O'Reilly v Ts & B Retail Systems Pty Ltd - [2010] VSCA 47

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 3882 of 2008

CHRISTOPHER PAUL O'REILLY
	Appellant
v
TS & B RETAIL SYSTEMS PTY LTD	Respondent

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JUDGES:	MANDIE and BONGIORNO JJA, HANSEN AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	2 March 2010
DATE OF JUDGMENT:	18 March 2010
MEDIUM NEUTRAL CITATION:	[2010] VSCA 47
JUDGMENT APPEALED FROM:	O’Reilly v TS & B Retail Systems (Ruling) (Unreported, County Court of Victoria, Judge Kennedy, 23 October 2008)

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COSTS – Indemnity costs sought on basis of party’s default on discovery – No allegation of misconduct – Principles applicable – Indemnity costs refused – Calderbank letter – Reasonableness of offeree’s conduct in refusing offer – Conduct unreasonable – Order for party/party costs from date of expiry of Calderbank offer – Indemnity costs refused – No error in judge’s exercise of discretion – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr J H Shaw	Mason Sier Turnbull
For the Respondent	Mr D G Collins SC	Madgwicks

MANDIE JA:

I agree with Bongiorno JA.

BONGIORNO JA:

This appeal concerns a ruling as to costs following a trial before her Honour Judge Kennedy, sitting alone, in the County Court. The trial was of a claim for damages by a former employee against his employer for breach of his employment contract – specifically for its failure to honour that contract in respect of his entitlement to equity participation in its business (including loss of dividend consequent upon that failure) and its failure to pay him a ‘performance bonus’. As at the date of trial, 26 May 2008, the plaintiff’s claim was quantified at about $284,000.

The plaintiff succeeded on his claim concerning shares in his employer and in respect of lost dividend on those shares, but only to the extent of $83,372.00 plus interest of $16,748.00. He abandoned his claim for the performance bonus before the end of the trial.

There were complications on the issue of costs. The plaintiff sought his costs from 3 August 2007 on an indemnity basis, his contention being that the defendant had been guilty of non‑compliance with a number of interlocutory orders relating to discovery. As against this claim the defendant sought to rely upon two Calderbank letters written on 16 and 20 May respectively. The first letter offered to settle the plaintiff’s claim for $250,000 inclusive of costs; the second for $320,000 on the same basis. The defendant also (perhaps in the alternative) sought an order that it be paid 30% of its costs by the plaintiff because the plaintiff abandoned some of his claims before the trial concluded.

Although the trial commenced on 26 May 2008 and ran for some days, due to the illness of counsel it had to be adjourned part-heard and was not completed until 3 September. Judge Kennedy delivered her judgment on 3 October. The argument on the costs issues was heard on 17 October and occupied almost a full day. It

generated 105 pages of transcript. Her Honour delivered her costs ruling, the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] VSCA 47
Decision Date: 18 March 2010

CaseChat Overview and Summary

In the case of O'Reilly v Ts & B Retail Systems Pty Ltd, the plaintiff, O'Reilly, sought indemnity costs from the defendant, Ts & B Retail Systems Pty Ltd, due to their alleged failure in the discovery process. The matter was heard in the Federal Court of Australia, where the plaintiff argued that the defendant's default warranted indemnity costs as no misconduct was alleged against them. The primary legal issue the court had to address was whether the defendant's failure to comply with the discovery process justified the imposition of indemnity costs and whether the plaintiff's conduct in refusing a Calderbank offer was reasonable.

The court examined the principles governing indemnity costs, which generally require a finding of misconduct or bad faith. The judge found that while the defendant did not act in bad faith, their failure to comply with the discovery process was a breach that warranted costs. However, the court also assessed the plaintiff's conduct in relation to a Calderbank offer, which is a conditional offer to settle that includes an undertaking on costs if the offer is not accepted and the offeree does not secure a more favourable outcome at trial. The court determined that the plaintiff's refusal of the Calderbank offer was unreasonable, leading to the conclusion that indemnity costs should not be awarded. Instead, the court ordered the plaintiff to pay the defendant's costs from the date the Calderbank offer expired.

The Federal Court found no error in the judge's exercise of discretion regarding the indemnity costs and the costs order arising from the Calderbank offer. Consequently, the appeal brought by the plaintiff was dismissed, affirming the lower court's decision. The court's ruling emphasised the importance of assessing both the conduct of the party seeking indemnity costs and the reasonableness of the conduct of the opposing party in relation to settlement offers.

Orders