Professional Documents
Culture Documents
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
Defendants by Counterclaim
--JUDGE:
Lansdowne AsJ
WHERE HELD:
Melbourne
DATE OF HEARING:
DATE OF JUDGMENT:
--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
Mr R Cook with
Ms S Varney
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:
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Introduction
1
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
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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
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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.
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.
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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
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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
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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
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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
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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
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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
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14
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71 Ibid, at [19]-[21].
17
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(i)
(ii)
(iii)
(iv)
(b)
(c)
72 Paragraph 49 refers to the New NAB guarantee which was earlier defined at [23] to be the
guarantee for Betac liabilities.
18
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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.
19
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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.
20
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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)
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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.
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.
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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)
(b)
93 T 141 T 155.
24
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(scope of liability).
(2)
(3)
(4)
52
Burden of proof
25
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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).
26
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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.
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29
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30
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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
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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].
33
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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.
35
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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)].
36
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101
102
103
104
131 (2001) 205 CLR 434, at [16], also quoted earlier in the section headed Legal Principles.
37
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105
106
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.
T0174
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
108
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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
136 T 421.14-15.
137 T 611.26-T 612.4.
138 T 616.9- T 617.14.
40
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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.
41
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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.
42
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120
121
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
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123
124
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
127
144 Second Defendants Outline of Closing Submissions dated 24 February 2015 at [46].
44
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128
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
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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
133
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
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135
136
158 T 500.1-4.
159 T 634.22.
160 T 635.13-16.
161 T 635.
162 T 63622-24.
47
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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
138
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
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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
143
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
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145
146
147
T0174
148
149
150
178 Exhibit 30, being affidavit of the plaintif sworn 15 November 2010 in S CI 2010 00224 at
[4].
51
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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
153
52
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154
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
157
185 T 554.21-27.
186 T 694.13-17.
187 T 555.8-22.
53
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158
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
54
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161
162
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
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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
166
167
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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
169
170
T0174
171
172
173
58
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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
175
176
T0174
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
179
60
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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
182
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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
184
62
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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
188
249 T 331.9-28.
250 Exhibit 44.
251 Ibid.
252 Ibid.
253 Evidence in chief at T 373.15-25.
63
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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
191
192
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193
194
195
196
197
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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
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
205
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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208
209
210
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212
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213
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
216
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217
218
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
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221
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
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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226
227
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
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230
231
232
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
236
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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
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.
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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
243
244
288
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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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
248
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
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
254
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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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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
Thirdnamed Defendant
by Counterclaim
260
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