Deputy Commissioner of Taxation v De Simone
[2020] VSC 14
•3 February 2020 (given ex tempore)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISOIN
GENERAL LIST
S CI 2014 04447
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| v | |
| GIUSEPPE GIOVANNI ANTONIO DE SIMONE | Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 February 2020 |
DATE OF JUDGMENT: | 3 February 2020 (given ex tempore) |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v De Simone |
MEDIUM NEUTRAL CITATION: | [2020] VSC 14 |
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SECURITY FOR COSTS – Application for security for costs in an appeal from an associate justice – No real prospect of success – Extent of the risk of a costs order not being satisfied –Jafari v 23 Developments Pty Ltd [2019] VSCA 16 – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Linden | Australian Government Solicitor |
| For the Defendant appeared in person |
HER HONOUR:
An application for security for costs is made by the Deputy Commissioner of Taxation (‘the Commissioner’). The Commissioner is the respondent to an appeal by Mr Giuseppe De Simone. The Commissioner seeks the amount of $29,754.82 as security of costs from Mr De Simone in relation to his appeal against orders granting the Commissioner summary judgment and requiring, amongst other things, that he pay $508,535.34 to the Commissioner.
I will dismiss the application for security for costs for the reasons below.
Background
On 10 June 2016 and 7 June 2019, orders were made granting the Commissioner summary judgment in respect of claims made against Mr De Simone. On 28 June 2019, Mr De Simone filed an appeal against the orders made by an associate justice on 7 June 2019 in respect of a ruling dated 27 May 2019. [1]
[1]Ruling [2019] VSC 346.
On 23 July 2019, the Commissioner made its application for security for costs. The application was supported by an affidavit made by Mr Vincent Tavolaro, sworn on 17 July 2019.
On 2 September 2019, orders were made by consent concerning the filing of affidavit material and outlines of submission. On 31 October 2019, on the Court’s own motion, further orders were made extending the timetable following the re-listing of the matter to this day.
The Commissioner filed an outline of submissions on 24 January 2020. Mr De Simone has not filed any affidavit material or written submissions responsive to the orders. During the hearing, he did produce an affidavit sworn this day (‘the De Simone affidavit’). His explanation for doing so was unsatisfactory. Late production was in breach of the Court timetable and may be taken into consideration on the question of costs of this day.
Commissioner’s submissions
The application for security is made pursuant to the inherent jurisdiction of the Court.
The key submissions made by the Commissioner are twofold. Firstly, that the appeal has no real prospect of success. The Commissioner says that the appeal is not a hearing de novo but in the nature of a rehearing. It will require Mr De Simone to establish that the associate justice has fallen into error and he has not done so.
Secondly, that Mr De Simone will not be able to meet a costs order made against him if his appeal is unsuccessful. He has not provided any evidence of assets in his own name. Although there is evidence of his superannuation fund, the Commissioner will not be able to access it as a judgment debt. If Mr De Simone becomes a bankrupt then the trustee in bankruptcy will not be able to access it. The judgment cannot be enforced against his superannuation fund, it is submitted. Mr De Simone has not paid the $508,535.34 he was ordered to pay and that is the subject of the appeal. The Commissioner concedes that there has been no demand that he do so, and says nor has there been an application by Mr De Simone to stay payment. They are the Commissioner’s key submissions.
Mr De Simone’s submissions
Mr De Simone objects to the application. His key submissions are as follows.
Firstly, he is not impecunious. He has approximately $3.6 million in superannuation. He is 61 years old and has been able to draw down on the superannuation monies. He deposes that he has paid other monies owing to the Australian Taxation Office when ordered to do so by drawing down from his superannuation. Mr De Simone rejects the suggestion that he would become bankrupt in order to avoid paying costs. It is implausible that he would rather become bankrupt than take the amount (less than $30,000) out of his superannuation of $3.6 million. Mr De Simone paid the previous amount of approximately $11,000 ordered in this proceeding by drawing down on his superannuation. If he paid that he queries, why would he not pay the costs sought. Mr De Simone says there is no evidence that there is a risk of him not paying the costs order. He concedes that he has not provided evidence of bank statements and says that is because he does not have any money in the bank because if he did so, the taxation authorities would garnishee it. He has deposed to his superannuation accounts which is where all his assets are.
Secondly, the Commissioner relies on an improper foundation for this application, being a ‘without prejudice’ email [where reference is made to Mr De Simone’s financial position].
Thirdly, there are public policy issues. It is highly unusual for a public authority to be given security for costs and unusual to be given security for a penalty proceeding.
Fourthly, the appeal has merit. It is evident from the length of time (number of days) taken for the hearing and the time taken from hearing to judgment that this was not a matter appropriate for summary judgment. Further, it is the type of proceeding in which there should have been cross-examination and there was not. Additionally, referring to the Running Balance Sheet, there was no evidence given by anyone which tested how the Australian Taxation Office applied the money. Further, he relies on the Practice Instructions of the Australian Taxation Office, and says there is no evidence of any proper delegation.
Applicable principles
The Court has an inherent jurisdiction to make orders for security for costs. Associate Justices have the power to hear such applications.[2]
[2]Rule 77.01(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
I adopt the relevant principles stated by the Court of Appeal in Jafari v 23 Developments Pty Ltd:[3]
[3][2019] VSCA 16 (Whelan, Hargrave JJA) [6]-[7], [12], [15].
6.The Court has a wide and unfettered discretion in deciding whether or not to grant security for a respondent’s costs of a proposed appeal and, if so, in what amount. The principles were summarised by Dodds-Streeton JA (Redlich JA agreeing) in Maher v Commonwealth Bank of Australia, where the discretion was described as one depending ‘entirely on the circumstances of each particular case’. Nevertheless, Dodds-Streeton JA gave a non-exhaustive list of matters relevant to the exercise of the discretion:
(1) the prospects of success of the appeal;
(2) the quantum of risk that a costs order would not be satisfied;
(3)whether the making of an order would be oppressive in that it would stifle a reasonably arguable claim;
(4)whether any impecuniosity of the appellant arises out of the conduct complained of;
(5)whether there are other aspects of public interest which weigh in the balance against such an order; and
(6)whether there are any particular discretionary matters peculiar to the circumstances of the case.
7One particular discretionary matter which is sometimes referred to is the difference between an application for security for costs at first instance and on appeal. At first instance, there is a general rule that, absent other factors, an impecunious natural person who sues will not be ordered to give security for costs. On an application for leave to appeal, different considerations apply, because there has already been a determination adverse to the impecunious applicant. This means that, subject to other discretionary factors, security will usually be ordered against an impecunious applicant if the proposed appeal is not reasonably arguable.
…
12.We agree that Botsman and Pioneer Park are distinguishable from this case. However, there is weight in the submission by the respondents that Jafari has not gone on oath and said that any order for security will stifle his claim. He has left the matter to inference only, arising from his insolvency. That is an unsatisfactory situation. An impecunious party seeking to resist a security for costs order on the basis it will stifle a claim or appeal should expressly depose to that fact.
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15.…In these circumstances, the Court adopts a broad brush approach to its assessment of the merits of the proposed appeal, and is careful not to express a considered view as to whether leave to appeal should be granted. (emphasis added)
Analysis
Turning now to the factors to consider.
Firstly, I consider that Mr De Simone has no real prospect of succeeding in his appeal. Taking the ‘broad brush’ approach appropriate to these applications: some of the grounds of appeal do not appear grounds at all in that they do not outline an error[4] or simply appear to be a view that his conclusion is different to that of the associate justice,[5] some (such as those relating to cross-examination,[6] the Australian Taxation Office Practice Instruction[7] and Running Balance Sheet[8]) were dealt with by the associate justice.[9] None appear to have any real prospect of establishing error.
[4]Grounds 2, 12, 16; Grounds 6 and 10; Ground 7. Some grounds raise new grounds not argued before the associate justice such as Ground 3, 11.
[5]Grounds 1, 16.
[6]Grounds 8, 9, 13.
[7]Ground 13.
[8]Grounds 14, 15
[9]See also Grounds 4, 5.
Secondly, the Commissioner has failed to establish that there is such a risk that a costs order would not be satisfied that it should attract an order for security. Mr De Simone has provided evidence of having superannuation funds with approximately $3.6 million. He has given evidence that he has recently drawn down on his superannuation to pay out monies to the Australian Taxation Office.[10] It is common ground that Mr De Simone has paid out the judgment debt of $11,355 in this proceeding. As to the $508,535.34 judgment debt that is the subject of his appeal, although there has not been a stay application, nor has there been a demand for the amount. It appears both parties are awaiting the outcome of the appeal. Further, costs have not yet been taxed in this proceeding and so this is not a situation where Mr De Simone has failed to pay costs.
[10]The amount of $101,000 referred to in the De Simone affidavit [8], [9].
The Commissioner has not provided any evidence to support its contention that Mr De Simone may become bankrupt in order to avoid the judgment debt. That is just speculative.
For clarity, given Mr De Simone’s superannuation funds, and that he has provided evidence he can draw down on his superannuation, I do not accept that he is impecunious.
I do not consider that there are any aspects of public interest relevant to this application. Whether or not it is unusual, as Mr De Simone asserts, for a public authority to be given security for costs for a director penalty proceeding is irrelevant. This application is decided on the basis of legal principles discussed above.
In conclusion, the Commissioner has not established there is such a risk that a costs order would not be satisfied that an order for security is appropriate. Accordingly, I will dismiss the Commissioner’s application
For completeness, there was some dispute about whether a particular email was subject to ‘without prejudice’ privilege. It is immaterial to this application given that Mr De Simone has deposed information regarding his financial position. Accordingly, it is unnecessary to determine the ‘without prejudice’ position.
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