Plaintiff v Defendant

2 The plaintiff has a paid up capital of $2. There was no evidence that it traded or was presently earning income. However, there was evidence that the plaintiff was the registered proprietor of real estate - two properties in Carlton - and that the equity in the two properties fell within the range of $415,000 to $2.3 million, depending on whether the market value of the properties was assessed by reference to rates notices or curb-side valuations provided by real estate agents. The plaintiff identified the current balance owing under registered mortgages but there was no evidence as to any other aspect of the plaintiff's financial position.

3 The question of whether the plaintiff was beneficially entitled to the equity in these properties was not raised between the parties, either in pre-application correspondence between solicitors or in the affidavits upon which the application proceeded. The issue was first raised in submissions before the primary judge. Counsel for the defendant submitted:

Indeed, the material is equivocal regarding the status of the plaintiff. It doesn't describe itself as being proceeding in the capacity as a trustee in the trust. But, the documents that have been discovered by the plaintiff suggest that it is the trustee of something known as the 'Chiodo Family Trust' and this is in profit and loss statements and balance sheets that were provided and are exhibited to Mr Anderson's second affidavit. So, the status of the plaintiff's claim is whether it is as trustee or whether it is acting beneficially is not really described in the material. The ownership of the properties to which it refers, whether it is ownership beneficially or on trust, is not disclosed in the material.

4 Later, referring to an earlier payment of security for costs, the defendant submitted there was no material as to the source of those funds, suggesting that such funds may have come from resources provided by those who stand behind the plaintiff such as the beneficiaries of the trust on which the plaintiff appears to hold the properties. Given the defendant's earlier description of the state of the material, there was no factual basis for the submission. It must have been speculation.

5 The only evidence before the primary judge possibly referable to the issue was financial statements describing the plaintiff as trustee of the Chiodo Family Trust and recording a current assed being 'equity in joint venture'. Every other entry in these accounts was redacted. Why that was so was not explained on the material before me and the redactions had not been challenged by the defendant. No attempt was made to reconcile the figure appearing in the financial statements as 'equity in joint venture' with the value of the plaintiff's claim in the proceeding for a joint venture interest in another property.

6 In conclusion on this point, the defendant submitted to the primary judge:

Sixthly, not making clear whether the assets are held beneficially or on trust, and if they're held on trust whether they are held on the same trust as the Chiodo Family Trust, or a different trust, the only information we have is the financial (indistinct) of an institute described as the Chiodo Family Trust and there is nothing in that material to show that these properties are assets of that trust, and they could well be the assets of a different trust.

In the context of the evidence and the submission to the primary judge, her conclusions, set out above on this beneficial interest question were entirely appropriate. It was not a factor that assisted in drawing any inference on the threshold question of whether the jurisdiction to grant security for costs had been enlivened.

7 Her Honour disposed of this issue with the following remark:

The issue as to whether or not the land is held beneficially or as trustee, yes, it is true we do not know that. But what I was meant to make of that was not made clear.

8 By the notice of appeal dated 17 October 2022, the defendant contended that the primary judge erred in finding that on a consideration of the material before the court the appellant had not established there was reason to believe that the plaintiff would not be able to satisfy an adverse costs order. The defendant contended that error was identifiable in three respects.

(a) The court should have found that the net asset position of the plaintiff was not able to be determined in circumstances where the plaintiff had not adduced information regarding its liabilities other than registered mortgages.

(b) The court should have considered whether the real property registered in the name of the plaintiff was owned by the plaintiff in its own right or in its capacity as trustee.

(c) The court should have considered all of the circumstances and the material before the court as a whole.

The defendant contended that the court should have found that there was 'a risk that the plaintiff would be unable to pay an adverse costs order'.

9 The notice of appeal squarely raised the issue of whether the plaintiff had beneficial ownership of the properties. The defendant first explained precisely how that issue was to be put on the appeal in its written outline of submissions dated 1 February 2023, which clearly communicated to the plaintiff that this issue was central to the appeal.

10 Shortly prior to the hearing of the appeal, the plaintiff filed a further affidavit, sworn that morning (6 February 2023), which in substance stated that it did not hold the two Carlton properties on any trust and was beneficially entitled to the equity in those properties. Mr Chiodo had not explicitly so stated in his initial affidavit as he had not appreciated that any issue of beneficial ownership had been raised.

11 Because the importance of this ground to the defendant's appeal was not made clear until this outline of argument was served, I am satisfied that the affidavit of Mr Chiodo sworn 6 February 2023 was a prompt response.

12 The defendant opposed the plaintiff's application for leave to rely on this affidavit, submitting that the principles for the admission of fresh evidence on an appeal from an associate judge are the same principles that apply when the Court of Appeal determines whether to grant leave to introduce fresh evidence upon an appeal.[2]

13 Those principles are stated in Clark v Stingel,[3] an appeal that followed a trial of a proceeding. The Court of Appeal has affirmed the application of these principles on many occasions, including, recently, in Hua Li v John Hong Ping So,[4] when the Court of Appeal restated another relevant principle:

These submissions misunderstand the role of this Court on appeal from a decision of a judge in the Trial Division. Its role is to determine whether the decision of the primary judge was or was not correct, on the evidence and the law as it stood at the time of the original decision. In so doing, the court will confine its attention to the alleged errors of fact or law specified in the grounds of appeal, rather than conduct a general review of the decision below or consider all of the evidence afresh. Furthermore, any attempt to put new or fresh evidence before the court on appeal must be done by way of formal application and the court's acceptance of such evidence is subject to strict limitations.

14 The Clark v Stingel principles were also affirmed in Apostolidis v Kalenik (No 2) when the Court of Appeal stated, about the policy underlying these principles―

As Chernov JA observed in Foody v Horewood, the question of whether to admit fresh evidence is largely one of discretion and degree bearing in mind the public interests in finality of litigation and, at the same time, the requirements of justice of the case in hand. Generally speaking, fresh evidence ought not to be admitted when it bears upon matters falling within the field or area of uncertainty in which the trial judge's estimate has previously been made. Exceptionally, however, it may be admitted, if some basic assumption, common to both sides, has been falsified by a subsequent event. More precisely, as Lord Wilberforce observed in Mulholland v Mitchell, courts will allow fresh evidence where to refuse it would affront common sense, or a sense of justice, always keeping in mind that it should be an exceptional event.[5]

15 Context is important. As appears from the extract from Hua Li, an appeal to the Court of Appeal is a 'strict appeal'. It is well accepted that the nature of an appeal from an associate judge to a judge of the trial division is an appeal by rehearing. The appellant is required to show legal, factual, or discretionary error before appellate power may be exercised.[6] An appeal of this nature is different to an appeal in the strict sense.[7] The distinction is made clear by Gleeson CJ, Gaudron and Hayne JJ in Coal and Allied Operations Pty Ltd v AIRC.[8]

16 In contra-distinction to strict appeals in the Court of Appeal, appeals from an associate judge concern matters of practice and procedure, where the court is yet to determine the substantive rights in issue between the parties in the dispute. The public interest in the finality of litigation remains relevant, particularly as the Civil Procedure Act 2010 (Vic) dictates that the court must give effect to the overarching purpose stated in s 7 of that Act in the exercise of any of its powers or in the interpretation of those powers (s 8). Doing so requires the court to have regard to the objects set out in s 9(1) and the matters specified in s 9(2).

17 The right of appeal from a determination of the trial division constituted by an associate judge to the trial division constituted by a judge is found in s 17(3) of the Supreme Court Act 1986 (Vic). Appeal rights are more particularly governed by the Supreme Court (General Civil Procedure) Rules 2015 (Vic). Order 64, in the case of appeals to the Court of Appeal and r 77.06 in the case of appeals from associate judges. Previously, an appeal from an associate judge was by rehearing de novo and there was a rule whereby special leave was required to rely on evidence not used or given before the primary judge (or Master). The purpose of this rule, based on the finality principle, was to prevent the mischief of a party using the hearing at first instance as a dry run and then making a second attempt, on different material, to obtain the relief initially denied to it.[9]

18 Recently, in AAA v County Court of Victoria,[10] I reviewed the authorities touching on the nature of an appeal in a different context. Relevantly, two matters may be restated from that analysis. First, the nature of the appeal, and the powers of the appellate court in respect of the evidentiary basis for that appeal, are identified by the proper interpretation of the statute governing the power of appeal. Secondly, one matter that defines the distinction between the nature of a strict appeal and appeal by way of rehearing is the issue of how fresh evidence is resolved. Depending on the requirements of the relevant statute, re-hearings may be limited to the evidence on the record, which is reconsidered by the appellate court, or new evidence may be permitted, in which case the court is not confined to the record of evidence from the original hearing.

19 Rule 77.06.9 empowers a judge on an appeal from an associate judge to receive further evidence upon questions of fact whether by oral examination in court, by affidavit, or by deposition taken before an examiner and to draw inferences of fact.

20 In both Re Ascot Vale Self-Storage and Loftus,[11] judges of this court considered that this power by r 77.06.9 to admit fresh evidence on appeal to a judge from an associate judge was governed by the same principles as apply in relation to an appeal to the Court of Appeal.[12] In other words, it was necessary for the applicant for the introduction of fresh evidence to demonstrate that such evidence should be received by reference to the principles identified in Clark v Stingel.[13]

21 Rule 64.36(3) provides that the Court of Appeal has power to receive further evidence upon questions of fact―

(a) by oral examination in court;

(b) by affidavit; or

(c) by deposition taken before an examiner.

Crucially, this power, although expressed in materially the same terms as r 77.06.9, is also expressed as subject to r 64.13, a qualification that was not present in the Rules considered in Re Ascot Vale Self-Storage and Loftus when r 64.22(3) (of the 2005 Rules as they stood then) was compared with, and found to be indistinguishable from, r 77.06.9(2).[14]

22 Rule 64.13 provides that on an application for leave to appeal or an appeal, oral evidence shall not be adduced and evidence which was not before the court or tribunal whose decision is sought to be appealed or is being appealed shall not be relied upon. That rule goes on to identify that an application may be made to the Court of Appeal to receive further evidence in accordance with the procedure described in the rule. That rule is plainly intended to facilitate the application of the principles in Clark v Stingel when the question of leave to adduce further evidence comes to be considered.

23 Because neither Re Ascot Vale Self-Storage nor Loftus recognise the material distinction in the text of the rules relating to the admission of further evidence on appeal - 'subject to r 64.13' - because it was introduced by amendment of the 2005 Rules after the determination of those cases, those cases are distinguishable and do not support the defendant's submission.

24 The material distinction is that the Rules do not provide that the powers of a judge hearing an appeal from an associate judge to receive fresh evidence are constrained by reference to the principles in Clark v Stingel. There is no rule to the same or like effect as r 64.13 applying to associate judge appeals. Rule 77.06.9(2) provides that the judge has power to receive further evidence upon questions of fact, whether by oral examination in court, by affidavit or by deposition taken before an examiner and power to draw inferences of fact. The judge on the appeal may give any judgment or make any order which ought to have been given or made and may make any further or other orders as the case may require.

25 Having regard to the text, context and purpose of the rules governing appeals from an associate judge to a judge of the court, I cannot accept the defendant's submission that in order to rely on the further affidavit of Mr Chiodo, the plaintiff must demonstrate that the principles from Clark v Stingel have been satisfied.

26 Rule 77.06.9 does not grant to a party to an appeal the right to reconstitute the evidentiary base of the application. The power of the court under r 77.06.9 is to be construed, and exercised, by reference to two considerations set out above. The first is the provisions of the Civil Procedure Act to which I have referred and the second is the observation by Chernov JA in Foody v Horewood,[15] as recited in Apostolidis v Kalenik (No 2), set out above at [14]. Reading in the quoted passage in place of 'the public interest in finality of litigation', a reference to the public interest in the court giving effect to the overarching purpose of the Civil Procedure Act, Chernov JA's statement of the underlying principles is apposite to condition the discretion whether to permit fresh evidence on an appeal from an assoc[16]te judge.16

27 In the ordinary case, an appeal will be determined on the evidence that was before the associate judge, but there will be exceptional cases where to refuse to admit fresh evidence would affront common sense or a sense of justice and would not further the overarching purpose of civil litigation. The need for that assessment explains why the admission of further evidence on appeal is a matter for the judge rather than an entitlement of the appealing parties.

28 Returning to the application at hand, the issue of whether the plaintiff was beneficially interested in the two properties was not identified in the evidence before the primary judge in a manner that enabled any inference to be drawn. That was a consequence of the issue not having been identified as relevant prior to the hearing. For the defendant to now prosecute an appeal centrally based on the proposition that the threshold question of its entitlement to security for costs is established because the plaintiff has failed to provide evidence as to whether it was beneficially interested in those properties is an affront to common sense. The defendant's approach denies the plaintiff a fair opportunity to address the contested fact. To permit that to occur by refusing to allow the plaintiff to address the issue by an affidavit, unless the plaintiff satisfied the Clark v Stingel principles, would constitute a failure to facilitate the just resolution of the real issues in dispute on the application.

29 There are no other relevant discretionary considerations. I do not consider that the plaintiff unreasonably delayed in serving the further affidavit, approximately five days after the defendant's outline of submissions identified how the issue was to be argued on appeal. However, the defendant foreshadowed that it might be prejudiced by its inability to deal properly with the affidavit on the hearing of the appeal. Although I have heard argument on the substance of the appeal, I will defer ruling on the appeal until the defendant has had an opportunity to identify any prejudice flowing from the short service of the affidavit. In the event that prejudice is identified it will be capable of being ameliorated either by a short adjournment or by a costs order.

[1] Pursuant to s 1335 of the Corporations Act 2001 (Cth).

[2] Citing Bailey D and Arthur J, Civil Procedure Victoria (LexisNexis), which draws that conclusion from Re Ascot Vale Self-Storage Centre Pty Ltd (in Liq) [2014] VSC 75; (2014) 98 ACSR 243 and ANZ Banking Group Limited v Loftus [2014] VSC 342.

[3] [2007] VSCA 292, [25].

[4] [2021] VSCA 32, [34] (citations omitted).

[5] [2011] VSCA 307; (2011) 35 VR 563, 581-2 [56] (citations omitted).

[6] Numerous decisions to this effect following on Oswal v Carson [2013] VSC 355 are collected in para I 77.06.0 of Bailey D and Arthur J, Civil Procedure Victoria (LexisNexis).

[7] Allesch v Maunz [2000] HCA 40; (2003) 203 CLR 172, 180-1 [23].

[8] [2000] HCA 47; (2000) 203 CLR 194, 203-4 [12]-[15].

[9] Brakatselos (Selos) v ABL Nominees Pty Ltd [2012] VSCA 231; (2012) 36 VR 490, 497-8 [27].

[10] [2023] VSC 13.

[12] These decisions were governed by and considered the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (version 53).

[14] Re Ascot Vale Self-Storage, [8] (n 2).

[15] [2007] VSCA 130; (2007) 62 ACSR 576.

[16] See also Fanniesab Pty Ltd v Futistasera Pty Ltd [2016] VSC 359.