Calcorp (Australia) Pty Ltd v 271 Collins Street Pty Ltd
[2010] VSCA 259
•4 October 2010
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2009 3817 | |
| CALCORP (AUSTRALIA) PTY LTD (ACN 103 572 738), ANTONIO DATTILO and PATRIZIA DATTILO | Appellants |
| v | |
| 271 COLLINS PTY LTD (ACN 098 248 385) | Respondent |
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JUDGES: | NETTLE, REDLICH and HARPER JJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 4 October 2010 | |
DATE OF JUDGMENT: | 4 October 2010 | |
MEDIUM NEUTRAL CITATION: | [2010] VSCA 259 | 1st Revision 14 October 2010 |
JUDGMENT APPEALED FROM: | 271 Collins Pty Ltd v Calcorp (Australia) Pty Ltd (Unreported, County Court of Victoria, Judge O’Neill, 3 July 2009) | |
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Appeal – Lease – Terms of settlement agreed between parties – Respondent sought orders that proceeding be reinstated and for judgment for agreed sum pursuant to Terms of Settlement – Whether provisions of Terms of Settlement for agreed larger sum in default of instalments and for indemnity costs a penalty – Whether obligation to pay indemnity costs a genuine pre-estimate of damage – Obligations imposed not in the nature of the penalty – Appeal dismissed – Cameron v UBS (2000) 2 VR 108, applied; Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2001] 2 Qd R 114, distinguished.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr D B Clough | Nicholls Legal |
| For the Respondent | Mr M I Borsky | Mark Fagenblat |
NETTLE JA:
This is an appeal from a judgment given in the Business List of the County Court. The claim below was for $262,648.96, plus interest and costs, pursuant to Terms of Settlement dated 28 November 2008. The appellants contended that the amount claimed was a penalty and so therefore unenforceable. The judge rejected that contention, and it is about that point that the appeal is mainly concerned. But there is also a dispute about costs.
The facts of the matter are in narrow compass. By instrument of lease dated 13 February 2006 the respondent (‘271 Collins’) leased to the first appellant (‘Calcorp’) premises known as Tenancy 6B, 268 Flinders Lane, Melbourne for a term of five years commencing on 20 February 2006 and expiring on 19 February 2011. By paragraph 6 of the lease, the second and third appellants (‘Mr and Mrs Dattilo’) unconditionally and irrevocably agreed to indemnify 271 Collins against any loss suffered by it in the event that Calcorp failed to perform any of its obligations under the lease.
After taking possession of the premises, Calcorp failed to make payments of rent and, in February 2007, 271 Collins re-entered the premises and took possession. At that point, the amount claimed to be outstanding was $77,809.72, from which was deducted an amount of $52,013.09 lodged as security for performance of the lease, leaving a net amount due of $25,796.63.
In May 2007, 271 Collins re-leased the premises to another tenant at a lower rent. At that point the amount claimed to be due under or in respect of the original lease was $93,729.06, being rent and outgoings unpaid up to the point of commencement of the new lease, plus a further $108,819.21, being the difference between the rent that would have been payable by Calcorp under the original lease and the rent payable by the new tenant under the new lease, from the commencement of the new lease (1 August 2007) until 19 February 2011. There was also a claim for interest.
Calcorp and Mr and Mrs Dattilo defended the claim. They alleged that 271 Collins re-entered the premises for reasons unrelated to their failure to pay rent and outgoings. They also counterclaimed that 271 Collins had taken possession of the premises wrongfully and in breach of the terms of the lease, whereby they had lost stock, fixtures and fittings, and thereby suffered loss and damage.
The claim and counterclaim were then compromised before trial, by Terms of Settlement dated 28 November 2008, which provided as follows:
The parties have agreed to settle this Proceeding on the terms and conditions set out in these Terms of Settlement (‘these Terms’):
1. On or before 5 December, 2008 each of the Second and Third Defendants shall provide to the Plaintiff sworn affidavits in which each of them deposes [as to their assets, interests and means].
2. The Defendants shall pay to the Plaintiff the total amount of $200,000.00 by instalments as follows:
(a) $30,000.00 on or before 10 December, 2008;
(b) $10,000.00 on or before 10 January, 2009;
(c) $10,000.00 on or before 10 February, 2009;
(d) $10,000.00 on or before 10 March, 2009;
(e) $10,000.00 on or before 10 April, 2009;
(f) $10,000.00 on or before 10 May, 2009;
(g) $120,000.00 on or before 10 June, 2009.
3. The liability of the Defendants to make each of the payments set out in paragraph 2 of the Terms is joint and several.
4. If for any reason whatsoever the Defendants fail to make any payment required to be made by 5pm on the due date as set out in paragraph 2 of these Terms (‘Defendants’ Default’), the Plaintiff shall be entitled immediately and without further notice to the Defendants to enter judgment in this Proceeding against the Defendants or any of them for:
(a)the full amount of the Plaintiff’s claim in the Proceeding in the agreed sum of $262,648.96 (less the total of any payments actually made by the Defendants);
(b)plus interest (at the rates from time to time fixed under the Penalty Interest Rates Act 1983); and
(c)the full amount of the Plaintiff’s costs of and incidental to its conduct of the Proceeding (including the costs of entering judgment) calculated as the total of all costs and disbursements paid by the Plaintiff to its solicitor and/or counsel as evidenced by the tax invoices rendered by the Plaintiff’s solicitor and counsel.
5. In the event of the Defendants’ Default, the Defendants, by their execution of these Terms, irrevocably consent to the Plaintiff entering judgment against them in the Proceeding for the amounts as set out and calculated in accordance with paragraph 4 of these Terms. In the event of the Defendant’s (sic) Default, the Defendants shall make no objection to any such entry of judgment against them by the Plaintiff and these Terms may be produced by the Plaintiff in absolute bar of any objection made or proceeding to set aside the judgment instituted by the Defendants and any such proceeding to set aside shall be forever stayed.
6. The parties agree that [there followed certain arrangements about stock and chattels].
7. Upon the execution of these Terms each of the Defendants for themselves, their respective legal personal representatives, successors and assigns forever releases and discharges the Plaintiff from and against any and all complaints, claims, suits, demands, proceedings, costs, expenses, obligations and causes of action of whatever nature which any of them now has or may have or which but for their execution of these Terms might have against the Plaintiff arising out of or relating to or in any way connected with the Counterclaim made by the First Defendant against the Plaintiff in the Proceeding.
8. Upon the Plaintiff being paid the total amount of $200,000.00 as provided in paragraph 2 of these Terms, the Plaintiff for itself, its successor and assigns forever releases and discharges the Defendants from and against any and all complaints, claims, suits, demands, proceedings, costs, expenses, obligations and causes of action of whatever nature which the Plaintiff now has or may have or which but for its execution of these Terms might have against the Defendants arising out of or relating to or in any way connected with the Claim made by the Plaintiff against the Defendants in the Proceeding.
Calcorp and Mr and Mrs Dattilo made all payments due under the Terms of Settlement except for the final payment of $120,000 which was due on 10 June 2009.
Thereupon, 271 Collins moved for judgment on the Terms of Settlement in the sum of $376,777.13, constituted of the $262,648.96 referred to in paragraph 4(a) of the Terms of Settlement, less the $80,000 instalments already paid, plus legal costs and disbursements pursuant to paragraph 4(c) of the Terms of Settlement of $157,803.54, plus interest.
The proceedings before the judge below
Before the judge below, the appellants did not dispute that 271 Collins was entitled to the $200,000 provided for in paragraph 2 of the Terms of Settlement, less the $80,000 instalments already paid, plus interest. They contended, however, that insofar as paragraph 4(a) of the Terms of Settlement provided for payment of a greater amount than clause 2, it was penal and therefore unenforceable. They relied in support of that contention on the decisions of the High Court in O’Dea v Allstates LeasingSystem (WA) Pty Ltd[1] and of the Queensland Court of Appeal in Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd.[2]
[1](1983) 152 CLR 359.
[2][2001] 2 Qd R 114.
The judge rejected the appellants’ argument. His Honour considered that ‘the agreed sum of $262,648.96’ referred to in clause 4(a) of the Terms of Settlement was a genuine pre-estimate of the amount to which 271 Collins was entitled on its claim for arrears of rent, outgoings and damages for the difference in rent between the original lease and the new lease; and, further that, by entering into the Terms of Settlement, the appellants had implicitly acknowledged the amount as being 271 Collins’ entitlement.
The judge was persuaded, however, that the obligation imposed by paragraph 4(c) of the Terms of Settlement, to pay indemnity costs, was a penalty. His Honour reasoned that, if the matter had proceeded to trial, the appellants’ obligation to pay the respondent’s costs would have been limited to costs taxed on a party/party basis. Inasmuch, therefore, as paragraph 4(c) imposed an obligation to pay a greater amount than that, it imposed an obligation to pay an amount which was not due or agreed to be due at the date on which the Terms of Settlement were entered into. Since the obligation imposed by paragraph 4(c) was only enforceable in the event of default, it followed that it was in the nature of a penalty.
The appellants’ contentions
The appellants contended that the judge was wrong in holding that clause 4(a) was not penal. They argued that the matter fell to be decided according to the Queensland Court of Appeal’s decision in Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd,[3] and that his Honour erred by failing to follow that decision. Counsel for the appellants submitted that, judged according to Zenith, it was apparent that ‘the agreed sum of $262,648.96’ referred to in clause 4(a) of the Terms of Settlement was not due or owing at the time of execution of the Terms of Settlement – it was simply a sum payable in default of payment of the instalments provided for in clause 2 – and thus, like the larger amount payable in the event of default in the payment of rent in O’Dea v All States Leasing, it was penal.
[3][2001] 2 Qd R 114.
The respondent’s contentions
The respondent contended that the judge was correct to view ‘the agreed sum of $262,648.96’ as an amount which the parties agreed was due as at the execution of the Terms of Settlement and, therefore, not a penalty. Counsel for the respondent argued, however, that his Honour was wrong in holding that the obligation to pay indemnity costs imposed by clause 4(c) of the Terms of Settlement was penal.
Relevant principles
It emerged in the course of argument that there was little dispute about relevant principles. Both sides accepted, as the High Court said in Ringrow Pty Ltd v BP Australia Pty Ltd,[4] that the starting point is the following passage in Lord Dunedin’s speech in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd:[5]
[4](2005) 224 CLR 656, 669 [32].
[5][1915] AC 79, 86–7.
2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage …
3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach …
4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be [a] penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach …
(b)It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid …
(c)There is a presumption (but no more) that it is [a] penalty when ‘a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage’.[6]
[6]Lord Elphinstone v Monkland Iron and Coal Co (1886) 11 App Cas 332, 342 (Lord Watson).
Both sides also accepted, therefore, that, if the Terms of Settlement properly construed comprised an acknowledgment by the appellants that the appellants were obligated to pay the ‘agreed sum of $262,648.96’ as at the date of execution of the terms, that amount was not a penalty and the obligation imposed by clause 4(a) to pay it (in the event of default of payment of the instalments provided for in clause 2) was enforceable. If, on the other hand, upon the proper construction of the Terms of Settlement, there was no agreement that the sum of $262,648.96 was owing as at the date of execution of the Terms of Settlement, and clause 4(a) was merely a stipulation for payment of that amount in the event of default of payment of the instalments of debt provided for in clause 2, it was penal and so, therefore, unenforceable.
The question is one of construction. Was it implicit in the Terms of Settlement that the appellants acknowledged that the sum of $262,648.96 was due, or not?
The proper construction of the terms
In my view, it was implicit in the Terms of Settlement that the appellants acknowledged that the sum of $262,648.96 was due. Several considerations lead me to that conclusion.
To begin with, to adopt and adapt the language of Buchanan JA in Cameron v UBS AG,[7] the obligation to pay that sum is not an obligation which sprang from the deed unheralded. Its genesis lay in past dealings between the appellants and the respondent concerning the leased premises.
[7](2000) 2 VR 108, 117 [28].
Secondly, although the existence of the obligation had not been established by judgment by the time of execution of the terms, there was no dispute about the existence of the lease, or the appellants’ default in payment of rent and outgoings under the lease, or even the amounts which the appellants had failed so to pay. Nor was there any dispute that, in consequence of their default, the respondent had re-entered the premises and brought the lease to an end. All of those things were admitted on the pleadings. Effectively, the only dispute was as to the amount due to the respondent by way of damages for the loss of the lease bargain and so, in point of principle, the position was analogous to that in Cameron v UBS.[8]
[8]Ibid, 114 [20].
Thirdly, the analogy between this case and Cameron v UBS derives strength from the observation of Ashley J in Australian Management Consultants Pty Ltd v Direct Financing Pty Ltd,[9] that:
As a matter of principle it seems to me that there is no essential difference between Terms of Settlement which arise out of a plaintiff’s disputed claim to enforce a foreign judgment and terms arising out of a plaintiff’s disputed entitlement to a money sum or damages in connection with a commercial dispute. In either event it is open for a defendant, in substance, to acknowledge his liability to a plaintiff by entry into Terms of Settlement.
[9][2003] VSC 202 [52].
Fourthly, the Terms of Settlement are to be viewed in context against the historical background of the lease and proceedings, so that, when one sees the amount of $262,648.96 described in the terms as the ‘full amount of the Plaintiff’s claim in the Proceeding in the agreed sum of $262,648.96’, there is an implication that the appellants were thereby acknowledging that the amount of the liability which was in issue on the pleadings was that amount, and thus that the appellants were liable to pay it at that time. Why else describe the sum of $262,648.96 as an agreed sum for which the respondent would be entitled to enter judgment on its claim if the appellants defaulted in payment of the instalments provided for in clause 2?
Fifthly, although not the same, clause 4(a) of the Terms of Settlement is analogous to the provision considered by Davies J in Perpetual Trustee Co Ltd v Mitchell,[10] whereby the debtor acknowledged that, in the event of default in payment of agreed instalments, the creditor would be entitled to enter judgment for $1,047,837.83 (being the amount owing under the Loan Agreement as at 22 January 2010). Just as Davies J held that to be an acknowledgement of an existing debt and an agreement as to its amount, it appears to me that clause 4(a) of the Terms of Settlement was an acknowledgment of an existing contractual obligation and as to its amount.
[10][2010] NSWSC 825 [21].
Sixthly, the position here is also in some ways similar to the situation in Perpetual Trustee Company Ltd v Aspley Specialist Centre Pty Ltd,[11] where there was an acknowledgment of the existence of a debt and agreement that the plaintiff be at liberty forthwith to enter judgment for the full amount of it if specified instalments of it were not paid timeously. In that case, the total amount of the debt and the total amount of the instalments were the same, as opposed to the position here where the total instalments if paid would have been less than ‘the agreed sum of $262,648.96’. But, practically speaking, the time value of money meant that the obligation in
Perpetual to pay the total amount at once was more burdensome than the obligation to pay it off by instalments over time.[11][2010] QSC 232 (McMurdo J).
The decision in Zenith
At first sight, the decision in Zenith[12] suggests that clause 4(c) was penal. On closer examination, however, it will be seen that Zenith turned very much on the terms of the deed of settlement there is issue. So far as one can tell, there was no admission on the pleadings, as there was here, as to the existence of an obligation to pay something; and there was nothing in the terms of the deed in Zenith, as opposed to the expression ‘agreed sum’ which appears in clause 4(a) of the Terms of Settlement in this case, which implied that the debtor acknowledged the amount which was due. In my view, Zenith was distinguishable on that basis and the judge was right to distinguish it.[13]
[12]Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2001] 2 Qd R 114.
[13]See and compare the basis on which McMurdo J distinguished Zenith in Perpetual Trustee Co Ltd v Aspley Specialist Centre Pty Ltd [2010] QSC 232 [25].
Costs
As to the question of costs, counsel for the respondent attacked the judge's reasoning as based on a false premise that an obligation of the kind for which clause 4(c) provides will necessarily be penal unless it represents a genuine pre-estimate of damage. In case it matters, I do not read the judge's reasoning in that fashion. Rather, it seems to me that his Honour proceeded by a process of deduction that, because the appellants were not under a pre-existing obligation to pay indemnity costs, the obligation provided for in clause 4(c) was to be seen as a new obligation created by the terms of settlement – as opposed to an existing obligation of which the existence was acknowledged by the terms of settlement. Since that new obligation only accrued upon default in payment of an instalment under clause 2, and required payment of a sum in addition to the instalments provided for in clause 2, it was in the nature of a penalty unless it could be viewed as a genuine pre-estimate of
damage. And since it was conceded that it could not be viewed as a genuine pre-estimate of damage, it followed it was penal.
As matters have turned out, however, it is unnecessary to reach a concluded view about that. During the course of argument, counsel for the respondent sought and was granted leave to rely on evidence (which was not before the judge) that, before entry into the Terms of Settlement, the respondent made an offer of compromise to settle the proceeding on the basis that both be discontinued and each side bear their own costs. That offer was considerably more advantageous to the appellants than the obligation to pay the $262,648.96 provided for in the Terms of Settlement. In those circumstances, there is a strong basis for inferring that, when the parties entered into the Terms of Settlement, the appellants were conscious that, if the matter proceeded to trial, there would be judgment for the sum of $262,648.96 which they acknowledged was due, and in that event they would be ordered to pay indemnity costs pursuant to Rule 26.08(2) of the Rules of Court.[14]
[14]County Court Rules of Procedure in Civil Proceedings 1999.
Needless to say, additional evidence is only received on appeal in exceptional circumstances. In this case, however, I am persuaded that the circumstances are exceptional. Affidavit evidence filed in support of the application to tender the additional evidence establishes that the failure to tender it below was due to exceptional and unavoidable circumstances. Additionally, counsel for the appellants frankly conceded that the appellants would not be prejudiced by allowing the evidence in at this stage. The only basis of objection to its tender was that, in counsel’s submission, it was irrelevant.
In my view, once it is understood that the appellants were aware that, if the matter proceeded to judgment, they faced a real prospect of being ordered to pay indemnity costs, it ought be inferred that, when they entered into clause 4(a) of the terms of settlement, and thereby acknowledged that they were liable in the amount
of $262,648.96, they intended to and did by clause 4(c) acknowledge that they were also liable for payment of the respondent’s indemnity costs.
I am strengthened in that conclusion by the fact that the appellants had made a substantial counter-claim in the proceedings only later to abandon it completely and to acknowledge that all such claims were discharged upon the entry into the terms of settlement. That suggests their counterclaim was commenced or continued in circumstances where the appellants, properly advised, should have known that it had no chance of success.[15]
[15]See Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401.
In the result, I conclude on the balance of probabilities that, by clause 4(c) of the Terms of Settlement, the appellants acknowledged that they were liable to the respondent, in the sense that they faced a contingent liability for indemnity costs in favour of the respondent which, unless the matter were settled, would crystallise and become due. It follows, in my view, that clause 4(c) was an acknowledgement of an existing obligation to pay indemnity costs, albeit conditional upon failure to pay the agreed instalments in accordance with clause 2, and, for that reason, not penal.
Counsel for the appellants contended that it was not enough for the appellants to acknowledge the existence of a contingent liability for indemnity costs. In his submission, in order to avoid the conclusion that clause 4(c) was penal, it would be necessary for the existence of the liability to have been established by determination of a competent court or tribunal.
I reject that contention. It is plain from the authorities to which I referred that it is sufficient to constitute the acknowledgement of an existing obligation for the purposes of the law relating to penalties that the party who acknowledges the obligation reasonably considers there is a real prospect of facing a liability in that amount.
The test in Ringrow
Finally, I should say that, in the course of argument, counsel for the respondent submitted that the judge erred by applying an incorrect test of what it is that amounts to a penalty.
Given the view which I have taken of the matter, it is probably unnecessary to say anything about that. In case it proves to be important, however, counsel's submission was that the High Court's decision in Ringrow Pty Ltd v BP Australia Pty Ltd[16] means that an obligation to make a payment in the event of default is not to be classed as penal unless it is extravagant or unconscionable in amount compared to the amount which the obligor would otherwise have been obliged to pay.
[16](2005) 224 CLR 656, 669 [32].
So much must be accepted. But it is important to understand that, in Ringrow, the High Court was concerned with a question of whether an obligation to pay an amount in the event of default (or, more precisely, to transfer property to the creditor in the event of default) was of such an amount or of such value as to be capable of being regarded as a genuine pre-estimate of the damage which the creditor had suffered by reason of the default; or, alternatively, was so extravagant and unconscionable and out of all proportion to the loss and damage which the creditor was likely to have suffered that it should be regarded as penal.
In this case, the default was default in payment of the instalments provided for in clause 2 of the Terms of Settlement. Logically, the costs which the respondent had already incurred in the proceeding up to the point of entry into the Terms of Settlement were not part of any loss and damage which it might later suffer as a result of the appellants defaulting in the obligation to pay the instalments provided for in clause 2. A genuine pre-estimate of the costs which the respondent might
suffer by reason of that default would be limited to the costs which it would incur in re-instating the proceeding and obtaining judgment on the Terms of Settlement.
It remains, however, that there is a sound basis to infer that by clause 4(c) of the Terms of Settlement the appellants acknowledged an existing obligation to pay the respondents' indemnity costs, and thus a sufficient basis to preclude the conclusion that the obligation imposed by clause 4(c) was in the nature of the penalty.
Conclusion
For those reasons, I would dismiss the appeal, allow the cross-appeal, and vary the orders below accordingly.
REDLICH JA:
As was the case in Cameron v UBS,[17] at the time that the parties entered the Terms of Settlement, the defendants agreed once and for all to withdraw their defences to the claim of the plaintiff and in this case, furthermore, to abandon their counterclaim. They agreed in clause 5 of the Terms of Settlement to irrevocably consent to the respondent entering judgment against them in the sum of $262,648.96 in the event that the appellants defaulted in the payment of any of the instalments set out under the Terms of Settlement. When read fairly, those Terms of Settlement did contain by implication an acknowledgement by the appellants of their liability for that sum.
[17](2000) 2 VR 108.
I concur in the reasons for judgment of Nettle JA and in the disposition of the appeal and cross-appeal as he proposes.
HARPER JA:
I also agree in the judgment of the learned presiding judge.
(Discussion ensued re costs.)
NETTLE JA:
A question has arisen as to the scale of costs which should be paid on appeal. Counsel for the respondent has tendered an offer to compromise dated 26 November 2009 which was, in substance, that each party walk away and bear its own costs of the appeal and cross-appeal. He submitted, on the basis of that offer and its rejection, that the court ought exercise its discretion pursuant to Rule 26.12 to order that the appellants pay the respondent’s costs of the appeal and cross-appeal on an indemnity basis.
The application is opposed. Counsel for the appellants points to the fact that, although the compromise offer was made early in the proceedings, which on one view of the matter is a consideration that militates in favour of the respondent, the respondent was then yet to file its outline of submissions and it had not then taken out the summons seeking leave to rely upon the additional evidence which has proved instrumental in its success in the cross-appeal.
The principles which apply in an application of this kind are set out at some length in the judgments in Berrigan Shire Council v Balleriniand Forrestry Commision of New South Wales,[18] and it is unnecessary to repeat them. In substance, they mandate an assessment of whether the offer was reasonable and whether the offeree's refusal or rejection of it was unreasonable in the circumstances which obtained. Some of the considerations which bear upon that assessment are the complexity of the matter, the state of authorities, and whether there was, according to those authorities, reason to suppose that the offeree might have been successful.
[18][2006] VSCA 65 [10]–[11] and [31]–[34] applying Hazeldene Chicken Farm Pty Ltd v Victorian WorkCover Authority (2005–2006) 13 VR 435.
As has been submitted by counsel for the appellants, this is a case in which those considerations militate in favour of the appellants. The appeal and cross-
appeal involved matters of some legal complexity and, on one view of the matter, differences between the authorities which, in the circumstances which obtained at the time of the offer, left some reason to suppose that the appellants could be successful.
In those circumstances, the Court is of the view that the application for indemnity costs should be refused and that the costs should be ordered to be paid on a party/party basis.
The orders of the Court will be as follows:
1. The appeal is dismissed.
2. The cross-appeal is allowed.
3. It is ordered, pursuant to Rule 64.22(2) of the Supreme Court (General Civil Procedure) Rules 2005, that proceeding number CI0703745 is reinstated.
4. Paragraph 2 of the orders passed below is set aside and in lieu thereof it is ordered that:
(a) the defendants pay the plaintiff's costs fixed in the sum of $157,803.54; and
(b) the defendants pay the plaintiff’s costs of the application made 25 June 2009 on an indemnity basis to be taxed in default of agreement.
5. The appellants shall pay the respondent’s costs of the appeal and cross-appeal to be taxed as between party and party.
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