Karastamatis v Tzanavaras (No 2) - [2014] SASC 21

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KARASTAMATIS v TZANAVARAS (No 2)
[2014] SASC 21
Reasons for Decision of The Honourable Justice Nicholson
27 February 2014
PROCEDURE - COSTS
Depriving a successful party of part of their costs - ordering a successful party to pay part of their opponent's costs.
Held: The defendant is to pay 85 per cent of the plaintiff's costs of the proceedings on a party and party basis.
Supreme Court Act 1935 s40; Supreme Court Rules 2006, Rule 263, Rule 264, referred to.
Copping v ANZ McCaughan (1995) 63 SASR 523; Gwinnett v Day (No 2) [2012] SASC 61; House v R (1936) 55 CLR 499; Cretazzo v Lombardi (1975) 13 SASR 4; Calderbank v Calderbank [1975] 3 All ER 333; Morris v McEwen (2005) 92 SASR 281, considered.

KARASTAMATIS v TZANAVARAS (No 2)
[2014] SASC 21
Civil

NICHOLSON J. The plaintiff and the defendant are brother and sister. At the trial of this matter various disputes in their personal capacities and arising out of the defendant’s administration of their deceased father’s estate were ventilated. In my reasons for judgment,[1] I allowed both the plaintiff’s claim in part and the defendant’s cross-claim in part.
[1] Karastamatis v Tzanavaras [2013] SASC 163.
The plaintiff seeks an order that the defendant pay her costs of the proceedings. However, the defendant seeks an order that the plaintiff pay his costs, in whole or in part, or in the alternative, that each party bears their own costs or in the further alternative, that the defendant be obliged to pay only a portion of the plaintiff’s costs.
Supreme Court Rule 6R 263 provides (subject to various referred to exceptions) that as a general rule costs follow the event. Rule 6R 264 provides that the court may, in the exercise of its discretion as to costs, award costs on any basis the court considers appropriate. However, the general approach is that costs are to be awarded as between party and party and in accordance with the relevant scale provided under the Rules. It is accepted that, when the Rules are read in conjunction with s40 of the Supreme Court Act 1935,[2] there has been conferred on courts and judges an unfettered discretion as to costs.[3] Of course, the discretion must be exercised judicially and by having regard to relevant considerations and not relying on irrelevant considerations.[4]
[2] Section 40(1) provides – subject to the express provisions of this Act and to the rules of court and to the express provisions in any other Act whenever passed, the costs of and incidental to all proceedings in the court, … shall be in the discretion of the court or judge and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.
[3] See generally Copping v ANZ McCaughan (1995) 63 SASR 523 at 527; Gwinnett v Day (No 2) [2012] SASC 61.
[4] House v R (1936) 55 CLR 499.
Ultimately, costs are discretionary and each case will turn on its own facts. Whilst, ordinarily, costs will follow the event, a judge is entitled to take a different approach if the circumstances warrant it.
If appropriate circumstances are established it would be within the discretion to deprive a successful plaintiff or a successful defendant of part or all of their costs or to order such a party to pay part or all of an unsuccessful party’s costs,[5] although it has been said that a successful defendant should only be ordered to pay the whole of a plaintiff’s costs in rare and exceptional cases.
[5] See generally Cretazzo v Lombardi (1975) 13 SASR 4 at 11-12.
The various complaints brought by the plaintiff against the defendant and by the defendant against the plaintiff and the manner of their respective resolutions are set out in some detail in the principal judgment; a very brief summary of those matters will suffice for present purposes.
Order for an account by the defendant on a wilful default basis
The plaintiff sought an order for an account by the defendant, in his capacity of executor of the estate of the parties’ father, on a wilful default basis. This was dismissed as the plaintiff was unable to make out a sufficient basis for such an order. This was so notwithstanding that the evidence disclosed a significantly poor recording of the estate accounts by the defendant and a wholly inadequate approach by the defendant to the obtaining and retaining of documentary records with respect to identification of assets, income and expenditures of the estate. Whilst the plaintiff failed under this heading she was justified in pursuing the defendant given his failings in this respect. In any event, the issue of this remedy took up little time over and above the consideration and resolution of the plaintiff’s specific complaints about the defendant’s administration of the estate referred to below.
97 Seventeenth Street, Renmark
The plaintiff sought an order for an account by the defendant, in his personal capacity, for rents received by the defendant when managing a property at 97 Seventeenth Street, Renmark on behalf of the parties as joint owners. Originally this property had been owned by their deceased father but had been left to the plaintiff and the defendant jointly in the will. By the time of the trial, this property had been transferred into their names as joint registered proprietors. The plaintiff also sought an order for sale and distribution of proceeds in lieu of partition. Both matters were contested by the defendant and the plaintiff succeeded with both matters.
Greek real estate
The plaintiff’s pleaded claim that the defendant had failed to disclose, in his executor’s affidavit, Greek real estate owned by their father at death and to account for the same was abandoned by the plaintiff during the opening. The issue occupied virtually no trial time and was left to the parties to resolve in accordance with Greek law and practices.[6]
Greek pension monies
[6] It was at all times common ground that the father owned Greek real estate (the location of which was known) which following his death had devolved (according to Greek law) to the parties in equal shares.
An issue in relation to alleged unaccounted for Greek pension monies was also ultimately abandoned by the plaintiff at trial. The evidence on both sides concerning the existence, likely amount and ultimate repository of any unaccounted for Greek pension money, if any, was unsatisfactory and did not provide a reliable basis for the making of any findings. To the extent that the plaintiff was unable to pursue this claim, fault should be attributed, in the main, to the defendant, as executor, in not making enquiries, in that capacity, sufficient to enable the position to be explored.
Farm tools, vehicles and machinery
The plaintiff pleaded and alleged in her opening that the deceased had owned farm tools, machinery and vehicles that the defendant had not recorded in his executor’s affidavit nor accounted for during his unfinished administration of the estate. It would appear that much of this plant and equipment, if not all was very old and quite dilapidated. At trial it emerged that the farm tools, machinery and vehicles (or the bulk thereof) were likely to have been owned by a now deregistered trustee company. Given the likely very low value and the likely very substantial effort that would be involved in unravelling the position, the plaintiff abandoned this claim as well. Again, significant fault for this must lie with the defendant as executor who failed, entirely, to explore the deceased father’s interest in a family trust and that trust’s ownership of the plant and equipment in question.
The Westpac joint account
The plaintiff’s complaint in relation to monies which formed part of the deceased estate, held in the Westpac joint account, was that the defendant had made various illegitimate withdrawals. Although the plaintiff abandoned her claim with respect to some of the withdrawals,[7] she was ultimately successful on this issue. The defendant was ordered to account to the plaintiff for a total sum of $6,067.50 together with interest.
Rent payable with respect to the Twenty Eighth Street property
[7] These were of relatively small amounts explained by the defendant in only general terms along the lines of they would have been used to pay estate debts although he had no specific recollections. Again, the defendant, as executor had failed to keep and/or produce any records verifying the purposes of these withdrawals.
The Twenty Eighth Street property was the deceased’s fruit block and home prior to death. It was left in the will to the defendant. However, some years prior to death the defendant and the deceased had entered into a lease or licence agreement pursuant to which, in effect, the defendant was entitled to work the fruit block and retain the proceeds but was to pay rent at a fixed amount to his father. The plaintiff alleged and pursued a claim at trial that not all of the rent due and payable by the defendant to his father, in accordance with their agreement, had been paid prior to death, that the estate was owed this unpaid rent and that the defendant, as executor, had failed to call in and account for that debt due to the estate.
Ultimately, the plaintiff failed with this claim. The plaintiff herself was unable to give evidence directly bearing on this issue.[8] In addition, the plaintiff was impeded in her endeavours, naturally, by the unavailability of the deceased to give evidence on this topic. The defendant gave evidence and insisted that all monies due and payable to the father prior to his death had been paid. I accepted this evidence, notwithstanding that there were no contemporary records produced by the defendant in support of his evidence that all monies had been paid over a period of some years and notwithstanding that the only records produced comprised confusing and conflicting schedules prepared for the purposes of trial and based solely on the defendant’s oral instructions.
[8] At all material times prior to the father’s death the plaintiff was living in Glenelg whereas the fruit block on which both the father and the defendant lived was in the Riverland, such that the working out of any arrangements between the father and the defendant occurred in the Riverland.
Ultimately, I was not satisfied that the plaintiff had proved her claim. However, the difficulties she confronted, in this respect, were in no way attributable to her but rather to the extremely poor record keeping of the defendant (this time, mainly in his capacity as tenant but also in his capacity of executor in failing to marshal all of the father’s financial records) over the relevant period of time. It was the nature of the arrangement entered into by the father and his son, the defendant, and the poor documentation of both the arrangement and the history of rent payments that led to this being an issue between the parties. Notwithstanding that the plaintiff failed on this issue, I make no criticism of her in pursuing it.
Failure by the defendant to distribute the personal effects of the deceased forming part of the residuary estate
The plaintiff alleged that various items of personal property belonging to the deceased and forming part of the residuary estate had not been called in and distributed in accordance with the terms of the will (which left the residuary estate to both parties in equal shares). This issue concerned various personal effects of little or no commercial value but of important sentimental value to each of the parties. There is no doubt that the defendant, as executor, had failed to properly deal with this aspect of the residuary estate. However, the issue involved very little time at trial and ultimately has been left to the parties to sort out. The plaintiff enjoyed a measure of success with respect to this claim.
The Glenelg North property – clause 4 of the will
A residential property at Glenelg North had been left by the father to the plaintiff. At the time of trial the property had been transferred into her name as registered proprietor. Soon after that transfer the property was further transferred from her name into the joint names of the plaintiff and her husband. According to the will, the devise was conditional on an encumbrance being registered on the title reserving to the defendant the right to use at will (but not to permanently reside in) a granny flat attached to the property. The issue is dealt with at length in the principal reasons. The plaintiff sought, inter alia, declaratory relief that the purported condition in the will was void and unenforceable with the effect that the Glenelg North property had devolved to her free of any such condition.
The defendant resisted this claim. His position changed over time from one of wishing to preserve or establish his entitlement in speci to a position of seeking damages or some form of equitable compensation for any failure to obtain and enjoy that aspect of the father’s gift.
In my view, the defence to the plaintiff’s claim here, in whatever form it took, was hopeless from the outset and the defendant, properly advised, should have understood this. It is also my view that this issue was the central issue of the trial and that it was, in a sense, a lightning conductor between the parties; it spawned and maintained their many disputes. It took up a considerable amount of pre-trial preparation and trial time. The plaintiff succeeded on all aspects of this claim.
The Millennium Bank account in Greece
As at death the deceased had monies on deposit in the Millennium Bank in Greece. Both the plaintiff and the defendant became joint signatories on that account. On a visit to Greece after her father’s death the plaintiff withdrew monies from this account for her own purposes. It is common ground that the parties had a joint entitlement to the money in this bank account. In his defence and cross-claim the defendant pleaded that the plaintiff’s withdrawals had been without authority and that she ought to be required to account to him for half of the sum withdrawn together with interest.
The defendant succeeded with this part of the cross-claim. However, the lack of authority and the obligation to account was conceded by the plaintiff prior to trial and did not become an issue at trial. The only issues that needed to be dealt with at the trial were the calculation of interest and the question of the time at which any accounting should take place. It was clear throughout the trial that it was highly likely that each party would end up owing the other party relatively small sums of money (that is, apart from any monies that the defendant might have been found to owe to the estate). Accordingly, I determined that the matter of a personal accounting between the parties (that is, independent of any monies that the defendant might owe to the estate) should be effected at the end of the trial and as a part of the final orders.
Improvements to the Glenelg North property by the defendant
In his defence and cross-claim, the defendant demanded from the plaintiff $25,000 by way of reimbursement for improvements, alleged to have been made by him to the granny flat at the Glenelg North property. These improvements were said to have taken place in the early 1990s at a time when the property was owned by the father and many years before he died. The defendant failed with this claim and, in my view, it was flawed, as a matter of law, from the outset for the reasons given in the principal judgment.
Claim for recovery of $28,500 allegedly lent by the defendant to the plaintiff in 2005
During the trial the defendant alleged that the defendant had, in his personal capacity, lent the plaintiff $28,500 in or about 2005 and that this amount, notwithstanding demand, had not been repaid. This claim had not been pleaded although the demand was made in correspondence prior to the trial. The claim was dismissed. However, the claim was dismissed, not after a review of its merits but, for the reason that the defendant should not be permitted to raise the claim in the present matter in the manner and in the circumstances in which he had attempted to do so.
By way of summary, the plaintiff succeeded with the most significant issue in dispute between the parties, that is, the proper construction of clause 4 of the will and the status, if any, of the purported conditional devise of the Glenelg North property. The plaintiff succeeded on other issues of substance but was unsuccessful with respect to two matters and ultimately did not press three others. However, the issues on which the plaintiff was unsuccessful or did not press can be regarded as relatively minor in the overall scheme of the litigation. Her lack of success can be, in no small way attributed to the defendant’s failure either in his personal capacity or in his capacity as executor to have kept proper or any records.
The defendant was successful in one only of his claims and that had effectively been conceded prior to the trial commencing. Whilst, once the orders for set off were made, the plaintiff was ultimately ordered to pay a net balance to the defendant (in the amount of $7,318) this does not adequately reflect the plaintiff’s success and the defendant’s lack of success at trial. The issues on which the plaintiff succeeded at trial both in number and significance carry significantly much greater weight when it comes to the question of costs than does the level of success enjoyed by the defendant.
The plaintiff seeks an order for all of her costs to be met by the defendant but she does not seek any special order, that is, she seeks only an order that costs be taxed on a party and party basis. Nevertheless, in support of that application the plaintiff has relied on correspondence between the parties prior to trial when efforts were made to resolve the matter. In particular, the plaintiff relies on a so called Calderbank[9] letter from her solicitors to the defendant’s solicitors dated 27 June 2012. The letter contains an, apparently, generous offer of settlement. I set out the material terms of that offer in full.
[9]    Calderbank v Calderbank [1975] 3 All ER 333 and see generally, Morris v McEwen (2005) 92 SASR 281.
1.The defendant will remove the caveat from the title of 57 Tapleys Hill Road and forgo any entitlement to use of the granny flat.
2.The defendant will remove his possessions from the granny flat within twenty eight (28) days.
3.The defendant will be released by the plaintiff from any amounts due to the estate for the use of Twenty-Eighth Street, Renmark.
4.The plaintiff will pay to the defendant the sum of EUR $10,392 in Euro or Australian dollars (as requested by the defendant) being one half of the balance of the Greek bank account as at the date of death and both the plaintiff and the defendant are released from any further claim by each other in relation to any dealings with the Greek bank account.
5.That the real estate in Greece be distributed to the plaintiff to the extent that the Corinth house and improvements and the Velestino house and improvements be registered in the name of the plaintiff and the balance of the land be registered to the defendant. This agreement is to be documented in accordance with terms of compromise made a rule of Court so that there is an order of Court to assist the Greek authorities in transferring the land in accordance with this agreement.
6.The defendant, as executor, will lodge all and any tax returns for the estate and be liable for the payment of any tax interest and penalties assessed on those returns.
7.The property at Seventeenth Street, Renmark be transferred to the defendant solely with the defendant responsible to pay stamp duty and registration costs.
8.The plaintiff is to receive from the estate the following items of furniture and personal items namely:
(a)     all original photographs as selected by her to copy;
(b)     half the silverware;
(c)     her original school case together with her one handmade cross stitch her late mother had made;
(d)     one shotgun; and
(e)     the Holden utility.
9.The plaintiff would wish to receive, if they can be located, the following items from the personal estate which the defendant cannot presently locate namely:
(a)     two handwritten cookbooks;
(b)     wind-up cars and harmonica which had been toys of the brother of the plaintiff and defendant; and
(c)     the 21^st birthday video of the plaintiff’s birthday.
10.The plaintiff will forgo any claim to rent from the property at Seventeenth Street, Renmark and the defendant will remain liable for any tax and other liability in relation to that property and the income derived from that property.
11.The bank account held in Australia for the estate will remain available to the defendant as executor and the plaintiff will forgo any claim to the balance of funds held in that bank account.
12.The plaintiff will renounce her executorship.
13.The claim and cross claim in Action No 672 of 2010 in the Supreme Court of South Australia will be discontinued with no liability as to costs.
14.That there be agreed mutual release and discharge between the parties.
15.That these terms of compromise be agreed and signed as terms of compromise and that they be made a Rule of Court in Action No. 672 of 2010.

I describe the offer as apparently generous because, insofar as the Australian estate (the subject of the present litigation) is concerned, had the offer been accepted the defendant would have been significantly better off than he now is following the trial. In particular:
(i)The defendant would not have been obliged to repay the amounts of the Westpac bank account wrongfully withdrawn by him.
(ii)The defendant would not have been obliged to repay a half-share of rent received by him from tenants of the Seventeenth Street, Renmark property.
(iii)The defendant would have been entitled to a transfer of the plaintiff’s half-share in the Seventeenth Street, Renmark property into his name absolutely, as opposed to the legal position of joint ownership as a result of which I have made orders for sale and equal distribution in lieu of partition (subject to a regime permitting the defendant to purchase the plaintiff’s share at market value).
(iv)The matter would have been entirely resolved with each party paying their own costs, that is, the defendant being relieved from any liability for costs either for preparation leading up to or conduct of the trial.
The difficulty with the offer from the defendant’s perspective, according to counsel for the defendant, was the proposal that the real estate in Greece be distributed in the way as set out in the offer. According to counsel for the defendant, that proposal would lead to an unfair distribution given the utility and value of the various parcels of land concerned. Accordingly, it made it difficult to value the offer as a whole and difficult for the defendant to accept the offer so as to resolve the Australian litigation without also compromising his position on the Greek properties which fell outside of the Australian litigation. I accept this submission and I do not rely on this letter for the purpose of assessing the question of costs.
Nevertheless, the plaintiff should be regarded as the successful party and by a very wide margin. The plaintiff did fail on some issues but not in circumstances which, in my view, would require an order that the plaintiff pay any of the defendant’s costs. In these circumstances, however, there remains a discretion to deprive the successful party of some of her costs.[10] A just result between the parties would be achieved by an order that the defendant pay 85 per cent of the plaintiff’s costs of the proceedings on a party and party basis and I make that order.
[10] See generally Cretazzo v Lombardi (1975) 13 SASR 4.