Sarina Investments Pty Ltd v The Brotherhood of St Laurence

[2023] VCC 107

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION – COMPLEX CASES LIST (FORMER EXPEDITED CASES LIST MATTER)

Revised
Not Restricted
Suitable for Publication

Case No. CI-21-03545

SARINA INVESTMENTS PTY LTD	Plaintiff/defendant by counterclaim
v
THE BROTHERHOOD OF ST LAURENCE	Defendant/plaintiff by counterclaim

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	Trial heard on 24-28 October, 8-9 and 24 November 2022, following reasons for judgment of his Honour Judge Macnamara dated 7 December 2022
DATE OF RULING:	9 February 2023
CASE MAY BE CITED AS:	Sarina Investments Pty Ltd v The Brotherhood of St Laurence
MEDIUM NEUTRAL CITATION:	[2023] VCC 107

REASONS FOR RULING
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Subject:COSTS

Catchwords:              Proceeding decided in favour of plaintiff – defendant’s counterclaim dismissed – plaintiff entitled to order for its costs of the proceeding – whether costs should be awarded on a full indemnity basis following defendant’s failure to accept offer of compromise and Calderbank offer – no order for indemnity costs in light of plaintiff being granted leave only at the outset of trial to withdraw a material admission – inappropriate to make indemnity costs order relative to separate hearing on jurisdictional issue raised by Court.

Legislation Cited:      County Court Civil Procedure Rules 2018 (Vic)

Cases Cited:Nakos v Serdaris [2016] VSC 179; PCCEF Pty Ltd v Geelong Football Club Ltd [2019] VSCA 191

Judgment:                  The defendant must pay the plaintiff’s costs of the proceeding to be assessed in default of agreement upon a standard basis.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Luke Virgona	HWL Ebsworth Lawyers
For the Defendant	Mr Ben Petrie	Rigby Cooke Lawyers

HIS HONOUR:

Background

1On 7 December 2022, I published reserved reasons for judgment determining this proceeding in favour of the plaintiff and dismissing the defendant’s counterclaim — [2022] VCC 2122. I reserved the question of costs.

2The parties have now filed their contentions on that question and asked for my determination of it “on the papers”.

Plaintiff’s contention

3The plaintiff’s counsel, Mr Virgona, noted that his client had been successful in the proceeding and as such was entitled, in accordance with the principle that costs follow the event, to an order for its costs of the proceeding.  Further, he contended that on and from 11.00am on 28 April 2022, those costs should be assessed on the uplifted full indemnity basis.

4The ground for claiming the higher scale was that the defendant and counterclaimant, The Brotherhood of St Laurence (“The Brotherhood”), had failed to accept settlement proposals on behalf of the plaintiff made in the form of an Offer of Compromise under Part 2 of Order 26 of the County Court Civil Procedure Rules 2018 (Vic) proposing that the dispute be resolved by the Brotherhood paying to the plaintiff $275,000 plus costs assessed on the standard basis to be “taxed” if not agreed and simultaneously, a letter expressed to be “without prejudice save as to costs” and describing itself as a “Calderbank offer” proposing a settlement for $330,000.  The “Calderbank offer” explained the basis upon which the offer was put and the reasons why, in the plaintiff’s view, the offer was reasonable, in particular by reference to an expert report which was served a few days earlier.  The proceeding had been the subject of an unsuccessful mediation on 13 April last year.

5Mr Virgona referred to a number of authorities relative to Calderbank offers and Offers of Compromise, in particular Nakos v Serdaris [2016] VSC 179 at [39] per Zammit J and PCCEF Pty Ltd v Geelong Football Club Ltd [2019] VSCA 191 at [23]‑[25]. He noted that according to those authorities, the presumption in favour of the award of costs on the full indemnity basis established by Order 26 is strong where the party failing to accept the offer does not obtain a more favourable outcome at trial. The presumption relative to Calderbank offers was less strong and it was necessary to consider various circumstances, including the stage at which the offer was made, and whether the basis on which it was contended the proposed settlement was reasonable was explained.

6Mr Virgona noted that it was common ground that the outcome at trial was less favourable to The Brotherhood than what was proposed either in the Offer of Compromise or the Calderbank offer.  Therefore, he said, the award of indemnity costs should be made.

7Mr Virgona noted that the defendant contended that no such award of indemnity costs should be made because it was only at the outset of trial that Sarina was permitted to withdraw an admission in its pleadings as to the existence of an “Undisclosed Engineer’s Report”.  Mr Virgona noted that whilst there was importance attached to this matter in The Brotherhood’s closing submissions, he said at the outset of trial it was conceded as being a matter of no importance.  More significantly, he said the state of the premises the subject of the proceeding was made clear by the expert engineering report served prior to the Offer of Compromise and the Calderbank offer.

Defendant’s contention

8Mr Petrie, on behalf of The Brotherhood, contended that no award of indemnity costs should be made.  He said the “Undisclosed Engineer’s Report” was of great significance to the fundamental issue in the proceeding as to whether the subject premises were affected by a structural defect.  As I understood the contention, it was that whilst the existence of this mysterious, though it now seems non-existent, report seemed to be in doubt, the possibility remained that despite the expert report afterwards obtained by the plaintiff and filed in the proceeding, there might be some consideration to “give the lie” to its conclusions.

9Mr Petrie said further that insofar as costs had been incurred in determining a preliminary jurisdictional issue which had been raised on the Court’s own initiative, it would be unjust to make an indemnity costs award as to that matter.

Conclusion

10I agree with Mr Petrie’s contention that there should be no indemnity costs award relative to the jurisdictional issue.  It was raised by the Court (though I did not anticipate that it would require the filing of additional evidence and the listing of a separate hearing).  This Court was chosen as the forum for the proceeding by the plaintiff and therefore the jurisdictional issue was primarily a matter of concern to it.

11The second issue, namely the significance or otherwise of the withdrawal of the admission as to the “Undisclosed Engineer’s Report”, is more problematic.  Implicit in Mr Petrie’s presentation is that the jurisdictional issue aside, the issue of the undisclosed report was the only basis on which an award of indemnity costs from late April onwards could be resisted.

12I was initially attracted to the contention by Mr Virgona that the expert report of Mr Flanders served earlier in April last year put the issue of an alleged structural defect in the subject premises to bed, resolving it in the negative.  Whilst, however, the issue of the “Undisclosed Engineer’s Report” remained outstanding, there was likewise, I suppose, some hope for The Brotherhood in obtaining a different finding on the issue of structural defects.  On one view, that was a somewhat forlorn hope.  On the other hand, if there were an undisclosed report “out there”, but not discovered and not apparently the subject of any claim for privilege, there might be grounds for thinking that this mysterious report was “dynamite” as far as the plaintiff was concerned.

13Therefore, I accept the contention of Mr Petrie that there should be no indemnity costs award relative to the jurisdictional issue and likewise that as to the balance of the proceeding after late April 2022, the award should be on the standard rather than the full indemnity basis.