Vision Eye Institute Ltd v Kitchen (No 3)

Vision Eye Institute Ltd, an ophthalmic medical practice, filed a claim against Michelle Kitchen, a former director and shareholder, and her associated entities. The primary dispute centred around allegations of misuse of corporate funds and breach of fiduciary duties. The matter was heard in the Supreme Court of New South Wales. The defendants, in turn, filed counterclaims against the plaintiffs, which were largely unsuccessful. The court was tasked with determining whether the plaintiffs' costs order should be adjusted to reflect the partial success of the defendants on their counterclaims. Additionally, the court had to decide if an order for costs on an indemnity basis was appropriate, given the defendants' failure to accept a formal offer to settle.

The court found that the plaintiffs were substantially successful in their primary claim and largely unsuccessful on their counterclaims. Despite the partial success of the defendants, the court determined that the plaintiffs were entitled to costs on an indemnity basis due to the defendants' failure to accept the plaintiffs' formal offer to settle. This offer included terms that would have led to the discontinuance of the proceedings entirely, and the subsequent judgment awarded to the plaintiffs was more favourable than the terms of the offer. The court concluded that the defendants' failure to accept the offer warranted a costs order on an indemnity basis, rather than simply following the general rule of costs following the event.

In light of the above, the court ordered that the defendants pay 95 per cent of the plaintiffs' costs of the principal proceeding and the counterclaim, including reserved costs, to be assessed on the indemnity basis. The liability of Michelle Kitchen for such costs was limited to the property of the MDK Trust, including the Restricted Securities held by the defendants in Vision Eye Institute Ltd. This comprehensive costs order aimed to reflect the substantial success of the plaintiffs in their primary claim while considering the defendants' partial success on their counterclaims.