Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos

Intuitively the amount claimed here is an overestimate of Gokan Yesilhat's defence costs in the debt/trust proceedings. As the Court has previously observed in Estate of Sclavos (No. 4), at [63], Gokan Yesilhat's case received "scant attention" up to the first judgment. Aspects of the Court's later judgments, Estate of Sclavos (No. 2), Estate of Sclavos (No. 3) and Estate of Sclavos (No. 4), gave greater emphasis to the individual case against Gokan Yesilhat and to his defence than had the first judgment. But even in these later judgments the issues concerning Gokan Yesilhat were but a small subset of the total issues being considered.
An analysis of the evidence and hearing times involving Gokan Yesilhat, relative to the whole proceedings, well supports that intuitive judgment. This is done below by reference to four metrics: (1) the evidence that Gokan advanced in his defence; (2) a comparison of the breadth of the proceedings as a whole with Gokan's case; (3) the prominence of Gokan's case in the judgments; and (4) the lack of proportionality between the debt claim against Gokan and his claimed expenditure in costs to defend it.
(1) Overview - Gokan's Evidence in Defence. Three affidavits were filed on Gokan Yesilhat's behalf. The first affidavit dated 24 April 2014 occupied 19 paragraphs and fitted within two A4 pages, excluding the jurat. In this affidavit Gokan Yesilhat gives a brief account of his brother's alleged close relationship with George Sclavos, events surrounding George's death on 13 August 2013 and Okan Yesilhat's actions after George's death.
Gokan Yesilhat's second affidavit was sworn on 28 January 2016. It comprised two pages of text dealing with the two main subjects. The first subject was information designed to discredit the character of Mr Versace. The second subject was some evidence, supplemented by a small number of annexed business records, that attempted to contradict certain statements of Ms Margaret Palmer. She had given evidence of seeing Gokan and Okan Yesilhat at the pharmacy on the afternoon of 13 August 2013. Gokan tried to answer her evidence by advancing evidence of transactions that he says he was involved in at the offices of Australia's Best Tyres, just when Margaret Palmer says that she saw the Yesilhat brothers at the pharmacy.
Gokan Yesilhat's third affidavit dated 12 February 2016 and filed on 16 February 2016 marginally supplements the information in his second affidavit. The third affidavit comprised only seven paragraphs within one page. It annexed an Optus telephone account, covering calls to his mobile telephone for the period 11 August 2013 to 14 August 2013 and certain customer invoices that were entered into the invoicing system of Australia's Best Tyres in the same period. None of these affidavits dealt with the debt claim against Gokan Yesilhat.
The Associate's record of proceedings shows that Gokan Yesilhat's involvement as a witness in the proceedings was as brief as these affidavits would predict. He was in the witness box for a short time. On 9 February 2016, Ms Culkoff called him to give evidence in chief at 10:37 AM. At 10:38 AM Mr Evans commenced cross-examination. The Court adjourned for morning tea at 11:30 AM for 20 minutes. Upon resumption at 11:50 AM Mr Evans continued cross-examination of Gokan Yesilhat until 1:07 PM when Ms Culkoff re-examined him for a short period. His time in the witness box that day was approximately two hours and 10 minutes. On 18 February 2016 he was recalled to give evidence, because of the additional evidence in his 12 February 2016 affidavit. This additional cross examination took 13 minutes. Thus, his total time giving evidence was 2 hours and 23 minutes.
(2) Overview - Okan's Defence Contrasted with the Whole Proceedings. The time taken for Gokan Yesilhat's defence is to be contrasted with the following statistics of the whole trial, with special focus on Okan Yesilhat's offensive and defensive cases. The contested affidavit evidence filed and all oral evidence in the proceedings was dealt with before the Court's first judgment. Substantial conflicts of fact were contested over 21 days of hearing between 1 February and 1 June 2016.
The defendants' case on behalf of Okan Yesilhat, Gokan Yesilhat and Australia's Best Tyres advanced evidence in support of Okan Yesilhat's family provision claim and in support of Okan's defence of the debt/trust proceedings. It is difficult to find any evidence that specifically related to Gokan Yesilhat's defence to the claim in debt against him.
This can be seen from some bare trial statistics. Okan Yesilhat gave oral evidence spread over 10 days out of the 21 days. He was the principal witness in the proceedings and was cross-examined for almost the whole time he was in the witness box. But the length of his evidence when added up from the Court's trial records represents a period of approximately 24 hours out of 105 hours, or 22 per cent of the total 21 hearing days (assuming an average hearing day of 5 hours). In contrast, Gokan Yesilhat's hearing time was a little under 2.5 hours, or 2.38 per cent of the total trial hearing time.
Analysis of the written evidence in the proceedings produces a similar result. Twenty-two witnesses swore affidavits in the proceedings and were cross-examined. Their affidavits were contained in nine volumes of the Court Book, totalling 2, 492 pages. Two of those witnesses were Okan Yesilhat and Gokan Yesilhat. In support of his family provision claim and in defence of the debt/trust proceedings Okan swore 4 affidavits, comprising 231 pages of the 2,492 page Court Book or 9.27% of the Court Book. Gokan Yesilhat, in contrast, filed 3 affidavits of 31 pages in total, representing 1.24% of the Court Book.
When it came to the Yesilhat parties' written submissions, unsurprisingly with this background they were focussed on Okan's alleged relationship with George Sclavos. To the extent they covered loans from George Sclavos their focus was entirely the dealings between Okan and George Sclavos.
(3) Overview - The Judgments. The Court dealt with Gokan Yesilhat's evidence about the matters in his affidavit and in his cross-examination in a limited number of paragraphs in the first judgment. The trial resulted in the first judgment of 219 pages and 828 paragraphs, which said very little about the specific case against Gokan Yesilhat. No issue of the recovery of money from Gokan Yesilhat was dealt with in the first judgment. This reflected the submissions advanced on behalf of the Yesilhat parties before the first judgment.
In the Court's second judgment, Estate of Sclavos (No. 2), given on 22 May 2019, the Court considered five issues, two of which concerned Gokan Yesilhat. In a judgment of 297 paragraphs over 82 pages, the two issues concerning Gokan Yesilhat occupied 28 paragraphs over 7 pages, 9.4% of the paragraphs and 8.5% of the pages of the judgment.
The Court's judgment, Estate of Sclavos (No. 3), given on 13 December 2019, considered some preliminary issues and then two substantive topics. Those two topics were the liability of Gokan Yesilhat to the estate and the liability of Australia's Best Tyres to the estate. Estate of Sclavos (No. 3), was a short judgment of only 29 paragraphs over 10 pages. In 12 paragraphs of reasoning over four pages, the decision found in favour of Gokan Yesilhat on the issue concerning him.
The Court's judgment, Estate of Sclavos (No. 4), given on 11 August 2020, dealt with five remaining matters for determination. One of these was what costs orders should be made in relation to both Australia's Best Tyres and Gokan Yesilhat. This judgment of 80 paragraphs over 26 pages dealt with the issue concerning Gokan Yesilhat and Australia's Best Tyres in the space of seven paragraphs over two pages. The costs orders made in Gokan's favour which are for present consideration were made on this date.
The Court's judgment, Estate of Sclavos (No. 5), given on 8 December 2021, a decision of 27 paragraphs over eight pages, dealt with the procedural question, whether specified gross sum costs orders in respect of the costs orders in favour of the estate should be considered at the same time as the costs orders in favour of Gokan Yesilhat. Contrary to the submissions put on behalf of Gokan Yesilhat, the Court decided to consider together a specified gross sum in respect of the orders for costs in favour of both parties. The Court did not make a costs order on this application. But it is an example of an application after Estate of Sclavos (No. 4) in which Gokan Yesilhat was unsuccessful and no specific costs order was made in his favour. Most of the delay between Estate of Sclavos (No. 5) and this judgment was caused by Gokan Yesilhat's non compliance with the Court's procedural directions to file evidence.
(4) Overview - Proportionality. Issues of proportionality between Gokan's defence costs and the claim against him should be considered. The Court's judgment in Estate of Sclavos (No. 3) makes clear that the estate claimed against Gokan Yesilhat that a total of $24,000, sourced from the bank account of George Sclavos had been advanced to Gokan Yesilhat and that Gokan Yesilhat repaid $12,000 of that amount so that a net amount of $12,000 was still claimed to be owing by Gokan Yesilhat to George Sclavos' estate.
The Court ultimately determined upon the available materials that the relevant net funds transfers to Gokan Yesilhat of $12,000 were equally consistent with an inter-sibling loan between Okan and Gokan Yesilhat rather than an advance by George Sclavos to Gokan Yesilhat: Estate of Sclavos (No. 2) at [229] and Estate of Sclavos (No. 3) at [11] - [23].
The financial stakes were considerably higher for Okan Yesilhat and Australia's Best Tyres in the debt/trust proceedings. The estate claimed $181,355 plus interest in those proceedings from Australia's Best Tyres and $25,000 plus interest from Okan Yesilhat. The defendants in the debt/trust proceedings conceded that Okan Yesilhat owed $73,600 and Australia's Best Tyres $45,355: Estate of Sclavos (No. 3) at [26]. But the material supplied to the Court was in a very confused state. By the time the Court gave judgment in Estate of Sclavos (No. 4), the Court concluded that of a total amount of $218,955, $95,355 was owed by Australia's Best Tyres to the estate and the balance of $123,600 was due by Okan Yesilhat to the estate. Judgment for those amounts was entered on the 11 August 2020 (Estate of Sclavos (No. 4) at 80. Even by the measure of what was at stake financially for the other defendants, Gokan Yesilhat's potential liability was minor.
In summary, all these metrics point in the same direction: the time taken for Gokan Yesilhat's defence compared with all other issues in the proceedings was very small. The Court nevertheless ordered that Gokan Yesilhat is entitled to 7.5% of the ascertainable common defence costs of all defendants.

Consideration

Can the Court be Satisfied on the Evidence? The authorities require that the Court must have sufficient materials provided to it to be satisfied that it can assess a gross sum that is "logical, fair and reasonable": Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213. Despite what the Court concludes below is an excessive claim for legal costs on behalf of Gokan Yesilhat, the Court's own extensive experience of this litigation, especially the main trial, gives it the capacity to make realistic judgments of a specified gross sum that is logical, fair, and reasonable, as is explained below.
The materials provided to the Court on behalf of Gokan Yesilhat are extensive. Despite the Court's very great reservations about those materials, the Court's direct experience of the litigation can now be used to reach a logical, fair and reasonable result. And the Court will, as the authorities direct, adopt a "broad brush" approach to the task: Bechara (t/as Bechara and Company) v Bates [2016] NSWCA 294.
There is a strong public interest in cases such as this in the Court undertaking this analysis itself. The expense of undertaking a costs assessment before a costs assessor of what the Court has concluded is a grossly overstated claim would itself be prohibitive and oppressive. The trial judge can make the s98(4)(c) determination here. A costs assessor would know far less about the case than the trial judge, reinforcing the argument for the Court to press ahead with making a specified gross sum costs order, by working with the materials that it has been given, despite the Court's reservations about aspects of the Yesilhat parties' evidentiary materials.
The costs order made in Estate of Sclavos (No. 4) suggests that the Court's analysis should be divided into three tasks. First, the Court will look at whether Gokan Yesilhat has established any liability to pay costs. Second, the Court will examine the proper calculation of the common defence costs of the defendants in the debt/trust proceedings and will then derive 7.5 per cent of those costs. This second task involves two sub-tasks, separating out the defence costs in the debt/trust proceedings from the costs in the administration/family provision proceedings and then isolating the "common defence costs" from those overall defence costs in the debt/trust proceedings. Third, the costs specifically referrable to Gokan Yesilhat's defence in the debt/trust proceedings should be identified and quantified and added to the result of the second task.
(1) Gokan Yesilhat's liability to pay costs. An award of costs is an indemnity for a successful party's obligation to pay costs. Here the estate argues that Gokan has no, or only very limited, liability to pay legal costs for his defence of the debt/trust proceedings.
Analysis of Gokan Yesilhat's liability to pay costs requires an understanding of the billing structure on the Yesilhat parties' side of this litigation. The Yesilhat parties have been represented throughout by Ms Culkoff of counsel and Mr Salvatore Russo. Mr Russo variously practised as Russo & Partners and S & R Lawyers. He incorporated his practice during the conduct of the proceedings. The identity of Mr Russo's various practice vehicles is not material for present purposes.
The estate commenced the debt/trust proceedings in November 2013. Okan Yesilhat commenced the administration/family provision proceedings in August 2014, when both proceedings were ordered to be heard together and that evidence in one would be evidence in the other.
Some procedural matters are relevant to this task. Gokan Yesilhat relied upon extensive affidavit evidence in support of his claim for a specified gross sum costs order, affidavits of Mr Salvatore Russo of 16 August, 19 August and 4 October 2022. This material was very late, being overdue months after Court orders and directions for it to be filed, due to some personal challenges Mr Russo faced. But the Court admitted it into evidence despite its lateness.
The hearing of the s 98(4)(c) applications ultimately took place on 6 December 2022 after which the matter was stood over to 2023 for the Court to consider in chambers whether further material was required from the parties. In the event no further material was required. At that 6 December 2022 hearing Ms Culkoff, on behalf of Okan Yesilhat, sought to rely upon a further affidavit of Mr Russo of 25 November 2022. The Court rejected the reading of this affidavit because it was out of time and would create further delay in the conclusion in these proceedings, when there had already been significant delay.
The case on behalf of the estate had raised in submissions the issue that there was no costs agreement in evidence to show that Gokan Yesilhat had any liability for costs to the solicitor for the Yesilhat parties. The affidavit of 25 November 2022 was an endeavour to rectify that omission by tendering costs agreements of 18 March 2014 and 3 May 2016.
But the estate challenged the validity of these costs agreements. The estate sought access to the original soft copies of the documents with a view to investigating their metadata to determine whether or not they was created at the time that they purport to have been created. This was a challenge which was open to the estate. The Court was not prepared to admit this material, because it would have further delayed the conclusion of the proceedings after the metadata of the soft copies of the costs agreement had been examined. The proceedings could ill afford another adjournment. So Gokan Yesilhat's case proceeded without the costs agreements.
This led to a submission on behalf of the estate that Gokan Yesilhat had not made out any liability to pay costs and so the claim for recovery of costs, it was submitted, should fail.
But cases such as Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 establish that in the absence of costs agreements cost recovery is still possible, and that the undertaking and provision of legal services pursuant to an express or implicit request to provide those services, may be inferred from the proven circumstances and may give rise to an entitlement to be paid either in contract or quasi-contract, thereby qualifying within the definition of "costs payable" in Civil Procedure Act 2005, s 3(1): see also Riva NSW Pty Limited v Mark A Fraser; Fraser v Riva (NSW) (No. 4) [2022] NSWSC 1624.
The Court can accept there was some contract for the provision of legal services between Gokan Yesilhat and Mr Russo. Services were in fact provided. Pleadings and affidavits were filed on his behalf. He was called in evidence. Work was clearly done for him by counsel and solicitors that the work could be inferred from such facts was not extensive. At some times bills were sent to him. He had some inferable liability for some periods based on the invoices and memoranda of fees.
The estate also submitted that the Yesilhat parties were responsible for significantly increasing the costs of this litigation and that Gokan Yesilhat should be disentitled from recovering any costs based on his participation in Okan Yesilhat's fraud. But it is too late for such an argument to be successful. The Court has made the limited orders that it has on 11 August 2020 in Gokan Yesilhat's favour. The Court is presently ascertaining whether a s 98(4)(c) order can be made in respect of those costs.
It is true that the Yesilhat parties are responsible for a significant increase in the cost of this litigation. The Court is entitled to take this into account in assessing the reasonableness and proportionality of the costs.
The evidence of Gokan Yesilhat's liability to pay costs to Mr Russo and to Ms Culkoff is unsatisfactory. Costs are awarded as an indemnity for a liability to pay costs. Gokan Yesilhat must establish a liability to pay costs. The evidence is in a very confused state. It may be briefly summarised as follows.
Mr Russo does not attach to his affidavits the actual invoices from his firm to his clients. But he has extracted a spreadsheet, which is constructed to show the costs he claims to have incurred in these proceedings relevant to Gokan Yesilhat's case. But his claims of relevance are opaque and difficult to analyse, and bear little resemblance to the methodology used by the Court in these reasons. He judges that all the defendant's costs incurred in the proceedings after 24 October 2017 were due to Gokan Yesilhat's successful defence. This is plainly wrong. The Court is not prepared to accept any of his judgments about these matters when such a clearly excessive claim has been made. He also attaches the memoranda of fees from Ms Culkoff.
In contrast, more direct evidence was obtained from the estate. The estate challenged Gokan's claim on the basis the same amounts were claimed by Mr Russo in the bankruptcy of Okan Yesilhat. The estate obtained material from BPS Recovery, who was the trustee in bankruptcy for Okan Yesilhat pursuant to Bankruptcy Act 1966 (Cth). This material included the actual invoices from Russo & Partners to the clients and from Ms Culkoff to Mr Russo.
An affidavit of Ms Calokerinos of 22 October 2022 annexed material in support of Mr Russo's claim against the bankrupt estate of Okan Yesilhat, the estate was able to submit that Mr Russo had claimed substantially the same legal costs, contending that Okan Yesilhat was therefore liable for these legal fees rather than Gokan Yesilhat.
The material obtained from BPS Recovery revealed Mr Russo's firm, issued invoices to three clients, Okan Yesilhat, Gokan Yesilhat and Australia's Best Tyres in the debt/trust proceedings up to 21 May 2013. Then from 6 August 2014 Mr Russo sent all memoranda of fees addressed to Okan Yesilhat, for billing up to 18 July 2014. These memoranda of fees generally include words descriptive of the work done such as "to our professional costs of acting and advising on your behalf in the above matter".
The estate contends this indicates that whatever the missing costs agreement might say, the correct inference from the bills of costs is that Mr Russo treated Okan Yesilhat as the firm's client and the only person liable to pay costs. The logic behind the estate's case was that it is understandable that Okan Yesilhat might have taken over responsibility for the payment of the legal fees, as the proceedings almost entirely related to his personal and financial affairs.
But the claim by Mr Russo against Okan Yesilhat's trustee in bankruptcy does not necessarily exclude Gokan's liability. Joint and several liability by the Yesilhat parties to Mr Russo is consistent with the claim against his bankrupt estate.
The memorandum of fees issued by Ms Culkoff presented a different picture. By far the greater claim for defendants' costs in this application is in respect of counsel's fees. Ms Culkoff initially charged Mr Russo separately in respect of the administration/family provision proceedings and the debt/trust proceedings. But from 25 February 2016, which was during the principal trial of these proceedings, Ms Culkoff merged the billing in her memorandum of fees combining both proceedings to the one set of costs. Ms Culkoff's memoranda of fees are addressed to Mr Russo's firm. But the structure of her memoranda of fees is ambiguous as to whether Ms Culkoff's memoranda of fees were payable by Okan Yesilhat (to whom Mr Russo's fees were sent) or by the defendants. The structure of Ms Culkoff's memoranda of fees is consistent with her recognising that Mr Russo's firm had treated Okan Yesilhat as an agent for all three defendants to receive her memorandum of fees.
Mr Russo and Ms Culkoff were clearly doing work from time to time for the sole benefit of Gokan Yesilhat, especially in the later stages of the proceedings. The contents of the memoranda of fees from Mr Russo and Ms Culkoff showing work for the benefit Gokan Yesilhat leads to an inference that he was liable to pay the solicitors and counsel for that work. The estate complains that Gokan Yesilhat has not adduced direct evidence that he had a liability for costs. Whilst that is true, there is no document that clearly shows Okan Yesilhat assumed sole legal liability for all costs incurred to the exclusion of the other defendants. His sole liability is supported by the evidence of Yesilhat being appointed as recipient of Mr Russo's invoices. But that change is as consistent with convenience as it is with having any legal significance. Moreover, an inference that Okan Yesilhat had sole liability for legal fees becomes much harder to draw towards the later parts of the proceedings when more work is being done for Gokan Yesilhat.
Despite this unsatisfactory evidence the Court infers a continuing liability for costs on the part of Gokan Yesilhat and will analyse the issues on that basis.
(2) Calculating Common Defence Costs & 7.5%. As earlier indicated this second task involves two sub-tasks, (i) separating out the defence costs in the debt/trust proceedings from the costs in the administration/family provision proceedings and then (ii) isolating the "common defence costs" from those overall defence costs in the debt/trust proceedings. Regrettably the claim advanced on behalf of Gokan Yesilhat undertakes neither subtask (i) nor (ii). But attempting these tasks on the available materials is difficult.
Gokan Yesilhat claims that 7.5 per cent of total Yesilhat parties' defence costs is the sum of $116,854.41. He calculates this amount by adding $28,747 (being 7.5 per cent of total solicitor's costs) and $88,106.49 (being 7.5 per cent of total counsel's fees). The derivation of this figure depends upon the Court accepting in the debt/trust proceedings that the amounts invoiced to the Yesilhat parties for solicitors' costs of $383,305.74 and for counsel's fees of $1,174,753.26 are the correct starting point for calculating common defence costs in the debt/trust proceedings. This is the primary error in Gokan Yesilhat's contentions.
Gokan Yesilhat's submissions and analysis do not attempt to undertake either subtask (i) or (ii). His case does not undertake subtask (i) by distinguishing between the the costs incurred by Yesilhat parties in the administration/family provision proceedings and in the debt/trust proceedings. Then his case fails to undertake subtask (ii) by isolating from all other costs and quantifying the "common defence costs" incurred by the Yesilhat parties in the debt/trust proceedings. Both these omissions contribute to overstatement of Gokan Yesilhat's claim. The Court can step in and do what Gokan Yesilhat's claim has omitted, at least with respect to subtask (i).
Subtask (i) - Separating Administration/Family Provision Costs. As to subtask (i), Ms Culkoff resists the conclusion that the costs incurred by Yesilhat parties in the administration/family provision proceedings need to be distinguished from their costs incurred in the debt/trust proceedings. In denying the need for this subtask, she submits that the Court made orders in August 2014 that the two proceedings should be heard together and she contends it is almost impossible now to work out what the costs were in the debt/trust proceedings, as distinct from the administration/family provision proceedings. Ms Culkoff submits Gokan Yesilhat, though only a party in the debt/trust proceedings, was involved in dealing with all the proceedings.
There are several problems with this submission. First, merely because the proceedings were ordered to be heard together does not automatically mean that all the costs in one proceeding are costs incurred in the other. The Court's costs order on 11 August 2020 in favour of Gokan is specific: the plaintiff is ordered to pay Mr Gokan Yesilhat's "costs of the debt/trust proceedings". This was not an order that any costs of the Yesilhat parties associated with the administration/family provision proceedings should be included in calculating Gokan Yesilhat's defence costs.
Second, contrary to Ms Culkoff's submission it is possible to undertake subtask (i). It is just that Gokan Yesilhat's analysis has not attempted to do the necessary separation consistently with the way the defence to the proceedings were conducted. To defend to the debt/trust proceedings all that was required effectively was an analysis of the accounts between George Sclavos and Okan Yesilhat, together with some elementary evidence that there was a personal friendship or closer relationship between George Sclavos and Okan Yesilhat, which was consistent with the transfers in question being gifts rather than loans. To defeat the debt/trust claim Okan Yesilhat, Australia's Best Tyres and Gokan Yesilhat only had to establish circumstances that were consistent with a gift. Close and warm friendship would have been quite sufficient for that purpose, without seeking to establish a de facto relationship.
But the contest in the administration/family provision proceedings became far more complex than this. Okan Yesilhat widened his case to include copious details of his alleged intimate relationship with George Sclavos. The minutiae of this relationship were not necessary to defeat the claims in the debt/trust proceedings. Those minutiae were primarily directed to Okan winning the administration/family provision proceedings. Most of the contest about George Sclavos' personal habits, relationships, sexual orientation and contact with Okan Yesilhat was designed to bolster Okan Yesilhat's attempt (unsuccessfully as it turned out) to establish that he and George Sclavos had an intimate relationship that made them de facto partners. Whilst that might have indirectly assisted the debt/trust defence it was not necessary for the defence of the debt/trust proceedings.
Moreover, no Court would ever have permitted the extensive evidence in chief and cross-examination that occurred in relation to the alleged private life of George Sclavos and Okan Yesilhat solely in defence of the debt/trust proceedings by the Yesilhat parties. The Court does not accept any part of the costs expenditure principally relevant to Okan Yesilhat's administration/family provision claim should be treated as the defence costs of the debt/trust proceedings. And it should not be recoverable as Gokan Yesilhat's costs in the debt/trust proceedings.
Had the Yesilhat parties undertaken sub task (i) in their analysis, the costs recovery they are now claiming would have been heavily reduced. More detailed examples will be given below, but at a general level the administration/family provision proceedings featured two highly time-consuming major issues which were separate from the claim against Gokan Yesilhat. The first of these was, as indicated above, the alleged intimate relationship between George Sclavos and Okan Yesilhat. But the second was the validity of George Sclavos' informal will of 26 October 2012. The principal proceedings were consumed with these two major issues. The paragraphs below show the wide range of factual disputes in contest within these major issues.
The dispute about the informal will of October 2012 was as dominating as the contest about the alleged intimate relationship between George Sclavos and Okan Yesilhat. The evidence in relation to the challenges to the informal will ranged over the following matters: expert handwriting evidence, the provenance of the document, the finding of the document, George Sclavos' technical capacity to create the informal will, George Sclavos' relationship with his nieces, and the communications between Okan Yesilhat and Ms Calokerinos after George's death. None of these extensively contested issues related to the estate's claim made against Gokan Yesilhat.
The same can be said about the alleged intimate relationship between Okan Yesilhat and George Sclavos. Contested matters involving extensive evidence in relation to that subject are occupied the principal trial. The following matters are some examples: George's relationships with several different women during the period of his alleged relationship with Okan Yesilhat, the two marriages of Okan Yesilhat, whether George lived at the pharmacy or at his Strathfield home, Okan Yesilhat's knowledge of the back area of the pharmacy and George's habits at the pharmacy, Okan Yesilhat's claim of spending time at the pharmacy at night with George, Okan Yesilhat's non-attendance at George's funeral, Okan Yesilhat's general conduct after George's death. None of these matters had bearing on Gokan Yesilhat's defence of the debt/trust proceedings.
Apart from issues concerning the informal will and the alleged intimate relationship between George Sclavos and Okan Yesilhat, many preliminary and subsidiary issues related to the administration/family provision proceedings also bore no relationship to Okan Yesilhat's defence of the debt/trust proceedings. Among these were the pre-trial contests about the deceased's diary, the Greek properties, the gathering of evidence from pharmacy employees, the alleged missing wages book, the alleged missing pharmacy computer and the contacting of night shift employees to give evidence. These are just some examples of the more prominent of these preliminary and subsidiary matters, which had no bearing on Gokan Yesilhat's defence of the debt/trust proceedings.
Most of these issues were determined in the first judgment. But consequential issues flowed through into the subsequent judgments. Judgments about sub task (i) can conveniently be paid a pivoting around the first judgment. Doing the best that the Court can based on its experience of the proceedings, the issues in the administration/family provision proceedings identified above occupied over 75% of the Yesilhat parties' legal costs associated with the principal hearing of these proceedings before the first judgment. But after the first judgment, consequential issues related to the administration/family provision proceedings, occupied somewhat less than 75% of the Yesilhat parties' legal costs. On balance, the Court would assess 75% of the Yesilhat parties' legal costs as related to the administration/family provision proceedings.
It might be argued for Gokan Yesilhat that this result is inconsistent with Ms Culkoff's division of costs between the debt/trust and administration/family provision proceedings before February 2016. But the Court does not accept that her division of costs is correct.
Subtask (ii) - Ascertaining Common Defence Costs. The "common defence costs" incurred by the Yesilhat parties in the debt/trust proceedings can be equated to the other 25% of the Yesilhat parties' total costs not accounted for by the costs of the administration/family provision proceedings. It is arguable that the "common defence costs" are smaller than this, because the Yesilhat parties' defence costs include many costs solely attributable solely to Australia's Best Tyres and Okan Yesilhat defending their own interests. Although the exercise of identifying common defence costs can be undertaken, the available materials have not been provided to the Court in a form which allows that to be done cost effectively. So the Court will not embark on it. Not undertaking this further discount will tend slightly to favour Gokan Yesilhat. But that is considered in the Court's overall assessment.
Taking 7.5% of Common Defence Costs. In Estate of Sclavos (No. 4) the Court has concluded that the costs attributable to Gokan Yesilhat are 7.5% of the common defence costs incurred by all three defendants in the debt/trust proceedings.
Why this discount is appropriate needs a little further explanation. It was never appropriate to divide the defence costs of the debt/trust proceedings equally among the three defendants. The central contests in the debt/trust proceedings mostly related to the liability of Okan Yesilhat and Australia's Best Tyres. They covered issues such as George Sclavos' support for the acquisition of Australia's Best Tyres, George's loan cards system, the interconnected bank accounts of Okan Yesilhat and George's transfers into those accounts and discussions between George Sclavos and his nieces about the loan accounts and their operation after George's death. These issues had little, if anything, to do with Gokan's liability.
An important structural feature of Okan's claimed liability in the debt/trust proceedings was that it was a derivative of the claimed liability of Australia's Best Tyres and Okan's liability. There were no direct money transfers between George Sclavos and Gokan Yesilhat. Accordingly, Gokan Yesilhat's interests were on most issues wholly identical to those of Okan Yesilhat and Australia's Best Tyres. He could readily afford to allow those other defendants to conduct a defence case on his behalf whilst conducting their own defence cases.
The Court proposes to take a broad-brush approach in this matter. Leaving aside arguments about the reasonableness of the Yesilhat parties' claims for costs, some useful guidance can be obtained by applying the logic discussed here to the undiscounted figures that Gokan Yesilhat relies upon. He claims a total of $887,868.67 in legal costs. Applying the percentage of those costs that the Court would allocate to the defence of the debt/trust proceedings of 25%, the costs attributable to that defence are $221,967.16. This can be rounded down to $220,000 for convenience. Then applying the 7.5% to that figure, to reach Gokan Yesilhat's share of those common defence costs, gives the sum of $16,650. That in turn should be discounted by 15% to take account in making a s 98(4)(c) order of the likelihood of a reduction in costs on a costs assessment. The same discount was applied to the estate's costs. The result is $14,153. But this only goes part of the way towards a satisfactory outcome.
(3) Costs Specifically Referrable to Gokan Yesilhat's Defence. Some costs incurred by the defendants were specifically referable to Gokan Yesilhat's defence ("Gokan - specific costs"). These are costs which are additional to common defence costs of the debt/trust proceedings. Curiously, it is hard to identify many of these Gokan - specific costs as having been incurred before the Court gave the first judgment. Gokan Yesilhat's affidavits filed before the first judgment were not related to issues specific to his own defence but to assist the cases of the other defendants. A joint pleading was filed on behalf of all defendants in their Amended Defence dated 29 July 2014. It is difficult to identify anything which is specifically referable to Gokan Yesilhat's defence to the debt claim against him before the date of the first judgment.
But this began to change when the Court gave its second and third judgments. In Estate of Sclavos (No. 2) the Court considered the case against each of Australia's Best Tyres and Gokan Yesilhat, indicating even then on 22 May 2019 (at [224] - [233]) that the claim against Gokan Yesilhat was difficult to maintain. The Court directed in Estate of Sclavos (No. 2) at 297 that Gokan Yesilhat isolate the costs of the proceedings that were specifically referable to his participation in the proceedings.
Then in Estate of Sclavos (No. 3), the Court gave judgment for Gokan Yesilhat against the estate on 13 December 2019. From then on, it is more likely that costs can be identified that are specifically referable to Gokan's defence, as distinct from common defence costs. This is because the defendants were each by then engaged in a very different exercise in the litigation. Okan Yesilhat and Australia's Best Tyres were seeking to limit their liability to the estate. Whereas a successful Gokan Yesilhat was seeking to recover costs from the estate.
Unfortunately, the material presented on behalf of Gokan Yesilhat does not direct itself to analysis of what are Gokan-specific costs in addition to common defence costs from the time of the second judgment. Once again, the position taken on his behalf was that all the costs can be lumped together, and he can recover all the costs incurred, or that the Court must accept Mr Russo's opaque division of costs. This is not persuasive.
In the absence of useful assistance from Gokan Yesilhat's case, the Court will do the best it can on the materials. The Court can reach a figure Gokan- specific costs. Once again, the Court's direct experience of the litigation can be applied. Some considerations more prominently guide the Court's analysis here. The figure in question should be added to the figure of $14,136 of common defence costs, as it is referable to Gokan - specific costs.
It can be assumed that in accordance with the Legal Profession Uniform Law 2015, s 72 that the legal practitioners incurring those Gokan - specific costs would charge costs that are no more than are fair and reasonable in all the circumstances, and that they were proportionally and reasonably incurred. Responsible legal practitioners incurring those Gokan - specific costs would not have incurred costs that were disproportionate to the amount claimed against Gokan Yesilhat of $12,000. Given the claim is brought in the Supreme Court rather than the Local Court, it can be expected that the Gokan - specific costs reasonably incurred might nevertheless be a few multiples of the amount in issue but not much more.
As the authorities provide, where the Court is considering what award should be given to a successful defendant represented by legal practitioners retained in common with unsuccessful defendants, the principle is that "the successful party is to be recompensed the liability he has reasonably incurred in defending himself": Ellingsen & Anor v Det Skandinaviske Compani & Ors [1919] 2 KB 567; Korner v H. Korner & Co. Ltd [1951] Ch 10 and King Network Group Pty Ltd v Club of the Clubs Pty Limited (No. 2) [2009] NSWCA 204 at [25]-[35].
Doing the best it can, and weighing the materials and these various considerations, the Court is of the view that an additional amount of a little less than $25,000 should be added to the common defence costs as determined above. This figure of a little less than $25,000 is inclusive of a 15% discount from the fees claimed on account of the s 98(4)(c) determination. This should be added to the $14,136 already reached for 7.5% of common defence costs.
The Court concludes therefore that a final figure of $40,000 is appropriate for Gokan Yesilhat's legal costs, comprising both common defence costs and the Gokan - specific costs. But this is consistent with what the Court expects of responsible legal practitioners, who would not have incurred total legal costs more than three to four times the amount in issue.
This outcome is conservative. Applying a 15 per cent discount on the costs claimed by the defendants, to take account of the outcome of cost reductions at a costs assessment does not disadvantage Gokan Yesilhat. Many of the costs incurred on the defendants' side of this litigation were wasteful, unreasonable and unnecessary. A constant feature of presentation of the defendant's case in this litigation was the taking of points and the adducing of evidence of tangential relevance to the main issues in the proceedings. The advising, appearance and preparation time associated with many of these issues would have been disallowed on an assessment of costs. The general nature of these wasted costs can be discerned from the rejection of the defendant's submissions in the Court's previous judgments.
This outcome covers the whole claim for costs made on behalf of Gokan Yesilhat. It also takes account of the whole period after the Estate of Sclavos (No. 3) on 13 December 2019, when Gokan Yesilhat received a costs order in his favour. Since then, as between the estate and Gokan Yesilhat the sole argument has been about the quantum of those costs. But Gokan Yesilhat's submissions have mostly been unsuccessful in this period and no costs considerations weigh in his favour during this period. He failed in Estate of Sclavos (No. 5). His ambit claim for costs has been massively reduced in this judgment.
The estate contended that there were no Gokan - specific costs arising out of the principal hearing and that Gokan Yesilhat's costs in the debt/trust proceedings were only his costs as a witness, which involved minimal affidavit preparation costs. But in the Court's view this is too parsimonious an outlook. Gokan Yesilhat was a co-defendant in the debt/trust proceedings, whose separate interests needed at least to be monitored during the main hearing. But that could and should have been done with a constant eye to tighten cost efficiencies and costs constraint, because Gokan Yesilhat was only ever facing a claim that would be at the low end of the Local Court's jurisdiction.
Some concluding observations. The estate complains that any award of costs to Gokan Yesilhat would be unfair to the estate given the massive costs it has incurred of over $1.5 million against Okan Yesilhat and Australia's Best Tyres, which are now irrecoverable because of the former's bankruptcy and the latter's liquidation. In this bitterly fought litigation the Court is very mindful of that submission and a sense of injustice on the part of the estate is understandable given the estate's overwhelming success against Okan Yesilhat and Australia's Best Tyres.
But this complaint of injustice should be weighed against other pertinent factors. First, as early as the judgment in Estate of Sclavos (No 2) on 22 May 2019 the Court made clear that it regarded the case against Gokan as difficult to sustain. The estate could have discontinued against Gokan Yesilhat at that point, which would have considerably reduced any costs order against it. Second, the Court did not find that Gokan Yesilhat was a co-conspirator with his brother Okan in seeking to financially disadvantage the estate.
The estate undertook an alternative analysis of what might be due to Gokan Yesilhat that should be mentioned. In this analysis the estate accepted that Gokan Yesilhat was liable up to 6 August 2014 in respect of Mr Russo's invoices. The estate submitted that applying the Court's costs orders in Estate of Sclavos (No. 4) left the Court with the following result. Only 10 of 59 invoices were filled in a manner which would on their face establish joint and several liability to all three defendants. These comprised total legal costs of $60,522.22. Calculating 7.5 per cent of that figure, the amount said to be attributable to Gokan Yesilhat is $4,539.17, which can be discounted by a further 15 per cent to reach $3,858.29. But for the reasons given that methodology does not consider that Gokan Yesilhat had a broader liability after 6 August 2014 to pay both common defence costs and Gokan - specific legal costs.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (12 paragraphs)

Legislation Cited (1)

Cases Cited (12)