Australian Super Developments Pty Ltd v David Wellesley Marriner (No. 2)
[2015] VSC 315
•30 June 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2005 2071
| AUSTRALIAN SUPER DEVELOPMENTS PTY LTD (ACN 058 626 761) | |
| Plaintiff | |
| v | |
| DAVID WELLESLEY MARRINER (AND OTHERS ACCORDING TO THE SCHEDULE ATTACHED) | |
| Defendants | |
(BY ORIGINAL PROCEEDING)
| DAVID WELLESLEY MARRINER | |
| (AND OTHERS ACCORDING TO THE SCHEDULE ATTACHED) | |
| Plaintiffs by Counterclaim | |
| v | |
| AUSTRALIAN SUPER DEVELOPMENTS PTY LTD (ACN 058 626 761) | |
| (AND OTHERS ACCORDING TO THE SCHEDULE ATTACHED) | |
| Defendants by Counterclaim | |
(BY COUNTERCLAIM)
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JUDGE: | SLOSS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 December 2014; 25 February 2015 | |
DATE OF JUDGMENT | 30 June 2015 | |
CASE MAY BE CITED AS: | Australian Super Developments Pty Ltd v David Wellesley Marriner & Ors (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2015] VSC 315 | FIRST REVISION: 22 July 2015 |
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PRACTICE AND PROCEDURE – Application for leave to file summons and further material after delivery of reasons for judgment on remitter hearing – Application to re-open – No ‘exceptional circumstances’ made out - Considerations of ‘the justice of the case’ would not favour the grant of leave to re-open – Nor would re-opening promote the ‘overarching purpose’.
QUANTUM OF LOSS – First defendant liable for knowingly inducing or immediately procuring breach of solicitor’s trust under the principle in Eaves v Hickson – Plaintiff settled with solicitor – Principle against double recovery – Effect of plaintiff’s settlement with solicitor – Separate claims and cause of action against first defendant.
COSTS – Costs of original trial and remitter hearing – Plaintiff sought a ‘special’ costs order – Calderbank offer – Offer of compromise – Whether offer of compromise should be treated as an effective Calderbank offer – Indemnity costs
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff (and the Defendants by Counterclaim) | Mr N J O’Bryan AM SC with Mr A T Broadfoot | Holding Redlich |
| For the Defendant (and the Plaintiffs by Counterclaim) | Mr P J Bick QC with Mr R A Heath | Meerkin & Apel |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Hearing as to final orders and costs issues on 3 December 2014............................................. 12
Final orders contended for by ASD.......................................................................................... 12
Final orders contended for by the Marriner parties.............................................................. 14
The Marriner parties contend that the form of judgment proposed by ASD would result in ‘double recovery’.............................................................................................................. 14
ASD’s claim for interest on the $80,000.................................................................................... 23
The Marriner parties’ application in December 2014 for leave to file a summons and further affidavit of Mr Pergl........................................................................................................................................ 23
Conclusion on the Marriner parties’ application for leave................................................... 32
Does ASD’s claim for $80,000 amount to ‘double recovery’?................................................... 35
Costs – applicable principles......................................................................................................... 46
ASD seeks a ‘special’ costs order................................................................................................... 48
ASD’s Calderbank letter............................................................................................................. 48
ASD’s offer of compromise........................................................................................................ 49
Has ASD demonstrated a basis for a ‘special’ costs order?....................................................... 50
ASD’s Calderbank letter............................................................................................................. 50
Conclusion on the Calderbank offer........................................................................................ 56
ASD’s offer of compromise........................................................................................................ 58
Conclusion on the offer of compromise.................................................................................. 59
Alternatively, should the Court treat ASD’s offer of compromise as an effective Calderbank offer? 60
Does Rule 63.24 apply to the present case?................................................................................. 62
The costs of the remitter hearing................................................................................................... 63
Costs orders relating to the hearing before Byrne J................................................................... 65
The Marriner companies............................................................................................................ 66
Proposed final orders...................................................................................................................... 67
HER HONOUR:
Introduction
The background and events that gave rise to the dispute between the parties in this proceeding are canvassed in the remitter decision.[1] The litigation arose from activities undertaken in the course of a joint venture conducted by interests associated with the first defendant, Mr David Wellesley Marriner, on the one hand and the Construction and Building Unions Superannuation Fund (‘CBUS’) on the other. Contemporaneous with the demise of their joint venture relationship in about mid-2000, Mr Marriner expressed interest in acquiring the Laguna Quays resort, which was one of the joint venture projects operated by the plaintiff, Australian Super Developments Pty Ltd (‘ASD’), the corporate vehicle through which the joint venture was conducted. The completion of the sale of Laguna Quays to entities associated with Mr Marriner did not take place until 17 April 2002.
[1]Australian Super Developments Pty Ltd v David Wellesley Marriner & Ors [2014] VSC 464 (‘remitter decision’).
In 2005, ASD commenced this proceeding. It brought numerous claims for damages and equitable compensation against Mr Marriner and some of his associated companies (the second to sixth defendants). ASD also brought claims against the partners of Wallace & Wallace, a firm of solicitors based in Mackay, North Queensland, for alleged breaches of a solicitor’s trust. In essence, ASD claimed that Mr Marriner had induced or procured payments to be made by Wallace & Wallace in breach of trusts of which it was the beneficiary. It also claimed that Mr Marriner, as Chief Executive Officer (‘CEO’) and a director of ASD, exceeded an expenditure limit imposed on him by the board of directors of ASD, by some $824,890, without its approval. Mr Marriner and his associated companies counterclaimed against ASD, United Super Pty Ltd, in its capacity as the trustee of CBUS, and Mr Ian Patience, who was the new CEO of ASD, and Messrs Ralph Willis, George Wason and Barrie Frost, who were members of the ASD board at the relevant time, for misleading and deceptive conduct and unconscionable conduct, amongst other things.
The first trial commenced before the Honourable Justice Byrne in mid-August 2009. As events transpired, the trial involved only (what may be conveniently called) ‘the ASD parties’ and ‘the Marriner parties’, the claims pleaded against the partners of Wallace & Wallace having been settled prior to its commencement.[2] The trial occupied some 20 sitting days. His Honour delivered judgment on 26 February 2010, upholding ASD’s claim in part and dismissing the Marriner parties’ counterclaim.[3] On 16 April 2010 his Honour delivered his reasons for dismissing the counterclaim,[4] and pronounced final orders, including as to costs. He ordered that there be judgment for ASD against Mr Marriner on the claim in the amount of $412,113, plus interest in the amount of $224,336.25, and that there be judgment for ASD on the counterclaim. As to costs, his Honour ordered that ASD’s costs on the claim be paid by Mr Marriner and that there be no order for costs on the counterclaim.
[2]See Australian Super Developments Pty Ltd v David Wellesley Marriner & Ors [2010] VSC 41, at [27] where Byrne J observed:
It will be seen that claims (vi) to (ix) [knowingly inducing and procuring Wallace & Wallace’s breach of trust etc] depend upon the fact that Wallace & Wallace acted in breach of trust or other duties owed by it to ASD. Until recently, the solicitors were defendants to this proceeding and relief was sought against them for those breaches. I was told that the claims against Wallace & Wallace have been resolved so that this part of the proceeding was struck out and Wallace & Wallace did not participate as a party in the trial. Notwithstanding this, it remained part of the proofs of ASD that, in disbursing the third tranche funds in accordance with Mr Jephson’s instruction, Wallace & Wallace acted in breach of duties owed to ASD.
(emphasis added)
[3]Ibid.
[4]Australian Super Developments Pty Ltd v Marriner (No 2) [2010] VSC 66.
The Marriner parties appealed to the Court of Appeal against the orders requiring Mr Marriner to pay $412,113 to ASD and dismissing his counterclaim for damages. The ASD parties cross-appealed, seeking an order that Mr Marriner pay them the sum of $929,800 on the basis that his Honour should have awarded ASD the entire amount claimed.[5] The appeal was heard in November 2011 and occupied two days. On 3 August 2012, the Court of Appeal (Neave and Mandie JJA and Judd AJA) delivered judgment, allowing the appeal and setting aside the orders made by the original trial judge requiring Mr Marriner to pay $412,113 to ASD.[6] The Court of Appeal also allowed ASD’s cross-appeal in part and remitted several issues to be determined by a judge of the trial division.
[5]The amount claimed on the cross-appeal was $929,800, made up of the ‘second tranche’ sum of $426,600 plus the ‘third tranche’ sum of $853,200, which was said to be the amount to which the cross-appellants were entitled, minus the sum of $350,000 received from Wallace & Wallace by way of settlement, plus statutory interest.
[6]Marriner & Ors vAustralian Super Developments Pty Ltd [2012] VSCA 171 (‘Court of Appeal’s Reasons’).
The Court of Appeal reserved the question of costs and directed that written submissions be filed. Later, following the retirement of Mandie JA, the parties agreed to have the costs issue dealt with by a bench of two judges. The Court of Appeal (Neave JA and Judd AJA) delivered its reasons and pronounced orders on 5 December 2012.[7] The Court held that as the Marriner parties were substantially successful in their appeal, they were entitled to an order for costs, save that some allowance should be made for ASD’s success on its cross-appeal. This success was reflected in the proportionate reduction in the costs ordered in favour of the Marriner parties. The Court ordered the ASD parties to pay the Marriner parties 80% of the costs of the appeal and that there be no order for costs with respect to the cross-appeal. The Court also granted the ASD parties a certificate under s 4 of the Appeal Costs Act1998 (Vic) in respect of their liability for the costs of the appeal.
[7]Marriner & Ors vAustralian Super Developments Pty Ltd [2012] VSCA 290 (‘Court of Appeal’s Costs Reasons’).
In their reasons concerning costs issues, their Honours succinctly described, by way of ‘background’, the nature of the ‘hard-fought’ litigation taking place between the parties. That account bears repeating in the context of the current applications for costs:
[3]The issues raised on the appeal and cross-appeal were complex. The complexity was, for the most part, a product of overworked and sometimes ambiguous pleadings, and the failure of the parties at trial to address what became important issues on appeal. The way in which the trial was conducted made the resolution of the issues unusually difficult for the trial judge.
[4]In essence, the dispute between the parties raised two overlapping issues. First, ASD claimed that Marriner had induced or procured payments of bond moneys expended in breach of a trust of which ASD was the beneficiary. It was alleged that the bond moneys were held on a Quistclose[8] trust in favour of ASD. It was also alleged that some of the bond moneys were held on a solicitor’s trust by ASD’s solicitors, Wallace & Wallace (‘Wallaces’). ASD failed on these issues at the trial and cross-appealed.
[5]On the cross-appeal, the Quistclose trust claim failed, as did ASD’s contention that Marriner procured or induced a breach of that trust by Mr Peter Jephson, the company secretary of ASD (‘Jephson’). The one area on the cross-appeal in which ASD achieved a measure of success was in relation to funds held on a solicitor’s trust by Wallaces. The Court concluded that the trial judge erred in holding that Wallaces were not liable for payments made in breach of the solicitor’s trust.
[6]Thus, the real issue on the cross-appeal became whether Marriner was, or his associated companies were, liable for a breach of trust which occurred as a consequence of directions given by Jephson to Wallaces to disburse the money to third party creditors, or for a payment of $80,000 which Marriner directed Wallaces to pay to WS Group. The trial judge stopped short of reaching any conclusion on that issue, having erroneously found that there was no breach of the solicitor’s trust by Wallaces.
[7]The Court concluded that it would be unfair to both sides to reach any conclusion on that issue, for the reasons expressed in paragraph 164 of the judgment. Instead, this part of the case was remitted for determination by a judge in the trial division.
[8]Secondly, ASD claimed that an expenditure limit of $4.7 million, which was imposed on Marriner as Chief Executive Officer and Director of ASD, was exceeded by him to the extent of $824,890, without ASD Board approval. The capital expenditure claim succeeded in part at the trial.
[9]There were 35 grounds of appeal relating to ASD’s claims and two grounds of appeal relating to the trial judge’s dismissal of Marriner’s counterclaim. Grounds 1 to 17 related to the capital expenditure claim. Marriner’s main arguments on appeal related to that claim. Although Marriner succeeded in having the trial judge’s order requiring him to pay $412,113 as compensation for expending money in excess of the limit set aside, his success was, to a significant extent, based on an argument about the effect of the alleged expenditure cap, which was not advanced at trial.
[10]Marriner also appealed against the decision of the trial judge rejecting various defences raised by him at trial (grounds 18 to 35). On appeal, the Court concluded that Marriner’s reliance on cl 11(b) of an agreement made on 19 October 2001 as a release from liability failed. However, Marriner also relied upon the conduct of ASD in the period leading to that agreement. He alleged that ASD had failed to disclose an intention to sue him or his companies to recover the bond moneys, as well as an amount equal to the excess capital expenditure. These affirmative defences relied upon a complex web of facts and inferences. Unfortunately, the trial judge failed to provide adequate reasons for rejecting the defences.
[11]The Court remitted these issues for determination by a trial division judge. The same course was adopted in relation to the appeal against the trial judge’s dismissal of the counterclaim made by Marriner (grounds 36 and 37), which was based on the same or similar facts and matters as those relied upon by him as affirmative defences to ASD’s capital expenditure claim.
[12]The question of the liability of Marriner companies, Goldworthy Pty Ltd, Laguna Australia Pty Ltd, and Stage Design Pty Ltd for the breaches of trust committed by Wallaces (including the applicability of any defences and related counterclaims), and the liability for the costs of the hearing before the trial judge, were also remitted for determination by a trial division judge.[9]
[8][1970] AC 567.
[9]Court of Appeal’s Costs Reasons, at [3]-[12].
The Court of Appeal remitted the question of liability for the costs of the original hearing because, it seems, their Honours apprehended that despite the Marriner parties’ apparent success on appeal, the resolution of the substantive issues remitted could effect a substantial change in the overall outcome of the proceeding. The Court stated:
[20]Having regard to the fact that a number of potentially significant issues have been remitted to the trial division which might, following their determination, substantially change the outcome as between the parties, it is not appropriate to make any order for the costs of the trial. For that reason, we will also remit the question of the order which should be made relating to the costs of the trial for determination by the judge in the trial division.[10]
[10]Ibid, at [20].
Against that background, the focus of the remitter hearing was on the two main issues remitted by the Court of Appeal:
· Questions arising on the ASD claim in chief – namely, whether Mr Marriner and his associated companies are liable for the breaches of the ‘solicitor’s trust’ which the Court of Appeal found, arising from facts and circumstances that took place in 2000 and 2001 in respect of the third tranche of the electricity bond monies and alleged to involve a species of liability under the Eaves v Hickson[11] principle and (second limb) Barnes v Addy;[12] and
· Questions arising on the Marriner parties’ counterclaim – in essence, whether the Marriner parties were misled and deceived or Mr Marriner was otherwise the object of unconscionable behaviour on the part of the ASD/United Super group of defendants by counterclaim, in respect of the negotiations that occurred during the winding up of the joint venture and the sale of Laguna Quays to the Marriner parties in 2000 and 2001.[13]
[11](1861) 30 Beav 136; 54 ER 840.
[12](1874) LR 9 Ch App 244.
[13]See remitter decision, at [21].
The orders made by the Court of Appeal required that those issues ‘be determined by a judge of the Trial Division and, subject to any contrary order of that trial judge, on the basis of the evidence already adduced in the trial’.[14] (I note that, for the purposes of the remitter, no contrary order was made.)
[14]See order of the Court of Appeal authenticated on 3 August 2012.
Relevantly, in relation to the third tranche funds, the Court of Appeal found that his Honour had erred in holding that Wallace & Wallace were not liable for payments made in breach of the solicitor’s trust because they did not act dishonestly. Rather, the Court of Appeal held, ‘[a] trustee is strictly liable for any breach of trust, even if the breach is entirely innocent.’[15] Accordingly, under the orders made by the Court of Appeal, the innocent breaches of trust committed by Wallace & Wallace were the starting point for the remitter hearing, in the sense that it was those breaches of trust that the ASD parties alleged Mr Marriner knowingly induced and procured.
[15]Court of Appeal’s Reasons [2012] VSCA 171, at [147].
In the written submissions filed in advance of the remitter hearing, each of the parties touched on the settlement that had been reached with Wallace & Wallace in advance of the commencement of the original trial. It is convenient to reproduce the relevant passages here.
In ASD’s written submissions, the alleged liability of Mr Marriner is addressed under two headings:
C.2 Marriner’s liability as to $80,000
[38]It is clear on the undisputed findings of Byrne J, and the reasons of the Court of Appeal, that on 22 May 2001 Mr Marriner personally directed Wallace & Wallace to pay $80,000 of the third tranche funds to a third party, namely the WS Group, which was a breach of trust. …
[39]… The Court of Appeal made clear that Mr Marriner’s liability for the $80,000 should be considered. There is no reason for Mr Marriner not to be liable for the unauthorised instruction to use ASD’s funds to pay a debt owed by one of his companies. …
…
[43]The fact is that Mr Marriner breached both the first and second limbs of Eaves v Hickson: he knowingly induced or directly procured a breach of trust which resulted in $80,000 of ASD’s money being paid to a third party who had no claim as against ASD for the money. Mr Marriner is submitted to be liable to pay damages on that basis.
C.3Marriner’s liability for the balance
[44]As discussed above, the balance of the third tranche was disbursed on directions given by Mr Jephson to Wallace & Wallace. On Mr Jephson’s instructions, $86,500 was paid to Mr Marriner’s family solicitors in Colac for the purchase of land in Victoria by Goldworthy, and the balance of $686,700 was paid to creditors of Mr Marriner’s companies to discharge debts for which ASD was not liable. …
…
[66]In these circumstances, the Court should infer that Mr Marriner authorised Mr Jephson to disburse the funds (save for the $80,000 which was the subject of his personal direction) knowing of “circumstances which indicated the facts to a honest and reasonable person”. That test, set out by the Court of Appeal at [162], is submitted to have been easily satisfied. Subject to any possible defences or offsetting counterclaims there should on the basis of the submissions set out above be judgment against Mr Marriner for the whole of the third tranche amount of $853,200. As ASD has already received as a settlement $350,000 from Wallace & Wallace it will agree not to enforce the judgment against Mr Marriner to that extent.
(emphasis added)[16]
[16]ASD’s Submissions for Resumed Hearing dated 16 August 2013 (revised version – to include references to volumes of the Court Book) (footnotes omitted).
In their responding written submissions, under the heading ‘Quantum issues’, the Marriner parties submitted:
D.1 Wallace & Wallace settlement sum
[98]During the First Trial the parties reached an agreement in respect of this payment and how it would impact on the assessment of damages, if any, payable to ASD. The parties agreed that, if ASD succeeded on any claims relating to the disbursement of the third tranche funds, the relevant Marriner parties were entitled to a credit of $350,000.00 in the assessment of damages. In his closing address, senior counsel for the Marriner parties related this agreement to Byrne J in the following terms [T 1815]:
MR BICK: The next matter, your Honour, is that your Honour was informed jointly by the parties through your Honour’s associate yesterday that the sum of $350,000 was to be deducted from any liability in respect of the third tranche of bond moneys by reason of a contribution made by or on behalf of Wallace & Wallace.
HIS HONOUR: Now what does that mean? I guess that’s something for Mr Anderson [Senior Counsel for ASD] but I’m not told anything about it other than I’m to deduct $350,000.
MR BICK:Yes, your Honour.
[99]This agreement is also reflected in ASD’s Notice of Cross-Appeal dated 26 March 2010 (under the heading “Orders Sought”). The relevant order sought is expressed in these terms:
2.An order that the respondents to the cross appeal pay compensation to the appellant by cross appeal in the sum of $929,800 (being the sum of $426,000 and $853,200 less $350,000 received from Wallace & Wallace) plus interest pursuant to statute.
[100]It follows that, if it is found that one or more of the Marriner parties must pay damages to ASD, the sum of $350,000.00 must be deducted from the amount awarded. This deduction is consistent with (1) the agreement described in paragraph 98, above and (2) the principle against double recovery. In summary, if ASD enjoys complete success against the Marriner parties in this stage of the litigation, the liability of the Marriner parties could not exceed $503,200.00 plus interest and costs.
[101]The Marriner parties refer to the last two sentences in [66] of ASD’s submissions. In substance, in relation to any judgment sum in its favour, ASD suggests that no deduction of $350,000 is required. By reference to the matters set out in the preceding paragraphs, that suggestion is wrong.[17]
[17]Submissions of the Marriner Parties for Resumed Hearing dated 26 July 2013 (footnotes omitted).
ASD responded to those submissions of the Marriner parties in its reply submissions, as follows:
[31]Having regard to the $350,000 received from Wallace & Wallace it is accepted (as submitted by the defendants at [100]) that ASD cannot recover more than $503,200, plus interest and costs from Mr Marriner.[18]
[18]ASD’s Submissions in Reply dated 13 August 2013.
At the remitter hearing, when Senior Counsel for the ASD parties opened, he outlined the claims as pleaded against Mr Marriner for misappropriation of the third tranche bond monies and the claim pleaded against Wallace & Wallace for the innocent breach of trust. He explained the effect of the settlement, as follows:
MR O’BRYAN: … So they [Wallace & Wallace] were innocently in breach of trust, which is not an answer unfortunately for them because it doesn’t matter whether a trustee is innocently in breach of trust, the trustee is in breach of trust, it’s strict liability, so they were strictly liable in respect of their breach of trust, and of course they were proceeded against, Your Honour, and settled for an amount which of course we must credit and we do credit towards our claim against the Marriner interests. I think it is $350,000.
HER HONOUR: I think you have noted that in your written submissions. I read that somewhere.
MR O’BRYAN: Yes. It is connected a little bit with Mr Bick’s so-called all or nothing defence, but we will come to that in due course, Your Honour. We say yes, of course we give credit for $350,000 but that still leaves us out of pocket $503,000 because it was a total of 853 plus interest over a very long period of time, et cetera.
So, Your Honour, paragraph 48 [of the Further Amended Statement of Claim], in the event that Wallace & Wallace are unable to account for the 853, then Marriner knowingly induced and assisted LQ Management to commit a breach of trust and is liable to compensate. That's the first limb of the claim.
Then the claim against Wallace & Wallace themselves, Your Honour, commences next. You will see the subheading above paragraph 49.[19] Further and in the alternative, when those moneys went into the Wallace & Wallace trust account they were impressed with the trust, so there's the solicitor's trust pleaded in [paragraph] 49. That is the solicitor's trust, Your Honour, the one pleaded in [paragraph] 49, which the Court of Appeal found existed and had been breached.
Then in [paragraph] 50, February 2001 upon receiving the trust money Wallace & Wallace owed various duties in their capacity as trustee. I don't need to take Your Honour through the duties of care because this is all now by-the-by. That complaint, as it were, has been resolved by the settlement between us and Wallace & Wallace.[20]
[19]The sub-heading reads: ‘Claim against Wallace & Wallace for unauthorised disbursement of trust funds’.
[20]Transcript 19/08/13, at p. 14 (line 18) – p. 15 (line 24).
Senior Counsel for ASD then continued, to outline the claim ASD pleads as against Mr Marriner personally, in paragraphs 59 - 62 of the Further Amended Statement of Claim, which concerns the remitted matter, for knowingly inducing and procuring Wallace & Wallace as trustee of the trust monies to commit a breach of trust.[21]
[21]Transcript 19/08/13, at p. 16 (line 21) – p. 18 (line 5).
Senior Counsel for the Marriner parties also addressed the effect of the payment by Wallace & Wallace in his oral submissions, as follows:
MR BICK: … Can I then make a point about quantum, Your Honour, which is this - - -
HER HONOUR: Just on that, so, for example, the point that you were making earlier this morning, that there was no allegation that Mr Jephson, as an employee of Stage Design Pty Ltd, et cetera, was involved, you say the only relevant case for these related companies is to the extent that Mr Marriner had some involvement, that's all that's pleaded and that's all I need to have regard to?
MR BICK: Yes, that's the way in which the case was run. Can I now draw Your Honour's attention to the fact that the maximum liability for Mr Marriner and his companies in respect of the third tranche bond moneys is, of course, the full amount of $853,000. By agreement of the parties, there is to be deducted from any amount Your Honour may find liability for the sum of $350,000, which was an amount received by ASD by way of settlement of its claims against Wallace & Wallace.
HER HONOUR: I think that is addressed in the reply submissions of Mr O'Bryan. Reference was made to the form of an order that was being sought and rather than entering judgment for the whole amount, the 853,200, it was acknowledged that it would be for the lesser sum, taking away the 350.
MR BICK: Yes. There's no dispute about that. …[22]
[22]Transcript 30/08/13, at p. 437 (lines 4 - 27).
The remitted issues were heard over 6 days in August and September 2013. The remitter hearing was conducted by reference to a Court Book that was prepared by the parties, containing the evidence relied upon by them. Importantly, for present purposes, the Court Book did not include any documentation pertaining to the settlement agreement reached with the Wallace & Wallace parties.
In the remitter decision delivered on 19 September 2014, the outcome was summarised as follows:
[23]For the reasons which follow, I have found that ASD has made out its claim that Mr Marriner knowingly induced or procured the innocent breach of trust by Wallace & Wallace in paying the sum of $80,000 to WS Group on or about 22 May 2001. As that payment was directed by Mr Marriner personally, and did not purport to be undertaken on behalf of any associated company, there is no basis for fixing any of them with responsibility for procuring or inducing that breach of trust. Nor was any associated company a knowing recipient of those funds. Furthermore, as there was no clear evidence as to what the $80,000 paid to WS Group related to, save for general assertions that the money was spent on Laguna Quays and was legitimately incurred, I have rejected the Marriner parties’ defence that because the monies were spent on the resort ASD was benefited, and I am not satisfied that there is any proper basis for commensurately reducing the loss suffered by ASD.
[24]I am not satisfied that ASD has made out its case in respect of the balance of the third tranche bond monies that Mr Jephson directed Wallace & Wallace to pay [i.e., $773,200], including the sum of $86,500 that he directed be paid to the trust account of Larkins McCarthy, solicitors, in Colac.
[25]I have also dismissed all of the affirmative defences and counterclaims brought by the Marriner parties. For the reasons set out below, I am not satisfied that Mr Marriner relevantly suffered from a special disadvantage in his dealings with ASD and was the subject of unconscionable conduct. Nor am I satisfied that ASD made the representations contended for by the Marriner parties and thereby engaged in misleading and deceptive conduct or that ASD was estopped by representation from acting as it did. It follows that the agreements made between the parties are effective according to their terms, with the result that ASD is not disentitled from making the bond monies claim and the Marriner parties are precluded from bringing the claims they now seek to make.[23]
[23]Remitter decision, at [23]-[25].
Accordingly, the net result after almost 10 years of litigation, the expenditure of many millions of dollars in legal fees, costs and disbursements on both sides, and the involvement of a significant amount of court time, is that ASD has succeeded in making out only one aspect of the many claims it advanced against the Marriner parties at trial and on the remitter, namely a small component of the claim against Mr Marriner in respect of the ‘third tranche’ bond monies. That is, the Court ultimately found that of the claim for $853,200 argued on the remitter, Mr Marriner was liable only in respect of the sum of $80,000 referable to the innocent breach of trust by Wallace & Wallace which he knowingly induced or procured on or about 22 May 2001. However, ASD also succeeded in striking out the counterclaims brought by the Marriner parties. In addition, prior to the commencement of the original trial, ASD received the sum of $350,000 by way of settlement of its claims against the Wallace & Wallace partners.
Following delivery of the remitter decision, the parties filed written submissions as to the final orders to be made, including as to the costs of the original trial before Byrne J and the remitter hearing, as follows:
(a) ASD’s submissions on final orders dated 8 October 2014 (with accompanying annexures);
(b) submissions of the Marriner parties on costs dated 17 October 2014 (with accompanying annexures, an affidavit of Mr James Murray Pergl sworn 16 October 2014 and an affidavit of Mr Ariel Weingart sworn 19 October 2014); and
(c) ASD’s submissions in reply on costs dated 24 October 2014 (with accompanying annexures and an affidavit of Mr David Neil Atkin affirmed 24 October 2014).
Hearing as to final orders and costs issues on 3 December 2014
The further hearing as to final orders and costs issues took place on 3 December 2014.
Final orders contended for by ASD
At the hearing, ASD sought orders in its favour as follows:
1.There be judgment for the plaintiff against the first defendant in the amount of $80,000 plus interest pursuant to s 60 of the Supreme Court Act in the sum of $ [insert sum].
2.The counterclaims brought by the defendants and plaintiffs by counterclaim are dismissed.
3.The first defendant and the plaintiffs by counterclaim pay the costs of and incidental to plaintiff's claims and the counterclaims, including the costs of the proceeding before Byrne J.
4.Such costs are to be taxed (in default of agreement) on a party and party basis[24] up until 4pm on [18 October 2012/22 February 2013] and thereafter on an indemnity basis.
[24]ASD later clarified that the reference to ‘party and party’ costs should be read as a reference to costs being taxed ‘on a standard basis’ in relation to costs incurred on or after 1 April 2013, if the Court is not minded to make an award of indemnity costs.
The alternative dates mentioned in paragraph 4 of ASD’s proposed order are references to, in the case of 18 October 2012, the date of expiration of a Calderbank[25] letter dated 2 October 2012 served by the solicitors for ASD, and in the case of 22 February 2013, the date of service by ASD of an offer of compromise made under Rule 26 of the Supreme Court (General Civil Procedure) Rules2005 (Vic) (‘the Rules’). ASD proposes an alternative form of order that would apply in the event that the Court were to find that neither the Calderbank letter nor the offer of compromise has any consequence, namely:
4.Such costs are to be taxed (in default of agreement) on a party and party basis up to and including 31 March 2013 and on a standard basis as from 1 April 2013.
[25]Calderbank v Calderbank [1976] Fam 93.
The ASD parties contend that the starting position as to costs is that where a party has been partially successful, costs should, as a general rule, follow the event and a successful party should be permitted to recover all of its costs of the action even though it failed to establish some of the alternative heads of its claim: see Investec Bank (Australia) Limited v Glodale Pty Ltd.[26] In seeking its costs in relation to the counterclaim, ASD acknowledges that there was some overlap between the principal claim and the counterclaim, in the sense that the evidence put on by ASD was also relevant to the counterclaim. The ASD parties rely upon the fact that the counterclaim overlaps the principal claim as a basis for opposing any reduction in the costs awarded in relation to the principal claim.
[26][2009] VSCA 113, at [4], where the Court of Appeal (Neave and Redlich JJA and Forrest AJA) endorsed the approach summarised by Eames J in Pricom Pty Ltd v Sgarioto (Unreported, Supreme Court of Victoria, Eames J, 10 April 1995, 24 April 1995, BC9503266, 5, and cited with approval in Spotless Group Ltd v Premier Building & Consulting Pty Ltd [2008] VSCA 115, at [13] and in McFadzean v Construction Mining and Energy Union [2007] VSCA 289, at [152]) as follows:
As a general rule costs should follow the event, and a successful party should obtain all of the costs of the action even although it failed to establish some of the alternative heads of its claim: Ritter v Godfrey (1920) 2 KB 47. However, in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim, or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748, per Toohey J at 48,136.
Final orders contended for by the Marriner parties
The Marriner parties oppose both the first order sought by ASD, concerning judgment, and the two costs orders for which ASD contends. They do not oppose the second order sought dismissing the counterclaims.
The Marriner parties contend that the form of judgment proposed by ASD would result in ‘double recovery’
The Marriner parties oppose the making of the first order sought by ASD, concerning judgment, on the basis of arguments about ‘double recovery’ that they contend arise from the payment of $350,000 made by or on behalf of Wallace & Wallace to ASD in order to settle the claims made against the partners of the firm.
The Marriner parties contend that during the first trial, the parties reached an ‘agreement’ in respect of the payment of the $350,000 and how it would impact on the assessment of damages, if any, payable to ASD. They say that at or around the time of commencement of closing addresses at the original trial, the ASD parties and the Marriner parties agreed that ‘if ASD succeeded on any claims relating to the disbursement of the third tranche funds, the relevant Marriner parties were entitled to a credit of $350,000 in the assessment of damages.’[27] They point to several passages in closing addresses before Byrne J and submissions that they say bear this out.
[27]Submissions of the Marriner Parties on Costs dated 17 October 2014, at [10], [51].
The payment of the $350,000 by Wallace & Wallace was not pleaded by either party, nor did it feature extensively or prominently in the oral submissions made on the remitter. Indeed, no evidence about the settlement reached with Wallace & Wallace or its terms was tendered by either party at the remitter hearing. The decision on the remitter records the position advanced by the parties as follows:
[234]Of these pleaded claims, ASD has since settled its ‘claim against Wallace & Wallace for unauthorised disbursement of trust funds’ for the sum of $350,000. The parties are agreed that ASD must give credit for that sum and reduce accordingly the amount now sought to be recovered from the Marriner interests.[28]
ASD says that after application of the $350,000 credit, the amount sought to be recovered from Mr Marriner was $503,200, ASD having originally claimed in its pleading the whole of the sum of $853,200 that comprised the third tranche funds.
The ASD parties submit that the Marriner parties, in their outline of submissions concerning final orders and costs, seek to effectively re-cast that position insofar as they now maintain that ‘the agreement does not operate to reduce accordingly the amount of ASD’s claim against the Marriner parties. Rather the agreement operates to reduce accordingly any sum recovered by ASD.’[29] Further, they say that the Marriner parties do not rely on the so-called agreement simply in relation to costs, but now seek to rely upon it, in effect, as a substantive defence to the claims the subject of the remitter hearing.
[28][2014] VSC 464, at [234].
[29]Submissions of the Marriner Parties on Costs dated 17 October 2014, at [6].
The ASD parties contend that an agreement of the kind now asserted by the Marriner parties was never reached,[30] nor was it ever pleaded or proven to have existed. ASD says that the Marriner parties have never articulated relevant matters such as when the so-called agreement was reached, and between whom, whether it was oral or written or to be implied, and if so by reference to what material facts, nor have they identified the relevant consideration for the agreement. Accordingly, the primary submission made by Mr Broadfoot, who appeared as counsel for the ASD parties at the first hearing concerning the final orders to be made,[31] was that the Court should not entertain any submission about the so-called agreement now being asserted by the Marriner parties, in circumstances where it was never pleaded. He said:
MR BROADFOOT: … There is no application been made to re-open the trial, there is no evidence put forward by the defendants to support the existence of it. We haven't had the opportunity to get discovery, et cetera, et cetera. If however, Your Honour is going to enter into the field and determine whether an agreement was made and if so how, and what the terms of it were and what the consequence of it is, then the affidavit of Mr Atkin is relevant, in my submission, and is determinative of the issue, and I wish to tender it on that basis.[32]
[30]See affidavit of Mr David Neil Atkin, CEO of United Super Pty Ltd (in its capacity as trustee of CBUS, affirmed 24 October 2014.
[31]On 3 December 2014.
[32]Transcript 03/12/14, at p. 624 (lines 4-13).
The reference to ‘the affidavit of Mr Atkin’ is a reference to an affidavit affirmed by Mr David Neil Atkin on 24 October 2014. Mr Atkin was the Chief Executive Officer of United Super Pty Ltd (in its capacity as trustee of CBUS) at all relevant times and the person responsible for providing instructions in relation to the litigation. As there was no objection from the Marriner parties to the tender by ASD of Mr Atkin’s affidavit, it was marked and identified as having been tendered and received by the Court without objection.[33] Contemporaneous with its tender and receipt, however, Mr Bick, Senior Counsel for the Marriner parties, stated that ‘although we don't object to it going in as evidence of some sort in relation to this application we will be making submissions as to relevance and weight’.[34]
[33]Exhibit ‘ASD 1’.
[34]Transcript 03/12/14, at p. 624 (lines 22-25).
In his affidavit, Mr Atkin deposes that following a mediation held on 31 July 2009, ASD received the sum of $350,000 from Wallace & Wallace in return for withdrawing the claims made against them. He produced the terms of settlement made between ASD and Wallace & Wallace dated 31 July 2009 (‘the ASD-Wallace & Wallace terms of settlement’), in advance of the trial commencing.[35]
[35]See Exhibit ‘DNA-1’.
It appears that terms of settlement were also entered into between ASD, Wallace & Wallace and the Marriner parties on the same date. A copy of these terms of settlement was produced by Mr James Murray Pergl, a senior associate with the solicitors for the Marriner parties, in his second affidavit which was tendered, without objection, on behalf of the Marriner parties.[36] Under those terms of settlement, each of the Wallace & Wallace parties consented to the dismissal of their claim against the Marriner parties with no order as to costs and released each of the Marriner parties and ASD from all claims they have, or may have, comprised in or arising out of the subject matter of the proceedings. Similarly, each of the Marriner parties and ASD released each of the Wallace & Wallace parties from all claims they have or may have comprised in or arising out of the subject matter of the proceedings. The Marriner parties also agreed not to make any claim for costs against the Wallace & Wallace parties consequent upon the withdrawal of their claim. The costs incurred by the Marriner parties in relation to the Wallace & Wallace claim were expressed, by cl 3, ‘to be agreed, or failing agreement, taxed and once agreed or taxed are to be costs in the cause as between [ASD] and the Marriner parties in these proceedings.’
[36]See Exhibit ‘JMP-1’ to the affidavit of Mr Pergl sworn 3 December 2014, (Exhibit ‘M2’).
In his affidavit, Mr Atkin refers to the Marriner parties’ submissions as to costs and deposes as to his understanding about their assertion that the parties reached an agreement ‘during the course of the first trial that any liability for damages found against any of the Marriner parties would be credited with the sum of $350,000, being the settlement sum paid by Wallace & Wallace to ASD.’[37] In essence, Mr Atkin says that ‘no such agreement was ever reached’[38] and he never gave instructions to ASD’s legal representatives to enter into any such agreement.[39]
[37]Exhibit ‘ASD 1’, at [9].
[38]Ibid, at [10].
[39]Ibid, at [14].
As noted earlier, the Marriner parties, on the other hand, contend that the effect of the settlement ASD reached with Wallace & Wallace was that the sum of $350,000 so paid does not operate to reduce the amount of ASD’s claims against the Marriner parties; rather it operates to reduce accordingly any sum recovered by ASD. The Marriner parties rely upon 4 matters:
(1) the effect of the ‘agreement’ reached;
(2) the way in which ASD treated the $350,000 payment in the original trial;
(3) the way in which ASD treated the $350,000 payment in the Court of Appeal; and
(4) the way in which ASD treated the $350,000 payment in the remitter hearing.
In essence, the Marriner parties contend that ‘an agreement’ was reached between ASD and the Marriner parties during the first trial to the effect that if ASD succeeded on any claims relating to the disbursement of the third tranche funds, the relevant Marriner parties were entitled to a credit of $350,000 in the assessment of damages (‘the agreement’). They rely on the first portion (italicized below) of the following exchange during closing submissions before Byrne J on 16 September 2009 as evidencing the agreement. ASD, however, relies on the portion that follows it, and in particular the bolded words, where Senior Counsel for Mr Marriner explains the significance of the $350,000 payment:
MR BICK: The next matter, your Honour, is that your Honour was informed jointly by the parties through your Honour’s associate yesterday that the sum of $350,000 was to be deducted from any liability in respect of the third tranche of bond moneys by reason of a contribution made by or on behalf of Wallace & Wallace.
HIS HONOUR: Now what does that mean? I guess that’s something for Mr Anderson but I’m not told anything about it other than I’m to deduct $350,000.
MR BICK:Yes, your Honour.
HIS HONOUR: So whether that represents a particular transaction or some sort of global paying off to avoid the risk or what.
MR BICK: Certainly true it is that your Honour hasn’t been told the nature or the reason for the payment. However, your Honour, for what your Honour has to decide that deduction is significant in that it reduces the liability in respect of the third tranche of bond monies to $553,000[40] and the total liability in respect of both tranches of bond monies to less than the $950,000 that Laguna Australia reimbursed ASD for the purchase of the converted leasehold land … (emphasis added)[41]
[40]Actually, $503,000 rather than $553,000.
[41]Transcript, 16/09/09, at pp. 1814-1815, referred to in the Marriner parties’ written submissions on costs at [10].
A little later during the same closing address before Byrne J, Senior Counsel for the Marriner parties said that ‘it has been agreed that it [the W & W settlement sum] comes off the damages in respect of the third tranche bond monies.’[42] Counsel for ASD apparently did not comment upon or challenge those statements or explanations about the effect of the payment of the settlement sum. In particular, the Marriner parties refer to and rely upon the following exchange that took place between his Honour and Senior Counsel for ASD in the final stages of the first trial:
[42]Transcript, 17/09/09, at p. 1901, referred to in the Marriner parties’ written submissions on costs at [12].
HIS HONOUR: I am contemplating the situation whether [sic] the amount recovered might be less than $350,000. If that were to happen is that just a bonus for you or is that brought to account elsewhere?
MR ANDERSON: No, your Honour, we can’t double-dip. It would have to be brought to account.
HIS HONOUR: So if I was to find that the liability under the third tranche was, say, $150,000, so there’s $200,000 surplus available, although you did get that for presumably – no, that’s from the solicitors so it only deals with that claim. Could that be brought to credit against Mr Marriner’s other liabilities?[43]
[43]It will be recalled that in addition to ASD’s claim against Mr Marriner in respect of the third tranche bond monies there were also claims brought by ASD against Mr Marriner for the capital expenditure ‘overspend’ and the second tranche bond monies (which did not involve Wallace & Wallace).
MR ANDERSON: No, it can only deal with the Wallace & Wallace, your Honour.
HIS HONOUR: So you could theoretically make a profit.
MR ANDERSON: Well, Wallace & Wallace paid an amount of money, your Honour.
HIS HONOUR: That’s right, and they may have paid too much.
MR ANDERSON: They may have paid too much. Your Honour is correct. It could be your Honour may find we get less but we have received 350. So be it.
HIS HONOUR: And if it’s more then you might be able to recover it from Mr Marriner. That is to say if your loss is greater than 350 he might be able to cover that surplus.[44]
[44]Transcript 18/09/09, at p. 2094 (line 15) – p. 2095 (line 8), referred to in the Marriner parties’ written submissions on costs at [14].
The Marriner parties contend that the statements made on behalf of ASD in this exchange accord with the effect of the ‘agreement’ that was announced to the Court two days earlier. It is said that ASD’s acknowledgment of an inability to ‘double-dip’ recognizes the principle against double recovery. Further, the Marriner parties argue that in this exchange ASD also acknowledges that it has received the $350,000 from Wallace & Wallace by way of settlement of the claims based on the disbursement of the third tranche funds, and the claim against Mr Marriner for the disbursement of the $80,000 from the solicitor’s trust account falls within that group of third tranche fund claims.
Secondly, the Marriner parties refer to ASD’s Notice of Cross-Appeal (dated 26 March 2010) which relevantly seeks:
2.An order that the respondents to the cross appeal pay compensation to the appellant by cross appeal in the sum of $929,800 (being the sum of $426,600 [the second tranche funds] and $853,200 [the third tranche funds] less $350,000 received from Wallace & Wallace) plus interest pursuant to statute.
The Marriner parties submit that before the Court of Appeal, it was never argued, or suggested, that the $350,000 amount operated to reduce the amount of the claim rather than the amount recovered.
Thirdly, in its written submissions filed in advance of the remitter hearing (dated 8 July 2013), the ASD parties stated:
Subject to any possible defences or offsetting counterclaims there should on the basis of the submissions set out be judgment against Mr Marriner for the whole of the third tranche amount of $853,200. As ASD has already received as a settlement $350,000 from Wallace & Wallace it will agree not to enforce the judgment against Mr Marriner to that effect.
(I have already noted above that the ASD parties further clarified this statement in their written outline of reply submissions.)
Fourthly, in opening ASD’s case at the remitter hearing, Senior Counsel for ASD said:
We say yes, of course we give credit for $350,000 but that still leaves us out of pocket $503,000 because there is a total of 853 plus interest over a very long period of time, et cetera.[45]
The Marriner parties argue that this submission was predicated on the argument that, in respect of the disbursement of the third tranche funds, Mr Marriner was liable to ASD in the full amount claimed (i.e., $853,200). That is, they say that ASD accepted that the sum of $350,000 should be deducted from the amount awarded (rather than the amount claimed).
[45]Transcript 19/08/13, at p. 15 (lines 1-4).
Fifthly, the Marriner parties refer to their closing submissions made at the remitter hearing where the following exchange took place:
MR BICK: … Can I now draw Your Honour's attention to the fact that the maximum liability for Mr Marriner and his companies in respect of the third tranche bond moneys is, of course, the full amount of $853,000. By agreement of the parties, there is to be deducted from any amount Your Honour may find liability for the sum of $350,000, which was an amount received by ASD by way of settlement of its claims against Wallace & Wallace.
HER HONOUR: I think that is addressed in the reply submissions of Mr O'Bryan. Reference was made to the form of an order that was being sought and rather than entering judgment for the whole amount, the 853,200, it was acknowledged that it would be for the lesser sum, taking away the 350.
MR BICK: Yes. There's no dispute about that. …[46]
[46]Transcript 30/08/13, at p. 437 (lines 13-27).
The Marriner parties submit that ASD never argued or suggested at the remitter hearing that the $350,000 amount was to operate to reduce the amount of the claim rather than the amount recovered. Relevantly, they say, ASD is bound by the way in which it conducted the first trial, the appeal and the remitter hearing and it cannot now contend for a different outcome.[47]
[47]See Coulton v Holcombe (1986) 162 CLR 1, at 7 (Mason CJ, Wilson, Brennan and Dawson JJ).
In oral submissions, Senior Counsel for the Marriner parties submitted that what was set out at paragraph 234 of the remitter reasons:
summarises one of two effects for the settlement for $350,000 to Wallace & Wallace. The other effect, Your Honour, is that Mr Marriner is to be given credit for that amount, and we say that that was firstly a matter of application of the correct leading principle and didn't require any agreement, and secondly it was what was agreed in any event.[48]
A little later, Mr Bick QC clarified that by ‘effect No. 1’ he meant that the sum of $350,000 was to be deducted from any liability in respect of the third tranche bond monies by reason of a contribution made by or on behalf of Wallace & Wallace, and that ‘effect No. 2’ was a reference to the fact that the total amount that could ever be recovered from Mr Marriner was reduced by $350,000[49] and thus ASD had to recover more than $350,000 in order to be entitled to recover anything.[50]
[48]Transcript 03/12/14, at p. 636 (lines 18-25).
[49]Ibid, at p. 637 (lines 6-8).
[50]Ibid, at p. 648 (lines 24-26).
In summary, the Marriner parties contend that in circumstances where the Court has found in respect of the third tranche claims that Mr Marriner is liable to ASD in the sum of $80,000, the effect of the ‘agreement’ concerning the payment of $350,000 by Wallace & Wallace means that Mr Marriner is not liable to pay the sum of $80,000 to ASD. In this regard, they rely on the principle that a plaintiff may not recover more than it has lost.[51]
[51]See Robert Deutsch & Ors v Erwin Deutsch & Ors (No 3) [2014] VSC 494, at [4] per Hargrave J.
The claim for the $80,000 that was paid out in breach of the solicitor’s trust was not the subject of a separate plea against either Wallace & Wallace or Mr Marriner. Rather, it was, in each case, part of the rolled-up claim brought in respect of the third tranche funds. The Court of Appeal, in its remitter, identified the claim for the $80,000 as a separate issue for determination. But, in a pleading sense, it was an integral part of both the claim for the third tranche bond monies of $853,200 brought against Wallace & Wallace, and also the similar claim for knowingly inducing or procuring the breach of the solicitor’s trust brought against Mr Marriner. No amendment was made to the pleadings following the settlement with Wallace & Wallace. Thus, the Marriner parties contend that ASD has received the sum of $350,000 from Wallace & Wallace in respect of claims based on the disbursement of the third tranche funds (which included the disbursement of the sum of $80,000 at Mr Marriner’s direction on 22 May 2001), and to permit ASD to now recover a further $80,000 from Mr Marriner in respect of the same cause of action would amount to ‘double recovery’. That is, while the Marriner parties accept that under the remitter decision ASD has established an entitlement to a judgment for $80,000, they contend that no order by way of judgment should be made giving effect to that entitlement. They argue that in circumstances where ASD has already received $350,000 from Wallace & Wallace in respect of claims based on the disbursement of the third tranche funds (including the $80,000 disbursed on 22 May 2001), it should not receive a further $80,000 from Mr Marriner in respect of the same facts. That is to say, at least initially, the Marriner parties did not contest that ASD has established an entitlement to a judgment against Mr Marriner for the sum of $80,000 but they say that if there were to be any recovery against Mr Marriner in respect of the $80,000, it would offend the principle against double recovery.[52]
[52]Transcript 03/12/14, at p. 651 (lines 3-5). Later in the hearing, at pp. 665-668, the Marriner parties moved away from that position, contending that there should be no judgment against Mr Marriner.
ASD’s claim for interest on the $80,000
In addition to its claim for recovery of the sum of $80,000 from Mr Marriner, ASD also claims that it is entitled to interest, pursuant to s 60 of the Supreme Court Act 1986 (Vic), on $80,000 from the date on which the proceeding commenced to the date of judgment. Section 60(1) provides:
The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of judgment over and above the debt or damages awarded.
The Marriner parties dispute that ASD is entitled to interest on the sum of $80,000. They argue that s 60 applies only to a proceeding for the recovery of debt or damages, and say that by reason of the receipt of the $350,000 from Wallace & Wallace, ASD is not entitled to an award for the recovery of debt or damages. Further, they say that even if ASD were entitled to $80,000 plus interest, which is not accepted, the combined amount would be less than $350,000. Accordingly, they oppose the entry of any judgment sum (including as to interest) against Mr Marriner.
The Marriner parties’ application in December 2014 for leave to file a summons and further affidavit of Mr Pergl
On 10 December 2014, Mr Pergl, the solicitor acting on behalf of the Marriner parties, sent an email to the Court, copied to the ASD parties, seeking leave to file a summons and further affidavit. In his email, he referred to the earlier hearing on 3 December 2014 and the reference Senior Counsel for the Marriner parties made at that hearing to Byrne J having been informed about the settlement with the Wallace & Wallace parties. Mr Pergl stated that:
Following the hearing, Senior Counsel has been able to locate with some difficulty, email exchanges between counsel at the time bearing on this subject, and also the email sent to Justice Byrne’s Associate stating the agreement reached by the parties regarding the effect of the W&W settlement and the Associate’s response.[53]
[53]Email from Mr Pergl to the Associate to Justice Sloss dated 10 December 2014.
In his email, Mr Pergl said the solicitors for the Marriner parties had informed the solicitors for the ASD parties that they now wished to place before the Court the earlier email exchange that took place with the Associate to Byrne J, and the solicitors for the ASD parties had responded, stating that they objected to the Marriner parties doing so without leave of the Court and foreshadowed that they would oppose any application for leave. Attached to the email was a proposed summons and a further affidavit of Mr Pergl sworn 10 December 2014.
The solicitors for the ASD parties confirmed their position by email to the Court later that day, stating that they object to the Marriner parties being granted leave to file supplementary material given that the hearing had concluded. That email referred to correspondence between the solicitors for the respective parties setting out the reasons why they say that no agreement was reached and the basis upon which they objected to the filing of the supplementary material at this late stage. Further, they said, if leave to file were granted, they would require at least 7 days to file responding material before the matter could be heard.
After consultation with the solicitors for the parties, and with a view to accommodating the availability of all counsel, the Marriner parties’ application for leave to file the proposed summons and affidavit was listed for hearing on 25 February 2015. The Court informed the parties that if the ASD parties wished to rely upon any material in response, it should be filed by 12 noon on 19 December 2014. On that day, ASD filed its submissions opposing leave.
In their proposed summons, the Marriner parties sought the following orders:
1.The Defendants/Plaintiffs by Counterclaim have leave to file, serve and rely on an Affidavit of James Murray Pergl sworn on 10 December 2014.
2.Such further or other order including as to the costs of the application as the Court considers appropriate.
In his affidavit in support, Mr Pergl summarises the background to the application for leave and the reasons why leave is sought. He commences by saying that at the hearing on 3 December 2014, counsel for the ASD parties ’disputed the existence of an agreement that the Marriner parties would be given a $350,000 credit by reason of the settlement reached by ASD with the Wallace & Wallace parties in 2009.’ (Lest it not be obvious, I should record here that the fact that the ASD parties actively disputed the existence of the so-called agreement could not have come as any kind of a surprise to the Marriner parties, it having been stated clearly in ASD’s reply submissions on costs filed on 24 October 2014 for the purposes of the 3 December 2014 hearing).
Mr Pergl deposes that prior to the hearing on 3 December 2014, both his firm and Senior and Junior Counsel ‘searched for, but were unable to locate, correspondence relating to the $350,000 agreement reached in September 2009.’ I note that, read in context, this statement tends to suggest that no efforts had earlier been made to locate the correspondence, for example for the purposes of inclusion in the Court Book for, or for use at, the remitter hearing. In any event, neither the written submissions filed by the Marriner parties in advance of the hearing, nor the oral submissions made on their behalf at the hearing mentioned that they had been searching for and were unable to locate the correspondence with the Court communicating the settlement reached with the Wallace & Wallace parties.
In his affidavit, Mr Pergl continues, stating:
On 4 December 2014 I was informed by Mr Bick QC that with considerable difficulty, he had been able to locate on 4 December 2014 from archived and deleted emails from September 2009, emails relating to the $350,000 credit agreement from Mr Broadfoot to Mr Bick copied to Mr Anderson SC for ASD and Mr Heath for the Marriner Parties, and from Mr Bick to Mr Broadfoot in response sent on 15 September 2009 at 10.29 am, 12.24 pm and 3.17 pm (two emails). In addition, Mr Bick located an email from Mr Broadfoot to Mr John Molloy, Associate to the Honourable Justice Byrne, copied to Mr Bick, Mr Anderson and Mr Heath, sent at 3.17 pm on 15 September 2009, and Mr Molloy’s response acknowledging receipt sent to Mr Broadfoot, and copied to Mr Bick, Mr Anderson and Mr Heath at 4.47 pm on 15 September 2009.[54]
[54]Affidavit of Mr Pergl sworn 10 December 2014, Exhibit ‘MFI M4’, at [5].
Mr Pergl then produces (as exhibit ‘JMP-1’) Mr Broadfoot’s email to Mr Molloy, the Associate to Byrne J, sent at 3.17 pm on 15 September 2009 and (as exhibit ‘JMP-2’) Mr Molloy’s response sent at 4.47 pm that day acknowledging receipt. Mr Pergl says that the Marriner parties wish to rely on the emails exhibited as ‘JMP-1’ and ‘JMP-2’ ‘in connection with their submissions to the Court on costs made on 3 December 2014, and, if necessary, seek leave to do so.’ He then adds:
It is my belief that the email provided to the Honourable Justice Byrne on 15 September 2009 was likely to have been placed on the Court file at the time by reason of the fact that exhibit ‘JMP-1’ was an email sent by Mr Broadfoot to the Court on behalf of both ASD and the Marriner Parties, recording what was stated in the email to be an agreement between the parties concerning a credit to be given to the Marriner parties arising from the settlement between ASD and the Wallace and Wallace parties.[55]
[55]Ibid, at [9].
I am informed that neither email was tendered as an exhibit at the original hearing before Byrne J. They were not included, or sought to be included, in the Court Book for the remitter hearing. Nor were they produced at the first hearing as to final orders and costs issues held on 3 December 2014.
In ASD’s written submissions, opposing the grant of leave to the Marriner parties to file the summons and further affidavit of Mr Pergl, the ASD parties contended that leave should be refused because:
(a)the [Marriner parties] have had ample opportunity to present their case and should not now be permitted to make a new case or adduce further evidence;
(b)if the application is granted then if, as ASD apprehends, the [Marriner parties] want to rely on the so-called $350,000 credit agreement referred to in their submissions on costs, there will need to be further pleadings filed in relation to the alleged agreement, there will need to be further evidence adduced (highly probably from new witnesses) and there will need to be a resumption of the trial to deal with matters that:
(i)go beyond the scope of the remitter; and
(ii)should not be permitted in light of the fact that, as the Court noted in the remitter reasons at [267], the Court of Appeal did not regard ASD as being precluded from obtaining judgment for some but not all of the third tranche funds; and
(c)there is no substance to any suggestion that any conduct of ASD at the trial, including the email of 15 September 2009, affected the evidence in chief, the cross-examination, or the outcome of the trial such that ASD might be bound by any agreement of the kind alleged by the [Marriner parties] (the existence of which is denied) as a consequence of the trial before Byrne J. [56]
[56]See ASD’s submissions opposing leave to file the defendants’ summons and affidavit of James Pergl dated 19 December 2014, at [2].
Further, in the written submissions, ASD observed that:
Although [the Marriner parties] have not been candid enough to say so, they seek in substance to amend the defence and to re-open the trial after the delivery of reasons for judgment and at a time when final orders are pending. The precise nature of the amendment and the scope of the proposed re-opening are unclear, but the principles applicable to the re-opening of a case after the conclusion of a trial (or appeal) and the tendering of new evidence are well understood, as are the principles applicable to amendments.[57]
[57]Ibid, at [4].
The Marriner parties did not seek to file any written outline of submissions in response. At the hearing of their application for leave on 25 February 2015, Senior Counsel for the Marriner parties opened by referring to the hearing on 3 December 2014 and said that ASD having ‘accepted that there was an agreement’, the contest between the parties was whether the agreement ‘operated to limit the amount that could be recovered.’ He then proceeded to explain that the email exchange exhibited to Mr Pergl’s affidavit ‘was not before the court in the sense that the parties did not place it before the court and its existence would seem to have been forgotten as at 3 December.’ Further, he said:
Not being aware of the existence of the email on 3 December both sides were constrained to make submissions as to the substance of the agreement to be derived from various sources. Principally dialogue between His Honour Justice Byrne and the parties in the course of final submissions at the trial in September 2009, and then subsequent submissions and references to the $350,000 credit agreement up to and including at the remitter hearing before you.[58]
[58]Transcript 25/02/15, at p.2 (lines 16-24).
At the hearing on 25 February 2015, the Court queried the correctness of that submission, in circumstances where the passages of the transcript of the hearing before Byrne J to which reference had been made clearly stated that the Court had been informed about a position as between the parties and then went on to set out the substance of what it was that the Court was informed. Importantly, when the parties were before the Court on 3 December 2014, the Court was not informed that the parties had been looking for, but were unable to locate, the communication made to the court in September 2009. Rather, in the oral submissions made that day, neither counsel suggested that there was a relevant document that they had not been able to locate. Furthermore, the notion that on 3 December 2014 both sides were unaware of the existence of the email does not accord with what is stated in paragraph 4 of Mr Pergl’s affidavit. He states, on the basis of information and belief, that counsel for the Marriner parties had ‘searched for but were unable to locate correspondence relating to the $350,000 credit agreement reached in September 2009.’ If that be correct, it is difficult to understand how counsel could have been ‘unaware’ of the existence of the email exchange. It is also a little surprising that the emails that could not be located prior to the hearing were able to be located ‘with considerable difficulty’ on the day following the hearing.
Be that as it may, the emails having now been located, the Marriner parties contend that the Court should have regard to exhibit ‘JMP-1’ because it records ‘what the court was informed actually was the agreement’ and ‘it resolves, we would submit – our learned friends will dispute this – the debate as to exactly what the agreement was, rather than going to secondary sources … It is the best evidence of the actual agreement.’[59]
[59]Ibid, at pp. 5-6.
The submission made by the Marriner parties in support of their application for leave to rely upon the affidavit of Mr Pergl was put on the basis that ‘there is a very real possibility the court may be led into error if the agreement the court was informed of in 2009 is not within the evidence the court may have regard to.’[60] They contend that the Court could have regard to the email exchange as it was ‘a communication already sent to the court and we don’t need to apply for leave to put it in. It's already in. But if we're wrong about that then we do apply for leave to rely on the affidavit of Mr Pergl to put the email in.’[61]:
[60]Ibid, at p. 12.
[61]Ibid.
A little later, even though no application had been made to ‘re-open’ the remitter hearing, Senior Counsel for the Marriner parties made the following submission:
So, Your Honour, should Your Honour regard the application as, in fact, being an application for leave to reopen after final submissions, but before judgment, then the law, in our submission, is clear, and there's no dispute between our learned friends and we in respect of what the law is.[62]
[62]Ibid, at pp. 12-13.
Reference was then made to a number of authorities said to support such a re-opening: Matthews v SPI Electricity Pty Ltd(Ruling No.28),[63] Inspector-General in Bankruptcy v Bradshaw,[64] and Nicholson v Hilldove Pty Ltd.[65] In Bradshaw, where an application to re-open was made for the purpose of pursuing issues in relation to quantification, Kenny J summarised the four recognised classes of case in which a court may grant leave to re-open, as follows:
The authorities indicate that, broadly speaking, there are four recognised classes of case in which a court may grant leave to re-open, although these classes overlap and are not exhaustive. These four classes are (1) fresh evidence (Hughes v Hill; Smith v New South Wales Bar Association [No. 2]); (2) inadvertent error (Brown v Petranker (application to recall a witness); Murray v Figge (application to tender answers to interrogatories); Henning v Lynch (application to re-open)); (3) mistaken apprehension of the facts (Urban Transport Authority of NSW v NWEISER (‘UTA’)); and (4) mistaken apprehension of the law. In every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open: see UTA; also The Silver Fox Co Pty Ltd as Trustee for the Baker Family Trust v Lenard’s Pty Ltd (No. 2).[66]
[63][2013] VSC 523.
[64][2006] FCA 22 (‘Bradshaw’).
[65][2013] VSC 231.
[66][2006] FCA 22, at [24] (citations omitted).
It was suggested by Senior Counsel for the Marriner parties that the present case might fall into the recognised category of ‘inadvertent error’, the ‘inadvertent error being the forgetting by the parties of the existence of the email or the inadvertent error in failing to locate the email’.[67] Alternatively, it was said the Court could find ‘that there is a mistaken apprehension as to the facts, that is, the court was clearly informed of the terms of the agreement in writing, but the parties appear to have misapprehended that that was the case in forgetting the existence of the email.’[68] That submission, made by reference to the decision of Sifris J in Nicholson v Hilldove,[69] was advanced on the asserted basis that ‘both sides and the court forgot the existence of the document’[70] and that if the application were granted, there would be no prejudice to the ASD parties.[71] In closing, it was submitted on behalf of the Marriner parties that:
Your Honour should grant leave, should leave be necessary for the plaintiff to rely on the affidavit of Mr Pergl sworn on 10 December, and Your Honour should have regard to the emails that are Exhibits 1 and 2 to that affidavit, in the context of the parties' submissions made on 3 December. There is no prejudice to ASD, beyond the fact that it might not like what the agreement was, and it's something, in our submission, ASD, had it been aware of the existence of the emails, had it remembered their existence, would have been obliged to advise the court of, and we of, as I submitted earlier.
If any power be needed to grant the application we make, Your Honour, one need look no further than s.9 of the Civil Procedure Act which was referred to by His Honour Justice Forrest in … paragraph 24 [of Matthews v SPI Electricity (Ruling No.28)].[72]
[67]Transcript 25/02/15, at p. 13.
[68]Ibid.
[69][2013] VSC 231.
[70]Transcript 25/02/15, at p. 14.
[71]Ibid, at p. 15.
[72]Ibid, at pp. 21-22. See also Kuek v Devflan [2012] VSC 327, at [44].
In oral submissions, Senior Counsel for the ASD parties reiterated their objection to the receipt of the affidavit, and primarily on grounds of relevance. First, the point was made that the Marriner parties do not actually seek leave to re-open. It was said that although they disavow it, their submissions make clear that what they are in effect seeking to do is to re-open so as to tender further evidence. Secondly, ASD submitted that the email exchange sought to be relied on by the Marriner parties was not ‘evidence before Justice Byrne’ because no-one tendered it and ‘that’s because no-one treated it as relevant to any issue between the parties.’[73] Indeed, ASD says, the reason why Mr Pergl’s affidavit has been prepared is so that they can tender the email exchange in evidence. But, as ASD submitted, the position is that the email exchange and the existence of the so-called credit agreement have never been pleaded or articulated as a defining issue between the parties at any point in the 10 years that the proceeding has been on foot, and it is only being relied on at the final hour when the Court has delivered its reasons on the remitter and turned to consider the question of final orders and costs. ASD contended that there is no ‘inadvertent error’ demonstrated here; rather ‘[t]here was a forensic decision made not to seek to re-open, not to seek to re-plead, not to seek to make any of this relevant.’[74] Accordingly, ASD submits, the application for leave should be refused.
[73]Transcript 25/02/15, at p. 27.
[74]Ibid, at p. 35.
ASD also referred to the decision of the Court of Appeal in Spotlight Pty Ltd v NCON Australia Ltd[75] and the requirement that ‘exceptional circumstances’ must be demonstrated before a court may allow a case to be re-opened in circumstances where the case has closed and judgment has been reserved. There, the Court (Harper and Tate JJA and Beach AJA) in a joint judgment, referred with approval to the decision of Kenny J in Bradshaw and said (footnotes omitted):
[17]There are good reasons why the circumstances must be exceptional before a court may allow a case, having been closed and judgment reserved, to be reopened. The need for finality in litigation is one. It is no answer to this point to say that the further evidence sought to be adduced by the respondent in this case is confined to the quantum of damages. Were applications to reopen to be allowed almost as of course, such applications would be regularly made. That would add enormously to inefficiencies in the administration of justice, even if the reopened hearing was strictly confined. The discipline which ought to attend the conduct of litigation by highly competent litigators would also inevitably decline.
Given the success that the Marriner parties enjoyed in the Court of Appeal, they were justified in believing that they would receive a significant portion of their costs of the appeal. They appear to have identified and recognised that their real weakness on the remitter lay in the claim made in respect of the $80,000 payment directed by Mr Marriner. But it was likely that the quantum of costs awarded to them on the appeal would exceed the sum of $80,000, even if awarded with interest. Were they to accept ASD’s offer, the Marriner parties were required to pay the sum of $70,000 and forego their award of costs. The likely fate of the counterclaim on the remitter was somewhat unclear, and the fact that the Court of Appeal did not decide it but instead remitted it to a trial judge appears to have conveyed the impression that their counterclaim had greater prospects than was ultimately found to be the case.
Further, if, as they now contend, the Marriner parties believed that on the remitter they would effectively have the benefit of the $350,000 paid by Wallace & Wallace, such that ASD would have to recover more than that sum before an order for costs would be made against the Marriner parties, then the approach taken by them is readily understandable. However, this argument was never raised before the Court of Appeal as a reason why there would be no utility in the remitter of Issue 4 nor was it ever deployed or advanced in their correspondence with the solicitors for ASD in October 2012 as a reason justifying the rejection of the offer.
ASD’s offer of compromise
In the case of the offer of compromise ASD made under the Rules, served on 22 February 2013, ASD contends that this offer was made on terms even more favourable than those under the Calderbank letter, offering a ‘complete walk away’ and with the Marriner parties retaining the benefit of the costs order made in their favour by the Court of Appeal. The Marriner parties disagree with that assessment and contend that the offer, as made, was an ‘all-in’ offer containing a costs-inclusive term and therefore it did not comply with rules 26.03(7) and (8) and was ineffective.
At that time, rule 26.03 relevantly provided as follows:
(7)Upon the acceptance of an offer of compromise in accordance with paragraph (4), unless the Court otherwise orders, the defendant shall pay the costs of the plaintiff in respect of the claim up to and including the day the offer was served.
(8)If an offer of compromise contains a term which purports to negative or limit the operation of paragraph (7), that term shall be of no effect for any purpose under this Part.[140]
[140]See Authorised Version No. 042, incorporating amendments as at 1 January 2013.
In Nolan v Nolan (No. 2),[141] Dodds-Streeton J expressed the view that ‘Order 26 does not allow for “all in” offers’ providing that each party bear their own costs, contrary to what is stated in rule 26.03(7).[142] Further, her Honour observed, ‘[t]he possibility that the court might “otherwise order” does not overcome the express terms of rules 26.03(7) and (8).’[143]
[141][2003] VSC 136. See also Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No. 8) [2007] VSC 363, at [16]; Victorian Education Foundation Ltd v A C Hall Airconditioning Contracting Pty Ltd [2013] VSCA 32, at [24]-[25], [28].
[142][2003] VSC 136, at [32].
[143]Ibid, at [47].
Here, the Marriner parties say that if one treats the term relating to costs, which appears in the letter and the proposed orders, as having ‘no effect for any purpose’, then the offer becomes one which is not capable of being clearly understood. That is, in circumstances where the offer ASD made was expressly one that operated in unison with the consent orders, the Marriner parties argue that they could not reasonably regard the term relating to costs as having no effect.
The ASD parties dispute the correctness of that position, pointing out that the offer of compromise itself made no mention of costs at all and cannot, therefore, be regarded as an ‘all-in’ offer. In that regard, it appears the ASD parties rely on the accompanying letter, rather than the offer itself, to clarify the position with respect to costs. The letter confirms that ‘if the offer is accepted, our clients will not seek costs against your clients and similarly your clients will not be entitled to costs against our clients, other than pursuant to the orders made by the Court of Appeal.’ The minute of proposed orders further confirms that is the intended outcome. ASD argues that even if the offer had referred to costs, the consequence would not be that the offer of compromise was ineffective; rather, under rule 26.03(8) only ‘that term’ (being the term concerning costs) would be of no effect.
The difficulty with the ASD parties’ position is that if the offer were accepted, the provisions of the Rules would render ineffective any term of the agreement between the parties that did not conform with rules 26.03(7) and (8), unless the Court otherwise ordered. ASD says that the offer of compromise was made in the proceeding as remitted and if accepted would not have affected Mr Marriner’s entitlement to costs as ordered by the Court of Appeal. Further, although the offer, read with the covering letter and the minutes of proposed order, represented a departure from the ordinary practice, nevertheless it offered a benefit to the Marriner parties in the sense that they were given the opportunity to settle the proceeding on a more favourable basis than would apply under the Rules.[144] Indeed, ASD says that short of offering to pay Mr Marriner’s costs, its offer to ‘walk away’ was the most generous offer it could make.
[144]Under rule 26.03(7) as applicable at the time, the ordinary consequence of acceptance of an offer by a defendant was that the defendant was required to pay the plaintiff’s costs in respect of the claim up to and including the day the offer was served.
Conclusion on the offer of compromise
In circumstances where it is unclear what effect an acceptance of the offer would entail, I am not satisfied that the offer of compromise as made, being one that expressly operated in unison with the consent orders, was one that was reasonably capable of acceptance in accordance with the Rules. If the Marriner parties accepted the offer, they were at risk that unless and until the Court determined otherwise, they may be ordered to pay ASD’s costs in accordance with rule 23.03(7).[145]
[145]That is, in respect of the claim up to and including the day the offer was served.
Alternatively, should the Court treat ASD’s offer of compromise as an effective Calderbank offer?
The Marriner parties argued that if the Court were to find that ASD’s offer of compromise made under the Rules was not a valid offer because it is not to be regarded as one that falls strictly within the scope of Order 26, then the Court should not proceed to treat the offer as being an effective Calderbank offer. First, they said that the offer failed to set out the basis for the contention that the Marriner parties should accept the compromise, and the extent of the compromise was illusory. Secondly, the offer did not explain why the Marriner parties should give up their claims in respect of the costs of the first trial. But even if the offer could be regarded as an effective Calderbank offer (which is not accepted), they say its rejection was not unreasonable. First, they maintain that the status of the $350,000 payment was a material consideration. Second, the question of liability for the costs of the first trial was open to be argued given the terms of the remitter, and thirdly, the counterclaims themselves had been remitted for further argument. Further, in the case of the claim regarding the $80,000 payment directed by Mr Marriner, if not all of the remitted claims concerning the third tranche funds, the outcome of the remitter hearing was neither obvious nor predictable.
Aside from the non-compliance with the Rules, the offer ASD made — to walk away completely and with the Marriner parties retaining the benefit of the costs order made by the Court of Appeal — was, in my view, an attractive one. Whilst the covering letter did not set out all of the reasons why ASD contended the offer was attractive and should be accepted, the basis for doing so had been canvassed at some length in the earlier Calderbank letter. I do not propose to re-visit each of the matters discussed under paragraphs (a) to (f) above in relation to the earlier Calderbank letter. Importantly, the Marriner parties were no longer required to pay $70,000 to ASD and they were entitled to retain the benefit of the costs order made in their favour by the Court of Appeal. Had they accepted, the ongoing litigation risk would have ceased and they would also have avoided the costs and expenses of the remitter hearing, and the prospect of them facing an adverse costs order from the original trial. In that regard, I note that in the Court of Appeal’s costs reasons, their Honours observed that Mr Marriner’s success on the appeal ‘was, to a significant extent, based on an argument about the effect of the alleged expenditure cap which was not advanced at trial.’[146]
[146]Court of Appeal’s Costs Reasons, at [9].
With the introduction of the Civil Procedure Act in 2010, the legislature made clear, if it was not already, that the parties to litigation, the practitioners representing them, and the Court are each required to promote the just, efficient, timely and cost effective resolution of the real issues in dispute. Viewed objectively, the substance of the offer ASD made was directed to furthering those objectives, in circumstances where the costs incurred by the parties in running the proceeding had reached the point where they now dwarfed the quantum of the relief to be determined on the remitter. In my view, the offer as made, even though not one that fell strictly within Order 26, was nevertheless one that invoked the principles discussed in decisions such as Calderbank.
The Marriner parties contend that when regard is had to the whole of the course of the litigation between the parties in this proceeding, no proper basis is demonstrated for any special costs order in favour of the ASD parties. Rather, they submit, in a situation where ASD as plaintiff has spent millions to recover a mere $80,000, the folly of pursuing this litigation is patent, and having regard to the provisions of the Civil Procedure Act 2010, the more appropriate course would be to order that the lion’s share of the costs incurred by the Marriner parties be paid by ASD. In my view, that submission further bears out the very reason why ASD made offers to settle the proceedings, recognising that little would be gained from pursuing the litigation in circumstances where the costs incurred had dwarfed the sums capable of being recovered.
In the present case, I am satisfied that the overarching purpose would be furthered by treating the offer of compromise made by ASD on 22 February 2013 as being effective as a Calderbank offer. In the circumstances, I am also satisfied that it was not reasonable for the Marriner parties not to accept the offer. Although the offer was not one that conformed strictly with Order 26, when the offer, the proposed orders and the covering letter were read together, the gist of what was being put forward for consideration by ASD was clear, as was the reason why it was put forward. If the Marriner parties were in any doubt, it would have been sensible for them to seek clarification.
In circumstances where ASD, by making an offer, has taken appropriate and timely steps in the litigation that were directed to furthering the overarching purpose, but the offer was not accepted by the Marriner parties even though it would have been reasonable for them to do so, it follows that any costs ordered to be paid by the Marriner parties are to be assessed on an indemnity basis. Under Calderbank offer principles, the indemnity costs would ordinarily be payable from the date of expiry of the offer, being 4.00 pm on 8 March 2013, rather than from 22 February 2013, being the date the offer was made, as would apply under Order 26. Accordingly, any costs ordered to be paid by the Marriner parties are to be assessed on an indemnity basis from 4.00 pm on 8 March 2013.
Does Rule 63.24 apply to the present case?
The Marriner parties advanced a second reason as to why no costs order should be made in favour of the ASD parties, based on rule 63.24.[147] They contend that even if ASD were entitled to recovery in respect of the $80,000 payment, it would not be entitled to recover an amount (exclusive of costs) that would exceed $100,000. Accordingly, they say rule 63.24 operates to limit the costs able to be recovered to those to which ASD would have been entitled had it commenced the proceeding in the County Court.
[147]Rule 63.24 provides:
(1)Subject to paragraph (1.1), where in a proceeding for debt or damages the plaintiff recovers by judgment or otherwise an amount (exclusive of costs) not exceeding $100,000, the plaintiff shall, unless the Court otherwise orders, be entitled only to the costs to which the plaintiff would have been entitled if the plaintiff had brought the proceeding in the County Court less an amount equal to the additional costs properly incurred by the defendant by reason of the proceeding having been brought in the Supreme Court instead of the County Court …
In the present case, rule 63.24 is not engaged. First, ASD is entitled to judgment for $80,000 plus damages in the nature of interest pursuant to s 60 of the Supreme Court Act 1986. It is common ground that damages in the nature of interest should be taken into account in determining whether the plaintiff recovers more than $100,000.[148] Secondly, even if there were any doubt about that, I am satisfied that this case is one where the Court should ‘otherwise order’ if the rule were applicable. As the ASD parties submit, the proceeding was a complex one involving difficult issues concerning liability for procuring breaches of trust and the counterclaim also involved complex allegations. Further, the fact that both the claim and counterclaims sought more than $200,000 meant that when the proceeding was commenced in 2005, and the counterclaims issued in 2006, they would have exceeded the then jurisdiction of the County Court.[149]
[148]The Marriner parties submissions expressly acknowledge that the debt or damages recovered by judgment is taken to include damages by way of interest – see Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221, at 275 per Byrne J.
[149]This was the effect of s 37(2) of the County Court Act1958 (Vic) as then applicable, and the definition of ‘jurisdictional limit’ in s 3. Note that the amending provisions set out in Part 2 of the Courts Legislation (Jurisdiction) Act2006 (Vic) did not commence until 1 January 2007, being after the counterclaims had been issued.
The costs of the remitter hearing
The ASD parties seek an order that Mr Marriner and the plaintiffs by counterclaim pay their costs of the remitter hearing. The Marriner parties on the other hand contend that the matter should be determined by adopting either an ‘issues-based’ approach and/or by adopting a pragmatic ‘apportionment-based’ approach, resulting in an order that ASD pay 65-75% of the Marriner parties’ costs of the remitter hearing.
As has been noted earlier, the remitter hearing was conducted on the basis of the evidence that was adduced at the first trial. Counsel for the respective parties opened the evidence that they relied upon and made submissions directed to the substantive issues on the remitter. There was, in my view, a considerable overlap between the factual matters pertaining to the remitted issues on ASD’s claim and those concerning the defences and counterclaims brought by the Marriner parties. Each counsel spent some considerable time taking me through the factual matters on which they relied to make good those claims.
I am not persuaded that it would be appropriate for me to deal with the question of costs of the remitter hearing on an ‘issues basis’ referable to the causes of action pleaded. Much has already been said by the original trial judge and the Court of Appeal about the unsatisfactory state of the pleadings in this matter. Suffice it to say that the lack of clarity in the pleadings in this case has not assisted in the resolution of the issues between the parties.
ASD has succeeded on the main issue, albeit only to the extent of $80,000 rather than the entirety of the third tranche funds. Because the claim for the $80,000 that Mr Marriner directed Wallace & Wallace to pay was itself a component of the third tranche funds, and all of the defences raised regarding the third tranche funds responded to it, it could not reasonably be said that significantly less evidence or submissions would have been required on that claim alone. In my view, the remitter hearing was conducted efficiently by both sides, and most, if not all, of the time spent in Court on ASD’s claim in chief was required for it to make good the claim for the $80,000.
Similarly, with the Marriner parties’ counterclaim. Much of this part of the case was put forward as a defence to ASD’s claim in chief, as well as being a counterclaim. Having considered the issues raised at some length in the remitter reasons, I determined that each of those claims must fail in their entirety.
ASD contends that the Court should treat Mr Marriner’s characterisation of the counterclaims as ‘defensive’ as being an acknowledgment of the fact that there was a significant overlap on the facts between the claims brought by ASD (including those on which it did not ultimately succeed, namely the second tranche and capital expenditure claims and the third tranche claims except for the $80,000) and the counterclaims. I tend to agree with the submission made by the ASD parties to the effect that the overlap between the counterclaims (on which they succeeded) and the claims on which ASD did not succeed favours an award of costs in favour of ASD because the factual underpinnings of ASD’s claims had to be addressed in the counterclaims.
When viewed against the final outcome on the remitted issues, it is clear that the ASD parties have enjoyed considerably more success than the Marriner parties. That is, the ASD parties have succeeded on both the primary claim and on the counterclaim. In my view, as the successful party, it is appropriate that the ASD parties be awarded their costs of the remitter.
Costs orders relating to the hearing before Byrne J
ASD submits that the same costs orders should be made in both the remitter hearing and the first trial. ASD says the usual rule is that, having succeeded in part, it should have its costs of the first trial paid in full. They rely on the fact that his Honour found that there were no ‘special circumstances’ that would justify a departure from the general rule that costs follow the event. That is the order that Byrne J made and ASD submits that no change should now be made to that order.
In his reasons for judgment, Byrne J was critical of the way the Marriner parties had conducted the first trial.[150] In his costs reasons, Byrne J noted that ‘in this case it is really not practical to sever issues … so as to make an issues-based [costs] order.’[151]
[150][2010] VSC 41, at [26]-[28]).
[151]Australian Super Developments Pty Ltd v Marriner & Ors (Unreported, Supreme Court of Victoria, Byrne J, 16 April 2010, at [7]).
In his reasons for judgment, Byrne J did not deal with the Marriner parties’ counterclaim in any detail. On 16 April 2010, his Honour then delivered short reasons dismissing the counterclaim.[152] When making his final orders that same day, Byrne J ordered that there be no order for costs on the counterclaim. On the remittal, as I have noted, a good deal of time was spent on the Marriner parties’ counterclaims but those counterclaims were also put forward as defences, and they have been dismissed in their entirety.
[152][2010] VSC 66.
The counterclaims heard on the remitter were directed at both ASD and its directors, and each was required to defend them. There was, however, common representation so it is unlikely that any significant additional costs were incurred by reason of the presence of the additional parties on the counterclaims. ASD accepts that no specific order for costs should be made in relation to the individuals that were successful in defending the counterclaims, and no such order is sought.
As was noted at the outset of these reasons, the Court of Appeal remitted to the trial judge hearing the remitter the question of liability for the costs of the original hearing because, it seems, their Honours apprehended that despite the Marriner parties’ apparent success on appeal, the resolution of the substantive issues remitted could effect a substantial change in the overall outcome of the proceeding. The position is that the ASD parties have been successful on their claim and on the Marriner parties’ counterclaim. In the circumstances, I see no reason to depart from the orders Byrne J made on the primary claim, however, in the case of the counterclaim, an award of costs should also be made in ASD’s favour.[153]
[153]This sentence was revised on 22 July 2015.
The Marriner companies
ASD’s claims against each of the Marriner companies failed. It submits, however, that as the claims made against them were inextricably intertwined with those made against Mr Marriner, no order for costs should be made in favour of those corporate defendants. The Marriner companies were jointly represented with Mr Marriner by the same legal team, they ran a joint defence and counterclaim, and relied upon essentially the same documents, evidence and submissions. On the remitter, the resolution of the question of the companies’ liability was disposed of in a single paragraph of the reasons for decision.[154] In the circumstances, I am satisfied that no separate order should be made in favour of those corporate defendants.
[154]See remitter decision, at [380].
Proposed final orders
For the reasons set out above it is proposed that final orders be made substantially as follows:
1.There be judgment for the plaintiff against the first defendant in the amount of $80,000 plus interest pursuant to s 60 of the Supreme Court Act in the sum of $ [insert sum].
2.The counterclaims brought by the defendants and plaintiffs by counterclaim are dismissed.
3.The first defendant and the plaintiffs by counterclaim pay the costs of and incidental to plaintiff's claims and the counterclaims, including the costs of the proceeding before Byrne J.
4.Such costs are to be taxed (in default of agreement) on a party and party basis up until 4.00 pm on 8 March 2013 and thereafter on an indemnity basis.
I will direct the parties to consult and bring in orders giving effect to these reasons. If necessary, I will hear the parties on the precise form of the final orders.
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