Soulos v Pagones; Soulos v Soulos; Soulos v Soulos; Soulos v Pagones; Kristallis v Soulos; Kristallis v Soulos; Kristallis v Pagones

Court of Appeal (NSW)|2023-11-17|Before: Ward P, Meagher JA, Mitchelmore JA

Kelly SC, PJ Muscat and B O'Connor (Maria Pagones) A Cheshire SC and T Rollo (James Soulos) V Bedrossian SC and N Bilinsky (Con Kristallis and Trevor Ian Cork) MR Elliott SC (Dimosthenis (Dennis) Soulos)

Solicitors: Wotton & Kearney (Nicholas Andrew Soulos and John Nicholas Soulos) Uther Webster & Evans Solicitors (Maria Pagones) Carroll & O'Dea Lawyers (James Soulos) McPhee Kelshaw Pty Ltd (Con Kristallis and Trevor Ian Cork) McCabes Lawyers (Dimosthenis (Dennis) Soulos) Chalk Behrendt Lawyers (Esperia Court) File Number(s): 2022/00370857; 2022/00370862; 2022/00370837; 2022/00370852; 2022/00369112; 2022/00369139; 2022/00369130 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2022] NSWSC 1507 Date of Decision: 7 November 2022 Before: Lindsay J File Number(s): 2018/00050908; 2019/00026988; 2019/00027080; 2021/00108316

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

JUDGMENT

THE COURT: On 13 October 2023, this Court published reasons largely dismissing appeals brought from orders made in related proceedings in the Equity Division arising out of a dispute between members of the Soulos family (Soulos v Pagones; Soulos v Soulos; Soulos v Soulos; Soulos v Pagones; Kristallis v Soulos; Kristallis v Soulos; Kristallis v Pagones [2023] NSWCA 243). The following adopts the abbreviations used in that judgment.
The appeal in which the relevant appellants (Nick and John) enjoyed some success was the Oppression Appeal. While this Court held that the primary judge did not err in the finding that there was oppressive conduct in the acquisition by Nick and John of a 20% personal interest in the Symond Arcade (and the subsequent partnership between them and Esperia Court) and that the oppression was continuing (see at [211], [226], Ward P; [690], Meagher and Mitchelmore JJA); nor in the conclusion that Nick and John had breached directors' duties in relation to the acquisition of the Symond Arcade and the ongoing partnership ([251], [255], Ward P; [690], Meagher and Mitchelmore JJA), this Court concluded that there was error in relation to the findings of oppression and breach of directors' duties in relation to the grant of a lease to SPH without a demolition clause ([211], [254], Ward P; [691], Meagher and Mitchelmore JJA).
Further, this Court concluded that the primary judge, in making orders amending the Constitution of Esperia Court and restructuring its shareholding (orders 1 to 7) had gone beyond what was necessary to bring an end to the continuing effects of the oppression and set aside the orders made by his Honour in that regard ([304], Ward P; [692], Meagher and Mitchelmore JJA), as well as the order varying the lease to SPH (order 8).
The appeals by the Executors and by Nick in relation to the respective siblings' Succession Act proceedings were dismissed with costs.
Directions were made for the filing of any brief submissions as to the costs of the proceedings at first instance or as to the costs of the Oppression Appeal, to be dealt with on the papers.
Submissions have now been received from each of Maria, on the one hand, and Nick and John, on the other hand, in relation to costs. Submissions have also been received from the company, Esperia Court, which had filed a submitting appearance save as to costs in the Oppression Appeal.
In summary, the opposing contentions as to costs are as follows. Maria submits that the cost orders of the proceedings at first instance should remain undisturbed and that Nick and John should be ordered to pay her costs of the Oppression Appeal. Nick and John submit that there should be no order as to costs of the proceedings at first instance and on appeal.
Esperia Court submits that it should not be ordered to pay Maria's costs of the Oppression Proceeding at first instance (alternatively, those costs should be apportioned based on the issues on which Maria ultimately succeeded on appeal - it being submitted that in that event Maria should be awarded 60% of her ordinary costs of the Oppression Proceeding at first instance, to be paid equally by all defendants; and that Esperia Court should be entitled to a set-off in respect of the costs it was awarded for defending a notice of motion by Maria in those proceedings in relation to a legal professional privilege claim). As to the appeal costs, Esperia Court submits that it should not be ordered to pay any other party's costs of the appeal (as it filed a submitting appearance) and it makes no submissions as to the costs of the other parties to the appeal.

Esperia Court's position

The position of Esperia Court can be dealt with briefly. There was no order at first instance requiring it to pay the costs of any other party; and it did not seek its costs from any other party (other than noting the existing costs order in its favour against Maria in relation to the interlocutory application referred to above). As it filed a submitting appearance save as to costs in the appeal, it is appropriate that there be no order that it pay any other party's costs of the appeal, nor has any other party suggested this. Accordingly, no order as to costs in relation to Esperia Court need here be made.

Opposing contentions of Maria and of Nick and John

The basis on which Nick and John argue that there should be no order as to the costs of the Oppression Proceedings at first instance or on appeal is that there was a mixed outcome in those proceedings. They maintain that it is appropriate that there be no differentiation in respect of the costs at first instance and on appeal because the parties largely ran the same arguments on appeal as they did at first instance.
Nick and John point to the fact that although Maria succeeded in establishing that the acquisition by them of a 20% interest in the Symond Arcade constituted oppressive conduct (and obtained relief in relation to that conduct), Maria has failed in her claim as to oppressive conduct or breach of directors' duties in relation to the grant of the SPH lease and failed in her claim that Nick and John should compensate Esperia Court for the conduct about which she had complained.
Nick and John emphasise that, at first instance, the primary relief sought by Maria was an order for the winding up of Esperia Court; and that, on appeal, Maria's primary focus in relation to relief was on supporting the primary judge's orders that provided for a re-distribution of the management shares between the four siblings. They note that Maria failed to obtain a winding up order (the primary judge concluding that it was not appropriate for Esperia Court to be wound up or for there to be an asset sale - see [397] of the primary judgment); and that while the primary judge considered that the appropriate relief involved re-distributing the management shares between the four siblings, this Court has held that, in relation to the Oppression Proceedings, there is no basis for the distribution of the management shares between the siblings in this way (referring to [300]-[303] of the appeal judgment).
Maria argues that the fact that the relief for the oppressive conduct has been moulded by this Court in a different way to terminate the effects of the oppression is not to the point, emphasising that s 233 of the Corporations Act 2001 (Cth) provides a broad range of potential relief for oppression and that she obtained findings of oppression and relief for that oppression. Accordingly, Maria contends that she should have her costs. Maria submits that her claim as to oppression in relation to the SPH lease was a minor part of the proceedings at first instance and on appeal; and that, considered in the context of the value of Esperia Court, it had no real prominence in the dispute. Maria contends that it is not appropriate to separate out that issue on an issue by issue basis in those circumstances. As to the findings of breach of directors' duties, it is noted that while these did not sound in an award of damages it was recognised that they informed the nature and extent of the relief to be granted (referring to [247] of the appeal judgment).
Maria refers to the decision of this Court in Tzavaras v Tzavaras & Sons Pty Ltd (No 2) [2023] NSWCA 222 at [23] to [26] per Gleeson JA, Adamson JA and Griffiths AJA as an analogous case where the question of oppression was altered on appeal but where the unsuccessful party was ultimately ordered to pay the successful parties' costs both of the trial at first instance and on appeal.

Determination

The applicable principles in relation to costs orders are well known and do not here need to be repeated (see Uniform Civil Procedure Rules 2005 (NSW) r 42.1 as to the general rule that costs follow the event; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44] (Brennan CJ), [134] (Kirby J); and Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] (Hodgson J, Mason P agreeing) as to the exercise of the discretion as to costs).
In the present case, although the claim of oppression in relation to the grant of the SPH lease was a separate issue in the proceedings both at first instance and on appeal, it was hardly a dominant issue and it does not warrant a differentiation as to any costs incurred solely in relation to that issue and the costs of the oppression claim in respect of which Maria succeeded.
Nor does the fact that Maria was unsuccessful in obtaining the primary relief sought (a winding up order) alter the fact that she was successful (both at first instance and on appeal) in obtaining relief in relation to the oppressive conduct in relation to the acquisition of the Symond Arcade. Although this Court found that the relief granted in relation to the amendment of the Constitution and restructuring of the shareholding of Esperia Court went beyond what was necessary to bring to an end the continuing effects of the oppression, ultimately, the relief granted in the related proceedings (which was not disturbed on appeal) as to the management shares in Esperia Court has the same practical effect; and Nick was the party unsuccessfully challenging that relief (both in his capacity as an Executor and in his own right as an affected beneficiary).
In all the circumstances, it is not appropriate that Maria should be required to bear her own costs of the Oppression Proceedings at first instance and on appeal (as Nick and John have contended). The costs orders at first instance should not be disturbed and, as already ordered, Nick and John should pay the costs of Maria of the Oppression Appeal.

Conclusion

For those reasons, the costs orders already made require no amendment. It may simply be noted that Esperia Court is not to be liable for Maria's costs of the appeal (and bears its own costs of the proceedings at first instance).

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: 17 November 2023

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