Ashthorn CA Pty Ltd v Yume Group Holdings Pty Ltd (Costs)
[2023] VCC 2419
•22 December 2023
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-22-01842
| Ashthorn CA Pty Ltd (ACN 167 783 128) | Plaintiff |
| v | |
| Yume Group Holdings Pty Ltd (ACN 613 528 475) | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers (written submissions dated 17 November 2023, 5 and 11 December 2023) | |
DATE OF RULING: | 22 December 2023 | |
CASE MAY BE CITED AS: | Ashthorn CA Pty Ltd v Yume Group Holdings Pty Ltd (Costs) | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 2419 | |
RULING
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Subject:COSTS – INTEREST – STAY
Catchwords: whether security out to be released – calculation of interest – costs of the proceeding – whether costs ought to be apportioned – offer of compromise – whether a stay on the judgment ought to be granted
Legislation Cited: Supreme Court Act 1986 s58(1); County Court Civil Procedure Rules 2018 rr26.08(5) & 62.05; Civil Procedure Act 2010; A New Tax System (Goods and Services Tax) Act 1999 ss40–5
Cases Cited:Ashthorn CA Pty Ltd v Yume Group Holdings Pty Ltd [2023] VCC 1945; G E Dal Pont in the Low of Costs (5th Ed.); Ajaimi v Giswick Pty Ltd (No 2) [2022] VSC 275; Smith v Gould [2012] VSC 542; BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557; Servier v Apotex Pty Ltd [2016] FCAFC 27; Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd (in liq) (Final Orders) [2023] FCAFC 119; SkyySpirits LLC v Lodestar Anstalt (No 2) [2015] FCA 575; Southstar Homes Pty Ltd v Form8 Constructions Pty Ltd (No 2) [2023] VCC 1545; Ritter v Godfrey (1920) 2 KB 47; Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; Stena Rederi Aktiebolag v Austal Ships Sales Pty [2007] FCA 1141; Windsurfing International Incorporated Inc v Petit (1987) AIPC 90-441; Waters v PC Henderson (Australia) Pty Ltd; (1994) 254 ALR 328; [1994] NSWCA 338 at 3 (Mahoney JA); Hughes v Western Australian Cricket Association Inc [1986] FCA 63; Cretazzo v Lombardi (1975) 13 SASR 4; Kalenik v Apostolidis (No 3) [2009] VSC 475; Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373; Mok v Minister for Immigration (No 2) (1993) 47 FCR 81; Pandolfo v Finadri & Ors (Costs) [2018] VSC 655
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | F Bentley | Peak Legal |
| For the Defendant | B Petrie | K&L Gates |
HER HONOUR:
Introduction
1On 27 October 2023, I gave judgment in favour of the plaintiff in this matter, Ashthorn CA Pty Ltd (“Ashthorn”) against the defendant (“Yume”).[1] I found that Ashthorn was entitled to fees under a consulting agreement in relation to a Strategic Partnership Agreement with SUEZ Recycling & Recovery Pty Ltd (“SUEZ”).
[1] Ashthorn CA Pty Ltd v Yume Group Holdings Pty Ltd [2023] VCC 1945 (the “Judgment”).
2The four discrete issues that were before me to determine at trial are outlined below:
(a)was Yume obliged to pay Ashthorn a Capital Raising Fee of $15,400.00 in relation to the shares acquired in Yume by an existing investor, Salu Folk Pty Ltd (the “Salu Folk Issue”);
(b)was Yume obliged to pay Ashthorn a Capital Raising Fee of $231,000.00 in relation to the events surrounding the dealings between Yume and Cleanaway Operations Pty Ltd (“Cleanaway”) (the “Cleanaway Issue”);
(c)was Yume obliged to pay Ashthorn a Business Sale Fee of $150,000.00, alternatively a Capital Raising Fee of $111,512.56, in relation to a Strategic Partnership Agreement entered into between Yume and SUEZ on 11 September 2019, and a Subscription Agreement entered into between Yume and SUEZ on 5 July 2021 (the “SUEZ Issue”);
(d)alleged unpaid Advisory Retainer Fees in the sum of $17,600.00 for the period from July to September 2019 (the “Advisory Retainer Fees Issue”).
3While I found in favour of Ashthorn in relation to the SUEZ transaction, I dismissed its claims relating to the Salu Folk and Cleanaway transactions, as well as the Advisory Retainer Fees. I held that “capital raising” had occurred pursuant to the SUEZ transaction and concluded that Yume ought to pay Ashthorn the sum of $58,712.56 plus interest.
4I further proposed to order that Yume pay Ashthorn’s costs of and incidental to the proceeding on a standard basis to be taxed in default of agreement, unless either party had a basis for seeking a different order as to costs and invited the parties to prepare draft orders to give effect to my reasons. The parties were unable to reach agreement on the issue of costs and have prepared written submissions outlining their positions.
Yume’s submissions
Costs
5Yume starts from the position that the $58,712.56 that Ashthorn was awarded is less than 50% of the $414,000.00 that it sought at trial and noted that this judgment sum is within the jurisdictional limit of the Magistrates’ Court.
6Yume submits that, because the Cleanaway Issue was the least meritorious but consumed the majority of time spent at trial, the Court should allow costs on an issue-by issue basis and award Yume 75% of its costs, or alternatively, make an order that the parties bear their own costs.
7Yume contends that, in considering the usual rule that the “costs follow the event”, the term “event” does not necessarily imply that the whole proceeding amounts to the relevant “event”. Yume cited the learned authors in G E Dal Pont in the Low of Costs (5th Ed.), who stated that the word “event” is to be approached distributivity, “with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the action”.
8Yume draws upon the case of Ajaimi v Giswick Pty Ltd (No 2),[2] in which M Osborne J noted the general rule that costs follow the event of the whole of the proceeding may be ousted in certain circumstances. His Honour gave the specific example of where a party that has succeeded on some issues, has nevertheless failed on a number of other issues. In such a case, the Court may determine that costs follow the “event” of each separate issue or cause of action. His Honour cited the decision of John Dixon J in Smith v Gould,[3] where his Honour outlined that costs might follow each separate issue or cause of action where the successful party:
(a)contested a number of issues which it failed;
(b)required the losing party to contest issues that it abandoned at trial;
(c)took unnecessary technical points;
(d)inappropriately prolonged litigation;
(e)pressed substantially exaggerated claims;
(f)caused the real issues to be obscured or unnecessary evidence to be led; or
(g)facilitated the loss of opportunity to expeditiously dispose of the case.
[2] [2022] VSC 275 at [12] (“Ajaimi”).
[3] [2012] VSC 542 at [11].
9Yume also relies on BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2)[4] and Servier v Apotex Pty Ltd,[5] which both broadly stand for the principle that depending on the way in which the successful party conducts its litigation (and the extent to which they exhibit factors similar to those identified above), costs may follow each event.
[4] [2007] FCA 557.
[5] [2016] FCAFC 27.
10Yume draws upon the case of Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd (in liq) (Final Orders),[6] where the Full Court of the Federal Court said that, where there has been a mixed outcome, and it is appropriate to apportion costs as between different issues in the proceedings, the apportionment will be carried out on a relatively broad-brush basis, and largely as a matter of impression and evaluation by the Court. Yume argues that this submission supports its argument that the costs awarded to Yume should be fixed at 75% for successfully defending the three issues and should not involve “precise arithmetical apportionment of costs”.
[6] [2023] FCAFC 119 at [30].
11Yume contends that the four issues put before the Court were all discreet issues, and even though they all related to the interpretation of the Engagement Agreement, they all turned on discreet bodies of evidence that the parties addressed the Court on separately.
12In relation to the Salu Folk Issue, which Yume was successful in defending, Yume says that each of Mr Beanland, Ms Barfield and Ms Aikman gave evidence and were cross-examined at length, and that a considerable amount of time was spent addressing each document in the Court Book relating to this transaction.
13Save for the minor issue regarding the proper interpretation of the Engagement Agreement, Yume submits that the Court rejected the majority of Ashthorn’s arguments. Importantly, Yume contends that the Court agreed with Yume on the facts regarding whether or not Pitzy’s commitment to invest in Yume was substantially influenced by Mr. Beanland’s actions. Yume argues that the Court should award Yume its costs for this issue given its substantial success.
14Yume submits that the Cleanaway Issue occupied most of the trial, that according to the transcript it dominated three days and that each of Mr Beanland, Ms Barfield and Ms Aikman were examined and cross-examined at length. Yume also points out that the Cleanaway sum, comprising of $231,000.00, was the most substantial claim of the total $414,000.00 (although as discussed below, on a proper consideration of the relief sought by Ashthorn, the total amount claimed was not the sum of $414,000.00).
15Yume contends that Ashthorn’s claim on the Cleanaway Issue was fundamentally unmeritorious, as it hinged on the degree to which Cleanaway had subjectively “committed” to a transaction, despite the fact that, as Ashthorn accepted, there was no legally binding commitment.
16Yume also points out that Ashthorn had failed to discover, until the second date of trial, a critical document that undermined the Cleanaway claim. The document revealed that Cleanaway’s CEO was required to sign off on any prospective investment with Yume and had not yet done so. Yume says that the document proved that no subjective commitment from Cleanaway to Yume had occurred, as this could not be the case absent the express approval of the CEO. Yume argues that had Ashthorn discovered this critical document prior to trial, it is entirely possible that this issue might not have been pressed at trial at all (or at least occupied a smaller part of the trial).
17Yume submits that, with regards to the Advisory Retainer Fee, the Court wholly agreed with Yume’s claim that Mr Beanland had expressly and unambiguously waived his entitlement to any fees for the relevant period. Yume says that this claim was also unmeritorious, but that they still had to go to the time and expense of defending this issue.
18Yume contends that, given the above unmeritorious claims brought by Ashthorn, the Court’s acceptance of virtually all of Yume’s arguments defending these claims, and the time and cost it took for Yume to defend these unmeritorious claims, Yume should have its costs on each issue.
19Yume argues that Ashthorn’s partial success on the SUEZ Issue should not be enough to justify that Ashthorn have its costs for the entire trial.
20Yume argues that, in the alternative, the Court should order that the parties bear their own costs, because, despite any success that Ashthorn had in relation to the SUEZ Issue, this was counteracted by Yume’s success on the Cleanaway Issue, and the Court should not sanction Ashthorn’s pressing of an unmeritorious claim that involved late discovery of critical documents that undermined the case.
Interest
21Yume accepts that it is required to pay interest on the judgment sum, but disputes Ashthorn’s calculations.
22Yume notes that, pursuant to s58(1) of the Supreme Court Act 1986 (the “Supreme Court Act”), interest applies from the date that a debt becomes payable or otherwise from when a demand for payment is made. Yume submits that Ashthorn’s analysis in relation to the date upon which Yume became liable to pay a Commitment Fee is incorrect and does not accurately take into account the terms of the Engagement Agreement.
23Yume draws particular attention to general condition 7 of the Engagement Agreement which states that “…Client agrees to pay any Fees, GST or other taxes specified in an invoice within 14 days of the date of the Invoice without set off, counterclaim or withholding…”.
24Yume submits that, on the basis of the contractual arrangement between the parties, Yume was only required to pay any fees regarding the SUEZ transaction, and, therefore, interest upon that sum, after first receiving an invoice from Ashthorn.
25Alternatively, Yume contends that pursuant to s58(1) of the Supreme Court Act, interest could only accrue from the date that Ashthorn made a demand for the payment of fees pertaining to the SUEZ transaction.
26Yume points out that the Court found that a commitment will only arise, for the purposes of clause 4.2 of the Engagement Agreement, where there has been an “agreement that is legally binding”. Yume submits that the Court specifically found in relation to the SUEZ transaction (in the context of discussing Ashthorn’s entitlement to a Business Sale Fee and the ROFR), that:[7]
“…a ROFR only crystallises into property once the “triggering” events have occurred. In this case, it is the decision on Yume’s part to sell shares. This right had not crystallised as no triggering event had occurred under the Strategic Partnership Agreement, or the first and second variations and extensions. It was only under the Share Sale Agreement that the ROFR became a contractual right. Further, this occurred more than 12 months after the Engagement Agreement had terminated. I therefore do not accept Ashthorn’s submission that the contractual right under the ROFR had accrued over time due to the Strategic Partnership Fees”.
(Emphasis added.)
[7] Op Cit at [190].
27Yume states that the Court did not find the existence of a “legally binding” agreement between Yume and SUEZ under the Strategic Partnership Agreement. It was only upon entry into the Share Sale Agreement, on 12 July 2021, that a legally binding agreement arose. Yume submits that it was only on that date that the ROFR became a contractual right and, therefore, that Ashthorn became entitled to a fee under clause 4.2 of the Engagement Agreement (according to the Judgment).
28Yume contends that, accordingly, Ashthorn could only have issued an invoice, or made a demand, on which it is entitled to rely for interest purposes, after 12 July 2021. Yume says that Ashthorn did not make any such demand until its solicitor sent an email on 23 September 2021 for unspecified fees. Yume argues that, accordingly, interest should be calculated from this date. Yume submits that interest should, therefore, be calculated from 23 September 2021. Alternatively, it should be calculated from 12 July 2021 at the earliest (the date of the Share Sale Agreement).
29Yume contends the Court should only calculate interest to the date on which it delivered its reasons for judgment on 27 October 2023.
30Yume argues that according to Ashthorn, interest does not apply to the GST component of the fee that is payable. Relevantly, the judgment sum of $58,712.56 is based on the SUEZ Capital Raising Fee of $111,512.56. This figure, according to Ashthorn’s closing submissions, includes GST. Accordingly, the GST exclusive component of the judgment sum is $53,375.10 (noting that the Advisory Fees that were rebated, as referred to in the Judgment,[8] also included GST). Yume says that this means that Yume is only liable to pay interest, at a rate of 10%, on the sum of $53,375.10, between the dates of 23 September 2021 and 27 October 2023. Therefore, the total interest payable is $11,172.21 only.
[8] Ibid at [276].
31Yume submits that Ashthorn seeks to downplay the significance of its failure to discover a key document by pointing to a document discovered by Yume during trial which Ashthorn says “demonstrated that Ms Barfield had been dishonest in her evidence”. However, Yume notes that the Court made no such finding and, again, it is highly inappropriate for Ashthorn to seek to re-litigate this matter now by inviting the Court to make a very serious finding in a costs decision that Ms Barfield was “dishonest in her evidence”. Yume says that the document established no such thing.
Preliminary Discovery
32Yume accepts that the preliminary discovery costs are costs in the proceeding.
33However, Yume rejects that it should be required to pay Ashthorn’s costs of the preliminary discovery application. Rather, in circumstances where Yume was successful on three out of four issues at trial, and for the same reasons submitted by Yume in its submissions of 17 November 2023:
(a)Ashthorn should be required to pay 75% of Yume’s costs of the preliminary discovery application;
(b)Alternatively, the parties should bear their own costs.
Offer of Compromise
34Yume incorrectly argues that Ashthorn has submitted that the offer of compromise entitles them to indemnity costs. This was not the point of Ashthorn’s submissions in relation to the offer of compromise, Ashthorn raised the offer of compromise to bolster their argument that they should be awarded costs in the proceeding. These matters are explored more below.
The Stay
35Yume submits that, prior to the Judgment, Ashthorn was ordered by the Court to pay the total amount of $167,000.00 into Court as security for Yume’s costs.
36Yume has indicated an intention to apply to the Court of Appeal for leave to appeal the judgment in relation to the SUEZ issue and is arguing for a stay on the enforcement of the judgment for the same reasons that it argued for and successfully obtained a security of costs order against Ashthorn, being that Ashthorn does not have the capacity to pay an adverse costs order.
Security for costs
37Yume disputes Ashthorn’s claim that there is a “considerable line of authority” supporting their submission regarding the release of security, noting that Asthorn only cites three cases in support of this claim to cases from the 1920s and an English case from 1982.
38Yume contends that the authorities are clear that a sufficient basis on which to grant a stay is if a successful appellant were to be deprived of the fruits of its appeal because a stay was not granted. Yume cites Perram J in SkyySpirits LLC v Lodestar Anstalt (No 2)[9] in which his Honour said in respect of a very similar situation, that “there is a potential irremediable unfairness if the security is returned now and the appeal succeeds…”.
[9] [2015] FCA 575 at [25].
39Yume argues that, in an even more recent decision by this Court in Southstar Homes Pty Ltd v Form8 Constructions Pty Ltd (No 2),[10] Judge Cosgrave (as his Honour then was) granted a stay on the release of funds held in Court as security for the unsuccessful defendants’ costs, on the basis that the defendants promptly file an application to the Court of Appeal for a further stay.
[10] [2023] VCC 1545 (“Southstar”).
40Yume submits that the Court should take the same approach as it did recently in Southstar and order an interim stay on its orders pending Yume filing an application for a further stay in the Court of Appeal within 42 days (to coincide with the date by which it is required to file an application for leave to appeal). Yume contends that if the Court is not minded to grant an interim stay in the form sought by Yume, then, to maintain the status quo, the Court should grant an interim stay of 7 days to permit Yume to file an urgent interlocutory application in the Court of Appeal.
Ashthorn’s submissions
Costs
41Ashthorn submits that the Court should not depart from the general rule that costs follow the event.
42Ashthorn acknowledges that the Court does have power to award costs such that there is an apportionment in accordance with each claim, and also that the Court has the power to make “each bear own” cost orders.
43However, Ashthorn notes that, as a general rule, a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim Ritter v Godfrey.[11] Ashthorn argues that the discretion to apportion costs is one that should be exercised in only the most exceptional of circumstances. It relies on the authorities of Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3)[12] and Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd.[13]
[11] (1920) 2 KB 47.
[12] (1979) 28 ALR 201.
[13] [2007] FCA 1141 at [12].
44Ashthorn submits the circumstances in which apportionment of costs may be appropriate include:
(a)where, in respect of one or more issues, the successful party has “unfairly, improperly, or unnecessarily increased the costs”: Windsurfing International Incorporated Inc v Petit;[14]
(b)where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded: Waters v PC Henderson (Australia) Pty Ltd;[15]
(c)where a particular issue or group of issues is clearly dominant or separable: Waters v PC Henderson.[16]
[14] (1987) AIPC 90-441 per Waddell J.
[15] (1994) 254 ALR 328; [1994] NSWCA 338 at 3 per Mahoney JA; see also Hughes v Western Australian Cricket Association Inc [1986] FCA 63 per Toohey J.
[16] Ibid at 5 per Mahoney JA; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6] per Beazley JA, McColl and Basten JJA.
45Ashthorn also contends that the Court should be mindful not to discourage litigants from canvassing all material issues for fear of an adverse costs order: Cretazzo v Lombardi.[17]
[17] (1975) 13 SASR 4 at 12.
46Ashthorn argues that, despite being unsuccessful in relation to Salu Folk, Cleanaway, and the unpaid Retainer Fees, a significant amount of time during the trial was taken up dealing with issues relating to Mr Beanland’s credit, which had no bearing on the successful defence. Ashthorn submits that Mr Beanland was entitled to defend and disprove attacks on his professionalism and character.
47Ashthorn does not agree that the Cleanaway Issue took up the majority of the trial instead, it says that it was the background to the Engagement Agreement, the entry into the Engagement Agreement and the SUEZ transaction which together occupied a majority of the trial, a claim which Ashthorn was ultimately successful in.
48In relation to the Salu Folk transaction, Ashthorn submits that it never disputed that Pitzy was an existing investor and has expressed a willingness to invest. Ashthorn contends that Yume wasted far more time attaching Mr Beanland’s credit than the substance of their claim, repeatedly stating that Mr Beanland had unreasonably “inserted himself” into and “meddled in” the Salu Folk transaction or structured it in a particular way simply to obtain a Capital Raising Fee.
49Ashthorn argues that the Cleanaway Issue was brought in the alternative to the SUEZ Issue, and it is, therefore, incorrect to say, as Yume does, that Ashthorn sought damages in the amount of $414,000.00 and only succeeded in recovering $58,712.56. Therefore, Ashthorn submits that the highest combined amount that Ashthorn could have been awarded if wholly successful in all its claims was $193,600.00, being the Cleanaway Issue ($231,000.00), the Salu Folk Issue ($15,400.00) and the Advisory Retainer Fees Issue ($17,600.00) (which themselves would have then been added to the $52,800.00 of Retainer Fees already paid and rebated against the Capital Raising Fees, cancelling them out).
50Ashthorn does not agree with Yume that the Cleanaway deal occupied a majority of the trial, and most of that trial time related to issues that were raised by Yume and then abandoned by Yume, and only went to issues of credit.
51Ashthorn rejects the suggestion that the Cleanaway Issue was as unmeritorious as Yume asserts or was extended by reason of Ashthorn’s “misconduct” in failing to discover a document.
52Ashthorn submits that, despite being unsuccessful, much of the trial was spent responding to Yume’s case theory which accused Mr Beanland of trying to rush the deal through, and then had sought to inappropriately pressure Yume with threats of insolvency into taking a dealt about which they had reservations. Ashthorn notes that none of this was found to be the case. Mr Beanland had to spend a great deal of time in the witness box refuting these allegations, and pointing to documents which revealed that it was Ms Barfield who had herself suggested and approved of the structure of the deal, who had openly and willingly agreed to the tranche variations to the deal, and that that deal was embodied into transaction documents by Yume’s own lawyer on the instructions of Yume.
53Ashthorn contends that in their witness outlines and in oral evidence, Yume sought to attack Mr Beanland’s credit with suggestions he attempted to rush through a deal with Cleanaway and pressured Yume into taking it.
54Asthorn notes that, ultimately the Court did not find that Mr Beanland pressured Yume in the Cleanaway deal, and that his advice was based on professional judgement as to which deal was commercial superior.
55Ashthorn argues that Ms Barfield did not address the concerns about the Cleanaway deal that she said she would in her witness outline and instead focused on the fact that she simply did not like Cleanaway as a partner (which would not have been disputed by Ashthorn). Ashthorn submits that Ms Barfield focused on the misaligning of values with Cleanaway and had no issues with undesirable terms.
56Ashthorn accepts that it inadvertently failed to discover a document relevant to the Cleanaway Issue, being an internal Cleanaway email, which stated that there is an internal Cleanaway policy which required a “sign off” process for a deal with Yume to be concluded.
57Ashthorn contends that Yume has inflated the significance of this document in its submissions, and that the early discovery of this document would have no impact whatsoever on the duration of the trial. Ashthorn says that all the email establishes is that Cleanaway had an administrative internal approvals process and it was setting up to have the relevant forms signed (noting that Ashthorn had never suggested otherwise, and wholly accepted that the parties to the transaction did not reach a binding agreement). Ashthorn argues that it is a misrepresentation to state that because the CEO had not signed the Contract Execution Review Form (“CERF”), Cleanaway was not entirely committed. Ashthorn submits that it was Yume’s decision to pull out of the transaction, not the absence of the CEO’s signature, that ended the transaction.
58Ashthorn contends that, it is not possible that, if the document had been discovered earlier, the issue would not have been pressed at trial, because, as discussed above, the signing of the CERF did not clearly indicate an unwillingness on part of Cleanaway to enter into the transaction.
59Ashthorn argues that the Advisory Retainer Fees Issue did not consume much of the trial time and was limited to a factual dispute around whether or not Ms Barfield called Mr Beanland on 16 July 2019 to terminate the Engagement Agreement. Regarding this issue, Ashthorn says it was Yume that failed to discover a relevant email. Ashthorn submits that the relevant email which was called for after being referred to in evidence revealed that Ms Barfield had been dishonest in her evidence. She had claimed that she had proposed terminating Ashthorn’s engagement to the board, and Mr Miller told her in an email “…absolutely, I think that's what you need to do” and “yes, do that in the morning”, whereas the email from Mr Miller actually said she should not do that.
60Ashthorn also contends that Yume did not plead a waiver as a defence until its amended defence filed on 27 July 2023, being the second day of trial. Prior to that stage, Yume had run a legal argument that Ashthorn had “agreed” not to charge the Advisory Retainer Fees. The Court found, as Ashthorn had argued, that there was no such agreement because of a lack of consideration.
61Ashthorn notes that, on 26 August 2022, it served Yume an offer of compromise, offering to settle the proceeding on the basis that Yume pay Ashthorn the sum of $68,500.00 in full and final settlement of the dispute (inclusive of interest), and that Yume pay Ashthorn’s costs on a standard basis. This offer was not accepted by Yume, who did not respond.
62Ashthorn argues that had Yume accepted the offer, it would have been liable to pay Ashthorn the sum of $74,431.23 plus costs on a standard basis until that date (the “Offer”). This figure is calculated by adding GST of $5,931.23 to the offer amount (noting that the Offer included interest of $9,187.72 (calculated at 10% on the GST inclusive amount until 26 August 2022) which is not subject to GST).
63However, Ashthorn notes that r26.08(5) of the County Court Civil Procedure Rules 2018 (the “Rules”) states that, for the purpose of determining whether the judgment was more or less favourable, “…the Court shall disregard so much of the amount recovered by or awarded to the plaintiff for interest or damages in the nature of interest as relates to the period after the day the offer of compromise was served”. Ashthorn also notes that the Rules are silent as to the effect an offer to accept costs to that date on a standard basis, but it is generally accepted that the comparator date for interest and costs for the purposes of evaluating an offer of compromise is the date of the offer.
64Ashthorn submits that the relevant figures, therefore, are the Offer of $74,431.23 and the amount of $66,980.56, and, therefore, the judgment amount is insufficient to enliven the statutory presumption that Ashthorn ought to be awarded indemnity costs from shortly after the date of the Offer.
65Ashthorn contends that the offer of compromise rules have been described as “…broadly to encourage the compromise of litigation and the saving of the private and public expenditure associated with it”.
66Ashthorn notes that in this case, the trial was not set down for 11 months after the Offer. Ashthorn argues that, even though Yume would be aware that interest would not accrue following the Offer, it ought to be aware that unless it accepted the claim, interest would accrue on the overall claim. Ashthorn argues that this accrual of interest, along with the 11 months of additional legal costs incurred from the date of the Offer to the conclusion of trial, the Offer plainly represented a more favourable outcome to Yume than that which it now faces as a result of the Judgment.
67Ashthorn quotes from Kalenik v Apostolidis (No 3),[18] in which Hargrave J found that Calderbank offers, even offers which would not of themselves justify an order for indemnity costs in favour of the party making the offer, are relevant to the Court’s exercise of discretion with respect to costs.
[18] [2009] VSC 475.
68Ashthorn concludes that, having regard to the Offer, and the parties’ obligations under the Civil Procedure Act 2010, at the very least, the Offer ought to afford cost protection to Ashthorn, irrespective of the fact that it was unsuccessful in relation to a few heads of claim.
Security for costs
69Ashthorn also seeks the release of the security for costs paid by it in this proceeding and in proceeding CI-21-05522. Rule 62.05 of the Rules gives the Court “an unfettered discretionary power to set aside an order requiring a plaintiff to give security for costs”. Ashthorn submits that there is a considerable line of authority which supports the position that once a plaintiff obtains a successful judgment, the purpose of the security is exhausted, and it ought be repaid to the plaintiff irrespective of whether an appeal is contemplated. Ashthorn notes that this principle is set out in Dal Pont’s Law of Costs.[19] Ashthorn contends that it is unreasonable that, having been successful at trial, Ashthorn ought not to have access to its own funds for an extended of period of time, while simultaneously having to defend an appeal.
[19] (2nd ed, 2009) at [28.65].
Interest
70Ashthorn argues that Yume is ordered by the Court to pay it “interest as claimed”, and that Ashthorn had claimed contractual interest, or alternatively interest pursuant to statute. Ashthorn draws upon s58(1) of the Supreme Court Act 1986, which provides that if a debt or sum certain is recovered, the successful party ought be allowed interest under the penalty interest rate from the time with the debt or sum was payable, or otherwise from when a demand for payment was made.
71Ashthorn contends the date that interest should accrue from is 31 March 2021, being the date on which SUEZ and Yume entered the second extension and variation agreement, in which the number of shares that SUEZ would purchase and the purchase price for those shares was fixed. Ashthorn argues that on its interpretation of the Engagement Agreement:
(a)any Capital Raising Fee is payable the date the Committed Amount (or the relevant part thereof) is obtained or committed (or is deemed to have been)” (clause 4.2);
(b)in relation to calculating the Capital Raising Fee it is to be assumed that “any conditions … are satisfied and that the Potential Counterparty will exercise any contingent commitment or options” (clause 4.2);
72Ashthorn submits that, accordingly, the Capital Raising Fee of $58,712.56 became due and payable to Ashthorn at the time the amount of $1,448,215.50 was committed, being 31 March 2021. By reason of sub-paragraph (b) above, it was to be assumed that SUEZ would exercise the option to purchase those shares and complete the Share Subscription.
73Ashthorn notes that interest at the penalty interest rate of 10% on $58,712.56 for the period 31 March 2021 to 5 December 2023 (being the date of its written closing submissions) is $15,763.92.
Preliminary Discovery
74Ashthorn also seeks its costs of the preliminary discovery application made in relation to this matter, including a reimbursement of the costs it has paid to Yume for the provision of that preliminary discovery. Ashthorn assumes that this will not be opposed given that, in January 2022, at the time of discussing the costs order in relation to the preliminary discovery application, K&L Gates stated in an email dated 28 January 2022: “The applicant may recover those costs if it then commences a proceeding to obtain relief and ultimately succeeds in that proceeding”.
75This application relates to the events occurring around September 2021 when Mr Beanland discovered that in July 2021, SUEZ was issued with 2,068,425 shares in Yume. Upon discovering this, Ashthorn’s solicitors wrote to Yume’s solicitors, K&L Gates, requesting information as to the further extensions of the SUEZ Agreement so as to determine Ashthorn’s entitlement to fees.
76In response to Ashthorn’s request, Yume stated that it would “…not be providing the requested information and nor will it be engaging any further with you or your client on these issues” and “[o]ur client will not be providing copies of any documents to Ashthorn”. K&L Gates, Yume’s solicitors, stressed their view that any claim in relation to SUEZ was baseless and sought to remind Ashthorn and its solicitors of their obligations under the Civil Procedure Act 2010 and reserved the right to seek costs against the solicitor if a proceeding was to be commenced.
77Ashthorn submits that, as a result of this adversarial correspondence and blanket refusal to provide documents to Ashthorn, it was forced to bring an application for preliminary discovery, which it filed on 23 December 2021.
78Ashthorn notes that Yume provided the first and second agreement but refused to provide the third. At this point, from Ashthorn’s perspective, it appeared that the eventual agreement mirrored that which had original been contemplated under the best and final offer (“BAFO”), and believed further information would shed light on this. Ashthorn was also concerned that it was not entirely accurate to state that there had been no “option” in the marketing agreement with SUEZ, despite there plainly being an option the second extension and variation agreement.
79Ashthorn contends that on 18 January 2022, K&L Gates estimated that it would cost $30,000.00 to make preliminary discovery and sought that to be paid by Ashthorn as security. Despite this, Yume’s indemnity costs of making preliminary discovery was $8,887.49 for the provision of just 50 documents.
80Ashthorn notes that the parties then engaged in a case conference facilitated by the Court. After 3 days, the parties reached consent orders and on 7 February 2022, the Court ordered, by consent, that Yume provide certain documents relating to the SUEZ Agreement to Ashthorn, that Ashthorn pay Yume’s costs of providing that discovery and that the costs of the application be reserved.
81Ashthorn argues that, on 22 February 2022, Yume made discovery of the preliminary documents, many of which subsequently formed the foundation of Ashthorn’s claim in relation to SUEZ.
82Ashthorn submits that Yume should pay its costs of the preliminary discovery application because firstly, it was successful in that application, and secondly, Yume’s approach to its request for documents was unnecessarily and unreasonably adversarial such that it was put to the cost and expense of having to apply for preliminary discovery. This included not only refusing to provide obviously relevant documents prior to the making of an application, a continued refusal to provide any further documents unless and until an order was in place and to demanding an extraordinary amount of security for costs to do so.
83Ashthorn contends that it is customary for the applicant to pay the costs and expenses of the respondent in making discovery, which includes the production of documents for the inspection of the applicant. Here, an order was made that Ashthorn pay $9,000.00 by way of security into Court for Yume’s estimated costs of providing the preliminary discovery. The monies have not been paid to Yume and remain in Court.
Analysis
84As a starting point, I accept in the circumstances of the present case, that costs should be apportioned on an issue-by-issue basis given Ashthorn’s mixed success.
85It is common ground, that as a general rule, the Court will order costs to be taxed on the standard basis.[20] The discretion to make a special costs order is an unlimited one though it must be exercised judicially and not unreasonably, and the circumstances should be “special”.[21] The usual order as to costs is that costs follow the event, and the successful party is entitled to an award of costs in its favour.[22]
[20] O63A r31 of the Rules (see r 30 regarding the meaning of “standard basis”).
[21] Aljade and MKIC v OCBC [2004] VSC 351 at [10].
[22] Oshlack v Richmond River Council (1998) 193 CLR 72 at [97].
86On such an analysis, it would follow that Yume pay Ashthorn’s costs of the proceeding as Ashthorn was successful. However, for the reasons set out below, I find that, given the particular nature of these proceedings, I will exercise my discretion to award costs relative to the success of each party in advancing or defending a given separate and independent claim.
87I accept that where “costs follow the event”, the “event” may be characterised as an issue or each separate issue that comprise an action. In the present proceeding, Ashthorn was successful on the SUEZ Issue but was unsuccessful on the Salu Folk Issue, Cleanaway Issue and the Advisory Retainer Issue. For the reasons that follow, I find that Ashthorn ought to be deprived of its costs of contesting the issues on which it failed. In Ajaimi, M Osborne J observed that the successful party need not have behaved unreasonably or inappropriately in depriving a party of its costs in relation to some issues where there has been a mixed outcome.[23]
[23] [2022] VSC 275 at [13].
88However, in making this finding, I have placed significantly more weight on the fact that Ashthorn was successful in relation to the SUEZ issue than as was submitted by Yume. In my view, on a proper analysis, it is not accurate to state, as Yume did in its written submissions, that the sum of $58,713.56 that Ashthorn was awarded is less than 50% of the $414,000.00 that it sought at trial. Ashthorn alleged the Cleanaway Issue in the alternative to the SUEZ Issue, and, therefore, the highest combined amount that Ashthorn could have been awarded if wholly successful in all its claims agitated at trial was $193,600.00, comprising the Cleanaway Issue ($231,000.00), the Salu Folk Issue ($15,400.00) and the unpaid Advisory Retainer Fees Issue ($17,600.00) (which themselves would have then been added to the $52,800.00 of retainer fees already paid by Yume and rebated against the Capital Raising Fees, cancelling them out).
89In the Judgment, Ashthorn was successful in one of its alternative causes of action, the SUEZ Issue. Because of this, Ashthorn’s success on the SUEZ Issue is more significant than Yume has credited in its submissions (as being only a partial success).
90In coming to the overall finding that costs should be apportioned on an issue by issue basis, I am persuaded by Yume that the qualities of this proceeding are reflected in some of the criteria that underpins apportioning costs as outlined in the cases of Ajaimi, Smith v Gould,[24] and BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2).[25] I have reached this conclusion due to Ashthorn’s unsuccessful claims in relation to three failed Issues run at trial, and the fact that the Cleanaway Issue consumed a lot of time during the trial (however, was argued on an alternative basis).
[24] [2012] VSC 542.
[25] [2007] FCA 557.
91My decision to apportion costs on an issue-by-issue basis is influenced by the finding in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2)[26] that costs ought to be apportioned where issues are clearly “separable”. To this end, I agree with Yume’s submission that the four issues put before the Court were all discreet issues, and that they all turned on independent and distinct bodies of evidence that the parties addressed in Court individually. Each of these issues are discussed further below.
[26] [2007] NSWCA 373 at [6].
Discreet issues
92The Salu Folk Issue, Cleanaway Issue, SUEZ Issue and the Advisory Retainer Fee Issues all relied on entirely separate bodies of evidence, which, apart from the terms of the Engagement Agreement, had virtually no overlap in regard to facts or evidence.
93Each issue related to different entities entering into separate agreements with Yume, all of which were structured entirely differently and engaged with distinct components of the Engagement Agreement.
94For example, the Salu Folk Issue drew upon those terms of the Engagement Agreement relating to requirement for soliciting a party, and then digressed into discussions about the agreement’s interpretation of “existing investors” and whether or not there had been a carve out.
95In relation to the SUEZ Issue and Cleanaway Issue, although both alleged transactions involved alleged instances of capital raising, SUEZ also included a claim for sale of assets, and both transactions involved consideration of bespoke factual matrixes with different key players, different agreements and within the context of different organisations operations.
96The Advisory Retainer Fee Issue involved clause 4.1 of the Engagement Agreement and whether it was agreed that Ashthorn would not charge those fees for the period July/August 2019 and August/September 2019, whether the statements made by Mr Beanland amounted to an agreement and whether there had been a waiver.
97The presence of four entirely discreet issues has influenced my decision to apportion costs issue by issue. Ashthorn was unsuccessful on three out of the four discreet issues agitated at trial. On the principles set out above, I find that Ashthorn ought to be deprived of its costs in relation to the three issues that it lost. I decline to exercise my discretion to award costs in favour of Yume in respect of the issues on which Ashthorn has failed. The Full Court of the Federal Court in Les Laboratories Servier v Apotex Pty Ltd[27] observed that warnings have been stated that care should be taken in such a course.
[27] [2016] FCAFC 27 at [301].
98The Courts have been slow to order a successful party to pay the costs where it been unsuccessful on some issues.[28] In Mok v Minister for Immigration (No 2)[29] Keely J observed that, without seeking to fetter the Court’s unlimited and broad discretion in relation to costs, the power to order that a successful party who has failed on some issues at trial pay the unsuccessful party ought to be exercised after consideration of all of the circumstances and after reaching a conclusion that the raising of the failed issue was so unreasonable that it is fair and just to make such an order.
[28] Les Laboratories at [303]
[29] (1993) 47 FCR 81 per Keely J at [84].
99When deviating from the starting point that the successful party is entitled to its costs, the Court must weigh up the competing interests of not discouraging plaintiffs from canvassing all material issues for fear of an adverse costs order with the raising of an issue that is so unreasonable that it should not have been raised. Given my findings that the issues raised by Asthorn were arguable, it is not the case that Ashthorn pressed substantially exaggerated claims, inappropriately prolonged the trial, or took unnecessary technical points such that it ought to pay Yume for the costs of the unsuccessful claims.
100In considering the success and failure on individual issues, the raising of those issues by Ashthorn was justified given that it involved the interpretation of a contract. However, given that time was expended, and costs incurred by the parties on the three unsuccessful discrete issues, and in circumstances where the evidence and arguments on each can be separated, Ashthorn will not be entitled to recover all of its costs in the proceeding.
The document produced at trial
101I do not accept Yume’s argument that, had Ashthorn produced the document (relating to the need for a signature from the CEO of Cleanaway) that it ultimately produced on the second day of trial at an earlier date, the Cleanaway Issue would not have been pursued by Ashthorn. The fact that there was one more formal hurdle to overcome prior to entering into the legally binding agreement, in this case the signature of the CEO, would not dissuade Ashthorn from pursuing the Cleanaway Issue. Its argument at trial was premised on the notion that “commitment” could occur prior to satisfaction of these formal requirements.
102I do not accept Yume’s submission that the majority of the time devoted to the Cleanaway Issue at trial centred around issues relating to Mr Beanlands’ integrity and credibility, or that these issues were somehow unrelated to the overall arguments surrounding the Cleanaway Issue. Certainly, there was some discussion around whether or not Mr Beanland was promoting Cleanaway from a place of professional judgment, and whether or not he had inflated the risk of insolvency for personal gain, and I accept that at least some of his evidence was devoted to refuting these claims. But the bulk of his evidence and the bulk of the evidence adduced at trial relating to the Cleanaway Issue related to factual matters surrounding whether or not there had been a subjective “commitment”. This went to the contest in relation to the appropriate interpretation of the terms contained in the Engagement Agreement.
The Offer
103I am not persuaded by Ashthorn that the rejected Offer in this matter should be factored into a ruling that costs are in the proceeding. Even though the amount set out in the Offer was relatively close to the amount awarded in Judgment, at the time the Offer was presented to Yume, it was not unreasonable for Yume to reject the Offer. Yume was ultimately successful defending three out of the four claims agitated by Ashthorn. It was not unreasonable for it to believe that there were reasonable grounds to defend Ashthorn’s claims.
104Further, taking into account Justice Hargrave’s observations in Kalenik v Apostolidis (No 3),[30] an Offer that may not of itself justify an order for indemnity costs in favour of the party making the Offer may in certain circumstances be relevant to the Court’s exercise of discretion as to costs. In my view, given the claims involved construction of a contract where arguments as to the proper interpretation of its terms are arguable, the Offer is not relevant to the exercise of the Court’s discretion with respect to costs where Ashthorn was unsuccessful on separate heads of claim.
[30] [2009] VSC 475 at [24].
The release of security for costs
105I agree with the learned authors of Dal Pont’s Law of Costs[31] that it is unreasonable that, having been successful at trial, the successful party ought not to have access to its own funds for an extended period of time while simultaneously having to defend an appeal. In my view, the purpose of the security has been exhausted and ought to be repaid to Ashthorn irrespective of whether Yume is contemplating its appeal rights.
[31] (2nd ed, 2009) at [28.65].
106The security for costs paid into Court by Ashthorn in this proceeding and the preliminary discovery application ought to be released and returned to Ashthorn immediately.
Interest
107I agree with Yume that the date upon which the accrual of interest is to occur is the date of the Share Sale Agreement, being 12 July 2021. However, Yume is incorrect in stating that a “legally binding” agreement between Yume and SUEZ only occurred on 12 July 2021 at the time of the Share Sale Agreement. The extract from my judgment which Yume seeks to rely on relates to the contractual right to the purchase of shares, which indeed only occurred on the exercise of the right of first refusal (“ROFR”). This does not mean that there was no legally binding agreement before this point, it only means that this particular contractual right had not been crystalized.
108I ultimately agree with Yume that interest should only be calculated from the date this contractual right was crystalized, which was 12 July 2021.
109I further agree with Yume and Ashthorn that interest does not apply to the GST component of the fee that is payable. This is because GST is not to be applied to penalty interest payments. Penalty interest payments are an input taxed supply under ss40–5 of A New Tax System (Goods and Services Tax) Act 1999. Therefore, it is not subject to GST and there is no entitlement to an input tax credit for the things that are acquired to make the financial supply.
110I note that, pursuant to Ashthorn’s closing submissions, the Capital Raising Fee of $111,512.56 includes GST. I, therefore, accept that the GST exclusive component of the judgment sum is $53,375.10, and that Yume is only liable to pay interest, at a rate of 10%, on the sum of $53,375.10, between the dates of 23 September 2021 and the date of the entry of judgment, being 22 December 2023, as opposed to the date of the delivery of reasons only. Therefore, the total interest payable is $13,073.24.
Preliminary discovery
111I agree with Ashthorn that costs for the preliminary discovery application should be paid by Yume as they are costs in the proceeding.
112Ashthorn was ultimately successful in the SUEZ Issue and it is not disputed that the documents discovered on 22 February 2022 related to the SUEZ Issue. Therefore, K&L Gates was not justified in resisting Ashthorn’s request for discovery, and the preliminary discovery application could have and should have been avoided.
113I do not agree with Yume that the preliminary discovery costs ought to be apportioned in accordance with the analysis relevant to the main proceeding set out above. The preliminary discovery concerned the separate issue on which Ashthorn ultimately won at trial. The costs of the preliminary discovery related purely to the successful SUEZ Issue.
114I take into account the solicitor for Yume’s concession in his email dated 28 January 2022 that Ashthorn may recover the costs paid by it to Yume in providing the preliminary discovery if it was ultimately successful in the issue of a proceeding. I further rely on the case of Pandaolfo v Findari & Ors (Costs)[32] that where a subsequent proceeding has been brought against the respondent to a preliminary discovery application that the costs previously awarded can be made part of the costs of the proceeding which the applicant can recover from the respondent.
[32] [2018] VSC 655 at [15].
115I find that Yume ought to pay Ashthorn’s costs of the preliminary discovery proceeding, and that Yume reimburse Ashthorn for the costs paid by Ashthorn for the provision of the preliminary discovery.
Conclusion and Orders
116While I agree with Yume that, in this proceeding, costs should be apportioned, I do not agree with its figure of 75% payable by Ashthorn to Yume. This figure does not adequately take into account the fact that Ashthorn was successful in one of its alternative claims and is also based on an incorrect quantum that does not factor in that the SUEZ Issue and Cleanaway Issue were brought in the alternative.
117However, I agree with Yume that the Cleanaway Issue, an ultimately unsuccessful claim, consumed a disproportionate amount of time during the trial, and I am also persuaded by the fact that Yume was successful on the discreet issues of Salu Folk and the Advisory Retainer Fees. For this reason, I will order that Yume must pay 50% of Ashthorn’s costs of and incidental to the proceeding on a standard basis to be taxed in default of agreement.
118Ashthorn does not oppose a stay for a period of 42 days on the Judgment and costs orders to allow Yume to file its foreshadowed appeal.
119For the foregoing reasons, the orders I will make are as follows:
In proceeding CI-22-01842
(a)There is judgment for the plaintiff against the defendant.
(b)The defendant must pay the sum of $58,712.56 (inclusive of GST) to the plaintiff.
(c)The defendant pay interest on the sum of $53,375.10 (exclusive of GST) to the plaintiff, calculated at the rate prescribed by s2 of the Penalty Interest Rates Act 1983 from 23 September 2021 to 22 December 2023, being the sum of $13,073.24.
(d)The defendant must pay the plaintiff’s costs of and incidental to the preliminary discovery application filed 23 December 2021 in CI-21-05522, including the reimbursement of any amount that the plaintiff has been ordered to pay the defendant for the provision of the preliminary discovery, and 50% of the plaintiff’s costs of and incidental to the proceeding, on a standard basis to be taxed in default of agreement.
(e)The amounts paid by the plaintiff into Court as security for the defendant’s costs of the proceeding and in CI-21-05522, be repaid to the plaintiff.
(f)The operation of paragraphs (b), (c) and (d) is stayed:
(i) for a period of 42 days from the date of this Judgment; and
(ii) until the hearing and determination by the Court of Appeal of any application for a further stay, provided such application is filed in the Court of Appeal within 21 days from the date of this Judgment.
In proceeding CI-21-05522
(a) The amounts paid by the plaintiff into Court as security for the defendant’s costs of the proceeding, be repaid to the plaintiff.
(b) The defendant must pay the plaintiff’s costs of and incidental to the preliminary discovery application filed 23 December 2021, including the reimbursement of any amount that the plaintiff has been ordered to pay the defendant for the provision of the preliminary discovery, on a standard basis to be taxed in default of agreement.
(c) The operation of paragraph (b) is stayed:
(i) for a period of 42 days from the date of this order; and
(ii) until the hearing and determination by the Court of Appeal of any application for a further stay, provided such application is filed in the Court of Appeal within 21 days from the date of this order.
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Certificate
I certify that these 30 pages are a true copy of the judgment of her Honour Judge Burchell delivered on 22 December 2023.
Dated: 22 December 2023
Gideon Lipinski
Associate to her Honour Judge Burchell
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