Cellmore Real Estate Pty Ltd v Funston

(a) Mr Funston pay 75% of Cellmore's and Mr Way's costs of and incidental to the proceeding (including costs of the proceeding in the Magistrates' Court of Victoria prior to its transfer, reserved costs, and costs of the counterclaim) on the standard basis until 11.00am on 16 July 2021, to be taxed in default of agreement;

(b) thereafter, Mr Funston pay Cellmore's and Mr Way's costs of and incidental to the proceeding (including reserved costs and costs of the counterclaim) on an indemnity basis, to be taxed in default of agreement; and

(c) Mr Funston's costs in paragraph (b) above include the sum of $2,200 payable to Russell Wheeler for loss of earnings resulting from his court attendance.[4]

1. In response to the costs application, Mr Funston seeks orders that Cellmore pay his costs of defending the claim on the standard basis to be taxed in default of agreement, and that Mr Funston pay Cellmore and Mr Way's costs of defending the counterclaim on the standard basis to be taxed in default of agreement.

1. On 14 March 2018, Cellmore issued a complaint against Mr Funston in the Magistrates' Court at Ringwood, claiming $3,519 for advertising expenses incurred in the sale of Mr Funston's property. The proceeding was listed for arbitration in the Magistrates' Court on 20 May 2019.
2. On 23 February 2019, Mr Funston requested an adjournment of the arbitration. The matter was re-listed for arbitration on 23 September 2019.
3. On 23 September 2019, the Magistrates' Court made orders vacating the arbitration and granting leave for Mr Funston to file an amended defence and counterclaim. The matter was re-listed for arbitration on 16 December 2019.
4. On 2 October 2019, Mr Funston filed an amended notice of defence and counterclaim seeking unparticularised loss and damage and other relief.
5. On 13 December 2019, Cellmore made discovery by way of an affidavit of documents.
6. On 31 January 2020, Mr Funston, through his former solicitors at Belleli King & Associates, provided particulars of loss and damage in respect of the counterclaim, particularising an alleged loss of $134,723.27.
7. On or about 13 August 2020, the proceeding was transferred from the Magistrates' Court to the County Court of Victoria.
8. On 10 September 2020, Cellmore's solicitors, Hall & Wilcox, filed a notice of change of practitioner in the County Court. Cellmore made further discovery by way of a supplementary affidavit of documents.
9. Following the transfer of the proceeding to the County Court, Mr Funston filed an amended counterclaim and applied for joinder of Mr Way as a defendant to the counterclaim.
10. On 2 March 2021, Cellmore made further discovery by way of a supplementary affidavit of documents.
11. On 26 March 2021, Hall & Wilcox emailed Mr Funston the Calderbank offer, offering that each party discontinue its respective claim and counterclaim and bear their own costs. The Calderbank offer was not accepted.
12. On 27 April 2021, Webb Korfiatis Commercial served an offer of compromise on Cellmore, offering for Mr Funston to accept $197,435.86 (inclusive of costs) to resolve the claim and counterclaim (Mr Funston's offer). Mr Funston's offer was not accepted.
13. On 10 May 2021, the proceeding was first listed for trial in the County Court, however it was subsequently adjourned.
14. On 1 July 2021, a mediation was held and Mr Funston was represented at the mediation by senior counsel, junior counsel, and their instructing solicitors. The matter did not settle at the mediation.
15. On 14 July 2021, Hall & Wilcox, served the Offer on Mr Funston, offering that Cellmore pay him the sum of $50,000 inclusive of costs, in settlement of the claim and counterclaim. The terms of the Offer were as follows:

"To: The defendant > > TAKE NOTICE that the plaintiff offers to compromise its claim and the defendant's counterclaim by offering to pay to the defendant the sum of $50,000.00 inclusive of costs. For the avoidance of doubt, the plaintiff's offer is in full and final settlement of: > > (a) the plaintiff's claim originally dated 14 March 2018; and > > (b) the defendant's counterclaim dated 2 October 2019. > > This offer is open to be accepted for 14 days after service of this notice only. > > This notice of offer of compromise is served in accordance with part 2 of order 26 of Chapter I of the rules of the County Court. > > Dated 14 July 2021"

16. On 28 July 2021, Webb Korfiatis Commercial emailed Hall & Wilcox, seeking a 7-day extension to respond to the Offer.
17. On 29 July 2021, Hall & Wilcox granted the 7-day extension and the Offer remained open for acceptance until 4 August 2021. The Offer was not accepted.
18. On 18 January 2023, Cellmore made further discovery by way of a further supplementary affidavit of documents.

1. In his written submissions, Mr Funston took issue with the reference to Mr Funston's offer in Mr Capannolo's affidavit on the basis that the evidence is prejudicial as neither Cellmore nor Mr Funston rely on Mr Funston's offer in relation to costs.
2. Cellmore submitted that Mr Funston's offer and the covering letter from Webb Korfiatis Commercial dated 27 April 2021 are relevant to the Court's consideration of whether it was unreasonable for Mr Funston not to accept the Offer. The Court can infer that Mr Funston was well-positioned to make an informed decision as to whether to accept the Offer because he was in a position at that stage to make a settlement offer.
3. In my view, Mr Funston's offer and the covering letter are relevant on the question of whether it was unreasonable for Mr Funston not to accept the Offer. The letter sets out the reasons for Mr Funston's refusal of the Calderbank offer and Mr Funston's position as to the prospects of Cellmore's defence to Mr Funston's counterclaim, supporting Cellmore's submission that he was sufficiently informed of the issues at that stage of the proceeding.

The Offer complied with the County Court Civil Procedure Rules 2018 (Vic)

1. Cellmore contends that the Offer complied with the formal requirements of Order 26 of the County Court Civil Procedure Rules 2018 (Vic) (the Rules). The Offer stated that it was made in accordance with Order 26 and was open for acceptance for 14 days.[5]
2. Rule 26.08(4) of the Rules may be applied in the circumstances as:

(a) claim in r 26.08 includes a counterclaim;[6]

(b) Mr Funston is the plaintiff for the purpose of r 26.08(4) and Cellmore the defendant;[7] and

(c) given the quantum of the counterclaim, Mr Funston was the moving party in the litigation.

1. Alternatively, the Court may make the orders sought by Cellmore under r 26.08(2) of the Rules.
2. Alternatively, for the same reasons, it was unreasonable for Mr Funston not to accept the Calderbank offer.

Mr Funston unreasonably failed to accept the Offer

1. It was unreasonable for Mr Funston not to accept the Offer.
2. The terms of the Offer were clear. There is no requirement that the Offer:

(a) distinguish between the claim and counterclaim so that Mr Funston may accept one part of the Offer but not the other;[8] nor

(b) be accompanied by a covering letter.

1. Most of the issues in dispute related to Mr Funston's counterclaim:

(a) The counterclaim failed entirely.

(b) The issues on the counterclaim required extensive evidence on a broad range of matters.

(c) The only part of the proceeding which Mr Funston successfully defended was the claim by Cellmore for $3,519 in advertising fees. That issue was determined on a short point of statutory construction. The other arguments relied upon by Mr Funston in defending that claim were unsuccessful.

(d) But for Mr Funston's counterclaim, Cellmore's claim would have been determined by the Magistrates' Court and not transferred to the County Court, meaning that parties' costs would have been kept at a minimum.

1. At the time the Offer was made, Mr Funston was well-positioned to make an informed decision on whether to accept it or not:

(a) Cellmore's claim had been ongoing for nearly three years and Mr Funston's counterclaim for nearly two years.

(b) Cellmore had made discovery.

(c) The parties attended their first mediation, at which Mr Funston was represented by senior counsel, junior counsel and his solicitors.

(d) Mr Funston's offer was made on 27 April 2021, which included a covering letter from Webb Korfiatis Commercial outlining his preparedness accept a sum to settle the proceeding.

1. None of the later pleading amendments affected Mr Funston's ability to assess whether to accept the Offer at the time it was made:

(a) The amendments largely related to Mr Funston's counterclaim, including new allegations relating to Mr Senaratne.

(b) Save that at trial Cellmore indicated that it would not seek to recover a component of $200, Cellmore's claim remained unchanged throughout the proceeding.

(c) Courts are mindful that a party who rejects an offer of compromise is assumed to have taken into account any risks and vicissitudes that may ensue, including as a result of subsequent pleading amendments.[9]

1. None of the discovered documents included in Mr Way's further supplementary affidavit of documents could have had any material effect on Mr Funston's decision whether to accept the Offer:

(a) The extent of the supplementary discovery was limited.

(b) The documents largely comprised copies of correspondence between Cellmore's agents and Mr Funston (of which he would already have been aware of the contents).

(c) The discovered correspondence with Mr Senaratne would not have affected Mr Funston's decision not to accept the offer of compromise, given (inter alia) that the Court has rejected Mr Funston's evidence that he would have accepted Mr Senaratne's offer.

(d) Mr Funston has not identified any particular document that was discovered later that was critical to his alleged inability to assess the Offer.

1. Mr Funston's counterclaim was not of significant public interest as alleged by him. It was not a test case. Whether the decision has implications for Cellmore and other real estate agents is a matter of speculation. In the circumstances, there is no reason to depart from the usual costs consequences applying to parties who unreasonably fail to accept offers of compromise in private litigation.

Cellmore and Mr Way have obtained a judgment no less favourable than the Offer's terms

1. Cellmore contended that as defendants to the counterclaim, it and Mr Way have obtained judgment no less favourable than the terms of the Offer.
2. The Court may readily infer that Mr Funston's costs of defending the claim up to the date of the Offer, if taxed, were significantly less than the Offer amount of $50,000 and not more than Cellmore and Mr Way's costs of defending the counterclaim:

(a) Mr Capannolo deposed that at the time of the Offer (served more than four years ago), Cellmore's costs were approximately $65,000 and most of those costs related to the counterclaim.[10]

(b) Before the proceeding was transferred to the County Court, Mr Funston's costs of defending the claim would have been assessed on the Magistrates' Court scale of costs.

(c) As the amount of Cellmore's claim was less than $10,000, the Magistrates' Court was required to transfer the matter to arbitration pursuant to s 102(1) of the Magistrates' Court Act 1989 (Vic):

(i) The matter was in fact transferred to arbitration.

(ii) The cost cap for an arbitration involving a successful claim of $3,519 is presently $3,703 (including for a pre-hearing conference).

(iii) Even if the arbitration costs cap had not applied, Cellmore and Mr Way calculated that on scale B of the Magistrates' Court scale of costs, Mr Funston's taxed costs of defending the claim to judgment were likely to be less than $6,000.

1. The Court can draw an adverse inference from the fact that Mr Funston has not put any evidence before the Court, or made any submissions, as to what his taxed costs of defending the claim would have been at the time the Offer was made.
2. Mr Funston bears the onus of displacing the presumptive rule set out by r 26.08 of the Rules. There are no special circumstances to justify a departure from the strong presumption.

1. In exercising its discretion as to costs, Cellmore and Mr Way submitted that the Court ought to take into account the manner in which Mr Funston conducted the litigation:

(a) He made a number of interlocutory applications, including to vacate trial dates and to adjourn the trial.

(b) Mr Funston made serious and unfounded allegations concerning Mr Way and Cellmore, which significantly delayed and lengthened the trial, and added to the cost of the litigation.

1. The Court ought to make an order apportioning any costs that Cellmore and Mr Way may be entitled to recover on a percentage basis, as this is a more workable approach than making competing orders on the claim and counterclaim.[11]
2. In accordance with the Court's discretion to apportion costs to reflect issues on which a party failed,[12] Cellmore proposed a percentage reduction of costs before 16 July 2021 to allow for the capped costs of $3,703 that Mr Funston may have recovered in the Magistrates' Court and to prevent Cellmore recovering a proportion of its overall costs that related to its claim (but not the counterclaim) before the Offer was served.

1. Cellmore and Mr Way seek an order for costs in the sum of $2,200 in respect of the costs of Mr Wheeler's attendance to give evidence at trial. Mr Wheeler gave evidence that he is a sole trader, operating a gardening business, and that as a result of his attendances, he lost $2,000 in income (plus GST), calculated at 20 lost jobs at $100 per job (plus GST).

1. Mr Funston submitted that the Court retains the discretion to determine an award of costs in a manner differing from the provisions in r 26.08(2)[13] and it ought to exercise its discretion as follows:

(a) Mr Funston ought not be ordered to pay Cellmore's costs on an indemnity basis in respect of his counterclaim as he did not unreasonably fail to accept the Offer; and

(b) the Court ought to make an order that Cellmore pay Mr Funton's costs of the claim on the standard basis and Mr Funston pay the costs of the counterclaim on the standard basis.

It was not unreasonable for Mr Funston not to accept the Offer

1. A key consideration in the exercise of the Court's discretion is whether Mr Funston's refusal of the Offer was unreasonable in the circumstances. Mr Funston's failure to accept the Offer was not unreasonable in the circumstances:

(a) The Offer was not clear and concise:

(i) The Offer did not distinguish between the monetary amounts offered for Cellmore's claim and Mr Funston's counterclaim or differentiate the quantum with respect to the costs of each claim.[14]

(ii) This prevented Mr Funston from agreeing to settle his counterclaim but not Cellmore's claim. Whilst permissible, the Offer did not distinguish between the substantive claims in monetary terms and the respective costs in each claim.[15]

(b) The defence of Cellmore's claim in respect of s 49A of the Estate Agents Act 1980 (Vic) (the Act) was a matter of significant wider public interest and of substantial importance to Mr Funston:

(i) The findings on compliance with s 49A(1)(c)(i) of the Act will likely have repercussions for the real estate industry.

(ii) The inability of Mr Funston to pursue his defence of Cellmore's claim was a significant impediment to him accepting the Offer.

(iii) The significance of Cellmore's claim was far greater to Mr Funston and the wider public than the monetary amount being claimed.

(c) Although Cellmore described its claim as merely a short point of statutory construction, the claim was both substantial and consequential with wide reaching implications for Cellmore and other real estate agents. Mr Funston successfully defended Cellmore's claim.

(d) The Offer was not accompanied by a covering letter explaining why the Offer should be accepted.[16] Had any explanation as to why Cellmore considered the Offer to be reasonable been forthcoming, it would have been wrong if it concluded that Mr Funston would fail in his defence of Cellmore's claim.

(e) Even though Mr Funston's counterclaim was unsuccessful:

(i) the making of the Offer where pleading amendments were still forthcoming and where evidence had not been filed meant that Mr Funston was not in a position to adequately consider his prospects of success;[17]

(ii) the documents discovered in Cellmore's further supplementary affidavit of documents were not discovered until more than 18 months after the Offer was made. As such, Mr Funston had not reviewed or analysed them; and

(iii) Mr Funston's counterclaim was one on which reasonable minds might differ as to the possible outcome, especially in light of Cellmore's conduct in procuring an Exclusive Sale Authority (ESA), which was determined to be invalid under s 50 of the Act.

1. It is uncertain whether, at the time the Offer was made, Mr Funston's costs of defending Cellmore's claim would have been less than the quantum offered. The Magistrates' Court scale of costs and arbitration cost caps are irrelevant to the reasonableness of his non-acceptance, as the costs to be taxed must be assessed on the scale applicable to the County Court. This calls for speculation as to what the parties' taxed costs would have amounted to.

(a) Such an inference cannot be readily drawn as the proceeding had been on foot for nearly three years, discovery had been made and a mediation had occurred.

(b) It is not for the Court to have to "infer" what the costs would have been in assessing whether an offer of compromise is effective.

1. In relation to the Calderbank offer, it is irrelevant in determining costs. It ought to be disregarded as it pre-dates the Offer (upon which Cellmore purports to rely) and no submissions on the reasonableness of the Calderbank offer have been made.
2. In any event, the Calderbank offer would fail to satisfy the making of an indemnity costs order as it does no more than seek a capitulation by Mr Funston in respect of his counterclaim.[18]

Court's broad discretionary power with respect to costs

1. Courts have a wide discretion in deciding questions of costs. That discretion must be exercised judicially and in accordance with established principles.[19] Section 78A(1) of the County Court Act 1958 (Vic) is as follows:

"(1) The costs of and incidental to all proceedings are in the discretion of the Court and the Court may determine by whom and to what extent the costs are to be paid..."

1. Under Part 4.5 of the Civil Procedure Act 2010 (Vic) (CPA), the Court may make any order as to costs which it considers appropriate to further the overarching purpose of the CPA.[20]

1. Pursuant to Order 26 of the Rules, a party may serve an offer of compromise in respect of any claim in a proceeding.
2. The definition of claim includes a counterclaim.[21]
3. The definition of defendant includes a defendant by counterclaim.[22]
4. The definition of plaintiff includes a defendant who serves a counterclaim.[23]
5. The offer of compromise may be inclusive of costs.[24]
6. Relevantly, rr 26.08(2) and 26.08(4) of the Rules provide that:

"(2) Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled - > > ...

(b) in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis...

(4) Where an offer of compromise is made by a defendant and the plaintiff unreasonably fails to accept the offer and the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant, then unless the Court otherwise orders -

(a) the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim until 11.00 a.m. on the second business day after the offer was made, taxed on the ordinarily applicable basis; and

(b) the defendant shall be entitled to an order against the plaintiff in respect of the defendant's costs after the time referred to in paragraph (a) taxed on an indemnity basis."

1. In PCCEF Pty Ltd v Geelong Football Club Ltd (No 3),[25] McLeish and Emerton JJA stated that:

"The party seeking to displace the prima facie rule in r 26.08 bears the onus. The onus is not readily discharged. In Gamboni, Tate JA and Kyrou AJA stated: > > In Simonovski, Ashley J stated that while the Court retains a discretion under r 26.08(2)(b) of the ... Rules, an 'order otherwise' should not be lightly made, and that the prima facie position established by the rule 'is a strong one, not easily displaced'. > > In Saric, McMillan J referred to the language used in the authorities to describe the kinds of case where the prima facie rule has been displaced: > > The Court must exercise caution in departing from the prima face rule and only do so in cases that warrant such a departure, invariably expressed in terms such as 'compelling and exceptional circumstances', 'for proper reasons which, in general, only arise in an exceptional case' and 'special circumstances'. > > Whether the Court will 'otherwise order' depends on whether doing so advances the purpose of O 26. That purpose, broadly speaking, is to encourage the compromise of litigation and the saving of the private and public costs associated with it. The reasonableness of the rejection or non-acceptance of an offer is one matter that may be taken into account, but is not of itself determinative."[26] (footnotes omitted)

2. In Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2),[27] the Court of Appeal established the following principles in relation to the Court's discretion with respect to costs:[28]

"The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to given an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it."[29]

1. The party upon whom the offer of compromise was served carries a heavy burden; the presumption as to liability for costs which arises under r 26.08 is not easily displaced.[30]

1. I am satisfied that r 26.08(4) of the Rules is engaged. The Offer complies with the requirements of the Rules.[31] The Offer was inclusive of costs. This is permitted by r 26.02(4)(a). The Offer was "on terms that [took] into account any other claim made in the proceeding between the parties". This is permitted by r 26.02(2). In accordance with the Reasons, the counterclaim is to be dismissed with judgment on the counterclaim entered in favour of Cellmore and Mr Way.[32]

Mr Funston unreasonably failed to accept the Offer

1. Viewed objectively as at the date of the Offer, I am satisfied that Mr Funston unreasonably failed to accept the Offer.
2. Mr Funston received the Offer at a stage in the proceeding when there was sufficient material available for him to make a realistic assessment of his prospects of success on the counterclaim:[33]

(a) The parties had made substantial discovery[34] and a mediation had taken place. Mr Funston understood the scope of the issues in dispute sufficiently to make his own Calderbank offer on 27 April 2021.

(b) The Offer was made on 14 July 2021, almost two weeks after the mediation, and a year and a half after Mr Funston filed his amended defence and counterclaim on 2 October 2019. The counterclaim set out in large part the claims run at trial (by Mr Funston against Cellmore).

(c) None of the subsequent pleading amendments affected Mr Funston's ability to make a realistic assessment of his prospects of success at the time of the Offer. Subsequent amendments were largely to Mr Funston's counterclaim involving refinement of the pleadings and the addition of an allegation in relation to Mr Senaratne. Later amendments related to the joinder of Mr Way as a defendant by counterclaim, with allegations that Mr Way was involved in the contraventions alleged against Cellmore.

(d) Cellmore's claim remained essentially unchanged[35] throughout the proceeding.

1. At the time of the Offer, it ought to have been apparent to Mr Funston (being cautious of the wisdom of hindsight) that he had poor prospects of proving loss and damage, even if he was able to establish liability.[36] For example:

(a) Mr Funston's self-serving evidence that he would have accepted the written November offer had it been passed onto him was likely to be rejected such that establishing loss and damage had poor prospects of success:

(i) The objective material available at the time of the Offer and within Mr Funston's knowledge[37] overwhelmingly supported a conclusion that the November offer was well below Mr Funston's committed price expectation for the property, such that proving loss would be problematic.

(ii) Mr Funston did not plead that he would have accepted the November offer had the signed contract of sale been provided to him.[38] Courts have been repeatedly warned about the dangers of evidence given 'through the prism of hindsight.'[39]

(b) Mr Funston's appreciation of what evidence would be required to prove causation and loss is evident from the covering letter to Mr Funston's offer, which stated that:

"By continuing to advertise the property your client quite effectively dissuaded other agents from taking it on, which was doubtless the effect intended by your client. It caused our client very substantial loss from other potential sales."

(i) No evidence that other agents were dissuaded from taking on the property or of any loss from other potential sales was called (let alone evidence of any other offers made and not passed on to Mr Funston).

(ii) The evidence of which Mr Funston was aware at the time of the Offer was overwhelmingly to the contrary. Mr Funston signed both exclusive and general sale authorities with other agents.

(iii) No evidence that any prospective purchasers were deterred from making an offer on the property as a consequence of anything said or done by Cellmore or that any statement alleged to have been made by Cellmore affected the purchase price of the property was called.

1. Mr Funston's claim that the Standard Form Representation was made and that he relied on it when signing the ESA, had poor prospects of success as reflected by the findings that Mr Funston was well aware of the presence of the charging clause in the General Sales Authority and the ESA, and signed it knowing it was there in the context of his disingenuous approach to dealing with Cellmore.
2. It ought to have been apparent to Mr Funston at the time of the Offer that he had poor prospects of success in relation to his claims under ss 21, 23 and 50 of the Competition and Consumer Act 2010 (Cth) Sch 2 (the ACL) including having regard to:

(a) the absence of disparity of bargaining power in favour of Cellmore as evidenced by Mr Funston's background and experience, including that he was a former compliance officer with the Estate Agents Board, a former real estate agent, and property developer; and

(b) the correspondence sent by Mr Funston to Cellmore from which it would have been apparent that Mr Funston was well able to protect himself.

1. The fact that these claims were not addressed in Mr Funston's written closing submissions, not even in reply submissions, underscores the tenuous nature of the allegations. They were nevertheless pressed. They ought not have been pursued.
2. In the circumstances, I do not consider that it was necessary for the Offer to descend to specificity as to why it should be accepted.[40] Cellmore had earlier identified the problem with proof of loss or damage. Before the Offer was made, Hall & Wilcox sent the Calderbank offer by email on 21 March 2021, stating that even if Cellmore was found liable to Mr Funston, he would be unable to establish that he suffered the alleged loss and damage. The Reasons reflect Cellmore's clear warning.
3. Having regard to Mr Funston's poor prospects of success on the counterclaim, the Offer, being an offer to pay $50,000 inclusive of costs in settlement of the claim and counterclaim, was a significant compromise:

(a) If Mr Funston was successful in defending Cellmore's claim (as he was), this would result in Cellmore being precluded from recovering the outstanding advertising invoice of $3,519.

(b) For the reasons submitted by Cellmore, it may readily be inferred that Mr Funston's costs of defending Cellmore's claim, if taxed at the time of the Offer, would likely have been less than $50,000:

(i) Mr Capannolo's evidence is that Cellmore had incurred approximately $65,000 (including GST) in legal costs in the proceeding up to the date of the Offer, including in the Magistrates' Court, and that most of Cellmore's costs were incurred in defending the counterclaim.[41]

(ii) Mr Funston's costs of defending the claim in the Magistrates' Court would have been assessed on the Magistrates' Court scale of costs.

(iii) Were it the case that Mr Funston's taxed costs of defending Cellmore's claim at the time of the Offer were likely to be in the order of $50,000, one would have expected Mr Funston to have put on evidence to that effect in response to Mr Caponollo's affidavit.[42]

1. I reject Mr Funston's submission that the so-called wider public interest and substantial importance of the matters raised by the claim to Mr Funston rendered it not unreasonable for him to fail to accept the Offer:

(a) Mr Funston's refusal of the Offer in order to pursue a perceived wider public interest through private litigation and in circumstances where his prospects of success on the counterclaim were poor, was fundamentally misconceived:

(i) As stated in the Reasons, the Act and Estate Agents (Professional Conduct) Regulations 2008 (Vic) (the Regulations) provide a comprehensive statutory framework by which alleged breaches of the Act and Regulations are dealt.

(ii) Pursuant to s 94 of the Act, every person who contravenes or fails to comply with any provision of the Act or the Regulations shall be guilty of an offence against the Act.

(iii) Proceedings for an offence against the Act or the Regulations may only be brought by the Director[43] or a person authorised by the Director.

(b) Mr Funston's failure to accept the Offer on the basis that the issues raised by the claim were of substantial importance to him, was misconceived. This is underscored by the findings as to the disingenuous way in which Mr Funston dealt with Cellmore, including that he signed the ESA with knowledge of the charging clause because he knew that if pursued, he would dispute his liability to pay the advertising costs down the track.

(c) The issues of statutory construction, the subject of the claim, could have been dealt with in short compass in the Magistrates' Court with low attendant costs.

1. In my view, the Offer was clear and concise. It dealt with both Cellmore's claim and Mr Funston's counterclaim and was inclusive of costs. As noted above, the Rules permit an offer to be made on terms that take into account any other claim made in the proceeding between the parties. The Rules also permit an offer to be made inclusive of costs. This is consistent with the purpose of r 26.08; broadly speaking to encourage the compromise of litigation and the saving of the private and public costs associated with it.[44]
2. I find that Mr Funston has not displaced the strong prima facie position established by r 26.08 such that I should "otherwise order" in respect of the basis on which costs ought to be awarded from the date of the Offer. For the reasons set out above, there is no good reason for displacing its application in that respect.[45]
3. I consider, however, that in the exercise of the Court's discretion, guided by what the justice of the case requires,[46] Cellmore ought to be awarded 70% of its costs of the proceeding on the standard basis up to the date of the Offer and thereafter 80% of its costs on an indemnity basis.[47] This is to reflect the dismissal of Cellmore's claim such that Cellmore does not recover its costs attributable to the claim and to allow for an amount of costs Mr Funston may have recovered in respect of his defence of the claim in the Magistrates' Court:[48]

(a) This approach is consistent with authority that where the outcome of litigation does not wholly favour one party, costs may be apportioned in respect of individual causes of action or issues, which may result in an order for a proportion of the successful party's costs.[49]

(b) I consider it appropriate to deny Cellmore a proportion of its costs of the entire proceeding to reflect the failure of its claim rather than to displace or modify the operation of r 26.08(4)(a) only.[50] The unreasonableness of the refusal of the Offer is accounted for by the award of costs on an indemnity basis from the time of the Offer.

(c) Where the Court apportions costs:

"...it does so primarily as a matter of impression and evaluation, rather than with arithmetical precision. Having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter."[51]

(i) Cellmore's claim raised a limited point of statutory construction. The other arguments relied on by Mr Funston in defending the claim were unsuccessful.

(ii) Mr Funston's counterclaim gave rise to most issues in the trial, the time taken for evidence of the witnesses and the time for submissions. The extent to which this is so, is illustrated by the Table of Contents of the Reasons, which is annexed to these reasons as Annexure A. Mr Funston's counterclaim failed in its entirety.

(iii) As set out above, had Mr Funston not counterclaimed, Cellmore's low value claim would have been dealt with in the Magistrates' Court with significantly lower costs incurred.

1. Having considered r 26.08(4) and found that Mr Funston unreasonably failed to accept the Offer, it is unnecessary for me to address r 26.08(2) or the costs effect of the Calderbank offer.
2. I consider the orders to be made balance the following factors appropriately:

(a) the policy considerations of private and public costs savings by encouragement of early and realistic assessment of claims;

(b) the greater indemnification of plaintiffs (defendants by counterclaim) put to additional expense by a defendant's (plaintiff by counterclaim) refusal of a reasonable offer made; and

(c) the equally important but competing consideration that potential litigants should not be discouraged from bringing their disputes before the Court.[52]

1. As for Mr Wheeler's costs of attending trial to give evidence, I am not persuaded to depart from the usual orders and to making a special or separate order in this regard.

1. After taking into account the default position provided for by r 26.08(4), the circumstances of this case, and the submissions put to me by counsel for the parties, I consider that the justice of the case requires that the following orders be made:

(a) Mr Funston pay 70% of Cellmore's and Mr Way's costs of and incidental to the proceeding (including costs of the proceeding in the Magistrates' Court of Victoria prior to its transfer, reserved costs, and costs of the counterclaim) on the standard basis until 11.00am on 16 July 2021, to be taxed in default of agreement.

(b) Thereafter, Mr Funston pay 80% of Cellmore's and Mr Way's costs of and incidental to the proceeding (including reserved costs and costs of the counterclaim) on an indemnity basis, to be taxed in default of agreement.

I certify that these 83 paragraphs are a true copy of the ruling of her Honour Judge Brimer delivered on 12 December 2025.

[1] Cellmore Real Estate Pty Ltd v Funston [2025] VCC 1205.

[2] At [353] of the Reasons, I proposed, subject to any matters that the parties sought to bring to my

attention on the question of costs, to order that the plaintiff pay the defendant's costs of the claim on the standard basis in default of agreement and the plaintiff by counterclaim pay the defendants by counterclaim's costs of the counterclaim on the standard basis in default of agreement.

[3] I have had regard to the submissions filed, to Mr Capannolo's affidavit, and to the following emails sent

to chambers after submissions were filed: Email from Mr Funston's solicitor to Hall & Wilcox dated 24 September 2025, objecting to certain paragraphs in Cellmore's submissions, the reply email from Hall & Wilcox to Mr Funston's solicitor dated 24 September 2025, and the email from Hall & Wilcox dated 26 September 2025, containing Cellmore's substantive response to the objections.

[4] Mr Wheeler was formerly a Cellmore property consultant during the relevant period in 2017 and gave evidence on day 7 of trial.

[5] County Court Civil Procedure Rules 2018 (Vic) (the Rules), r 26.03(3).

[7] Adaz Nominees Pty Ltd v Castleway Pty Ltd (No 4) [2024] VSC 261, [37] (Adaz Nominees).

[8] Key Infrastructure Australia Pty Ltd v Bensons Property Group Pty Ltd (No 2) [2019] VSC 763 (Key

Infrastructure) in which the Court gave effect to a walkaway offer of compromise that related to a claim and counterclaim.

[9] RW & ME Smith Pty Ltd v Boral Resources (Vic) Pty Ltd (No 3) [2024] VCC 356.

[10] Affidavit of Matthew Cappanolo at [23].

[11] In the manner ordered by Robson J in Key Infrastructure.

[13] Mr Funston did not take issue with the Offer's compliance with r 26.08 or with the Rules' engagement

[16] Gray v Wagga Wagga City Council (No 2) [2021] NSWDC 196 (Gray v Wagga Wagga).

[17] See also Gray v Wagga Wagga, [12].

[18] W284 Pty Ltd v MRES Pty Ltd & Ors (No 2) [2023] VCC 1124, [48]-[49] and [71].

[19] MA & J Tripodi Pty Ltd v Swan Hill Chemicals Pty Ltd [2019] VSCA 46, [152] (MA & J Tripodi).

[20] Civil Procedure Act 2010 (Vic) (CPA), s 65C.

[24] The Rules, r 26.02(4)(a). Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [25] (Hazeldene).

[25] [2019] VSCA 191 (PCCEF).

[27] Hazeldene, 442, cited in Cottrell v Miglic (No 2) [2025] VSCA 177, [13].

[28] Smith v Jovanoska (No 2) [2013] VSC 714, [13] held that these principles were also applicable to offers of compromise.

[30] Gamboni v Bendigo and Adelaide Bank Ltd [2013] VSCA 282.

[31] As to form, content and timing, see Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154 (Grbavac v Hart). Mr Funston

requested a 7 day extension in which to consider the Offer, which was granted by Cellmore.

[32] The claim is also to be dismissed with judgment on the claim entered in favour of Mr Funston. In Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd [2017] VCC 274, his Honour Judge Anderson held that the requirement in r 26.08(4) that "the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant" was satisfied in circumstances where the defendant made an offer of compromise in respect of the proceeding including the counterclaim and both the claim and counterclaim were dismissed. No order as to costs was made, however. His Honour considered it a "nil all draw" in the circumstances of that case.

[33] Mr Funston's successful defence of the claim is considered below at [73].

[34] The parties had filed the following affidavits of documents up to the date the Offer was made: Cellmore's

affidavit of documents sworn 13 December 2019, Mr Funston's affidavit of documents sworn 13 February 2020, Cellmore's affidavit of documents sworn 2 March 2021, and Mr Funston's affidavit of documents sworn 23 April 2021. The extent of the supplementary discovery was limited.

[35] Other than the deduction of a $200 component of the claim.

[36] As set out in the Reasons, Mr Funston would have failed established liability on any of the causes of

[37] Including the many other sales authorities signed by Mr Funston, which reflected Mr Funston's

price expectation for the Property of $1.5 million or above.

[38] Rather, Mr Funston had pleaded that he lost the opportunity to sell the property to the purchaser that

had made the November offer. Mr Funston later pleaded that he was unable to accept the November offer as it had not been provided to him.

[39] Stealth Enterprises Pty Ltd v Calliden Insurance Ltd [2017] NSWCA 71. In respect of other aspects of

loss and damage alleged but in respect of which no evidence was called, see paragraphs [275], [344]-[345] of the Reasons.

[40] Hazeldene, [26]-[27]. Oversea-Banking Corporation v Richfield Investments Pty Ltd [2004] VSC

[41] Affidavit of Matthew Capannolo at [23].

[42] By email dated 24 September 2025, Mr Funston's solicitor objected to the evidence of Mr Capannolo

as to Mr Funston's likely taxed costs as at the date of the Offer on the basis that the Court's orders for the filing of material did not provide for affidavit material to be filed. The orders dated 2 September 2025, ordered the parties to file and serve written submissions and any supporting material.

[43] The Director of Consumer Affairs Victoria.

[45] Key Infrastructure, [10]. I do not consider that to do so would advance the purpose of O 26 PCCEF, [25]

[46] Key Infrastructure, [30] citing MA & J Tripodi, [154].

[47] Rather than 75% of its costs on the standard basis up to the date of the Offer and thereafter 100%

of its costs on an indemnity basis, as contended for by Cellmore.

[48] I accept Cellmore's submission that the likely costs that would have been recovered by Mr Funston in the Magistrates' Court would have been subject to the arbitration costs cap.

[49] Key Infrastructure, [29]. State of Victoria v McIver & Ors [2005] VSCA 50 (McIver). In

Chen & Ors v Chan & Ors [2009] VSCA 233, the Court of Appeal stated at [4] that "a court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interest of justice."

[51] Key Infrastructure, [30] citing MA & J Tripodi, [153].

[52] Di Falco v Emirates (Ruling No 3 - Costs Ruling) [2019] VSC 732, [9].