Ikosidekas v MWL Financing Pty Ltd (Costs)
[2022] VCC 887
•20 June 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
Case No. CI-19-01998
| Ikosidekas | Plaintiff |
| v | |
| MWL Finance Pty Ltd (ACN 154 571 356) & Ors | Defendants |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 May 2022 and 5 May 2022 | |
DATE OF RULING: | 20 June 2022 | |
CASE MAY BE CITED AS: | Ikosidekas v MWL Financing Pty Ltd & Ors (Costs) | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 887 | |
RULING
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Subject:COSTS
Catchwords: Whether costs should be paid on a standard or indemnity basis – Whether rejection of Calderbank offer reasonable – Whether the plaintiff’s case was hopeless – Where liability found positively in favour of plaintiff – Where prior contribution negated recovery of compensatory damages on the pleaded case – Principles to be applied to unmeritorious and hopeless cases – Application for indemnity costs refused
Legislation Cited: Civil Procedure Act 2010 (Vic); County Court Civil Procedure Rules 2018; Australian Securities and Investments Commission Act 2001 (Cth); Supreme Court Act 1986 (Vic); Trade Practices Act 1974 (Cth); Competition and Consumer Act 2010 (Cth)
Cases Cited:
Marks v GIO Australia Holdings (1998) 196 CLR 494; Livingstone v Rawyards Coal Co (1880) 5 AC 25; Whitfield v De Lauret & Co Ltd (1920) 29 CLR 71; Fatimi Pty Ltd v Bryant [2004] NSWCA 140; Hungerfords v Walker (1989) 171 CLR 125; XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985); 155 CLR Aljade and MKIC v OCBC [2004] VSC 351; Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd (2010) 31 VR 46; Oshlack v Richmond River Council (1998) 193 CLR 72; Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225; 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; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294; Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [No 2] [2015] VSCA 123; Hannover Life Re of Australasia v Colella [2014] VSCA 205; Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs) (2021) 64 VR 200; Banksia Securities Ltd v Insurance House Pty Ltd (Costs) [2020] VSC 234;Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397; J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301; Macedon Ranges Shire Council v Thompson (2009) 170 LGERA 41; United Petroleum Australia Pty Ltd & Ors v. Herbert Smith Freehills (No 2) [2018] VSC 501; Grbavac v Hart [1997] 1 VR 154; Roberts v Rider [2006] NSWSC 1084; Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2) [2016] FCA 1169.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Blair | Klonis Kirby & Co |
| For the Second Defendant | Mr J Lipinski | Stenta Legal |
HER HONOUR:
Introduction
1On 13 May 2022, I dismissed the proceeding. I invited parties to make written submissions on the question of costs to be determined on the papers.
2The second defendant seeks orders of the Court that:
(a) the plaintiff should pay the second defendant’s costs of and incidental to the proceeding up to 31 May 2020 on a standard basis; and
(b) the plaintiff should pay the second defendant’s costs from 1 June 2020 on an indemnity basis; or alternatively
(c) that the plaintiff pay the second defendant’s costs of and incidental to the proceeding on a standard basis.
3The plaintiff seeks orders of the Court that:
(a) the second defendant pay the plaintiff’s costs on the standard basis to be taxed in default of agreement; or alternatively
(b) the second defendant pay the plaintiff’s costs to be on the standard basis to be taxed in default of agreement until 31 May 2020, being the date upon which the plaintiff was compensated by the first and third defendants; and
(c) there otherwise be no orders as to costs from 1 June 2020 to the date of judgment; and
(d) the second defendant pay the plaintiff’s costs on the standard basis to be taxed in default of agreement in respect of this application as to costs.
4For the reasons set out below, the second defendant should pay the plaintiff’s costs of and incidental to the proceeding on a standard basis to be taxed in default of agreement until 31 May 2020 and the plaintiff ought to pay the second defendant’s costs of and incidental to the proceeding from 1 June 2020 on a standard basis to be taxed in default of agreement.
Procedural History
5The plaintiff (“Ikosidekas”) applied for judgment against the second defendant (“Glenis”) on the basis that he committed a fraud on Ikosidekas by making false representations and warranties regarding a loan agreement for the sum of $160,000.00. Ikosidekas claimed that he advanced the funds based on a signed loan agreement and has suffered loss and damage in the amount of $742,250.00 (plus interest), alternatively, exemplary damages.
6Glenis opposed the claim, denying the representations and not admitting the warranties. Glenis claimed in his defence that he paid $190,000.00 in payment or discharge of the loan (which was not pressed at trial) and says any amount owing by him to Ikosidekas ought to be reduced by the $160,000.00 contribution made by the first defendant (“MWL Finance”) and the third defendant (“White”) and interest that does not constitute a penalty.
7Glenis further contended that Ikosidekas could not prove causation in tort or misrepresentation in relation to the pleaded loss for contractual interest under the loan agreement or as expectation loss. Glenis argued that Ikosidekas had recovered the loss and damage in relation to the principal advanced and, as such, was not entitled to compensatory damages. Therefore, Ikosidekas was not entitled to exemplary damages.
8It was common ground between the parties that the proceeding settled as between MWL Finance and White pursuant to confidential terms of settlement and orders were made on 18 May 2020 that the proceeding against MWL Finance and White be dismissed.
9In his prayer for relief, Ikosidekas claimed against Glenis the loss and damage being the sum owed pursuant to the $160,000.00 principal advanced less the contribution.
Deceit and Misleading & Deceptive Conduct Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”)
10The Court considered the cause of action of deceit and misleading and deceptive and unconscionable conduct under the ASIC Act.
11For a cause of action for deceit under the Trade Practices Act 1974 (Cth) (replaced by the Competition and Consumer Act 2010 (Cth) with analogous provisions to s12GF ASIC Act), the appropriate method to calculate damages for breach of tort is reliance loss, and not expectation loss.
12It was conceded by Ikosidekas, in closing submissions, that he was not advancing a claim for opportunity loss arising from the loss of the use of the funds advanced to Glenis.
13By seeking the contractual interest, Ikosidekas was seeking loss of expectation damages through s12GF of the ASIC Act. The analogous s82 TPA cases stand for the proposition that misleading and deceptive conduct inducing a claimant into entering into a contract does not give rise to compensation for expectation loss under that contract.[1]
[1] Marks v GIO Australia Holdings (1998) 196 CLR 494 at [17] per Gaudron J, [38] – [40] per McHugh, Hayne and Callinan JJ.
14On the pleaded case, Ikosidekas did not claim for any consequential loss other than the contractual interest. The Court noted that such an alternative transaction would have been a known head of damage under this section.
Tort of Deceit
15The Court considered that the general principle in assessing damages in tort is that the plaintiff should as near as possible receive a sum of money which, as far as money can, place them in the same position as if the wrong had not been sustained.[2]
[2] Livingstone v Rawyards Coal Co (1880) 5 AC 25 at [39] per Lord Blackburn.
16Ikosidekas could not claim that he suffered loss in the sum of the contractual interest because he altered his position in reliance of the misrepresentations. Had Glenis not made the representations, Ikosidekas says that he would not have entered the loan agreement and, therefore, he would not be entitled to the contractual interest.
17Further, the Court noted that damages for the tort of deceit are reliance-based damages and do not encompass expectation loss damages.[3]
[3] Ibid at [15].
18On the pleaded case, the Court was required to deduct from the established loss of $160,000.00, the recovered amount of $160,000.00 received from the first and third defendants.
19Ikosidekas’ loss had been satisfied and, therefore, there was no further entitlement to compensatory damages.
Restitution
20The Court noted the difficulty in the argument of restitution given that the terms of the settlement agreement dated 18 May 2020 had not been produced.
21Ikosidekas was not entitled to contractual interest as part of a restitution claim, therefore, the application to any contractual interest was not permitted.
22There was insufficient proof before the Court to attribute legal costs to White alone and the pleadings did not seek an allocation of the $160,000.00 to interest and costs of the proceeding.
Exemplary and Compensatory damages
23The Court emphasised that it is well-established law that exemplary damages are a separate category of award that does not compensate for loss. It seeks to punish and deter the defendant from wrongdoing.[4] An award of exemplary damages will be made only where the defendant has undertaken conscious wrongdoing in contumelious disregard of the plaintiff’s rights.[5]
[4] Whitfield v De Lauret & Co Ltd (1920) 29 CLR 71 at [77].
[5] Ibid.
24As such, exemplary damages are “parasitic” on compensatory damages when proof of loss is an ingredient of the plaintiff’s cause of action.[6]
[6] Fatimi Pty Ltd v Bryant [2004] NSWCA 140 at [72].
25The Court noted that the principles of compensatory damages would allow Ikosidekas to seek relief for reliance loss including any claim for loss of the use of the funds, such as an opportunity to enter into other short-term loans or other investment opportunities or seek Hungerfords[7] interest, because damages in tort seeks to put the claimant in the position they were in but for the wrongdoing.
[7] Hungerfords v Walker (1989) 171 CLR 125.
26However, this form of relief was not pleaded and proven by the plaintiff in his statement of claim.
27Further, despite being contended by Ikosidekas, there are no cases that support the use of default or contractual interest rate under contract in calculating exemplary damages. The authorities also state that the Court must exercise moderation in fixing an award of exemplary damages.[8]
[8] XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR at 463 per Gibbs CJ.
Statutory Interest Provisions
28The Court noted that s57 of the Supreme Court Act 1986 (Vic) (“SCA”) was not engaged in the present case as the loan agreement was said to be forged. There was no allegation on the pleadings that Ikosidekas entered into a contract with Glenis and there was no lawful recovery in circumstances where the loan agreement was procured by deceit.
29Further, as a consequence of the deduction of the contribution to the damage suffered by Ikosidekas, there was no debt or damage over and above which interest may be awarded. Therefore, the statutory interest provisions under s60 of the SCA and on the pleaded case were not engaged.
30Accordingly, in light of the summarised reasons detailed above, the Court ordered the proceeding be dismissed and that the plaintiff pay the second defendants’ costs of and incidental to the proceeding on the standard basis, to be taxed in default of agreement (unless either party has a basis for a different cost order).
Legal Framework
31It is common ground that as a general rule, the Court will order costs to be taxed on the standard basis: O63A and r63A.31 of the County Court Civil Procedure Rules 2018 (“Rules”) (see r63A.30 regarding the meaning of “standard basis”). The discretion to make a special costs order is an unlimited one, though it must be exercised judicially and not unreasonably, and the circumstances should be “special”.[9] The usual order as to costs is that costs follow the event, and the successful party is entitled to an award of costs in its favour.[10]
[9] Aljade and MKIC v OCBC [2004] VSC 351 at [10] see also Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd (2010) 31 VR 46 at [15].
[10] Oshlack v Richmond River Council (1998) 193 CLR 72 at [97].
32In Colgate-Palmolive Co & Anor v Cussons Pty Ltd,[11] Justice Shepherd set out many categories of circumstances which will warrant the making of a special costs order:
(a) the making of allegations of fraud knowing them to be false;
(b) the making of irrelevant allegations of fraud;
(c) evidence of particular misconduct that causes loss of time to the court and to other parties;
(d) the fact that the proceedings were commenced or continued for some ulterior motive or with wilful disregard of known facts or clearly established law; and
(e) the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
[11] (1993) 46 FCR 225 at [23]– [24].
33In considering whether or not a party should have their indemnity costs and the relevance of Calderbank offers, the principles that guide the Court are set out in the decision of Justice Habersberger in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3)[12] as follows:
[12] [2012] VSC 414 at [59]– [67] referring to Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCoverAuthority (No 2) (2005) 13 VR 435.
First, the fact that a less favourable result is achieved does not give rise to a presumption of a special costs order. The making of an offer and its rejection are “but two albeit important circumstances” to which the Court will have regard in the exercise of its costs discretion.
Secondly, the competing policy objectives relevant to the exercise of the costs discretion are principally the desirability of promoting settlement and reducing litigation costs as against the undesirability of discouraging potential litigants from bringing their dispute to the courts.
Thirdly, the critical question is whether the rejection of the offer was unreasonable in the circumstances. As the Court of Appeal said in Hazeldene:
In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
Fourthly, a court considering submissions that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
the stage of the proceeding at which the offer was received;
the time allowed for the offeree to consider the offer;
the extent of the compromise offered;
the offeree’s prospects of success, assessed as at the date of the offer;
the clarity with which the terms of the offer were expressed; and
whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
Fifthly, as the determination of whether it was unreasonable for the offeree to have rejected the offer is made “as at the time, or within a reasonably short time after, the offer” was made,[13] the Court should not too readily embrace submissions that it was inevitable that the proceedings would fail. As Hamilton J put it in Grynberg v Muller:
These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious …
Sixthly, the onus lies on the offeror to demonstrate the unreasonableness of the offeree’s rejection of the offer. This means that it is necessary to analyse what was proposed.
Seventhly, there is no general rule that the Calderbank offer must set out with specificity the basis for the offeror’s contention that the offeree should accept the compromise. Whether there is a need to do so depends upon a consideration of all of the circumstances existing at the time of the offer.
Eighthly, it is not necessary for the applicant for an indemnity costs order to establish matters which might be relevant to other, well-recognised, grounds for indemnity costs. Such conduct is not a pre-requisite for a finding that the rejection of the Calderbank offer was unreasonable.
Ninthly, an “all in” offer is permitted in a Calderbank offer. (citations omitted)
[13] Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [21] per Goldberg J.
34Justice Habersberger’s decision was upheld on appeal to the Court of Appeal in Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [No 2].[14]
[14] [2015] VSCA 123 at [55].
35The above “principles established by Habersberger J” were referred to by the Court of Appeal in Hannover Life Re of Australasia v Colella[15] without any criticism.
[15] [2014] VSCA 205 at [91].
36The principles and case authorities to be applied with respect to unmeritorious claims was considered in detail and helpfully summarised by Justice Riordan in Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs).[16]
[16] (2021) 64 VR 200 at [4] – [11].
37Justice John Dixon recently stated the principles applicable to an award of indemnity costs in Banksia Securities Ltd v Insurance House Pty Ltd (Costs) as follows:[17]
(a) Costs are to be assessed on a standard basis unless the circumstances of the case justify a departure from the usual course.
(b) The making of an indemnity costs order is in the unlimited discretion of the court, with such discretion to be exercised judicially and not unreasonably.
(c) The court may order indemnity costs where the circumstances warrant departing from the usual rule that costs be payable on a standard basis, including conduct that bears a ‘sufficient or unusual feature’ or some ‘relevant delinquency’.
[17] [2020] VSC 234 at [15].
38Justice John Dixon went on to say:[18]
“[t]he court may order indemnity costs in cases where a party, properly advised, knew or should have known that it had no chance of success and has persisted with its claim”.
[18] Ibid.
39Justice Woodward in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd[19] further considered, with respect the category of unmeritorious cases, jurisdiction to award indemnity costs. He considered indemnity costs were enlivened if the litigant had an ulterior motive for the litigation, and that an ulterior motive would be presumed if the litigant should have known there was no chance of success.[20] He explained:[21]
“I believe that it is appropriate to consider awarding … ‘indemnity costs’, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.”
[19] (1988) 81 ALR 397.
[20] Ibid at [401].
[21] Ibid.
40In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2),[22] Justice French did not consider it necessary to find that the proceeding had been commenced or continued for an ulterior motive to exist or that there was wilful disregard of the known facts or the clearly established laws. He said that the discretion to award indemnity costs could be enlivened if, “for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case”.[23]
[22] (1993) 46 IR 301.
[23] Ibid at [303] (emphasis added).
41The Court of Appeal cited Justice French’s statement with approval in Macedon Ranges Shire Council v Thompson.[24] The Court of Appeal confirmed that that the discretion to make a special costs order may be enlivened if a litigant presses a case that, on proper consideration, should have been seen as hopeless. However, the Court of Appeal stated that the Court may not be inclined to make such an order if the litigant did not recognise that its case was without merit.[25] In each case, the Court must have regard to:[26]
“The litigant’s conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made and the legal advice which the litigant ought reasonably to have obtained”.
[24] (2009) 170 LGERA 41, 49 [15] per Redlich JA and Beach AJA.
[25] Ibid.
[26] Ibid.
42Justice Riordan in Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs)[27] summarised the principles to be applied in considering an application for indemnity costs on the basis of an unmeritorious claim as follows[28]:
(a) The fact that a litigant filed or maintained a proceeding which has no, or substantially no prospect of success, does not of itself enliven the jurisdiction to award indemnity costs.
(b)The jurisdiction is enlivened if the litigant knew or should have known, on proper consideration, that the case was hopeless.
(c) The Court may decline to exercise its discretion if the litigant did not in fact recognise that the case was hopeless.
[27] (2021) 64 VR 200 at [11].
[28] Ibid.
Second Defendant’s Submissions
43The second defendant submitted that a proper exercise of the Court’s discretion is to order indemnity costs where a party commences or continues an action in circumstances where, properly advised, they should have known that they had no chance of success. It relied on the decision of Justice Woodward in Fountain Selected Meats (Sales Pty Ltd) v International Produce Merchants Pty Ltd and others.[29]
[29] (1988) 81 ALR 397 at [401].
44The second defendant identified the plaintiff’s alleged forms of loss. First, that Glenis had not repaid the $160,000.00 principal advanced. Second, the contractual interest pursuant to the terms of loan agreement he was misled into entering.
45In respect of the principal advanced, the second defendant submitted that on 31 May 2020, Ikosidekas recovered from the MWL Finance and White $160,000.00 pursuant to a settlement agreement. Accordingly, the Court found that Ikosidekas recovered his loss and damage in relation to the principal advanced.
46The second defendant also submitted that the contractual interest was obviously not available as both a matter of law and fact. Citing the reasons within the judgment and applicable authorities, the second defendant submitted that it is firmly established that misleading or deceptive conduct which induces a person to enter into a contract does not give rise to compensation for expectation loss under that contract. Further, that Ikosidekas’ case was that he would not have entered into the loan agreement with Glenis absent of false representations and warranties.
47The second defendant contends that as early as 5 June 2020, Glenis through his lawyers, put Ikosidekas on notice that he would not succeed on the contractual interest claim. It referenced a letter from Glenis’ lawyers to the plaintiff’s lawyers dated 5 June 2020, exhibited to the affidavit of Luke Faba sworn on 3 June 2022 (“Calderbank Letter”).
48Referring to the decision of Fountain Selected Meats (Sales Pty Ltd) v International Produce Merchants Pty Ltd and others,[30] the second defendant submitted that once Ikosidekas received the $160,000.00 settlement sum on 31 May 2020, properly advised, he ought to have known that he had no chance of success. At that point, Ikosidekas had recovered the sum equal to the principal advanced and the contractual interest was not available as a matter of law and fact.
[30] (1988) 81 ALR 397 at [401].
49The second defendant argues that it was no answer for the plaintiff to continue the proceeding after this point, on the basis of obtaining exemplary damages and statutory interest, for two key reasons. First, on the basis that is it well established that if no compensatory damages are awarded, a plaintiff will not be entitled to exemplary damages. Second, that since there was no loss or damage for the Court to compensate, there was no debt or damage to which an award of statutory interest would be applicable under provisions.
50For the reasons summarised above, the second defendant submits that “special circumstances” apply to depart for the general rule and settled practice to order costs to be taxed on a standard basis.[31]
[31] Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd (2010) 31 VR 46 at [15].
51Addressing the Court’s findings in respect of Glenis’ conduct, in particular false representations and warranties, and citing Oshlack v Richmond River Council,[32] the second defendant submits that such conduct is not relevant to the Court’s cost analysis as it did not relate to the conduct of the litigation itself or the lead up to the litigation.
[32] 193 CLR 72 at [69].
52On this basis the second defendants submit that the plaintiff should:
(a) pay Glenis costs of and incidental to the proceeding on a standard basis until 31 May 2020, after which indemnity costs should be awarded;
(b) alternatively, pay Glenis’ costs of and incidental to the proceeding on a standard basis.
Plaintiff’s Submissions
53The plaintiff submitted that the second defendant was entirely responsible for the proceeding that was brought before the Court and relies on its adverse factual findings made against Glenis’ conduct. The plaintiff contends that, absent of Glenis’ conduct, Ikosidekas would not have suffered any loss or damage and no action would have been commenced.
54In its costs submissions, the plaintiff addressed the second defendant’s reliance on the Calderbank Letter.[33] Referring to the decision of Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[34] the plaintiff submits that the reasonableness of the conduct turns on the question of whether it was unreasonable in the circumstances for the plaintiff to not accept the offer at the time it was made. Further, that the Court may consider several factors as outlined by Elliot J in United Petroleum Australia Pty Ltd & Ors v Herbert Smith Freehills (No 2),[35] including:
[33] Calderbank v Calderbank [1975] 3 All ER 333.
[34] (2005) 13 VR 435 at [23] to [27].
[35] [2018] VSC 501 at [18]-[19].
(1) The stage of the proceeding at which the offer was received.
(2) The time allowed to the offeree to consider the offer.
(3) The extent of the offer of compromise.
(4) The offeree’s prospects of success as assessed as at the date of the offer.
(5) The clarity with which the terms of the offer were expressed.
(6) Whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
55The plaintiff argued that the second defendant’s offer in the Calderbank Letter was uncertain and lacked clarity, not a genuine compromise, made in circumstances where the nature of the proceeding included serious adverse findings against Glenis and after Ikosidekas had compromised his position with MWL Finance and White. It made specific reference to the following terms expressed in the Calderbank Letter: “… [D2] proposes that this matter is resolved on the basis that [D2] agree to pay [the plaintiff] 50% of any sum recovered by [D2] in the other proceeding”.
56Citing the decision of President Winneke in Grbavac v Hart,[36] the plaintiff submitted that the offer was uncertain and unclear on its face and entirely contingent upon the successful outcome of separate litigation of which there was no evidence in respect of its success. The plaintiff cited Roberts v Rider[37] and stated that, as the Calderbank Letter was not clear about what was being proposed, it was reasonable for the plaintiff to reject it. Further, the Calderbank Letter was not a genuine compromise of the second defendants’ position and, at best, could only be characterised as a promise to pay an uncertain amount at an uncertain future time.
[36] [1997] 1 VR 154.
[37] [2006] NSWSC 1084.
57Addressing its prospects of success in the proceeding, the plaintiff acknowledged the Calderbank Letter was dated 5 June 2020 and that its pleaded case was not amended until at least 18 February 2021. In turn, at the time of the offer, Ikosidekas’ prospects of success in respect of Glenis’ liability was strong in light of the factual findings made by the Court in its reasons for judgment. It remained open to Ikosidekas to advance his claim on different grounds that would arguably have resulted in an adverse order against Glenis and the fact that this did not occur in the proceeding was of no relevance to the question of costs.
58The plaintiff acknowledged that the Court was unable to order its principal relief claimed, given the contribution paid by MWL Finance and White prior to the judgment. However, in light of Glenis’ conduct, it would have been appropriate for the Court to make an allowance for exemplary damages had it been open to order compensatory damages in respect of at least one head of damage claimed.
59The plaintiff argues that the dismissal of the proceeding was not on the basis of the second defendant’s successful defence nor because the plaintiff failed to make out its claims. Rather, it was because at the time of the judgment, Ikosidekas had already received a contribution equal to the Court’s assessment of the quantum of the plaintiff’s loss and damage.
60The plaintiff contended that it would be contrary to the interests of the justice that Ikosidekas, as a victim of Glenis’ misconduct, be ordered to indemnify Glenis for costs arising out of legitimate claims. Alternatively, it argued that the “special circumstances” of the proceeding, being Glenis’ conduct together, with the contribution before the judgment, should be interpreted to warrant departure from the general rule and settled practice to order costs.
61Except for the settlement with MWL Finance and White, the plaintiff argues that Glenis would have been found liable for Ikosidekas’ loss and damage together with exemplary damages, interest, and cost. It should therefore be entitled to its costs until the time it was properly compensated for loss and damage.
62For the reasons summarised above, the plaintiff submits that the proceeding was not maintained for an improper purpose following settlement with the first and third defendants and the Calderbank Letter. Further, the plaintiff submits that Glenis was not wholly successful in his defence in the proceeding, given the Court held that Ikosidekas made out the main cause of action and entitlement to compensatory damages as a result of Glenis’ deceit.
63The plaintiff rejected the second defendant’s costs submissions of any concession made in respect of the plaintiff’s interest claims. At a minimum, it was open and arguable to maintain the proceeding after the date of the Calderbank Letter for the purposes of seeking statutory interest as identified in its prayer for relief.
64On this basis, the plaintiff submits that the second defendant should:
(a) pay the plaintiff’s costs of and incidental to the proceeding, including those costs reserved to be taxed on a standard basis in default of agreement;
(b) alternatively, pay the plaintiff’s costs of and incidental to the proceeding, including those costs reserved up to and including 31 May 2020 and thereafter no order as to costs save for the application as to costs to be orders in favour of the plaintiff;
(c) alternatively, that it remains open to the Court to order the second defendant pay the plaintiff’s costs in any event if exceptional circumstances are demonstrated to justify departure from the usual position.
Analysis
65In relation to the Calderbank Letter, it is well established that the mere refusal of an offer does not automatically mean that the Court should make an order for costs on an indemnity basis where the ultimate result is less favourable than that contained in the offer.[38]
[38] Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCoverAuthority (2005) 13 VR 435 at [18]–[20].
66I accept the plaintiff’s submissions in respect of the Calderbank Letter and the offer expressed by the second defendant therein. At the time of the offer expressed in the Calderbank Letter dated 5 June 2020, it was reasonable for the plaintiff to not accept it. The Calderbank offer should be afforded no weight in the exercise of the Court’s discretion.
67However, I note that the basis of the second defendants’ costs submissions was premised on the argument that the plaintiff had no reasonable prospects of success in continuing the proceeding. Put more simply, that the plaintiff had an unmeritorious claim.
68The second defendant neither contended nor addressed the plaintiff’s rejection of the Calderbank Letter and offer therein as a basis for the Court to exercise its discretion and award indemnity costs in its favour.
69Instead, the second defendant submitted that the plaintiff was put on notice by the Calderbank Letter that it would not succeed on the contractual interest claim. Further, that once Ikosidekas received the settlement sum, prior to the Calderbank Letter, the plaintiff ought to have known it had no prospect of success and no basis to continue the proceeding on the basis of obtaining exemplary damages and statutory interest.
70I, therefore, will now turn my analysis to the primary basis of costs submissions on the issue of whether the plaintiff had reasonable prospects of success and a meritorious claim after the Calderbank Letter dated 5 June 2020.
71It is uncontentious that on 31 May 2020, Ikosidekas recovered from MWL Finance and White $160,000.00 pursuant to a settlement agreement. Further, that on 5 June 2020, a Calderbank Letter was sent from Glenis’ lawyers to Ikosidekas’ lawyers. The parties both agreed in their submissions that Ikosidekas recovered his loss and damage in relation to the principal advanced, and further, that the contractual interest claim was not available.
72I accept the second defendant’s submission that the contractual interest claim was not available as both a matter of law and fact. However, despite the second defendant’s submission that Glenis, through his lawyers, put Ikosidekas on notice of this fact, I agree with the plaintiff that there was no evidence in the Calderbank Letter of any concession made in respect of the plaintiff’s contractual interest claim.
73The second defendant’s submissions relied on the decision of Justice Woodward in Fountain Selected Meats (Sales Pty Ltd) v International Produce Merchants Pty Ltd and others[39] to argue that after Ikosidekas received the $160,000.00 settlement sum on 31 May 2020, properly advised, he ought to have known that he had no chance of success.
[39] (1988) 81 ALR 397 at [401].
74However, more recently in Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs),[40] Justice Riordan distilled and clarified the principles guiding an application for indemnity costs on the basis of an unmeritorious claim. Affirming Justice Beach in Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2),[41] Justice Riordan emphasised:[42]
“that the jurisdiction to award indemnity costs for unmeritorious claims is not enlivened by the mere fact that the proceeding had no or substantially no prospect of success. Rather, it is enlivened by the fact that the litigant knew or should have known, on proper consideration, that the case was hopeless.”
[40] (2021) 64 VR 200.
[41] [2016] FCA 1169, [4]– [20].
[42] (2021) 64 VR 200 at [27] and [33].
75I accept the second defendant’s submission that when Ikosidekas recovered the sum equal to the principal advanced, the contractual interest claim was not available as a matter of law and fact. In respect of continuing the proceeding, because no compensatory damages were awarded to Ikosidekas, he was not entitled to exemplary damages. Further, there was no debt or damage to which an award of statutory interest would be applicable.
76However, in my view, and in following the reasoning of Justice Riordan in Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs),[43] I do not consider that the plaintiff’s position was hopeless, or that it should have been known as hopeless, for the following reasons.
[43] Ibid.
77I accept the plaintiff’s submission that the Calderbank Letter is dated 5 June 2020 and the plaintiff’s pleaded case was not amended until at least 18 February 2021 and, therefore, the appropriate time to assess the plaintiff’s prospects of success was the date of the Calderbank Letter. At the time of the offer, it remained open to Ikosidekas to advance his claim on a different basis that would, arguably, have resulted in an adverse order against Glenis.
78I accept the plaintiff’s submissions that the dismissal of the proceeding was not on the basis of the second defendant’s successful defence in relation to the alleged representations and warranties nor because the plaintiff failed to make out its claims in respect of liability. Except for the settlement with MWL Finance and White, the second defendant would have been found liable for the plaintiff’s loss and damage on the evidence.
79I conclude that the plaintiff’s opposition and continuation of the proceeding was not hopeless or without prospects following the settlement with MWL Finance and White and the Calderbank Letter date 5 June 2020. The second defendant's application for indemnity costs on the basis of an unmeritorious claim should be dismissed.
80However, I reject the plaintiff’s submission that it would be incongruous with the interests of the justice that Ikosidekas, as a victim of Glenis’ misconduct and deception, be ordered to compensate or indemnify Glenis for legal costs arising from legitimate claims. As submitted by the second defendant, and relying on Oshlack v Richmond River Council,[44] the plaintiff’s conduct is not relevant to the costs analysis as it did not relate to the conduct of the litigation itself or the lead up to the litigation.
[44] 193 CLR 72 at [69].
81Further, I reject both parties’ submissions to the effect that the “special circumstances” of the proceeding warrants a departure from the general rule and settled practice of the Court to order costs to be taxed on a standard basis.[45]
[45] Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd (2010) 31 VR 46 at [15].
82The authorities indicate that an award of indemnity costs is given in exceptional circumstances.[46] The circumstances of the present case do not warrant the Court departing from its usual course. In light of all the circumstances, the Court’s discretion will not be exercised to depart from the usual order for costs as there are no special or unusual features or special circumstances to elevate the award for costs other than on a standard basis.
[46] Leichhardt Municipal Council v Green[2004] NSWCA 341 at [45] per Santow JA; Colgate-Palmolive Co & Anor v CussonsPty Ltd (1993) 46 FCR 225 per Sheppard J at [233].
83For the foregoing reasons, where the Court has found for the plaintiff on liability and in circumstances where the plaintiff would have received a positive compensatory award of damages against the second defendant until 31 May 2020, being the date the plaintiff was compensated by MWL Finance and White, and it was only as a consequence of the contribution that the plaintiff did not recover any additional compensatory damages from the second defendant on the pleaded case, I find that the second defendant ought to pay the plaintiff’s costs of and incidental to the proceeding, including any reserved costs up to and including 31 May 2020.
84In subsequently seeking to pursue exemplary damages and interest, and failing in that endeavour on the pleaded case, I find that the plaintiff should pay the second defendant’s costs of and incidental to the proceeding, including any reserved costs from 1 June 2020.
Conclusion
85Accordingly, the costs orders are as follows:
(a) the second defendant pay the plaintiff’s costs of and incidental to the proceeding on a standard basis to be taxed in default of agreement until 31 May 2020;
(b) the plaintiff pay the second defendant’s costs of and incidental to the proceeding from 1 June 2020 on a standard basis to be taxed in default of agreement.
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Certificate
I certify that these 21 pages are a true copy of the ruling of her Honour Judge Burchell delivered on 20 June 2022.
Dated: 20 June 2022
Nikki Thomson
Associate to Her Honour Judge Burchell
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