Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos (No. 4)

Case •

[2020] NSWSC 1044

•

11 August 2020

No judgment structure available for this case.

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos (No. 4) [2020] NSWSC 1044
Hearing dates: 10 March 2020
Date of orders: 11 August 2020
Decision date: 11 August 2020
Jurisdiction:Equity
Before: Slattery J
Decision:

Judgments entered against the first and third defendants jointly and severally in specific amounts. Order for costs made against the third defendant on the ordinary basis. Orders for two thirds of the plaintiff’s costs made for the period after the first judgment. Each party ordered to pay its own costs in respect of the plaintiff’s claim for damages. Order for pre-judgment interest made on monies outstanding from the first and third defendants, dating from the first occasion when monies were demanded to be repaid.

Catchwords:

RELIEF HEARING – contest concerning consequential relief after judgment – what amount is due to the plaintiff from each of two defendants, one a natural person and the other a corporation – what costs orders should be made against the natural person defendant and the corporate defendant – what costs orders should be made against the natural person defendant and the corporate defendant in respect of the period after the Court’s first judgment – what costs order should be made as a result of the plaintiff’s withdrawal of her claim for damages – whether interest can be awarded under Civil Procedure Act 2005 despite the parties apparently agreeing that the loans were made on an interest-free basis.

Legislation Cited:

Civil Procedure Act 2005, s 100

Corporations Act 2001, s 131

Cases Cited:

Bostik Australia Pty Limited v Liddiard (No. 2) [2009] NSWCA 304

Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos [2017] NSWSC 666

Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos (No. 2) [2019] NSWSC 584

Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos (No. 3) [2019] NSWSC 1752

Degman Pty Ltd (in liq) v Wright [1983] 2 NSWLR 348

Falkner v Bourke (1990) 19 NSWLR 574

King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204

Ruby v Marsh (1975) 132 CLR 642

Ryan v South Sydney Junior Rugby League Club Ltd & Ors (1975) 2 NSWLR 660

Screenco Pty Ltd v RL Dew Pty Ltd (2003) 58 NSWLR 720

Category:Consequential orders
Parties:

2013/358168
Plaintiff: Cleopatra Sclavos Calokerinos, as executor of the estate of the late George Sclavos
First Defendant: Okan Yesilhat
Second Defendant: Gokan Yesilhat
Third Defendant: Australia’s Best Tyres & Auto Pty Ltd ACN 151 629 131

2014/212466
Plaintiff: Okan Yesilhat
Defendant: Cleopatra Sclavos Calokerinos, as executor of the estate of the late George Sclavos
Representation:

Counsel:
Plaintiff/Cross-Defendant: M.B. Evans
Defendants: V. Culkoff

Solicitors:
Plaintiff: Remon Basta, Aston Reid Lawyers
Defendants: Salvatore Russo, Russo & Partners
File Number(s): 2013/358168; 2014/212466
Publication restriction: No

Judgment

  1. This is the Court’s fourth judgment in these proceedings. The Court’s previous judgments are: Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat, Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos [2017] NSWSC 666, Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos (No. 2) [2019] NSWSC 584 and Calokerinos, Executor of the Estate of the late George Sclavos v Yesilhat; Yesilhat v Calokerinos, Executor of the Estate of the late George Sclavos (No. 3) [2019] NSWSC 1752.

  2. Events, matters and things are referred to in this judgment in the same way as they are in the Court’s first, second and third judgments.

  3. The Court’s third judgment on 16 December 2019 dealt with two issues, which had been reserved by the Court on 25 October 2019 for consideration. On the first of those issues, the Court decided that Mr Gokan Yesilhat did not have any liability to repay the estate in respect of advances made before the deceased’s death. And the second issue was whether the corporate third defendant, Australia’s Best Tyres Pty Ltd (“Australia’s Best Tyres”), has any liability to repay monies to the deceased’s estate in respect of advances made before the deceased’s death. The Court said in the third judgment that on the available materials, the Court could not decide this question without more assistance from the parties in analysing the money flows in question. Since then, the plaintiffs have provided, in the form of an aide memoire, an analytical forensic accountants report by Mr Hugo Loneragan of Quantum Forensics Solutions dated 11 February 2020.

  4. This judgment deals with as many of the remaining issues between the parties as can be determined to bring this matter to a final conclusion.

  5. Ms V. Culkoff of counsel continued to appear for Okan Yesilhat, Gokan Yesilhat and Australia's Best Tyres, instructed by Russo & Partners. Mr M. Evans continued to appear for Ms Calokerinos, instructed by Aston Reid Lawyers.

The Remaining Issues for Determination

  1. Several matters remain for determination. These are the following:

  1. does Australia’s Best Tyres have any liability to repay monies to the deceased’s estate in respect of advances made before the deceased’s death;

  2. what costs order should be made as a result of the withdrawal of the plaintiffs’ claim for damages;

  3. what legal costs should be ordered against Australia’s Best Tyres and Gokan Yesilhat;

  4. what costs order should be made concerning the costs of the proceedings after the first judgment on 9 June 2017; and

  5. what interest, if any, is payable on any monies found to be outstanding to the estate.

  1. These reasons will build each of these issues in turn.

(1) Australia’s Best Tyres’ Liability to Repay Monies to the Deceased’s Estate

  1. The parties are in dispute about Australia’s Best Tyres’ liability to repay monies to the deceased’s estate in respect of advances made before the deceased’s death.

  2. Preliminary Matters. Before analysis of this first group of issues it is important to revisit a number of preliminary matters. The first preliminary matter is in relation to the structure of these proceedings. The proceedings were conducted on the basis that after the main hearing, when relief was an issue, the Court would not permit the parties to recall further oral evidence, which would put the parties’ credibility in issue again. The Court had decided all credibility issues in the first judgment. Had the Court not taken this approach the Court would have required the parties to conduct any contest about relief issues during the main hearing. Therefore, in the relief hearing the parties had to rely upon such inferences as were available from the existing oral and documentary evidence, any further documentary evidence and any non-contentious analytical expert evidence.

  3. In the result, in preparation for the relief hearing Ms Calokerinos put on additional documentary evidence, mainly in the form of bank statements. In accordance with its original directions, the Court did not permit any further cross-examination of Ms Calokerinos on what this documentary evidence but directed the parties to make submissions based upon the bank statements and the existing evidence.

  4. But after the Court’s third judgment, in which the Court indicated it had difficulty in working with the materials that had been provided by the parties, Ms Calokerinos commissioned a report from Mr Hugo Loneragan from Quantum Forensics Solutions (“QFS”) of 11 February 2020 to give a better analytical overview of the transactions in the documentary materials. The QFS report was provided to the defendants and to the Court as an aide memoire for submissions but was not tendered in evidence and the Court has found it very useful as an analytical tool and has treated it that way.

  5. The defendants have criticised the QFS report on several grounds. They submit: that leave to obtain and advance the report was not obtained; that the report purports to amend the total amount due to the estate; that QFS were instructed that at least $45,355 was owing by Australia’s Best Tyres to the estate (contrary to the defendants later submissions where concessions that any such amount might be owing were withdrawn); that Mr Loneragan was not available for cross-examination; and that all transfers and George’s accounts to Australia’s Best Tyres were undertaken by Mr Okan Yesilhat.

  6. But the Court has not used the QFS report as evidence. The Court has looked to the schedules which the parties have provided. The QFS report has been used only for its mathematical logic and its convenient distillation from the schedules of the real accounting differences between the parties. So these various criticisms fall away. Moreover, some of the criticisms, such as the last one (that Mr Okan Yesilhat was responsible for all transfers to Australia’s Best Tyres) are without foundation.

  7. The second preliminary matter relates to an aspect of the QFS report. Consistent with the Court treating the QFS report as a submission, the Court has not used the findings in the QFS report to allow additions to the plaintiff’s claim. The parties have an existing agreement as to the total amount due to the estate by reference to their analysis of the existing evidence. As early as 18 June 2018 the parties agreed that the amounts referred to in the Court’s first judgment ($304,100), as being claimed on behalf of the estate, were incorrect because more repayments to George had been found. The revised total amount due to the estate was agreed at $218,955. In the course of preparing the QFS report, Mr Loneragan found an additional transaction (a transfer from one George’s accounts to an Australia’s Best Tyres account in the sum of $10,000), which had apparently been overlooked by the parties. The plaintiff wanted to add that additional sum to her claim on behalf of the estate. The Court declines to take this amount into account, as it is contrary to the earlier agreement between the parties as to the total amount due. If the Court were to open up this aspect of the parties’ 18 June 2018 agreement in fairness, it would have to open up other parts of the agreement. Moreover, to allow this additional claim in the plaintiff’s case would go further than treating the QFS report just as part of the plaintiff’s submissions.

  8. The next preliminary matter is to examine what the Court has already found about Australia’s Best Tyres’ liability to the estate. This was dealt with in the Court’s second judgment. In that judgment, the Court rejected the defendants’ argument that the Court had found that only Mr Okan Yesilhat, and not Australia’s Best Tyres, had been found to owe loan money to the estate in the debt/trust proceedings: second judgment at [210] to [221]. The second judgment went on to discuss the liability of Mr Gokan Yesilhat, which was ultimately resolved in Mr Gokan Yesilhat’s favour in the third judgment (at [21]). But the second judgment (at [234] to [237]) also made the following findings and conclusions concerning the liability of Australia’s Best Tyres:

“[235]   There is no doubt that Australia’s Best Tyres received money from George and that all the money it received, George expected it to receive: after all he was repaid by it. The evidence shows that Australia’s Best Tyres received that money either directly or through Mr Okan Yesilhat. It paid money back to George. To the extent that Australia’s Best Tyres received that money directly or indirectly, in my view, a restitutionary remedy is available to Ms Calokerinos against Australia’s Best Tyres.

[236]   The pleadings (paragraph 45 of the Amended Statement of Claim) have long made a claim for “monies loaned by the deceased to the defendants or one of them”, a claim sufficient to encompass the restitutionary relief of the old common law action of “monies lent”. It is not necessary for the Court to trouble itself about the agency relationship between Mr Okan Yesilhat and George, or Australia’s Best Tyres. The fact is some, but not all, of the money was received by Australia’s Best Tyres. To the extent that the money was received, and has not been repaid by Australia’s Best Tyres, the company is liable in restitution to repay the money to the estate. The Court will make declarations to that effect.

[237]   But the precise amount that was received by Australia’s Best Tyres, and not repaid, has not been separately isolated in the calculations, as distinct from the gross sum that was advanced and not repaid to all the Yesilhat parties. That separate sum will need to be isolated and can be made the subject of a separate judgment against Australia’s Best Tyres.”

  1. Consequent upon this reasoning, the orders and declaration made with the second judgment included the following declaration (at [297(15)]:

“Declare that Australia’s Best Tyres is liable to repay to Ms Calokerinos all amounts actually received by Australia’s Best Tyres either directly (or indirectly through Mr Okan Yesilhat) as moneys lent to Australia’s Best Tyres by the late George Sclavos but less all moneys actually repaid by Australia’s Best Tyres to the late George Sclavos.”

  1. The Court’s present task is to calculate the amount that was received by Australia’s Best Tyres and not repaid. The Court’s task is complicated: by the primary task of allocating loan monies received but not repaid as between Australia’s Best Tyres and Mr Okan Yesilhat; and then, in dealing with Australia’s Best Tyres’ contentions that some of the monies advanced to it were in fact loans to Mr Okan Yesilhat.

  2. The last preliminary matter is to revisit the chronology of some of the Court’s findings about the loans George made between 2011 and 2013. These findings provide a basis for some of the inferences the Court will draw as to which of the defendants various loan advances were made.

  3. The Court has found that substantial financial advances commenced between George and the Yesilhat interests in March 2011, long after George and Mr Okan Yesilhat had met and about the time that Mr Yesilhat opened negotiations to acquire Australia’s Best Tyres: first judgment at [323]. The early transfers that George made comprising a total of $140,000 were by cheque to Mr Okan Yesilhat and took place between 8 March 2011 and 1 July 2011: first judgment at [323]. On 18 July 2011, three personal accounts in the name of George Sclavos, numbered 7244, 5559 and 9317, were linked to a NetBank facility numbered 9878 in the name of Okan Yesilhat and from that date Okan Yesilhat had unrestricted access to conduct transactions on George’s personal accounts: first judgment at [327] and [332].

  4. From about February 2011, Mr Okan Yesilhat negotiated the purchase of Mr Versace’s retail tyre business. Negotiations culminated on 1 July 2011 in the Yesilhat brothers’ company Australia’s Best Tyres acquiring that business for a consideration of $500,000, which was comprised of a deposit of $130,000 with the balance of $370,000 being provided by way of vendor finance. The Court also found that as the amount of the cheque advances ($140,000) that George made between 8 March 2011 and 1 July 2011 was very close to the amount of the deposit (of $130,000), the overall pattern of the advances is consistent with their being made in the context of the acquisition of the business of Australia’s Best Tyres: first judgment at [288] and [289].

  5. Analysis. In light of the Court’s ruling above, disallowing the extra $10,000 found by QFS, the plaintiff and the defendants agree upon and work from a common assumption: that together Australia’s Best Tyres and Mr Okan Yesilhat owe the estate a total of $218,955. The issue is how much of that is owed respectively by Australia’s Best Tyres and Mr Okan Yesilhat. On this question the plaintiff and the defendants have over time taken different positions. In June 2018, the defendants appeared to concede that $45,355 was owing to the estate by Australia’s Best Tyres and the balance was owed by Mr Okan Yesilhat. But by the time of the final relief hearing, the defendants were contending that only Mr Okan Yesilhat owed the estate the whole $218,955. And the plaintiff offered a number of different scenarios as to the correct amount due from each of these defendants.

  6. The Court has been much assisted in isolating the differences between the parties’ calculations through the summary analysis of the QFS report, which is based on certain payment schedules produced by the parties. The analysis here examines the parties’ respective schedules and then draws upon the analysis of the QFS report to determine which of the calculations is correct.

  7. The parties have reduced the many relevant transactions in the bank statements into schedules to manage the data. Ms Calokerinos has extracted from George’s, Australia’s Best Tyres’ and Mr Okan Yesilhat’s bank statements in evidence into a schedule (“the plaintiff’s schedule”), all the various transactions among that are said to be relevant to the computation of Australia’s Best Tyres’ and Mr Okan Yesilhat’s liability to the estate. The plaintiff’s schedule deals with and numbers some 77 bank transfer transactions between George and those two defendants that occurred between 8 March 2011 and 1 August 2013. It describes basic detail of each of the transactions, the account numbers involved and the claimed effect of each transaction on a notional running balance between George and either of Australia’s Best Tyres’ and Mr Okan Yesilhat.

  8. The defendants have produced their own schedules. They accept that they are looking at the same 77 transactions and have conveniently adopted the same numbering system that is used in the plaintiff’s schedule.

  9. As QFS points out, of the 77 transactions in the relevant period, 20 were not loans or repayments to George and can be excluded. Of the remaining 57 transactions, the plaintiff’s schedule correlates with the information in the primary evidence in the bank statements. The QFS report identifies that the differences between the plaintiff’s schedule and the defendants’ schedules are confined to four transactions, namely transactions 14, 15, 50 and 51. Analysis of those four transactions will be decisive in determining which of the competing calculations the Court should accept.

  10. But the starting point for analysis is an overview of the parties’ differences, as they are summarised in the QFS report, based on the parties’ respective schedules. But that is only the starting point because the defendants now argue that their own regional schedules may have been too generous in conceding some liability to Australia’s Best Tyres. That tweak to the defendants’ contentions arguments will be considered later.

  11. The QFS report well summarises the differences between the plaintiff’s schedule and the defendants’ schedules in paragraph 3.4.3, showing computation of payments made directly by George to each defendant and the respective repayments made by each defendant to George, as follows:

Monetary Transfers

Yesilhat

Plaintiff

Difference

Deceased to ABT

ABT repayments

$169,000

($123,645.00)

$158,000.00

($73,645.00)

$11,000.00

$50,000.00

ABT Liability

$45,355.00

$84,355.00

($39,000.00)

Deceased to Okan

Okan repayments

$228,100.00

($54,500.00)

$239,100.00

($104,500.00)

$11,000.00

$50,000.00

Okan Liability

$173,600.00

$134,600.00

$39,000.00

Total Owed to Estate

$218,955.00

$218,955.00

$0.00

  1. Thus, the estate claimed (in what it called its second scenario) that of the total amount owed to the estate of $218,955, some $84,355 was owed to the estate by Australia’s Best Tyres and the balance of $134,600 (two total $218,955) was owed to the estate by Mr Okan Yesilhat. The defendants claimed that only $45,355 was owed to the estate by Australia’s Best Tyres and that the balance of $173,600 was owed by Mr Okan Yesilhat.

  1. The QFS report shows, on the basis of the parties’ schedules, that transactions 14, 15, 50 and 51 account for the differences between the parties’ calculations as follows:

Transaction # [date]

Amount

Tr. to or (From) George

14 [11 August 2011]

$25,000

$25,000

15 [11 August 2011]

$25,000

$25,000

50 [4 January 2013]

$18,000

($18,000)

51 [4 January 2013]

$1,000

($1,000)

  1. Analysis – Transactions 14 and 15. The two substantial transfers of transactions 14 and 15, totalling $50,000 paid to George can be considered together. They are both made on 11 August 2011. But Australia’s Best Tyres did not acquire its tyre business until 1 July 2011 and there is no evidence in the bank statements of George advancing any money to Australia’s Best Tyres until 18 August 2011. Therefore, as at that date, Australia’s Best Tyres could not have been indebted to George.

  2. The defendants submit that this pair of transactions, taking place one week before George’s first loan to the company, could not have been a loan repayment by Australia’s Best Tyres to George. That much can be accepted. But the defendants then submit that it should be treated as a loan from Australia’s Best Tyres to George, so that transfers by George to Australia’s Best Tyres after 18 August 2011 should be accounted for as repayments of this $50,000 loan rather than as fresh advances by George to Australia’s Best Tyres. The net effect of the defendants’ characterisation of these two payments is to subtract $50,000 from Australia’s Best Tyres liability to the estate.

  3. In support of this characterisation, the defendants point to a series of later transactions in the plaintiff’s schedule (transactions 54 [$35,000], 57[$5000], 58[$5000], 67[$1000] and 74[$12,000]) which totalled $58,000, and argue they were a repayment by George to Australia’s Best Tyres of the original loan of $50,000 to him on 11 August 2011. The defendants’ account for the overpayment of $8,000 is not consistent with this theory, as explained by the lack of any real pattern in payments between these parties (as was agreed by the plaintiff’s expert, Mr Moylan).

  4. But the plaintiff’s completing construction of these payments, as set out in the plaintiff’s schedule, is that this $50,000 is a repayment of some of Mr Okan Yesilhat’s then existing debt to George. Mr Okan Yesilhat was using Australia’s Best Tyres to discharge his obligations to George. As it was a discharge of Mr Okan Yesilhat’s debt it should not be deducted from Australia’s Best Tyres overall liability to the estate.

  5. The plaintiff’s characterisation of these payments is the more persuasive for several reasons. First, Mr Okan Yesilhat had a substantial personal liability to George by 11 August 2011 and Australia’s Best Tyres had none. All the transfers of funds amounting to $140,000 between 8 March 2011 and 1 July 2011 had been made by cheque directly to Mr Okan Yesilhat. The Court has found that these payments to Mr Okan Yesilhat were loans not gifts. As a Court’s first judgment shows (at [358] to [360]), when George’s nieces in about April 2011 had found out about George’s loans to Mr Okan Yesilhat, they counselled him about having his loans repaid and he said, “I will keep an eye on it”. The more probable inference to be drawn from these circumstances is that George acted on his nieces’ counsel and sought repayment from Mr Okan Yesilhat of at least part of what by 1 July 2011 was already a substantial loan.

  6. Second, nowhere in Mr Okan Yesilhat’s evidence, the plaintiff’s evidence or indeed in the Court’s findings is there any clear indication that Australia’s Best Tyres was making loans to George. All the evidence points to loans going the other way with George making loan advances to Mr Okan Yesilhat and Australia’s Best Tyres.

  7. Third, the defendants’ construction of these payments is not consistent with the Court’s findings of a friendly (although not intimate) relationship between George and Mr Okan Yesilhat. The idea that Mr Okan Yesilhat would direct the company that he had just acquired with an advance of George’s money to lend money to George before he paid back George what he owed him is offensive to the nature of the relationship which the Court has found between the pair, and quite contrary to the relationship that Mr Okan Yesilhat alleged.

  8. Fourth, it is not obvious from any of the evidence that the newly acquired business, Australia’s Best Tyres, which no doubt needed working capital as it commenced a trade under new ownership, would be likely to have engaged in an informal moneylending exercise such as this. It is far more likely that such available capital as Australia’s Best Tyres had would only be used to discharge, on Mr Okan Yesilhat’s behalf, the priority moral and financial obligations he had to George, which had allowed he and his brother to acquire the business in the first place.

  9. Fifth, there is no reason to believe, either from the form, timing or amount of the later payments totalling $58,000 from George to Australia’s Best Tyres (transactions 54, 57, 58, 67 and 74) made between 31 January 2013 and 2 July 2013 that these were repayments of an earlier advance from Australia’s Best Tyres to George.

  10. The Court will accordingly treat transactions 14 and 15 as repayments by Australia’s Best Tyres of George’s loans to Mr Okan Yesilhat.

  11. Analysis - Transactions 50 and 51. These two transactions transferring $18,000 and $1,000 respectively from George to Mr Okan Yesilhat took place on 4 January 2013. The plaintiff says that the purpose of the transactions was for Australia’s Best Tyres to purchase tyres from Vietnam and that these advances were applied in that way and should be treated as borrowings by Australia’s Best Tyres.

  12. There are several difficulties with this construction of these two transactions. First, as the Court’s first judgment showed, is difficult to accept anything reliable in Mr Okan Yesilhat’s case about the acquisition of tyres from Vietnam. Second, it is not clear in the evidence that this money was used to acquire tyres from Vietnam. Third, even if that evidence could be identified, such a transaction would be just as consistent with Mr Okan Yesilhat trading in tyres on his own account or making his own shareholders loan to Australia’s Best Tyres for the purposes of effecting a tyre purchase transaction, which is inconsistent with George lending this money to Australia’s Best Tyres.

  13. The Court will therefore treat transactions 50 and 51 as borrowings by Mr Okan Yesilhat, not by Australia’s Best Tyres.

  14. Analysis – Notations on the Transfers to Australia’s Best Tyres. The defendants have withdrawn their earlier concession that the sum of $45,355 transferred directly from George’s accounts to Australia’s Best Tyres account represented loan advances from George to Australia’s Best Tyres. They submit that certain notations associated with those transfers indicate that in substance George was making loans to Mr Okan Yesilhat, not to Australia’s Best Tyres, which should be seen as receiving these monies as an agent for Mr Okan Yesilhat.

  15. The notations in question are clear on transactions 16 to 19, 22 and 23, 25 to 27, 37, and 42 to 43, which total $110,000. These electronic transfers from George’s accounts to Australia’s Best Tyres account record in the account of origin narration some version of the words “TFR Okan”. The defendants submit that it should be inferred from this narration that all these transfers were intended to be loans for the benefit of Mr Okan Yesilhat and not Australia’s Best Tyres.

  16. In support of the submission the defendants contend that Australia’s Best Tyres’ company records did not record any loans from George and that George's own records, including his tax returns, did not record any loans payable to him by Australia’s Best Tyres. The defendants further point out that the proper characterisation of these payments was not explored during the hearing.

  17. But this contention is not persuasive. First, the notation “TFR OKAN” is an unlikely basis to infer that a transfer to an Australia’s Best Tyres account should really be characterised as a loan to Mr Okan Yesilhat. If a loan to Mr Okan Yesilhat was intended the transfer could have been made directly to one of Mr Okan Yesilhat’s accounts, rather than to an Australia’s Best Tyres account with a notation for it to be transferred on to Mr Okan Yesilhat.

  18. Second, the notation “TFR OKAN” in the account of origin narration is far more likely to be an indication that money has been requested to be paid by or generally to support the interests of, Mr Okan Yesilhat. The transferor’s account will already show that the transferee was Australia’s Best Tyres, so there is no good reason to repeat that information in the narration. It may also be an indication that Mr Okan Yesilhat was performing the keystrokes to effect the transaction.

  19. Third, if “TFR OKAN” means that George and Mr Okan Yesilhat were to treat transfers to Australia’s Best Tyres as destined for Mr Okan Yesilhat, the plaintiffs analysis and the plaintiff’s schedule shows that that did not happen. There is no clear pattern of these exact transfers being paid on from Australia’s Best Tyres to Mr Okan Yesilhat.

  20. Analysis – Pre-Incorporation Contracts. The plaintiff argues that the $140,000 in advances apparently made by George to Mr Okan Yesilhat up to 1 July 2011 should be treated as pre-incorporation contracts with Australia’s Best Tyres, which were ratified when Australia’s Best Tyres began to make repayments after its incorporation on 22 June 2011. The plaintiff says that these loans are binding on Australia’s Best Tyres upon incorporation and its commencement of repayments by reason of the operation of Corporations Act 2001, s 131.

  21. But as the Court has already found in its first judgment these early payments to Mr Okan Yesilhat very closely approximate the amount of the deposit he was required to pay to acquire Australia’s Best Tyres. It is strongly to be inferred these early payments were made to Mr Okan Yesilhat personally, so he could assemble a fund to pay Mr Versace to acquire the business and not invested in the business itself. The money may have been paid on to Australia’s Best Tyres and thence to Mr Versace. But at best these were shareholders loans Mr Okan Yesilhat made to the company. The structure of these early loans is not consistent with loans by George to the company.

  22. In the result therefore, the only adjustment which is required to the QFS table set out above in relation to the relative liabilities of Australia’s Best Tyres and Mr Okan Yesilhat is to add a liability of $50,000 (for transactions14 and 15) to Mr Okan Yesilhat’s original and correct concession that $45,355 was owing by Australia’s Best Tyres to George’s estate. Thus $95,355 is owed by Australia’s Best Tyres to George’s estate. And the balance of $123,600, of the first and third defendants’ joint liability of $218,955, is owing by Mr Okan Yesilhat to the estate. Judgment for these amounts will be entered accordingly.

(2) Costs upon the Withdrawal of the Plaintiff’s Claim for Damages

  1. The parties are in dispute about what costs order should be made as result of the withdrawal of the plaintiff’s claim for damages. The withdrawal of the claim still leaves the costs of the damages claim unresolved. The Court has raised the issues of whether or not each party should bear his or her own costs of this issue but as no agreement has been reached the matter will have to be determined.

  2. In the Court’s opinion, no separate order for costs should be made to cover the defendants’ costs of this withdrawn claim. The plaintiff was successful in establishing the defendants’ liability and was entitled to deploy a claim for damages. But after written and oral submissions were put on both sides on the issue of damages, the Court in its second judgment (at [148] to [209]) pointed out that there were difficulties both in the plaintiffs damages claim and in the defendants’ defence of aspects of that claim. The Court said the following in its second judgment at the conclusion of its discussion of the plaintiffs damages claim:

“[208]   In summary, the damages claim contains considerable scope for further contention. It is hoped that the parties may be able to reach some measure of agreement on it without further occupying the Court’s time. If not, directions will need to be made for a damages hearing.

[209] This is especially important given the damages claim is small compared with the further costs to be incurred at such a hearing. The Court must have regard to proportionality in the incurring of costs: Civil Procedure Act, s 60.”

  1. After the Court gave its second judgment, the plaintiff decided not to proceed with her damages claim on behalf of the estate. In doing so, the plaintiff conducted herself reasonably, and indeed responsively to the Court’s indications that such a claim may cost more to pursue than it would merit in damages.

  2. The usual rule is that the Court will order costs in accordance with the outcome of the proceedings as a whole, without attempting to differentiate between particular issues on which a party may or may not have succeeded: Bostik Australia Pty Limited v Liddiard (No. 2) [2009] NSWCA 304.

  3. It certainly cannot be said that the plaintiff’s claim for damages would have failed had it proceeded. All that can be said is that there would have been a strong contest on both sides. In the circumstances, in a claim in which the plaintiff has otherwise been successful (including in recovering debts from two defendants on behalf of the estate) the appropriate course for the withdrawn damages claim is for the Court to make no order as to costs for the preparation and conduct of that claim, to the intent that each of the plaintiff and the defendants shall bear their own costs of this part of the proceedings.

(3) What Costs Order in Relation to Australia’s Best Tyres and Gokan Yesilhat

  1. The parties are in dispute about what legal costs should be ordered against Australia’s Best Tyres and Gokan Yesilhat. But the Court has found Australia’s Best Tyres is liable to the estate in a substantial sum and there is no good reason why costs should not follow the event. The estate already has an order for indemnity costs against Mr Okan Yesilhat up to 9 June 2017. The Court said in the first judgment that because of the apparent joint control of Australia’s Best Tyres by both Mr Okan Yesilhat and Mr Gokan Yesihat that in order for indemnity costs against Australia’s Best Tyres would not be warranted: second judgment at [264]. The Court will order the third defendant, Australia’s Best Tyres, to pay the plaintiff’s costs of the proceedings up to 9 June 2017 on the ordinary basis.

  2. It should be noted that a costs order against two defendants will ordinarily make them both liable jointly and severally for those costs: Ryan v South Sydney Junior Rugby League Club Ltd & Ors (1975) 2 NSWLR 660, at 663. But here the first and second events will only be jointly liable in respect of costs assessed on the ordinary basis, because the indemnity costs order has been made only against the first defendant, Mr Okan Yesilhat.

  3. But a dispute still remains about Gokan Yesilhat’s costs. The estate’s case against Gokan Yesilhat failed. He claims costs against the estate. The estate submits that a costs order should be made against him, as he participated in furthering the cases of the other two defendants which the Court as found, at least in Mr Okan Yesihat’s case to be based on a fraudulent scheme of invention.

  4. In the Court’s third judgment, the Court laid out a prima facie approach as to how Mr Gokan Yesilhat’s costs could be determined: third judgement at [22] and [23]. It is a not uncommon situation for one of several defendants, who retain the same legal representatives, to be successful and for the case of the other defendants to fail. That is what has happened here. Ms Culkoff and Russo & Partners have acted for all three defendants. Mr Okan Yesilhat and Australia’s Best Tyres have been unsuccessful in their defence but Gokan Yesilhat has been successful.

  5. The applicable rules of practice are clear. Ordinarily where a solicitor acts for more than one successful defendant in a proceeding, each successful defendant is only entitled to that party’s proportion of the costs incurred on behalf of all, plus any extra costs incurred exclusively on behalf of that party; and this rule is said to be convenient for the “ordinary case” but is not to be automatically applied in every case: King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204, at [25] – [35]), (per Young JA, Hodgson and Campbell JJA agreeing) (“King Network Group”).

  6. This King Network Group combined approach to making an award of costs against two defendants achieving different trial outcomes is also supported by another consideration: that the Court should be mindful of minimising inconvenience to the parties in the later assessment of costs. Attempting to separate out the particular legal costs incurred by Mr Gokan Yesilhat from other costs is likely to generate much disputation on a costs assessment. Any costs assessment after a separate order for costs in favour of Mr Gokan Yesilhat that is not based on King Network Group principles is likely to be a difficult, time-consuming, artificial and conflict-prone exercise.

  7. In these proceedings any separate case brought by the estate against Mr Gokan Yesilhat received only scant attention. The estate’s conduct of that case, as distinct from its conduct of the cases against Mr Okan Yesilhat and Australia’s Best Tyres, consumed very little Court time. The Court was able to observe closely the conduct of all the defendants’ cases, including that of Mr Gokan Yesilhat. He was in the witness box being cross-examined for a small part of the time that his brother Okan was giving evidence. Separate submissions on his behalf were minimal. Little time was taken up with Gokan Yesilhat’s separate position in the Court’s principal judgment.

  8. From the Court’s observations and experience of the trial, the Court would assess the proportion of common costs of the defendants referable to the case of Mr Gokan Yesilhat to be no more than 7.5% of the defendants’ common legal costs. On top of that assessment of common costs, a limited number of specific expenses are referable solely to Mr Gokan Yesilhat’s case. The most obvious example of these is the parts of the pleadings that relate to him and his own affidavit evidence. The Court’s final orders below will reflect this analysis.

(4) Costs of the Proceedings after the First Judgment on 9 June 2017

  1. The parties are in dispute about what costs order should be made concerning the costs of the proceedings in the period after the Court’s first judgment was given on 9 June 2017. The Court specifically limited the indemnity costs orders that it made in the second judgment against Mr Okan Yesilhat to the period up to 9 June 2017. This was because the relief hearing and other issues that followed the principal judgment were conducted with more mixed success on both sides than the proceedings up to 9 June 2017.

  2. Costs should ordinarily follow the event for this later period from 9 June 2017, as they did up to 9 June 2017. But the judgment to be made here about costs is largely an assessment of who has been more successful during this period. Looking at the outcomes of the various arguments leading to the Court’s second, third and fourth judgments, the Court assesses that an appropriate balanced assessment will result in an order that the first and third defendants pay two thirds of the plaintiff’s costs incurred after 9 June 2017. This is because the plaintiff has been substantially but not wholly successful in respect of the various issues in contention after 9 June 2017.

  3. The plaintiff asks for indemnity costs for this period. The contest for the period from 9 June 2017 has largely consisted of legal argument concerning what consequential relief should be granted based on the Court’s findings in its first judgment. Argument has been reasonably maintained by counsel and solicitors on both sides during this period. In the Court’s view, the conduct of neither unsuccessful defendant warrants an order for indemnity costs. The costs orders against Mr Okan Yesilhat and Australia’s Best Tyres in respect of two thirds of the plaintiff’s costs incurred after 9 June 2017 will be assessed on the ordinary basis, not the indemnity basis.

(5) What Interest, if Any, is Payable on Monies Outstanding to the Estate

  1. The parties are also in contest about whether interest is payable on any unpaid monies found by these reasons to be due by Mr Okan Yesilhat and Australia’s Best Tyres to the estate of the late George Sclavos. Where the Court has found money due to the estate, interest would ordinarily be payable at the rates fixed under Civil Procedure Act2005, s 100.

  2. But here the defendants submit that because George agreed when they were made that these loan monies would be advanced on an interest-free basis that no interest up to judgment should now be paid on the loans. The plaintiff acknowledges that the loans were first advanced on an interest-free basis but submits that interest up to judgment should be awarded under Civil Procedure Act2005, s 100 from the latest date that it should be inferred that George demanded the loans be repaid.

  3. The applicable legal principles may be shortly stated. A successful plaintiff who obtains a money judgment will generally be entitled to an award of interest: Ruby v Marsh (1975) 132 CLR 642, at 644; (1975) 6 ALR 385; (1975) 49 ALJR 320; [1975] HCA 32. In the exercise of the Court’s discretion, interest will almost invariably be awarded: Falkner v Bourke (1990) 19 NSWLR 574, at 576B. The purpose of the discretion is to permit a successful party to be properly compensated for the practical loss it has suffered: Screenco Pty Ltd v RL Dew Pty Ltd (2003) 58 NSWLR 720; [2003] NSWCA 319. The plaintiff has referred to certain US authority on the issue of interest but the Court has not found that authority to be of assistance.

  4. The defendants have argued that interest cannot be awarded under Civil Procedure Act, s 100 where a party has an independent entitlement to interest; citing Degman Pty Ltd (in liq) v Wright [1983] 2 NSWLR 348. The defendants submit that the parties agreed here that interest would be 0% and that s 100 cannot now be used to overcome that agreed entitlement (or non-entitlement) to interest.

  5. The plaintiff’s contentions are the more persuasive on this issue. Despite the fact these loans were originally interest-free, by the time the principal of the loans was demanded back and remained unpaid, George and later his estate, were owed principal and were out of pocket in the amount of the principal. From at least that time the Court can properly exercise its Civil Procedure Act, s 100 discretionary power to award interest.

  6. The Court has already concluded in the first judgment that the regular deposits of $2,500 back into George’s account 2428 from the Australia’s Best Tyres account 7383, which commenced in April 2013, show that George had taken his nieces’ advice and had started to make regular collections of these outstanding loans: first judgment at [382] – [386]. The Court has already characterised those regular transfers of $2,500, as repayments of prior loans. The Court infers from its existing findings that George must have requested repayment of his advances to Mr Okan Yesilhat and Australia’s Best Tyres, no later than the first of those repayments of $2,500, which was on 3 April 2013.

  7. It is not in contest that there was no agreed date for repayment of these loans. In those circumstances, as the advances have been found to be loans, not gifts, the loans are repayable on demand on reasonable notice. George must have made what was in substance a demand for repayment of these loans by no later than the date of the first repayment, on 3 April 2013.

  8. By 3 April 2013 these loans, although originally made on an interest-free basis, were the subject of a demand for repayment, which had only been partially satisfied by the time of George’s death. The plaintiff, Ms Calokerinos, then sued on behalf of the estate for payment of the unsatisfied balance, when she commenced the Debt/Trust proceedings in November 2013.

  9. Here, the practical loss that George and his estate have suffered is the cost to them of the principal not being repaid, when there was default in answer to their demand. Whatever agreement was originally made for the advance to be given on an interest-free basis, the interest-free period did not expressly contemplate what would happen after capital was claimed back and not paid in default of the lender’s demand. That period of default is not a period the Court would readily construe as being covered by the original agreement for an interest-free loan.

  10. The Court will therefore award interest on outstanding loan monies for any period for which they were due to George or his estate but unpaid. The quantum of interest due by both Mr Okan Yesilhat and Australia’s Best Tyres should now be calculated. The plaintiff’s calculations of interest will need to be done and checked by the defendants based upon the Court’s findings in this judgment. The Court will direct the plaintiff to prepare, and the defendants to check, interest calculations on the amounts due from each defendant from 3 April 2013 up to 10 August 2020 on the rates in force from time to time for interest up to judgment under Civil Procedure Act, s 100.

Conclusions and Orders

  1. If any party contends that the Court has not resolved other issues and should deal with them, then liberty to apply has been granted to deal with any such issues. The question of whether a specified gross sum will be fixed instead of assessed costs is one such possible issue.

  2. For the purposes of the orders made below, where it is necessary to distinguish between the proceedings, for convenience the respective proceedings will bear the following names:

  1. Proceedings 2013/321052 will be referred to as the “the probate proceedings”;

  2. Proceedings 2013/358168 will be referred to as “the debt/trust proceedings”; and

  3. Proceedings 2014/212466 will be referred to as “the administration/family provision proceedings”;

  1. The Court will make the following orders, notations and directions:

  1. Order that the defendants, Mr Okan Yesilhat and Australia’s Best Tyres, pay two thirds of the plaintiff’s costs of these proceedings incurred after 9 June 2017, which costs shall be assessed on the ordinary basis;

  2. Note that the Court makes no order as to costs in relation to the plaintiff’s withdrawal of her claim for damages on behalf of the estate of the late George Sclavos in the “the debt/trust proceedings”, to the intent that each of the plaintiff and the defendants shall bear their own costs of the plaintiff’s claim for damages in those proceedings;

  3. Order that the plaintiff pay Mr Gokan Yesilhat’s costs of the debt/trust proceedings, which shall be assessed on the ordinary basis and on the basis that he shall receive (a) the costs attributable to his defence which are 7.5% of the common costs incurred by all the defendants in the proceedings, together with (b) any specific expenses referable solely to his participation in the proceedings, being for example expenses related to the preparation of his affidavits.

  4. Judgment for the plaintiff in the debt/trust proceedings:

  1. against Mr Okan Yesilhat in the sum of $123,600; and

  2. against Australia’s Best Tyres Pty Limited in the sum of $95,355;

  1. Order Australia’s Best Tyres Pty Limited pay the plaintiff’s costs of the debt/trust proceedings up to 9 June 2017 on the ordinary basis;

  2. Order that the defendants, Mr Okan Yesilhat and Australia’s Best Tyres Pty Limited pay interest to the plaintiff from 3 April 2013 until today on the judgments entered against those defendants today at the rate fixed from time to time for interest up to judgment pursuant to Civil Procedure Act, s100;

  3. Direct the plaintiff to serve upon the defendants and provide to the Court by 5pm on Friday, 14 August 2020 the final calculations of interest up to the date of judgment.

  4. Direct the defendants to indicate by 5pm on Friday, 21 August 2020 to the plaintiff and provide to the Court any disagreement with the plaintiff’s calculation of interest and the basis for that disagreement; and

  5. Grant Liberty to apply.

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Amendments

23 November 2020 - Coversheet- Decision: "second" to "third" in first, third and second last line.


Coversheet - Solicitors, plaintiff's solicitor added


[2] insert last line "first, second and third" judgments".


[3] sixth line, "second" to "third"


[5] first line, the plaintiff to "Okan Yesilhat, Gokan Yesilhat and Australia's Best Tyres" and last line "appear for the defendant" changed to "Ms Calokerinos"


[51] third last line, "second" to "third"


[57] third last line, "second" to "third"


[66] fourth last line, "second" to "third"

Decision last updated: 23 November 2020

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