Dinakis and Zurcas v Zurcas
[2013] VSC 79
•28 February 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2010 02735
IN THE MATTER of Part IV of the Administration and Probate Act 1958
AND IN THE MATTER of the Will and Estate of VASSILIOS ZURCAS, deceased
BETWEEN
| DAPHNE DINAKIS AND CONNIE ZURCAS | Plaintiffs |
| and | |
| STAN ZURCAS, SAM ZURCAS AND NICK ZURCAS (As Executors of the Will and Estate of VASSILIOS ZURCAS, deceased) | Defendants |
---
JUDGE: | DIGBY J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 December 2012 | |
DATE OF JUDGMENT: | 28 February 2013 | |
CASE MAY BE CITED AS: | Dinakis & Zurcas v Zurcas & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 79 | |
---
ADMINISTRATION AND PROBATE – Testator’s family maintenance – Application for discovery – Documents sought not relevant to issues raised by parties – No special circumstance to justify discovery – Application refused.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Riordan SC and Mr S Newton | Tasiopoulos Lambros & Co |
| For the Defendant | Ms C H Sparke SC | Middletons |
HIS HONOUR:
The appeal
Daphne Dinakis and Connie Zurcas, by notice dated 23 October 2012, appeal pursuant to r 77.06 of the Supreme Court (General Civil Procedure) Rules 2005 (“SCR”) against the whole of the judgment of the Honourable Associate Justice Zammit dated 16 October 2012, by which her Honour dismissed the plaintiffs’ application for discovery by summons dated 9 May 2011.
These proceedings were commenced by Originating Motion issued on 20 May 2010. The plaintiffs seek relief pursuant to Part IV of the Administration and Probate Act 1958 (“the Act”), in essence for orders providing for the proper maintenance and support of the plaintiffs out of the estate of the deceased, one Vassilios Zurcas and for any necessary and consequential orders, directions, accounts and inquiries.
In the application by summons dated 9 May 2011 and in this appeal, the plaintiffs seek discovery of a number of categories of documents. In the initial application before the Honourable Associate Justice discovery was sought of sixteen categories of documents pursuant to r 29.07(2) of the SCR. Those categories, as detailed in paragraph 6 of her Honour’s Judgment dated 16 October 2012, may be generally described as financial statements and transaction-related documents concerning the Zurcas Family Trust and relating to negotiations and the acquisitions of property, and other interests by Zurcas Nominees, and interests associated with the second and third defendants by Allendale Pty Ltd. In addition documents were also sought in respect of certain negotiation and/or redemption of interests by V.& D. Zurcas Holdings Pty Ltd, and the second and third defendants. Discovery was also sought before her Honour of documents relating to the transfer of interests held by Vassilios Zurcas (or entities of which Vassilios Zurcas was director or shareholder) and/or Dosta Zurcas to the defendants, or entities associated with the defendants, together with all financial and trust records for the financial years ending 30 June 2006, to a date in about mid September 2012, in relation to certain trusts including the Zurcas Family Trust and the Allendale Unit Trust.
In this appeal the plaintiffs continue to seek:
(i)Orders pursuant to Ch II r 16.07(a) that the defendants produce for inspection (rather than discovery) the files held by the deceased Vassilios Zurcas (prior to his death), Mr Zurcas’ solicitors in Shepparton and Mr Zurcas’ accountants in Shepparton in respect of the acquisition by Zurcas Nominees of most of the assets and interests which had been the subject of the application for discovery rejected by her Honour;
(ii)Pursuant to r 29.07(2) that the defendants make discovery of documents including the financial statements for Sacruz Nominees Pty Ltd, documents relating to transfer of power of appointment from Vassilios Zurcas in the Zurcas Family Trust; documents relating to the Zurcas Family Trust Deed and documents relating to the transfer of interests held by Vassilios Zurcas, Dosta Zurcas (or entities which Vassilios Zurcas was a director or shareholder) to the defendants or entities associated with the defendants. Discovery is also sought of all financial and trust records for the financial years ending 30 June 2006 to about mid December 2012 in relation to the same trust and unit trusts which were the subject of the application for discovery by summons dated 9 May 2011. The application for the discovery of these documents was also rejected by her Honour.
Background
The plaintiffs are the daughters of Vassilios and Dosta Zurcas who died in 2009 and 2011 respectively. Both Vassilios and Dosta Zurcas left wills dated 31 July 2008.
The plaintiffs Daphne Dinakis and Connie Zurcas are siblings together with the first defendant Stan Zurcas. The second and third defendants Sam Zurcas and Nick Zurcas are the sons of Stan Zurcas.
The wills of the deceased parents make provision resulting in the plaintiffs receiving approximately $950,000.00 each and the defendants benefiting in the sum of approximately $4.7 million in the aggregate.
The plaintiffs and the defendants rely upon a number of affidavits in this application namely:
(a)The plaintiffs’ affidavits:
(i) Affidavit of Nicholas Lambros sworn 8 May 2012.
(ii) Reply Affidavit of Nicholas Lambros sworn 12 June 2012.
(iii) Affidavit of Connie Zurcas sworn 22 November 2010.
(b)The defendants’ affidavits:
(i) Affidavit of Anthony Brooke Watson sworn 8 June 2012 .
(ii) Affidavit of Travis Robert Payne sworn 11 September 2012.
The application and the defendants’ responses to it also require the consideration of the earlier affidavits filed by the parties in support of the Originating Motion dated 20 May 2010 and the defendants’ case in response, as outlined below.
Nature of review
Rule 77.06 provides for this Court to consider an appeal from any judgment or order of an Associate Judge; such an appeal is by way of a re-hearing de novo.
Discovery applications – Part IV of the Act
Both the plaintiffs and the defendants expressly recognise in their submissions that in a proceeding such as this, commenced by originating motion in relation to testator’s family maintenance-related relief, discovery will not be ordered unless the applicant for discovery can establish that the discovery sought relates to a question in the proceeding and special circumstances exist which justify the making of the orders sought. In this regard both the plaintiffs and the defendants cite Lord Greene in Re Borthwick[1] where Lord Greene MR described the jurisdiction of the court in connection with discovery applications in family provision proceedings as follows:[2]
The jurisdiction, of course, is a peculiar one, and anyone familiar with it knows that if the procedure were to be abused and not kept under proper control, it might lead to litigation of the greatest acrimony and the threshing out of a lot of irrelevant material which would not be in the public interest.
The plaintiffs also cite a further passage of his Lordship’s speech:[3]
The plaintiffs, however, have not put forward a single shred of fact or a single suggestion casting doubt on the fairness or accuracy of the executors’ evidence on the subject of value. Indeed their complaint is this: ‘We cannot do that without some materials and the reason why we want discovery is to enable us to test what the executors have said and to see whether or not we can find something on which to attack their estimate’. In ordinary litigation, of course, the ordinary rules of discovery enable litigants to conduct such an examination, but this is a very special jurisdiction under a very special Act governed by very special rules. The judge has ample power, if he is not satisfied or if he thinks there is a reasonable ground for doubting the accuracy of such an estimate as this, to require further evidence on the point, to summon the executors before him, to put questions to them and to subject them to cross-examination. If he thought that was the proper course and if the matter was a matter of doubt or if suspicion was aroused, that no doubt would be the course that he would take. But here we have what on the face of it is sworn testimony by reputable people, the accuracy of which has been subjected to the not too easy test of an investigation by a government department. Everybody who has a little experience of these matters knows that the valuation of shares in private companies is often an extremely difficult matter, and also, I think, everybody knows that where such shares come up for valuation for death duty purposes they are a subject-matter on which the death duty officials are particularly vigilant and particularly inquisitive. A judge who is asked to exercise his discretion in a case of that kind has to weigh in his mind these considerations. Here are plaintiffs who cannot suggest any doubt about this prima facie reliable method of arriving at the valuation, who merely ask for the instrument of discovery to be put into their hands to enable them to see if they can find something on which to attack it. If ever there was a case where a judge should decline to exercise a discretionary jurisdiction to grant an order for discovery, I think this is such a case. If any reasonable suggestion of doubt could be raised, I have no doubt the judge in his discretion under the power given to him by these specific rules would require further information.
[1][1948] Ch 645.
[2]Ibid 468.
[3]Ibid 650–651.
The above approach has been affirmed by this Court, subsequent to the enactment of s 91 of the Act in its current form.[4]
[4]Harris v Bennett (No 3) (2002) 8 VR 425.
The plaintiffs’ arguments
The plaintiffs contend that the factual context in which the deceased has conducted 30 years of successful entrepreneurial activity, namely, on the plaintiffs’ assertion, for the benefit of his son Stan Zurcas, is a particularly relevant factor under s 91(4)(l) of the Act in determining whether the deceased had made adequate provision for the proper maintenance and support of each of the plaintiffs and the amount of provision which the court should order pursuant to s 91 of the Act.
The plaintiffs argue that the fact that the deceased had conferred, on the plaintiffs’ contention, substantial benefits and also provided the opportunity to Stan Zurcas (and his family) to acquire further very substantial benefits, but did not do so in his lifetime for the plaintiffs, is a relevant matter, on a number of bases including that s 91(4)(l) of the Act provides that the Court must take into account any benefit previously given by the deceased person to any applicant or any beneficiary. Further, the plaintiffs argue that if the discovery sought is not ordered, the plaintiffs will be prevented from putting before the Court evidence which, particularly in his case, would be highly relevant to the Court’s determination of the applications in the respects referred to in this paragraph.
The plaintiffs further assert that the discovery sought in this matter is necessary to advance the case the plaintiffs wish to run at trial, namely that the deceased Vassilios Zurcas conferred benefits in the order of tens of millions of dollars on the first defendant (and his family) during his lifetime and it is necessary for the Court to have regard to this fact in determining whether the testators in their wills made adequate provision for proper maintenance and support of the plaintiffs.
The plaintiffs submit that the successful entrepreneurial activities, which it is asserted benefited the first defendant (and his family), and the benefits asserted to be conferred by Vassilios Zurcas on the first defendant (and his family) render relevant the acquisitions, transactions and financial records they seek to discover. As noted, what is sought by way of discovery and inspection before this Court is substantially the same scope of discovery pursued before the Associate Judge.
Section 91 of the Act provides as follows:
91 Power of the Court to make maintenance order
(1)Despite anything in this Act to the contrary, the Court may order that provision be made out of the estate of a deceased person for the proper maintenance and support of a person for whom the deceased had responsibility to make provision.
…
(3)The Court must not make an order under sub-section (1) in favour of a person unless the Court is of the opinion that the distribution of the estate of the deceased person effected by —
…
does not make adequate provision for the proper maintenance and support of the person.
(4)The Court in determining —
…
(b)whether or not the distribution of the estate of the deceased person as effected by —
(i)the deceased’s will; or
(ii)the operation of the provisions of Part 1, Division 6; or
(iii)both the will and the operation of the provisions —
makes adequate provision for the proper maintenance and support of the person; and
(c)the amount of provision (if any) which the Court may order for the person; and
…
(f)any obligations or responsibilities of the deceased person to the applicant, any other applicant and the beneficiaries of the estate;
(g)the size and nature of the estate of the deceased person and any charges and liabilities to which the estate is subject;
(h)the financial resources (including earning capacity) and the financial needs of the applicant, of any other applicant and of any beneficiary of the estate at the time of the hearing and for the foreseeable future;
…
(l)any benefits previously given by the deceased person to any applicant or to any beneficiary;
…
(p)any other matter the Court considers relevant.”
The plaintiffs emphasise that the above issues constitute particularly relevant factors under s 91(4)(l) of the Act in determining whether the deceased had made adequate provision for the proper maintenance and support of each of the plaintiffs and the amount of provision which the Court should order pursuant to s 91 of the Act. Further, the plaintiffs submit that the fact that the deceased has, on the plaintiffs’ contention, conferred on the first defendant, but not on the plaintiffs, substantial benefits as well as opportunities to acquire further substantial benefits is a relevant matter including on the following bases:
(i)Section 94(4)(l) provides that the Court must take into account any benefits previously given by the deceased person to any applicant or any beneficiary.
(ii)The defendants’ case appears to be that the plaintiffs have already received substantial benefits of about $950,000.00 from each of the estates of the deceased and his wife and that as a result they have no need for further provision. The plaintiffs submit that in assessing the plaintiffs’ need the Court must take into account all the circumstances and in particular the overall wealth of the deceased. The plaintiffs further argue that if it is established that the deceased controlled a substantial business empire, well beyond the assets in his own name, and transferred the benefit of that empire to the first defendant and others during his life but did not give the plaintiffs the same benefits or opportunities, those circumstances are likely to be material to the Court’s consideration of the extent of the provision which the Court might be prepared to make for the benefit of the plaintiffs.
(iii)If the discovery sought is not ordered the plaintiffs will be prejudiced in putting before the Court the case which they wish to establish at trial.
The plaintiffs also submit that if the Court was to order the discovery sought there will be no undue delay to the proceeding either in its interlocutory progress or by prolonging the trial. The plaintiffs also argue that, in any event, the prejudice to them in not being able to investigate and present all potentially relevant evidence outweighs any prejudice to the defendants arising from a more involved and/or protracted and costly proceeding.
The defendants’ arguments
In addition to observing that the material which the plaintiffs seek by way of discovery needs to be relevant to issues in the proceeding and further that the plaintiffs must identify a special circumstance to justify discovery in this sort of proceeding, the defendants argue that the plaintiffs’ entitlement to discovery should not be tested by reference to the list of “relevant factors” in s 91 of the Act but is to be determined by reference to the pleadings, if any, and/or the substantive material filed by the parties in the proceeding which informs the issues to be addressed at trial.[5]
[5]Cf Harris v Bennett (No 3) (2004) 8 VR 425 [38].
The defendants also argue that in applications such as this the Court ordinarily resists the general investigation of financial affairs by discovery, or related processes. The defendants also argue that at all events, the documents sought are not relevant as determined by the affidavit material filed in the proceeding because the plaintiffs do not in their affidavit material conduct their case on the basis there has been substantial financial support to the defendants by means of earlier conferred benefits by the deceased. Further, the defendants argue that they do not profess to have financial need or a financial competing claim and accordingly, in effect the plaintiffs are competing with the deceased’s freedom of testation rather than with the other beneficiaries.
The defendants note that they do not deny that they have interests in non-estate entities but say that they have worked with the deceased and his entities and that they have earned what they have received. The defendant beneficiaries do not proffer a competing claim or otherwise put in issue the extent to which they have been compensated or received provision. The defendants submit therefore that the case can be conducted on the present affidavit material.
The defendants also argue that the documents sought are not relevant because the plaintiffs do not make their own claim in the proceeding by demonstrating that the other beneficiaries do not have claims of their own by reason of their financial position, but rather what is relevant is the extent to which proper provision ought to be made for the plaintiffs taking into account the plaintiffs’ moral claim and financial position. The defendants emphasise that neither party in the proceeding advances a case on the basis of a “dependency” created, but not met by the testator.
Finally, the defendants assert that the plaintiffs’ application is fishing and oppressive, fails to adequately define the discovery sought and also observe that if this application were successful the defendants would probably require the plaintiffs to give similar discovery to the defendants. The defendants say that if the discovery and inspection sought was ordered that would extend the interlocutory phase of the proceeding by at least six months and would result in the trial being extended from three days to at least ten days.
Reasons for rejecting the plaintiffs’ application for discovery and appeal
I accept the defendants’ contention that discovery should not be ordered in this case unless it can be established that the discovery sought relates to substantial issues in the proceeding as presently framed. It is therefore necessary to consider the issues raised by the parties both in the Originating Motion and the substantive affidavits.
The plaintiffs’ Originating Motion filed 20 May 2010 seeks the following relief pursuant to Part IV of the Act:
… such provision for the plaintiffs proper maintenance and support as this Honourable Court thinks fit be made out of the estate of the deceased.
The primary affidavits of Daphne Dinakis and Connie Zurcas sworn 4 August 2010 address the deponents’ relationship with their deceased father, contributions made by the deceased and the care and attention which both Daphne Dinakis and Connie Zurcas provided to their father, particularly towards the end of his life. Daphne Dinakis’ affidavit of 4 August 2010 provides a general overview of the family history and provides a little evidence about the family businesses including in relation to a property at Tatura and the purchase of the GV Hotel, a cool store, a transport business and the Sherbourne Hotel. Neither of these affidavits raise the issue of Vassilios Zurcas conferring benefits in the order of tens of millions of dollars on the deponents’ brother, Stan Zurcas and his family.
Similarly, subsequent affidavits of Connie Zurcas sworn 22 November 2010 and Daphne Dinakis’ affidavit of 18 November 2010 do not seek to advance the issue of the extended benefits which the deceased conferred upon Stan Zurcas and his family. Daphne Dinakis’ affidavits of 21 November 2011 and 13 December 2011 do not seek to rely upon such matters or even raise them.
The defendants’ principal affidavit dealing with the deceased’s financial affairs deposed to by Stan Zurcas on 17 September 2010 deals with the deceased’s business interests and the ownership of relevant assets and also describes the way in which the deceased and family members participated in the running of the relevant family companies. By affidavit sworn 17 September 2010, Nick Zurcas generally supports Stan Zurcas’ affidavit of the same date.
It is to be noted that in the affidavits in reply filed by Daphne Dinakis on 18 November 2010 and Connie Zurcas sworn 22 November 2010, neither Daphne Dinakis nor Connie Zurcas addressed the “conferred benefits” issue as such. However, Connie Zurcas’ reply affidavit states in paragraph 4:
In relation to paragraph 9, although he says that he worked for many years for my father with little pay or return, he has accumulated considerable assets during his life.
In this paragraph Connie Zurcas is addressing in paragraph 9 of the affidavit of Stan Zurcas sworn 17 September 2010 which referred to the transfer of certain assets to V & D Zurcas Holdings, which Stan Zurcas says was in recognition of many years working for the deceased for little pay.
At paragraph 6 of her affidavit sworn 22 November 2010 Connie Zurcas deposes:
… I believe that Stan overstates his role in and involvement with the Sherbourne Hotel. He carried out minimal duties. I believe that income from the hotel was used to pay Stan’s family’s household bills and assist in the accumulation of assets which were purchased by Stan and his children.
This passage represents the only allusion to anything in the nature of the conferred benefits argument put forward by the plaintiffs on appeal. However, read together with all of the affidavit material referred to above and in the context of the Originating Motion of 20 May 2010, paragraphs 4 and 6 of the Connie Zurcas affidavit sworn 22 November 2012 do not appear to raise a positive case by which the plaintiffs seek to establish that the deceased conferred extensive benefits on Stan Zurcas and his family. Rather, they represent discrete responses in reply to elements of evidence in Stan Zurcas’ statements in paragraph 9 and 12 of his affidavit sworn 17 September 2010, to the effect that the deceased recognised Stan Zurcas’ many years of work for little pay or return by transfering certain assets to Stan’s benefit. In paragraph 12 of his affidavit of 17 September 2010 Stan Zurcas deposes to the extent of work which he contributed, together with his sons, in relation to the operation of the Sherbourne Hotel.
The plaintiffs also rely on the affidavits of Nicholas Lambros sworn 8 May 2012 and 12 June 2012 which purport to deal with the nature and structure of certain relevant businesses. Nicholas Lambros is the solicitor acting for the plaintiffs in this proceeding. His affidavits assert that the deceased gave extremely substantial benefits to the first defendant and his family during the course of his life as set out in paragraph 6(b) of his affidavit. Much of Mr Lambros’ affidavit of 12 June 2012 is in the nature of a submission as is also Mr Lambros’ affidavit sworn 8 May 2012, and in particular paragraph 6 of that affidavit. In my view the Lambros affidavits add little to the assertion that this proceeding raises the issue of benefits conferred by the deceased on Stan Zurcas and his family. It is the substantive affiavits of the plaintiff beneficiaries which are instructive as to what is the issue in the proceeding.
Accordingly, I am not persuaded that the plaintiffs’ substantive case has put in issue the conferred benefits which the plaintiffs argue justify the Court ordering extensive discovery at this late stage of the proceeding. It is for the parties to determine the issues and the scope of the Court’s enquiry. Justice Redlich in Harris v Bennett explained the relationship between the provisions of s 91(4)(e)-(o) of the Act, as follows:
[37]The plaintiff’s submission that the proper construction and effect of the mandatory provisions require the applicant and all beneficiaries to provide discovery in relation to the matters enumerated in paras (h) and (l) of s 91(4) of the Act cannot be sustained.
[38]No authority need be cited for the proposition that the determination of an application under s 91 of the Act must be based upon relevant considerations. Whether a matter enumerated in s 91(4)(e)-(o) will bear upon the court’s determination of the application must depend upon its relevance to the issues as defined by the material relied upon by the parties to the proceedings. Where the issues as so defined reveals that a matter enumerated in paras (e)-(o) is irrelevant, the curial process should not be employed to compel a party to make discovery. While a court must have regard to such matters, each is to be considered only to the extent that it is found to be relevant.
Further, I am not persuaded that the plaintiffs’ affidavit material establishes anything in the nature of the required special circumstance justifying the discovery order sought. I also consider that the extent and nature of discovery sought is disproportionately large and far reaching, given the substantive issues in the proceedings.[6] In this regard I have considered the affidavit of Anthony Brooke Watson, sworn 8 June 2012, which appears, prima facie, to establish that there will probably be considerable time and cost involved in addressing the plaintiffs’ intended discovery and inspection both in the interlocutory and the trial stages of this proceeding.
[6]Blair v Blair [2002] VSC 131 [2]-[3]; Harris v Bennet (No 3) (2004) 8 VR 425.
In the circumstances of this case ordering the discovery sought by the plaintiffs does not seem consonant with the objects of s 7(1) of the Civil Procedure Act 2010. The expense and delay of discovery would be disproportionate to the utility of the materials sought to be discovered. Mr Watson’s affidavit at paragraph 19 deposes to a period of at least six months to address the task of dealing with the plaintiffs’ requested discovery and inspection and also deposes to an expansion of the time for trial from three 3 to 10 days and a very substantial increase in the costs of dealing with the trial where the plaintiffs’ applications for discovery and inspection to be successful.
Mr Lambros in his affidavit of 12 June 2012 disagrees with Mr Watson’s evidence about the consequences of the discovery order being sought. Although the Court is not in a position to finally evaluate the competing evidence as to consequences in relation to the discovery and inspection, given the extensive material sought to be discovered and inspected, as set out in the plaintiffs’ Notice of Appeal, and proposed orders, it appears more probable than not that were the Court to accede to the plaintiffs’ applications there would at least be considerable further interlocutory effort required by the parties, a likely delay in the trial of the matter together with a significantly extended period being required for the trial together with attendant increases in legal costs. Although these matters are of course not decisive against the plaintiffs’ application, they are nevertheless relevant factors to be taken into account.
Conclusion
The plaintiffs’ heavy reliance upon the Act in s 91(4)(l) obfuscates the critical issue, namely whether the discovery sought relates to a significant issue in the proceeding and does not itself identify a special circumstance justifying the making of the orders sought.
As earlier explained, in this proceeding there is no issue as to the defendants’ financial resources or needs nor will the defendants’ circumstances be of likely relevance to the plaintiffs’ claim and the court will therefore not ultimately be required to give consideration to such matters.
Further, the learned Associate Judge observed, even if the conferred benefits inter vivos received by the defendants were to be relevant, the affidavit material filed in the matter to date should be adequate to ventilate that issue at trial. However, as noted in Borthwich, in any event there must be more than just relevance, there must be a special circumstance to justify the orders sought and the plaintiffs’ application appears to be premised on no more than a possible chain of inquiry in connection with the large number of documents sought by them in this appeal.
Finally, no special circumstance is here made out.
Accordingly I dismiss the plaintiffs’ appeal.
I shall hear the parties as to costs, if necessary.
---
3
0