Litopoulos v Indiana Holdings Pty Ltd

[2020] WASC 408

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   LITOPOULOS -v- INDIANA HOLDINGS PTY LTD [2020] WASC 408

CORAM:   MASTER SANDERSON

HEARD:   17 SEPTEMBER 2020

DELIVERED          :   13 NOVEMBER 2020

PUBLISHED           :   13 NOVEMBER 2020

FILE NO/S:   CIV 2138 of 2019

BETWEEN:   VICKI LITOPOULOS

Plaintiff

AND

INDIANA HOLDINGS PTY LTD

First Defendant

SOUNION PTY LTD

Second Defendant

PAVLOS LITOPOULOS

Third Defendant

ELEFTHERIA PAPANDREOU

Fourth Defendant

Catchwords:

Practice and procedure - Application to amend originating summons - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Leave refused

Category:    B

Representation:

Counsel:

Plaintiff	:	N Dillon
First Defendant	:	M Curwood
Second Defendant	:	M Curwood
Third Defendant	:	M Curwood
Fourth Defendant	:	M Curwood

Solicitors:

Plaintiff	:	Hammond Legal
First Defendant	:	Effective Legal
Second Defendant	:	Effective Legal
Third Defendant	:	Effective Legal
Fourth Defendant	:	Effective Legal

Case(s) referred to in decision(s):

Nil

MASTER SANDERSON:

1. This is the plaintiff's application for leave to amend an originating summons in terms of a minute of amended originating summons filed 24 January 2020.  If the amendment is allowed, the originating summons will read as follows (marking up included):

   1. This Honourable Court reviews the exercise of the power by the First Defendant as Trustee for the K. Litopoulos Family Trust ('Trust') to remove the Plaintiff as a general beneficiary and capital beneficiary of the K. Litopoulos Family Trust.

   2. This Honourable Court reviews the exercise of the power by the Second Defendant as Trustee for the Litopoulos Family Trust to transfer assets from that Trust to the K. Litopoulos Family Trust.

   3. Substitute trustees be appointed as trustees for the K. Litopoulos Family Trust and Litopoulos Family Trust.

   3. Further:

   4.1 A declaration is made by this Honourable Court that the purported request by Mr Kimon Litopoulos made by letter dated 7 July 2017 addressed to the First Defendant that the financial records of the Trust be varied to reallocate a liability of $653,331.00 recorded as repayable by the Trust to him to record that liability as repayable to the Third Defendant as to $326,666.00 and the Fourth Defendant as to $326.666.00, be declared void.;

   4.2 The trustees of the Trust be ordered to amend the financial records of the Trust to record the said liability as repayable by the Trust to Mr Kimon Litopoulos.

   3.5.      The Third and Fourth Defendants do pay the Plaintiff, First and Second Defendants' costs of this application or, in the alternative, the costs of this application be paid from the assets of the K. Litopoulos Family Trust.

2. The defendants object to the amendments on two grounds.  First, the proposed amendments raise disputed issues of fact and the originating summons procedure is not a suitable vehicle for determining such matters.  Second, it is said that the proposed amendments do not disclose a cause of action.  The defendants' submissions refer to the plaintiff not having 'standing to bring the action'.  However, the argument is the same – the defendants say the proposed amendment does not raise any judiciable issue. 

3. There was no dispute between the parties as to the facts relevant to this application.  In par 12 of his written submissions, counsel for the plaintiff set out the position with admirable clarity.  I can do no better than repeat counsel's summary:

   However, for convenience the following key facts are set out here.  The facts stated are not in contest.

   12.1. The Plaintiff, Third Defendant and Fourth Defendant are the only children of Mr K Litopoulos and his former wife.

   12.2. On 11 February 1985, Mr K Litopoulos and Mrs Litopoulos, established and vested assets in the KLFT for succession planning purposes.  The general and capital beneficiaries were Mr K Litopoulos, Mrs Litopoulos and the three children.

   12.3. On 28 May 2000, Mr K Litopoulos and Mrs Litopoulos executed mirror wills which bequeathed their estate:

   12.3.1. at first instance to each other; and

   12.3.2. if they predeceased, to their children in equal shares.

   12.4. In around 2008 Mr K Litopoulos and Mrs Litopoulos separated and divorced.

   12.5. On 21 May 2009 Mr K Litopoulos made a last will ('KL Last Will') which appointed his three children as executors and bequeathed his share in the First Defendant to his three children in equal shares and the residue of his estate to his three children in equal shares.

   12.6. On 16 May 2017 Mr K Litopoulos executed enduring powers of:

   12.6.1. attorney, appointing the Third and Fourth Defendants as his joint and several attorneys; and

   12.6.2.guardianship, appointing the Fourth Defendant as his guardian and the Third Defendant as the substitute guardian.

   12.7. Up to 29 June 2017 Mr K Litopoulos was executing documents as a director of the First and Second Defendants – from 29 June 2017 the Third Defendant executed documents on behalf of the First and Second Defendants.

   12.8. From early to mid-2017 it was identified Mr Litopoulos was displaying signs of dementia and the clinical position was confirmed by a "My Aged Care" report dated 29 September 2017 which reported Mr K Litopoulos as suffering from 'Dementia, possibly Alzheimer's'.

   12.9. Mr K Litopoulos has deteriorated so that he now has no legal capacity.  That is, he has no legal capacity to review, amend or alter the KL Last Will.

   12.10.On 13 July 2018 the Third and Fourth Defendants, in their capacity as its directors, caused the First Defendant as trustee of the KLFT to exercise the discretion to formally exclude (with the consent of the Third and Fourth Defendants as the newly appointed guardians of the trust) the Plaintiff from the class of general beneficiaries and specified made the Plaintiff a member of the 'excluded class'.  That is, the Third and Fourth Defendants using their positions as directors of the trustee and guardians of the trust have caused the Plaintiff to be excluded as a potential beneficiary of the KLFT.

   12.11.In these proceedings, by affidavit sworn 9 September 2019, the Third Defendant, as a director of the First Defendant, to justify or explain the exercise of the power to exclude the Plaintiff as a discretionary beneficiary, deposes that he:

   12.11.1.does not 'enjoy a close relationship with the Plaintiff';

   12.11.2.observed what he considered (in his personal capacity) verbal abuse by the Plaintiff towards Mrs Litopoulos and Mr K Litopoulos in 2006.

   12.12.By letter to the First Defendant dated 7 July 2017 Mr K Litopoulos requested a liability of $653,331 owed to him by the KLFT be re-allocated to the Third and Fourth Defendants in equal shares – the text of the letter reads as follows:

   "Dear Trustees,

   LOAN TO THE K LITOPOULOS FAMILY TRUST

   Please be advised that the loan, which is owed from the K Litopoulos Family Trust to me, is to be reallocated and split 50% each to Pavlos Litopoulos and Eleftheria Papandreou as at the date of this letter.

   Should you have any questions in relation to this matter, please do not hesitate to contact me.

   Yours faithfully"

   12.13.At the time of the gift the $653,331 was effectively the entirety of Mr K Litopoulos' assets and estate (other than his interest as a discretionary beneficiary of the KLFT).

   12.14.Subsequently, the gift has been allocated in the KLFT accounts between the Third and Fourth Defendants.

   12.15.Over the 2017/2018 and 2018/2019 financial years, the Third Defendant has been credited from the KLFT $79,840 and has been benefited by capital/credit of $11,546.  The Fourth Defendant has been credited from the KLFT $26,350 and has been benefited by capital/credit of $172,543.  No commensurate distributions have been made to the Plaintiff (prior to her exclusion as a discretionary beneficiary on 13 July 2018 or otherwise).

   12.16.For completeness, there is no evidence to the effect that Mr K Litopoulos has ever proposed he:

   12.16.1.amend the KL Last Will to exclude the Plaintiff;

   12.16.2.amend the KLFT trust deed to exclude the Plaintiff as a beneficiary

4. Procedurally, the matter has had a somewhat unfortunate history. The amended originating summons (AOS) was filed and served on 24 January 2020. The document is incorrectly dated 28 June 2019. The relevant amendment to the AOS is to raise a new cause of action and pursuant to O 21 r 6 of the Rules of the Supreme Court 1971 (WA) it was necessary for the plaintiff to obtain leave pursuant to r 5. No formal application for leave was made. However, the proceedings have progressed on the basis that the AOS stand as the plaintiff's originating process. Moreover, orders have been made progressing the proceedings. The plaintiff has, in compliance with orders, prepared, filed and served her statement of issues, facts and contentions, which includes the issues, facts and contentions in relation to the amendment to the AOS.

5. The plaintiff points out that under O 2 r 1 where there has been a failure to comply with the requirements of the rules, the failure will be treated as an irregularity and will not nullify any steps taken or document filed in reliance thereon.  Further, the court may allow such amendments which have been given effect by the irregularity.  The plaintiff says having allowed the AOS to stand as the plaintiff's process for such an extended period of time, it is now too late for the defendants to seek to challenge the amendment. 

6. For present purposes, it is unnecessary for me to deal in any detail with the defendants' contentions.  It is sufficient if I say that had it been a question of just the amendment, without the issue of standing being raised, I would have granted leave.  It is true that the originating summons procedure is not a suitable vehicle to commence proceedings when issues of fact are involved.  Here, it was proper and appropriate for the plaintiff to commence the action by way of originating summons.  At that point, it seemed the only issue related to the trust.  When the issue now raised in proposed par 3 emerged, the plaintiff could have issued a writ, applied to have the two matters heard together and proceeded accordingly.  Perhaps, in strict theory, that would have been the better course.  But given the issues of fact are relatively straightforward (even if the evidence in relation to those facts might be somewhat complicated) applying to amend was a reasonable option.  After all, it is always open to order pleadings in an originating summons matter.  The amounts at issue in this case are relatively modest and any approach which minimises costs is to be favoured.  So at least so far as the procedure is concerned, I see no difficulty with the plaintiff's proposed cause of action.  But that leaves the question of standing.  In his written submissions, counsel for the defendants put the position this way:

9. Vicki has no interest in the subject matter of the gift/assignment of Kim's loan account.  The loan account is a liability of the KLFT not an asset.  To the extent that Vicki is a beneficiary under Kim's will, that does not confer any right or interest in his property to her.  A beneficiary under a will of a person still living derives, while the testator remains alive, no legal or equitable right or title from the will.  All the beneficiary has is the prospect of acquiring a right or title if the testator dies in the lifetime of the prospective beneficiary without revoking or altering the will.  That is to be distinguished from the case of a person who has a contingent interest under the will of a deceased testator.

1. In answer to this submission, counsel for the plaintiff pointed out that Kim is now of unsound mind and will not be in a position in the future to alter his will.  This, it was submitted, put a different complexion on the issue raised by the plaintiff.  Counsel submitted it was proper and appropriate if the affairs of the family generally were to be litigated, the validity of the assignment of the loan account should be included.  The alternative was to wait until Kim's passing – the facts would not have changed but fresh proceedings would be necessary and it was possible the funds which had been transferred to the trust would have been dissipated.

2. On balance, I am satisfied there is no judicable issue raised by the proposed par 3.  The arguments put by the defendants are unanswerable.  At present the plaintiff has no interest at all under the will and it is not open to her to contest a matter essentially on the basis she does have such an interest.  To allow that to happen would be to raise a hypothetical matter and that is not an appropriate use of the declaration procedure.

3. Leave to amend in terms of the AOS will be refused.  I will hear the parties as to the form of order and as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

TM
Associate to Master Sanderson

13 NOVEMBER 2020