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IN THE SUPREME COURT OF VICTORIA

AT MELBOURNE
COMMERCIAL COURT

Not Restricted
S CI 2007 10201

BETWEEN:
POLYXENI KAMBOURIS (also known as
JENNY KAMBOURIS)

Plaintif

v
THEO TAHMAZIS (who is sued in his
capacity as personal representative of
the estate of BILL FLOROS) (also known
as VASILIOS FLOROS) and others
(according to the schedule attached)

Defendants

AND BETWEEN:
THEO TAHMAZIS (who is sued in his
capacity as personal representative of
the estate of BILL FLOROS) (also known
as VASILIOS FLOROS)

Plaintif by Counterclaim

- and POLYXENI KAMBOURIS (also known as


JENNY
KAMBOURIS)
and
others
(according to the schedule attached)

Defendants by Counterclaim

--JUDGE:

Lansdowne AsJ

WHERE HELD:

Melbourne

DATE OF HEARING:
DATE OF JUDGMENT:

4, 5, 6, 9, 10, 11, 26 and 27 February 2015 and


further written submissions on 17 and 27 March 2015.
30 April 2015

CASE MAY BE CITED AS:

Kambouris v Tahmazis (No 2)

MEDIUM NEUTRAL CITATION:

[2015] VSC 174

--NEGLIGENCE Solicitor found liable in earlier trial for failing to inform his client
on her entering into guarantees that a promised security had not been provided
Assessment of damages referred to an associate judge Client claims the
subsequent loss of her security properties Whether causation established in

the earlier trial Whether that loss was caused by the solicitors negligence
Application of the Wrongs Act 1958 (Vic) Factual causation Negligent
omission No transaction counterfactual Plaintif must show that not entering
the transaction would have prevented the loss, not just that it may have
Factual causation not proved Scope of liability Not proved that it would be
appropriate to extend the solicitors liability to the loss claimed.
ASSESSMENT OF DAMAGES FOR NEGLIGENCE Deduction of pre-existing
liability from quantum Nominal damages for breach of retainer Wrongs Act
1958 (Vic), s 51.
--APPEARANCES:

Counsel

Solicitors

For the Plaintif

Mr R Cook with
Ms S Varney

AMC Law & Associates

For the Defendants

Mr N de Young

Minter Ellison

TABLE OF CONTENTS
Introduction.....................................................................................1
Facts and procedural history.............................................................2
The plaintiffs claim before Judd J and in this trial.............................12
Has causation already been determined?..........................................19
Legal Principles..............................................................................23
Common law or the Wrongs Act?...................................................................23
Factual causation in the case of a negligent omission...................................26
Section 51(2): here not applicable.................................................................30
Scope of liability.............................................................................................30
Factual Causation............................................................................ 31
The elements of the plaintifs case...............................................................31
Evidence in the plaintifs case.......................................................................35
The plaintifs evidence...........................................................................35
Mr Kambouris evidence.........................................................................37
Assessment of the evidence..........................................................................38
Credit..........................................................................................................
......................................................................................................38
Conduct in relation to guarantees..........................................................44
Acting as her husband requested...........................................................51
Reasons to proceed with the restructure................................................54
Legal costs.....................................................................................................67
Repayment of $100,000 and lost interest thereon.........................................67
Summary of conclusions on factual causation...............................................68
Scope of Liability............................................................................71
Pre-existing liability........................................................................................76
Post negligence increase in liability...............................................................78
Continued use of The Boulevard....................................................................80
The nature of the duty, the breach and the loss............................................80
Quantum........................................................................................82
Nominal damages............................................................................ 86
Orders............................................................................................ 88

iii

HER HONOUR:

T0174

Introduction
1

The trial concerns the assessment of damages sufered by the plaintif,


Mrs Polyxeni Kambouris (also known as Jenny Kambouris), arising from
three breaches of duty by the second defendant, Mr Con Kiatos, her
solicitor. A liability trial was conducted on an undefended basis before
Judd J in March and May 2013. On my analysis of his judgment, His
Honour found that the second defendant breached his duty of care to the
plaintif on three occasions, by failing to advise her in October 2006,
November 2006 and May 2007 that she was not protected, as she had
believed, by an indemnity agreement executed by that solicitors wife, Ms
Anna Papakostas, and a mortgage granted by Ms Papakostas over a
property at Loch Sport.1 On 24 May 2013, his Honour gave judgment for
the plaintif against the second defendant with damages to be assessed,
and referred the assessment of damages to an associate judge pursuant
to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2005.
The trial of the assessment of damages was subsequently listed to
proceed on two occasions, 14 March 2014 and 22 September 2014. The
trial was vacated on the first occasion because the plaintif was not ready.
The trial was vacated on the second occasion due to the unavailability of
an associate judge.

It was, until closing submissions in this trial, common ground that


causation had not been determined by Judd J and fell to be determined in
this trial. In other words, I would be required to determine first whether
the loss the plaintif claimed was caused by the breaches of duty as found
by Judd J, and then, if causation was proved, the quantum of that loss. In
closing submissions, lead counsel for the plaintif submitted that Judd J
had already determined causation. For the reasons that I will elaborate
shortly, I do not consider that correct. I consider that it was necessary for
me to determine in this trial whether there was the necessary causal
connection between the losses claimed by the plaintif and the breaches
of duty found by Judd J. I have concluded that the plaintif has failed to
prove that factual causation, as required by s 51(1)(a) of the Wrongs Act
(Vic) 1958 (Wrongs Act or the Act) in respect of any of the claimed
loss.

If I am wrong in that regard, I also consider that the plaintif has failed to
prove that, pursuant to s 51(1)(b) of the Act, it is appropriate for the scope
of the second defendants liability to extend to the harm he caused, again
in respect of any of the categories of claimed loss.

For these reasons, with the exception of a proposed award for nominal
damages for the breaches of retainer by Mr Kiatos, I will give judgment for
the second defendant. I will make some brief findings in relation to
quantum should I be held to be in error in respect of both s 51(1)(a) and s
51 (1)(b) of the Act.
Facts and procedural history

1 Kambouris v Tahmazis [2013] VSC 271 (judgment of Judd J.) at [20].


5

T0174

This trial was factually dense, but much of the factual background is
established by uncontroverted documentary evidence or the second
defendants Notice to Admit, which was largely undisputed. Other facts
were determined by the judgment of Judd J. The only witnesses who gave
evidence of the facts were the plaintif and her husband, Mr Theodoros
Kambouris (also known as Theo Kambouris). Mr Kiatos was not called, and
there were no witnesses as to the background facts called in his case.
Expert evidence was tendered by consent without cross examination. I set
out below an outline of these facts, and some elements of the evidence. I
will discuss the significance of these matters later in the judgment.

The plaintif is the wife of Mr Kambouris, who is a builder now of over forty
years experience. Until 2000 he engaged in that work either as an
individual or through family owned corporate entities. In about 2001 2 he
commenced a property development joint venture with two other
individuals, Mr Bill Floros and Mr Con Kiatos, the second defendant. Judd J
found that, broadly speaking, it was agreed between them that Mr
Kambouris would provide construction services, Mr Kiatos, who was a
solicitor, legal and bookkeeping services, and Mr Floros finance. The joint
venture was undertaken through two corporate entities, BTC
Developments Pty Ltd (so called because of the first initials of each of the
joint venturers first names) (BTC) and Betac Investments Pty Ltd
(Betac). BTC had a business cheque account with the National Australia
Bank (NAB) from at least July 2002, which became active in September
2002 3, and a mortgage account from at least May 2004.4

2 Evidence of Mr Kambouris in chief, T282.12.


3 Exhibit 9.
4 Exhibit 10.
6

T0174

Mr Kambouris and his wife, the plaintif, had a pre-existing relationship


with the NAB. A corporate entity of which they were directors and
shareholders, T & P Kambouris Nominees Pty Ltd as trustee for the T & P
Kambouris Family Trust (Kambouris Nominees), had a loan account
with the NAB.
The plaintif and her husband jointly and severally
guaranteed the obligations of Kambouris Nominees to the NAB in May
2001.5 The NAB also held from 1998 mortgages over three properties,
103 The Boulevard, Loch Sport (The Boulevard), and Units 1 and 2,
70 Gove St, Springvale (Gove St units). Initially The Boulevard was
owned by Kambouris Nominees. In 2003, the property was transferred to
the plaintif, but remained subject to a registered mortgage to the NAB.
The registered proprietors of the Gove St units were at all times the
plaintif and Mr Kambouris, although they contend that Mr Kambouris
transferred his interests in both units to the plaintif in 1997 by a transfer
which states it is made pursuant to a Deed of Gift dated 21 April 1997. 6
That transfer was never registered.

It is agreed that the NAB mortgages over these properties were all monies
mortgages. Accordingly, they secured monies owed to the NAB by the
registered proprietors, ultimately the plaintif and Mr Kambouris, arising
from any source.

Initially the joint venture continued the sort of residential development in


which Mr Kambouris had previously been engaged. In either late 2004 or
early 2005 the joint venturers decided to undertake commercial work, for
which they required more funds.7 BTC obtained funds from the NAB in
April 2005 with a basic facility limit of up to $684,000 by way of mortgage
account and business cheque account.8 The plaintif (together with her
husband, Mr Floros and Betac) (together the BTC guarantors) jointly
and severally guaranteed the obligations of BTC to the NAB, including
those arising from the mortgage account and business cheque account, to
a basic liability of $684,000, by a guarantee and indemnity dated 20 April
2005 (first BTC guarantee).9

10 In June 2005, BTC obtained further lines of credit from the NAB, being an
overdraft with a limit of $400,000, a bank guarantee facility with a limit of
$260,000 and a mortgage facility of $234,000.10 The BTC guarantors
signed a further guarantee and indemnity in respect of the liabilities of
BTC to the NAB in the increased sum of $894,000 (second BTC
guarantee).11 The plaintif gave evidence in the liability trial before Judd
J that she first met Mr Kiatos in 2005, although she did not give a date in
that year.

5 Defendants Notice to Admit dated 4 July 2014 (Notice to Admit) at [5].


6 Exhibit B.
7 Evidence in chief of Mr Kambouris at T284-5.
8 Notice to Admit at[ 12].
9 Exhibit 13. The plaintifs signature in one location on the document is dated 20 May 2005,
but this is inconsistent with the other signatures and so may be an error.
10 Judgment of Judd J. at [5].
11 Exhibit 14. The signatures are diferently dated, but all are in the period 19-22 June 2005.

T0174

11 Mr Floros signed an agreement dated 4 July 2005 between himself, the


plaintif and BTC which recorded that the plaintif required comfort from
Mr Floros in consideration of allowing her properties to be security for the
activities of BTC and Mr Floros. The agreement obliged Mr Floros to
charge his property in East Bentleigh in favour of the plaintif.12
12 A similar agreement was prepared around the same time for signature by
Ms Papakostas, who as earlier noted was the wife of Mr Kiatos, in respect
of her property at Loch Sport, but was never signed by Ms Papakostas. 13
Notwithstanding that he knew that his wife had not signed the agreement,
Mr Kiatos instructed another solicitor, Ms Ella Gorenstein, to lodge a
caveat over the Papakostas Loch Sport property, and she did so.14
13 Mr Kambouris says that he first learnt that the Papakostas agreement had
not been signed and no mortgage had been given by her in August
2007.15 The plaintif could not recall when she first learnt of this fact, but
the implication from her evidence in chief is that it was not before she first
learnt that there were problems with the bank which was in late 2007. 16
Together with Mr Floros and Betac, Mr Kambouris and the plaintif signed
further guarantees and indemnities for the liabilities of BTC to the NAB in
increased sums on 6 October 2005 (up to $930,000) 17 (third BTC
guarantee) 11 October 2005 (up to $947,000)18 (fourth BTC
guarantee) and 7 May 2006 (also $947,000)19 (fifth BTC guarantee).
14 In the meantime, from late 2005 BTC began to experience financial
difficulties.20 By mid-2006, Mr Kambouris formed the view that unless
something was done to save the business, BTC would most probably go
into liquidation.21 A historical company search for BTC shows that an
application was made to wind up BTC on 5 May 2006, which was
subsequently dismissed on 28 June 2006. A further application to wind up
BTC was made on 17 October 2006. An administrator was appointed to
BTC efective on 13 December 2006.22

12 Exhibit H.
13 Exhibit 19 and the judgment of Judd J. at [7].
14 Judgment of Judd J. at [8] and [9].
15 T 364.12-15.
16 Evidence in chief, at T 646.4-11.
17 Exhibit 15.
18 Exhibit 16.
19 Exhibit 17.
20 Evidence of Mr Kambouris in cross-examination, T 506.
21 Ibid, at T 508
22 Exhibit 22.
8

T0174

15 Mr Kambouris evidence is that he, Mr Floros and Mr Kiatos agreed that


existing BTC contracts and properties owned by BTC would be transferred
to Betac, and funding for Betac be sought from the NAB. In other
proceedings, he has contended on oath that Betac was then to conduct
business solely on account of him and his family. 23 By contrast, Mr
Kambouris evidence in this trial is that the intention of the joint venturers
was that Betac was to appear to the outside world, including creditors of
BTC and the liquidator of BTC, as a diferent entity to BTC, 24 but, in reality,
the joint venture business was to continue through Betac. 25 He now says
on oath that when he gave evidence on oath to the contrary earlier, he
was maintaining a lie.26
16 For the refinancing to proceed, the NAB would require the plaintif to
guarantee the monies advanced to Betac. The guarantee would in turn be
supported by the existing mortgages over The Boulevard, and the Gove St
units. The plaintif gave evidence before Judd J that she expressed
concern to her husband as to how the changeover from one entity to
another would afect the security that she had been given by the
mortgages (from Mr Floros, and she assumed, Ms Papakostas). She said
that she was telephoned by her husband in October 2006, who was then
at the offices of an accountant, with Mr Kiatos and Mr Floros, and he put
Mr Kiatos on the telephone. She said she asked Mr Kiatos how this new
arrangement they were planning to put in place would afect me and he
said that I would still be totally legally protected as, you know, with the
agreement and the two mortgages.27
17 She gave evidence before Judd J that she met Mr Kiatos on two further
occasions, one on 22 November 2006 and the second on 22 May 2007,
when Mr Kiatos signed solicitors certificates in respect of advice given to
her as her solicitor in conjunction with advances to Betac. She did not
recall specifically what he said to her on those occasions, but it was to the
efect that she remained protected by the Floros and Papakostas
mortgages.28
18 On 22 November 2006 Betac obtained a funding facility with the NAB to
the extent of $852,500.29 The plaintif, her husband and their son, Mr
Jonathan Kambouris (Jonathan), gave guarantees and indemnities to the
NAB in respect of the advances to Betac each in the amount of $852,500,
on the same date, 22 November 2006 (first Betac guarantee).30 Mr
Kiatos certified on that document that as the solicitor for the plaintif he
had explained the efect of the guarantee and indemnity to her.

23 Exhibit 37.
24 For example, at T 507.
25 For example, at T 510.29-T 511.9.
26 Ibid.
27 Exhibit S, T 130.4-20.
28 Ibid, at T 130-T 132.
29 Notice to Admit at [31].
30 Exhibit DD.
9

T0174

19 A portion of the funds advanced to Betac was used to pay out the BTC
accounts with the NAB, which were closed on 30 November 2006. The
amount required to pay them out was $651,846.12.31 This indebtedness
had of course been secured by the earlier guarantees given by the
plaintif and her husband, and so by the mortgages over The Boulevard
and the Gove St units. Those mortgages also secured the indebtedness
of Kambouris Nominees, which was in the order of $199,000 in November
2006.32 Thus, when she signed the first guarantee in respect of Betac, the
potential liability that the plaintif undertook was in the same order as her
existing actual total liabilities to the NAB, and about $200,000 more than
her pre-existing actual liability in respect of the joint venture.

31 This is the total of the business cheque account when closed on 30 November 2006 (Exhibit
20) and the closure amount of the mortgage account on that day (Exhibit 21).
32 Exhibit 8.

10

T0174

20 Further lines of credit were obtained from the NAB in April 2007 33 to
enable Betac to purchase further properties for development. On 10 April
2007 the plaintif, her husband and their son entered into a further
guarantee and indemnity for the obligations of Betac to the sum of
$1,260,000 (second Betac guarantee).34 Mr Kiatos did not witness the
signature of the plaintif or give any certificate as her solicitor on this
document. He did do so, however, on a guarantee and indemnity that the
plaintif signed on 22 May 2007 (third Betac guarantee), in which she,
her husband and their son guaranteed the liabilities of Betac to the NAB in
the slightly reduced sum of $1,250,000.35
21 Mr Kambouris collected the file relating to the Papakostas caveat from
Ms Gorenstein on 3 August 2007.36 As noted, his evidence is that this is
when he first became aware that there was no mortgage signed by Ms
Papakostas in favour of the plaintif to support the caveat. Mr Kambouris
said in evidence that he raised this with Mr Kiatos at that time and Mr
Kiatos admitted that his wife had not signed the agreement and that there
was no mortgage in place. Mr Kambouris said that Mr Kiatos asked him
not to sue him and gave him assurances that he, Mr Kiatos, would fix it
and provide the funds.37
22 Emails sent by Mr Kambouris in late November and early December 2007
to Mr Kiatos and Mr Floros contain content that appears to assume that
both mortgages exist i.e. both Floros and Papakostas mortgages are in
place or registrable.38 Notwithstanding these emails, I find on the basis of
Mr Kambouris oral evidence as to his discussion with Mr Kiatos after he
obtained the file from Ms Gorenstein, that he, Mr Kambouris, was aware
from early August 2007 that there was no signed agreement or mortgage
from Ms Papakostas. There is no evidence as to whether, or when, he told
the plaintif of this fact.
23 On 19 and 20 September 2007 the plaintif, her husband and their son
signed a further guarantee and indemnity of the liabilities of Betac to the
NAB in the increased amount of $1,677,517 (fourth Betac
guarantee).39
Mr Kambouris and Jonathan Kambouris signed the
guarantee on 19 September 2007, and the plaintif on 20 September
2007. Mr Kiatos did not sign the guarantee as a witness for the plaintif,
or as her solicitor. Mrs Kambouris signed the guarantee before a bank
officer. A peculiarity of the document, not explored in evidence, is that
the plaintif declares in it that she attended the offices of Mr Kiatos in
March 2006 to obtain advice in relation to her rights and obligations under
that guarantee.

33 Exhibit G.
34 Exhibit 23.
35 Exhibit W.
36 Exhibit M and T 364.12-19.
37 T 368.10- T 369.3.
38 Exhibits J and L.
39 Exhibit 24.
11

T0174

24 The plaintif, her husband and their son Jonathan signed a further
guarantee and indemnity in respect of the Betac facilities in the same
amount i.e. $1,677,517, on 18 and 19 February 200840 (fifth Betac
guarantee), Jonathan and Mr Kambouris on 18 February 2008 and the
plaintif on 19 February 2008.
The plaintif signed the fifth Betac
guarantee before a bank officer, Caroline Roberts. There is no solicitor
certificate. Ms Roberts certified that the plaintif appeared to understand
the nature and efect of the guarantee and added the notation Has signed
guarantee within last 5 years.
25 Ultimately, Betac went into liquidation on 3 December 2008. 41 This was
an event of default under the Betac facilities, and triggered demands on
the Betac guarantors, including the plaintif, in respect of the various
Betac liabilities to the NAB. The NAB made demands in writing dated 6
February 2009, which sought a total sum of $1,290,522.00 in respect of
Betac liabilities as at 30 January 2009. 42 The letters of demand in
evidence are solely in respect of Betac liabilities. Mr Kambouris agreed in
evidence that the bank also demanded repayment of the indebtedness of
Kambouris Nominees, 43 at that time in the order of $190,000.44
26 The plaintif commenced this proceeding on 24 December 2007, initially
against Mr Floros only, seeking possession of the property mortgaged by
him to her pursuant to the agreement dated 4 July 2005. Mr Floros died
on 8 January 2009. Initially Mr Christos Floros was substituted for Mr
Floros as his personal representative. Subsequently, by order made 25
June 2010, Mr Theo Tahmazis was substituted for Mr Floros as the personal
representative of his estate. The plaintif was given leave to join Mr Kiatos
and Ms Gorenstein as defendants to the proceeding by order made 12
February 2010.
27 By that time, the NAB had commenced recovery proceedings against the
plaintif (in respect of The Boulevard) and against her and her husband (in
respect of the Gove St units, they both still being the registered
proprietors thereof), in both cases relying on the 1998 mortgages. Those
proceedings were commenced on 19 January 2010. Neither the demands
or the writs recite the source of the liability secured by the mortgages, but
it is common ground that the relevant Betac liability was the fifth Betac
guarantee, signed by the plaintif and Mr Kambouris (and their son
Jonathan) in February 2008.

40 Exhibit 25.
41 Exhibit EE.
42 Exhibit O.
43 Notice to Admit at [43] and [44] and T 563.17-18.
44 T 563.25-28.
12

T0174

28 In respect of the Gove St units, the NAB obtained judgment in default of


appearance against Mr Kambouris on 21 April 2010 and judgment against
the plaintif on a successful application for summary judgment on 14
December 2010.45 Mr Kambouris acknowledged in evidence that he knew
that the general denial defence filed by the plaintif on 7 May 2010 46 on
his instructions was a weak defence and the purpose was to gain time to
negotiate with the bank.47
29 In respect of The Boulevard, Mrs Kambouris filed a substantive amended
defence. She alleged in her amended defence filed 19 September 2011 48,
amongst other things, that her signature to the February 2008 guarantee
was obtained in circumstances that were oppressive and/or
unconscionable, because the NAB knew that it was her husband, not she,
who had knowledge of the financial afairs of Betac; and that the NAB
failed to fully inform her of the nature of the debt being secured and did
not inform her that the security she was providing extended to The
Boulevard, as well as the Gove St units. She also alleged that the NAB
and Kambouris Nominees had agreed in 1998 to release The Boulevard
from the mortgage, but the NAB had failed to do so. Mrs Kambouris gave
sworn evidence to the efect of these contentions in her affidavit sworn 15
November 201049 filed in that proceeding in opposition to an application
for summary judgment. In her evidence in this trial, she conceded that
she knew at the time she swore that affidavit that it was false to state, as
she did, that The Boulevard property was not intended to be available as
security for her husbands businesses. She said she swore the affidavit
containing those false statements on the basis of legal advice. 50
Mr Kambouris also conceded in his evidence in this trial that he had the
substantial conduct of that proceeding for the plaintif, and knew that her
defence was very weak.51

45 Exhibit 33.
46 Exhibit 27.
47 T 565.9-12 and T 626.3-6.
48 Exhibit 32.
49 Exhibit 30.
50 T 675.19-29, T 676.24-29.
51 T 567.8-14.
13

T0174

30 The NAB sold the Gove St units as mortgagee in possession on 20 August


2011.52 The NAB also sold as mortgagee in possession one of the Betac
development properties, 2/650 Warrigal Rd, Oakleigh in May 2012. 53 On
18 June 2012, the plaintif and the NAB executed terms of settlement
pursuant to which the plaintif agreed to pay the NAB $450,000 in full and
final satisfaction in respect of the plaintifs exposure to the NAB in respect
of both the indebtedness of Kambouris Nominees and Betac. 54 On the
same date, consent orders were made that the NAB recover possession of
The Boulevard.55 By transfer dated 14 September 2012, the plaintif
transferred all her interest in The Boulevard to Serras Holdings Pty Ltd,
a company owned by her daughter Natalie Kambouris and son Jonathan,
and controlled by her daughter, 56 for a stated consideration of $580,000. 57
Mr Kambouris evidence is that he negotiated a settlement of the NABs
remaining claim against the plaintif for $450,000 which was funded by
this sale.58 There is no evidence as to whether or not the diference of
$130,000 between this and the stated consideration of $580,000 was paid
to the plaintif.
31 The plaintif settled her claim against Ms Gorenstein by Deed of
Settlement dated 29 August 2012,59 by which the plaintif accepted
$290,000 inclusive of costs in full settlement of her claim against Ms
Gorenstein.
32 The trial against Mr Tahmazis and Mr Kiatos was due to commence on 20
March 2013. By order made 18 March 2013, Judd J ordered that the trial
proceed on liability alone. It is recited in Other Matters that the plaintif
had informed the Court that she was not yet in a position to provide full
particulars of loss and damage.
33 After the commencement of the trial, the plaintif compromised her claim
against the estate of Mr Floros. She agreed to accept $200,000 in
settlement of that claim, if paid within a certain time frame. 60 The plaintif
concedes that the quantum of her claim against Mr Kiatos is to be reduced
by both this sum and the amount agreed with Ms Gorenstein.
34 Mr Kiatos initially personally participated in the trial to oppose the claim
against him, but shortly prior to the resumption of the trial in May 2013 he
withdrew his defence and sought and obtained leave to cease to act as
solicitor in his own case. The plaintif elected to proceed on evidence i.e.
as an undefended trial as against Mr Kiatos, now represented by his
professional indemnity insurer, rather than seeking default judgment on
the averments in the statement of claim.
52 The transfer was registered, and so the sale presumably completed, on 2 November 2011see title search being part of Exhibit 44.
53 Transfer registered 25 July 2012-Exhibit 44.
54 Notice to Admit at [48].
55 Exhibit 34.
56 Exhibit 35.
57 Exhibit 36.
58 T 590.21- T 591.19.
59 Exhibit 38.
60 Exhibit 39.

14

T0174

The plaintiffs claim before Judd J and in this trial


35 The plaintif prosecuted the liability trial against Mr Kiatos before Judd J in
accordance with a document dated 20 March 2013 and entitled Third
Further Amended Statement of Claim (Filed pursuant to the Order of the
Hon. Justice Judd and further amended on 20 March 2013) (20 March
2013 Third FASOC). This document was filed in the course of the trial
before Judd J to conform the plaintifs claim and the evidence adduced in
support of it. This iteration of the statement of claim is on the file,
although without a filing date endorsed on it. It did not appear in the
Court Book prepared for this trial, which was prepared by the second
defendant, but I determined early in the trial that that it was the iteration
before Judd J.61
36 The plaintifs claim against Mr Kiatos commenced at paragraph 38 and
ran until paragraph 64. She made five allegations of breach of duty
against Mr Kiatos, as her solicitor.
37 The first allegation was that instructing Ms Gorenstein to lodge a caveat
over the Papakostas property, when he knew that his wife had not signed
the agreement or authorised the lodgement of the caveat, was a breach of
his duty of care to the plaintif. This is the event that occurred in July
2005.62
38 The second allegation made was that Mr Kiatos, as solicitor for the
plaintif, represented to her in October 2006 that the Floros mortgage and
agreement and the Papakostas agreement would continue to secure the
full amount which Floros and Papakostas had agreed to contribute to the
plaintif if all amounts owing to the NAB under the BTC facilities were not
repaid. This representation was said to have been made by Mr Kiatos on
the telephone to the plaintif in October 2006 from an accountants
offices, where Mr Kambouris, Mr Floros and the accountant Mr Nicktas
were also present.63
39 The third allegation was that Mr Kiatos, as her solicitor, made the same
representation to the plaintif as above in respect of the Floros mortgage
and agreement, and the Papakostas agreement, on 22 November 2006 at
the time that he signed a solicitors certificate for her in respect of the
refinance leading to the repayment of the BTC facilities.64
40 The fourth allegation of breach was in respect of a similar representation
made by Mr Kiatos to the plaintif as her solicitor in respect of further
borrowings then being made by Betac in May 2007 at the time that he
signed a solicitors certificate for her in respect of such further
borrowings.65
41 In respect of the first allegation, duty, breach and loss was claimed.
Breach of retainer was not expressly pleaded.
61 See order made 4 February 2015.
62 This claim is made at [38]-[44] of the 20 March 2013 Third FASOC.
63 Made at [45].
64 Made at [46].
65 At [47].
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42 The second to fourth allegations were pleaded to arise expressly in


negligence and in contract at paragraphs [50]-[51] (duty and breach in
negligence), and in contract at paragraphs [52] (duty) and [53] (breach).
These paragraphs related only to the representations made in October
2006, November 2006 and May 2007, and only in respect of failure to
disclose that there was no proper security over the Papakostas property.
Failure to disclose that there was no proper security over the Floros
property was alleged only if the Court found that that security did not
extend to the Betac liabilities, as the first defendant had contended. 66 No
such finding was made, because the proceeding against the first
defendant settled. Loss in negligence or contract in respect of these
allegations was pleaded at [54].
43 The Third FASOC also contained until final submissions before Judd J a
pleading in misleading or deceptive conduct in respect of the same
representations that formed the basis of the negligence and breach of
retainer claims made by allegations two to four. This claim was withdrawn
in final submissions.67
44 The fifth allegation, confined to breach of retainer, was pleaded in respect
of an alleged failure by Mr Kiatos in May 2007 to instruct counsel to draw
certain documents to protect the position of the plaintif and Mr
Kambouris visavis the Papakostas and Floros agreements and
mortgages.68
45 Judd J recited all these allegations in his judgment. 69 He found as a fact, in
respect of the first, that the plaintif gave her security to the bank in the
belief that she was supported by an indemnity agreement and mortgage
given by each of Mr Floros and Ms Papakostas. 70 He did not, however, in
terms make a finding of breach of duty of care in respect of this first
allegation. On my analysis of his judgment, Judd J made express findings
of breach in respect of the allegations relating to the representations
made in October 2006, November 2006 and May 2007 only. In other
words, he did not make a finding of breach in respect of either the first or
the fifth allegations.
46 He set out his findings on breach in paragraphs 19-21 of his judgment as
follows (emphasis added):
The evidence given by the plaintif and her husband conforms
generally with the allegation in the plaintifs statement of claim
that in around October 2006 and May 2007, Mr Kiatos represented
to her that both mortgages continued to secure her position in
respect of the borrowings by Betac. I am satisfied that Mr Kiatos
was acting as the plaintifs solicitor at the time he gave each of
the certificates, with the knowledge that his wife had not in fact
executed an agreement or given a mortgage. He was, at the very
least, obliged to inform the plaintif of that fact and alert her to the
risk that she only had recourse to the property of Mr Floros. By

66 20 March 2013 Third FASOC at [51(b)(ii))] and [53(iii)].


67 Exhibit 45 at T 133-T 135.16.
68 Ibid, at [61]-[63].
69 Kambouris v Tahmazis [2013] VSC 271 at [14]-[18].
70 Ibid, [15].
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failing to so inform the plaintiff, Mr Kiatos breached his duty


of care, if only to make full disclosure of facts known to him and
the associated risk.
When the bank ultimately called in the security, the plaintif was
unable to call upon the security she believed had been provided by
Ms Papakostas. In my opinion, the plaintif has sufered loss and
damage by reason of the breach by Mr Kiatos, in failing to
advise her in October 2006 and May 2007, when she was
called upon to provide additional security to the bank, that she was
not protected by an indemnity agreement executed by
Ms Papakostas that would support the caveat, and a mortgage
granted by Ms Papakostas over the Loch Sport property.
Accordingly, the plaintif is entitled to judgment against the second
defendant, Con Kiatos, with damages to be assessed. 71

47 As the emphasised words show, these findings related at most to the


certificates (November 2006 and May 2007) and failing to properly advise
her in October 2006 (the telephone conversation). The findings were
confined to failures to correctly advise in relation to the Papakostas
mortgage, not the Floros mortgage.
48 At the time of the trial before Judd J there were no particulars of loss in
any of the paragraphs of the 20 March 2013 Third FASOC, in particular in
paragraph 54 which pleaded loss arising from breaches in negligence or
retainer relating to the October 2006, November 2006 and May 2007
representations.
It was accepted by both parties in this trial that
causation was pleaded in respect of those representations at paragraph
49 of the 20 March 2013 Third FASOC. At the time of the trial before Judd J
and until opening submissions in this trial, that paragraph read as follows:
49.

Acting on the faith and truth of the Kiatos Representations


and induced thereby the plaintif did or refrained from doing
the following things.
(a)

plaintif would not have

71 Ibid, at [19]-[21].
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(i)

agreed to provide the New NAB Guarantee and security


over the Plaintifs Properties as security for the Betac
Facilities.

(ii)

signed the New NAB Guarantee; further or in the


alternative,

(iii)

made the NAB payment;

(iv)

made further borrowings referred to;

(b)

the plaintif would have sought and obtained from Floros a


variation to the Floros Agreement and the Floros Mortgage so
that they provided for Floros to indemnify the plaintif in
respect of her obligations to the NAB under the NAB
Mortgages and the New NAB Guarantee in respect of the
Betac Facilities and to charge the Floros Property with that
liability;

(c)

the plaintif would have insisted upon due execution of the


Papakostas Agreement and/or the provision of proper security
over the Papakostas property. The plaintif would then have
sought and obtained from Anna Papakostas a variation to the
Papakostas Agreement so that it provided for Anna
Papakostas to indemnify the plaintif in respect of her
obligations to the NAB under the NAB Mortgages and the New
NAB Guarantee in respect of the Betac Facilities and to
charge the Papakostas Property with that liability.

49 It is apparent that paragraph 49(a) pleads a no transaction case in


causation i.e. that had the representations not been made, the plaintif
would not have entered into the first Betac guarantee in November 2006
or the third Betac guarantee in May 2007. 72 By contrast, paragraphs 49(b)
and (c) (conceded to be collectively in the conjunctive and alternative to
(a)), pleaded a diferent transaction case. In other words, they asserted
that had the plaintif known that the Floros mortgage may not extend to
Betac liabilities, she would have sought a variation to ensure that it did
and had she known that the Papakostas agreement was not signed she
would have insisted on execution of it or proper security for Betac
liabilities.
50 Early in the trial before me, I ruled that the plaintif must make an election
in relation to these alternatives before evidence commenced. The plaintif
elected to proceed with the no transaction case i.e. paragraph 49(a).

72 Paragraph 49 refers to the New NAB guarantee which was earlier defined at [23] to be the
guarantee for Betac liabilities.

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51 As noted earlier, at the time of the trial before Judd J there were no
particulars of loss in the 20 March 2013 Third FASOC. After that trial, the
plaintif filed a document entitled Updated List of Damages to be Assessed
dated 2 September 2013. This was amended on three further occasions.
By the first amendment,73 the plaintif deleted (from her claim for loss) a
claim for costs in this proceeding and a claim for lost revenue from
properties sold by the NAB; quantified her claim for damages arising from
the claimed loss of $100,000; and added claims for deposits on properties
and damages for interest on that sum. By the second amendment 74, the
plaintif deleted a portion of the document 75 that I had ruled amounted to
a submission. By the third amendment, 76 made in closing submissions,
the plaintif deleted the claim for deposits and interest thereon.
52 As a consequence of these amendments, and the election made in
relation to causation, the plaintifs claim for damages seeks, to place
(herself) into the position that she would have occupied had the breach of
duty or breach of retainer not occurred. The plaintif asserts that had
Kiatos not acted wrongly (which was found by Judd J to have occurred in
October 2006, November 2006 and May 2007) the Gove St units and The
Boulevard properties would not have had to have been sold as the Floros
and Papakostas mortgages would have covered any liability to (the NAB).
The plaintif seeks:
(a) the current value of those properties (claimed in the document to total
$1,490,000;
(b) legal costs she incurred in defending the NAB recovery proceedings in
the sum of $94,555.45;
(c) repayment of a sum of $100,000 that she claims she made to BTC
when its liabilities were paid out in November 2006; and
(d) damages by way of interest on the sum of $100,000 quantified at
$68,963.77
53 From these sums, the plaintif concedes that the two settlement sums
totalling $490,000 must be subtracted.

73 Encapsulated in the Amended Updated List of Damages to be Assessed handed up in court


on 6 February 2015 and subsequently filed 9 February 2015.
74 Made on 6 February 2015- see order made that day.
75 Headed (B) Note on Additional Contributions made towards BTC and increased NAB facility.
76 See order made 26 February 2015.
77 Amended Updated List of Damages to be Assessed filed 9 February 2015, further amended
by leave 26 February 2015, initialled, dated and marked A by me.

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54 Although the claim for legal costs is said by the Amended Updated List of
Damages to be Assessed filed 9 February 2015 to relate only to legal costs
incurred in respect of the NAB recovery proceedings, the plaintif also
adduced evidence of other legal costs incurred in her name, including
costs incurred in this proceeding, in respect of a proceeding commenced
by Ms Papakostas against Betac,78 and in respect of another proceeding
against Mr Floros to remove caveats he had lodged over The Boulevard,
99-101 Warrigal Road, Hughesdale and 2/650 Warrigal Road Oakleigh. 79
The registered proprietor of 99-101 Warrigal Road and 2/650 Warrigal
Road was Betac, and so it is unclear why the plaintif would be liable for
those legal costs in any event. There was no application made to further
amend the claim for damages to encompass these costs and their
relevance to the claim as made was not explained by counsel for the
plaintif. Accordingly, I disregard them.
55 The second defendant denies that his negligence, as found by Judd J,
caused any loss to the plaintif. The second defendants case as put is
confirmed in the defence filed after the conclusion of the trial on 4 March
2015 in accordance with order made by me in the trial. For completeness,
I also note that the plaintif filed a reply to this defence after the
conclusion of the trial, which reply maintains the contention put in closing
submissions that causation has already been determined by Judd J.
56 If the plaintif is correct in this contention, or is able in this trial to
establish causation, then the second defendant contends that the
quantum of the claimed loss in respect of the Gove St units and The
Boulevard should be significantly reduced, having regard to the plaintifs
pre-existing indebtedness prior to first occasion of breach in October
2006, or the indebtedness that would have remained if joint venture
properties were sold first, and some other matters. In addition, in respect
of the legal costs claim, the second defendant contends that the plaintif
has not proved that it was she, as opposed to her husband and children,
who paid those costs. In relation to the claim for $100,000 and interest
thereon, the second defendant contends that there is no evidence to show
that this sum would have been repaid to her but for the negligence of Mr
Kiatos.
Has causation already been determined?
57 In the second sentence of the penultimate paragraph of his judgment,
quoted earlier in these reasons, Judd J commenced his conclusion in these
words (emphasis added):
In my opinion, the plaintif has suffered loss and damage by
reason of the breach by Mr Kiatos, in failing to advise her in
October 2006 and May 2007

78 Exhibit P.
79 Exhibit Q.
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58 In her closing submissions, the plaintif contended that this must be read
as a finding on causation. In other words, the plaintif was not required, in
the trial before me, to show a causal link between the loss she claimed
and the breaches found by Judd J. I do not consider this correct, for the
following reasons.
59 First, this submission is entirely at odds with the way the plaintif opened
her case and the evidence that she called. In the written opening
submissions prepared by her counsel, the plaintif disputed the
defendants assertion that causation should be assessed as at 2006, and
submitted that:
As Mrs Kambouris did not know until the end of 2007 that breach of
duty/breach of retainer had occurred it is not until that date that
any person would be in a position to prevent any damages which
might have flowed in the interim to occur. It is at that time that one
examines the events that will then occur and their causative
relationship to the actions of Kiatos.80 (emphasis added)

80 Opening Submissions of the Plaintif at [37].


21

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60 This written opening submission by the plaintif responds to and does not
dispute the assertion made by the second defendant in his written
opening submission that causation had not yet been determined. 81 In
addition, in discussion at the opening of the trial, there were repeated
assertions by the second defendant and concessions by the plaintif that
causation was not determined in the earlier trial. 82 Further, the plaintif
made applications to call evidence from the plaintif and further evidence
from Mr Kambouris, notwithstanding that that evidence had not been
foreshadowed in a witness outline.
The evidence was said to be
necessary in part because evidence on causation was required. 83 The
plaintif also made an election prior to the evidence to pursue paragraph
49(a) only.84 Each of these actions of the plaintif is entirely inconsistent
with the submission made at the end of the trial that there was no need to
establish causation, because it had already been found.
61 Finally, on leave being granted to do so, the plaintif and Mr Kambouris
both gave evidence to the efect that the plaintif would not have signed
the first and third Betac guarantees had she known the correct position in
relation to the Papakostas mortgage. This evidence was unnecessary if it
had already been found that the plaintif would not have signed those
guarantees but for the negligence of Mr Kiatos. In accordance with
ordinary principles, the plaintif should be bound by the case that she ran.
62 Lead counsel for the plaintif submits that although that may be the usual
approach, the difficulty is that a judgment has been given and must be
given efect to. As loss is an element of a cause of action in negligence, a
finding of liability in negligence requires a finding of loss, and so a finding
of causal connection between the breach and the loss.
63 In my view, that submission fails because the judgment is equally capable
of being supported by the cause of action in contract. In contract, as the
second defendant correctly submits, nominal damages may be awarded
for a breach which is not proved to have occasioned actual pecuniary
loss.85
64 Secondly, to hold that Judd J determined causation at a time when no loss
had been identified at all in the pleading or in the evidence before him
would be a nonsense. In this regard, I accept the submission for the
second defendant, that to determine causation one must, as a matter of
logic, reason backward from the particular loss claimed. In other words,
one cannot determine that a particular loss was occasioned, without
knowing what that loss is said to be.

81 Second defendants Outline of Opening Submissions on the Assessment of Damages dated 3


February 2014 (should have been 2015) at [25] and [26].
82 T 37.28-29, T 38.17-18, T 39.22- T 40.8; T 59.4-7, T 74.8-16, T 83.21-25.
83 T 83.21-25; T 177.25-27.
84 T 233.22-T 234.1.
85 Simply Irresistible Pty Ltd v Couper [2010] VSC 601 at [401]-[403] per Kyrou J.; State of New
South Wales v Stevens [2012] NSWCA 415 at [18].

22

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65 This is made manifest by the use of the words particular harm in the
causation provisions in the Wrongs Act, which I will shortly discuss, but as
the High Court held in Wallace v Kam,86 also applied to the determination
of causation at common law. The Court there held that the first aspect of
the determination of causation for the purpose of attributing legal
responsibility is a question of historical fact as to how particular harm
occurred87 (emphasis added). Here, the pleading did not identify even
what would have occurred had the negligence been known, other than in
the very broad terms of paragraph 49(a) or (b) and (c). Indeed, when
submissions were put to him as to what might have occurred, but for the
negligence, Judd J noted that this was speculation and queried if there was
any such evidence.88 Mr Colbran said in answer that there was evidence
that the transfer to Betac would not have occurred, but scrutiny of the
evidence of Mr Kambouris and the plaintif in that trial 89 shows that there
was no evidence as to what they would have done had they known that
there was no Papakostas mortgage. It is plain from the discussion between
then lead counsel for the plaintif, Mr Colbran, and Judd J in closing
submissions in the liability trial that both considered that causation, or
least some causation issues would arise in the damages trial. 90 I do not
accept the plaintifs submission91 that this discussion related only to the
withdrawal of the misleading and deceptive conduct claim.
66 Thirdly, there is an alternative interpretation of His Honours use of the
phrase has sufered loss and damage by reason of the breach. That
alternative interpretation is that the loss to which he there refers is the
absence of the protection that would have been aforded by the indemnity
agreement, as identified by him in the same paragraph. In other words,
an increased exposure, the measure of which would have been at its
highest the equity in the Papakostas property. As the second defendant
correctly submits,92 if this is what was found, this is a diferent
transaction case, before Judd J available to the plaintif by virtue of
paragraph 49(c), but abandoned in this trial. Accordingly, if the plaintif is
correct that causation has been determined, she has now elected not to
pursue the case as found.

86 (2013) 250 CLR 375.


87 Ibid, at [11].
88 Exhibit 45, at T 136.18-25.
89 Exhibit S.
90 Exhibit 45, at T 137.10-15.
91 In oral closing submissions at T 763 and T 849.14-15.
92 T 784-T 785.
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67 In fairness to the plaintif, I do not consider that I should now conclude she
has abandoned her case entirely by her election to pursue paragraph
49(a), as the interpretation set out above would require. I consider that
now that the plaintif has particularised the losses said to have been
occasioned by the breaches by Mr Kiatos on the basis that she would not
have signed the first or third Betac guarantees had she known there was
no Papakostas mortgage, it falls to be determined in this trial whether the
negligent omissions by Mr Kiatos in October and November 2006 and May
2007 in failing to advise her that there was no such mortgage caused
those losses.
68 For completeness, I note that the plaintif did seek at an early stage of the
trial that I refer the whole of the damages issue back to Judd J, or adjourn
the trial to allow certain questions (unidentified) to be put to him. 93 I
refused those applications, for reasons given at the time, including that if
the plaintif considered that there was any question arising from the
judgment of Judd J she had had ample opportunity to seek to raise that
herself before His Honour, and had not done so. For current purposes
I add only that the plaintif did not at the time of those applications for
referral or adjournment before me base them on any ambiguity as to
whether or not causation had been established, and indeed, as noted
above, at the time of her application for referral back to Judd J or
adjournment did not cavil with the proposition advanced by the second
defendant that causation fell to be determined in this trial. The questions
proposed to be put to Judd J were not identified but were said to relate to
whether the findings on breach extended to representations in relation to
the adequacy of the security provided by Mr Floros, or were, as I had
ruled, limited to the Papakostas mortgage.
Legal Principles
Common law or the Wrongs Act?
69 The parties were not in agreement as to the legal principles to apply. The
written opening submissions for the plaintif assumed, and the written
closing submissions for the plaintif explicitly stated, that the principles to
apply are those that apply to a negligence claim at common law.
70 The second defendant contends that the legal principles that are to be
applied to determine the causation issue are set out in ss 51 and 52 of the
Wrongs Act. Those sections provide as follows:
51

General Principles

(1)

A determination that negligence caused particular harm


comprises the following elements
(a)

that the negligence was a necessary condition of the


occurrence of the harm (factual causation); and

(b)

that it is appropriate for the scope of the negligent


person's liability to extend to the harm so caused

93 T 141 T 155.
24

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(scope of liability).
(2)

In determining in an appropriate case, in accordance with


established principles, whether negligence that cannot be
established as a necessary condition of the occurrence of
harm should be taken to establish factual causation, the court
is to consider (amongst other relevant things) whether or not
and why responsibility for the harm should be imposed on the
negligent party.

(3)

If it is relevant to the determination of factual causation to


determine what the person who sufered harm (the injured
person) would have done if the negligent person had not
been negligent, the matter is to be determined subjectively in
the light of all relevant circumstances.

(4)

For the purpose of determining the scope of liability, the


court is to consider (amongst other relevant things) whether
or not and why responsibility for the harm should be imposed
on the negligent party.

52

Burden of proof

In determining liability for negligence, the plaintif always bears the


burden proving, on the balance of probabilities, any fact relevant to
the issue of causation.

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71 These provisions form part of Part X of the Act, which Part was inserted
consequent on the Australia wide review of the law relating to negligence,
the Ipp Report, following the collapse in 2001 of the insurer HIH Insurance
Ltd. By s 44 of the Act, Part X applies to any claim for damages resulting
from negligence, regardless of whether the claim is brought in tort, in
contract, under statute or otherwise. By s 43, court is defined to
relevantly mean this Court in this trial, damages includes any form of
monetary compensation, and harm includes economic loss. There are
exclusions from the Part set out in s 45, but none of those apply. Parties
can contract out of the application of the Part, by virtue of s 46, but that
did not here occur.
72 I consider the second defendants contention that these provisions, rather
than common law principles, apply to this case, whether considered in
negligence or contract, to be plainly correct. The plaintif also accepted
by the second day of oral closing submissions that it is the Wrongs Act
that applies.94 Section 47 of the Wrongs Act, also contained within Part X,
provides that (e)xcept as provided by this Part, this Part is not intended to
afect the common law. Lead counsel for the plaintif, although ultimately
accepting that it is the Act that here applies, placed some emphasis on
this section to assert the continuing relevance of the common law
authorities to which he took me.
73 The intention of the statutory test expressed in Victoria in s 51(1)(a) and
in New South Wales in s 5D of the Civil Liability Act 2002 (NSW) and how it
difers from common law principles has been considered by the High
Court. In Adeels Palace Pty Ltd v Moubarak (Adeels Palace) 95 the High
Court held, in respect of the cognate provision in the New South Wales
Civil Liability Act 2002, that dividing the issue of causation into factual
causation and scope of liability as per s 51 of the Act:
expresses the relevant questions in a way that may difer from
what was said by Mason CJ, in March v E and MH Stramare Pty Ltd,
to be the common laws approach to causation. The references in
March v Stramare to causation being ultimately a matter of
common sense were evidently intended to disapprove the
proposition that value judgment has, or should have, no part to
play in resolving causation as an issue of fact. By contrast, s 5D(1)
(the NSW equivalent to s 51(1)) treats factual causation and scope
of liability as separate and distinct issues.
It is not necessary to examine whether or to what extent the
approach to causation described in March v Stramare might lead to
a conclusion about factual causation diferent from the conclusion
that should be reached by applying (the NSW cognate provision to s
51(1)(a)). It is sufficient to observe that, in cases where the Civil
Liability Act or equivalent statutes are engaged, it is the applicable
statutory provision that must be applied.96

94 T 854.23- T 855.10.
95 (2009) 239 CLR 420
96 Ibid, at [43]-[44] (citations omitted).
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74 In the more recent case of Wallace v Kam97 the Court expanded on these
comments. The Court explained the relationship between the common
law test and the statutory test as follows (citations omitted):
The common law of negligence requires determination of causation
for the purpose of attributing legal responsibility.
Such a
determination inevitably involves two questions: a question of
historical fact as to how particular harm occurred; and a normative
question as to whether legal responsibility for that particular harm
occurring in that way should be attributed to a particular person.
The distinct nature of those two questions has tended, by and large,
to be overlooked in the articulation of the common law.
In
particular, the application of the first question, and the existence of
the second, have been obscured by traditional expressions of
causation for the purposes of the common law of negligence in the
conclusory language of directness, reality, efectiveness and
proximity.
Statute now requires that the two questions be kept distinct.
The distinction now drawn by s 5D(1) between factual causation
and scope of liability should not be obscured by judicial glosses. A
determination in accordance with s 5D(1)(a) that negligence was a
necessary condition of the occurrence of harm is entirely factual,
turning on proof by the plaintif of relevant facts on the balance of
probabilities in accordance with s 5E.
A determination in
accordance with s 5D(1)(b) that it is appropriate for the scope of the
negligent person's liability to extend to the harm so caused is
entirely normative, turning in accordance with s 5D(4) on
consideration by a court of (amongst other relevant things) whether
or not, and if so why, responsibility for the harm should be imposed
on the negligent party.
Thus, as Allsop P explained in the present case:
[T]he task involved in s 5D(1)(a) is the elucidation of the
factual connection between the negligence (the relevant
breach of the relevant duty) and the occurrence of the
particular harm. That task should not incorporate policy or
value judgments, whether referred to as proximate cause or
whether dictated by a rule that the factual enquiry should be
limited by the relationship between the scope of the risk and
what occurred. Such considerations naturally fall within the
scope of liability analysis in s 5D(1)(b), if s 5D(1)(a) is
satisfied, or in s 5D(2), if it is not.

75 The High Court held in Adeels Palace,98 as followed in the subsequent


cases of Strong v Woolworths Ltd99 and Wallace v Kam, that the statutory
factual causation test, which is to be applied rather than the common law
approach, is a restatement of the but for test. The Court stated it thus in
Wallace v Kam:
The determination of factual causation in accordance with (the NSW

97 (2013) 250 CLR 375.


98 Ibid, at [45].
99 (2012) 246 CLR 182 at [18].
27

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cognate provision to s 51(1)(a)) involves nothing more or less than


the application of a but for test of causation. That is to say, a
determination in accordance with (in Victoria s 51(1)(a)) that
negligence was a necessary condition of the occurrence of harm is
nothing more or less than a determination on the balance of
probabilities that the harm that in fact occurred would not have
occurred absent the negligence. 100

100 Ibid, at [16].


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76 In his written opening submissions for the plaintif counsel contended,


supported by reference to March v Stramare101 and other authority that
predates Part X of the Wrongs Act, that it is not appropriate to use a but
for test and that causation should be determined by the application of the
criteria of common sense.102 Ultimately counsel for the plaintif accepted
that the statutory test in the Wrongs Act here applies, but continued to
submit that, notwithstanding Wallace v Kam, the but for test does not
always apply, and this is an instance where it should not apply. 103 He was
unable to identify any authority to support that proposition and I consider
it incorrect in the light of the clear statements by the High Court. The
common law may, however, be of some continuing assistance in relation
to the determination of scope of liability pursuant to s 51 (1)(b).104 I will
return to this at a later point.
Factual causation in the case of a negligent omission
77 Judd J found that Mr Kiatos was negligent in that he failed to inform the
plaintif in October 2006 (in his telephone conversation with the plaintif),
in November 2006 (on giving his solicitors certificate to support the first
Betac guarantee) and in May 2007 (on giving his solicitors certificate to
support the third Betac guarantee) that his wife Ms Papakostas had not in
fact executed an agreement to indemnify the plaintif or given a
mortgage. Thus the negligence so found was by way of negligent
omission. How is the but for test to be applied in the case of a negligent
omission?
78 The second defendant relies on the Court of Appeal judgment in Wodonga
Regional Health Service v Hopgood 105 in support of his proposition that in
cases of negligent omission, the plaintif must establish the causal link
required by s 51(1)(a) by way of a counterfactual hypothesis. In that case,
Maxwell P., with whom Buchanan and Harper JJ.A. agreed, held that
(w)hen- as here- a plaintif alleges a negligent omission, the causal link
between the breach of duty and the claimed damage can only be
established by means of a counterfactual hypothesis. 106 That case turned
on common law principles, as an exception to the Act. However, it is clear
from other cases of negligent omission that fell to be determined by the
statutory scheme, here and in New South Wales, that the application of s
51(1)(a) and its interstate cognate provisions similarly require the
consideration of a counterfactual in cases of negligent omission.107

101 (1991) 171 CLR 506.


102 Submissions of the Plaintif dated 23 February 2015 at [60]
103 T 855. 12-T 857.3.
104 Hudson Investment Group Ltd v Atanaskovic and anor [2014] NSWCA 255 at [122] per
Sackville AJA, Beazley P. and Ward JA. agreeing.
105 [2012] VSCA 326.
106 Ibid, at [31].
107 Adeels Palace (2009) 239 CLR 420, and Lederberger and anor v Mediterranean Olives
Financial Pty Ltd and anor [2012] VSCA 262 (a case of solicitor negligence by failure to properly
advise).

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79 The second defendant contends that in positing that counterfactual, the


plaintif must show that, had she taken the posited action, she would have
prevented the loss of her properties. The second defendant contends that
it is not sufficient for her to show merely that she may have done so. The
plaintif disputes this proposition.108
80 I consider the second defendant to be correct, on the basis of the High
Court decision in Adeels Palace. In that case, the plaintif had been
injured in a shooting at licensed premises. The claimed negligence lay in
failing to provide security staf. The High Court held that the statutory
test for causation under the New South Wales equivalent of s 51(1)(a) was
not satisfied if the plaintif could show only that changing the surrounding
circumstances might have made a diference.109 What the plaintif in that
case had to show, and did not, is that it was more probable than not that,
but for the absence of security personnel, the shootings would not have
taken place. Unless that degree of connection was shown, on the balance
of probabilities, the statutory test that the negligence was a necessary
condition of the occurrence of the harm was not satisfied.110
81 The plaintif says that rather than showing that her actions in the
counterfactual would have prevented sale of her properties, she only has
to show that it is appropriate that the scope of Mr Kiatos negligence
extend to that loss. The error in the plaintifs reasoning on this point lies,
in my view, in conflation of the scope of liability limb of s 51 with the
factual causation limb, with which this portion of Adeels Palace was
concerned.
82 Section 51(3) of the Act provides that the question as to what the person
who sufered harm would have done if the negligent person had not been
negligent is to be determined subjectively in the light of relevant
circumstances. At common law, courts in Australia are required to apply
a subjective test in determining what a plaintif would have done had she
been properly advised. The test is not what a reasonable person in the
plaintifs position would have done, but what this particular plaintif would
have done.111 The sub-section preserves the admissibility of subjective
evidence as to what the plaintif would have done. 112 The High Court has
warned, however, of the inherent dangers in evidence given in hindsight
after harm has occurred. In Rosenberg v Percival113 a number of members
of the Court addressed this issue. Gleeson CJ expressed it thus (footnotes
omitted):
In the way in which litigation proceeds, the conduct of the parties is
seen through the prism of hindsight.
A foreseeable risk has
eventuated, and harm has resulted. The particular risk becomes
the focus of attention. But at the time of the allegedly tortious
conduct, there may have been no reason to single it out from a

108 T 919.23-T 920.19.


109 Ibid, at [50].
110 Ibid, at [53].
111 Chappel v Hart (1998) 195 CLR 232 per Kirby J. at 272-273.
112 As compared, for example, to the position in New South Wales s 5D(3)(b) of the Civil Liability
Act 2002 (NSW).
113 (2001) 205 CLR 434.

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number of adverse contingencies, or to attach to it the significance


it later assumed. Recent judgments in this Court have drawn
attention to the danger of a failure after the event, to take account
of the context, before or after the time of the event, in which a
contingency was to be evaluated. This danger may be of particular
significance where the alleged breach of duty of care is a failure to
warn about the possible risks associated with a course of action,
where there were, at the time, strong reasons in favour of pursuing
the course of action.114

114 Ibid, at [16].


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83 It may be that the final phrase of s 51(3) of the Act, that directs the Court
to determine what the plaintif would have done absent the negligence
subjectively in the light of all relevant circumstances is intended to
incorporate into the statute the consideration of context to which the
Chief Justice referred. Although I was not referred to express authority on
the point, this construction and mode of application is consistent with the
recent Court of Appeal decision of Odisho v Bonazzi,115 and accordingly is
the manner in which I will apply the sub-section.
84 In that case, the Court of Appeal upheld the dismissal of a claim against a
medical practitioner for failing to warn of the risk of a particular treatment.
The Court upheld the decision of the trial judge that factual causation had
not been proved, because the plaintif had failed to prove that, even if she
had been warned of the risk, she would have declined the treatment
concerned. The claim was also dismissed on the basis that the plaintif
had failed to prove that the treatment in fact caused the harm in question
in any event. In the Court of Appeal, Beach JA and McMillan AJA, with
whom Nettle JA agreed, approved the statement by Kirby J in Hoyts Pty
Ltd v Burns116 that such evidence is so hypothetical, self-serving and
speculative as to deserve little (if any) weight, at least in most
circumstances.
85 Beach JA and McMillan AJA considered the evidence given by the plaintif
at trial as to what she would have done had she been told of the possible
risk of the treatment, and held that the dangers associated with such
evidence were well illustrated in the case before them. In particular, they
looked to the whole of the evidence, including the evidence of treatment
to which the appellant had been prepared to consent, and upheld the view
of the trial judge that an appropriate warning of the risk there in question
would not have made any material diference to the events that
occurred.117
Section 51(2): here not applicable

115 [2014] VSCA 11.


116 (2003) 77 ALJR 1934, at 1944 [54].
117 Odisho v Bonazzi [2014] VSCA 11 at [41].
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86 Section 51(2) is directed to a situation where negligence cannot be shown


to be a necessary condition of the occurrence of harm according to
established principles. The High Court by majority has held that this subsection is intended to apply to two situations where causation cannot be
established by the necessary condition test. Those are cases where
there is a cumulative operation of factors in which the contribution of each
factor to the harm is unascertainable, and cases where the cause of the
plaintifs harm is impossible to prove on the current state of medical or
scientific knowledge, but the negligent conduct has materially increased
the risk of harm.118 In Powney v Kerang and District Health119 the Court of
Appeal held, in the light of that interpretation, that s 51(2) was not
intended as a fall back provision in a conventional case for a plaintif who
is unable to establish factual causation. Rather, it was designed to
accommodate cases quite out of the ordinary.120
87 It was not here suggested by either party that s 51(2) applied, and that is
plainly correct.
Scope of liability
88 At common law, the March v Stramare test efectively dealt with scope of
liability and factual causation as one: part of the common sense
approach to causation.121 The Wrongs Act now separates out scope of
liability into a distinct concept, on which the plaintif must succeed in
addition to success on factual causation. The Court of Appeal has
commented that application of s 51(1)(b) requires not only that the issue
be dealt with separately, but also that the Court makes a value judgment
based on precedent and policy considerations, which may limit the liability
of a person found to be responsible under the factual causation test.122
89 Reference to precedent may initially be puzzling, given that in Wallace v
Kam, the High Court had held that the determination of the question
posed by s 51(1)(b) is entirely normative.123 The Court in Wallace v Kam
went on, however, to explain that where the case in question falls within
an established class the normative question posed by s 51(1)(b) is
properly answered by a court through the application of precedent.124
90 In a novel case, however, the Court held in respect of the identical
provisions to s 51(4) and s 51(1)(b) in New South Wales:
s 5D(4) makes it incumbent on a court answering the normative
question posed by s 5D(1)(b) explicitly to consider and to explain in
terms of legal policy whether or not, and if so why, responsibility for
the harm should be imposed on the negligent party. What is
required in such a case is the identification and articulation of an
evaluative judgment by reference to the purposes and policy of the

118 Strong v Woolworths Ltd (2012) 246 CLR 182, 193-194 [25].
119 [2014] VSCA 221
120 Ibid, at [96].
121 Powney v Kerang and District Health (Powney) [2014] VSCA 221 at [76].
122 Ibid, at [79].
123 Wallace v Kam (2013) 250 CLR 375 at [14].
124 Ibid, at [22].
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relevant part of the law. Language of directness, reality,


efectiveness or proximity will rarely be adequate to that task.
Resort to common sense will ordinarily be of limited utility unless
the perceptions or experience informing the sense that is common
can be unpacked and explained.125

125 Ibid, at [23].


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91 The second defendant submits that this is a novel case within the
meaning of that phrase in Wallace v Kam. I will discuss scope of liability in
more detail later in this judgment.
Factual Causation
The elements of the plaintiffs case
92 There is a diference between the plaintifs case as pleaded, and her case
as closed.
93 As discussed earlier, the plaintifs case is pleaded at paragraph 49(a) of
the 20 March 2013 Third FASOC. On analysis, the first three subparagraphs relate to the October and November 2006 breaches, and the
fourth to the May 2007 breach.
94 The efect of sub-paragraph (a)(i) is that had the plaintif been correctly
advised by Mr Kiatos in October 2006 or November 2006 that in fact she
did not have security by way of mortgage over Ms Papakostass property
then she would not have agreed to provide the New NAB guarantee
(which is defined in the pleading at paragraph 23 to be the Betac
guarantee she entered into after October 2006 ie. what I have called the
first Betac guarantee). The efect of sub-paragraph (a) (ii) is that nor
would she have signed it. The efect of sub-paragraph (a) (iii) is that, in
the alternative, she would not have made the NAB payment. This is
defined in the pleading at paragraph 17 to be payment out by Betac of the
BTC liabilities, which occurred in November 2006, and so did not in terms
involve any payment by the plaintif.
95 Sub-paragraph (a)(iv) pleads that she would not have made the further
borrowings referred to in paragraph 47 of the pleading. That paragraph
relates to the further borrowings at the time of the May 2007 guarantee,
the third Betac guarantee.
96 Applying s 51(1)(a) of the Wrongs Act to this claim as pleaded, there are
three elements to the plaintifs case:
(a) 1. If correctly advised at the respective times, she would not have
agreed at those times to the refinancing or signed the first Betac
guarantee; or agreed to the further borrowings and signed the third
Betac guarantee;
(b) 2. The implication is that she would not have entered into these
transactions at all, not just not at those times; and
(c) 3. Not entering into the transactions would have prevented the loss of
her properties, and the other losses that she claims.

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97 The plaintifs case as closed is that had she known in October/November


2006 or May 2007 that there was no Papakostas mortgage as she had
been promised she would not have proceeded at that time with the
refinance and first Betac guarantee, or the third Betac guarantee. 126 The
plaintif submits that this is all that she need show on the but for test in s
51(1)(a). This submission turns on the proposition that it is irrelevant that
she may have signed the respective guarantees at some later point, after
taking advice and reassessing her position. 127 On this submission, the
plaintif contends that she does not need to prove element 2, as identified
by me above.
98 There is some support for this approach to factual causation in the High
Court decision Wallace v Kam,128 although counsel for the plaintif did not
take me to it. In that case, the Court identified three possible scenarios
that might arise consequent on a negligent failure to warn. That case
concerned the negligence of a surgeon who failed to advise of certain
risks of surgery. On the facts of that case, the plaintif would not have
proceeded at all if correctly advised. The Court also considered the
possible scenario in which a plaintif would not have proceeded at the
time, if correctly advised, but may have done so later. The Court
expressed the view, obiter on the facts of that case, that the better view
is that factual causation should also be found in this scenario.129
99 I do not, however, accept the plaintifs submission put in closing, because
this case is not the case that the plaintif pleaded and conducted. It is
simply not consistent with the evidence of Mr Kambouris as to what would
have occurred had the plaintif been correctly advised. Further, the case
as put in this way for the plaintif is essentially a loss of opportunity case
or a diferent transaction case. If it is a loss of opportunity case, the
plaintif has not pleaded or proved what the relevant opportunity was, or
its value. If seen as a diferent transaction case i.e. the case that was
pleaded in paragraph 49(b) and (c) of the 20 March 2013 Third FASOC,
then this case was withdrawn at the commencement of the trial. Finally,
had the diferent transaction case proceeded, at its highest the damage
sufered by the plaintif would have been the value of the equity then held
by Ms Papakostas in her Loch Sport property, as this would have been the
security promised but not provided. This limitation is not consistent with
the losses claimed by the plaintif.
I accept the submission of the second defendant 130 that, in relation
to factual causation, the plaintif is required by her pleaded case to show
that she would not have signed the first or third Betac guarantees at all,
had she been told the truth, and that as a consequence, the ultimate loss
of her properties would have been avoided, not just that that loss may
have been avoided. The plaintif bears the onus of proof on causation.
Accordingly, the plaintif is required to prove the three elements I have
identified above.

100

126 Oral closing submissions for the plaintif at T 893.4-11; T 896.26-27; T 909.18-28.
127 Ibid, at T 894.29- T 895.1.
128 (2013) 250 CLR 375.
129 Ibid, at [20].
130 Second Defendants Outline of Closing Submissions on the Assessment of Damages dated
24 February 2015 at [17(a)(ii) and (iii)].

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In this section of the judgment I conclude that the plaintif has


proved element 1 identified above, but has not proved elements 2 and 3.
I find that had Mr Kiatos told the plaintif that there was no Papakostas
mortgage at any of October or November 2006 or May 2007, she would
not have proceeded immediately to agree to the proposal under
consideration or sign the relevant guarantee. I accept her evidence that
she would have taken advice. I am not persuaded, however, that she
would not have entered into those transactions later, and indeed I find
that, on the balance of probabilities, she would still have done so. This is
because there were, to use the terminology of Gleeson CJ in Rosenberg v
Percival at the time, strong reasons in favour of pursuing (that) course of
action.131

101

Even if I am wrong in my conclusion on element 2, and the plaintif


would not, after taking advice, have proceeded with the restructure to
Betac, and she and her husband would have asked the bank to sell the
BTC and Betac properties to meet the BTC liabilities and then sought to
refinance the balance of her indebtedness, I am nevertheless not
persuaded that she has proved element 3. I also consider in this section
of the judgment the evidence as to the likely sale proceeds of the BTC and
Betac properties, and the plaintifs remaining indebtedness if those
proceeds were applied to her BTC liabilities. I conclude that it is possible
on the figures that the plaintif may have been able to meet her liabilities
arising from pre-existing BTC guarantees if the properties owned by BTC
and Betac had been sold and the proceeds of those sales applied to the
liabilities, and she had been able to extend the security over her own
properties to cover the balance and her pre-existing liability for Kambouris
Nominees. In other words, not entering the transactions may have
prevented the forced sale of her properties.

102

In accordance with Adeels Palace, however, this is not enough.


What the plaintif must show is that these steps would have been taken,
because otherwise she has not shown that not entering the transactions
would have prevented her losses. The figures identified in the expert
evidence are calculated on the basis that the NAB would have sold the
BTC and Betac properties first, before considering sale of the plaintifs
properties. There is no evidence, however, to show that this is what
would have occurred, and on the evidence it may not even have been
likely. Accordingly, the plaintif has not shown that the loss of her
properties would have been avoided, even if she would not have
proceeded with the transactions at all.

103

I turn now to detailed consideration of the evidence.

104

Evidence in the plaintiffs case


The plaintiffs evidence

131 (2001) 205 CLR 434, at [16], also quoted earlier in the section headed Legal Principles.
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As noted earlier, the plaintif gave evidence before Judd J as to a


telephone conversation with Mr Kiatos in October 2006 and what was said
in meetings she had with him in November 2006 and May 2007 when he
signed solicitors certificates. Findings have now been made about those
events, and the parties are bound by those findings. Judd J accepted the
plaintifs evidence. He found that there had been an occasion in October
2006 when Mr Kiatos spoke to the plaintif on the telephone and reassured
her that she was protected by the two mortgages. He also found that Mr
Kiatos did not inform her, as he should have done, when signing
certificates for her in November 2006 and May 2007 that there was no
such protection from Ms Papakostas.
Given those findings, further
evidence about those events was not required in this trial and, although
this point was not taken by the second defendant, may even have been
inadmissible.132

105

What is admissible and critical, however, is the plaintifs evidence


about what she would have done had she been told the truth. Her
evidence as to what she would have done had she known the truth in
October 2006 was as follows (omitting interjections):

106

MR COOK: And if you were told by Mr Kiatos at that time that


Ms Papacostas (sic) had not signed a mortgage or had not secured
her house like you were told, what would you have done at that
stage?--MRS KAMBOURIS: Well, I would've had to take legal advice because
this is what I was told that it was now diferent and I would've
proceeded on the basis of that.
MR COOK: Yes, and what would you have done? Who would you
have taken the legal advice from?--MRS KAMBOURIS: Well, I would've gone to someone else obviously,
because the advice I was given like previously Mr Kiatos had said
something if it turned out not to be correct I would've had to go to
someone elseand find out what the position was.

MR COOK: Yes, and if the advice confirmed what you'd been told, in
other words that Mrs Papacostas (sic) hadn't provided security for
you, what would you have done then?--MRS KAMBOURIS: Well, I don't know what the advice would've been
but I did know that the company - um, had three properties they
were developing - um, so - and - and also at that stage I was of the
belief that this - to this day I - I believed that I was entitled to Mr
Floros' - um, mortgage. So I would've moved to maybe - um, satisfy
the bank to a certain extent and give me a breathing space to move
against that mortgage so I can repay and get my properties out of
trouble.

MR COOK: All right, we're back at the hypothetical question. We're

132 I raised these difficulties with counsel at T 303.15-28.


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back at the time that you were having the telephone conversation
with Mr Kiatos and you were being asked to sign a guarantee. And
at the time you were told by Mr Floros that you were, Covered?--MRS KAMBOURIS: Mr Kiatos, yes.
MR COOK: Mr Kiatos told you that, I'm sorry. And I was asking you a
hypothetical question and I asked you what would you have done if
you had been - if you'd been told by Mr Kiatos that Mrs Papacostas
(sic) wasn't providing security, hadn't signed her mortgage, and you
said you'd take legal advice. And I suggested in the hypothetical
question, what would've happened if the legal advice had confirmed
what Mr Kiatos had said in the hypothetical case? In the case - -?--MRS KAMBOURIS: Well, I wouldn't have signed the document
because that would've put me in a perilous position.
MR COOK: Yes. What would you have done if you hadn't signed the
document?--MRS KAMBOURIS: I would've assessed what options were open to
me to - um, get my properties out. Whether that was moving
against Mr Floros or - or getting the bank to move on the company
or whatever assets they had I would've done what any reasonable
person would've been to move to secure my position. 133

In re-examination, the plaintif said that, had she learnt the truth in
October 2006 I would have waited to ..seek further legal advice as to
where I stood before I went any further.134

107

In relation to May 2007, her evidence as to what she would have


done if told that the Papakostas mortgage had not been signed was as
follows:

108

Well, I wouldnt have signed. And as-if he had been told me


previously I would have taken advice on how to go about it to
minimise at least my exposure, if not to get out of it altogether. My
primary concern was always to protect my properties, and thats the
assurances I received.135

133 T 637.29-T 638.10; T 638.22-T 639.2; T 642.7-28.


134 T 718.13-15.
135 T 645.30-T 646.3.
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Mr Kambouris evidence
Mr Kambouris evidence in chief is that had he known the true
situation as far as security from Ms Papakostas was concerned, he would
have made sure that his wife did not sign the guarantees. 136 The
implication is that his wife would principally have been guided by him. For
reasons that I will elaborate shortly, I consider this to be correct.

109

110In cross examination, he acknowledged that BTC was in financial trouble in


October/November 2006 but resisted the proposition that BTC and Betac
would still have proceeded with the refinance and he and his wife would
still have given the November 2006 guarantees even if they knew at that
time that there was no Papakostas mortgage. He did agree that without
the first Betac guarantee, Betac could not have borrowed more than the
existing BTC amount.137
111In re-examination, he expanded on the other options that were open at
that time as follows. Without increased borrowings, Betac would have had
no cash flow. Mr Kambouris says that this would not have been a concern,
because he would not have been prepared to continue with the business
and would have worked for someone else as he currently does. In other
words, he would have allowed the business of BTC and Betac to cease. Mr
Kambouris had conceded in cross examination that this would have
triggered a default entitling the NAB to move on the security properties,
but in re-examination he said that the bank could have sold the three
properties that belonged to BTC and Betac and so recovered $450$500,000. He acknowledged that there would have been an amount still
owing to the NAB, but considered that this could have been negotiated
with the bank given the amount of equity in his wifes properties, to give
him and his wife time to sue Mr Floros on his mortgage. Given these
options, he reiterated that he would have told his wife not to sign.138
Assessment of the evidence
112In assessing the subjective evidence of the plaintif and her husband as to
what they would have done, I am required by s 51(3) of the Act and the
authorities to consider it in the light of all relevant circumstances, with the
caution in mind that the evidence is self-serving and given in hindsight,
and having regard to my assessment of their credit.
Credit

136 T 421.14-15.
137 T 611.26-T 612.4.
138 T 616.9- T 617.14.
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113I first consider the reliability of the evidence given by the plaintif and
Mr Kambouris in terms of its truthfulness. I will deal first with the
truthfulness of the evidence of Mr Kambouris. I consider that the weight
to be given to his evidence, particularly his evidence as to what he would
have done had he known the truth, is critically undermined by what he
admits was his failure to tell the truth in the past on oath, and the
repeated demonstrations of his willingness to deceive in an endeavour to
preserve his assets.
114In the course of cross examination, Mr Kambouris conceded that he had
given false evidence on oath in three earlier affidavits, one in this
proceeding in response to an affidavit of Mr Floros, one in an affidavit in a
proceeding commenced by Ms Papakostas, and one in an affidavit in
support of his wifes opposition to summary judgment in the NAB recovery
proceeding concerning The Boulevard. 139 The poor light that this casts on
Mr Kambouriss truthfulness is compounded by the fact that this false
evidence was not confined to one topic only. The aspect of the affidavits
in response to Mr Floros and Ms Papakostas that he now says was false is
the same- that is, whether Betac was to be operated on behalf of him and
his family alone (as he there contended) or was, in truth, a continuation of
the BTC joint venture (which is what he now says was the truth). He now
says that in those earlier affidavits he was maintaining a lie, which was
intended to disguise from the outside world, in particular creditors, that
Betac was a continuation of BTC. Mr Kambouris volunteered this account
of the restructure from BTC to Betac, including transfer of a BTC property
to Betac, in chief without any apparent consciousness that there could be
any discredit cast on him in seeking to deceive creditors in this way.
115The area of his affidavit in the NAB recovery proceeding that he now says
was false is entirely diferent. That topic is whether or not The Boulevard
was to be available to the NAB by way of security for the joint venture. In
the affidavit he said, as did his wife in hers, that the arrangement with the
bank was that The Boulevard was not to be so available. He now says
that he knew at the time he swore that affidavit that that was not true. 140
Mr Kambouris and his wife swore falsely in this regard to support what he
knew at the time was a weak defence by her to the recovery proceeding,
in order, on his account, to obtain time to negotiate with the bank.

139 His evidence in this regard is the subject of certificate pursuant to s 128 of the Evidence Act
2008 (Vic).
140 T 576.3-7.

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116I also rely on what was revealed of the conduct of Mr Kambouris, and that
of his wife, in a proceeding they instituted against the plaintifs mother in
1997. In that proceeding, Mr and Mrs Kambouris contended that a
mortgage that they had given to the plaintifs mother over the Gove St
units was a sham to deter creditors of their building business from
pursuing that property. It would appear that the plaintifs mother did not
agree with this account, as the matter came before this Court on an
application to remove a caveat lodged by the plaintifs mother, and,
according to that judgment, before the County Court on the merits. 141 The
judgment in the caveat removal does not make findings as to the
genuineness, or otherwise, of the mortgage. Accordingly, the relevant
conduct for the purpose of this proceeding is not whether or not the
mortgage was in fact a sham, but the preparedness of Mr Kambouris, and
his wife, to assert that it was.
117The common theme in each of these incidents is that Mr Kambouris has
been in the past prepared to tailor his actions or account of events, even
on oath, to suit his purpose. On all these occasions that purpose has been
to preserve his or his wifes assets, or the assets of his businesses.
Recovering for the loss of those assets is of course also the intent of this
proceeding. Mr Kambouris denied that he was similarly tailoring his
evidence in this trial to suit that purpose. However, having regard to his
past approach to the truth in relation to protection of assets, I do not
consider that I should accept Mr Kambouris evidence as to what he and
his wife would have done, had he known at the relevant times that there
was no Papakostas mortgage, unless that evidence is consistent with, or
supported by, other evidence.
There is no objective or independent
evidence to support his evidence as to what they would have done, and
his evidence on the point is not, in my view, consistent with his actions in
relation to BTC and Betac at the time. I consider the question as to what
he would have done, and asked his wife to do, is better judged by his past
conduct, rather than by his present evidence.
118I turn now to the plaintif. Should her evidence as to what she would have
done had she been correctly advised be accepted as truthful?

141 Kambouris and Kambouris v Marcopoulos and anor unreported judgment of Coldrey J 14
March 1997 in No 4535 of 1997.

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119The plaintifs credit is similarly undermined by her concession in this trial


that she gave false evidence on oath in her affidavit resisting summary
judgment in the NAB proceeding to recover The Boulevard. 142 The plaintif
says that she gave false evidence in that affidavit to the efect that her
husband and the bank had agreed that The Boulevard was not to be
available to the NAB as security for her husbands businesses and that she
believed that that was the case. This contention formed part of her
defence to the recovery application. She now says that she gave that
false evidence on legal advice. I reject that explanation. She was unable
to produce any documentary or other evidence to support the
explanation. This is not surprising given that it is patently unlikely that a
solicitor would advise his client to swear a false affidavit. The more likely
explanation is that this is the account of events given by her and her
husband to their solicitor, who then advised that it may constitute a
defence.
I also take into account in assessing the truthfulness of the plaintifs
evidence in this trial that, on their own case in the proceeding she and her
husband took against her mother, she has been prepared to engage in a
sham transaction in the past to protect her properties.

120

It follows that, as in the case of her husband, the plaintif has


demonstrated a willingness to give false evidence on oath, and possibly
also engage in a sham transaction, in an endeavour to protect her assets.
I do not accept the submission put on her behalf that her earlier untruths
on oath are irrelevant or that their significance is militated against by her
volunteering them in this trial.143 Given this past conduct, should the
plaintif now be believed when her evidence in this trial is also directed to
recovering for the loss of those assets?

121

I have concluded that in some respects the plaintifs evidence as to


what she would have done, had she been correctly advised, should be
accepted, notwithstanding that that evidence is self-serving and in
hindsight. I make a distinction between her and her husband in this
regard. The evidence I accept is that, had the plaintif been told that
there was no Papakostas mortgage in October 2006 she would not have
agreed at that time to the refinance; had she been told in November 2006
she would not at that time have signed the first Betac guarantee; and had
she been told in May 2007 she would not at that time have signed the
third Betac guarantee. I accept the plaintifs evidence that had she been
given the correct information at any of those times, she would have
sought advice other than from Mr Kiatos. I do so for two reasons.

122

142 As with Mr Kambouris, the evidence she gave to that efect is protected by the issue of a
certificate pursuant to s 128 of the Evidence Act 2008 (Vic).
143 T 870.9-24.

43

T0174

First, having regard to the manner and content of her evidence, I


accept that the plaintif was, and is, greatly distressed by the loss of her
properties. Distress after the event of loss is not necessarily a reliable
indicator of an equal degree of concern and action to prevent that loss
before the event, but I accept that she was concerned in general terms at
the time to protect her properties. Her own evidence is to this efect, it is
inherently probable, and the fact that Mr Kambouris asked Mr Kiatos to
reassure her in this regard when the restructure from BTC to Betac was
proposed also supports this conclusion. On that occasion, it was not seen
as sufficient for he alone to reassure her.

123

As I will discuss further, however, I do not accept her assertions that


she sought assurance that she was protected on every occasion she
entered into a new transaction. I consider she has only proved three
occasions on which she sought and obtained assurance from Mr Kiatos,
and that on most occasions she was prepared to sign further guarantees
that exposed her properties to risk on the basis of her husbands request
alone. If she sought assurance, it was generally from him only. To this
extent I accept the second defendants submission that the plaintifs
evidence now as to her degree of concern is influenced by hindsight and
inflates the importance to her at the time of the security to be provided by
Ms Papakostas.144

124

The second reason for my acceptance of the plaintifs evidence that


she would have sought advice, is that it is inherently probable that a
guarantor concerned about her exposure who is told that the security she
believed to be in place, was not in fact in place, would take time to
consider her position.

125

Further, the plaintifs evidence does not exclude the possibility that
after taking advice, she may nevertheless have proceeded. She is less
adamant and specific than her husband as to what they would have done,
had they known that the Papakostas mortgage had not been given. This
also makes her evidence on this point more plausible than his. She says,
and plausibly, that she would have had to consider what should be done
on the basis of further advice.

126

Having regard to the whole context and surrounding circumstances,


I do not accept that the plaintif would not have signed the guarantees at
a later point in time, after taking advice and considering her position. I
consider that in all probability the plaintif would have proceeded with the
refinance and subsequent guarantees, after taking advice. I reach this
conclusion having regard three matters- the plaintifs demonstrated
conduct in relation to the giving of guarantees; the external factors at the
time of the restructure and further borrowings, including her husbands
powerful desire to continue the business; and her habitual reliance on him
and preparedness to do what he asked.

127

144 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [46].
44

T0174

Before elaborating on these matters, I note one further submission


put by the plaintif in relation to acceptance of her evidence and that of Mr
Kambouris. That is that their evidence should be accepted, unless clearly
wrong, because Mr Kiatos gave no evidence in opposition to it, or at all. 145
In usual circumstances, the fact that their evidence was unopposed would
be a powerful factor in favour of acceptance of it. However, they have
both admitted giving false evidence on oath on earlier occasions and that
cannot be ignored. It must raise a doubt as to whether their current
evidence on oath is truthful, particularly where their current evidence
directly contradicts their earlier evidence (as it does in Mr Kambouris
evidence on whether or not Betac was a continuation of the joint venture).
Further, this trial is not concerned with whether or not Mr Kiatos was
negligent. On that point his evidence would have been crucial, if he
denied the allegations. This trial is concerned with what the plaintif and
her husband would have done had Mr Kiatos not been negligent, and the
quantum of the plaintifs loss, and it is not clear that Mr Kiatos could have
given any relevant evidence on those points.

128

Conduct in relation to guarantees


The plaintif gave five guarantees for BTC liabilities in the period
April 2005 to May 2006.146 Those guarantees were in increasing amounts
from $684,000 to $947,000. The first issue I consider is whether she had
obtained any assurance from Mr Kiatos prior to entering into the first of
these guarantees, in April 2005.

129

The plaintif gave evidence before Judd J that she first met Mr Kiatos
in 2005, at which time he promised to obtain security for her from Mr
Floros and Ms Papakostas. Her evidence was that her husband had asked
her to provide security over the Gove St units and The Boulevard, I was a
bit concerned about it and so she and her husband went to Mr Kiatos
office, and he explained to me how he would handle it so that I would be
protected. She said that Mr Kiatos said that there would be mortgages
given to me by Mr Floros and a Miss Papacostas (sic), so in the event of
something going wrong I wouldnt loseI wouldnt be disadvantaged by
putting my properties forward for the business venture, coz that was my
concern.147

130

The plaintif did not specify in her evidence before Judd J when in
2005 that conversation took place, and Judd J made no finding in that
regard. The implication from the evidence, however, is that the discussion
occurred before she had given any security by way of guarantee for the
joint venture. The plaintifs evidence in this trial is also that she first
learnt of security to be provided by Mr Floros and Ms Papakostas when she
first started signing indemnities, i.e. presumably before she signed the
first BTC guarantee.148

131

145 T 844.4-17.
146 This is set out in detail in the Facts portion of this judgment.
147 Exhibit S at T 128.22-T 129.10.
148 T 692.6-12, T 699.3.
45

T0174

If the thrust of her evidence before Judd J and in this trial is that Mr
Kiatos promised security from Mr Floros and Ms Papakostas before the first
BTC guarantee, then it is inconsistent with the evidence of Mr Kambouris
on that point. The evidence of Mr Kambouris has consistently been that
the first discussion about security being provided to the plaintif by Mr
Floros and Ms Papakostas occurred no earlier than May 2005 i.e. after the
plaintif had already given the first BTC guarantee in April 2005.

132

Mr Kambouris gave evidence about the first discussion in relation to


security to be provided by Mr Floros in an affidavit sworn by him on 15
May 2008 in this proceeding, in support of Betacs application to remove
caveats lodged by Mr Floros over Betac properties. 149 He said in that
affidavit that this discussion about security between him and Mr Floros
occurred in late June 2005.150 In this trial, he confirmed that his evidence
to that efect in that affidavit was correct, although other aspects of the
evidence he gave in the affidavit were not. 151 In the pleading that came
before Judd J and was also relied upon in this trial, it is pleaded that the
agreement relating to security from Ms Papakostas (the parallel
agreement to that signed by Mr Floros) was proposed in early July 2005. 152
In his evidence before Judd J, however, Mr Kambouris said that the
conversation with Mr Kiatos about security from Ms Papakostas took place
earlier, in May 2005.153 In this trial, by contrast, he agreed with the
proposition that the conversations about security to be provided by
Mr Floros and Ms Papakostas occurred in the period June-July 2005. 154 In
fairness to him, he was not taken to the evidence as to the date that he
had given before Judd J before being asked this question, but to an earlier
portion of his evidence. Accordingly, he did not have the opportunity to
explain that discrepancy.

133

Contemporaneous documents support the evidence Mr Kambouris


gave in this trial in relation to the timing of the discussions about security.
The agreement signed by Mr Floros is dated 4 July 2005. 155 The draft
agreement to be signed by Ms Papakostas, which Mr Kambouris says he
sighted and approved156 was sent by Mr Kambouris to Mr Kiatos by email
dated 5 July 2005.157 Accordingly, I find it more likely that the draft
agreement with Ms Papakostas was proposed in the period June-July 2005,
than in May as Mr Kambouris said before Judd J.

134

149 Exhibit 37
150 Ibid, at [11].
151 See, for example, his evidence in cross examination at T 489.8-14.
152 20 March 2013 Third FASOC at [39].
153 Exhibit S at T 25.17.
154 T 499.24-30.
155 Exhibit H.
156 T 541.10-19.
157 T 541.28-T 542.3 and Exhibit 19.
46

T0174

Even if proposed in May, however, on Mr Kambouris consistent


evidence since 2008 the question of security from Ms Papakostas was not
raised until after the plaintif had already given the first BTC guarantee,
which was in April 2005. Mr Kambouris agreed that this was the case in
cross-examination.158 I consider Mr Kambouris evidence on this point to
be more likely correct than that of the plaintif for the following reasons.

135

First, Mr Kambouris first account of this timing, at least the first


account in evidence, is far more proximate in time to the events than the
evidence given by the plaintif in this trial. That in itself makes it more
likely to be an accurate recollection. Secondly, the plaintifs evidence
was very general, and given in hindsight, without reference to any specific
conversation with Mr Kiatos except the telephone conversation, found by
Judd J to have occurred in October 2006. Further, the plaintifs evidence
in this trial does not sit entirely conformably with her evidence before Judd
J. She said in her evidence in chief in this trial that she first heard about
the afairs of BTC in 2006, 159 although it is plain that she had signed BTC
guarantees in 2005, and gave evidence before Judd J that her meeting
with Mr Kiatos was in 2005. It was only on being shown the guarantee
that she signed on 20 April 2005 that she qualified her earlier answer by
saying that that was when they originally asked me.160 She then said that
in 2006 she was asked to give a guarantee on changing over company
names161 and referred to a telephone conversation with Mr Kiatos in which
he said that I would be protected by mortgages on Mr Floros and Ms
Papacostas (sic) properties162 (emphasis added). Her evidence implies
that this was the first occasion on which Mr Kiatos had said this, or, at
least, that the agreements to provide the security had not yet been
prepared, yet her evidence before Judd J was that Mr Kiatos promised her
this security in 2005, and the agreements were prepared and, in the case
of Mr Floros, signed in 2005. Before Judd J her evidence was that what
occurred in 2006 was reassurance by Mr Kiatos, not the original promise
by him.

136

158 T 500.1-4.
159 T 634.22.
160 T 635.13-16.
161 T 635.
162 T 63622-24.
47

T0174

The plaintif also had a very poor recollection of the guarantees that
she had signed. When first asked about the BTC guarantees in cross
examination she could not recall how many she had signed. She said
there may have been two or three guarantees for BTC liabilities. 163 In fact,
there were five. The plaintif asserted that she signed the April 2005
guarantee on the condition that I was having security, 164 but could not
recall if it was the first occasion on which she guaranteed BTC liabilities. 165
She could not recall why she was asked to sign two BTC guarantees only a
short time apart in October 2005. 166 The plaintif was taken to the third
Betac guarantee, that she signed in May 2007, in chief, but when first
asked about other Betac guarantees that she signed in 2007 in cross
examination, she did not appear to have an independent recollection of
them.167

137

Finally, is also apparent from the whole of the plaintifs evidence


that she had little knowledge of the day to day afairs of BTC or Betac.
She conceded as much. By contrast, her husband gave detailed evidence
both before Judd J and in this trial, and had also done so in the affidavit
sworn 15 May 2008 in this proceeding, in respect of the financial position
of BTC and thereafter Betac. It is more likely that he, rather than the
plaintif, would have an accurate recollection of the timing of events
relating to that financial position.

138

The plaintif specifically disagreed with the proposition that she


signed the first BTC guarantee in April 2005 before she had received any
assurance of security to be provided to her from Mr Floros and Ms
Papakostas168, but I find that she did.

139

The next issue is the degree of assurance about security that the
plaintif sought before signing the second BTC guarantee, on 19 June
2005. In her evidence before Judd J the plaintif said that she signed a
document as a result of her meeting with Mr Kiatos in 2005 at his office. 169
That document was identified earlier in the transcript as being the
agreement with Mr Floros,170 who was also, on the plaintifs evidence
before Judd J, at that meeting with Mr Kiatos. That agreement is dated
4 July 2005, which suggests that the meeting with Mr Kiatos must have
taken place either on or before that date. If it took place before 4 July
2005, it is possible that the plaintif signed the second BTC guarantee (on
19 June 2005) after the meeting i.e. only after being given assurance of
security. Even if so, she was apparently prepared to sign this guarantee
without execution of the agreement by Mr Floros. If the meeting took
place on 4 July 2005, she was prepared to sign the three further BTC
guarantees (in October 2005 and May 2006) without ever sighting a
signed like agreement in relation to Ms Papakostas.

140

163 T 663.5-16.
164 T 688.11-12.
165 T 688.24-28.
166 T 690.26-29.
167 T 696.29-31.
168 T 693.6-11.
169 Exhibit S, p 129.13-20.
170 Exhibit S, p 79.24-25.
48

T0174

There is no evidence as to the particular circumstances in which


these further three BTC guarantees were signed by the plaintif. She did
not independently recall them. This alone suggests that she did not
consider the request to sign them as worthy of note. Whatever the
circumstances leading to the guarantees, the mere fact of their execution
demonstrates a preparedness by the plaintif to continue to guarantee
increasing joint venture liabilities.

141

The plaintif asserts that every time she signed a guarantee (except
those with no significant increase in exposure) I would have asked to be
reassured that the position I was put into in the first place still existed. 171
I do not accept this evidence for the following reasons. First, her language
only assumes, in hindsight, that she would have done so- it does not give
an account, on the basis of recall, that she actually did so, let alone a
detailed account. Next, the only occasions on which the plaintif sought
assurance from Mr Kiatos about which she has given specific evidence,
either before Judd J or in this trial, are the meeting in 2005; a question she
put to him at some time she could not recall as to when she would get her
properties back; the telephone conversation in October 2006; 172 and on
her execution of the first and third Betac guarantees, in November 2006
and May 2007 respectively, when Mr Kiatos signed solicitors certificates
that he had explained the guarantees to her.173 Judd J made findings in
relation to the October and November 2006, and May 2007 occasions, and
recited the 2005 meeting in his recital of the facts. Those occasions are
proved. The plaintifs evidence that there was another occasion on which
she asked Mr Kiatos when she would get her properties back was not
disputed, and so I find that proved as well. In the absence of specific
evidence of any other occasion on which the plaintif sought assurance
from Mr Kiatos, I find that these occasions are the only occasions on which
she did so.

142

The three proved dated occasions on which she sought reassurance


from Mr Kiatos after 2005 were in relation to refinancing through Betac, or
further borrowing by Betac, not in relation to further BTC guarantees. It
follows that the plaintif signed the BTC guarantees after her conversation
with Mr Kiatos in 2005 and execution of the Floros agreement without
seeking further assurance from him.

143

Her past preparedness to sign guarantees for joint venture liabilities


is further demonstrated by her evidence that at the time she signed the
first BTC guarantee in April 2005 she thought the indebtedness she was
guaranteeing was already the amount of the guarantee, $684,000, when
in fact the joint venture actual liabilities at that time were in the order of
$460,000.174 In other words, she was prepared to sign a guarantee for
liabilities for more than $200,000 greater than the actual current liability.

144

171 T 699.15-16.
172 She gave evidence about this before Judd J. and in this trial at T 717.11-25.
173 Exhibit S, p 130-T 132.
174 Evidence in chief of Mr Kambouris at T 487 and Exhibits 11 and 12; cross examination of the
plaintif at T 686.31- T 687.11.

49

T0174

The plaintifs conduct shows that, notwithstanding her stated, and I


have found genuine, concern that her properties be protected, she was
prepared to put those properties at increasing risk. Initially she was
prepared to do so without other security, and subsequently she was
prepared to do so without reassurance of security from Mr Kiatos, and
without knowing much of the circumstances.

145

This preparedness to put her properties at risk was also


demonstrated after it became apparent that there was no Papakostas
mortgage as promised. As set out earlier, I find that Mr Kambouris knew
this by August 2007. Nevertheless, he, together with the plaintif and
their son signed the fourth Betac guarantee in September 2007. I am
unable to determine on the evidence whether or not the plaintif knew
when she signed that guarantee that there was no Papakostas mortgage.
Mr Kiatos had promised Mr Kambouris to fix it and so it is possible that
Mr Kambouris did not at this stage tell his wife the true situation. The
plaintif could not recall in her own evidence when she first knew that
there was no Papakostas mortgage. She knew that there were problems
with the bank meaning that the company was in trouble and theyd put
my properties at grave risk by late 2007.175 I infer that the plaintif knew
at least by late 2007, if not earlier, that there was no Papakostas
mortgage. Nevertheless, in February 2008 the plaintif signed the fifth
and final Betac guarantee. This guarantee was in the sum of $1,677,517.
This was the same amount as the September 2007 fourth Betac
guarantee, but, significantly, the amount guaranteed was $400,000 more
than the guaranteed amount in the third Betac guarantee. That was the
last proved occasion on which Mr Kiatos had reassured her that she had
security from Ms Papakostas. In other words, the plaintif was prepared to
sign a guarantee for $400,000 more than her existing liability, even
though she knew by this stage that she did not have security from Ms
Papakostas, and had been required to commence proceedings against Mr
Floros to recover on the security he had provided.

146

The fifth Betac guarantee of February 2008 guarantee was the


guarantee on which the NAB later sued for possession. In her affidavit
opposing summary judgment in the subsequent NAB recovery proceeding
in respect of The Boulevard, the plaintif swore that she signed this
guarantee at the request of her husband. She said that when she had
asked her husband what the guarantee was for, he said dont worry about
it, just sign the document. You know the company has property and can
pay the borrowings. She deposed that I did not think much of it at that
time, and that she signed the guarantee without reading it, and without
being given an explanation of its contents by the bank manager. 176 Both
the plaintif and her husband agreed in this trial that that account of the
circumstances in which she signed the February 2008 guarantee, knowing
by that stage that there was no Papakostas mortgage, was correct.177

147

175 Evidence in chief at T 646.7, 20-21.


176 Exhibit 30 at [10].
177 T 707.10-T 708.23.
50

T0174

In summary, I find that the plaintif was prepared to sign multiple


guarantees for BTC and Betac between April 2005 and September 2007,
that she cannot now recall with any precision, and was prepared to do so
without accurate knowledge of the financial circumstances leading to the
request for the guarantee, or even her actual current exposure. Further,
she was prepared to sign a further guarantee, for an increased exposure,
in February 2008 even after she knew that there was no Papakostas
mortgage, and that her security from Mr Floros was not being willingly
provided. She did so on that occasion because her husband asked her to.

148

Acting as her husband requested


In my view, the evidence establishes that the approach both Mr
Kambouris and the plaintif agree she took in relation to the February
2008 guarantee was their habitual pattern. I reach this conclusion for the
following reasons.

149

In addition to her account in her affidavit in the summary judgment


application about her signing of the February 2008 guarantee, the plaintif
also gave evidence in that affidavit of the general practice. She said that
at all times it was her husband who dealt with the NAB in relation to
business afairs and in relation to any borrowings. She deposed that she
was not kept informed in relation to the borrowings by either her husband
or the bank and that he always collected the mail. She said that:

150

I would from time to time be told by my husband to go there or here


in relation to execution of documents for the Bank (the NAB) and
shown where to sign when the need arose. When I did query my
husband from time to time about what the documents I was signing
was for, he would say to me not to worry about it, it is a business
document or when I asked him what was the borrowing for this
time, he would say words to the efect of dont worry about it, the
company has sufficient security to pay out the liabilities. 178

178 Exhibit 30, being affidavit of the plaintif sworn 15 November 2010 in S CI 2010 00224 at
[4].

51

T0174

In cross examination in this trial both the plaintif and her husband
were asked if this paragraph correctly described the approach they took to
the signature of all documents for the NAB i.e. not just the February 2008
guarantee. Mr Kambouris agreed it was correct, although he added that
he would also tell her what the deal was and why he was hoping to
proceed.179

151

The plaintif agreed that the approach there described was correct,
but disagreed with the proposition that that was the approach she and her
husband took to each and every document she signed in connection with
her husbands business. She added that the description was, however,
correct as far as the NAB proceedings were concerned. 180 It is not
entirely clear what the plaintif meant by this qualifier. Whatever the
reason for, or meaning of, the qualification, I do not consider that it
outweighs the other evidence tending to the conclusion that the plaintif
habitually signed business documents at her husbands request.181

152

In addition to her husbands evidence to this efect, the plaintif said


that it was her husband who had knowledge of the day to day afairs of
the business, the implication being that she did not. 182 The thrust of
Mr Kambouris evidence is that he kept his wife informed in a general way.
For example, he said in his evidence that he would have told his wife
about the then current liabilities of BTC at the time of the restructure as a
matter of practice. He said they had regular discussions about the need
for extra funds, and that he told her about the dispute with the unions in
2005/2006 in discussions over the dinner table. 183 When this evidence
was put to Mrs Kambouris, she could not remember any such discussions
and tersely noted that I mean men talk about their business. It doesnt
necessarily mean that I would follow.184 In other words, even on the basis
of what Mr Kambouris told her she had little knowledge of or
understanding of the business, and perhaps did not see it as her concern.
She could not then have signed business documents on the basis of her
own knowledge and appreciation of the circumstances. I conclude that it
was her habit to do so on the basis of her husbands request.

153

179 T 576.24-T 577.24.


180 T 673.5-20; T 673.22-26; T 674.8-9.
181 I reach this conclusion on the evidence, but it may be that counsel for the plaintif in fact
conceded it in closing submissions- T 869-T 870.
182 T 710.2-4.
183 T 550.29- T 551.26.
184 T 693.12-22.

52

T0174

It is plain from the whole of his evidence that Mr Kambouris tended


to take an optimistic view of the benefits of further borrowings, and did
not tell his wife all the financial details, or facts that could have been
considered negative. For example, at the time of the restructuring from
BTC to Betac, and the associated November 2006 guarantee, he knew
that BTC had outstanding debts that it could not pay, but he said in crossexamination that he did not tell his wife this in any detail. He merely told
her that we needed toget a bit of cash flow going so we can pay the
bills and continue our business and make money. 185 This is consistent
with the evidence of the plaintif that she was not aware that BTC was in
financial trouble at that time, other than needing some cash flow.186

154

Similarly, Mr Kambouris agreed that he knew that without that cash


flow, BTC would have to be closed and that the bank could then call on
the securities it had, including his wifes properties. He did not, however,
tell his wife that in that negative wayjust because, as I said, I honestly
believed that we can trade out of trouble. He believed that the joint
venturers had a plan, which was to transfer contracts to Betac and Betac
taking out additional lines of credit to spare up some cash flow. 187 As I will
shortly discuss, he demonstrated a similar view that he could trade out of
their difficulties in late 2007/2008, even when he knew there was no
Papakostas mortgage.

155

I find that it was the habitual practice of the plaintif to give further
guarantees when requested to do so by Mr Kambouris, although on
occasion she would seek reassurance as to her position. In October 2006
she sought reassurance from Mr Kiatos, and he also provided that
reassurance by the certificates he gave in November 2006 and May 2007.
In February 2008, the plaintif sought reassurance from Mr Kambouris, and
she may have done so on other occasions as well. Mr Kambouris gave
that reassurance in February 2008 (as set out in her affidavit in the
recovery proceedings), and I find would have done so on other occasions
on which it was sought, because he believed throughout that extending
their exposure was the best way to proceed, with a view to trading out of
their difficulties.

156

Accordingly, if Mr Kambouris had asked her to proceed, he knowing


that there was no Papakostas mortgage, she would have done so. They
both agree that this is precisely what occurred in February 2008 (when
they both knew that there was no Papakostas mortgage). I infer that it is
also what occurred in September 2007 (when Mr Kambouris at least was
aware of the true situation).

157

Reasons to proceed with the restructure

185 T 554.21-27.
186 T 694.13-17.
187 T 555.8-22.
53

T0174

In this section, I conclude that the plaintif and Mr Kambouris would


have taken the same approach at the critical earlier times, in October or
November 2006, and in May 2007, had they known at those times that
there was no Papakostas mortgage, that they in fact took in September
2007 and February 2008. In other words, had Mr Kiatos correctly advised
the plaintif at any of those times, I find that Mr Kambouris would still have
wished to proceed, would have asked the plaintif to do so, and she would
ultimately have done so, even if she took other advice first. I reach this
conclusion because of the combination of the objective circumstances in
favour of proceeding, and what I find would have been Mr Kambouris
desire to do so. On the basis of his demonstrated approach to risk taking
and his consistent belief that he would be able to trade out of their
difficulties, I consider that he would have strongly urged proceeding in
each instance, rather than accepting the loss of the business.

158

I first consider the objective circumstances that prevailed at the


time of the refinance in October/November 2006 and the further
borrowings in May 2007.

159

Had the plaintif been told the truth in October or November 2006
and taken independent legal and/or financial advice at that time, that
advice would no doubt have identified for her that she was already
considerably exposed, by virtue of her existing exposure and the
indebtedness of BTC.
As set out earlier, the plaintif had signed
guarantees for joint venture liabilities since April 2005. In May 2006 she
had signed the fifth BTC guarantee with a limit of $947,000. 188 This was in
addition to her existing exposure in respect of Kambouris Nominees. By
early October 2006 her actual exposure was approximately $624,000 in
respect of the BTC facilities189 and approximately $200,000 in respect of
Kambouris Nominees.190 By the time of the restructure, on 22 November
2006, her exposure in respect of the combined liabilities was in the range
$843,489-$850,000.191

160

188 Exhibit 17.


189 Exhibit 20 and Exhibit 21 as at 6 October 2006. A figure of $640,000 was put to Mr
Kambouris in cross examination, with which he agreed T 522.3-5.
190 Exhibit 8.
191 The first figure is given by the second defendants accountant, Mr Meredith, in Exhibit 42 at
page 4. The second figure is as calculated by the plaintifs accountant, Mr Jones, in Exhibit BB
at [3.1(a)]. , The BTC indebtedness reduced shortly thereafter due to receipt of the proceeds of
sale of one of the joint venture properties, Alfred Grove.

54

T0174

By 2006 the BTC liabilities were secured by the plaintifs properties


and three properties owned by BTC or Betac. 192 The uncontradicted
evidence from her husband is that BTC was in financial difficulties from
the end of 2005.193 As noted, his evidence in cross examination was that
by May 2006 the financial difficulties were so serious that the joint
venturers began to transfer existing building contracts from BTC to
Betac.194 They also agreed to transfer properties owned by BTC to Betac
to keep them away from a liquidator of BTC. 195 The property at 2/650
Warrigal Road was transferred from BTC to Betac by transfer dated 2
December 2005, which was not registered until 9 March 2007, the same
date on which a mortgage to the NAB was registered. 196 In his affidavit
sworn 15 May 2008 Mr Kambouris said the transfer took place in late
November or early December 2005, i.e. conformably with the date on the
transfer.197 In his evidence in this trial Mr Kambouris said that he actually
signed the transfer at a later point in time, 198 in other words it was
backdated.

161

Applications were made to wind up BTC in May and October 2006.


Mr Kambouris said he could not recall the winding up applications, or any
statutory demands as opposed to outstanding bills, 199 but a search of the
company record would have revealed them to external advisers. BTC
eventually went into liquidation in November 2006. In short, BTC was in
serious financial difficulty at the time of the refinancing, and in the
absence of the refinancing, to facilitate which the plaintif entered into
the first Betac guarantee, would likely have gone into liquidation. This
would have triggered a demand on its guarantors, and, in respect of the
plaintif, a demand in respect of the Kambouris Nominees liabilities as
well. I find that it is more probable than not that the plaintif would have
been told by independent advisors that the bank may move on her
properties in any event, given the existing indebtedness of BTC and
Kambouris Nominees, if she did not agree to the refinance for which the
first Betac guarantee was required.

162

The plaintifs case, as most completely articulated in the evidence


of Mr Kambouris, is that a demand from the NAB could have been met by
sale of the properties owned by BTC and Betac and refinance of her
remaining indebtedness, rather than by forced sale of her own properties.
As set out earlier, I accept the submission of the second defendant that
the plaintif must show that this outcome was not just possible, but that it
would have occurred, and would have prevented the sale of her own
properties.

163

192 T 308.11-16.
193 T 505.30-32.
194 T 508.21-30.
195 In chief T 329.28-30; in cross examination T 507.
196 Title search contained within Exhibit 44.
197 Exhibit 37 at [16].
198 Exhibit 18 and T 518.23- T 519.24.
199 T 552.31- T 553.22.
55

T0174

BTC and Betac owned three properties prior to the refinance- a


property at 2/650 Warrigal Road, Oakleigh South; a property owned by
Betac at 38 Goodlett Avenue, Loch Sport and a property owned by BTC at
19 Alfred Grove, Oakleigh East. Alfred Grove, which was vacant land, was
in fact sold in 2006, and the whole of the sale proceeds were applied to
the BTC liability on 30 November 2006. The evidence of Mr Kambouris is
that the whole of the sale proceeds of $160,000 were required for a bank
guarantee that had been called upon, and so efect could not be given to
an earlier agreement he had reached with Mr Kiatos and Mr Floros that
$60,000 from the proceeds would be paid to his son Jonathan in lieu of
wages, and $100,000 to the plaintif in lieu of Mr Kambouris wages.200

164

The other two properties were not externally sold at this time. The
plaintifs counterfactual assumes that they would have been, and would
have sufficiently reduced her liability to the NAB to avoid sale of her own
properties. The second defendant obtained retrospective descriptions and
valuations of these properties as at December 2006 from Sutherland
Farrelly, on the assumption of sale at that time. There was no cross
examination on that evidence, and no competing evidence in the
plaintifs case, and accordingly I accept the evidence of Mr Stuart Norman
of Sutherland Farrelly.201

165

That evidence is that 2/650 Warrigal Road is the rear of a dual


occupancy, efectively being the rear yard of an original weatherboard
dwelling. Mr Norman assumed that at December 2006 it was vacant land,
because it was at the date of his retrospective valuation ( 23 April 2014)
under development.202 He values the site at that time on that basis in the
range $130,000-$150,000. Mr Kambouris evidence is BTC or Betac had
commenced developing the site, had brought construction up to framing
and bricking and had a buyer. After Betac went into liquidation the NAB
sold the property, but as the construction had been exposed to the
weather it had to be demolished.203 As it is not clear from Mr Kambouris
evidence what the state of the land was at December 2006, and what the
likely sale price was, if developed at that time, I prefer the evidence of Mr
Norman on value at that time.

166

Goodlett Avenue was also vacant land as at the date of its


retrospective valuation (20 April 2014) and is assumed to have been so at
December 2006. Sutherland Farrelly value it in the range $150,000$175,000 as at December 2006.

167

200 T 346. 17-T 347.21.


201 Exhibit 40.
202 Ibid, at p8.
203 T 327.27-28; T 331. 9-28.
56

T0174

Although the onus is on the plaintif to show that sale of these two
properties would have so reduced the plaintifs remaining indebtedness,
after application of the sale proceeds from Alfred Grove, that she could
have refinanced the balance, she has not given any evidence herself to
support that proposition, or adduced detailed evidence from Mr Kambouris
to that efect, or obtained any expert evidence to support the proposition.
The only evidence to support it in the plaintifs case is the evidence of Mr
Kambouris that the NAB would have recovered in the order of $450,000 or
$500,000 and that there was sufficient equity in his wifes properties to
renegotiate the remaining indebtedness, and allow time to pursue Mr
Floros. 204

168

The second defendant did obtain expert evidence to test the


contention, from Mr Meredith of Ferrier Hodgson, which was admitted
without cross examination. Accordingly, I accept that evidence. Where it
difers from that of Mr Kambouris, I prefer the evidence of Mr Meredith in
view of his expertise and his detailed examination of the question.

169

Mr Meredith was asked to assume the forced sale, i.e. at the


instance of the NAB, of 2/650 Warrigal Road and Goodlett Avenue, in
about December 2006 or January 2007, and to calculate the plaintifs
remaining BTC indebtedness after application of the net sale proceeds.
He initially did not take into account the $160,000 applied from the sale of
Alfred Grove, as he was unaware of its provenance, 205 but on instructions
corrected his conclusions to take it into account.
His corrected
conclusions are as follows. The total amount that would have been owed
by BTC to the NAB as at 30 November 2006 (i.e. after sale of Alfred Grove,
but before sale of 2/650 Warrigal Road and Goodlett Avenue) would have
been $490,282.206 On this sum, interest would continue to run until the
likely settlement date of 1 March 2007 leading to an outstanding debt of
$500,206 as at 1 March 2007.207 He assumes a sale price in the mid-point
of the value range ascribed to the properties by Mr Norman as at
December 2006208 and calculates the net sale proceeds from the sale of
both 2/650 Warrigal Road and Goodlett Avenue as being $273,672. 209 This
is substantially less than the assertion by Mr Kambouris that the sale
proceeds would have been in the order of $450-$500,000. As noted
above, I consider Mr Merediths evidence to be more reliable and prefer it.
Applying the sale proceeds to the loan balances as at 1 March 2007, the
residual indebtedness of the plaintif to the NAB arising from BTC liabilities
would have been $226,534.210

170

204 In re-examination, T 617.2-11.


205 Exhibit 42 at [64]-[65].
206 Exhibit 43 at [7].
207 Ibid, at [9].
208 Exhibit 42 at [80].
209 Ibid, at [79]-[86].
210 Exhibit 43 at [10].
57

T0174

The plaintif had also guaranteed the Kambouris Nominees debt to


the NAB. Mr Merediths evidence, which I accept, is that this debt was
$199,720 as at 22 November 2006.211 Assuming this debt to have been
remained in the order of $199,000 212 to March 2007 the plaintifs
combined remaining indebtedness as at March 2007 would have been in
the order of $425,000.213

171

Mr Norman of Sutherland Farrelly also retrospectively valued the


plaintifs properties, giving a range for each property. He values Unit 1/70
Gove St in the range $320,000-$340,000; Unit 2/70 Gove St in the range
$250,000-$270,000, and The Boulevard in the range $220,000-$240,000
all as at December 2006. 214 His report was admitted without cross
examination, and there was no competing evidence in the plaintifs case
as to valuation at this time. Accordingly, I accept his evidence. Assuming
a mid-point value for each property, as at December 2006 their combined
value was $820,000. Assuming this to remain their combined value as at
1 March 2007, the plaintif would have had a liability in the order of
$425,000 against security valued in the order of $820,000.

172

The bald comparison of these figures does suggest that, as the


plaintif contends, it may have been possible for the plaintif to refinance
to avoid the forced sale of any of her properties. In addition to her equity
in those properties, she also had the benefit of the security provided by Mr
Floros. However, this proposition assumes that the NAB would have been
content to sell the other properties first and to allow the plaintif to
refinance. As the second defendant correctly submits, 215 there is no
obligation on a secured lender to exercise its rights against security
property in any particular order, or to leave the borrowers home to last.
Further, the plaintif has called no evidence from the NAB or any banker as
to the likely preparedness of the NAB or other bank to do so at this time.
It is important in my view to note that 2/650 Warrigal Road and Goodlett
Avenue were both vacant land. They were also each individually worth
less than any of the plaintifs properties, including The Boulevard which
was also vacant land in December 2006. 216 By contrast, the Gove St units
were developed residential properties in suburban Melbourne. The sale of
just one of those properties, the plaintifs home at Unit 1/70 Gove St,
would have achieved the same amount on Mr Normans figures, as the
sale of both 2/650 Warrigal Road, and Goodlett Avenue together, with the
cost and inconvenience of only one sale, rather than two.

173

211 Exhibit 42 at[53].


212 Exhibit 8 shows the debt in the range $201,596- $198,308 in the period 24 August 2006 to
31 January 2007.
213 The Kambouris Nominees debt as at December 2008 was slightly less, in the order of
$190,000- T 563.27-28.
214 Exhibit 40.
215 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [60].
216 Exhibit 40 , page 10.

58

T0174

The plaintifs proposition assumes that the NAB would have been
prepared to engage in two sales, rather than one, and to give more weight
to the plaintifs desire not to lose her home (Unit 1 of the Gove St units),
or that of her mother (Unit 2), rather than economic factors. Economic
factors may have tended towards the sale of developed property in
suburban Melbourne.

174

The evidence shows that the plaintifs proposition is possible.


However, the plaintif must do more than that. She must show, on the
balance of probabilities, that she would have been able to prevent the sale
of her properties, not just that it was possible that she could have done so.
There is no evidence as to the likely attitude of the NAB in late 2006 to the
sale of the properties. Further, as I will detail shortly, the actual order of
sale of the security properties when Betac went into liquidation and the
February 2008 guarantee was called on does not support the contention
that the NAB would have been content to leave the plaintifs properties
till last. It follows that, even accepting the plaintifs case that she would
not have proceeded with the restructure, she has not shown that that
course of action would have avoided the subsequent loss of her
properties.

175

I now turn to my findings on Mr Kambouris likely attitude, had he


known at the time of the restructure or further borrowings that there was
no Papakostas mortgage. Mr Kambouris intention in respect of the
refinance was that Betac would take over the BTC liabilities, and pay them
out by trading out.217 BTC had a number of ongoing building contracts at
that time, which were transferred to Betac. 218 Mr Kambouris evidence in
chief was that he could see at that time the prospect not just of paying
out the debts, but also of making a lot of money by buying properties to
do them up and sell at a profit, as the joint venture had initially done. 219
He agreed in cross examination that following the restructure and
refinancing, Betac was in a better financial position than BTC had been.
Indeed, he said that the business plan that we had was miles ahead of
BTC Developments.220 Consistently with this view, the necessity for the
plaintif to guarantee the refinance was put to her by Mr Kiatos,
apparently with the agreement of Mr Kambouris, as a short time plan
only.221

176

217 Evidence in chief at T 296.6-9.


218 Ibid, at T 317-319.
219 Ibid, at T 321.
220 T 558.29- T 559.3.
221 T 314.23-25.
59

T0174

On refinance, Betac was advanced the sum of $852,500 and the


plaintif, Mr Kambouris and their son gave guarantees to that same limit.
Immediately after the refinance, Mr Kambouris on behalf of Betac entered
into contracts to purchase two further properties, in addition to 2/650
Warrigal Road.
These properties were 99-101 Warrigal Road,
222
Hughesdale
and 2/111 Huntingdale Road, Chadstone.223
These
purchases were funded on settlement by monies advanced by the NAB.
The intention of these purchases was to develop the properties for profit.
Mr Kambouris said in chief that he had anticipated a quick profit on 2/111
Huntingdale Road.224 The intention was to also sell 2/650 Warrigal Road,
and plough part of the profit back into development of 99-101 Warrigal
Road.225

177

Thus the refinance was not only necessary to avoid likely imminent
call on the plaintifs properties. It was also at the time perceived by Mr
Kambouris to be potentially profitable, and the need for the plaintif to be
involved was presented to her as a short term necessity only for that
reason.

178

Mr Kambouris conceded at one point in cross examination that if the


refinance had not proceeded, then it was most likely that BTC would
have gone into liquidation, and in that event, it was also most likely that
the bank would have called upon the security properties, which included
those belonging to his wife.226 He said, however, that he didnt think that
there was a real issue at the time of the properties being called in, but he
was worried about moving forward and that they needed extra capital for
that purpose.227 At a later point in his cross examination, he resisted the
proposition that even if he had discovered in October 2006 that there was
no Papakostas mortgage they would have been forced to continue with
the restructure, but conceded that the bank would not have lent more
money to Betac, than the current liabilities of BTC.228 Given that Mr
Kambouris saw the need for more cash flow to both pay bills and permit
further work, and more cash flow required increased borrowings, I
consider this to be an acknowledgement that, even with knowledge that
there was no Papakostas mortgage in October /November 2006, he would
have urged his wife to proceed.

179

222 Exhibit 37 at [23] and T 523.18-20.


223 Exhibit 37 at 24] and T 525.5-9.
224 Evidence in chief at T 322.7-22.
225 Evidence in chief at T 327.25- T 328.4.
226 T 545.17-24. Counsel for the plaintif also appears in closing to have conceded that the
restructure was necessary- T 844-845.
227 T 546.21-24.
228 T 611.26- T 612.4.

60

T0174

The next Betac guarantees signed by the plaintif were the second
(April 2007) and third (May 2007). There is no specific evidence as to the
purpose of these guarantees, but as the purchase of 2/111 Huntingdale
Road by Betac settled on 16 April 2007 and a mortgage to the NAB was
registered at that time,229 I infer that the purpose of the second Betac
guarantee signed 10 April 2007 was to guarantee the increased borrowing
thereby required. The third Betac guarantee, the May 2007 guarantee,
was in slightly smaller sum than the April 2007 guarantee, and difered
from it in that it was witnessed by Mr Kiatos. There is no evidence as to
why it was required in addition to the 10 April 2007 guarantee, but it may
have been to secure for the NAB the additional protection of a solicitors
certificate.

180

The plaintifs case is that she would not have signed this guarantee
if Mr Kiatos had told her at that stage that there was no Papakostas
mortgage. Even if she taken this course, she was already exposed in the
same sum by virtue of the April 2007 guarantee and the further borrowing
made to purchase 2/111 Huntingdale Road.

181

Mr Kambouris hopeful plans for the restructure were not


subsequently realised. The financial situation of Betac deteriorated in
2007.
Mr Kambouris said that arguments about their respective
contributions began between him, Mr Floros and Mr Kiatos from mid2007.230 He did not identify in his evidence whether these disagreements
preceded or post-dated the third breach by Mr Kiatos, being the certificate
given by him on 22 May 2007. I consider it more likely than not that the
disagreements became acute after May 2007 because the first
contemporaneous document in evidence that shows a potential dispute is
dated 15 June 2007. That is an email exchange between Mr Kambouris
and Mr Kiatos in which Mr Kambouris asks Mr Kiatos to arrange for the
Papakostas or Floros mortgage documents to be sent by Ms Gorenstein to
his current lawyers for registration.231 Mr Kambouris eventually collected
the file from Ms Gorenstein himself on 3 August 2007 232 and it was then he
discovered there was no Papakostas mortgage. Also in evidence are two
written communications between Mr Floros and Mr Kambouris, the first
dated 13 November 2007 from Mr Floros233 and the reply dated 30
November 2007 from Mr Kambouris.234
These emails show serious
disagreement about respective contributions and responsibilities for Betac
debts.

182

229 Exhibit 44.


230 Ibid, at T 330.18- T 331.8.
231 Exhibit K.
232 Exhibit M.
233 Exhibit I.
234 Exhibit J.
61

T0174

The title search for 99-101 Warrigal Road shows that the purchase
by Betac settled on 12 July 2007, with a mortgage to the NAB. 235 On 7
August 2007, the sale of Goodlett Avenue by Betac for $230,000 settled
and the proceeds were applied to reduce debt to the NAB. 236 The next
guarantee for Betac liabilities was not given until September 2007. There
is no specific evidence as to why that further guarantee, which increased
the existing exposure by $400,000, was required. However, the evidence
of Mr Kambouris suggests that the financial position of Betac was
declining. He says in evidence that the bank interest on the Betac loans
was being met by wages foregone by him and his son. 237 Bank guarantees
were called on.238 A debt due to Carpet World in 2007 was not paid, and
eventually Carpet World put Betac into liquidation.239

183

Relations between Mr Kambouris and both of the other joint


venturers broke down entirely by December 2007. 240 These proceedings
were commenced in December 2007, initially against Mr Floros only. By
the time 2/111 Huntingdale Road was ready to be sold, and a buyer found,
Mr Floros had lodged a caveat over that and other Betac properties. 241
Those caveats were lodged on 18 January 2008. 242 The buyer for 2/111
Huntingdale Road was lost, and the property later sold at a lower price
once the caveat had been removed. 243 The title search shows that the
sale of 2/111 Huntingdale Road was completed on 3 September 2008. 244
The NAB declined to allow any of the proceeds from the sale to be
returned to Betac to allow development of 99-101 Warrigal Road. 245 Betac
went in to liquidation in December 2008. The property, 99-101 Warrigal
Road, could not be developed because the necessary funds from the sale
of Huntingdale Road were not available. 246 It was later sold to Serras
Holdings Pty Ltd, a property controlled by the daughter of Mr and Mrs
Kambouris.247 The title search shows registration of that transfer on
1 September 2009.248

184

235 Exhibit 44.


236 Exhibit 37 at [8] and [21] and T 521.20-24. Mr Kambouris said the sale was in 2006 but it is
agreed that the title search in Exhibit 44 shows settlement occurred in 2007.
237 Ibid, at T 355-356.
238 Ibid, T 356.18-29.
239 Ibid, T 358.15-21.
240 Exhibit L.
241 Exhibit N.
242 Exhibit N and the title searches in Exhibit 44.
243 T 327.
244 Exhibit 44.
245 T 328.7-10.
246 T 334.16-19.
247 T 334.20-29, T 380.
248 Exhibit 44.

62

T0174

Development of the remaining Betac property 2/650 Warrigal Road


could not be completed, and that property was eventually sold by the NAB
as mortgagee in possession.249 The title search shows that that sale
completed on 25 July 2012.250 By that time, the NAB had already caused
the sale as mortgagee in possession of the Gove St units. Their title
search shows that the sale of the Gove St units completed on 2 November
2011.251 The last of the security properties to be sold, The Boulevard, was
sold to Serras Holdings Pty Ltd. The title search shows registration of that
transfer on 24 September 2012.252

185

The evidence as to why this was the order of sale of the security
properties is scant and incomplete. There is no evidence other than that
of Mr Kambouris, and he does not give a detailed account of the
circumstances of every sale, or reasons why this was the order of sale.
What the evidence does show, however, is that when the liquidation of
Betac triggered demands from the NAB, it was not the case that the Betac
properties were all sold before the properties belonging to the plaintif.
On the contrary. The Gove St units, which were the home of the plaintif
and her mother, were sold before the Betac property at 2/650 Warrigal
Road and before the sale of The Boulevard.

186

Mr Kambouris hopes for the refinance and Betac were not realised.
I find, however, that this was not evident until after the third breach by Mr
Kiatos as found by Judd J which was in May 2007. I find that the objective
circumstances suggested, and Mr Kambouris anticipated, success from
both the refinance in October/November 2006 and the further borrowings
in May 2007.

187

Further, on his own evidence when Mr Kambouris did find out, in


August 2007 that there was no Papakostas mortgagee, he remained of the
view that there was no alternative but to continue with plans for
development and then sale of the Betac land, so that Betac could trade
out of its difficulties.253 He and the plaintif executed further guarantees
for Betac liabilities in September 2007 and February 2008.

188

249 T 331.9-28.
250 Exhibit 44.
251 Ibid.
252 Ibid.
253 Evidence in chief at T 373.15-25.
63

T0174

His evidence in this trial of his attitude after discovering that there
was no Papakostas mortgage is consistent with evidence he gave before
Judd J in cross-examination, to the efect that his attitude on the
restructure in late 2006 and thereafter was to try and trade out of
financial difficulties, and make profit, rather than conceding defeat. 254
I
consider that he would have taken this view had he discovered the true
situation in relation to the Papakostas mortgage at any of October 2006,
November 2006 or May 2007. I find that he would have still wished to
proceed with the restructure and the further borrowings even if he had
known at the relevant times that there was no Papakostas mortgage. In
other words, I do not accept his evidence that he would have been
content to allow the business to cease and its properties to be sold. I find
that he would have urged the plaintif to proceed. On the basis of her
usual reliance on him, I consider that she would have done so.

189

Legal costs
The plaintif seeks to recoup the legal costs she incurred in
defending the NAB recovery proceedings. The evidence from both the
plaintif and Mr Kambouris is that while the legal costs were incurred in
her name, she did not pay them. Mr Kambouris said that he, his daughter
and his son paid all the bills relating to the recovery proceedings. 255 It is
conceivable, of course, given that the plaintif and Mr Kambouris are
married, that he made his contributions from joint funds, and so in that
way the plaintif still sufered part of the loss. There is, however, no
evidence to this efect and nor is there any evidence that the plaintif has
any obligation to repay the amounts paid on her behalf 256. I find that she
did not sufer the loss of the legal costs. On this finding, no questions of
causation arise.

190

In any event, I assume that recovery proceedings were only


necessary at all because the plaintif and Mr Kambouris had refused to
surrender the Gove St units and The Boulevard. Once those proceedings
were instituted, on the evidence of Mr Kambouris and the plaintif, it was
Mr Kambouris who was principally responsible for the conduct of their
defences. He conceded that he knew that the defences advanced were
weak, and were principally designed to buy time.

191

If it were necessary, I would not consider it appropriate to extend


the liability of Mr Kiatos to legal costs incurred in the defence of the
recovery actions because I do not consider it proved that it was
reasonable to defend them at all. The defence of the proceedings may
have bought time, but that does not demonstrate a reasonable legal
defence, and the plaintif has not shown that extra time minimised her
loss.

192

Repayment of $100,000 and lost interest thereon

254 Exhibit S, at pages 66, 70.


255 Summarised at T 613.8-19.
256 This was conceded by counsel for the plaintif in closing- T 922.23-26.
64

T0174

In her final particularisation of her claimed loss, the plaintif


described this loss as a sum she contributed to the payment out of the
BTC liabilities. On the evidence, it was not a payment that she made, but
a promised payment that she did not receive from the sale proceeds of
Alfred Grove. In my view, the plaintif has entirely failed to show how her
inability to obtain a promised $100,000 from the sale proceeds of Alfred
Grove was in any way related to the negligence of Mr Kiatos.

193

First, Mr Kambouris evidence is that he, Mr Floros and Mr Kiatos had


agreed to pay her $100,000 from the proceeds, to be used to develop The
Boulevard, by way of compensation for his wages foregone. Even if
accepted, this evidence does not prove that the plaintif had any
entitlement to the $100,000, only, at its highest, that her husband did.
Even that must be doubted in the absence of any corroborating evidence.

194

Secondly, Mr Kambouris evidence is that this sum could not be paid


to her because the bank required the whole sale proceeds to meet a bank
guarantee that had been called on. The bank guarantee was presumably
called upon as a result of a claim arising from defects in work undertaken
by Betac, and so did not arise from the negligence of Mr Kiatos found by
Judd J.

195

Summary of conclusions on factual causation


The plaintif has not shown that she sufered any loss in respect of
the legal costs of the NAB recovery proceedings or the $100,000 her
husband contends was to be paid to her.

196

In relation to the principal component of her claimed loss, the


properties, I summarise my conclusions as follows. On the whole of the
evidence given by each of them, I find that, as between Mr and Mrs
Kambouris, it was Mr Kambouris who made the business decisions,
including whether or not to borrow further, and in the case of the
BTC/Betac changeover, to refinance. I consider it more likely than not
that, given this habitual division of roles, the most significant influence on
the plaintif in deciding whether to proceed, had she learnt in either
October/ November 2006 or May 2007 that there was in fact no
Papakostas mortgage, would have been what her husband asked her to
do.

197

65

T0174

I accept that at least on the occasions she detailed before Judd J the
plaintif sought reassurance from Mr Kiatos that her properties were still
protected. In that sense, she did not sign the first or third Betac
guarantees merely because her husband asked her to. I also accept her
evidence that, had she been told the true position i.e. that there was no
Papakostas mortgage in October or November 2006, or May 2007, she
would not immediately have agreed to the refinance and signed the first
Betac guarantee, and then the third Betac guarantee in May 2007. I
accept she would have sought advice. However, I am not persuaded that
she would not, after taking that advice, have signed those guarantees,
because I find that her husband would have asked her to proceed and
relied on the other secured properties to reassure her that her properties
were safe. In short, what Mr and Mrs Kambouris would have done is best
judged not by what they now say, in hindsight and against a background
of both on earlier occasions being prepared to tell untruths on oath, but by
what they in fact did do.

198

In one respect, what the plaintif and her husband did do when they
learnt that there was no Papakostas mortgage is consistent with what they
now say they would have done. That is, the plaintif did commence
proceedings against Mr Floros. But they did not act on the other aspect of
their evidence as to what they would have done, which was to allow the
business to collapse, triggering a default, and ask the bank to sell the
Betac properties first. What Mr Kambouris in fact asked the plaintif to do
in February 2008, and I infer in September 2007, was to sign a further
guarantee, although he knew by that stage that there was no Papakostas
mortgage. The plaintif also knew that at least by February 2008, yet she
signed that further guarantee. There is no evidence in the plaintifs case
to explain why they would have taken a diferent approach had they
known the true situation earlier. Nor is there any indication in the
evidence that Mr Kambouris would have been prepared to abandon the
business had he learnt the true situation earlier, as he now contends he
would have done, and all the evidence he has given about his hopes and
expectations for the business at that time, and his actual conduct, is to
the contrary.

199

Reasoning backwards from what they in fact did when they knew
there was no Papakostas mortgage, at a time when the Betac business
was in a worsening state, to supposed knowledge in May 2007 when
Betac was in a better position, I do not accept Mr Kambouris evidence
that he would have told his wife not to sign on that occasion. I find that
even if he had known there was no Papakostas mortgage he would in fact
have wanted to proceed in May 2007, would have asked his wife to do so
and assured her that her properties were safe, and she would have done
so at his request.

200

The position is even clearer in my view in respect of supposed


knowledge in October or November 2006 that there was no Papakostas
mortgage. The financial position of BTC provided very strong incentive for
the refinance to proceed, and Mr Kambouris was eager to do so, believing
there was the possibility of profit.

201

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If I am wrong, and
the plaintif would not have signed the
November 2006 and May 2007 guarantees at all, had she been told at
those times that there was no Papakostas mortgage, I consider that the
plaintifs case also fails on the second limb of s 51(1)(a). The plaintif
must show that had she not signed on either occasion, the loss of her
properties would have been avoided, not just that it may have been. I do
not consider that this is shown.

202

If the plaintif had not signed the first Betac guarantee, then BTC
would shortly have gone into liquidation, triggering a default and the bank
could have called on the existing BTC guarantees. Her case assumes that
the bank would have been prepared to sell undeveloped or
underdeveloped BTC or Betac properties rather than properties in her
name, including the Gove St units which were developed residential
properties in suburban Melbourne. There is no independent evidence to
show that this was likely, and it is not what occurred following the
eventual default.

203

I conclude that, in relation to her claim for the lost value of her
properties, the plaintif has failed to establish factual causation as
required by s 51(1)(a).

204

For completeness, I record that the second defendant made a


further submission that the plaintifs claim in respect of the loss of The
Boulevard should be independently rejected, because the claim was put
on the basis that all properties had been sold at mortgagee sales, and this
was not the case in respect of The Boulevard. Instead, the plaintif and
the NAB reached a settlement in the sum of $450,000 for her remaining
indebtedness and the property was transferred by the plaintif to Serras
Holdings Pty Ltd.
Further, there was no evidence, so the second
defendant contends, that the settlement sum had been paid to the NAB.

205

Had it been necessary, I would not have accepted this submission. I


would have held that it could safely be inferred that the plaintif had paid
the settlement sum, and accepted the plaintifs submission that any
departure from her particulars in this respect caused the second
defendant no, or no substantial, prejudice.

206

Scope of Liability
For completeness, and in case my conclusions on s 51(1)(a) are held
to be incorrect, I will also address the scope of liability requirement in
51(1)(b) in relation to loss of the properties, although in shorter compass.

207

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It is not necessary to consider s 51(1)(b) at all if s 51(1)(a) is not


met. Accordingly, in this section of the judgment, I assume, contrary to
my actual conclusions, that the plaintif has satisfied s 51(1)(a) in relation
to loss of the properties. I have found that, had Mr Kiatos told the plaintif
that there was in fact no Papakostas mortgage at any of October 2006,
November 2006 or May 2007 she would have acted as her husband
requested, perhaps after taking other independent advice as well. For
the purpose of considering scope of liability, I assume that Mr Kambouris
evidence that he would have advised his wife not to proceed, he would
have accepted the closure of the business and they would have asked the
bank to sell the business properties first should be accepted. I also
assume that his evidence that the bank would have done so, and this
would have prevented the loss of any of the plaintifs properties, should
be accepted. If those assumptions are made, is it appropriate to extend
the scope of Mr Kiatos liability to the loss of the properties?

208

Section 51(1)(b) requires a normative consideration, based on


precedent if such exists, or otherwise on an articulation of relevant policy
factors. The parties did not rely in detail on the reasoning in any authority
where scope of liability under the Wrongs Act has been determinative. The
plaintif referred me to the recent New South Wales decision Hudson
Investment Group Ltd v Atanaskovic (Hudson),257 which had been
included in the defendants folder of authorities. That was a case of
solicitor negligence, determined under the New South Wales equivalent of
the Wrongs Act provisions, and scope of liability was there determinative.
Counsel for the plaintif did not analyse the facts of that case in detail, and
seek to apply its reasoning to this case, however, but relied on it for a
diferent purpose- to assert the continuing relevance of common law
authorities. In Hudson, Sackville AJA, with whom Beazley P. and Ward JA.
agreed, expressed the view that the approach taken by McHugh J in the
common law case March v Stramare is helpful in applying the statutory
test of scope of liability.258

209

Against that background, counsel for the plaintif relied in detail on


an English case Hayes & Anor v Dodd.259 That case concerned the
purchase by the plaintifs of a motor repair business which needed rear
access. The defendants, who were the solicitors for the plaintifs, failed to
advise them that there was no such rear access. At trial the plaintifs
recovered their whole loss from the transaction, although it took several
years to extricate themselves from it. That approach to the award of
damages was upheld on appeal.

210

257 (2014) 311 ALR 290.


258 Ibid, at [106].
259 [1990] 2 All ER 815.
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211The plaintif sought to rely on this case generally in relation to causation.


There are difficulties with this reliance. First, the case was determined at
common law, not under the statutory test embodied in the Wrongs Act.
Even if common law principles retain relevance to scope of liability,
applying them requires clear articulation and must be done with caution.
Secondly, it is apparent that, at least by appeal, there was no issue as to
what the plaintifs would have done had they known the true position.
Lord Justice Staughton noted in passing in his judgment that it is clear
that, on receipt of (the correct) advice, Mr and Mrs Hayes would have
decided not to enter the transaction at all. They would have bought no
property, spent no money, and borrowed none from the bank. 260 In other
words, causation on the no transaction counterfactual was not in issue.
Accordingly, the case does not assist the plaintif in this case on factual
causation. Counsel for the plaintif also relied on the case as relating to
reasonableness, however, and so in relation to scope of liability. 261 With
the significant caution that the case was decided at common law, and
reasonableness is a common law concept, I accept the submission that
the approach there taken to the assessment of damages may have some
relevance to scope of liability under the Wrongs Act.
The plaintif also placed some reliance on the Victorian Court of
Appeal decision Lederberger and anor v Mediterranean Olives Financial
Pty Ltd and ors (Lederberger).262 The relevant aspect of that case
concerned a negligent omission by a solicitor to advise a prospective
executrix that she would be liable for the debts of a business if she
accepted the appointment as executrix. She was subsequently sued on a
contract entered into by another partner in the business. At trial, she was
held liable, and her third party claim against the solicitors failed on the
basis that the solicitors negligence had not caused her loss. Her appeal
against the judgment against her on the contract succeeded on an agency
point. Accordingly, it was not necessary for the Court to determine her
appeal against the failure of her third party claim against the solicitors.
The Court did, however, express views in relation to it. At trial, the
executrix was not cross examined on her evidence that had she been
correctly advised, she would not have accepted the appointment as
executor. The Court held that in these circumstances factual causation
under the Wrongs Act was proved. Had her appeal against the contract
judgment failed, scope of liability would then have been critical.

212

260 Ibid, at 818.


261 T 860.29-T 861.4.
262 (2012) 38 VR 509.
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The Court expressed a stringent view in relation to the duty of a


solicitor to advise in relation to entry into a transaction, 263 and a
correspondingly generous view as to scope of liability, if harm then ensues
to the client from entering into that transaction. They noted that, while
the appellant could not recover all losses for all time brought about by
the breach of duty, she could have recovered, had it been necessary, the
loss occasioned by the entry of the partnership into the subject
transaction because if she had been given proper advice she would not
have been a partner at all, as she would not have accepted the
appointment as executrix.264 I will return to this case later in this portion
of the judgment.

213

The second defendant submitted that the plaintifs claim is a novel


case. In other words, scope of liability on the facts must be considered
from first principles. There were, in fact, two authorities in the second
defendants folder in which scope of liability under the New South Wales
equivalent of s 51(1)(b) was determinative- Wallace v Kam,265 which was a
case of medical negligence by failing to advise of risks of surgery, and
Hudson, noted above. The second defendant did not rely on these cases
in this respect, however, and it is not self-evident how the reasoning
process employed in them can be, or should be, applied to the facts of this
case. The facts in each of those cases are very diferent to the facts here,
and in Wallace v Kam at least singular. For these reasons, I will not
attempt to apply the reasoning of those cases to this, and will confine my
discussion of scope of liability to the submissions as put.

214

The plaintif submits that the relevant date for the purpose of
assessment of causation is not, as the second defendant has approached
the matter, in late 2006, but the end of 2007. This is said to be because it
was not until this time that the plaintif knew of the negligence and so was
in a position to take any action. 266 I do not consider that to be correct in
relation to factual causation. This is because the but for analysis in s
51(1)(a) requires consideration of the no transaction counterfactual as at
the dates of the negligence- i.e. October and November 2006, and May
2007- not as at the date of its discovery. The plaintif also submits that
late 2007 is the relevant starting point for consideration of scope of
liability.267 I consider that submission to be correct.

215

Some of the plaintifs submissions in relation to scope of liability


relate to the seriousness of the negligence. She submits that Mr Kiatos
had known for a long period of time prior to the first occasion of
negligence in October 2006 that what he had promised the plaintif in
2005 (security to be given by his wife) had not been given. 268 She also
submits that the loss that she sufered was the very sort of loss about
which she sought reassurance from Mr Kiatos.269

216

263 Ibid, at [100]-[101].


264 Ibid, at [121]-[123].
265 (2013) 250 CLR 375.
266 Opening Submissions of the Plaintif at [37] and (Closing) Submissions dated 23 February
2015 at [58]..
267 T 900.26- T 901.3.
268 T 900.21-24.
269 T 902.3-11.

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The other submissions for the plaintif in relation to scope of liability


are, in broad terms, that after discovery of the negligence she acted
reasonably in all respects, notwithstanding that she did not sufer the
ultimate loss of her properties for some time. In this regard counsel for
the plaintif submits in particular that the plaintif acted reasonably in
seeking legal advice, once she learnt of the negligence, which advice lead
to the commencement of this proceeding;270 it was not unreasonable not
to join Mr Kiatos initially, given his promise to make good; 271 and she and
her husband took every step they could to limit their losses. 272 Those
steps included entering into subsequent transactions, including the
February 2008 guarantee, but that guarantee should properly be regarded
as a continuation of the status quo because by that time the plaintif had
no real alternative.273 Further, the plaintif submits that the loss that she
sufered, the loss of the properties, was an entirely foreseeable
consequence of the negligence.274 The plaintif submits that she is
entitled to an award of damages to put her in the same position as she
would have been if there had been no wrong.

217

I will discuss these submissions in more detail shortly. The principal


case relied on by the plaintif as similar on the facts, Hayes v Dodd,
provides a useful starting point for analysis.
I do not accept the
submission of counsel that the facts in Hayes v Dodd are relevantly similar
to the facts here. In that case, although it took a number of years for the
plaintifs to extricate themselves from the transaction into which they had
entered due to the negligence of the defendants, there does not appear to
have been any suggestion that they entered into further transactions,
after the subject transaction, that further exposed them to loss, or that
they were already at risk of loss prior to the subject transaction. At most
in that case, it was contended by the defendant that they had not taken
the most efective steps to extricate themselves from the transaction
tainted by negligence.

218

Put into a guarantee context, the facts in Hayes v Dodd would


equate to a simple case where the plaintif, who had not previously
guaranteed the liability of another, entered into one guarantee only on the
basis of negligent advice, and sufered the loss of the property securing
the guarantee by a call on that guarantee.

219

That was not the situation on the facts in this case. By virtue of the
matters exposed by comparison to Hayes v Dodd, and for one further
reason, I do not consider it appropriate to extend the scope of the second
defendants liability to the ultimate loss of the plaintifs properties.

220

Pre-existing liability

270 T 902 and following.


271 T 913.25-29.
272 T 901.9 and following.
273 T 921.
274 T 901.25-30.
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The plaintifs properties were already at risk prior to the first


occasion of negligence by Mr Kiatos in October 2006 by virtue of the BTC
guarantees she had given prior to that date. In the case of the first BTC
guarantee signed in April 2005, this was given before even any promise
by Mr Kiatos of security from Ms Papakostas.

221

As the second defendant concedes, 275 it is conceivable, and


conceptually sound to argue, that the negligence of Mr Kiatos in October
and November 2006 and then in May 2007 increased the risk to the
plaintif of loss of her properties. If that were shown, then it may be
appropriate to extend the scope of the second defendants liability for his
negligence to her eventual loss, even though her properties were already
at risk prior to the first occasion of negligence. On this analysis, her preexisting liability would be a factor to be considered in relation to quantum,
not a reason to exclude liability.

222

However, the first Betac guarantee given after the first occasion of
negligence (November 2006 $852,000) was in a sum considerably less
than the last BTC guarantee (May 2006 $947,000) given prior to that
negligence. Indeed, it was in lesser sum than all the BTC guarantees after
June 2005. In other words, the plaintifs exposure was less after the first
and second occasions of negligence than before them.

223

As the second defendant identifies, a guarantee is a contingent


liability, and so the risk is better assessed by reference to the actual
financial position of the guaranteed entity, rather than the potential
exposure. Here again, however, the evidence shows that the plaintif was
in a better position after the first and second occasions of negligence than
before them. As set out in detail earlier, Mr Kambouris evidence was that
Betac immediately after the restructure was in a significantly better
position than BTC had been, and he anticipated profit.

224

The May 2007 guarantee given on the third and final occasion of
negligence was in the sum of $1,250,000, $400,000 more than the first
Betac guarantee. This was essentially the same amount as already
guaranteed in April 2007, without a certificate from Mr Kiatos, but I
assume for this purpose that the plaintif could legitimately put that she
was still under the influence of her belief that there was security from Ms
Papakostas when she signed the second Betac guarantee in April 2007. It
follows that the negligence of Mr Kiatos exposed the plaintif to an
increased risk of $400,000 over the period November 2006 to May 2007.
This was an increased exposure, however, and not necessarily an
increased risk of loss of her properties. That would depend on the
financial position of Betac.

225

275 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [63].
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The financial position of Betac deteriorated in 2007, but I have


found that this was not until later that year. There were also changes in
the asset position of BTC/Betac by May 2007. Alfred Grove had been sold
in late 2006, but the purchase of Huntingdale Road settled in April 2007.
Betac owned 2/650 Warrigal Road, and may also have been under
contract to purchase 99-101 Warrigal Road by May 2007, as that transfer
was registered on 12 July 2007. No further guarantee was apparently
required to complete that purchase, as the next guarantee was not
required until September 2007. In other words, increased indebtedness as
at May 2007 may have been ofset by increased assets. The plaintif has
not adduced evidence to show that the increased exposure of the May
2007 guarantee equated to an increased risk of loss of her properties.

226

Post negligence increase in liability


I have assumed for the purpose of this consideration of s 51(1)(b),
that the plaintif has shown that, if she had not proceeded with the
restructure in 2006, or the third Betac guarantee in May 2007, she would
not have lost her properties at that time. She did not, however, ultimately
lose the properties on the basis of the May 2007 guarantee. She
ultimately lost the properties by a call on a guarantee that she gave in
February 2008, well after she already knew that there was no Papakostas
mortgage. That guarantee, as did the earlier guarantee given by the
plaintif and her husband in September 2007 after at least Mr Kambouris
knew that there was no Papakostas mortgage, increased their exposure by
$400,000 above the May 2007 level.
Is it appropriate to extend the
liability of Mr Kiatos for his negligence, the last occasion of which was May
2007, to loss occasioned by entry into a guarantee well after that date, in
full knowledge of his negligence, and for greater sum?

227

In my view, the answer must be no. I do not accept the submission


of the plaintif that entry into this guarantee should be seen as a
continuation of the status quo.
As the plaintif and Mr Kambouris
acknowledge in their own evidence, there were courses of action open to
them had they known there was no Papakostas mortgage in late 2006
other than entering into further indebtedness. They could have cut their
losses, allowed BTC to go into liquidation, and sought to persuade the
bank to first call in secured properties other than those owned by the
plaintif. Further, on the plaintifs pleaded case in paragraph 49(b) and
(c) of the 20 March 2013 Third FASOC, abandoned in this trial, she could
have sought to obtain the security she had been promised from Ms
Papakostas before entry into any further guarantees.

228

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The plaintif has not shown that similar choices were not also
available to them when they discovered in 2007 that there was no
Papakostas security. Counsel for the plaintif contends in his further
submissions276 that (b)y then the ability of the plaintif to manage her
afairs in November 2006, against the background of events then, had
gone. He does not refer to any evidence to support this contention and in
my view the only evidence is that given by Mr Kambouris that the financial
position of Betac declined in 2007. Mr Kambouris did not in that evidence
elaborate how that afected any choices that he and the plaintif could
make as to how to proceed, once they discovered there was no security
from Ms Papakostas. Indeed the evidence he did give about their choice
to enter into the further guarantee in February 2008 suggests that he still
considered the best approach was to trade out, in the belief that there
was a sound plan to do so. He said when asked in re-examination why he
signed that guarantee after he knew that there was no Papakostas
mortgage:

229

I didnt believe that it would increase the exposure- the exposure


was the same but at the same time I would have signed this
guarantee because we still have a relationship with the bank- we
still have an agreement how we are going to try it out of the
properties so we had a plan. We had an agreement with the bank
how to try it with the properties so if the bank says sign a guarantee
you have to sign it.277

276 Sent by email dated 27 March 2015 at point 2 (a).


277 T 62418-25.
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In closing oral submissions, counsel for the plaintif said, in answer


to a query as to whether the plaintif could have then cut her losses by
selling properties, that she tried to do so, but could not because of the
caveats that Mr Floros had placed on the properties. 278 The caveats were
placed on the properties in January 2008, but Mr Kambouris does not refer
to that difficulty as a reason for his decision to enter into the February
2008 guarantee in the extract from his evidence quoted above. The
choice by Mr Kambouris to try to trade out, and the preparedness of the
plaintif to act as he requested, led them into further indebtedness,
knowing that they had less security than they had earlier believed. Their
decision was a voluntary act, and entry into the further guarantees in
September 2007 and February 2008 is not shown to be the only course of
action available to them once they learnt of Mr Kiatos negligence. I
accept the submission of the second defendant 279 that for this reason as
well it is not appropriate to extend the scope of his liability to the loss of
properties.

230

Continued use of The Boulevard


The second defendant contends that it is also not appropriate to
extend the scope of his liability to the loss claimed in respect of The
Boulevard because the plaintif and her family have retained the benefit
of the use of the property.280 I do not accept this submission.

231

The evidence cited in support of it is from Mr Kambouris only. It is to


the efect that he has recently spent time at the property, and that his
wife the plaintif probably does although not with him. 281 There is no
evidence on the point from the plaintif. Accordingly, there is no direct
evidence that she uses the property at all. Even if she does, she no longer
owns it. It is now owned, it is true, by a company owned and controlled by
her children, but the significant matter in relation to economic loss is
ownership.

232

The nature of the duty, the breach and the loss


Comparison of the breaches as found by Judd J and the loss claimed
by the plaintif provides my final reason for concluding that it would not be
appropriate to extend the second defendants liability for those breaches
to the loss of the properties.

233

278 T 910.13-22.
279 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [65]-[67].
280 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [68].
281 T 589 27-31.
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The plaintif has submitted that the negligence was serious, because
Mr Kiatos knew the true position for a long time, and that the loss that
eventuated was the very sort of loss that Mr Kiatos had a duty to warn her
about. Although counsel for the plaintif did not refer me to any specific
evidence as to when Mr Kiatos first knew that the promised security by his
wife had not been given, I accept that it should have been apparent to
him from very early on, and certainly from the time he instructed Ms
Gorenstein to lodge a caveat without an executed agreement, that there
was no such security. I accept that the negligence was serious for this
reason.

234

The plaintifs proposition that the loss of her properties was the
very sort of loss that Mr Kiatos had a duty to warn her about is consistent
with the view of the Court of Appeal in Lederberger that a solicitor has a
broad duty to advise his or her client as to the legal consequences of a
step which that client is proposing to take. 282 As loss of her properties was
a consequence that could follow from entry into the first and third Betac
guarantees, by this reasoning the scope of Mr Kiatos liability for his
negligent advice to her on the occasion of entry into those guarantees
should extend to the ultimate loss of those properties. Counsel for the
plaintif submitted to similar efect that loss of the properties was an
entirely foreseeable consequence from that negligence, and that the
advice the plaintif sought from Mr Kiatos was specifically whether or not
her properties were protected.283

235

There is force in this submission. The difficulty for the plaintif,


however, is that Judd J expressed his findings of duty and breach in narrow
terms. He found that Mr Kiatos had breached his duty of care by failing to
advise the plaintif that there was no Papakostas mortgage. 284 The words
he used did not exclude the possibility of a broader duty and so broader
breach, but he did not make any express finding of such broader breach.
In particular, Judd J did not find Mr Kiatos to be in breach of his duty of
care by failure to advise the plaintif that her properties were at risk by
reason of the guarantees. On the facts before him, and before me in this
trial, the plaintif already knew that. I consider that I am bound by this
finding as the specific nature of the duty and so the breach.

236

282 (2012) 38 VR 509, at [100]-[101].


283 T 901.25- T 902.11.
284 [2013] VSC 271, at [19]-[20].
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The loss that most directly arises from the breach as found is the
loss of the amount that the Papkostas security would have provided to the
plaintif, had she had to call on it. At its highest, this is the equity that Ms
Papakostas held in the property. Arguably, this amount should then be
discounted to take into account the costs of recovery, if the security was
not provided willingly. The uncontradicted expert evidence in relation to
this promised security is that it was purchased by Ms Papakostas in August
2002 for $56,000, as at the date of valuation (7 June 2014) was still
vacant land, and as at February 2009 would have been in the order of
$110,000-$125,000 in value. The title search shows that is encumbered
by a mortgage from 19 August 2002. 285 There is no evidence as to Ms
Papakostass remaining equity, but on this expert evidence it could not
have exceeded $125,000.

237

Mr Kambouris gave evidence that he thought the value of the land,


which he knew was vacant, was greater than this, in excess of $250,000,
on the basis of his knowledge of the area. Had it been necessary, I would
have preferred the expert evidence to his lay opinion. Further, Mr
Kambouris did not know the land was already encumbered, and made no
enquiries in that regard.286

238

The plaintif may have had an arguable case for this loss, but that is
not the case that she has put, or the loss that she seeks. She seeks the
loss of her properties, although the negligence of Mr Kiatos did not relate
to a failure to advise her that they were at risk. In my view, this is a
further normative reason why the scope of his liability for his negligence
should not extend to this claimed loss.

239

Quantum
The plaintif has not shown that she sufered the losses she claims
for legal costs and the $100,000. I disregard them in this discussion of
quantum, and consider only the loss of her properties. It is not necessary
to reach a conclusion in relation to the quantum of that loss, as the
plaintif has failed on both limbs of s 51(1) in relation to causation. Had it
been necessary, I would have taken the following approach to quantum.

240

I accept that the starting point for assessment of the quantum of the
plaintifs loss in respect of the properties is their current market value.
This is the approach both parties took. Their experts were able to agree
on the current market value of Unit 1 of the Gove St units, and The
Boulevard, but continued to disagree as to the current market value of
Unit 2 of the Gove St units, although they narrowed their disagreement on
that point.287 Notwithstanding this remaining disagreement, neither party
called the expert of the other for cross examination.

241

285 Exhibit 41.


286 T 543.1-17.
287 Exhibit A.
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The experts agreed that the current market value of The Boulevard
was $550,000 and that of Unit 1 $500,000, being a total of $1,050,000. In
relation to Unit 2, given the absence of cross examination, I would have
taken the mid-point of the range given by the expert for the second
defendant, which was $420,000- $440,000, and found the current market
value to be the mid-point of that figure and the figure given by the expert
for the plaintif, which was $450,000. Accordingly, I would have found the
current market value of Unit 2 to be $440,000. It follows that, I would
have found the total current market value of all the plaintifs properties to
be $1,490,000.

242

I accept the submission of the second defendant that the plaintifs


pre-existing liability must be deducted from the current market value of
the properties. The plaintif opposes this course, but I consider it to be
correct, because she was already exposed to the loss of her properties at
the time of the first negligence of Mr Kiatos by reason of the guarantees
for Kambouris Nominees and BTC she had already given.

243

The second defendant puts the appropriate deduction in two


ways.
The second defendants primary submission is that the quantum
should be reduced by the sum of the indebtedness of Kambouris
Nominees (stated as $202,152.14) and BTC (stated as $490,656.84),
being a total of $692,808.98. The second defendant in his written closing
submissions does not give the date at which these figures applied,
describing it only as as at the time of the negligence found by Judd J. 289
The first occasion of negligence was in October 2006, and the
indebtedness of BTC reduced shortly thereafter by reason of the receipt of
the proceeds of sale of Alfred Grove. In fairness to the plaintif, I consider
that her pre-existing BTC indebtedness for the purpose of deduction from
the quantum of her loss should be considered to be the amount remaining
after receipt of those proceeds. On the expert evidence of Mr Meredith,
that remaining indebtedness as at 30 November 2006 was $490,282. 290 I
will utilise the indebtedness shown in the relevant bank statement for
Kambouris Nominees as at that same date, 30 November 2006, being
$199,090.24.291 These are the figures I will utilise rather than the figures
given by the second defendant in his written closing submissions. The
total of the relevant prior indebtedness is then $689,372.24.

244

288

The second defendants alternative submission assumes that the


bank would have sold all security properties other than hers first, and so
her pre-existing liability was only the amount by which she would have
remained indebted, being $226,534, and the interest that would have
accrued on that debt.

245

288 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [76]-[78].
289 Ibid, at [76].
290 Exhibit 43 at [7].
291 Exhibit 8.
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In my view, the second defendants primary submission more


correctly reflects the increase in the plaintifs risk arising from the
negligence of Mr Kiatos (assuming causation had been proved). That risk
arose from guarantees which on the usual construction imposed joint and
several liability on the guarantors. There is nothing in the guarantees to
show that this usual construction did not apply. It follows that it is not
correct to regard the plaintifs liability under those guarantees as only
that portion that could not be met by the borrower or other guarantors,
including Betac in the case of the BTC guarantees.

246

The plaintif submits that, if there is to be any deduction for preexisting liability, it should be calculated not only on the basis of the
remaining liability after sale of all the other properties, but also on the
basis of the agreement between the joint venture parties that they would
share equally in the liabilities. Thus, the plaintif submits that at the
highest she should be considered to have only a pre-existing liability as to
one third of the amount remaining after sale of all properties other than
her own.292

247

In my view the submission as to a one third allocation is flawed for


two reasons. First, the agreement as to equal responsibility for liabilities
was as between the joint venturers, Mr Kambouris, Mr Kiatos and Mr
Floros. The joint venturers were not the same persons as the BTC
guarantors or the guarantors for Kambouris Nominees. In relation to BTC,
the plaintif was a guarantor, but not a joint venturer, and Mr Kiatos was
not a BTC guarantor. The submission is also flawed for similar reasons to
the alternative submission of the second defendant. The guarantees
imposed joint and several liability for the whole of the BTC and Kambouris
Nominees indebtedness, not distinct liability for each guarantor for a
portion only of it.

248

Accordingly, I would have reduced the current market value of the


properties by the whole of the plaintifs pre-existing liability for both
Kambouris Nominees and BTC as at 30 November 2006 and arrived at a
sum in the order of $800,628.

249

The plaintif concedes that the amounts she has already recovered
for her loss by way of settlements with the estate of Mr Floros and Ms
Gorenstein, which total $490,000, must be deducted. This would result in
a sum in the order of $310,628.

250

292 Plaintifs further submissions made by email dated 27 March 2015 at [2(b)].
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From that sum, the second defendant contends that amounts that
the plaintif recovered from Betac should also be deducted, as those funds
would not have been generated had the restructure not occurred. The
experts for both parties agreed that these amounts were in the sum of
$82,398.293 Counsel for the plaintif submitted that these sums included
refund of the deposits for properties initially paid by Mr Kambouris, which
refunds should not properly be included. The second defendant did not
demur with that submission, and I accept it. 294 Accordingly, the further
sum by which the recoverable quantum is to be reduced is $53,298.

251

The remaining sum after all deductions is $257,330. That is the


amount I would have awarded had the plaintif been successful on
causation.

252

Nominal damages
The plaintif has failed at each level in her substantive case. She
has not proved that the second defendant caused the losses she claims;
nor that his responsibility should extend to those losses; nor that the
losses she has sufered are in the amount that she seeks. However, Judd J
did find that she had sufered a loss by reason of the breaches by Mr
Kiatos, and in my preliminary view that finding would justify an award of
nominal damages. I say preliminary because the parties did not address
me at length in relation to the nominal damages. I will hear them further
if the plaintif seeks that award, and if either of them then so requires.

253

The second defendant did draw my attention to the recent decision


of the New South Wales Court of Appeal, State of New South Wales v
Stevens (Stevens).295 That case concerned a claim for damages for
personal injury arising from breach of a deed. The plaintif failed at trial to
show that the injury she had sufered had been caused by the breach, or
that, even if it had, it met the threshold for a claim for personal injury
damages. The trial judge awarded her the sum of $10,000 for nominal
damages. On appeal, the Court of Appeal held that that amount was
excessive, and reduced the amount to $100.

254

293 Exhibit 42 at [118] and Exhibit BB at [3.1(h)].


294 T 923.2-4.
295 [2012] NSWCA 415.
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The case is in some respects distinguishable. The loss there claimed


was personal injury, and damages were sought for non-economic loss. As
it was a claim relating to personal injury, there were provisions of the Civil
Liability Act 2002 (NSW) (Civil Liability Act) on which the appellant
successfully relied on appeal which do not here apply. However, the same
definition of damages as there applied, also here applies. That is,
damages is defined both in s 43 of the Wrongs Act and in the relevant
provision in the Civil Liability Act to include any form of monetary
compensation. In Stevens, the appellant argued that by virtue of this
definition, an award of nominal damages was precluded if the plaintif had
failed to establish her case for personal injury damages under the Civil
Liability Act. The Court of Appeal rejected that argument, and held that
the award of nominal damages is not governed by the Civil Liability Act.296
It is made to vindicate the plaintifs claim that her legal rights have been
infringed. By analogy, nor is such an award governed by Part X of the
Wrongs Act.

255

The Court held, however, that it was an error of discretion for the
trial judge to take into account in determining an amount of $10,000 for
nominal damages the factors she identified, being the cost of the plaintif
engaging solicitors, the stress she sufered consequent on the breach and
the length of time the breach continued.297 McColl JA noted that these
factors were relevant to compensatory damages, on the assumption
causation had been proved.298 Similarly, Sackville JA noted that the
contentions that the State had treated the plaintif carelessly and with
insufficient regard for her interests were factors that could have been
relevant to aggravated or even exemplary damages, had they been
claimed, proved and not precluded by the Civil Liability Act, but were not
relevant to an award of nominal damages.299

256

In this case, the plaintif has given evidence that she sufered deep
distress over the loss of her properties. 300 I accept that evidence. Mr
Kambouris evidence suggests that he feels at least in some part
responsible for that distress,301 and for his own part feels a profound sense
of betrayal by Mr Kiatos.302 It is also fair to say that viewed even from an
objective perspective, the breaches by Mr Kiatos were serious. He entirely
failed to advise his client, the plaintif, that a security he had promised her
had been provided, had not in fact been so provided. He did so not just
once, but on three occasions. It is also significant in my view that the
promised security was to be from his own wife. It follows that he was in
an obvious position to know that it had not been provided.

257

296 Ibid, per McColl JA at [24] and Sackville JA at [75], Ward JA agreeing with both.
297 These factors are identified in an extract from the trial judges reasons at [8].
298 Ibid, at [35].
299 Ibid, at [78].
300 For example, see T 711.
301 This was the explanation he gave for paying the legal bills directed to his wife.
302 For example, see T 425.
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If the principles identified in Stevens apply, however, none of these


matters are relevant to the quantum of an award for nominal damages.
After a detailed consideration of the authorities in that recent case, $100
was considered to be an appropriate award.
Subject to further
submissions from the parties, that is the amount I would award in this
case.

258

Orders
I will give the parties the opportunity to consider these reasons and
ask them to prepare proposed orders to give efect to them. I will hear
them further if required in relation to nominal damages and costs,
including the question of the costs orders that were foreshadowed by my
rulings in relation to the grant of leave to the plaintif to give evidence and
to call evidence from her husband on the basis of his further outline of
evidence.

259

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SCHEDULE

OF

PA RT I E S
S CI 2007 10201

BETWEEN:
POLYXENI KAMBOURIS (also known as JENNY KAMBOURIS)

Plaintif

- and THEO TAHMAZIS (who is sued in his capacity as personal Firstnamed Defendant
representative of the estate of BILL FLOROS) (also
known as VASILIOS FLOROS)
CON KIATOS

Secondnamed
Defendant

ELLA GORGENSTEIN

Thirdnamed Defendant

AND BETWEEN:
THEO TAHMAZIS (who is sued in his capacity as personal Plaintif by
representative of the estate of BILL FLOROS) (alsoCounterclaim
known as VASILIOS FLOROS)
- and POLYXENI KAMBOURIS (also known as JENNY KAMBOURIS)

Firstnamed Defendant
by Counterclaim

THEODORE KAMBOURIS

Secondnamed
Defendant by
Counterclaim

BETAC INVESTMENTS PTY LTD (ACN 103 071 110)

Thirdnamed Defendant
by Counterclaim

260

83

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