Kordovoulos v Dixon-Hughes

The first respondent's submissions

1. The first respondent relied on what she submitted were the poor prospects of the appeal. She submitted that the credit findings that the primary judge made were central to his Honour's determination of the matter. It followed, consistently with authority, that the appellants needed to do more than assert error in those findings, and rather needed to show that the findings were "glaringly improbable" or "contrary to compelling inferences": Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [55] and Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [28]. As the appellants had not undertaken that task in their written submissions, their prospects of succeeding on the appeal were very weak.
2. The first respondent next relied on the impecuniosity of the appellants, accepting that impecuniosity would, without more, be insufficient to warrant an order for security. In relation to the first appellant, the first respondent submitted that she did not own any real property (this was common ground). The first respondent also relied on evidence that the first appellant gave in the proceedings below, to the effect that she was in receipt of the pension, the entirety of which was paid to the aged care facility in which she resided. In response to a proposition that she wanted to join her husband in the aged care facility because she was struggling on a daily basis, the first appellant also stated: "What do you mean, I was struggling? We didn't have money." As to the second appellant, the first respondent relied on evidence in the proceedings below from each of the Executors and Trustees appointed under the Will of John Kordovoulos, Ms Visvis and Ms Nesnas, who each stated that she would not be making an application for probate "because there are no real property or other material assets in the estate".
3. The first respondent also relied on the position of the appellants' solicitors, submitting that the solicitors are acting on a contingency basis and are funding the appeal as a matter of substance. Senior Counsel for the first respondent relied in this respect on a letter signed by Mr Nolan, dated 4 November 2021, which was addressed to the first appellant but sent by email to an email address in the name of Ms Visvis. Relevantly for present purposes, Mr Nolan wrote: "I confirm that it was not until 15 September [2021] that we received full instructions from you to commence the appeal, that being the date that we received the payment referred to below We had advised you that we would run your appeal if we receive $20,000.00 as part payment for Theodore Solomon & Partners and $20,000.00 as part payment for David Eardley, the rest to be due and payable should you win the appeal. We will add our additional fees for the appeal onto the current amounts outstanding. Should you loose [sic] the appeal then we will not pursue you for these outstanding amounts."
4. In contending that the manner in which the solicitors stood to benefit from a successful appeal was a factor supporting the existence of special circumstances, the first respondent relied on a number of decisions, including Murray John Carter v Ian Mehmet t/as ATF Ian G Mehmet Testamentary Trust [2021] NSWCA 32 ("Mehmet"); Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690 ("Longjing"); and Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1.
5. The first respondent also relied on the position that the Executors under the Will of the second appellant had adopted. Senior Counsel for the first respondent submitted that if there had been a grant of probate, the Executors for the Estate would have been liable for an adverse costs order, which would not be capped by reference to the value of the estate. This would have provided an additional avenue in relation to costs if the appellants were unsuccessful. Instead, the Executors had taken the position of not wishing to be involved and had not sought a grant of probate, which was to the first respondent's disadvantage.
6. In considering the exercise of the discretion, the first respondent submitted that the position of the appellants on appeal was different from their position at first instance. The first respondent relied in this respect on the decision of Bell P (as his Honour then was) in Mr D v Ms P [2020] NSWCA 174, where his Honour referred to a series of cases involving exceptions to the general rule that a natural person who sues will not be ordered to give security for costs. His Honour included the decision of Jagot J in Tran v The Commonwealth [2009] FCA 921 at [5], where her Honour observed that for an impecunious person who "has already obtained access to a court, and has received a decision dismissing the claim", courts may not have the usual reluctance to order that person to provide security. As Bell P noted at [38] of Mr D v Ms P, Spender J explained the difference in Tait v Bindal People [2002] FCA 322 at [3]: "The difference is that, at the appellant [sic] level, there has already been a determination adverse to the person against whom security for costs is sought and, if it be shown that there is a substantial risk that even if successful the respondent to the application for leave to appeal, or to an appeal, will be deprived of his costs, such an outcome would clearly be unjust."

The appellants' submissions

1. In relation to prospects, counsel for the appellants relied on the submissions that have now been filed. He emphasised the primary judge's characterisation of the case as one that was "in some respects finely balanced", and submitted that there was an arguable case on the appeal. Counsel drew support in this respect from the Registrar's description of the appeal as arguable when he granted the extension of time to appeal.
2. Counsel for the appellants did not challenge the submissions of the first respondent regarding impecuniosity, presumably because it supported the position he advanced in relation to stultification. When I raised with counsel what if anything should be made of the plaintiffs' receipt of $155,000 from the fourth defendant by way of settlement, counsel echoed the first respondent's submission that receipt of those funds in 2020 was not inconsistent with the first appellant being impecunious now. Counsel submitted that I should not conclude that the first appellant still had access to any of those funds.
3. In relation to the position of the solicitors acting for the appellants, counsel submitted that the letter of 4 November 2021 did not establish that the solicitors were acting on a contingency basis. He relied in this respect on part payment of fees having been made for the proceedings below, both to the solicitors and to counsel, as indicating that the agreement was not in the nature of a contingency agreement. He also relied on Mr Nolan referring to the fees for the appeal being added "onto the current amounts outstanding". As to the final sentence, he submitted that it did not reflect a contingency arrangement as between the solicitors and the appellants but, rather, the taking of a commercial decision by the solicitors (albeit in advance) not to pursue amounts which were due and payable in the event that the appellants lost the appeal.
4. The appellants otherwise sought to distinguish the authorities on which the first respondent relied regarding the position of solicitors on the basis that they involved commercial parties in disputes regarding commercial arrangements. Counsel submitted that the circumstances of the present case were more akin to a personal injury case, referring to Meagher JA's description, in Mehmet at [33], of no-win-no-fee arrangements in cases of that kind as ensuring access to justice by impecunious plaintiffs. As to the position of the Executors, counsel for the appellant submitted that the force of the first respondent's submission was undermined by the non-opposition to the appointment of the first appellant as representative of the Estate.
5. The appellants submitted that an order for security for costs would stultify the appeal. In circumstances where the primary judge described the case as one that was finely balanced, the appellants should not be deprived of their right to challenge his Honour's conclusions.

Consideration

1. It is common ground that the appellants do not have the financial resources to meet a costs order if the appeal is unsuccessful. That impecuniosity is not of itself sufficient to constitute "special circumstances" for the purposes of r 51.50 of the UCPR.
2. In relation to the prospects of success of the appeal, I must approach the matter generally: see Mr D v Ms P at [45]. The focus of the grounds of appeal is the primary judge's conclusion that the proceeds of the sale of the Property were a gift from the appellants to the first respondent. That conclusion is expressly referred to in Ground 3 and Ground 5, while Ground 7 proceeds on the basis that the challenge to that conclusion will be made good. The appellants also take issue with aspects of his Honour's decision which contributed to that conclusion. Specifically, they challenge the weight that the primary judge attributed to the affidavit evidence of the second appellant (Ground 1), his Honour's construction of the Authorisation for Balance of Monies document (Ground 2), his Honour's findings regarding the content of conversations between one or more of the appellants and the first respondent (Ground 4), and his Honour's failure to find that the first respondent's subsequent payment of some monies to the appellants was not consistent with a gift (Ground 6). The written submissions filed on the appeal appear to cover these issues, albeit in a different order.
3. I have noted above that the primary judge's conclusion depended in large part on "the acceptance or not" of conversations as between the appellants and the first respondent. Although his Honour was critical of both the first appellant and the first respondent, he ultimately accepted the latter's version of events, noting that the appellants bore the onus and the second respondent's evidence was in some respects corroborated by unchallenged evidence from other witnesses. The appellants' written submissions on the appeal acknowledge the high bar for appellate review of factual findings involving the credit of witnesses, by reference to Johnson v Mackinnon [2021] NSWCA 152 at [115] per Brereton JA (Macfarlan JA and Simpson AJA agreeing). However, the appellants' submissions do not articulate with any precision how, and by reference to what evidence, that bar is to be overcome.
4. Counsel for the appellant emphasised the primary judge's description of the case at [262] as "in some respects a finely balanced one". As Senior Counsel for the first respondent stated in reply, his Honour qualified that description by reference to two particular factors: the death before the hearing of a number of witnesses, including the second plaintiff and the second and third defendants, and the equivocal language in the Authorisation for Balance of Monies document. Ultimately, the primary judge's conclusion about the latter, to which I have referred above, was influenced by his findings regarding the circumstances surrounding the appellants signing the document (his Honour rejecting as "absurd" the second appellant's evidence that the first respondent forged his signature). Contrary to the appellants' reliance on "finely balanced" as supporting their prospects, it rather tends to underscore the extent to which the primary judge's preference for the evidence of the first respondent over that of the first appellant as to what was said about the proceeds of sale guided his Honour's conclusions. My preliminary view is that the prospects of success are far from strong.
5. As to the position that the Executors of the Estate of John Kordovoulos have taken, I do not accept the appellants' submission that the first respondent's non-opposition to the appointment of the first appellant under rule 7.10 precluded her from advancing the submissions she did. I accept the first respondent's submission that if the Executors had sought a grant of probate, the position on costs recovery as against the Executors would be as the first respondent submitted. This is a factor that has some relevance to special circumstances.
6. Of greater significance is the role of the appellants' solicitors. On the basis of Mr Nolan's letter of 4 November 2021 that I have set out at [28], I am satisfied that the solicitors have accepted an arrangement whereby the recovery of their outstanding legal costs from the proceedings below is contingent on the outcome of the appeal. The appellants took issue with the characterisation of the arrangement as a contingency or no-win-no-fee arrangement. Whatever be the precise label, however, as a matter of substance the payment of the solicitors' outstanding costs below is contingent on the outcome of the appeal. That is apparent from the manner in which Mr Nolan records, in the letter, what he said to the first appellant: "We had advised you that we would run your appeal if we receive $20,000 as part payment for Theodore Solomon & Partners, and $20,000 as part payment of David Eardley, the rest to be due and payable should you win the appeal" (emphasis added). The appellants did not provide any evidence as to the fee arrangements with their solicitors which would support a different conclusion.
7. I have noted above at [24] Mr Balasubramanian's evidence that the solicitors acting for the first respondent issued invoices between April 2020 and November 2021 totalling $142,006.99. Invoices issued by the solicitors to the second respondent (being Mr Balasubramanian's firm) between 30 May 2019 and 30 June 2021 totalled $155,364.30. To put such amounts in context, the total of the appellants' claim before the primary judge after settling with the fourth defendant was $176,735.47. Although I do not have evidence from the appellants as to the amount of fees that their solicitors invoiced them, having regard to the fees the subject of the invoices issued to the first and second respondents, the likelihood is that those fees were at least in the order of what was incurred for the second defendant. The settlement with the fourth defendant, which I was informed was inclusive of costs, and the part payment of $40,000 which the solicitors received as a condition of running the appeal will, of course, have reduced the outstanding fees. However, it is reasonable to infer that there remains a considerable amount outstanding, which the solicitors have indicated will only be due and payable if the appellants are successful on the appeal.
8. There is some force in the appellants' submission that the circumstances of the present case distinguish it from those that arose in Mehmet, Longjing and the other cases on which the first respondent relied. The present case does not involve commercial parties or commercial transactions; the dispute involves the proceeds of sale of the appellants' home. In this respect the solicitors' conduct may have a facilitative aspect to it, in terms of access to justice, that is more akin to personal injury cases than it is to cases such as Longjing and Mehmet. At the same time, however, I am mindful that the first respondent is also an individual. The first respondent has the benefit of a judgment at first instance in which the primary judge ultimately preferred her version of events to that of the appellants. She incurred costs in defending those proceedings which are not insubstantial for an individual (see [24] above), and which have not been paid (noting of course that the costs order would likely be set aside if the appellants were successful).
9. By reason of the arrangement I have referred to as between the appellants and the appellants' solicitors, the solicitors "stand to benefit from the successful prosecution of the appeal beyond being paid their costs of the appeal incurred on a no win-no fee basis": Mehmet at [32] (emphasis added). For the reasons I have just explained, the amount by which they stand to benefit is likely to be considerable, and gives them a substantial interest in the outcome of the appeal. As a result of the position that the appellants' solicitors have adopted with respect to their costs, the appellants have been able to proceed notwithstanding their impecuniosity; and the first respondent will incur further costs in defending the judgment on appeal which, in the absence of any security, she has no realistic prospect of recovering if the appeal is dismissed: Mehmet at [41]. I have noted my preliminary views as to prospects above. A number of procedural missteps have also been made in the progress of this appeal, for which the first respondent was not responsible and which have added to those costs.
10. I accept that the appellants could not meet a costs order if they do not succeed on the appeal. However, in view of the conclusion I have reached regarding the position the appellants' solicitors have taken in running the appeal, the appellants' impecuniosity does not of itself establish that the appeal would be stultified if an order for security for costs were made. In this respect, as the respondents raised in their respective written submissions, and Senior Counsel for the first respondent raised in oral submissions, there is no evidence from the appellants' solicitors as to whether or not they would be prepared to advance funds by way of security: Tyneside Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWCA 404 at [27] per Sackville AJA.
11. For all of the above reasons, I find that special circumstances exist that warrant the making of an order for security for costs. The estimate provided of the first respondent's costs of the appeal was reasonable. Mr Balasubramanian very properly pointed out that costs recovery on the ordinary basis could be between 65 and 80 per cent of the estimated amount. As Bell P stated in Mr D v Ms P at [57] by reference to a number of authorities, the Court does not set out to give a complete and certain indemnity, a point that the appellants also made in their written submissions. Having regard to all of the circumstances, I consider that security in an amount of $25,000.00 would be reasonable.
12. I noted above that the notice of motion initially sought security for costs on behalf of both the first respondent and the second respondent. In light of the appellants' change of position regarding the second respondent as indicated in their written submissions, the second respondent properly did not press the application for security. However, as relief was sought against the second respondent up to that point, there was a basis for the second respondent to seek security. In my view, the second respondent is entitled to his costs up to the date on which the appellants' written submissions were served.

Conclusion

1. I make the following orders: 1. Pursuant to UCPR rule 51.50(1), the appellants are to provide within 14 days security in the sum of $25,000 for the first respondent's costs of the appeal either by payment of that amount into Court or in such other form as the appellants and respondents may agree in writing before that time expires. 2. Stay these proceedings until the appellants have provided security for the first respondent's costs of the appeal in accordance with Order 1. 3. Order that the appellants pay the respondents' costs of the application. 4. List the proceedings before the Registrar on 20 July 2022 for directions.

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