Castleway v Adaz Nominees [2026] VSCA 16

[2026] VSCA 16

Castleway v Adaz Nominees [2026] VSCA 16 | Case summary | Zoe

[11]

On 7 December 2010, the respondents (conveniently called the 'TPC Group') entered into a written agreement with the applicants, Castleway Pty Ltd and Gerard Keeghan, whom it is convenient to call together 'Castleway'. The agreement was entitled 'Property Development and Services Agreement' ('PDSA') and was expressed to have effect on and from 1 July 2007.
The business of the TPC Group at this time principally concerned property development. This involved the acquisition of land in Victoria and Queensland and its subsequent subdivision, followed by the sale of residential lots. Since 1994, Mr Keeghan had been the chief executive officer of one of the entities within the TPC Group, and from 2001 he was responsible for running the TPC Group's property acquisition, development and management business. Along with the PDSA, on 7 December 2010 the parties executed an Executive Services Agreement, by which Mr Keeghan was appointed as chief executive officer of the TPC Group's central operating company. Mr Keeghan did not have equity in the business.
The PDSA provided that, in return for providing property development services to the TPC Group, Castleway would be entitled to an annual 'service fee' calculated by reference to a sliding percentage of the profit of the group (as defined). In the final year of the term of the PDSA, the service fee was to be adjusted by a 'termination adjustment' by reference to 'unrealised capital gains' and 'unrealised capital losses', to be calculated as at the date of the termination of the PDSA.
Castleway was also entitled to commission on 'introduced projects', being projects that the TPC Group was made aware of by Mr Keeghan or Castleway before the termination of the PDSA, for the purpose of acquisition, development or management.
The PDSA contained a series of steps by which the annual service fee was to be calculated. That process involved the appointment of a 'nominated accountant' to calculate the fee. At the relevant time, the firm Grant Thornton was the nominated accountant.
A judge in the Trial Division made orders in respect of numerous amounts in dispute, which involved:

[47]

The third and, in dollar terms, most important area of dispute between the parties concerns the calculation of the termination adjustment. More specifically, a significant point of departure between the parties is whether the phrase 'unrealised capital gains' (and losses) refers to any gains made by the TPC Group in its business or only those which are recorded on capital account, thus excluding items on revenue account.

Before coming to the competing constructions, it is convenient to explain at this point why it matters.

The distinction between income on capital account and on revenue account has long been a fundamental one under Australian tax law. The distinction remains important, but less so than during an earlier time when capital gains were tax free.

The income tax legislation has brought to tax as income both income as understood on ordinary concepts and income as captured by various statutory extensions. One of the extensions relates to income derived from the sale of trading stock.[2] In Commissioner of Taxation (Cth) v St Hubert's Island Pty Ltd,[3] it was accepted that land could constitute trading stock if the land is bought and sold as part of a business. In such cases, income derived from the sale of land would be treated as income and not a capital gain. As might be imagined that was particularly important when capital gains were not taxed as income or the taxpayer was keen to deduct expenses related to land against assessable income.

The method of calculating income in respect of trading account was explained by Dixon J in Commissioner of Taxes (SA) v Executor Trustee & Agency Co of South Australia Ltd where he explained, '[t]he basis of a trading account is stock on hand at the beginning and end of the period and sales and purchases.'[4]

These concepts are now embodied in the ITAA. There are three key features of these provisions:[5]

(a) an amount received by the taxpayer in respect of the disposal of trading stock in the ordinary course of business is included in the taxpayer's assessable income as 'ordinary income';[6]

(b) the costs incurred in relation to the trading stock are deductible against the taxpayer's assessable income;[7] and

(c) the taxpayer's assessable income also includes the difference between the 'value' of the trading stock at the end of the income year and its value at the start of the income year.[8]

In calculating the value of the trading stock at the opening and close of the income year, the taxpayer may elect to adopt one of three methods: its cost, its market selling value or its replacement value.[9] The value of the trading stock at the opening of an income year is the same amount as applied at the end of the last income year. Although the taxpayer must elect to use a method of valuation, it may chose a different method in different years. The method chosen may mean that the taxpayer could obtain a higher allowable deduction or a lower assessable income in a particular year.

Before the making of the PDSA, the TPC Group treated some, but not all, of its land holdings as trading stock. In respect of some land holdings, the characterisation of the property changed over time depending on the prevailing purpose for which the property was held. Where land was held as trading stock, the TPC Group elected to use the cost prices as the opening and closing value of trading stock with the effect that it only brought income to account when properties were sold and not by reference to changes in closing value compared to opening value.

As a consequence of how the assets were dealt with in the TPC Group accounts, the land held as trading stock was not held as a capital asset in the management accounts and sales were not treated as capital gains under the CGT provisions. Rather, the revenue on sale was included as income.

...

The net effect is that, as at the date of termination, a number of properties were held as trading stock and were not included by the TPC Group in the calculation of the termination adjustment on the basis that they were not 'unrealised capital gains'. The question is whether, as a matter of construction, the TPC Group was correct to exclude those properties from the termination adjustment.

[49]

The judge held that, on the proper construction of item 4, 'unrealised capital gains' do not include 'notional gains in respect of assets that are not held as capital assets but which are recorded on revenue account within the TPC Group accounts'.[13]
The judge noted that the parties had agreed to modify the profit figure in the TPC Group tax returns by making the various adjustments in item 2 of sch 2 of the PDSA. He observed that these provisions confirm that the parties were aware that capital gains are treated differently to income on revenue account for taxation purposes. So, for example, the parties had agreed that the calculation should include notional non-assessable gains, or losses, derived from the disposal of pre-CGT assets, even though such gains were not part of the TPC Group taxable income.[14]
Next, the judge stated that the construction favoured by Castleway, by which unrealised gains on all properties were taken into account, gave no meaning to the word 'capital', even though the parties were sophisticated commercial actors with a developed appreciation of the nature of the business and its accounting practices. On Castleway's approach, 'capital' had no meaning because the term covered every asset of the TPC Group. [15]
The judge also referred to two matters concerning past performance and the subjective understandings of the parties. The first was the manner in which the conversion of a property to trading stock in the 2015 financial year had been treated: a notional capital gain was recorded and treated as income in the TPC Group Profit for that year. The second was the fact that the TPC Group had initially treated the termination adjustment as an expense, calculated by reference to all properties owned by the group including those held as trading stock.[16]
Finally, the judge acknowledged that the construction he favoured might have induced Castleway to bring forward projects prematurely. That was because the properties held as trading stock and excluded from the calculation of the termination adjustment (on the judge's construction) were those in respect of which Castleway was likely to have provided more property development services, compared to properties still held in the TPC Group 'land bank' awaiting development. Castleway might be more likely to be expected to earn a proportion of the unrealised gain on the former property. The judge considered, however, that these considerations also 'at most' reflected the subjective understanding of the parties, and did not justify the departure from the language of the PDSA which Castleway's construction involved.[17]

[52]

Castleway submitted that, consistently with this wider purpose, the purpose of the termination adjustment was to reward Castleway for gains, and penalise it for losses, on projects it had managed that were unrealised at the end of the term of the PDSA. It submitted that the judge's construction frustrated this purpose, first by resulting in the TPC Group sharing the profits on only some projects for which Castleway was responsible; and secondly by requiring Castleway to bear a share of the costs of projects during the term of the PDSA (through the inclusion of those costs in the TPC Group Profit and therefore in the calculation of the service fee), without sharing in the anticipated proceeds of those projects.
Moreover, it was contended that on the judge's construction, the ability of the TPC Group to move properties between capital and trading accounts would leave the termination adjustment susceptible to large fluctuations, depending on the categorisation of properties rather than Castleway's management of them.
In that context, Castleway submitted that commercial contracts are to be construed on the basis that the parties intended a commercial result.[20] Too literal an interpretation may distort or frustrate that purpose.[21]
In oral argument, senior counsel for Castleway emphasised the repeated references in the PDSA to 'property development', including in the description of the services Castleway was to provide, in the recitals and in the headings in sch 2. It was submitted that item 2 of the schedule ensured that all gains and losses for which Castleway was responsible were reflected in the TPC Group Profit, including those excluded from the calculation of taxable income.
As to the judge's statement that the construction advanced by Castleway gave no work to the word 'capital', Castleway submitted that the expressions 'capital gain' and 'capital loss' had their ordinary meanings. Moreover, on the alternative construction, Castleway contended, the expressions 'CGT capital gain' and 'CGT capital loss' had the same meaning as 'capital gain' and 'capital loss', giving no work to 'CGT' in that context. Alternatively, it was submitted that it may be appropriate to interpret words in a way that makes them redundant, for example where the alternative construction is inconsistent with other provisions or with the commercial purpose of the contract, or where it appears that the words have been included for abundant caution.[22]
Castleway also drew attention to the provision for commission on introduced projects in cl 4.5 and noted that it did not refer to 'unrealised' capital gains or losses, but applied sch 2 generally, irrespective of whether the property in question was held on capital or revenue account when it was realised. It was submitted that, if the parties intended to draw a distinction between capital and income assets for the purpose of calculating the termination adjustment for unrealised properties, that distinction would be expected to be reflected in the case of introduced projects as well.
Castleway submitted that Mr Keeghan did not have control over decisions to change the status of projects as being on capital account or trading stock. The evidence of Mr Keeghan was that this was a decision made by the TPC Group accountant in the course of preparing the financial statements.

[53]

The TPC Group submitted that Castleway's case rested on two false premises. The first was that the PDSA provided for a general form of profit-sharing. The second was that, for this purpose, 'profit' included all gains, whether capital or revenue in nature.
The first premise was said to be wrong because the PDSA provided for Castleway's remuneration to depend on the 'TPC Group Profit', as defined and calculated in accordance with item 2 of sch 2. The second premise was wrong because item 2 identified specific amounts to be added or deducted from the income amount recorded in relevant tax returns. Item 2 did not provide that all gains and losses were to be reflected in the TPC Group Profit.
The TPC Group submitted that identifying the purpose of the PDSA as allowing Castleway to share in the profits of the TPC Group was too abstract and general, and distracted attention from the language chosen by the parties. It was submitted that Castleway's construction of 'unrealised capital gains' and losses gave the word 'capital' no work to do.
Castleway had submitted that the fact that the provision for commission on introduced projects did not discriminate between assets held on capital and revenue account suggested that the termination adjustment operated in the same way. In answer to this submission, the TPC Group argued that the PDSA provided for different forms of remuneration using different language, which reinforced the necessity to have regard to the particular terms of sch 2 item 4.
In response to Castleway's submission that the trial judge's construction of 'unrealised capital gains' produced an unlikely outcome because the TPC Group could easily change the status of projects from capital account to trading stock and the construction meant that the termination adjustment could be determined by such changes, rather than by Castleway's performance on a project, the TPC Group made three responses.
First, it was submitted that Mr Keeghan had substantial control over decisions to change the status of projects from capital account to trading stock. It was noted that Castleway asserted that Mr Keeghan had sole control of the day-to-day operations of the business during the currency of the PDSA, which included the period leading up to its execution.
Secondly, it was reasonable to consider that the parties excluded properties held on revenue account from the termination adjustment because they anticipated that such properties would be close to the point of development and sale, such that Castleway would soon be entitled to commission.
Thirdly, the TPC Group submitted that conversion of a project to revenue account could be of benefit to Castleway. If the conversion to trading stock took place at market value, rather than at cost, the uplift from its purchase cost was reflected as income in the TPC Group Profit and therefore in Castleway's service fee.
The TPC Group submitted that the judge had correctly noted that sales of trading stock are disregarded for capital gains tax purposes, and was correct to state that the treatment of proceeds of sale of trading stock as a capital gain did not obliterate the well understood distinction between assets held on capital and revenue account. Item 2 in sch 2 made it clear that the parties were aware that, in some respects at least, taxation law distinguished between income to be treated as a capital gain and income on revenue account. This was said to make it all the more unlikely that the word 'capital' had no work to do in item 4. The parties had carefully chosen their language, including by making it clear when they were referring to capital gains tax considerations rather than the capital/income distinction.

[57]

We have already referred to this Court's description of the purpose of the PDSA in earlier litigation.[24] That purpose was 'to provide for a long term relationship between the TPC Group on the one hand and Castleway and Mr Keeghan on the other whereby the TPC Group would combine its resources and Castleway and Mr Keeghan's expertise to generate profits from property development opportunities'.
The agreement was made in circumstances where the relationship was already on foot, and had been for more than three years. It can be taken from this that the parties were at least aware that properties in the course of development and management might be held on capital or revenue account.
The construction issue presented by the first ground of appeal concerns item 4 of sch 2 to the PDSA. Item 4 has several features that should be noted.
First, the text appears under the heading 'Termination Adjustment and Final Service Fee'. When one goes to the text, it is immediately apparent that item 4 provides for a single payment, not an adjustment 'and' a fee. Rather, the 'adjustment' is part of the calculation of the fee.
Secondly, the fee for which item 4 provides is described in the heading as the 'Final Service Fee', reflecting the fact that the fee is the service fee for which cl 3.1 provides, adjusted as described in item 4. The payment under item 4 is not an independent entitlement, but a modified version of the entitlement to a service fee.
Thirdly, the adjustment takes place by reducing or increasing the 'TPC Group Profit', which is exhaustively defined in item 2, for the final financial year of the PDSA only. The specific purpose of item 4, which we are yet to address, must therefore sit harmoniously with the purpose of item 2 and the service fee it helps to define.
Fourthly, as noted, item 4 applies only in the final financial year of the PDSA.
Fifthly, the adjustment for which item 4 provides turns critically on taking account of unrealised capital gains and losses as at the end of the PDSA.
The purpose of item 4 emerges from these features. It is to adjust the final service fee to allow for the fact that in previous years the fee has not taken account of unrealised capital gains and losses on particular projects. Item 4 reflects the intention of the parties that Castleway should share in unrealised capital gains and should bear a proportion of unrealised capital losses, as at the end of the PDSA, according to the formula for calculating TPC Group Profit in item 2 as adjusted for those gains or losses. The status of gains or losses as 'unrealised' emerges as key to the operation and purpose of item 4.
Taking account of the unrealised capital gains and losses in this way might cause a change in the percentage band in item 1 applicable for the final year of the PDSA, by causing the TPC Group Profit to fall within a higher or lower band. Whether or not that happens, the effect of item 4 is to apply the applicable percentage band for the year to the total unrealised capital gains and losses, ultimately yielding either an increase or a decrease in the service fee.
The hypothesis for the operation of item 4 is that there are capital gains and capital losses, in respect of the property development and management services provided by Castleway, that are yet to be realised. Item 4 is intended to account for those gains and losses, in circumstances where gains and losses realised after the PDSA ends will not be the subject of any service fee payment (albeit that commission may be payable to Castleway in the case of introduced projects).
The services Castleway provided under the PDSA extended from procurement, through to management and development of the properties, to the point of their sale at a profit, which was the express commercial purpose of the enterprise (cl 2.5(d)). In that context, properties were held by the TPC Group either on capital or revenue account (the latter reflecting the status of properties as trading stock), depending how well advanced each project was. Some attention was given in argument to the question how far the parties influenced or controlled the status of a property for accounting purposes. Leaving that issue to one side, however, the PDSA required Castleway to perform its services at every stage. There is no apparent reason why the remuneration structure would not reflect and recognise that circumstance.
In that context, the parties can be seen to have made provision, in item 4, for the fact that there were likely to be unrealised gains and losses arising from the performance of Castleway's services when the PDSA came to an end, in respect of which Castleway had performed services but not been fully remunerated. Most importantly, those unrealised gains and losses might reflect projects on capital or on revenue account. No rationale has been advanced as to why the parties would have intended to reflect only those gains and losses in respect of projects on capital account, in the final service fee under the PDSA. As the judge pointed out, if anything the greater work is likely to have been performed by Castleway on a project that has reached the 'trading stock' stage.[25] As such, the exclusion of such projects from the calculation would be anomalous. It is noteworthy, in that regard, that no distinction between capital and revenue account is drawn with respect to the commission on introduced projects in cl 4.5 of the PDSA.
The TPC Group contended that the construction by which unrealised gains or losses are taken into account, irrespective of whether the project in question is accounted on capital or revenue, gives no meaning to the word 'capital'.
It is true that the TPC Group's construction gives a clear meaning to the word 'capital'. It gives the word a pivotal role in the construction of item 4. But the term also has meaning on Castleway's construction, as part of the composite expressions 'capital gains' and 'capital losses'. In the context of a property development enterprise, those expressions connote the disposal or sale of the property in question as part of the enterprise, as senior counsel for Castleway submitted. We therefore reject the submission that Castleway's construction leaves no work for the word 'capital'. To the contrary, 'capital' has a sufficiently clear meaning and does not require the injection of implied qualifying language to make commercial sense.
In that regard, the way in which the contract was concluded is also relevant. These were sophisticated commercial actors who chose their words carefully in reaching a complex agreement settled by lawyers. In those circumstances, the absence of qualifying language (such as reference to revenue or capital account) counts against such words being implied.
The TPC Group was correct to point out that item 2 of the Schedule does not provide that all gains and losses are to be reflected in the TPC Group Profit. But this consideration does not tell against Castleway's construction of item 4. It merely points to the context in which the need for item 4 arises. It is because the PDSA would otherwise end, leaving certain gains and losses unreflected in the TPC Group Profit, that item 4 is required. It operates to supplement item 2, not to replicate its limitations.
Equally, as the TPC Group submitted, the fact that item 2 uses the word 'capital' in distinguishing capital and income gains and losses reflects the parties' awareness of that distinction, and its importance for income tax purposes. But again this does not inform the construction of item 4, whose context is not income tax and which does not mention income. Its focus is on taking account of unrealised gains and losses which fall outside item 2, by way of a one-off adjustment to the service fee in the final year of the PDSA.
For these reasons, in our view, the contractual text, viewed in context and in light of the purpose of the parties we have identified, points to the correctness of Castleway's construction. We would therefore grant leave and uphold the first ground of appeal.

[70]

The next ground involves another question of construction of the PDSA. It concerns the calculation of commission on introduced projects which were held at the time of termination of the PDSA and were therefore taken into account in calculating the termination adjustment. On the judge's approach to unrealised capital gains, this issue only arose in the case of properties held on capital account at the end of the PDSA.
Irrespective of the proper construction of 'unrealised capital gain' as raised by the first ground, the PDSA provided for two payments to Castleway in respect of some, if not all, introduced projects held as at the determination of the PDSA. (On our construction of item 4, the issue arose in respect of all introduced projects so held.)
In earlier litigation between the parties, the Court made a declaration that any termination adjustment 'that Castleway has already received' in relation to introduced projects will be taken into account when calculating the commission on introduced projects.[31]
The parties agree that the PDSA does not contemplate double payment, but differ as to how the provisions are to be construed in order to avoid that outcome.[32] The TPC Group contended that it was first necessary to identify the realised gain for the introduced project at the time of its disposal, in accordance with the TPC Group accounts. Then the commission payable on that gain was to be calculated by reference to the table of percentages in item 1 of sch 2 to the PDSA as required by cl 4.5(b). Finally, that part of the service fee based on the termination adjustment in respect of the introduced project was to be deducted.
Castleway contended that the first step was to identify the profit on disposal of the relevant property. Next, the unrealised capital gain for the purposes of the termination adjustment should be deducted. Finally, the percentages in item 1 should be applied to the difference between the two amounts. In short, the commission was to be calculated by subtracting the termination adjustment from the unrealised capital gain, and then applying the percentages in item 1 to the net amount.

[72]

Castleway submitted that its preferred approach was consistent with the declaration made in earlier proceedings and the PDSA. As to the declaration, it required that the termination adjustment be taken into account when calculating the commission, not the other way around. As to the PDSA, cl 4.5 required the commission to be calculated in accordance with the principles in sch 2 for each introduced project. Those principles include the termination adjustment itself. Moreover, adding the termination adjustment to the annual service fee improved the prospect that the final service fee will qualify for a higher percentage rate in item 1. The method endorsed by the judge was said to undo the termination adjustment. Castleway submitted that, if the parties had intended the TPC Group to recoup, by means of the commission calculation, amounts previously paid by way of the termination adjustment, the PDSA might have been expected to make express provision to that effect (as item 4.5(d) did in respect of overpaid commission).
Next, Castleway contended that the judge's method could produce commercially absurd results. For example, if a project yielded zero commission and contributed an unrealised capital loss for the purposes of the termination adjustment, any recoupment of that loss by the time of realisation would not be reflected in the commission amount. Instead, the commission is calculated at the outset and an intervening improvement in the financial position was not shared with Castleway. It was submitted that this was antithetical to the profit-sharing purpose of the PDSA.
Castleway submitted that the judge's method was at odds with the reasoning underlying the Court's earlier declaration. In making that declaration, Robson J had referred to the need to ignore double counting of 'profit', which Castleway's method did but TPC Group's did not.
Finally, Castleway argued that the judge was wrong to find that the method Castleway advocated would set the commission on a hypothetical basis. Instead, its method started with the actual profit on sale of the property and then adjusted that figure by the termination adjustment, which was an actual calculation. Castleway submitted that this was not a basis for distinguishing the competing methods in any event. The TPC Group's approach could equally be characterised as involving a hypothetical figure, in the form of the part of the service fee attributable to the termination adjustment, which was to be deducted from the commission.

[74]

In respect of projects introduced by Mr Keeghan that were incomplete as at the end of the PDSA, provision was made for two forms of remuneration, but the parties did not intend that fact to produce a windfall for Castleway or the TPC Group. In other words, double counting was intended to be avoided.
The PDSA does not address this issue directly. In our view, however, the way in which the two entitlements in question are structured confirms the resolution favoured by the trial judge.
Two features of those entitlements may be noted. First, whereas commission on introduced projects falls to be calculated in respect of each project completed after the termination of the PDSA, the termination adjustment is calculated only once.
The commission is payable by 30 days after the later of the settlement of the introduced project and the calculation of all accounting costs of that project by the TPC Group: cl 4.5(c). Such payment is an advance payment pending the determination of the final total commission payable for the relevant financial year: cl 4.5(d).
This points to the second feature. The commission on introduced projects is determined on an individual project basis, but one of the integers in the determination is the percentage in item 1 of the Schedule applicable to the 'aggregate' TPC Group Profit (or Loss) for introduced projects for the financial year. The final amount of the commission on any introduced project is therefore not known until the end of the relevant year. Similarly, the termination adjustment is calculated as part of the determination of the service fee for the final financial year of the PDSA, when TPC Group Profit (or Loss) has been ascertained, including any unrealised capital gains or losses.
It follows that neither calculation is intrinsically 'hypothetical' in a way that usefully distinguishes them. Once the accounting figures are known, each entitlement can be ascertained on a final basis for the year in question, even if the project-by-project basis of calculating the commission means that some amount or amounts will already have been paid or recorded as losses as individual projects were completed. All that relevantly means is that there needs to be a reconciliation at the end of the financial year.
The approach to double counting urged by Castleway would sit uncomfortably with this structure. The approach fails to acknowledge the provisions for calculation and payment of commission in respect of individual projects by way of advance. Those provisions require application of the percentage in item 1 applicable to the individual project, pending the aggregate calculation at the end of the financial year. On Castleway's approach, it would be necessary not only to revisit the percentage as part of the aggregate calculation, as cl 4.5(b) and (d) require, but to deduct any termination adjustment in respect of the project before identifying the applicable percentage. That is not consistent with the provision for applying the percentage in item 1 when calculating the commission under cl 4.5.
In contrast, the method advanced by the TPC Group addresses the double counting by applying an offset after the relevant percentage amounts have been applied to the calculation of each entitlement as the PDSA provides. This effects the commercial objective, namely that double payment be avoided, in a straightforward way by offsetting one entitlement against another. That fits readily into a context where there is already contractual provision for a process of reconciliation to ascertain the final amount of the commission on introduced projects for the financial year.
This construction recognises that the commission on introduced projects is a specific entitlement, whereas the termination adjustment is a one-off correction to the service fee entitlement. The construction we favour treats the commission as the primary amount to which Castleway is entitled, which falls to be calculated on its own terms and then paid, subject to any necessary offset in respect of the relevant projects by reference to the termination adjustment. In contrast, the termination adjustment plays a secondary role, as its designation suggests, effectively adjusting not only the service fee for the final financial year but also the commission payment for each year.
We have reached this conclusion without reliance on the declaration made in the earlier proceedings. The terms of that declaration, which was not directed at resolving the present issue, are too general to point to one construction over the other.
For these reasons, while we would grant leave to appeal, we reject ground 4.

[84]

The judge noted that Castleway had beaten the service fee offer and the commission offer but had fallen short of the termination adjustment offer. He accepted the TPC Group's submission that Castleway had fallen short of the offers considered 'globally'.[42]
The judge accepted that the interrelated aspects of the termination adjustment and the commission made the offer a complex one, noting also that the TPC Group had reserved its rights to adjust the amounts in relation to introduced projects settled after the date of the offer. On the other hand, if Castleway had accepted all the offers, the area of disputation would have been small and confined to introduced projects that had not settled. In respect of those projects, the offer provided for the claimed amount in full as part of the termination adjustment.[43]
The judge held that the TPC Group had offered to resolve the dispute as it existed at the time on terms that were more favourable to Castleway than the ultimate result. Taken as a whole, the three offers only left for future determination the amount of commission payable in respect of introduced projects that had not been sold and settled by the date of the offer. The judge found that, while there would have been a need for reconciliation after each such project settled, in respect of any payments that had been made earlier in respect of the same project, this did not make it reasonable to decline the offers.[44]
The judge held that, having regard to 'the nature of the dispute with its many specific aspects and the parties' overarching obligations under the Civil Procedure Act 2010', Castleway's 'failure to accept the offer' was unreasonable and that there was 'no other reason why the TPC Group should not be awarded costs from 11:00 am on 11 August 2022, being two business days after the offer was served'.[45]
In respect of costs before that time, the judge was not persuaded to depart from the default position under r 26.08(3)(a), namely that Castleway was entitled to its costs on the ordinarily applicable basis.[46]

At a glance

Court

Decision date

Before

Source

Judgment (122 paragraphs)

Castleway v Adaz Nominees [2026] VSCA 16 (19 February 2026)

Parties

Legislation Cited (4)

Cases Cited (5)