Wallis v Rudek

1. [1]

   The Court has before it today two notices of motion listed for a hearing of not more than three hours. The first notice of motion was filed by the plaintiffs (to whom I shall refer as “the Wallises”) on 8 September 2020 and seeks:

2. [2]

   The second notice of motion was filed on 28 September 2020 for the defendant (to whom I shall refer as “Ms Rudek” and for whom Mr J R Bennett of Counsel appeared) and seeks:

3. [3]

   Stepping back for a moment from the detail of the motions, what is really being decided by the Court today are the final consequences of an unhappy dispute between the Wallises and their daughter Ms Rudek, which has already been the subject of several judgments at first instance and on appeal: Wallis v Rudek [2020] NSWSC 162; Wallis v Rudek (No 2) [2020] NSWSC 215; Wallis v Rudek (No 3) [2020] NSWSC 338; Wallis v Rudek [2020] NSWCA 61; Wallis v Rudek (No 2) [2020] NSWCA 175; Wallis v Rudek [2020] NSWCA 207.

4. [4]

   In summary, the Wallises claimed that they sold their property in Pennant Hills in which they lived (the “Property”) to Ms Rudek on terms that would allow the Wallises to continue to reside indefinitely in part of the Property. The effect of the decision at first instance of Parker J, and then of the Court of Appeal upholding his Honour’s decision, is that the Wallises failed in the substantive part of their claim. However, they had limited success in one respect. As a condition of the relief which Parker J gave to Ms Rudek (possession of the Property), Ms Rudek was required to do equity by paying into Court a sum of $124,287.75 (the “Judgment Sum”). That has been done. One issue before the Court today was whether, rather than being paid to the Wallises, that money should be applied, in particular, to Ms Rudek's costs.

5. [5]

   After setting out the reasons why I refused a last minute adjournment application by the Wallises, I will deal issue by issue with the matters that were raised by the two motions.

Adjournment

1. [6]

   The first matter which I had to consider was an application by the Wallises to adjourn today's hearing. At the hearings before Parker J and in the Court of Appeal, the Wallises were represented by a solicitor and counsel. For the purposes of the hearing of the current motions they continued to be represented by the same solicitor, Mr P Dobrich. Yesterday my staff were informed by Mr Dobrich that he had filed a notice of intention of ceasing to act and that he would appear this morning as a courtesy to the Court to seek leave to withdraw. He did so, and I granted him that leave.

2. [7]

   This left the Wallises unrepresented. They applied for today’s hearing to be adjourned to enable them to get legal representation. I declined their application.

3. [8]

   There was no evidence before me one way or another about why Mr Dobrich ceased to act for the Wallises. However, the matter had been fixed on 12 October 2020 for hearing today and Mr Dobrich had been on the record up to and including this morning. Despite that, the Wallises had not complied with the pre-trial directions for the hearing of this application. Ms Rudek's legal representatives had prepared a Court Book and provided submissions. In circumstances where there had been unexplained non-compliance while Mr Dobrich was on the record, and where it was clear from the evidence that the amount of the Wallises’ costs liability pursuant to various costs orders made at first instance and in the Court of Appeal exceeded the Judgment Sum, I considered that nothing would be achieved by allowing the adjournment. Furthermore, an adjournment would only bring additional delay and costs for Ms Rudek in a matter which is crying out for finalisation, and where the apparent impecuniosity (by their own admission) of the Wallises means that there is a very real doubt that Ms Rudek will be able to recover all of the costs to which she is entitled.

4. [9]

   The hearing then continued and I gave the Wallises every opportunity to put before me whatever they wanted to say. I do not think I am doing them an injustice by reducing their submissions to the proposition that as impecunious pensioners who had been ordered to vacate what had been their home, they very much needed the Judgment Sum to which Parker J had found they were entitled. But the fact remains that this Court has made a number of costs orders against them which appear to exceed the Judgment Sum. Ultimately, the Wallises accepted that the Court should make a decision today that would finalise the dispute.

Caveat

1. [10]

   Early in the history of the proceedings the Wallises lodged a caveat over the Property. That caveat was extended until further order by Parker J. It claimed this interest:

2. [11]

   The short point is that the interests asserted, even assuming that they gave rise on their face to an interest in land, have not been vindicated by the outcome of the litigation. On any view, the result of the litigation is that the Wallises do not have an interest in the Property as claimed in their caveat or at all.

3. [12]

   The disposition of the proceedings is the further order that would, in the ordinary course, bring to an end what was in its nature an interlocutory order made by Parker J extending the caveat. However, it may be accepted that the Land Titles Office will require something more than a confirmation that the order has come to an end to allow for the removal of the caveat.

4. [13]

   Ms Rudek's notice of motion seeks orders pursuant to s 74MA of the Real Property Act 1900 (NSW) for an order that the caveat be withdrawn. That section provides:

5. [14]

   Because the current notice of motion was served on the Wallises' then solicitor, the requirement for service under s 74MA(2) has been met. However, for more abundant caution, and given that the Wallises are now unrepresented, I will make an order dispensing with the requirement for service of the application for the withdrawal of the caveat. I will make an order that the Wallises must withdraw the caveat on or before next Wednesday, 18 November 2020. That order is made on the assumption that they will not in fact have withdrawn the caveat by that time, so that an office copy of the Court’s order can then be filed on behalf of Ms Rudek to lapse the caveat.

Chattels

1. [15]

   There remains an ongoing dispute between the parties about chattels left on the Property which are said to belong to the Wallises. A suite of orders made by Parker J, and then in more detail by White JA, was designed to give the parties an opportunity to identify the Wallises’ chattels and for them to be removed in a peaceable and orderly way from the Property. It is not necessary for me to set out those orders.

2. [16]

   Unfortunately, the regime prescribed by those orders broke down. Nor is it necessary for me to attribute blame in relation to that. The Wallises have since commenced proceedings in NCAT designed to recover what they say are their chattels. The present motions were fixed for a hearing time of three hours. It would be quite disproportionate on any basis, having regard to s 56 of the Civil Procedure Act 2005 (NSW), for the Court to attempt to untangle the rights and wrongs of what has happened in relation to those chattels in determining this application.

3. [17]

   Ms Rudek, through her counsel, has, with respect, entirely sensibly agreed to my suggestion that I should, by my own order, in effect “refresh” the dates in the regime provided for by White JA to give the parties one more chance to resolve the question of the chattels consensually and peacefully. That should be done on the basis that the process must be completed by Christmas. I can only urge the parties to cooperate and be sensible about this because it is quite clear that, notwithstanding relations having broken down between them, it is something which it is in their interests to resolve without further proceedings. However, if they are unable to complete the process by the application of the renewed regime, the dispute over chattels will have to be resolved in NCAT against the background of White JA’s orders and the orders that I will make. Those orders provide for chattels to be deemed to have been abandoned as part of the working out of the process.

Accommodation fee

1. [18]

   On 7 April 2020 White JA made these orders:

2. [19]

   There can be no doubt that pursuant to undertaking 1(b), Ms Rudek is entitled to payment of the amount for lodging referred to in that undertaking. There is no dispute that amount is $7,800 and there will be an order that it is to be paid to Ms Rudek out of the Judgment Sum, subject to a reservation I will discuss later in these reasons.

Ms Rudek’s costs

1. [20]

   It will be noted that undertaking 1(c) set out in paragraph [18] above refers to the Judgment Sum standing as security for Ms Rudek’s costs. On any view that must refer to her costs of the appeal. She was successful on the appeal and orders were made that she should have her costs of the appeal on the ordinary basis. The evidence before me is that on a solicitor/client basis those costs are $64,025.

2. [21]

   However, there is some ambiguity as to whether the Judgment Sum also secures Ms Rudek’s costs at first instance. There is nothing in the surrounding material, including White JA’s judgment, in relation to the orders and undertakings set out in paragraph [18] above that casts any light on that question. On their face, and with great respect, it seems to me that the terms of the undertaking are perfectly ambiguous.

3. [22]

   However, Mr Bennett has drawn my attention to some correspondence between the parties’ solicitors when Mr Dobrich was on the record. The gravamen of that correspondence was an assertion by Ms Rudek's solicitor, Mr N Buckley, to Mr Dobrich of the former’s understanding, upon which he proposed to act, that unless Mr Dobrich told him otherwise, the security of the Judgment Sum extended to the costs at first instance.

4. [23]

   By email of 9 April 2020 Mr Buckley had sent Ms Rudek’s application for a costs assessment to Mr Dobrich. On 14 April 2020, Mr Dobrich sent an email to Mr Buckley:

5. [24]

   On 11 May 2020, Mr Buckley responded to Mr Dobrich with this email, to which Mr Dobrich never replied:

6. [25]

   I accept Mr Bennett’s submission that on the basis Mr Dobrich’s non-response, I should conclude that the reference to costs in the undertaking extends to security for Ms Rudek’s costs at first instance. However, even if I am wrong about this, it makes no practical difference because, as will appear below, I have come to the view that the costs which I will shortly fix by a gross sum costs order, should in any event be met, to the extent they can be, out of the Judgment Sum. The Wallises' financial circumstances mean that the Judgment Sum is likely to be the only fruitful source of funds for Ms Rudek to recover at least some of the costs to which the Court has determined she is entitled.

Costs as a gross sum

1. [26]

   The next issue is Ms Rudek’s application for gross sum costs orders. The legal principles in relation to such orders are familiar. For present purposes, I gratefully adopt as a convenient summary of those principles what was said by Sackar J in the recent decision of WLD Practice Holdings v Sara Stockham [2020] NSWSC 1354:

2. [27]

   I have already observed that this is a case which cries out to be finalised. There has been a complete breakdown of the relationship between the parties, and there is a real risk that whatever order the Court makes in relation to costs will not be able to be fully satisfied by the Wallises. The Court has before it detailed invoices and summaries of Ms Rudek's costs sworn to by her solicitor, Mr Buckley. In all of those circumstances I am satisfied that it is both appropriate for a gross sum costs order to be made and that the Court is in a position, on the material before it, to do so in a fair and just manner. It is, however, necessary to split those costs up into components.

3. [28]

   Before turning to those components, I should make a general observation about the way in which Ms Rudek's costs have been worked out. What is apparent from Mr Buckley's evidence is that in a time-honoured tradition of solicitors Mr Buckley has, in effect, been providing some degree of legal aid to his client by writing off significant amounts of his time for work done in the conduct of the litigation. That is a matter which reflects very well on Mr Buckley and he is to be commended for it.

4. [29]

   However, it also gives rise to a point of principle of which I have not lost sight. While the fact that there has already been significant discounting is a matter that I can ultimately take into account in my discretion as to the final costs figures I determine, I do so mindful of the indemnity principle. The fact is that Ms Rudek has no obligation to pay Mr Buckley's firm those costs that have been written off. It would not be correct for me to do anything other than to start with the amounts on a solicitor/client basis which Mr Buckley's affidavit demonstrates have in fact been invoiced to Ms Rudek which she is liable to pay. That is how I propose to proceed.

5. [30]

   Turning to the various components of the amounts claimed, the first is the costs of the proceedings before Parker J. On 5 March 2020, his Honour ordered the Wallises to pay Ms Rudek's costs of the proceedings, including their cross-claim, on the indemnity basis. The solicitor/client costs set out in Mr Buckley's affidavit in respect of those proceedings total $80,720.86. An order for indemnity costs means that a client is entitled to recover all of the costs that they have expended except for those that have been unreasonably incurred. I have looked at the material that has been presented and, taking into account both that material and the significant amounts written off to which I have already made reference, the Court is satisfied that there should be no reduction in the amount of $80,720.86 that is the subject of the claim. That conclusion extends to not making a discount of the kind to which Sackar J refers in paragraph [11] of his reasons (as set out in paragraph [26] above) because the Court has ordered Ms Rudek to have her costs of the first instance proceedings on the indemnity basis.

6. [31]

   The next component derives from an order made by Parker J on 30 March 2020 that the Wallises should pay Ms Rudek's costs of a notice of motion filed on 27 March 2020. The costs incurred in relation to that on a solicitor/client basis are $9,275.50. That order was made on the ordinary basis and the Court determines that there should be a 10 per cent reduction in that figure to allow for the discount to which I have referred in the preceding paragraph. I have selected a discount at the lower end of the range identified by Sackar J to take into account the already discounted effect of the invoices that have been presented in the evidence because of the amounts written off (which I have also taken into account as obviating the need to make a reduction of the figure from solicitor/client to party/party costs).

7. [32]

   The next component is Ms Rudek’s costs incurred in the appeal. Those costs on a solicitor/client basis are $64,025. They have been ordered on the ordinary basis, and conformably with the approach that I have taken in the previous paragraph, that figure should be discounted by 10 per cent.

8. [33]

   The last component is that on 18 September 2020 a registrar of the Court ordered the Wallises to pay Ms Rudek $1,043 together with the reasonable costs of the execution of a writ of possession. As that sum of $1,043 has already been ordered to be paid, it should be paid out of the Judgment Sum, subject again to the reservation that I will discuss below.

9. [34]

   Finally, I record that Ms Rudek sought an order for interest on costs. As Mr Bennett properly conceded, there was no evidence that Ms Rudek had in fact paid the various invoices that had been put before the Court, so I did not accept that there was any reason to make an order for interest.

10. [35]

    The orders which I propose to make in the nature of a gross sum costs order cover the entirety of the proceedings up to the filing of Ms Rudek's motion that is the subject of these reasons. There will be an order that the Wallises pay Ms Rudek's costs of that motion. Directions will be given for any application by Ms Rudek for those costs to be quantified on a gross sum costs basis to be made in a timely fashion and dealt with by me on the papers.

A final reservation

1. [36]

   A feature of the orders made by Parker J was that before the Wallises could have access to the Judgment Sum it would be necessary for them to reimburse the Commonwealth for rental assistance which they had claimed, to which his Honour had come to the view that they were not entitled (Wallis v Rudek [2020] NSWSC 162):

2. [37]

   His Honour’s conclusion means that, at least prima facie, the Commonwealth has an interest in the Judgment Sum. As is usual in these kinds of applications for orders for payment out of a sum held in Court, it is necessary for the applicant to satisfy the Court that there are no other parties entitled to that fund. Parties who may have an interest must be notified and given an opportunity to appear if they wish on the application for payment out.

3. [38]

   It is no criticism of Ms Rudek or her legal advisors to note that in this case the Commonwealth has not been given notice of her application. However, it seems to me that before the Court can make a final order allowing the Judgment Sum to be paid out to Ms Rudek for her costs and the accommodation payment, it will be necessary for the Commonwealth to be given notice and an opportunity to determine whether it wishes to be heard.

4. [39]

   The final orders that I will make will put the responsibility for notifying the Commonwealth of that possibility on Ms Rudek's legal advisors. An appropriate timetable can be ordered so that either that opportunity is taken up and determined by me (which I would intend to do on the papers, if at all possible, in the interests of minimising costs). Alternatively, the Court can be informed that the Commonwealth does not wish to assert a claim for part of the Judgment Sum, in which case the orders that I will otherwise make for Ms Rudek to be paid the Judgment Sum can become final.

Conclusion

1. [40]

   Finally, it follows from what I have concluded that there will be orders dismissing the Wallises' notice of motion filed on 8 September 2020 with costs. The only direction I make today is that Ms Rudek is to provide by email to my Associate a proposed form of orders giving effect to these reasons on or before 16 November 2020.