Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 3)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2022 00813

BETWEEN:

BRIGHTON AUTOMOTIVE HOLDINGS PTY LTD (ACN 150 926 480) AS TRUSTEE FOR THE BRIGHTON HONDA UNIT TRUST	Plaintiff
and
HONDA AUSTRALIA PTY LTD (ACN 004 759 611)	Defendant

---

JUDGE:	Matthews J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 November 2024
DATE OF JUDGMENT:	6 December 2024
CASE MAY BE CITED AS:	Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 3)
MEDIUM NEUTRAL CITATION:	[2024] VSC 753

---

CONTRACTS – Dealership agreement repudiated and subsequently terminated prior to conclusion of its term – Damages for breach of contract for loss of profits for remaining contractual period – Liability conceded by defendant – Dispute as to quantum of damages – Findings on key disputed integers in the assessment of damages determined in earlier judgment – Amount of damages to be calculated by experts retained by the parties in accordance with the findings.

CONTRACTS – Finalisation of quantum of damages awarded for breach of contract – Onus of proof when alleging failure to mitigate loss – TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 180 CLR 138.

PRACTICE AND PROCEDURE – Costs – Whether to apportion costs on issues basis – Calderbank offer – Whether unreasonable to have rejected offer – Whether to order indemnity costs for whole proceeding after date of offer – Sedgwick v Varzonek (No 2) [2015] NSWSC 1613 considered – Calderbank v Calderbank [1975] 3 All ER 333; Hazeldene’s Chicken Farm Pty Ltd v Workcover Authority (Vic) (No 2) (2005) 13 VR 435 applied – Chen v Chan [2009] VSCA 233 – Smith v Starke [2016] FCA 40 – McKay v Commissioner of Main Roads (No 7) [2011] WASC 223 (S).

---

APPEARANCES:	Counsel	Solicitors
For Brighton Automotive	Mr N De Young KC and Mr J Claridge of counsel	HWL Ebsworth
For Honda Australia	Mr B McLachlan, Mr C O’Bryan, and Ms M Salinger of counsel	Arnold Bloch Leibler

Contents

A.. Introduction

B.. Quantification of damages for Remaining Contract Period

B.1          Background
B.2          Issue 1: ‘Other expenses’ as fixed or incremental costs
B.2.1        Experts’ evidence
B.2.2        Plaintiff’s submissions
B.2.3        Defendant’s submissions
B.2.4        Consideration

B.3          Issue 2: ‘Other expenses’ (mitigation)
B.3.1        Experts’ evidence
B.3.2        Plaintiff’s submissions
B.3.3        Defendant’s submissions
B.3.4        Consideration

B.4          Issue 3: Rental expenses of the Honda service and parts business
B.4.1        Experts’ evidence
B.4.2        Plaintiff’s submissions
B.4.3        Defendant’s submissions
B.4.4        Consideration

B.5          Issue 4: Fixed expenses of the Honda service and parts business
B.5.1        Experts’ evidence
B.5.2        Plaintiff’s submissions
B.5.3        Defendant’s submissions
B.5.4        Consideration

B.6 Other variances
B.7 Adjustments to damages calculation of the experts

C.. Interest

D.. Costs

D.1         Background
D.2         Plaintiff’s submissions
D.2.1        Multiple issues with partial success
D.2.2        Brighton Automotive’s Calderbank Offer
D.2.3        Brighton Automotive’s preliminary discovery application

D.3         Defendant’s submissions
D.3.1        Multiple issues with partial success
D.3.2        Brighton Automotive’s Calderbank Offer
D.3.3        Brighton Automotive’s preliminary discovery application

D.4         Consideration
D.4.1        Multiple issues with partial success
D.4.2        Brighton Automotive’s Calderbank Offer
D.4.3        Brighton Automotive’s preliminary discovery application

E... Conclusion and disposition

HER HONOUR:

A Introduction

On 24 May 2024, I handed down my judgment in this proceeding.[1] Among other things, I determined that the quantum of the first plaintiff’s (Brighton Automotive) contractual damages is to be assessed by the parties’ respective experts having regard to my findings in the Judgment.
[1]Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2) [2024] VSC 262 (the Judgment).
These reasons concern the quantum which should be ordered, as well as matters such as interest and costs. These reasons assume a degree of familiarity with the Judgment. Capitalised terms in these reasons have the same meaning as in the Judgment, unless otherwise stated.

B Quantification of damages for Remaining Contract Period

B.1 Background

It was common ground that Brighton Automotive was entitled to be compensated for its loss and damage sustained by reason of the breach by the defendant (Honda Australia) of the Dealer Agreement by terminating it before the end of its term. At trial, the parties disagreed as to the amount of loss and damage to which Brighton Automotive was entitled as a result of the breach of contract claim for the Remaining Contract Period. This required, in part, a comparison of what had actually occurred in the Remaining Contract Period with the counterfactual, that being that Honda Australia would not have terminated its dealers prior to the end of their agreements or implemented the Agency Model in July 2021. Instead, Honda Australia would have continued to operate under the Dealership Model until the end of the term of the Dealer Agreement.
As part of the Judgment, I decided disputed integers which were identified by the parties as key to assessing the quantum of Brighton Automotive’s damages for the Remaining Contract Period by comparing Brighton Automotive’s actual position following early termination of the Dealer Agreement with the counterfactual. These were:
(a)the number of new Honda vehicles which Brighton would have sold;
(b)the gross profit which Brighton Automotive would have made on each new Honda vehicle sold;
(c)the lost profits from servicing and parts;
(d)the appropriate date for the assessment of damages; and
(e)mitigation of loss.
I had anticipated that after determining those matters in the Judgment, the damages assessment would be relatively straightforward for the experts, Michael Smith and Dawna Wright,[2] to carry out. As will be seen, the experts were unable to agree on certain matters, which the parties now bring to the Court for determination. None of these particular matters were identified by the parties as requiring my determination at the time of trial.
[2]Mr Smith was the accounting expert retained by Brighton Automotive and Ms Wright was the accounting expert retained by Honda Australia. Both experts had provided individual expert reports which were admitted into evidence. They had also conferred prior to trial and produced a joint report, which was also admitted into evidence. They gave concurrent oral evidence at trial.
On 10 July 2024, I made orders by consent setting out a procedure for the experts to calculate the damages figure for the Remaining Contract Period (the July Orders). The July Orders allowed the experts an opportunity to confer and jointly inform the parties’ solicitors whether the Court’s findings enabled them to calculate the damages for the Remaining Contract Period Claim and, in the event that further instructions were needed, for the parties to provide a joint letter of instructions to the experts.
On 27 June 2024, the parties received a letter from the experts requesting further information and further instructions that they considered necessary to reach agreement in respect of the damages calculation (Experts’ Letter). The Experts’ Letter contained the following distinct items:
(a)Item 1: Regarding the 70% of the total used car business, is it:
1.   70% of all used cars from Honda direct trade ins; or
2.   70% of used car sales in Honda department are Honda direct trade-ins?
(b)Item 2(a): Did termination result in a decrease in Brighton Automotive’s headcount requirements for the following during the Remaining Contract Period:
1.   salaries supervisor;
2.   salaries stock control;
3.   wages detailers; and/or
4.   heat, water & power?
(c)Item 2(b): If yes to 2(a), what are the estimated cost savings associated with the decrease in Brighton Automotive’s other expenses headcount requirement and utilities expenses?
(d)Item 3: What is the extent to which the reduction in new vehicle sales would have resulted in a reduction in the fixed expenses for the Honda business department?
(e)Item 4(a): Were the Bentleigh Premises used by Brighton Automotive prior to termination?
(f)Item 4(b): Were the Bentleigh Premises used by Brighton Automotive following termination and if so what was the Premises used for?
(g)Item 4(c): If no, details of rent paid by Brighton Automotive in relation to the service and parts department at the Bentleigh Premises.
(h)Item 5: Identification of the inputs and calculation steps used to get to the 15.33% figure contained in the Judgment.
(i)Item 6: Experts did not have financial information for the full financial year. Now that they have actual data, should the experts use actual instead of estimated data?
On 5 July 2024, Brighton Automotive’s solicitors prepared and sent a draft joint letter of instruction to Honda Australia’s solicitors for their approval. Honda Australia’s solicitors objected to the draft joint letter of instruction on the principal basis that it contained proposed instructions and factual propositions that were not in evidence.
On 17 July 2024, Brighton Automotive proposed that it file and serve a supplementary affidavit in response to the Experts’ Letter to address Honda Australia’s objection. Honda Australia did not agree with this proposal, arguing that this would constitute a re-opening of Brighton Automotive’s case and require in turn that Honda Australia be given an opportunity to put on responsive evidence.
On 25 July 2024, Honda Australia contacted my Chambers seeking directions regarding a response to the Experts’ Letter. The matter was subsequently listed for directions on 30 August 2024. Both parties filed written submissions in advance of the hearing.
Following the directions hearing on 30 August 2024, I made orders that, inter alia:
1. By 4.00pm on 18 October 2024, the parties file a joint expert report setting out the experts’ calculation of the damages for the Remaining Contract Period Claim (the Damages Calculation). For the avoidance of doubt, the experts are to prepare the joint report on the basis of the conclusions set out at [220] of Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2) [2024] VSC 262. The experts are not to be provided with further instructions, other than a response to paragraphs 1, 5 and 6 of the Information Request. To the extent the experts disagree on the Damages Calculation they are to identify any areas of disagreement in the joint report, each expert’s preferred approach in relation to that area of disagreement, and each expert’s reasons for their preferred approach.
In the course of reviewing the Experts’ Letter, I identified a clerical mistake or accidental slip in the Judgment. On this basis, I also ordered that, pursuant to r 36.07 of the Supreme Court (General Civil Procedure) Rules 2015, paragraph 220(a) of the Judgment be amended by deleting the words: ‘The sales volumes that Brighton Automotive would likely have achieved in the counterfactual should be calculated using the method outlined at paragraph 157 above’, and replacing them with the words: ‘The sales volumes that Brighton Automotive would likely have achieved in the counterfactual are set out in the table at paragraph 158 above’. This dealt with item 5 of the Experts’ Letter.
On 31 October 2024, Brighton Automotive filed the Further Joint Report, in which the experts have each undertaken a calculation of Brighton Automotive’s damages for the Remaining Contract Period Claim. Mr Smith calculates Brighton Automotive’s loss at $13,928,657. Ms Wright calculates the loss at $12,160,299.
The difference between the experts’ calculations turns on their different treatment of four issues:
(a)Issue 1: treatment of ‘other expenses’ in respect of the Honda Business and whether they are incremental costs.
(b)Issue 2: treatment of ‘other expenses’ in respect of the Nissan Business and whether they are incremental costs.
(c)Issue 3: whether rent expenses for the service and parts department is incremental.
(d)Issue 4: treatment of ‘fixed expenses’ in Honda business service and parts department.
Pursuant to my orders made 30 August 2024, the parties each filed written submissions addressing the difference between the experts as to the quantification of Brighton Automotive’s damages, and the approach that should be adopted by the Court. The parties also made submissions on interest on the damages calculation and on legal costs, including the possible effect of a Calderbank offer made by Brighton Automotive to Honda Australia on 14 February 2024. Counsel for both parties also made oral submissions at the hearing for the making of orders held on 12 November 2024 (November Hearing).

B.2 Issue 1: ‘Other expenses’ as fixed or incremental costs

B.2.1 Experts’ evidence

Mr Smith was advised that ‘expenses split across multiple brands and not variable to Honda revenue would be Salaries Stock Control, Rent, Heat Water and Power and the portion of administration expenses allocated to this department historically’. Based on these instructions, Mr Smith classified the expenses ‘[h]eat, water & power’ (the utilities expenses), ‘salaries supervisor’, ‘salaries stock control’ and ‘wages detailers’ (the salary expenses) as ‘Other Expenses’, which would continue to be incurred by the overall business at ‘fixed’ levels, whether the Brighton Honda business was operating or not. According to Mr Smith, as it is an accounting allocation of expenses, and is not variable to the Honda brand, it should not be included in the assessment of loss.
In Ms Wright’s opinion, the expenses classified by Mr Smith as ‘other expenses’ are costs that would have been expected to reduce upon the termination of the Honda business, and therefore should not be treated as fixed costs that are the same before and after the Termination Date. As such, Ms Wright’s loss calculation treats the utilities expenses and salary expenses as variable (incremental) costs, which reduced by $1,240,104 upon termination of the Honda business.

B.2.2 Plaintiff’s submissions

Brighton Automotive submits that the instructions relied upon by Mr Smith are supported by the unchallenged evidence of Mr Avis that ‘[a]fter the termination of the dealer agreement, there were multiple expenses attributed to the Honda dealership (across all of its departments generally) that Astoria Brighton continues to incur notwithstanding the termination of the Astoria Brighton Dealer Agreement with Honda Australia …’.[3] On that basis, Mr Smith assumes that the utilities expenses and the salary expenses are fixed.
[3]First Avis Statement, [100].
Brighton Automotive submits that:
(a)it is not in dispute that the relevant expenses would have been incurred in the counterfactual scenario (in which Honda Australia did not terminate the contract with Brighton Automotive and instead continued to operate a dealership network for the Remaining Contract Period) because they were costs associated with running the Honda business; but
(b)the dispute between the experts concerns Brighton Automotive’s expenses in the actual scenario not the counterfactual scenario.
Brighton Automotive submits that Ms Wright’s approach should be rejected because:
(a)the question before the Court is not one of opinion, as Ms Wright offers when she says that she ‘would expect’ the relevant expenses to reduce, but one of fact — namely, whether the relevant expenses were incurred in the actual scenario in respect of the Honda business;
(b)it is inconsistent with the unchallenged evidence of Mr Avis and none of Ms Wright’s propositions on this topic were put to Mr Avis at trial, which invokes the rule in Browne v Dunn;[4] and
(c)it is inconsistent with the expenses recorded in Brighton Automotive’s management accounts, evidence that was also not challenged at trial.
[4](1893) 6 R 67.
Brighton Automotive submits that Mr Avis gave evidence that in the wake of Honda Australia’s termination, Brighton Automotive did not terminate the employment of any of its staff, as the business was committed to looking after its staff and their families. As a consequence, Brighton Automotive’s expenses went up in relation to its revenue.
In response to Honda Australia’s submission that the costs related to issue 1 reflect a failure by Brighton Automotive to mitigate its losses, Brighton Automotive submits that where it is contended by the defendant that the plaintiff should have taken steps to mitigate its loss, the onus of proof is on the defendant to prove that contention.[5] Furthermore, there is no evidence that Brighton Automotive’s management accounts do not fairly represent its financial position in respect of its Honda business. Brighton Automotive submits that Mr Avis gave unchallenged evidence that external accountants were consulted on how best to allocate overheads, and a decision was made to allocate them based on revenue.
[5]TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 180 CLR, 138.

B.2.3 Defendant’s submissions

Honda Australia submits that the answers to issues 1 and 2 should ultimately turn on what loss is properly attributable to Honda Australia’s breach. Honda Australia does not claim that Brighton Automotive’s management accounts are incorrect, but instead submits that the loss properly attributable to the breach may be different from what is recorded therein. In this regard, Honda Australia draws a distinction between accounting records and legal loss, and submits that it is for this reason that Honda Australia did not need to challenge Brighton Automotive’s witnesses on the topic. Honda Australia largely accepts that the management accounts are accurate, but disputes that they were reasonable or that they should form the basis of the loss calculations.
Honda Australia submits that Mr Smith’s approach is not supported by lay evidence and lacks ‘intuitive appeal’. Mr Smith proceeded, as instructed, on the basis that these ‘other expenses’ would have been incurred at the same rate regardless of whether the Dealer Agreement was terminated. However, that instruction was not supported by lay evidence. This is despite Brighton Automotive having had the opportunity to put on supporting lay evidence after Ms Wright first questioned the correctness of this instruction in her initial expert report filed on 6 October 2023, and Brighton Automotive having filed a supplementary witness statement from Mr Avis after this point on 14 November 2023.
Honda Australia submits that, by contrast, Ms Wright’s approach has intuitive appeal. It is to be expected that utilities expenses would have reduced following termination of the Dealer Agreement because the Honda showroom was vacant until the Nissan business was acquired in July 2022. Similarly, once Brighton Automotive stopped operating as an authorised Honda dealer, it would be expected that it would require fewer staff.
At the hearing, counsel for Honda Australia made the following submission on the topic of staffing levels:
And in Honda’s submission, Your Honour, keeping staff on at an increased cost … is admirable, of course. But Honda shouldn’t be made to foot the bill for that decision. Mr Avis’s own evidence makes clear that he made the decision to keep staff on, and absorb the extra expense of doing so, …. So, this was not a commercial decision.
Honda accepts it is liable for the loss caused by its breach, but it is not liable for additional expenses Mr Avis chose to continue to incur. These increased staffing costs are properly characterised as a failure to mitigate Astoria’s loss. And so it follows in Honda’s submission that Ms Wright is and was correct to proceed on the footing that it would be expected that Astoria would reduce its staffing costs following termination of the dealership agreement, and was therefore correct to treat this as an incremental expense.

B.2.4 Consideration

For an expense to be considered part of Brighton Automotive’s loss, the expense needs to have been incurred by Brighton Automotive in the actual scenario rather than just the ‘but-for’ counterfactual scenario. This is true of all four issues of dispute between the experts.
In the counterfactual, Honda Australia would not have terminated the Dealer Agreement, and Brighton Automotive would have continued to incur operational expenses largely consistent with those incurred up until the Termination Date. However, only expenses incurred by Brighton Automotive in the actual scenario can be considered to have resulted from Honda Australia’s termination, and therefore form part of Brighton Automotive’s loss.
Brighton Automotive submits that the question of whether certain expenses were incurred in the actual scenario is one of fact, rather than one of expectation or opinion. However, I have difficulty accepting this submission. The fact that an expense is recorded in the company’s management accounts does not mean that it was reasonably incurred for the purpose of a damages assessment. Brighton Automotive has an obligation to mitigate its loss.
That being said, Brighton Automotive is right when it says that if Honda Australia wishes to contend that Brighton Automotive should have taken steps to mitigate its loss, the onus lies with Honda Australia to prove that contention.
The only evidence available to me that is capable of informing the answer to issue 1 are the witness statements and oral evidence of Mr Avis, along with the management accounts contained in the Court Book. None of Mr Avis’s evidence relating to the utilities expenses or salary expenses was challenged at trial. Furthermore, Honda Australia did not adduce any evidence of its own to challenge the accuracy or reasonableness of the management accounts. As such, the Court has no way of discerning what a reasonable reduction in Brighton Automotive’s overheads ought to have been.
At the hearing, I questioned counsel for Honda Australia on the topic of the utilities expenses. To my mind, Ms Wright’s expectation that the relevant expenses would reduce following termination would be based not only on the Honda showroom being vacant until the acquisition of the Nissan business, but also on those expenses not being incurred during the relevant period. Counsel agreed with me on this point. However, the evidence is that those costs were in fact incurred. Furthermore, if the utilities expenses were not separately charged — ie, if Brighton Automotive could not have simply isolated the showroom for the purpose of switching off the heat, water or power — then presumably those expenses would continue to be incurred even once the showroom became vacant. Counsel for Honda Australia conceded that there was nothing in the evidence to indicate otherwise, but submitted that the Court should infer as a matter of logic that if the showroom is empty, it would be expected that Brighton Automotive’s overall utilities bill would decrease for that period.
I do not accept this submission. In order for the utilities expenses to reduce while the Honda showroom was no longer in use, the showroom would need to be easily separable from the rest of the premises. There is no evidence before me as to the design or physical layout of the premises within which the Honda showroom was situated, nor is there evidence of how the heating or other utilities could be switched off or isolated. In the absence of any such evidence, I am left with the management accounts of Brighton Automotive, which record that these expenses were incurred, as well as a reasonable explanation as to why these expenses continued to be incurred even after termination of the Honda business. As such, I do not consider it appropriate to reduce Mr Smith’s calculation of loss for utilities expenses.
Honda Australia submits that the loss recorded in the management accounts may differ from what could be properly classified as Brighton Automotive’s legal loss. It suggests that Mr Smith’s approach lacks ‘intuitive appeal’ in that it fails to recognise that the utilities expenses and salary expenses would reduce with the termination of the Honda business. The showroom is empty and the same amount of staff is no longer needed. I do not agree with these submissions in relation to the utilities expenses for the reasons I have already given. However, I do consider that they have merit in relation to the salary expenses.
Mr Avis’s evidence is that he did not reduce Brighton Automotive’s staffing levels after termination of the Honda business because he wanted to look out for his people and their families. This is undoubtedly a laudable thing for Mr Avis to have done. However, I question whether the resulting cost is one that Honda Australia should have to bear. I accept Honda Australia’s submission that this was not a commercial decision. It was instead a decision driven by Mr Avis’s loyalty to his staff. There is no evidence to suggest by how much Brighton Automotive’s staffing levels ought to have been reduced. As already noted, the onus was on Honda Australia to adduce evidence as to what reasonable staffing levels would have been. However, in my view, some adjustment for salary expenses ought be made as I consider it reasonable that the damages calculation for which Honda Australia is liable should be partially reduced. It is reasonable and logical to infer that reasonable mitigation of loss by Brighton Automotive would involve reduction in staffing levels to some degree. It is necessary for me to address issue 2 before dealing with the amount of that reduction.

B.3 Issue 2: ‘Other expenses’ (mitigation)

B.3.1 Experts’ evidence

Mr Smith’s response regarding issue 2 is the same as his response for issue 1.
In Ms Wright’s opinion, the costs described under issue 1 are costs that would have been expected to increase upon Brighton Automotive’s acquisition of the Nissan business, and therefore should have been treated as incremental costs. As such, Ms Wright’s loss calculation treats the utilities expenses and the salary expenses as variable (incremental) costs, which increased by $214,431 when the Nissan business was acquired. Ms Wright adds this amount to the damages calculation.

B.3.2 Plaintiff’s submissions

Brighton Automotive submits that issues 1 and 2 are ‘flip sides of the same coin’. Mr Smith makes no adjustment for the effect of increased costs after the commencement of the Nissan business because he has not reduced Brighton Automotive’s loss under issue 1 in the first place. Mr Smith instead relies on the management accounts and the evidence of Mr Avis.

B.3.3 Defendant’s submissions

As outlined earlier, Ms Wright assumes that the utilities expenses and salary expenses would reduce following termination of the Dealer Agreement but would then increase again when Brighton Automotive acquired the Nissan franchise. Honda Australia submits that even though Ms Wright’s approach to issue 2 increases the loss payable to Brighton Automotive, and is therefore contrary to Honda Australia’s own interests, it is nevertheless the more principled approach and is to be preferred.

B.3.4 Consideration

I accept the submission that issue 2 is the flip side of issue 1. As a matter of principle they have to go together. Given that I have concluded that no adjustment is required to account for the utilities expenses under issue 1, I therefore do not consider it necessary for an adjustment to be made to account for those expenses under issue 2.
Given that I consider there should be some adjustment for salary expenses in issue 1, it follows that there should be some adjustment for salary expenses in issue 2. These adjustments are dealt with below, in section B.7 of these reasons.

B.4 Issue 3: Rental expenses of the Honda service and parts business

B.4.1 Experts’ evidence

Mr Avis’s evidence is that in July 2022 the Honda service and parts business was moved from 961 North Road, Bentleigh East (the Tovan Akas Premises) to 956–958 North Road, Bentleigh East (the Bentleigh Premises). This was done to enable the opening of the Nissan service and parts business at the Tovan Akas Premises as part of Brighton Automotive’s attempt to mitigate the loss caused by Honda Australia’s termination. According to Mr Smith, this resulted in Brighton Automotive incurring a further expense in the form of the rent payable at the Bentleigh Premises in FY2023. He includes this expense in his damages calculation.
In Ms Wright’s opinion, the rent on the Bentleigh Premises in FY2023 was not an incremental cost, but rather should be treated as a fixed cost that would have been the same before and after the Termination Date. Prior to termination, there were two service departments in two different locations: the Tovan Akas Premises, which was the service department of the pre-amalgamation Brighton Honda; and the Bentleigh Premises, which was the service and parts business of Astoria Bentleigh. Following the relocation in July 2022 of the Honda service and parts business to the Bentleigh Premises, the Tovan Akas Premises was still used by Brighton Automotive for the servicing department of its newly acquired Nissan business. According to Ms Wright, rent was incurred at each location both before and after the Termination Date, and should therefore be treated as a fixed cost rather than an incremental cost.
In Ms Wright’s opinion:
(a)Mr Smith has not established that the rent shown in the profit and loss statement of the Honda business in FY2023 represents an actual cash outflow, rather than an inter-company accounting allocation entry only;
(b)the loss calculation should not be artificially increased by the rent expense that has been allocated to the Honda business, in circumstances where there would be a corresponding ‘benefit’ to Astoria Bentleigh; and
(c)consideration of the ‘overall picture’ reveals that in the actual and but-for scenarios, the same rent is paid in respect of both premises.
On this basis, Ms Wright is of the view that Mr Smith’s loss calculation should be reduced by $112,896.

B.4.2 Plaintiff’s submissions

Brighton Automotive submits that Mr Smith’s approach of treating the rent paid for the Bentleigh Premises after July 2022 as an incremental cost that was incurred by Brighton Automotive because of the termination is to be preferred because:
(a)the question before the Court is a factual one relating to the actual scenario not the but-for counterfactual scenario; and
(b)it reflects the expenses recorded in Brighton Automotive’s management accounts, the accuracy of which was not challenged at trial.
Brighton Automotive submits that Ms Wright’s approach to this issue should be rejected, because it:
(a)makes several criticisms of the approach taken by Mr Smith which are unsupported by the evidence;
(b)impermissibly conflates Brighton Automotive and Astoria Bentleigh; and
(c)erroneously describes the rental expenses of the Honda service and parts business as involving ‘an intercompany accounting allocation only’ where there is corresponding ‘benefit’ to Astoria Bentleigh.
Brighton Automotive submits that the task is to quantify the damages of Brighton Automotive, and that Astoria Bentleigh is a separate company that had a separate claim against Honda Australia, which was resolved prior to trial. The fact that Astoria Bentleigh (and not Brighton Automotive) paid rent in respect of the Bentleigh Premises prior to FY2023 is irrelevant to the quantification of Brighton Automotive’s damages during the Remaining Contract Period.

B.4.3 Defendant’s submissions

Honda Australia submits that Brighton Automotive bears the onus of proving the extent of its loss, but has failed to adduce critical evidence in relation to the operation of its Honda service and parts business. Therefore, there is no proper basis for Mr Smith’s approach to issues 3 and 4. As Ms Wright explains, rent was incurred for the Bentleigh Premises both before and after termination of the Dealer Agreement, and the experts have not been provided with any information to suggest that the rent now incurred by Brighton Automotive should be treated as an actual cash outflow rather than an inter-company accounting allocation.
Honda Australia repeats its submission that it did not need to challenge Brighton Automotive’s witnesses, per the rule in Browne v Dunn, on the accuracy of its management accounts, because it does not seek to impugn those accounts. Instead, Honda Australia draws a distinction between the entries contained therein, and what should be classified as Brighton Automotive’s legal loss.
Honda Australia submits that Ms Wright’s approach of considering the overall picture is to be preferred, particularly in circumstances where the use of the Bentleigh Premises, and the rent paid for those premises from 1 July 2022 to 30 June 2023:
(a)was not a matter in dispute between the experts at trial;
(b)has only been raised by Mr Smith as an issue at this late stage without the benefit of lay evidence directed to this issue; and
(c)was not a matter the parties were able to test by cross-examination.

B.4.4 Consideration

I consider the answer to issue 3 to be relatively straightforward. The expenses that ought be included in the calculation of Brighton Automotive’s loss are those that were incurred in the actual scenario as a result of Honda Australia’s termination.
Roughly 18 months after Honda Australia terminated the Dealer Agreement, Brighton Automotive sought to mitigate its loss resulting from that termination by purchasing the Nissan business. However, because Brighton Automotive was still operating its Honda service and parts business, it needed to find space for both businesses. It resolved this problem by moving the Honda service and parts business from the Tovan Akas Premises to the Bentleigh Premises to make space for the Nissan business at the Tovan Akas Premises. This was a perfectly reasonable business decision to make, and I do not believe that Honda Australia says otherwise. However, as a consequence of operating the Honda service and parts business from the Bentleigh Premises (while still paying rent for the Tovan Akas Premises), Brighton Automotive incurred additional rental expenses. To my mind, this is a predictable consequence of Brighton Automotive’s acquisition of the Nissan business.
Ms Wright is of the opinion that because the Astoria Bentleigh service and parts department was already operating out of the Bentleigh Premises, Mr Smith’s loss calculation should be reduced. This is said to be the case because the loss calculation has been ‘artificially increased’ by Brighton Automotive paying rental expenses in circumstances where Astoria Bentleigh is receiving a corresponding ‘benefit’. Brighton Automotive submits that Ms Wright’s approach impermissibly conflates Brighton Automotive and Astoria Bentleigh. I accept this submission. Brighton Automotive and Astoria Bentleigh are separate companies. Yes, Astoria Bentleigh forms part of a group of companies with shared leadership, and was one of three plaintiffs when this proceeding was commenced. However, Astoria Bentleigh ceased being a party to the proceeding in May 2023 when its claim against Honda Australia was resolved and dismissed. As such, any potential benefit conferred on Astoria Bentleigh via Brighton Automotive paying rent at the Bentleigh Premises is not a valid consideration for the purpose of a loss calculation in respect of Brighton Automotive. I reject the submission that a consideration of the overall picture is to be preferred in these circumstances.
Honda Australia submits that Brighton Automotive bears the onus of proving the extent of its loss, but has failed to adduce critical evidence in relation to the operation of its Honda service and parts business. It is submitted that, in particular, Brighton Automotive has not adduced any evidence as to how space is used or apportioned between the businesses operating out of the Bentleigh Premises. To my mind, this lack of evidence actually works against Honda Australia. Honda Australia concedes that there is no clear evidence on the question of how rental expenses at the Bentleigh Premsises were shared (or not shared) between Brighton Automotive and Astoria Bentleigh after July 2022. Nor is there evidence of any agreement between those two entities relating to the use of the space.
What is in evidence are the management accounts, which show that Brighton Automotive incurred the additional rental expense as a result of relocating the Honda service and parts business. Honda Australia submits that there is no evidence to show that these expenses are an actual cash outflow. But, likewise, there is no evidence to show that the rental expenses were an inter-company allocation as Ms Wright appears to suggest. In the absence of any evidence to the contrary, I am content to rely on management accounts as evidence of the rental expenses incurred by Brighton Automotive. In any event, Honda Australia was not able to point to any authorities indicating that there had to be an actual cash outflow for the purposes of the instant calculation.
I reject Honda Australia’s submission summarised at paragraph 51 above.
For the reasons given above, I do not consider it appropriate to make an adjustment to Mr Smith’s loss calculation for the rental expenses of the Honda service and parts business after July 2022.

B.5 Issue 4: Fixed expenses of the Honda service and parts business

B.5.1 Experts’ evidence

As noted under issue 3, in July 2022 the Honda service and parts business was moved from the Tovan Akas Premises to the Bentleigh Premises. In his assessment of Brighton Automotive’s loss, Mr Smith has included the actual fixed expenses of the Honda service and parts business in FY2023 as an actual cost required to operate the department. In Mr Smith’s opinion, given the scale of the pre-existing and lost service and parts business, the operational costs of the Honda service and parts business could not simply be absorbed into the Bentleigh Premises with all pre-existing fixed costs eliminated. As such, Mr Smith has included an amount of $621,778 in his loss calculation over and above the fixed costs that were already being incurred at the Bentleigh Premises.
In Ms Wright’s view, because the Honda services and parts business was merged with an existing business at the Bentleigh Premises, no additional fixed costs were incurred by Brighton Automotive as those costs were already being incurred for the existing service and parts business operated at the Bentleigh Premises.
Ms Wright notes that the fixed costs in relation to issue 4 mainly relate to staff wages and salaries. On the evidence of Mr Avis, staff levels were not reduced following Honda’s termination, at an increased cost to the business rather than reduce its costs in response to the decline in sales. Therefore, to the extent fixed costs actually increased after the Honda business moved its service and parts department to the Bentleigh Premises, then in Ms Wright’s view this was due to Brighton Automotive’s choice rather than being representative of the costs that were actually required to operate the business.
Similar to issue 3, in Ms Wright’s opinion:
(a)Mr Smith has not established that the fixed costs shown in the profit and loss statement of the Honda business in FY2023 represent an actual cash outflow, rather than an inter-company accounting allocation entry only;
(b)the loss calculation should not be artificially increased by any fixed expenses that have been allocated to the Honda business, in circumstances where there would be a corresponding ‘benefit’ to Astoria Bentleigh; and
(c)consideration of the ‘overall picture’ reveals that fixed costs were already being incurred in respect of the Bentleigh Premises prior to July 2022, and therefore no additional fixed costs should be accounted for when the Honda business was merged into the Bentleigh Premises, regardless of which related entity paid these fixed costs.

On this basis, Ms Wright is of the view that Mr Smith’s loss calculation should be reduced by $621,778.
In Ms Wright’s view, Mr Smith has not established that the fixed costs shown in the profit and loss statement of the Honda business in FY2023 represent an actual cash outflow, rather than an inter-company accounting allocation entry only.

B.5.2 Plaintiff’s submissions

Brighton Automotive submits that Mr Smith’s approach of including fixed expenses in respect of Brighton Automotive’s service and parts department for FY2023 is to be preferred. Brighton Automotive submits that Ms Wright’s approach assumes that Brighton Automotive’s fixed costs in connection with the relocation of its Honda service and parts business were in fact lower than recorded in the management accounts, an approach that involves an unfounded attack on the accuracy of Brighton Automotive’s management accounts. Honda Australia did not cross-examine Mr Avis or Mr Klein on this matter, and there is no basis to find that Brighton Automotive’s management accounts are not accurate in this regard.
Brighton Automotive submits that even if the expense of operating the Honda service and parts business was an inter-company allocation, it would still classify as an expense of Brighton Automotive.

B.5.3 Defendant’s submissions

Honda Australia submits that issue 4 raises two sub-issues (emphasis added be me):
(a)the treatment of certain ‘fixed expenses’ in the Honda business service department, which accounts for $547,893 of the difference between the experts; and
(b)the treatment of those expenses in the Honda business parts department, which accounts for $73,885 of the difference between the experts.
Whereas Mr Smith treats these expenses as fixed, Ms Wright considers that it is not appropriate to account for them in the actual scenario. Honda Australia submits that because the service and parts department was merged into an existing business at the Bentleigh Premises, the fixed costs that were previously referable to operating the service and parts department separately at the Tovan Akas Premises were no longer incurred. Ms Wright is correct to question whether this amount is an actual cashflow, given that Astoria Bentleigh was already operating from that premises.
Honda Australia submits that Mr Smith’s opinion turns on the fact that certain fixed expenses continued to be recorded in the management accounts post-termination. However, there is no evidence about how the relevant expenses were allocated between Brighton Automotive and Astoria Bentleigh. There are only Brighton Automotive’s management accounts, and the entries contained therein. Honda Australia submits that, therefore, Ms Wright’s opinion is to be preferred because the experts do not have a basis to conclude that those amounts included in the profit and loss statements reflect an actual cashflow, rather than only an inter-company accounting allocation entry. Ms Wright does not accept that simply because something is recorded in Brighton Automotive’s management accounts, that it is therefore an expense which should be taken into account in the legal calculation of loss.

B.5.4 Consideration

In regard to the fixed expenses of the Honda service and parts business, I believe that Ms Wright has made the same error as she did under issue 3 by conflating Brighton Automotive with Astoria Bentleigh. As I have concluded above, these are two separate companies and, in the absence of evidence to the contrary, expenses incurred by Brighton Automotive as a result of Honda Australia’s termination of the Dealer Agreement must be accounted for in the loss calculation. There is no evidence of these expenses being an inter-company accounting allocation, and it is irrelevant that Astoria Bentleigh may have benefited from Brighton Automotive taking on some of the costs associated with operating a business from the Bentleigh Premises.
Furthermore, I do not consider Ms Wright’s approach to issues 1 and 4 to be logically consistent. Ms Wright says that Brighton Automotive’s expenses under issue 1 were variable and would be expected to go down after termination of the Honda business. However, Ms Wright goes on to say that expenses at the Bentleigh Premises were fixed and would not have increased despite the addition of the Honda service and parts business. With all due respect to Ms Wright, Honda Australia cannot have it both ways. Either the gain or loss of a business department has an effect on company overheads, or it does not.
I note Ms Wright’s observation that the fixed costs in relation to issue 4 relate mainly to staff wages and salaries. If Mr Avis’s evidence is that Brighton Automotive kept on all of its staff in the wake of Honda Australia’s termination then it might be expected that the company retained enough staff to operate the Honda service and parts business. However, as I intend to make an adjustment under issues 1 and 2 to account for the expected drop in staffing levels, I do not find it necessary to make a second adjustment under issue 4.

B.6 Other variances

As a result of minor differences in the approaches taken by each of the experts to assess loss, in addition to the above identified issues there is a net $8,011 variance between the experts’ assessment of loss. The experts believe the remaining differences are both minor and immaterial. Each of the differences have been reviewed by the experts. However, as at the date of their report they remain unresolved. The parties were both content for the Court to disregard this issue. Accordingly, I make no adjustment for it.

B.7 Adjustments to damages calculation of the experts

It follows from the above that there is some adjustment to be made for issues 1 and 2, but not in the amounts calculated by Ms Wright, and that there is to be no adjustment for issues 3 and 4, or for other variances.
As noted above, Ms Wright’s approach would result in a reduction in Mr Smith’s calculation of damages by $1,240,104 for issue 1, and an increase to Mr Smith’s calculation of damages by $214,431. The net effect of Ms Wright’s approach to issues 1 and 2 would be a reduction in Mr Smith’s damages calculation of $1,025,673.
For the reasons set out above, this net figure requires a series of adjustments.
First, only the amounts referable to wages need be taken into account, as I have determined not to make any adjustment for the utilities expenses.
Second, Annexure A of the Further Joint Report, which contains Ms Wright’s calculations for issue 1, includes amounts for utilities and salaries for FY2024, FY2025 and FY2026 for the new cars department. There is no explanation in the Further Joint Report as to why these figures were included for those years. It is not apparent to me why they have been included, and it appears inconsistent with the Judgment for them to be included, since I did not find that loss associated with the new cars department after FY2023 should be included. I asked a question about this at the November Hearing. Counsel for Honda Australia informed the Court that they were not in a position to assist me in that regard, as they had no instructions which would be able to answer the question. In my view, the amounts for FY2024, FY2025 and FY2026 should be excluded from the calculation of Brighton Automotive’s loss.
With those two adjustments, the net adjusted amount for issues 1 and 2 following Ms Wright’s approach would be $838,951.[6]
[6]This is obtained by adding up the salary components for Feb-21 to Jun-21, FY2022 and FY2023 in Annexure A ‘But-For Scenario’ (being $1,305,081), deducting from that the salary components for the same period in Annexure A ‘Actual Scenario’ (being $274,526), which gives $1,030,555. From that, the salary components in Annexure B (which contains calculations for the Nissan business in the ‘Actual Scenario’) of $191,604 are deducted, to give a net figure of $838,951 for issues 1 and 2.
However, that is not the end of the matter. For the reasons set out above, I have concluded that it is appropriate to make a further adjustment. As there is no evidence as to what reasonable mitigation would have involved in terms of reduced staffing, the best that I can do is make what I consider to be a fair allowance for this. I do not consider it reasonable that Honda Australia be liable for the full amount calculated by Mr Smith, and so I have decided to make an adjustment to Mr Smith’s damages figure by reducing it by $251,685. This is 30% of the net adjusted amount for issues 1 and 2 using Ms Wright’s approach. The onus was on Honda Australia to adduce evidence as to what it alleges was a failure to mitigate. That Honda Australia did not do so means that the allowance I make for that failure should be a modest one.
Accordingly, the amount which Honda Australia will be ordered to pay in damages to Brighton Automotive will be $13,676,972.

C Interest

The parties agree that there is no good cause to depart from the current penalty interest rate of 10% per annum, and that this should be applied to Brighton Automotive’s damages from the commencement of the proceeding — that being 15 March 2022 — to the date of judgment. I also see no good cause to depart from the usual position so far as interest on damages is concerned.

D Costs

D.1 Background

Brighton Automotive seeks orders that Honda Australia pay its costs of the proceedings on a standard basis up to and including 14 February 2024 and thereafter on an indemnity basis. Brighton Australia’s position is that it succeeded at trial, so it should have its costs. It seeks indemnity costs from 15 February 2024 on the basis of a settlement offer it made to Honda Australia which was not accepted.
Honda Australia concedes that it ought be ordered to pay Brighton Automotive’s costs of part of the proceedings, being those relating to the calculation of the contractual damages claim. It resists that any of these should be payable on an indemnity basis. Honda Australia contends that Brighton Automotive should pay its costs of its unsuccessful claims, including the costs relating to providing preliminary discovery pursuant to orders made in October 2021.
There were four claims by Brighton Automotive that were the subject of the trial. These were:
(a)the Remaining Contract Period Claim. In respect of this claim, Honda Australia had conceded liability from the outset and what was in dispute was the quantification of that claim;
(b)the Further Contract Period Claim;
(c)the MDC Claim; and
(d)the UC Claim.
Following trial and for the reasons set out in the Judgment, I rejected Brighton Automotive’s Further Contract Period Claim, MDC Claim and UC Claim (together, the Unsuccessful Claims).

D.2 Plaintiff’s submissions

Brighton Automotive submits that the general rule is that costs should follow the event, but that it is necessary to determine the relevant ‘event’ in a case involving multiple issues. Such a determination is not limited to consideration of the event in a technical pleading sense. Rather, it involves a ‘broad brush’ approach.[7]
[7]Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425, [24]–[25].
The English Court of Appeal in Roache v News Group Newspapers,[8] as cited by the Queensland Court of Appeal in Timms v Clift,[9] usefully posed the question as to who is to be seen as the successful party ‘in the event’ as being a question as to:
… who, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?
[8][1992] TLR 551.
[9][1998] 2 Qd R 100, 107.
Brighton Automotive submits that the Court should ordinarily award the costs of the proceedings to a successful party without attempting to differentiate between the issues on which the party succeeded and any issues on which the party failed.[10] Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim or argument.[11]
[10]Waters v PC Henderson (Aust) Pty Ltd (1994) 254 ALR 328 (Waters), 330–331.
[11]Oshlack v Richmond River Council (1998) 193 CLR 72, 97–8; David Weiping Chen v Kim Man Chan (No 2) [2009] VSCA 233 (Chen v Chan), [10]; Paragreen v Lim Group Holdings (No 2) [2020] VSCA 97, [5].
Brighton Automotive submits that, as a matter of commercial substance and reality, the relevant ‘event’ in this proceeding is its successful claim for damages. According to the opinions expressed by the experts in the Further Joint Report, Brighton Automotive is entitled to damages of between $12,160,299 and $13,928,657, which Brighton Automotive submits is $10 million more than the position expressed by Honda Australia in its opening submissions at trial.
Brighton Automotive submits that it was successful in respect of the ‘main’ or ‘key’ issues for determination in the proceeding on quantification of damages, those being:
(a)the volume of new Honda vehicles Brighton Automotive would have sold during the Remaining Contract Period;
(b)the gross profit which Brighton Automotive would have made on each new Honda vehicle sold; and
(c)Brighton Automotive’s mitigation of its loss.
As such, Brighton Automotive submits that it has succeeded in fighting to ‘win’ the ‘prize’ which had been denied by Honda Australia, and therefore costs should follow accordingly.

D.2.1 Multiple issues with partial success

Brighton Automotive submits that the usual circumstance in which a court will deprive the successful party of the costs relating to an issue on which the successful party lost is when that issue is clearly dominant or separable.[12] Where a Court determines to make an order apportioning costs, then it does so primarily as ‘a matter of impression and evaluation’,[13] rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.[14]
[12]Monie v Commonwealth (No 2) [2008] NSWCA 15, [64]; Waters, 330–331; Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219, [17].
[13]Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5].
[14]Chen v Chan, [10].
Brighton Automotive submits that while its Further Contract Period Claim, MDC Claim and UC Claim were unsuccessful, the Court should not differentiate them for the purposes of the general rule that costs should follow the event for the following two reasons. First, Brighton Automotive has still won the ‘prize’ in this litigation in the form of an award for damages which far exceeds Honda Australia’s position. Second, the Unsuccessful Claims were not ‘clearly dominant or separable’ from the successful damages claim.
Brighton Automotive also makes the following further submissions in relation to the Unsuccessful Claims:
(a)The evidence relevant to the Unsuccessful Claims was also relevant to the quantification of Brighton Automotive’s Remaining Contract Period Claim. For example, the witness statements of Carolyn McMahon and Stephen Collins exhibited numerous internal Honda documents evidencing the link between reductions in Honda Australia’s annual sales targets and the introduction of the Agency Model. Those documents were relevant to the question of Brighton Automotive’s likely volume of new car sales in the counterfactual and to the Unsuccessful Claims.
(b)The Unsuccessful Claims were relatively minor in the context of the overall dispute. The majority of the evidence and submissions of the parties in the proceeding were directed to the central issue of Brighton Automotive’s Remaining Contract Period Claim. The Unsuccessful Claims were addressed much more briefly, reflecting their relative lack of importance in the proceeding.
In support of its written submissions in respect of costs, Brighton Automotive filed an affidavit of Nicholas Mark Holt dated 7 November 2024 (Holt Affidavit). The Holt Affidavit contains an analysis that seeks to delineate between the legal costs incurred by the parties in relation to the successful contract damages claim and those incurred in relation to the Unsuccessful Claims, based on the time spent by the parties on each claim (Claims Analysis).
The Claims Analysis involves comparing the number of words relating to the successful damages claim against the total number of words in the parties’ written opening and closing submissions, the parties’ respective expert reports, the parties’ respective witness statements, the experts’ joint report, and the transcript from each day of trial.
According to Mr Holt, the Claims Analysis demonstrates that 65% of the time taken in this proceeding related to Brighton Automotive’s successful contract damages claim. In inviting me to adopt a ‘broad brush’ approach, Brighton Automotive submits that I am entitled to take into account my ‘intuitive feel’ about the proceeding, having run the trial, seen the issues, the evidence, and the written submissions. In this regard, the Holt Affidavit and the Claims Analysis contained within was intended to guide that process.

D.2.2 Brighton Automotive’s Calderbank Offer

Brighton Automotive relies on a letter dated 14 February 2024 from its solicitors HWL Ebsworth to Honda Australia’s solicitors Arnold Bloch Leibler (Offer Letter). By that letter, Brighton Automotive offered to settle the proceeding on terms that Honda Australia pay, in full and final settlement:
(a)$9,500,000 (the Settlement Sum) within 14 days of accepting the offer;
(b)interest on the Settlement Sum from the date the proceeding was filed to 14 February 2024 in accordance with applicable penalty interest rates; and
(c)Brighton Automotive’s costs of the proceeding on a standard basis, to be taxed in the absence of agreement;
(the Offer).
The Offer was expressed to be made in accordance with the principles set out in Calderbank v Calderbank.[15]
[15][1975] 3 All ER 333 (Calderbank).
Honda Australia did not respond to or accept the Offer.
Brighton Automotive submits that the Court may order indemnity costs where the circumstances warrant departure from the general rule that costs should be awarded to the successful party on the standard basis, including where a party has unreasonably rejected a Calderbank offer and received a less favourable result at trial.
In considering whether the rejection of a Calderbank offer was unreasonable, the Court will ordinarily have regard to the following matters:[16]
(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’s rejecting it.
[16]Hazeldene’s Chicken Farm Pty Ltd v Workcover Authority (Vic) (No 2) (2005) 13 VR 435 (Hazeldene), 442 [25].
Brighton Automotive submits that the Offer was substantially lower than the damages that will be ordered in favour of Brighton Automotive as a consequence of the Judgment and the Further Joint Report, and that Honda Australia’s rejection of the Offer was unreasonable.
Having regard to the matters identified by the Court of Appeal in Hazeldene, Brighton Automotive submits that its Offer:
(a)was made at a time when the parties had participated in a mediation, exchanged lay and expert evidence, and had filed and served written outlines of opening submissions, which meant that Honda Australia was in a good position to assess the merits of the Offer, as well as its prospects of success at trial;
(b)was open for a period of five days, which afforded Honda Australia a reasonable amount of time to assess it;
(c)constituted a substantial compromise by reference to the loss calculations of Mr Smith, and was by no means derisory or a demand for Honda Australia to capitulate;
(d)was expressed clearly, such that there could be no uncertainty as to the nature and extent of the compromise;
(e)explained the reasons why it should be accepted by Honda Australia; and
(f)foreshadowed an application for indemnity costs in the event that Honda Australia rejected it.

Brighton Automotive submits that it is a perfectly legitimate purpose of a Calderbank offer to influence the cost discretion if the offer is not accepted, and refers the Court to Smith v Starke,[17] where Gleeson J said (citations omitted):
A Calderbank offer is an informal offer made on terms expressed to be without prejudice save as to costs. One purpose of such an offer is to influence the costs discretion if the offer is not accepted. A Calderbank offer may be used to support an application for indemnity costs, or an order that the offeree pay the offeror’s costs on a party-party basis.
[17][2016] FCA 40 (Smith v Starke), [18].
In response to the submission by Honda Australia that there was significant divergence between the experts and the complexity of their calculations, Brighton Automotive submits that, in rejecting the Offer, Honda Australia failed to ‘grapple’ with the facts of the case and the issues in the loss assessment — namely, counterfactual volumes, gross profit, and mitigation.
In response to the submission by Honda Australia that the Offer failed to specify the quantum of costs, Brighton Automotive submits that this is no impediment to a good Calderbank offer. Brighton Automotive relies on John Selak v National Tiles Co Pty Ltd (No 5),[18] where Connock J found no defect in a Calderbank offer that was expressed in simple terms, which is that the costs would be assessed on the standard basis.
[18][2024] VSC 504 (Selak), [106].
In response to Honda Australia’s submission that there was no delineation in the Offer between the costs incurred in the dispute regarding the quantification of damages and the costs incurred in respect of the Unsuccessful Claims, Brighton Automotive submits that this criticism is not a weighty one because:
(a)Honda Australia does not say that Brighton Automotive has not done better than the Offer;
(b)no apportionment of costs will have the effect that Brighton Automotive has not bettered the Offer; and
(c)there is no evidence that there was some impediment to Honda Australia’s analysis of the merits of the Offer by reason of the question of costs.
Brighton Automotive submits that for these reasons it was unreasonable for Honda Australia to reject the Offer, and that it should therefore be awarded costs on an indemnity basis from the date of the Offer.
Lastly, Brighton Automotive submits that Honda Australia’s unreasonable rejection of the Offer weighs against the apportionment of costs from at least the date of the Offer. Brighton Automotive relies on Sedgwick v Varzonek (No 2),[19] where Slattery J held that:
Where the court finds that an offeree did unreasonably reject a Calderbank offer, as the court has found here, there are important public policy considerations that persuade the court that it should order the assessment of all the costs on the indemnity basis. Had Mrs Varzonek accepted the Calderbank offer, as it was reasonable for her to do, none of the costs of the hearing would have been incurred. The fact that Mr Sedgwick spent a significant proportion of his costs of the hearing on an unsuccessful issue does not displace the importance of Mrs Varzonek’s antecedent conduct in unreasonably rejecting the Calderbank offer.
[19][2015] NSWSC 1613 (Sedgwick), [32].
Brighton Automotive submits that if the Court were to consider apportionment, then the correct approach — rather than making a costs award in favour of Honda Australia — should be to, at most, reduce Brighton Automotive’s costs entitlement by 20% prior to the Offer, with 100% costs being awarded after that point. This is Brighton Automotive’s fallback position if the Court does not accept its primary position.

D.2.3 Brighton Automotive’s preliminary discovery application

Brighton Automotive submits that Honda Australia’s position in regards to the preliminary discovery application — that Brighton Automotive should pay Honda Australia’s costs in connection with the application — is misconceived.
Brighton Automotive refers to the orders made by me on 8 October 2021 (Discovery Orders) after publishing my reasons in respect of the preliminary discovery application in S ECI 2020 04769. The Discovery Orders contained the following orders:
1.   Pursuant to r 32.05 of the Rules, the First Respondent give verified discovery of documents in the categories set out in Annexure A hereto by 30 November 2021.
2.   There be no order as to costs of the application for preliminary discovery as against the First Respondent.
3.   The Applicants pay the costs of the First Respondent in providing discovery and inspection in accordance with Order 1 on the standard basis, save that if the Applicants commence a proceeding against the First Respondent following discovery and inspection of the documents by 28 February 2022 those costs will be costs in that proceeding.
Brighton Automotive submits that, per the Discovery Orders, the costs of Honda Australia providing discovery were to be costs in the cause if a proceeding was commenced by the stipulated date, which it was.

D.3 Defendant’s submissions

Honda Australia distinguishes between an apportionment of costs in the sense of an order which provides that a party pay a particular percentage of another party’s costs, and what could be described as an issues-based approach.
Honda Australia submits that in exercising its discretion with respect to costs, the Court should delineate between the dispute insofar as it related to the calculation of damages on the breach of contract claim (liability for which was conceded by Honda at the earliest opportunity), and the dispute insofar as it related to the contested causes of action unsuccessfully brought by Brighton Automotive (being the Further Contract Period Claim, MDC Claim and UC Claim).

D.3.1 Multiple issues with partial success

Honda Australia submits that the Court’s discretion with respect to costs is to be exercised judicially, with the fundamental purpose of compensating the successful party (and not punishing the unsuccessful party).[20] It has long been recognised that a successful party who has failed on certain issues may not only be deprived of the costs of those issues, but may also be ordered to pay the other party’s costs of them.[21]
[20]EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 (EMI Songs), [9].
[21]Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748, 48, 136; EMI Songs, [9]; Sandoz Pty Ltd v H Lundbeck A/S (No 2) [2021] FCAFC 47, [31].
Honda Australia relies on Nom De Plume Nominees Pty Ltd v Fingal Developments Pty Ltd,[22] where the Court of Appeal held that:
… while the general rule is that costs should follow the event, where there is a multiplicity of issues and mixed success has been enjoyed by the parties, the court may take a pragmatic approach in relation to costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Such an approach will be primarily a matter of impression and evaluation.[23]
[22]Nom De Plume Nominees Pty Ltd v Fingal Developments Pty Ltd [2016] VSCA 233 (Nom de Plume Nominees).
[23]Nom De Plume Nominees, [13].
Honda Australia rejects the assertion by Brighton Automotive that the Unsuccessful Claims were relatively minor in the context of the overall dispute, and submits that a significant proportion of the legal and factual issues at trial related to them, namely:
(a)Brighton Automotive’s preliminary discovery application;
(b)the vast majority of documents discovered by Honda Australia;
(c)the majority of Honda Australia’s lay evidence, which required extensive witness conferences;
(d)several lengthy PowerPoint presentations, many of which required translating from Japanese into English; and
(e)that Honda Australia was put to the expense of having its expert opine on the damages payable should it be held liable for the Unsuccessful Claims.
Having successfully defended these aspects of the proceeding, Honda Australia submits that in line with the broad evaluative judgment of what justice requires, it ought be awarded the costs it incurred with respect to these issues. Honda Australia embraces the principle that a court will deprive a successful party of its costs relating to an issue which that party lost where that issue is ‘clearly dominant or separable’, and submits that the Unsuccessful Claims are readily separable from the contract damages claims.
Honda Australia highlights that Brighton Automotive dropped the damages claim with respect to its MDC Claim on the second day of trial, but continued to press the MDC Claim as being relevant to the UC Claim, such that it still needed to be decided. Honda Australia emphasised that this occurred after I asked the following question on the first day of trial:
If Honda ought to have disclosed that [it was contemplating or considering the early termination of the dealer agreement] to the plaintiff then isn’t it something that the plaintiff would have trouble arguing it didn’t have to disclose to a potential purchaser? And wouldn’t that also have an effect on value?
Honda Australia submits that it was made to go through discovery and the production of lay evidence with respect to a claim which was fundamentally flawed as a matter of basic logic, and rejects Brighton Automotive’s submission that the evidence relating to the Unsuccessful Claims was also broadly relevant to the quantification of damages for the remaining contract term. Honda Australia submits that the only aspect of the evidence that overlaps was the simple fact that under the Agency Model, Honda reduced its volume targets. Meanwhile, the evidence that Honda Australia adduced to defend the Unsuccessful Claims related to the fact that it had a legitimate commercial interest in changing its business model, that it had due regard to the dealer’s interest, and that it did not mislead or deceive its dealers.
Lastly, Honda Australia submits the Holt Affidavit should not be relied upon for the purpose of apportioning costs because:
(a)there is no way to assess whether the assessment of what words related to Brighton Automotive’s successful claims was reasonable;
(b)the method of assessment is shrouded in mystery and wholly subjective;
(c)the method of analysis is wrong, as there is no rational connection between the number of words used in various documents that related to the successful claims and the costs incurred by the parties with respect to those issues;
(d)the analysis is limited to documents produced for the purposes of litigation, yet the costs incurred extend far beyond this and include preliminary discovery, discovery, and the preparation of evidence; and
(e)each phase of the litigation in the present case was resource intensive, and the costs were disproportionately incurred by Honda Australia.

D.3.2 Brighton Automotive’s Calderbank Offer

Honda Australia accepts that the Offer was a Calderbank offer and submits that, accordingly, its effect must be assessed by reference to the common law, which involves no preconceptions about when the rejection of the Offer should lead to the making of a special costs order, but will only do so where it is concluded that the rejection of the Offer was unreasonable.[24]
[24]Hazeldene, 440 [19].
Honda Australia submits that the onus is on Brighton Automotive to establish that it unreasonably failed to accept the Offer,[25] and that the question of whether a party unreasonably failed to accept the Offer is a matter of judgment and impression, requiring consideration of the applicable circumstances at the time the Offer was made.[26]
[25] Selak, [73].
[26]Hazeldene, 441-2 [24]; Selak, [74].
Honda Australia submits that its rejection of the Offer cannot be said to be unreasonable because:
(a)the Offer was made shortly before trial, which was likely a tactic employed for the primary object of altering the costs order rather than a genuine attempt to reach a settlement, and should therefore be afforded little weight;[27]
(b)the assessment of unreasonableness must be made without the benefit of hindsight — ie, without reference to the judgment sum ultimately awarded;
(c)there was significant divergence between the experts’ assessment of likely damages and the complexity of their calculations;
(d)the Settlement Sum was grossly disproportionate to the profits Brighton Automotive had previously generated through the sale of Honda vehicles; and
(e)the Offer required Honda Australia to pay Brighton Automotive’s costs of the proceeding, yet failed to delineate between costs incurred with respect to the dispute regarding the quantification of damages, and costs incurred with respect to the Unsuccessful Claims.
[27]McKay v Commissioner of Main Roads (No 7) [2011] WASC 223 (S) (McKay), [144]; Smith v Starke, [18].
Honda Australia therefore submits that it would be appropriate in the present case that, notwithstanding the Offer, the Court award Brighton Automotive its costs with respect to the calculation of damages on a standard basis.
In response to Brighton Automotive’s reliance on Smith v Starke, Honda Australia refers to McKay, a case that was referred to by Gleeson J in the relevant paragraph of Smith v Starke. In McKay, Beech J of the Supreme Court of Western Australia said:[28]
But another central purpose of a genuine Calderbank offer is to bring about a settlement by compromise. A last minute offer might be made in circumstances that support the view that it was not a genuine attempt to reach a settlement of the action by compromise, but was a tactic employed for the primary object of altering the costs orders. In those circumstances the offer would be worthy of little weight.
[28]McKay, [144].
Honda Australia submits that this is what Brighton Automotive has done in the present case and that, therefore, the Offer should be given little weight.
In response to Brighton Automotive’s reliance on Sedgwick, Honda Australia submits that all costs decisions are fact specific, and that in Sedgwick the plaintiff’s unsuccessful claim was ‘a relatively minor’ part of the total claim.[29] As such, Slattery J’s observations in that case are simply inapposite to the facts at hand.
[29]Sedgwick, [16].

D.3.3 Brighton Automotive’s preliminary discovery application

Honda Australia submits that the entirety of the documents sought in the preliminary discovery application related to the MDC Claim and UC Claim. At the time, these claims were referred to by Brighton Automotive as the ‘Putative Claims’ for the purposes of the preliminary discovery application, given that even at that early stage Honda Australia had conceded liability with respect to the contract claim.
Honda Australia submits that the documents sought by Brighton Automotive related entirely to the strategic review of its business model and ultimate determination to restructure the business, and that per the Discovery Orders the costs of the preliminary discovery application are now costs in the proceeding.
Honda Australia submits that, given it was entirely successful with respect to the ‘Putative Claims’ upon which the preliminary discovery application was premised, Brighton Automotive should now pay Honda Australia’s costs associated with the production and inspection of the relevant documents.

D.4 Consideration

D.4.1 Multiple issues with partial success

The parties appear to be in agreement that the ordinary course for the award of costs is that costs follow the event. They can hardly contend otherwise given the orthodoxy of this proposition. Brighton Automotive submits that the relevant ‘event’ in this proceeding is its successful claim for contract damages. In support of this contention, Brighton Automotive submits that it ‘won’ on every major aspect of the damages claim; those being the question of new car sales volumes, gross profit margins, and mitigation of loss during the Remaining Contract Period. True it is that my findings in regard to those issues at trial were closer to the position advocated for by Brighton Automotive than that of Honda Australia. However, I do not agree with the submission that a costs order should follow on from this ‘event’ alone. Instead, I accept Honda Australia’s submission that in exercising its discretion as to costs, the Court should delineate between Brighton Automotive’s damages claim — for which Honda Australia has always accepted liability — and its Unsuccessful Claims; those being the Further Contract Period Claim, MDC Claim and UC Claim. I do so for the reasons that follow.
First, while it can be said that Brighton Automotive has won the ‘prize’ in terms of the damages it has secured as compared to the case originally put by Honda Australia, I do not consider this to be the only factor that ought influence the exercise of my discretion as to costs. The Remaining Contract Period Claim was but one of four claims brought by Brighton Automotive against Honda Australia, three of which failed or were abandoned at trial. As such, there was much more to the proceeding than Brighton Automotive now portrays.
Second, while Brighton Automotive submits that the Unsuccessful Claims were relatively minor in the context of the overall dispute, Honda Australia submits that these claims in fact required a substantial amount of work to be performed, as outlined at paragraph 119 above. I accept Honda Australia’s submissions on this point. In responding to the Unsuccessful Claims, the solicitors and counsel for Honda Australia had to respond to the plaintiff’s preliminary discovery application, make discovery in response to the Discovery Orders, put on lay evidence addressing Brighton Automotive’s claims, instruct Ms Wright and seek her opinion as to the possible quantum of damages on all claims, file written submissions, and make oral submissions at trial. These tasks were undoubtedly time-consuming and costly for Honda Australia to undertake, and could have been avoided almost entirely had Brighton Automotive not brought the Unsuccessful Claims.
Brighton Automotive submits that the Unsuccessful Claims were addressed much more briefly than the contract damages claim, reflecting their relative lack of importance in the proceeding as compared to the contract damages claim. I do not accept this. Brighton Automotive abandoned its claim for damages in respect of the MDC Claim on the second day of trial. That it subsequently sought only to rely on the pleaded misleading or deceptive conduct in support of its UC Claim does not undo the fact that Honda Australia was forced to prepare evidence and submissions in defence of the MDC Claim. As was submitted by counsel for Honda Australia at the November Hearing, ‘it’s very easy to allege misleading and deceptive conduct and then it takes a lot of work to deny it’. I believe the same can be said in respect of the UC Claim; it may not have received the same level of attention at trial as the contract damages claim, but Honda Australia still had to undergo the work required to prepare and deliver its defence.
Third, I accept Honda Australia’s submission that the Unsuccessful Claims were readily separable from the contract damages claim. Brighton Automotive submits that the evidence relating to the Unsuccessful Claims was also relevant to the quantification of its damages claim. There is some merit to this argument. For example, in her witness statement, Ms McMahon states that Honda Australia’s transition to the Agency Model formed part of a broader restructure of the company’s operations that included selling a narrower model range, reducing overall national sales volumes to 20,000 units, reducing the number of dealers and realigning existing areas of responsibility for dealers. Yet, Ms McMahon and Mr Collins both conceded at trial that in order to maintain the viability of the Honda dealer network in Australia it was necessary to supply a minimum of 40,000 new vehicles each year. At paragraphs 116 to 118 of my Judgment, I concluded that the reduced target of 33,000 units in Ki year 2020/21 was an intermediate step towards an eventual sales volume target of 20,000 units that was at least partially motivated by Honda Australia’s desire to transition to the Agency Model without causing undue disruption to its dealership network.

That being said, the approach I ruled should be taken in order to calculate Brighton Automotive’s likely sales volume under the counterfactual involved not only the supply of Honda vehicles, but also Brighton Automotive’s share of the national Honda vehicle market, the average drop in production experienced in Thailand during the Remaining Contract Period, and Honda Australia’s average sales shortfall across 2018 and 2019. As such, it was not simply a question of why Honda Australia reduced the supply of new vehicles during the Remaining Contract Period; it was a complex assessment of several distinct variables. Furthermore, it is misleading to assume that Brighton Automotive would never have uncovered why Honda Australia reduced its supply of vehicles during the Remaining Contract Period without the evidence that was discovered and subsequently adduced as part of the Unsuccessful Claims. A major dip in Honda Australia’s supply of new vehicles would undoubtedly have been a live issue at trial, given its impact on Brighton Automotive’s sales volumes in the counterfactual. A such, it is an issue that Brighton Automotive could have agitated in any number of ways that would not have required the bringing of the Unsuccessful Claims.
While there is some merit to Brighton Automotive’s submission that the evidence overlapped between its successful claim and the Unsuccessful Claims, I do not consider the overlap to be significant. In my view, there is a principled basis in this case for apportioning costs on the basis of the issues decided.
My impression and evaluation, having presided at the trial, was that the Unsuccessful Claims were not minor or secondary. There was no doubt that the damages calculation for the Remaining Contract Period Claim, which involved determining disputed matters such as sales volumes, gross profit, and mitigation of loss, was the main game. However, the Unsuccessful Claims still received significant time, argument and emphasis.
For these reasons, I do not consider that the contract damages claim was inseparable from the Unsuccessful Claims. As such, I will not be making the costs order sought by Brighton Automotive. Instead, given that it succeeded in defending the Unsuccessful Claims, I consider it appropriate that Honda Australia be awarded its costs incurred with respect to those claims.
Given that I have rejected Brighton Automotive’s primary position as to no apportionment of costs, I need to deal with its fallback position. It follows from what I have already said that I have also rejected Brighton Automotive’s alternate argument that, rather than award Honda Australia its costs of the Unsuccessful Claims, I should reduce Brighton Automotive’s costs to be paid by Honda Australia by a percentage. There will be instances where such an approach is reasonable, particularly when one considers the taxation of costs exercise, but this is not one of them.
I do not consider it reasonable to base a percentage on my impressions formed at trial of the proportion of time taken up with the Unsuccessful Claims, as I do not consider that to be a sufficiently reliable indicator of the likely costs. I do not accept the Claims Analysis in the Holt Affidavit as providing a sufficient basis for determining a percentage, as I accept Honda Australia’s criticisms of it. Nor do I accept Brighton Automotive’s submission that an appropriate reduction would be 20%.[30] While I can take a broad brush approach, I am not satisfied that it would be fair to the parties to take that approach here.
[30]I observe here that this appears to be inconsistent with Brighton Automotive’s reliance on the Claims Analysis. While nothing turns on this, it does highlight the arbitrariness of choosing a percentage in relation to this issue on the material before me.

D.4.2 Brighton Automotive’s Calderbank Offer

I accept that the Offer made by Brighton Automotive on 14 February 2024 was a Calderbank offer and that Honda Australia’s lack of response constituted a rejection of that offer. As such, the unreasonableness of that rejection must be assessed per the factors outlined in Hazeldene.
There is no contest between the parties that Brighton Automotive will, as a result of the Judgment, better the Offer, even if Ms Wright’s figure of $12,160,299 prevails in these reasons, and regardless of the costs order which I end up making.
On the issue of timing, I prefer the submissions of Brighton Automotive. The Offer was made at a time when both parties were well positioned to evaluate the relative strengths and weakness of their case, and therefore the merit of the Offer. While 14 days is often regarded as the standard time for an offer to be open, there are numerous instances where courts have regarded lesser periods as adequate. It depends on what is reasonable in the circumstances. Where the trial is imminent, the issues are well known to the parties and they are focused on the proceeding, lesser periods are often adequate. Here, the Offer was open for a reasonable amount of time, that being five days in the lead-up to trial.
Honda Australia submits that the Offer was made primarily for the purpose of securing a favourable costs order. Relying on Gleeson J’s ruling in Smith v Starke, Brighton Automotive submits that this is a perfectly legitimate purpose of a Calderbank offer. Honda Australia contests this reading of Smith v Starke, submitting that Beech J’s ruling in McKay states that such an offer should be afforded little weight where it does not contain a genuine attempt to reach a settlement. I do not see any conflict between these authorities. Seeking to obtain a favourable costs order is a legitimate purpose of a Calderbank offer. However, where it does not contain features that would demonstrate it to be a genuine attempt at settlement, such as a compromise, then a court is unlikely to regard it as unreasonable to have rejected it. It all depends on the terms of the offer and whether it was unreasonably rejected. In this instance, I do not think that making the Offer was a mere tactic to secure a favourable costs order, as I consider the Offer to indeed be a genuine attempt to reach a settlement. This will be elaborated on below.
In their original respective reports, Mr Smith assessed Brighton Automotive’s damages in respect of the Remaining Contract Period Claim as being between $22,138,104 and $22,331,885, whereas Ms Wright assessed these damages as being between a loss of $1,648,128 and a gain of $2,678,248. As such, Brighton Automotive’s offer of settling the proceeding for $9,500,000 plus costs represented a substantial compromise when compared to the assessment of damages provided by its expert. It is true that there was a significant divergence between the experts’ respective assessments of likely damages. However, Honda Australia knew the ‘universe’ for the Remaining Contract Period Claim: it had admitted liability and damages were going to be awarded, and they would be somewhere between $0 (given Ms Wright’s range including a gain rather than a loss) and $22 million. That the experts were so far apart does not lead to a conclusion that rejecting the Offer was reasonable. It is also true, as Honda Australia submits, that the Settlement Sum was much higher than the profits Brighton Automotive had previously generated through the sale of Honda vehicles. However, I believe Brighton Automotive is correct when it says that Honda Australia failed to properly grapple with several of the major factors relevant to the assessment of loss.
First, despite accepting that the counterfactual would have involved ‘business as usual’ under the Dealership Model rather than the Agency Model, Honda Australia’s position at trial was that Brighton Automotive’s damages should be calculated on the basis of its actual sales volumes during the Remaining Contract Period under the Agency Model. This approach was flawed from the outset, and ignored the obvious reality that a significant reduction by Honda Australia in the supply of new vehicles would affect Brighton Automotive’s sales figures.
Second, despite accepting that the Deloitte Dealership Benchmarks provided a useful reference point for determining the average gross profit per unit that Brighton Automotive likely would have earned in the Remaining Contract Period, Honda Australia sought to apply a discount that was reflective of a period of time when Brighton Automotive was still operating under its ‘discounter’ model in a pre-COVID industry landscape, rather than Brighton Automotive’s actual approach at the relevant time.
Third, Honda Australia submitted that by reason of its early termination of the Dealer Agreement, Brighton Automotive effectively acquired its Nissan franchise 2.5 years earlier than it otherwise would have, such that the profits that it has earned or will earn in that year period should be offset against the losses that Brighton Automotive has incurred by reason of Honda’s repudiation of the Dealer Agreement, an approach which I rejected.
At the November Hearing, counsel for Honda Australia submitted that at the time the Offer was made, Honda Australia could not have anticipated my ‘disposition’ with respect to the quantification of damages, given how multi-factorial that quantification was. I do not accept this submission. No party can predict with perfect accuracy how submissions will be received or how issues will be determined by the Court. However, at the time the Offer was made, the parties had participated in a mediation, exchanged lay and expert evidence, and filed and served their written opening submissions. Honda Australia was fully aware of the case that would be run against it, the issues likely to be raised, the evidence likely to be adduced, and the arguments it would likely need to contest. Highly relevant to this issue was that the Offer Letter clearly stated that Brighton Automotive had pitched its offer by reference only to the quantification of damages for the Remaining Contract Period Claim. The Offer was to settle all claims, but the amount was based only on that claim. Therefore, Honda Australia did not need to grapple with its prospects of successfully defending the Unsuccessful Claims or ascribe a likely amount to them should Honda Australia fail. This ought to have made it easier for Honda Australia to assess the Offer.
Lastly, Honda Australia submits that the Offer did not specify the quantum of costs, in that it failed to delineate between costs incurred with respect to the dispute regarding the quantification of damages, and costs incurred with respect to the Unsuccessful Claims. In response, Brighton Automotive submits that this is no impediment, and that the Offer was expressed in clear terms.
In Selak, Connock J made the following comments in relation to a Calderbank offer that did not specify the quantum of the costs payable:
Whilst it is true that the quantum of costs . . . was not specified, that does not relevantly assist the plaintiff or impugn the clarity or validity of the Offer. It is also unsurprising and common place. It did not make the Offer ambiguous or the offer . . . incapable of sufficient assessment. Further, the plaintiff was represented by experienced counsel and solicitors who were intricately involved [in the matter] . . . They were well placed to make their own sufficient assessment of costs and had time to do so. If they desired more certainty about that existing costs order it was open to them to ask. There was no evidence that they did so. In any event, my conclusion would remain the same even if these last two matters were put to one side, noting in this context that the terms of the Offer are clear.
I find this example highly analogous to the present case. The fact that Brighton Automotive did not specify or particularise the costs payable under the terms of the Offer is no impediment. It is, in fact, quite common for a Calderbank offer to be expressed in such terms — ie, that the offeree pay the offeror’s costs of the proceeding on a standard basis. If Honda Australia had desired greater specificity in relation to this issue, it could easily have sought it from Brighton Automotive. Instead, the Offer went completely unanswered.
For the reasons given, I find that Honda Australia’s rejection of the Offer was unreasonable. As such, I will make an order that Honda Australia pay Brighton Automotive’s costs on an indemnity basis from the date the Offer was made, that being 14 February 2024. It remains to consider whether those costs should be all costs incurred after then, or just the costs of the Remaining Contract Period Claim.
Brighton Automotive submits that Honda Australia’s unreasonable rejection of the Offer ought weigh against the apportionment of costs from at least the date of the Offer. Honda Australia contends for the opposite.
In Sedgwick, Slattery J found that the defendant’s unreasonable rejection of the plaintiff’s offers of compromise was an ‘overwhelming factor weighing against the exercise of my discretion to depart from the ordinary rule . . . that costs are to follow the event’.[31] However, his Honour went on to note that ‘The Court is not bound or even presumed to order indemnity costs against an offeree who does not accept a Calderbank offer and does not obtain a more favourable judgment. Rather, discretionary considerations are at large.’[32]
[31]Sedgwick, [32].
[32]Ibid, citations omitted.
Honda Australia submits that all costs decisions are fact specific, and that Sedgwick should be distinguished from the present case because the plaintiff’s unsuccessful claim in that case was a relatively minor part of the total claim, while the Unsuccessful Claims were substantial. I do not accept Honda Australia’s submission that in Sedgwick the plaintiff’s unsuccessful claim was a ‘relatively minor’ part of the total claim. In that regard, Honda Australia refers to paragraph 16 of Sedgwick, where Slattery J did indeed characterise the plaintiff’s restitution claim in that way. However, his Honour’s discussion of that claim was in the context of whether it had been sufficiently articulated for it to mean that it was unreasonable for the defendant to have rejected the plaintiff’s offer, not in the context of whether costs should be apportioned or whether indemnity costs should be reduced. Later in the judgment, Slattery J stated that had he found the defendant had acted reasonably in rejecting the plaintiff’s offer, he would have been minded to make an order as to costs which reflected the time the court spent dealing with another of the plaintiff’s unsuccessful claims, being a family provision claim, which his Honour said had taken up a significant part of the trial by way of both evidence and argument.[33]
[33]Ibid.
Sedgwick is not on all fours with this case, as I have already found that it is appropriate to apportion the costs of the proceeding as set out in section D.4.1 above. In Sedgwick, no apportionment of costs was made for the period prior to the Calderbank offer being made. However, I agree with his Honour’s point that had the offer been accepted, no costs would have been incurred past the date of the offer.
I consider the factors here to be finely balanced. On one hand, if Honda Australia had accepted the Offer, as it was reasonable for it to do, none of the subsequent costs associated with the Unsuccessful Claims would have been incurred. Given the timing of the Offer, it is really the costs of the trial which are largely in issue. On the other hand, the time spent at trial on the Unsuccessful Claims was sizeable.
In this instance, two matters weigh in favour of an order that Brighton Automotive’s costs from 15 February 2024 be paid on an indemnity basis without any apportionment based on a distinction between the Remaining Contract Period Claim and the Unsuccessful Claims:
(a)it was unreasonable for Honda Australia to have rejected the Offer; and
(b)had it not unreasonably rejected the Offer, Honda Australia would have been released from the Unsuccessful Claims without having to pay anything for them.
Therefore, I am satisfied that the right balance is struck by ordering that Brighton Automotive’s costs from 15 February 2024 be paid on an indemnity basis without an apportionment.

D.4.3 Brighton Automotive’s preliminary discovery application

The documents sought in the preliminary discovery application related almost entirely to the MDC Claim and UC Claim. The small degree of evidentiary crossover described by Brighton Automotive at paragraph 95(a) does not alter this fact. Furthermore, Honda Australia was entirely successful in defending the Unsuccessful Claims that followed on from the preliminary discovery. The only costs of the preliminary discovery application which were ordered to be costs in the proceeding were the costs of providing discovery and inspection of the documents ordered in the preliminary discovery application. The Discovery Orders expressly stated that there was no order as to the costs of making the application. Consistent with my findings here, as well as under section H.3.1 above, I consider it appropriate that Brighton Automotive pay Honda Australia’s costs of providing discovery and inspection pursuant to the Discovery Orders.

E Conclusion and disposition

For the above reasons, I have made orders today as follows:
1.By 4.00pm on Friday 10 January 2025, Honda Australia pay to Brighton Automotive the sum of $13,676,972 by way of contractual damages (Damages Sum).
2.By 4.00pm on Friday 10 January 2025, Honda Australia pay to Brighton Automotive interest on the Damages Sum levied at a rate of 10% per annum from the date that the proceeding was filed, being 15 March 2022, to the date that the Damages Sum is paid in full.
3.Honda Australia pay Brighton Automotive’s costs:
(a)of and incidental to the breach of contract claim for the Remaining Contract Period up to and including the day the Calderbank Offer was made, being 14 February 2024, on a standard basis to be taxed in default of agreement; and
(b)of the proceeding, from the day after the Calderbank Offer was made, being 15 February 2024, on an indemnity basis to be taxed in default of agreement.
4.Brighton Automotive pay Honda Australia’s costs of and incidental to the MDC Claim, the UC Claim and the Further Contract Period Claim up to and including 14 February 2024 on a standard basis, to be taxed in default of agreement.
5.Brighton Automotive pay Honda Australia’s costs of and incidental to providing discovery and inspection pursuant to the Discovery Orders, on a standard basis, to be taxed in default of agreement.
6.The proceeding otherwise be dismissed.

[2024] VSC 753

6 December 2024