Szwarcbord v Charbord Investments Pty Ltd
[2024] VSCA 92
•14 May 2024
| SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2024 0013 |
| ISABELLE SZWARCBORD | Applicant |
| v | |
| CHARBORD INVESTMENTS PTY LTD (ACN 104 932 532) & ORS (ACCORDING TO THE ATTACHED SCHEDULE) | Respondents |
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| JUDGES: | BEACH and ORR JJA |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 1 May 2024 |
| DATE OF JUDGMENT: | 14 May 2024 |
| MEDIUM NEUTRAL CITATION: | [2024] VSCA 92 |
| JUDGMENT APPEALED FROM: | [2023] VCC 2141 (Judge Cosgrave) |
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PRACTICE AND PROCEDURE – Application for leave to appeal – Security for costs – Applicant claims to be impecunious – Unacceptable risk that costs order against applicant would not be satisfied – Evidence that applicant has significant unexplained income and expenditure – Application for leave to appeal unlikely to be stifled – Public interest in determination of appeal less relevant where application will not be stifled – Security for costs ordered.
A E Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 43; Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [No 3] [2016] VSCA 185; Mikkelsen v Li [2022] VSCA 126; Timbercorp Finance Pty Ltd (in liq) v Tomes [2015] VSCA 322.
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| Counsel | |||
| Applicant: | Mr NA Frenkel | ||
| Respondents: | Mr TJ North KC with Dr E Kelly | ||
Solicitors | |||
| Applicant: | Atticus Lawyers | ||
| Respondents: | CIE Legal | ||
BEACH JA
ORR JA:
This is an application for security for costs filed on 22 March 2024 in response to an application for leave to appeal. On 1 May 2024 at the hearing of the application we ordered that security for costs be paid in the amount of $98,000. We said we would publish our reasons subsequently. These are those reasons.
Background
The applicant in the proceeding (‘Isabelle’)[1] is a daughter of the third respondent (‘Peter’).
[1]Relevant individuals are referred to by their given names. This is for ease of reference. No disrespect is intended.
Peter is a director and shareholder of several corporate entities engaged in property development (the ‘Group’). These entities include the first respondent (‘CI’), the second respondent (‘CI6’) and Trawalla Developments Pty Ltd (‘Trawalla Developments’).
In 2013 Trawalla Developments became the registered proprietor of 4 Trawalla Avenue, Toorak (‘Trawalla Avenue Property’). The Trawalla Avenue Property was subsequently developed by the Group into four units and a penthouse.
By a contract of sale dated 30 October 2015, Trawalla Developments sold Unit 2 of the Trawalla Avenue Property, which was then still under development, for $3,570,000 to Peter’s father (‘Jacob’) and/or Isabelle and/or a nominee purchaser. The purchase price was not paid at this time.
The development on the Trawalla Avenue Property was completed in early 2017. Jacob moved into Unit 2 on 2 March 2017, and lived there until around February 2021, after which time the property appears to have been unoccupied.
On 22 March 2017, Isabelle was nominated under the sale contract as the sole purchaser of Unit 2. Trawalla Developments transferred Unit 2 to Isabelle in June 2017. Isabelle contributed no funds to the purchase. The funds were instead supplied by CI, CI6 and a loan to the Group from the Australia and New Zealand Banking Group Ltd (‘ANZ’). Under the loan, Isabelle gave ANZ as security a first registered mortgage over Unit 2 and a guarantee and indemnity. She became the sole registered proprietor of Unit 2 around 11 August 2017.
On 2 July 2018, Isabelle entered a ‘Loan Deed’ with CI as lender and Isabelle as borrower. By the Loan Deed she charged her interest in Unit 2 to CI.
In January 2021, the relationship between Isabelle and the rest of her family soured. From July 2021, CI, C6 and Peter requested that Isabelle consent to the sale of Unit 2. She refused those requests.
On 23 December 2021, CI, CI6 and Peter commenced proceedings against Isabelle. They sought to enforce the charge over Unit 2 and to recover a debt exceeding $4 million said to be owed under the Loan Deed. CI, CI6 and Peter contended that Unit 2 had been purchased in accordance with an agreement entered into between Peter, Jacob and Isabelle in 2015 (the ‘Acquisition Agreement’). By the Acquisition Agreement, the purchase price and all outgoings in respect of Unit 2 were to be paid by CI and CI6; either Jacob or Isabelle was to be the registered proprietor; and as and when required by the Group, the registered proprietor would consent to the sale of Unit 2, the discharge of any encumbrances, and the return of any profits of sale to the Group. The Acquisition Agreement was said to reflect an established business practice of the Group, which gave members of the family a home to live in while also giving the Group the benefit of greater publicity for developments it was working on through pre-sales, as well as the scope for tax benefits.[2]
[2]Charbord Investments Pty Ltd v Szwarcbord [2023] VCC 2141, [381], [474] (‘Reasons’).
Isabelle contended that she was the beneficial owner of the fee simple in Unit 2. She said that she had been given Unit 2 as a gift. She said she had signed the Loan Deed and the mortgage which encumbered the property as a result of undue influence and/or unconscionable conduct by Peter. She denied the existence of the Acquisition Agreement.
Although these matters were not pleaded, Isabelle also sought to contend that the Loan Deed and the Acquisition Agreement (if it existed) should not be enforced because their purpose was to unlawfully avoid land tax and capital gains tax that would otherwise by payable by CI and CI6. She sought to contend that the Group had submitted documents to the State Revenue Office (‘SRO’) and other entities which falsely represented that she was the beneficial owner of Unit 2 instead of CI and CI6.
In a judgment delivered on 23 November 2023, the judge held that Unit 2 was not given to Isabelle as a gift and she was not the beneficial owner. Instead, she held Unit 2 on constructive trust for CI and CI6, which arose from a common intention expressed in the Acquisition Agreement that the beneficial ownership of Unit 2 was to lie with the Group.
The judge noted that Isabelle was insistent in her closing submissions that the Court should not grant any relief to CI, CI6 or Peter, because ‘the court should not countenance, or be party in any way, to illegal conduct whereby a party sought to engage in unlawful tax avoidance’.[3] The judge said that he would not allow Isabelle to advance this matter because she had failed to explicitly raise it in her pleadings and give fair notice of the allegation; and CI, CI6 and Peter had objected when the matter was raised during the hearing.[4]
[3]Reasons, [32].
[4]Reasons, [33].
Nevertheless, later in the Reasons the judge said:
The question of equity and discretion is relevant also to the question raised by the documents filed at the State Revenue Office indicating Isabelle is the beneficial owner. As mentioned earlier, the fundamental intent underlying the operation of the Group business and the implementation of the business practice is that the interests of the Group are paramount and the interests of individual family members are subservient. Hence, it was never legitimate for Isabelle to claim the beneficial ownership of Unit 2.
I accept that the State Revenue Office documents created the impression that Isabelle was the beneficial owner. Plainly in view of my findings, this cannot stand and the plaintiffs must take appropriate steps to rectify the situation. As to capital gains tax, no questions arise until Unit 2 is sold. However, I expect the Group to deal with the taxation authorities on the basis that Isabelle held the property on trust and not beneficially. Notwithstanding these comments regarding the State Revenue Office and the Australian Taxation Office, I do not accept that there is any proper basis to say the business practice is inherently illegitimate or unlawful. That being so it is, in my view, not appropriate to refuse the plaintiffs relief on public policy grounds. Equity is flexible and the interests of justice are best served by granting the plaintiffs relief but requiring them to address these other matters which have arisen during the trial.
…
… To the extent that some documents filed with the State Revenue Office suggested that [Isabelle] was the beneficial owner of Unit 2, they were incorrect. [CI, CI6 and Peter] will need to take prompt remedial action to file amended documents with the State Revenue Office or otherwise take such measures as are necessary to regularise the situation concerning the beneficial ownership of Unit 2.[5]
[5]Reasons, [496]–[497], [520].
The judge rejected Isabelle’s claims that she was subjected to any undue influence by Peter, as well as her allegations of unconscionable conduct.
Application for leave to appeal
On 5 February 2024, Isabelle filed an application for leave to appeal. It was amended on 15 March 2024. Fourteen proposed grounds are advanced.
By those grounds, Isabelle contends that the judge erred in finding that Unit 2 was not gifted to her, that she held Unit 2 on constructive trust for CI and CI6, and that she owed a sum under the Loan Deed secured by a charge over Unit 2. She maintains that there was no Acquisition Agreement. Further, the judge’s finding that she held Unit 2 on constructive trust is inconsistent with a finding that the Loan Deed was valid and enforceable. Isabelle also contends that she was denied procedural fairness because the judge refused to entertain her submission that the Acquisition Agreement (if it existed) and the Loan Deed were entered into in furtherance of a business purpose that was unlawful and contrary to public policy, namely to avoid land tax and capital gains tax.
Application for security for costs
The respondents sought an order that Isabelle provide security for the respondents’ costs of the present proceeding, in a sum to be fixed by the Court. The respondents also sought an order that the proceeding be stayed until the security is given.
The application was accompanied by an affidavit affirmed on 22 March 2024 by Mark Waters, the solicitor for the respondents (the ‘first Waters affidavit’). Mr Waters deposed that Isabelle was ordinarily resident outside of Victoria. He exhibited searches demonstrating that Isabelle held no real property assets in Australia apart from Unit 2, which is subject to orders for judicial sale, with no proceeds to flow to Isabelle.
Mr Waters exhibited extracts from the trial transcript recording evidence given at trial by Isabelle and her husband (‘Jeremy’), concerning Isabelle and Jeremy’s relocation to Queensland; the incorporation of Isabelle Eleanore Global Pty Ltd (‘IEG’), an entity of which Jeremy was the sole director and shareholder; the payment of Isabelle’s income as a content creator (which averaged $80,000 per month) into a bank account in the name of IEG; and the payment by IEG and Jeremy of Isabelle’s legal costs associated with the trial.
Mr Waters also exhibited correspondence between the parties prior to trial, in which the respondents sought, unsuccessfully, to obtain confirmation of a funding arrangement between Isabelle and Jeremy for the purpose of the proceedings below, either in his personal capacity or in his capacity as sole director and shareholder of IEG. Correspondence dated 21 February 2024, in which the respondents had requested that Isabelle give security for the costs of the present proceeding, was also exhibited, as was a letter dated 1 March 2024 in which Isabelle refused that request.
The first Waters affidavit included the following table, in which Mr Waters estimated the respondents’ costs of the proceeding:
Item
Description
Amount
Total
1.
Review Applicant Documents (Leave Application, Written Case, Authorities, Draft Summary and Application Book Index), research, conferences
$6,060
2.
Correspondence and communication in relation to appeal
$12,400
3.
Assist preparation of response documents (Written Case, List of Authorities, copy of Draft Application Book Index)
$7,700
4.
Prepare for and instruct at directions hearing
$2,800
5.
Prepare and instruct at Appeal hearing
$18,400
$47,360
6.
Counsel fees
$101,400
$101,400
Total
$148,760
Mr Waters estimated that if Isabelle is unsuccessful in the present proceeding and a costs order is made in favour of the respondents, the respondents’ costs are likely to be $129,000 on an indemnity basis or $98,000 on a standard basis.
In response to the first Waters affidavit, Isabelle filed an affidavit sworn on 9 April 2024. She deposed that other than Unit 2 she does not own any real property and that Jeremy does not own any real property. She said she has no other assets of substantial value apart from her personal effects. The balance of her personal bank account is $21.31, the balance of Jeremy’s is $42.89, the balance of their joint account is $470.42, and the balance of IEG’s bank account is $24.95. She said she was scheduled to undergo surgery on 18 April 2024 and her recovery was likely to take two to three months, during which time it would be difficult for her to generate income. Isabelle deposed that if security for costs is ordered, depending on the amount required, she cannot say whether she will be able to raise the funds to pay it.
Mr Waters affirmed a second affidavit on 26 April 2024 (the ‘second Waters affidavit’). He deposed that the premises identified by Isabelle in her affidavit as her address was last sold for $1,935,000 and had an estimated rental yield of between $1,380 and $1,880 per week. On 16 April 2024 he had caused a notice to produce to be sent to Isabelle’s solicitors calling for documents confirming the bank balances to which Isabelle referred in her affidavit. On 22 April 2024 he caused a follow up email to be sent requesting the documents. As at 26 April 2024 no response had been received.[6] He referred to the judge’s finding that Isabelle and Jeremy had a ‘shopping addiction’ and annexed posts made to Isabelle’s Instagram account between 15 February and 4 April 2024 which, Mr Waters said, indicated her continued spending on shopping and dining.
[6]At the hearing on 1 May 2024 counsel for the respondents informed us that they had received a response to the notice to produce on 30 April 2024. They did not seek to put before the court any of the material produced.
Applicable principles
The respondents bear the onus of persuading the Court that it should exercise its discretion to order that security for costs be given.[7]
[7]Mikkelsen v Li [2022] VSCA 126, [10] (Kyrou and Walker JJA).
However, the general principle is that the discretion will ordinarily be exercised in favour of a respondent who applies for such an order if:
(1)there is an unacceptable risk that the applicant would not be able to meet a costs order in favour of the respondent made consequent upon the application or appeal being unsuccessful; and
(2)there are no discretionary or other considerations which require that security for costs not be ordered.[8]
[8]Ibid [9].
Various factors can inform the exercise of the Court’s discretion whether to order security for costs, including the following:
(1)the prospects of success of the appeal;
(2)the magnitude of risk that a costs order would not be satisfied;
(3)whether the giving of security would be oppressive in that it would stifle a reasonably arguable claim;
(4)whether the conduct of the respondent that is the subject of the appeal has contributed to the risk that the applicant would not be able to satisfy a costs order;
(5)whether the appeal is defensive in nature;
(6)whether the respondent has cross-appealed;
(7)whether the respondent has delayed in applying for security for costs;
(8)whether there are aspects of the public interest which ought to be taken into consideration in deciding whether security should be provided; and
(9)whether there are particular discretionary matters that are relevant in the case.[9]
[9]Ibid [11].
If there are said to be circumstances peculiar to an applicant’s case that militate against the making of an order for security for costs, he or she has an evidentiary onus to identify them and to draw the Court’s attention to any evidence that supports them.[10]
The respondents’ submissions
[10]Ibid [10].
The respondents made five submissions in support of their application for security for costs.
First, there are serious and genuine concerns as to Isabelle’s ability to satisfy any adverse costs order made in this Court. Isabelle has no assets and her income is diverted to IEG. She and Jeremy contrived to avoid Isabelle paying the respondents’ legal costs at trial, which were ordered in the sum of $1,582,944.80. While Isabelle has foreshadowed seeking a stay of that costs order, no such application has been made.
Secondly, a security for costs order would not stultify the proceeding. IEG and Jeremy paid Isabelle’s legal costs below, and could continue to do so. At the time of the trial, IEG was receiving on average $80,000 a month of Isabelle’s diverted income. The significance of this financial support is amplified by Isabelle’s ‘claim’ at first instance and on appeal being brought for the benefit of Jeremy, who would necessarily benefit in equity as Isabelle’s husband if Unit 2 is found to have been gifted to Isabelle.
Thirdly, the respondents requested security for costs promptly, and prior to the filing of their written case in response to the application for leave to appeal.
Fourthly, the proposed grounds of appeal do not identify error of the House v The King (‘House’)[11] kind, instead expressing dissatisfaction with the judge’s weighing of the evidence. They therefore lack prospects of success. Further, the applicant’s contention on appeal that the respondents engaged in unlawful activity is likely to fail because it was not advanced below.
[11](1936) 55 CLR 499; [1936] HCA 40.
Fifthly, no question of public importance is raised by the proceeding. Although Isabelle contends that the application for leave to appeal is of public importance because it concerns the legality of the Group’s business practice, Isabelle made a decision at trial, by her pleadings, not to proceed with the contention that the Acquisition Agreement and Loan Deed were unlawful. She should not, and would not, be permitted to raise it on appeal.
As to the quantum of any security, the respondents submitted that Mr Waters is an experienced practitioner in commercial litigation, including in appellate matters in this Court. They submitted, based on Mr Waters’ estimate of the respondents’ likely costs on a standard basis, that it would be appropriate to order security in the sum of $98,000.
As to how long Isabelle should have to provide security for costs (if ordered), the respondents suggested a period of 14 days.
Isabelle’s submissions
Isabelle opposed an order for security on the basis that it would not be ‘in the interests of justice’. She made four submissions in support of this proposition.
First, the proposed appeal raises a matter of public interest. Even though the contention that the Acquisition Agreement and Loan Deed were unlawful was not pleaded, it was put to some witnesses, canvassed in closing submissions, and ruled on by the judge.[12] It therefore could be advanced on appeal.[13] For six years, the respondents did not pay land tax that would have been payable on trust property. They put Unit 2 in Isabelle’s name to avoid tax, and submitted documents to the SRO and other entities that falsely indicated that Unit 2 was owned by her in fee simple and not on trust. The practical effect of the judgment below was said to be that it is permissible to submit knowingly false documents to taxation authorities if this is done as part of a business practice of minimising tax liabilities.
[12]Isabelle referred to Reasons, [493], [495]–[497].
[13]Isabelle referred to Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33.
Secondly, the application for leave to appeal is defensive in that it has been brought to defend Isabelle’s ownership of Unit 2. The need to do so follows from the judge’s orders denying her interest in the property.
Thirdly, if the application for leave to appeal were stultified by reason of a security for costs order, there would be the possibility of serious injustice. Isabelle has been deprived of her only asset with which to raise security.
Fourthly, the conduct of the respondents has contributed to the risk that Isabelle would not be able to satisfy a costs order. The respondents submitted documents to the SRO and other entities stating that Unit 2 belonged to Isabelle. Yet they claimed in the proceedings that they had always in fact owned it in equity.
In response to the submission that there are serious concerns as to her ability to satisfy an adverse costs order, Isabelle submitted that any such concern was not supported by the evidence. Nor was the claim that she diverted her income to avoid paying legal costs. Isabelle accepted, however, that she owned no real property apart from Unit 2.
In response to the submission that a security for costs order would not stultify the proceeding, Isabelle’s counsel accepted that there is evidence that Isabelle has the capacity to earn significant sums of money. He also accepted that the Instagram posts exhibited in the second Waters affidavit, which depicted designer wear, luxury accommodation and fine dining, reflected her ‘expenditures on discretionary matters’. However, the claim that there was a litigation funding arrangement at trial was said to be without factual or evidentiary foundation. Isabelle also denied that the proposed appeal had been brought for Jeremy’s benefit, and said that if the respondents’ submission was correct, then every married litigant would be held to be bringing or defending proceedings for the benefit of their spouse.
In response to the submission that her application for leave to appeal lacked prospects of success, Isabelle submitted that her prospects were good. Whilst accepting the respondents’ submission that she needed to establish error of the House[14] kind to succeed on appeal, her position was that this posed no obstacle because the judge’s finding that she was liable to repay a loan in respect of Unit 2 notwithstanding that she never had any beneficial interest in Unit 2 was untenable. And the contemporaneous documents overwhelmingly suggested that Isabelle had beneficial ownership of Unit 2.
[14](1936) 55 CLR 499; [1936] HCA 40.
As to the quantum of any security ordered, Isabelle submitted that Mr Waters had not explained how he had arrived at the figure of $98,000 in his affidavit. Whilst accepting that the trial had lasted for 15 days, she submitted that the issues on the application for leave to appeal were much narrower than at trial. In addition, much of the parties’ costs had been ‘front-ended’ because written cases had already been filed. Relatedly, both of the respondents’ counsel on appeal had appeared below.
As to how long she should have to provide security for costs (if ordered), Isabelle requested a period of 90 days. She did not oppose the respondents’ request for an order that the proceeding be stayed if security was not provided within a period fixed by the court. Nor did she seek to resist a further order refusing the application for leave with costs if security had still not been provided within a subsequent period specified by the court.
Consideration
The starting point is whether there is an unacceptable risk that Isabelle would not be able to meet a costs order if her application for leave to appeal is unsuccessful.
It is not in dispute that Isabelle has no real property aside from Unit 2. On her own evidence, she and Jeremy have very limited funds in their personal bank accounts. Isabelle has chosen to direct her income to a corporate entity in which she has no shareholding.
As to whether that corporate entity was established to protect Isabelle from liability, Jeremy gave the following evidence at trial:
I’ll show you a search of the company. Can you pass one up. So is this the company you just referred to?---Yes, it is.
And it seems to bear a date of registration of 12 March 2021?---Yes.
And that is at a time when you were concerned about the litigation between Isabelle and her father; is that not right?---Yes, yes.
And you were advised to transfer the income source for protection purposes to this entity; that’s correct, isn’t it?---No.
You were not advised to set up a company for protection purposes?---We were advised to set up a company from our — by our accountant for taxation purposes. It may have been for protection purposes but it was advice given to us from our accountant.
Well, when you say ‘may have been’, you’ll need to just explain that. Did your accountant advise you to set up a company for protection purposes?---I don’t know if it was for protection purposes but it was for tax purposes because our income was going up.
So can you explain to me the structure of the company?---At the moment our accountant advised us to set it up as me as the sole director of the company and Isabelle as the manager of the company and then that — that may change upon his advice.
Yes. But that was to protect the position insofar as this case is concerned and any liability that you may have in respect of this case, was it not?---It’s not why we opened the company but there may have been a purpose to protect Isabelle.
Well, is your evidence therefore that there was a purpose to protect Isabelle’s potential liability in respect of this case; that's correct, isn’t it?---Yes, I guess it is.
Did you say yes?---Yes.
Isabelle gave the following evidence at trial:
And is there any reason why you’re not a shareholder of that company?---To protect my family.
To what?---To protect my family.
Protect your family?---Yes.
Who’s included in the family?---Myself and Jeremy.
So no other family member of yours is protected by this operation, is it?---No.
It was incorporated at a time when proceedings were about to be issued, wasn’t it?---Yes.
And is that the they [sic] protection that was sought to be gained by the incorporation of this entity?---Can you elaborate?
Was it discussed with your husband---?---Yes.
--- that you needed to incorporate a company to protect you from any adverse orders made in a courtroom?---The company wasn’t incorporated to protect. The company was incorporated from the advice of our accountants. I wasn’t made a director to protect.
So protect what?---Our assets.
What assets?---Our income.
Your income stream?---Yeah.
This evidence was not entirely consistent as to the purpose for which IEG was incorporated. However, Jeremy ultimately conceded that there was a purpose to protect Isabelle from potential liability in respect of the litigation. Whilst Isabelle did not accept that IEG was incorporated to protect her from adverse court orders, the decision not to make Isabelle a director of IEG was made, on her own admission, to protect her assets.
In these circumstances, and in the light of Isabelle’s claimed impecuniosity, we are satisfied that there is an unacceptable risk that she would not be able to meet a costs order if she is unsuccessful on her application for leave to appeal.
We turn to whether there are nonetheless discretionary or other considerations which require that security for costs not be ordered in the circumstances of this case.[15]
[15]See [29] above.
Unless an application for leave to appeal is patently without merit, this Court will ordinarily be reluctant to express a concluded view on its prospects of success on the hearing of an application of security for costs.[16] We are not satisfied that the application for leave to appeal is patently without merit. It is unclear whether success on the application would depend upon an error of the House kind, as the respondents contend. In any event various complaints made on the application for leave to appeal are capable of amounting to House errors, in that they allege that the judge made untenable factual findings.
[16]A E Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 43, [27] (Osborn JA).
We are not persuaded that the granting of security for costs would stifle Isabelle’s claim. The evidence at trial was that Isabelle was generating average income of $80,000 per month, which was deposited into the bank account of IEG. She and Jeremy each drew an annual wage of around $140,000 from this account, with the remainder left in the account. That evidence is difficult to reconcile with the bank balances stated in Isabelle’s affidavit of $21.31 (Isabelle), $42.89 (Jeremy), $470.42 (joint) and $24.95 (IEG). Also difficult to reconcile with those bank balances is the evidence that Isabelle and Jeremy live in an expensive residence and that Isabelle’s ‘discretionary expenditure’ extends to luxury goods and fine dining. Isabelle has provided no explanation of these matters, which suggest to us that she has some undisclosed source of funds.
Isabelle claims that the conduct of the respondents that is the subject of the appeal has contributed to any risk that she would not be able to satisfy a costs order, in that they completed and submitted contemporaneous documents identifying her as the owner of Unit 2. However, Isabelle’s case is not that this conduct has caused her impecuniosity. Indeed, Isabelle would not have owned Unit 2 had she not been gifted it (as she claims) by Peter. In any event, given our findings on the other factors, we would not find this factor to be decisive.
It may be accepted that the appeal is defensive in nature. That was not disputed by the respondents.
It may also be accepted that the application for security for costs was brought promptly. That was not disputed by Isabelle.
Finally, while there may be some public interest in the determination of the legality of the respondents’ business practices, it is not correct, in our view, to say that the practical effect of the judgment was that it is permissible to submit knowingly false documents to taxation authorities where this is done as part of a business practice of minimising tax liabilities. To the contrary, the judge said that documents which created the impression that Isabelle was the beneficial owner ‘cannot stand’, and he ordered the respondents to ‘regularise the situation’ with the authorities.[17] In any event, the public interest in the determination of an issue on appeal is unlikely to be a significant factor unless it appears that ordering security would cause the application for leave to appeal not to proceed.[18] Given our view that ordering security for costs is not likely to stifle Isabelle’s claim, this factor is of less importance.
[17]Reasons, [497], [520].
[18]Timbercorp Finance Pty Ltd (in liq) v Tomes [2015] VSCA 322, [34] (McLeish JA, Santamaria JA agreeing at [40]). See also Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [No 3] [2016] VSCA 185, [22] (McLeish JA).
As to quantum, we have considered each of the items in the table in the first Waters affidavit and they appear to be reasonable. The proposed appeal is likely to be of some complexity, and the respondents have engaged senior and junior counsel. Also reasonable is the ‘discount’ that appears to have been applied to arrive at the estimated figure for costs on a standard basis, which is less than two-thirds of the respondents’ total estimated costs. There is nothing to suggest that Mr Waters has disregarded the fact that the same counsel who appeared below have been engaged for the proposed appeal. In our view, $98,000 is an appropriate amount of security.
Conclusion
For these reasons, we granted the application for security for costs and made orders to the following effect:
(1)By 4:00 pm on 30 June 2024 the applicant is to pay into Court security for the respondents’ costs of the application for leave to appeal and any appeal if leave be granted, until the determination of the application for leave to appeal and any appeal if leave be granted, in the sum of $98,000.
(2)If such security is not provided by 4:00 pm on 30 June 2024, the proceeding is stayed until further order.
(3)If such security is not provided by 4:00 pm on 31 August 2024, the application for leave to appeal is refused with costs.
(4)The applicant pay the respondents’ costs of the application for security for costs on the standard basis.
(5)There is liberty to apply.
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SCHEDULE OF PARTIES
ISABELLE SZWARCBORD Applicant and CHARBORD INVESTMENTS PTY LTD (ACN 104 932 532)
AS TRUSTEE FOR CHARBORD FAMILY TRUST
First respondent CHARBORD INVESTMENTS NO 6 PTY LTD (ACN 606 069 612)
AS TRUSTEE FOR CHARBORD FAMILY TRUST NO 6
Second respondent PETER STEVEN SZWARCBORD Third respondent
3
8
0