Makripoulias v Arhontovasilis (No 2)
[2022] VSC 272
•26 May 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUST EQUITY AND PROBATE LIST
S PRB 2021 07071
| DIMITRA MAKRIPOULIAS | Plaintiff |
| v | |
| AFRODITI ARHONTOVASILIS | Applicant |
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JUDGE: | Moore J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 26 May 2022 |
CASE MAY BE CITED AS: | Makripoulias v Arhontovasilis (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 272 |
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COSTS – Wills and Estates – Orders were made to restrain plaintiff solicitor from acting – Successful party applied for costs – Whether there is good reason to depart from usual order as to costs – Evidence in interlocutory application relevant to substantive issues to be determined at trial – Costs reserved – ss 22 and 23 of the Civil Procedure Act 2010 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms Margo J Harris | |
| For the Applicant | Ms Anita S Bartfeld | TNV Lawyers |
HIS HONOUR:
On 16 February 2022, I made an order restraining a solicitor, Thomas Koutsoupias, from continuing to act for the plaintiff in this proceeding, Dimitra Makripoulias. My reasons for making that order are set out in Makripoulias v Arhontovasilis [2022] VSC 53.[1] This judgment is in relation to the issue of costs of that application.
[1]In this ruling I use the abbreviations as defined in my reasons for judgment.
Ms Arhontovasilis, who succeeded in obtaining the restraining order, seeks an order that Ms Makripoulias and/or Mr Koutsoupias immediately pay the costs of and incidental to the application to restrain Mr Koutsoupias from acting on an indemnity basis, or alternatively on the standard basis, to be taxed in default of agreement, and that these costs be paid without recourse to the estate of the deceased. She also seeks that Ms Makripoulias bear her own costs without recourse to the estate of the deceased.
Ms Makripoulias submits that the Court should instead order that the costs of and incidental to the summons filed by Ms Arhontovasilis be reserved.
Ms Arhontovasilis’ submissions
Ms Arhontovasilis submitted that s 24(1) of the Supreme Court Act 1986 (the Act), and/or s 29 of the Civil Procedure Act 2010 (the CPA) and/or r 63.23 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules)[2] give the Court power to make the orders she proposed.
[2]Solely in relation to Mr Koutsoupias.
Ms Arhontovasilis referred to the well-established principles dealing with the award of indemnity costs as articulated in Ugly Tribe Co Pty Ltd v Sikola & Ors,[3] and r 63.20.1 of the Rules in relation to the Court’s power to require the payment of costs immediately. Ms Arhontovasilis also referred to principles relating to the payment of costs without recourse to the estate of a deceased, including that a trustee’s right of indemnity is not absolute and that expenses and liabilities which are improperly incurred are not caught by the right of indemnity and are to be borne by a trustee personally.
[3][2001] VSC 189, [7].
Ms Arhontovasilis submitted that the orders which she proposed should be made because she wholly succeeded in the interlocutory application and costs should follow the event in the usual way. She argued that there was no arguable basis to depart from the usual rule, given the Court’s finding that Mr Koutsoupias would be placed in an unacceptable position of conflict between his duty to his client to prosecute her claim as to the validity of the will; his personal interest in defending his advice and the position he had adopted about the evidence which is admissible on the question of testamentary capacity; and his overriding professional duties as an officer of the Court.[4]
[4]Makripoulias v Arhontovasilis [2022] VSC 53, [43].
Ms Arhontovasilis also emphasised that the subject matter of the application was a discrete issue which was determined to finality and which bears no specific relationship with the matters that remain for consideration at trial. It was therefore appropriate to make the orders sought, even though the costs related to an interlocutory decision.
In addition to the fact that she was wholly successful in an interlocutory application in respect of a discrete matter, Ms Arhontovasilis focused her submissions on the following conduct engaged in by Mr Koutsoupias and/or Ms Makripoulias (collectively, ‘the Conduct’):
(a)Mr Koutsoupias’ action in continuing to represent Ms Makripoulias despite being advised by Ms Arhontovasilis’ solicitor that:
(i)Mr Koutsoupias may be called to give evidence material to the determination of contested issues before the Court which may give rise to a conflict of interest, and the need for him to cease acting (as conveyed in a letter dated 1 September 2021);
(ii)Ms Arhontovasilis’ solicitor would be issuing an application for revocation of the grant of probate, that Mr Koutsoupias was conflicted, that neither he nor his firm was able to act in the matter, and that a failure to cease acting would potentially expose him to an adverse costs award (and being provided with the Law Institute of Victoria Ethics Guidelines in respect of solicitors as a material witness) (as conveyed by letter dated 22 September 2021);
(iii)Ms Arhontovasilis’ solicitor maintained the existence of a conflict of interest and that, in the event that Mr Koutsoupias disagreed, he was urged to obtain a ruling from the Ethics Committee of the Law Institute, and that failure to cease to act exposed him to costs being awarded against him personally (as conveyed by letter dated 6 October 2021);
(iv)Ms Arhontovasilis’ solicitor wanted the conflict of interest to be resolved before addressing the substantive issues (as conveyed by telephone on about 21 October 2021); and
(v)due to the conflict of interest, Mr Koutsoupias should withdraw from the proceeding (as conveyed by letter dated 5 November 2021).
(b)Mr Koutsoupias’ failure to obtain an ethics ruling as he was urged to do by Ms Arhontovasilis’ solicitor, or independent legal advice about the conflict of interest, despite being informed about the above matters.
(c)Ms Makripoulias’ failure to instruct Mr Koutsoupias to cease acting on her behalf despite being made aware of the above matters.
Ms Arhontovasilis submitted that the Conduct caused significant delay, wasted costs and/or costs to be incurred improperly, unnecessarily and without reasonable cause, as well as a substantial waste of the Court’s time.
By reason of the above matters, it was submitted that the Conduct engaged in by Mr Koutsoupias and Ms Makripoulias resulted in breaches by them of ss 19, 20, 22, 24 and 25 of the Act which warranted:
(a)a costs order against Mr Koutsoupias and/or Ms Makripoulias pursuant to s 29 of the Act on an indemnity basis; and/or
(b)a costs order against Mr Koutsoupias pursuant to r 63.23 of the Rules on the basis that the consequences of the conduct, insofar as it related to Mr Koutsoupias, resulted from a failure by him to act with reasonable competence and expedition.
Ms Arhontovasilis submitted that, as the unsuccessful party, Ms Makripoulias and/or Mr Koutsoupias should be ordered to pay the applicant’s costs of and incidental to the application on an indemnity basis because, despite being put on notice of the conflict of interest at least five times between 1 September and 5 November 2021, Mr Koutsoupias continued to act for Ms Makripoulias and Ms Makripoulias continued to instruct him to act on her behalf. In those circumstances, and given the Court’s finding that it was overwhelmingly likely that Mr Koutsoupias would be called as a witness in the hearing of the application for revocation of probate, Mr Koutsoupias’ failure to cease to act was egregious. It was submitted that the Conduct and the manner in which the proceeding was pursued by Ms Makripoulias and Mr Koutsoupias constituted the continuation of the proceeding in wilful disregard of known facts or clearly established law. It was said that a simple, free step (the obtaining of an ethics ruling) would have likely prevented the need for the application. It was contended that these matters constituted special circumstances which justified an award of indemnity costs and was conduct which amounted to a breach of r 27.1 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015.
As to why an order for costs should be required to be paid immediately, Ms Arhontovasilis relied upon the following observations of Besanko J in Rafferty v Time 2000 West Pty Ltd (No 3):[5]
… the court may order that costs be paid forthwith, and the cases suggest that that power may be exercised in circumstances in which there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely that there will be a long delay between the interlocutory proceeding and the conclusion of the principal proceeding…
[5](2009) 257 ALR 503, [21].
Ms Arhontovasilis submitted that an order for the immediate payment of costs should be made because Mr Koutsoupias was now removed from the proceeding and, in the event that the Court made a personal costs order against him, there would be no benefit in delaying the payment of those costs.
Ms Arhontovasilis submitted that, in the event that Ms Makripoulias and/or Mr Koutsoupias were ordered to pay her costs, neither should have recourse to, or be indemnified from, the deceased’s estate. It was submitted that the Conduct was neither prudent, diligent or reasonable in the circumstances and that accordingly the relevant expenditure of costs was not proper. Allowing for costs to be paid from the estate of the deceased would be unjust because it would in effect punish whoever is ultimately entitled to the residuary estate of the deceased for the conduct of Ms Makripoulias.[6]
[6]It was noted that the current beneficiaries of the Will of the deceased were minors and that the beneficiaries of the penultimate will were Ms Arhontovasilis and Ms Makripoulias.
Ms Makripoulias’ submissions
Ms Makripoulias made the following submissions as to why the appropriate course was for the Court to reserve the costs of the application to restrain Mr Koutsoupias from acting.
Counsel for Ms Makripoulias first referred to the correspondence which passed between the parties before the proceeding was commenced. It was submitted that an analysis of that correspondence demonstrated that Ms Arhontovasilis’ solicitor did not put Ms Makripoulias on notice of all the factual and legal issues raised in the legal proceeding which was ultimately commenced, or what evidence Mr Koutsoupias was likely to give, or be expected to give, in relation to those matters. Fair notice of the issues in dispute was not given by the correspondence.
It was submitted that order 63 of the Rules relates to orders for costs in respect of a proceeding. Because the applicant did not have proceedings on foot at the time of the correspondence sent by her solicitors on 1 and 22 September 2021, or when Ms Makripoulias’ solicitor’s responses were sent, the costs of that correspondence cannot be costs of the application. Whether there is any basis for the recovery of the costs of Ms Arhontovasilis’ pre-litigation correspondence as it relates to the substantive matters in dispute was more properly a matter for the trial judge.
As to the correspondence which passed between the parties after the proceeding was commenced, Ms Makripoulias submitted that the letter from Ms Arhontovasilis’ solicitor dated 6 October 2021 simply reasserted her previous position about the deceased’s capacity, and no reference was made to any alleged suspicion concerning the handwriting on the will, or any personal interest Mr Koutsoupias was said to have in the outcome of the proceeding. Although Mr Koutsoupias attempted in correspondence to better understand how it was contended that there existed a conflict of interest, Ms Arhontovasilis’ solicitor failed to address this issue in her responsive correspondence of 5 November 2021, and in fact stated that a response would not be provided because it would only result in the parties incurring further unnecessary costs.
Ms Makripoulias also advanced submissions by reference to a consideration of the ‘[c]omplexity of the factual and legal issues raised in the proceeding’, being one of the identified matters referred to in s 65C(2A) of the CPA which the Court may consider in making an order under s 65C(1). Section 65C(1) relevantly provides that the Court ‘may make any order as to costs it considers appropriate to further the overarching purpose’. It was submitted that Mr Koutsoupias’ letter of 5 November 2021 identified the complexity of the factual and legal issues arising from Ms Arhontovasilis’ grounds for revocation and that it ought to have been evident to Ms Arhontovasilis’ solicitor from the exchange of correspondence that a detailed response was required. The failure to provide a detailed response meant that Ms Makripoulias remained uncertain about how Ms Arhontovasilis’ case was put.
Ms Makripoulias also noted that the correspondence from Ms Arhontovasilis’ solicitor dated 5 November 2021 made no reference to Mr Koutsoupias’ personal interests, being the matter relied upon at the hearing of the application. Neither did Ms Arhontovasilis’ affidavit filed in support of her application for revocation contain any reference to Mr Koutsoupias’ alleged conflict of interest.
Ms Makripoulias submitted that, consistent with ss 23 and 24 of the CPA, Ms Arhontovasilis was obliged to actively engage with Ms Makripoulias to narrow the issues in dispute or to seek to resolve the issue of conflict by fulsome discussion; there was instead a refusal by Ms Arhontovasilis’ solicitor to engage in further correspondence. In contrast, Mr Koutsoupias was actively and appropriately seeking to engage with the issues. In circumstances where there had not been a proper response provided to Mr Koutsoupias’ correspondence about the factual and legal matters relied upon in relation to the claimed conflict, it was not unreasonable for Ms Makripoulias to oppose the application to restrain Mr Koutsoupias. In that context, it would be inconsistent with the overarching obligations to make an adverse costs order.
Ms Makripoulias noted that the evidence filed on her behalf in opposition to the application was the only evidence relied upon by Ms Arhontovasilis at the hearing of the application. Mr Koutsoupias deposed in detail to all matters relevant to the issues in dispute which were said to give rise to a conflict of interest. Furthermore, the fulsome evidence given by Mr Koutsoupias and Ms Makripoulias was evidence directly relevant to the substantive issues to be determined at trial. Any adverse costs orders made against Ms Makripoulias at this time in respect of that evidence would deprive Ms Makripoulias of the opportunity of recovering those costs as costs in the proceeding, should she successfully defend the summons for revocation.
Consideration
The parties’ submissions highlight the various sources of the Court’s power to award costs and the breadth of its discretion as to how that power may be exercised in the circumstances of each case. The discretion must, however, be exercised judicially.
Having considered the parties’ submissions I consider that, in the rather unusual circumstances of this case, the appropriate course is for the costs of and incidental to Ms Arhontovasilis’ summons dated 2 December 2021 to be reserved.
This conclusion involves a departure from the usual rule that costs should follow the event. There is good reason to depart from the usual rule in this case because, although I concluded that there were strong grounds to challenge the approach adopted by Mr Koutsoupias to the determination of the deceased’s testamentary capacity, I considered that it would be inappropriate and unnecessary to resolve to finality, in the context of the interlocutory application, the question of whether Mr Koutsoupias is able to give admissible evidence about the testamentary capacity of the deceased when the will was made. That is a matter for trial. Accordingly, contrary to the submissions advanced on behalf of Ms Arhontovasilis, as a matter of substance, the underlying controversy which required adjudication in determining Ms Arhontovasilis’ summons is not separate and distinct from the controversies which will fall for determination at trial. In my assessment, this is an important consideration which militates in favour of costs of the interlocutory application being reserved.
This conclusion is underlined by the fact that the evidence relied upon in the context of the interlocutory application will be directly relevant to the substantive issues to be determined at trial. There is accordingly force in the submission advanced on behalf of Ms Makripoulias that any adverse orders made against her at this time in respect of that evidence would deprive her from recovering those costs in the proceeding in the event that she succeeds in defending the summons for revocation at trial.
A further consideration which has borne upon my decision to reserve costs concerns the fact that the principal way in which Ms Arhontovasilis’ case was advanced at the hearing of the summons - that Mr Koutsoupias was in an unacceptable position of conflict between his duties to his client, his personal interests and his duties to the Court[7] - was not properly articulated by Ms Arhontovasilis’ legal representatives in the rather extensive correspondence which passed between the parties before the summons was filed. Further, there is force in Ms Makripoulias’ submissions that, despite Mr Koutsoupias’ attempts to engage in a dialogue with Ms Arhontovasilis’ legal representatives in relation to the issue of conflict, the response provided by Ms Arhontovasilis’ legal representatives was less than fulsome. A more comprehensive and timely engagement with the issues, including the way on which the issue of conflict was later advanced at the hearing of the summons, might otherwise have resolved the conflict between the parties, or resulted in some reduction in the areas of disagreement between the parties.
[7]Makripoulias v Arhontovasilis [2022] VSC 53, [23], [43].
The above observations are also borne out by the fact that, to a very substantial extent, counsel’s submissions advanced on behalf of Ms Arhontovasilis were overwhelmingly developed by reference to the affidavits filed by Mr Koutsoupias and Ms Makripoulias. Ms Arhontovasilis’ legal representative did not avail herself of the opportunity – which Mr Koutsoupias invited in his correspondence – to articulate her client’s claim in that way in the correspondence between the parties.
In light of the above matters and the overarching obligations set out in ss 22 and 23 of the CPA, I consider it would be unjust for Ms Arhontovasilis to obtain an award for costs in relation to the interlocutory application, notwithstanding that she was successful. The more appropriate course is for the costs of and incidental to the application to be reserved. It is accordingly unnecessary for me to further determine the other matters raised by Ms Arhontovasilis in her submissions.
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