(5) The Defendant pay the Plaintiffs’ costs of the proceedings on the ordinary basis up to 4.00pm on 6 October 2022 and on the indemnity basis thereafter.
(6) The Defendant pay the Fourth Defendant by Counterclaim’s costs of the proceedings on the ordinary basis.
Parties’ submissions
Plaintiffs
8The plaintiffs submit that because they have succeeded in all major aspects of their claims, that they are entitled to relief in the terms sought in their statement of claim.
9The ANZ agreed with the plaintiffs proposed minute of orders.
10In relation to the final orders dealing with Unit 2, the plaintiffs contend that the court should declare that the beneficial ownership of Unit 2 belongs to them and that the property is charged with the repayment of the loan made under the loan deed. They seek to sell the property subject to the same powers and duties as a mortgagee under section 77 of the Transfer of Land Act 1958 (“TLA”).
11Moreover, they say that if the court makes the orders the plaintiffs seek, then the court will not be required to determine the exact quantum of indebtedness owed by Isabelle. The plaintiffs advised the court that they would not press for repayment from Isabelle of any amount beyond that obtained from the sale of Unit 2, regardless of how much was ultimately owed under the loan deed or other security in respect of Unit 2. I infer from this that the plaintiffs seek to recover only the proceeds of sale from the disposal of the property and otherwise will not seek further monies from Isabelle. In the alternative, the plaintiffs rely upon an updated debt calculation that they provided during closing submissions and again in their bundle of supporting material.
12In regard to the costs of the proceeding, the plaintiffs contend that the costs should follow the event so that Isabelle is ordered to pay costs on an indemnity basis. They advance four arguments in support of their application.
13First, the plaintiffs served an offer of compromise pursuant to Order 26 of the County Court Civil Procedure Rules 2018 (“the Rules”) on Isabelle on 22 March 2023 (five days before trial).
14The offer is said to be on less favourable terms for the plaintiffs than those the plaintiffs obtained at judgment. In the offer of compromise, the plaintiffs sought recovery of possession of Unit 2 and offered to pay Isabelle $200,000 in respect of the counterclaim. Isabelle did not accept the offer.
15The plaintiffs submit that according to Order 26 of the Rules, they are prima facie entitled to a standard costs order until 11.00am on 24 March 2023 and an indemnity costs order after that time.
16Secondly, the plaintiffs contend that, up to November 2022, they made repeated offers, on both an open and without prejudice basis, to settle the proceeding in whole or in part on the basis that Isabelle consent to the sale of Unit 2. Isabelle did not accept, or failed to respond to, any such settlement offers.
17Thirdly, the plaintiffs point to the principal reasons and the finding that the loan deed, and in particular clauses 7.1 to 7.4, is valid. Those clauses provide that Isabelle indemnifies the first plaintiff on a full indemnity basis in relation to any legal costs incurred in respect of the creation, enforcement, or attempted enforcement, of the loan deed. It includes a full indemnity for legal and other costs and disbursements incurred by the lender arising out of any event of default under the loan deed.
18Fourthly, the plaintiffs say that there are sufficient special circumstances to warrant the ordering of indemnity costs against Isabelle. In particular, they note that Isabelle:
(a) made serious, irrelevant and unfounded allegations (including fraud) which ought never to have been made, were not put to the relevant witnesses in cross-examination and which unduly prolonged the case;
(b) commenced and continued the proceedings with a wilful disregard of known facts; and
(c) otherwise wasted the court’s time by failing to admit a vast number of business records showing payments in respect of Unit 2 in a documents case.
19The plaintiffs also argue that because they have paid all of the ANZ’s costs in this proceeding and all amounts related to the loan borrowed from the ANZ to satisfy the balance of the purchase price that they are entitled to an assignment of any costs order obtained by the ANZ.
20Finally, they also seek orders allowing them to pursue a third party costs application against Jeremy and/or Isabelle Eleanore Global Pty Ltd (“IEG”), a company of which Jeremy is the sole director and shareholder. The plaintiffs contend that IEG was incorporated prior to the proceeding to protect Isabelle’s income in the event the plaintiffs succeeded in this case. It receives all of Isabelle’s income and has paid Isabelle’s own legal costs of the proceeding. They also seek orders allowing them to apply to transfer the proceeding, if necessary, as I have been appointed to the Supreme Court of Victoria.
ANZ
21The ANZ agreed with, or did not contest, the orders proposed by the plaintiffs and said further that those orders reflect: the findings of the court in respect of the claims made against the ANZ by Isabelle; the findings of the court in respect of the ANZ’s counterclaim against Isabelle; and the relief sought by the ANZ in its counterclaim.
22It made no submissions in relation to the other orders.
Isabelle
23Isabelle submitted that a declaration that a constructive trust exists in favour of the plaintiffs over the property would give effect to the judgment. She says that, if she transfers the property so that the beneficial and legal interest are aligned, no other relief would be required.
24Isabelle also submitted that the court should require the plaintiffs to submit a copy of the judgment to the State Revenue Office (“SRO”) within seven days of final orders.
25Isabelle submits that the declaration in the orders about false statutory declarations should be qualified such that it relates only to Isabelle’s false claim that she obtained independent legal advice.
26As to the plaintiffs’ costs of the proceeding, Isabelle conceded that she would have to pay indemnity costs. She submitted that costs should be ordered on an indemnity basis from 6 October 2022 being the expiry date of the plaintiffs’ offer made on 21 September 2022.
27Finally, in relation to the ANZ’s costs, she contends that the ANZ has claimed reasonable costs in relation to the proceedings in its pleadings and accordingly, the ANZ should only be entitled to costs on an ordinary basis.
Issues
28The main areas of dispute derived from a comparison of the various orders submitted are as follows:
(a) should the court order the plaintiffs to send a copy of the principal reasons to the SRO?
(b) should the court make a declaration of a charge in favour of CI and consequential orders for the sale of Unit 2 pursuant to section 77 of the TLA? Alternatively, is it enough to order the defendant to effect a transfer of Unit 2 to CI and CI6?
(c) should the defendant indemnify the ANZ for losses arising from the false declarations?
(d) should the defendant pay the plaintiffs’ costs on an indemnity basis from a date different from 6 October 2022?
(e) should the defendant pay the ANZ’s costs of the proceeding on an indemnity basis?
(a) Should the court order the plaintiffs to send a copy of the principal reasons to the SRO?
29In my opinion, there is no need to make an order requiring the plaintiffs to send a copy of the principal reasons to the SRO. The plaintiffs’ supporting material shows that, by letter dated 30 November 2023, Tisher Liner, the plaintiffs’ solicitors, have written to the SRO advising them of some of the background to this case, the part of the judgment regarding the constructive trust and a reference (including a citation) to the principal reasons for judgment handed down late last month.
30In the circumstances, the plaintiffs are already acting to resolve the issue of whether, and how much, land tax ought be payable in respect of Unit 2. That being so, there is no need to make an order directing delivery of the judgment to the SRO. Should the SRO wish to obtain a copy of the judgment, it can do so from the internet. The judgment is already publicly available.
(b)Should the court make a declaration of a charge in favour of CI and consequential orders for the sale of Unit 2 pursuant to section 77 of the TLA? Alternatively, is it enough to order the defendant to effect a transfer of Unit 2 to CI and CI6?
31The plaintiffs submit that the court should make a declaration that the beneficial ownership of Unit 2 lies with them and that because the loan deed has been held to be valid a charge exists over the property. They say that this would be the basis for orders pursuant to section 77 of the TLA permitting the sale of Unit 2.
32They have sought the sale of the property since at least July 2021. They have specifically sought a grant of a mortgagee’s powers under section 77 since the issue of the writ and statement of claim.
33Isabelle submitted that the court should order that she transfer the property to the plaintiffs. She says that if such an order is granted, no further relief will be required.
34Clause 5.1 of the loan deed provided that, in consideration for CI entering into the loan deed, Isabelle would charge all of her present and future right, title and interest in Unit 2. Clause 5.4 provided that any default under the loan deed was a default under the charge. In the principal reasons I held that the loan deed was a valid agreement that Isabelle entered.
35I therefore find that there is sufficient evidence to support a declaration that a charge exists in favour of CI over the property – no contrary evidence or submissions have been provided.
36CI lodged a caveat in support of its charge on 29 January 2021.
37On 20 August 2021, CI gave notice that the termination date was to be 19 September 2021. The whole of the principal sum became due by that date.
38Because no monies were paid by 19 September 2021, Isabelle was in default of both the loan deed and the charge.
39I accept that the beneficial ownership of Unit 2 lies with the first and second plaintiffs and a charge exists on the property securing the funds lent under the loan deed by the first plaintiff.
40I consider that section 77 of the TLA is inapplicable to the current proceedings. It seems from the surrounding context that the charge referred to in section 77 is one securing the payment of an annuity.[1] The power in section 77 itself makes clear that only a mortgagee or an annuitant may sell the charged land.
[1] Section 74(1)(b)
41As is obvious from the principal reasons, CI is not a mortgagee. The charge does not secure an annuity so CI cannot be an annuitant.
42The charge created by the loan deed is an equitable charge.[2]
[2] See the discussion of equitable charges in Hycenko v VHY Enterprise Pty Ltd [2020] VSC 834 at [33] – [35]
43Accordingly, I am not satisfied that I should make the order sought by the plaintiffs pursuant to section 77 of the TLA.
44The County Court nonetheless has power to order a judicial sale of the property. This can be effected pursuant to section 91 of the Property Law Act 1958 (Vic) (“PLA”) which is in the following terms:
91 Sale of mortgaged property in action for redemption or foreclosure
(1) Any person entitled to redeem mortgaged property may have a judgment or order for sale instead of for redemption in an action brought by him either for redemption alone, or for sale alone, or for sale or redemption in the alternative.
(2) In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the Court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, notwithstanding that—
(a) any other person dissents; or
(b) the mortgagee or any person so interested does not appear in the action—
and without allowing any time for redemption or for payment of any mortgage money, may, if it thinks fit, direct a sale of the mortgaged property, on such terms as it thinks fit, including the deposit in court of a reasonable sum fixed by the Court to meet the expenses of sale and to secure performance of the terms.
(3) But, in an action brought by a person interested in the right of redemption and seeking a sale, the Court may, on the application of any defendant, direct the plaintiff to give such security for costs as the Court thinks fit, and may give the conduct of the sale to any defendant, and may give such directions as it thinks fit respecting the costs of the defendants or any of them.
(4) In any case within this section the Court may, if it thinks fit, direct a sale without previously determining the priorities of incumbrancers.
(5) This section shall apply to actions brought either before or after the commencement of this Act.
(6) In this section mortgaged property shall include the estate or interest which a mortgagee would have had power to convey if the statutory power of sale were applicable.
(7) For the purposes of this section the Court may, in favour of a purchaser, make a vesting order conveying the mortgaged property, or appoint a person to do so, subject or not to any incumbrance, as the Court thinks fit; or, in the case of an equitable mortgage, may create and vest in the mortgagee a legal estate to enable him to carry out the sale in like manner as if the mortgage had been made by deed by way of legal mortgage.
45The power in section 91 is discretionary. Derham AsJ summarised the law regarding charges and judicial sale in Hychenko v VHY Enterprise Pty Ltd.[3] I accept that summary, the main points of which were:
· An equitable charge is created when property is expressly or constructively made liable to discharge a debt or some other obligation and the charge confers on the chargee a right of realisation by judicial process, such as an order for sale.
· No special form is required to create a charge. It is enough if the court can derive from the instrument an intention that the property should constitute security for repayment of a debt.
· The relief available for a charge over real property includes an application for judicial sale. This process is the standard way of enforcing an equitable charge.
· The definition of mortgage in section 18 of the PLA includes an equitable charge so the power given by section 91 of the PLA applies to the enforcement of equitable charges.
· Usually, a sale will not be ordered unless there is evidence of the value of the property.
· The court authorising the sale should exercise some control over the terms and manner of the conduct of the sale. This includes the fixing of a reserve price, who conducts the sale and the inclusion of conditions which protect any first mortgagee.
· An equitable charge does not of itself confer a right to immediate possession of the property. It requires a court order.
[3] [2020] VSC 834 at [33] – [48]
46In the present case, the plaintiffs and the ANZ as first mortgagee seek a sale of the property. Given that the plaintiffs have claimed relief by way of judicial sale in the statement of claim since the inception of the proceeding and Isabelle advanced no compelling reason for withholding this relief, I am content to award it in the circumstances.
47The orders proposed by the plaintiffs seem to me appropriate. They protect the ANZ as mortgagee and the SRO. The plaintiffs also protect Isabelle by limiting their debt claims against her to whatever is realised through selling Unit 2. I will reserve liberty to apply in the event that some further question arises which requires the consideration of the court.
(c)Should the defendant indemnify the ANZ for losses arising from the false declarations?
48As I noted in the principal reasons,[4] in her reply submissions dated 7 June 2023 Isabelle conceded that if the guarantees were not set aside, then clause 12.4 would apply. I did not find that the guarantees were liable to be set aside. Therefore, clause 12.4 does apply.
[4] Charbord Investments Pty Ltd & Ors v Szwarcbord [2023] VCC 2141 at [334]
49Clause 12.4 of the 2017 guarantee is in the following terms:[5]
ANZ can recover from you (and you agree to pay ANZ on demand) for any liability or loss (other than any liability or loss caused by ANZ’s own negligence or wilful misconduct) directly arising from, and any reasonable Costs incurred in connection with:
(a)you not complying with any of your obligations under this guarantee and indemnity or a representation, warranty or statement made, or taken to be made, by or on your behalf in this guarantee and indemnity being incorrect or misleading (including by omission) when made or taken to be made; or
(b)ANZ exercising, enforcing or preserving rights, powers or remedies in connection with this guarantee and indemnity (or considering doing so).
[5] Court book, 2639
You agree to pay amounts due under this indemnity on demand from ANZ.
50The 2018 and 2020 guarantees are in materially the same terms. However, they contain a further description of what is excluded from clause 12.4:
The, liability, loss and Costs referred to in this clause 12.4 do not include any liability or loss or Costs to the extent they arise from the negligence, fraud or wilful default of ANZ or its officers, employees, contractors or agents or any ANZ Appointee or Attorney.
51The ANZ did not call any witnesses during the trial.
52The only witness from the ANZ who appeared at trial was David Foran. Isabelle called him. Foran gave no evidence in relation to losses or costs that the ANZ had suffered because of the false statutory declarations made by Isabelle.
53I infer from the ANZ’s decision not to ask Foran about losses which the ANZ suffered due to the false statutory declarations and the bank’s decision not to call any other witnesses to give such evidence, that the ANZ has not suffered any loss arising from the statutory declarations.
54Thus, it appears to me, that, based on the evidence led at trial, there are no losses proven by the ANZ as arising from, or attributable to, her false statutory declarations. Accordingly, Isabelle is not obliged to indemnify the ANZ for unproven losses.
(d)Should the defendant pay the plaintiffs’ costs on an indemnity basis from a date different from 6 October 2022?
55The plaintiffs claim indemnity costs for the whole of the proceeding. One basis is that clauses 7.1 – 7.4 of the loan deed were valid and provide for a full indemnity in relation to legal costs incurred in enforcing, or attempting to enforce, the loan deed or where the costs arise from an event of default. Both criteria are satisfied in this case and give the plaintiffs a sound basis for the order which they seek.
56The second basis relied on was the “special circumstances” criterion. The plaintiffs raised a number of factors as justifying an order for indemnity costs: making serious unpleaded allegations of fraudulent behaviour; the proceeding being commenced and/or continued in wilful disregard of known facts; wasting the court’s time by failing to admit many business record documents.
57I would not order indemnity costs on this basis. Although the allegations about fraud on the SRO and the Australian Taxation Office were not pleaded, the documents in the court book raised obvious concerns due to the suggestion that Isabelle was the legal and beneficial owner of Unit 2. Although I said that Isabelle could not develop and run this allegation in final address, I was sufficiently concerned in my capacity as a judicial officer that I required the plaintiffs to regularise the situation with the SRO. It should be acknowledged that the plaintiffs have already begun this process.
58In relation to the question of capital gains tax, the issue will not become live until the property is sold. However, the plaintiffs must again ensure that they satisfactorily perform their legal obligations in this sphere as well.
59There is substance in the point that Isabelle began, and persisted with, a claim which she knew was not well-founded. For reasons set out in the principal reasons, she was aware that Unit 2 was part of the family business and did not belong to her beneficially whether as a gift or otherwise. The family business operated on the assumption that the collective rights and financial well-being of the family trumped individual claims. Family members were required to sacrifice their personal wishes or interests for the greater good of the Group. Thus, when the family needed to sell a property to further the interests of the Group, the individual in whose name the property was registered was expected to cooperate.
60Thirdly, the plaintiffs contend that they made a number of settlement offers which Isabelle did not accept. The plaintiffs’ supporting material revealed written offers made on 20 August 2021, 30 June 2022, 30 August 2022 and 11 November 2022. The first three offers were not put as Calderbank offers but the final offer was. Because the plaintiffs made no express mention in the open correspondence of referring to these letters in order to obtain costs on an indemnity basis, I consider I should discount these offers and not use them as the basis for a higher award of costs.
61The November 2022 letter was written as a Calderbank letter. Normally, I would examine the principles of law governing the use and operation of Calderbank letters.[6] However, in her submissions, Isabelle conceded that the defendant should pay the plaintiffs’ costs of the proceeding on a standard basis up to 4.00pm on 6 October 2022 and thereafter on an indemnity basis. That being so, the November 2022 letter and its effect is strictly irrelevant in practical terms.
[6]These principles are comprehensively and usefully summarised by Habersberger J in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414 at [58] – [67]
62The final possibility is the offer of compromise dated 22 March 2023 made under Order 26. The offer complies with the requirements of the Rules. The offer to pay Isabelle $200,000 on her counterclaim reflected a genuine offer to compromise the litigation. Due to Isabelle’s rejection of the offer and the operation of the Rules, the plaintiffs would be entitled to their costs of the proceeding on a standard basis until 11.00am on 24 March 2023 and thereafter, to recover their costs on a indemnity basis.
63As to the matter of the costs incurred by the ANZ which the plaintiffs claim to have already paid, I find this part of the case unclear. To the extent that Isabelle breached the terms of any agreement made with the ANZ, she should be responsible for the consequences including the payment of the ANZ’s costs where appropriate. It was not clear from the evidence whether the plaintiffs had paid the ANZ’s legal costs in relation to Isabelle’s breaches or on what basis. Given the uncertainty, I am willing to make an order for the plaintiffs’ costs which relate only to their own costs and do not extend to cover monies which they allegedly paid to the ANZ for its legal costs incurred in defending Isabelle’s claim. I note that in closing submissions the plaintiffs’ counsel referred to the plaintiffs paying the whole of the indebtedness owed to the ANZ under a specific facility. This payment was not the subject of evidence or a concession by Isabelle. I said to the parties that, if submissions depended upon evidence which was not adduced before the close of evidence in March 2023 or was not permitted after an application to reopen and lead fresh evidence, then I would not take such factual matters into account.
64I find that, as the criteria in clauses 7.1 – 7.4 of the loan deed are satisfied, the plaintiffs are entitled to costs on an indemnity basis for the entirety of the proceeding. Alternatively, I would award indemnity costs because Isabelle precipitated this proceeding by asserting a beneficial entitlement to Unit 2 when she was aware she had no such right. As a final alternative, Isabelle acknowledged the appropriateness of an order to pay the plaintiffs’ costs on an indemnity basis after 4.00pm on 6 October 2022.
(e)Should the defendant pay the ANZ’s costs of the proceeding on an indemnity basis?
65Clause 12.4 of the 2017, 2018 and 2020 guarantees provided that Isabelle would indemnify the ANZ for any costs arising from or in connection with the ANZ exercising, enforcing or preserving rights in relation to the guarantee and indemnity.
66In this proceeding, the ANZ has sought a declaration that Isabelle made false statutory declarations when she signed the guarantees and defended Isabelle’s counterclaim that sought to set aside the guarantees. It is clear that both of these matters fall within clause 12.4.
67I have not set aside the guarantees and indemnities and Isabelle has agreed that the clause is applicable. Therefore, I find that she should pay the ANZ’s costs of the proceeding on an indemnity basis.
Other issues
68The plaintiffs have indicated that they may wish to pursue IEG for costs and to transfer or uplift this case to the Supreme Court of Victoria. Without making any comment about the merits of either application, I am willing to grant the plaintiffs the leave sought.
Conclusion
69For the reasons set out, I make the following orders:
OTHER MATTERS:
The plaintiffs have assured the Court that in enforcing their rights against Isabelle, they will not seek to recover from Isabelle any monies owing under the loan deed beyond the monies they receive as the proceeds of sale from disposing of Unit 2.
THE COURT DECLARES THAT:
1 The property situated at Unit 2, 4 Trawalla Avenue, Toorak, Victoria 3142, being the land more particularly described in folio of the Register Volume 11868 Folio 896 (“Unit 2”):
(a)is, and has at all relevant times, been held by the defendant on constructive trust for the benefit of the first and second plaintiffs;
(b)is charged with repayment of the sum owing to the first plaintiff under the loan deed executed on or around 2 July 2018.
2 The defendant has no beneficial interest in Unit 2.
3 The defendant made false statutory declarations on 28 July 2017, 21 December 2018 and 10 July 2020.
THE COURT ORDERS THAT:
4 There be judgment for the plaintiffs against the defendant.
5 There be judgment for the fourth defendant by counterclaim against the defendant.
6 The defendant’s further amended counterclaim be dismissed.
7 Pursuant to section 91 of the Property Law Act 1958, the first and second plaintiffs conduct a judicial sale of Unit 2.
8 Upon sale of Unit 2, the first and second plaintiffs pay the proceeds of sale in the following order:
(a)first, to the first and second plaintiffs for all proper costs and expenses relating to the sale of Unit 2;
(b)secondly, to the relevant entities for such sum as is due in respect of any duties or taxes payable in relation to Unit 2;
(c)thirdly, to the fourth defendant by counterclaim in payment of any amount owing under the mortgage over Unit 2, including any unpaid legal costs on an indemnity basis;
(d)fourthly, to the first plaintiff, for such sum as is due in respect of its charge over Unit 2; and
(e)fifthly, to the first and second plaintiffs, the balance.
9 The defendant cooperate with the plaintiffs in selling Unit 2 by signing such documents or doing such other things as the plaintiffs reasonably request in order to effect the sale.
10 There be liberty to apply to the Court for any further directions or orders.
11 The defendant pay the plaintiffs’ costs of the proceeding such costs to be taxed on an indemnity basis in default of agreement.
12 The defendant pay the fourth defendant by counterclaim’s costs of the proceeding such costs to be taxed on an indemnity basis in default of agreement.
13 The plaintiffs have leave to file and serve, by 15 December 2023:
(a)any application for third party costs orders; and
(b)any related application under the Courts (Case Transfer) Act 1991 and the Courts (Case Transfer) Rules 2021.
SCHEDULE OF PARTIES
BETWEEN
| CHARDBORD INVESTMENTS PTY LTD (ACN 104 932 532) AS TRUSTEE OF CHARBORD FAMILY TRUST | First plaintiff |
| CHARBORD INVESTMENTS NO 6 PTY LTD (ACN 606 069 612) AS TRUSTEE OF CHARBORD FAMILY TRUST NO 6 | Second plaintiff |
| PETER STEVEN SZWARCBORD | Third plaintiff |
| and | |
| ISABELLE SZWARCBORD | Defendant |
| [BY ORIGINAL PROCEEDING] AND | |
| ISABELLE SZWARCBORD | Plaintiff by counterclaim |
| and | |
| CHARDBORD INVESTMENTS PTY LTD (ACN 104 932 532) AS TRUSTEE OF CHARBORD FAMILY TRUST | First defendant by counterclaim |
| CHARBORD INVESTMENTS NO 6 PTY LTD (ACN 606 069 612) AS TRUSTEE OF CHARBORD FAMILY TRUST NO 6 | Second defendant by counterclaim |
| PETER STEVEN SZWARCBORD | Third defendant by counterclaim |
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) | Fourth defendant by counterclaim |
[by counterclaim]
0
3
0