Melbourne Property v St Kilda Estates (interest and costs) - [2020] VCC 1418

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION
GENERAL CASES LIST

Revised
(Not) Restricted
Suitable for Publication

Case No. CI-16-01377

MELBOURNE PROPERTY INVESTMENTS REAL ESTATE PTY LTD (ACN 088 926 014)	Plaintiff
v
ST KILDA ESTATES (NO 2) PTY LTD (ACN 147 530 103)	First Defendant
and
THE REAL ESTATE INSTITUTE OF VICTORIA LIMITED (ACN 004 210 897)	Second Defendant

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JUDGE:	HER HONOUR JUDGE MARKS
WHERE HELD:	Melbourne
DATE OF HEARING:	28 May 2020
DATE OF JUDGMENT:	17 August 2020
CASE MAY BE CITED AS:	Melbourne Property v St Kilda Estates (interest and costs)
MEDIUM NEUTRAL CITATION:	[2020] VCC 1418

REASONS FOR RULING
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INTEREST – Estate agent instituted proceedings claiming commission from vendor under an exclusive sales authority – agent was barred from seeking commission from vendor at time proceeding commenced due to non-compliance with s49A disclosure requirements of Estate Agents Act 1980 (Vic) – remedial legislation passed enabling commission to be claimed – dispute as to whether interest should be awarded under the exclusive sales authority from 30 days after invoice was sent, or from date of remedial legislation – s58 Supreme Court Act1986 (Vic) – consideration of when the debt was ‘payable’ – payable after remedial legislation came into effect so interest awarded from that date

COSTS – Sanderson order sought – whether conduct of unsuccessful defendant caused successful defendant to be joined – whether it is just that unsuccessful defendant pay costs of successful defendant – no – order that plaintiff pay costs of successful defendant

COSTS – Calderbank offer – indemnity required in order to accept offer – not unreasonable not to accept it

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	Mr M Ravech	Holman Webb Lawyers
For the first defendant	Mr P Ehrlich QC with Mr J Claridge	Property and Business Lawyers
For the second defendant	Mr S J Hibble	Gilchrist Connell

Contents

Introduction

Chronology
What interest should the vendor pay?

Interest claimed under contract
Interest claimed under s58 Supreme Court Act 1986

Costs of claim against vendor
REIV’s costs

Should vendor pay REIV’s costs?
Calderbank letter

Costs of interest and costs disputes

HER HONOUR:

Introduction

This ruling deals with interest and costs disputes following the principal judgment in this proceeding: Melbourne Property v St Kilda Estates [2020] VCC 570. These reasons adopt the same definitions as that judgment.
The question to be decided in that principal judgment related to an exclusive sales authority pursuant to which the agent sought commission from the vendor. The agent’s case depended on whether the rebate statement in the exclusive sales authority (ESA) was ‘in a form approved by the Director’ within the meaning of s49A(6) of the Estate Agents Act 1980 (Vic). I found that it was.
In summary, as set out in the principal judgment:
[2] Section 49A of the Estate Agents Act1980 (Vic) requires certain information set out in s49A(4) to be included in exclusive sales authorities as a precondition of agents recovering commission.
[3] The parties agree that in this case, information required by s49A(4)(c) was not included in the ESA rebate statement. They also agreed that that does not matter, provided the ESA rebate statement is ‘in the form approved by the Director’. Section 49A(6) of the Act has the effect that if the rebate statement contained in the ESA ‘is in the form approved’ by the Director of Consumer Affairs Victoria (the Director) then it does not fail to comply with s49A(4) merely because it does not contain the statements referred to in s49(4)(a) or (c).
[4] The question to be decided is whether the ESA rebate statement is ‘in a form approved by the Director’ within the meaning of s49A(6) of the Estate Agents Act 1980 (Vic).
ESA rebate statement
[5]    The ESA consists of a five page Real Estate Institute of Victoria (REIV) Exclusive Sale Authority Form.   The ESA rebate statement is item 6 of various terms and conditions. It states (bold formatting replicated):
Item 6. Rebate Statement – Section 48A-E of the Act
*The Agent will not be, or is not likely to be, entitled to any rebates. A rebate includes any discount, commission, or other benefit, and includes non- monetary benefits.
(*If entitled to a rebate, complete and attach the rebate statement approved by the Director of Consumer Affairs Victoria, at the time of signing this Authority. The statement can be downloaded at    The Director had authorised two relevant Forms at the time. Both were available for download from the Consumer Affairs Victoria (CAV) website. Those Forms were described in this proceeding as the ‘Long Form’ and the ‘Short Form’.
[7]   The Short Form has a heading Rebate Statement – No Rebate will be Received. As noted above, item 6 of the ESA has a heading: Item 6. Rebate Statement – Section 48A-E of the Act.
[8]   The relevant difference which I am asked to consider, between the ESA rebate statement and the Short Form comes down to five words. No Rebate will be Received is included in the Short Form heading, but not in the ESA rebate statement heading. The vendor says that this means that the ESA rebate statement is not ‘in a form approved by the Director’ under s49A(6).
[9] If the rebate statement contained in the ESA is not in the form approved by the Director, then the effect of s49A(6) is that the agent cannot sue for commission.
[10] If the Court were to find the ESA rebate statement was not in the form approved by the Director, the agent would prosecute its alternative case against the REIV (the second defendant). The agent claims that it used the REIV form for its ESA, relying on it as being compliant with the Act.
[11] For the reasons that follow, I am satisfied that the ESA rebate statement is ‘in a form approved by the Director’. The heading to the Short Form is not part of the form of the rebate statement approved by the Director.
[12] In any event, where information is required to be conveyed in an approved form, it is sufficient if the information conveyed is substantially the same as the approved form. I am satisfied that the information conveyed by the ESA rebate statement is substantially the same as that conveyed by the Short Form (including the Short Form heading). That is, relevantly to the issue before me, that the agent will not be, or is not likely to be, entitled to any rebate.
The parties agree that it follows from the finding that the ESA rebate statement is in a form approved by the Director, that the agent owes the vendor commission of $124,025.
Where the parties disagree is on what orders should be made in relation to interest, and also in relation to costs. The parties filed written submissions in relation to these issues, and made oral submissions at a virtual hearing.

Chronology

The agent commenced this case by writ on 7 April 2016, claiming an entitlement to commission as a debt. It relied on the ESA signed by the vendor on 15 April 2015.
On 10 May 2016, the vendor filed its defence. Amongst other matters, it said that:
9 Further to paragraphs 6, 7 and 8 above, the Defendant says that section 50(1)(b) of the Estate Agents Act 1980 (Vic) (Act) operates to preclude the Plaintiff from suing or recovering or retaining any commission in respect of the sale of unit 5 on the basis that the ESA did not contain a rebate statement as required by section 49A(1)(c)(iii) of the Act in that the rebate statement therein did not comply with section 49A(4) of the Act as:
(a) it was not in a form approved by the Director;
(b)further or alternatively, it did not contain the statement required by section 49A(4)(c) of the Act.
Relevantly to the next steps in the current proceeding, I handed down judgment on 29 August 2017 in a different matter relating to the validity of an exclusive sales agreement in the context of s49A of the Act. In that decision, Advisory Services Pty Ltd v Augustin & Anor [2017] VCC 1195, I found that the relevant agent was not entitled to sue for commission in the absence of the exclusive sales authority in question containing a statement required under s49A(4)(c) of the Act.
On 19 April 2018, the Court of Appeal upheld my decision: Advisory Services Pty Ltd (t/a Ray White St Albans) v Augustin [2018] VSCA 95.
The Court of Appeal decision in Advisory had the effect of making it clear, for the purposes of the agent’s claim in the present case, that the agent was not entitled to sue the vendor for commission, as the ESA did not contain a statement required under s49A(4)(c) of the Estate Agents Act 1980.
Many agents’ claims for commissions were unable to be brought as they did not contain such a statement. On 20 June 2018, the Victorian government introduced a bill for remedial legislation to overcome that difficulty, in circumstances where a rebate statement in an exclusive sales authority was in a form which had been approved by the Director of Consumer Affairs Victoria (see principal judgment at [18]-[22]).
On 11 July 2018, the agent issued a summons seeking to join the REIV as second defendant to this proceeding.
The vendor brought an application for summary judgment against the agent, which was first heard before His Honour Judge Macnamara on 13 July 2018. The agent sought, successfully, to adjourn the application to a time after it hoped that the remedial legislation would be enacted. Costs were reserved. Relevantly, His Honour ruled:
2    A recent decision of the Court of Appeal, Advisory Services Pty Ltd v Augustin [2018] VSCA 95, determines authoritatively that the form of agreement which the plaintiff signed the defendant up to, and which purported to create the liability to pay commission, is, in the circumstances, ineffective and unenforceable because of a failure to comply with s49A(4) paragraph (c) of the Estate Agents Act 1980. The form in question was one published by the Real Estate Institute of Victoria and approved by the Director of Consumer Affairs. These facts indicate why the present state of the law on these matters is somewhat embarrassing for those institutions.
3    I have been told, and it is not in dispute, that a bill has been introduced into the Legislative Assembly by the Attorney General, the effect of which would be retrospectively to reverse the effect of the Court of Appeal's decision such that the standard form document, which was found wanting by the Court in the Advisory Service's case, would be valid and effective to create a liability to pay commission. In those circumstances, the plaintiff has foreshadowed two things - first, it wishes to join as a defendant to the proceeding the Real Estate Institute of Victoria, contending, in effect, that if its claim against St Kilda Estates were to be unsuccessful, then it would have suffered damage as a result of breaches of duty by the Institute. In the meanwhile, however, St Kilda Estates has applied for a summary dismissal of the proceeding against it pursuant to s62 of the Civil Procedure Act 2010 and the Rules of Court in Order 23 which regulates such applications.
4     The plaintiff now seeks to adjourn this proceeding to a date in November. By that time, the plaintiff hopes that the retrospective legislation will have been enacted so that its claim against St Kilda Estates may go forward successfully. Alternatively, if this has not occurred, it may press on with its application to join the Real Estate Institute of Victoria. It may seek to join the Institute in any event.
…
16 Mr Ravech, aside from his reliance on Humphris's case, took me to s64 of the Civil Procedure Act 2010. That section provides:
"Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because-
(a)   it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate."
He submitted that, in the circumstances described - namely, where the plaintiffs claim seemed at peril of being lost upon a technical error made by official or semi-official institutions - the interests of justice require that the matter not be disposed of in this manner if there is a possible escape route, such as the retrospective legislation. Neither counsel referred me to any decisions upon the operation of s64. Possibly that is because there are no authoritative determinations upon the section, nor were they able to tell me whether this section has analogues in other Australian jurisdictions, or, indeed, in England and Wales. That being the case, I am without authoritative guidance.
17 Ms Gory said that, insofar as I was to be guided, as s64 paragraph (a) would have it, by the 'interests of justice', the justice in question must be justice according to law, the justice that requires a party to be entitled to have its case adjudicated upon the law as it now stands, and the justice according to law which, by force of the decision of the Court of Appeal in Advisory Services, requires that the plaintiff's claim be dismissed. Unsurprisingly, Mr Ravech advocated a wider view of what justice might require. Neither counsel referred me to any authoritative statements in this context as to what might be regarded as the interests of justice, which are, of course, a paramount consideration by virtue of s7 of the statute.
18 With utmost hesitation, I believe, in the circumstances, that I ought to grant the adjournment which has been sought by Mr Ravech upon the basis of s64. It is one thing to say, as the authorities relied on by Ms Gory do, that a party is entitled to have its case tried upon the law as it then exists. The application which her client makes, however, is that there be no trial and that the matter be summarily disposed of. If the law gave the defendant an unconditional right to have such a summary dismissal, the contention would be unanswerable. Section 62, which is the source of the entitlement to make the application, includes the word "may". It says the defendant in a civil proceeding may apply to the Court for summary judgment. There is nothing in the section, however, that says that the Court 'may' grant summary judgment. The word "may" in modern Victorian legislation imports a discretion – see s45 of the Interpretation of Legislation Act.
19 In the present circumstances, once a summary judgment application is made, there is no discretion in this Court as to whether to grant it or not. If the grounds are made out for a summary dismissal, the summary dismissal must be granted. Therefore, there is nothing in s62 which would be a basis for granting an adjournment. Section 64 must be the source of any discretion that might be exercised here. In my view, whilst generally justice in our system is justice according to law, not justice according to our own potentially idiosyncratic views of what is fair or not, in the relatively confined circumstances which we have here, justice does stretch far enough to give the plaintiff the opportunity to avail itself, if it in fact occurs, of the advantage of retrospective legislation to remove what, in populous parlance, would be described as a loophole.
20   For these reasons, therefore, I am prepared to grant the adjournment.
The REIV was served with the writ on 24 July 2018. The agent’s claim against it was put in the alternative to its case against the vendor.
The amended statement of claim pleads as against the REIV, at [9]:
Alternatively, if the Plaintiff is precluded by operation of section 50(1)(b) of the Estate Agents Act 1980 (Vic) (the Act), from suing the First Defendant for any commission in respect of the sale of unit 5 by reason that the ESA did not contain a rebate statement that complied with section 49A(1)(c)(iii) of the Act, then the Plaintiff makes the following claims against the Second Defendant.
The amended statement of claim then goes on to set out the agent’s claims against the REIV for breach of agreement, professional negligence and deceptive conduct. They arise out of the fact that the agent relied on an exclusive sales authority form prepared by the REIV.
The REIV served its defence on 3 September 2018. It pleaded (at [9]) that the ESA included a rebate statement approved by the Director of Consumer Affairs Victoria as required by s49A(4) of the Estate Agents Act. It then set out other defences.
On 25 September 2018 the remedial legislation took effect, having received royal assent.
On 6 December 2018, the agent amended its reply to plead that the remedial legislation made the ESA effective.
On 10 December 2018, the REIV filed an amended defence to include the following:
9A. The second defendant further states that that by virtue of s.49A(6) of the Act that a rebate statement in a form approved by the Director of Consumer Affairs Victoria and contained in an engagement or appointment entered into prior to 26 September 2018 does not fail to comply with s.49A(4) merely because the rebate statement does not contain:
the statement referred to in s.49A(4)(a) of the Act; or
the statement referred to in s.49A(4)(c) of the Act.
…
12A.    The second defendant says that:
…
(b) it does not provide legal advice to its members and/or their
              employees about real estate laws and regulations (including
requirements of the Act); and
(c) by virtue of r.6 of the Estate Agents (Professional Conduct) Rules
             2008 (Vic) (as it then operated) an estate agent and an agent’s
representative must have a working knowledge of the Act and
any regulations made under the Act.
…
14B.Further, and in the alterative, the second defendant says that if the plaintiff has suffered any loss and damage:
(a) it has done so by reason of the ESA’s non-compliance with s
         49A(1)(c)(i) and (ii) of the Estate Agents Act1980 (Vic) and not
         by any negligence, breach of agreement or misleading or
         deceptive conduct on behalf of the REIV;
(b) in the alternative says that if such loss and damage was suffered
         as a result of any of the REIV’s negligence or breach of
          Agreement (all of which is denied) then:
(A)   the plaintiff’s remedy for breach of the Agreement, including
                 any non-excludable condition is, at the REIV’s option,
                 limited to repair or replacement of the ESA; and
(B)   the REIV’s liability is otherwise excluded; and
(C) in any event, the plaintiff has suffered such loss and
                  damage as the result partly of its own failure to take
                  reasonable care.
Particulars
The plaintiff failed to review, modify or amend the ESA to ensure that it contained the information required by s 49(A)(4)(c) of the Estate Agents Act 1980 (Vic).
(c) in the alternative to subparagraphs (b)(A) and (B) above, by


reason of subparagraph (b)(C) above and s 26(1) of the Wrongs
        Act 1958 (Vic), the damages recoverable in respect of the wrong


must be reduced to such an extent as the court thinks just and


equitable having regard to the plaintiff’s share in the responsibility


for the damage.
On 30 January 2019, the adjourned hearing of the vendor’s summons for summary judgment took place before His Honour Judge Cosgrave. The vendor argued against summary judgment, on the basis of the argument it ran at trial. It said that the remedial legislation did not have the effect of making the ESA in question valid as the rebate statement was not in a form approved by the Director. On 20 February 2020, His Honour dismissed the summons, reserving costs.
On 20 February 2019, the vendor amended its defence to plead that point:
9A Further to paragraph 9 above, the First Defendant says that the ESA is not in a form approved by the Director within the meaning of sections 49A(4) and 49A(6) of the Act.

The orders to be made in relation to costs and interest need to be determined in the context of the chronology set out above.

What interest should the vendor pay?

The agent and vendor disagree about what interest the vendor should be ordered to pay the agent on the commission of $124,025.
The agent seeks interest from 20 November 2015 (being 30 days after it sent a tax invoice to the vendor for the commission). It says it is entitled to this under the ESA or pursuant to section 58 of the Supreme Court Act1986 (Vic).
The vendor says it should not have to pay interest until after the remedial legislation was in effect, on 25 September 2018, as until then the agent was not entitled to sue for commission under the ESA.

Interest claimed under contract

I turn first to the agent’s claim for interest under contract.
The ESA provides (at general clause 3) that:
If the Vendor fails to pay the Agent any moneys due under this Authority within 30 days of receipt of the Agent’s invoice (“the due date for payment”), then interest at the rate fixed from time to time under section 2 of the Penalty Interest Rates Act 1983 will be paid on the unpaid money (or the balance owing from time to time) calculated from the due date for payment to and including the day on which the unpaid money is paid in full if demanded.
Section 104 of the Estate Agents Act1980 (Vic) provides:
104 Rebate statements
(1) Section 49A as amended by the Justice Legislation Miscellaneous Amendment Act 2018 applies to, and is taken to have always applied to, the engagement or appointment of an estate agent in respect of work done by, or on behalf of, the agent or in respect of any outgoings incurred by the agent.
(2) Despite subsection (1), the amendment of section 49A by the Justice Legislation Miscellaneous Amendment Act 2018 does not affect the rights of the parties in the proceeding known as Advisory Services Pty Ltd (trading as Ray White St Albans) v Augustin & Anor [2018] VSCA 95 in the Supreme Court.
(3) Despite section 14(2) of the Interpretation of Legislation Act 1984, subsection (1) applies to any other proceeding commenced before 9 June 2018 which concerns the validity of a rebate statement contained in an engagement or appointment of an estate agent because the rebate statement does not contain—
(a) the statement referred to in section 49A(4)(a); or
(b) the statement referred to in section 49A(4)(c).
Section 14(2) of the Interpretation of Legislation Act1984 (Vic) provides:
(2)   Where an Act or a provision of an Act—
(a)   is repealed or amended; or
(b)   expires, lapses or otherwise ceases to have effect—
the repeal, amendment, expiry, lapsing or ceasing to have effect of that Act or provision shall not, unless the contrary intention expressly appears —
(c)revive anything not in force or existing at the time at which the repeal, amendment, expiry, lapsing or ceasing to have effect becomes operative;
(d)affect the previous operation of that Act or provision or anything   duly done or suffered under that Act or provision;
(e)affect any right, privilege, obligation or liability acquired, accrued or incurred under that Act or provision;
(ea)affect any immunity or indemnity conferred or given by or under    that Act or provision;
(f)affect any penalty, forfeiture or punishment incurred in respect of an offence committed against that Act or provision; or
(g)affect any investigation, legal proceeding or remedy in respect   of anything mentioned in paragraphs (e) to (f)—
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if that Act or provision had not been repealed or amended or had not expired, lapsed or otherwise ceased to have effect.
The agent submits that interest on outstanding money was part of what the vendor agreed to pay it – just as commission was agreed to be paid - and it is entitled to interest under the ESA. It relies on the retrospective effect of the remedial legislation set out in s104 of the Act. It says there is nothing to show the legislature intended to differentiate between commission on the one hand, and interest on the other.
However, I do not accept that the ESA regulates the date from which I should order interest is to be paid, given the circumstances of this case.
Whilst the ESA provided for interest from 30 days after the agent sent a tax invoice that was only in respect of ‘moneys due’. And at that stage there were ‘no moneys due’ from the vendor. At that time, section 49A(1) of the Estate Agents Act prohibited the agent from obtaining or seeking to obtain payment for commission, and section 51B barred suit.
It was not until the remedial legislation received royal assent on 25 September 2018 that the agent was entitled to recover its commission under the ESA.
Under s14(2) of the Interpretation of Legislation Act, ‘unless the contrary intention expressly appears’, amending legislation does not have retrospective effect (in relation to the matters listed in s14(2)(c)-(g)).
Contrary intention does expressly appear in relation to the amendments to s49A of the Act: it is demonstrated by s104(1) and s104(3) of the Act.
The effect of s104(1) of the Estate Agents Act is to provide that s49A is taken to have always applied to the engagement of the agent (and so the agent was entitled to claim for commission). Due to s104(3)(g) it was also entitled to pursue its claim in this proceeding, instigated before the remedial legislation took effect.
However, I do not consider that s104(1) has the effect of magically making that commission ‘due’ from 30 days after the agent send the tax invoice. The money needed to be due at that time, for interest to be claimed from that point pursuant to general clause 3 of the ESA.

Interest claimed under s58 Supreme Court Act 1986

The agent then relies on Section 58 of the Supreme Court Act1986 (Vic), which provides:
(1) If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
…
(3) A debt or sum payable or a date or time is to be taken to be certain if it has become certain.
The effect of s58 is that the Court must – unless good cause is shown to the contrary – allow interest at the applicable rate ‘from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain)’.
It became payable when royal assent to the remedial legislation was given on 25 September 2018.
So – is good cause shown to the contrary as to why the Court should order payment dating back to the time provided for under the ESA?
The agent argues that it is, submitting:
14. Indeed, to avoid paying the commission owed to the Plaintiff under the ESA, the First Defendant sought to take advantage of the fact that the rebate statement contained within the ESA, (which was a proforma document published by the Second Defendant), did not comply with section 49A(4) of the Act prior to the remedial amendments made by the Amending Act. Since the First Defendant took no defence on the merits to the Plaintiff’s claim, the enactment of remedial legislation to compel payment of the commission was a risk arising from the litigation that the First Defendant voluntarily assumed.
15. It is well established that interest is awarded, in exercise of the statutory power, to compensate a plaintiff for being kept out of its money and thereby deprived of its use. [Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382 at 396.] Consequently, it would have been appropriate that the statutory power be exercised on this occasion to compensate the Plaintiff who, undisputedly, provided the services contracted for but was kept out of its money, and thereby deprived of its use, for over 4½ years.
I consider the vendor was entitled to rely on the legal defences then available to it. They were, then, meritorious defences. I do not agree that the possibility of remedial legislation is a risk arising from litigation that the vendor voluntarily assumed.
I accept that interest of this nature is awarded as compensation for a plaintiff being deprived of the use of its money, and being ‘kept out of its money’. The relevant question is the date from which the agent was deprived of the use of the money in the context of the relevant law as it evolved. That date was when the remedial legislation was passed.
I do not consider that ‘good cause is shown to the contrary’ as to why interest should be allowed earlier than 25 September 2018 (when the remedial legislation was passed).

Costs of claim against vendor

The vendor says that all its costs up till the remedial legislation took effect on 25 September 2018 were wasted – it had raised a defence that was no longer relevant given the now changed law.
The agent says the vendor should pay its own costs from the outset of this proceeding, because the vendor took the risk that the law in relation to section 49A might change. The agent argues that at all times the agent had been entitled to bring a claim against the vendor.
However, I consider that the vendor was entitled to defend the proceeding on the basis of the law as it stood – which was that the agent could not bring its claim for commission relying on the ESA – until such time as the law changed, allowing the agent to claim commission.
The vendor should have its costs of defending the proceeding up to 25 September 2018. That includes its costs in relation to its summary judgment application to that point, including the costs of the hearing before His Honour Judge Macnamara on 13 July 2018 (which were reserved).
I will order that the agent pay the vendor’s costs until 25 September 2018, including costs reserved on 13 July 2018.
I will order that the vendor pay the agent’s costs after 25 September 2018.

REIV’s costs

I now turn to the issues relating to the agent’s claim against the REIV.
By the end of the hearing on 28 May 2020, the agent and the REIV had agreed to the following orders being made as between them:
1. The plaintiff’s claim against the second defendant be dismissed subject to Order 2
2. In the event that the first defendant appeals the decision of the Court dated 8 May 2020 and the effect of the Court of Appeal decision is that the first defendant is successful in defending the proceeding and the answer to the preliminary question is in the negative:
Is the rebate statement contained in Item 6 of the Exclusive Sale Authority between the plaintiff and the first defendant dated 15 April 2015 in a form approved by the Director within the meaning of section 49A(6) of the Estate Agents Act 1980 (Vic)?
then the plaintiff has a right of reinstatement as against the second defendant.
The first line of defence of the REIV to the claim brought against it was that the ESA was compliant with section 49A as amended by the remedial legislation. This defence was successful.
It follows that the REIV is entitled to its costs. Two issues arose in relation to those costs: who should pay them, and how much they should be?

Should vendor pay REIV’s costs?

The agent says the vendor should have given up its defence when the remedial legislation came into effect on 25 September 2018, and paid the agent on its claim. It says that then its case against the REIV would not have proceeded. It says at that stage there were then no real costs incurred by the REIV.
The agent seeks a ‘Sanderson’ costs order: that the vendor, as an unsuccessful defendant, pay the costs of the REIV, which it describes as a ‘successful defendant’.
The usual situation is that a party who has unsuccessfully sued a defendant pays that defendant’s costs. Here, the agent says that orders should be made that the first defendant (the vendor) pay the costs of the second defendant (the REIV). It argues that the vendor:
…by the conduct of its defence in asserting throughout that the ESA was ineffective to create a liability to pay commission since the rebate statement contained within it did not comply with section 49A of the Act, drove and induced the Plaintiff to join the Second Defendant (who produced the proforma document in which the ESA was embodied), that being the reasonable and proper course for the Plaintiff to follow.
[citations omitted]
The agent issued its summons to join the REIV to the proceeding after the Court of Appeal decision in Advisory had been handed down. It says that it was reasonable for it to join the REIV to ensure recovery of the damages sought.
It argues that conduct on behalf of a losing defendant, which shows that it was reasonable and proper for the plaintiff to proceed against the successful defendant, is not confined to conduct before the date on which the successful defendant is joined. Subsequent conduct, such as conduct during interlocutory applications or at trial may justify the costs order: MLC Ltd v J & W Management Services Pty Ltd [2001] VSC 352.
It says the vendor induced the agent to join the REIV to the proceeding, referring to its submissions for the adjourned hearing of the summary judgment application (on 10 December 2018), where the vendor argued in relation to the efficacy of the ESA:
[24]For reasons that follow, this is fatal for the Plaintiff because the Authority used by the Plaintiff is not in a form approved by the Director.
[25]This may mean that the Plaintiff will succeed in its claim against the Second Defendant, for it plainly relied upon the REIV (the Second Defendant). But its claim against the First Defendant must fail because the pro forma form drawn by the REIV and used by the Plaintiff is not in a form approved by the Director of CAV.
[bold formatting added].
The vendor argues that a Sanderson order ought not even be considered, as unlike cases where Sanderson orders are generally made, the REIV was not a ‘successful defendant’. It says that because the alternative case put against the REIV did not proceed, due to the fact that the case against the vendor was successful.
I reject that submission. The agent’s case was that it was entitled as a matter of law given the remedial legislation to succeed against the vendor. The REIV agreed with that, and supported that argument in its submissions, having pleaded that point in its defence at [9]. Their joint view on that issue was upheld. The fact that the REIV raised a number of other defences which did not need to proceed to a hearing (given the success of its first point) does not mean it was not a successful defendant.
However, I am not satisfied that the vendor, as unsuccessful defendant, should pay the REIV’s costs, as successful defendant. I do not consider it appropriate to make a Sanderson order in this case.
I reject the suggestion that the vendor ‘induced’ the joinder of the REIV by taking a statutory interpretation defence it was entitled to take. There was no endeavour to ‘inculpate’ the REIV by asserting that the rebate statement contained in the ESA was defective. Pointing out that there ‘may’ be a claim against the REIV is not inducing joinder. The submissions referred to on 10 December 2018 were made after REIV had been joined; but even to the extent the suggestion the agent might be successful against the REIV was made prior to such joinder, it would have been irrelevant. It did not induce joinder.
The agent decided to sue the REIV in the alternative, as it was entitled to do. Doing so gave it some finality in litigation and avoided the possibility of a multiplicity of proceedings.
But that does not mean that it is the vendor who should pay the costs of that decision It does not follow that because the vendor defended a claim brought against it – raising defences it was entitled to raise – that the vendor should be liable for the costs occasioned by the agent’s decision to join the REIV in this proceeding.
In Victorian WorkCover Authority v KaganBros Consolidated Pty Ltd [2011] VSCA 91 at [17], the Victorian Court of Appeal referred to the reasons of Nettle JA in Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65 at [40-42]. There Nettle JA summarised the circumstances in which a Sanderson (or Bullock) order will not ordinarily be made:
[17] The purport of the sentence from the reasons of Nettle JA in Berrigan
       which much influenced his Honour’s decision appears to have been
       misunderstood by the trial judge. We should therefore refer to the
       relevant passage of Nettle JA’s reasons where he said:
The conditions for a Sanderson or Bullock order were recently restated by this court in State of Victoria v Horvath (No 2). As Vincent, J.A., with whom Winneke, P. and Chernov, J.A. agreed, put it:
‘In general terms, a plaintiff who seeks to have the losing defendant pay the costs of the successful defendant pursuant to a Bullock or a Sanderson order must establish that, in the circumstances of the case, it would be reasonable and just for such an order to be made - see for example, Sanderson, Reid and Gould v. Vaggelas. Additionally, a court will ordinarily not make such an order unless a number of requirements are satisfied. For example, a costs order in the Bullock or Sanderson form will not be made if the plaintiffs' claims against the two or more defendants are not interdependent or are not, in essence, alternative claims. Thus, for example, in Norwest Refrigeration Services Pty. Ltd. v. Bain Dawes (W.A.) Pty. Ltd., the majority refused to make a Bullock order requiring the unsuccessful defendant (the Co-operative) to indemnify the plaintiff against the costs it was required to pay to the successful defendant (the insurer). Their Honours considered that the plaintiff's unsuccessful claim on the policy was "a straightforward action which was not interdependent with or in any real sense alternative to the claim against the Co-operative." See also in this regard Bankamerica. ...
If that requirement is satisfied, a plaintiff who seeks a Bullock or a Sanderson order must also ordinarily show that it was reasonable for him to have joined the successful defendant and that the conduct of the unsuccessful defendant was such as to make it just to require him to indemnify the successful defendant...’
In short an order will not ordinarily be made unless:
(a)       the plaintiff’s claims against the two defendants are
          interdependent or essentially alternative claims; and
(b)       it is reasonable for the plaintiff to have joined the
          successful defendant and the conduct of the
          unsuccessful defendant has been such as to make the
          order just.
…
[citations omitted]
I am not satisfied the conduct of the vendor makes a Sanderson order just.
I note too that the agent did not give the vendor any warning that it would seek to have the vendor pay the REIV’s costs. The first time this was raised was after judgment. That too, weighs against making a Sanderson order.
Since I will not make a Sanderson order, the agent must pay the REIV’s costs.

Calderbank letter

On 27 November 2018, the REIV sent a Calderbank letter to the agent. It relies on that now, seeking to have the agent pay its costs on an indemnity basis from that date (rather than standard costs).
The principles relevant to the costs consequences of non-acceptance of a Calderbank offer are summarised by the Court of Appeal in Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [234]:
In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2], the Court of Appeal held that the rejection of a Calderbank offer is a matter to which the court should have regard when considering whether to order indemnity costs. The Court said that the critical question is whether the rejection of the offer was unreasonable in the circumstances.
[citations omitted]

I consider that it was not unreasonable for the REIV’s offer to be refused. Acceptance of that offer would have resulted in the REIV receiving more from the agent than occurred as a result of the trial. In particular, by that letter, the REIV required an indemnity be given.
I agree with the agent’s submissions about this aspect:
23. The offer of settlement contained in the Calderbank letter of the
Second Defendant:
(a)was that the proceeding against the Second Defendant be dismissed on the basis that each party bears its own costs; and
(b)was expressed to be “conditional upon the execution of an agreed Deed of Settlement and Release containing releases and an indemnity in favour of [the Second Defendant] from any claims arising out of the subject matter of the proceeding”.
24. It is submitted that by reason of the terms of the offer contained in the Calderbank letter, it was not unreasonable of the Plaintiff not to accept the offer and accordingly, there should be no adverse costs consequences for the Plaintiff, for the following reasons:
(a) First, the offer did not involve a real and genuine element of compromise. The offer effectively sought capitulation which has been held to excuse non-acceptance; and
(b) Secondly, the release upon which acceptance of the offer was conditioned effectively precluded the Plaintiff from ever pursing its claims for damages and costs against the Second Defendant in the event that its claim against the First Defendant was unsuccessful.
[citations omitted]
I will not order indemnity costs.

Costs of interest and costs disputes

One issue remains: who should pay what in relation to the costs of arguing these interest and costs issues?
The parties will need to consider their positions as to that in the light of this ruling.
The following orders would have given effect to the rulings in this matter to date, but will need to be adapted to allow for orders as to who pays for the submissions and hearing in relation to those interest and costs issues.
1. The first defendant pay the plaintiff $124,025 together with interest on that sum pursuant to s58 of the Supreme Court Act1986 from 25 September 2018 to the date of this order.
2.    The proceeding against the first defendant be otherwise dismissed.
3.   The plaintiff pay the first defendant’s costs of the claim against the first defendant up to 25 September 2018, including the costs reserved on 13 July 2018, on the standard basis to be assessed by the Costs Court in default of agreement
4.    The first defendant pay the plaintiff’s costs of the claim against the first defendant from 25 September 2018, on the standard basis to be assessed by the Costs Court in default of agreement.
5.    The plaintiff’s claim against the second defendant to be dismissed subject to order 6.
6.   In the event that the first defendant appeals the decision of the Court dated 8 May 2020 and the effect of the Court of Appeal decision is that the first defendant is successful in defending the proceeding and the answer to the preliminary question is in the negative:
Is the rebate statement contained in Item 6 of the Exclusive Sale Authority between the plaintiff and the first defendant dated 15 April 2015 in a form approved by the Director within the meaning of section 49A(6) of the Estate Agents Act 1980 (Vic)?
then the plaintiff has a right of reinstatement as against the second defendant.
7.   The plaintiff pay the second defendant’s costs of the claim against the second defendant on the standard basis to be assessed by the Costs Court in default of agreement.
By 5 pm on Thursday 20 August, the parties should either provide consent orders to my chambers, or each provide submissions limited to 3 pages as to who should bear the costs of the interest and costs dispute, and a copy of the orders they say should be made.

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Certificate

I certify that these 21 pages are a true copy of the reasons for ruling of Her Honour Judge Marks, delivered on 17 August 2020, revised on 19 August 2020.
Dated: 19 August 2020

Zeinab Ali
Associate to Her Honour Judge Marks