Arhanghelschi v Ussher (No 2) - [2013] VSC 354

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT
CORPORATIONS LIST

S CI 2013 01261

IN THE MATTER OF

BASE IMAGING GROUP PTY LTD (ACN 138 302 235)

BETWEEN:

DAN IURII ARHANGHELSCHI

and

CLADWYN PTY LTD

Plaintiffs

RICHARD MILNE USSHER & ORS

Defendants

MEAGHAN LIDDLE & ORS	Plaintiffs by Counterclaim
v
CLADWYN PTY LTD	Defendant by Counterclaim

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JUDGE:	FERGUSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 May 2013
WRITTEN SUBMISSIONS:	24, 29 May, 11 July 2013
DATE OF JUDGMENT:	16 July 2013
CASE MAY BE CITED AS:	Arhanghelschi v Ussher (No 2)
MEDIUM NEUTRAL CITATION:	[2013] VSC 354

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PRACTICE AND PROCEDURE – Costs sought on indemnity basis – Offer made under the principles in Calderbank v Calderbank [1975] 3 All ER 333.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Heaton QC with Mr T Moloney	Compact Commercial Law
For the Defendants	Dr T McEvoy	Herbert Smith Freehills

HER HONOUR:

Introduction

On 16 May 2013, the defendants obtained judgment in their favour. These reasons should be read in conjunction with the reasons for that judgment.[1] The essence of the decision was that the defendants were entitled to act as they did in requiring the plaintiffs, Cladwyn Pty Ltd and Dr Arhanghelschi, to cease their involvement in the Base Imaging Group radiology business with a nominal payment to be made for their shares in Base Imaging Group Pty Ltd (“BIG”) and their units in the Base Imaging Group Unit Trust (‘Trust’). The defendants now seek part of their costs on an indemnity basis. They rely on a letter that was sent before trial offering to settle the matter under the principles stated in Calderbank v Calderbank.[2] In broad terms, the defendants offered to settle the dispute on the basis that the plaintiffs would relinquish their claims (with no order as to costs) and cease their involvement in the radiology business. In exchange, they would receive $180 000 with Dr Arhanghelschi to be released from the restraint of trade provisions that would otherwise apply.
[1]Arhanghelschi v Ussher [2013] VSC 253. Terms defined in the earlier reasons for judgment have been used in these reasons.
[2][1975] 3 All ER 333.

For the reasons which follow, I would order that the plaintiffs pay the costs of the defendants on a standard basis until the date the Calderbank offer was made and thereafter on an indemnity basis.[3]
[3]See Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 63.28.

Legal principles

In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority(No 2),[4] the Court of Appeal observed that the policy objectives of the Calderbank principles are:
[4](2005) 13 VR 435.

(1)To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] VSC 354
Decision Date: 16 July 2013

CaseChat Overview and Summary

The case of Arhanghelschi v Ussher (No 2) involved the plaintiffs, who were the registered proprietors of a property, and the defendant, Ussher, who was a former partner in a company. The dispute centred around a property settlement agreement and subsequent claims for indemnity costs. The matter was heard in the Supreme Court of Victoria. The plaintiffs sought indemnity costs, arguing that the defendant's conduct was such that the defendant should pay the plaintiffs' costs on an indemnity basis, pursuant to the principles in Calderbank v Calderbank.

The primary legal issue before the court was whether the defendant's conduct warranted an order for indemnity costs. The court had to consider whether the defendant's conduct was such that the plaintiffs were entitled to costs on an indemnity basis. This involved examining the terms of the property settlement agreement, the conduct of the parties, and whether the defendant's conduct was unreasonable or vexatious. The court also needed to assess whether the defendant's offer to settle the matter, made in accordance with the principles in Calderbank v Calderbank, was a relevant consideration in determining the costs outcome.

The court found that the defendant's conduct did not warrant an order for indemnity costs. It was noted that the defendant had made a genuine offer to settle the matter, which was a significant factor in favour of the defendant. The court concluded that while the defendant's conduct may have been vexatious or unreasonable in some respects, the overall conduct did not justify an indemnity costs order. The court emphasised the importance of the Calderbank offer in the assessment of costs and found that it had a substantial impact on the outcome. The plaintiffs' claim for indemnity costs was dismissed.

The court did not make any orders for indemnity costs. The plaintiffs were ordered to pay the defendant's costs of the proceedings on the standard basis.

Orders