Supreme Court New South Wales Medium Neutral Citation: Brylewski v Maclean (No 2) [2024] NSWSC 227 Hearing dates: On the papers Date of orders: 12 March 2024 Decision date: 12 March 2024 Jurisdiction: Common Law Before: Basten AJ Decision: Order that the defendant pay the plaintiffs' costs of the proceedings in the possession list in an amount of $67,500. Catchwords: BANKRUPTCY – civil proceedings – proceedings resolved without order as to costs – sequestration order against estate of unsuccessful party – whether costs order could be made in civil proceedings after sequestration order COSTS – general rule that costs follow the event – whether subsequent events affect success – effect of delay in pursuing costs application – related issue raised in separate unresolved proceedings in Equity Division COSTS – form of order – order sought for assessment on indemnity basis – Calderbank offers by plaintiff – whether defendant unreasonable in failing to accept offers – gross costs order – complexity of case Legislation Cited: Bankruptcy Act 1966 (Cth), ss 58(3), 82 Civil Procedure Act 2005 (NSW), s 98 Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rr 36.16(3A), 42.1 Cases Cited: Brylewski v Maclean [2022] NSWSC 1654 Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; [2007] HCA 56 Hamod v State of New South Wales [2011] NSWCA 375 Maclean v Brylewski [2022] NSWCA 217 Maclean v Brylewski [2023] NSWCA 128 Maclean v Brylewski [2023] NSWCA 173 Category: Costs Parties: Maria Brylewski (First Plaintiff) Tadeusz Brylewski (Second Plaintiff) Jacqueline Maclean (First Defendant) David Raynor (Second Defendant) Emil Radecki (Third Defendant) Representation: Counsel: Mr M Bennett (First and Second Plaintiff) Mr C Adamson (First Defendant) No appearance (Second Defendant) No appearance (Third Defendant) Solicitors: Marsdens Law Group (First and Second Plaintiff) Mr C Adamson (First Defendant) File Number(s): 2021/221464 Publication restriction: N/A JUDGMENT 1. BASTEN AJ: The present matter is a costs application in proceedings heard on 28 November 2022 and resulting in a judgment delivered on 6 December 2022. The proceedings involved an application by the plaintiffs (Maria and Tadeusz Brylewski) for an order for possession of a residential unit on Rome Street, Canterbury. The plaintiffs held a 50% interest in the property and claimed an entitlement pursuant to a 2013 Deed to the remaining 50% interest held by Ms Brylewski's uncle, Emil Radecki (the testator), who died on 17 April 2022. Concurrently with the possession proceeding in this Division, there were proceedings in the Equity Division with respect to probate of a 2010 will, the validity of a marriage between the testator and the active defendant, Jacqueline Maclean, and the validity of a subsequent 2020 will in favour of the defendant. 2. The proceeding in this Division was commenced by the plaintiffs on 3 August 2021. A defence was filed on 28 September 2021. On 6 June 2022 (following Mr Radecki's death) Ms Maclean's solicitor filed a notice of motion seeking a number of orders. By a judgment delivered on 6 December 2022 the notice of motion was dismissed and orders for possession were made in favour of the plaintiffs, subject to certain conditions including an undertaking as to the steps to be taken with respect to the property pending determination of proceedings in the succession list in the Equity Division. [1] No order for costs was made at that stage. Order 4 granted leave to the parties "to seek a variation of the orders, if not by consent, within 14 days of entry of the orders". The orders were originally entered on 16 December 2022. 3. In reliance on that leave, on Monday, 19 December 2022, the plaintiffs' solicitors sent an email to my associate, seeking orders for costs and attaching a copy of their submissions on costs, an affidavit of the solicitor of 13 December 2022 and exhibit RB-4 to that affidavit. The email of 19 December 2022 was also sent to the solicitor acting for Ms Maclean. 4. These chambers were unattended from Friday, 16 December 2022 until late January 2023. There was no contact with the Court registry. 5. I am satisfied that, in so far as an application is required to vary orders by the addition of an order for costs, an application was made within 14 days, both pursuant to the leave reserved in the orders and pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.16(3A). In so far as it was not in the form of a notice of motion as required by the rule, I am able to waive compliance with that aspect of the rule (though not with respect to the limitation period). However, had a notice of motion been filed in proper form, it would, no doubt, have sought appropriate directions to deal with the proposed additional orders. There was no response from the defendant and, unfortunately, no directions were given following the commencement of the new Law Term in 2023. Nor were any directions then sought by the plaintiffs. 6. During the course of 2023 the defendant unsuccessfully pursued (i) an appeal against the judgment of 6 December 2022, (ii) a stay of the execution of the writ for possession and (iii) an appeal from the refusal of the stay. Thereafter there appears to have been an email exchange between the parties in the course of which the solicitor for the defendant indicated that she opposed any costs order, but without providing reasons, followed by a request for reasons to which there was no response. 7. On 7 June 2023 directions were given requiring the defendant to serve any evidence and submissions with respect to the application by 16 June 2023. On 18 September 2023 the plaintiffs' solicitors emailed my associate noting the exchange of correspondence between the parties, and the failure of the defendant to respond in accordance with the directions. On 7 December 2023 a further email was sent to my associate enquiring as to "the status" of my judgment as to costs. 8. The sole response from the defendant's solicitor, on 18 September 2023 had raised issues as to the Court's power to make a costs order, the effect of the delay in seeking to prosecute the application for costs and requesting an opportunity to make fuller and more detailed submissions within two days. 9. The submissions from the defendant were unhelpful, and left it uncertain as to whether there was a sound basis for resisting a costs order. 10. Much of the early history as to the steps taken between the parties was unknown to the Court until December last year. Accordingly, on 11 December 2023 directions were given for the exchange of submissions according to a timetable by which the plaintiffs were to reply by 7 February 2024. That timetable was complied with. However, the material supplied by the parties indicated that, on 6 February 2024, a sequestration order was made in relation to the estate of the defendant on the application of the plaintiffs. There was a further exchange as to the effect of that order on the power of this Court to deal with the outstanding costs application. That issue should be disposed of first. Effect of sequestration order 1. The solicitor for the defendant suggested that the sequestration order stayed all proceedings against the bankrupt. The solicitor for the plaintiffs submitted that, in accordance with the reasoning of the High Court in Foots v Southern Cross Mine Management Pty Ltd, [2] the sequestration order did not prevent the Court dealing with the outstanding issue of costs. 2. The reasoning in Foots supported the plaintiffs' position by way of two steps. The first step was to note that the stay on proceedings and the requirement for leave in s 58(3) of the Bankruptcy Act 1966 (Cth) was limited to enforcing a remedy against the person or property of the bankrupt "in respect of a provable debt": s 58(3)(a). [3] 3. The second step was to consider whether an unsuccessful party in litigation has a contingent liability for costs which would constitute a provable debt where no costs order had in fact been made prior to the bankruptcy. That question turned on the scope of s 82 of the Bankruptcy Act, which rendered provable in a bankruptcy "all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy". The joint reasons of the majority in Foots rejected the proposition that a costs order, which lay in the discretion of the Court, fell within the scope of a "provable debt" as so defined. [4] It follows that there is no constraint on this Court now making a costs order in these proceedings. Should a costs order be made in favour of the plaintiffs? 1. In terms of the orders made on 6 December 2022, dismissing the defendant's notice of motion and requiring that she was required to deliver vacant possession of the property to the plaintiffs, the plaintiffs were wholly successful. That circumstance would warrant an order in their favour pursuant to s 98 of the Civil Procedure Act 2005 (NSW) and UCPR r 42.1. 2. The defendant resisted this conclusion on three broad bases. The first was that the plaintiffs were not in practical terms successful, because, although the defendant had been required to leave the property, the property was neither let, nor sold, as anticipated in order 3. That submission should not be accepted. Whether or not the orders are not, or cannot be, subsequently enforced does not affect the nature of the orders, nor the success of the party in obtaining them. 3. Secondly, the defendant submitted that, on the basis of statements made by the Court of Appeal, none of the issues she wished to raise in the equity proceedings, including as to the validity of the 2013 Deed, were foreclosed by the judgment in this Court. Accordingly, the claim by the plaintiffs for vacant possession having been based on their entitlement under the 2013 Deed, that issue could be (and now has been) raised in the equity proceedings, thereby, in effect, rendering the judgment of this Court interlocutory rather than final and subject to reversal in the equity proceedings. (It appears to have been treated as a final judgment by the defendant when seeking leave to appeal, but nothing turns on that.) The point that no issue estoppel arose from the present proceeding as to the validity of the 2013 Deed, that not having been an issue in the hearing before me, does not render the orders subject to reversal. Whether the defendant may later obtain possession of the unit (or the proceeds of sale) on a basis not raised in this Court does not affect the fact that, on the issues litigated here, the plaintiffs were successful and expended funds to achieve that success. 4. Thirdly, the defendant relied upon the delay in pursuing the application for costs. I agree that the delay is unfortunate, but the evidence does not demonstrate that it has caused unfairness or relevant prejudice to the defendant. There was a timely application for costs which was never abandoned, but consideration of which was delayed in part as a result of the failure of the defendant to respond. It is true that the plaintiffs did not pursue the matter expeditiously, but that appears to have been due to an assumption that all necessary material had been provided and that judgment was reserved. 5. In the absence of any evidence of prejudice, and having regard to the fact that the defendant pursued three unsuccessful appeals from orders made in the Division – the first concerning the listing of her notice of motion together with the application for possession [5] ), the second being an appeal from my judgment [6] and the third an application for leave to appeal from the refusal of a stay of the execution of the writ of possession [7] – in each of which costs were awarded against the defendant, there is no reason to not award the successful plaintiffs the costs of the substantive proceedings on the basis of delay. 6. In contending that she might still succeed on her challenge to the validity of the 2013 Deed in the proceedings in the Equity Division, which were still on foot, and which would remove the basis of the plaintiffs' success in this Court, the defendant also submitted that the costs in the possession proceedings should either be stood over until the equity proceedings are resolved, or should be treated as part of the costs in the equity proceedings. 7. While it is undoubtedly unfortunate that the duplication of proceedings between the two Divisions has increased the complexity of the litigation, that is not a reason to decline to deal with the costs of the possession proceedings; rather it is a reason to dispose of the final issue in relation to those proceedings. 8. Further, none of these reasons support departure from the ordinary outcome, namely that the defendant should pay the plaintiffs' costs. Claim for costs on an indemnity basis 1. The plaintiffs seek an order for payment of costs to be assessed on an indemnity basis from 2 November 2021 (or 16 December 2021) being dates on which they made written offers to the defendant, to the effect that if she vacated the property within 14 days, they would not seek costs. 2. The element of compromise in these offers was limited. Each was in the form of a Calderbank offer, but it is by no means clear that the defendant was unreasonable in failing to accept either of them. There was interlocutory skirmishing which, as the plaintiffs noted, led to discussion in the 6 December judgment as to the steps which might have been taken by the defendant to challenge the validity of the 2013 Deed in this Court. Her failure to take such steps, which are not said to give rise to an Anshun estoppel against the defendant, do not demonstrate unreasonableness in failing to accept the plaintiffs' offers. There was, and remains, a live issue which may reasonably have warranted failure to accept the offers. I am not satisfied that the defendant acted unreasonably, based on the material before me, and reject the application for indemnity costs. Gross costs order 1. Finally, the plaintiffs seek a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act. 2. On the face of it, there is much to be said for making a lump sum costs order. As the Court of Appeal stated in Hamod v State of New South Wales [8] such an order "is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment". 3. There is undoubtedly complexity in the present case: which is largely a function of the multiplicity of proceedings, as well as the several issues. The issues in the possession proceedings were relatively confined. However, they were accompanied by a number of interlocutory judgments, including, as noted above, three judgments of the Court of Appeal. There were concurrent proceedings in the Equity Division, succession list. Separate costs orders have been made in respect of some judgments, including those in the Court of Appeal. No doubt some costs were properly accounted for in relation to the possession list proceedings, even though they appear to have related to steps being taken in the succession list proceedings. However, I am satisfied that a perusal of the invoices annexed to the affidavit of Roland Blackstone of 13 December 2022, relied on in support of the gross costs order, allows a rough assessment of costs recoverable on a party/party basis and purely in relation to the possession proceedings in the Division, up to 6 December 2022. I note that the fees were increased by the vacation of April hearing dates at short notice as a result of the death of the testator shortly before the hearing. However, accepting that the matter was ready for hearing by mid-April, a significant portion of the solicitor's costs incurred between that date and the hearing in November could not readily be justified on a party/party basis. 4. The amount invoiced by the plaintiffs' solicitors is a sum of $98,172. Of that amount, $71,747 are for the solicitors' professional fees, an amount of $3,012 for sundry disbursements and $19,648 for counsel's fees. 5. I accept that counsel's fees appear to relate to the possession list proceedings only and are reasonable. Making an allowance for solicitor/client costs which would not be recoverable on a party/party basis, and for a degree of apparent overlap with the succession list proceedings, I would allow an amount of $45,000 for the solicitors' professional fees, plus disbursements of $3,000. In round figures, with $19,500 for counsel's fees, that would give a figure of $67,500. 6. There was no opposition from the defendant as to the making of a gross sum costs order in the event that costs were payable. Nor was any particular issue taken with the amount of the invoices set out in the affidavit. Accordingly, an order should be made in the amount of $67,500. Order 1. For these reasons, I make the following order: Order that the defendant pay the plaintiffs' costs of the proceedings in the possession list in an amount of $67,500. ********** Endnotes 1. Brylewski v Maclean [2022] NSWSC 1654. 2. (2007) 234 CLR 52; [2007] HCA 56. 3. Foots at [14]. 4. Foots at [37] and [66] (Gleeson CJ, Gummow, Hayne and Crennan JJ). 5. Maclean v Brylewski [2022] NSWCA 217. 6. Maclean v Brylewski [2023] NSWCA 128. 7. Maclean v Brylewski [2023] NSWCA 173. 8. [2011] NSWCA 375 at [817]. 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