Aljade and MKIC v OCBC [2004] VSC 351

OVERSEA-CHINESE BANKING CORPORATION LIMITED (A.R.B.N. 073 598 035)

ALJADE DEVELOPMENT AND CONSTRUCTION SDN BHD (Company No. 208479-W)

OVERSEA-CHINESE BANKING CORPORATION LTD (ARBN 073 598 035)

2. Malayasian Kuwaiti Investment Co SDN BHD (MKIC) and Jadewealth Pty Ltd (Aljade) ("the Plaintiffs") having obtained judgments in their favour against the Oversea-Chinese Banking Corporation Limited (OCBC "the Defendant") seek an order for costs on an indemnity basis. The Defendant submits that it should pay the Plaintiffs' costs of the proceedings on a party/party basis up to 6 February 2004 and that the Plaintiffs should thereafter pay the Defendant's costs on a party/party basis.

5. Proceedings were commenced by the parties in mid 2002. On 14 May 2003 MKIC sent a facsimile to the solicitors for the Defendant in which it made an informal offer of compromise which was left open for 14 days. MKIC offered to compromise those proceedings by relinquishing its claim for one of the apartments in exchange for which OCBC was to abandon its claim to any encumbrance over the remainder of the apartments and pay MKIC its costs on a party/party basis in each proceeding. The letter noted that if the offer was not accepted, the letter would be produced in support of submissions concerning costs in both proceedings.

8. By letter dated 16 April 2003 and marked without prejudice save as to costs Aljade made an offer of compromise that each party bear their own costs and that OCBC abandon its claim to an encumbrance over any of the apartments. The letter recited that should Aljade obtain a judgment more favourable than the offer, the letter would be produced on the question of costs (the Calderbank letters).

11. Each Plaintiff initially sought costs on an indemnity basis from the commencement of the proceedings. These claims were amended during oral argument, costs being sought from the date of each Plaintiff's offer of compromise.

14. The Plaintiffs rely upon the conduct of the Defendant prior to and during the litigation as warranting an order for costs on an indemnity basis. In the alternative they submit that such an order should follow as a consequence of the rejection of the Plaintiffs' offers of compromise.

17. After judgment in their favour on 19 December 2003 the Plaintiffs foreshadowed their applications for indemnity costs. On 6 February 2004 I gave directions requiring each of the parties to file and serve any affidavits upon which they wished to rely and outline of arguments in support of the orders that they would seek. At that time there was an issue which was subsequently resolved by agreement concerning income by way of rental received by OCBC. Each of the parties filed substantial written submissions which were supplemented by oral argument on 28 and 29 July 2004.

21. Section 24 Supreme Court Act 1986 provides that the Court has a discretion as to the making of orders for costs in respect of all matters before the Court unless otherwise expressly provided for by this or any other Act or by the Rules.

24. The usual order as to costs is that the successful party would be awarded costs on a party/party basis. The usual order rests upon reasons of fairness and policy but it is not made to punish an unsuccessful party. Fairness dictates that the unsuccessful litigant should bear the cost of the litigation. Oshlack v Richmond River Council[1]. It is recognised that such an order is likely to leave a successful party out of pocket. PCRZ Investments Pty Ltd v National Golf Holdings Ltd[2]. This disparity provides an incentive to settlement. Cachia v Hanes[3]; Colgate-Palmolive Company v Cussons Pty Ltd[4].

27. The Supreme Court (General Civil Procedure) Rules 1996 (the Rules) provide:

"63.28 Subject to this Part, costs in a proceeding which are to be taxed shall be taxed on -

63.30 On a taxation on a solicitor and client basis all costs reasonably incurred and of reasonable amount shall be allowed. 63.30.1(1) Subject to sub-paragraph (2), on a taxation on an indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred. (2) Any doubt which the Taxing Master may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable. 63.31 Except as provided by these Rules or any order of the Court costs shall be taxed on a party and party basis."

36. As a general rule the Court will order costs to be taxed on a party/party basis. Rule 63.31; Bass Coast Shire Council v King & Vink Nominees Pty Ltd[5]. The discretion to make a special costs order is an unlimited one though it must be exercised judicially and not unreasonably but the circumstances should be "special".[6] Ugly Tribe Pty Ltd v Sikola[7].

39. In PCRZ Investments Pty Ltd Chernov JA after noting that a special costs order may be made where there are "special" or "unusual" circumstances[8] stated:

"......It is true that the categories of such circumstances are not closed. Nevertheless, the authorities indicate that, generally, the ordinary cost rule should only be departed from where the losing party has misconducted itself in relation to the proceeding or where the institution of the proceeding was plainly unreasonable or where the proceeding was issued for an ulterior or collateral purpose....."[9]

Circumstances which warrant a special costs order

44. Many categories of circumstances which will warrant the making of a special costs order are referred to by Sheppard J in Colgate Palmolive Company v Cussons Pty Ltd[10].

47. Relevant delinquency on the part of the unsuccessful party may in particular circumstances justify a special costs order. Oshlack v Richmond River Council[11]. The making of such orders is not confined to parties who are to be regarded as "ethically or morally delinquent". Botany Municipal Council v Department of Arts, Sports & Environment[12]. The New South Wales Court of Appeal in Rosniak v Government Insurance Office[13], in a passage of its judgment which has been referred to with approval[14], held as sufficient that the party establish "unreasonable conduct" of some sort though "it need not rise as high as vexation".

50. An "extended and dismissive refusal" to recognise the Plaintiffs' claim[15] or the pursuit of a claim which cannot succeed where its futility has been drawn to the attention of the losing litigant[16] have been recognised as circumstances supporting a special costs order.

The Plaintiffs' grounds for making a special costs order

54. The Plaintiffs rely on the following grounds recognised as constituting a sufficient basis for a special costs order. They assert that the Defendant acted with high-handed presumption throughout the litigation and that as a consequence of inertia and carelessness it failed to address the likely factual findings and their legal consequences. They submit that the Defendant properly advised ought to have known that it had no real prospects of success or alternatively that it wilfully disregarded the facts and the clearly established law. They submit the Defendant imprudently rejected their offers of compromise.

57. At the conclusion of the hearing the Plaintiffs provided the Court with a summary of the indicators which it was submitted demonstrated the Defendant's attitude of high handedness premised on the Plaintiffs having no rights. Most of the matters relied upon were the subject of detailed submissions. The Plaintiffs submitted that:

(1) The Defendant advanced money to the mortgagor without any regard to the rights of the Plaintiffs as purchasers under the contracts of sale of which the Defendant had notice.

(2) The Defendant demanded possession of the apartments from the Plaintiffs.

(3) The Defendant pressed the Plaintiffs for removal of their caveats.

(4) The Defendant provided misleading information via its solicitors when information was sought in April 2002.

(5) The Defendant refused to negotiate with the Plaintiffs and demanded full discharge of the mortgagor's loan.

(6) The Defendant issued caveat proceedings and relied upon affidavit material that did not refer to the fact that the original facility had been fully repaid at the time that it made a further loan to the mortgagor.

(7) The Defendant falsely claimed in its defence which was not amended until a week before the trial that it had no notice of the Plaintiffs' interests in their contracts of sale.

(8) The Defendant belatedly made discovery of some documents which revealed their prior notice of the Plaintiffs' interests.

(9) The Defendant in its answers to interrogatories gave false or misleading answers.

(10) The mediation of March 2003 was unsuccessful.

(11) The Defendant unreasonably rejected the Plaintiffs' informal offers of compromise though they were aware of all of the relevant facts and the weakness of their legal position.

63. The Defendant submitted that there were serious questions as to its liability based on questions of fact and law and that it could not fairly be said that its position was hopeless or its conduct high handed. The Defendant submitted that there was an inconsistency between the Plaintiffs' contentions that the Defendant was afflicted by inertia and carelessness and that it acted with high handed presumption or in wilful disregard to known facts and established law. It further submitted that the application of the rule in Hopkinson v Rolt[17] was complex.

67. The Plaintiffs rely upon conduct of the Defendant prior to the commencement of the litigation.

70. Conduct which gives rise to the litigation will not ordinarily justify an award of costs on an indemnity basis. Special circumstances do not generally include conduct antecedent to the litigation. NMFN Property Pty Ltd v Citibank Bank Ltd[18].

73. There is Canadian authority that conduct of a litigant giving rise to the proceedings may in exceptional circumstances provide the basis for a special costs order[19]. The Australian position is that it must be connected to the conduct of the litigation and deserving of criticism.[20] Some element of delinquency in the conduct of the proceedings is required before a special costs order will be made.

76. Pre-litigation conduct and a party's knowledge of past events may be relevant to the assessment of a party's conduct during the litigation.[21] In Ali v Hartley Poynton, Smith J observed:

"On any view, however, wrongs done to the successful party will provide the context within which to judge the subsequent conduct leading up to and during any subsequent litigation. It may make the subsequent conduct more difficult to justify and appear more high handed. AGC v De Jager. It appears to me that the present case should be approached in this way."[22]

81. The Plaintiffs rely upon the failure by the Defendant to provide information that was sought concerning the state of the mortgagor's accounts. In reply the Defendant submitted that because the relationship of banker and customer subsisted between it and the mortgagor, such information was of a confidential nature. Tournier v National Provincial & Union Bank of England[23]. Insofar as the Defendant did disclose information concerning the mortgagor's affairs it did so in accordance with its right to make such disclosures in legal proceedings where its interests required such disclosure. Esso Australia Resources Ltd v Plowman (Minister for Energy & Minerals)[24]. The Defendant also pointed to instructions given to it by the mortgagor that it not provide information to the Plaintiffs but direct their inquiries to the mortgagor's solicitors.

84. The Plaintiffs' criticism of the limited information provided by the Defendant and its solicitors in response to inquiries from the Plaintiffs' solicitors is not a matter which has assisted me in drawing any inferences concerning the Defendant's conduct after the litigation commenced. The Plaintiffs did not contend that the inference that I should draw from any material non-disclosure of information before the litigation commenced was due to any recognition by the Defendant or its advisers that there was no merit in the Defendant's position.

87. I make no findings about whether there was any material non-disclosure of information by the Defendant or whether it misled the Plaintiffs' solicitors in any respect. It is unnecessary that I do so. I accept the submission made on the Defendant's behalf that nothing turns on these matters.

90. It was not in issue that at the time the Plaintiffs commenced proceedings all relevant information had been disclosed that related to the proceedings. The conduct of the Defendant prior to the commencement of litigation did not disadvantage the Plaintiffs. It had no consequence in relation to the conduct of the litigation.

94. The Plaintiffs claimed that the Defendant's unwillingness to ascertain the full extent of its knowledge of the Plaintiffs' rights or to address its true legal position prior to the commencement of the litigation continued until the trial commenced, when all of the facts were known to the Defendant. The Plaintiffs submit that even then the Defendant refused to face the significance of those facts and accept their legal consequences.

97. The Plaintiffs submit that the Defendant was careless in its approach to its pleadings, discovery, answering interrogatories and to the admissions of fact which the Plaintiffs sought, or alternatively did not take its obligations seriously. The Plaintiffs point to the fact that the Defendant in its answers to interrogatories said that it had made all due and proper inquiries of its servants and agents in relation to critical documents when it had not done so. The Plaintiffs relied upon the Defendant's Notice of Dispute in which it refused to admit various critical facts which the Plaintiffs ultimately established. The Plaintiffs also relied upon the Defendant's carelessness in asserting that the mortgagor was contingently liable to the Defendant for the debts of Century Estates pursuant to a guarantee given to the Defendant by the mortgagor in 1997. During the course of the trial that allegation was withdrawn by the Defendant but only after it had considered the documentation in its possession which demonstrated there was no substance in the allegation. Each of these complaints was set out in some detail in the written submissions, some of it being amplified in oral argument.

100. The acts or omissions of the Defendant relied upon by the Plaintiff will only be relevant to a special order for costs where it can be seen that they have had a consequential effect on the conduct of the trial or its outcome.[25] Such conduct, having had no adverse or causative effect on the manner in which the trial was conducted or its outcome, need not be the subject of any further consideration.

103. The Defendant accepted that its conduct prior to the commencement of litigation could be considered in combination with its conduct as a litigant if, but for such conduct, the litigation may have been avoided. Counsel referred to Verna Trading v New India Assurance[26] which indicates that such circumstances are by their very nature exceptional.

107. Costs may be ordered whenever it appears that an action has been commenced in circumstances where the applicant properly advised should have known it had no chance of success. Nettle JA, in Murdaca v Maisano[27] delivering the principal judgment referred to the passage from the much cited authority of Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchant Ltd[28] in these terms:

"As Woodward, J. put it, it is appropriate to consider awarding solicitor/client costs or indemnity costs whenever it appears that a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or to clearly established laws."[29]

111. When a litigant presses on where on proper consideration their case should have been seen to be hopeless, the discretion to make a special costs order may be enlivened.[30] French J in J-Corp[31] considered that the discretion to award such costs would be enlivened when a party persisted, for whatever reason, in what should on proper consideration have been seen to be a hopeless case and that it was an unnecessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. Where a party has been put on notice as to significant deficiencies in their case and nonetheless proceed an indemnity costs order may be justified.[32]

114. Where the litigant did not recognise that its case was without merit Court's have sometimes declined to make a special costs order.[33] Where there were serious and genuine questions of fact to be tried, a special costs order will not generally be imposed on the losing litigant.[34] In Ugly Tribe Harper J drew attention to the policy consideration that potential litigants should not be unnecessarily discouraged from seeking to litigate a factual dispute, it seldom being possible to predict with any certainty what findings of fact will be made.[35] Disbelief of a party's witnesses does not as a matter of principle provide a sufficient basis for the award of indemnity costs.[36]

117. In the often cited case of Australian Guarantee Corp Ltd v De Jager[37] Tadgell J awarded indemnity costs as the conduct of the Plaintiff in pursuing the action was "a high handed presumption"[38] in which the Plaintiff had "allowed itself a luxury" by pursuing the action with knowledge that its witness had not attested the signature of the Defendant to the mortgage on which it relied.

120. When an assessment of this nature is called for the Court must measure the litigant's conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made and the legal advice which the litigant ought reasonably to have obtained.[39]

123. The Plaintiffs sought to characterise the Defendant's conduct of the litigation as falling within recognised categories. It may be convenient and desirable that frequently occurring circumstances be classified into categories to advance a principle of justice that like cases should be treated alike and that there be some guidance as to the criterion for the judicial exercise of the discretion. In Colgate-Palmolive Sheppard J referred to the need to avoid a wilderness of single instances.[40] But facts which render it just that a special costs order be made need not be resolved into a recognised category. It is often stated that the categories are not closed. Ultimately the manner of exercise of the discretion depends upon the peculiar circumstances of each individual case.

128. There is a real risk that the Court, upon making findings concerning contested questions of fact may too readily embrace submissions that it was inevitable that the proceedings would fail. As Hamilton J said in Grynberg v Muller:

".....These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious....." [41]

132. Care must be taken in assessing the conduct of the Defendant undertaken without the advantage of hindsight. McDonnell v McDonnell[42]; Wenzel v Australian Stock Exchange Ltd[43]. The dangers associated with the analysis of conduct of parties seen through the prism of hindsight were discussed by Gleeson CJ in Rosenberg v Percival[44] where the Chief Justice, though speaking in a different context stated:

"....Recent judgments in this Court have drawn attention to the danger of a failure, after the event, to take account of the context, before or at the time of the event, in which a contingency was to be evaluated...."[45]

137. To make out its defence at trial the Defendant sought to establish the following at the trial:

(1) That Ms Koh was told by the mortgagor that it was no longer intending to proceed with the contracts of sale with the Plaintiffs.

(2) That the communication of that fact superseded or supplanted any other knowledge by its officers or its solicitors about the mortgagor or the Plaintiffs' intentions with respect to their contracts of sale.

(3) That Ms Koh had no intention to oust the Plaintiffs' interests.

(4) That the rule in Hopkinson v Rolt required such an intention.

(5) That it had priority over the Plaintiffs' interests by reason of the first mortgage having been registered at all relevant times.

(6) That the conduct of the mortgagor in selling to the Plaintiffs acted in breach of the terms of the mortgage, that the Plaintiffs had knowledge of such breaches and that justice and fair dealing required that the rule in Hopkinson v Rolt not be applied.

143. The Defendant failed in respect to each of these matters. The Plaintiffs submit that the Defendant had no reasonable prospects of establishing any of those matters of fact or law. The Plaintiffs further submit that if, contrary to the clearly established law, an intent or endeavour to oust the interests of the Plaintiff was necessary, the conversation which the Defendant alleged the mortgagor had with Ms Koh did not constitute advice that the Plaintiffs had abandoned or extinguished their interest in the contracts of sale. They rely upon the findings that the Defendant had failed to establish that the Plaintiffs had abandoned their interests and that Ms Koh did not believe that the purchasers' equitable interest had been abandoned.[46] Further they submitted that as the bank had failed to make any inquiries as to whether the Plaintiffs had abandoned their interests its defence was doomed to fail.

146. The Defendant submitted that at the trial there was a real issue as to whether there were reasonable grounds for suspicion by Ms Koh of fraud by the mortgagor, and that in the absence of reasonable grounds for suspicion of fraud, Ms Koh would not have been required to make further inquiries and that it was arguable that Jared v Clements[47] and Barry v Heider[48] were distinguishable. This submission cannot be sustained. It was inescapable that a Court would conclude that if Ms Koh spoke to Mr Fong as alleged, Ms Koh had compelling reasons to be suspicious of the mortgagor.[49] At best it was arguable that the rule in Jared v Clements did not apply. Having regard to the likely findings of fact such an argument had little prospect of success.

150. In support of its contention that its defence was not hopeless, the Defendant relied upon the fact that the Plaintiffs had not sought to strike out its amended defence on the ground that it was bound to fail. This argument misconceives the nature of a case which is characterised as "hopeless" and deserving of a special costs order.

153. Whilst a pleading that is futile because it is unsound in law will not be permitted, a pleading which is arguable while appearing not to have much chance of success cannot be refused.[50]

156. Prior to the trial the facts or the law may permit the view that the claim is an arguable one. After a full hearing on the merits a Court may be able to assess whether a party's claim had any real prospects of success. Mindful that the losing litigant and their advisers did not have the advantage of hindsight, a Court may be able to determine whether the view was reasonably open to the losing litigant that it had sufficient prospects of success to justify its pursuit of the litigation. If the answer is in the negative, the case may be treated as one that was "hopeless" and warranting the making of a special costs order.

160. The Plaintiff's advanced a detailed submission as to why indemnity costs should follow the rejection of their offers of compromise. They submitted that such an order must follow the defendant's failure to obtain a judgment more favourable than their offers.

163. Amongst those circumstances identified by Sheppard J in Colgate Palmolive Pty Ltd v Cussons Pty Ltd[51] which may justify an award of indemnity costs is an imprudent refusal of an offer of compromise. This provides a sound basis for an award of special costs. Hartford Holdings Pty Ltd v CP (Adelaide) Pty Ltd[52] The need for litigants to pursue genuine settlement negotiations and give realistic consideration to offers of settlement is reflected in the orders for mediation which are now made in this Court as a matter of course. This policy also underlies the compromise procedures found in Order 26 and the approach to costs where there is an informal offer of compromise.

166. The Rules of Court make provision for the award of costs when an offer of compromise is rejected and a judgment no less favourable than the offer is obtained.[53] Rule 26.08 applies to an offer of compromise which has not been accepted at the time of verdict or judgment. Rule 26.08(2) provides that unless the Court otherwise orders, a Plaintiff who obtains a judgment which is no less favourable to him than the terms of the offer shall be entitled to an order for his costs taxed on an indemnity basis.

169. In Maitland Hospital v Fisher (No. 2)[54] the Court of Appeal in the course of considering the New South Wales Supreme Court Rule, the equivalent of Order 26.08 of the Victorian Supreme Court Rules, having found that such a Rule applied to an offer of compromise made after the institution of an appeal said:

"Saying this does not lend the weight of the Court's authority to the conduct of litigation, any more than it is, as a form of litigious lottery in which a litigant (and those advising it) are subjected unreasonably to an added peril; that of a special costs order. The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of a litigation. Where, in the particular circumstances, the litigant or its advisers mis-judge the prospects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case......"[55]

173. Originally the Rule provided for an order for costs to be made on a "solicitor and client" basis but by Statutory Rules 121 of 2002 the Rule was amended to substitute "indemnity" for "solicitor and client".

177. The principle in Calderbank v Calderbank[56] applied in McDonnell v McDonnell[57] and Cutts v Head[58] and referred to in cases such as Azzopardi v Netin[59]; Messiter v Hutchison[60]; Mideco Manufacturing Pty Ltd v Tait[61]; Quirk v Bawden[62] and Grbavac v Hart[63] exposes a litigant to the risk of a costs order if, taking into account all relevant considerations including the facts known to the offeree at the time of the offer, the offeree unreasonably ignores a reasonable offer of compromise. In Mutual Community Ltd v Lorden Holdings Pty Ltd[64], Byrne J ordered costs on a solicitor/client basis as a consequence of the offeree's failure to obtain a judgment more favourable than the terms offered in a Calderbank letter. His Honour said:

"The policy of the court is to encourage litigating parties to undertake genuine settlement negotiations and, for the purpose, to face up to serious offers of settlement...........The response of a litigant in receipt of an offer of settlement will always be affected by the prospect that the sum which the court might order including party and party costs may be less advantageous than the terms of the offer. Experience, however, shows that this prospect alone is not always sufficient to compel a litigant to face up to the offer. The further prospect of a super-added costs penalty if a reasonable offer be not accepted is a salutary inducement to an offeree to undertake this often painful task......."[65]

181. It was submitted on behalf of MKIC that in considering the approach that should be adopted towards a Calderbank letter I should have regard to the Rules of Court and so far as practical adopt the same approach. MKIC relied upon MT Associates Pty Ltd v Aqua-Max Pty Ltd[66]; Pearson v Williams[67] and Clarke v Australian Broadcasting Corporation[68] to support the submission that where the procedure under the Rules for an offer of compromise is not available effect should be given to a Calderbank letter.

184. It was not disputed before me that the Plaintiffs were unable to use the offer of compromise procedure under Order 26 of the Rules because their offers contained terms which dealt with the payment of costs by the parties and were therefore inconsistent with Order 26.03(7).

187. Order 26 sets out the procedure concerning Offers of Compromise but it does not constitute a code precluding parties from relying upon common law principles in relation to Calderbank letters. Hayne JA in Grbavac v Hart[69] considered that an offer though not made in accordance with the Rules may be treated as though it were a Calderbank offer. Such an informal offer of compromise may be considered by a Court in determining whether to make an order for special costs even though the procedure under Order 26 has not been complied with. Such an approach has been adopted in the Federal Court concerning Calderbank letters where the mechanism under Order 23 of the Federal Court Rules has not been followed.[70] In Alpine Hardwood Weinberg J, speaking of Calderbank letters said:

"The principle is designed to impress upon the parties the need to give careful consideration to the consequences of proceeding further with their dispute: Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd [1996] FCA 931. Such letters constitute `such a useful and flexible weapon for litigants who want to achieve reasonable settlement' that, in the absence of expressed provision, it should not be inferred that the rule makers intended O23 to operate to the exclusion of the general principles governing Calderbank offers: Henderson v Amadio Pty Ltd [1996] FCA 184 per Heerey J."[71]

191. While it may be relevant for the Court to consider the provisions of the various Rules of Court concerning Offers of Compromise the Court's discretion in awarding costs where a Calderbank offer has been made are not constrained by the rules. Jones v Bradley (No. 2).[72]

194. The Defendant, correctly in my view, did not challenge the right of the Plaintiffs to make informal offers of compromise by way of their Calderbank letters. Those letters allowed the Defendant 14 days in which to consider the Plaintiffs' offers. The offers did not substantially depart from the regime envisaged by the Rules.[73]

197. The Plaintiffs, relying upon the judgment of Gillard J in MT v Aqua-Max, submit that the Court's approach to the Calderbank letters should mirror the approach required by Order 26.[74] They rely on the fact that Order 26 creates a predisposition in favour of the granting of indemnity costs unless the Court otherwise orders. They point to the absence of any requirement under Order 26 that the terms of the offer of compromise include reasons why the offer should be accepted. They submit that the rule is not concerned with the strength or hopelessness of the offeree's case. The Court was invited to approach the Plaintiffs' Calderbank letters in the same manner.

Predisposition to indemnity costs where Calderbank letter rejected

201. The Plaintiffs contend that the rejection of reasonable offers no less favourable than the judgment obtained, entitles the offeror to indemnity costs and that it is wrong in law to take other matters into account.

204. The Plaintiffs submit that there are no special rules concerning Calderbank letters and they should be given effect according to their terms. They relied upon a line of authority that suggests that if the offeree does not accept the offer the Court commences with a disposition towards the granting of indemnity costs.[75] In each of the decisions relied upon, the Court commenced with a presumption in favour of the granting of indemnity costs in such circumstances unless the offeree can show good cause why such an order should not be made. Although not conceded by the Plaintiffs, these cases recognise the need for the offer to have been unreasonably rejected.[76]

208. The conclusion of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation[77] is predicated upon the view that the rejection is unreasonable because the offeree failed to obtain a result more favourable than the offer. The fact that a judgment or verdict is no more favourable than a rejected offer does not, viewed in isolation, make it likely that the rejection of the offer was unreasonable. Such a conclusion could only be arrived at if other facts were known. In my respectful view the basis for a prima facie presumption that such a cost order should be made, rests not upon a deductive process of reasoning but upon policy considerations. These were extensively explored by Rolfe J and have much to commend them.

211. The process of negotiation which may lead to the settlement of litigation resulting in parties resolving their disputes with certainty and without the need to incur substantial expense at trial thereby enabling Court resources to be otherwise utilised is an important objective. The considerations referred to by the New South Wales Court of Appeal in Maitland Hospital v Fisher[78] were regarded by Hayne JA in Grbavac as "powerful reasons in favour of such a disposition of costs" where such an offer is rejected.[79] A similar view was expressed by Thomas J in Smith v Smith[80].

214. But there are other competing objectives of equal importance. Potential litigants should not be discouraged from bringing their dispute to the Courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.

217. In McKenna v McKenna[81] McGarvie J, in a different context, warned against the creation of formulas that would involve an impermissible fettering of the discretion.

220. Any suggestion that there was a rule in commercial or any other class of case, save those specifically provided for by rules, that special costs orders be made was rejected by Kirby P in Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd[82] as presenting a risk that costs recovered entitlements would be abused.[83] Any shift to a general or common rule is one which should be made by the legislature or by the rule maker.[84]

223. The Court of Appeal has warned against the establishment of guidelines which may become determinative of the manner in which a Court's discretion is exercised.[85] These concerns are raised in the judgments of Dodds-Streeton J in Nolan[86] and Osborn J in Maher & Ors v Millennium Markets[87]. In the latter case his Honour referred with approval to the following passage from the judgment of Dodds-Streeton J in Nolan v Nolan:

"........If Calderbank letters offering settlement on the basis that each party bear its own costs without any further particularity than that contained in the pleadings was served early in the proceeding, and routinely given full effect, indemnity costs could, by a defacto process, displace party-party as the usual basis of a costs order. In the light of the Court of Appeal's recent reaffirmation that the problems associated with a growing gap between party and party costs and costs actually payable to a party's solicitor should not lead to a departure from the usual party and party basis for costs, and its caveat that reference to other decisions should not constrict the discretionary nature of an award of costs, it may be that a Calderbank offer, taken in isolation, should not create any predisposition to award indemnity costs, although it should be a factor in favour of such an order......"[88]

No presumption - rejection a significant factor

228. There is another line of authority which has treated the rejection of a Calderbank letter as only a significant circumstance which should be taken into account when considering whether in the exercise of discretion, indemnity costs should be ordered.[89] These decisions indicate that the rejection of a Calderbank offer does not necessarily or even presumptively lead to an award of indemnity costs.

231. Recent decisions of the New South Wales Supreme Court are also to the effect that there is no presumption that a special order for costs should be made if an offer of settlement is rejected and not bettered.[90]

234. In SMEC Testing[91] the New South Wales Court of Appeal found that the rejection of a Calderbank offer which is not bettered on judgment is a matter to which the Court may have regard when considering whether to order indemnity costs but it does not automatically bring the different order into play. Gyles JA stated:

"......In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure......"[92]

Hamilton J in Grynberg concluded that Rolfe J's decision in Multicon cannot be supported in the face of the decision in SMEC Testing.

239. Although there continued to be some difference of opinion in New South Wales following the decision of the Court of Appeal in SMEC Testing[93] the matter appears to have been finally settled in New South Wales following the decision of the Court of Appeal in Jones v Bradley[94]. The approach taken by the Court of Appeal in SMEC Testing was said in Bradley to be correct and should be the approach consistently applied when dealing with Calderbank offers.[95]

242. The notion of a presumption or disposition towards the granting of special costs has been consistently rejected in the Federal Court. The well settled approach in the Federal Court is that the mere refusal of a Calderbank offer and failure to secure a more favourable outcome in the proceedings does not of itself warrant an order for indemnity costs. The conduct of the offeree must be unreasonable before such an order can be made.[96]

245. Weinberg J in Alpine Hardwood[97] did not consider that the policy of promoting sensible compromises of disputes required that an offeree be at risk of having to pay indemnity costs merely because he had received an offer and rejected it. Faced with arguments similar to those of the Plaintiffs in the present case that it would be unjust to deny the offeror indemnity costs from the date of their Calderbank offer because to do so would mean that the offeree was no worse off and the offeror no better off than if that offer had never been made, his Honour said:

"The Full Court in Black v Lipovac emphasised that the mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs. The offeror needs to show that the conduct of the offeree was unreasonable. Moreover, the reasonableness of that conduct must be viewed in light of the circumstances which existed at the time the offer was rejected. The fact that the applicants ultimately failed to make good their case does not mean that they acted unreasonably in rejecting the initial offer. Nor does the fact that that initial offer was itself reasonable mean that it was unreasonable to reject it ... ....The fact that the offeree was ultimately unsuccessful in the litigation, and could have accepted a reasonable settlement at an earlier stage does not of itself show that the course adopted by the offeree was relevantly unreasonable or imprudent."[98]

His Honour was not satisfied that the offeree ought reasonably to have foreseen the difficulties that it would face at trial as they did not know the strength of the other party's case. His Honour viewed the onus as resting upon the offeror to show that the offeree acted unreasonably or imprudently. Lindgren J in NMFN Property Pty Ltd v Citibank Ltd[99] had expressed a similar opinion.

250. The Queensland Court of Appeal has eschewed any notion of a presumption, adopting the approach that all of the surrounding circumstances must be considered in determining whether or not the rejection of a Calderbank offer is unreasonable.[100]

253. The learned author of the current text "The Law of Costs" refers to what is described as the better view in these terms:

"........that the making of a Calderbank offer is a factor, and possibly even a weighty factor, which may be taken into account by a Court in exercising its judicial discretion as to costs. It goes too far to say that the mere making of a Calderbank letter that proves to be generous, and its rejection, is a ground, without more, for an order for costs on an indemnity basis."[101]

257. The Plaintiffs submitted that the decisions of the Federal Court, the New South Wales and Queensland Courts of Appeal and those of single judges of this Court in which similar views had been expressed should be regarded as not correctly stating the law and should not be followed. I do not agree. In my view the preponderance of authority, and the weight of more recent decisions is to the effect that there is no rule, predisposition, presumption or guideline to the effect that a failure to obtain a judgment more favourable than a rejected Calderbank offer will, in the absence of persuasion to the contrary, lead to a special costs order. The passage in the commentary to Williams Supreme Court Practice at paragraph 26.01.75 that the balance of judicial opinion supports such a rule is not, in light of the weight of authority and more recent pronouncements, correct.

260. In a number of cases the suggestion is made that the difference in approach between the two lines of authority is unlikely in most cases to produce a different outcome.[102] There is a substantial risk in my respectful opinion that a predisposition will in many cases affect the outcome where the offeree cannot adduce persuasive evidence to support a conclusion to the contrary.[103]

263. The adoption of a "rule" to determine when indemnity costs should be granted was decried by Chesterman J in Emanuel Management Pty Ltd v Fosters Brewing Group Ltd[104]. His Honour rejected both any presumption that a party should have its costs on the indemnity basis unless it could be shown that the offeree had some good reason why another order should be made, but also criticised the view that the offeror "must show that the offer was rejected unreasonably, judged in the circumstances known at the time it was made".[105] If were necessary for me to do so I would adopt the same approach.

266. To speak as the Plaintiffs did, of a rule, presumption or disposition in favour of a special costs order where an informal offer is rejected places the free exercise of the discretion at risk. The weight of authority to which I have referred, strongly points to an approach that involves no preconceptions about when the rejection of a Calderbank offer should lead to the making of a special costs order. It will do so where it is concluded that the rejection of the offer was unreasonable.

270. The degree of compromise offered in a Calderbank letter may bear upon the reasonableness of both the offer and its rejection. In its written submission the Defendant made reference to the elements of compromise contained within each of the Plaintiffs' Calderbank offers. It described MKIC's offer of one apartment as modest. Aljade offered only to bear its own costs and I have understood the Defendant's argument to be that this amounted to no offer at all. Although the submission was not explored in oral argument I have treated the submission as a contention that the proposals made by each Plaintiff contain insufficient elements of compromise to make it unreasonable for the Defendant to have rejected it.

273. A compromise involves a party in giving something away. Hobartville Stud Pty Ltd v Union Insurance Co Ltd[106]. Authorities differ as to whether an offer to settle a case by abandoning, withdrawing or dismissing the claim with each party bearing its own costs constitutes a genuine offer of compromise.

277. An offer to settle by dismissing the claim with no order as to costs is sometimes viewed as insufficient to constitute a genuine offer to settle or as being no offer of compromise at all.[107]

280. In Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd[108] the Plaintiff offered to discount its claim by a nominal amount. Habersberger J adverted to the policy which underlies the rules relating to offers of compromise and observed that policy considerations are not advanced where the offer of compromise is not a genuine one which viewed objectively would hold any attraction for the offeree.

283. In different circumstances Courts have regarded offers that a party will bear all or part of its own costs as constituting a sufficient and genuine offer of compromise. The extent of the offer of compromise must be viewed in conjunction with all of the relevant circumstances to determine whether the rejection of the offer was unreasonable.[109]

286. It is undesirable to attempt to define when terms of an informal offer of compromise will constitute a sufficient or genuine offer. The willingness of Aljade to forego its costs in exchange for the abandonment of the claim against it, should be viewed as genuine. The offer of Aljade was made at a time when the costs savings for the Defendant would have been substantial. Both Plaintiff's offers called for serious consideration by the offeree.

290. Cole J in Macquarie Bank Ltd v National Mutual Life Association of Australasia Ltd[110] in a passage referred to by Rolfe J in Multicon[111] said:

"....There is no obligation upon a party making an offer of settlement in a Calderbank letter to specify with precision the reasons why the opposing party will fail, or should accept the offer in the letter......"[112]

294. In Wenzel's case Sundberg J eschewed a presumption in favour of indemnity costs. Consideration of the circumstances which existed at the time of the non-acceptance of the offer did not lead His Honour to the conclusion that its rejection was unreasonable. Sundberg J considered that the extent to which a Calderbank letter draws the offeree's attention to the weaknesses of its case is a consideration relevant to the making of an indemnity order. A reasoned exposition of the weakness of the offeree's case may give the offer more weight.[113]

297. In Australian Competition and Consumer Commission v AMCOR, Sackville J observed:

"......The significance to be attached to a Calderbank offer depends on its terms and the circumstances of the litigation, including the time at which the offer is made and the understanding of the parties as to the strengths and weaknesses of their respective cases......" [114]

301. Sundberg J in Wenzel adopted the view of Lindgren J in NMFN Properties that the letter must descend to particularity. The Plaintiffs submitted that Dodds-Streeton J in Nolan v Nolan[115] was of the same opinion. That is not so. Her Honour regarded the factor as a "material consideration"[116]. Her Honour said:

".....The reasonableness of the offeree in rejecting the Calderbank offer is one important factor in determining the weight to be attributed to it. The degree of specificity of reason expressed in the letter, the stage at which the letter is received, and the content of and response to the offer, may all be relevant to reasonableness."[117]

305. In Maher & Ors v Millenium Market & Ors[118] Osborn J found that a Plaintiff's failure to accept a Calderbank offer which did not contain any analysis of the issues was not unreasonable,[119] his Honour referring with approval to the judgment of Dodds-Streeton J in Nolan.[120]

308. Any attempt to prescribe the reasoning which must accompany an offer should be resisted. Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted must depend upon a consideration of all of the circumstances existing at the time of the offer. The extent to which the weakness of a party's position is exposed through the pleadings, affidavits and the various communications between the parties during the course of the litigation may bear upon the significance of the absence of specificity in the informal offer. In the present case the knowledge which the Defendant had or ought to have had as a consequence of the course of the litigation prior to the offer did not require the Plaintiffs to particularise the reasons why the offer should be accepted.

312. The Plaintiffs argued in the alternative that I should conclude that the Defendant's rejection of their offers was unreasonable.

315. In Multicon[121] Rolfe J accepted as correct the view previously expressed by Olney J in WCW Pty Ltd v Charthill Ltd[122] and referred to by Hill J in John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd[123] that:

"The making of an offer of compromise is but one of the many factors which may be taken into account by the court in exercising its judicial discretion. It goes too far, in my opinion, with respect, to say that the mere making of a Calderbank letter and its rejection, grounds without more, an order for costs on an indemnity basis." [124]

319. Those cases which have followed the decision in Multicon recognise that a determination of what is "reasonable" must be made in the light of the circumstances that existed at the time the offer was rejected. Ashley J in Pearson v Williams[125] after referring to the difference of judicial opinion as to the starting point where a Calderbank offer has been rejected expressed a preference for the view that it is appropriate to start with a predisposition. His Honour stated:

".......whether or not consideration of the costs issue begins with a certain predisposition, the type of circumstances which will be relevant to whether a special costs order should be made will be - in addition to the fact of the making of the offer - the types of circumstances which are relevant in the general case where a successful party seeks such an order. It will be necessary to consider the facts of the particular case to see whether any such circumstances are present. Unreasonableness of an offeree's conduct, which counsel for Frances submitted was a touchstone, relying upon dicta in Santo, MGICA (1992) and Nobrega, should be considered as no more than a shorthand for the varied circumstances which it will be legitimate for the court to consider. It seems improbable that the courts in those matters intended to set up some new and different criteria by which to assess liability for a special order for costs in one particular class of case. Fourth, the whole question of the approach which should be applied should not be permitted - despite what I have just said - to become over-conceptualised. In the end, the exercise of a judicial discretion is what is involved, and there are definite warnings against the exquisite refinement of judicial guides to the exercise of such a discretion....."[126]

323. In Ciccone v Ark Projects Pty Ltd[127] Hansen J referring to the consequences of the rejection of a Calderbank letter did not consider that it gave rise to an automatic entitlement to an order for solicitor and client costs the question turning upon reasonableness in the circumstances.

326. The lack of substance of the offeree's case and the fact that the issues were identified in the pleadings and readily to be understood may be decisive in assessing the reasonableness of the offeree's response.[128] A Defendant is not entitled to assume that the rejection of the Calderbank letter would carry no cost consequences and would necessarily or even probably be ignored by the Court.[129]

329. It is not necessary to establish misconduct by the offeree before the rejection of the offer can be viewed as unreasonable.[130] Lack of merit in the way a party has conducted its case is not a pre-requisite for the making of an indemnity costs order.

332. The Plaintiffs' primary submission is that an order for indemnity costs must follow the Defendant's failure to obtain a judgment more favourable than the offers made. Counsel for the Plaintiffs submitted that if it is necessary to show unreasonableness by the offeree, the existence of some special circumstances would have to be established which usually attracts the Court's general discretion to make a special order for costs. Thus it is contended that there will have been no point to the making of the Calderbank offer.

335. This argument is flawed. It fails to maintain any distinction between conduct sufficient to warrant the conclusion that the rejection of an offer had been unreasonable and conduct which supports the making of an order for special costs on some other basis. It was not necessary for the Plaintiffs to show that the Defendant's case was hopeless or that it acted with wilful disregard to known facts or clearly established law or that it acted with high handed presumption. Such conduct need not be present for a finding that the rejection of the Plaintiffs' Calderbank offers was unreasonable. Were it otherwise the offeror would have no benefit from the making of the Calderbank offer and the offeree would bear no disadvantage from the rejection of the offer.

338. Whether the Calderbank offer was reasonable and its rejection unreasonable is to be answered by reference to the terms of the offer and having regard to all of the relevant circumstances which existed and bear upon the offer and its rejection. The rejection of the Plaintiffs' Calderbank offers should be considered in conjunction with the other circumstances which alone or in combination may warrant the making of a special costs order.[131]

342. At trial the Defendant set out to establish that it did not act in wilful disregard of the Plaintiffs' rights. It relied upon Australian and Irish authority that appeared to support such a defence. This was misconceived. But the conduct of the Defendant in the litigation involved no want of probity, design or calculated ignorance on its part or that of its principal witness. The Defendant had failed to discharge its evidentiary onus in negating its notice of the Plaintiffs' interests. There is substance in the Defendant's submission that the advantages of hindsight have fuelled the Plaintiffs' argument that the defence case was hopeless and conducted in wilful disregard of known facts or established law. These criticisms of the Defendant's conduct are not made out. But this does not preclude a conclusion that the Defendant has, in other respects been guilty of relevant delinquency in its conduct of the litigation.

345. Any controversial facts, critical to the resolution of the principal issues in the case rested upon the testimony of the Defendant's own witnesses and the content of its own documents. The bank's amendment to its pleadings very shortly prior to the commencement of the trial to acknowledge that it had acquired some knowledge of the contracts of sale before making the further advance still did not reflect the full nature and extent of the Defendant or its solicitor's notice of the Plaintiffs' interests.

348. By the time the trial commenced the Defendant had received each Plaintiff's Reply to its amended defence. It was provided with a written opening of the Plaintiffs. The weakness of the Defendant's legal position which should long have been apparent was now spelt out in explicit terms. That material further emphasised that the rule in Hopkinson v Rolt was founded on notice and that the Plaintiffs had rights which were superior to its.

351. The Defendant ought to have recognised the substantial difficulties it faced in establishing that it received any advice from the mortgagor. Such advice as Ms Koh claimed to have received, did not provide a basis for the belief that the Plaintiffs' equitable interests no longer existed. Such advice could not supplant the knowledge of its solicitors. In defending the proceedings it was aware that it had made no inquiries of the Plaintiffs or the Plaintiffs' solicitors or its own solicitors which could affect the notice it had of the Plaintiffs' interests.

354. Ms Koh persisted during the trial in her misguided views about the rights of the Defendant based upon the registered first mortgage. It sought to negate its notice of the Plaintiffs' interests by relying upon Ms Koh's alleged ignorance of the facts and her erroneous view of the law which were a consequence of her failure to make reasonable inquiries about the Defendant's position.[132]

357. The Defendant had no real prospects of establishing that the Plaintiffs had constructive notice of the terms of the mortgage, or of establishing that the Plaintiffs were aware of any alleged breach of the negative covenants in the mortgage, or that any such breach might disentitle the Plaintiffs to equitable relief under the rule in Hopkinson v Rolt.

360. I am satisfied that the Defendant's persistent failure or unwillingness to address the weakness of its position, whether born of high-handed presumption, intransigence, careless indifference or an extended dismissive refusal justifies an order for special costs. The Defendant's imprudent refusal to accept the Plaintiffs' Calderbank offers also leads to the same conclusion.

363. The conduct of the Defendant in the litigation and the rejection of the Plaintiffs' offers whether viewed separately or in conjunction demonstrate that it was unreasonable that the Plaintiffs should have been put to the expense of a trial to establish their prior rights to the apartments. It is not in issue that by the commencement of the trial all of the facts and law which it would be necessary for the Defendant to take into account to make a proper assessment of its position were known or should have been known by the Defendant. The Plaintiffs should have their costs on an indemnity basis from the commencement of the trial.

[1] [1998] HCA 11; (1998) 193 CLR 72; (1998) 152 ALR 83 per McHugh J at 101 at [67].

[2] [2002] VSCA 24 per Callaway JA at [2] and per Chernov JA at [35].

[3] (1991) 23 NSWLR 304.

[4] [1993] FCA 536; (1993) 46 FCR 225 per Sheppard J at 228.

[5] [1997] 2 VR 5 per Winneke P at 29.

[7] [2001] VSC 189.

[10] Supra Footnote 4. They were the subject of further discussion in Australian Transport Insurance Pty Ltd & Anor v Graham Phillips Road Transport Insurances Pty Ltd [1986] FCA 85; (1986) 10 FCR 177; (1986) 71 ALR 287; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397; Czerwinski v Syrena Royal Pty [2000] VSC 135; Ugly Tribe Co Pty Ltd v Sikola, supra Footnote 7; Mond v Berger [2004] VSC 150 at [32-51]; National Australia Bank Ltd v Petit-Breuilh (No. 3) [2000] VSC 291.

[11] Supra Footnote 1 per Gaudron and Gummow JJ at [44].

[12] (1992) 34 FCR 412 per Gummow J.

[13] (1997) 41 NSWLR 608 at 616.

[14] Di Carlo v Dubois & Ors [2002] QCA 225; Rivkin v John Fairfax Publications Pty Ltd [2004] NSWSC 671.

[15] Toal v Aquarius Platinum Ltd (No.2) [2004] FCA 678 per French J at [20].

[16] Williams v Minister for Environment & Heritage [2004] FCAFC 58.

[17] [1861] EngR 641; (1861) 9HL Cas 514; (1861) 11 ER 829.

[18] (2001) 109 FCR 77; (2001) 187 ALR 654; [2001] FCA 480.

[19] Perry v Heywood (1998) 175 Nfld & PEIR 253; Sun Life Assurance Co of Canada v Richie (2000) 184 DLR (4th) 635.

[20] Smith, Re; Ex parte Rundle (No. 2); (1991) 6 WAR 299 per Malcolm CJ at 301; NMFN Property Pty Ltd v Citibank Ltd, supra Footnote 18 at 92-95; Ali v Hartley Poynton Pty Ltd [2002] VSC 292; Australian Guarantee Corporation Ltd v De Jager [1984] VicRp 40; [1984] VR 483; Hagan v Waterhouse (No. 2) (1992) 34 NSWLR 400; Harrison v Schipp [2001] NSWCA 13; Dal Pont, Associate Professor G.E. (2003) Law of Costs, Chatswood, NSW, LexisNexis Butterworths, at [16.42].

[21] NMFN Property Pty Ltd & Ors v Citibank Ltd supra Footnote 18; Ali v Hartley Poynton supra Footnote 20 at [10]; Mond v Berger supra Footnote 10 at [46].

[23] [1924] 1 KB 461 at 473.

[24] (1995) 183 CLR 10 per Mason CJ at 31 and per Brennan J at 36.

[25] National Australia Bank v Petit-Breuilh (No. 2) [1999] VSC 395 per Balmford J at [9-10]; Ugly Tribe Co. Pty Ltd. v Sikola, supra Footnote 7 per Harper J at [7 (vi)]; Guss v Geelong Building Society (in liq) [2001] VSC 288 per Ashley J at [63-68]; Nolan v Nolan [2003] VSC 136 per Dodds-Streeton J at [26].

[26] [1991] VicRp 12; [1991] 1 VR 129 at 151 per Kaye J at 156; McGarvie J at 156; and Ormiston J at 174.

[27] [2004] VSCA 123.

[30] Dooney v Henry (2000) 174 ALR 41; (2000) 74 ALJR 1289 per Callinan J at 1296; Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 per Callinan J at 415; NMFN Property Pty Ltd, supra Footnote 18; Re; J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia & Anor Unreported FCA per French J 9 February 1993; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd supra Footnote 10; Yates Property Pty Ltd v Boland (No. 2) [1997] FCA 760; (1997) 147 ALR 685 per Branson J at 693; Yates v Boland [2000] FCA 1895, Unreported 21 December 2000 at [65-85].

[32] UFH Holdings Pty Ltd v Ord Minnett Corporate Finance Ltd, Unreported Supreme Court Victoria, Chernov J 26 June 1998; Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 at 250; Compare Mandarin International Developments Pty Ltd v Growth Corp (Aust) Pty Ltd (1998) 143 FLR 408.

[33] Hurstville Municipal Council v Connor (1991) 24 NSWLR 724; Monitronix Ltd v Michael (1992) 7 WAR 195; Ugly Tribe Co Pty Ltd v Sikola, supra Footnote 7 per Harper J at [18]; Clarke v Deputy Commissioner of Taxation [2002] FCA 75; (2002) 50 ATR 173..

[34] Wenzel v Australian Stock Exchange Ltd [2002] FCA 353; Ugly Tribe Co. Pty. Ltd v Sikola, supra Footnote 7.

[36] McHattan v Saramoa Charters Pty Ltd, Unreported FCA 17 September 1996; Expectation Pty Ltd v PRD Realty Pty Ltd [2003] FCA 1086.

[38] See also Murdaca v Maisano supra Footnote 27.

[39] NMFN Property Pty Ltd & Ors v Citibank Ltd, supra Footnote 18 per Lindgren J at [72].

[41] [2002] NSWSC 350 at [48].

[42] [1977] 1 WLR 34.

[43] Supra Footnote 34 per Sundberg J at [10].

[44] [2001] HCA 18; (2001) 205 CLR 434; (2001) 178 ALR 577; (2001) 75 ALJR 734.

[45] Supra Footnote 44 (2001) 205 CLR at 441-442.

[46] OCBC v MKIC [2003] VSC 495 at [158].

[47] [1903] 1 Ch 428; [1902] 2 Ch 399.

[48] [1914] HCA 79; (1914) 19 CLR 197.

[50] Commonwealth v Verwayen (1990) CLR 394 at 456; Gimson v Victorian Workcover Authority [1995] VicRp 14; [1995] 1 VR 209; Howarth v Adey [1996] VICSC 4; [1996] 2 VR 535.

[51] Supra Footnote 4 per Sheppard J at 228.

[52] [2004] SASC 161.

[53] Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721 at 724; Whitehead v Maas [1991] SASC 3011; (1991) 56 SASR 362; Pirrotta v Citibank Ltd (1998) 72 SASR 259 at 262-263.

[56] [1976] Fam 93; [1975] 3 All ER 333.

[59] [1986] VicRp 56; [1986] VR 593 at 600.

[61] [1989] VicRp 6; [1989] VR 50.

[63] [1996] VSC 37; [1997] VR 154 per Tadgell JA at 160 and per Hayne JA at 165.

[64] Unreported, Supreme Court of Victoria Byrne J 28 April 1995.

[66] [2000] VSC 163 at [80].

[67] [2002] VSC 30 per Ashley J at [19].

[68] [2001] VSC 274 per Ashley J at [16].

[70] Smallacombe v Lockyer Investment Co Pty Ltd [1993] FCA 169; (1993) 42 FCR 97; Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No. 2) [2002] FCA 224 at [18].

[72] [2003] NSWCA 258 at [13].

[73] As to the consequences of couching the Calderbank offer in terms which do not conform to the regime in the Rules. See Pirrotta v Citibank Ltd, supra Footnote 53 at 267_; Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd_ [2003] QSC 13 at 452; Pearson v Williams, supra Footnote 67 at [29].

[74] MT Associates Pty Ltd v Aqua-Max, supra Footnote 66 at [80].

[75] Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 per Rolfe J; MT Associates Pty Ltd v Aqua-Max Pty Ltd, supra Footnote 66 per Gillard J at [68-71]; Pearson v Williams, supra Footnote 67 per Ashley J; Lines MacFarlane & Marshall Pty Ltd v Fletcher Constructions Australia Ltd [2000] VSC 568 per Nathan J; Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Ltd [1999] 1 Qd R 518; [1998] QSC 18; R v Murfett [2004] VSC 181; Thomas v Southcorp Australia Pty Ltd [2004] VSC 50.

[76] MT Associates Pty Ltd v Aqua-Max Pty Ltd, supra Footnote 66.

[80] [1987] 2 Qd R 807 at 810.

[81] [1984] VicRp 58; (1984) VR 665 at 674.

[84] Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd, supra Footnote 32; Rosniak v Government Insurance Office, supra Footnote 13 at 616; Di Carlo v Dubois & Ors, supra Footnote 14 at [38].

[85] Bass Coast Shire Council v King [1997] 2 VR 5 per Winneke P at 29 with whom Hayne and Charles JJA agreed; PCRZ Investments Pty Ltd v National Golf Holdings Limited & Anor, supra Footnote 2 per Chernov JA at [33] with whom Callaway and Buchanan JJA agreed.

[87] [2004] VSC 195.

[89] Azzopardi v Netin, supra Footnote 59; Mideco Manufacturing Pty Ltd v Tate , supra Footnote 61; Grbavac v Hart, supra Footnote 63; Smith v Smith, supra Footnote 80; Quirk v Bawden, supra Footnote 62; John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201; MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236; 140 ALR 707; Pirrotta v Citibank Ltd, supra Footnote 53; Federation Properties Pty Ltd v Tzioras (No. 2) [2001] VSC 152; Nolan v Nolan, supra Footnote 25; Maher & Ors v Millenium Market & Ors, supra Footnote 87; Emanuel Management Pty Ltd v Fosters Brewing Group [2003] QSC 299; Ciccone v Ark Projects Pty Ltd [1999] VSC 122.

[90] SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 per Gyles JA at [37]; Grynberg v Muller, supra Footnote 41 per Hamilton J; Enron Australia Finance Pty Ltd (in liq) v Integral Energy Australia [2002] NSWSC 819; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74; Cumming v Sands [2001] NSWSC 706; CBA Investments Ltd v Northern Star Ltd (No. 2) [2002] NSWCA 146; Woodland v Manly Municipal Council [2003] NSWSC 524; Dodds v Premier Sports Australia Pty Ltd & Ors [2004] NSWSC 389 at [29]; Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302; Wentworth v Rogers [2003] NSWSC 944; Optus Networks Pty Ltd v Leighton Contractors Pty Ltd [2002] NSWSC 450.

[93] Smits v Roache [2002] NSWSC 663; Assaf v Skalkos [2000] NSWSC 935.

[96] John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd, supra Footnote 89; Sanko Steamship Co Ltd v Sumitomo Australia Ltd Unreported, 7 February 1996 Federal Court of Appeal; Black v Tomislav Lipova BHNF Maria Lipovac [1998] FCA 699; Coshott v Learoyd [1999] FCA 276; NMFN Properties Pty Ltd v Citibank Ltd (No. 2), supra Footnote 18; Wenzel v Australian Stock Exchange supra Footnote 34 [2002] FCA 353; Christofidellis v Zdrilic [2000] FCA 679 per Einfeld J; Expectation Pty Ltd v PRD Realty Pty Ltd [2003] FCA 1086 Spender J 9 October 2003; Kvaerner Oil & Gas Australia Pty Limited v Egis Consulting Australia Limited [2003] NSWSC 75 Unreported Einstein J 19 February at [7]; Vasram v AMP Life Limited [2002] FCA 1286 at [13]; Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd & Aitken, Unreported FCA Lehane J, 11 February 1998; Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No. 2) [2002] FCA 192; (2002) 201 ALR 618 per Hill J at 630; Sydney Markets Limited v Sydney Flower Market Pty Limited [2002] FCA 283 per Hely J at [14-18]; Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No. 2), supra Footnote 70 per Weinberg J at 124-127; Australian Competition and Consumer Commission v AMCOR Printing Papers Group Ltd [2000] FCA 163; Seven Network Limited v News Limited [2004] FCA 75 per Sackville J at [9]; Becker Group Ltd v Motion Picture Company of Australia Ltd (No. 2) [2004] FCA 740.

[98] Supra Footnote 70 at [28] and [35].

[100] Tector v FAI General Insurance Ltd [2000] QCA 426; [2001] 2 Qd R 463; Westpac Banking Corp v Commissioner of State Revenue [2004] QSC 19 at [32-34].

[102] Pirrotta v Citibank Ltd, supra Footnote 53 at 266; Black v Thomaslav Lipovac, supra Footnote 96 at [218]; Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd, supra Footnote 73 at 452; Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No. 2), supra Footnote 96, Nolan v Nolan, supra Footnote 25 at [34]; Jones v Bradley, _s_upra Footnote 72.

[103] Dal Pont - "Law of Costs", supra Footnote 20 at [13.47].

[106] (1991) 25 NSWLR 358 per Gyles J at 368.

[107] Sydney Markets Limited v Sydney Flower Market Pty Limited, supra Footnote 96; McKerlie v State of New South Wales (No. 2) [2000] NSWSC 1159; Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No. 2), supra Footnote 96; Bishop v State of New South Wales [2000] NSWSC 1042 Unreported Dunford J 17 November; Chapman v Wickman Ryan Pty Ltd [2000] FCA 336 Unreported Mathews J 28 April; Vasram v AMP Life Limited, supra Footnote 96 at 12; Little v Saunders [2004] NSWSC 655; Becker Group Ltd v Motion Picture Company of Australia Ltd, supra Footnote 96; Singh v Singh (No.2) [2004] NSWSC 225 Unreported Barrett J 26 March.

[108] [2002] VSC 409.

[109] Ciccone v Ark Projects Pty Ltd, supra Footnote 89; Mutual Community Ltd v Lorden Holdings Pty Ltd [1993] VSC Unreported Byrne J 28 April; Nolan v Nolan, supra Footnote 25; Maher & Ors v Millenium Markets & Ors, supra Footnote 87; Rahie v ING Life Ltd [2004] QSC 146 [55].

[110] [1994] NSWSC Unreported Cole J 27 July.

[113] Waiviata Pty Ltd v New Millenium Publications Pty Ltd [2002] FCA 481 per Sundberg J at [6].

[122] [1992] FCA Unreported Olney J 7 July.

[128] Ciccone v Ark Projects Pty Ltd, supra Footnote 89; Clarke v Australian Broadcasting Corporation, supra Footnote 68.

[129] Ciccone v Ark Projects Pty Ltd, supra Footnote 89 at [52]; Clarke v Australian Broadcasting Corporation, supra Footnote 68 at [19].

[130] Multicon Engineering Pty Ltd v Federal Airports Corporation, supra Footnote 75 at 441-442; MT Associates Pty Ltd v Aqua-Max, supra Footnote 66; Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568; Baltic Shipping Company, The Mikail Lermontov v Dillon (1991) 22 NSWLR 1 per Kirby P, Gleeson CJ concurring; Primus Telecommunications Pty Ltd v CCP Australian Airships Ltd [2003] VSC 141.

[131] Aghajanian v Stanley Thompson Valuers Pty Ltd [2000] NSWSC 215 at [2-6]; Nolan v Nolan, supra Footnote 25 at [16]; Waiviata Pty Ltd v New Millenium Publications Pty Ltd, supra Footnote 113 at [6].

[132] Supra Footnote 46 at [98-161].