Chiodo Investments Pty Ltd v Rilac Pty Ltd (Costs)
[2023] VSC 651
•10 November 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2021 03012
| CHIODO INVESTMENTS PTY LTD (ACN 110 861 857) (AS TRUSTEE FOR THE CHIODO FAMILY TRUST) | Plaintiff |
| v | |
| RILAC PTY PTD (ACN 007 275 407) | Defendant |
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JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers, following judgment given on 5 October 2023 |
DATE OF RULING: | 10 November 2023 |
CASE MAY BE CITED AS: | Chiodo Investments Pty Ltd v Rilac Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 651 |
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COSTS – Where plaintiff seeks indemnity costs based on defendant’s failure to accept offer – Whether costs decision should be delayed pending sale of property – Where need to avoid hindsight in assessing response to offer - Whether unreasonable not to accept offer where offer would have resulted in a different arrangement to that which could be achieved by the litigation - Where defendant succeeded on some issues and failed on others - Where apportion costs to achieve practical justice - BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414 - Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 - Civil Procedure Act 2010 (Vic) s 29(1)(a).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L Virgona | Marshalls + Dent + Wilmoth |
| For the Defendant | Mr C Northrop | Harwood Andrews Lawyers |
HIS HONOUR:
A. Introduction
On 5 October 2023, I delivered reasons in which I:
(a) accepted Chiodo Investments Pty Ltd’s contentions that a deed signed by one of Rilac Pty Ltd’s directors was binding on Rilac Pty Ltd;
(b) accepted Rilac Pty Ltd’s contentions that the deed extinguished Chiodo Investments Pty Ltd’s beneficial interest in the property the subject of the deed and that Chiodo Investments Pty Ltd was not entitled as a ‘co-owner’ to an order for the sale of the property under the Property Law Act 1958;
(c) accepted Rilac Pty Ltd’s contention that Chiodo Investments Pty Ltd was statute barred from suing for breach of a contractual obligation on Rilac Pty Ltd to sell the property the subject of the deed;
(d) accepted Chiodo Investments Pty Ltd’s contentions that the deed gave it a right to effect a sale of the property the subject of the deed and to recover part of the proceeds of that sale to the extent that sale price exceeds $1.5 million;
(e) accepted Chiodo Investments Pty Ltd’s contention that the delay did not preclude it from exercising its right to effect a sale of the property the subject of the deed and to recover part of the proceeds of that sale; and
(f) accepted Chiodo Investments Pty Ltd’s contentions that the deed gave it a right to recover 10% of the rental income that Rilac Pty Ltd had received since 30 October 2012. [1]
[1]Chiodo Investments Pty Ltd v Rilac Pty Ltd [2023] VSC 590.
The parties were granted time to attempt to agree on a form of order that reflected my reasons and to prepare submissions on the question of costs. They were able to reach agreement on a form of order. These reasons deal with the question of costs, which I said I would determine on the papers.
The parties agree that Chiodo Investments Pty Ltd was successful in the proceeding and is entitled to an order for costs in its favour. Chiodo Investments Pty Ltd seeks indemnity costs as from the service by it of an offer to settle the proceeding and seeks that the determination of the costs be stayed for 90 days so that the property can be sold and the true attractiveness of its offer can be assessed once the sale price is known. Rilac Pty Ltd contends that the costs order made should reflect the fact that it succeeded in a number of issues in the case and that it should be ordered to pay only 50% of Chiodo Investments Pty Ltd’s costs.[2] Chiodo Investments Pty Ltd also indicated that it might wish to bring a claim for compensation under s 29 of the Civil Procedure Act 2010 arising from the fact that Rilac Pty Ltd had shortly before the hearing leased out the property without advising it of that fact.
B. Chiodo Investments Pty Ltd’s offer and whether the costs application should be delayed
[2]Rilac Pty Ltd’s proposed form of order provided for the payment of 80% of Chiodo Investments Pty Ltd’s costs. I assume that this was a typographical error as its written submission clearly contends for only 50%.
By letter dated 1 June 2023, Chiodo offered to resolve the proceeding on terms that Rilac Pty Ltd pay to it $450,000 within 28 days and the parties otherwise provide mutual releases and consent to the proceeding being dismissed with no order as to costs.
The material before the Court indicated that the property was valued at $2,200,000. The value of the property was not otherwise an issue for determination. Under the division of proceeds provided for in the deed, a sale at that price would result in Chiodo Investments Pty Ltd receiving approximately $350,000 (putting to one side the costs of sale). Assuming that the amount owing representing 10% of the rental income received by Rilac Pty Ltd amounted to approximately $36,000, as seems to be the case, that would take Chiodo Investments Pty Ltd’s total receipt to about $385,000. This is to be compared with its offer that Rilac Pty Ltd pay to it $450,000 inclusive of costs. Chiodo Investments Pty Ltd contends that when its costs are taken into account, it is apparent that the offer would represent a better result for Rilac Pty Ltd than it achieved at trial. But, as noted above, it wishes to have the costs decision delayed for 90 days so the property can first be sold.
Chiodo Investments Pty Ltd’s offer will only entitle it to costs assessed on the indemnity basis if it were unreasonable in the circumstances for Rilac Pty Ltd not to accept it.[3] I do not consider that there is a sufficient prospect of that being established to warrant delaying the making of a costs order. The wisdom of not accepting the settlement offer should not be assessed in hindsight. If the property were to be sold for $2,200,000, Chiodo Investments Pty Ltd’s offer probably represented a better outcome for Rilac Pty Ltd than it achieved in the litigation because Chiodo Investments Pty Ltd’s costs were probably substantial, but in the absence of some knowledge about the level of party-party costs then recoverable it was unclear how much better an outcome it would have been. The difference may have been marginal. More importantly, however, and although there was evidence that the property was worth about $2,200,000, there was no guarantee that the property would sell for that. If it sold for less, the offer was less attractive. If it sold for more, the offer was more attractive. These were unknowns. The fact that Chiodo Investments Pty Ltd has asked to have the determination of the costs delayed until after the sale so that the true value of the offer may be ascertained supports the proposition, once it is accepted that hindsight should not be used, that it was not unreasonable for Rilac Pty Ltd not to have accepted the offer when it was made.
[3]Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, 441 [23] (Warren CJ, Maxwell P and Harper AJA); BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414, [61].
Also, and perhaps more fundamentally, there are significant structural differences between Chiodo Investments Pty Ltd’s offer and what it might have achieved in the litigation. It is difficult to compare coming under an obligation to pay a fixed sum of $450,000 within 28 days with being obliged to sell a property and to share the proceeds of that sale, whatever they are, after moneys have been realised from that sale. Even taking into account the fact that the offer would permit Rilac Pty Ltd to retain the property, it cannot be said, in my view, that in the circumstances of this case it was unreasonable for Rilac Pty Ltd not to have accepted an offer that required it to pay a substantial fixed sum within 28 days.
Chiodo Investments Pty Ltd also contended that the fact that Rilac Pty Ltd leased out the property prior to trial without telling it that it had done so placed it in breach of its obligations under the Civil Procedure Act 2010, and, because that too could affect the costs to be awarded,[4] the costs determination should be delayed until that issue may be investigated. There was nothing in the terms of the deed that prevented Rilac Pty Ltd from leasing out the property. Indeed, that was the expectation. The fact that the property had been leased out did not affect the costs that were incurred in the proceeding. It is not as if documents were withheld that were relevant to the issues that I had to decide. For these reasons, I do not consider that Rilac Pty Ltd’s failure to inform Chiodo Investments Pty Ltd that the property had been leased out is sufficient reason to delay the making of a costs order.
[4]Civil Procedure Act 2010 (Vic) s 29(1)(a).
Accordingly, I propose to determine the costs now, and to order Rilac Pty Ltd to pay costs on the standard basis, rather than on the indemnity basis.
C. What allowance should be made for the varying success of the parties?
Costs are not punitive, and the making of a costs order against a party reflects the reality that costs are incurred and have to be borne by one party or the other. Chiodo Investments Pty Ltd, as the successful party, is entitled to a costs order in its favour. But in deciding what costs order to make I am entitled to take into account that Rilac Pty Ltd succeeded in some of the issues that were litigated. A pragmatic approach may be taken and the aim is to provide substantial justice to the parties having regard to my impression and evaluation of the importance of, and time taken up by, different issues rather than to attempt an unachievable ‘arithmetical precision’.[5]
[5]See, eg, Chen v Chan [2009] VSCA 233, [10] (Maxwell P, Redlich JA and J Forrest AJA).
Here, Chiodo Investments Pty Ltd succeeded in what I consider were the principal issues. The most significant issue in the case, by a significant margin, was whether Rilac Pty Ltd was bound by the deed at all. That was the issue at which most of the evidence was directed and on which most of the time was spent. The issues on which Chiodo Investments Pty Ltd failed were almost incidental by comparison. That said, I accept that by making the arguments that it did, upon which it failed, Chiodo Investments Pty Ltd put Rilac Pty Ltd to expense and that some allowance should be made for those matters. In my view, practical justice may be done between the parties by ordering Rilac Pty Ltd to pay 90% of Chiodo Investments Pty Ltd’s costs to be taxed in default of agreement on the standard basis.
D. The floated claim for compensation under the Civil Procedure Act 2010
I express no views on the merits of any claim that Chiodo Investments Pty Ltd may bring against Rilac Pty Ltd for compensation under s 29 of the Civil Procedure Act 2010, but the orders made should not preclude Chiodo Investments Pty Ltd from bringing an application for compensation if it wishes to do so. I will, in my orders, reserve liberty to Chiodo Investments Pty Ltd to apply for compensation under s 29 of the Civil Procedure Act 2010.
E. Disposition
I will make the following orders:
1. The plaintiff is authorised to sell the property situate at and known as 66 River Street, South Yarra, Victoria and more particularly described in certificate of title volume 10487 folio 633 (‘the Property’).
2. The defendant shall co-operate and execute all such documents and do all such things as may be necessary to enable the plaintiff to sell the Property and to give effect to the sale of the Property.
3. The defendant shall pay to the plaintiff 10% of the total rent received by the defendant for the Property for the period September 2015 to June 2023 inclusive, in the sum of $35,713.30, together with interest thereon (for the period August 2021 to October 2023 inclusive) in the sum of $640.13.
4. The defendant shall account to the plaintiff for 10% the net rent received by the defendant for the Property from the date of this order until the date of settlement of the sale of the Property.
5. The amount paid into Court by the plaintiff as security for the defendant’s costs in the total sum of $99,000.00 be released to the plaintiff and paid to the Marshalls Dent Wilmoth Law Practice Trust Account.
6. The amount paid by the plaintiff as security for the defendant’s costs in the sum of $26,660.00 (together with any interest thereon) held in the Bank of Melbourne controlled monies account be released to the plaintiff and paid to the Marshall Dent Wilmoth Law Practice Trust Account.
7.The defendant pay 90% of the plaintiff’s costs to be assessed in default of agreement on the standard basis.
8.There be liberty to the plaintiff to apply for compensation under s 29 of the Civil Procedure Act 2010 (Vic).
9.The proceeding otherwise be dismissed.
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