Hycenko v Hrycenko
[2016] VSC 112
•22 March 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2015 04902
| NICHOLAS HYCENKO | Plaintiff |
| v | |
| GEORGE HRYCENKO ( in his personal capacity and in his capacity as executor of the Estate of the late Ludmilla Hrycenko ) | First Defendant |
| LUDMILLA HRYCENKO | Second Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 March 2016 |
DATE OF RULING: | 22 March 2016 |
CASE MAY BE CITED AS: | Hycenko v Hrycenko and anor |
MEDIUM NEUTRAL CITATION: | [2016] VSC 112 |
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PRACTICE AND PROCEDURE - Summary judgment – Hearing on merits appropriate - orders sought seeking that a solicitor be partially relieved from a private undertaking – No applicable principle identified
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J D McKay | Kennedy Guy Solicitors |
| For the First Defendant | Mr S Marantelli | Frenkel Partners |
HER HONOUR:
Background
This application concerns a dispute over payment of sale proceeds from a property, a former family home located at 82 Richardson Street, Essendon (‘the Property’). An adult son has made a claim against his 92 year old father. The claim was also initially made against his mother, Ludmilla Hrycenko, who is now deceased. The parties informed the Court that there is also a separate proceeding in which the plaintiff son is taking action in relation to the family trust. There is also another adult son, however he is not a party to the proceedings the subject of this ruling.
By way of summons filed 26 February 2016, the father, who is the first defendant, seeks release of some of the net sale proceeds. They are currently held by the family solicitor, Jacob Okno, who has given a private undertaking not to release them. The undertaking was given to the plaintiff son in return for the son removing a caveat over the Property to enable its sale. The father seeks that the solicitor be partially released from the undertaking so as to authorise payment of some of the monies to him. In the alternative, the father seeks that part of the son’s claim for more than half of the net proceeds of sale be struck out and that he be given summary judgment.
For convenience, a reference to ‘the defendant’ in this ruling is a reference to the first defendant.
It is useful to set out a short chronology of some, but not all, of the background to this matter.
19 May 2000 – will of Ludmilla, appointing her husband, the first defendant, as the executor and beneficiary to her will; Alan Wainwright J.Okno & Co appointed as solicitors to her estate
23 July 2001 – the first defendant and Ludmilla are registered as joint proprietors of the Property
11 July 2014 - sale of Property for $2,950,000
24 June 2015 – plaintiff lodges caveat over Property with grounds of claim being implied, resulting or constructive trust
14 August 2015 – removal of the caveat over the Property
17 September 2015 – plaintiff issues these proceedings
22 October 2015 – defendants file defence
28 October 2015 – settlement of sale of Property; balance net sale proceeds of $2,361,166.03 paid into Okno trust account
8 December 2015 – death of Ludmilla Hrycenko
Both parties made oral and written submissions. Both parties filed affidavits and the Court relies upon them. The defendant filed an affidavit affirmed on 1 March 2016 (the defendant’s affidavit), and an affidavit of Jacob Okno, solicitor, sworn on 9 March 2016 (‘the Okno affidavit’) in support of its application. The Court also considered the affidavits of the defendant’s solicitors: Arthur Bourandanis, sworn 17 and 18 February 2016, and Anna Alevizopoulos, sworn 18 February 2016. The plaintiff filed affidavits sworn by Peter Guy, solicitor, on 18 February 2016 (‘the first Guy affidavit’) and 10 March 2016 (‘the second Guy affidavit’).
Defendant’s submissions
The defendant says that it is beyond argument that half of the net sale proceeds, that is $1,350,000 is not in contention. He says this half belonged to him and to his late wife, and now to him alone. He says he and his wife were joint tenants of the Property, and after her death, he took her interest by right of survivorship. In any event, the defendant says that he is the sole beneficiary of his late wife’s estate. He seeks the money to put towards his accommodation and care.
The defendant says that only he and his late wife paid the costs of acquisition of the Property. It was never mortgaged. The defendant says the plaintiff never contributed a single dollar towards the acquisition, improvement or conversion of the Property, and nor does he allege that he did.
The defendant says that because the plaintiff is not claiming more than half of the net sale proceeds of the Property, and it is beyond argument that the defendant is entitled to at least half, then the Court does not need to be satisfied that the test for summary judgment has been met.
The defendant submits that at trial the Court will be sceptical of the plaintiff’s claim because he makes representations that are not separately pleaded, and in paragraph 4 of the statement of claim, only particulars (f), (k) and (m) have any probative value, and the representations were not made to the plaintiff alone, but also to his brother. The defendant says this also limits the claim to a maximum of half of the net sale proceeds of the Property.
In the Okno affidavit, the following is deposed, inter alia:
I have been the solicitor for the first defendant (‘George’) and the (now deceased) second defendant (‘Ludmilla’) and their corporate entity for in excess of 40 years.
As the family solicitor I have also acted for George and Ludmilla’s sons, Nicholas (the plaintiff) and [name of other son] over the years.
I acted for George and Ludmilla in the sale of their family home at [the Property]. After the [Property] was sold, Nicholas lodged a caveat over the [Property] claiming an interest in it. To ensure that settlement was not delayed, Nicholas, George and Ludmilla agreed that I should hold the net proceeds of sale of the [Property] ($2,360,000) on trust, pending agreement by all parties as to disbursement of funds or court order in the absence of agreement.
George is 92 years old. I am advised and verily believe that George requires the release of a portion of the funds that I am holding, about $1,000,000, to pay for an Accommodation Bond for a Nursing Home and for his ongoing, day to day medical care and needs.
Should this Honourable Court make an order directing the release of funds for these purposes, I will not release any funds other than for such purposes and on condition that I receive written evidence that it is indeed for the benefit of George. Accordingly funds will not be released for the benefit of Nicholas or [name of other son].”
During the course of the hearing, the defendant conceded that the best case for the plaintiff was $1.45 million. The defendant indicated that he was prepared not to draw down on the balance of the net sale proceeds except for care and accommodation.
Plaintiff’s Submissions
The plaintiff submits that his claim is a 50 per cent interest in the net sale proceeds. He says that this claim arises from proprietary estoppel, common intention constructive trust or joint endeavour constructive trust.
The plaintiff says that the net sale proceeds appear to have been $2,908,166.03, making the quantum of the plaintiff’s claim $1,454,083.02. This is calculated by reference to half of the net sale proceeds paid to his late mother, and half of the proceeds paid to the defendant. That is, $727,041.51 from his late mother, and $727,041.51 from the defendant. The plaintiff says that the defendant has already disbursed $547,000 leaving $907,083.02 to satisfy any judgment. If the plaintiff’s claim against the defendant of $727,041.51 is deducted from that, the amount remaining is $180,041.51.
Defendant’s share of sale proceeds (50% / $2,908.166.03) $1,454,083.02
Less disbursements made by defendant -$547,000
Less plaintiff’s claim against defendant (50% /$1,454,083.02) -$727,041.51
Total =$1,274,041.51
Remainder ($1,454,083.02 - $1,274,041.51) =$180,041.51
The plaintiff’s calculations rely on the premise that the joint tenancy in which his parents held the Property was severed and equity imposed a trust as tenants in common.
The plaintiff says he does not object to $180,041.51 being distributed to the defendant. The plaintiff opposes the distribution of further monies, as sought in the summons.
The plaintiff opposes the summary judgment application. He says that he had a beneficial interest in the Property. The defendant refers to Corin v Patten,[1] and relies on it as authority that an equitable assignment or alienation of one joint tenant’s interest can break the unities and sever the joint tenancy. He says that the consequence of this is that equity will impose a trust as tenants in common upon the whole of the interest.
[1](1990) 169 CLR 540.
The plaintiff submits that the defendant’s assertion that he holds an unimpeached 50 per cent of the Property by survivorship presupposes the outcome of the trial. If the plaintiff establishes his claim, he says that a consequence of it will be that the joint tenancy was severed and that Ludmilla’s estate retained half of the net sale proceeds subject to his equitable interest.
The plaintiff says that although the defendant is the sole beneficiary of the estate, this does not give him an immediate and unqualified right to the estate’s share of the net proceeds. They are taken subject to any debts of the estate and any claim against it.
Mr Okno’s undertaking is contained in a letter dated 21 October 2015 addressed to Mr Peter Guy, the plaintiff’s solicitor (‘the Undertaking’): Exhibit ‘PDG-1’ to the first Guy affidavit.
Dear Mr Guy
Re: G &L Hrycenko
Sale: 82 Richardson Street, Essendon
Further to the above matter and subject to you providing a withdrawal of caveat [number] immediately we undertake to hold the balance of proceeds of sale received at settlement less legal costs and disbursements and sale expenses in trust for our clients pending agreement by all parties as to disbursement of the funds or court order in the absence of agreement.
As the purchaser has indicated that proceedings for specific performance will be issued your urgent request is requested.
Yours faithfully,
Alan Wainwright J Okno & CoPer: Jacob Okno
The plaintiff’s solicitor responded to the above letter the following day, namely on 22 October 2015: Exhibit ‘PDG-1’ to the first Guy affidavit. The plaintiff solicitor’s letter referred to the Undertaking and enclosed the required Withdrawal of Caveat. It also requested a copy of the final statement of adjustments, confirmation of the amount of net sale proceeds held in trust, and to be kept updated as to the progress of settlement.
In respect of the Undertaking, the plaintiff says that the relief sought is in the nature of an injunction or Order 54 and should not be granted. Order 54 relates to the administration of estates and execution of trusts.
Applicable Law
Summary judgment
The principles applicable to summary judgment applications pursuant to section 62 of the Civil Procedure Act 2010 (‘CPA’) are well-established and were not the subject of submissions by the parties. Pursuant to s 62, the defendant can apply for summary judgment on the ground that a plaintiff’s claim or part of that claim has ‘no real prospect of success’. The applicable test is set out in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[2]
[2](2013) 42 VR 27.
The first defendant also relies upon Rule 23.03 of the Supreme Court (General Civil Prcoedure) Rules 2005. Rule 23.03 has been revoked. At any rate, s 62 of the CPA is a more liberal test that the former Rule 23.03.
Undertakings
Courts may enforce lawyer’s undertakings given to it in the same way as an injunction: R v Khazaal.[3]
[3](2006) 167 A Crim R 565, [20].
The Undertaking is a private one, not one given to the Court. Courts may enforce undertakings given by lawyers in the course of their duties: Re Grey.[4]
[4][1892] 2 GB 440 at 443.
In respect of undertakings given to court, a court may release or modify an undertaking given to it in special circumstances: per Brennan J; Esso Australia Resources Ltd v Plowman.[5]
[5](1995) 183 CLR 10 at 37.
Neither party cited any authority as to whether or not a Court may release a lawyer from a private undertaking given in the course of the lawyer’s professional duties. There does not appear to be any such authority.
Application
Undertaking
On 3 February 2016, the defendants filed a summons seeking that Mr Okno be appointed as the defendant’s Litigation Guardian and that he be authorised to pay for the benefit of the defendant 50 per cent of the monies presently held by him on trust in respect of the net sale proceeds from the Property. On 16 March 2016, the defendants indicated that they did not intend to pursue this summons and it was dismissed by consent on the same date. Instead, the defendant relies on its summons filed 26 February 2016.
The plaintiff does not consent to the defendant’s application that Mr Okno should be partially released from the Undertaking. It is a private Undertaking, not one given to the Court. There is no applicable principle which supports the proposition that the Court simply has the power to partially relieve Mr Okno of his Undertaking or modify it. Even if analogously the principles applying to undertakings given to the court apply, the Court is not satisfied that there are the requisite ‘special circumstances’, particularly in circumstances where there is no consent, the monies in question are in dispute in this proceeding, and there has been no probate.
It follows that if the Court were to make such an order in the absence of a specific power to relieve Mr Okno from, or to modify the Undertaking, an order requiring Mr Okno to release the monies sought by the defendant in the summons would amount to a mandatory injunction. An injunction has not been sought, nor does an Associate Justice have the power to make such orders.
Summary Judgment application
The defendant seeks orders that the plaintiff’s claim as it claims more than the sum of $1,350,000 of the net sale proceeds be struck out. However, the controversy is not limited to $1,350,000. As discussed above, during the course of the hearing, the defendant conceded that approximately $1.45 million was in dispute. The Court considers this alone is fatal to the summary judgment application. Nevertheless, and in the alternative, it considers the other grounds advanced by the defendant.
The statement of claim seeks orders, inter alia, for a declaration that the defendant and Ludmilla held half of the Property for the plaintiff’s benefit. As discussed above, the plaintiff says that the net sale proceeds appear to have been $2,908,166.03, making the quantum of the plaintiff’s claim $1,454,083.02. He makes this claim on the basis that there was a severance of the joint tenancy. The plaintiff says that his parents made representations, and he relies upon them to claim relief. This is a factual dispute that needs to be ventilated at trial.
The Court does not consider the plaintiff’s submissions regarding severance of the joint tenancy can be said to have no real prospects of success. There are circumstances when equity will consider a joint tenancy severed: Williams v Hensman.[6] It may occur if a constructive trust has arisen: Delaney v Molloy.[7] It may be implied from the conduct of the joint tenants: Williams v Hensman.[8] Whether a joint tenancy can be severed in equity in the circumstances that the plaintiff contends is a legal dispute for determination at trial.
[6](1861) 70 ER 862 at 866-867.
[7](1993) NSW ConvR 55-664, at 59-798.
[8](1861) 70 ER 862 at 866-867.
Further, the net sale proceeds were paid prior to the death of Ludmilla Hrycenko, and accordingly this dispute concerns the distribution of her estate. The defendant had not applied by probate at the time of the hearing of this application. He has indicated to the Court that he now intends to do so. As the plaintiff submitted, although the defendant is the sole beneficiary of the state, this does not give him an immediate and unqualified right to the estate’s share of the net proceeds. They are taken subject to any debts of the estate and any claim against the estate.
In relation to the alleged defects in the plaintiff’s pleadings in relation to paragraph 4, it is noted that the defendant did not object to that paragraph in its defence. It pleaded to it. Further, the Court is not satisfied that any pleading defects in paragraph 4 could not be cured by amendment.
The Court declines to make such orders sought on the ground that it is not satisfied that the part of the plaintiff’s claim of more than $1,350,000 has no real prospect of success.
Conclusion
The Court will make orders dismissing the summons in respect of paragraphs 1-4 and 6.
By way of paragraph 5 of the summons, the defendant seeks, in the alternative, a speedy trial or examination of him by a Judge or Associate Justice of the Court. The Court will hear further from the parties in relation to these issues, in light of the ruling the Court has made in respect of the summons. The Court will also hear the parties on costs.
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