Aibi Holdings Pty Ltd v Virtual Technology Services Pty Ltd (Costs)

[2022] FCA 804

FEDERAL COURT OF AUSTRALIA

AIBI Holdings Pty Ltd v Virtual Technology Services Pty Ltd (Costs) [2022] FCA 804  

File number:

NSD 177 of 2021

Judgment of:

PERRAM J

Date of judgment:

12 July 2022

Catchwords:

COSTS – where offer of compromise – whether unreasonable to refuse offer – whether costs on an indemnity basis

Legislation:

Competition and Consumer Act 2010 (Cth) Sch 2 s 27

Federal Court Rules 2011 (Cth) r 25.14

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Regulator and Consumer Protection

Number of paragraphs:

6

Date of last submission:

29 June 2022

Date of hearing:

Determined on the papers

Counsel for the Applicant:

Mr W Soon

Solicitor for the Applicant:

Avantro

Counsel for the Respondent:

Mr J O’Sullivan

Solicitor for the Respondent:

Quest Legal Pty Ltd

ORDERS

NSD 177 of 2021

BETWEEN:

AIBI HOLDINGS PTY LTD (ACN 619 923 125)

Applicant

AND:

VIRTUAL TECHNOLOGY SERVICES PTY LTD (ACN 141 194 470)

Respondent

ORDER MADE BY:	PERRAM J
DATE OF ORDER:	12 JULY 2022

THE COURT ORDERS THAT:

1.The Applicant pay the Respondent’s costs of the proceeding on a party-party basis.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1. The Respondent (‘VTS’) seeks an order that the Applicant (‘AIBI’) pay its costs of the proceedings on a party-party basis up to 30 June 2021 and on an indemnity basis thereafter.  It relies upon an offer of compromise made under the Federal Court Rules 2011 (Cth) (‘the Rules’) on 1 July 2021. The offer made was that AIBI should withdraw its proceeding and that each party would bear its own costs. The offer was accompanied by a substantive explanation of why the third agreement was not a standard form contract within the meaning of s 27 of the Australian Consumer Law (‘ACL’), being Sch 2 to the Competition and Consumer Act 2010 (Cth). The reasons advanced by VTS for why the third agreement was not a standard form contract were not precisely the same as the reasons which led me to conclude that it was not. However, they included the fact that Ms Mao was able to negotiate the terms of third agreement and the email correspondence which led to the third agreement. The letter of 1 July 2021 identified correctly what the problem with AIBI’s case was.

2. I do not think that it is to the point, as AIBI submitted, that VTS had not served its evidence at the time the letter was sent on 1 July 2021. The points made in the letter were fulsomely explained. The facts about the negotiation of the second and third agreements were already in AIBI’s evidence and they largely pointed to the third agreement not being a standard form agreement within the meaning of s 27 of the ACL.

3. Nor do I accept that it can be said that AIBI obtained relief and therefore obtained a superior outcome to the offer. It is true that during the course of the trial, AIBI obtained the benefit of an undertaking proffered by VTS not to rely upon cl 11.9 other than for CPI increases. But AIBI did not obtain any relief to that effect because of the conclusion that the third agreement was not a standard form contract. The reality is that its proceeding was dismissed. It is the fact of that dismissal which enlivens r 25.14(2) of the Rules.

4. On the other hand, at the time the offer was made, AIBI was still pursuing its investigation into the contracts that VTS had with its other clients.  I ultimately concluded that the results of that investigation did not assist AIBI.  However, at the time of the offer, VTS had provided AIBI with only redacted versions of a limited range of agreements together with a spreadsheet.  Subsequently, following some trial-eve manoeuvrings, a wider selection of unredacted agreements were provided. 

5. Whilst I accept that VTS’ offer was a reasonable one, the question is whether it was unreasonable for AIBI not to accept that offer: r 25.14(2). The nature of reasonableness implies that in some cases a reasonable offer may be reasonably declined. This is such a case. In view of the uncertainty which existed from AIBI’s perspective about the third party agreements, I do not think it was unreasonable for it to decline the offer at the time it was made.

6. The appropriate order is therefore that AIBI pay VTS’ costs of the proceedings on a party-party basis.

I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.

Associate:

Dated:       12 July 2022