Toorak Home Developments Pty Ltd v VPJ Developments Pty Ltd (No 2)

[2023] VCC 543

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

Expedited CASES List

Case No. CI-20-05439

TOORAK HOME DEVELOPMENTS PTY LTD (ACN 637 546 304)	First Plaintiff
and
BAQIR REZAIE	Second Plaintiff
V
VPJ DEVELOPMENTS PTY LTD (ACN 604 516 369)	Defendant

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, written submissions filed 2, 22 and 27 March 2023
DATE OF RULING:	13 April 2023
CASE MAY BE CITED AS:	Toorak Home Developments Pty Ltd v VPJ Developments Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2023] VCC 543

RULING
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Subject:PRACTICE AND PROCEDURE – COSTS

Catchwords:              Whether indemnity costs should be ordered in favour of the plaintiffs following the defendant’s rejection of the plaintiffs’ offer of compromise

Legislation Cited:      County Court Civil Procedure Rules 2018

Cases Cited:The Friendly Backpacker Pty Ltd v Will Ang Drive Pty Ltd (No.2) [2023] VCC 114; Oshlack v Richmond River Council (1998) 193 CLR 72

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J D McKay	Mills Oakley
For the Defendant	Mr D K Carlile	NOH Legal

HER HONOUR:

1On 23 February 2023, I delivered reasons for judgment in this matter (“the principal reasons”).[1]  The plaintiffs succeeded in their claim for an order for specific performance of a contract of sale of land. These reasons assume familiarity with the principal reasons and adopt the same terminology.

[1]Toorak Home Developments Pty Ltd v VPJ Developments Pty Ltd [2023] VCC 195

2The parties were directed to confer and file a minute of consent orders or failing agreement, to file and serve submissions regarding the orders to be made, including costs.

3The plaintiffs filed submissions on 2 March 2023. The submissions attached a minute of proposed order and an offer of compromise served on the defendant’s solicitors on 17 June 2021 (“the offer of compromise”).

4The defendant was granted an extension of time in which to file its submissions. The defendant’s submissions were undated but were served on 22 March 2023. In response to those submissions, the plaintiffs served reply submissions dated 27 March 2023.

5Two issues for determination arise from the submissions, namely, the period required for settlement of the contract of sale and costs. I will deal with the costs issue first.

Costs

6The plaintiffs seek an order that the defendant pay the plaintiffs’ costs of and incidental to the proceeding on a standard basis in respect of costs incurred until 11:00am on 21 June 2021 and thereafter on an indemnity basis, to be taxed in default of agreement. This order was sought on the basis of the offer of compromise which was not accepted by the defendant.

7The offer of compromise provides relevantly as follows:

TAKE NOTICE that the Plaintiffs offer to compromise in full and final settlement, their claim against the Defendant in this proceeding on the following terms:

1.     The Plaintiffs pay the sum of $55,000 to the Defendant within 30 days of acceptance of this offer.

2.     Pursuant to the contract of sale dated 22 October 2019, the first plaintiff and the defendant proceed with settlement of the property situated at certificate of title volume 10049 folio 732, with settlement to occur on a date agreed by the parties but not later than 60 days after acceptance of this offer with payment of the sum of $972,000 (as adjusted in accordance with the terms of the contract of sale, without any adjustment for interest in favour of the purchaser or vendor) to be made to the defendant as settlement.

3.     This Offer of Compromise is:

(a)inclusive of costs;

(b)open to be accepted by the Defendant for a period of 14 days after service;

(c)served in accordance with Order 26 of the County Court Civil Procedure Rules 2018 (Vic); and

(d)made on a “without prejudice” basis.

8The plaintiffs rely on Rule 26.08(2) of the County Court Civil Procedure Rules 2018 (Vic) (“the Rules”) which deals with the costs consequences of a failure to accept an offer of compromise. Rule 26.08 (2) provides that if an offer of compromise is not accepted by a 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, in respect of a claim under sub-s2(b), to an order against the defendant for the plaintiff’s costs before 11:00am 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. The prima facie presumption created by the rule is that indemnity costs should be awarded unless the Court otherwise orders.

9The onus lies on the party wishing to displace the prima facie rule in Rule 26.08 as to costs to establish grounds for its displacement. This has been described as a heavy burden or sometimes as exceptional circumstances. The prima facie presumption is a strong one and not easily displaced.[2] However, it is to be emphasised that such labels do not operate 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.[3] 

[2] The Friendly Backpacker Pty Ltd v Will Ang Drive Pty Ltd (No.2) [2023] VCC 114 at [36] – [39] and the authorities referred to therein

[3] G E Dal Pont Law of Costs Lexis Nexis 5th ed at [13.32]

10In determining whether the discretion to oust the effect of the rule should be made, the Court will have regard to the reasonableness of the offer and also the timing of the offer. The stage of the proceeding when the offer was made is relevant if, for example, at an early stage the offeree lacked sufficient information to assess its reasonableness. Generally speaking, an offer made late in the proceedings may disincline the Court to oust the prima facie rule as the more advanced the proceedings are, the greater the ability for the offeree to make an informed assessment of the merits of the offer.[4] 

[4] Ibid at [13.39]

11Other factors to consider are whether the offer has been made in clear terms and whether it reflects a genuine compromise. Generally speaking, a demand for capitulation will not amount to a genuine offer to compromise. However, a walk-away offer where an offeror is willing to settle on the basis that each party bear its own costs can amount to a genuine attempt to compromise a dispute.[5] 

[5] Ibid at [13.9]

12The defendant submits the Court should make an order that each party bear its own costs of the proceeding. The defendant contends the claim was complex and that the plaintiffs underestimated the complexity of the case by commencing the proceeding by way of an originating motion. The defendant says it was only after obtaining subpoenaed documents from the Council that it became aware of the significant number of changes made to the planning permit. It argues that the issues in dispute needed to be determined by the Court and consequently, the parties should each bear their own costs. The defendant’s default position is that if the Court is not minded to make such an order, then the costs should be awarded on a standard basis.

13The defendant concedes that the plaintiffs obtained a judgment on terms no less favourable than the offer of compromise. This is manifestly so in circumstances where the plaintiffs agreed to bear their own costs of the proceeding and also to pay the defendant the sum of $55,000, in addition to the contract of sale of land being completed in accordance with its terms. However, the defendant seeks to argue that the offer of compromise was not a genuine one, the defendant’s defence was not hopeless and the offer was made at an early stage of the proceeding. It is put that the offer was, in effect, a demand that the defendant capitulate.

14The defendant contends the offer was made at a very early stage of the proceeding. At the time it was made the defendant had only filed its defence and no discovery was made. It said the issue of discovery was relevant because the plaintiffs on a number of occasions maintained they had no documents relating to the second permit application, as these documents were either with the Council or Mr Al-Sharbati. Accordingly, the defendant says it had no real opportunity or ability to genuinely consider the offer of compromise and once discovery was made, the offer of compromise had expired.

15The plaintiffs set out a detailed chronology of the interlocutory steps taken in the proceeding in their reply submissions. The plaintiffs say that many of the matters raised by the defendant’s submissions are factually inaccurate. The reply submission also dealt with the allegations made by the defendant regarding the form of the process and whether it was appropriate to use the Order 45 procedure. The plaintiffs note that in any event the affidavits filed in support of the motion and summons were used at trial and no significant costs were therefore wasted due to the use of the Order 45 procedure. If anything, it caused the parties to expedite their evidence and conclude their case with greater promptitude.

16The plaintiffs accept that the defendant’s case was not hopeless, but it was attended by a substantial difficulty in that the defendant did not purport to terminate the contract until 30 October 2020. By this time, the planning permit had issued, and the plaintiffs were seeking to settle. The plaintiffs say it was clear that the recission notice served on 30 October 2020 was defective on its face. The plaintiffs argue they do not need to demonstrate the defendant’s case was hopeless to obtain the presumptive outcome conferred under Rule 26.08 and the defendant does not suggest otherwise. The plaintiffs contend that the submission made that the offer was not a genuine compromise is erroneous. The plaintiffs had a good case. Despite this, they offered to bear their own costs and pay an additional $55,000 to the defendant to secure the completion of the contract which they argue was a real compromise.

17The plaintiffs dispute the offer was made at an early stage of the proceeding. The offer was served on 17 June 2021. By then, substantial evidence by way of affidavit had been served, including the first affidavit of the expert witness, Mr Saloumi and mediation had occurred. In terms of the issues that were before the parties, these were well known by 17 June 2021. These issues included the construction of the recission notice point, the failure of the defendant to terminate until 30 October 2020 by which time the permit had issued and the failure on the part of the defendant to call evidence to establish that the changes to the plans caused any significant delay to the permit application.

Consideration

18The usual position is that costs follow the event.[6] Having succeeded on their claim,  the plaintiffs should recover their costs from the defendant. I am not persuaded by the defendant’s submission that there should be a departure from the usual position and that each party should bear its own costs. The mere fact that there were some complex issues which ended up being determined by the Court is not a sound basis for denying the plaintiffs their costs in circumstances where they succeeded at trial. In my view, there is no basis established for depriving the plaintiffs of an order for costs of the proceeding in their favour.

[6] Oshlack v Richmond River Council (1998) 193 CLR 72 at [97]

19That being so, the next issue is whether the plaintiffs should receive an award of indemnity costs having regard to the offer of compromise. The offer of compromise was clear in its terms and complied with the requirements under Rule 26. I consider the offer made was a genuine offer to compromise the proceeding and did not amount to a demand for capitulation, contrary to the defendant’s submission. The plaintiffs were willing to bear their own costs and in addition, pay the sum of $55,000 to the defendant. The position that the defendant has ended up in now is that the plaintiffs have succeeded in their claim, and it has to bear not only its own costs but also the costs of the plaintiffs. It is not disputed that the judgment obtained is no less favourable than the offer of compromise.

20Consequently, the plaintiffs are entitled to indemnity costs following the defendant’s rejection of the offer unless there are circumstances which would persuade the Court to order otherwise.

21In my view, by the time the offer was served in June 2021, the issues in dispute were well known to the parties and it is significant that mediation had occurred. Therefore, I reject the submission put by the defendant that the offer was made too early in the proceeding and that the defendant was not in a position to assess properly the merits of the offer made.

22The defendant has failed to convince me that it has established any good grounds or exceptional circumstances which should oust the usual presumption contained in Rule 26.08. Accordingly, the defendant has not discharged the onus placed upon it to rebut the prima facie presumption. I find that the plaintiffs are entitled to rely upon the offer of compromise which was rejected by the defendant and should have their costs in accordance with the minute of order submitted by the plaintiffs.

Timing of settlement

23The parties disagree as to how long it would take for the settlement of the contract of sale to be conducted. The defendant contends settlement could be arranged within a timeframe of seven days from the date of final orders or alternatively 14 days. In contrast, the plaintiffs submit a reasonable timeframe should be allowed to enable the parties to organise themselves for settlement. This would be needed in order to obtain refreshed property certificates, calculate adjustments, and otherwise make proper arrangements for settlement. The plaintiffs submit that such an appropriate timeframe would be 30 days, alternatively 21 or 14 days.

24In the circumstances and given the delay in the making of final orders which has been in part due to the defendant’s request for an extension of the time to file submissions, I consider a reasonable period would be 21 days from the date of final orders.

Conclusion

25I will make the following declaration and orders:

1.        There is judgment for the plaintiffs.         

2.It is declared that the second plaintiff as purchaser (and the first plaintiff as nominated purchaser) are entitled to an order for specific performance against the defendant under a contract of sale between the second plaintiff and the defendant dated 22 October 2019 (“the contract of sale”).

3.Subject to any variation that the parties may agree, the second plaintiff and the defendant must specifically perform their respective obligations under the contract of sale.

4.Within 21 days of the date of these orders, the second plaintiff and the defendant do all things necessary to settle the contract of sale so that the second plaintiff’s nominee, the first plaintiff, becomes the registered proprietor of the land situated at Certificate of Title Volume 10049 Folio 732, land otherwise known as 73-75 Nettle Drive, Hallam, Vic 3803, on the terms and conditions specified in the contract of sale.

5.At settlement, the second plaintiff shall pay to the defendant or procure the payment by the first plaintiff, the balance of the purchase price due under the contract of sale, being $972,000 and procure a release to the defendant of the deposit monies paid under the contract of sale.

6.The defendant pay the plaintiffs’ costs of and incidental to the proceeding on a standard basis in respect of costs incurred until 11:00am on 21 June 2021 and thereafter on an indemnity basis, to be taxed in default of agreement.

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Certificate

I certify that these 8 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 13 April 2023.

Dated:   13 April 2023

Associate to Her Honour Judge A Ryan