Peter Kulczycki v Public Trustee; Michael Kulczycki v Public Trustee; Peter Kulczycki v Public Trustee (No 2)
[2014] ACTSC 6
•31 January 2014
PETER KULCZYCKI v PUBLIC TRUSTEE
MICHAEL KULCZYCKI v PUBLIC TRUSTEE
PETER KULCZYCKI v PUBLIC TRUSTEE (NO 2)
[2014] ACTSC 6 (31 January 2014)
COSTS – family provision and maintenance – offer of settlement – where offer was not clear, precise and certain – failure to accept not unreasonable – costs incurred by party joined late in proceedings – party preparing affidavits read by another party – whether costs recoverable
Calderbank v Calderbank [1976] Fam 93
Kemp v Ryan [2012] ACTCA 12
Singer v Berghouse (1994) 181 CLR 208
No. SC 308 of 2012
No. SC 53 of 2013
No. SC 227 of 2013
Judge: Master Mossop
Supreme Court of the ACT
Date: 31 January 2014
IN THE SUPREME COURT OF THE )
) No. SC 308 of 2012
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:PETER KULCZYCKI
Plaintiff
AND:PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY (AS EXECUTOR OF THE ESTATE OF KATARYNA KULCZYCKI)
First Defendant
AND:MICHAEL KULCZYCKI
Second Defendant
ORDER
Judge: Master Mossop
Date: 31 January 2014
Place: Canberra
THE COURT ORDERS THAT:
Orders 3 and 4 made on 29 November 2013 are discharged and substituted with:
3. Michael Kulczycki’s costs of his application for costs and the preparation of the following affidavits be paid out of the estate:
(a) Michael Kulczycki dated 11 April 2013
(b) Joanne Kulczycki dated 11 April 2013
(c) Tony Kulczycki dated 23 April 2013
(d) Deborah Tighe dated 24 April 2013
4. Except as provided in order 2 and 3 there is no order as to costs.
IN THE SUPREME COURT OF THE )
) No. SC 53 of 2013
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:MICHAEL KULCZYCKI
Plaintiff
AND:PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY (AS EXECUTOR OF THE ESTATE OF KATARYNA KULCZYCKI)
Defendant
ORDER
Judge: Master Mossop
Date: 31 January 2014
Place: Canberra
THE COURT ORDERS THAT:
Order 5 made on 29 November 2013 is discharged.
IN THE SUPREME COURT OF THE )
) No. SC 227 of 2013
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:PETER KULCZYCKI
Plaintiff
AND:PUBLIC TRUSTEE FOR THE AUSTRALIAN CAPITAL TERRITORY (AS EXECUTOR OF THE ESTATE OF KATARYNA KULCZYCKI)
Defendant
ORDER
Judge: Master Mossop
Date: 31 January 2014.
Place: Canberra
THE COURT ORDERS THAT:
Order 4 made on 29 November 2013 is discharged.
In my decision on 29 November 2013 (Kulczycki v Public Trustee [2013] ACTSC 230) I made orders in relation to costs which would not take effect if any party notified my associate within seven days that it wished to tender evidence in relation to costs or make further submissions in relation to costs. Michael Kulczycki indicated that he did wish to make submissions in relation to costs and the parties agreed on a timetable in relation to filing affidavit material and written submissions.
In summary, the submissions of the parties are as follows. Michael submits that he should be entitled to the costs incurred in proceedings 308 of 2012, the proceedings in which Peter claimed that the Narrabundah property was owned by him rather than the estate. He points to an arrangement made with the Public Trustee in relation to those proceedings that the Public Trustee would only file limited affidavits and additional affidavits relevant to the matter would be prepared and filed by Michael but would be served by the Public Trustee. Michael submits that all but two of the affidavits read at the hearing were prepared and filed by his solicitors, not the Public Trustee. He submits that the costs of preparing this material would otherwise have been incurred by the Public Trustee. Michael submits that the Public Trustee took a relatively passive role in the proceedings and that Michael was the real contradictor of Peter’s claim.
Peter, on the other hand, submits that the arrangement between Michael and the Public Trustee was “highly unusual”. He submits that Michael should not have his costs of preparing affidavits for proceedings 308 of 2012. He submits that the conduct of the Public Trustee in permitting Michael to prepare the affidavits was inappropriate and should lead to the Public Trustee being denied its costs or limited to costs on a solicitor and client basis rather than an indemnity basis.
Peter also submits that as a consequence of two offers made to Michael or the Public Trustee pursuant to the principles in Calderbank v Calderbank [1976] Fam 93 any award of costs to Michael should be limited to costs incurred prior to 18 December 2012 and that after that date Peter should be entitled to his costs of the proceedings.
The Public Trustee made some submissions in response to the submissions made by Peter that the Public Trustee should not receive its costs on an indemnity basis but rather on a solicitor and client basis. It submits that there is no reason that it should not receive its costs on an indemnity basis and that, whether or not it has a costs order to that effect, unless it has acted obstructively, unreasonably or in pursuance of a personal interest, it retains its entitlement to an indemnity from the estate.
Consideration
Offers of settlement
I will deal first with the settlement offers made by Peter. Proceedings 308 of 2012 commenced on 25 September 2012. On 12 December 2012, Michael, Peter and Tony Kulczycki as well as the Public Trustee participated in a mediation. That mediation did not resolve the then extant proceedings (308 of 2012) or the anticipated Family Provision Act claims. On 18 December 2012 Peter made an offer addressed to the Public Trustee to resolve “the matter” on the basis that Peter would:
1. relinquish any claim on the residue;
2. pay the total sum of $30,000 to Michael; and
3. sell his motor vehicle (valued at around $21,000) and pay the proceeds to Michael.
Although there is nothing to this effect in terms of the letter itself, the affidavit of Lorraine White filed in support of the application for costs says:
The offer was made on the basis that at least $62,000 was available in the residue after the Public Trustee was paid and on the understanding that Mr Tony Kulczycki had also agreed to relinquish his share of the residue. The effect of the offer was that Michael Kulczycki would receive between $45,000 and $46,000 of the residue plus cash from Peter of $51,000. The remaining 25% share of the residue was to be paid to the two children of the parties deceased brother. The offer was put on the basis that this would pay out Michael’s mortgage of $96,000 (as advised by Michael's solicitor) and was made in accordance with the principles enunciated in Calderbank v Calderbank.
These matters were not made explicit in the terms of the letter.
The evidence does not directly disclose that this offer was communicated to Michael but it is likely that it was. There is no evidence that the offer was rejected by the Public Trustee but if it was not then it was not accepted and lapsed in accordance with its terms.
The terms of the offer are not “clear, precise and certain” as referred to in the authorities cited in Kemp v Ryan [2012] ACTCA 12 at [13]. In particular, it is not clear from the terms of the letter, as it should have been, precisely what proceedings or anticipated proceedings were being compromised. Further, there is nothing in the offer that deals with the legal costs of the proceedings that were then on foot. There is no doubt that the Public Trustee had incurred recoverable legal costs at that point and likely also that Michael had done so in relation to his anticipated family provision claim. That issue and any other issues arising out of the loose terms of the offer were simply left to the “execution of a suitable deed of compromise and settlement” to which the offer was subject. In my view the offer was not clear enough for the principles derived from Calderbank v Calderbank to apply. However, as I will explain below, even if those principles did apply the non-acceptance of the offer would not warrant denying Michael the costs of his family provision claim.
On 2 January 2013 Michael made an offer to Peter. Although not explicit, the offer appears to be one to settle the proceedings then on foot as well as anticipated Family Provision Act claims. The offer made by Michael involved the Narrabundah property being sold and the proceeds split on the basis of 50% going to Michael and 50% going to Peter. Alternatively it involved half of the value of the Narrabundah property being paid to Michael. Peter rejected that offer on 3 January 2013.
On 18 October 2013, shortly before the commencement of the hearing, a further offer was made by Peter to both Michael and the Public Trustee. Peter’s offer was that all three proceedings then on foot would be settled on the basis that Peter would:
1. Relinquish any claim on the residue;
2. Pay the total sum of $50,000 to Michael; and
3. Each party to pay their own costs.
The ultimate outcome of the proceedings has been that Peter’s claim in proceedings 308 of 2012 was unsuccessful, his Family Provision Act claim was unsuccessful and Michael’s Family Provision Act claim was successful and led to an award of $95,000.
If the factual matters deposed to in the affidavit of Lorraine White (quoted at paragraph 7 above) are accepted then the value of the offer made by Peter is a payment of between $96,000 and $97,000 by Peter to Michael. Although the letter is not clear, it is likely that this was intended to settle all proceedings both existing and contemplated between Michael, Peter and the Public Trustee. This compares with the award of $95,000 to Michael plus an order for at least some of the costs of his Family Provision Act claim.
Taking all of the proceedings together, I am not satisfied that Peter’s offer represented a more favourable outcome than Michael has achieved in the proceedings.
First, the dollar outcome is said to have been based on an assumption, not articulated in the offer and not demonstrated in the evidence, that Tony Kulczycki either had at that time or would have in the future relinquished any claim upon the residue of the estate for the purposes of facilitating such a settlement. Second, the valuation of the motor vehicle was necessarily imprecise and there was no assurance that the estimated value of $21,000 would be achieved. Any risk that the estimated value was not achieved would lie with Michael rather than Peter. Third, there was no accounting for the legal costs of the Public Trustee or any legal costs that have been incurred by Michael in relation to his anticipated Family Provision Act claims.
As a consequence it is not strictly necessary to consider whether Michael’s refusal to accept the offer communicated to him by the Public Trustee was unreasonable. However, I am not satisfied that the rejection or non-acceptance of the offer made was unreasonable so as to deprive Michael of his costs after the date of the offer. The offer was made to the Public Trustee, not Michael. Although the evidence is not clear, it appears that the offer was communicated by the Public Trustee to Michael. I accept that if Michael and Tony had accepted the offer then it is likely that the Public Trustee would also have accepted the offer and the proceedings and anticipated proceedings would have resolved on the terms of the offer.
Even if the offer is interpreted in the manner most favourable to Peter’s current position which, on the terms of the letter, I do not think is justified, I do not consider that the failure to accept the offer was unreasonable. Plainly enough in a case like this, once the first stage identified in Singer v Berghouse (1994) 181 CLR 208 at 208-209 is passed there is a discretionary judgment to be made as to the appropriate amount to provide to a claimant. That can obviously involve a range of outcomes. In the present case, on a best case scenario, the offer was $1,000 or $2,000 better than the result which was actually achieved but included no component in relation to costs incurred by Michael or the Public Trustee. It appears to have been subject to risks that would be passed to Michael relating to the sale of his motor vehicle. The offer was contingent upon the negotiation of a “suitable” deed of settlement and compromise and hence not clearly open to immediate acceptance. In those circumstances I am not satisfied that the conduct of Michael in rejecting it was unreasonable so as to warrant denying him his costs after the date of the expiry of the offer.
In relation to the offer of 18 October 2013 I am not satisfied that this offer was more favourable than the outcome achieved by Michael at the hearing. The cash payment is less than achieved at trial, it has not been shown that the relinquishment of any claim to the residue would have led to the result at trial being bettered and there is no allowance for costs.
Costs in proceedings 308 of 2012
At the interlocutory stages of the proceedings prior to the commencement of the family provision applications there was an application by the Public Trustee to join Michael as the second defendant in proceedings 308 of 2012. This application was not determined and was not reconsidered after the commencement by Michael and Peter of their respective family provision applications. The formal status of Michael in proceedings 308 of 2012 again became contentious at the commencement of the hearing. Ultimately at the conclusion of the evidence I ordered that Michael be joined as a defendant in proceedings 308 of 2012 and indicated that in relation to costs I would “take into account the circumstances and the reasons for his joinder” as well as giving the parties an opportunity to make submissions.
In relation to the costs incurred by Michael in proceedings 308 of 2012, there was no strict necessity for Michael to be involved in those proceedings. The Public Trustee as executor of the estate was perfectly able to conduct the defence of the proceedings. However, as a practical matter in circumstances where the proceedings were being heard together, Michael was separately represented and was going to be involved in the hearing in any event, it therefore made some sense for Michael and his solicitors to reach the agreement in relation to preparation of affidavit material that they did. Had that agreement not been reached the Public Trustee would have been obliged to prepare affidavits itself in circumstances where the deponents of those affidavits had prepared further affidavits for the purposes of Michael’s Family Provision Act claim. Some or all of them were separately represented and one, Michael, was pursuing a separate claim against the Public Trustee. Four of the affidavits prepared by Michael’s solicitors were in fact read by the Public Trustee at the hearing. They were the affidavits of Michael Kulczycki dated 11 April 2013, Joanne Kulczycki dated 11 April 2013, Tony Kulczycki dated 23 April 2013 and Debra Tighe dated 24 April 2013. In fact at the hearing, although generally affidavit evidence in one proceeding was admitted in each, significant parts of these affidavits were limited in their use to the family provision proceedings, a fact which, having regard to the orders made in favour of Michael in those proceedings, supports his claim to recover their costs. The evidence of Michael’s solicitor is that the affidavit of Michael Kulczycki dated 26 March 2013 was prepared by Michael’s solicitors. It was in fact filed by the Public Trustee.
While it may reasonably be said that in preparing the affidavits Michael acted as a volunteer seeking to advance his own interests but with no assurance that he would be entitled to recover any of his costs in doing so where he was not a party (at that stage) to the proceedings, I think that because the arrangement between the Public Trustee and Michael was a reasonable one and did not overall increase the costs incurred in litigation, Michael should be entitled to recover the costs of preparing those affidavits from the estate. I do not consider that it is appropriate that the costs order in favour of Michael extend beyond the affidavits that were prepared and read. In circumstances where the Public Trustee was at the relevant times the only named defendant in the proceedings, I do not think it appropriate to make an order which would increase the burden of costs upon the estate other than in the way that I have indicated. In relation to the affidavit of Michael Kulczycki dated 26 March 2013 this is an affidavit filed by the Public Trustee which the Public Trustee always intended to file. It appears to me that any involvement by Michael’s solicitors was volunteered and I am not satisfied that Michael should be entitled to the costs of the involvement of his solicitors in its preparation.
As will be apparent, I do not accept Peter’s submission that there was an impropriety on the part of the Public Trustee in the manner in which it approached proceedings 308 of 2012.
As a result, in my view it is appropriate that the costs of preparing the affidavits that were read in proceedings 308 of 2012 be recoverable by Michael. In my view, Michael should be entitled to the costs of the application for costs and the Public Trustee should have its costs also because it was required to respond to the submissions on behalf of Peter. Those costs should be paid from the estate, the latter being recoverable pursuant to the costs orders already made.
Therefore I will discharge orders 3 and 4 made on 29 November 2013 and substitute instead:
3. Michael Kulczycki’s costs of his application for costs and the preparation of the following affidavits be paid out of the estate:
(a) Michael Kulczycki dated 11 April 2013
(b) Joanne Kulczycki dated 11 April 2013
(c) Tony Kulczycki dated 23 April 2013
(d) Deborah Tighe dated 24 April 2013
4. Except as provided in order 2 and 3 there is no order as to costs.
In relation to proceedings 53 of 2012, no variation of the costs orders is appropriate and therefore I will simply discharge order 5.
Similarly, in proceedings 227 of 2013, no variation of the costs orders is appropriate and I will therefore simply discharge order 4.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master Mossop.
Associate:
Date: 31 January 2013
Counsel for Peter Kulczycki: T Crispin
Solicitors for Peter Kulczycki: Baker, Deanne & Nutt
Counsel for Michael Kulczycki: C M Lawrence
Solicitors for Michael Kulczycki: Meyer Vandenberg
Counsel for the Public Trustee: W L Sharwood
Solicitor for the Public Trustee: Snedden Hall & Gallop
Date of hearing: Written submissions dated 11, 16, 17 December 2013
Date of judgment: 31 January 2014
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