General Motors Holden Australia NSC Pty Ltd v Beecham Motors Pty Ltd
[2024] VSCA 177
•15 August 2024
| SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2023 0138 |
| GENERAL MOTORS HOLDEN AUSTRALIA NSC PTY LTD (ACN 603 486 933) | Applicant |
| v | |
| BEECHAM MOTORS PTY LTD (ACN 010 580 551) | Respondent |
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| JUDGES: | FERGUSON CJ, WALKER and MACAULAY JJA |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 22 July 2024 |
| DATE OF JUDGMENT: | 15 August 2024 |
| MEDIUM NEUTRAL CITATION: | [2024] VSCA 177 |
| JUDGMENT APPEALED FROM: | [2023] VSC 640 (Matthews J) |
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PRACTICE AND PROCEDURE – Group Proceeding – Accepted offer of compromise in respect of plaintiff’s claims – Terms of settlement regarding costs’ component – Meaning of ‘plaintiff’s costs of the proceeding’.
Supreme Court Act 1986, Pt 4A; Supreme Court (General Civil Procedure) Rules 2015, Order 26.
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, applied.
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| Counsel | |||
| Applicant: | Mr JC Giles SC with Mr AN McRobert | ||
| Respondent: | Dr CO Parkinson KC with Mr H Hill-Smith | ||
Solicitors | |||
| Applicant: | Norton Rose Fulbright Australia | ||
| Respondent: | HWL Ebsworth Lawyers | ||
FERGUSON CJ
WALKER JA
MACAULAY JA:
In 2018 the applicant, GM Holden, entered into five-year dealership agreements with a number of dealers, including the respondent, Beecham. The dealers were authorised to sell and service new Holden brand motor vehicles and to sell parts for them. The terms of each dealership agreement were substantially the same. In February 2020, GM Holden’s parent company announced that it would wind down all sales, design and engineering operations in Australia and retire the Holden brand in 2021. The dealers have been unable to purchase new Holden vehicles since March 2020. In those circumstances, GM Holden made offers of compensation to all dealers.
Beecham did not accept the offer made to it and instead commenced a group proceeding. It brought the proceeding on its own behalf and on behalf of other dealers. The group is closed and there are 10 members. Essentially, Beecham alleged that GM Holden breached the dealership agreements and statutory good faith obligations, thereby causing it and each group member to suffer loss and damage. The proceeding includes a number of issues common to the group members (the ‘common questions’), as well as issues that are specific to an individual group member, such as evidence concerning the quantum of the alleged loss of that group member.
On 14 July 2023, GM Holden served an offer of compromise offering to settle Beecham’s individual claim in the proceeding. Beecham accepted that offer which included the following terms:
1.The defendant offers to compromise the plaintiff’s claims in this proceeding in the following manner:
(a) by paying [the Settlement Sum] to the plaintiff;
(b)consenting to an order pursuant to section 33W(1) of the Supreme Court Act 1986 (Vic) that the plaintiff has leave to settle the whole of its claims in the proceeding on the terms of this offer of compromise; and
(c)consenting to an order (including pursuant to section 33W(5) of the Supreme Court Act 1986 (Vic)) in such terms as the Court may consider fit providing for the payment by the defendant of the plaintiff’s costs of the proceeding, up to and including the day this offer of compromise is served.
The question for determination by this Court is the meaning of paragraph 1(c).
The primary judge held that GM Holden is required to pay all of the costs of the proceeding incurred by Beecham to 14 July 2023, that being the date the offer was made.[1] This means the costs of its claim, which include the costs of the common questions (but does not include the costs of specific individual issues of any other group member, if any such costs were incurred before 14 July 2023). In reaching this conclusion, the judge held that the phrase ‘the plaintiff’s costs of the proceeding’ has a well understood ordinary meaning which is ‘all of the legal costs for which the plaintiff is liable and which were incurred…, subject only to those costs being agreed between the parties or taxed on a standard basis’.[2] The judge made an order that ‘the defendant pay the plaintiff’s costs of the proceeding up to and including 14 July 2023, to be taxed failing agreement’.[3]
[1]Beecham Motors Pty Ltd v General Motors Holden Australia NSC Pty Ltd [2023] VSC 640 (‘Reasons’).
[2]Reasons [81].
[3]Order dated 15 November 2023.
GM Holden seeks leave to appeal on the basis that paragraph 1(c) did not encompass the costs of the common questions. If successful before this Court, GM Holden seeks an order in the following terms:
[GM Holden] pay the individual costs of [Beecham] in the proceeding up to and including 14 July 2023, to be taxed failing agreement.
(As we explain below, there was some debate at the hearing of the appeal about what the phrase ‘the individual costs of [Beecham] in the proceeding’ would encompass.)
As part of its argument, GM Holden relies on the covering letter that was sent with the offer and says that it forms part of the context in which the offer was made and accepted. That letter included the following text:
GM Holden makes this offer for the purpose of seeking to avoid the costs and uncertainty of a trial in relation to Beecham’s alleged loss. Having regard to our client’s view that the upper end of the realistic range of Beecham’s alleged loss is less than [$X], it is clear that the costs of the proceeding are, or are becoming, disproportionate to the amount in issue.
…
The offer of compromise includes payment of Beecham’s costs. The scope of the costs to be paid if the offer is accepted would be subject to, and in accordance with, any costs order as the Court may make in approving the settlement on an application made under section 33W(1) of the Supreme Court Act 1986 (Vic); having regard to whether an order is made for the substitution of a new lead plaintiff, or otherwise as to the continuation (or not) of the group proceeding.
The offer includes GM Holden’s consent to an appropriate order under section 33W(1) of the Supreme Court Act 1986 (Vic). Other orders will of course be required in relation to the future configuration of the proceeding and the possible use of the time currently set down for trial – these orders can be discussed before or after acceptance of the offer of compromise, as may be convenient.…
If, for any reason, the enclosed Offer of Compromise is not effective under Order 26, this letter and the substance of the offer enclosed will be relied upon on the question of costs on the principles in Calderbank v Calderbank [1975] 3 All ER 333 and Cutts v Head [1984] Ch 290. In this event, if the offer were not accepted, and GM Holden achieved a better outcome than the offer in the final determination of this proceeding, GM Holden would seek costs orders equivalent to those at rule 26.08(3) or (4) as appropriate.
For the reasons which follow, we would refuse leave to appeal.
The judge’s reasons
There was no dispute that the offer of compromise resulted in a contract between GM Holden and Beecham (which we will refer to as the ‘settlement agreement’). Before the judge, GM Holden initially contended that the proper construction of the settlement agreement, in so far as it dealt with costs, was that it encompassed those costs ‘incurred by’ Beecham, being those costs Beecham had paid or was liable to pay.[4] It ultimately resiled from that submission and contended that the scope of clause 1(c) was Beecham’s individual costs, not including the costs of the common questions[5] — a construction that would limit its liability to Beecham to 1/11th of the total costs of the proceeding up to the date of the offer.[6] In large part, that contention was based upon the costs sharing agreement between the group members, by which they agreed to share the costs of the proceeding equally.[7] Separately, Beecham and the group members had entered into a costs agreement with their solicitors, HWL Ebsworth. Under that costs agreement, Beecham and the group members were jointly and severally liable to HWL Ebsworth for payment of their fees.[8]
[4]Reasons, [20]. In its written reply submissions below, GM Holden submitted that the costs were limited to those that Beecham ‘had paid’, but conceded at the hearing before the judge that an order in those terms was not appropriate: Reasons, [20(c)].
[5]Reasons, [50].
[6]Reasons, [71]. Although there were 10 group members, the costs were divided into 11 portions because one group member owned two dealerships.
[7]Reasons, [82]. This was disclosed in a group proceeding summary statement filed in the proceeding.
[8]Ibid.
The judge began by noting that the ‘ordinary principles of contractual interpretation apply, beginning with giving the words used their ordinary meaning and taking into account the context known to both parties’.[9] The judge examined the words used and noted that the ordinary meaning given to ‘the plaintiff’s costs of the proceeding’ is ‘all of the legal costs for which the plaintiff is liable and which were incurred’ up to the date of the offer.[10] Later in her reasons, the judge observed that the phrase has a ‘well understood meaning’.[11] The judge observed that it was clear that Beecham is liable to HWL Ebsworth for all the costs incurred due to the joint and several nature of the obligation under the costs agreement.[12] This obligation was not to be conflated with the funding arrangements for those costs as described in the summary statement.[13]
[9]Reasons, [77].
[10]Reasons, [81].
[11]Reasons, [83].
[12]Reasons, [82].
[13]Ibid.
The judge did not accept that the ‘plaintiff’s costs of the proceeding’ is limited to 1/11th of the solicitor’s costs. The judge observed that the surrounding circumstances and those words ‘are clear and are fairly susceptible of one meaning only’ — namely the meaning she had previously identified, being the costs for which Beecham was liable, incurred up to the date of the offer.[14] That meaning was not contradicted by the settlement being confined to Beecham’s individual claim; no distinction was made in the offer between individual costs and group costs.[15] The judge also observed that GM Holden’s argument that it was only liable for costs associated with Beecham’s individual claim, not including the costs of the common questions, did not sit well with its contention that it was only liable for 1/11th of the costs of the proceeding.[16]
[14]Reasons, [83].
[15]Reasons, [84]–[85].
[16]Reasons, [86].
The judge also noted that Beecham’s construction (which she accepted) was not productive of a commercial nonsense.[17] In any event, the judge stated that the provision was not ambiguous and it would be impermissible to re-write the parties’ agreement.[18] The judge noted that at the time the compromise of Beecham’s claim was reached, it was not known whether the group proceeding would continue and, if it did, it was not known whether Beecham would continue as the plaintiff or be replaced.[19] The judge noted that GM Holden was ‘free to offer to settle [Beecham’s] individual claim on any terms it saw fit, which it did, and it used the orthodox formulation in respect of costs which has an orthodox interpretation’.[20]
[17]Reasons, [87].
[18]Reasons, [90].
[19]Reasons, [93].
[20]Reasons, [96].
The judge accepted that the letter that accompanied the offer of compromise formed part of the context for the settlement agreement. However, she did not accept that the letter made clear that the costs to be paid related only to the costs of Beecham’s individual claim to the exclusion of the costs of group members.[21] The statutory recognition of the difference between the costs of common and individual questions did not, in her Honour’s opinion, necessitate the construction contended for by GM Holden.[22] Given her view that the meaning of the offer was clear, it was not necessary for her to apply the principle that ambiguous terms should be construed against the party which drafted the contract.[23] Had it been necessary to have regard to that principle, her Honour would have applied it to construe any ambiguity against GM Holden.[24] Her Honour noted that any further disputation on a taxation about the meaning of the phrase would be informed by her Reasons.[25]
[21]Reasons, [93].
[22]Reasons, [95].
[23]Often referred to by the Latin phrase ‘contra preferentum’.
[24]Reasons, [97].
[25]Reasons, [98].
Finally, her Honour accepted that GM Holden’s changing position and lack of clarity showed that it was ‘trying to re-write the settlement agreement on terms more favourable to it’.[26] In this regard, the judge stated that there had been three proposed iterations by GM Holden of the order for which it contended — GM Holden had ‘moved from costs incurred by the plaintiff, to costs paid by the plaintiff, incorporating concepts such as 1/11th of the costs or excluding the costs of the common questions’.[27]
[26]Reasons, [99].
[27]Reasons, [99] nn 34.
Grounds of appeal
There are two proposed grounds of appeal, which may be dealt with together. GM Holden contended that the judge misconstrued paragraph 1(c) of the offer by finding that the ordinary, well understood meaning and orthodox interpretation of the words ‘plaintiff’s costs of the proceeding’ led to a conclusion that GM Holden was required to pay all of the legal costs for which Beecham was liable. GM Holden argued that the judge should not have started from those words alone, but instead should have considered the language of the offer as a whole, the covering letter that accompanied the offer, the email accepting the offer as well as the purpose and context of the offer. GM Holden contended that the judge only considered these matters as a secondary consideration to see if they contradicted the ordinary meaning which she attributed to the phrase.
GM Holden said that, if the correct analytical process had been followed, the judge would have arrived at the proper construction of paragraph 1(c), which required GM Holden to pay only the individual costs of Beecham — which, it argues, does not include costs associated with the common questions or the costs of specific individual issues of any other group member. In GM Holden’s submission, costs associated with the common questions remain extant and fall to be determined at the conclusion of the trial of the remaining issues for the class, the proceeding having continued following settlement with Beecham. Indeed, GM Holden contended that if it succeeds in the trial, Beecham having continued as plaintiff could be liable for its costs of the common questions incurred both before and after the settlement was reached.
GM Holden contended that the judge erred in finding that the phrase ‘plaintiff’s costs of the proceeding’ has a fixed ordinary meaning in the context of settlement of the plaintiff’s individual claim in a group proceeding. In GM Holden’s submission, the type of proceeding (that is, a group proceeding) impacts on the interpretation of paragraph 1(c). It pointed to the operation of the offer of compromise under Order 26 of the Supreme Court (General Civil Procedure) Rules 2015 and its intersection with pt 4A of the Supreme Court Act 1986 (which concerns group proceedings). In broad terms, those two regimes operate as follows:
(a)Under rr 26.08(3) and (4), where a defendant’s offer of compromise has not been accepted, and either the plaintiff is unsuccessful in the proceeding or obtains a judgment which is not more favourable than the terms of the offer, the defendant receives some protection in relation to a costs order being made against it.
(b)Under pt 4A of the Supreme Court Act, if the plaintiff’s individual claim is settled the proceeding may continue with the same plaintiff,[28] or with a substituted group member as plaintiff,[29] or there may be de-classing such that the group proceeding does not continue.[30]
[28]Supreme Court Act 1986, s 33D(2).
[29]Ibid s 33W.
[30]Ibid s 33N.
Here, GM Holden said that there is a clear textual indication in the offer that the costs of the proceeding which it agreed to pay were the individual costs of Beecham. It pointed to the fact that the offer was addressed to ‘the plaintiff’; the settlement sum was to be paid to Beecham; only Beecham’s individual claim was to be settled; and the references in the offer to s 33W, which relate to the settlement of the individual claim of a plaintiff. GM Holden submitted that this demonstrates that the premise of the offer was that the proceeding would continue in respect of the remaining group members and it would remain able to recover costs (other than the individual costs of Beecham) if successful at trial, and if unsuccessful, the plaintiff (Beecham or a substituted group member) would be able to recover those costs.
GM Holden contended that there is ambiguity in the phrase used in paragraph 1(c) of the settlement agreement. It relied on the text of the letter which accompanied the offer as a contemporaneous explanation of the offer. In particular, it relied on the reference to the offer including payment of Beecham’s costs (in contrast to references to ‘costs of the proceeding’ in other parts of the letter) and the letter’s reference to the scope of the costs to be paid if the offer is accepted. GM Holden contended that this makes clear that the costs were the individual costs of Beecham and that paragraph 1(c) contemplated that the scope of those costs would be addressed by the form of costs order to be made by the Court on the s 33W approval application and reflect the continuation of the proceeding, notwithstanding the resolution of Beecham’s claim. It pointed to the final part of a paragraph in the letter which reads: ‘having regard to whether an order is made for the substitution of a new lead plaintiff, or otherwise as to the continuation (or not) of the group proceeding’. GM Holden submitted that this part of the letter makes it clear that the ‘scope of the costs to be paid’ is directed to three alternatives — (a) a new lead plaintiff; (b) Beecham continuing as the plaintiff; or (c) the proceeding not continuing. GM Holden contended that there would be no work for the sentence about scope to do if all of the costs (including the costs of the common questions) are to be borne by it.
GM Holden also submitted that the construction arrived at by the judge has an odd consequence because it is inconsistent with the apparent commercial purpose of the settlement agreement. That consequence was to settle Beecham’s claim but leave the proceeding otherwise to continue to trial, such that GM Holden would be liable for all costs of the common questions to the date of the offer even though the common questions were not settled and remain in issue. In the event that GM Holden succeeded at trial, it said that it would be deprived of the usual rule that the successful party is awarded costs. In the case of a group proceeding, that order would be against whichever dealer was plaintiff at the time by virtue of s 33ZD. That section provides that the Court may order the plaintiff or the defendant to pay costs and, subject to two exceptions, may not order a group member or sub-group member to pay costs. Those exceptions are in relation to determining a question that only relates to the claim of an individual group member,[31] and where the Court appoints a person other than the plaintiff to be a sub-group representative party.[32] GM Holden submitted that, when viewed objectively, it is improbable that it offered to pay the costs of an issue that remained in dispute.
[31]Ibid s 33R.
[32]Ibid s 33Q.
GM Holden accepted that its construction of paragraph 1(c) of the settlement agreement results in a lack of finality between it and Beecham. However, it contended that the dispute with Beecham was resolved finally as at the date of the settlement agreement (including as to costs) and that it was Beecham’s decision to remain as plaintiff that led to the consequence that there is a lack of finality between it and Beecham. Had Beecham been replaced as plaintiff, the new plaintiff would then be liable for costs under s 33ZD. GM Holden submitted that the offer contemplated that Beecham may continue as a plaintiff, which means that finality was not a necessary consequence, nor a necessary objective, of the offer.
GM Holden compared this group proceeding with a closed class to a proceeding with 11 plaintiffs. In its submission, settlement with one plaintiff would not result in the defendant having to pay the costs of the other 10 plaintiffs. Here, there is a known costs sharing agreement between Beecham and the group members which GM Holden contended reinforces the commercial incongruity that it agreed to meet anything more than the individual costs of Beecham.
Is GM Holden obliged to pay Beecham costs in respect of the common questions?
Before this Court, GM Holden did not submit, as it did before the judge, that it was liable for 1/11th of the costs of the proceeding up to the date of the offer. As mentioned above, the judge noted that that was one of three iterations of the order for which GM Holden contended in the application before her.[33] GM Holden no longer seeks such an order. Rather, it has a further formulation of the order it seeks; that is, that it pay ‘the individual costs’ of Beecham. In oral argument, GM Holden explained that by ‘individual costs’ it meant Beecham’s costs of the specific individual issues that concern it, and not the costs of the common questions (and not any costs specific to any other group members). In contrast, Beecham contended that Beecham’s ‘individual costs’ necessarily encompassed both its specific individual costs and the costs of the common questions, and excluded only the costs of the other group members relating to their specific individual issues (if any).
[33]Reasons, [99].
There is no dispute that, under the settlement agreement, GM Holden is obliged to pay costs that relate only to Beecham’s claim; for example, the costs of an expert report relating to Beecham’s alleged loss and damage. There is also no dispute that GM Holden is not obliged to pay costs that relate only to the claims of other group members; for example, the costs of an expert report relating to another group member’s alleged loss and damage.[34] At issue is whether GM Holden is liable to pay to Beecham the costs in respect of the common questions in the proceeding up to the date of the offer.
[34]The Court was not informed whether there had been any such costs incurred in the conduct of the litigation before the date of the offer, 14 July 2023.
The principles of construction of a commercial agreement are not in dispute. The principles were stated concisely by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd:
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning…
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.[35]
[35](2015) 256 CLR 104, 116–17 [46]–[48], [51] (citations omitted). See also, Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640.
Applying those principles, in our view the proper construction of cl 1(c) of the settlement agreement is the construction at which the judge arrived.
To recap, cl 1 provides that GM Holden would pay a settlement amount to Beecham; would consent to an order granting leave to Beecham to settle; and would:
(c)[consent]… to an order (including pursuant to section 33W(5) of the Supreme Court Act 1986 (Vic)) in such terms as the Court may consider fit providing for the payment by the defendant of the plaintiff’s costs of the proceeding, up to and including the day this offer of compromise is served.
Text
Unsurprisingly, the judge started with that text, as do we.
The words ‘plaintiff’s costs of the proceeding’ are clear. They are commonly found in court orders. Indeed, the judge made an order in the precise terms used by GM Holden in its offer, that offer then comprising the terms of the settlement agreement with Beecham following acceptance of the offer. The words used ordinarily mean all those costs which the plaintiff has incurred and for which it is liable. That ordinary meaning was, and is, the appropriate starting point for the construction of the settlement agreement, bearing in mind that the context and purpose could require a departure from the ordinary meaning. We consider that to be the meaning that ordinary commercial businesspersons would give to the language used.
Context
Turning to the context in which the offer was made, part of that context was the reference in paragraph 1(c) to ‘such terms as the Court may consider fit’. As GM Holden accepted, that did not give the Court licence to depart from the agreement reached by the parties. Rather, those words simply recognised that the Court may choose a method and language of its own to give effect to the agreement requiring GM Holden to pay Beecham’s costs of the proceeding. For example, the Court may have made a lump sum order for costs or, as the judge did, order that the costs be taxed failing agreement of the parties. That contextual language thus does not require any departure from the ordinary meaning of the language used.
Other context found in the settlement agreement itself supports the proposition that the meaning of the language used includes the costs of the common questions. What was being settled was Beecham’s claim. In part, the success or otherwise of its claim would necessarily arise from the answers to the common questions, not just from proof of the quantum of its loss and damage or any other matters relevant only to it. Success on the common questions — that is, on the breach of the dealer agreement or the statutory good faith obligation — was a necessary condition for Beecham’s success on its own claim as the representative plaintiff. Its costs, for which it was liable to HWL Ebsworth, encompassed the costs of litigating the common questions on its own behalf, albeit as well as on behalf of the group members. Indeed on this basis, we consider that the terms of the order for which GM Holden contended before us would lead to the same result — the individual costs of Beecham must include the costs associated with pursuing its claim, including the costs of the common questions. As senior counsel for GM Holden appeared to accept before us, the cost sharing arrangement between Beecham and the group members did not diminish Beecham’s liability to HWL Ebsworth.
We accept that another part of the relevant context is that this settlement was arrived at in a group proceeding, with reference in the offer to ss 33W(1) and 33W(5) of the Supreme Court Act. At the time of settlement, whether the proceeding was to continue and if so, in what form, was not known. The settlement agreement must be construed by reference to the time it was entered; not by reference to what occurred afterwards. Section 33W(1) provides for the settlement of the plaintiff’s individual claim with leave of the Court. In those circumstances, the Court may order that the plaintiff cease to be plaintiff.[36] The Court may order that a group member be substituted as plaintiff.[37] In either of those events, the Court may make an order ‘on such terms and conditions, as to costs or otherwise, as the Court thinks fit’.[38] It is also not beyond the realms of possibility that GM Holden may have brought a de-classing application under s 33N, particularly in the light that it had previously unsuccessfully made such an application. In the context of the uncertainty as to what may happen with a group proceeding following settlement of the plaintiff’s claim, there may be many reasons why an offer is made and accepted which deals with the whole of the costs of the proceeding — in this case, the plaintiff was to receive payment of all the costs of the proceeding to the date of the offer with the defendant to bear its own costs to that point in time. Ultimately, none of those matters compel the construction for which GM Holden contended, or otherwise require any departure from the ordinary meaning of the language adopted by the parties.
[36]Supreme Court Act 1986, s 33W(2).
[37]Ibid s 33W(3).
[38]Ibid s 33W(5).
More of the context referred to in the settlement agreement is that the offer was purportedly made under the Supreme Court (General Civil Procedure) Rules. The rules relating to costs are concerned with the liability of parties to the proceedings in respect of costs. For example, under r 63.13, a party to a proceeding is not entitled to recover any costs of the proceeding from any other party except by order of the Court. As stated above, in a group proceeding, it is the plaintiff who is the party against whom the defendant may claim costs.[39] Under r 26.02, a party may serve on another party an offer of compromise. Here, the parties were GM Holden (as defendant) and Beecham (as plaintiff) and it is therefore unsurprising that the offer was addressed to the plaintiff. In that context, a reference to the plaintiff’s costs of the proceeding supports the construction that what was being offered, and was accepted, is payment of all of Beecham’s costs of the proceeding, including the costs related to common questions (but not including the costs of specific individual issues of any other group members, if any such costs had been incurred).
Purpose
[39]Ibid s 33ZD.
Moreover, in our opinion a significant purpose of the settlement agreement, considered objectively, was finality of the dispute between GM Holden and Beecham at a particular date. That purpose would not be achieved by leaving the costs of the common questions to be dealt with after the settlement. In the present case, the fact that there may be a second dispute, arising from Beecham having continued as plaintiff, does not detract from the intended finality of the dispute (including liability as to costs) that the settlement secured upon the date the offer was accepted.
The covering letter
Assuming, for the purposes of the argument, that the covering letter that accompanied the offer may be relied upon as part of the contemporaneous context, it takes matters no further. The reference in that letter to the costs of the proceeding becoming disproportionate to the amount in issue says nothing about other unexpressed reasons why GM Holden may have wished to settle with Beecham and to pay all of the costs to the date the offer was made. As noted above, one possibility may have been the termination of the proceeding as a result of a successful de-classing application being made. In any type of commercial litigation, a corporate entity may well be motivated by any number of considerations to settle for more than what at first blush seems sensible. To give just a few examples, there is the certainty of outcome a settlement brings, the saving of time of executives and employees involved in the litigation, the removal of distraction from the core business of the commercial entity, the removal or reduction of reputational risk associated with litigation — the list is endless.
The references in the covering letter to ‘Beecham’s costs’ and ‘scope of the costs to be paid’ similarly do not advance GM Holden’s argument. As noted above, Beecham’s costs in prosecuting its claim include the costs it has incurred in respect of the common questions. The ‘scope’ of the costs is simply short form language to repeat what is contained in the offer — that is, that the costs order would be in ‘such terms as the Court may consider fit’. For the reasons given above, that does not mean the costs would be limited.
One thing that the letter does make clear, through its reference to Calderbank v Calderbank, is that, one way or another, GM Holden intended to rely on the offer as some form of costs protection in the event the matter ran to judgment. Therefore, the offer had a dual purpose:
(a)to reach a settlement of Beecham’s claim; and
(b)if settlement was not achieved, to give GM Holden some protection against an adverse costs order in the event that it was not successful at trial.
As noted above, in broad terms, under rr 26.08(3) and (4) where a defendant’s offer has not been accepted and either the plaintiff is unsuccessful in the proceeding or obtains a judgment which is not more favourable than the terms of the offer, the defendant receives some costs protection. Calderbank offers, which are made outside the Supreme Court (General Civil Procedure) Rules, have a similar effect. Leaving other complexities as to the effect of offers of compromise in group proceedings aside, there must be some doubt about the effectiveness of the offer to achieve some costs protection for GM Holden unless all of the costs of the proceeding to that time were to be paid. That is so regardless of whether Beecham declined the offer, accepted the offer and continued as plaintiff or in either of those circumstances was replaced at some point in the group proceeding by a new plaintiff. In making the offer in the terms that it did, GM Holden took the risk that it would be accepted with a consequence being that it would pay the costs to the date of the offer of common issues which had not at that time been determined but would possibly be determined subsequently if the proceeding continued. GM Holden cannot now be heard to say that the settlement agreement does not have the meaning it had at the time the offer was made.
GM Holden’s comparison between its settlement with Beecham in this proceeding and a proceeding settled with one of 11 plaintiffs is inapt. There are many differences between the two types of proceeding. Suffice to say that in a proceeding with multiple plaintiffs, the liability for costs would not rest with only one of them; in a group proceeding, because of s 33ZD, the liability for costs falls on the plaintiff and not on the group members (subject to limited exceptions as referred to above).
Conclusion
Essentially, if GM Holden’s contentions were to be accepted, the Court would in effect be re-writing the parties’ settlement agreement. That is not permissible. It was for GM Holden to frame its offer in terms of its choosing. Having done so, it cannot now walk away from the meaning that ordinary commercial businesspersons would give to it. If GM Holden intended something different, then different language was needed.
For the reasons given, the proposed grounds of appeal do not have reasonable prospects of success. Leave to appeal must be refused.
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