Kordovoulos v Dixon-Hughes

Court of Appeal (NSW)|2022-06-16|Before: Mitchelmore JA, Ms P, Sackar J

The application for security for costs

In the written submissions on the appeal, the appellants indicated that they do not press for relief against, relevantly, the second respondent. Senior Counsel for the respondents indicated that in those circumstances, the application for security for costs was pressed only with respect to the first respondent.
Rule 51.50(1) of the UCPR provides: "In special circumstances, the court may order that such security as the Court thinks fit be given for costs of an appeal."
The principles regarding security for costs under the rule are well-settled. In Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 at [18], Basten JA identified a number of factors as applicable to applications of this kind. Of the factors his Honour identified, which have since been applied in many cases, Basten JA noted at [19] that some of them, and in particular the last two, "may better be seen as influencing the exercise of the discretion, rather than as potential 'special circumstances' engaging the power": 1. no order for security should be made in the absence of "special circumstances"; 2. consideration of what may constitute special circumstances should not be fettered by some general rule of practice; 3. impecuniosity, without more, will usually be insufficient; 4. an order may be appropriate if the appeal is shown to be hopeless, unreasonable or of an harassing nature; 5. where a bona fide and reasonably arguable appeal would be stifled by an order for security, such an order should usually not be made; and 6. the subject matter of the appeal, including an issue as to the liberty of the individual, or a public interest may provide a reason for not imposing a security order which would stifle the continuation of the appeal.

The first respondent's submissions

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.
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".
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."
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.
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.
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

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.
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.
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.
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.
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

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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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

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.

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 June 2022

Procedural history of the appeal proceedings

On 7 July 2021, the appellants filed a notice of intention to appeal, which was invalid as orders had not yet been entered. Following the entry of orders on 20 August 2021, the appellants did not file a notice of appeal by 18 September 2021 as required by rule 51.16(1) of the UCPR. Instead, on 4 November 2021, the appellants filed a Summons Seeking Leave to Appeal, when leave was not required. The draft Notice of Appeal in the White Folder which was filed with the Summons did not contain any grounds of appeal.
On 13 December 2021, when the matter was listed for directions, the Registrar ordered the appellants to file an amended Notice of Appeal by 19 January 2022. The Notice of Appeal filed on that date identified Vicki Kordovoulos as the first appellant and "The Estate of John Kordovoulos" as the second appellant. Although this was consistent with the approach that was adopted below, a deceased estate is not a juristic person: see Binetter (as the Representative of the Estate of the Late Ida Wolff) v Binetter [2020] NSWSC 552 at [17] per Beech-Jones J (as his Honour then was). In giving reasons for extending the time to commence the appeal proceedings, on 8 March 2022, the Registrar described the absence of a representative for the estate as "troubling" and observed that it was difficult to see how the appeal could progress until this was clarified. The Registrar expressed the same concern regarding the identification of the second respondent as "The Estate of Yvette Kordovoulos".
At a directions hearing on 8 March 2022, the Registrar made an order directing the first appellant to advise the Court on the next occasion as to how she intended to resolve the representation status of each of the second appellant and the second respondent. At a further directions hearing on 16 March 2022, the Registrar directed that an amended Notice of Appeal be filed and served by 2 April 2022. On 31 March 2022, the appellants filed an amended Notice of Appeal which identified the second respondent as "Mario Kordovoulos as Executor in the Estate of Yvette Kordovoulos", but made no change to the second appellant.
When the respondents' motion was first listed before me, on 3 May 2022, I raised the issue attending the status of the second appellant. Counsel for the first appellant confirmed that there had been no grant of probate in relation to the Estate of John Kordovoulos ("the Estate") and that the Executors were not proposing to apply for such a grant, the Estate having negligible assets. Conscious of the time that had already passed since the Registrar had first raised the issue, I directed the first appellant to notify the respondents of what steps she proposed to take and to serve any Further Amended Notice of Appeal on or before 13 May 2022. I also directed the appellants to file and serve their written submissions on the appeal, which should have been filed by 2 March 2022 (see UCPR rule 51.37), on or before 23 May 2022.
On 17 May 2022, the Court received a document marked "Further Amended Notice of Appeal", which identified the second appellant as "Vicki Kordovoulos as executrix of The Estate of John Kordovoulos ad litem". On 20 May 2022, two affidavits were filed. The first affidavit was sworn by Vicki Kordovoulos on 20 May 2022, consenting to act as the representative of the Estate. The second affidavit was sworn by Christopher John Nolan on 20 May 2022. Mr Nolan is the solicitor on the record for Vicki Kordovoulos. In his affidavit, Mr Nolan deposed that on 13 May 2022, he spoke separately to Ms Georgia Visvis and Ms Lana Nesnas, who are the appointed Executors and Trustees under the Will of John Kordovoulos, as to whether they wanted to represent the Estate in the appeal proceedings. Ms Visvis told him during the conversation that she did not want to be involved, while Ms Nesnas did not respond to Mr Nolan's request that she let him know if she wished to be involved. Mr Nolan also deposed to visiting Vicki Kordovoulos on 20 May 2022 to confirm her instructions about representing the Estate.
On 22 May 2022, the appellants filed their written submissions on the appeal. They refer in those submissions to the position of the second appellant and to UCPR rule 7.10, which provides: "(1) This rule applies to any proceedings in which it appears to the court - (a) that a deceased person's estate has an interest in the proceedings, but is not represented in the proceedings, or (b) that the executors or administrators of a deceased person's estate have an interest in the proceedings that is adverse to the interests of the estate. (2) The court - (a) may order that the proceedings continue in the absence of a representative of the deceased person's estate, or (b) may appoint a representative of the deceased person's estate for the purposes of the proceedings, but only with the consent of the person to be appointed. (3) Any order under this rule, and any judgment or order subsequently entered or made in the proceedings, binds the deceased person's estate to the same extent as the estate would have been bound had a personal representative of the deceased person been a party to the proceedings. (4) Before making an order under this rule, the court may order that notice of the application be given to such of the persons having an interest in the estate as it thinks fit."
In correspondence with the respondents' solicitor dated 16 May 2022, the appellants foreshadowed filing a notice of motion seeking an order under UCPR rule 7.10. They did not do so. However, in view of the affidavit evidence filed on behalf of the second appellant, at a directions hearing on 24 May 2022 I indicated that I proposed to proceed on the basis that the appellants were seeking such an order. Senior Counsel for the respondents submitted that while that course was not opposed, the position that the Executors had taken did have consequences for the security for costs application. In order to preserve their position in that regard, the respondents did not consent to an order under rule 7.10.
At the outset of the hearing on 16 June 2022, after the evidence to which I have referred above was read and it was confirmed that the respondents' position had not changed, I made an order under rule 7.10(2)(b) appointing Vicki Kordovoulos as the representative of the Estate of John Kordovoulos for the purposes of the appeal. I concluded that it was appropriate to make an order pursuant to that rule in circumstances where I was satisfied on the evidence that: 1. the Estate has an interest in the appeal proceedings and was not represented; 2. a grant of probate in respect of the Estate had not been sought, and would not be sought; 3. Vicki Kordovoulos, as the first appellant and the sole beneficiary under the Will of John Kordovoulos, consented to represent the Estate; and 4. appropriate notice was given to Ms Visvis and Ms Nesnas, the Executors and Trustees appointed under the Will.

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