Kambouris v Tahmazis (No 2)
[2015] VSC 174
•30 April 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2007 10201
BETWEEN:
| POLYXENI KAMBOURIS (also known as JENNY KAMBOURIS) | Plaintiff |
| v | |
| THEO TAHMAZIS (who is sued in his capacity as personal representative of the estate of BILL FLOROS) (also known as VASILIOS FLOROS) and others (according to the schedule attached) | Defendants |
| AND BETWEEN: | |
| THEO TAHMAZIS (who is sued in his capacity as personal representative of the estate of BILL FLOROS) (also known as VASILIOS FLOROS) | Plaintiff by Counterclaim |
| - and - | |
| POLYXENI KAMBOURIS (also known as JENNY KAMBOURIS) and others (according to the schedule attached) | Defendants by Counterclaim |
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JUDGE: | Lansdowne AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4, 5, 6, 9, 10, 11, 26 and 27 February 2015 and further written submissions on 17 and 27 March 2015. |
DATE OF JUDGMENT: | 30 April 2015 |
CASE MAY BE CITED AS: | Kambouris v Tahmazis (No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 174 |
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NEGLIGENCE – Solicitor found liable in earlier trial for failing to inform his client on her entering into guarantees that a promised security had not been provided – Assessment of damages referred to an associate judge – Client claims the subsequent loss of her security properties – Whether causation established in the earlier trial – Whether that loss was caused by the solicitor’s negligence – Application of the Wrongs Act1958 (Vic) – Factual causation – Negligent omission – No transaction counterfactual – Plaintiff must show that not entering the transaction would have prevented the loss, not just that it may have – Factual causation not proved – Scope of liability – Not proved that it would be appropriate to extend the solicitor’s liability to the loss claimed.
ASSESSMENT OF DAMAGES FOR NEGLIGENCE – Deduction of pre-existing liability from quantum – Nominal damages for breach of retainer – Wrongs Act 1958 (Vic), s 51.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Cook with Ms S Varney | AMC Law & Associates |
| For the Defendants | Mr N de Young | Minter Ellison |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Facts and procedural history............................................................................................................ 2
The plaintiff’s claim before Judd J and in this trial................................................................... 12
Has causation already been determined?.................................................................................... 19
Legal Principles................................................................................................................................ 23
Common law or the Wrongs Act?............................................................................................. 23
Factual causation in the case of a negligent omission........................................................... 26
Section 51(2): here not applicable............................................................................................. 30
Scope of liability.......................................................................................................................... 30
Factual Causation............................................................................................................................. 31
The elements of the plaintiff’s case.......................................................................................... 31
Evidence in the plaintiff’s case.................................................................................................. 35
The plaintiff’s evidence.................................................................................................... 35
Mr Kambouris’ evidence.................................................................................................. 37
Assessment of the evidence....................................................................................................... 38
Credit.................................................................................................................................. 38
Conduct in relation to guarantees................................................................................... 44
Acting as her husband requested.................................................................................... 51
Reasons to proceed with the restructure....................................................................... 54
Legal costs.................................................................................................................................... 67
Repayment of $100,000 and lost interest thereon................................................................... 67
Summary of conclusions on factual causation....................................................................... 68
Scope of Liability............................................................................................................................. 71
Pre-existing liability................................................................................................................... 76
Post negligence increase in liability......................................................................................... 78
Continued use of The Boulevard............................................................................................. 80
The nature of the duty, the breach and the loss..................................................................... 80
Quantum............................................................................................................................................ 82
Nominal damages............................................................................................................................. 86
Orders................................................................................................................................................. 88
HER HONOUR:
Introduction
The trial concerns the assessment of damages suffered by the plaintiff, Mrs Polyxeni Kambouris (also known as Jenny Kambouris), arising from three breaches of duty by the second defendant, Mr Con Kiatos, her solicitor. A liability trial was conducted on an undefended basis before Judd J in March and May 2013. On my analysis of his judgment, His Honour found that the second defendant ‘breached his duty of care’ to the plaintiff on three occasions, by failing to advise her in October 2006, November 2006 and May 2007 that she was not protected, as she had believed, by an indemnity agreement executed by that solicitor’s wife, Ms Anna Papakostas, and a mortgage granted by Ms Papakostas over a property at Loch Sport.[1] On 24 May 2013, his Honour gave judgment for the plaintiff against the second defendant with damages to be assessed, and referred the assessment of damages to an associate judge pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2005. The trial of the assessment of damages was subsequently listed to proceed on two occasions, 14 March 2014 and 22 September 2014. The trial was vacated on the first occasion because the plaintiff was not ready. The trial was vacated on the second occasion due to the unavailability of an associate judge.
[1]Kambouris v Tahmazis [2013] VSC 271 (judgment of Judd J.) at [20].
It was, until closing submissions in this trial, common ground that causation had not been determined by Judd J and fell to be determined in this trial. In other words, I would be required to determine first whether the loss the plaintiff claimed was caused by the breaches of duty as found by Judd J, and then, if causation was proved, the quantum of that loss. In closing submissions, lead counsel for the plaintiff submitted that Judd J had already determined causation. For the reasons that I will elaborate shortly, I do not consider that correct. I consider that it was necessary for me to determine in this trial whether there was the necessary causal connection between the losses claimed by the plaintiff and the breaches of duty found by Judd J. I have concluded that the plaintiff has failed to prove that factual causation, as required by s 51(1)(a) of the Wrongs Act (Vic) 1958 (‘Wrongs Act’ or ‘the Act’) in respect of any of the claimed loss.
If I am wrong in that regard, I also consider that the plaintiff has failed to prove that, pursuant to s 51(1)(b) of the Act, it is appropriate for the scope of the second defendant’s liability to extend to the harm he caused, again in respect of any of the categories of claimed loss.
For these reasons, with the exception of a proposed award for nominal damages for the breaches of retainer by Mr Kiatos, I will give judgment for the second defendant. I will make some brief findings in relation to quantum should I be held to be in error in respect of both s 51(1)(a) and s 51 (1)(b) of the Act.
Facts and procedural history
This trial was factually dense, but much of the factual background is established by uncontroverted documentary evidence or the second defendant’s Notice to Admit, which was largely undisputed. Other facts were determined by the judgment of Judd J. The only witnesses who gave evidence of the facts were the plaintiff and her husband, Mr Theodoros Kambouris (also known as Theo Kambouris). Mr Kiatos was not called, and there were no witnesses as to the background facts called in his case. Expert evidence was tendered by consent without cross examination. I set out below an outline of these facts, and some elements of the evidence. I will discuss the significance of these matters later in the judgment.
The plaintiff is the wife of Mr Kambouris, who is a builder now of over forty years’ experience. Until 2000 he engaged in that work either as an individual or through family owned corporate entities. In about 2001[2] he commenced a property development joint venture with two other individuals, Mr Bill Floros and Mr Con Kiatos, the second defendant. Judd J found that, broadly speaking, it was agreed between them that Mr Kambouris would provide construction services, Mr Kiatos, who was a solicitor, legal and bookkeeping services, and Mr Floros finance. The joint venture was undertaken through two corporate entities, BTC Developments Pty Ltd (so called because of the first initials of each of the joint venturer’s first names) (‘BTC’) and Betac Investments Pty Ltd (‘Betac’). BTC had a business cheque account with the National Australia Bank (‘NAB’) from at least July 2002, which became active in September 2002 [3], and a mortgage account from at least May 2004.[4]
[2]Evidence of Mr Kambouris in chief, T282.12.
[3]Exhibit 9.
[4]Exhibit 10.
Mr Kambouris and his wife, the plaintiff, had a pre-existing relationship with the NAB. A corporate entity of which they were directors and shareholders, T & P Kambouris Nominees Pty Ltd as trustee for the T & P Kambouris Family Trust (‘Kambouris Nominees’), had a loan account with the NAB. The plaintiff and her husband jointly and severally guaranteed the obligations of Kambouris Nominees to the NAB in May 2001.[5] The NAB also held from 1998 mortgages over three properties, 103 The Boulevard, Loch Sport (‘The Boulevard’), and Units 1 and 2, 70 Gove St, Springvale (‘Gove St units’). Initially The Boulevard was owned by Kambouris Nominees. In 2003, the property was transferred to the plaintiff, but remained subject to a registered mortgage to the NAB. The registered proprietors of the Gove St units were at all times the plaintiff and Mr Kambouris, although they contend that Mr Kambouris transferred his interests in both units to the plaintiff in 1997 by a transfer which states it is made pursuant to a Deed of Gift dated 21 April 1997.[6] That transfer was never registered.
[5]Defendant’s Notice to Admit dated 4 July 2014 (‘Notice to Admit’) at [5].
[6]Exhibit B.
It is agreed that the NAB mortgages over these properties were all monies mortgages. Accordingly, they secured monies owed to the NAB by the registered proprietors, ultimately the plaintiff and Mr Kambouris, arising from any source.
Initially the joint venture continued the sort of residential development in which Mr Kambouris had previously been engaged. In either late 2004 or early 2005 the joint venturers decided to undertake commercial work, for which they required more funds.[7] BTC obtained funds from the NAB in April 2005 with a basic facility limit of up to $684,000 by way of mortgage account and business cheque account.[8] The plaintiff (together with her husband, Mr Floros and Betac) (together ‘the BTC guarantors’) jointly and severally guaranteed the obligations of BTC to the NAB, including those arising from the mortgage account and business cheque account, to a basic liability of $684,000, by a guarantee and indemnity dated 20 April 2005 (‘first BTC guarantee’).[9]
[7]Evidence in chief of Mr Kambouris at T284-5.
[8]Notice to Admit at[ 12].
[9]Exhibit 13. The plaintiff’s signature in one location on the document is dated 20 May 2005, but this is inconsistent with the other signatures and so may be an error.
In June 2005, BTC obtained further lines of credit from the NAB, being an overdraft with a limit of $400,000, a bank guarantee facility with a limit of $260,000 and a mortgage facility of $234,000.[10] The BTC guarantors signed a further guarantee and indemnity in respect of the liabilities of BTC to the NAB in the increased sum of $894,000 (‘second BTC guarantee’).[11] The plaintiff gave evidence in the liability trial before Judd J that she first met Mr Kiatos in 2005, although she did not give a date in that year.
[10]Judgment of Judd J. at [5].
[11]Exhibit 14. The signatures are differently dated, but all are in the period 19-22 June 2005.
Mr Floros signed an agreement dated 4 July 2005 between himself, the plaintiff and BTC which recorded that the plaintiff required comfort from Mr Floros in consideration of allowing her properties to be security for the activities of BTC and Mr Floros. The agreement obliged Mr Floros to charge his property in East Bentleigh in favour of the plaintiff.[12]
[12]Exhibit H.
A similar agreement was prepared around the same time for signature by Ms Papakostas, who as earlier noted was the wife of Mr Kiatos, in respect of her property at Loch Sport, but was never signed by Ms Papakostas.[13] Notwithstanding that he knew that his wife had not signed the agreement, Mr Kiatos instructed another solicitor, Ms Ella Gorenstein, to lodge a caveat over the Papakostas Loch Sport property, and she did so.[14]
[13]Exhibit 19 and the judgment of Judd J. at [7].
[14]Judgment of Judd J. at [8] and [9].
Mr Kambouris says that he first learnt that the Papakostas agreement had not been signed and no mortgage had been given by her in August 2007.[15] The plaintiff could not recall when she first learnt of this fact, but the implication from her evidence in chief is that it was not before she first learnt that ‘there were problems with the bank’ which was in late 2007.[16] Together with Mr Floros and Betac, Mr Kambouris and the plaintiff signed further guarantees and indemnities for the liabilities of BTC to the NAB in increased sums on 6 October 2005 (up to $930,000)[17] (‘third BTC guarantee’) 11 October 2005 (up to $947,000)[18] (‘fourth BTC guarantee’) and 7 May 2006 (also $947,000)[19] (‘fifth BTC guarantee’).
[15]T 364.12-15.
[16]Evidence in chief, at T 646.4-11.
[17]Exhibit 15.
[18]Exhibit 16.
[19]Exhibit 17.
In the meantime, from late 2005 BTC began to experience financial difficulties.[20] By mid-2006, Mr Kambouris formed the view that unless something was done to save the business, BTC would most probably go into liquidation.[21] A historical company search for BTC shows that an application was made to wind up BTC on 5 May 2006, which was subsequently dismissed on 28 June 2006. A further application to wind up BTC was made on 17 October 2006. An administrator was appointed to BTC effective on 13 December 2006.[22]
[20]Evidence of Mr Kambouris in cross-examination, T 506.
[21]Ibid, at T 508
[22]Exhibit 22.
Mr Kambouris’ evidence is that he, Mr Floros and Mr Kiatos agreed that existing BTC contracts and properties owned by BTC would be transferred to Betac, and funding for Betac be sought from the NAB. In other proceedings, he has contended on oath that Betac was then to conduct business solely on account of him and his family.[23] By contrast, Mr Kambouris’ evidence in this trial is that the intention of the joint venturers was that Betac was to appear to the outside world, including creditors of BTC and the liquidator of BTC, as a different entity to BTC,[24] but, in reality, the joint venture business was to continue through Betac.[25] He now says on oath that when he gave evidence on oath to the contrary earlier, he was ‘maintaining a lie’.[26]
[23]Exhibit 37.
[24]For example, at T 507.
[25]For example, at T 510.29-T 511.9.
[26]Ibid.
For the refinancing to proceed, the NAB would require the plaintiff to guarantee the monies advanced to Betac. The guarantee would in turn be supported by the existing mortgages over The Boulevard, and the Gove St units. The plaintiff gave evidence before Judd J that she expressed concern to her husband as to how the changeover from one entity to another would affect the security that she had been given by the mortgages (from Mr Floros, and she assumed, Ms Papakostas). She said that she was telephoned by her husband in October 2006, who was then at the offices of an accountant, with Mr Kiatos and Mr Floros, and he put Mr Kiatos on the telephone. She said she asked Mr Kiatos ‘how this new arrangement they were planning to put in place would affect me’ and he said that ‘I would still be totally legally protected as, you know, with the agreement and the two mortgages’.[27]
[27]Exhibit S, T 130.4-20.
She gave evidence before Judd J that she met Mr Kiatos on two further occasions, one on 22 November 2006 and the second on 22 May 2007, when Mr Kiatos signed solicitor’s certificates in respect of advice given to her as her solicitor in conjunction with advances to Betac. She did not recall specifically what he said to her on those occasions, but it was to the effect that she remained protected by the Floros and Papakostas mortgages.[28]
[28]Ibid, at T 130-T 132.
On 22 November 2006 Betac obtained a funding facility with the NAB to the extent of $852,500.[29] The plaintiff, her husband and their son, Mr Jonathan Kambouris (‘Jonathan’), gave guarantees and indemnities to the NAB in respect of the advances to Betac each in the amount of $852,500, on the same date, 22 November 2006 (‘first Betac guarantee’).[30] Mr Kiatos certified on that document that as the solicitor for the plaintiff he had explained the effect of the guarantee and indemnity to her.
[29]Notice to Admit at [31].
[30]Exhibit DD.
A portion of the funds advanced to Betac was used to pay out the BTC accounts with the NAB, which were closed on 30 November 2006. The amount required to pay them out was $651,846.12.[31] This indebtedness had of course been secured by the earlier guarantees given by the plaintiff and her husband, and so by the mortgages over The Boulevard and the Gove St units. Those mortgages also secured the indebtedness of Kambouris Nominees, which was in the order of $199,000 in November 2006.[32] Thus, when she signed the first guarantee in respect of Betac, the potential liability that the plaintiff undertook was in the same order as her existing actual total liabilities to the NAB, and about $200,000 more than her pre-existing actual liability in respect of the joint venture.
[31]This is the total of the business cheque account when closed on 30 November 2006 (Exhibit 20) and the closure amount of the mortgage account on that day (Exhibit 21).
[32]Exhibit 8.
Further lines of credit were obtained from the NAB in April 2007[33] to enable Betac to purchase further properties for development. On 10 April 2007 the plaintiff, her husband and their son entered into a further guarantee and indemnity for the obligations of Betac to the sum of $1,260,000 (‘second Betac guarantee’).[34] Mr Kiatos did not witness the signature of the plaintiff or give any certificate as her solicitor on this document. He did do so, however, on a guarantee and indemnity that the plaintiff signed on 22 May 2007 (‘third Betac guarantee’), in which she, her husband and their son guaranteed the liabilities of Betac to the NAB in the slightly reduced sum of $1,250,000.[35]
[33]Exhibit G.
[34]Exhibit 23.
[35]Exhibit W.
Mr Kambouris collected the file relating to the Papakostas caveat from Ms Gorenstein on 3 August 2007.[36] As noted, his evidence is that this is when he first became aware that there was no mortgage signed by Ms Papakostas in favour of the plaintiff to support the caveat. Mr Kambouris said in evidence that he raised this with Mr Kiatos at that time and Mr Kiatos admitted that his wife had not signed the agreement and that there was no mortgage in place. Mr Kambouris said that Mr Kiatos asked him not to sue him and gave him assurances that he, Mr Kiatos, would ‘fix it … and provide the funds’.[37]
[36]Exhibit M and T 364.12-19.
[37]T 368.10- T 369.3.
Emails sent by Mr Kambouris in late November and early December 2007 to Mr Kiatos and Mr Floros contain content that appears to assume that both mortgages exist i.e. both Floros and Papakostas mortgages are in place or registrable.[38] Notwithstanding these emails, I find on the basis of Mr Kambouris’ oral evidence as to his discussion with Mr Kiatos after he obtained the file from Ms Gorenstein, that he, Mr Kambouris, was aware from early August 2007 that there was no signed agreement or mortgage from Ms Papakostas. There is no evidence as to whether, or when, he told the plaintiff of this fact.
[38]Exhibits J and L.
On 19 and 20 September 2007 the plaintiff, her husband and their son signed a further guarantee and indemnity of the liabilities of Betac to the NAB in the increased amount of $1,677,517 (‘fourth Betac guarantee’).[39] Mr Kambouris and Jonathan Kambouris signed the guarantee on 19 September 2007, and the plaintiff on 20 September 2007. Mr Kiatos did not sign the guarantee as a witness for the plaintiff, or as her solicitor. Mrs Kambouris signed the guarantee before a bank officer. A peculiarity of the document, not explored in evidence, is that the plaintiff declares in it that she attended the offices of Mr Kiatos in March 2006 to obtain advice in relation to her rights and obligations under that guarantee.
[39]Exhibit 24.
The plaintiff, her husband and their son Jonathan signed a further guarantee and indemnity in respect of the Betac facilities in the same amount i.e. $1,677,517, on 18 and 19 February 2008[40] (‘fifth Betac guarantee’), Jonathan and Mr Kambouris on 18 February 2008 and the plaintiff on 19 February 2008. The plaintiff signed the fifth Betac guarantee before a bank officer, Caroline Roberts. There is no solicitor certificate. Ms Roberts certified that the plaintiff appeared to understand the nature and effect of the guarantee and added the notation ‘Has signed guarantee within last 5 years’.
[40]Exhibit 25.
Ultimately, Betac went into liquidation on 3 December 2008.[41] This was an event of default under the Betac facilities, and triggered demands on the Betac guarantors, including the plaintiff, in respect of the various Betac liabilities to the NAB. The NAB made demands in writing dated 6 February 2009, which sought a total sum of $1,290,522.00 in respect of Betac liabilities as at 30 January 2009.[42] The letters of demand in evidence are solely in respect of Betac liabilities. Mr Kambouris agreed in evidence that the bank also demanded repayment of the indebtedness of Kambouris Nominees, [43] at that time in the order of $190,000.[44]
[41]Exhibit EE.
[42]Exhibit O.
[43]Notice to Admit at [43] and [44] and T 563.17-18.
[44]T 563.25-28.
The plaintiff commenced this proceeding on 24 December 2007, initially against Mr Floros only, seeking possession of the property mortgaged by him to her pursuant to the agreement dated 4 July 2005. Mr Floros died on 8 January 2009. Initially Mr Christos Floros was substituted for Mr Floros as his personal representative. Subsequently, by order made 25 June 2010, Mr Theo Tahmazis was substituted for Mr Floros as the personal representative of his estate. The plaintiff was given leave to join Mr Kiatos and Ms Gorenstein as defendants to the proceeding by order made 12 February 2010.
By that time, the NAB had commenced recovery proceedings against the plaintiff (in respect of The Boulevard) and against her and her husband (in respect of the Gove St units, they both still being the registered proprietors thereof), in both cases relying on the 1998 mortgages. Those proceedings were commenced on 19 January 2010. Neither the demands or the writs recite the source of the liability secured by the mortgages, but it is common ground that the relevant Betac liability was the fifth Betac guarantee, signed by the plaintiff and Mr Kambouris (and their son Jonathan) in February 2008.
In respect of the Gove St units, the NAB obtained judgment in default of appearance against Mr Kambouris on 21 April 2010 and judgment against the plaintiff on a successful application for summary judgment on 14 December 2010.[45] Mr Kambouris acknowledged in evidence that he knew that the general denial defence filed by the plaintiff on 7 May 2010[46] on his instructions was a ‘weak defence’ and the purpose was to gain time to negotiate with the bank.[47]
[45]Exhibit 33.
[46]Exhibit 27.
[47]T 565.9-12 and T 626.3-6.
In respect of The Boulevard, Mrs Kambouris filed a substantive amended defence. She alleged in her amended defence filed 19 September 2011[48], amongst other things, that her signature to the February 2008 guarantee was obtained in circumstances that were oppressive and/or unconscionable, because the NAB knew that it was her husband, not she, who had knowledge of the financial affairs of Betac; and that the NAB failed to fully inform her of the nature of the debt being secured and did not inform her that the security she was providing extended to The Boulevard, as well as the Gove St units. She also alleged that the NAB and Kambouris Nominees had agreed in 1998 to release The Boulevard from the mortgage, but the NAB had failed to do so. Mrs Kambouris gave sworn evidence to the effect of these contentions in her affidavit sworn 15 November 2010[49] filed in that proceeding in opposition to an application for summary judgment. In her evidence in this trial, she conceded that she knew at the time she swore that affidavit that it was false to state, as she did, that The Boulevard property was not intended to be available as security for her husband’s businesses. She said she swore the affidavit containing those false statements on the basis of legal advice.[50] Mr Kambouris also conceded in his evidence in this trial that he had the substantial conduct of that proceeding for the plaintiff, and knew that her defence was ‘very weak’.[51]
[48]Exhibit 32.
[49]Exhibit 30.
[50]T 675.19-29, T 676.24-29.
[51]T 567.8-14.
The NAB sold the Gove St units as mortgagee in possession on 20 August 2011.[52] The NAB also sold as mortgagee in possession one of the Betac development properties, 2/650 Warrigal Rd, Oakleigh in May 2012.[53] On 18 June 2012, the plaintiff and the NAB executed terms of settlement pursuant to which the plaintiff agreed to pay the NAB $450,000 in full and final satisfaction in respect of the plaintiff’s exposure to the NAB in respect of both the indebtedness of Kambouris Nominees and Betac.[54] On the same date, consent orders were made that the NAB recover possession of The Boulevard.[55] By transfer dated 14 September 2012, the plaintiff transferred all her interest in The Boulevard to Serras Holdings Pty Ltd, a company owned by her daughter Natalie Kambouris and son Jonathan, and controlled by her daughter,[56] for a stated consideration of $580,000.[57] Mr Kambouris’ evidence is that he negotiated a settlement of the NAB’s remaining claim against the plaintiff for $450,000 which was funded by this sale.[58] There is no evidence as to whether or not the difference of $130,000 between this and the stated consideration of $580,000 was paid to the plaintiff.
[52]The transfer was registered, and so the sale presumably completed, on 2 November 2011-see title search being part of Exhibit 44.
[53]Transfer registered 25 July 2012-Exhibit 44.
[54]Notice to Admit at [48].
[55]Exhibit 34.
[56]Exhibit 35.
[57]Exhibit 36.
[58]T 590.21- T 591.19.
The plaintiff settled her claim against Ms Gorenstein by Deed of Settlement dated 29 August 2012,[59] by which the plaintiff accepted $290,000 inclusive of costs in full settlement of her claim against Ms Gorenstein.
[59]Exhibit 38.
The trial against Mr Tahmazis and Mr Kiatos was due to commence on 20 March 2013. By order made 18 March 2013, Judd J ordered that the trial proceed on liability alone. It is recited in Other Matters that the plaintiff had informed the Court that she was not yet in a position to provide ‘full particulars of loss and damage’.
After the commencement of the trial, the plaintiff compromised her claim against the estate of Mr Floros. She agreed to accept $200,000 in settlement of that claim, if paid within a certain time frame.[60] The plaintiff concedes that the quantum of her claim against Mr Kiatos is to be reduced by both this sum and the amount agreed with Ms Gorenstein.
[60]Exhibit 39.
Mr Kiatos initially personally participated in the trial to oppose the claim against him, but shortly prior to the resumption of the trial in May 2013 he withdrew his defence and sought and obtained leave to cease to act as solicitor in his own case. The plaintiff elected to proceed on evidence i.e. as an undefended trial as against Mr Kiatos, now represented by his professional indemnity insurer, rather than seeking default judgment on the averments in the statement of claim.
The plaintiff’s claim before Judd J and in this trial
The plaintiff prosecuted the liability trial against Mr Kiatos before Judd J in accordance with a document dated 20 March 2013 and entitled ‘Third Further Amended Statement of Claim (Filed pursuant to the Order of the Hon. Justice Judd and further amended on 20 March 2013) (’20 March 2013 Third FASOC’). This document was filed in the course of the trial before Judd J to conform the plaintiff’s claim and the evidence adduced in support of it. This iteration of the statement of claim is on the file, although without a filing date endorsed on it. It did not appear in the Court Book prepared for this trial, which was prepared by the second defendant, but I determined early in the trial that that it was the iteration before Judd J.[61]
[61]See order made 4 February 2015.
The plaintiff’s claim against Mr Kiatos commenced at paragraph 38 and ran until paragraph 64. She made five allegations of ‘breach of duty’ against Mr Kiatos, as her solicitor.
The first allegation was that instructing Ms Gorenstein to lodge a caveat over the Papakostas property, when he knew that his wife had not signed the agreement or authorised the lodgement of the caveat, was a breach of his duty of care to the plaintiff. This is the event that occurred in July 2005.[62]
[62]This claim is made at [38]-[44] of the 20 March 2013 Third FASOC.
The second allegation made was that Mr Kiatos, as solicitor for the plaintiff, represented to her in October 2006 that the Floros mortgage and agreement and the Papakostas agreement would continue to secure the full amount which Floros and Papakostas had agreed to contribute to the plaintiff if all amounts owing to the NAB under the BTC facilities were not repaid. This representation was said to have been made by Mr Kiatos on the telephone to the plaintiff in October 2006 from an accountant’s offices, where Mr Kambouris, Mr Floros and the accountant Mr Nicktas were also present.[63]
[63]Made at [45].
The third allegation was that Mr Kiatos, as her solicitor, made the same representation to the plaintiff as above in respect of the Floros mortgage and agreement, and the Papakostas agreement, on 22 November 2006 at the time that he signed a solicitor’s certificate for her ‘in respect of the refinance leading to the repayment of the BTC facilities’.[64]
[64]Made at [46].
The fourth allegation of breach was in respect of a similar representation made by Mr Kiatos to the plaintiff as her solicitor in respect of further borrowings then being made by Betac in May 2007 at the time that he signed a solicitor’s certificate for her ‘in respect of such further borrowings’.[65]
[65]At [47].
In respect of the first allegation, duty, breach and loss was claimed. Breach of retainer was not expressly pleaded.
The second to fourth allegations were pleaded to arise expressly in negligence and in contract at paragraphs [50]-[51] (duty and breach in negligence), and in contract at paragraphs [52] (duty) and [53] (breach). These paragraphs related only to the representations made in October 2006, November 2006 and May 2007, and only in respect of failure to disclose that there was no proper security over the Papakostas property. Failure to disclose that there was no proper security over the Floros property was alleged only if the Court found that that security did not extend to the Betac liabilities, as the first defendant had contended.[66] No such finding was made, because the proceeding against the first defendant settled. Loss in negligence or contract in respect of these allegations was pleaded at [54].
[66]20 March 2013 Third FASOC at [51(b)(ii))] and [53(iii)].
The Third FASOC also contained until final submissions before Judd J a pleading in misleading or deceptive conduct in respect of the same representations that formed the basis of the negligence and breach of retainer claims made by allegations two to four. This claim was withdrawn in final submissions.[67]
[67]Exhibit 45 at T 133-T 135.16.
The fifth allegation, confined to breach of retainer, was pleaded in respect of an alleged failure by Mr Kiatos in May 2007 to instruct counsel to draw certain documents to protect the position of the plaintiff and Mr Kambouris vis–a–vis the Papakostas and Floros agreements and mortgages.[68]
[68]Ibid, at [61]-[63].
Judd J recited all these allegations in his judgment.[69] He found as a fact, in respect of the first, that the plaintiff ‘gave her security to the bank in the belief that she was supported by an indemnity agreement and mortgage given by each of Mr Floros and Ms Papakostas.’[70] He did not, however, in terms make a finding of breach of duty of care in respect of this first allegation. On my analysis of his judgment, Judd J made express findings of breach in respect of the allegations relating to the representations made in October 2006, November 2006 and May 2007 only. In other words, he did not make a finding of breach in respect of either the first or the fifth allegations.
[69]Kambouris v Tahmazis [2013] VSC 271 at [14]-[18].
[70]Ibid, [15].
He set out his findings on breach in paragraphs 19-21 of his judgment as follows (emphasis added):
The evidence given by the plaintiff and her husband conforms generally with the allegation in the plaintiff’s statement of claim that in around October 2006 and May 2007, Mr Kiatos represented to her that both mortgages continued to secure her position in respect of the borrowings by Betac. I am satisfied that Mr Kiatos was acting as the plaintiff’s solicitor at the time he gave each of the certificates, with the knowledge that his wife had not in fact executed an agreement or given a mortgage. He was, at the very least, obliged to inform the plaintiff of that fact and alert her to the risk that she only had recourse to the property of Mr Floros. By failing to so inform the plaintiff, Mr Kiatos breached his duty of care, if only to make full disclosure of facts known to him and the associated risk.
When the bank ultimately called in the security, the plaintiff was unable to call upon the security she believed had been provided by Ms Papakostas. In my opinion, the plaintiff has suffered loss and damage by reason of the breach by Mr Kiatos, in failing to advise her in October 2006 and May 2007, when she was called upon to provide additional security to the bank, that she was not protected by an indemnity agreement executed by Ms Papakostas that would support the caveat, and a mortgage granted by Ms Papakostas over the Loch Sport property.
Accordingly, the plaintiff is entitled to judgment against the second defendant, Con Kiatos, with damages to be assessed.[71]
[71]Ibid, at [19]-[21].
As the emphasised words show, these findings related at most to the certificates (November 2006 and May 2007) and failing to properly advise her in October 2006 (the telephone conversation). The findings were confined to failures to correctly advise in relation to the Papakostas mortgage, not the Floros mortgage.
At the time of the trial before Judd J there were no particulars of loss in any of the paragraphs of the 20 March 2013 Third FASOC, in particular in paragraph 54 which pleaded loss arising from breaches in negligence or retainer relating to the October 2006, November 2006 and May 2007 representations. It was accepted by both parties in this trial that causation was pleaded in respect of those representations at paragraph 49 of the 20 March 2013 Third FASOC. At the time of the trial before Judd J and until opening submissions in this trial, that paragraph read as follows:
49.Acting on the faith and truth of the Kiatos Representations and induced thereby the plaintiff did or refrained from doing the following things.
(a) plaintiff would not have –
(i) agreed to provide the New NAB Guarantee and security over the Plaintiff’s Properties as security for the Betac Facilities.
(ii) signed the New NAB Guarantee; further or in the alternative,
(iii) made the NAB payment;
(iv) made ‘further borrowings’ referred to;
(b) the plaintiff would have sought and obtained from Floros a variation to the Floros Agreement and the Floros Mortgage so that they provided for Floros to indemnify the plaintiff in respect of her obligations to the NAB under the NAB Mortgages and the New NAB Guarantee in respect of the Betac Facilities and to charge the Floros Property with that liability;
(c) the plaintiff would have insisted upon due execution of the Papakostas Agreement and/or the provision of proper security over the Papakostas property. The plaintiff would then have sought and obtained from Anna Papakostas a variation to the Papakostas Agreement so that it provided for Anna Papakostas to indemnify the plaintiff in respect of her obligations to the NAB under the NAB Mortgages and the New NAB Guarantee in respect of the Betac Facilities and to charge the Papakostas Property with that liability.
It is apparent that paragraph 49(a) pleads a ‘no transaction’ case in causation i.e. that had the representations not been made, the plaintiff would not have entered into the first Betac guarantee in November 2006 or the third Betac guarantee in May 2007.[72] By contrast, paragraphs 49(b) and (c) (conceded to be collectively in the conjunctive and alternative to (a)), pleaded a ‘different transaction’ case. In other words, they asserted that had the plaintiff known that the Floros mortgage may not extend to Betac liabilities, she would have sought a variation to ensure that it did and had she known that the Papakostas agreement was not signed she would have insisted on execution of it or proper security for Betac liabilities.
[72]Paragraph 49 refers to the ‘New NAB guarantee’ which was earlier defined at [23] to be the guarantee for Betac liabilities.
Early in the trial before me, I ruled that the plaintiff must make an election in relation to these alternatives before evidence commenced. The plaintiff elected to proceed with the ‘no transaction’ case i.e. paragraph 49(a).
As noted earlier, at the time of the trial before Judd J there were no particulars of loss in the 20 March 2013 Third FASOC. After that trial, the plaintiff filed a document entitled Updated List of Damages to be Assessed dated 2 September 2013. This was amended on three further occasions. By the first amendment,[73] the plaintiff deleted (from her claim for loss) a claim for costs in this proceeding and a claim for lost revenue from properties sold by the NAB; quantified her claim for damages arising from the claimed loss of $100,000; and added claims for deposits on properties and damages for interest on that sum. By the second amendment[74], the plaintiff deleted a portion of the document[75] that I had ruled amounted to a submission. By the third amendment,[76] made in closing submissions, the plaintiff deleted the claim for deposits and interest thereon.
[73]Encapsulated in the Amended Updated List of Damages to be Assessed handed up in court on 6 February 2015 and subsequently filed 9 February 2015.
[74]Made on 6 February 2015- see order made that day.
[75]Headed ‘(B) Note on Additional Contributions made towards BTC and increased NAB facility’.
[76]See order made 26 February 2015.
As a consequence of these amendments, and the election made in relation to causation, the plaintiff’s claim for damages seeks, to ‘place (herself) into the position that she would have occupied had the breach of duty or breach of retainer… not occurred’. The plaintiff asserts that ‘had Kiatos not acted wrongly’ (which was found by Judd J to have occurred in October 2006, November 2006 and May 2007) the Gove St units and The Boulevard properties ‘would not have had to have been sold as the Floros and Papakostas mortgages would have covered any liability to (the NAB)’. The plaintiff seeks:
(a) the current value of those properties (claimed in the document to total $1,490,000;
(b) legal costs she incurred in defending the NAB recovery proceedings in the sum of $94,555.45;
(c) repayment of a sum of $100,000 that she claims she made to BTC when its liabilities were paid out in November 2006; and
(d) damages by way of interest on the sum of $100,000 quantified at $68,963.[77]
[77]Amended Updated List of Damages to be Assessed filed 9 February 2015, further amended by leave 26 February 2015, initialled, dated and marked ‘A’ by me.
From these sums, the plaintiff concedes that the two settlement sums totalling $490,000 must be subtracted.
Although the claim for legal costs is said by the Amended Updated List of Damages to be Assessed filed 9 February 2015 to relate only to legal costs incurred in respect of the NAB recovery proceedings, the plaintiff also adduced evidence of other legal costs incurred in her name, including costs incurred in this proceeding, in respect of a proceeding commenced by Ms Papakostas against Betac,[78] and in respect of another proceeding against Mr Floros to remove caveats he had lodged over The Boulevard, 99-101 Warrigal Road, Hughesdale and 2/650 Warrigal Road Oakleigh.[79] The registered proprietor of 99-101 Warrigal Road and 2/650 Warrigal Road was Betac, and so it is unclear why the plaintiff would be liable for those legal costs in any event. There was no application made to further amend the claim for damages to encompass these costs and their relevance to the claim as made was not explained by counsel for the plaintiff. Accordingly, I disregard them.
[78]Exhibit P.
[79]Exhibit Q.
The second defendant denies that his negligence, as found by Judd J, caused any loss to the plaintiff. The second defendant’s case as put is confirmed in the defence filed after the conclusion of the trial on 4 March 2015 in accordance with order made by me in the trial. For completeness, I also note that the plaintiff filed a reply to this defence after the conclusion of the trial, which reply maintains the contention put in closing submissions that causation has already been determined by Judd J.
If the plaintiff is correct in this contention, or is able in this trial to establish causation, then the second defendant contends that the quantum of the claimed loss in respect of the Gove St units and The Boulevard should be significantly reduced, having regard to the plaintiff’s pre-existing indebtedness prior to first occasion of breach in October 2006, or the indebtedness that would have remained if joint venture properties were sold first, and some other matters. In addition, in respect of the legal costs claim, the second defendant contends that the plaintiff has not proved that it was she, as opposed to her husband and children, who paid those costs. In relation to the claim for $100,000 and interest thereon, the second defendant contends that there is no evidence to show that this sum would have been repaid to her but for the negligence of Mr Kiatos.
Has causation already been determined?
In the second sentence of the penultimate paragraph of his judgment, quoted earlier in these reasons, Judd J commenced his conclusion in these words (emphasis added):
In my opinion, the plaintiff has suffered loss and damage by reason of the breach by Mr Kiatos, in failing to advise her in October 2006 and May 2007…
In her closing submissions, the plaintiff contended that this must be read as a finding on causation. In other words, the plaintiff was not required, in the trial before me, to show a causal link between the loss she claimed and the breaches found by Judd J. I do not consider this correct, for the following reasons.
First, this submission is entirely at odds with the way the plaintiff opened her case and the evidence that she called. In the written opening submissions prepared by her counsel, the plaintiff disputed the defendant’s assertion that causation should be assessed as at 2006, and submitted that:
As Mrs Kambouris did not know until the end of 2007 that breach of duty/breach of retainer had occurred it is not until that date that any person would be in a position to prevent any damages which might have flowed in the interim to occur. It is at that time that one examines the events that will then occur and their causative relationship to the actions of Kiatos.[80] (emphasis added)
[80]Opening Submissions of the Plaintiff at [37].
This written opening submission by the plaintiff responds to and does not dispute the assertion made by the second defendant in his written opening submission that causation had not yet been determined.[81] In addition, in discussion at the opening of the trial, there were repeated assertions by the second defendant and concessions by the plaintiff that causation was not determined in the earlier trial.[82] Further, the plaintiff made applications to call evidence from the plaintiff and further evidence from Mr Kambouris, notwithstanding that that evidence had not been foreshadowed in a witness outline. The evidence was said to be necessary in part because evidence on causation was required.[83] The plaintiff also made an election prior to the evidence to pursue paragraph 49(a) only.[84] Each of these actions of the plaintiff is entirely inconsistent with the submission made at the end of the trial that there was no need to establish causation, because it had already been found.
[81]Second defendant’s Outline of Opening Submissions on the Assessment of Damages dated 3 February 2014 (should have been 2015) at [25] and [26].
[82]T 37.28-29, T 38.17-18, T 39.22- T 40.8; T 59.4-7, T 74.8-16, T 83.21-25.
[83]T 83.21-25; T 177.25-27.
[84]T 233.22-T 234.1.
Finally, on leave being granted to do so, the plaintiff and Mr Kambouris both gave evidence to the effect that the plaintiff would not have signed the first and third Betac guarantees had she known the correct position in relation to the Papakostas mortgage. This evidence was unnecessary if it had already been found that the plaintiff would not have signed those guarantees but for the negligence of Mr Kiatos. In accordance with ordinary principles, the plaintiff should be bound by the case that she ran.
Lead counsel for the plaintiff submits that although that may be the usual approach, the difficulty is that a judgment has been given and must be given effect to. As loss is an element of a cause of action in negligence, a finding of liability in negligence requires a finding of loss, and so a finding of causal connection between the breach and the loss.
In my view, that submission fails because the judgment is equally capable of being supported by the cause of action in contract. In contract, as the second defendant correctly submits, nominal damages may be awarded for a breach which is not proved to have occasioned actual pecuniary loss.[85]
[85]Simply Irresistible Pty Ltd v Couper [2010] VSC 601 at [401]-[403] per Kyrou J.; State of New South Wales v Stevens [2012] NSWCA 415 at [18].
Secondly, to hold that Judd J determined causation at a time when no loss had been identified at all in the pleading or in the evidence before him would be a nonsense. In this regard, I accept the submission for the second defendant, that to determine causation one must, as a matter of logic, reason backward from the particular loss claimed. In other words, one cannot determine that a particular loss was occasioned, without knowing what that loss is said to be.
This is made manifest by the use of the words ‘particular harm’ in the causation provisions in the Wrongs Act, which I will shortly discuss, but as the High Court held in Wallace v Kam,[86] also applied to the determination of causation at common law. The Court there held that the first aspect of the determination of causation for the purpose of attributing legal responsibility is a ‘question of historical fact as to how particular harm occurred’[87] (emphasis added). Here, the pleading did not identify even what would have occurred had the negligence been known, other than in the very broad terms of paragraph 49(a) or (b) and (c). Indeed, when submissions were put to him as to what might have occurred, but for the negligence, Judd J noted that this was speculation and queried if there was any such evidence.[88] Mr Colbran said in answer that there was evidence that the transfer to Betac would not have occurred, but scrutiny of the evidence of Mr Kambouris and the plaintiff in that trial[89] shows that there was no evidence as to what they would have done had they known that there was no Papakostas mortgage. It is plain from the discussion between then lead counsel for the plaintiff, Mr Colbran, and Judd J in closing submissions in the liability trial that both considered that causation, or least ‘some causation issues’ would arise in the damages trial.[90] I do not accept the plaintiff’s submission[91] that this discussion related only to the withdrawal of the misleading and deceptive conduct claim.
[86](2013) 250 CLR 375.
[87]Ibid, at [11].
[88]Exhibit 45, at T 136.18-25.
[89]Exhibit S.
[90]Exhibit 45, at T 137.10-15.
[91]In oral closing submissions at T 763 and T 849.14-15.
Thirdly, there is an alternative interpretation of His Honour’s use of the phrase ‘has suffered loss and damage by reason of the breach’. That alternative interpretation is that the loss to which he there refers is the absence of the protection that would have been afforded by the indemnity agreement, as identified by him in the same paragraph. In other words, an increased exposure, the measure of which would have been at its highest the equity in the Papakostas property. As the second defendant correctly submits,[92] if this is what was found, this is a ‘different transaction’ case, before Judd J available to the plaintiff by virtue of paragraph 49(c), but abandoned in this trial. Accordingly, if the plaintiff is correct that causation has been determined, she has now elected not to pursue the case as found.
[92]T 784-T 785.
In fairness to the plaintiff, I do not consider that I should now conclude she has abandoned her case entirely by her election to pursue paragraph 49(a), as the interpretation set out above would require. I consider that now that the plaintiff has particularised the losses said to have been occasioned by the breaches by Mr Kiatos on the basis that she would not have signed the first or third Betac guarantees had she known there was no Papakostas mortgage, it falls to be determined in this trial whether the negligent omissions by Mr Kiatos in October and November 2006 and May 2007 in failing to advise her that there was no such mortgage caused those losses.
For completeness, I note that the plaintiff did seek at an early stage of the trial that I refer the whole of the damages issue back to Judd J, or adjourn the trial to allow certain questions (unidentified) to be put to him.[93] I refused those applications, for reasons given at the time, including that if the plaintiff considered that there was any question arising from the judgment of Judd J she had had ample opportunity to seek to raise that herself before His Honour, and had not done so. For current purposes I add only that the plaintiff did not at the time of those applications for referral or adjournment before me base them on any ambiguity as to whether or not causation had been established, and indeed, as noted above, at the time of her application for referral back to Judd J or adjournment did not cavil with the proposition advanced by the second defendant that causation fell to be determined in this trial. The questions proposed to be put to Judd J were not identified but were said to relate to whether the findings on breach extended to representations in relation to the adequacy of the security provided by Mr Floros, or were, as I had ruled, limited to the Papakostas mortgage.
[93]T 141 –T 155.
Legal Principles
Common law or the Wrongs Act?
The parties were not in agreement as to the legal principles to apply. The written opening submissions for the plaintiff assumed, and the written closing submissions for the plaintiff explicitly stated, that the principles to apply are those that apply to a negligence claim at common law.
The second defendant contends that the legal principles that are to be applied to determine the causation issue are set out in ss 51 and 52 of the Wrongs Act. Those sections provide as follows:
51 General Principles
(1)A determination that negligence caused particular harm comprises the following elements—
(a)that the negligence was a necessary condition of the occurrence of the harm (factual causation); and
(b)that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability).
(2)In determining in an appropriate case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be taken to establish factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.
(3)If it is relevant to the determination of factual causation to determine what the person who suffered harm (the injured person) would have done if the negligent person had not been negligent, the matter is to be determined subjectively in the light of all relevant circumstances.
(4)For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.
52 Burden of proof
In determining liability for negligence, the plaintiff always bears the burden proving, on the balance of probabilities, any fact relevant to the issue of causation.
These provisions form part of Part X of the Act, which Part was inserted consequent on the Australia wide review of the law relating to negligence, the Ipp Report, following the collapse in 2001 of the insurer HIH Insurance Ltd. By s 44 of the Act, Part X applies ‘to any claim for damages resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise’. By s 43, ‘court’ is defined to relevantly mean this Court in this trial, ‘damages’ includes any form of monetary compensation, and ‘harm’ includes economic loss. There are exclusions from the Part set out in s 45, but none of those apply. Parties can contract out of the application of the Part, by virtue of s 46, but that did not here occur.
I consider the second defendant’s contention that these provisions, rather than common law principles, apply to this case, whether considered in negligence or contract, to be plainly correct. The plaintiff also accepted by the second day of oral closing submissions that it is the Wrongs Act that applies.[94] Section 47 of the Wrongs Act, also contained within Part X, provides that ‘(e)xcept as provided by this Part, this Part is not intended to affect the common law’. Lead counsel for the plaintiff, although ultimately accepting that it is the Act that here applies, placed some emphasis on this section to assert the continuing relevance of the common law authorities to which he took me.
[94]T 854.23- T 855.10.
The intention of the statutory test expressed in Victoria in s 51(1)(a) and in New South Wales in s 5D of the Civil Liability Act 2002 (NSW) and how it differs from common law principles has been considered by the High Court. In Adeels Palace Pty Ltd v Moubarak (‘Adeels Palace’)[95] the High Court held, in respect of the cognate provision in the New South Wales Civil Liability Act 2002, that dividing the issue of causation into factual causation and scope of liability as per s 51 of the Act:
…expresses the relevant questions in a way that may differ from what was said by Mason CJ, in March v E and MH Stramare Pty Ltd, to be the common law’s approach to causation. The references in March v Stramare to causation being ‘ultimately a matter of common sense’ were evidently intended to disapprove the proposition that ‘value judgment has, or should have, no part to play in resolving causation as an issue of fact’. By contrast, s 5D(1) (the NSW equivalent to s 51(1)) treats factual causation and scope of liability as separate and distinct issues.
It is not necessary to examine whether or to what extent the approach to causation described in March v Stramare might lead to a conclusion about factual causation different from the conclusion that should be reached by applying (the NSW cognate provision to s 51(1)(a)). It is sufficient to observe that, in cases where the Civil Liability Act or equivalent statutes are engaged, it is the applicable statutory provision that must be applied.[96]
[95](2009) 239 CLR 420
[96]Ibid, at [43]-[44] (citations omitted).
In the more recent case of Wallace v Kam[97] the Court expanded on these comments. The Court explained the relationship between the common law test and the statutory test as follows (citations omitted):
The common law of negligence requires determination of causation for the purpose of attributing legal responsibility. Such a determination inevitably involves two questions: a question of historical fact as to how particular harm occurred; and a normative question as to whether legal responsibility for that particular harm occurring in that way should be attributed to a particular person. The distinct nature of those two questions has tended, by and large, to be overlooked in the articulation of the common law. In particular, the application of the first question, and the existence of the second, have been obscured by traditional expressions of causation for the purposes of the common law of negligence in the conclusory language of ‘directness’, ‘reality’, ‘effectiveness’ and ‘proximity’.
Statute now requires that the two questions be kept distinct….
The distinction now drawn by s 5D(1) between factual causation and scope of liability should not be obscured by judicial glosses. A determination in accordance with s 5D(1)(a) that negligence was a necessary condition of the occurrence of harm is entirely factual, turning on proof by the plaintiff of relevant facts on the balance of probabilities in accordance with s 5E. A determination in accordance with s 5D(1)(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused is entirely normative, turning in accordance with s 5D(4) on consideration by a court of (amongst other relevant things) whether or not, and if so why, responsibility for the harm should be imposed on the negligent party.
Thus, as Allsop P explained in the present case:
[T]he task involved in s 5D(1)(a) is the elucidation of the factual connection between the negligence (the relevant breach of the relevant duty) and the occurrence of the particular harm. That task should not incorporate policy or value judgments, whether referred to as ‘proximate cause’ or whether dictated by a rule that the factual enquiry should be limited by the relationship between the scope of the risk and what occurred. Such considerations naturally fall within the scope of liability analysis in s 5D(1)(b), if s 5D(1)(a) is satisfied, or in s 5D(2), if it is not.
[97](2013) 250 CLR 375.
The High Court held in Adeels Palace,[98] as followed in the subsequent cases of Strong v Woolworths Ltd[99] and Wallace v Kam, that the statutory factual causation test, which is to be applied rather than the common law approach, is a restatement of the ‘but for’ test. The Court stated it thus in Wallace v Kam:
The determination of factual causation in accordance with (the NSW cognate provision to s 51(1)(a)) involves nothing more or less than the application of a ‘but for’ test of causation. That is to say, a determination in accordance with (in Victoria s 51(1)(a)) that negligence was a necessary condition of the occurrence of harm is nothing more or less than a determination on the balance of probabilities that the harm that in fact occurred would not have occurred absent the negligence.[100]
[98]Ibid, at [45].
[99](2012) 246 CLR 182 at [18].
[100]Ibid, at [16].
In his written opening submissions for the plaintiff counsel contended, supported by reference to March v Stramare[101] and other authority that predates Part X of the Wrongs Act, that it is not appropriate to use a ‘but for’ test and that causation should be determined by the application of the criteria of ‘common sense’.[102] Ultimately counsel for the plaintiff accepted that the statutory test in the Wrongs Act here applies, but continued to submit that, notwithstanding Wallace v Kam, the ‘but for’ test does not always apply, and this is an instance where it should not apply.[103] He was unable to identify any authority to support that proposition and I consider it incorrect in the light of the clear statements by the High Court. The common law may, however, be of some continuing assistance in relation to the determination of scope of liability pursuant to s 51 (1)(b).[104] I will return to this at a later point.
[101](1991) 171 CLR 506.
[102]Submissions of the Plaintiff dated 23 February 2015 at [60]
[103]T 855. 12-T 857.3.
[104]Hudson Investment Group Ltd v Atanaskovic and anor [2014] NSWCA 255 at [122] per Sackville AJA, Beazley P. and Ward JA. agreeing.
Factual causation in the case of a negligent omission
Judd J found that Mr Kiatos was negligent in that he failed to inform the plaintiff in October 2006 (in his telephone conversation with the plaintiff), in November 2006 (on giving his solicitor’s certificate to support the first Betac guarantee) and in May 2007 (on giving his solicitor’s certificate to support the third Betac guarantee) that his wife Ms Papakostas had not in fact executed an agreement to indemnify the plaintiff or given a mortgage. Thus the negligence so found was by way of negligent omission. How is the ‘but for’ test to be applied in the case of a negligent omission?
The second defendant relies on the Court of Appeal judgment in Wodonga Regional Health Service v Hopgood[105] in support of his proposition that in cases of negligent omission, the plaintiff must establish the causal link required by s 51(1)(a) by way of a counterfactual hypothesis. In that case, Maxwell P., with whom Buchanan and Harper JJ.A. agreed, held that ‘(w)hen- as here- a plaintiff alleges a negligent omission, the causal link between the breach of duty and the claimed damage can only be established by means of a counterfactual hypothesis’.[106] That case turned on common law principles, as an exception to the Act. However, it is clear from other cases of negligent omission that fell to be determined by the statutory scheme, here and in New South Wales, that the application of s 51(1)(a) and its interstate cognate provisions similarly require the consideration of a counterfactual in cases of negligent omission.[107]
[105][2012] VSCA 326.
[106]Ibid, at [31].
[107]Adeels Palace (2009) 239 CLR 420, and Lederberger and anor v Mediterranean Olives Financial Pty Ltd and anor [2012] VSCA 262 (a case of solicitor negligence by failure to properly advise).
The second defendant contends that in positing that counterfactual, the plaintiff must show that, had she taken the posited action, she would have prevented the loss of her properties. The second defendant contends that it is not sufficient for her to show merely that she may have done so. The plaintiff disputes this proposition.[108]
[108]T 919.23-T 920.19.
I consider the second defendant to be correct, on the basis of the High Court decision in Adeels Palace. In that case, the plaintiff had been injured in a shooting at licensed premises. The claimed negligence lay in failing to provide security staff. The High Court held that the statutory test for causation under the New South Wales equivalent of s 51(1)(a) was not satisfied if the plaintiff could show only that changing the surrounding circumstances might have made a difference.[109] What the plaintiff in that case had to show, and did not, is that it was more probable than not that, but for the absence of security personnel, the shootings would not have taken place. Unless that degree of connection was shown, on the balance of probabilities, the statutory test that the negligence was a necessary condition of the occurrence of the harm was not satisfied.[110]
[109]Ibid, at [50].
[110]Ibid, at [53].
The plaintiff says that rather than showing that her actions in the counterfactual would have prevented sale of her properties, she only has to show that it is appropriate that the scope of Mr Kiatos’ negligence extend to that loss. The error in the plaintiff’s reasoning on this point lies, in my view, in conflation of the scope of liability limb of s 51 with the factual causation limb, with which this portion of Adeels Palace was concerned.
Section 51(3) of the Act provides that the question as to what the person who suffered harm would have done if the negligent person had not been negligent ‘is to be determined subjectively in the light of relevant circumstances’. At common law, courts in Australia are required to apply a subjective test in determining what a plaintiff would have done had she been properly advised. The test is not what a reasonable person in the plaintiff’s position would have done, but what this particular plaintiff would have done.[111] The sub-section preserves the admissibility of subjective evidence as to what the plaintiff would have done.[112] The High Court has warned, however, of the inherent dangers in evidence given in hindsight after harm has occurred. In Rosenberg v Percival[113] a number of members of the Court addressed this issue. Gleeson CJ expressed it thus (footnotes omitted):
In the way in which litigation proceeds, the conduct of the parties is seen through the prism of hindsight. A foreseeable risk has eventuated, and harm has resulted. The particular risk becomes the focus of attention. But at the time of the allegedly tortious conduct, there may have been no reason to single it out from a number of adverse contingencies, or to attach to it the significance it later assumed. Recent judgments in this Court have drawn attention to the danger of a failure after the event, to take account of the context, before or after the time of the event, in which a contingency was to be evaluated. This danger may be of particular significance where the alleged breach of duty of care is a failure to warn about the possible risks associated with a course of action, where there were, at the time, strong reasons in favour of pursuing the course of action.[114]
[111]Chappel v Hart (1998) 195 CLR 232 per Kirby J. at 272-273.
[112]As compared, for example, to the position in New South Wales s 5D(3)(b) of the Civil Liability Act 2002 (NSW).
[113](2001) 205 CLR 434.
[114]Ibid, at [16].
It may be that the final phrase of s 51(3) of the Act, that directs the Court to determine what the plaintiff would have done absent the negligence subjectively in the light of all relevant circumstances is intended to incorporate into the statute the consideration of context to which the Chief Justice referred. Although I was not referred to express authority on the point, this construction and mode of application is consistent with the recent Court of Appeal decision of Odisho v Bonazzi,[115] and accordingly is the manner in which I will apply the sub-section.
[115][2014] VSCA 11.
In that case, the Court of Appeal upheld the dismissal of a claim against a medical practitioner for failing to warn of the risk of a particular treatment. The Court upheld the decision of the trial judge that factual causation had not been proved, because the plaintiff had failed to prove that, even if she had been warned of the risk, she would have declined the treatment concerned. The claim was also dismissed on the basis that the plaintiff had failed to prove that the treatment in fact caused the harm in question in any event. In the Court of Appeal, Beach JA and McMillan AJA, with whom Nettle JA agreed, approved the statement by Kirby J in Hoyts Pty Ltd v Burns[116] that such evidence is ‘so hypothetical, self-serving and speculative as to deserve little (if any) weight, at least in most circumstances’.
[116](2003) 77 ALJR 1934, at 1944 [54].
Beach JA and McMillan AJA considered the evidence given by the plaintiff at trial as to what she would have done had she been told of the possible risk of the treatment, and held that the dangers associated with such evidence were well illustrated in the case before them. In particular, they looked to the whole of the evidence, including the evidence of treatment to which the appellant had been prepared to consent, and upheld the view of the trial judge that an appropriate warning of the risk there in question would not have made any material difference to the events that occurred.[117]
[117]Odisho v Bonazzi [2014] VSCA 11 at [41].
Section 51(2): here not applicable
Section 51(2) is directed to a situation where negligence cannot be shown to be a necessary condition of the occurrence of harm according to ‘established principles’. The High Court by majority has held that this sub-section is intended to apply to two situations where causation cannot be established by the ‘necessary condition’ test. Those are cases where there is a cumulative operation of factors in which the contribution of each factor to the harm is unascertainable, and cases where the cause of the plaintiff’s harm is impossible to prove on the current state of medical or scientific knowledge, but the negligent conduct has materially increased the risk of harm.[118] In Powney v Kerang and District Health[119] the Court of Appeal held, in the light of that interpretation, that s 51(2) ‘was not intended as a fall back provision in a conventional case for a plaintiff who is unable to establish factual causation. Rather, it was designed to accommodate cases quite out of the ordinary…’.[120]
[118]Strong v Woolworths Ltd (2012) 246 CLR 182, 193-194 [25].
[119][2014] VSCA 221
[120]Ibid, at [96].
It was not here suggested by either party that s 51(2) applied, and that is plainly correct.
Scope of liability
At common law, the March v Stramare test effectively dealt with scope of liability and factual causation as one: part of the ‘common sense’ approach to causation.[121] The Wrongs Act now separates out scope of liability into a distinct concept, on which the plaintiff must succeed in addition to success on factual causation. The Court of Appeal has commented that application of s 51(1)(b) requires not only that the issue be dealt with separately, but also that the Court ‘makes a value judgment based on precedent and policy considerations, which may limit the liability of a person found to be responsible under the factual causation test’.[122]
[121]Powney v Kerang and District Health (‘Powney’) [2014] VSCA 221 at [76].
[122]Ibid, at [79].
Reference to ‘precedent’ may initially be puzzling, given that in Wallace v Kam, the High Court had held that the determination of the question posed by s 51(1)(b) is ‘entirely normative’.[123] The Court in Wallace v Kam went on, however, to explain that where the case in question falls within an ‘established class’ the normative question posed by s 51(1)(b) is ‘properly answered by a court through the application of precedent’.[124]
[123]Wallace v Kam (2013) 250 CLR 375 at [14].
[124]Ibid, at [22].
In a ‘novel case’, however, the Court held in respect of the identical provisions to s 51(4) and s 51(1)(b) in New South Wales:
s 5D(4) makes it incumbent on a court answering the normative question posed by s 5D(1)(b) explicitly to consider and to explain in terms of legal policy whether or not, and if so why, responsibility for the harm should be imposed on the negligent party. What is required in such a case is the identification and articulation of an evaluative judgment by reference to ‘the purposes and policy of the relevant part of the law’. Language of ‘directness’, ‘reality’, ‘effectiveness’ or ‘proximity’ will rarely be adequate to that task. Resort to ‘common sense’ will ordinarily be of limited utility unless the perceptions or experience informing the sense that is common can be unpacked and explained.[125]
[125]Ibid, at [23].
The second defendant submits that this is a ‘novel case’ within the meaning of that phrase in Wallace v Kam. I will discuss scope of liability in more detail later in this judgment.
Factual Causation
The elements of the plaintiff’s case
There is a difference between the plaintiff’s case as pleaded, and her case as closed.
As discussed earlier, the plaintiff’s case is pleaded at paragraph 49(a) of the 20 March 2013 Third FASOC. On analysis, the first three sub-paragraphs relate to the October and November 2006 breaches, and the fourth to the May 2007 breach.
The effect of sub-paragraph (a)(i) is that had the plaintiff been correctly advised by Mr Kiatos in October 2006 or November 2006 that in fact she did not have security by way of mortgage over Ms Papakostas’s property then she would not have agreed to provide the ‘New NAB guarantee’ (which is defined in the pleading at paragraph 23 to be the Betac guarantee she entered into after October 2006 ie. what I have called the first Betac guarantee). The effect of sub-paragraph (a) (ii) is that nor would she have signed it. The effect of sub-paragraph (a) (iii) is that, in the alternative, she would not have made the ‘NAB payment’. This is defined in the pleading at paragraph 17 to be payment out by Betac of the BTC liabilities, which occurred in November 2006, and so did not in terms involve any payment by the plaintiff.
Sub-paragraph (a)(iv) pleads that she would not have made the ‘further borrowings’ referred to in paragraph 47 of the pleading. That paragraph relates to the further borrowings at the time of the May 2007 guarantee, the third Betac guarantee.
Applying s 51(1)(a) of the Wrongs Act to this claim as pleaded, there are three elements to the plaintiff’s case:
1. If correctly advised at the respective times, she would not have agreed at those times to the refinancing or signed the first Betac guarantee; or agreed to the further borrowings and signed the third Betac guarantee;
2. The implication is that she would not have entered into these transactions at all, not just not at those times; and
3. Not entering into the transactions would have prevented the loss of her properties, and the other losses that she claims.
The plaintiff’s case as closed is that had she known in October/November 2006 or May 2007 that there was no Papakostas mortgage as she had been promised she would not have proceeded at that time with the refinance and first Betac guarantee, or the third Betac guarantee.[126] The plaintiff submits that this is all that she need show on the ‘but for’ test in s 51(1)(a). This submission turns on the proposition that it is irrelevant that she may have signed the respective guarantees at some later point, after taking advice and reassessing her position.[127] On this submission, the plaintiff contends that she does not need to prove element 2, as identified by me above.
[126]Oral closing submissions for the plaintiff at T 893.4-11; T 896.26-27; T 909.18-28.
[127]Ibid, at T 894.29- T 895.1.
There is some support for this approach to factual causation in the High Court decision Wallace v Kam,[128] although counsel for the plaintiff did not take me to it. In that case, the Court identified three possible scenarios that might arise consequent on a negligent failure to warn. That case concerned the negligence of a surgeon who failed to advise of certain risks of surgery. On the facts of that case, the plaintiff would not have proceeded at all if correctly advised. The Court also considered the possible scenario in which a plaintiff would not have proceeded at the time, if correctly advised, but may have done so later. The Court expressed the view, obiter on the facts of that case, that the ‘better view’ is that factual causation should also be found in this scenario.[129]
[128](2013) 250 CLR 375.
[129]Ibid, at [20].
I do not, however, accept the plaintiff’s submission put in closing, because this case is not the case that the plaintiff pleaded and conducted. It is simply not consistent with the evidence of Mr Kambouris as to what would have occurred had the plaintiff been correctly advised. Further, the case as put in this way for the plaintiff is essentially a ‘loss of opportunity’ case or a ‘different transaction’ case. If it is a ‘loss of opportunity’ case, the plaintiff has not pleaded or proved what the relevant opportunity was, or its value. If seen as a ‘different transaction’ case i.e. the case that was pleaded in paragraph 49(b) and (c) of the 20 March 2013 Third FASOC, then this case was withdrawn at the commencement of the trial. Finally, had the ‘different transaction’ case proceeded, at its highest the damage suffered by the plaintiff would have been the value of the equity then held by Ms Papakostas in her Loch Sport property, as this would have been the security promised but not provided. This limitation is not consistent with the losses claimed by the plaintiff.
I accept the submission of the second defendant[130] that, in relation to factual causation, the plaintiff is required by her pleaded case to show that she would not have signed the first or third Betac guarantees at all, had she been told the truth, and that as a consequence, the ultimate loss of her properties would have been avoided, not just that that loss may have been avoided. The plaintiff bears the onus of proof on causation. Accordingly, the plaintiff is required to prove the three elements I have identified above.
[130]Second Defendant’s Outline of Closing Submissions on the Assessment of Damages dated 24 February 2015 at [17(a)(ii) and (iii)].
I didn’t believe that it would increase the exposure- the exposure was the same but at the same time I would have signed this guarantee because we still have a relationship with the bank- we still have an agreement how we are going to try it out of the properties so we had a plan. We had an agreement with the bank how to try it with the properties so if the bank says sign a guarantee you have to sign it.[277]
[276]Sent by email dated 27 March 2015 at point 2 (a).
[277]T 62418-25.
In closing oral submissions, counsel for the plaintiff said, in answer to a query as to whether the plaintiff could have then cut her losses by selling properties, that she tried to do so, but could not because of the caveats that Mr Floros had placed on the properties.[278] The caveats were placed on the properties in January 2008, but Mr Kambouris does not refer to that difficulty as a reason for his decision to enter into the February 2008 guarantee in the extract from his evidence quoted above. The choice by Mr Kambouris to try to trade out, and the preparedness of the plaintiff to act as he requested, led them into further indebtedness, knowing that they had less security than they had earlier believed. Their decision was a voluntary act, and entry into the further guarantees in September 2007 and February 2008 is not shown to be the only course of action available to them once they learnt of Mr Kiatos’ negligence. I accept the submission of the second defendant[279] that for this reason as well it is not appropriate to extend the scope of his liability to the loss of properties.
[278]T 910.13-22.
[279]Second Defendant’s Outline of Closing Submissions dated 24 February 2015 at [65]-[67].
Continued use of The Boulevard
The second defendant contends that it is also not appropriate to extend the scope of his liability to the loss claimed in respect of The Boulevard because ‘the plaintiff and her family have retained the benefit of the use of the property’.[280] I do not accept this submission.
[280]Second Defendant’s Outline of Closing Submissions dated 24 February 2015 at [68].
The evidence cited in support of it is from Mr Kambouris only. It is to the effect that he has recently spent time at the property, and that his wife the plaintiff ‘probably does’ although not with him.[281] There is no evidence on the point from the plaintiff. Accordingly, there is no direct evidence that she uses the property at all. Even if she does, she no longer owns it. It is now owned, it is true, by a company owned and controlled by her children, but the significant matter in relation to economic loss is ownership.
[281]T 589 27-31.
The nature of the duty, the breach and the loss
Comparison of the breaches as found by Judd J and the loss claimed by the plaintiff provides my final reason for concluding that it would not be appropriate to extend the second defendant’s liability for those breaches to the loss of the properties.
The plaintiff has submitted that the negligence was serious, because Mr Kiatos knew the true position for a long time, and that the loss that eventuated was the very sort of loss that Mr Kiatos had a duty to warn her about. Although counsel for the plaintiff did not refer me to any specific evidence as to when Mr Kiatos first knew that the promised security by his wife had not been given, I accept that it should have been apparent to him from very early on, and certainly from the time he instructed Ms Gorenstein to lodge a caveat without an executed agreement, that there was no such security. I accept that the negligence was serious for this reason.
The plaintiff’s proposition that the loss of her properties was the very sort of loss that Mr Kiatos had a duty to warn her about is consistent with the view of the Court of Appeal in Lederberger that a solicitor has a broad duty to advise his or her client as to the legal consequences of a step which that client is proposing to take.[282] As loss of her properties was a consequence that could follow from entry into the first and third Betac guarantees, by this reasoning the scope of Mr Kiatos’ liability for his negligent advice to her on the occasion of entry into those guarantees should extend to the ultimate loss of those properties. Counsel for the plaintiff submitted to similar effect that loss of the properties was an entirely foreseeable consequence from that negligence, and that the advice the plaintiff sought from Mr Kiatos was specifically whether or not her properties were protected.[283]
[282](2012) 38 VR 509, at [100]-[101].
[283]T 901.25- T 902.11.
There is force in this submission. The difficulty for the plaintiff, however, is that Judd J expressed his findings of duty and breach in narrow terms. He found that Mr Kiatos had breached his duty of care by failing to advise the plaintiff that there was no Papakostas mortgage.[284] The words he used did not exclude the possibility of a broader duty and so broader breach, but he did not make any express finding of such broader breach. In particular, Judd J did not find Mr Kiatos to be in breach of his duty of care by failure to advise the plaintiff that her properties were at risk by reason of the guarantees. On the facts before him, and before me in this trial, the plaintiff already knew that. I consider that I am bound by this finding as the specific nature of the duty and so the breach.
[284][2013] VSC 271, at [19]-[20].
The loss that most directly arises from the breach as found is the loss of the amount that the Papkostas security would have provided to the plaintiff, had she had to call on it. At its highest, this is the equity that Ms Papakostas held in the property. Arguably, this amount should then be discounted to take into account the costs of recovery, if the security was not provided willingly. The uncontradicted expert evidence in relation to this promised security is that it was purchased by Ms Papakostas in August 2002 for $56,000, as at the date of valuation (7 June 2014) was still vacant land, and as at February 2009 would have been in the order of $110,000-$125,000 in value. The title search shows that is encumbered by a mortgage from 19 August 2002.[285] There is no evidence as to Ms Papakostas’s remaining equity, but on this expert evidence it could not have exceeded $125,000.
[285]Exhibit 41.
Mr Kambouris gave evidence that he thought the value of the land, which he knew was vacant, was greater than this, in excess of $250,000, on the basis of his knowledge of the area. Had it been necessary, I would have preferred the expert evidence to his lay opinion. Further, Mr Kambouris did not know the land was already encumbered, and made no enquiries in that regard.[286]
[286]T 543.1-17.
The plaintiff may have had an arguable case for this loss, but that is not the case that she has put, or the loss that she seeks. She seeks the loss of her properties, although the negligence of Mr Kiatos did not relate to a failure to advise her that they were at risk. In my view, this is a further normative reason why the scope of his liability for his negligence should not extend to this claimed loss.
Quantum
The plaintiff has not shown that she suffered the losses she claims for legal costs and the $100,000. I disregard them in this discussion of quantum, and consider only the loss of her properties. It is not necessary to reach a conclusion in relation to the quantum of that loss, as the plaintiff has failed on both limbs of s 51(1) in relation to causation. Had it been necessary, I would have taken the following approach to quantum.
I accept that the starting point for assessment of the quantum of the plaintiff’s loss in respect of the properties is their current market value. This is the approach both parties took. Their experts were able to agree on the current market value of Unit 1 of the Gove St units, and The Boulevard, but continued to disagree as to the current market value of Unit 2 of the Gove St units, although they narrowed their disagreement on that point.[287] Notwithstanding this remaining disagreement, neither party called the expert of the other for cross examination.
[287]Exhibit A.
The experts agreed that the current market value of The Boulevard was $550,000 and that of Unit 1 $500,000, being a total of $1,050,000. In relation to Unit 2, given the absence of cross examination, I would have taken the mid-point of the range given by the expert for the second defendant, which was $420,000- $440,000, and found the current market value to be the mid-point of that figure and the figure given by the expert for the plaintiff, which was $450,000. Accordingly, I would have found the current market value of Unit 2 to be $440,000. It follows that, I would have found the total current market value of all the plaintiff’s properties to be $1,490,000.
I accept the submission of the second defendant that the plaintiff’s pre-existing liability must be deducted from the current market value of the properties. The plaintiff opposes this course, but I consider it to be correct, because she was already exposed to the loss of her properties at the time of the first negligence of Mr Kiatos by reason of the guarantees for Kambouris Nominees and BTC she had already given.
The second defendant puts the appropriate deduction in two ways.[288] The second defendant’s primary submission is that the quantum should be reduced by the sum of the indebtedness of Kambouris Nominees (stated as $202,152.14) and BTC (stated as $490,656.84), being a total of $692,808.98. The second defendant in his written closing submissions does not give the date at which these figures applied, describing it only as ‘as at the time of the negligence found by Judd J’.[289] The first occasion of negligence was in October 2006, and the indebtedness of BTC reduced shortly thereafter by reason of the receipt of the proceeds of sale of Alfred Grove. In fairness to the plaintiff, I consider that her pre-existing BTC indebtedness for the purpose of deduction from the quantum of her loss should be considered to be the amount remaining after receipt of those proceeds. On the expert evidence of Mr Meredith, that remaining indebtedness as at 30 November 2006 was $490,282.[290] I will utilise the indebtedness shown in the relevant bank statement for Kambouris Nominees as at that same date, 30 November 2006, being $199,090.24.[291] These are the figures I will utilise rather than the figures given by the second defendant in his written closing submissions. The total of the relevant prior indebtedness is then $689,372.24.
[288]Second Defendant’s Outline of Closing Submissions dated 24 February 2015 at [76]-[78].
[289]Ibid, at [76].
[290]Exhibit 43 at [7].
[291]Exhibit 8.
The second defendant’s alternative submission assumes that the bank would have sold all security properties other than hers first, and so her pre-existing liability was only the amount by which she would have remained indebted, being $226,534, and the interest that would have accrued on that debt.
In my view, the second defendant’s primary submission more correctly reflects the increase in the plaintiff’s risk arising from the negligence of Mr Kiatos (assuming causation had been proved). That risk arose from guarantees which on the usual construction imposed joint and several liability on the guarantors. There is nothing in the guarantees to show that this usual construction did not apply. It follows that it is not correct to regard the plaintiff’s liability under those guarantees as only that portion that could not be met by the borrower or other guarantors, including Betac in the case of the BTC guarantees.
The plaintiff submits that, if there is to be any deduction for pre-existing liability, it should be calculated not only on the basis of the remaining liability after sale of all the other properties, but also on the basis of the agreement between the joint venture parties that they would share equally in the liabilities. Thus, the plaintiff submits that at the highest she should be considered to have only a pre-existing liability as to one third of the amount remaining after sale of all properties other than her own.[292]
[292]Plaintiff’s further submissions made by email dated 27 March 2015 at [2(b)].
In my view the submission as to a one third allocation is flawed for two reasons. First, the agreement as to equal responsibility for liabilities was as between the joint venturers, Mr Kambouris, Mr Kiatos and Mr Floros. The joint venturers were not the same persons as the BTC guarantors or the guarantors for Kambouris Nominees. In relation to BTC, the plaintiff was a guarantor, but not a joint venturer, and Mr Kiatos was not a BTC guarantor. The submission is also flawed for similar reasons to the alternative submission of the second defendant. The guarantees imposed joint and several liability for the whole of the BTC and Kambouris Nominees indebtedness, not distinct liability for each guarantor for a portion only of it.
Accordingly, I would have reduced the current market value of the properties by the whole of the plaintiff’s pre-existing liability for both Kambouris Nominees and BTC as at 30 November 2006 and arrived at a sum in the order of $800,628.
The plaintiff concedes that the amounts she has already recovered for her loss by way of settlements with the estate of Mr Floros and Ms Gorenstein, which total $490,000, must be deducted. This would result in a sum in the order of $310,628.
From that sum, the second defendant contends that amounts that the plaintiff recovered from Betac should also be deducted, as those funds would not have been generated had the restructure not occurred. The experts for both parties agreed that these amounts were in the sum of $82,398.[293] Counsel for the plaintiff submitted that these sums included refund of the deposits for properties initially paid by Mr Kambouris, which refunds should not properly be included. The second defendant did not demur with that submission, and I accept it.[294] Accordingly, the further sum by which the recoverable quantum is to be reduced is $53,298.
[293]Exhibit 42 at [118] and Exhibit BB at [3.1(h)].
[294]T 923.2-4.
The remaining sum after all deductions is $257,330. That is the amount I would have awarded had the plaintiff been successful on causation.
Nominal damages
The plaintiff has failed at each level in her substantive case. She has not proved that the second defendant caused the losses she claims; nor that his responsibility should extend to those losses; nor that the losses she has suffered are in the amount that she seeks. However, Judd J did find that she had suffered a loss by reason of the breaches by Mr Kiatos, and in my preliminary view that finding would justify an award of nominal damages. I say preliminary because the parties did not address me at length in relation to the nominal damages. I will hear them further if the plaintiff seeks that award, and if either of them then so requires.
The second defendant did draw my attention to the recent decision of the New South Wales Court of Appeal, State of New South Wales v Stevens (‘Stevens’).[295] That case concerned a claim for damages for personal injury arising from breach of a deed. The plaintiff failed at trial to show that the injury she had suffered had been caused by the breach, or that, even if it had, it met the threshold for a claim for personal injury damages. The trial judge awarded her the sum of $10,000 for nominal damages. On appeal, the Court of Appeal held that that amount was excessive, and reduced the amount to $100.
[295][2012] NSWCA 415.
The case is in some respects distinguishable. The loss there claimed was personal injury, and damages were sought for non-economic loss. As it was a claim relating to personal injury, there were provisions of the Civil Liability Act 2002 (NSW) (‘Civil Liability Act’) on which the appellant successfully relied on appeal which do not here apply. However, the same definition of ‘damages’ as there applied, also here applies. That is, ‘damages’ is defined both in s 43 of the Wrongs Act and in the relevant provision in the Civil Liability Act to include ‘any form of monetary compensation’. In Stevens, the appellant argued that by virtue of this definition, an award of nominal damages was precluded if the plaintiff had failed to establish her case for personal injury damages under the Civil Liability Act. The Court of Appeal rejected that argument, and held that the award of nominal damages is not governed by the Civil Liability Act.[296] It is made to vindicate the plaintiff‘s claim that her legal rights have been infringed. By analogy, nor is such an award governed by Part X of the Wrongs Act.
[296]Ibid, per McColl JA at [24] and Sackville JA at [75], Ward JA agreeing with both.
The Court held, however, that it was an error of discretion for the trial judge to take into account in determining an amount of $10,000 for nominal damages the factors she identified, being the cost of the plaintiff engaging solicitors, the stress she suffered consequent on the breach and the length of time the breach continued.[297] McColl JA noted that these factors were relevant to compensatory damages, on the assumption causation had been proved.[298] Similarly, Sackville JA noted that the contentions that the State had treated the plaintiff carelessly and with insufficient regard for her interests were factors that could have been relevant to aggravated or even exemplary damages, had they been claimed, proved and not precluded by the Civil Liability Act, but were not relevant to an award of nominal damages.[299]
[297]These factors are identified in an extract from the trial judge’s reasons at [8].
[298]Ibid, at [35].
[299]Ibid, at [78].
In this case, the plaintiff has given evidence that she suffered deep distress over the loss of her properties.[300] I accept that evidence. Mr Kambouris’ evidence suggests that he feels at least in some part responsible for that distress,[301] and for his own part feels a profound sense of betrayal by Mr Kiatos.[302] It is also fair to say that viewed even from an objective perspective, the breaches by Mr Kiatos were serious. He entirely failed to advise his client, the plaintiff, that a security he had promised her had been provided, had not in fact been so provided. He did so not just once, but on three occasions. It is also significant in my view that the promised security was to be from his own wife. It follows that he was in an obvious position to know that it had not been provided.
[300]For example, see T 711.
[301]This was the explanation he gave for paying the legal bills directed to his wife.
[302]For example, see T 425.
If the principles identified in Stevens apply, however, none of these matters are relevant to the quantum of an award for nominal damages. After a detailed consideration of the authorities in that recent case, $100 was considered to be an appropriate award. Subject to further submissions from the parties, that is the amount I would award in this case.
Orders
I will give the parties the opportunity to consider these reasons and ask them to prepare proposed orders to give effect to them. I will hear them further if required in relation to nominal damages and costs, including the question of the costs orders that were foreshadowed by my rulings in relation to the grant of leave to the plaintiff to give evidence and to call evidence from her husband on the basis of his further outline of evidence.
SCHEDULE OF PARTIES
| S CI 2007 10201 | |
| BETWEEN: | |
| POLYXENI KAMBOURIS (also known as JENNY KAMBOURIS) | Plaintiff |
| - and - | |
| THEO TAHMAZIS (who is sued in his capacity as personal representative of the estate of BILL FLOROS) (also known as VASILIOS FLOROS) | Firstnamed Defendant |
| CON KIATOS | Secondnamed Defendant |
| | |
| AND BETWEEN: | |
| THEO TAHMAZIS (who is sued in his capacity as personal representative of the estate of BILL FLOROS) (also known as VASILIOS FLOROS) | Plaintiff by Counterclaim |
| - and - | |
| POLYXENI KAMBOURIS (also known as JENNY KAMBOURIS) | Firstnamed Defendant by Counterclaim |
| THEODORE KAMBOURIS | Secondnamed Defendant by Counterclaim |
| BETAC INVESTMENTS PTY LTD (ACN 103 071 110) | Thirdnamed Defendant by Counterclaim |
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