Sandstrom v FSS Trustee Corporation (No. 2)

[2020] NSWSC 581

Supreme Court

New South Wales

Medium Neutral Citation:	Sandstrom v FSS Trustee Corporation & Anor (No. 2) [2020] NSWSC 581
Hearing dates:	27 March 2020
Date of orders:	19 May 2020
Decision date:	19 May 2020
Jurisdiction:	Equity
Before:	Slattery J
Decision:	Limited stay of proceedings granted pending any possible appeal No order for indemnity costs made.
Catchwords:	CIVIL PROCEDURE – Stay of proceedings – Pending appeal – the plaintiff is successful in a TPD claim against an insurer defendant – defendant appeals – judgment in excess of $750,000 – plaintiff has no property in her name – whether a stay should be granted pending appeal.   COSTS – Party/Party – Exceptions to general rule that costs follow the event – Offers of compromise/Calderbank offers - plaintiff issues Calderbank letter offering to settle for $300,000 plus costs – plaintiff successful in a greater sum – whether it was unreasonable for the defendant not to have accepted the plaintiff’s offer.
Legislation Cited:	Civil Procedure Act 2005, s 135 Uniform Civil Procedure Rules 2005, r 51.9
Cases Cited:	Evans Shire Council v Richardson (No. 2) [2006] NSWCA 61 Sandstrom v FSS Trustee Corporation & Anor [2020] NSWSC 200 Penrith Whitewater Stadium Ltd & Anor v Lesvos Pty Ltd & Anor [2007] NSWCA 103
Category:	Consequential orders
Parties:	Plaintiff: Rebecca Sandstrom First Defendant: FSS Trustee Corporation ACN 118202672 Second Defendant: Metlife Insurance Limited
Representation:	Counsel: Plaintiff: D. E. Baran; M. B. Eirth Second Defendant: G.M. Watson SC; C. Purdy   Solicitors: Plaintiff: George Petar Draca, Norwest Lawyers Second Defendant: Matthew Carter Harding, HWL Ebsworth Lawyers
File Number(s):	2015/291949
Publication restriction:	No

Judgment

1. This is the Court’s second judgment in these proceedings. In the Court’s first judgment it declared that Metlife Insurance Limited’s (“MetLife”) 2015 determination denying the plaintiff entitlements on the basis that she was totally and permanently disabled (“TPD”), was void and of no effect, declared the plaintiff was TPD and ordered the defendant insurer to pay two TPD entitlements to the FSS Trustee Corporation to be held on account of the plaintiff’s claims: Sandstrom v FSS Trustee Corporation & Anor [2020] NSWSC 200.

2. This judgment should be read with the Court's first judgment. Matters, persons and events are referred to in both judgments in the same way.

3. As a result of motions filed after the first judgment, the parties contested two post judgment issues: (1) whether there should be a stay upon the Court's judgment pending appeal; and (2) whether the defendant should pay the plaintiff's costs on the indemnity basis from March 2018, by reason of the service of a Calderbank letter at that time.

4. Written submissions were prepared on each side by Mr D. Baran and Mr M. Eirth for the plaintiff and by Mr C. Purdy on behalf of the defendant. The submissions were comprehensive on both sides and there was no need for an oral hearing. The Court has therefore dealt with the matter in Chambers.

5. The parties were also at issue about questions of interest upon the total judgment sum of $752,818 (being $582,718 payable under the PBRI Policy and $170,100 payable under the FSS Policy). But the parties have been able to resolve that issue and orders were entered by consent on 6 May 2020.

(1) Should a Stay Pending Appeal be Granted?

6. MetLife seeks a stay pending appeal pursuant to Civil Procedure Act 2005, s 135 of the orders the Court made with its first judgment on 9 March 2020. MetLife filed a Notice of Intention to Appeal on 23 March 2020. The time for filing a Notice of Appeal now expires on 9 June 2020: Uniform Civil Procedure Rules 2005 (“UCPR”), r 51.9. MetLife only seeks a stay beyond 9 June 2020 if it files a Notice of Appeal by that date. Otherwise the stay which it proposes would terminate on that date. If it does file a Notice of Appeal it seeks that the proposed stay remains in force until determination of the appeal by way of judgment on or settlement of the appeal.

7. The granting or refusal of the stay under Civil Procedure Act, s 135 is discretionary, and the balance of convenience is an important consideration in the exercise of that discretion. The principles applicable to the grant of stays under Civil Procedure Act, s 135 are conveniently summarised by McColl JA in Penrith Whitewater Stadium Ltd & Anor v Lesvos Pty Ltd & Anor [2007] NSWCA 103 at [18] – [20] where her Honour said:

“18.   The overriding principle in an application for a stay is to ask what the interests of justice require: New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83] per Spigelman CJ (Meagher JA and Sheller JA agreeing).

19. The detailed principles concerning the grant of a stay are set out in Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 at 694:

a.   Where there is a risk that an appeal will prove abortive if the appellant succeeds and a stay is not granted, the Court will normally exercise its discretion in favour of granting a stay;

b.   the onus is upon the applicant to demonstrate a proper basis for a stay;

c.   it is a matter of discretion whether the Court grants a stay and if so as to the terms which would be fair as part of the granting of a stay;

d.   what is important in considering whether or not a stay ought be granted is the balance of convenience and the competing rights of the parties before it;

e.   it is not necessary that special or exceptional circumstances should be made out; it is sufficient for the applicant to demonstrate a reason or an appropriate case to warrant the exercise of discretion in its favour.

20.   Since a stay will prevent the judgments being enforced while the appeal is pending, the Court should endeavour to preserve the status quo by protecting the judgment creditor from the risk of loss: McLean Tecnic v Digi-Tech; Kalifair v Digi-Tech [2002] NSWCA 383; (2002) 55 NSWLR 737 at [28].

…”

8. Here MetLife argues that there is a risk that the appeal will prove abortive if MetLife succeeds and a stay is not granted because the payment of the money to the plaintiff will carry with it the risk that it may not be repaid. MetLife accepts it bears the onus of demonstrating a proper basis for the stay.

9. The circumstances that enlivened MetLife's concern that an appeal may prove abortive if successful is the present and prospective asset and liability position of Ms Sandstrom. It is not in contest that she owns no real estate in her own name, that she is presently in receipt of workers compensation payments and that she is not employed for remuneration outside the home.

10. The plaintiff entered into a deed with the New South Wales Commissioner of Police (“the Commissioner”) on 27 June 2011, which has the effect that if she received a TPD benefit under the judgment, she must repay to the Commissioner within 14 days an amount of $503,879. This means that apart from the separate amounts of interest that have been agreed to be due to her, the plaintiff will receive a net benefit of $248,939 from the capital sum due under the judgment.

11. MetLife’s arguments on this issue are persuasive. MetLife argues that if it were to be successful on the appeal and in the meantime the judgment sum has been paid to Ms Sandstrom, she will be required within 14 days to comply with the deed with the Commissioner and the judgment sum will be out of her hands. Moreover, she will be in a position to apply the balance of the judgment sum as she pleases. This will have the result that a very substantial component of the judgment sum is likely to be not readily recoverable from her in the event that the defendant insurer is successful on the appeal.

12. Although MetLife has not provided a draft Notice of Appeal, its submissions have set out the general grounds of appeal that it might rely upon. The proposed appeal is not unarguable.

13. In reply, the plaintiff submits the case has gone on for a long time and she is entitled to the judgment sum now. She has such an entitlement but that it is still subject to the legal principles that govern stays.

14. This is a case where a stay is appropriate. The plaintiff has not offered security over real estate to support the repayment of the judgment sum in the event the plaintiff is unsuccessful on the appeal. Nor is she expected to do so. No other undertaking not to deal the money has been given on the plaintiff’s behalf. But even if such an undertaking had been given, the plaintiff will still incur a liability to remit the judgment sum to the Commissioner upon its receipt. There is a significant prospect that if paid to the plaintiff in the short term, the judgment sum may become irrecoverable for that reason, in the event that she is unsuccessful on appeal.

15. The Court will grant a stay. But it will only be until and on terms that the defendant files a Notice of Appeal by 9 June 2020. If the defendant does not do that, the stay will expire. If the defendant does file a Notice of Appeal, the stay will continue until the resolution of the appeal by judgment or settlement.

(2) Should Indemnity Costs be Ordered?

16. Ms Sandstrom and MetLife attended a mediation on 20 March 2018. The mediation was unsuccessful. But on that day Ms Sandstrom served a Calderbank letter upon MetLife, which offered to resolve the matter on the basis that MetLife paid her the sum of $300,000 inclusive of interest and costs, together with the discharge of all prior costs orders. The offer expired on 28 March 2018.

17. As a result of the first judgment, Ms Sandstrom has achieved a better outcome than this offer. She now seeks indemnity costs from 29 March 2018. But MetLife contends that she has not made out the basis for an indemnity costs order upon the expiry of a Calderbank letter.

18. The applicable principle is that the offeror of a Calderbank letter must establish that the offeree’s rejection of the offer was unreasonable in the circumstances: Evans Shire Council v Richardson(No. 2) [2006] NSWCA 61 at [26].

19. MetLife points out that two components of Ms Sandstrom’s evidence, which played an important part in the Court’s reasoning in the first judgment, were not available in March 2018 when the Calderbank offer was made. First, Mr Abbott’s statement had not been served. As the Court’s first judgment shows, the assessment of Mr Abbott’s evidence was an important ingredient in the Court’s acceptance of the plaintiff’s evidence.

20. The other component of the plaintiff’s evidence was the oral evidence of Dr Wilkins. His written evidence did not address the question of whether Ms Sandstrom’s condition was unlikely to respond to treatment as thoroughly as did his oral evidence in response to detailed questioning on the issues. His oral testimony was an important basis for the Court’s reasoning that the plaintiff was TPD, as the first judgment shows.

21. Ms Sandstrom submits that there was nothing new or remarkable about this evidence. But MetLife’s argument on this issue better reflects the place of these two pieces of evidence in the reasoning in the Court’s first judgment.

22. Had either of them been available in March 2018, they are likely to have been at the forefront of consideration by an offeree such as MetLife, in receipt of the Calderbank offer. The absence of this evidence at that time, in my view, prevents Ms Sandstrom from being able to establish that MetLife’s rejection of the offer was unreasonable in the circumstances.

23. Other arguments were fielded in relation to MetLife not having had time by March 2018 to make investigations and develop its case theory but such considerations do not assist either way.

Costs of These Post-Judgment Applications

24. The plaintiff has failed on these post judgment arguments. But some post judgment legal activity was inevitable between these parties. The parties had to discuss and mutually agree upon the quantum of interest which was payable. The merits of whether or not a stay was appropriate will only be known when the outcome of an appeal is determined. An order that each party’s costs of that issue would be that party’s costs in the cause would be appropriate. It is only in respect of the Calderbank letter that there is any real argument that Ms Sandstrom should pay the defendant’s costs of the post judgment argument.

25. In the circumstances, the better course, in the Court’s view, is simply to excise post judgment costs from the final costs order on the ordinary basis to be made in the plaintiff’s favour.

Conclusions and orders

26. For these reasons the Court orders that:

1. execution upon the judgment of the Court of 9 March 2020 is stayed until 9 June 2020 but if before then the second defendant files a notice of appeal against the said judgment, the stay shall be extended until the determination or discontinuance of the appeal; and

2. the Court orders that the second defendant pay the plaintiff’s costs of these proceedings on the ordinary basis but excluding the costs of this post judgment argument.

**********

Decision last updated: 19 May 2020