Talacko v Talacko (Costs Ruling)
[2018] VSC 807
•20 December 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2009 7819
| JAN TALACKO (as Executor of the Estate of Helena Marie Talacko) & ORS (according to the Schedule attached) | Plaintiffs |
| v | |
| JAN EMIL TALACKO & ORS (according to the Schedule attached) | Defendants |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 December 2018 |
DATE OF JUDGMENT: | 20 December 2018 |
CASE MAY BE CITED AS: | Talacko v Talacko (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 807 |
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COSTS – Special and unusual circumstances – Defendants engaged in conduct constituting an equitable fraud which compelled plaintiffs to commence proceeding – Plaintiffs’ legitimate aspirations to enforce equitable compensation judgment frustrated by defendants’ conduct – Defendants engaged in misconduct in litigation – Defendants’ conduct warranting indemnity costs order – Gross sum costs order – Bankruptcy Act 1966 (Cth) s 77(1)(e) – Foreign Judgments Act 1991 (Cth) s 15 - Civil Procedure Act 2010 s 20 – Supreme Court Act 1986 s 24(1) –Supreme Court (General Civil Procedure) Rules 2015 rr 26.03(3), 63.07(2)(d), 63.31, 63.34, 77.05.
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APPEARANCES: | Counsel | Solicitors |
| For the first plaintiff | Mr M J Hooper | Patrick & Associates |
| For the second to fifth plaintiffs | Mr O M Ciolek | Brand Partners |
| For the fourth defendant | Mr J B Masters | Strongman & Crouch |
HIS HONOUR:
On 7 December 2018, the Court delivered judgment assessing the liability of the second to fourth defendants to pay damages and interest to the first to fifth plaintiffs (‘quantum judgment’).[1] This judgment deals with the question of costs of:
[1]Talacko v Talacko [2018] VSC 751.
(a) the proceeding in March 2015, which preceded the liability judgment[2] (‘liability proceeding’);
(b) reserved costs in the liability proceeding; and
(c) the quantum proceeding, which preceded the quantum judgment (‘quantum proceeding’).
[2]Talacko v Talacko [2015] VSC 287.
The principal issue between the parties is whether costs should be awarded on a standard basis or on an indemnity basis. The first to fifth plaintiffs submit that costs should be on an indemnity basis. Second to fifth plaintiffs submit that indemnity costs should not be in accordance with scale pursuant to r 63.34 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). Rather, the second to fifth plaintiffs submit that their entitlement to indemnity costs should be based on a gross sum costs order calculated by reference to costs agreements between the second to fifth plaintiffs and their legal advisers and expert witnesses.
The principles governing the award of indemnity costs are well established. Pursuant to s 24(1) of the Supreme Court Act 1986, the Court ‘has full power to determine by whom and to what extent the costs are to be paid.’ The usual order as to costs is an award to the successful party on a standard basis.[3] In order for there to be a departure from the usual practice of costs on a standard basis, there must some special or unusual feature of the case justifying such departure.[4] A number of authorities have identified categories of conduct which might enliven the discretion to order indemnity costs.[5] However, the categories of special circumstances are not closed.[6] The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a standard basis.[7]
[3]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.31.
[4]Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233 (‘Colgate-Palmolive’); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 [7]−[8] (‘Ugly Tribe’).
[5]Colgate-Palmolive (1993) 46 FCR 225, 233–234; Ugly Tribe [2001] VSC 189 [7]−[8].
[6]Ugly Tribe [2001] VSC 189 [8].
[7]Colgate-Palmolive (1993) 46 FCR 225, 234.
There are a number of special features of both the liability proceeding and the quantum proceeding which warrant a departure from the usual practice of awarding costs on a standard basis. It is important to bear in mind the genesis of the current proceeding. When the Donation Agreement was entered into in May 2009, the equitable compensation proceeding before Kyrou J (as His Honour then was) had not been heard. That proceeding was scheduled to be heard in October 2009. When the Donation Agreement came to light, in the first instance, the plaintiffs in the equitable compensation proceeding sought to join David and Paul Talacko as defendants to the equitable compensation proceeding. Kyrou J raised concerns about the potential for delay in the trial of the equitable compensation proceeding by reason of the joinder. As a result, the plaintiffs commenced the current proceeding in July 2009.[8]
[8]Talacko v Talacko [2015] VSC 287 [28]–[29].
The Donation Agreement is at the heart of the current proceeding. The Court has concluded:
(a) the Donation Agreement constituted an equitable fraud;
(b) the defendants’ unlawful means conspiracy was actuated by malice and a desire to hurt the plaintiffs; and
(c) the defendants have engaged in conscious wrongdoing in contumelious disregard of the plaintiffs’ rights.
The circumstances underpinning the current proceeding (both in respect of liability and quantum) are extremely unusual. The May 2009 Donation Agreement has played a central role in frustrating the plaintiffs’ legitimate aspirations of receiving the fruits of the Kyrou J equitable compensation judgment. The plaintiffs have been forced to embark on what has proved to be since July 2009, a lengthy and expensive course of litigation. The wellspring of the expense which has been visited upon the plaintiffs has been the defendants’ unlawful means conspiracy in entering into the May 2009 Donation Agreement.
Mr Masters, who appeared for the fourth defendant, submitted that the court’s discretion to order indemnity costs is not enlivened because the plaintiffs have failed to establish any misconduct on the part of the fourth defendant or her legal representatives in the conduct of the litigation. Mr Masters submits that the Donation Agreement, which predates the commencement of this proceeding in July 2009, is irrelevant to the exercise of the discretion to award indemnity costs.[9] He further submitted that the conduct which the Court has held to constitute an unlawful means conspiracy cannot be used as an aggravating circumstance warranting an indemnity costs order.[10]
[9]See G E Dal Pont, Law of Costs (LexisNexis Butterworths, 4th ed, 2018) 582–3 [16.48].
[10]Ibid, citing Great Lakes Council v Lani (2007) 158 LGERA 1.
In the costs judgment which I delivered on 22 September 2015,[11] I declined to make any order that the fourth defendant be paid any costs by the plaintiffs. This was notwithstanding that I had concluded that the fourth defendant was not liable to pay damages to the plaintiffs because of my conclusion, since overturned, that the plaintiffs had not established pecuniary loss. My reasons for declining to make any costs order in favour of the fourth defendant were as follows:
[11]Talacko v Talacko (No 2) [2015] VSC 496.
Section 24(1) of the Supreme Court Act 1986 (Vic) provides that, unless otherwise expressly provided by legislation or by the Rules, the costs of and incidental to all matters in the court, including the administration of estates and trusts, is in the discretion of the court and the court has full power to determine by whom and to what extent the costs are to be paid. There are a number of discretionary considerations in the present proceedings which weigh heavily against any order for costs being made in favour of the fourth defendant.
First, the fourth defendant was a party to an agreement with the first to third defendants to injure the plaintiffs by the first defendant divesting himself of properties against which a judgment debt could attach. The manifestation of this agreement was the Donation Agreement between the first to third defendants. That agreement was an equitable fraud. Although the fourth defendant was not a party to the Donation Agreement, she was a party to the agreement to injure the plaintiffs, and is therefore tainted by the finding that the agreement constituted an equitable fraud.
Second, the first and fourth defendants jointly proposed to the first defendant’s solicitor in the equitable compensation proceedings, Mr Michael Witt, that an affidavit be prepared giving a false explanation for the Donation Agreement by deposing that the first defendant was gifting the properties to the second and third defendants in order to avoid Czech inheritance laws.
Third, whilst the fourth defendant was entitled to refrain from giving evidence in the current proceedings, she was not entitled to waste the court’s time whilst vacillating whether or not to do so. The principal judgment records my findings relating to the fourth defendant’s foreshadowed application under s 42E of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) (‘s 42E application’) to give evidence via video link rather than in person. A hearing on 4 March 2015 was confined solely to this foreshadowed application. Further time was taken up with the matter on 5 March and 6 March 2015. Ultimately, the fourth defendant did not pursue the s 42E application and did not give evidence in the proceedings. The foreshadowed application resulted in a waste of time and necessarily resulted in costs being incurred by the second to fifth plaintiffs and fifth and sixth defendants.
Fourth, the fourth defendant failed to comply with her discovery obligations. Her tax returns and bank statements for the period 2000 to 2002 were discoverable. Her failure to discover these documents was a serious breach of her discovery obligations. No satisfactory explanation was provided for this breach. This was in circumstances where the fourth defendant had been placed squarely on notice from 30 September 2014 when served with the third amended statement of claim that the plaintiffs would rely upon her conduct in taking out a mortgage over the matrimonial home in May 2000 as evidence of her common purpose with the other defendants to deny the plaintiffs access to the Glenferrie Road property.
A defendant who has been wholly successful may be deprived of some or all of their costs where they have done some wrongful act in the course of the transaction of which the plaintiff complains. In Ritter v Godfrey, Atkin LJ observed that a successful defendant might be denied costs where they have engaged in conduct which constitutes a fraud or preparation for a fraud in the course of the transaction complained of. It does not automatically follow that an otherwise successful defendant is to be denied their costs by reason of having engaged in misconduct. Nevertheless, the circumstances of the present case warrant an order to the effect of that the fourth defendant will not be entitled to any order for costs. The Donation Agreement was the critical transaction underpinning the current proceedings. It was the catalyst for the plaintiffs to seek leave in June 2009 to amend the statement of claim in the equitable compensation proceedings to join the second and third defendants. The Donation Agreement constituted an equitable fraud. It was the vehicle pursuant to which the first to fourth defendants sought to give effect to their common purpose of injuring the plaintiffs by denying them access to restituted properties. The fourth defendant’s conduct in respect of the Donation Agreement involved a level of impropriety which justifies the exercise of the court’s discretion to deny her any costs. In reaching this conclusion, I have also had regard to the fourth defendant’s conduct in jointly proposing with the first defendant that an affidavit be prepared in the equitable compensation proceedings giving a false explanation for the Donation Agreement. Although not implemented, this proposed course of action constituted a ‘preparation for a fraud’ of the type referred to by Atkin LJ in Ritter v Godfrey.
When the court delivered judgment on 7 August 2015, the parties were requested to file submissions on the question of whether the fourth defendant had breached her overarching obligations under the Act, and if so, whether any costs consequences should flow. It is unnecessary to make a finding as to whether the conduct of the fourth defendant constituted a breach of her overarching obligations under ss 20 and 26 of the Act. The fourth defendant’s conduct in respect of the Donation Agreement coupled with her conduct in jointly proposing the preparation of a false affidavit provides a sound basis for the making of an order the effect of which, subject to two exemptions discussed below, will be to deny her any entitlement to costs.[12]
[12]Ibid [23]–[29] (citations omitted).
The first, second and fourth matters apply with equal force in favour of a finding that the fourth defendant should pay the plaintiffs’ costs on an indemnity basis. The third matter was the subject of a discrete indemnity costs order which was not set aside on appeal. The fourth matter constitutes a finding of misconduct by the fourth defendant in the proceeding. The first and second matters involve misconduct of a more fundamental nature, which, as discussed below, enlivens the court’s discretion to award indemnity costs. Although those findings were made in respect of the liability phase of the proceeding, they apply with equal force in respect of the costs of the quantum phase of the proceeding.[13] The wellspring of the costs in both phases of the proceeding is the Donation Agreement in respect of which the fourth defendant was a co-conspirator.
[13]While the Court ordered separate trials on liability and quantum, there is only one proceeding, commenced by writ filed on 17 July 2009.
Mr Ciolek submitted that the Court should conclude that the fourth defendant attempted to mislead the Court when, in an affidavit sworn on 20 January 2011, she answered ‘no’ to the following question in the plaintiffs’ interrogatories dated 24 December 2019:
Did you have any communication about the transfer of the Properties with any other Defendant:
(a) prior to the transfer application date?
Mr Ciolek submitted:
It was the uncontradicted evidence of Peter Talacko in the liability trial that, before the transfers of the Properties were effected, a Skype call took place between the first to fourth defendants and, initially, Peter Talacko. The purpose of the call was to discuss the divestment of the properties to the second and third defendants. The conversation turned “very quickly” to the subject of the divestment of the properties. The fourth defendant organised or arranged the call, probably from Prague. She was, at least, present on the call.
On this evidence, the Court should conclude that the fourth defendant attempted to mislead it in sworn evidence in respect of an issue that was central to the question of her liability for the tort.[14]
[14]Second to Fifth Plaintiffs, ‘Second to Fifth Plaintiffs’ submissions on costs’, 12 December 2018, [19](c), (d) (citations omitted).
At the time the fourth defendant answered the interrogatory, Peter Talacko was not a defendant. He was joined as a defendant on 24 September 2014.
At paragraph 82 of the liability judgment, I made the following finding regarding the fourth defendant’s involvement in the Skype conference call:
In April 2009, the fourth defendant organised a Skype conference call, involving herself and the first, second, third and fifth defendants. The only direct evidence regarding this Skype call was given by the fifth defendant. His evidence was that the purpose of the call was to discuss the possibility of the first defendant transferring his Czech properties to the second and third defendants. I shall set out my findings in relation to this Skype call in detail in the section of this judgment relating to the allegations against the fifth and sixth defendants. For present purposes, it is sufficient to record my finding that although the fourth defendant organised and initiated the Skype call, there is no evidence that she made any contribution to the discussion between the first, second, third and fifth defendants regarding the mooted Donation Agreement.[15]
[15]Talacko v Talacko [2015] VSC 287 [82] (citations omitted).
Based on this finding, it is not open to conclude that the fourth defendant attempted to mislead the Court. Notwithstanding this conclusion, I am satisfied that there are special circumstances which warrant an order that the fourth defendant pay the plaintiffs’ costs on an indemnity basis.
There has also been misconduct in the proceeding on the part of the second and third defendants. In the liability judgment, I recorded my conclusion that the second and third defendants have made a deliberate decision not to participate in the current proceeding. By doing so, they breached the overarching obligation under s 20 of the Civil Procedure Act 2010 to cooperate in the conduct of the litigation. Further, by reason of their non-involvement, they have failed to comply with their discovery obligations. In addition to their misconduct in the litigation, the misconduct of the second and third defendants in respect of the Donation Agreement has been egregious. They facilitated the transfer of the Czech properties. This in turn has been a significant factor in frustrating the legitimate aspirations of the plaintiffs to enforce the judgment of Kyrou J. Second, the second and third defendants failed to comply with an order of Kyrou J on 24 July 2009 requiring them to take steps to undo the Donation Agreement. This failure resulted in arrest warrants being issued on 17 December 2009 pending a contempt proceeding. Third, the second and third defendants have breached orders made by Kyrou J precluding them from disposing of any of the property which was the subject of the Donation Agreement. The second and third defendants sold the Holešovice Plot shortly before the commencement of the liability trial in March 2015.
I accept that conduct which leads to an indemnity costs order is usually related to the way in which litigation is conducted rather than the conduct of the party giving rise to the litigation in the first place. As set out above, there has been conduct on the part of the second to fourth defendants in the litigation which justifies an indemnity costs order. However, putting this conduct to one side, where, as in the current proceeding, the defendants are the substantive aggressors and the plaintiffs have had no option but to commence a proceeding, conduct of the defendants which pre-dates the commencement of the litigation can legitimately be relied upon in support of an indemnity costs order.
In Pham v Enterprise ICT Pty Ltd (No 2),[16] Pembroke J held that a transfer of land from the third to first defendant was fraudulent. His Honour held that both the first and third defendants intended to defeat the plaintiffs’ rights as purchasers pursuant to a contract for the sale of land. As to the question of costs, his Honour stated:
I have no hesitation in concluding that the first and third defendants should pay the plaintiffs’ costs on an indemnity basis from the date of the transfer to Enterprise ICT. Litigation caused by an unwillingness to complete is one thing. But litigation which is the result of the third defendant’s dishonesty, in which his brother Richard Sebie participated, is of a different dimension. The complications and further litigation arising from that dishonesty should never have occurred. The first and third defendants should be accountable for their actions. The plaintiffs are entitled to be indemnified by the first and third defendants for the costs that they have incurred after 20 July 2015. There was never a bona fide dispute, merely dishonesty, and perhaps delusion on the part of the third defendant.[17]
His Honour made an order that the first and third defendants pay the plaintiffs’ costs on an indemnity basis.
[16][2017] NSWSC 583 (‘Pham’). The judgment was upheld on appeal: Enterprise ICT Pty Ltd v Pham (No 2) [2018] NSWCA 185.
[17]Pham v Enterprise ICT Pty Ltd (No 2) [2017] NSWSC 583 [9].
In Porter v Australian Prudential Regulations Authority[18] Perram J stated:
Thus, whilst it is generally true that circumstances which antedate the commencement of proceedings are not relevant to the question of indemnity costs, this is not so where the defendant is the substantive aggressor and where the actions which compel the defensive suit are sufficiently unreasonable. The situation is analogous to a proceeding which is commenced in wilful disregard to known facts or law: cf. Colgate-Palmolive Co v Cussons (1993) 118 ALR 248 at 257 per Sheppard J. Here, the notice was issued and served within time frames for which no justification has been offered.[19]
[18][2009] FCA 1148 (‘Porter’).
[19]Ibid [12].
The reasoning in Pham and Porter applies equally in the present proceeding. The second to fourth defendants engaged in conduct in respect of the Donation Agreement which compelled the plaintiffs to commence the current proceeding in July 2009. The complications and expense of further litigation arising from the Donation Agreement should never have happened. The second to fourth defendants, as co-conspirators, should be held accountable for their actions. On this basis, and quite apart from their misconduct in the proceeding, an indemnity costs order should be made against them.
In the quantum judgment, I concluded that the conduct of the second and third defendants in respect of the Donation Agreement was objectively worse than that of the fourth defendant.[20] I have given careful consideration to whether it is appropriate, in light of this finding, to make the same form of costs order against each of the second to fourth defendants.
[20]Talacko v Talacko [2018] VSC 751 [109], [114].
Notwithstanding my finding that the conduct of the second and third defendants in respect of the Donation Agreement was objectively worse than that of the fourth defendant, it is appropriate to make a gross sum costs order against the fourth defendant. Her conduct, although not as egregious as that of her sons, nevertheless warrants an order that she pay indemnity costs of the second to fifth plaintiffs on a gross sum basis.
The conclusion set out above renders it unnecessary to address the first plaintiff’s submission that he is entitled to indemnity costs post 19 April 2018 by reason of the fourth defendant’s failure to accept an offer of compromise and Calderbank letter, each of which was taken to be served on 17 April 2018.[21] Nevertheless, for the sake of completeness, I shall do so.
[21]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 3.05(2).
The covering letter attached to the offer of compromise stated that the offer remained open until 4.00 pm on 1 May 2018. However, the offer itself stated that the offer remained opened until 5.00 pm on 26 April 2018. As such, the offer did not comply with the requirements in r 26.03(3) of the Rules that an offer of compromise remain open for a minimum of 14 days after service.[22] I accept Mr Master’s submissions that the offer of compromise is ineffective because it stipulated a date short of the 14-day prescribed period. Mr Hooper submitted that the offer was effective by reason of the 1 May 2018 date stipulated in the covering letter. I reject this submission. Rule 26.03(3) is expressed in mandatory terms. An offer which stipulates a period for acceptance of less than 14 days is invalid.
[22]Cf Toomey v Scolaro’s Concrete Constructions Pty Ltd (No 4) [2002] VSC 28 [20].
On 17 April 2018, the first plaintiff served a Calderbank offer on the fourth defendant, offering to settle the proceeding on the basis of the fourth defendant paying $1,050,000, inclusive of all costs. The fourth defendant submits that her failure to accept the offer has no adverse costs consequences. Relevantly, the Calderbank letter stated:
At this point, your client is aware of all material facts required to consider her exposure in this case. She can assess the reasonableness of this offer in light of the evidence led in the trial before McDonald J and the finding by the Court of Appeal that:
(a)your client conspired to thwart the enforcement of our client’s judgment against Jan Emil Talacko;
(b)our client suffered loss as a consequence of your client’s conspiracy; and
(c)accordingly, all elements of the tort of conspiracy have been made out, and the only matter that remains to be determined is the quantum of that loss.
As you are aware, it is our client’s position that the direct consequence of the transfer of the properties by Jan Emil to Paul and David Talacko was to prevent the otherwise certain process of enforcing the Kyrou J Judgment dated 11 December 2009 in the Czech Republic. Accordingly, your client will be liable to compensate our client in full for any shortfall in the recovery of the judgment sums to date, including legal costs, in addition to reimbursing our client’s legal expenses in the Czech Republic.
That being the case, the potential financial exposure that your client faces personally from our client’s claims is likely to exceed $10 million once interest is calculated. The above offer of $1,050,000 represents a very significant discount to that figure. It is highly unlikely that your client will achieve a result better than this figure.
This offer is made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 33 and Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435.
Mr Masters submitted that the fourth defendant did not act unreasonably in not accepting the Calderbank offer:
The offer of 16 April 2018 was made before the filing of outlines of evidence and expert reports by the plaintiffs. The plaintiffs had at that time provided no evidence which would have enabled the reduction in the value of the chance of executing the judgment to be assessed. The outline of evidence of the first plaintiff was served on the fourth defendant on 4 May 2018, which was after the offer had expired. That document outlined, for the first time in the proceeding, the first plaintiff’s position and proposed evidence in relation to, among other things, his reasons for bankrupting the first defendant, what would have occurred had the Czech properties not been transferred, and details of the work undertaken by the first plaintiff’s Czech lawyers. The first plaintiff was not correct in stating in the offer that the fourth defendant could assess the reasonableness of the offer in light of the evidence led in the liability trial.
The offer also predated the articulation by the plaintiffs of the way in which they would run their case at trial, which did not occur until a directions hearing on 18 July 2018. Significantly, the Calderbank letter stated that the first plaintiff’s position was that the transfer of the Czech properties ‘prevent[ed] the otherwise certain process of enforcing the Kyrou J judgment dated 11 December 2009 in the Czech Republic’, and that the fourth defendant ‘will be liable to compensate [the first plaintiff] in full for any shortfall in the recovery of the judgment sums to date’ (emphasis added). The letter did not refer at all to a claimed loss of chance. It not only failed properly to articulate the first plaintiff’s case, but mischaracterised the nature of the assessment to be undertaken by the Court in accordance with the Court of Appeal’s reasons. In these circumstances, it was not unreasonable for the fourth plaintiff to reject the offer of 16 April 2018.[23]
[23]Fourth defendant, ‘Submission of the fourth defendant on costs’, 12 December 2018, [18]–[19] (citations omitted, emphasis in original).
I do not accept the submissions set out above. The Calderbank letter refers specifically to the finding of the Court of Appeal that ‘our client suffered loss as a consequence of your client’s conspiracy.’ This was a reference to the findings at [111] to [115] of the Court of Appeal judgment. This part of the judgment included an express finding that the first plaintiff’s loss of opportunity included the loss of opportunity to recover the judgment debt against the first defendant’s future trustee in bankruptcy by resort to the Czech properties.
In the quantum judgment, I assessed the plaintiffs’ chance of enforcing the judgment debt against the trustee in bankruptcy by resort to the Czech properties prior to the Donation Agreement. I assessed the value of this chance as equating to 75 per cent of the equitable compensation judgment together with interests and costs. After making allowance for the remaining 20 per cent chance of enforcing against the Czech properties post the Donation Agreement, I assessed the value of the lost opportunity as equating to 55 per cent of the equitable compensation judgment, interests and costs. In respect of the first plaintiff this translates to an entitlement to damages of $5,900,227.92.
I do not accept Mr Master’s submission that the offer was not formulated with sufficient clarity. The letter refers expressly to the Court of Appeal’s judgment. The fourth defendant was specifically on notice as a result of that judgment that the plaintiff would be contending that the relevant loss of opportunity included the lost opportunity to enforce the judgment debt against the trustee in bankruptcy by resort to the Czech properties. Mr Masters pointed to the fact that the expert evidence of Dr Richter was not filed until immediately prior to the time for acceptance of the offer expired. He submitted that, absent this evidence, the fourth defendant was not in a position to make an assessment of the strength of the first plaintiff’s case. I do not accept this submission. The key consideration in the assessment of the first plaintiff’s prospects of success as at 17 April 2018 turned upon an argument based on s 77(1)(e) of the Bankruptcy Act 1966 (Cth). Absent the Donation Agreement, the first defendant’s trustee in bankruptcy would have had good prospects of securing an order pursuant to s 77(1)(e) requiring the transfer of title in the Czech properties from the first defendant to the trustee in bankruptcy. This in turn would have facilitated the sale of the properties by the trustee and the distribution of the proceeds of sale to the plaintiffs.
It is correct that a significant factor impacting the value of the lost opportunity to enforce the judgment debt against the trustee in bankruptcy was the date of the assessment of the lost opportunity. Prior to mid-2011, laws governing property ownership in the Czech Republic would have precluded the trustee in bankruptcy from obtaining a transfer of title of the Czech properties. However, this was one factor to be weighed by the fourth defendant in assessing the reasonableness of the offer. In this regard, it is to be noted that the Court accepted the fourth defendant’s submission that the value of the lost opportunity should be assessed at the point in time that the proceeds from the sale of properties would have been received, which post-dated a relaxation in foreign ownership laws. Further, the extent of the compromise offered by the first plaintiff was very significant. It represents less than 15 per cent of the damages and interest awarded to the first plaintiff in the quantum judgment. In addition, the offer was inclusive of costs.
The Calderbank letter foreshadowed an application for indemnity costs in the event of the fourth defendant rejecting it. The fourth defendant was provided with ample time to accept the offer. In accordance with the principles laid down in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2),[24] I consider that it was unreasonable for the fourth defendant not to have accepted the offer contained in the Calderbank letter served on 17 April 2018. Absent my primary conclusion regarding the first plaintiff’s entitlement to indemnity costs, I would have concluded that the first plaintiff is entitled to indemnity costs in respect of any costs incurred in the proceeding after the date of the offer.
[24](2005) 13 VR 435, 442 [25].
Should a gross sum costs order be made?
Rule 63.34 provides that, absent special grounds, a legal practitioner for a party to whom costs are payable (whether on a standard or an indemnity basis) shall be entitled to costs in accordance with the scale. The second to fifth plaintiffs seek an order that their costs be paid on an indemnity basis, and that these costs be calculated by using the costs agreements entered into by the second to fifth plaintiffs with their legal advisers and expert witnesses as an appropriate measure of costs, subject to the court exercising its jurisdiction to assess the reasonableness of those costs. Mr Ciolek confirmed that the second to fifth plaintiffs seek to have their costs assessed as a gross sum instead of taxed costs.
In the equitable compensation proceeding, Kyrou J made an order on 24 April 2013 in the following terms:
Pursuant to rule 63.07(2)(d) of the Rules, the sum in respect of indemnity costs ordered on 11 December 2009 be determined by way of a gross sum costs order in the following manner:
The quantum of the indemnity costs is to be calculated by using the costs agreements entered into by the plaintiffs with their solicitors, counsel and experts as an appropriate measure of costs, subject to the Court exercising its jurisdiction to assess the reasonableness of those costs.
A gross sum costs order was also made by Croft J in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3).[25] The order was subject to challenge on appeal, but was upheld.[26]
[25][2012] VSC 399.
[26]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237 [529]−[572].
I consider that, subject to the court exercising its jurisdiction to assess the reasonableness of the amounts, it is appropriate to make a gross sum costs order in respect of the second to fifth plaintiffs costs of the liability hearing (including reserved costs) and the quantum hearing. The egregious conduct of the second to fourth defendants warrants an order which, subject to the court being satisfied as to the reasonableness of the amounts awarded, ensures that the second to fifth plaintiffs are fully compensated for the expenses which they have incurred during both the liability and quantum phase of the proceeding.
I propose to make an order in the following terms:
1.The second to fourth defendants pay the first to fifth plaintiffs’ costs of and incidental to the proceeding from the date of remittal by orders of the Court of Appeal of 27 June 2017, including reserved costs, on an indemnity basis.
2.Save for the costs of 4 March 2015, the second to fourth defendants pay, on an indemnity basis, the first to fifth plaintiffs’ costs:
(a)Of the trial in this proceeding in March 2015;
(b)That were reserved costs of the directions hearings on 1 March 2010, 8 June 2010, 11 December 2012, 28 May 2013, 26 September 2014, 11 November 2014 and 17 December 2014;
(c)That were reserved costs of the second to fifth plaintiffs’ application heard by Daly AsJ on 16 May 2014 to inspect documents produced by Peter Talacko; and
(d)That were reserved costs of the second to fifth plaintiffs’ summons dated 31 July 2014.
3.Pursuant to r 63.07(2)(d) of the Rules, the sum in respect of the second to fifth plaintiffs’ entitlement to indemnity costs be determined by way of a gross sum costs order in the following manner:
(a) The quantum of the indemnity costs is to be calculated by using the costs agreements entered into by the second to fifth plaintiffs with their solicitors, counsel and experts as an appropriate measure of costs, subject to the court exercising its jurisdiction to assess the reasonableness of those costs.
(b) The costs are to be assessed by an Associate Justice. A reference is made to an Associate Justice under r 77.05 for this purpose.
(c) On or before 29 March 2019, the second to fifth plaintiffs are to file and serve the evidence on which they rely in support of the assessment, as a gross sum, of their costs pursuant to this order.
(d) On or before 30 May 2019 the fourth defendant is to file and serve any evidence in reply.
(e) The costs assessment is referred to an Associate Justice on a date to be fixed.
(f) The second and third defendants have liberty to apply for leave to file and serve evidence in reply to the evidence of the second to fifth plaintiffs.
Should a separate order be made in respect of the second and third defendants?
The second to fifth plaintiffs seek a separate order against the second and third defendants in respect of their liability to pay the second to fifth plaintiffs aggravated and exemplary damages. Mr Ciolek submitted that a separate order will facilitate the enforcement of the Court’s award of aggravated and exemplary damages against the second and third defendants in the Czech Republic. He submitted that, if one order is made in respect of the second to fourth defendants, and the fourth defendant appeals against those parts of the order directed to her, this may adversely impact the plaintiffs’ capacity to obtain a certificate under s 15 of the Foreign Judgments Act 1991 (Cth).
The second to fifth plaintiffs have a legitimate interest in the enforcement, without delay, of the Court’s judgment that the second and third defendants are liable to pay the second to fifth plaintiffs aggravated and exemplary damages. The Court shall make a separate order directed to the second and third defendants in respect of their liability to pay aggravated and exemplary damages as follows:
1. The second and third defendants pay to the second plaintiff AUD$90,000.
2. The second and third defendants pay to the third plaintiff AUD$90,000.
3. The second and third defendants pay to the fourth plaintiff AUD$90,000.
4. The second and third defendants pay to the fifth plaintiff AUD$10,000.
5.The second and third defendants pay to the second to fourth plaintiffs AUD$375,000.
SCHEDULE OF PARTIES
S CI 2009 7819
BETWEEN:
JAN TALACKO
(as Executor of the Estate of Helena Marie Talacko) First plaintiff
ALEXANDRA ANN BENNETT Second plaintiff
MARTIN TALACKO Third plaintiff
ROWENA TALACKO Fourth plaintiff
MARGARET HELEN BEATRICE TALACKO Fifth plaintiff
and
JAN EMIL TALACKO First defendant
DAVID TALACKO Second defendant
PAUL ANTHONY TALACKO Third defendant
JUDITH GAIL TALACKO Fourth defendant
STATE TRUSTEES LTDSeventh defendant
6
10
0