Bullhead Pty Ltd v Brickmakers Place Pty Ltd

TRUSTS AND TRUSTEES - Relief - Equitable relief for breach of trust, breach of fiduciary duties, and knowing assistance - Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 360 ALR 1 applied - Appropriate reductions made.

PRACTICE AND PROCEDURE - Interest - Whether to award statutory interest rate or lower equitable rate - Talacko v Talacko [2009] VSC 579 applied - Equitable interest with compound annual rests awarded.

PRACTICE AND PROCEDURE - Costs - Costs of trial and appeal - Judgment sum less than amount of applicant's compromise offer - Applicant succeeded on appeal based on arguments not raised at trial - Costs awarded on standard basis for trial and appeal.

1 On 27 November 2018, the Court published its reasons for allowing the appeal ('principal reasons').[1] These reasons use the same terminology used in the principal reasons and assume familiarity with those reasons.

2 Following publication of the Court's principal reasons, there was some argument as to the form of orders which should be made as a consequence of the appeal being allowed, and concerning the costs of the trial and of the appeal. During the course of that brief argument, and before the Court had determined the form of final orders to be made, counsel for Bullhead informed the Court of an offer of compromise which had been served by it before trial, and submitted that, on this basis, indemnity costs orders should be made for part of the costs of the proceeding below and for the whole of the appeal. At the time, no objection was taken to that disclosure. Having heard brief argument, the Court asked the parties for written submissions on the form of orders to be made and as to the costs of both the proceeding below and on appeal. No substantive orders have yet been made.

(1) the remaining questions of final orders and costs of the proceeding below should be remitted to the trial judge for consideration, because the disclosure of the offer of compromise was both premature and improper;

(2) if the remaining questions are not remitted, the respondents contest the form of final orders proposed by Bullhead as a consequence of its appeal being allowed;

(3) further, if there is to be no remitter, and notwithstanding the offer of compromise, the respondents contend that only standard costs orders should be made for the whole of the proceeding below; and

(4) in any event, the costs of the appeal should be allowed on a standard basis only.

4 We will deal first with the respondents' remitter application. For the reasons given below, that application should be refused. It will thus be necessary to deal with the remaining issues for determination.

Should the form of orders and trial costs be remitted?

5 There is no dispute that the offer of compromise was prematurely disclosed, because 'all questions of liability and the relief to be granted [had not] been determined'.[2] In these circumstances, a court has a discretion as to what course it should adopt. Different factors may apply to the exercise of that discretion when the issue arises on appeal, as compared with when it arises before a trial judge in the course of a trial.

6 The respondents principally rely upon the decision of the Full Court (Young CJ, Starke and Marks JJ) in Skafidas v ATM Industries Pty Ltd.[3] That case concerned an appeal against an assessment of damages in a personal injury action. The Court determined that the appeal should be allowed, and the successful appellant urged the Court to act under s 19A of the Supreme Court Act 1958 [cf s 14 of the Supreme Court Act 1986] and carry out its own assessment of the appellant's damages. Marks J noted that this course would ordinarily follow, but that the respondent objected because of premature disclosure in the appeal book of a payment into Court. Marks J accepted the respondent's submission on the basis that, '[h]aving seen the figures involved ... [he] would be very embarrassed [by that knowledge] in trying to reach an independent assessment of the appellant's damages'.[4] Accordingly, he determined that a new trial as to damages should be ordered.

7 Young CJ agreed that a new trial as to damages should be ordered, noting that this would not ordinarily be the position where, as in that case, there was no real conflict of evidence.[5] In the Chief Justice's view, the fact that a court of appeal may in such circumstances feel an embarrassment in determining the remaining damages assessment was not the prevailing reason why a new trial should be ordered in the circumstances of that case. The Chief Justice stated:

The reason is not so much that the information may be an embarrassment to the court, for it is after all not uncommon for a court to be obliged to decide a question without regard, for instance, to evidence which has been given but which is inadmissible. The reason is rather that if the information is disclosed to the court it may not thereafter appear that justice has been seen to be done.[6]

8 Notwithstanding the emphasised statement by the Chief Justice, he then recognised that the Full Court had a discretion to determine the damages which, '[i]n all the circumstances [it was] not prepared to exercise'.[7]

9 Starke J agreed with both Young CJ and Marks J, but added that, 'having regard to the amount paid into court, [he] would have felt acutely embarrassed if called upon to assess the damages'.[8]

10 We do not read the emphasised sentence from the Chief Justice's reasons as laying down a rule that, in every case where a court of appeal has a discretion in circumstances such as the present, it must be exercised in favour of a remitter - because it may not thereafter appear 'that justice has been seen to be done'. The discretion remains in every case. That is certainly the case in respect of premature disclosure to a trial judge.[9]

11 If Young CJ intended to lay down a rule, we disagree with it. It is inconsistent with the position where there is premature disclosure in the trial division, and there is no logical reason why that should be so. In our view, the discretion is to be exercised on the facts of each case. In exercising that discretion in a case such as the present, an appellate court will need to consider a range of factors, including:

(1) the nature of the remaining questions for determination as a consequence of the result on appeal;

(2) whether the evidence on those remaining questions is complete - in the sense that the issues were in contest at trial and each party had the opportunity to call or tender such evidence as it wished;[10]

(3) the extent of any contest as to the credibility or cogency of the relevant evidence at trial and, if so, whether the trial judge has made factual findings in that regard;

(4) any relevant reasons or findings by the trial judge as to the amount of any compensation or damages, or otherwise as to the appropriate form of relief;

(5) the extent of any delay in hearing and deciding any remitter in the ordinary course of the disposition of the trial division's business;

(6) whether further delay can be avoided if the Court of Appeal determines the issues - in particular by avoiding the risk of any further appeal following a remitter;

(7) the overarching purpose under the Civil Procedure Act 2010, to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute;[11]

(8) the degree of embarrassment felt by the individual members of the Court of Appeal in the circumstances of a particular case; and

(9) whether, in the particular circumstances of the case, a fair-minded lay observer might reasonably apprehend that the Court might not bring an impartial mind to the resolution of the remaining questions,[12] by reason of knowledge of an offer of compromise or Calderbank offer which has been prematurely disclosed.

12 Ordinarily, in deciding whether to remit remaining questions to the trial division, a practical case management decision will be made by the Court of Appeal which takes these and any other relevant factors into account without the need to individually refer to all of the factors. In this case we are of the clear view that this Court should not remit the remaining questions, but should determine them for itself. Our reasons follow.

13 First, the evidence on the remaining questions was relevant at trial, and the parties gave or tendered the evidence on which they rely on those questions at trial. On the basis of that evidence, submissions were made to the trial judge as to the appropriate form of relief.

14 Second, as will appear below, the evidence called by the respondents on the remaining questions is not such as to require assessment of its credibility or cogency. Thus, the fact that the Court does not have the assistance of findings and analysis by the trial judge on the evidence is not as important a factor as it may be in other cases.

15 Third, the task is one which this Court is able to determine in the circumstances. We are fully across the issues, having just determined the appeal and received written submissions on the remaining questions.

16 Fourth, the overarching purpose under the Civil Procedure Act would be furthered if there were no remitter. If there is a remitter, there will be delay and the possibility of further appeal.

17 Fifth, notwithstanding our knowledge of the offer of compromise, none of us feels any embarrassment in determining the remaining questions. As Young CJ said in Skafidas, it is commonplace for a court to be obliged to decide a question without regard to inadmissible evidence of which it is aware.[13]

18 Sixth, we are not satisfied that a fair-minded lay observer might reasonably apprehend that this Court might not bring an impartial mind to the resolution of the remaining questions. There may be cases of premature disclosure of an offer of compromise or Calderbank offer where this is so, but we do not consider this is one of them. We do not accept the submission made by the respondents that, because equitable compensation is at play, and that is an evaluative task where matters of fairness and equity must be weighed, the position is different from a common law damages assessment.

19 We will accordingly proceed to consider the remaining questions.

20 The effect of the Court's principal reasons is that the respondents are liable to account to Bullhead for the profit they made as a result of their dishonest breaches of fiduciary duty, or to pay equitable compensation in such an amount. In assessing the amount of the profit to be disgorged, or equitable compensation paid, the starting point is that the issue of the discounted units should be set aside, as the trial judge held.[14] On this basis:

(1) the number of issued units should be reduced by the amount of the discounted units;

(2) the amounts paid for the discounted units (totalling $260,000) should be treated as deemed loans by the initial unitholders to the trust;

(3) Bullhead's unitholding entitlement increased to 24.4 per cent of the total issued units;[15] and

(4) there was a corresponding increase in Bullhead's entitlement to share in the distributable profit of the trust.

21 The question remains: what is the amount of the distributable profit for the purposes of assessing the excess profits received by the respondents and which they should disgorge? The starting point is the distributable profit stated in the Stasi spreadsheet projection based on sales of the six unsold apartments for their list prices, on which the finalisation agreement is based ('finalisation agreement profit'). That amount is $4,904,330.[16] Both parties agree that the $260,000 deemed loans from the initial unitholders should be deducted from that amount, resulting in a net distributable profit of $4,644,330. Bullhead claims an account of profits or equitable compensation on the basis of 24.4 per cent of the unpaid balance of that amount. We note that $396,000 was paid in late December 2013.[17]

22 The respondents contend that the finalisation agreement profit should be further reduced to take account of other adjustments. In summary, on the basis that the discounted units are set aside and the finalisation agreement is not enforceable against Bullhead, the respondents contend that the finalisation agreement profit should be further reduced by the following amounts:

(1) a management fee bonus, which would become payable if the equity of the trust is reduced;

(2) the additional consideration received by the trust due to the Lastrina brothers purchasing the six unsold apartments at their list prices;

(3) estate agents' commissions payable on the sale of the six unsold apartments if there had been no finalisation agreement;

(4) an allowance for interest on the deemed loans to the trust of $260,000; and

(5) an allowance for the unremunerated skill, expertise, effort and resources contributed by the Lastrina brothers, in particular Charlie, to the development project.

23 We will consider each of these claimed deductions from the finalisation agreement profit. Before doing so, however, it is necessary to say something about the principles to be applied in quantifying the amount of the benefit or advantage received by a defaulting fiduciary which should be disgorged to the beneficiary. The principles were most recently considered by the High Court in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd ('Lifeplan Australia').[18] It is unnecessary to consider the facts of that case for present purposes.

24 In this case, it is clear from the trial judge's reasons and our principal reasons that the respondents have variously received extra profits caused by acts of knowingly assisting a breach of trust, breaching fiduciary duties and knowing assistance of those breaches. In these circumstances, the statement of the plurality (Kiefel CJ, Keane and Edelman JJ) in Lifeplan Australia is applicable:

Once it has been determined that a benefit or advantage has been caused by the acts of knowing assistance, there remains the question of quantification of the benefit to be disgorged. While it is true that equity will not require an errant fiduciary or a participant in a breach of fiduciary duty to account for an advantage which the breach of fiduciary duty has not caused or to which it has not sufficiently contributed, where causation is sufficiently established the onus is upon the errant fiduciary or participant to show that he or she should not account for the full value of the advantage. That onus is not discharged by mere conjecture or supposition giving the benefit of the doubt to a proven wrongdoer. The requirement of proof conforms with the obligation of a party charged with a breach of fiduciary duty to show why the full value of an advantage obtained in a situation of conflict of duty should not be disgorged.[19]

25 Later, the plurality stated that, in order to satisfy the onus that there is no reasonable causal nexus between the wrongdoing and the profit claimed:

No precise test has been prescribed for determining when it will be inequitable to account for a benefit on the basis that it has no reasonable connection with wrongdoing. Nor is there any need for such a test. All of the circumstances must be considered, including the nature of the conduct. It is pertinent here that the profits were from deliberate and dishonest conduct, and were those desired to be achieved.[20]

26 Gageler J delivered a separate judgment, agreeing with the plurality in the result. He described the task of the Court in circumstances such as the present as involving the 'cardinal principle of equity ... that the remedy must be fashioned to fit the nature of the case and the particular facts'.[21] He described the onus on a defendant who is a defaulting fiduciary, or is liable to account 'as if' a fiduciary - such as a person who knowingly assists a breach of trust or fiduciary duty[22] - in the following terms:

the defendant needs to demonstrate, in order to establish that it is inequitable to order an account of the value of the whole of the identified benefit or gain, either that the benefit or gain is attributable in part to one or more other contributing causes by reference to which it is 'practically just' that the benefit or gain be apportioned or that some allowance be made in favour of the defendant, or that there is some other reason why accounting for the whole of the gain would amount to a windfall to the plaintiff of such a nature or to such a degree that the accounting would fail to vindicate the purposes underlying equity's imposition of the fiduciary obligation that has been breached.[23]

27 Gageler J added that the evaluative task, although not discretionary or related only to causation,[24] and not intended to be a punishment,[25] nevertheless included:

consideration of what is just in the context of the equitable obligation to be vindicated by the remedy [and] cannot exclude consideration of the severity of the breach of the fiduciary obligation and the extent of the defendant's own involvement and culpability in it. The judgment to be made must accommodate the stringency of the equitable obligation to be vindicated to the need to ensure that the remedy is not 'transformed into a vehicle for the unjust enrichment of the plaintiff'.[26]

Importantly, it is the outcome of that ultimate evaluative judgment, and not merely the outcome of the initial inquiry into causation, which yields the 'true measure' of the benefit or gain to be reflected in the order.[27]

29 With these principles in mind, we proceed to consider the various adjustments to the finalisation agreement profit which are relied on by the respondents.

30 It is, however, first necessary to note two general submissions made by the parties. First, Bullhead contends that the principal reasons uphold the existence of the finalisation agreement, which remains binding on the trustee and the respondents - albeit unenforceable against Bullhead. Bullhead contends on this basis that the finalisation agreement profit is the appropriate basis for calculating its entitlement to relief and, on this basis alone, all of the reductions sought by the respondents should be refused.

31 We do not accept that contention. While we accept that the finalisation agreement remains binding as between the respondents, the focus of the Court's assessment of Bullhead's remedy is on the amount of the profits received by the initial unitholders in respect of the invalidly issued discounted units. That requires the Court to consider what profits they would have been entitled to if: (1) the discounted units had not been issued; (2) the $260,000 deemed loans are taken into account, and (3) the finalisation agreement had not been made - as it would not have been necessary but for the invalid issue of the discounted units. If the respondents are able to satisfy their onus as to the appropriateness of any particular reduction in all the circumstances then, in accordance with the principles discussed above, the appropriate adjustments should be made.

32 Second, the respondents contend that Bullhead's entitlement to relief should be assessed on the basis that, if Buckland had been told about the discounted units, Bullhead would not have purchased units in the trust. The respondents rely on Buckland's evidence that if he had been told about the discounted units and the purported 'land revaluation' basis on which they were allegedly issued, he would not have invested. We do not accept this contention. Bullhead has established a case in equity that the respondents are liable as defaulting fiduciaries to disgorge the profits they made as a result of the wrongful issuing of the discounted units. That profit is - subject to such reductions as the respondents can establish should be made - represented by the increased profits received by the initial unitholders as a result of them holding the discounted units.

34 Charlie had effective control of the management of the development project. Through his company, Ottor Pty Ltd, he received development management fees pursuant to a development management agreement. Clause 5.2 of that agreement provided for a bonus fee of 12 per cent of any net profit before tax in excess of 1.5 times the 'contributed equity' - being the amount paid for units in the trust. The effect of the Court setting aside the issue of the discounted units is to reduce the number of units on issue from 4,860,000 to 2,460,000 units.[28] On this basis, the respondents contend that the bonus fee would have been paid in the hypothetical circumstances.

35 Bullhead contends that this hypothetical payment should not be assumed in the profit calculation to be applied in assessing its remedy - because it is speculative. We do not accept that submission. In our view, it is highly probable that Charlie would have insisted on the bonus fee being paid if it was earned under the terms of the development management agreement. For example, in his 20 November 2013 email to all unitholders with reference to 'the net profit and what is classified as equity', Charlie said that 'unfortunately for Ottor Pty Ltd the Bonus fee will not apply'. The bonus fee was clearly at the forefront of his mind at relevant times.

36 The question remains as to the proper calculation of the bonus fee and its effect upon Bullhead's profit entitlement. In this regard, the respondents' calculations are inconsistent with the necessary underlying assumption - that the starting point is the finalisation agreement profit less the deemed loans of $260,000. On this basis, the relevant calculation is as follows:

(1) 1.5 times contributed equity ($2,460,000 x 1.5) - $3,690,000.

(2) finalisation agreement profit less deemed loans ($4,904,330 minus $260,000) - $4,644,330.

(3) net profit in excess of 1.5 times contributed equity ($4,644,330 minus $3,690,000) - $954,330.

(4) 12 per cent of the excess profit ($954,330 x 12 per cent) - $114,519.60.

37 On this basis, we are satisfied that the respondents have discharged their onus to show that the finalisation agreement profit should be reduced by $114,519.60.

(2) Additional consideration received for six unsold apartments

38 The respondents contend that further reductions should be made from the finalisation agreement profit, to reflect the fact that the Lastrina brothers purchased or arranged the purchase of the six unsold apartments at their 'list prices'. They refer to the evidence at trial that these apartments were proving difficult to sell, and would likely not be sold unless their prices were discounted - with consequent adverse effects upon the net distributable profit of the trust. It was on this basis that the Stasi spreadsheet projected three scenarios: sales at list price, sales at a 10 per cent discount, and sales at a 20 per cent discount. The respondents contend that, taking the evidence before the trial judge on this issue as a whole, the Court should infer that the six unsold apartments were all worth less than the 'list price' amounts attributed to them in the finalisation agreement profit.

39 The only evidence about the value of the six unsold apartments, however, is that one of them was sold to an arms-length purchaser at a discount of $20,000, being 3.66 per cent of its list price of $544,455. The remaining five unsold apartments were purchased by the Lastrina brothers or interests associated with them, but there was no evidence at trial as to the value of those apartments at the time of the sales or thereafter.

40 On this basis, the respondents provided this Court with a range of possible reductions in the trust's profits to reflect the fact that, in the absence of the finalisation agreement, the trust's profits would have been reduced to reflect sales at a range of reduced prices based on 20 per cent, 10 per cent, 5 per cent and 3.66 per cent respectively. In effect, the respondents ask the Court to infer in their favour that it was likely that all six apartments would have been sold for below their list prices - and to choose a percentage reduction in price to apply across all six apartments.

41 In this respect, we do not accept that the respondents have discharged their onus to establish a substantial reduction. However, taking the evidence as a whole on the issue, we are prepared to make a modest reduction of 3.66 per cent across the board. We do so because there was uncontested evidence that the six unsold apartments were proving difficult to sell at the list prices, and there is evidence of one sale at 3.66 per cent less. In making this modest adjustment, we are influenced by the fact that the respondents are in the position of deliberate and dishonest wrongdoers who are liable to account as fiduciaries. The arithmetical calculation put forward shows that the finalisation agreement profit should be reduced by a further amount of $125,541 for the reduced prices of the six unsold apartments.

42 There was evidence at trial that the estate agent's commission on all sales of apartments in the project was at a rate of 3.85 per cent of the sale price. Applying this rate to the adjusted sale price of the six unsold apartments, we would allow a further reduction of $137,982 from the finalisation agreement profit, as calculated by the respondents and not challenged by Bullhead.

43 The respondents contend that the finalisation agreement profit should be further reduced by interest on the deemed loans of $260,000, from the date of the unitholders' agreement (14 March 2008) to the date of commencement of the proceeding in the trial division (15 January 2015). They claim this interest at the annual rate of 5.81 per cent or, alternatively, 5 per cent. They rely on evidence at trial that, as at December 2012, the annual interest rate payable on the money Bullhead had borrowed to fund its purchase of units in the trust had fallen to 5.81 per cent.

44 It is in our view fair that, if the discounted units are set aside and the subscription moneys for them are treated as deemed loans, an allowance should be made for commercial rates of interest. Otherwise, there will be a windfall to Bullhead amounting to unjust enrichment. The evidence shows that Bullhead initially (in March 2008) paid 9.27 per cent interest on its loans, and interest rates have been relatively stable since that rate had reduced to 5.81 per cent in December 2012. In the circumstances, and in the absence of Bullhead suggesting an alternative rate, we will apply 5.81 per cent as sought by the respondents. The respondents' calculation (not challenged by Bullhead) of this amount for the relevant period is $103,341.59. The finalisation agreement profit should be further reduced by this amount.

45 The respondents contend that the evidence at trial demonstrated unremunerated effort on the part of the Lastrina brothers, in particular Charlie, in relation to the development project. They refer to the identification of the Brickmakers site for development; negotiating its purchase; securing finance for the purchase; developing plans and obtaining approval; conceiving and implementing the unit trust; applying development acumen; and managing the ongoing affairs of the trust throughout the development. They contend that these amounts are separate from the management fees payable to Ottor under the development management agreement. In all the circumstances, they contend that a suitable figure to allow is 15 per cent of the final profit.

46 The respondents referred to Warman International Ltd v Dwyer[29] to support this submission.

47 We are not prepared to make any allowance in this regard. First, such an approach would be inconsistent with the trial judge's strong rejection of the defence that the issue of the discounted units was legally and commercially justifiable.[30] Second, we take into account the nature of the deliberate and dishonest conduct underlying the issue of the discounted units. Third, in these circumstances, we are not prepared to engage in conjecture and supposition for the benefit of proven wrongdoers.

Summary of reductions to the finalisation agreement profit

48 For the above reasons, in assessing the profits to be disgorged from the respondents, the finalisation agreement profit should be reduced to $4,162,945.81, as set out below:

49 It follows that Bullhead is entitled to recover a 'judgment sum' equalling 24.4 per cent of the adjusted development profit, less the amounts already paid to it, as follows:

50 It is next necessary to consider Bullhead's entitlement to interest on that amount.

What interest is payable on the judgment sum?

51 Bullhead claims simple interest from the time proceedings were commenced until the date of judgment, in accordance with s 60 of the Supreme Court Act 1986 (the 'statutory rate'). Section 60 provides for simple interest to be awarded from the commencement of the proceeding to the date of judgment at such a rate as the Court thinks fit, not exceeding the penalty rate.

52 The respondents contend that the Court should not fix interest at the statutory rate but, instead, exercise the equitable power to award interest independently of s 60. They contend that the appropriate rate to be awarded is either 5 per cent or, alternatively, 5.81 per cent. As appears above, the rate of 5.81 per cent represents the rate Bullhead was paying on its loan of $600,000 to fund its equity investment in the trust, as at December 2012. The final trust distributions took place well after that date - on 2 May 2014 - but interest rates have been notoriously stable since that time.

53 There is a considerable body of law surrounding the Court's equitable power to award interest in cases such as the present. The cases were reviewed by Kyrou J in Talacko v Talacko,[31] a case involving liability to pay equitable compensation. The following principles relevant to this case may be extracted from Talacko:

(1) There is an equitable jurisdiction to award interest where money has been withheld or misappropriated by a fiduciary, and that right is independent of statute.[32]

(2) Traditionally, at a time when interest rates were stable, a fiduciary whose liability was based on misconduct (as here) was ordered to pay interest at an annual 'mercantile rate' of five per cent.[33]

(3) During times of interest rate volatility, however, awards of interest at higher rates were made in a number of cases, so that 'the mercantile rate should reflect the reality of the market place' at the relevant times.[34]

(4) The purpose of awarding interest in equity is not to punish the defaulting fiduciary but, rather, 'to restore to the innocent party the benefit derived by the defaulting fiduciary from his or her use of the property'.[35]

(5) In some circumstances, compound interest with yearly rests may be awarded. For example, where the defaulting fiduciary has used the money for commercial purposes, or where the defaulting fiduciary 'has been guilty of fraud or serious misconduct'.[36]

(6) It may be that the right to award compound interest is limited to 'cases where the defaulting fiduciary is being compelled to disgorge a gain' - as here.[37]

(7) In order to justify an award of compound interest, there must be 'some evidentiary foundation' for an assumption that the defaulting fiduciary has made a gain from use of the profit which must be disgorged.[38]

(8) In the case of defaulting fiduciaries, there is a discretion to award the statutory rate in times of interest rate volatility.[39]

54 The respondents contend that it would be against principle to award the statutory rate in this case, because the object of awarding interest for breach of fiduciary duty is not to punish, but only to compensate the innocent party 'for the cost of having been out of funds'. While we accept that the object of an award of interest in equity is not to punish the defaulting fiduciary, this contention must otherwise be rejected. It was said to be supported by the statement of Kyrou J in Talacko set out in paragraph [53][40]) above,40 but the statement in fact focuses on the benefit derived by the defaulting fiduciary from his or her use of the relevant[41]roperty.41

55 Although Bullhead's principal contention is that it should have statutory interest, its written submissions refer to the circumstances in which compound interest may be awarded in equity. We take this reference as an alternative submission that, if the Court fixes a lower rate in equity, there should be compound interest. Bullhead has not identified any evidentiary basis on which it may be inferred that the respondents have gained by the use of the excess profit distributions they received. On the other hand, the evidence is clear (and the trial judge so found) that the respondents were guilty of serious misconduct in connection with the issue of the discounted units.

56 Taking the facts as a whole, we conclude that the justice of this case demands that equitable interest be paid at 5.81 per cent per annum, compounded with annual rests from 2 May 2014 (when the final trust distributions were made) until the date of judgment. We have made a calculation of this amount to today on the amount of $619,758.78, and it is set out below.

57 For the reasons given in the principal reasons, and in these reasons, the appeal is allowed and, instead of the trial judge's orders, Bullhead is entitled to judgment against the respondents for the total sum, including interest, calculated as follows:

What costs orders should be made for the trial?

58 Bullhead seeks indemnity costs for the proceeding below, from 26 May 2016. The basis of this submission is that, on 24 May 2016, it offered to compromise its claim against the respondents for $790,000 plus costs and this offer remained open for acceptance until 26 May 2016. It supported that submission by reference to detailed calculations as to the amount of the claimed judgment sum and statutory interest until 26 May 2016. However, for the reasons given above, the judgment sum is for a lesser amount, and even including interest to that date on the basis we have awarded, Bullhead has recovered less that the amount of the offer of compromise.[42]

59 We add that, in any event, we would not have granted Bullhead any indemnity costs. This is because the two principal bases on which it succeeded on appeal were not pleaded or argued before the trial judge.

What costs orders should be made for the appeal?

60 The respondents acknowledge that they should pay Bullhead's costs of and incidental to the appeal on a standard basis. Bullhead seeks indemnity costs. In our view there should be an order for standard costs only. Bullhead accepts that its offer of compromise has no direct application to the costs of the appeal.[43] However, it contends that its offer of compromise nevertheless remains a relevant consideration to be taken into account in exercising this Court's broad discretion as to the costs of the appeal.[44] On this basis, it seeks indemnity costs for part of the appeal. We do not agree. It is enough to note that, on appeal, Bullhead raised arguments which were not put to the trial judge below and which, in one case, required amendment of its grounds of appeal.[45]

61 For the above reasons, consequent on the appeal being allowed, Bullhead is entitled to judgment against the respondents in the sum of $619,758.78, together with interest in the sum of $190,961.08, making a total of $810,719.86 as at 31 January 2019.

62 It will be ordered that the respondents pay the costs of the proceeding below and of the appeal. The respondents will be granted an indemnity certificate under s 4 of the Appeal Costs Act 1998. Orders will also be made releasing security for costs provided on behalf of Bullhead.

BRICKMAKERS PLACE PTY LTD (ACN 128 994 749) (IN LIQUIDATION)

[1] Bullhead Pty Ltd v Brickmakers Place Pty Ltd (in liq) [2018] VSCA 316 ('principal reasons').

[2] Supreme Court (General Civil Procedure) Rules 2015 r 26.05(2).

[3] [1979] VicRp 16; [1979] VR 164 ('Skafidas').

[9] Murphy v Murphy [1963] VicRp 83; [1963] VR 610, 613; Williams v Volta [1982] VicRp 74; [1982] VR 739, 744-5, each citing Millensted v Grosvenor House (Park Lane) Ltd [1937] 1 KB 717, 722-3.

[10] If a trial is limited to liability only, the remaining issues will usually be remitted to allow evidence to be called on questions of relief. On the other hand, where, as here, there has been a trial on all issues (including relief), and submissions have been made on those matters at trial, an appellate court will more readily determine the remaining questions for itself - so as to avoid the further costs and delay associated with the remitter.

[12] Cf Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337, 350 [33].

[13] Skafidas [1979] VicRp 16; [1979] VR 164, 166.

[14] Bullhead Pty Ltd v Brickmakers Place Pty Ltd [2017] VSC 206 [83].

[18] (2018) 360 ALR 1.

[19] Ibid 7 [13] (emphasis added) (citations omitted).

[20] Ibid 8 [16] (emphasis added) (citations omitted).

[21] Ibid 24 [83], quoting Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 559.

[22] Ibid 22 [77], quoting Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189, 1198 [9].

[23] Ibid 26 [92] (emphasis added) (citations omitted).

[26] Ibid, citing Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (emphasis added) (other citations omitted).

[27] Ibid 27 [95], citing Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 558.

[28] See principal reasons [7]-[8].

[29] [1995] HCA 18; (1995) 182 CLR 544.

[31] [2009] VSC 579.

[34] Ibid [12]-[13], quoting Hagan v Waterhouse (1991) 34 NSWLR 308, 393, and citing Murdocca v Murdocca (No 2) [2002] NSWSC 505 [24]; Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 [13].

[36] Ibid [15], quoting Southern Cross Commodities Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818, 843, which was approved in Hagan v Waterhouse (1991) 34 NSWLR 308, 393.

[37] Ibid [16], citing Fico v O'Leary [2004] WASC 215.

[42] The calculations at [56] above show a total of judgment sum and interest at 1 May 2016 of $693,868.47. Interest for the period from 2 May 2016 to 26 May 2016 is $2,650.77, making a relevant amount as at 26 May 2016 of only $696,519.24.

[43] Rosa v Galbally & O'Bryan [No 3] [2013] VSCA 159 [8]; Supreme Court (General Civil Procedure) Rules 2015 r 26.12.

[45] Principal reasons [113]-[114], [136].