Supreme Court New South Wales Medium Neutral Citation: Wallis v Rudek (No 2) [2020] NSWSC 215 Hearing dates: 5 March 2020 Date of orders: 05 March 2020 Decision date: 05 March 2020 Jurisdiction: Equity Before: Parker J Decision: See [14] Catchwords: COSTS – Party/Party – Exception to general rule that costs follow the event – Offer of compromise/ Calderbank offers – unreasonable rejection – plaintiffs not prepared to agree to settlement which did not give right to live in property Cases Cited: Calderbank v Calderbank [1975] Fam 93 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Category: Costs Parties: Yuri Wallis (First Plaintiff) Olga Wallis (Second Plaintiff) Suzanne Rudek (Defendant) Representation: Counsel: B Oliak/DE Thomas (First and Second Plaintiffs) J Bennett (Defendant) Solicitors: P Dobrich & Co (First and Second Plaintiffs) Optic Lawyers (Defendant) File Number(s): 2018/191080 Publication restriction: Nil Judgment – EX TEMPORE Revised and reissued on 11 March 2020 1. I delivered my principal judgment in these proceedings orally on 26 February 2020 and the revised version of my judgment was published earlier today: Wallis v Rudek [2020] NSWSC 162. This supplementary judgment assumes familiarity with my principal judgment. 2. The case was listed before me this afternoon for the purpose of making orders for the disposition of the proceedings in accordance with my principal judgment. Following some debate between the parties, a form of final orders to be made has been settled, except for the question of costs; and I must now deal with that question. 3. Counsel for the Wallises sought an order that Mrs Rudek, as defendant, pay their costs of the proceedings. Counsel submitted that the Wallises had been successful in obtaining relief in the proceedings in the form of a judgment by way of equitable compensation, which was calculated for the purpose of the final orders as being approximately $124,000. Counsel submitted that in the circumstances, costs should follow the event. 4. For his part, counsel for Mrs Rudek sought an order that the Wallises pay Mrs Rudek's costs of the proceedings, and that they do so on an indemnity basis. This contention was based on a Calderbank offer which was made prior to the commencement of the proceedings. The letter of offer was dated 17 April 2018. It referred to earlier correspondence in March. That correspondence is not in evidence but it can be seen from the letter of offer that the solicitors for the Wallises were advancing claims along the same lines as the claims which were ultimately pleaded and litigated in these proceedings. 5. The letter of offer set out the facts and canvassed the merits of the claims at some length, arguing that the Wallises should not succeed. The letter then referred to the offer made orally to the Wallises in February 2018, to pay them $200,000 to leave the premises (see the principal judgment at [96]). 6. Although I did not refer to it in my principal judgment, there was evidence before me that Mr Wallis rejected that offer. In doing so, he said that the figure was too low and that Mrs Rudek owed interest on top. But he also said that the Wallises were not going anywhere and the only way they would leave the property would be through court processes. 7. The letter of offer referred to this response and stated that as a result of Mr Wallis' behaviour, the Wallises' continued residence at the property was untenable. It went on to make an offer in the sum of $191,432.93 all inclusive "to resolve this matter now". 8. The letter explained that the figure was calculated by deducting from the oral offer of $200,000, the sum of $8,567.07, which was the outstanding balance under the personal loan which had been taken out by Mrs Rudek at the Wallises' behest (see my principal judgment at [75]). The letter continued: Once your clients agree to the above offer, our client will proceed with obtaining the necessary finance to pay them the above sum. 1. The letter invoked the principles in Calderbank v Calderbank [1975] Fam 93 and stated that the offer was open for acceptance for 28 days. There appears to have been no response within the 28 day period, but on 5 June, the solicitors acting for the Wallises responded. They apologised for the delay in replying, but said that this had been necessary in order "to obtain and review all of the available evidence and confer in detail with Mr and Mrs Wallis". 2. On behalf of the Wallises, the solicitors rejected Mrs Rudek's Calderbank offer without making any counter‑offer. 3. The solicitor went on, in summary form, to respond to the arguments in the letter of offer that the Wallises had no claim. The solicitors made it clear that the Wallises wished to continue to live in the property undisturbed, under what they described as "the current arrangements". Nowhere in their letter was there any recognition that the Wallises might have only a monetary claim, nor was there any attempt to quantify the additional "interest" to which Mr Wallis had referred in rejecting the oral offer. 4. An offer of compromise made under the Rules has presumptive costs consequences, provided that the ultimate judgment in the proceedings is no less favourable or no more favourable to the offeror or offeree party (as the case may be). Where an informal Calderbank offer is made, the position is different. Such an offer is only effective for cost purposes if the refusal of the offer was unreasonable, and the onus for demonstrating its unreasonableness rests on the offeror party who seeks to rely on it. 5. The mere fact that the ultimate judgment proves to be less favourable than the terms of the offer does not of itself mean that refusal of the offer, which must be judged as at the time the offer was made, was unreasonable. But at the same time, the Court does not engage in a minute investigation into the information and evidence available to the offeree as at the date of the offer: see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344. The question of reasonableness should be determined, in my opinion, as a matter of substance and looking at the circumstances of the case at the time of the offer in the broad. 6. I think it is clear from the evidence before me in the proceedings, as well as from the way in which they were conducted, that throughout, the Wallises' objective was to secure their continued residence in the property. The letter from their solicitors of June 2018 in response to the offer simply bears that out. Although the Wallises have succeeded in obtaining a judgment by way of equitable compensation, this was very much a final fall-back on their part. The whole thrust of their case, at an evidentiary level, involved seeking to establish that a promise had been made to them which would allow them to remain in the property indefinitely. 7. Counsel for the Wallises pointed out that the grant of equitable relief is discretionary and submitted that the Court might readily have awarded a larger amount by way of equitable compensation, perhaps calculated by reference to the current value of the property. One difficulty with this submission is that there was, in fact, no evidence before me of the current value of the property; and at no stage in the proceedings before me was that measure of compensation put forward. This only reflects the fact to which I have already referred, namely that, for the Wallises, any award of any amount of equitable compensation was a last resort. 8. I think it is fair to say that the reason why the proceedings were brought in the face of the offer was that the Wallises were not prepared to agree to any settlement which did not give them the right to continue to live at the property. The substantial issue litigated in the proceedings was whether they had such a right. 9. On that issue the Wallises, on my findings, failed. In particular, I found that no promise was made to the Wallises in the terms which they alleged. I also found that even if a promise sufficient to support a promissory estoppel had been made, the behaviour of the Wallises, and Mr Wallis in particular, was such that the Court would not grant relief which would allow them to continue to live at the property as they sought. 10. It is thus clear in hindsight that the costs of these proceedings are attributable to the Wallises' determination, against the merits as they were revealed by the evidence, to remain in the property. The result of the case has demonstrated the unreasonableness of that position. In my view, therefore, it is appropriate to make a special costs order against the Wallises on account of the offer recorded in the letter of 17 April 2018 and to order that the Wallises pay Mrs Rudek's costs of the proceedings (including the costs of the cross‑claim) on an indemnity basis. 11. The orders of the Court are: On the undertaking of the Second Plaintiff to repay all rental assistance welfare payments received by her in connection with her occupation of 2 Schofield Parade, Pennant Hills NSW 2120 (the Property), together with any interest and penalties associated with such repayments, the Court: 1. Orders the defendant to pay the plaintiffs the sum of $124,287.75 ("Judgment Sum"). 2. Orders the Judgment Sum to be paid into Court within 28 days of the date of these orders, and grant liberty to apply with respect to these monies, on two days' notice. 3. Declares that the defendant is entitled to vacant possession of the Ground Floor Unit of the building at the Property. 4. Orders the plaintiffs to provide vacant possession of the Ground Floor Unit within 28 days from the date of these orders, subject to any further order of the Court. 5. Declares that the plaintiffs are the lawful owners of the chattels listed in Annexure A to the Statement of Claim (the Chattels). 6. Orders that the defendant makes the Chattels available for collection by the plaintiffs at a time during regular business hours to be notified by the plaintiffs (or through their solicitors) to the defendant's solicitors. 7. Orders the plaintiffs to remove the Chattels within 28 days from the date of these orders. 8. Order that first plaintiff not harass, intimidate, stalk or assault the defendant, her husband Vass Rudek, or her children between the date of these orders and the date upon which the plaintiffs vacate the Property. 9. The defendant has liberty to apply for a stay of execution of any orders pending appeal. Such application to be returnable before me at 4pm on 30 March 2020. 10. Order that the plaintiffs pay the defendant's costs of the proceedings (including the cross-claim) on an indemnity basis. ******* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 March 2020