Applicant v First Respondent Second Respondent

8 In addition to their written and oral submissions addressed at the hearing on 5 May 2017 and in the Reasons, the Respondents' rely, particularly, in support of their submissions on the costs issue, upon the matters set out in paragraphs 31 to 38 of the Reasons - the nub of which is, in the present context, contained in paragraphs 31 and 32, which are set out above.[11]

9 The Respondents' Submissions also rehearse the matters raised generally or more particularly at the 5 May hearing;[12] matters which are also in more general and, in some instances, dealt with in more particular terms in the Reasons. To the extent that these submissions might appear to be canvassing indemnity costs issues - given the reference to paragraphs 33 to 37 of the Reasons - in their submissions, I should make it clear that nothing now raised in those submissions causes me to depart from my view that there is no sufficient basis to order indemnity costs. Coming back to the primary basis of the Respondents' position, they submit:[13]

1. The Tribunal has a broad discretion in making the costs order.[14] Given:

(a) the applicant has withdrawn claims in respect of franchise restaurants and unauthorised discounts and reduced significantly the quantum of other claims, being the refund of commissions paid, lost gross margin and restoring customer volumes; and

(b) the applicant has failed to produce a satisfactory further amended points of claim,

the Tribunal ought to infer that the substantial majority of the costs incurred by the respondents to date have been wasted. In that case, the respondents submit that the Tribunal should order the applicant to pay its costs of the proceedings (excluding the injunction application) because:

(c) of the insoluble difficulty on a taxation of costs in awarding payment of some but not other costs;[15]

(d) the applicant has not served the further amended points of claim on which it intends to rely;

(e) accordingly, until the applicant files and serves its further amended points of claim, the costs which are thrown away are not capable of being identified; and

(f) the comments of the applicant's Senior Counsel (as set out above) that interlocutory processes will, effectively, have to start again.

1. To do otherwise (as the applicant proposes), and award costs in respect of some, but not all, of the applicant's claims or the respondents' various Tribunal appearances, may create extreme difficulties for both the applicant and the respondents in the taxation of those costs. The Costs Court would be asked to speculate as to the final form further amended points of claim to be filed and served by the applicant once the stay is lifted. This is obviously unsatisfactory.
2. The Tribunal has found that it is fair that the applicant pay the respondents' costs. In the whole of the circumstances of the case, but particularly because the applicant is starting again after 20 months in which significant costs have been incurred and because the applicant has not yet filed its further amended points of claim, it is appropriate that the applicant pay the whole of the respondents' costs. It does not matter that not all of the respondents' costs will be thrown away, if and when the applicant finally serves its further amended points of claim, because it is fairer, and in the interests of justice, that the applicant is ordered to pay those costs to the respondents. Put another way, even if the applicant gets its house in order and succeeds in its claim against the respondents, given its conduct of the proceedings to date, it is still fair that the applicant pay the respondents' costs (save in relation to the injunction application).

10 The difference between the party positions - having regard to the Applicant's concession as to costs liability[16] - is that the Applicant says that the broad costs order proposed would indemnify the Respondents beyond their "damnification":[17]

1. Dal Pont[18] cites a statement of principle made by Bramwell B in Harold v Smith[19] for the proposition that costs are given by the law as an indemnity to the person entitled to them and not as a punishment on the party who pays them, nor as a bonus to the party who receives them. Bramwell B says "[t]herefore if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained".
2. The proposed order will either be punitive of the Applicant or give a bonus to the Respondents to the extent that it requires the Applicant to indemnify the Respondents beyond their "damnification" - that is to say, requires the Applicant to indemnify the Respondents in respect of costs that they would have incurred in any event, regardless of the conduct enlivening the power to award costs under s 109 of the VCAT Act.
3. The proposed order requires consideration of the principles on which courts and tribunals act to order a successful party to pay the unsuccessful party's costs in whole or in part. These principles are engaged because the proceeding is continuing and the Applicant may be the successful party. The proposed order would not be fair now if it would not be made after judgment for the Applicant at trial.
4. Dal Pont says "[t]here is now jurisdiction to order a successful party, even a wholly successful party and whether plaintiff or defendant, to pay his or her opponent's costs in part or in whole, although as an exercise of discretion the court will not do so other than ... in very exceptional circumstances."[20]
5. Dal Pont cites Earnshaw v Loy (No 2)[21] as illustrative of the circumstances in which a successful plaintiff was ordered to pay part of the defendant's costs. In that case, the circumstances included that the plaintiff had succeeded but the verdict was contemptuous,[22] that the plaintiff had made a large and exaggerated claim, that the plaintiff had unnecessarily increased the defendant's costs by having sued in the Supreme Court,[23] and had raised issues that extended the trial to more than twice the length it would otherwise have had,[24] on which he had lost.[25]
6. In those circumstances Sholl J ordered the successful plaintiff to pay half the defendant's costs.
7. The effect of the plaintiff's conduct in Earnshaw v Loy (No 2) was known and could be determined by the court.

Reference is also made to Alginates (Australia) Pty Ltd v Thompson & Carroll Pty Ltd.[26] Moreover, it is said that VCAT has already declined to order costs in favour of the Respondents[27] and that the Applicant's conduct since July 2016 does not justify the proposed order.[28]

11 As to the latter, nothing in the Applicant's Submissions - directed to post July 2016 or any other period - causes me to depart from previously expressed views, in the Reasons or otherwise, as to the unsatisfactory conduct of those proceedings. In any event, the Applicant has conceded a basis for a costs order under s 109.

12 For the preceding reasons, there is no basis, in my opinion, for taking any different view from that expressed in the Reasons for a costs order against the Applicant and on the scale rate indicated in those reasons.

13 The points raised in the Applicant's Submissions in relation to a costs order going no further than addressing the extent of "damnification" are well taken. Clearly, costs orders are not a punishment but a means of doing justice between the parties. It follows that the justice to be done here is to compensate the Respondents for costs thrown away as a result of recasting - and in a very unsatisfactory manner at that - by the Applicant of its claim, as previously discussed in the Reasons.

14 In the present circumstances, the ultimate result of this proceeding is unknown and that does, naturally, affect the nature and extent of costs orders appropriate at this time.

15 It is, however, clear that as a result of the examination of and the recasting of the Applicant's case in the hearings before me and the steps necessarily taken to deal with the pleadings deficiencies, extra costs have been, or will be, incurred - costs thrown away with respect to work done since the commencement of the VCAT proceedings in 2015 and costs which will be incurred in the future. The latter must, of course, be considered when the outcome of the proceeding is known, but the former are now wasted as a result of the Applicant's conduct of the proceedings.

16 Having regard to the history of this matter, it is, in my view, entirely appropriate that all costs thrown away in these proceedings - since their commencement - be assessed and paid forthwith. In my view, this is to do justice to the parties, particularly the Respondents, which should not have to suffer any delay in being compensated for costs thrown away as a result of the Applicant's conduct of these proceedings. Moreover, this is not a position dependent upon the ultimate outcome of the proceedings. Even if the Applicant were successful, the injustice would have been done to the Respondents in meeting the cost of now pointless work. This is the feature which distinguishes the present situation from the authorities relied upon by the Applicant. However, it should also be observed that a broader costs order, as sought by the Respondents, would not, in my view, do justice between the parties as it would more than compensate the Respondents - beyond their "damnification".

17 In this respect, the fact that VCAT may or may not have made costs orders previously is not relevant to this approach, as the costs position with respect to costs now thrown away is, and can only be, assessed in light of the outcome of the hearings before me. Obviously though, there must not be any "double counting" and costs orders already made must be allowed by the Respondents as a "credit" in the assessment of costs payable now by the Applicant. In any event, these are now matters for the Costs Court, which is to assess, settle, tax and, if necessary, review costs.[29]

18 Finally, having regard to the manner in which these proceedings have been conducted, it is entirely appropriate that no further steps be taken in the proceedings until these costs are assessed and paid.

19 The parties are to bring in orders to give effect to these reasons.

[1] See Pizza Fellas Pty Ltd v Eat Now Pty Ltd [2017] VSC 226; [2017] VCAT 589, [5].

[2] Pizza Fellas Pty Ltd v Eat Now Pty Ltd [2017] VSC 226; [2017] VCAT 589 ("Reasons").

[5] Martin v Fasham Johnson [2007] VSC 54, [27].

[7] Applicant's Submissions, [3], [4].

[9] [2007] VSC 54, [35]; Reasons, [30].

[10] Respondents' Proposed Orders (19 May 2017), [2], [3].

[12] Respondents' Submissions, [8]-[34].

[13] Respondents' Submissions, [35]-[37].

[14] See generally Jason Pizer and Emrys Nekvapil, Pizer's Annotated VCAT Act (Thomson Reuters, 5th ed, 2015) [VCAT.109.40].

[15] See generally Jason Pizer and Emrys Nekvapil, Pizer's Annotated VCAT Act (Thomson Reuters, 5th ed, 2015), 608; A K Fruend Pty Ltd v Kameel Pty Ltd [2004] VCAT 1336, [48] (Macnamara DP).

[17] Applicant's Submissions, [5]-[11].

[18] G E Dal Pont, Law of Costs (LexisNexis Butterworths, 1st ed, 2003) ("Dal Pont 2003") [see now G E Dal Pont, Law of Costs (LexisNexis Butterworths, 3rd ed, 2013) ("Dal Pont 2013")].

[19] [1860] EngR 516; (1860) 5 H&N 381, 385; [1860] EngR 516; 157 ER 1229, 1231: set out at Dal Pont 2003, 213 [7.8] [Dal Pont 2013, 161 [7.5]].

[20] Dal Pont 2003, 263 [8.48] [contra Dal Pont 2013, 233 [8.62] "The courts have jurisdiction to order a successful party, whether plaintiff or defendant, to pay an opponent's costs in part or in whole, and judicial remarks that premise its exercise on proof of 'exceptional' circumstances should not be viewed as an attempt to alter the discretionary character of such decisions" (citations omitted)].

[21] [1959] VicRp 44; [1959] VR 252.

[22] [1959] VicRp 44; [1959] VR 252 at 253.

[23] [1959] VicRp 44; [1959] VR 252 at 256.

[24] Five days in fact when it should have been only two days: [1959] VicRp 44; [1959] VR 252 at 257.

[25] [1959] VicRp 44; [1959] VR 252 at 255-6.

[26] [1970] VicRp 74; [1970] VR 570, esp at 575 (Smith J).

[27] Applicant's Submissions, [16], [17].

[28] Applicant's Submissions, [18], [20].

[29] Victorian Civil and Administrative Tribunal Act 1998, s 111(b).