Galaxidis v Galaxidis (No. 2)

[2004] NSWCA 387

CITATION:	Galaxidis v Galaxidis (No. 2) [2004] NSWCA 387
HEARING DATE(S):	On papers
JUDGMENT DATE:	1 November 2004
JUDGMENT OF:	Giles JA at 1; Hodgson JA at 2; Tobias JA at 3
DECISION:	(1) Appeal allowed in part; (2) Declarations and orders made by Austin J on 20 December 2002 set aside; (3) The first and second appellants pay to the first respondent compensation in the sum of $145,156.05 together with interest thereon from 1 August 2004 to the date of payment at the rate prescribed by Schedule J to the Supreme Court Rules 1970; (4) The first and second appellants pay to the first respondent additional compensation in the sum of $128,888.88 being one ninth of the value as at 20 May 2004 of the land comprised in Folio Identifier 1/735865 together with interest thereon from 1 August 2004 to the date of payment at the rate prescribed by Schedule J to the Supreme Court Rules 1970; (5) The land comprised in Folio Identifier 1/735865 to be the subject of a first ranking charge except as to Mortgage No. 2589700 to secure payment by the first and second appellants to the first respondent of the amounts referred to in Orders (3) and (4); (6) The first and second appellants be restrained from increasing or varying their liability under Mortgage No. 2589700 unless and until the charge referred to in Order (5) is discharged; (7) Subject to Orders (5) and (6), the first and second appellants are permitted to further encumber the land in Folio Identifier 1/735865 by way of charge, mortgage or otherwise ranking in priority behind the charge referred to in Order (5); (8) The appellants pay the first respondent's costs of the proceedings before Austin J including any reserved costs; (9) The cross-appeal be dismissed; (10) Each party to pay their or his own costs of the appeal and cross appeal; (11) Any subsisting stays of execution be discharged; (12) Liberty to apply to amend or vary the above orders pursuant to Part 20 r 10(1) of the Supreme Court Rules only if made within 7 days of the date hereof
CATCHWORDS:	JUDGMENTS - Request for withdrawal of - Ultimate finding of court not addressed in grounds of appeal - Possibility of finding was apparent to the parties - COSTS - Both parties partially successful - Bear own costs - ORDERS - Security for - Mortgage over property - Priority of
LEGISLATION CITED:	Supreme Court Rules 1970
CASES CITED:	None
PARTIES :	Athanasios Galaxidis Georgia Galaxidis Antonios Galaxidis John Galaxidis Nikolaos Galaxidis
FILE NUMBER(S):	CA 40078/03
COUNSEL:	1A, 2A & 3A: J E Thomson / M J Watts 1R: D Smallbone
SOLICITORS:	1A, 2A & 3A: Colin Biggers & Paisley 1R: M J Woods & Co, Sydney 2R: G B Fernie & Co, Sydney

LOWER COURTJURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 3884/98
LOWER COURT JUDICIAL OFFICER :	Austin J

CA 40078/03
SC 3884/98

GILES JA
HODGSON JA
TOBIAS JA

Monday 1 November 2004

ATHANASIOS GALAXIDIS & ORS v JOHN GALAXIDIS & ANOR (No. 2)

Judgment

1 GILES JA: I agree with Tobias JA.

2 HODGSON JA: I agree with Tobias JA.

3 TOBIAS JA: On 20 May 2004, the Court delivered its substantive judgment in this matter (the judgment) pursuant to which it was ordered, inter alia, that the appeal be allowed in part, the cross-appeal dismissed and the declaration and orders made by Austin J on 20 December 2002 be set aside.

4 The primary judge had held that arising out of what is referred to by his Honour as "the third conversation", the property known as the Flinders Street property (being the land in Certificate of Title Folio Identifier 1/735865), was held by Mr and Mrs Galaxidis upon trust for their sons John, Nikolaos and Antonios. The basis of this finding was that Mr and Mrs Galaxidis had encouraged in their sons an expectation that they would transfer an immediate proprietary interest in the whole of the Flinders Street property to the sons, the latter had acted upon that expectation to their detriment and consequently Mr and Mrs Galaxidis were estopped from unconscionably departing from the assumption which they had so encouraged.

5 In [62] of the judgment, reference was made to the primary judge's finding that there were two competing interpretations of the arrangement founded on the third conversation. The first was that Mr and Mrs Galaxidis promised or represented to their sons that they were granting to them an indefinite right or licence to use and occupy one third of the Flinders Street property but which did not confer any proprietary interest therein. The second was that they promised or represented to their sons that they would make them the immediate beneficial owners of the Flinders Street property subject to certain conditions. The primary judge considered that second of those competing interpretations was the one he should adopt. This Court came to a different view and considered that the first interpretation was the correct one.

6 Upon publication of its reasons, the Court sought submissions from the parties on the issue of the costs of the appeal, as well as directing that short minutes to give effect to the Court's conclusions be prepared. Because the Court had concluded that John was entitled only to a one-ninth interest in the Flinders Street property (being one-third of one-third), the parties agreed that an award of monetary compensation was the appropriate form relief to which John was entitled. It was necessary to obtain a current valuation of the Flinders Street property to give effect to that conclusion. This has been done and the amount of compensation has been agreed.

7 Given that the appellants only partially succeeded in their appeal, the Court foreshadowed in [153] of the judgment that the first respondent should be ordered to pay only one-third of the appellants' costs of the appeal. However, the parties were given leave to make submissions to support the making of a different order. The first respondent, who has submitted that a different order for costs of the appeal should be made to the one foreshadowed, has availed himself of that opportunity. The appellants are content with the order foreshadowed.

The application to re-open the appeal

8 Before dealing with the issue of costs, the first respondent has made submissions to the effect that the Court should withdraw the judgment and grant leave to the parties to make further submissions with respect to the nature of the interest in the Flinders Street property which it was asserted that Mr and Mrs Galaxidis were estopped from denying.

9 Essentially, the first respondent complains that none of the appellants' grounds of appeal covered the finding made by the Court as to the nature of that interest. Reference was made to Ground 1C of the Amended Grounds of Appeal filed on 1 March 2004 (after the written submissions had been filed) and which alleged that the primary judge was in error in that he should have concluded that if any clear, unequivocal promise was made in the third conversation, that promise did not go beyond permitting the business partnership between the three brothers to use one-third of the Flinders street property for the retailing the partnership's motor vehicles for the life of the partnership. I should make it clear that the appellants' primary argument was that there was no promise or representation made at all which could give rise to any form of estoppel. If the Court repeated that contention (as it did), the license interest referred to in Ground 1C was the appellants' fall-back position if this Court also rejected the primary judge's finding with respect to the three brothers having an immediate proprietary interest in the whole of the Flinders Street property.

10 The first respondent submits that the question of an intermediate position being an irrevocable licence or a licence of indefinite duration in one third of the Flinders Street property was a suggestion which fell from the Court during the course of argument and upon which neither party had made considered submissions. It is true that the written submissions did not cover such a possibility although those of the appellants, in support of the proposition that the third conversation did not extend to the brothers receiving the beneficial ownership of the whole of the Flinders Street property, did concede that that conversation did relate to one third of that property. Nevertheless, the point made by the first respondent is correct namely, that the written submissions did not cover the interest in the Flinders Street property which the Court adopted. However, oral submissions were made with respect to this issue although, according to the first respondent, they were made "on the run".

11 The first respondent submits that this Court's conclusions in the judgment were premised on its disagreement with the view of the primary judge as to the interest in the Flinders Street property, which was the subject of the expectation with respect thereto encouraged in the brothers by their parents and on which they acted to their detriment. It is submitted that it was not open to this Court to reject the interpretation of the arrangement founded on the third conversation adopted by the primary judge, and which was the second of the two competing interpretations referred to in [62] of the judgment. It was contended that because it was open to the primary judge to adopt the interpretation (which he did), then this Court in effect had no proper basis to interfere with his Honour's finding. It was said that the primary judge's view was based upon his Honour's impressions of the witnesses, the cultural expectations of the parties and other facts and matters set forth in the first respondent's written submissions.

12 Further, it is submitted that the reasons for judgment overlooked a number of findings of the primary judge such as the fact that the discussion about one third of the Flinders Street property occurred in a later part of the third conversation and that there were two parts to that conversation, one dealing with the security of tenure for the sons' business in one third of the yard and the other dealing with the property at large.

13 The complaint is thus made that the primary judge considered that there were two parts to the third conversation dealing with two different subjects rather than just one but that this Court has conflated the two, an approach that was rejected by the primary judge, it being open to him to do so.

14 Finally, it is submitted that the relief proposed by this Court is outside the ambit of the Amended Notice of Appeal and therefore on that basis the appeal should be dismissed. As to the last-mentioned submission, the appellants' argument at the hearing of the appeal was that no estoppel arose as a consequence whereof the primary judge's orders should be set aside. That, of course, was one extreme. The other extreme advanced by the first respondent was that the appeal should be dismissed. This Court considered that there was properly, on the evidence, a third position, which is the one it adopted.

15 In my opinion, the first respondent's application for the Court to withdraw its judgment and the appeal to be re-argued based on further written submissions should be firmly rejected. The primary position of the appellants was that his Honour erred in adopting what I have referred to as the second of the two interpretations of the third conversation. The Court agreed with this submission. The primary judge himself (at [106] of his judgment) recognised the possibility of an indefinite right of occupation to one third of the Flinders Street property. The first respondent must have recognised that this was a possible interpretation which this Court might adopt as an appropriate fallback position if the appellants were successful (as they were) in persuading the Court that the primary judge erred in finding that Mr and Mrs Galaxidis intended to give their sons an immediate proprietary interest in the whole of the Flinders Street property. Had that not been the first respondent's fall back position he would have received nothing or, at the most, a licence of limited duration as adumbrated by the appellants in Amended Ground of Appeal 1C. Clearly, a licence of indefinite duration in one third of the Flinders Street property, which the Court adopted, was the best the first respondent could do given the Court's rejection of the interest found by the primary judge. I can see no proper basis upon which the first respondent should now be permitted to reopen the appeal to further argue that the primary judge's interpretation of the third conversations was correct. That was the subject of extensive written and oral submissions and the Court has made its considered judgment thereon.

16 To suggest as does the first respondent that the appeal will miscarry if this Court acts (as it has) upon a view of the facts concerning the nature of the encouraged expectation which differs from that adopted by the primary judge without a further opportunity for the first respondent to contest that claim after it has been developed in further submissions by the appellants is, in my opinion, misconceived. As I have said, the first respondent was faced with the appellants succeeding in having the primary judge's findings set aside, the appeal allowed and John's claim to any interest in the Flinders Street property dismissed. It was not the appellants' submission that if they succeeded in having the primary judge's findings set aside their fallback position was a license of indefinite duration in one-third of the Flinders Street property. It was their primary submission that there was no licence at all, but if there was one it was confined to one third of the property for the duration of the partnership between the three brothers. The Court considered that there was a third option, which it ultimately adopted, and it was in the first respondent's interest to advance and embrace it as the best that could be achieved in the event that this Court acceded to the appellants' submission that his Honour erred in finding that there was an immediate proprietary interest to the whole of the Flinders Street property.

17 It is remarkable that the first respondent should now be saying that the third option should not be adopted. If that fallback is not adopted, the first respondent gets nothing.

18 Accordingly, for the foregoing reasons I would reject the first respondent's application to re-open the appeal.

The costs of the appeal

19 The first respondent submits that to require him to pay one third of the appellants' costs in the appeal would be unfair given that he has succeeded on the vast bulk of the issues which were argued and which were conducted at substantial expense in terms of time and effort. It is further submitted that the appellants should not be entitled to an order for costs in respect of a form of relief for which they did not contend in their Amended Notice of Appeal. There is no substance in this last-mentioned matter but, in my opinion, there is substance in the fact that the first respondent was required to defend, and was successful in doing so, the proposition that he had a real and valuable interest in the Flinders Street property and was thus successful in resisting any attempt by the appellants to strip him of any entitlement whatsoever.

20 The first respondent therefore submits that the burden of costs between the parties should be adjusted in several ways. The first is that the first respondent pay the appellants' costs of the cross-appeal and the preparation of the Red, Blue and Black appeal books together with one quarter of their costs of the hearing to be off-set by an order that the appellants' pay the first respondent's costs up to the commencement of the hearing (excluding the costs of the cross-appeal) and thereafter one half of the first respondent's costs. In the alternative, the first respondent submits that there should be no order for costs.

21 The appellants submit that the basis on which they have succeeded (albeit not to the full extent for which they contended) was clearly an issue on the appeal and made clear from the appellants' written submissions to which the Amended Notice of Appeal was a response to a submission by the first respondent that a number of their submissions were not covered by the original Notice of Appeal. The appellants therefore submit that the contention that there be orders for costs to be off-set, depending upon the time such costs were incurred, is inappropriate and fails to reflect a reasonable analysis of the course of the proceedings on the appeal and the result.

22 In my opinion, it is correct that there were a number of discrete issues that were litigated between the parties and which are set out in [80] of the judgment. The appellants succeeded on some of those and failed on others. In essence, the appellants failed in their primary case that there was no estoppel giving rise to any form of interest of the first respondent in the Flinders Street property but succeeded in reducing that interest from that adopted by the primary judge. Although it is not suggested that the Court's foreshadowed costs order regarding the cross-appeal should be disturbed, it is to be observed that the cross-appeal was only confined to the question of indemnity to which reference is made in [140] of the judgment.

23 At the end of the day, I consider that there is substance in the first respondent's submissions. However, I would not be prepared in the particular circumstances of this case to adopt the orders proposed by the first respondent which involve a set-off. In my opinion, the appropriate order for costs is that each party should bear their or his own costs both of the appeal and the cross-appeal. Such an order clearly reflects the fact that both parties have partially succeeded in the appeal with the result that the costs of the appeal should lie where they fall.

The question of security

24 The parties have agreed on the form of orders (apart from costs) upon the assumption that the first respondent's application for leave to re-open the appeal is rejected. The orders proposed are that Mr and Mrs Galaxidis pay John compensation in the sum of $145,156.05 by way of an occupation fee as a consequence of his ejection from the Flinders Street property by Mr Galaxidis in July 1996. Interest is to be paid on that sum from 1 August 2004 at the rate prescribed by Schedule J to the Supreme Court Rules 1970.

25 Further, Mr and Mrs Galaxidis are to pay John additional compensation equal to one ninth of the value of the Flinders Street property, which is now agreed in the sum of $128,888.88, together with interest thereon in accordance with the Rules from 1 August 2004. Accordingly, subject to the addition of interest, the total amount due from Mr and Mrs Galaxidis to John is $274,044.93.

26 The appellants are prepared to accept that the amount of compensation that they should be ordered to pay to John should be secured over the Flinders Street property subject to a current first registered mortgage thereon in the sum of $500,000. Although Mr and Mrs Galaxidis are to be permitted to increase the amount owing under that mortgage and/or to further encumber the property by way of charge or other mortgage, any such increase or other encumbrance is to rank in priority behind the charge proposed in the orders in favour of John.

27 The Flinders Street property has been valued for present purposes at $1,160,000. This is a valuation the parties have agreed to as the basis for the calculation of the compensation to be paid in respect of John's one-ninth interest thereon. When the amount of compensation in the sum of $274,045 is added to the amount owing under the existing first mortgage of $500,000, the total due is $774,045,000 leaving an equity of $385,955 or 33% of the value of the property.

28 Nevertheless, the first respondent submits that the security should extend beyond the Flinders Street property and be charged over four other properties owned by Mr and Mrs Galaxidis and Antonios. The basis for this submission is that the primary judge found that the first respondent was entitled to security over those properties when he made his orders on 20 December 2002.

29 It is further submitted by the first respondent that although the appellants challenged the first respondent's entitlement to any expectation of interest in the Flinders Street property, that general challenge failed. Furthermore, there was no particular challenge advanced by the appellants with respect to the form of the security ordered by the primary judge or his reasons for so ordering. There is, so it is contended, no basis for depriving the first respondent of that security. It would be a denial of procedural fairness to do so. The appellants' respond by submitting that the form of the orders and the nature of the relief, including the provision of security, ordered by the primary judge was at all times squarely challenged. In reply the first respondent takes issue with this assertion. However, he does make the point that a charge over the Flinders Street property would not be a first-ranking security and that, as Mr and Mrs Galaxidis have been found guilty of unconscionable conduct, no indulgence should be accorded them in the circumstances of this unfortunate matter that would in any way prejudice the prompt payment of the amounts of compensation proposed to be ordered.

30 In my opinion, and notwithstanding that the proposed charge over the Flinders Street property is only a second-ranking encumbrance, the proper approach to the question of security, given that any relief must reflect the minimum necessary to do justice between the parties, is to confine that security to the Flinders Street property itself. Although the first respondent suggests that there may be claims by Nikolaos still to be dealt with regarding that property, there is no indication that that will occur and, in any event if it does and he is successful, any security to which he is entitled will need to be worked out based upon the factual situation with respect to the Flinders Street property at the time.

31 For the foregoing reasons, therefore, I would reject the first respondents' submission that the amount of compensation payable to him should not only be charged against the Flinders Street property but also against the four other properties not associated with the Flinders Street property owned by Mr and Mrs Galaxidis and Antonios.

Proposed orders

32 The orders I propose are as follows:

(1) Appeal allowed in part;

(2) Declarations and orders made by Austin J on 20 December 2002 set aside;

(3) The first and second appellants pay to the first respondent compensation in the sum of $145,156.05 together with interest thereon from 1 August 2004 to the date of payment at the rate prescribed by Schedule J to the Supreme Court Rules 1970;

(4) The first and second appellants pay to the first respondent additional compensation in the sum of $128,888.88 being one ninth of the value as at 20 May 2004 of the land comprised in Folio Identifier 1/735865 together with interest thereon from 1 August 2004 to the date of payment at the rate prescribed by Schedule J to the Supreme Court Rules 1970;

(5) The land comprised in Folio Identifier 1/735865 to be the subject of a first ranking charge except as to Mortgage No. 2589700 to secure payment by the first and second appellants to the first respondent of the amounts referred to in Orders (3) and (4);

(6) The first and second appellants be restrained from increasing or varying their liability under Mortgage No. 2589700 unless and until the charge referred to in Order (5) is discharged;

(7) Subject to Orders (5) and (6), the first and second appellants are permitted to further encumber the land in Folio Identifier 1/735865 by way of charge, mortgage or otherwise ranking in priority behind the charge referred to in Order (5);

(8) The appellants pay the first respondent's costs of the proceedings before Austin J including any reserved costs;

(9) The cross-appeal be dismissed;

(10) Each party to pay their or his own costs of the appeal and cross-appeal;

(11) Any subsisting stays of execution be discharged.

(12) Liberty to apply to amend or vary the above orders pursuant to Part 20 r 10(1) of the Supreme Court Rules 1970 only if made within 7 days of the date hereof.

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Last Modified: 11/03/2004