Kurzyp v Kurzyp (No 2)

1. [1]

   HER HONOUR: This is an application for indemnity costs, following non-acceptance of a Calderbank letter. This judgment assumes familiarity with my principal judgment: Kurzyp v Kurzyp [2021] NSWSC 851.

Facts

1. [2]

   These proceedings commenced on 15 February 2019. The defendant had caused a lapsing notice to issue in respect of a caveat lodged by his ex-wife over a Liverpool townhouse. They had purchased the townhouse in 1987 but title was registered in the defendant’s name only. By summons and an affidavit in support, the plaintiff wife sought an extension of caveat and declaratory relief in respect of her interest in the townhouse.

2. [3]

   In May 2019, the husband filed an affidavit. In June 2019, the wife swore a further affidavit. In October 2019, the wife amended the summons, claiming inter alia a declaration that the defendant held the legal estate in the Liverpool townhouse on trust for the wife in proportion to her contributions to the purchase price or, alternatively, a one-half interest. In addition, the wife sought an order that the husband account for the rent earned on the townhouse in proportion to her contribution to the acquisition of the property or, alternatively, a one-half interest. The wife also served further affidavits in support of her claim, being a further affidavit by herself, an affidavit from the couple’s real estate agent and an affidavit by the couple’s son. In December 2019, the husband swore a second affidavit, responding to the wife’s evidence.

3. [4]

   On 31 January 2020, the wife’s solicitors sent a letter to the husband’s solicitors marked “without prejudice save as to costs”, noting that the wife was seeking one-half of the value of the Liverpool town house together with one-half of the net rent received on the property. The wife’s solicitors pointed to contemporaneous documents accompanying the affidavits filed in support of the wife’s case as pointing to a conclusion that the wife was entitled to the relief sought and attached some of those documents. The letter stated:

4. [5]

   Self-evidently, if the wife’s offer was accepted, then the wife forewent any claim for her costs of the proceedings. As to the reasonableness of the figures in the letter, the wife relied on a valuation by Century 21 Combined Liverpool, which assessed the value of the townhouse as at January 2020 in the vicinity of $520,000, including by reference to two comparable sales shortly before and after the date of the Calderbank letter.

5. [6]

   The offer was made at a time in the proceedings when the parties’ evidence was on and the defendant was well-placed to assess the strengths and weaknesses of each side’s case. Indeed, given the underlying subject matter of the proceedings, he was well-placed to know what had happened in any event.

6. [7]

   The offer was open for a little over two weeks. Whilst it may have been open for the defendant to contend that the time available to consider the offer was insufficient, he clearly had enough time to do so as, on 6 February 2020, the husband’s solicitors replied, rejecting the wife’s offer and noting, “Our client agrees to your client’s discontinuance of the proceedings … on the condition that your client pays our client’s legal costs of those proceedings on an indemnity basis.” This, of course, was no offer at all as, even if the wife had discontinued the proceedings, the husband was most unlikely to be entitled to his costs of the proceedings on an indemnity basis.

7. [8]

   On 7 February 2020, the wife’s solicitor wrote again “without prejudice save as to costs” noting, “[Y]our client’s invitation to capitulate is rejected. If your client wishes to make a commercial proposal within seven days to settle the matter, we will obtain instructions.” No response was received.

8. [9]

   The wife was successful at trial. I made orders declaring that the husband held the legal estate in the Liverpool townhouse on trust for the wife as to a one-half share, and gave judgment in favour of the wife in the sum or $154,860, being her half-share the rental income. The wife has achieved a better result than what she was prepared to accept in her Calderbank offer.

Consideration

1. [10]

   The principles in determining whether a special costs order should be made on the basis of a Calderbank offer were recently considered by Ward CJ in Eq in In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161 at [93]-[99], which summary I gratefully adopt:

2. [11]

   The Calderbank letter was a genuine offer of compromise as the wife offered to resolve the proceedings for less than half the value of the townhouse and rental income and by foregoing her costs which, at that stage of the proceedings, were likely to be substantial. While the husband would not have known the precise amount of the wife’s legal costs, he would have appreciated that the costs were likely to be substantial, if for no other reason than he would have been paying his own legal costs in preparing evidence in defence of her claim.

3. [12]

   The offer was made when the proceedings were well advanced: the plaintiff had filed her evidence, to which the defendant had filed evidence in response. The defendant had all the material at his disposal to assess whether the offer was reasonable. The terms of the letters from the wife’s solicitor made plain that, if the offer was not accepted, then cost consequences may follow.

4. [13]

   The defendant submitted that the wife’s claim was “highly unusual” as it concerned disputed events occurring in the 1980s and 1990s, where the wife’s contentions were said to be largely unsupported by contemporaneous documents. One of the wife’s witnesses, Ms Malchevski, did not swear her affidavit until after the Calderbank offer was made. In these circumstances, it was said that it was not unreasonable for the defendant to consider that the wife’s version of events would have to be tested in cross-examination. Thus, the justice of the case was said to preclude the making of an indemnity costs order.

5. [14]

   There is no doubt that the wife’s claim faced challenges, given the passage of time and the lack of documentary evidence which had survived. But the wife’s claim was not without contemporaneous records. Nor was the wife’s claim unsupported by the evidence of others.

6. [15]

   The defendant’s submission, at its heart, amounts to the proposition that the defendant was entitled to put the wife to proof of her claim as there was a reasonable prospect that evidence would not be believed and her claim would fail. That may be so, but taking that course also had its risks, including that the wife’s evidence, supported by the surviving contemporaneous documents and the evidence of others, would be accepted (as it was) and his evidence to the contrary would be disbelieved (as it was).

7. [16]

   Having ‘stayed the course’, the wife’s legal costs should be reimbursed on the higher costs basis as she was effectively put to those costs by her husband’s failure to accept her offer to compromise her claim for a lesser sum at an earlier point in the proceedings. In all of the circumstances, I consider his rejection to have been unreasonable and consider it appropriate to make the indemnity costs order sought.

8. [17]

   I note that the husband has since filed an appeal to the Family Court of Australia. On 23 September 2021, I stayed my orders subject to conditions. I note that, on 14 October 2021, the husband approached the Duty Judge, Rein J, to extend the time for compliance with my orders granting a stay. If the stay has since lifted – and I do not know whether it has – the wife may wish to seek a specified gross sum instead of assessed costs, under section 98(4)(c) of the Civil Procedure Act 2005 (NSW), so that her costs may be deducted from the proceeds of sale of the Liverpool townhouse before remitting the balance to the husband. If, however, the stay remains on foot then the wife should have her costs assessed in the ordinary course as there is ample time to do so before the appeal will be heard and determined.

Orders

1. [18]

   For these reasons I make the following orders:

   1. (1)

      Pursuant to rule 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) vary Order 9 made on 3 August 2021 and instead order that the defendant pay the plaintiff’s costs of the proceedings on an ordinary basis up to 5 February 2020 and on an indemnity basis thereafter.

   2. (2)

      Order the defendant to pay the plaintiff’s costs of the plaintiff’s motion filed on 17 August 2021.

   3. (3)

      In the event that the stay ordered on 23 September 2021 by Rees J, as varied on 14 October 2021 by Rein J, lifts, grant liberty to the plaintiff to seek a specified gross sum under section 94(4)(c) of the Civil Procedure Act 2005 (NSW) by serving any affidavits and submissions on the defendant, copied to the Associate to Rees J.

   4. (4)

      In the event that the liberty in Order 3 is exercised, direct the defendant to serve any affidavit and submissions within 21 days thereafter with any such application to be determined on the papers.