Key Infrastructure Australia Pty Ltd v Bensons Property Group Pty Ltd (No 2)
[2019] VSC 763
•26 November 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2017 00073
BETWEEN:
| KEY INFRASTRUCTURE AUSTRALIA PTY LTD | Plaintiff |
| v | |
| BENSONS PROPERTY GROUP PTY LTD | Defendant |
AND BETWEEN:
| BENSONS PROPERTY GROUP PTY LTD | Plaintiff by Counterclaim |
| v | |
| KEY INFRASTRUCTURE AUSTRALIA PTY LTD | First Defendant by Counterclaim |
| BARRY RICHARD GALE | Second Defendant by Counterclaim |
| BRUNO GATSBY | Third Defendant by Counterclaim |
| NIGEL ROBERT HUTCHINSON-BROOKS | Fourth Defendant by Counterclaim |
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JUDGE: | Robson J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 August 2019 |
DATE OF JUDGMENT: | 26 November 2019 |
CASE MAY BE CITED AS: | Key Infrastructure Australia Pty Ltd v Bensons Property Group Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 763 |
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COSTS – Plaintiff awarded nominal damages of $100 for breach of contract – Counterclaim dismissed – Offer of compromise in ‘walk-away’ terms by plaintiff – Rule 26.08(2) of the Supreme Court (General Civil Procedure Rules) 2005 (Vic) – Whether good reason to depart from the usual order set out in the rule – Plaintiff’s entitlement to costs under the rule reduced.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Little | Michael Benjamin & Associates |
| For the Defendant | Mr R Peters | Arnold Bloch Leibler |
HIS HONOUR:
Introduction
On 14 August 2019, I delivered judgment in this matter, awarding nominal damages of $100 to the plaintiff on its claim and dismissing the defendant’s counterclaim. The plaintiff alleged, inter alia, that the defendant had breached an agreement between the parties. The defendant counterclaimed, alleging a breach by the plaintiff and each of its directors. For the reasons expressed in my decision,[1] I found that the defendant had breached the agreement, that the plaintiff had not breached the agreement, and that, while the plaintiff had suffered loss, it had, while the proceeding was ongoing, mitigated that loss entirely such as to disentitle it to anything more than nominal damages.
[1]Key Infrastructure Australia Pty Ltd v Bensons Property Group Pty Ltd [2019] VSC 522 (‘KIA v Bensons’).
This judgment assumes knowledge of my earlier decision, and I adopt the defined terms used in that earlier decision.
The parties filed written submissions on costs on 16 August 2019. The hearing on costs took place on 19 August 2019. I reserved my decision.
KIA and its directors (‘the KIA parties’), relying on an offer of compromise dated 10 October 2017 (‘offer’),[2] seek an order in accordance with r 26.08(2)(b) of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’). The offer was in terms that the proceeding (including the counterclaim) be dismissed with no order as to costs. The offer was not accepted.
[2]Exhibit P99.
Rule 26.08 provides:
Costs consequences of failure to accept
(1) This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.
(2) Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled—
(a) if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim taxed on an indemnity basis;
(b) in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis.
By operation of rr 26.01 and 26.02(2) of the Rules, any reference to ‘claim’ in r 26.08 includes a counterclaim.
Bensons accepts that the KIA parties obtained a judgment on the claim and counterclaim ‘no less favourable’ than the terms of the offer.[3]
[3]‘Rule 26.08(2)(b) prima facie applies to the offer’: Bensons’ Submissions on Costs, 16 August 2019 [8].
Bensons resists the making of an order in accordance with r 26.08(2)(b), however, and submits that the Court should exercise its discretion to ‘otherwise order’ on the basis that there were special circumstances. These were, in summary, that:
(a) KIA significantly amended its pleadings and added substantial new evidence after the making of the offer;[4] and
(b) KIA failed on the majority of substantial issues in the proceeding.[5]
[4]Bensons relied upon Simply Irresistible Pty Ltd v Couper [2011] VSC 33 (‘Simply Irresistible’); Bensons’ Submissions on Costs, 16 August 2019 [8]–[11].
[5]Bensons relied upon State of Victoria v McIver (2005) 11 VR 458 (‘McIver’); Bensons’ Submissions on Costs, 16 August 2019 [12]–[14].
On this basis, Bensons submits that the appropriate order in the circumstances is that KIA pay 50 per cent of Bensons’ costs of the proceeding and that there be no order as to costs of the counterclaim (the KIA parties’ success on the counterclaim being reflected in the reduction in costs payable by KIA in the proceeding).
The discretion to ‘otherwise order’
Bensons accepts that it carries a heavy burden to displace KIA’s prima facie entitlement to costs under the Rules.[6] What this requires has been variously described — for example, ‘special circumstances’,[7] or ‘compelling and exceptional circumstances’[8] — however, ‘none of these expressions is intended to fetter the court’s discretion … but instead emphasise the weight of the rule-based presumption, and the need for the court to be convinced of a “good reason” to oust its effect’. [9] The purpose of r 26.08 needs also to be kept in mind:
The use of an expression such as “exceptional circumstances” is thus not to be treated as an impermissible gloss on the language but rather a practical explanation of the predicament facing the offeree in the light of the obvious purpose of the Rules to encourage settlement of the proceedings and their structure in so far as they provide a default position which cannot be ignored when exercising that discretion. This was made clear by Doyle CJ in Shaw v Jarldorn [1999] SASC 529; 76 SASR 28 at [4]:
The power to “order otherwise” confers upon the Court an unfettered discretion. But it is a discretion which, if exercised, is exercised to displace what will otherwise be the required effect of [the relevant rule], which is that the defendant pay the whole of the plaintiff’s costs of action as between solicitor and client. In other words, it will be proper for the court to order otherwise only if, in the exercise of that wide discretion, there is good reason to order that the rule is not to have its usual effect. In considering whether there is good reason to so order, it is necessary to bear in mind the manner in which the rule operates, and the context in which it operates.[10]
[6]Bensons’ Submission on Costs, 16 August 2019 [8] citing Nakos v Serdaris [2016] VSC 179 [17]–[18].
[7]Simply Irresistible (n 4).
[8]Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 6) [2010] FCA 381 [18].
[9]GE Dal Pont, Law of Costs (LexisNexis Butterworths, 4th ed, 2018) 403 [13.33] citing Shaw v Jarldorn (1999) 76 SASR 28, 29 (Doyle CJ).
[10]Forge v Rewers (No 2) [2017] ACTSC 273 [29] (Mossop J).
I will deal with each of Bensons’ alleged special circumstances in turn.
Change in circumstances or change in case after offer made
Bensons submits firstly that where, after making an offer of compromise, a party makes amendments which expand the factual and legal issues that materially contribute to the findings of the court, the court may ‘otherwise order’ under r 26.08(2), because the issues and evidence could not be taken into account when the offeree considered the offer. In support of this contention, Bensons cites the decision of Simply Irresistible Pty Ltd v Couper (‘Simply Irresistible’).[11]
[11]Simply Irresistible (n 4).
In that case, the plaintiff established its cause of action in contract but failed to establish any loss, and was accordingly awarded nominal damages of $1. The defendants, who had made an offer of compromise for the amount of $10,000 which was not accepted by the plaintiff, sought their costs on an indemnity basis. The plaintiff resisted the making of an order in accordance with r 26.08(3),[12] on the basis that there were special circumstances.
[12]Which concerns offers of compromise made by a defendant.
Kyrou J agreed that significant amendments proposed and subsequently made by the defendants to their defence after the offer of compromise expired constituted special circumstances such that a departure from the usual order was justified:
[13] The amendments to the defence expanded the evidence upon which [the defendants] relied in relation to the issues of causation, failure to mitigate loss and contributory negligence. …
…
[15] The factual and legal issues that were added to the proceeding by virtue of the amendments to the defence materially contributed to the findings of the Court in relation to causation.
[16] The fact that the amendments were made after the expiration of the offer of compromise meant that [the plaintiff] could not take them into account when it was considering the offer of compromise and that it could not assess their possible impact on the outcome of the proceeding. In my opinion it would be unfair for [the plaintiff] to pay to [the defendants] the additional costs that were incurred as a consequence of the amendments. Accordingly, the amendments and their timing constitute special circumstances warranting departure from the order set out in r 26.08(3) of the Rules.[13]
[13]Simply Irresistible (n 4) [13], [15]–[16].
Bensons submits these statements of Kyrou J are apposite to this matter. After the offer was made on 10 October 2017, KIA filed a Third Further Amended Statement of Claim on 17 April 2018.[14] Bensons claims that this had the effect of ‘dramatically altering’ KIA’s case,[15] by, for the first time, making allegations about:
[14]It appears no Second Further Amended Statement of Claim was ever filed.
[15]Transcript of Proceedings (19 August 2019) 36.1-3.
(a) breaches of clause 2.3(e) of the DMA;
(b) mitigation of loss, including KIA’s claim for substantial damages on account of mitigation costs; and
(c) the claim for $100,000 loss of deposits.[16]
[16]Bensons’ Submissions on Costs, 16 August 2019 [5]. See also Transcript of Proceedings (19 August 2019) 36.20-37.11, 52.
Further, Bensons says this ‘dramatic change’ in KIA’s case was evidenced not only by the change in pleadings, but by four additional lists of documents and revised witness statements.[17]
[17]Bensons’ Submissions on Costs, 16 August 2019 [6]–[7]. See also Transcript of Proceedings (19 August 2019) 52.6-10.
For the following reasons, I am not convinced that the amendments made by KIA following the offer constitute good reason to depart from the usual order set out in r 26.08(2).
At the time the offer was made in October 2017, the pleadings were as follows:
(a) Amended Statement of Claim dated 7 February 2017;
(b) Defence and Counterclaim dated 9 February 2017;
(c) Reply and Defence to Counterclaim dated 27 March 2017.
The Amended Statement of Claim put in issue:
(a) Bensons’ purported election to appeal to VCAT pursuant to clause 2.3(e) of the DMA,[18] its purported obligation to exercise its rights, powers and discretions under clause 2.3(e) of the DMA to appeal to VCAT,[19] and its failure to do so;[20]
[18]Plaintiff’s Amended Statement of Claim, 7 February 2017 [8].
[19]Ibid [9].
[20]Ibid [10]. Admittedly the Amended Statement of Claim does not plead that Bensons was in breach of clause 2.3(e) of the DMA in [10], but the claim that Bensons refused to appeal to VCAT appears in [10], immediately following the claim that Bensons was obliged to appeal to VCAT in [8]–[9].
(b) the implied duties of good faith and co-operation and breach of these duties;[21]
(c) KIA’s claim for loss and damage for its steps in mitigation between 18 May 2016 and 5 July 2016;[22] and
(d) KIA’s claims for loss and damage equivalent to the costs of its two VCAT applications.[23]
[21]Ibid [6(g)], [6(h)], [10], [12], [15].
[22]Ibid [16], Schedule B.
[23]Ibid [30], Schedule 1.
The Reply and Defence to Counterclaim put in issue the prevention principle and estoppel claim.[24]
[24]Plaintiff’s Reply and Defence to Counterclaim, 27 March 2017 [7]–[25]; [38(c)].
The issues that were added to the proceeding after the offer was made, therefore, by virtue of the Third Amended Statement of Claim, were KIA’s costs in mitigation between January 2017 and February 2018[25] and the loss of deposits.[26] KIA also abandoned its claim for specific performance of the DMA in the Third Amended Statement of Claim.
[25]Plaintiff’s Third Amended Statement of Claim, 17 April 2018 [29]–[35], Schedule B.
[26]Ibid [36]–[44], Schedule A.
The amendments and further evidence relating to KIA’s costs in mitigation are clearly attributable to the supervening sale of the land and permit to a third party. This was not a case where late amendments were made as an afterthought to add different causes of action on the same set of facts; the underlying facts had changed as a result of KIA’s steps in mitigation, which resulted in the sale of the land pursuant to the V-Leader contract.
Notwithstanding the change to the underlying factual matrix after the offer was made, I do not consider that the amendments expanded issues that ‘materially contributed’ to the Court’s findings. The amendments related only to the quantification of loss and damage flowing from a finding of breach of contract, and not to establishing a necessary element of that (or another) cause of action. While the space devoted to the mitigation and deposit issues in the pleading may have been considerable, only approximately five pages of my 98-page decision related to those issues.[27]
[27]KIA v Bensons (n 1) 92–7.
The Court’s discretion to ‘otherwise order’ due to a change in circumstances or change in case after the offer is made should be exercised where the change is ‘extraordinary’ and not where the change could be considered an ‘ordinary ris[k] inherent in litigation’.[28]
[28]Dal Pont (n 9) 410 [13.43].
In Shaw v Jarldorn,[29] Doyle CJ stated:
[6] A defendant who does not accept an offer made by a plaintiff will, of necessity, only know after judgment if the defendant was right to fight on rather than to accept the offer. But once again, the rule operates on the premise that if an offer is made by the plaintiff, the defendant will weigh up the advantages and disadvantages of not accepting the offer. In weighing up those advantages and disadvantages, the defendant must take into account the ordinary risks of litigation, including the fact that in a damages claim in particular it is usually impossible to predict with any precision the amount of damages that will be awarded. And such a defendant must also bear in mind that if matters of fact that will affect the amount of damages are in issue, a decision on those matters can go one way or the other. …
…
[8] … [E]vents that occur after the offer is made will be of limited weight, unless they demonstrate that the amount of the judgment that the plaintiff ultimately recovers was materially affected by subsequent events that the defendant could not reasonably have anticipated. And, in that context, I emphasise that both the defendant and the plaintiff will be assumed to anticipate the ordinary risks and vicissitudes of litigation. In deciding not to accept an offer a defendant makes the judgment that it will run the risk of the plaintiff equalling or bettering the offer, in the hope that the plaintiff will recover less than the amount of the offer. A defendant who makes that choice cannot reasonably complain if, as a result of the ordinary risks and vicissitudes of litigation, the defendant's judgment is proven to be unsound.[30]
[29](1999) 76 SASR 28 (‘Shaw v Jarldorn’).
[30]Ibid [6], [8].
In my view, it is a risk inherent in litigation that a party alleging breach of contract will take steps in mitigation, the consequence of which is that amendments to pleadings will be made and further evidence as to those steps introduced. In this case, it was in fact KIA’s successful steps in mitigation which resulted in only nominal damages of $100 being awarded against Bensons, as opposed to a more substantial sum. I do not consider that KIA should, in those circumstances, be penalised by denying it the benefit of the costs consequences prescribed by the Rules.
Bensons has not established that I should depart from the usual order under the Rules because of the amendments to KIA’s case.
Award of nominal damages and alleged failure on majority of substantial issues
Bensons alternatively submits that KIA’s failure on substantial issues at trial and its award of nominal damages constitute ‘good reason’ for the Court to depart from the usual order.
In NCON Australia Ltd v Spotlight Pty Ltd [No 7] (‘NCON’),[31] I considered both the status of a party who has obtained an award of nominal damages only and the power of the court to award costs proportionately where a party has enjoyed mixed success. In short, a plaintiff who receives an award of nominal damages is not usually viewed as the successful party, unless the plaintiff also establishes a legal right independent of damages in the proceeding.[32] Where the outcome of litigation does not wholly favour one party, costs may be apportioned in respect of individual causes of action or issues, which may result in an order for a proportion of the successful party’s costs.[33]
[31][2014] VSC 25 (‘NCON’).
[32]Ibid [14]–[23].
[33]Ibid [24]–[25], citing GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296.
The Court of Appeal has also recently considered these matters. In MA & J Tripodi Pty Ltd v Swan Hill Chemicals Pty Ltd (‘Tripodi Pty Ltd’),[34] the Court (comprising Kyrou, Kaye and Emerton JJA) stated:
[152] Courts have a wide discretion in deciding questions of costs. That discretion must be exercised judicially and in accordance with established principles. One such well-established principle is that costs usually follow the event, that is, that the unsuccessful party is usually ordered to pay the successful party’s costs. However, there can be departures from that principle where required by the justice of a particular case. Where parties enjoy mixed success, the court can fashion a costs order that fairly reflects the measure of success achieved by each party and all the other circumstances that bear upon the justice of the case.[35]
[153] Where a court determines to make an order apportioning costs, it does so primarily as a matter of impression and evaluation, rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.[36]
[154] Where a plaintiff seeks damages for breach of contract and establishes the existence of a contract and a breach of it by the defendant and is awarded only nominal damages because the plaintiff is not able to prove that any loss resulted from the breach, it is open to the court to treat the plaintiff as not being the successful party for costs purposes.[37] Where the court so characterises the plaintiff, it might make one of a number of costs orders, including that there be no order as to costs, that the defendant pay a proportion of the plaintiff’s costs or that the plaintiff pay a proportion of the defendant’s costs. However, there are no fixed rules as to the appropriate costs order in that or any other situation. Ultimately, the court must be guided by what the justice of the case requires.[38]
[34][2019] VSCA 46 (‘Tripodi Pty Ltd’).
[35]See generally Boz One Pty Ltd v McLellan [2015] VSCA 145 [41].
[36]Chen v Chan [2009] VSCA 233 [10].
[37]NCON (n 31) [14]–[21]; Braham v Stephan (No 2) [2015] VSC 194 [15]–[21].
[38]Tripodi Pty Ltd (n 34) [152]–[154]. For recent comments of the High Court on the discretion as to costs see Northern Territory v Sangare [2019] HCA 25 [25]–[25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ).
The Court of Appeal has indicated that where a plaintiff’s offer of compromise under the Rules is engaged, the Court may still apportion costs reflecting issues on which the plaintiff failed. In State of Victoria v McIver (‘McIver’),[39] Mr McIver was prima facie entitled to all his costs in respect of the claim on an indemnity basis under r 26.08(2)(a). Counsel for the State had submitted to the trial judge that the court should ‘otherwise order’ due to the considerable time consumed by an issue resolved against Mr McIver, the issue being the profitability of Mr McIver’s business (relevant to the consideration of past and future economic loss). The trial judge apparently accepted that submission, however, without giving reasons, awarded Mr McIver indemnity costs only from the date his offer of compromise was served, in substance applying r 26.08(2)(b).
[39]McIver (n 5).
On appeal, Callaway JA, with whom Ormiston and Batt JJA agreed, concluded that the trial judge’s discretion had miscarried, as there was ‘no logical connection’ between the date of service of the offer of compromise and the profitability issue (and the time it consumed at trial). Callaway JA, allowing the cross-appeal, did not decide whether the issue of the business’ profitability, which was resolved against Mr McIver, was an appropriate basis for ‘moderating the effect of r 26.08(2)(a)’ but did state:
It would probably have been better to deny the plaintiff a proportion of his costs of the entire proceeding to reflect the issue on which he failed rather than to displace or modify the operation of r 26.08(2)(a), but the State did not ask the judge to deny the plaintiff a proportion of his costs. …[40]
[40]Ibid [33].
Bensons points to the main issues identified in my earlier judgment, which can be summarised as:
(a) the election issue;
(b) the procuration issue;
(c) the prevention issue;
(d) the duty of co-operation (and breach) issue;
(e) the duty of good faith (and breach) issue;
(f) the estoppel issue; and
(g) the quantification of loss and damage.[41]
[41]KIA v Bensons (n 1) [31].
Bensons submits that the outcome of this proceeding should be characterised as follows. Of the numerous issues identified above, KIA succeeded only in establishing that Bensons prevented KIA from obtaining the permit and that Bensons breached the duty of co-operation. As a result of the success on these two issues, KIA was entitled to the remainder of its fee under the DMA, and the KIA parties succeeded in defending Bensons’ counterclaim for the return of the instalments of the fee already paid by Bensons.[42] Each of the damages claims that were contested by Bensons were reduced by the Court.[43] The issues in this proceeding were severable and those issues resolved against KIA consumed considerable trial time, including significant amounts of evidence that would not have been admissible had the issues in the proceeding been limited to those on which KIA succeeded.[44] Further, Bensons submits that, as at all times KIA acknowledged it had to give credit for the $2.232 million it received in mitigation, its claim can be seen as a claim for $730,000 in VCAT costs, which it lost entirely.[45]
[42]Bensons’ Submissions on Costs, 16 August 2019 [1].
[43]Transcript of Proceedings (19 August 2019) 51.26–27.
[44]See, eg, Transcript of Proceedings (19 August 2019) 43–51.
[45]Transcript of Proceedings (19 August 2019) 55.19–23.
Bensons contends it should be considered the successful party who, having lost the prevention and breach of duty of co-operation issues, should have its costs reduced to reflect that loss. As mentioned above, Bensons submits it is pragmatic for the Court to order that KIA pay 50 per cent of Bensons’ costs, the reduction reflecting the issues Bensons lost and the KIA parties’ success on the counterclaim.[46]
[46]Transcript of Proceedings (19 August 2019) 50.23–27, 56.16–22.
In my view, the starting point, as identified in McIver, is to deny a plaintiff who is otherwise entitled to his costs of the proceeding by reason of a rejected offer of compromise a proportion of his costs to reflect issues on which he has failed. Bensons, it can be seen, has not followed this approach, but has effectively adopted the starting position that KIA’s failure in the claim is such as to entitle Bensons to all its costs, regardless of the rejected offer of compromise.
In Simply Irresistible, Kyrou J addressed a submission that r 26.08(3) did not apply because the plaintiff ‘wholly failed’ in the proceeding, receiving only nominal damages of $1. Kyrou J disagreed, stating:
In my opinion r 26.08(3) applies because [the plaintiff] has obtained judgment for an amount that is not more favourable than [the defendants’] offer of compromise.
Even if it were appropriate to consider whether [the plaintiff] ‘wholly failed’ in the proceeding, the fact is that [the plaintiff] did not wholly fail. Although it is true that [the plaintiff] was awarded nominal damages of $1, rather than the compensatory damages of $1,452,661.40 that it claimed, it was successful on the key issues of the scope of the retainer and breach of the retainer and the tort duty. It was also successful on the issues of failure to mitigate loss and contributory negligence, even though it became unnecessary for the Court to decide these issues, and on some ancillary issues, such as the doctrine of merger. [The plaintiff] established its cause of action in contract, as reflected by the award of nominal damages. In the circumstances of this case, the fact that damages were nominal is not, of itself, sufficient to justify an order for costs wholly in [the defendants’] favour.[47]
[47]Simply Irresistible (n 4) [26]–[27].
Bensons avoids the phrase ‘wholly failed’, but submits that ‘the justice of the case requires that KIA be considered an unsuccessful party who failed on the majority of the substantial issues’.[48]
[48]Bensons’ Submissions on Costs, 16 August 2019 [12].
Despite the enumeration of issues in my earlier decision (which is often adopted to assist with the structure of a long judgment), I consider that the matter is appropriately viewed as one dispute with two distinct elements. Firstly, was KIA entitled to its fee under the DMA, so as to retain the instalments it had already received and establish that it had suffered the loss of the unpaid instalments? Secondly, was KIA entitled to recover the costs it had incurred in appealing to VCAT? Viewed in this manner, KIA was successful on one element and unsuccessful on the other.
Accepting that the proper approach is to reduce a portion of the plaintiff’s costs to which it is otherwise entitled under the Rules to reflect issues which were resolved against it, KIA should forfeit some of the costs to which it is otherwise entitled as a result of the offer.
As mentioned above, in making an order apportioning costs, the Court can:
… fashion a costs order that fairly reflects the measure of success achieved by each party and all the other circumstances that bear upon the justice of the case …
… it does so primarily as a matter of impression and evaluation, rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.[49]
[49]Tripodi Pty Ltd (n 34) [152]–[153].
I held that KIA was entitled to the balance of its fee under the DMA. In my view, that was a substantial victory. Counsel for Bensons submitted that, if the case was reduced to whether KIA was entitled to its fee, most, if not all of the evidence relied upon in relation to KIA’s claim for VCAT costs would be inadmissible;[50] however, I was not convinced by this submission.
[50]See, eg, Transcript of Proceedings (19 August 2019) 43–51.
Although KIA failed in its claim that Bensons had elected to go to VCAT, in my opinion much of the evidence led in relation to that claim was also relevant to the claim that Bensons breached its duty to co-operate.
A further matter relates to the commencement of the proceedings. While KIA was the party who commenced the action in January 2017, it did so following receipt of a letter from Bensons’ solicitors which stated:
… the DMA is at an end and/or voidable.
Pursuant to clause 2.3(d) of the DMA, KIA must repay to Bensons the First Instalment and the Second Instalment by 14 January 2017.
If Bensons does not receive payment in the sum of $440,000 (inclusive of GST) by on or before 14 January 2017, we have instructions to issue proceedings against KIA and its directors, relying on the guarantee provided by them under clause 2.3(f) of the DMA.[51]
[51]Exhibit P45.
I consider it relevant that Bensons wrongfully breached the DMA, then threatened KIA with recovery proceedings.
Finally, in my view, the terms of the offer are relevant. In my opinion, the ‘walk-away’ offer was a reasonable offer that Bensons may well have accepted. In rejecting a ‘walk-away’ offer, Bensons accepted the significant risk that in continuing the litigation, KIA would obtain a judgment in terms ‘no less favourable’ than the offer.
Orders
After taking into account the default position provided for by r 26.08(2)(b), the circumstances of this case and the submissions put to me by counsel for the parties, I consider that the justice of the case requires that the following orders be made:
1.The defendant pay the plaintiff and defendants by counterclaim’s costs of and incidental to the proceeding (including the counterclaim), including any reserved costs on a standard basis until 11am, 12 October 2017, to be taxed in default of agreement;
2.Thereafter, the defendant pay 80 per cent of the plaintiff’s costs of and incidental to the claim and 100 per cent of the defendants by counterclaim’s costs of and incidental to the counterclaim, including any reserved costs on an indemnity basis, to be taxed in default of agreement.
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