Katsoulas v Kritikakis; Katsoulas v Apostolatos (No 2)

1. [1]

   LEEMING JA: On 7 February 2024 I delivered judgment in these two proceedings: Katsoulas v Kritikakis; Katsoulas v Apostolatos [2024] NSWSC 67. It will be convenient, in order to explain the matters left in dispute, to reproduce [2] and [180]-[188] of those reasons:

2. [2]

   In accordance with the second direction, Tony supplied proposed short minutes of order and a note explaining why Anthony should be ordered to pay $1,134,037.26 and Zoi and George should be ordered to pay $553,062.75.

3. [3]

   Contrary to the third direction, no response was received from the defendants. On 22 February 2024, my Associate sent the following email to the counsel and solicitors retained by the parties:

4. [4]

   That rapidly elicited two responses. One was a resubmission of the calculations put forward on behalf of Tony, this time including Annexure B. The other was an email from Mr Finch, who said that he had “understood deft reply to Plaintiffs draft orders by 27th Feb”. A further email was sent from my chambers, advising that:

5. [5]

   On the afternoon of 26 February 2024, the defendants supplied a “Reply to Plaintiff’s Proposed Orders” which identified those areas (which were few) where there was agreement, and the reasons for disagreement with most of the orders proposed by Tony.

Pecuniary relief

1. [6]

   Consistently with [167] and [182] of the principal judgment, Zoi and George are liable to account to the estate in the amount of $703,041.09 less $179,612.66 less $50,015 = $473,413.43. The defendants agree with that calculation.

2. [7]

   Tony calculates the interest to which the estate is entitled as $79,649.32. That calculation is based on pre-judgment rates for the period from 21 January 2021 to 7 February 2024. I have checked the calculations and detected no error in the application of the rates specified from time to time under s 100 of the Civil Procedure Act 2005 (NSW).

3. [8]

   The defendants oppose an order for interest, saying:

4. [9]

   But Tony only seeks interest from the date of Lakis’ death. Accordingly, nothing turns on the very low rate of interest on the transaction account, or the rates of interest on the term deposit during Lakis’ lifetime. What should have occurred is that the executors should have promptly accounted to Tony. Instead, the executors had the benefit of those monies since Lakis’ death (and indeed, for some time beforehand). Some of those funds were used to acquire assets (like George’s Audi) of which they had the benefit. Others were used to pay down debts owned by Zoi and George on an investment property. Bearing in mind that Zoi and George are only to account to the Estate for money which they actually received into their joint account, and then only for the period after Lakis’ death, I see no reason not to award interest at the rates specified in s 100 of the Civil Procedure Act.

5. [10]

   The total amount, as at 7 February 2024, which Zoi and George are required to account to the estate, is $473,413.43 + $79,649.32 = $553,062.75. Judgment in that amount, with effect from 7 February 2024 will be entered, however I will make an order pursuant to s 101(3) of the Civil Procedure Act so that the defendants will continue to have 28 days from today within which they can pay the amount without incurring post-judgment interest under that section. The result is that to the extent that the judgment is paid within 28 days of today, no interest will accrue, but to the extent that it is not, interest will accrue at post-judgment rates as and from 7 February 2024.

6. [11]

   Consistently with [180] of the principal judgment, Anthony is liable to account to the estate in the amount of $880,000 plus $41,203.84, and Tony’s calculations proceed on that basis. However, those calculations go on to deduct a “just allowance” of $60,700 and then add an “allowance after April 2019” of $110,215.07. These amounts misapprehend the effect of the judgment.

7. [12]

   The $60,700 in Tony’s calculation is evidently the sum of the $25,000 mentioned at [170] in argument by Mr Morahan as an allowance which might be given together with the $35,700 mentioned at [176] representing the withdrawals from the 8296 account between April 2016 and April 2019.

8. [13]

   I explained at [172]-[175] that I was conscious that the relief to which Tony was entitled in equity was discretionary, that the evidence suggested that he had been able to commence proceedings some three years before he did, that the evidence suggested that some amounts of cash had been given to Lakis and kept by him at St Basil’s, and my concern that, notwithstanding the onus rested with Anthony to show that the withdrawals he effected were authorised, the relief not be penal. I also noted the qualitative difference between the relatively small withdrawals prior to May 2019, which essentially merely consumed the monthly pension payments, and the much larger withdrawals thereafter which drew on the part of the term deposit which had not been reinvested. I concluded at [176]:

9. [14]

   The effect of that withholding of relief is that Anthony is to obtain a benefit of $35,700 in relation to the entirety of the funds withdrawn by him from the 8296 account. Another way of expressing that point is that Tony is not entitled to require Anthony to account for money withdrawn by him from the 8296 account prior to May 2019.

10. [15]

    Tony’s Annexure B calculates an amount of $110,215,07 in the following way. He first adds the withdrawals from the 8296 account from May 2017 until January 2021, which is $290,215.07. Included in the sum is the amount of $52,515.07 to which I shall return. From that sum he subtracts $180,000 representing the two deposits of funds ($150,000 and $30,000) not reinvested from the maturing term deposit.

11. [16]

    But the correct calculation is to calculate the amounts withdrawn after May 2019. That is $110,000 for the period May-December 2019 (see [64]-[65] of the principal judgment) plus the amount of $92,000 for January 2020 until 5 January 2021 (see [67]-[69] of the principal judgment) = $202,000.

12. [17]

    As Tony’s calculations acknowledged, much of those $202,000 withdrawn reflected the withdrawal of amounts not reinvested when the term deposit matured, namely, the deposits of $150,000 on 2 May 2019 and $30,000 on 4 August 2020. It would be double counting to require Anthony to account both for the drawing down of the term deposit and for the withdrawals of the amounts sourced from the part of the maturing term deposit which were not reinvested.

13. [18]

    Tony’s calculations in Annexure B also included a withdrawal of $52,515.07. I addressed this at length in the reasons at [65]-[66] and [70]. As I said at [65]:

14. [19]

    Anthony is already required to account to Tony for the $50,000 as part of the $880,000 representing the diminution of the term deposit, and the $2,515.07 as part of the $41,203.84 interest on the term deposit. It would be wrong for Anthony to have to account for either amount twice. I made that point in the hearing, and repeated it at [70] of the principal judgment. I do not accept that aspect of the claim.

15. [20]

    Further, Anthony’s withdrawals from the 8296 account were also funded in part by the $6,895.62 deposited on 2 May 2019, which was found at [62] to be interest on the term deposit for the period from 2 September 2018 until 2 May 2019. This is a component of the $41,203.84 for which Anthony is required to account. It is double counting to count it twice.

16. [21]

    The result is that the additional amounts for which Anthony is required to account, over and above the diminution of the term deposit and the interest on the term deposit, are $202,000 - $150,000 - $30,000 - $6,895.62 = $15,104.38.

17. [22]

    Tony’s Annexure B makes no allowance for the $50,015 spent to transfer $50,000 to him, or the $179,612.66 spent from Zoi’s and George’s account on Lakis’ expenses. But the ultimate source of those funds was the amounts drawn down from Lakis’ term deposit account. Anthony needs to receive a credit for these amounts. Test the matter this way. Tony’s claim is for loss to the estate. It does not matter whether estate funds were withdrawn by Anthony, then given to Zoi and George, and then used to pay expenses of Lakis or to make the payment of $50,000 to Tony. To the extent that Lakis’ money was spent on those expenses, none of the defendants is required to account for it.

18. [23]

    Most of these points were made in the defendants’ submissions, as follows: “The Plaintiff allows no credit for $179,612.6 [77] nursing expenses, and the payment of $50,015 [76] to Tony” and “The Plaintiff in calculating the net diminution in account 8296 the Plaintiff does not start with the Court’s findings of $240,000 [70], and deduct the transfer of $156,895.82 [61], and the just allowance of $35,700 [176]”.

19. [24]

    The total amount for which Anthony must account therefore is:

    1. (1)

       $880,000 plus $41,203.84 representing the entirety of the diminution in principal of the term deposit, plus interest earned by the term deposit;

    2. (2)

       Plus $15,104.38, representing the amounts withdrawn by Anthony from May 2019 until January 2021 which do not double count the amounts in (1) above;

    3. (3)

       Less $179,612.66, representing the amounts paid for expenses,

    4. (4)

       Less $50,015, being the amount withdrawn so as to make payment to Tony,

    5. (5)

       Equals $706,680.56.

20. [25]

    That is some $265,000 less than has been calculated by Tony. The difference represents Tony’s calculations failing to deduct $179,612.66 of authorised expenses and $50,015 paid to him, incorporating double counting of $52,515.07 and $6,895.62 but giving Anthony a credit of $60,700 which is $25,000 more than he is entitled.

21. [26]

    The defendants oppose the award of interest on these amounts. But for substantially the same reasons given above, I see no reason not to order interest in accordance with s 100. Tony should have had the money to which he was entitled as primary beneficiary under the estate from shortly after his father’s death. The delay of some three years has been brought about by the stance taken by the defendants which in large measure I have rejected. I see no reason why pre-judgment interest at the rates specified for the purposes of s 100 should not apply.

22. [27]

    Prejudgment interest on $706,680.56 from 21 January 2021 until 7 February 2024 is $118,895.29. (By way of cross-check, the interest calculated by Tony on a principal of $970,718.91 was $163,318.35, and I note that 706,680.56 / 970,718.91 x 163,318.35 = 118,895.29.)

23. [28]

    The total amount, as at 7 February 2024, for which Anthony is liable to account to the estate, is $706,680.56 + $118,895.29 = $825,575.85. I shall make a similar extension of time pursuant to s 101(3) of the Civil Procedure Act so that Anthony has 28 days to pay that amount without incurring post-judgment interest.

Other orders

1. [29]

   In 2022/00066764, order 1 proposed by Tony has already been made (it was order 1 made on 7 February 2024) and need not be made again.

2. [30]

   I shall make orders revoking the grant of probate, requiring the existing grant to be delivered up, and an order for administration of the estate be granted to Tony with the will of the deceased dated 20 October 2016 annexed in a form similar to orders 2-4 proposed by Tony. I shall make an order dispensing with the requirements of the Probate Rules with a view to the new grant being made forthwith, in circumstances where I see no need for order 5 proposed by Tony which involves further compliance with the rules.

3. [31]

   Orders 6 and 7 proposed by Tony involve a prohibitory and a mandatory injunction upon Zoi and George. Neither order was sought in the originating process. There is no evidence that they will not comply with the Court’s orders. No submissions have been made in support of any such order. My declining to make the order will not prevent Tony, if so minded, seeking such relief, on a proper basis, in the course of executing the judgment.

4. [32]

   Tony seeks declaratory relief directed to the principle of double recovery. I would not issue declaratory relief in the abstract, without there being any suggestion of a dispute on this issue, especially in circumstances where the three defendants are related to each other and represented by the same legal practitioners, and in light of what has been said at [183]-[184] in the main judgment.

5. [33]

   The defendants seek an order that the estate pay 25% of the cost of the litigation. They say:

6. [34]

   All those propositions may be accepted. However, as I noted in the principal judgment, this was not litigation primarily about the administration of an estate. The question was whether during Lakis’ lifetime Anthony had breached fiduciary duties, and whether Zoi and George had during Lakis’ lifetime received money. All of the monies which contribute to the sums the defendants are required to account reflect transactions made during Lakis’ lifetime.

7. [35]

   Further to the above, Anthony and Zoi and George retained the same solicitor and counsel, reflecting the absence of any separate interest on the part of the deceased estate.

8. [36]

   For those reasons, the appropriate order as to costs should reflect the substance as opposed to the form of the litigation, namely, that it was inter partes litigation about the conduct of the litigants while Lakis was alive, with no material component concerning the administration of the estate.

9. [37]

   For his part, Tony also seeks special orders which purport to make all three defendants liable for the costs of both proceedings. But Tony ran different cases against the defendants, which raised different issues and resulted in different judgments. I see no reason why all three should be jointly and severally liable for Tony’s costs incurred in respect of his claims against each of them. I would accept, however, that consistently with the nature of Tony’s claim against Zoi and George, they should be jointly and severally liable for Tony’s costs.

10. [38]

    The defendants also seek a note that nothing in the orders affects the defendants’ entitlements to bequests in the will. I shall make that note.

11. [39]

    I have considered whether Tony’s considerably less than complete success on the application for costs and orders warrants the costs of that application being treated on any different basis. Those costs should not on any view include any component for an email sent on the afternoon of 27 February 2024 seeking to make further submissions on the point, without leave (despite which I have considered the obvious errors pointed out in paragraph 1 and the assertions in paragraphs 2 and 3 – I consider that the latter lack any sound foundation). On balance, while I have accepted the submissions advanced by Tony in respect of interest, I have generally not accepted all other contentious aspects of the orders claimed, and they introduced unnecessary errors many of which were pointed out by the defendants. The result is that I have concluded that Tony should obtain a favourable costs order, but one which does not extend to the costs incurred in making submissions concerning orders and costs, with the intention that the parties bear their own costs of that aspect of the litigation.

12. [40]

    I make the following orders: