Taheri v Vitek

Serious question to be tried? 5Careful submissions were made by Mr Zipser, who appeared for the Viteks, in support of the proposition that the appeals were "poor to hopeless", or at the least, did not raise serious issues for the determination of the appellate court (see Kalifair at [18]). In many interlocutory applications in this Court, where it is conceded that the appeal is brought bona fide and is not hopeless, little attention needs to be given to this threshold element of the analysis. Indeed, it is inappropriate to do so: see for example Reddy v C&P Syndicate Pty Ltd [2013] NSWCA 425 at [34]-[35] (security for costs). However, the present application was not such a case. 6After reading Mr Zipser's submissions, and hearing from him, I indicated that I was not persuaded that Ms Taheri's appeal was so weak that no consideration should be given to the discretionary circumstances governing fairness to the parties. My reasons for that conclusion may be stated simply, and without descending to the detail of all of the submissions. 7First, the notice of appeal on its face is carefully drafted in a way that suggests close attention has been, and will continue to be, given to the advancing of legally persuasive submissions. 8Secondly, those arguments were articulated, albeit concisely, by senior counsel, in a way that withstood at least superficial scrutiny. One reason for his concision was me. Although I read and heard Mr Zipser's submissions at considerable length, I indicated to Mr Condon SC (who appeared for Ms Taheri) that I did not wish to hear from him in chief in detail as to the prospects of the appeal, and that I did not need to hear from him on that issue in reply. Hence it should not be suggested that the following fully captures all of the arguments that will be put on behalf of Ms Taheri when the appeals are heard. In relation to the appeal from the orders made by Bergin CJ in Eq, he pointed to the fact that the case had been conducted on the basis that the Viteks had maintained from the beginning that Ms Taheri's evidence ought not be accepted as truthful, as subtracting from her Honour's finding of causation. He had in his favour the fact that the Viteks did not plead that they believed the representations which were found to be fraudulent; instead they pleaded that they did not know that they were false (see at [62]). Her Honour's finding that the fraudulent representations were a contributing cause of the compromise was in part based upon the testimonial evidence of Mr Vitek, but no Fox v Percy argument was made in paragraphs 45-50 of Mr Zipser's written submissions, and it does seem to me that Ms Taheri will continue to rely upon what was elicited as to the state of mind of the Viteks' then barrister on this issue. It may very well be, indeed it may quite probably be, the case that no appellable error is established as to causation, but I am not persuaded that the challenge is hopeless so as to make it unnecessary to consider balance of convenience considerations. 9Thirdly, aspects of the challenge advanced by Mr Taheri were expressed at a relatively high level. For example, ground 12 of the notice of appeal from the orders of Rein J is in these terms: "[T]he primary judge (at [49]) erred in holding, 'I do not accept that where the principal has knowledge of all the circumstances by which the act by the agent was done a principal's understanding as to whether he or she could disavow the transaction is a relevant fact or circumstance in determining whether there has been ratification. No authority was cited for the contention and it seems to introduce a requirement for which there is no obvious justification', when the appellant did cite and rely upon the notion that in Australian jurisprudence mistake of law can be, or alternatively ought be, a basis to negative ratification by reason of the appellant's mistaken belief as a matter of law that she was in any event bound: see para 11(a) above; cf [41], [48], [51]." (emphasis added) 10That challenge is extended in ground 17(b) in support of the challenge to the reasoning based on estoppel. I am reluctant to conclude that that challenge is so weak that it is hopeless, at least not without full argument on the point, and, to be sure, Mr Zipser as I read and heard his submissions does not contend to the contrary. Instead, he maintains that the premise to the submission is a finding of fact that Ms Taheri did not hold any mistaken belief (written submissions, paragraphs 33-34). I deal with this below. 11Fourthly, although Ms Taheri has been found to have made fraudulent misrepresentations, the judgments the subject of the appeals are not based upon an assessment of her demeanour. She did not give evidence before Bergin CJ in Eq or Rein J. Oral argument before me focussed on the reasons on Rein J. In large measure, the reasoning that Ms Taheri seeks to challenge on appeal is legal reasoning: (a) on the construction and operation of s 163B of the Conveyancing Act 1919, as to which Mr Zipser quite properly conceded that there was a divergence of views at first instance; (b) the alternative conclusions of ratification (see [35]-[55] of the reasons of Rein J); and (c) estoppel (see [56]-[62] of the same reasons). As I read the reasoning on ratification and estoppel, the essential question is the application of legal principle to a largely uncontroversial documentary history of the transaction. I am very conscious that such appeals, even where no apparent error seemingly appears on the face of the reasons, are best determined against the light of the evidentiary background. Once again, the primary judge is entitled to considerable deference in respect of factual finding, even where the witness did not give evidence, and it may well be that no appellable error is shown, but I am reluctant to conclude in an evidentiary vacuum that the challenge is hopeless. 12In short, I am satisfied that Ms Taheri's appeals face considerable obstacles. She may well fail completely. And my assessment and analysis of prospects is necessarily abbreviated on an application such as this. But I am not persuaded that her prospects are so hopeless that I should disregard questions of balance of convenience.

Balance of convenience 13I turn therefore to questions of balance of convenience. With considerable force, the Viteks submitted that it was for Ms Taheri to put forward evidence of her financial position, and the prejudice she would suffer if a stay of execution were not continued, which she had failed to do. Certainly, although there is limited evidence of her assets, it is far from clear what liabilities she is subject to. Partly, as Mr Condon SC conceded, that is a consequence of the bankruptcy of Mr Taheri and the fact that a deal of real property was held by them jointly. 14It was established on the evidence that Ms Taheri is the sole registered proprietor of property in Seaforth, where she lives, which is subject to a single registered mortgage to the Commonwealth Bank of Australia, and the indebtedness on that home loan is $640,015.42. In the course of the hearing, Mr Condon confirmed that on his instructions the bank was the only creditor with security over that property, and against the possibility that that turns out not to be the case, I granted liberty to apply. 15As the Viteks pointed out, it was possible if not indeed likely that the registered mortgage secures other indebtedness of Ms Taheri to the Bank, and the evidence established that in all Ms Taheri held funds of $212,420.55 with the Bank, and owed $2,657,676.72 to the Bank, a net negative position of $2,445,256.17. I admitted into evidence, over the objection of Mr Zipser, an unsigned "market appraisal" prepared by Mr Mark Griffiths, a principal of a Seaforth real estate agent, which Ms Taheri's solicitor said had been obtained the previous day. As Mr Zipser observed, the appraisal contains no reasons, nor it does it identify what material was supplied to Mr Griffiths, nor what investigations he undertook. However, it concludes: "Determining the eventual selling price is by no means an exact science, which is why we rely on our experience and current market indicators to give you an expected sale price range. Your property could achieve in the vicinity of $4,000,000 - $5,000,000." 16For the reasons given by Mr Zipser, I place almost no reliance on the figures contained in the appraisal. However, there is also evidence that Ms Taheri has been proposing for some time to replace the bi-fold windows on her property, which is estimated to cost well over $100,000. Windows can be expensive, but one would not spend well over $100,000 to replace the windows on a small bungalow. I also think I can safely take judicial notice of the fact that Seaforth is a harbourside suburb in which there are a number of very expensive houses. 17Although the evidence is very slight, and its deficiencies are wholly attributable to Ms Taheri, it seems plausible that Ms Taheri lives in a multi-million dollar home in a harbourside suburb of Sydney which, if sold, could realise more than $2 million (quite possibly, substantially more). To date, there has been an undertaking not to sell, transfer, further encumber or otherwise deal with that property save on 28 days' written notice, and I have not been taken to any material to suggest that the Viteks did not regard that arrangement as an appropriate holding position pending their obtaining final orders. I regard the charge over that property which Ms Taheri proffers as the price of a stay as a substantial improvement in the position of the Viteks, even though I fully accept that it is not clear whether they have thereby become fully secured or merely under-secured creditors. 18Also in evidence were certificates of title of two apartments in George Street, Sydney, each of which is mortgaged, and is owned jointly by Mr and Ms Taheri, which also have been subject to the existing undertaking, but which are now proposed to be sold (and relatively speedily, given the time of year), with the proceeds being paid into Court. There is also evidence of a deal of additional property. 19As for Ms Taheri's liabilities, as Mr Zipser points out, there is no evidence of matters such as: (a) any taxation liability of Ms Taheri; (b) any other unsecured claims; and (c) any outstanding obligations of Ms Taheri to her lawyers. The absence of evidence quantifying those liabilities leads me to proceed on the basis that more likely than not they exist and are substantial. 20The absence of clear evidence of the true position of assets and liabilities is particularly significant in the present application because two judges have found that Ms Taheri has committed fraud (see [2010] NSWSC 237 at [114] and [145] and [2013] NSWSC 589 at [69] and [72]). That consideration is often very weighty in an application of this nature: see Mio Amico Pty Ltd v ANZ Banking Group [2013] NSWCA 353 at [49] and Portaccomm Building Systems Pty Ltd v Southern Sheet & Coil Pty Ltd [2013] NSWCA 123 at [15]-[16]. In the latter case, Macfarlan JA said: "Whilst the appellants adduced some evidence of their financial position, it was far from satisfactory...[t]he need for an explanation and evidence of the [financial] position is accentuated by the primary judge's findings that the second appellant 'demonstrated commercial dishonesty' and was not 'a reliable and credible witness'." 21A final matter is that Mr Zipser's clients undertook not to dispose of or encumber their residential home, which (it is not disputed) is valued at more than $2 million and is held by them unencumbered, in the event that a stay was refused. He submits, and Mr Condon accepted, that there is no risk that Ms Taheri will be prejudiced if the judgment amount is paid and she succeeds on appeal. 22But ultimately the question is one of fairness. On the one hand, the Viteks are prima facie entitled to the fruits of their final judgments. On the other hand, Ms Taheri enjoys an appeal as of right, which she proposes should be heard in May 2014, and importantly, she has put forward as security an asset which is of substantial value, and which in any event irrespective of its value is apt to give considerable comfort to the Viteks, because it is where Ms Taheri lives. Mr and Ms Vitek will be immediately entitled to lodge a caveat, securing her obligation under the orders she challenges in her appeals. In many respects, that places the Viteks in a stronger position than they would otherwise be, for they become secured creditors. 23I made it plain to Mr Zipser that I placed relatively little weight upon the general undertaking not to dissipate assets, and was conscious of the practical restrictions upon his clients' ability to monitor and enforce that undertaking. I also acknowledge the fact that the value of the three properties which have for months served as security is not fully known. But either Ms Taheri has assets sufficient to pay a judgment debt or she does not. If she does, then there is little prejudice to the Viteks. If she does not, then their present position as unsecured creditors is not materially diminished by the terms which are proposed. Mr Zipser's response was twofold. The first was to point to the possibility, which I accept is not fanciful, that Ms Taheri's asset position is steadily declining, and may materially diminish between now and the determination of her appeals. But if that is so, then there are very considerable advantages to the Viteks becoming secured creditors now. The second was a preference for his clients to remain in control, which I understood to mean at liberty to proceed to execute the judgment through lodging writs on the properties and issuing a bankruptcy notice. That is an understandable position for the Viteks to take, no differently from any other successful judgment creditor. But this litigation has, to date, occupied some years. I think I am entitled to have regard to the fact that the majority of the amount claimed by the Viteks is not damages, but interest and costs. I have to balance what is fair to both parties, in terms of assessing the holding position for the next five months and such time as is necessary for judgment to be delivered on the appeal, which the Supreme Court Act 1970 gives to Ms Taheri as of right. In the scheme of things, that is a relatively short time. 24Ms Taheri undertakes that she will not alienate, charge, dispose of or encumber any of her assets until the determination of the appeals, other than to meet ordinary business expenses (including tax liabilities), ordinary living costs and expenses, and legal costs. As Mr Zipser points out and as I accept, that is of limited utility given the imperfect understanding of Ms Taheri's assets and liabilities, but any breach will sound in contempt. Ms Taheri also proposes to seek to sell the two George Street properties and pay the proceeds of sale into Court. She undertakes to prosecute the appeals with expedition, and there is no reason why those appeals may not be listed, next week by the Registrar, in May 2014. 25The upshot of what Ms Taheri undertakes is to transform Mr and Ms Vitek into secured creditors, to give them the comfort that any breach will sound in contempt, as well as entitling them to apply to discharge the stay, and the relative certainty of an expeditious determination of the appeal, which she enjoys as of right. The alternative is to leave it to the Viteks to execute the judgment, whether by way of writ, bankruptcy notice or garnishee order. I accept that the situation is necessarily less than satisfactory to either party, but that is the nature of applications of this type. In all the circumstances, bearing in mind that the most substantial asset against which the Viteks could confidently proceed is Ms Taheri's home, and that she is proffering a charge over that home, this is an appropriate case to extend the stay on the terms that have been proffered. 26For those reasons I made the orders 1-6 on 11 December 2013, in the following terms: (1)I note that the existing undertaking in paragraph 1 of the short minutes of order dated 19 June 2013 continues, but is subject to the following orders and undertakings. (2)The applicant undertakes to the Court that she will prosecute with due despatch proceedings 2013/200165 and 2013/364156 and will to that end seek an order that the proceeding be expedited. (3)The applicant undertakes to the Court that she will not dispose of, alienate, charge or encumber her assets until the determination of these appeals other than to meet: (a)her ordinary business expenses (including tax liabilities); (b)her ordinary living costs and expenses; and (c)her legal costs of and incidental to proceedings no. 2013/200165, proceedings no. 2013/364156, proceedings no. 2010/328982 and proceeding 2005/258339. (4)The applicant charges (subject to existing encumbrances) the property contained in folio identifier 2/1110862 (being the land known as 81 xxxxxx Seaforth) with her liability to the respondents pursuant to the orders made by Bergin CJ in Equity and Rein J the subject of the appeals. (5)The applicant undertakes to the Court to take reasonable steps to place on the market for sale the properties contained in folio identifiers 259/SP65785 and 323/SP65785 (being the properties known, respectively, as xxxxxx George St, Sydney and xxxxxx George St, Sydney) by 1 March 2014 and will pay into Court the net proceeds of those sales at settlement. (6)Order that the stay ordered by Rein J 29 November 2013, extended by me on 9 December 2013, be further extended until further order. 27The Viteks asked for costs of Ms Taheri's motion, on the basis that the offer to charge the Seaforth property was not originally made, and that Ms Taheri was seeking an indulgence from the Court. But most of the time occupied at the hearing and in these reasons was in my rejection of the Viteks' submissions that Ms Taheri's appeal was hopeless or near to hopeless. Ms Taheri was content with an order that there be no order as to costs on the basis that the costs of this application will be costs in the appeal. I made such an order, because in my view it more fairly reflected the relative success of the parties.

Amendments 16 December 2013 - Insertion of references in parentheses at end of first sentence. Amended paragraphs: 20 30 January 2014 - Correct date of decision under appeal from 22/12/2013 to 22/11/2013 Amended paragraphs: Coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 January 2014