Bignaches Pty Ltd v Access Strata Management Pty Ltd (Costs)
[2022] VSC 793
•16 December 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 00355
IN THE MATTER OF ACCESS STRATA MANAGEMENT PTY LTD (ACN 605 929 039)
BETWEEN:
| BIGNACHES PTY LTD (ACN 105 959 126) | Plaintiff |
| and | |
| ACCESS STRATA MANAGEMENT PTY LTD (ACN 605 929 039) AND OTHERS | Defendants |
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JUDGE: | Riordan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 December 2022 |
DATE OF RULING: | 16 December 2022 |
CASE MAY BE CITED AS: | Bignaches Pty Ltd v Access Strata Management Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 793 |
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COSTS — Whether defendants capitulated on the allegation of oppression — Whether Calderbank offer represented a better result for the offeree than the judgment — Whether rejection of the Calderbank offer was unreasonable — Effect of Calderbank offer on the general discretion as to costs — Order for plaintiff to pay the defendant’s costs on a standard basis from the date of Calderbank offer.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Williams KC | Sinisgalli Foster |
| For the Second and Third Defendants | Mr L Molesworth | Holding Redlich |
HIS HONOUR:
On 21 October 2022, I made orders relevantly including:
1.By a settlement date of 6 December 2022, the second defendant and/or third defendant purchase the shares of the plaintiff in the first defendant based on a valuation of $666,135.
2.If the second defendant and/or third defendant fail to complete the purchase of the shares of the plaintiff in the first defendant by 6 December 2022, the plaintiff purchase the shares of the second and third defendants in the first defendant based on a valuation of $666,135 by a settlement date of 23 December 2022.
3.If the shares are not purchased in accordance with either paragraph 1 or 2 of these Orders, the matter is listed for directions on a date to be fixed.
The orders were subject to a condition recorded in Other Matters being:
The purchase of the shares in the plaintiff to be undertaken pursuant to paragraph 1 of these orders is to be (and will not be effective as compliance with that order unless it is) accompanied by:
A.A release of the mortgage security provided by the plaintiff to National Australia Bank Limited (‘NAB’) as security for the borrowings of the first defendant from NAB;
B.A release of the guarantee provided by Peter Morey to NAB for the borrowings of the first defendant from NAB; and
C. Payment to Access Mercantile Services Australia Pty Ltd in full of the then balance of the loan from Access Mercantile Services Australia Pty Ltd to the first defendant, which balance as at 28 October 2022 stood at $97,500.
The reasons for judgment[1] in substance consisted of answers to the questions posed by the parties as follows:
[1][2022] VSC 639 (‘the Principal Reasons’).
The Parties’ Agreed Orders
(a)The second defendant and/or third defendant purchase the plaintiff’s shares in Access Strata Management Pty Ltd (‘the Company’) based on a valuation of $666,135, less allowances for any liabilities referred to below.
(b)If the second defendant and/or third defendant fail to complete the purchase by the fixed date referred to above in paragraph (a), the plaintiff purchase the second and third defendants’ shares in the Company for a price to be calculated by reference to the Court’s valuation to be completed by a date to be fixed by the Court.
(c)If the plaintiff fails to complete the purchase by the fixed date referred to above in paragraph 4b, the Company be wound up pursuant to s 461(k) of the Corporations Act.
The questions to be determined by the Court
(i)Are there outstanding rent/occupancy payments (‘the Rent Claim’) validly owed by the Company as alleged by the plaintiff at paragraphs 11 to 20 of the Statement of Claim filed 21 June 2021 (‘the Statement of Claim’)?
(ii)Are there outstanding consultancy fees (‘the Consultancy Fee Claim’) validly owed by the Company as alleged by the plaintiff at paragraphs 21 to 25 of the Statement of Claim?
(iii)Are there outstanding interest payments (‘the Interest Claim’) validly owed by the Company as alleged by the plaintiff?
The Court answered ‘no’ to each of the above questions.
At the time of the trial the shareholding of the Company was held as follows:
(a)The plaintiff, a company associated with Peter Morey 44.44%
(b)Ms Jones 44.44%
(c)Mr Kane 11.11%.
In accordance with the orders, the second and third defendants completed the purchase of the plaintiff’s shares for the payment of $296,060.
The proposed costs orders
The plaintiff submitted that the Court should make the following orders with respect to costs:
(a)The second and third defendants pay the plaintiff’s costs of the proceeding excluding the hearing on 17, 18 and 21 October 2022, such costs to be taxed on a standard basis in default of agreement.
(b)The plaintiff pay the second and third defendants’ costs of the hearing on 17, 18 and 21 October 2022, such costs to be taxed on a standard basis in default of agreement.
(c)Otherwise, there be no order as to costs.
The second and third defendants submitted that the Court should order that the plaintiff pay the second and third defendants’ costs:
(a)in the gross sum of $250,000; or alternatively
(b)on an indemnity basis, and be taxed in default of agreement; or alternatively
(c)on a standard basis until 3 September 2021 and thereafter on an indemnity basis to be taxed in default of agreement.
The background facts to this dispute were set out in paragraph [3] of the Principal Reasons.
For the purpose of the application with respect to costs, the relevant facts are as follows:
(a)By originating process filed 15 February 2021, the plaintiff relevantly sought the following orders:
(i)A declaration that the affairs of the Company were being conducted in a manner oppressive to, or unfairly prejudicial to or unfairly discriminatory against the plaintiff.
(ii)Within 14 days after formal entry of orders sought, the second and/or third defendants purchase the plaintiff’s shares in the Company for their market value.
(b)In March 2021, PKF Melbourne Corporate Pty Ltd, on the instructions of the defendant, valued the Company at between $390,000 and $755,000, which based on the midpoint valued the plaintiff’s interest at approximately $254,440 (‘PKF Report’).
(c)In May 2021, Mr Mark Ellis of Rodgers Reidy, on the instructions of the plaintiff, valued the Company at between $390,000 and $565,000, which on the midpoint valued the plaintiff’s interests at approximately $212,454 (‘Rodgers Reidy Report’).
(d)By Statement of Claim, the plaintiff sought the relief previously claimed in the originating process on the basis that the following acts and omissions constituted oppression:
(i)exclusion from management;
(ii)the failure to pay the Rent Claim;
(iii)the failure to pay the Consultancy Fee Claim; and
(iv)failure to repay the undisputed loan to a related company Access Mercantile Services Pty Ltd (‘the AMS Loan’).
The plaintiff also sought an alternative remedy that the second and third defendants sell their shares in the Company to the plaintiff for their market value.
(e)By letter dated 3 September 2021, the defendants made an offer (‘the First Open Offer’) in accordance with the principles set in Calderbank v Calderbank,[2] as follows:
[2][1976] Fam 93.
(a)Our clients will purchase your client's shares in Access Strata for the sum of $260,000 (inclusive of GST if payable) (the Purchase Price).
(b)The Purchase Price will be payable within 60 days of execution of the Deed of Settlement.
(c)In addition to the Purchase Price, the following amounts will be paid by Access Strata:
(i) Rent to Lyndon Peak in the amount of $70,000 plus GST.
(ii)Loans to Access Mercantile in the amount of $117,000.00 (being the amount currently outstanding).
(d)Payment of the amounts identified in [paragraphs (a) and (c)] above are conditional upon your client undertaking not to pursue (and indemnifying) Access Strata for the alleged claims by Lyndon Peak (for payment of consultancy fees and any additional rent) and Access Mercantile (for the loan amounts claimed).
(e)Our clients will facilitate the release of any securities provided by your client in respect of Access Strata.
(f) Upon execution of the Deed of Settlement:
(i) Peter will resign as a director of Access Strata; and
(ii)Peter and Bignaches will return all company property (including documents) and relinquish access to any communications systems of Access Strata.
(g)Upon payment of the Purchase Price, the Proceeding will be dismissed with no order as to costs.
(h) The parties will bear their own costs of the Proceeding.
(f)On 17 September 2021, the plaintiff rejected the First Open Offer and counter-offered:
1. Mr Ivan Glavas or Mr Mathew Gollant be appointed administrator of the Company at the next available opportunity.
2. Each (active) party pays his or her own costs.
(g)On 17 December 2021, the defendants filed an expert report of Mr Michael Smith which valued the Company at between $302,113 and $510,113, which the midpoint valued the plaintiff’s shares at $180,495.
(h)By letter dated 23 December 2021, the defendants made a further offer (‘the Second Open Offer’) to the plaintiff on the following terms:
(a)Our clients (or Access Strata) will purchase your client's shares in Access Strata for the sum of $181,000.00 (inclusive of GST if payable) (the Purchase Price).
(b)The Purchase Price will be payable within 60 days of execution of the Deed of Settlement.
(c)In addition to the Purchase Price, Access Strata will repay to your client the Loans to Access Mercantile in the amount of $112,500.00 (being the amount currently outstanding).
(d)Payment of the amounts identified in [paragraphs (a) and (c)] above are conditional upon your client, including related entities, providing full releases, undertaking not to pursue (and indemnifying) Access Strata for the alleged claims by Lyndon Peak (for payment of consultancy fees and any additional rent) and Access Mercantile (for the loan amounts claimed).
(e)Peter will agree to pay $50,000.00 in consideration for our clients' legal costs and disbursements incurred in the Proceeding (which represents less than 25% of total costs incurred). This is reasonable in circumstances where our clients made an open offer to purchase your client's shares for an amount in excess of the CFAS valuation. The amount will be deducted from the amount payable to your client on completion. The parties will otherwise bear their own costs of the Proceeding.
(f)Our clients will facilitate the release of any securities provided by your client in respect of Access Strata. Our clients will be ready, willing and able to facilitate the release at completion.
(g) Upon execution of the Deed of Settlement:
(i) Peter will resign as a director of Access Strata; and
(ii)Peter and Bignaches will return all company property (including documents) and relinquish access to any communications systems of Access Strata.
(h)Upon payment of the Purchase Price, the Proceeding will be dismissed with no order as to costs.
(i)On 13 January 2022, the plaintiff rejected the offer of 23 December 2021 and counter-offered, on the condition of the replacement of security provided by the plaintiff and Mr Morey:
1. Mr. Mathew Gollant … is appointed liquidator of Access Strata
Management Pty Ltd; and
2. Your clients pay our client the sum of $25,000.00 in respect of its
legal costs in the proceeding.
(j)In September 2022, Mr Smith and Mr Ellis prepared a joint report and on the basis that none of the alleged Rent Claim, Consultancy Fee Claim or Interest Claim was payable (‘the Base Case’) valued the Company as follows:
(i)Mr Smith $483,456; and
(ii)Mr Ellis $151,273.
(k)By letter of 10 October 2022, the second and third defendants made a further offer (‘the Third Open Offer’) to the plaintiff on the following terms:
(a)Our clients (or Access Strata) will purchase your client's shares in Access Strata for the sum of $215,000 (inclusive of GST payable) (the Purchase Price) (being 44.44% of the Smith valuation in the Joint Experts' Report).
(b)The Purchase Price will be payable within 60 days of execution of the Deed of Settlement (Completion).
(c)Access Strata will repay to your client the Loans to Access Mercantile in the amount of $97,500 (being the amount currently outstanding) at Completion.
(d) Access Strata will pay to your client's related entity, Lyndon Peak, $50,000 at Completion in recognition of occupancy expenses but without recognition of any liability in respect to such fees. Given the Base Case valuation (which assumes rent is not payable) has been adopted for the purpose of the Purchase Price, this renders the entire offer extremely reasonable.
(e)Payment of the amounts identified in [paragraphs (a) and (c)] above are conditional upon your client, including related entities, providing full releases, undertaking not to pursue (and indemnifying) Access Strata for the alleged claims by Lyndon Peak (for payment of consultancy fees and any additional rent) and Access Mercantile (for the loan amounts claimed). Such releases are reasonable in circumstances where the Base Case valuation (which assumes rent and consultancy fees are not payable) has been adopted for the purpose of the Purchase Price, plus a further amount has been offered for occupancy expenses.
(f)In the event that Completion does not occur (other than a delay caused by the plaintiff or the National Australia Bank which is beyond the control of our clients), your client will be entitled to purchase the defendants' shares based on the same pro rata value set out in [paragraph (a)] above.
(g)Mr Morey will agree to pay $100,000 in consideration for our clients' legal costs and disbursements incurred in this proceeding (which represents less than 50% of total costs incurred). This is reasonable in circumstances where your client's claim as pleaded is bound to fail and our client made an open offer to purchase your client's shares on 3 September 2021 for an amount which exceeds this offer (based on an earlier valuation) and exceeds the amount your client could ever achieve at trial.
(h)Our client will facilitate the release of any securities provided by your client in respect of Access Strata. Our clients will be ready, willing and able to facilitate the release at Completion.
(i) Upon execution of the Deed of Settlement:
(i) Mr Morey will resign as a director of Access Strata; and
(ii)Mr Morey and Bignaches will return all company property (including documents) and relinquish access to any communications systems of Access Strata.
(j)Upon payment of the Purchase Price, the Proceeding will be dismissed with no order as to costs.
(l)On 11 October 2022, the parties agreed that the proceeding should be fixed for trial on 17 October 2022 on the basis of an agreed list of questions to be determined by the Court. The questions then agreed between the parties were the same as those set out in paragraph [3] above except the first agreed order provided for the Court to value the shares in the Company as follows:
The second defendant and/or third defendants purchase the plaintiff’s shares in Access Strata Management Pty Ltd (‘Access Strata’) for a price to be calculated by reference to the Court’s valuation of Access Strata as at 30 September 2022, such purchase to be completed by a date to be fixed by the Court.
(m)On 14 October 2022, the plaintiff filed a further report of Mr Ellis which valued the Company, on the Base Case, at $666,135 and therefore the plaintiff’s shares at $296,060. On the same date, the second and third defendants accepted the valuation of Mr Ellis and as a result, the agreed orders and questions for determination were ultimately as set out in paragraph [3] above, which removed the question relating to the valuation of the Company.
(n)The trial proceeded on 17 October 2022 and I delivered the judgment on 21 October 2022 and made the orders referred to in paragraph [1] above. The effect of the orders was that the second defendant and/or the third defendant were ordered to purchase the shares of the plaintiff in the first defendant for the sum of $296,060.
Submissions of the second and third defendants
In support of their application for costs, it was submitted on behalf of the second and third defendants as follows:
(a)Costs should follow the event and, in the event, the plaintiff was not successful because:
(i)there was no finding of oppression; and
(ii)the Rent Claim, Consultancy Fee Claim and Interest Claim brought by the plaintiff were found to be invalid.
(b)The costs should be awarded on the indemnity basis from the date of the First Open Offer. The First Open Offer was a genuine offer of compromise and rejection was unreasonable for the following reasons:
(i)The plaintiff was in possession of the PKF Report prepared on the instructions of the defendants and the Rodgers Reidy Report prepared on the instructions of the plaintiff and the offer was based on the higher PKF Report valuation.
(ii)While the plaintiff was confident the oppression claim would fail they offered that each party bear their own costs.
(iii)Despite denying the Rent Claim, the second and third defendants offered some consideration.
(iv)The second and third defendants offered to:
(1)facilitate the release of any securities granted by the plaintiff and its director; and
(2)pay out the AMS Loan although it was repayable over 10 years.
(c)A further basis for an order for the indemnity costs is that the Rent Claim, Consultancy Fee Claim and Interest Claim were each brought by the plaintiff without a proper basis and the proceeding was commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law.
Plaintiff’s submissions
In support of its application for costs, it was submitted on behalf of the plaintiff as follows:
(a)The second and third defendants denied the plaintiff’s allegation of oppressive conduct until shortly prior to the trial at which time they acknowledged that the Court had jurisdiction under s 232 of the Corporations Act 2001 (Cth) to order a share buyout, which jurisdiction could only be enlivened by the existence of oppressive conduct. Accordingly, the acknowledgment was a concession of oppression.
(b)The First Open Offer was made on the basis that each party bear their own costs of the proceeding, which the plaintiff was entitled to reject on the basis of the plaintiff’s successful allegation of oppressive conduct.
(c)Each of the settlement offers was made on the basis of a valuation of the shares not agreed by the parties and were related to the opinions of experts in respect of which there were significant differences. The second and third defendants should have conceded that the value of the shares was $666,135, at the Base Rate, at an earlier time, which would have avoided unnecessary costs.
(d)The plaintiff’s entitlement under the judgment was $296,030.35 which is more than the amount offered for the shares in any of the offers.
(e)It was reasonable for the plaintiff to reject the Second Open Offer and the Third Open Offer on the basis that they included terms that the plaintiff pay the defendants’ costs of $50,000 and $100,000 respectively.
(f)It was reasonable for the plaintiff to reject the First Open Offer and the Second Open Offer because they did not include an undertaking to obtain from the NAB a release of Mr Morey’s guarantee or the release of the real property security provided by Mr Morey and his associated entity.
(g)It was reasonable to reject each of the defendants’ offers because the defendants failed to provide evidence of their capacity to pay the sums offered. The defendants’ failure to produce proof of the ability to complete resulted in the Court ordering that, if they did not do so, the plaintiff was entitled to purchase the defendants’ shares based on the same valuation.
Principles
The relevant principles to be applied in considering orders for costs and the effect of Calderbank offers were not in dispute. The principles were usefully distilled by Bond J in S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2),[3] as follows:
[3][2020] QSC 323, [8]-[14] (citations omitted).
First, the usual rule is that where the Court orders the costs of one party to litigation to be paid by another party, the order is for assessment of those costs on the standard basis.
Second, the Court will depart from the usual rule where the circumstances of the case warrant that course.
Third, one feature which may justify a departure from the usual rule is the rejection of a Calderbank offer to compromise. However, it is wrong to think that an offeree’s rejection of a Calderbank offer gives rise to a presumption that the offeree should pay the offeror’s costs on an indemnity basis if the offeree obtains a less favourable result than contained in the offer. Rather, the correct approach is to consider whether the rejection of the Calderbank offer, in all the circumstances, justifies a departure from the usual rule
Fourth, the balance between the competing policy considerations of, on the one hand, appropriately encouraging settlement and, on the other, not discouraging potential litigants from bringing their disputes to the courts, is found by applying a test of “reasonableness”. The policy rationale for requiring the offeree to indemnify the offeror for costs incurred after the offeree’s unreasonable rejection of an offer is that, from the time of the unreasonable rejection, notionally the real cause and occasion of the litigation is the unreasonable attitude adopted by the offeree.
Fifth, deciding the critical question of whether the offeree’s rejection of the offer is unreasonable in all the circumstances will always involve matters of judgment and impression. However, the discretion as to costs must be exercised judicially and is subject to review in accordance with the principles set out in House v The King (1936) 55 CLR 499 at 505. Without being exhaustive concerning the considerations which should be taken into account, a court should ordinarily have regard to at least the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
Further, in my opinion, the Court may have regard to a purported Calderbank offer in the exercise of its general discretion as to costs as between the parties, even if the offer does not enliven the discretion to award indemnity costs, at least in the following circumstances:
(a)If a Calderbank offer would have resulted in a better outcome for the offeree than the judgment of the Court, but it cannot be found that the rejection of a Calderbank offer was unreasonable at the relevant time. As Beech J observed in McKay v Commissioner of Main Roads [No 7][4]:
In a sense, the present case also illustrates my point. The defendants do not seek indemnity costs. Nor, in my view, could they have. I am satisfied that the plaintiffs did not unreasonably reject the Calderbank offer so as to enliven a power to award indemnity costs. But, for the reasons I explain below, I am satisfied that the justice of the case is met by an order for party-party costs against the plaintiffs.
The breadth of the court's discretion ensures that the court retains the maximum flexibility to meet the justice of the case. The character of what animates the exercise of the exceptional power to award indemnity costs explains why the courts require a finding of unreasonable rejection before indemnity costs are available based on a Calderbank offer. Those considerations do not apply to using a Calderbank offer to order party-party costs. I do not think the breadth of the costs discretion should be or is constrained by a requirement of finding unreasonable rejection as a prerequisite to a party-party costs order based on a Calderbank offer.
(b)If there is some imprecision in the offer,[5] providing the offeree should have been in no reasonable doubt as to the nature and extent of the offer.[6] Although a ‘party is entitled to know just what it is giving away, at least in substance, and usually in reasonable detail, before agreeing to abandon a proceeding’,[7] the Court should take a practical and realistic approach.[8] For example, the fact that the offer contemplates a deed may not deprive an offer of effect particularly if the terms of the proposed deed are sufficiently clear from the offer, and the offeree does not respond by expressing such a concern.[9]
[4](2011) 185 LGERA 118, 137 [125]-[127].
[5]Facton Ltd (formerly known as G-Star Raw Denim KFT) v Seo (2011) 91 IPR 135, 147 [55(6)] (Gordon J).
[6]Grbavac v Hart [1997] 1 VR 154, 155 (Winneke P) and 160 (Tadgell JA).
[7]Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2020] FCA 598 [66] (Bromwich J).
[8]Ibid [65].
[9]Ibid [67]-[69].
Conclusion
Taking into account the following considerations, in my opinion, it is appropriate that the plaintiff pay the second and third defendants’ costs of this proceeding to be assessed on a standard basis from the date of the First Open Offer.
The plaintiff’s disputed claims were a significant part of the plaintiff’s claim for oppression and were the only matters determined at trial. At trial, each of the claims was dismissed and I consider that an order for costs to follow that event is appropriate.
Under the terms of the First Open Offer, the plaintiff and associated companies would have received the total sum of $330,000 plus payment of the undisputed AMF Loan, which is in excess of the amount ordered to be paid under the judgment. In circumstances where the recipients of the monies offered to be paid were both companies owned and controlled by Mr Morey, I do not consider that the efficacy of the First Open Offer is deprived of effect by the fact that the second and third defendants apportioned the sum offered as to:
(a)$260,000 for the shares (compared to the $296,000 in the judgment); and
(b)$70,000 for the Rent Claim.
I have had regard to the fact that the First Open Offer was said to be subject to the execution of a deed and may not have been capable of acceptance on its terms. In particular, clarification of the offerors’ precise obligation with respect to their release of securities may have been required. However, the substance of the First Open Offer was clear and it provided reasonable detail as to the proposed terms. In cases requiring resolution of complex commercial disputes the policy of the law to encourage litigants to settle,[10] and the overarching obligation to use reasonable endeavours to resolve the dispute, under s 22 of the Civil Procedure Act 2010 (Vic) require a constructive response to such an offer, from an offeree if it wishes to avoid cost consequences; and subsequently fails to recover more than the substance of the offer. The fact that the precise terms of an offer may require some degree of clarification, ‘does not mean that the offer cannot be considered by the court in the exercise of its general costs discretion’,[11] particularly if the offeree does not attempt to clarify any uncertainty.
[10]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, 441 [21].
[11]Facton Ltd (formerly known as G-Star Raw Denim KFT) v Seo (2011) 91 IPR 135, 147 [55(6)] (Gordon J).
I reject the plaintiff’s submission that the parties’ agreement to limit the issues at trial (by proceeding on the agreed basis that, in the first instance, the second and third defendants would purchase the plaintiff’s shares at a price to be determined by the Court) was inferentially a concession or capitulation on a question of oppression. In my opinion it was a sensible and practical basis to narrow the issues between the parties and facilitate the just and efficient resolution of the dispute. The Court should be slow to draw inferences that would discourage litigants from narrowing issues in this manner.
I do not consider an order for indemnity costs is appropriate for the following reasons:
(a)In the circumstances, I am unable to make a finding about whether the plaintiff’s refusal to accept the First Open Offer fell on one side or the other of the reasonable/unreasonable dichotomy. Rather, I have had regard to it as one of the factors that has led me to conclude that the plaintiff should pay the second and third defendants’ costs of this proceeding to be assessed on a standard basis from the date of the First Open Offer.
(b)In my opinion the basis of each of the claims was tenuous (as set out in the Principal Reasons).[12] However, the principles to be applied in determining an application for costs on the basis of an unmeritorious claim are as follows:
(i)The fact that a litigant filed or maintained a proceeding which has no, or substantially no prospect of success, does not of itself enliven the jurisdiction to award indemnity costs.
(ii)The jurisdiction is enlivened if the litigant knew or should have known, on proper consideration, that the case was hopeless.
(iii)The Court may decline to exercise its discretion if the litigant did not in fact recognise that the case was hopeless.[13]
Although tenuous, I am unable to conclude that the plaintiff knew or should have known, on proper consideration, that each of the Rent Claim, the Consultancy Fee Claim and the Interest Claim was hopeless.
[12][18]-[20], [23]-[27], [30]-[34].
[13]Winslow Constructors Pty Ltd v Head, Transport for Victoria (2021) 64 VR 200, 205-206 [11] (Riordan J).
As my order contemplates the payment of costs from 3 September 2021 on a standard basis, I am not satisfied that an appropriate sum may be determined fairly between the parties on the materials available; and accordingly do not propose to make an order under r 63.07 of the Supreme Court (General Civil Procedure) Rules2015 (Vic).
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