Mischel Holdings Pty Ltd (in liq) v Mischel
[2013] VSCA 375
•17 DECEMBER 2013
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2012 0187
| MISCHEL HOLDINGS PTY LTD (IN LIQUIDATION) (ACN 082 871 261) | Appellant |
| v | |
| IGO NORBET MISCHEL (IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF MARIA MISCHEL) | Respondent |
---
| JUDGES | ASHLEY, PRIEST and SANTAMARIA JJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 11 NOVEMBER 2013 |
| DATE OF JUDGMENT | 17 DECEMBER 2013 |
| MEDIUM NEUTRAL CITATION | [2013] VSCA 375 |
| JUDGMENT APPEALED FROM | Igo Mischel (as Executor of the Estate of Maria Mischel) v Mischel Holdings Pty Ltd (in liq) [2012] VSC 292 and Igo Mischel (as Executor of the Estate of Maria Mischel) v Mischel Holdings Pty Ltd (in liq)(No. 2) [2012] VSC 421 (Croft J, 27 July 2012 and 13 September 2012) |
---
CO-OWNERSHIP – Appeal - Joint tenancy at law – Whether tenancy in common in equity – Four unities of possession, interest, time and title – Right of survivorship – Equity is equality – Equity’s dislike of joint tenancies – Intention of parties when property was acquired - Whether consideration given for half share – Whether joint tenancy severed at inception by agreement to distribute proceeds if property sold – Whether joint tenancy severed at time of sale of property by agreement to divide proceeds – Whether joint tenancy severed by conduct – Death of joint tenant before completion of sale of the subject land – Whether nett proceeds of sale of the subject land lay with executor of estate or with liquidator of corporate joint tenant – Attack on credit of witnesses – Whether judge should have found facts based upon testimony of witnesses – Duty of Court of Appeal when challenge made to findings based on credit – Weighing of findings of credit with findings on all relevant probabilities – Appeal dismissed.
PRACTICE AND PROCEDURE – Application to lead fresh evidence – Failure of appellant to serve subpoena on bank at trial – Whether there was a ‘high probability’ the fresh evidence would have produced the opposite result at trial – Application refused.
PRACTICE AND PROCEDURE – COSTS – Non-party costs order – Costs order made against liquidator personally – Application for leave to appeal costs order against non-party – House v The King (1936) 55 CLR 499 – No error of principle – Application refused.
PRACTICE AND PROCEDURE – COSTS – Application for leave to appeal costs order – Offer of compromise made by respondent before appeal – Consequences of rejection – Whether respondent entitled to costs on an indemnity basis – Whether judge had reasonable regard to Calderbank offer – Whether judge erred in his analysis of Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No. 2) (2005) 13 VR 435 – Application dismissed.
---
| Appearances: | Counsel | Solicitors |
| For the Appellant | Mr E N Magee QC with Mr T P Mitchell | Foster Nicholson Jones Lawyers |
| For the Respondent | Mr M S Osborne | Lovegrove Solicitors |
THE COURT:
Introduction
On 14 November 2011, Igo Norbet Mischel (‘the respondent’ or ‘Igo’), in his capacity as executor of the estate of his mother, Maria Mischel, issued an originating motion in the Common Law Division against Mischel Holdings Pty Ltd (‘the appellant’), which, by court order, was placed into liquidation on 16 December 2011.
The relief sought included declarations that:
· the joint tenancy between Maria Mischel and the appellant with respect to a property at 27/185 Barkly Street, St Kilda (’the St Kilda property’) was severed on the sale of the property on 25 May 2011;
· alternatively, that the joint tenancy between Maria Mischel and the appellant in the St Kilda property was severed on 18 May 2011 ‘on the purchase for and on behalf of’ Maria Mischel of 35/2940 Gold Coast Highway, Surfers Paradise, Queensland (‘the Queensland property’);
· proceeds of the sale of the St Kilda property, in the sum of $357,000, is held in trust by Benjamin Ian Zylberszpic, the solicitor for the vendor, on a constructive or resulting trust for the estate of Maria Mischel; and
· alternatively, half the proceeds of the sale of the St Kilda property held in trust by Benjamin Ian Zylberszpic, the solicitor for the vendor, plus any pro rata interest, is held on a constructive or resulting trust for the estate of Maria Mischel.
On 20 and 21 June 2012 the proceeding was heard by a judge in the Trial Division; and, on 27 July 2012, the judge gave judgment for the respondent (‘the primary judgment‘).[1] The ‘critical issue’ in the proceeding was whether the beneficial entitlement to proceeds of sale of the St Kilda property lay with the respondent, in his capacity as executor of Maria Mischel’s estate, or with the appellant (in liquidation).[2]
[1]Igo Mischel (as Executor of the Estate of Maria Mischel) v Mischel Holdings Pty Ltd (in liq) [2012] VSC 292 (Primary judgment).
[2]Primary judgment [1].
At trial, the respondent contended that, notwithstanding that Maria Mischel and the appellant were registered as joint proprietors of the St Kilda property, the Court should hold that no joint tenancy arose because (a) there was no unity of possession at the time of its creation, (b) Maria and the appellant made unequal contributions to the purchase price of the St Kilda property and (c) an agreement was made at the time of purchase which had the effect of severing the joint tenancy from the very beginning.[3] Alternatively, the respondent submitted that, if a joint tenancy had continued to subsist in 2011, either the agreement between the parties that the proceeds of the sale of the St Kilda property be split or their conduct in taking steps to ensure that those proceeds were split meant that the parties had mutually intended that survivorship not apply either to the St Kilda property or to any proceeds arising from the sale of it.
[3]These matters were not raised by the prayer for relief in the originating motion; but, they were raised by affidavits in support of the respondent’s case.
In essence, the judge concluded that Maria Mischel was entitled to a half-share of the proceeds of sale of the St Kilda property ‘either because she was, at the time she acquired an interest in the premises, a tenant in common in equity as to one-half share, or because any joint tenancy was severed by agreement or conduct prior to her death, with the result that she thereupon became beneficially entitled to the half-share of the proceeds of sale of the premises’.[4] Costs were reserved.
[4]Primary judgment [75].
Costs were argued before the judge on 17 August 2012. By letter dated 14 June 2012, the respondent had provided a settlement offer to the appellant in the form of a Calderbank offer. The judge identified three issues for determination: first, whether the respondent’s costs of the proceeding should be awarded on an indemnity basis; secondly, whether a non-party, the liquidator of the appellant, Samuel Richwol (‘the liquidator’), should be ordered to pay costs personally; and thirdly, whether the liquidator ought to have his remuneration and legal costs paid from the proceeds of sale of the St Kilda property then held in a solicitor’s trust account. On 13 September 2012 the judge gave judgment on the costs question (‘the costs judgment’).[5] We will say more about the costs order later, but the judge ordered that the appellant and the liquidator jointly and severally pay the respondent’s costs of the proceeding on a party and party basis in the period from 14 November 2011 (the commencement of proceeding) to 10:00am on 20 June 2012 (the first day of the trial), and thereafter on an indemnity basis.
[5]Igo Mischel (as Executor of the Estate of Maria Mischel) v Mischel Holdings Pty Ltd (in liq)(No 2) [2012] VSC 421 (Costs judgment).
By notice of appeal dated 27 September 2012, the appellant seeks to appeal the orders resulting from both the primary judgment and the costs judgment.[6] The notice is somewhat extravagant in its drafting, containing 19 grounds (and many sub-grounds) relating to the primary judgment, and a further 13 grounds (and a large number of sub-grounds) relating to the costs judgment. For reasons that follow, we would dismiss the appeal with respect to the primary judgment, and would refuse leave to appeal with respect to the costs judgment.
[6]Leave to appeal the costs judgment is required: Supreme Court Act 1986 (Vic) s 17A(1)(b).
Moreover, it should be noted that by summons dated 1 November 2013, the appellant sought leave ‘to tender into evidence an email from Henry Mischel to Graham Dudley dated 12 May 2005’. On 11 November 2013, following oral argument on the application to tender this so-described ‘new document’, the Court refused the application and indicated it would later provide reasons. Those reasons also follow.
Before turning to a consideration of the grounds of appeal and their resolution, however, it is necessary briefly to outline the background facts and the judge’s findings.
The factual background
Maria Mischel (‘Maria’) died, aged 94 years, on 15 August 2011. She had two sons, the respondent, Igo, and Henry Mischel (‘Henry’).
Henry was declared bankrupt on two occasions, first in 1993 and later in 2011.
According to the respondent’s case, in 1988, Maria owned an apartment in Elwood (‘the Elwood property’) which she sold to Henry. Maria lent Henry or the appellant the sum of approximately $140,000 from the proceeds of the sale of the Elwood property to assist him with his business. She later lent him or the appellant or Mischel Nominees Pty Ltd, another of Henry’s companies, a further $67,500 by way of repayment of debts owed to others.
In 2001, Maria and Henry discussed the possible purchase of the St Kilda property, which was then on the market. The respondent’s case, which was disputed, was that Maria asked Henry whether the loans that she had previously made to him could be used to help her to purchase the St Kilda property, since her finances were insufficient to permit her to purchase it and service a mortgage. Henry had not repaid the loans earlier made to him by Maria, and he told her that he would help her purchase the St Kilda property by arranging finance through the appellant.
Although the subject of dispute at trial, the respondent’s case was that he and Henry discussed arrangements for buying the St Kilda property, and arrived at a proposal, which had the following core elements:
· first, Maria and Henry would own the St Kilda property in equal proportions and both become registered proprietors;
· secondly, mortgage repayments were solely going to be Henry’s responsibility, Maria not having to make any contribution towards them; and
· thirdly, if the St Kilda property were to be later sold, Maria Mischel would receive half the total value because the repayment of any mortgage would come from Henry Mischel’s share of the sale price.
The St Kilda property was purchased with funds advanced by the Commonwealth Bank of Australia (‘CBA’), and Maria and the appellant became registered proprietors of the property as joint tenants. It was not disputed that Maria made no actual transfer of funds towards the purchase. The judge accepted, however, as had been put by the respondent and Henry, that Maria had made a notional contribution, represented by the repayment to her of the loans she had made in or around 1988.
In the relevant CBA mortgage, the appellant was identified as the borrower, and both Maria and Henry were mortgagors and guarantors. Between the date of the purchase of the St Kilda property in 2002, and the settlement of the sale of the St Kilda property in September 2011, the appellant made all of the repayments of the CBA mortgage.
In 2011, following the deterioration of her health, in consultation with her sons, Maria decided to move to Surfers Paradise where she could live closer to the respondent.
By a mortgage of land dated 3 March 2010, but not registered until 22 March 2011, Maria and the appellant mortgaged the St Kilda property to Zigmo Australia Pty Ltd for $1,000,000, for advances said to have been made on 8 November 2007.
In 2009, Mr Gloss Pty Ltd issued a proceeding in the Supreme Court of Victoria[7] (‘Mr Gloss proceeding’) in which allegations of serious misconduct, including misleading and deceptive conduct and breach of fiduciary duty, were made against Henry.
[7]Proceeding No. S CI 2009 10897.
In April 2011, Mr Gloss Pty Ltd commenced a further proceeding against Henry in the Supreme Court of Victoria[8] (‘the Zigmo proceeding’) in which an application was made to have the mortgages and transaction documents between Henry (and his related entities) and Zigmo Australia Pty Ltd set aside on the grounds that they were part of a scheme to defraud creditors; and, in October 2011, Henry (and his related entities) consented to the mortgages to Zigmo Australia being set aside.
[8]Proceeding No. S CI 2011 1569. (Primary judgment [30] and see fn 28).
On 18 May 2011, the respondent, after consulting Maria, exercising a power of attorney, entered into a contract to acquire the Queensland property. Settlement of the sale of the Queensland property was scheduled to take place on 17 June 2011. Since Maria did not have sufficient readily available funds for settlement, the respondent provided bridging finance of $30,000 so that the settlement could proceed.
On 29 May 2011, the St Kilda property was sold by private sale for the sum of $735,000, with settlement due on 29 August 2011. A power of attorney was prepared pursuant to which Maria appointed Henry as her attorney in relation to the sale of the property. The power was signed by Maria; it was witnessed by Igo. The contract of sale was executed by Henry. A subsequent transfer was in evidence; it was executed by the transferees. Henry gave evidence that he had signed the transfer ‘on behalf of [Maria] in [his] capacity as her attorney and also as a director of [the appellant]’.
Due to illness, Maria was admitted to the Alfred Hospital in Melbourne on 24 July 2011.
On 31 July 2011, the respondent discussed the progress of the sale of the St Kilda property with Henry. Henry told the respondent that settlement was due on 29 August 2011, and that Maria would receive $357,000, being her free and clear proceeds from the sale after discharge of the mortgage.
In order to keep the proceeds of sale completely separate from Maria’s general banking, on 1 August 2011, the respondent went to the Acland Street St Kilda branch of the Westpac Bank and opened a separate Deeming Account in her name.
Two weeks before settlement was due, on 15 August 2011, Maria died.
Following the discharge of the mortgage over the St Kilda property at settlement, there was a sum remaining of $357,000. That sum was placed into the trust account of a solicitor. It was agreed that the sum would be kept in trust until resolution of the proceedings between the respondent, on behalf of his mother’s estate, and the appellant.
The primary judgment
In the proceeding brought by the respondent, he asserted that, at inception there was no joint tenancy in the St Kilda property between Maria and the appellant; or, alternatively, any joint tenancy had been severed in 2011. Through the liquidator, however, the appellant claimed an entitlement to the entirety of the proceeds of the sale of the St Kilda property based on a claimed right of survivorship arising on the death of Maria.
The judge dealt with the claims on two bases. First, he referred to the common law presumption in favour of a joint tenancy and said it was rebuttable if one or more of the ‘four unities’ of possession, interest, time and title is absent. Second, he referred to the authorities on severance which reaffirm equity’s dislike of joint tenancies because of the arbitrary way in which survivorship operates.
The judge addressed the question whether the unity of possession was absent because of the agreement that Maria, ‘alone, was to live at the premises (indicated) that there was never any intention that the (appellant), a company, would have an equal right to possession as against Maria’.[9] The judge considered that an ‘agreement of this kind, if recognised in equity as relevant to the state of the title, would eliminate one of the “four unities” – possession’.[10] The way the judge approached the matter was not to ask whether any specific agreement had been made about Maria’s right to exclusive possession. Rather, he considered that, if Maria had given full consideration for a purchase of a half interest in the St Kilda property, that would, by itself, eliminate the requisite unity of possession.[11] Having framed the question that way, he answered it by finding that Maria had made that contribution.[12] Maria, he found, ‘plainly believed that the moneys were still owing to her’.[13] She had a ‘reasonable and honest belief in the claim’.[14] So, ‘(t)he consideration that she provided in relation to Henry Mischel’s promise to arrange and finance the purchase of the premises was to give up her claim for the repayment of the sums she advanced’.[15]
[9]Primary judgment [37].
[10]Primary judgment [39].
[11]Primary judgment [41].
[12]Primary judgment [43].
[13]Primary judgment [50].
[14]Ibid.
[15]Ibid.
For these reasons, the judge held that the agreement of the parties deprived the appellant of the entitlement to possession. Absent this ‘unity’, the parties were to be considered as tenants in common in equity.
The judge also found that, by reason of her having contributed unequally to the purchase price of the premises, there was evidence of ‘an agreement between the parties, operative in equity with respect to the title to the premises, for ownership other than on the basis of joint tenancy subject to survivorship’.[16]
[16]Primary judgment [55].
The judge rejected a contention that Maria had not given consideration for her contribution. Whether there was, in fact, any existing indebtedness to her, Maria had continued to insist on and Henry had acknowledged his continuing obligation to Maria. In giving up a claim which she reasonably and honestly believed that she had that moneys were still owing to her, Maria gave good ‘common law’ consideration ‘in relation to (Henry’s) promise to arrange and finance the purchase of the premises’.[17] The judge also rejected a contention that Maria was a volunteer. Whether she had herself made a contribution of half of the purchase price or whether Henry had given Maria her share of the purchase price, the gift was complete at the time of acquisition.[18]
[17]Primary judgment [50].
[18]Primary judgment [53].
The judge further held that a joint tenancy may be severed by agreement or conduct. He held that an agreement such as an agreement that, when a property is sold, the proceeds are to be divided equally between the joint tenants, results in equity regarding the parties as tenants in common as soon as the agreement is made ‘even though the legal title remains in them as joint tenants, and even though the agreement contemplates the occurrence of future events’.[19] The judge found that Maria and Henry had made such an agreement when the St Kilda property was acquired in 2001.
[19]Primary judgment [65].
The judge also found that, even if the joint tenancy had not been severed upon acquisition, it had been severed by agreement in 2011. The agreement made in 2001 for the division of proceeds in the event of a sale ‘was an ongoing one’.[20] So, if severance had not occurred earlier, it was severed when Maria put into operation the proposal to sell the St Kilda property and divide the proceeds. A unilateral act to determine the joint tenancy would not be sufficient.
[20]Primary judgment [71].
Finally, the judge found that ‘Maria and Henry Mischel … showed by their conduct that they regarded themselves as each entitled to a moiety or equal half-share in the premises and the proceeds of sale …’.[21] In doing so, he referred to the acceptance by Henry that Maria had contributed to the purchase price and to a declaration he had made that he held a divided interest in only half of the St Kilda property. He also referred to Maria’s taking a loan (the bridging loan from Igo) on the strength of her ability to repay that loan from her share of the proceeds of the sale of the property. The judge considered that these circumstances constituted ‘a general dealing, sufficient to manifest the intention to divide the whole’.[22]
[21]Primary judgment [73].
[22]Primary judgment [74].
The evidence also made it plain that Henry himself was the person who facilitated the sale of the property and, apart from its being suggested to him that his mother was unaware of the sale of the property, it was not suggested to him that he was not a party to the arrangement that, when the property was sold, his mother was to share in the proceeds.[23]
[23]Primary judgment [71].
Grounds of appeal with respect to the primary judgment
Distillation of the 19 grounds of appeal (grounds 1 to 19) and sub-grounds with respect to the primary judgment is not an easy task. Although there is always a risk that any summary will be incomplete, the grounds do seem to raise the following principal contentions. It is said that the judge was in error in holding, concluding or finding that:
· as at the date of her death Maria was a tenant in common in equity as to one half share of the St Kilda property;
· prior to Maria’s death, the joint tenancy with the appellant had been severed by agreement ;
· prior to Maria’s death, the joint tenancy with the appellant had been severed by conduct ;
· the loans made by Maria in 1988 could create an interest in the St Kilda property.
Most of the contentions in the grounds revolve around a claimed insufficiency of evidence.
Moreover, a number of grounds set out what the judge ‘should have found’. Thus, much abbreviated, it is said the judge should have found that:
· Maria’s loan to Henry or the appellant in 1988 could not represent consideration for her share of the purchase price of the St Kilda property;
· in the absence of a deed, Henry or an associated entity could not ‘at law or in equity’ assign to the appellant the burden to repay the loan to Maria;
· Maria’s belief of continued indebtedness for her loan ‘could not provide good consideration’ to the appellant for her half interest in the St Kilda property acquired in 2002;
· there was no evidence of any dealing between Maria and the appellant prior to 2002 supporting a claim against the appellant to repay her loan;
· Maria did not contribute to the purchase price of the St Kilda property;
· the loan was unenforceable at the expiration of six years;
· Maria did not contribute to the purchase price of the St Kilda property and ‘this precluded her from claiming a separate and severable tenancy in common interest in the premises’;
· in circumstances where the appellant borrowed and paid the purchase price of the St Kilda property, equity presumed a trust in its favour.
Grounds 18 and 19 appear to be ‘catchall’ grounds, in that they assert that the judge erred in accepting the uncorroborated evidence of Henry, and ‘in finding any evidence of severance in the absence of any written document, personally signed by Maria, signifying an intention to sever the joint tenancy’.
Although none of the grounds was specifically abandoned, it should be noted, however, that many of the contentions advanced in the grounds of appeal were not contained in the written outline of submissions or the subject of oral argument.
The appellant’s case: preliminary observation
Save in one respect,[24] at the hearing of the appeal, the appellant did not contend that the judge had misconceived the law or had applied it inconsistently to the facts that he had found. Rather, the appellant contended that those facts should not have been found. At trial, Igo and Henry were the only persons to give oral testimony.[25] The judge had accepted their evidence as to the facts and circumstances surrounding the acquisition of the St Kilda property in 2001 and its registration in joint names, and how the property came to be sold in 2011. The findings of fact, it was said, should not have been made because each was an unreliable witness.
[24]See [91]-[98] below in relation to whether Maria Mischel gave common law consideration as her contribution to the acquisition of the property.
[25]A good part of their testimony, particularly that of Igo, was secondary evidence of what Maria Mischel had said. To that end, the plaintiff served a Notice of Intention to Adduce Evidence of Previous Representations under s 67(1) of the Evidence Act 2008 (Vic) and r 5 of the Evidence Regulations 2009 (Vic) for the purposes of s 63(2) of the Evidence Act 2008 (Vic).
Igo was unreliable, it was said, because he had backdated documents and had facilitated Henry’s evasion of those provisions of the Bankruptcy Act 1966 (Cth) that disqualify insolvent persons from the management of companies.
Henry had been convicted of offences involving dishonesty; he had consented to judgment in cases in which allegations of dishonesty had been made against him. The appellant had attacked his credit at trial and had argued that no finding should be made unless his evidence was independently corroborated.
It will be necessary to deal with the appellant’s attack upon the credit of each of the witnesses. As will become evident, we are not disposed to overturn the judge’s findings on credit. Even if we had been prepared to accept the criticism of the judge’s reliance on the credit of Henry, that would leave standing the evidence of Igo. And, the greater part of the evidence that related to what had occurred both in 2001 (the acquisition of the St Kilda property and why it had been registered in joint names) and in 2011 (the sale of the property and the proposal to divide the proceeds of sale) was given by Igo, and not by Henry. Thus, even if the evidence of Henry was wholly rejected on the basis that he was an unreliable witness, the evidence adduced from Igo provided a sufficient basis for the necessary findings of fact.
A further observation needs to be made; it depends not so much upon the issue of credit as upon the alternative ways in which the respondent’s case was put at trial. Even if there was no proper basis upon which equity would consider that, in 2001, the joint tenants at law had acquired their interests as tenants in common, there remained sufficient evidence in respect of the decision to sell the St Kilda property and to divide the proceeds that made it more probable than not that the parties had intended to sever the joint tenancy in 2011.
As is evident from his reasons, the judge was fully conscious of the force of the attack upon the credit of Igo and Henry Mischel. However, as he was required to do, he weighed the issue of the credit of a witness with the other probabilities It will be necessary later in these reasons to canvas the various things that were said about the witnesses during the appeal. But, first, we will consider the judge’s findings in respect to the facts.
The findings as to the inception of the joint tenancy
The judge held that Maria gave ‘full consideration for the purchase of a half interest in the premises by releasing an indebtedness of equivalent value from Henry Mischel to her’.[26] That consideration comprised Henry’s discharge of his indebtedness to Maria. To reach that conclusion, the judge made the following findings of fact:
[26]Primary judgment [41].
(a) in the late 1980s, Maria had lent Henry or one of Henry’s companies $207,500;
(b) the $207,500 comprised (1) $140,000 which formed part of the proceeds of the sale of Maria’s property in Elwood and (2) $67,500 which was paid by Maria to third party creditors of Henry;
(c) as at 2001 the indebtedness remained outstanding or, alternatively, Maria had ‘a reasonable and honest belief’ that Henry or one of his companies remained indebted to her;
(d) Maria and the appellant had mortgaged the St Kilda property to the CBA in order to raise the funds necessary to purchase it;
(e) Maria used her share of the proceeds of the mortgage to acquire her interest in the St Kilda property;
(f) Maria and Henry agreed that Henry’s indebtedness to her would be discharged by Henry’s repaying Maria’s share of the mortgage to the CBA;
(g) if the St Kilda property was sold at some stage during Maria’s lifetime, she would receive half the value of the property and, vis-à-vis Henry, she would be under no obligation to make any repayment to the CBA as Henry’s share was to be used to repay the whole of the mortgage debt;
(h) in the event that Maria died before the premises were sold, her share was to pass automatically to Henry.
We have distilled these findings from the following paragraphs of the judgment below:
[4] In 1988, Maria Mischel owned an apartment, Flat 7 at 21 Dickens Street, Elwood, Victoria, which she sold to Henry Mischel. Maria Mischel lent Henry approximately $140,000 from the proceeds of the sale of the Dickens Street property to assist him in his business affairs. Later, she lent a further $67,500 by way of various payments to Henry Mischel directly and, at his direction, to others, including his brother Igo Mischel, as repayment of debts to those people. Henry Mischel’s evidence is that although his mother did not specify a date for the repayment of these loans, she did, nonetheless, remind him of his debt to her from time to time. These loans from Maria Mischel to Henry Mischel are not documented and it is not entirely clear now whether Maria Mischel thought that she was lending money to Henry Mischel personally for use as he thought fit in his business affairs or whether she thought she was lending the money to a company or companies associated with Henry.
[5]In February 1989, Igo Mischel and his family moved from Melbourne to Surfers Paradise in Queensland. Igo Mischel’s evidence was that after his father’s death towards the end of 1989, his mother became more reliant upon him and, at some time in 1994, relocated to Surfers Paradise, where she could be closer. In early 1999, Igo Mischel returned to Melbourne to enhance his income earning prospects and to be closer to his children. After he returned to Melbourne, Maria Mischel told him that she also wanted to return to Melbourne so that she could be closer to him and to the rest of her family.
[6]In about August 2000, Maria Mischel returned to Melbourne and moved into the premises as a rent paying tenant from a third party who then owned the premises. After living in the premises for a period of time, Maria Mischel told Igo and Henry Mischel that she would like to settle in Melbourne and that if the premises became available to be purchased, she would like to buy, but would need financial help. Igo and Henry Mischel discussed their mother’s request, but Igo was not able to assist financially because of his divorce.
[7]As time went on, the premises did come onto the market, in 2001. Maria Mischel was then about 85 years old, but in good health and mentally astute. The evidence indicates that she then needed accommodation of the type provided by the premises, at least for some years to come.
[8]Maria and Henry Mischel discussed buying the premises. She asked Henry whether the loans she had previously made to him could be used to help her with the purchase, as she did not otherwise have the financial capacity or ability to obtain and service a mortgage for this purpose. Henry told his mother that he would help her purchase the premises and that he would arrange finance through Mischel Holdings Pty Ltd, the defendant company.
[9]Arrangements for buying the premises were discussed between Igo and Henry Mischel, and they agreed on a proposal which they would both explain to their mother. The proposal agreed between Igo and Henry was that their mother and Henry would own the premises in equal proportions and both be registered on the Certificate of Title as proprietors. It was further agreed that the premises would be used as security for one or more mortgages, if necessary, and that Henry would be responsible for these mortgages. Igo Mischel said that it was his suggestion that Maria and Henry be registered on Title as joint tenants, rather than tenants in common. Igo Mischel was then a practising solicitor. As the proposal was ultimately implemented, it was Mischel Holdings Pty Ltd, the defendant company, rather than Henry which was registered on Title as a joint tenant.
[10]Both Igo and Henry Mischel then explained the proposal to their mother. Igo said to his mother, “Henry will own half [of the premises] and you will own half [of the premises] as a result of money you earlier lent to Henry. There will be a mortgage or mortgages [over the premises], which you as a registered proprietor would also have to sign”, or words to that effect. Igo explained further that, “You won’t have to make the mortgage repayments because that is going to be Henry’s responsibility. If the premises are sold at some later stage you would receive half of the value [of the premises] because the repayment of any mortgage would come first from Henry’s share of the sale price”. Continuing, Igo said to his mother that, “If you pass away without selling the premises, your share will automatically pass to Henry”. Igo says that his mother understood and agreed to these arrangements.
[11]Henry told Igo Mischel that he would approach the then owner of the premises and if the owner agreed to sell, he would organise finance through the Commonwealth Bank of Australia. The premises were subsequently purchased and Maria Mischel and Mischel Holdings Pty Ltd, the defendant company, both became registered as proprietors of the premises, as joint tenants.
[12]Igo Mischel, who was a practising solicitor at the time the premises was purchased, handled the purchase. His evidence is that the proprietorship of the premises, that is, Maria Mischel and Mischel Holdings Pty Ltd as joint tenants, was adopted because it was his understanding, based on discussions with both Maria and Henry Mischel, that it was agreed between them that if their mother passed away without the property being sold, Henry would keep the property by way of survivorship. Igo Mischel did, however, emphasise in his evidence that on the basis of the conversations he had with Henry and with his mother to which reference has been made, and other similar conversations, it was his understanding that if the premises was ever sold before Maria Mischel’s death, his mother would be entitled to half the sale price, with any mortgage repayment to come first from Henry’s share of the sale price.
(footnotes omitted.)
These findings were the factual foundation for the conclusions described in [29] to [34] above.
The findings as to the sale of the St Kilda property
Between 2001 and 2011, Maria, despite her advanced years, remained in good health and mentally acute. Frequently, she expressed her intention not to go into a nursing home so long as she was mentally competent.[27] On several occasions, she expressed her belief that she was entitled to a full half share of the St Kilda property. In the early part of 2011, Igo had discussions with Maria about her future care. The judge found:
At the time of these discussions, IgoMischelsaid that his mother’s mind was “still totally sharp”, and she saw no reason why she should be moved into an aged care facility. On more than one occasion, subsequently, she said to Igo, “I own half of this apartment. Henry can’t sell [the premises] without my signature. He is treating me as if I was already dead and he owned the place. Nobody will force me out of here unless I choose to leave and agree to sell. If I agree to sell, I expect to receive my share of the sale price”, or words to that effect. As a result of these discussions, Igo and Maria made a “pact”, at her insistence, that as long as she was mentally competent, Igo would never support the idea of her being moved into an aged care facility against her will.[28]
[27]Primary judgment [16].
[28]Ibid.
Eventually, Maria agreed to move to Surfers Paradise and to buy a flat there to be close by Igo. Evidence was given that she had available funds to pay the greater part of the purchase price of the flat and that she agreed to accept from Igo bridging funds to enable settlement to proceed. At the same time, steps were taken to place the St Kilda property on the market in order to provide her with the funds necessary to repay Igo. Maria and Henry agreed that, when that property was sold, Maria was to receive $357,000 from the proceeds of sale.
The relevant findings with respect to the critical events that occurred in 2011 may be distilled as follows:
(a) on 29 May 2011, Henry signed a contract for the sale of the St Kilda property;
(b) settlement on the purchase of the flat at Surfers Paradise took place on 17 June 2011;
(c) settlement on the sale of the St Kilda property was due on 29 August 2011;
(d) Maria and Henry agreed that, when settlement occurred, Maria was to receive $357,000 in free and clear proceeds from the sale;
(e) on or about 31 July 2011, Igo came to Melbourne and went to a St Kilda branch of the Westpac bank where his mother banked;
(f) using a power of attorney for his mother, Igo opened a separate Deeming Account in her name by depositing $50 in cash;
(g) Igo opened the separate Deeming Account to keep the proceeds from the sale of the St Kilda property ‘completely separate from her general banking, for the purpose of keeping things “nice and clear” for Centrelink and her pension’.[29]
[29]Primary judgment [21].
The judge then described what happened next:
[22]Following settlement of the purchase of the Surfers Paradise property, Igo and Maria Mischel agreed a schedule for her move to Surfers Paradise. It was planned that she would leave Melbourne on 14 August 2011 following the renovation of the Surfers Paradise property after it was vacated by the then existing tenants. Maria Mischel subsequently became ill and on or about 24 July 2011 she was admitted to the Alfred Hospital in Melbourne. Arrangements were made for the removal of her belongings in mid-August 2011 in anticipation of her recovery from surgery which took place in late July or early August. However, due to Maria Mischel’s illness, the anticipated removal of her belongings on 10 August 2011 did not take place. Igo Mischel paid the removalist’s tax invoice on behalf of his mother. These charges were payable because of the late cancellation of the move due to Maria Mischel’s then state of health.
[23]Maria Mischel died five days later at the Alfred Hospital. Igo Mischel was with her the previous night and said in his evidence that even at this time, she was anxious to assure him that he should not worry about any debt she owed. He said that his mother did not like owing anyone any money, even her own sons, notwithstanding that she freely lent or gave her money to her sons when they had needed it in the past. In particular, Igo said that his mother said to him, “The Melbourne unit will settle any day and I will pay you back straight away”. Igo says that he responded: “Don’t worry about it. It’s all under control. Henry has organised for you to receive your share on the 29th August [2011]. Just look after your strength, so I can get you moved to Surfers [Paradise]”, or words to that effect.[30]
[30]Primary judgment [22]-[23] (footnotes omitted).
These findings were the factual foundation for the conclusions described in [35] to [37] above.
Severance of a joint tenancy in equity
Under the general law, there are two principal characteristics of a joint tenancy: (1) the so-called four unities which must be present for the creation of a joint tenancy and (2) the right of survivorship (the jus accrescendi). As Latham CJ put it in Wright v Gibbons:[31]
The interests of each joint tenant in the land held are always the same in respect of possession, interest, title and time. No distinction can be drawn between the interest of any one tenant and that of any other tenant. If one joint tenant dies his interest is extinguished. He falls out, and the interest of the surviving joint tenant or joint tenants is correspondingly enlarged.[32]
[31](1949) 78 CLR 313.
[32]Ibid 323. In the Commentaries on the Laws of England, 17th ed. (1830), vol 2, at 180, Sir William Blackstone said:
The properties of a joint estate are derived from its unity, which is fourfold; the unity of interest, the unity of title, the unity of time, and the unity of possession: or, in other words, joint-tenants have one and the same interest, accruing by one and the same conveyance, commencing at one and the same time, and held by one and the same undivided possession.
See Abela v Public Trustee [1983] 1 NSWLR 308, 313 (Rath J).
The right of survivorship is perhaps the best known feature of a joint tenancy: upon the death of one joint tenant, his or her interest in the estate accrues to the surviving joint tenant(s).[33] Accordingly, where a husband and wife hold an estate in land as joint tenants, the death of one spouse means that the survivor automatically becomes the sole owner of the whole of that estate.
[33]At law, a body corporate, such as Mischel Holdings Pty Ltd was incapable of holding property as a joint tenant; Law Guarantee and Trust Society v Bank of England (1890) 24 QBD 406, 411. But, see Property Law Act 1958 (Vic) s 28.
Unity of possession occurs where each co-owner is as entitled to the possession of the estate as each of the other co-owners. Unity of title is only achieved where each of the co-owners derives his or her title from the same act or instrument. Unity of time means that the interest of each of the co-owners vested at the same time. Unity of interest means that the interest of each of the co-owners must be identical in extent, interest and duration.[34]
[34]See, eg. AG Securities v Vaughan [1988] 2 All ER 173, 182.
In York v Stone,[35] Lord Cowper LC, said ’a joint tenancy in equity is an odious thing’.
[35](1709) 1 Salk.158; cf. Gould v Kemp (1834) 2 My. & K. 304, 309.
In Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies,[36] the authors explain the attitude of equity to joint tenancies as an aspect of the maxim equity is equality. ‘The rule is embodied in the principle “equity leans against joint tenancies”. Equity considered the incidents of a joint tenancy to be unequal because survivorship unduly favoured the person of longevity’.[37]
[36]Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (Butterworths Lexis Nexis, 4th ed, 2002).
[37]Ibid [3-150]. See also Jill E Martin, Hanbury & Martin, Modern Equity (Sweet & Maxwell London, 16th ed, 2001) 30.
Either joint tenancy would not be recognised because of the absence of one of the four unities or because there had been some evidence that it was intended that there should not be a joint tenancy.[38] Similarly, a joint tenancy would be considered as having been severed in equity. By severance, joint tenants are considered to be tenants in common.[39]
[38]In several situations, equity treats persons who are joint tenants at law as tenants in common. In particular, it does so in cases of business partners (Jus accrescendi inter mercatores locum non habet), mortgagees or co-owners who have contributed unequally to the purchase price. Such circumstances are not limited to these three categories; see Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] 1 AC 549. The maxim is that equity is equality. The effect of this maxim on common ownership is described in Snell’s Equity (Sweet & Maxwell London, 31st ed, 2005) 103 as follows:
The maxim has long been illustrated by equity’s dislike of a joint tenancy. On the death of a joint tenant, the whole estate belongs to the survivor, and the representatives of the deceased take nothing. There is here no equality, except, perhaps, an equality of chance. Equity, therefore, leans in favour of a tenancy in common … the presumption arises in three main classes of case to which however it is not restricted … Thus a lease to two persons as joint tenants for their several business purposes will be held by them as tenants in common in equity in shares proportional to the benefits each enjoyed. So also where land is vested in two persons jointly the usual entry on the registrar restricting a disposition by one joint proprietor without an order of the court or the Land Registrar is a pointer towards the conclusion that they intended to hold the property in equity as tenants in common.
See Xenou v Katsaras (2002) 7 VR 335, 347-8 [67]-[69] (Mandie J).
[39]Under Victorian law, there is a presumption that, when property is transferred to co-owners who acquire the same interest at the same time, a joint tenancy is created. See Transfer of Land Act 1958 (Vic) s 33(4): ‘(4) Any two or more persons named in any instrument as transferees mortgagees lessees or as taking any estate or interest in land shall unless the contrary is expressed be deemed to be entitled jointly and not in shares and every such instrument when registered shall take effect accordingly’. Section 33(4) does not preclude the operation of equity; Sacks v Klein [2011] VSC 451, [25]. The situation in other jurisdictions is different. In New South Wales, Queensland and in the ACT, legislation provides that, when property is sold, given away or left by will to co-owners, it is to be presumed that they are tenants in common unless the transaction under which they obtain their interest makes it clear that they are joint tenants; see Conveyancing Act 1919 (NSW) s 26; Property Law Act 1974 (Qld) s 35; Law of Property (Miscellaneous Provisions) Act 1958 (ACT) s 3.
In Williams v Hensman,[40] Page Wood VC said:
A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund - losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention,
with respect to the particular share, declared only behind the backs of the other persons interested.[41]
[40](1861) 1 J & H 546; 70 ER 862.
[41](1861) 1 J & H 546, 557-558; 70 ER 862, 867. See Corin v Patton (1990) 169 CLR 540, 546-547 (Mason CJ and McHugh J).
In Abela v Public Trustee,[42] Rath J summarised the different ways in which a joint tenancy would be taken as terminated. This included termination by agreement and by a course of conduct which unequivocally evinced an intention to treat their interests as severed. Thus:
1. Severance is effected by agreement to sever the joint tenancy.
2. The agreement need not be specifically enforceable or even binding as a contract at law.
3. Subsequent repudiation of the agreement does not affect its operation of severance.
4. Severance may also be effected by conduct of the joint tenants not evidencing in an agreement to sever but showing a common intention that the joint tenancy shall be severed.[43]
[42][1983] 1 NSWLR 308.
[43]Ibid 315.
In Saleeba v Wilke,[44] Chesterman J said, in relation to severance by conduct, that the critical question was: ‘Was there a course of conduct inconsistent with a joint tenancy from which one would objectively infer an intention to hold property as tenants in common?’.[45]
[44][2007] QSC 298; [2007] ANZ ConvR 664.
[45]Ibid [38].
In Delehunt v Carmody,[46] Gibbs CJ discussed the circumstances that arise when several people contribute to the purchase price of property. In doing so, he distinguished cases where contributions had been made in unequal shares from those cases in which there had been equality of contributions. In the former case, absent the operation of a presumption of advancement, equity would consider that the property was held on a resulting trust for the contributors as tenants in common in proportion to the amounts which each had contributed.[47] There was no authority in respect of ’the precise question whether, when a resulting trust was raised in favour of purchasers who had contributed to the price in equal shares, the beneficial interest of the purchasers would have been that of joint tenants or of tenants in common’.[48] Gibbs CJ referred to cases where a conveyance or an express trust is made in favour of equal contributors. In both cases, equity would follow the law and consider that the contributors held beneficially as joint tenants. He continued:
In either case slight circumstances would have been enough to indicate that it was intended that there should not be a joint tenancy. Equity had a dislike for joint tenancies, because their effect was to make the ultimate ownership of the property depend on the chance of survivorship, and, in the words of Snell's Principles of Equity, 28th ed. (1982), at p.37: "There is here no equality except, perhaps, an equality of chance”.[49]
[46](1986) 161 CLR 464.
[47]Ibid 472. Gibbs CJ referred to Calverley v Green (1984) 155 CLR 242, 246-247, 258.
[48]Ibid.
[49](1986) 161 CLR 464, 473.
Equity requires little by way of evidence to show an intention that joint tenants are to hold as tenants in common. In Robertson v Fraser,[50] Lord Hatherley LC said:
I cannot doubt, having regard to the authorities respecting the effect of such words as 'amongst' and 'respectively', that anything which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy, and to create a tenancy in common.[51]
[50](1871) 6 Ch. App. 696.
[51]Ibid 699. See Public Trustee v Pfeiffle [1991] 1 VR 19, 33.
In Damberg v Damberg,[52] Heydon JA discussed the type of evidence needed to displace the presumption of advancement when a parent conveys property to a child. What he said may be applied analogically when considering whether joint tenants at law should be considered to be tenants in common in equity. After an extensive analysis of the authorities, Heydon JA said that the standard of proof to be met in order to rebut the presumption ‘does not call for application of the principles discussed in Briginshaw v Briginshaw (1938) 60 CLR 336, or rest on any analogy with the high standard of proof in rectification. But it does call for proof of a "definite intention" to retain beneficial title, not a "nebulous intention to rely upon the ... relationship as a source of control over the property": Drever v Drever [1936] ALR 446 at 450 per Dixon J (dissenting, but not on this point)’.[53]
[52](2001) 52 NSWLR 492.
[53]Ibid [44].
In Allingham v Allingham,[54] Lowe J held that the mere entry by joint tenants into a contract to sell the property jointly owned was not, by itself, evidence of an intention to sever the joint tenancy. However, in Kingsford v Ball,[55] the joint tenants were paid a sum by way of deposit on the sale of their property. They agreed to divide the deposit ‘equally between them’. That was held to be a most effective way to sever the joint tenancy. In Abela v Public Trustee,[56] Rath J held that a consent order agreed between husband and wife, after negotiations for the distribution of matrimonial property, was evidence of their agreement that they no longer intended a joint tenancy with the result that the agreement automatically effected a severance whether or not the agreement was binding. In Re Pozzi,[57] Thomas J held that the entry by a husband and wife into an agreement upon the dissolution of their marriage which included a provision that the wife should have sole use and occupation of the former matrimonial home and, on cessation of that right to occupation, that the home was to be sold and the proceeds distributed between them operated to sever their joint tenancy in the home. In Calabrese v Miuccio (No. 2)[58] the Full Court held that an agreement between the former parties to a marriage that the proceeds of a bank account in their joint names should be divided between them in particular proportions operated to sever the joint tenancy notwithstanding that, subsequently, the husband withdrew his consent to the making of an order by the Family Court sanctioning the agreement. His former wife died when the bank account remained in joint names. The Court held that the enforceability of the agreement was a matter distinct from its effect upon the joint tenancy. Derrington J said ‘[t]he former depends on its terms and is subject to certain rules as to conditions and repudiation. The latter merely depends upon the consequences of the fact that a contract has been negotiated and made as going to demonstrate the intention of the parties as to the nature of the ownership, and is not dependent upon the precise terms of the agreement but only the underlying intention as to ownership which they reveal. That does not depend upon express agreement but rather on consensuality of the parties’.[59]
[54][1932] VLR 469.
[55](1852) 2 Giff. App.1; 66 ER 294.
[56][1983] 1 NSWLR 308.
[57][1982] Qd R 499.
[58][1985] 1 Qd R 17.
[59]Ibid 26.
In Public Trustee v Pfeiffle,[60] the Full Court considered an agreement between husband and wife, which had been approved by the Family Court, to settle their respective property claims. In that agreement, each acknowledged that the other was legally and equitably entitled to a one half interest in each of their properties and that the properties should be sold upon the happening of specified events, and upon completion of the sale, the proceeds should be divided equally. The wife died before any steps were taken to sell the properties the subject of the agreement. The husband became registered as the proprietor of all the properties. The administrator of the wife’s estate conducted a proceeding, by originating motion in which declarations were sought that the husband held the title to the properties on trust for himself and the estate of his wife as tenants in common. The primary judge dismissed the motion. The Full Court allowed an appeal and made the declarations. Kaye J said:
[60][1991] 1 VR 19.
... there is a line of authority which establishes the following ... : if joint tenants are agreed to a sale and division of the proceeds on the happening of a particular event, then the joint tenancy is immediately severed, notwithstanding that the event had never occurred.[61]
[61]Ibid 24-25.
McGarvie J said:
Conscious that survivorship frequently operates unfairly, courts applying principles of equity have leant towards severance and have facilitated it by treating a mutual intention of the parties to sever as sufficient to effect severance in equity: ... . The mutual intention to sever may be an expressed intention ... (underlying intention revealed by agreement) or may be inferred from the conduct and dealings of the parties. ... The mutual intention to sever does not need to be expressed in an enforceable contract ... or in any contract ....[62]
Ormiston J said:
... I have no doubt that the parties intended to declare that their beneficial interests ... were to be held as tenants in common ... essentially because ... they expressed those interests to be several interests of a kind consistent only with a tenancy in common. It was sufficient for them to agree that “each” was entitled to a ”one half interest” in the two properties.[63]
[62]Ibid 29-30.
[63]Ibid 35.
In Saleeba v Wilke,[64] Chesterman J said that:
What seems to underlie the reasoning in these cases is that the right of survivorship is an essential incident of joint ownership. A sale of their jointly owned property and a division of the proceeds destroys the possibility of survivorship. After the sale none of the co-owners can succeed to the interests of any others who might die. Accordingly an intention to sell has implicit within it an intention to destroy the co-owners’ right to survivorship which is essential to joint ownership. The agreement to sell is a manifestation of the intention to bring the joint tenancy to an end.[65]
[64][2007] QSC 298; [2007] ANZ ConvR 664.
[65]Ibid [25]. (Where Chesterman J is reported as saying ‘[a]ccordingly an intention to sell has implicit within it’, the sense is plainly ‘an intention to sell and divide the proceeds has implicit within it’.)
More difficult cases arise where an inchoate agreement has not been executed or, in any way, performed. In Burgess v Rawnsley,[66] Lord Denning MR said: ‘It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common. I emphasise that it must be made clear to the other party.’[67] However, this passage was disapproved in Corin v Patton,[68] in which it was held that a unilateral declaration of intention by one joint tenant was insufficient to sever a joint tenancy.[69] In that case, a wife and husband were registered joint proprietors of land under the Real Property Act 1900 (NSW). The wife had executed several documents by which she purported to transfer her interest in the land to her brother. She died before any transfer was registered. There was no evidence that her intention to sever the joint tenancy had ever been communicated to her husband. Mason CJ and McHugh J said:
Unilateral action cannot destroy the unity of time, of possession or of interest unless the unity of title is also destroyed, and it can only destroy the unity of title if the title of the party acting unilaterally is transferred or otherwise dealt with or affected in a way which results in a change in the legal or equitable estates in the relevant property. A statement of intention, without more, does not affect the unity of title. Thirdly, if statements of intention were held to effect a severance, uncertainty might follow; it would become more difficult to identify precisely the ownership of interests in land which had been the subject of statements said to amount to declarations of intention. Finally, there would then be no point in maintaining as a separate means of severance the making of a mutual agreement between the joint tenants.[70]
[66][1975] 1 Ch 429.
[67]Ibid 439.
[68](1990) 169 CLR 540, 547-8 (Mason CJ and McHugh J), 566 (Brennan J).
[69]In Victoria, as is the case in several other jurisdictions, statutory provision has been made for the severance of joint tenancies. See Property Law Act 1958 (Vic) Pt IV Co-Owned Land and Goods. Part IV was introduced by Property (Co-ownership) Act 2005 (Vic). See also Victorian Law Reform Commission, Disputes Between Co-owners, Report 2002. Section 223 of the Property Law Act 1958 (Vic) (which forms part of Part IV) provides: ‘Nothing in this Part affects or prevents the severing of a joint tenancy by any other means that exist under this Act or any other Act or law’. See also Law of Property Act 1925 (UK) s 36(2).
[70](1990) 169 CLR 540, 548.
In Saleeba v Wilke,[71] two Melbourne residents purchased a unit in Tewantin in Queensland. When the property was transferred to them in 1994, they were registered as joint tenants. It seems they had intended to live in the unit during the Victorian winter and, at other times to let it out to produce income. As it happened, each of them lived in different parts of the property for extended periods of time. In late 2001, the joint tenants engaged in correspondence with a view to separating their interests. However, nothing further was done. One of the joint tenants continued to reside in the property for another two years. He died in June 2004. His executrix brought proceedings seeking a declaration that at the time of his death the joint tenants held their respective interests in the home unit as tenants in common. Chesterman J surveyed the authorities and concluded:
The weight of authority favours the view that negotiations, which come to nothing, for the purchase of one co-owner’s interest, or its partition, or sale to a third party and the division of proceeds, do not amount to a course of dealing so as to satisfy the third rule. The correspondence does not amount to negotiations. There was a proposal which attracted temporary interest and then lapsed. There is nothing to show an intention to alter the nature of the co-tenancy.[72]
[71][2007] QSC 298; [2007] ANZ ConvR 664.
[72]Ibid [48].
Questions of credit
As we noted above, the appellant conducted its case at trial by contending that the findings necessary to the success of the respondent’s claim depended upon the evidence of Igo and Henry. The appellant had said their testimony should not be accepted as each was an unreliable witness. In other words, the defence to the claim turned upon an attack on their credit. In these circumstances, a court of appeal must bear in mind the advantages the judge has when it comes to such matters.[73] It should not overturn findings on credit unless it is persuaded that the decision was ‘glaringly improbable’ or ‘contrary to compelling inferences’.[74]
[73]See Jones v Hyde (1989) 63 ALJR 349, 351-352; 85 ALR 23, 27-28; Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472, 479, 482-483. See also Ahmedi v Ahmedi (1991) 23 NSWLR 288, 291 (Kirby P); State Rail Authority (NSW) v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306, 321; 160 ALR 588, 608; Watkins v Victoria (2010) 27 VR 543, 552.
[74]Burgess v Y-Trans Pty Ltd [2010] VSCA 28, [2] (Buchanan and Weinberg JJA); Fox v Percy (2003) 214 CLR 118, 125-128 [23]-[29]; see also Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357, 381 (Heydon, Crennan and Bell JJ); Filipovski v Ogemi Services Pty Ltd (2009) 25 VR 316, 347 (Robson AJA); Zachariadis v Allforks Australia Pty Ltd (2009) 26 VR 47, 58 [65] (Neave JA).
The judge was fully conscious of the attacks upon Igo’s and Henry’s credit. He summarised those attacks as follows:
[24]The defendant contended that both Igo and Henry Mischel were unreliable witnesses. It was said of Igo’s evidence that it is self-serving, as he is the sole beneficiary of his mother’s estate. It is, of course, the position that many plaintiffs are in this position, which means, simply, that their evidence is to be exposed to the usual testing process, including cross-examination and its veracity tested having regard to other oral and documentary evidence. Consequently, I am of the opinion that this submission with respect to the evidence of Igo Mischel is to be treated and considered in the usual way and that there is no basis to discount it on the basis of such a general assertion.
[25]In relation to the evidence of Henry Mischel, much was made on behalf of the defendant of previous and unrelated civil proceedings in which Henry or companies with which he is or was associated were involved and a criminal conviction for obtaining financial advantage by deception against him personally in which serious allegations were made against Henry or these companies. In the context of a general attack on the credit of Henry Mischel on this basis, I am of the opinion that, again, his evidence is to be treated in this proceeding in the usual way subject to the usual testing process to which reference has been made.[75]
[75]Primary judgment [24]-[25] (footnotes omitted).
The credit of Igo Mischel
The more significant evidence of the facts and circumstances that obtained both at the time that the St Kilda property was acquired and when it was sold was given by Igo. At trial, an attempt was made to impeach his credit on the basis (fully disclosed by him) that he was the sole beneficiary of his mother’s estate and, therefore, was the only person who stood to benefit from the proceedings he had commenced as his mother’s executor. The judge rejected that attack on his credit. As is self-evident, many witnesses have a financial interest in their evidence being accepted. Their veracity is to be tested in the normal way and not to be wholly discounted on no more than a ‘general assertion’ that they have an interest.[76] That attack upon Igo’s credit was not renewed on appeal.
[76]Primary judgment [24].
At trial, Igo’s credit was impeached on two other bases. Those attacks were renewed on appeal. For reasons which will be discussed below, we consider that the judge was entitled to reject those attacks. It was accepted that Henry had been bankrupted twice and that several companies with which he had had a close association had been placed into liquidation. It was, in part, these circumstances that formed the basis of the further attacks upon Igo’s credit.
First, it was said that, by agreeing to be a director of one of Henry’s companies, Igo had assisted his brother to evade statutory provisions which prohibit insolvent persons from being engaged in the management of companies. The respondent had two responses to this attack upon Igo’s credit. First, it was said that the evidence did not show that Igo had been a director of any such company at a time that Henry was under a disqualification. Second, the allegation, not having been put to Igo at trial, may well have been able to have been answered.
A company search revealed that Igo had been appointed a director of Mischel & Co Pty Ltd on 30 July 1997. During his cross-examination, it was asserted by counsel that this was the company through which Henry conducted his main accounting practice after his release from gaol. Questions relating to Igo’s appointment as a director of this company were objected to as irrelevant. They were justified on the basis that they went to his credit as a witness. It was said that they were relevant to the question whether Igo had assisted his brother breach the provisions of the Bankruptcy Act 1966 (Cth) by allowing him to conduct business activities ‘during a period of prohibition’. The judge permitted the question. However, despite a promise by the cross-examiner to ‘take Igo Mischel through all those issues’, the matter was not further addressed.[77]
[77]During reply submissions on the appeal, it was said that the allegation had been squarely put to Igo. Examination of the transcript reveals that this allegation was put to Igo. But, further examination of the transcript also reveals that, after an objection was made, the allegation was not put to Igo in such a way that he had a fair opportunity to answer it.
The same allegation was raised during the hearing of the appeal: Igo, it was said, should not have been believed because of the assistance he had lent his brother during the period of his bankruptcy. But, as the matter had not been developed at trial, Igo had not been given a fair opportunity to respond to the allegation, there was no basis on which this Court could take the matter further.[78]
[78]On the hearing of the appeal, it was also said that this particular criticism of Igo was misconceived. When the chronology was closely followed, there was said to be no basis for the allegation that Igo had been a director of one of Henry’s companies during either of the latter’s bankruptcies.
A second attack on the credit of Igo related to his role in facilitating the sale of the St Kilda property in 2011. At some stage, Maria executed a power under which she appointed Henry as her attorney to do on her behalf ‘any thing that I may lawfully authorise an attorney to do in relation to the sale of the property at Unit 27, 183-189 Barkly Street, St Kilda’. Igo accepted that he had been in Melbourne in early May 2011, and that he had witnessed his mother’s signing the power of attorney. On its face, the power bore the date ‘2nd day of May 2011’. The entries ’2nd’ and ’May’ are in manuscript. Igo was asked whether he had made those manuscript entries. He said (twice) that the ‘writing was not his’. And, later ‘it was not my date’. The point of the cross-examination was revealed by a further document tendered in cross-examination. A draft power of attorney (which, to all intents and purposes was identical to the executed power) was prepared by Benjamin Ian Zylberszpic, Lawyer, and sent to Henry on 2 June 2011. Ex hypothesi, the power that was executed by Maria, and witnessed by Igo, could not have been brought into existence until some time after the date (2 May 2011) that it purported to bear. It was not suggested that the insertion of the date 2 May 2011, rather than some later date, bore on any fact in issue in the case; the issue was entirely collateral: it was directed solely to Igo’s credit.
On appeal, this criticism of Igo was renewed. Again, as the matter had not been properly pursued at trial, nothing could turn on it. Various reasonable hypotheses that might have explained the manner in which the document was dated were suggested by the respondent in the appeal. They were not excluded at trial; they were not met on the appeal. In the end, the matter went nowhere, and Igo’s evidence stood uncontradicted.
The credit of Henry Mischel
At trial, the appellant made a sustained attack upon Henry’s credit.
The first attack on his credit was direct: in 1993, he was convicted for obtaining financial advantage by deception[79] for which he was sentenced to 66 months imprisonment with a non-parole period of 45 months. He was also a defendant in the Mr Gloss proceedings and in the Zigmo proceedings in which allegations were made which reflected seriously on his honesty. In each of those proceedings, he had consented to judgment. During cross-examination, Henry was given an opportunity to explain why he had consented to judgment in the Zigmo proceeding. He said that the decision to consent to judgment was commercial: he lacked the ability to fund the defence of the proceeding. In re-examination, he was asked why he consented to judgment in the Mr Gloss proceeding. He said that he was unable to continue the case: ‘the case was going to go for 5 days, and partway through the case both my solicitor and barrister were talking about withdrawing because it was going to need 15 days in their eyes. They wanted another couple of hundred thousand dollars in costs, which I didn’t have … they couldn’t guarantee a win, and I ran out of money ...’. The second attack was inferential. It was contended that on two occasions since its acquisition, Henry had further mortgaged the St Kilda property so that he could not have had any realistic expectation that proceeds would be available to make any payment to Maria when the property was sold. Although the further borrowings were referred to during Henry’s cross-examination, he was given no opportunity to explain or to answer what was ultimately submitted.
[79]Primary judgment [25].
Conclusions on credit
As indicated above, the judge was in a position to evaluate the credit of Igo and Henry and all other relevant probabilities. He rejected the attack upon their credit and found that their oral evidence was consistent with the other probabilities.
He said this:
[61]I have already indicated that the self interest and credit issues raised by the defendant in relation to the evidence of Igo and Henry do not mean that their evidence is not to be considered and evaluated in the usual way. The self interest point raised against Igo has been dealt with already. Other credit issues raised do not, on any view, detract from their evidence which was given in a balanced way. The witnesses conceded matters when recollection of matters or details was unclear and otherwise presented a very cogent and understandable account of the latter years of Maria Mischel’s life, her accommodation needs, her financial assistance to Henry and concern at indebtedness to Igo. The failure on Igo and Henry’s part to mention mortgages of the premises is not, in my view, significant in all the circumstances in relation to substantive matters or credit – particularly as the sale of the premises did yield surplus proceeds as anticipated. Neither do I think that Igo’s assistance to Henry in holding a directorship of one or more of the companies with which Henry is or was associated was significant in the present circumstances. The same applies, in my view, in relation to Igo’s recollection of dates of meetings and visits to Melbourne.[80]
[80]Primary judgment [61]. The judge made further comments on the treatment of credit issues in the Costs judgment. See Igo Mischel (as Executor of the Estate of Maria Mischel) v Mischel Holdings Pty Ltd (in liq) (No 2) [2012] VSC 421, [78]-[79].
It needs to be remembered that it was Igo who gave the greater part of the evidence as to the arrangements that were made when the St Kilda property was purchased in 2001 and the arrangements that were made when it was disposed of in 2011. It was Igo who explained why it was that the property was put into joint names. He was the one who gave evidence of his mother’s abiding belief that Henry was indebted to her. It was Igo who implemented the arrangements necessary to ensure that Maria was in a position to repay the bridging finance that she had borrowed from him to purchase the unit in Surfers Paradise. Finally, it was Igo who had opened the new account at Westpac to ensure that Maria’s share of the proceeds of the St Kilda property were kept separate.
For the reasons given above, we do not consider that the judge was in error in making findings on the basis of the evidence adduced from Igo and Henry Mischel. His findings were open to him; they were not glaringly improbable; nor were they contrary to any compelling inference.
Attacks upon Credit
Before leaving this issue, we wish to make two further observations. The first relates to the manner in which the appellant’s case was conducted at trial; the second relates to the handling of questions of credit more generally.
In the present case, the appellant chose to conduct its case largely as an attack on the credit of Igo and Henry Mischel. An attack upon credit is always a precise matter; when it is central to a case, its demands can be exacting. It is true that the collateral evidence rule provides that, generally speaking, a witness’s answers on a matter going to credit are final.[81] However, that rule does not prevent a cross-examiner testing the witness on matters that go to the witness’s credit. Nor, does the rule excuse a cross-examiner, when dealing with matters of credit, from giving the witness a fair opportunity to explain his or her evidence. If some collateral matter is said so to discredit a witness that none of his or her evidence can be accepted without independent corroboration, it is incumbent upon the cross-examiner to exclude any explanation that would otherwise justify that matter.
[81]See State Securities Pty Ltd v Dromi [2010] VSCA 264, [22] and the authorities collected there. See also Nicholls v The Queen (2005) 219 CLR 196; R v BDX (2008) 24 VR 288; Papazoglou v The Queen (2010) 28 VR 644.
Over the last decade, the High Court has addressed the duty of an intermediate appellate court when faced with findings based on credit or upon demeanour. The High Court has reminded appellate judges that they are not relieved of their duty to make findings based on the probabilities notwithstanding any advantage the judge may have arising from his or her observation of a witness.[82] What the High Court had to say was addressed to appellate judges. But, it applies no less to trial judges: their judicial duty requires them to make findings on all relevant probabilities and to weigh those findings with whatever might be their findings on the credit of particular witnesses. For trial judges to be able to do that, it is incumbent upon practitioners, both counsel and solicitors, to assemble, and, then, to adduce the evidence in respect of those probabilities. In the present case, given Henry’s reputation, it was inevitable, and proper, for counsel to address the issue of his credit. However, his reputation may have distracted due attention being given to other matters with which that reputation had to be weighed. In the present case, the judge did not permit himself to be overwhelmed by the attack on the credit of an important witness; he addressed and weighed all the probabilities.
[82]Fox v Percy (2003) 214 CLR 118, 128 [28]-[29] (Glesson CJ, Gummow and Kirby JJ); CSR Ltd v Della Maddalena (2006) 80 ALJR 458, 466; 224 ALR 1, 8-9, [21]-[23] (Kirby J). Each of those cases may be thought to qualify what the High Court said concerning the need for appellate courts to respect the advantages of trial judges, and especially where their decisions might be affected by their impression about the credibility of witnesses whom the trial judge sees but the appellate court does not. See Jones v Hyde (1989) 63 ALJR 349, 351-352; 85 ALR 23, 27-28; Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472, 479, 482-483. See also Ahmedi v Ahmedi (1991) 23 NSWLR 288, 291 (Kirby P); State Rail Authority (NSW) v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306, 321; 160 ALR 588, 608; Watkins v Victoria (2010) 27 VR 543, 552.
Whether Maria Mischel gave consideration for her half-share in the St Kilda property
The appellant submitted that the judge should not have held that Maria gave ‘common law’ consideration for the acquisition of her share in the St Kilda property of which she was registered as a joint tenant.
The appellant contended that Maria had given no consideration for the agreement with the appellant. Henry, it was said, was under no obligation to repay any indebtedness to Maria. Even if it was accepted that Maria had lent money to Henry in the 1980s,[83] there was no ‘live debt’ at the time the agreement was made. Either it had been extinguished by the first of Henry’s bankruptcies, or it was statute barred. There having been no release of any ‘live debt’, there was no ‘common law’ consideration. Further, had there been a debt, the creditor was Henry, and not the appellant.
[83]Henry gave direct evidence of the loans. He was not cross-examined on this evidence Primary judgment [43]. In his statement of affairs prepared 22 September 1993, Henry made no reference to his owing any amount to his mother.
In evidence in chief, Henry had said that the money had been lent to him whereas in cross-examination he had volunteered, for the first time, that the borrower had been Mischel Nominees Pty Ltd. It was never suggested that the money had been lent to the appellant.
The judge summarised the evidence given by Henry:
(a)after the advances were made by Maria Mischel from 1988 onwards Maria from time to time reminded Henry of her debt to her;
In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No2),[99] the Court identified six non-exhaustive considerations which are pertinent to deciding whether the rejection of an offer of settlement was unreasonable. The Court said this:
[99](2005) 13 VR 435, 442.
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.[100]
[100]Ibid 442 [25].
In oral submissions for the appellant, it was said that, although the judge had correctly identified the six considerations, he had erred in his analysis of considerations (c) – the extent of the compromise offered – and (d) – the offeree’s prospects of success, assessed as at the date of the offer. There were two aspects to the alleged error respecting consideration (d). It was submitted that, although the judge had expressed the consideration correctly,[101] he had, in fact, misapplied it by not considering the circumstances known to the liquidator at the time of offer, but had rather taken into account what had transpired at trial. Counsel submitted also that what was known to the liquidator at the relevant time had well-justified the claim being defended. In that connection, he referred to matters set out in the submission noted at [117] above; and he reminded the Court that the liquidator had been represented by solicitors. He submitted that the Court should not infer that the solicitors had not complied with their duties under the Civil Procedure Act2010 (Vic).
[101]Costs judgment [23].
Counsel submitted further that the time allowed to the liquidator to consider the offer (matter (b)) had been inadequate. He did not press this as entitling success on the leave application, but submitted that it would become relevant on the appeal, if leave was granted.
Counsel treated what he submitted was the error in the judge’s analysis of considerations (c) and (d) – putting the timing point to one side – in a global way. In short, this was a very small offer made to a liquidator who, at time of offer, had good reason to defend the claim. The liquidator had been entitled to conclude that the claim was weak. Had he accepted the offer, he would have been open to criticism by creditors of the company.
Counsel submitted that the same circumstances which had entitled the liquidator, speaking for the company, to reject the Calderbank offer were relevant to consideration whether he should have been made personally liable to pay the respondent’s costs. Those circumstances were, in essence, the matters in the appellant’s written outline which we have set out at [117]. They should have caused the judge to reject the respondent’s application for a costs order against the liquidator personally.
Respecting the question whether the liquidator should be liable to pay the respondent’s costs personally, counsel took no issue with the judge’s extensive analysis of legal principle.[102] But, to contrary effect, he submitted that the judge had been wrong, when applying principle, to say that a party should not be advantaged by tactical manoeuvring. He submitted that it was wrong to say that it mattered not whether the liquidator was plaintiff or defendant.
[102]Costs judgment [49]-[59], [61]-[77]. These paragraphs also deal with the application of principle to the facts of the case.
In written submissions, counsel for the respondent contended that the judge’s conclusion that the liquidator should have realised that the company had a very weak case was clearly correct. There had been a complete absence of contradictory evidence, as revealed by the course of cross‑examination at trial. There was no evidence that the liquidator had taken legal advice, and he had made no application to the court for directions.
Those submissions addressed the arguments advanced in writing for the appellant. Orally, counsel submitted that no error of a House v The King[103] kind had been demonstrated. With respect to the Calderbank issue, the Court was being asked to say that the judge’s conclusion was wrong. The submission for the appellant that the judge had taken the wrong vantage point – that is – after trial – was incorrect. What the judge had done was to reason that later events shed light on what the liquidator should have known at the time of offer.
[103](1936) 55 CLR 499.
With respect to both issues agitated orally for the appellant, counsel for the respondent submitted that the liquidator had apparently been so obsessed with the corruptness of Henry that he failed to notice the probabilities of the litigation. Particularly, he had failed to address the strength of the case based upon the 2011 agreement as severing any pre-existing joint tenancy. The respondent had provided a written outline of argument to the appellant in late 2011 – many months before trial. The outline had dealt with severance, concentrating upon the 2011 agreement.
Counsel also relied upon the liquidator’s failure to seek directions, which he submitted was relevant, although (as the judge held) not determinative.
Upon the question of substantial injustice, said by counsel to be relevant on the leave application, it was submitted that there was simply no evidence that the liquidator would be out of pocket by reason of the costs order. It was not known what, if any, arrangements had been made with creditors of the company for indemnification.
Resolution
The leave to appeal test
Although, in Wentworth v Rogers (No3),[104] Kirby P said that an application for leave to appeal against such an order attracted the principles requiring leave to appeal from an interlocutory decision[105] with special force, the emphasis in many Victorian cases has been upon the great difficulty that a litigant faces in obtaining leave to attack a discretionary decision, where House v The King[106] considerations apply. The question whether leave should be granted, and consideration whether the appeal is likely to succeed, have been elided.
[104](1986) 6 NSWLR 642, 644, cited by Batt JA in Etna and Anor v Arif and Ors [1999] 2 VR 353, 378 [67].
[105]See, in Victoria, Niemann v Electronic Industries Ltd [1978] VR 431, 433 (McInerney J).
[106](1936) 55 CLR 499.
So, in Etna and Anor v Arif and Ors,[107] Batt JA observed:
Here, in my view, the appellant has not succeeded in the difficult task of showing that leave should be granted. No question of principle appears to me to be raised in this paradigm matter of practice and procedure and I discern no good reason, over and above whatever opinion this court might have as to the best costs order in the circumstances, for granting leave.[108]
[107][1999] 2 VR 353.
[108]Ibid 378 [68].
Then, in TAC v O’Reilly,[109] Ormiston JA said:
Nevertheless, whatever be the nature of the discretion as understood in the Court of Chancery, it has been accepted for many years that it is extraordinarily difficult to show that a court of first instance or a tribunal with wide discretionary powers has erred in the exercise of its powers to award costs, if there be some basis for making an order other than the conventional order in favour of the successful party.[110]
[109][1999] 2 VR 436.
[110]Ibid 457 [46].
That observation was made in a case where leave to appeal was not required. But it has been cited and applied in cases where leave is a prerequisite. So, in Spotless Group Ltd v Premier Building & Consulting Pty Ltd and Anor[111] Redlich JA (with whom Dodds-Streeton JA agreed) summarised the position this way:
[111][2008] VSCA 115.
It is convenient to deal first with the application for leave to appeal the costs judgment. An order made by a judge of the Trial Division as to costs which are in the discretion of the Trial Division are not subject to appeal to the Court of Appeal except by leave where the challenge to the costs order goes beyond the mere consequences of a successful appeal on the merits on other substantive grounds.
It is well established that an appellate Court will not, in the absence of strong reasons, interfere with the exercise of discretion by the Court below with respect to the question of costs. As Callaway JA said in Hanlon v Brookes:
It is almost invariably the case that the judge at first instance is better placed to deal with the costs after a long trial and counsel seeking leave ordinarily has a difficult task. The test is not whether we should have exercised the discretion in the same way as his Honour did but whether there was or were a ground or grounds on which he could reasonably do so.
This Court may disturb the costs orders made below where an error in principle is identified, where the judge acted on a manifestly erroneous view of the facts, or where the award is manifestly unreasonable. But the applicant must satisfy a high threshold for such a grant of leave. The test to be applied is not whether the Court of Appeal would have made the same order but whether there is a ground upon which the order by his Honour could reasonably be made. Some manifest error must be exposed to take the case out of the ordinary situation in which, wherever a discretion is to be exercised, minds may differ on the result.
(Redlich JA then cited the passage from the judgment of Ormiston JA in TAC v O’Reilly extracted in [136] above).
The same passage was cited by Nettle JA (with whom Neave JA agreed) in Peet Limited v Richmond.[112] His Honour then observed:
More generally, an appellate court will not overturn a judge's decisions on costs unless the judge is seen to have failed to exercise his or her discretion on reasonable grounds or has applied wrong principle or taken a manifestly erroneous view of the facts.[113]
[112][2010] VSCA 71, [3].
[113]Ibid [4] (citations omitted); See also McFadzean v Construction Forestry Mining and Energy Union (2007) 20 VR 250, 289 [150].
It was in that context that Nettle JA expressed his conclusion that the judge’s order was not ‘attended by sufficient doubt to warrant the grant of leave to appeal’.
In a costs matter arising under s 17A(1)(b) of the Supreme Court Act1986 (Vic), it is to be borne in mind that leave is being sought from a final and not an interlocutory order. The second limb of the test which applies to a leave application in an interlocutory matter (viz: that substantial injustice would be caused if the order was allowed to stand)[114] is likely to have rare application in the case of a final order – in the sense that the injustice of permitting an arguably erroneous final decision to stand will ordinarily be not only obvious, but decisive. So it is that, in a variety of instances, both civil and criminal, in which there is a prerequisite of grant of leave from a final order (in a criminal case, conviction and/or sentence), the question has been formulated along the lines whether, as Nettle JA said in Peet, the order was attended by sufficient doubt to warrant grant of leave; or, in the criminal context in Victoria, whether the proposed ground of appeal is ‘reasonably arguable’.[115]
[114]Niemann v Electronic Industries Ltd [1978] VR 431, 433 (McInerney J).
[115]See Criminal Procedure Act2009 (Vic) s 280(3). In Western Australia, to add to the flavour of the appropriate test, the Supreme Court must be satisfied that the appeal ‘has a reasonable prospect of succeeding’: Criminal Appeals Act2004 (WA), s 9(2).
We give an instance, not in a costs matter, of what an applicant must show in order to obtain a grant of leave. Under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), to appeal against an order of the Tribunal – it must be upon a question of law, and the order could be ‘interim’ as well as final – there must be grant of leave. In Department of Premier and Cabinet v Hulls[116] JD Phillips JA dealt with what must be established, and outlined points of distinction between the situation of final and interim[117] orders. He made these observations:
[116][1999] 3 VR 331.
[117]Which should be understood, the judge said, as ‘interlocutory’.
10.… on an application for leave to appeal it cannot be expected that error below be established: that is for the appeal itself. Something less must be sufficient on the application for leave to appeal and ordinarily the applicant will be required to show that there is a real or significant argument to be put that error exists. In other contexts, this has sometimes been called “a prima facie case”, or “an arguable case”, but these are no more than attempts to describe the degree to which an applicant must satisfy the court from which leave is sought that there is a real or significant argument, in favour of the applicant, on the question of law which is identified. (Contrast in a different context Beecham Group Ltd. v. Bristol Laboratories Pty. Ltd. (1968) 118 C.L.R. 618 at 620, per Kitto J.) It is not possible to lay down in advance any standard of satisfaction, for much may depend upon the importance of the question of law to the remedy to be sought. What is peripheral may be thought less persuasive, in relation to leave to appeal, than an issue which is central.
…
12.… For myself, I am attracted by the proposition articulated in Niemann, that the decision below should be “attended by sufficient doubt to justify the grant of leave to appeal”. That seems to me to leave open what is “sufficient”, while at the same time confirming that there must be doubt “sufficient ... to justify the grant of leave”. Beyond that it is difficult to be more precise … .
13.Once a question of law has been identified which bears directly upon the relief which will be sought on the appeal, and once it has been shown that there is sufficient doubt attending that question to justify the grant of leave to appeal, it may be supposed that leave will ordinarily go if the order below is a final order. That must always be subject to its being just to grant leave, a consideration which will in some cases be determinative. It directs attention to the position of the parties — and perhaps third parties if directly affected by the order below or the proposed appeal — and perhaps the simplest example arises when the order below is plainly interlocutory.
…
15.Where the order which is under challenge is final, the injustice of allowing the determination below to stand uncorrected, if indeed it is attended by error, will be more readily discerned. It will be apparent, at least in many cases, that to leave a final order standing which would be reversed if error of law were established is unjust to the party adversely affected by the order: the prejudice lies in that party’s being bound to comply with an order that ought not to have been made as a matter of law… What was said in Niemann might then still be a useful guideline under s. 148, whether the order below be final or interlocutory — provided it is recognised that the injustice attending an order’s continuing to stand is probably more readily discernible if it is final rather than interlocutory. …[118]
[118][1999] 3 VR 331, 335 [10], 336 [12]-[13], 336-7 [15].
JD Phillips JA summarised what he intended to be non-prescriptive guidelines this way:
16.… The applicant must show that there is a real or significant argument to be put on that question of law at least to this extent: that there is sufficient doubt about it to justify the grant of leave. Moreover, it may have to be shown that to allow the error to go uncorrected would impose substantial injustice, although, where the order below is final, that injustice will often be more readily discernible.[119]
[119]Ibid 337 [16]. See also, applying the judge’s analysis, Myers v Medical Practitioners’ Board (Vic) (2007) 18 VR 48 and Aitken v Victoria [2013] VSCA 28.
In our opinion, the formulation stated by JD Phillips JA, and that stated by Nettle JA in Peet, amount to the same thing. It is the test which we should apply. For the reason mentioned by us at [140], which is consistent with what JD Phillips JA said in Hulls, the question of substantial injustice is likely to have rare application – that is, to operate against grant of leave to appeal - in the case of a final order.
The appellant’s final position summarised
In the present case, as we apprehend it, the appellant’s final position was that it –
(1)Sought to identify one misapplication of principle – that is, that the reasonableness or otherwise of the liquidator’s rejection of the Calderbank offer was not considered at the time when the offer was made.
(2)The judge had either misdirected himself or taken an irrelevant consideration into account by saying, in the context of deciding whether the liquidator should be made personally liable for costs, that a party should not be advantaged by tactical manoeuvring; and that there was no difference whether the liquidator was plaintiff or defendant.
(3)Otherwise, in substance, submitted that the judge had taken a manifestly erroneous view of the facts respecting considerations (c) and (d) of the Calderbank analysis, and generally respecting the liquidator’s personal liability for costs. The discretion in each instance had not been exercised on reasonable grounds.
The Calderbank argument
The alleged misapplication of principle turned on the text of one of a series of paragraphs in the judge’s reasons which appeared under the heading - ‘The offeree’s prospects of success, assessed as at the date of the offer’.
This is the text of the paragraph:
[44]There is no evidence as to how the Defendant responded to the Calderbank Letter. No evidence was put or submissions made as to the reasoning process behind the Defendant’s failure to accept the Plaintiff’s offer. However, what is known as a result of the trial is that the Defendant’s case was, as submitted by the Plaintiff, substantially based on collateral credit attacks on the evidence provided by the principal witnesses for the Plaintiff, Igo Mischel and Henry Mischel, a basis which I rejected. The Defendant emphasised that it was entitled to give weight to the position that documentary evidence indicated that the premises had been mortgaged or charged to an extent which exceeded its realisable value. Nevertheless once one stripped away these credit attacks and had regard to the fact that the sale of the premises did in fact yield surplus proceeds, in spite of claims that it had been mortgaged or charged to the extent that all the equity of Maria Mischel in it had been extinguished, the Defendant would have to have had significant doubts as to its prospects on these points. Add to this position the evidence upon which the Plaintiff’s case relied which was contained in reasonably detailed witness statements, which the Defendant had ample opportunity to consider fully, I think that the Defendant must have realised, or ought to have realised, that it had a very weak case.[120]
[120]Costs judgment [44] (citations omitted).
In our opinion, the judge did not misapply principle in the impugned paragraph. What the judge was searching for was what the appellant had available to it to resist the respondent’s claim when the offer was made. Light was cast on that matter by the way that the appellant had conducted the trial. It was to be inferred that the appellant’s resistance at time of offer to the respondent’s claim was substantially based on issues of collateral credit. As the judge pointed out, credit attacks did not address objectively ascertainable facts. Moreover, the detail of the respondent’s case had been available to the appellant for months before trial. In light of these various considerations, the judge concluded, that the appellant must have realised before trial, or ought to have realised, that it had a very weak case.
In truth, the only possible suggestion that the judge took an ‘after trial’ vantage point lies in the words ‘a basis which I rejected’. But that was no more than a statement of fact, reflecting an outcome which, as the judge explained, ought to have been perceived by the appellant as being the very likely outcome when the offer was made.
The ‘tactical manoeuvring’ argument
We turn to what the judge said about ‘tactical manoeuvring’. This involved yet another non-correspondence between the grounds of appeal, the written outline of argument, and oral submissions. The submission made orally appeared in a variety of ways in the grounds, but not a word was said about it in the outline of argument.
To understand this ground, as pursued orally, it is necessary to understand the way in which the judge addressed the question whether the liquidator personally should be ordered to pay the respondent’s costs.
The starting point was the factual position, alleged by the appellant and evidently accepted by the respondent and the judge, that the appellant had no assets with which to meet a costs order; and the situation that the respondent would not be able to prove in the appellant’s bankruptcy for anything but a fraction of his costs.
Next, the judge correctly stated that a non-party order should only be made in ‘exceptional circumstances’. He analysed what is comprehended by that phrase, specifically with respect to persons in the special position of liquidators. He referred to the policy considerations that a liquidator ought not be discouraged from performing his or her function; and, that the office should not be made too onerous – as would discourage persons from accepting it. The Court needed to consider whether the liquidator’s conduct in the proceedings was reasonable or prudent in pursuing the claim or defence. The judge accepted that an opposing party need not establish ‘a degree of personal misconduct or wilful recklessness’ on the part of the liquidator; but that ‘mere negligence or mistake or the incurring of costs unreasonably were sufficient to constitute the relevant degree of impropriety’.[121]
[121]Mead v Watson [2005] NSWCA 133.
The appellant took no exception to the judge’s statement of circumstances and principle thus far.
Then, the judge identified four matters relied upon by the respondent to show that the liquidator’s prosecution of the defence was unreasonable:
(1)The only evidence referable to facts in issue was that of Igo Mischel and Henry Mischel, which had been provided to the appellant seven months before trial.
(2)The liquidator did not seek directions from the Court as to the maintenance of the proceedings.
(3)There was no evidence that the liquidator received independent legal advice.
(4)The nature of the cross‑examination of Igo and Henry further indicated the absence of any proper basis to defend the proceeding. There had been limited cross‑examination, or no cross‑examination, upon pertinent factual issues. Particularly in the case of Henry, cross‑examination had been essentially directed to his credit.
The judge carefully considered the circumstances and submissions pertinent to each of those matters.
As to the first, he noted that the appellant had asserted that it was reasonable to defend the claim because it had indefeasible title to the St Kilda property until the Court ruled otherwise; and that it was reasonable to test the respondent’s evidence because of suspicions raised about that evidence.
With respect to the liquidator’s failure to seek directions, the judge concluded that the liquidator could and should have sought the Court’s assistance. He did not accept the submission for the liquidator that any approach to the Court must have been futile. But he did not treat the failure to seek directions as determinative that a costs order should be made against the liquidator.
With respect to the absence of evidence that the liquidator had taken independent legal advice, the judge concluded that it would have been reasonable and prudent for the liquidator to have taken such advice. But again, considered discretely, he did not treat it as decisive of the application.
Turning to the fourth matter raised – the way in which the appellant had conducted its case – the judge evidently accepted that the appellant had gone ahead despite the evident weakness of its defence. That defence had focussed upon matters of credit, rather than facing up to objective evidence.
That takes us to the passages in the judgment arising out of which the appellant mounted its ‘tactical manoeuvring’ submissions. Thus:
[80]The Plaintiff also contended that another factor favouring a costs order in favour of the Plaintiff was the fact that had the Defendant initiated the proceedings then the Plaintiff would have been able to obtain security for costs. Thus, it was contended that the Plaintiff ought not to be in “any different position simply because he had to bring a claim”. In my view it is highly undesirable that matters of procedure and form be allowed to affect substantive outcomes. This only invites tactical positioning by parties and is at odds with the approach of the courts to costs issues, which address substance rather than form.[122]
[81]The Liquidator submitted that the Plaintiff ought to have given him notice if the Plaintiff was concerned that the Liquidator was conducting the proceedings unreasonably. The Liquidator further submitted he had never had to address any allegation of “delinquent conduct” such as might attract an order for costs against him. That does not, in my view, appear to be a submission that carries any weight. First, the authorities discussed previously do not suggest any requirement that a liquidator ought to be put on notice that his or her conduct is claimed to be unreasonable before a non-party costs order can be made against him or her. Secondly, even if such notice were required, the Liquidator was, in my view, relevantly put on notice in this respect when the Calderbank Letter raised the possibility that a costs order, including indemnity costs, might be sought against him personally.[123]
And:
[84]As I have sought to indicate in the discussion of the authorities there is a potentially difficult balance to be struck between maintaining, effectively, the usual position of a party with respect to costs and the position of a liquidator of an opposing party. Where the company in liquidation is a plaintiff these issues are less likely to arise as it is open to the defendant to seek security for costs. The issues are, however, more likely to arise where, as here, the plaintiff does not have that protective option.
[85]In circumstances like the present, the party in control of the risk with respect to costs is the Defendant and its Liquidator. The Liquidator is able to protect his position by a variety of means, as discussed, and would be expected to do so in circumstances like the present when it must, on any reasonably considered basis, have been far from clear that the Defendant had or would have any assets against which the Liquidator could have recourse to meet a costs order or any basis.
[86]Consequently, I am of the opinion that in all the circumstances the Liquidator must be held to have a personal obligation to meet the costs of the Plaintiff recovered in these proceedings.[124]
[122]See, for example, Bischof v Adams [1992] 2 VR 198.
[123]Costs judgment [80]-[81] (footnotes omitted).
[124]Costs judgment [84]-[86].
In support of its contentions that the judge erred in finding that – (1) the appellant only became the defendant by tactical manoeuvring;[125] (2) the appellant was the effective plaintiff;[126] and (3), the appellant and the liquidator were in control of the risk with respect to costs of the proceeding[127] - each of which has some sort of connection with the oral submission for the appellant that a party should not be advantaged by procedural consequences - attention was particularly directed to paras 80, 84 and 85 of the Costs judgment.
[125]See Ground 29.
[126]See Grounds 25.2, 25.3.
[127]See Ground 31.
In our opinion, the submissions sought to ascribe to the judge’s reasons things which were not there.
In the Cost judgment [80], the judge recorded a submission for the respondent which focused on an alleged disadvantage because the plaintiff was not the defendant. He then said, in substance, that tactical positioning should not decide the question for his determination. That was the antithesis of saying that the appellant, by manoeuvring, had made itself the defendant and thus avoided the risk of having to give security for costs.
But it was the fact that the respondent was the plaintiff. All that the judge said in Costs judgment [84] was that costs issues are less likely to arise in a case in which a company in liquidation is the plaintiff than in a case where such a company is the defendant. That is because the security for costs procedure is not available in the latter case. What the judge said was a simple and correct statement of fact. It conveyed no hint that the liquidator was to be punished by a personal costs order, as it were, because the respondent was the plaintiff.
The attack on Costs judgment [85] was also misconceived. When the judge said that the party in control of the risk with respect to costs was the appellant and liquidator, he was plainly referring to the ways in which, by seeking directions from the court, or taking independent legal advice, the liquidator could and should have protected his position against an application that he pay the costs personally. That was particularly the situation where, as the judge evaluated the position, the appellant’s defence was very weak.
Further, and contrary to the submission for the appellant, the judge did not say that the position of a liquidator, whether as plaintiff or defendant, is the same when a costs question arises.
A manifestly erroneous view of the facts?
In our opinion, the judge’s costs order could not be successfully impugned on the footing that the judge took a manifestly erroneous view of the facts. There are a number of reasons why that is so. They apply equally to the Calderbank and liquidator’s personal liability issues.
First, the appellant argued – see [117] above – that the respondent’s case that Maria Mischel was a tenant in common from the time of purchase of the St Kilda property had multiple problems. But that argument did not address events in 2011 at all. On the objective facts, for reasons which we have set out, the respondent had a powerful case that, if there was a joint tenancy at time of purchase, it came to an end both by agreement and conduct in 2011. The liquidator was put on notice of that case, months before trial, both by affidavit evidence and an outline of argument.
Second, the judge’s reasons, both in the principal judgment and respecting costs, emphasise the extent to which the appellant’s case dwelt upon credit issues – particularly Henry’s corruptness. The same approach is evident in the argument raised on the appeal – see paragraphs (a)-(e) in the excerpted passage from the appellant’s outline of argument at [117] above. There was much to commend the submission of respondent’s counsel that the liquidator was so obsessed by Henry’s corruptness that he failed to discern the objective strength of the claim, particularly as to events in 2011.
Third, we consider, in the circumstances, that the judge was entitled to bring to account the liquidator’s failure to seek directions; and, as it appeared, his failure to seek independent legal advice. The cross-examination of Henry below, and interchanges between the judge and the cross-examiner, to our mind emphasise the desirability that independent advice had been taken.
We should finally say that we have not brought to account, in deciding whether leave to appeal should be granted, the submission for the respondent that there was no evidence that the costs order would leave the liquidator out of pocket. But we provisionally doubt that the submission was weighty. If not the liquidator, then a creditor or creditors, would be out of pocket. We doubt that leave should have been refused because there was uncertainty whether it was one or the other.
Conclusions with respect to the costs judgment
As we have earlier said, we refuse leave to the appellant to appeal against the order for costs made against the liquidator personally. In our opinion, the appellant conspicuously failed to establish that the making of the order was attended by sufficient doubt to justify grant of leave.
Conclusions and orders on the appeal
The appeal against the primary judgment should be dismissed; and the application for leave to appeal against the costs judgment should be refused.
We will hear the parties on the subject of costs.
- - -
14
28
0