As these proceedings were originally constituted, the plaintiff, Mr Kyriacou, sued to enforce an agreement allegedly made between himself and Ms Makis, in about June 2012, to the effect that Ms Makis' interest in a set of units that were called the MacDonald Street units would be transferred to him. The agreement was said to be contained in a document called the "Partnership Dissolution Agreement".
On 9 February 2021, I published the primary judgment in these proceedings on Mr Kyriacou's claim: Kyriacou v Makis [2021] NSWSC 60. I dismissed Mr Kyriacou's claim. Although Mr Kyriacou apparently believed that a final and binding agreement had been made with Ms Makis, and the evidence supported a conclusion that negotiations had been undertaken for that purpose, Mr Kyriacou failed to prove that a specific agreement had been made with Ms Makis' authority.
Prima facie, under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1, the costs of the proceedings should follow the event, which would mean that an order would be made that Mr Kyriacou pay Ms Makis' costs of the proceedings on the ordinary basis. However, UCPR r 42.1 maintains the Court's discretion as to the costs order that is appropriate and the Court may make a different order if it is satisfied, on the application of judicial principle, that some other order should be made.
This matter raises special circumstances, as it has become apparent that, by reason of the manner in which Ms Makis has conducted the litigation, the hearing of the claim made by Mr Kyriacou has not remotely determined all of the issues in dispute between the parties.
The Court was told early in the hearing that the Court had made orders that required Ms Makis to serve a draft cross claim on Mr Kyriacou, for the purpose of facilitating an order that Ms Makis be given leave to file a cross claim in appropriate terms. The purpose of the proposed cross claim was for Ms Makis to seek relief arising out of what she said was the dissolution of a partnership between herself and Mr Kyriacou. The Court made orders on 7 March 2019, 15 March 2019, 22 August 2019 and 11 October 2019 for Ms Makis to serve her draft cross claim on Mr Kyriacou by specified dates. Ms Makis did not comply with those case management orders, and indeed had not filed her cross claim by the time the hearing that was the subject of the primary judgment commenced.
Counsel for Ms Makis raised the issue early in the hearing and put to the Court that the real issue between the parties was whether they had been engaged in a long-term partnership, whether the partnership should be dissolved, and if so, what were the financial consequences. The dispute raised by Mr Kyriacou concerning the entitlement to the MacDonald Street units was only part of the overall partnership dispute. That appeared to me to be a valid assertion, because a substantial amount of the evidence served by Ms Makis, to which Mr Kyriacou was required for practical reasons to respond, concerned matters that had arisen over a number of decades that may have related to the alleged partnership dispute, but had very little to do with the dispute concerning the entitlement to the MacDonald Street units.
I set out the position, as I understood it, concerning the wider partnership dispute in the primary judgment at [37]-[45] and [227]-[230]. As explained at [47], in response to an invitation from the Court, on the second day of the hearing Ms Makis delivered to the Court her written case summary. That case summary asserted that Mr Kyriacou and Ms Makis "carried on a business in property development for profit". It contained assertions about loans made to the alleged partnership to fund its commercial ventures and made broad assertions about some transactions effected with borrowed funds. The case summary ended with the statement: "At the appropriate time the Defendant will seek orders under the Partnership Act from the Court for a dissolution of the partnership and an accounting between the partners to take place".
It appeared to me that the course taken by Ms Makis, in not filing her foreshadowed cross claim, would have the effect that it would not be possible for the Court, in deciding the case before it, to determine all the issues in contest between the parties. Furthermore, a substantial portion of the evidence that had been served did not relate to the issues that had been pleaded, but instead supported a case that Ms Makis intended to mount that was not actually before the Court. Ms Makis had not sought any declaration concerning the existence of the alleged partnership, its commercial ambit, or its terms. That created a forensic problem because, although Ms Makis had foreshadowed an application for a partnership accounting, that process could not be undertaken efficiently unless the existence and the terms of the partnership had first been determined.
It appeared to me that not only would the determination of the case limited to the issues raised by the amended statement of claim not resolve the real dispute between the parties, but furthermore, there was likely to be a substantial costs overlap, in the sense that much of the evidence introduced at the hearing would not be of significance to the issues that were to be determined, but would potentially be significant to the resolution of the partnership dispute that had not been brought before the Court.
After the primary judgment was delivered on 9 February 2021, case management orders were made on 29 March 2021 for Ms Makis to file her cross claim by 10 May 2021 and for Mr Kyriacou to file his defence to the cross claim by 21 June 2021. Those pleadings have now been filed by the parties.
Ms Makis in her cross claim has elaborately pleaded the terms of a partnership said to have initially been entered into in 1995 between Mr Kyriacou, Ms Makis and their respective spouses, and, from October 2002, carried on by Mr Kyriacou and Ms Makis alone. The cross claim contains detailed allegations concerning the transactions entered into by the alleged partnership, including at pars 154 to 164 the purchase of the Macdonald Street units.
Mr Kyriacou's defence to the cross claim responds in detail to the allegations made by Ms Makis. It is not necessary for the purpose of these reasons to analyse in detail the allegations contained in the cross claim and the defence to the cross claim. It may be noted, however, that a particular theme of the defence to the cross claim is the allegation made by Mr Kyriacou that his involvement in many of the transactions that Ms Makis alleges were partnership transactions involved only notional transactions in so far as Mr Kyriacou was concerned, because he agreed at the request of Ms Makis' former husband to lend his name to transactions entered into by the former husband in which Mr Kyriacou had no real interest.
The purpose of my making this observation is that it reinforces the suspicion that I formed during the course of the hearing that there would be a very substantial overlap in respect of the evidentiary issues relevant to Mr Kyriacou's claim and the foreshadowed partnership claim by Ms Makis. It is quite clear that much of the evidence will concern the determination of the real nature and effect of the conduct of Ms Makis' former husband.
In par 19(a) of Ms Makis' submissions on the issue of the costs order that should now be made, Ms Makis submitted that she had been completely successful with respect to the claims brought by Mr Kyriacou in the amended statement of claim. That is true, but I consider that submission is an artificial one, as it is only true because Ms Makis serially breached her duty to comply with the numerous case management orders that required her to serve her draft cross claim on Mr Kyriacou so that the Court would be able to deal in the one hearing with all of the issues in dispute between the parties.
The Court is presently unable to forecast the outcome of the dispute between the parties on the issues raised by Ms Makis in her cross claim. It is possible that, after all the issues have been determined by the Court, it will appear that Mr Kyriacou's claim for an order enforcing the alleged agreement that Ms Makis would transfer to him her interest in the Macdonald Street units was sufficiently separate from all other issues in dispute between the parties to justify a costs order being made against Mr Kyriacou in favour of Ms Makis in respect of that claim. However, I do not consider that that possibility is sufficiently clear at this stage to justify the Court making a costs order in favour of Ms Makis on the issues determined by the primary judgment. I consider that, even if ultimately the Court thinks that the claim brought by Mr Kyriacou was a discreet one, it will also conclude that Ms Makis has been responsible for the wastage of considerable costs because much of the evidence traversed at the first hearing was not in fact relevant to the issues, but rather will be relevant and will be required to be reconsidered for the purposes of the determination of the issues raised by Ms Makis' cross claim.
Ms Makis apparently appreciated the reality of this position, because in par 21 of her written submissions she submitted that it was at least appropriate for the Court, at this stage, to make a partial costs order in a lump sum in her favour on the same general basis as did Parker J in Rhino Rack Australia Pty Ltd v Hub Computing Services Pty Ltd [2021] NSWSC 231.
Ms Makis relied upon an affidavit of her solicitor sworn on 23 April 2021, in which the solicitor deposed that in the proceedings to date Ms Makis has incurred legal costs and disbursements of $291,544 and paid an amount of $167,221.30.
Ms Makis also relied upon the submission that, given the extensiveness of the issues raised by the cross claim and the defence to the cross claim, it is inevitable that it will be a considerable time before these proceedings are finally determined.
That submission is most likely to be true, but the problem substantially lies at the feet of Ms Makis for failing to have served her draft cross claim on Mr Kyriacou by 23 April 2019, as the first case management order dealing with that subject made on 7 March 2019 required. If Ms Makis had complied with the Court's order, there is every possibility that the Court would have been able to deal with all of the issues in dispute between the parties in the hearing that commenced on 21 September 2020, although it is possible that a somewhat longer hearing time would have been required.
A review of Ms Makis' solicitor's affidavit shows that Ms Makis has incurred legal costs in relation to two firms of solicitors before her present solicitor, including counsel's fees for counsel other than the counsel who appeared for her at the hearing. Those earlier solicitors filed notices of ceasing to act at times during the preparation of Mr Kyriacou's claim that were likely to have the effect of causing delay and wastage of legal costs, by reason of the need for new solicitors and counsel to repeat work that had been done at an earlier time.
Mr Kyriacou's submissions on the issue of costs pointed out that much of his costs had been incurred as a result of attempts to obtain documentary evidence to deal with much of the evidence served by Ms Makis that in reality went to issues relevant to the cross claim that has now been filed rather than the claim in Mr Kyriacou's amended statement of claim.
The Civil Procedure Act 2005 (NSW) relevantly provides in s 56:
(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
…
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
…
(5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs.
…
I consider that the failure of Ms Makis to bring the claims now made in her cross claim before the Court in a timely way was a serious breach of the duty imposed upon her by s 56 of the Civil Procedure Act.
It will not be appropriate for the Court to make an order in favour of Ms Makis that Mr Kyriacou pay her costs of the proceedings to date, or even of the hearing in so far as it dealt with the claim raised by Mr Kyriacou's amended statement of claim. I am also not prepared to make an interim lump sum costs order in Ms Makis' favour, as I consider that any attempt by the Court to estimate an appropriate amount to be paid by Mr Kyriacou would be an artificial and essentially speculative exercise. I consider that it would be impossible for the Court, in any judicially principled manner, to make a proper allowance for the wastage of costs that is likely to have been caused by the failure of Ms Makis to comply with the Court's directions on the many occasions that she has failed to do so, in so far as her conduct has had the effect that the Court was required to conduct the hearing limited only to one issue of many overlapping issues that will now have to be determined after separate preparation and a new hearing.
Consequently, the only costs order that the Court will make at this stage in respect of the hearing that commenced on 21 September 2020 is:
1. Save for any costs orders that have been made to date, the costs of the proceedings to the point of the delivery of judgment handed down on 9 February 2021 are reserved.
[3]
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: 15 July 2021