Kyriacou v Makis

[2020] NSWSC 1068

Supreme Court

New South Wales

Medium Neutral Citation:	Kyriacou v Makis [2020] NSWSC 1068
Hearing dates:	23 July 2020
Decision date:	14 August 2020
Jurisdiction:	Equity
Before:	Robb J
Decision:	See par [19].
Catchwords:	CIVIL PROCEDURE — Interlocutory applications — where the parties reached an impasse after the plaintiff has been unable to make mortgage payments out of net rents received — where the Court is forced to resolve minor disputes that are reflective of an unwillingness to come to a sensible compromise
Category:	Procedural and other rulings
Parties:	Kyriacos Kyriacou (plaintiff) Andrea Makis (first defendant) Tina Georgiou as Executor of the Estate of the Late George Georgiou (second defendant) Sam Pambris (third defendant)
Representation:	Counsel: J Darvall (plaintiff) R Allsop (sol) (first defendant) Solicitors: Valenti & Valenti Solicitors (plaintiff) Allsop Glover Solicitors (first defendant)
File Number(s):	2018 / 81547

Judgment

1. This is yet another of a seemingly unending number of petty interlocutory applications made by parties to proceedings in the Court, who refuse to make sensible compromises, and who think nothing about diverting judges from their primary task, in order to resolve disputes that the parties’ lawyers should have the fortitude to require be dealt with by reasonable accommodation.

2. The proceedings are set down for final hearing before me for four days commencing on 21 September 2020. Consequently, the final outcome of the dispute will be known as early as the time that the Court will be able to deliver its reasons for judgment.

3. The underlying dispute arises out of the dissolution of an alleged partnership between the parties that involved the joint ownership of various real properties. The plaintiff seeks a number of declarations concerning the effect of an alleged partnership dissolution agreement made in about June 2012. The plaintiff alleges that the defendant agreed to hold her interest in an eight lot home unit block in Lakemba on trust for the plaintiff as his share of the distribution of the assets of the dissolved partnership. The plaintiff further alleges that the defendant breached the partnership dissolution agreement by agreeing to charge her interest in the Lakemba home units in favour of a certain person.

4. It is not necessary for the purpose of dealing with the present application to set out in any detail the issues that are raised by the principal proceedings.

5. Apparently, the tenants of two of the home units have been paying their rent directly to the plaintiff. As to the other six home units, in 2012 the parties jointly executed an authority to the managing agent authorising him to pay the net rent to the plaintiff. The plaintiff asserts that the execution of this authority was consistent with the terms of the partnership dissolution agreement. The plaintiff has applied the money received by him from the leasing of the eight home units towards the payment of instalments of the mortgage that the parties had jointly taken out and was secured on the property.

6. In about March 2020, the defendant sent a communication to the managing agent which had the effect of revoking the authority that she had jointly given to the managing agent with the plaintiff in 2012.

7. The managing agent understandably responded, in order to protect himself, by ceasing to pay the net rent for the six home units to the plaintiff, and instead retaining that money in trust pending the resolution of the dispute between the parties.

8. The consequence has been that the plaintiff has been unable to make mortgage payments out of the net rents received. For the period March to July 2020 the plaintiff has apparently paid some mortgage instalments from his own funds.

9. Not unreasonably, the plaintiff raised the difficulty caused by the defendant’s conduct at a pre-trial hearing before me, as the judge appointed as the trial judge. There then ensued what would probably be described in a publication not as august as a judgment of this Court a certain amount of ‘argy-bargy’. I informed the parties that I considered that, given the relatively brief time that the interlocutory arrangement would operate, the status quo before the defendant revoked her authority to the managing agent should be restored. That relatively innocuous observation apparently provoked debate as to what should be treated as the relevant status quo.

10. The plaintiff offered to resolve the impasse by offering to undertake to the Court that, if the net rent from all of the home units was paid to him, he would apply the money in the payment of mortgage instalments and outgoings, and after creating a fund of $20,000 to meet future expenses, pay any balance towards the principal of the mortgage.

11. This offer was not acceptable to the defendant. The Court has been provided with an affidavit of the defendant sworn on 22 July 2020 with a 142 page exhibit.

12. At a directions hearing on 23 July 2020, after hearing various allegations and counter-allegations, the Court made directions for the parties to provide material to the Court that would hopefully enable the Court to resolve the dispute on the papers in a summary manner.

13. The plaintiff has responded in a reasonable way by offering two options going forward. Both involve the defendant being required to join with the plaintiff in giving the managing agent an authority that will enable the managing agent to pay out the accumulated and future net rent. The difference between the two options is that option 1 would involve the payments being made into an account in the name of the plaintiff alone. This option would work in practical terms and would be the simplest to implement. Option 2 would involve the money being paid into a joint account in the name of the parties that has been set up as an interest offset account with the bank who is the mortgagee. This arrangement would have the benefit of leading to some reduction in the interest payable on the mortgage, but would introduce the slight complication of requiring the parties to join in signing an additional authority to the bank to cause the proposed arrangement to work in practical terms.

14. It appears from the written submissions provided by the defendant that the defendant will accept option 2 subject to the following changes. Option 2 involved the plaintiff giving an undertaking to the Court that he would direct all net rental payments in respect of all of the home units to be deposited into a nominated offset account, and then cause to be paid from the offset account all monthly payments due on the mortgage, together with all outgoings and expenses. The undertaking would allow the plaintiff to “receive by way of reimbursement the amount of the mortgage payments made by him for the months of March until July 2020 inclusive, less the rents received from the two units during that period”. The undertaking would then involve any surplus of rental payments to be retained in the offset account. The short minutes of order provided by the plaintiff included orders to give effect to this arrangement.

15. The defendant’s objection was to the sub-paragraph of the undertaking in option 2 to be given by the plaintiff that would allow him to repay himself for mortgage payments that he has made from his own funds.

16. In my view, it will be reasonable for the plaintiff to be entitled to reimburse himself for any mortgage contributions that he has made from his own funds, and accordingly I reject the change suggested by the defendant.

17. I add that this is only an interlocutory regime, and it is likely that, as part of the final hearing of this partnership dissolution dispute, the Court will have to address the question of any accounting as between the parties that is appropriate in the circumstances. Any application by the plaintiff of the net rents in reimbursing himself for mortgage payments that he has made can be the subject of any appropriate accounting.

18. The only other change suggested by the defendant was the deletion of the words “becoming liable to be held on account of [the plaintiff]” in the draft direction as to payment to the managing agent. It is probably reasonable for the defendant to ask for the deletion of these words, as if the defendant signed the document in the terms requested by the plaintiff, that could arguably constitute an admission that all of the net rents were held by the managing agent on account of the plaintiff. The direction as to payment will be equally effective if those words are deleted.

19. I will accordingly make orders in terms of the draft short minutes of order suggested by the plaintiff in relation to option 2, but the draft direction as to payment to the managing agent will be varied in the manner described above.

20. I will reserve the costs of this unfortunate litigious diversion to the final hearing and will deal with the issue of the appropriate costs order to be made at that time.

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Decision last updated: 14 August 2020