Re Vibe-Tastic Pty Ltd (No 2)
[2024] VSC 582
•19 September 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 00493
IN THE MATTER of VIBE-TASTIC PTY LTD (ACN 656 981 636)
BETWEEN:
| PRIYANKA PRIYANKA | Plaintiff |
| v | |
| SHWETA JAIN | Defendant |
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JUDGE: | Waller J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers following submissions filed on 4 and 6 September 2024 |
DATE OF JUDGMENT: | 19 September 2024 |
CASE MAY BE CITED AS: | Re Vibe-Tastic Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 582 |
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COSTS – Plaintiff’s offer of compromise – Defendant’s Calderbank offer – Whether plaintiff’s failure to accept offer was unreasonable – No order as to costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Black | Nevile & Co |
| For the Defendant | In person |
HIS HONOUR:
A. INTRODUCTION
I published my reasons for judgment in this proceeding on 30 August 2024 (‘Principal Judgment’)[1] and final orders were made on 6 September 2024, except in relation to costs.
[1]Re Vibe-Tastic Pty Ltd [2024] VSC 529.
I concluded that both parties had, to some extent, made out their claims of oppressive conduct against the other.
I ordered that Ms Jain purchase Ms Priyanka’s interest in Vibe-Tastic Pty Ltd (‘Company’) for a total sum of $170,282.90 comprising $30,387.50 for Ms Priyanka’s 50% interest in the shares in the Company, $132,608 for Ms Priyanka’s capital contribution to the Company and $7,287.40 representing half the sum of $14,574.81 which Ms Jain caused the Company to overpay herself. If Ms Jain failed to pay that amount within 30 days of the Court’s order then Ms Priyanka had the opportunity to purchase Ms Jain’s interest in the Company within 60 days of the Court’s order by paying her $153,709.10 comprising $30,387.50 for Ms Jain’s 50% interest in the shares, $130,609 for Ms Jain’s capital contribution less $7,287.40 representing half the sum of $14,574.81 which Ms Jain caused the Company to overpay herself. If neither party purchased the other’s interest in the Company within the time provided, then the Company would be wound up.
On 12 September 2024, the Court was informed that Ms Jain had paid Ms Priyanka the sum of $170,282.90 as ordered by the Court.
B. PARTIES’ SUBMISSIONS
The parties have filed submissions identifying the costs orders they seek.
Ms Priyanka contends that Ms Jain should pay Ms Priyanka’s costs on a standard basis up to 12 July 2023 and thereafter on an indemnity basis. She relies on an offer of compromise dated 10 July 2023, made pursuant to Order 26 Part 2 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Offer of Compromise’). The Offer of Compromise proposed that Ms Priyanka pay Ms Jain $220,000 inclusive of costs to acquire all of Ms Jain’s shares and interest in the Company.
Ms Priyanka argues that she obtained a result no less favourable than that set out in the Offer of Compromise, in accordance with r 26.08(2). She contends that while the Court’s determination gave Ms Jain the first option to buy out Ms Priyanka, the decision indicates it was a ‘close call’. Ms Priyanka says that her offer of $220,000 is almost 50% more than the $153,709.10 she would have to pay under the Court’s order if required to buy out Ms Jain.
Ms Priyanka submits that the Offer of Compromise was made at a point when Ms Jain’s legal costs were reasonably constrained, being less than a month after judicial mediation and before the costs of witness outlines, submissions and trial had been incurred.
Alternatively, Ms Priyanka submits that each party should bear their own costs of the proceeding, including reserved costs, except where otherwise ordered.
Ms Jain submits that although she was not wholly successful, she obtained priority in acquiring the business, which was the relief sought by both parties. She contends that as the prevailing party who has obtained their relief, she should be entitled to recover her costs.
Ms Jain contends that Ms Priyanka should pay Ms Jain’s costs on a standard basis up to 30 June 2023 and thereafter on an indemnity basis. She relies on a Calderbank offer dated 30 June 2023, which offered to pay Ms Priyanka $200,000 inclusive of costs as consideration for Ms Priyanka’s shares in and loan to the Company (‘Calderbank Offer’). The Calderbank Offer was open for acceptance for seven days.
Ms Jain submits that the Calderbank Offer was made over nine months prior to trial, was timed to help both parties avoid significant legal costs and was substantial, exceeding Ms Priyanka’s capital contribution by more than 50%. She contends that she made the Calderbank Offer despite having a strong defence and greater prospects of success, that the offer was clear and detailed and expressed that indemnity costs would be sought in the event of its rejection.
As an alternative, Ms Jain submits that each party should bear their own costs of the proceeding, including reserved costs, except where otherwise ordered.
Ms Priyanka submits that the Calderbank Offer should be given little weight because the time allowed for its acceptance was relatively short, the extent of the compromise offered was not significant when compared to the result and Ms Jain’s capacity to pay the offered amount was questionable.
C. CONSIDERATION
Pursuant to s 24(1) of the Supreme Court Act 1986, the Court has a broad discretion in relation to costs.[2] That discretion is unconfined and unfettered but must be exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations.[3]
[2]See also s 65C of the Civil Procedure Act 2010 (Vic).
[3]Latoudis v Casey (1990) 170 CLR 534, 540–1 (Mason CJ), 557 (Dawson J); Oshlack v Richmond River Council (1998) 193 CLR 72, 86 [34], 96–7 [65]–[66] (Gaudron and Gummow JJ).
In Thurin v Krongold Constructions (Aust) Pty Ltd (No 2) the Court of Appeal stated:[4]
[i]n exercising its discretion, the Court is entitled to look to the realities of the litigation and it will attempt to do ‘substantial justice’ between the parties. Accordingly, while the general position is that costs should follow the event, such an order may not be appropriate in every case. In particular, where there is a multiplicity of issues, and mixed success has been enjoyed by the parties, the Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis.
[4][2022] VSCA 252, [12] (McLeish, Niall and Walker JJA) (citations omitted).
An award of costs is usually on a standard basis unless there are special or unusual features warranting an order for costs on an indemnity basis.[5] Such circumstances include where:
[5]See Colgate-Palmolive Company v Cussens Pty Ltd (1993) 46 FCR 225, 233 [4] (Sheppard J) (‘Colgate v Cussens’); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [7] (Harper J); Yap v Lee [2019] VSC 743, [6] (McDonald J).
(a) proceedings are commenced or continued for an ulterior motive;[6]
[6]Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175, 177 (Davies J).
(b) proceedings are commenced or continued in disregard of known facts or clearly established law; [7]
(c) a defendant raises issues that could not succeed in establishing a defence and the proceeding was entirely unnecessary;[8] or
(d) there is an imprudent refusal of an offer to compromise.[9]
[7]J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301; [1993] FCA 70, [5] (French J).
[8]Specialist Australian Security Group Pty Ltd (in liq) v Onwatch Pty Ltd [2017] VSC 184, [45]–[57] (Elliott J).
[9]Colgate v Cussens (n 5) 223 [5] (Sheppard J).
In the Principal Judgment I found that both parties had engaged in oppressive conduct. Both parties had sought an order that they purchase the other’s interest in the Company. Although I regarded Ms Jain’s oppressive conduct as more serious and far reaching, for the reasons set out in the Principal Judgment, I considered it was appropriate, in the first instance, that she be required to buy out Ms Priyanka’s interest in the Company. Even though this coincided with the relief sought by Ms Jain, she ought not be regarded as the successful litigant.
In view of the orders I have made, and the fact that Ms Jain has now bought out Ms Priyanka’s interest in the Company, Ms Priyanka’s Offer of Compromise has no bearing on the question of costs.
The issue for determination is whether Ms Priyanka’s rejection of Ms Jain’s Calderbank Offer warrants departure from the ordinary rules as to costs.
The principles which apply to Calderbank offers were summarised by Nettle JA (as his Honour then was) in Berrigan Shire Council v Ballerini (No 2):[10]
[10][2006] VSCA 65, [33] (citations omitted).
The rejection of a Calderbank offer not later bettered by judgment does not lead automatically to an indemnity costs order in favour of the offeror. The question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable, and the answer to that question turns in each case on all the circumstances of the case. 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. As the court explained in Hazeldene’s Chicken Farm:
‘The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
a) the stage of the proceeding at which the offer was received;
b) the time allowed to the offeree to consider the offer;
c) the extent of the compromise offered;
d) the offeree’s prospects of success, assessed as at the date of the offer;
e) the clarity with which the terms of the offer were expressed;
f) whether the offer foreshadowed an application for an indemnity costs [order] in the event of the offeree’s rejecting it.’
The first issue is whether the Calderbank Offer was later bettered by the judgment. The Calderbank Offer offered to pay Ms Priyanka $200,000 inclusive of costs as consideration for Ms Priyanka’s shares in and loan to the Company. The judgment required Ms Jain to pay Ms Priyanka the sum of $170,282.90. Without an assessment of the costs incurred by Ms Priyanka at the time the Calderbank Offer was made or lapsed, it is not certain whether the judgment was at least as favourable or more favourable than the Calderbank Offer.[11]
[11]Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322, [144] (Basten JA, Beazley JA agreeing at [2]).
Even if the Calderbank Offer was not later bettered by the judgment, the second issue is whether Ms Priyanka’s rejection of the Calderbank Offer was unreasonable. Ms Jain bears the onus on this question. The fact that the Calderbank Offer itself was reasonable does not make its refusal unreasonable.
I do not consider that Ms Priyanka’s refusal of the Calderbank Offer was unreasonable. Given that Ms Priyanka had sought to buy out Ms Jain, an offer that Ms Jain buy out Ms Priyanka did not constitute a real and genuine compromise on the part of Ms Jain. Further, at the time the Calderbank Offer was made, Ms Priyanka was entitled to consider that her prospects of success in achieving the relief she sought were reasonably high.
In these circumstances I do not consider that Ms Priyanka’s rejection of the Calderbank Offer warrants departure from the ordinary rules as to costs.
For the reasons set out in the Principal Judgment, neither party has fully succeeded in their claims. Neither the Offer of Compromise nor the Calderbank Offer warrant departure from the ordinary rules as to costs.
Both parties’ submissions contemplated that, in these circumstances, each party should bear their own costs of the proceeding including reserved costs, except where otherwise ordered. I agree. In all the circumstances, I consider it appropriate that there be no order as to costs.
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