Brosnan v Katke

JUDGE: GREENWOOD J DATE: 23 APRIL 2015 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 On 12 March 2015, the Court pronounced final judgment in this matter and ordered that the application be dismissed as against all respondents: Brosnan v Katke [2015] FCA 203. The Court also directed (as varied by an order made on 19 March 2015) the parties to file submissions in relation to the disposition of the costs of the proceeding. 2 The respondents have now filed written submissions in support of their contentions and the applicants have filed responsive submissions. 3 The respondents in their submissions contend that the applicants should be ordered to pay the respondents' costs of the proceeding including all costs previously reserved; those costs should be paid on an ordinary party and party basis for the period until 16 December 2013 and on an indemnity basis on and from 17 December 2013 being the date of the respondents' Calderbank offer which was rejected on 6 January 2014 and, alternatively to that proposition, the applicants pay the respondents' costs of the proceeding on an ordinary basis save for their costs of defending the claims made at paras 27 and 33-34 of the consolidated third further amended statement of claim with those costs being paid on an indemnity basis. 4 The applicants do not oppose an order being made against them for costs of the proceeding but they say that those costs ought to be on a party and party basis. The applicants oppose any order for indemnity costs against them arising out of a failure to accept the respondents' Calderbank offer on the footing that having regard to all of the circumstances at the time the offer was made and rejected, the applicants did not act unreasonably in rejecting the offer. 5 The applicants also oppose any order for indemnity costs being made against them in relation to the particular issues concerning the patent representations. 6 Further, the applicants seek an order for costs in their favour on a party and party basis of proving factual matters asserted in para 10(a) and (b) of the statement of claim to the effect that the third respondent could not proceed to an IPO on a recognised United States Stock Exchange in 2005 and remained unable to do so up to and including July 2007. 7 In the course of the respondents' submissions reference is made to a Calderbank offer contained in a letter from Johnson Winter & Slattery to the solicitors for the applicants, Mills Oakley Lawyers. In that letter, the solicitors for the respondents observe that they propose to enforce orders for costs against the individuals personally and in that context they observe that: Those costs will be substantial and already exceed $2 million. Recovery will be sought, if necessary, by way of equitable execution over each applicant's shares in MetaHoldings as well as all other real and personal property. Notwithstanding our clients' intention, they are nonetheless conscious of the time and energy involved in ongoing litigation and the distraction it causes key executives from their primary objective of increasing the value of Metagenics (of which your clients are shareholders). In those circumstances, we have been instructed to make the following commercial offer with a view to ending all of the litigation now: 1 Our clients will consent to the proceedings being discontinued by all of the applicants on terms that there be no order as to costs as between the discontinuing applicants and the respondents. 2 This offer is only capable of acceptance in writing. 3 This offer remains open for acceptance until 14 January 2014, following which it will automatically lapse. This offer is made in accordance with the principles set out in Calderbank v Calderbank (1975) 3 All ER 333. Should your clients reject the offer and the matter proceeds to judgment and they obtain a result that is no more favourable than the offer contained in this letter, we reserve the right to rely on this letter in recovering our clients' costs of the proceedings from your clients personally on a full indemnity basis. 8 This offer was made at a reasonably advanced stage of the litigation. 9 Nevertheless, on 6 January 2014, Mills Oakley responded and in part said this on the question of costs: That your clients have spent $2M to this point is either foolish or complete nonsense. That they think that they will recover any more than 10% of that amount on an assessment is at best optimistic if not highly ambitious. Presumably you have told your clients of the risk they run on the recoverability of their costs. 10 Even though the solicitors for the applicants are, plainly enough, ridiculing the notion that the respondents have incurred costs to this point of $2 million, Mills Oakley seem to accept that at least an optimistic or highly ambitious assessment of party and party costs incurred by the respondents to this point would be approximately $200,000.00. 11 The question of whether the applicants have acted reasonably or unreasonably in rejecting what might be said to be a commercial or uncommercial offer is in part informed by a realistic assessment of the quantum of the costs that the respondents were willing to absorb with a view to simply walking away from the litigation. Those costs would involve two elements. First, an understanding of the costs actually incurred and secondly, an understanding of the party and party proportion of those actual costs. There is no evidence before me in relation to any aspect of the disposition of costs. In part that it is no doubt because the earlier orders contemplated the filing of only submissions by the respondents and then the filing of responsive submissions by the applicants. However, it seems to me that it would be helpful, having regard to the factual contentions in the correspondence, to have some evidence on the quantum of costs. It would be sufficient, in my view, to have evidence from the solicitors acting for the parties in this matter as experienced solicitors in commercial litigation. If a party wishes to support that evidence by evidence from a costs assessor that would be entirely a matter for the particular party. 12 In the result, for present purposes, I propose to make further orders for the filing of affidavits in relation to these questions and orders in relation to the resolution of the costs question. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.