Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [No 2] [2021] VSCA 116

COSTS - Appellant sought special order based on offer of compromise - Supreme Court (General Civil Procedure) Rules 2015 r 26.08 - Special order not made - Offer designed to obtain costs protection, not a genuine attempt at compromise - Appellant sought additional order pursuant to Supreme Court (General Civil Procedure) Rules 2015 r 63.34(4) - No special grounds identified.

1 On 24 March 2021, this Court allowed an appeal against a decision of a judge in the Trial Division. On that day orders were made which substituted for the orders made at trial an order that the proceeding brought by Key Infrastructure Australia Pty Ltd ('KIA') be dismissed and requiring KIA to repay to Bensons Property Group Pty Ltd ('Bensons') the sum of $400,000.

2 In accordance with a protocol established to address the COVID-19 pandemic that affected the ability and desirability of parties appearing in Court, the orders and reasons for judgment were published to the parties electronically without the ability of the parties to appear. The orders that were made included an order permitting the parties to file submissions on costs and any other orders that were sought by the parties.

3 Pursuant to that leave Bensons has sought further orders against the second, third and fourth respondents (the 'individual respondents') requiring them to also pay the sum of $400,000 (plus interest). Submissions have also been filed concerning the costs of both the trial and the appeal.

4 The order made by this Court against KIA was in the following form:

4(b) Key Infrastructure Australia Pty Ltd repay to Bensons Property Group Pty Ltd $400,000.

5 The basis for that order is explained in the reasons for judgment of the Court. What follows assumes a familiarity with those reasons. Essentially, KIA and Bensons entered into a development management agreement (the 'contract') for the payment of a development management fee (the 'fee') subject to the satisfaction of certain conditions. The fee was payable in instalments and had been part paid. The contract provided that in the event that the conditions were not satisfied the fee was not payable and any instalment that had been paid was to be repaid to Bensons. At trial, KIA argued that the conditions had been satisfied, or alternatively, if they had not been satisfied, it was because Bensons had prevented KIA from being able to do so. The judge rejected the first contention and accepted the second. In this Court Bensons appealed the findings that it had prevented KIA from satisfying the conditions and breached an implied term to cooperate in the contract. The order made by the Court gave effect to that conclusion.

6 The liability of the individual respondents was not a primary liability but arose because they guaranteed the obligations of KIA under cl 2.3 of the contract. In its application for leave to appeal Bensons sought an order that all of the respondents repay the instalments (plus interest). Perhaps understandably, in the appellant's written case and oral submissions, no time was spent on the liability of the individual respondents. In light of the possibility that the individual respondents may have something further to say, leave was given to the parties to address further orders.

7 It is in that context that Bensons submits that order 4(b), set out above, be 'corrected' so that it reads: 'The defendants by counterclaim pay to the plaintiff by counterclaim $566,947.95 (including interest of $166,947.95)'. It submits that either it was a mistake or the order made does not reflect the judgment, which does not distinguish between the respondents. It relies on r 36.07 of the Supreme Court (General Civil Procedure) Rules 2015 (the 'Rules'). That rule provides that the Court may at any time correct a clerical mistake in an order or an error arising in an order from any accidental slip or omission. Bensons also submits that the Court has inherent jurisdiction to make a supplemental order.

8 In a joint submission, made on behalf of all of the respondents, it is submitted that the order of the Court of 24 March 2021 has been perfected and cannot be changed. In that respect, they call in aid the well understood principle that it is desirable that there be an end to litigation and it would be mischievous if there were jurisdiction to rehear a matter decided after a full hearing. They submit that, having regard to the reference in the reasons for judgment that there should be judgment for Bensons requiring KIA to refund the instalments of the fee, the issues in dispute had been resolved and the orders gave effect to this.

9 It is clear from the orders made on 24 March 2021 that the Court was not intending to, and did not, finally dispose of the appeal and expressly reserved an opportunity for the parties to seek further orders if they could not agree on them. There is no reason to treat the reference to 'other orders' narrowly, all the more so given that the parties were not able to be heard at the time that the orders were made. The challenge for the Court to balance the orthodox and correct approach, the efficient dispatch of its business and the need to put in place protective measures to assist in the suppression of the pandemic is not an easy one. It is critical that parties have the opportunity to address questions that arise, including as to the form of orders.

10 The liability of the individual respondents arises under a different sub-clause of the contract and is independent of, but derivative of, the liability of KIA.[1] The liability of KIA is a necessary condition for the liability of the individual respondents. The order made by the Court, when read with the reasons for judgment, fixed the liability of KIA. It did not, by negative implication, determine the liability of the individual respondents. It was not the intention of the Court that Bensons would be foreclosed from seeking orders against the individual respondents. Neither the reasons of the Court nor the orders made on 24 March 2021 had that effect.

11 Having heard from the parties, the liability of the individual respondents under the guarantee is clear and established by the reasons of the Court. The respondents do not make any submission doubting the substantive liability of the individual respondents but say that finality of orders precludes any further order. We reject that submission. The orders left open the possibility of further orders. The proposed orders against the individual respondents do not involve the rehearing of the case or the raising of a new issue, and nor do they contradict, alter or undermine the findings and order against KIA. It does not offend the principle of finality to make the proposed orders against the individual respondents.

12 Even if the orders of the Court could be read as disposing of the appeal in relation to the individual respondents, that was not the intention of the Court. In Gamboni v Bendigo and Adelaide Bank [No 2],[2] this Court accepted that it has the power to make a supplemental order where the existing orders do not truly represent what the Court intended to pronounce. That power extended to making a supplemental order but not varying an existing order. Here, the proposed order would impose a liability on the individual respondents for the first time. In doing so, it is important to note that the form of supplemental order does not alter the liability of KIA under the existing orders, which remains the same. It causes no injustice to KIA. It simply addresses the liability of the individual respondents.

13 There should be judgment against the individual respondents in favour of Bensons. As a matter of form, that could be achieved by additional orders directed to the individual respondents, making it clear that they are liable to pay the judgment sum. However, interest needs to be included in the judgment sum, necessitating an amendment to order 4(b) in any event. It is convenient to vary order 4(b) to include the individual respondents.

14 Bensons seeks a further order to deal with interest. In response, the respondents did not dispute the quantum of the interest payable on the claimed amount. Once the liability for the judgment sum is established against all respondents, there should be an order for interest fixed in the sum claimed by Bensons ($166,947.95).

15 In their submissions, the respondents submit that KIA should pay Bensons' costs at trial on a standard basis. They submit that the individual respondents were successful and should have a costs order in their favour. For the reasons given above in relation to the form of order, this later submission cannot be accepted. A costs order must be made against all of the respondents for the trial.

16 Bensons seeks a special costs order in respect of the trial based on the application of r 26.08 to the service of an offer of compromise dated 13 October 2017 (the 'offer').

17 At the time of the offer, the state of the proceedings was as follows. By its amended statement of claim, KIA sued for $1,760,000 for the third and fourth instalments of the fee which it said was owing but unpaid. Bensons counterclaimed, seeking repaying of the $400,000 already paid (plus interest).[3]

18 The offer was to accept $360,000 (plus interest) in settlement of both proceedings. That required KIA to capitulate in its own claim and pay approximately 90% of Bensons' counterclaim.

19 Bensons submits that KIA's proceeding was dismissed and Bensons obtained judgment in a higher amount on its counterclaim and that KIA's failure to accept the offer was unreasonable. On that basis, it is entitled to a special costs order from 17 October 2017 unless the Court otherwise orders and there is no reason for the Court to do so.

20 We are not persuaded that the rejection of the offer was unreasonable. It required KIA to capitulate on its claim. The issues in the claim and counterclaim were interconnected. The issues were by no means clear, as evidenced by the success that KIA had at first instance. Although this Court has come to a contrary view, the issues were of some complexity.[4]

21 Moreover, the offer on the counterclaim was very close to requiring full payment of the claim. In the overall context of the proceeding, we consider that it was designed to obtain costs protection and was not a genuine attempt at compromise.[5]

22 We refuse the application for a special costs order.

23 In the result, the respondents should pay Bensons' costs of the trial on a standard basis.

24 The respondents accept that KIA should pay Bensons' costs of the appeal on a standard basis. As noted above, orders should be made against all of the respondents and they should pay costs. There is no reason apparent to us, and none identified by the parties, to depart from the usual order in respect of the appeal.

25 Bensons seeks an additional order pursuant to r 63.34(4) of the Rules that the Costs Court be given the same authority as the Court under r 63.34(3) to allow an increase of the fees prescribed in Appendix A to the Rules. Sub-paragraph 63.34(3) provides that '[t]he Court may, on special grounds arising out of the nature and importance or the difficulty or urgency of the case, allow an increase not exceeding 30 per cent of the legal practitioner's charges allowed'.

26 No special grounds have been identified. We cannot see any basis for special grounds and do not propose to make the order sought. There is no reason to think that the costs set out in Appendix A are inadequate to the task.

BENSONS PROPERTY GROUP PTY LTD (ACN 063 470 833) Appellant

KEY INFRASTRUCTURE AUSTRALIA PTY LTD (ACN 154 574 937) First Respondent

[1] Clause 2.3(d) in respect of KIA and cl 2.3(f) in respect of the individual respondents.

[2] [2013] VSCA 282.

[3] Bensons initially claimed GST of $40,000 but did not pursue it.

[4] As the judge explained, the evidence of Bensons was, in many respects, poor and the behaviour it exhibited warranted close scrutiny.

[5] Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd [No 2]; [2002] VSC 409, [14] (Habersberger J).