First Plaintiff/First defendant by counterclaim v First Defendant/First plaintiff by counterclaim

INTEREST - Supreme Court Act 1986 ss 58, 60 - Whether 'debt or sum certain recovered' for purpose of s 58(1) of Supreme Court Act 1986 - Whether the Penalty Interest Rates Act 1983 rate ('PIRA rate') should apply - Whether contractual interest displaces statutory interest - One of relevant factors in exercise of discretion - Discount applied to PIRA rate - Euromark Ltd v Smash Enterprises Pty Ltd & Ors (No 2) [2021] VSC 393, applied.

COSTS - Indemnity costs - Calderbank offers - Rejection of Calderbank offers - Whether rejections unreasonable - Defendants succeeded on complex and finely-balanced reasons - Rejections not unreasonable - Calderbank v Calderbank [1976] Fam 93, applied - Hazeldene's Chicken Farm Pty Ltd v Victoria Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, applied.

COSTS - Whether to reduce costs of successful party based on issues on which it failed - Discretion to be exercised in a broad-based and pragmatic way - Based upon judge's evaluation and impression of the factual and legal issues in this proceeding and the degree of success - Successful parties' costs reduced by 25 per cent - Mandie v Mehmart Nominees Pty Ltd [2020] VSCA 320, applied - Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, applied.

COSTS - Indemnity costs - Whether claim had no reasonable prospects of success - Clear that the claim had no reasonable prospect of success - Letter shortly before trial seeking party confirm not pressing claim - Indemnity costs ordered from time of that letter.

1 By Reasons delivered on 19 December 2024,[1] I found in favour of the Sellers in respect of the claim made by, and the Sellers' counterclaims against, EMR6B and in favour of the 29Metals in respect of the Sellers' counterclaims against it.

2 At trial, there were 14 issues raised for determination. However, I reserved some issues for determination, including the form of relief and costs, until the parties had an opportunity to consider the Reasons.

3 The parties have filed submissions in relation to these matters pursuant to orders made on 19 December 2024. The Sellers filed principal submissions on 31 January 2025; the plaintiffs filed submissions in opposition on 10 February 2025; the Sellers filed reply submissions on 17 February 2025. No party sought an oral hearing. I have now read the submissions of the parties which raise a number of different matters. I shall deal with each in turn.

4 This proceeding consisted of the claims made by the plaintiffs against the Sellers and the Receivers, and the counterclaims made by the Agent of the Sellers against the plaintiffs (collectively, 'the Proceeding'). The claims made by and against EMR6B constituted the substantive issues for determination at trial. Those claims related to whether the Sellers were entitled to the Earnout Payment from EMR6B under the Share Sale Agreement (ie the 2018 SSA) and a related Share Mortgage entered into between the parties in 2018.

(a) pursuant to the 2018 SSA, EMR6B acquired the 3.5 per cent shareholding owned by the Sellers in CCH with the result that EMR6B owned all the shares in CCH which owned the Capricorn Copper mine;

(b) under cl 6.1(a) of the 2018 SSA, the purchase price included a conditional payment of $12.5 million, referred to as the Earnout Payment, which was payable on the satisfaction on one of two condition relating to financial returns;

(c) under the Share Mortgage, EMR6B mortgaged 10 per cent of its shares in CCH (ie the Collateral) to the Sellers to secure payment of the 'Secured Money';

(d) under clause 5.1(c)(ii) of the Share Mortgage, EMR6B was not allowed to transfer the Collateral without the consent of the Sellers' Agent unless EMR6B paid 'an amount equal to the Secured Money (including any secured money that would reasonably foreseeably be owing in future)' into an specified escrow account with arrangements to release that amount to the Sellers immediately upon the completion of the 'Relevant Transaction';

(e) on 7 June 2021 and without the consent of the Sellers' Agent, EMR6B transferred all its shares in CCH to a new entity, 29Metals, so that the Capricorn Copper mine could participate in an IPO shares in 29Metals which was successfully completed on 5 July 2021;

(f) as the intended consequence of the IPO, on 5 July 2021, other assets unrelated to the Capricorn Copper mine owned by companies affiliated to EMR6B were transferred 29Metals (ie the non-CCH assets);

(g) the Sellers contended that by reason of the events on 7 June 2021, EMR6B should have paid into the escrow account in accordance with cl 5.1(c)(ii) of the Share Mortgage an amount equivalent to the Earnout Payment. EMR6B denied any such obligation but admitted that no such amount was paid into such an escrow account;

(h) the Sellers' entitlement to the Earnout Payment depended upon the construction of relevant clauses of the 2018 SSA and Share Mortgage, in particular:

(i) clause 6.1(a) of the 2018 SSA and whether the value of the non-CCH assets in 29Metals should be taken into account in determining the Earnout Payment; and

(ii) clause 5.1(c)(ii) of the Share Mortgage and the meaning of the phrase 'an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future)'.

(a) on the proper construction of cl 6.1(a) of the 2018 SSA, the value of the non-CCH assets in 29Metals should be taken into account in determining the Earnout Payment;

(b) on the evidence before me, at the time of the sale of the CCH shares at 29Metals, the Earnout Payment would 'reasonably foreseeably be owing in future' under cl 5.1(c)(ii) of the Share Mortgage;

(c) by transferring the Collateral to 29Metals on 7 June 2021 without the consent of the Sellers' Agent and without paying the Earnout Payment into the escrow account in accordance with the Share Mortgage, EMR6B breach cl 5.1(c)(ii) of the Share Mortgage which constituted an Event of Default;

(d) as a result, the Earnout Payment was due and payable and the Sellers were entitled to appoint receivers under the Share Mortgage; and

(e) the Sellers' claim against 29Metals for inducing EMR6B to breach the 2018 SSA and the Share Mortgage was not established.

7 As noted above, I reserved some issues which I had been asked to determine, namely:

(a) Issue 10 which relates to whether the Consideration Shares formed part of the Collateral under the Share Mortgage, from 7 June 2021;

(b) Issue 11 which relates to whether the failure by EMR6B to deliver up title to the Consideration Shares immediately after 7 June 2021 constituted an Event of Default under cl 6.2(b) of the Share Mortgage by reason of a breach by EMR6B of cll 5.2(g) or 5.2(h) of the Share Mortgage;

(c) Issue 13 which relates to whether the Agent has an entitlement to be indemnified for his costs of enforcement of the Share Mortgage under cl 11.6 of the Share Mortgage, and if so on what basis; and

(d) Issue 14 which relates to the relief to be ordered.

8 The first issue is whether the Sellers are entitled to an order that there be judgment for the first defendant as Agent for the Sellers against EMR6B for the sum of $12.5 million. They also seek interest, but I will address that as the second issue.

9 EMR6B opposed such an order where, in the Further Amended Defence and Counterclaim dated 2 March 2022 ('FADCC'), the Sellers only sought a declaration that the Earnout Payment is presently due and payable. EMR6B submitted that based on the comments in Dare v Pulham,[2] judgment in the form now sought by the Sellers ought not be allowed. This is because it contended that, had the Sellers formulated a claim for enforcement of debt prior to now, the Proceedings might have been conducted differently.

10 By contrast, the Sellers submitted that judgment for the Earnout Payment forms part of the pleaded case and agreed list of issues, notwithstanding there was no specific prayer for relief. This is in a context where the Sellers pleaded, from their demand on 17 June 2021, that the Earnout Payment became immediately due.[3] The Sellers also relied upon the issues determined at trial, most relevantly issues 1 and 3, and issue 8 which asked 'upon demand being made by Mr Hallion, did the Earnout Payment become immediately due and payable?'. The Sellers referred to Reasons [565] and [572] where I concluded in answer to that issue that the Earnout Payment became due and payable on about 17 June 2021. The Sellers also relied upon the fact that they seek 'such further orders as the Court thinks fit' in their prayer of relief.

11 Further, the Sellers submitted that if monetary relief not granted, they may have no choice but to commence new proceedings to obtain a judgment debt based on the Reasons. This outcome would be inconsistent with the overarching purpose of Civil Procedure Act 2010. The Sellers notified EMR6B of their intention to seek such relief on 31 January 2025.

12 In light of the issues before me at trial, I consider it is appropriate that there be a judgment against EMR6B in the sum of $12.5 million. This is because in substance the Court was asked to determine and did determine that Earnout Payment of $12.5 million was due and payable on about 17 June 2021. While the failure to seek relief for a judgment in that amount is regrettable, to make such a judgment now for that sum is consistent with the overarching obligation under Civil Procedure Act 2010, in particular the just, efficient, timely and cost-effective resolution of the real issues in dispute. This is in circumstances where, although EMR6B asserted that it might have conducted the Proceeding differently had the Sellers formulated a claim for enforcement of debt prior to now, it did not indicate how the Proceeding might have been conducted differently.

13 The second issue is the rate of interest that ought be awarded in respect of the judgment debt before judgment. After the entry of judgment, interest accrues on a judgment debt pursuant to s 101 of the Supreme Court Act 1986.

14 The Sellers seek an order that EMR6B pay interest at the rate of 10 per cent under s 2 of the of the Penalty Rates Act 1983 ('PIRA') on:

(a) the amount of $12.5 million from 17 June 2021 until the 9 September 2021 (the date of the counterclaim) pursuant to s 58 of the Supreme Court Act 1986; and

(b) on the amount of $12.5 million plus interest under (a), from 9 September 2021 until the date of judgment, pursuant to s 60 of the Supreme Court Act 1986.

15 EMR6B filed submissions in the event that the Court entered judgment for the Earnout Payment. In summary, EMR6B opposed the interest rate of 10 per cent under the PIRA. EMR6B submitted that s 58 only applied where a debt is recovered and s 60 only applied where a debt or damages are awarded. EMR6B emphasised that until 31 January 2025, the Sellers did not seek a judgment debt in the amount of $12.5 million and no damages were ever awarded in their favour.

16 Rather, EMR6B submitted that the rate of interest to be awarded is in the discretion of the Court, subject to the limit of the PIRA rate. EMR6B relied upon the agreed default interest rate in cl 15.3 of the 2018 SSA. That clause provides in substance that the default rate under the 2018 SSA is 2 per cent above the Reference Rate compounding monthly. The Reference Rate is relevantly defined to mean 'the average bid rate displayed on the Reuters Screen BBSY for a 3-month term at or about 10.30am' on which interest first accrued in respect of the relevant payment. EMR6B submitted that, while there is no evidence of the BBSY at the date of the relevant demand, the rates are published and the Court can take notice that on 18 June 2021 the rate was 0.0713 per cent. EMR6B relied upon an extract 'from the Bloomberg Terminal showing the 3-month average BBSY as at 18 June 2021' which was annexed to the plaintiffs submissions.[4] EMR6B submitted that the disparity between the 2018 SSA rate and the statutory rate was significant, even accounting for interest compounding monthly. As a result, EMR6B submitted that the statutory rate would go beyond that which is necessary to compensate the Sellers.[5]

17 In response, the Sellers submit that there was no contractually agreed rate at which interest should be paid under the Share Mortgage and that cl 15.3 of the 2018 SSA only applies to sums payable under that agreement. Further, they submitted that the plaintiffs put forward no evidence as to what the lower rate of interest should be and why it is more appropriate than the PIRA rate.

(a) section 58 relevantly provides that if in a proceeding a debt or sum certain is recovered, the Court must on application, 'unless good cause is shown to the contrary', allow interest on the debt at the rate not exceeding the PIRA rate from the time the debt was payable or the demand made; and

(b) section 60 relevantly provides that if in a proceeding a debt or damages is recovered, the Court must, 'unless good cause is shown to the contrary', give damages in the nature of interest at the rate not exceeding the PIRA rate from the commencement of the proceeding until judgment.

19 I have previously considered the principles to be applied in determining the rate of interest under ss 58 and 60 in the Supreme Court Act 1986 in Euromark Ltd v Smash Enterprises Pty Ltd (No 2).[6] In summary, those principles are:

(a) the purpose of interest includes compensating the plaintiff for being kept out of his or her money and encouraging settlement;

(b) by incorporating the PIRA rate, these sections recognise that such awards of interest may have a punitive effect;

(c) these sections do not mandate the PIRA rate unless good cause to the contrary is shown. Rather, they designate that rate as the maximum rate that may be applied, leaving the Court with discretion to apply lower rates;

(d) the expression 'good cause to the contrary' is no more and no less than good reason according to the justice of the case for not allowing interest at all or for not allowing interest for the whole of the period marked out by the section;

(e) where a defendant contends that the facts and circumstances of the case warrant a lower rate, evidence is required as to the appropriate rate;

(f) the practice in Victoria is to treat the maximum rate as the starting point for the exercise of discretion, ie the Court must exercise its discretion with that starting point in mind to determine the appropriate rate of interest having regard to the circumstances of the individual case;

(g) delay may be a relevant factor in the award of interest; and

(h) the mere fact that the PIRA rate is higher than market rates is not itself a sufficient reason to apply a lower rate.

20 In my view, I do not consider it is appropriate to award interest at the PIRA rate from the time that the Earnout Payment became due and payable.

21 There has been significant delay on the part of the Sellers in actually claiming a judgment debt in the Proceeding. I refer to my comments above, noting that the first time the EMR6B was on notice that a judgment debt was sought was 31 January 2025, after delivery of the Reasons. In addition, in my view, the Sellers' pursuit of expert evidence and further discovery resulted in delays in this Proceeding being given a trial date. I refer to my comments below when dealing with the costs as between EMR6B and the Sellers.

22 Further, bearing in mind the purpose of the interest rate includes compensating the plaintiff for being kept out of their money, the PIRA rate for the relevant period seems far in excess of the commercial rates for the relevant period. The Reserve Bank of Australia's cash rate (the interest rate on unsecured overnight loans between banks) was as follows:

(a) 0.10 per cent in June 2021;

(b) ranged between 0.10 and below 1.0 per cent from June 2021 until 5 July 2022;

(c) ranged between 1 per cent and 3 per cent until 6 December 2022;

(d) ranged between 3 per cent and 4 per cent until 6 June 2023; and

(e) increased to 4.1 per cent from 7 June 2023 until 7 November 2023;

(f) increased to 4.35 per cent from 8 November 2023; and

(g) reduced to 4.1 per cent for the quarter from 19 February 2025.

23 I consider that I am able to take judicial notice of the Reserve Bank of Australia's cash rate. Even assuming a margin of 2 or 3 per cent which might reflect a more commercial rate, this produces a result far in excess of the PIRA rate over the relevant period.

24 In all these circumstances, in the exercise of my interest discretion, I will order interest at a rate of 6 per cent under s 58 of the Supreme Court Act 1986 from the time the Earnout Payment became due and payable on 17 June 2021 until judgment.

25 Finally, I have not had regard to the 'BBSY rate' as contended by EMR6B. While I am conscious rate that the interest rate under the 2018 SSA does not apply to the claim for the Earnout Payment pursuant to cl 5.1(c)(ii) of the Share Mortgage, in my view it would be appropriate to have regard to that rate of interest in determining which interest rate ought be applied under ss 58 and/or 60. However, EMR6B produced no evidence of the BBSY rate in an admissible form. I am not prepared to take judicial notice of the extract attached to the plaintiffs' submissions.

26 The Sellers seek an order that EMR6B pay the Sellers' costs of the Proceeding, on an indemnity basis from 30 September 2021, or alternatively 16 September 2022. They seek an order for standard costs before either of those dates.

27 The Sellers submitted that they ought to have their costs on an indemnity basis based upon informal offers of compromise made in September 2021, and September 2022 (the 'Calderbank offers').[7] The Sellers relied upon Calderbank[8] principles. They also relied upon r 26.08(4) of the Supreme Court (General Civil Procedure) Rules 2015. However, that rule only applies to offers of compromise served in accordance with Order 26. The Sellers have not put forward the September 2021 letter or the September 2022 letter or any basis upon which it is open to conclude either of these letters were served in accordance with Order 26. As a result, I will only consider these letters in the context of the Calderbank principles.

28 These Calderbank offers were not in evidence. However, although it is not entirely clear, the Sellers' submissions record that:

(a) on 20 September 2021, the Sellers sent a Calderbank offer to EMR6B which was open for acceptance by 30 September 2021;

(b) on 1 September 2022, the Sellers sent a Calderbank offer to EMR6B which was open for acceptance by 7 September 2022;

(c) the terms of each of the Calderbank offers were that EMR6B would pay to the Sellers $12.5 million plus a sum on account of 50 per cent of the Costs incurred by the Sellers at the date of that offer and, upon payment, the Sellers would retire the Receivers and the parties would agree mutual releases; and

(d) these offers were rejected by the plaintiffs.

29 Given the plaintiffs did not dispute any of these matters in their submissions, I will proceed on this basis.

30 Further, the Sellers asserted that the interest that had accrued on the $12.5 million on the dates of each of the Calderbank offers was approximately $326,209.41 and $1,538,410.58, respectively.

31 The Sellers submitted, if the Court were not minded to make an order for indemnity costs, the Court should make a costs order in favour of the Sellers on a standard basis and without any discount or deduction, given that the entirety of the costs incurred by the parties in relation to the Proceeding could have been avoided, had the Calderbank offer/s been accepted.

32 The plaintiffs opposed any order for indemnity costs. They relied upon the following factors are relevant to a determination on costs:

(a) the issue the Sellers succeeded on (namely issue 2(1)) was a narrow point of construction of the EMR Investors issue;

(b) the Sellers ultimately abandoned reliance on their valuation evidence, which consumed a disproportionately large amount of resources both in pre-trial steps and at the hearing; and

(c) given the highly contestable point on which the Sellers ultimately succeeded, it was reasonable for the plaintiffs not to accept the Calderbank offers.

33 Further, the plaintiffs contended that, while it is true that the Calderbank offers were rejected, this is only one matter to which the Court ought have regard when considering indemnity costs: the critical question is whether the rejection was unreasonable.[9] EMR6B submitted that the rejection was not unreasonable given issues of contractual construction (including the EMR Investors construction issue) were finely balanced, complex and 'far from clear'.[10]

34 In seeking to limit or apportion the Seller's costs they plaintiffs also relied upon the time and expense involved matters in set out in [32(a)] and [32(b)] above. As to the valuation evidence, the plaintiffs submitted that the significant costs involved in relation to this evidence could have been avoided in circumstances where:

(a) it was the Sellers who pressed the necessity of expert valuation evidence in determining whether the Earnout Payment was reasonably foreseeably owing: the plaintiffs only filed valuation evidence in reply;

(b) as a result, the Sellers' insistence of expert valuation evidence lengthened the trial with the majority of oral evidence devoted to the five expert witnesses;

(c) the Sellers insistence on the expert valuation evidence resulted in a protracted and costly discovery dispute in circumstances where the plaintiffs argued such discovery was unnecessary from November 202;[11] and

(d) notwithstanding (a)-(c) above, the Sellers effectively abandoned their reliance on the expert valuation evidence at trial, acknowledging in their written closing submissions this evidence was 'not strictly necessary' but rather a matter from which the Court can 'take comfort'.[12] This resulted in significant avoidable costs in responding to discovery applications, discovery, preparation of responsive valuation evidence and hearing time devoted to expert valuation evidence.

35 As a result, the plaintiffs submitted that it is appropriate to order that the plaintiffs pay 50 per cent of the Sellers' costs, taxed on the standard basis, and none of the Sellers' costs of discovery going to valuation.[13]

36 Before setting out my conclusions as to costs, I have taken into account the nature of the indemnity provided in cl 11.6 of the Share Mortgage and set out at [620] of the Reasons. That provides for EMR6B to indemnify the Sellers for all 'reasonable' 'Costs' (with Costs defined to include 'any cost, expense, charge, liability or disbursement') incurred by any Seller or Receiver in the exercise of purported exercise of a power under the mortgage. In particular, I have had regard to this clause in light of EMR6B's submission that the costs of the Sellers ought be limited to the issues in the Proceeding (ie the plaintiffs' claim and the Sellers' counterclaims) in respect of which they were successful. In my view, the existence of that provision is of relevance to, but not determinative of, the costs of the Sellers in respect of this Proceeding which are to be determined by this Court pursuant to the powers and discretion vested in it by s 24 of the Supreme Court Act 1986, set out in the following paragraph.[14]

37 The principles to be applied in respect of costs and Calderbank offers are clear. Costs are generally in the discretion of the Court, but that discretion must be exercised judicially. Section 24(1) of the Supreme Court Act 1986 provides:

Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

38 In the ordinary case, costs follow the event and the successful party in litigation is entitled to an award of costs in its favour.

39 As to the basis on which costs may be calculated in circumstances where a Calderbank offer has been rejected, the Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) ('Hazeldene's Chicken Farm')[15] stated that the rejection of a Calderbank offer is a matter to which the Court should have regard when considering whether to order indemnity costs. There is no presumption that the party which made the offer is to be entitled to indemnity costs if the offeree receives a less favourable result at trial. The question is whether the rejection of the offer was unreasonable in the circumstances. What is unreasonable will involve matters of judgment and impression, taking into account all relevant considerations.[16]

40 While there is no exhaustive list of factors to be taken into account in determining whether the rejection of an offer is unreasonable, the Court of Appeal in Hazeldene's Chicken Farm noted that a court should ordinarily have regard to at least the following matters:[17]

(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; and

(f) whether the offer foreshadowed an application for indemnity costs if the offeree rejects the offer.

41 In this case, the Sellers have not established that it was unreasonable to reject each of the Calderbank offers.

42 I am not satisfied that EMR6B unreasonably rejected each Calderbank offer given that, as disclosed by the Reasons, the contractual provisions of the 2018 SSA and the Share Mortgage upon which EMR6B's liability was based were complicated and far from clear. As a result, EMR6B's prospects of success were far from clear at the date of either Calderbank offer.

43 Further, at the time the Calderbank offers were made, the Sellers were not actually seeking judgment for the Earnout Payment but a declaration that the Earnout Payment was due and payable. As noted above, the Sellers did not put EMR6B on notice of such claim until 31 January 2025.

44 In addition, I have reservations about reaching such a conclusion where the Sellers have not made available the terms of each of those offers. As a result, it is difficult to form any view about the factor in [40(f)] above or a concluded view about the factor in [40(e)] above. Further, I am unsure whether the Calderbank offers addressed the claim against 29Metals for inducing breach of contract.

45 The Sellers asserted that the interest that had accrued on the $12.5 million on the dates of each of the Calderbank offers was approximately $326,209.41 and $1,538,410.58, respectively. The basis upon which this interest was calculated is not made clear. This is in a context where the Sellers had not put EMR6B on notice that it sought judgment for the Earnout Payment until 31 January 2025. Relatedly, while I am prepared to accept that the Calderbank offers offered a degree of compromise (seeking payment of all the Earnout Payment, 50 per cent of costs and forgoing any interest entitlement), the extent of that compromise is not clear.

46 In these circumstances, in the exercise of my discretion I decline to order costs in favour of the Sellers on an indemnity basis.

47 I will now turn to whether the Sellers ought only be entitled to a proportion of their costs of the claim and counterclaim against EMR6B. As noted above, in the ordinary case, costs follow the event. However, where there is a mixed outcome it is relevant to consider 'the importance of the matters upon which the parties have been successful or unsuccessful'.[18] The apportionment of the comparative importance of the relevant claims or matters in the proceeding should ordinarily be carried out on a broad-based approach based on impression and evaluation, rather than arithmetic precision.[19]

48 In Mandie v Mehmart Nominees Pty Ltd ('Mandie'),[20] the Court of Appeal held that the success of the appellants was 'decidedly mixed'. As a result, the Court considered it appropriate to 'adopt a pragmatic approach' with respect to an award of costs of the trial.[21] The Court referred to Paragreen v Lim Group Holdings Pty Ltd [No 2], where Tate, Kaye and Niall JJA stated:[22]

[I]t is recognised that where multiple issues have been agitated, and the successful party has only enjoyed mixed success in respect of some of them, a court may, in an appropriate case, adopt a pragmatic approach by which it awards the successful party a proportion of its costs, but not the full amount.

49 The Court held in Mandie that the proper approach, in the circumstances of the case, to the exercise of the Court's discretion as to costs was a 'broad-based one, based on impression and evaluation' rather than attempting 'arithmetical precision on a strictly issue-by-issue basis'.[23]

50 So too, in Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2), the Court of Appeal said:

[W]here there is a mixed outcome in the proceeding, such as here, the apportionment of the comparative importance of the relevant claims in the proceeding - here, the claim and the counter-claim - can only be carried out on a broad basis, it being primarily a matter of impression and evaluation rather than arithmetic precision.[24]

51 In my view, consistent with the authorities, it is necessary to exercise my discretion in a broad-based and pragmatic way based upon my evaluation and impression of the factual and legal issues in this Proceeding and the degree of success the Sellers had in relation to them.

52 The Sellers were ultimately successful in defending the claims brought by the plaintiffs, most relevantly EMR6B, and prosecuting their counterclaim against EMR6B. Nevertheless, the Sellers were unsuccessful on a number of issues, in particular relating to the valuation evidence which took up the bulk of the evidence at trial. That evidence was pursued at the insistence of the Sellers. I accept that the plaintiffs would not have led expert evidence as part of establishing their relief and only did so because it was pursued strenuously by the Sellers. The Sellers' discovery application involved a substantial amount of affidavit material and the Sellers were seeking a broad variety of documents, many of which were confidential. The material filed in relation to this discovery application was voluminous and involved numerous categories of documents.

53 Further, the valuation evidence was the subject of extensive and detailed expert reports on the reasonably foreseeable value of CCH in the future as at 7 June 2021 subject to the necessary discount. After two reports were filed by Mr Dawson and one report was filed by Ms Wright, these experts conferred with a facilitator, resulting in a joint report dated 9 June 2023. Mr Dawson then filed a further expert report dated 2 October 2023. After Mr Audcent and Mr Twigger each filed an expert report, these experts conferred with a facilitator and filed a joint report dated 29 June 2023. Five of the six witnesses who gave oral evidence at trial gave expert valuation evidence. The nature and extent of this evidence is reflected in the Reasons and the length of them in having to address this evidence. The expert evidence relied upon was not relevant to my conclusion that the Earnout Payment 'would reasonably foreseeably be owing in future' based upon the proper construction of cl 6.1(a) of the 2018 SSA in the 2nd scenario only.[25]

54 Further, as noted by the plaintiffs in their written closing submissions, the Sellers abandoned their primary reliance on the expert evidence in relation to the 3rd scenario choosing to rely instead upon four contemporaneous documents to establish that the Earnout Payment would reasonably foreseeably be owing in future. They failed in establishing this. And contrary to the Sellers' submissions, Mr Dawson's evidence did not give me comfort.[26]

55 As a result, in my view, the pursuit by the Sellers of the expert evidence and related discovery added significantly to the time and costs of this Proceeding, both before and during the trial. Further, in my view, the pursuit by the Sellers of the expert evidence and related discovery delayed the matter from being given an earlier trial date_._

56 In all these circumstances, I consider it is appropriate to order costs based on the issues on which the Sellers were successful and unsuccessful.

57 I do not accept that I should award EMR6B some of its costs of the Proceeding. In my view, this would add further to costs of all parties, particularly should they not agree on what those costs ought be.

58 Rather, having regard to my evaluation and impression of the factual and legal issues in this Proceeding, the degree of success the Sellers had in relation to them and the ultimate success of the Sellers:

(a) I will order that EMR6B pay 75 per cent of the costs of the Sellers on a standard basis; and

(b) I will not order that the Sellers pay any part of EMR6B's costs.

59 In my view, it is appropriate that such a costs order only be made against EMR6B. This is because, as set out above, the claims made by and against EMR6B constituted the substantive issues for determination at trial. Further, in their submissions dated 31 January 2025, the Sellers only sought costs orders against EMR6B.[27] In my view, the costs of 29Metals, although a plaintiff, should be dealt with separately and in the context of the claims made by the Sellers against it for inducing breach of contract. I will deal with this in the next section.

60 Finally, in reaching these conclusions, I have regard to the matters set out in [36] above. To the extent it is necessary, it follows from conclusion in [58] that in my view, the costs associated with the pursuit by the Sellers of the expert evidence and related discovery, in the circumstances set out above, were not reasonably incurred.

61 As to the costs of 29Metals, the Sellers submitted that it is appropriate that there be no order as to costs as between 29Metals and the Sellers on the following basis:

(a) 29Metals was represented by the same solicitors and counsel as EMR6B at trial;

(b) the costs incurred solely with respect to the claim against 29Metals were insubstantial and otherwise would have been incurred with respect to the balance of the issues in dispute between EMR6B and the Sellers; and

(c) 29Metals did not adduce any evidence with respect to that claim, and the claim against 29Metals did not occupy a significant portion of the time at trial.

62 In the alternative, the Sellers submitted that any costs order in favour of 29Metals should be limited to the costs incurred by that entity solely in relation to the defence of the counterclaim against it.

63 The plaintiffs contended given that the Sellers' claim against 29Metals was wholly unsuccessful, there are no special circumstances to justify a departure from the general rule that the costs should follow the event.

64 Further, the plaintiffs contended that the Sellers were put on notice that the claim was bound to fail and lacked evidentiary support in the Amended Reply and Defence & Defence to Counterclaim ('ARD&DC') dated 11 March 2022, in a letter to the Sellers dated 6 October 2023 and in the plaintiffs' reply submissions dated 6 October 2023. Nevertheless, the Sellers' solicitors persisted with the claim against 29Metals. As a result, EMR6B submitted that an order for indemnity costs on the counterclaim from 29Metals is justified from 6 October 2023.[28] I note that in the ARD&DC, the plaintiffs raised that the claim against 29Metals did not include proper particulars of key allegations including breach and intention to induce breach. In the plaintiffs' reply submissions dated 6 October 2023, the plaintiffs noted that there was no evidence adduced in relation to key elements of the claim against 29Metals and that claim was simply not addressed in the Sellers' opening submissions. In the 6 October 2023 letter, the plaintiffs requested that the Sellers confirm that they were not pressing the claim for inducing breach of contract against 29Metals.

65 In response, Sellers submitted that, if the Court were to make any costs orders against the Sellers, it ought be limited to costs payable to 29Metals if they are costs that, but for the existence of the counterclaim, would not have been incurred.

66 In summary, in the Reasons I concluded that the claim against 29Metals for inducing breach of contract failed for a number of reasons.

67 The primary reason is because 29Metals did not have the requisite knowledge that by entering the CCH SSPA and the 29Metals Escrow Deed, EMR6B was in breach of the Share Mortgage given that the relevant provisions were complex and far from clear.[29] The Sellers did not address the content of the nature of the relevant breach for the purpose of its claim against 29Metals in its pleading, particulars, evidence or submissions.[30] The breach that I have found was based on the construction of the term 'EMR Investors' which was not raised at any time by the Sellers in the lead up to the alleged breach on 7 June 2021.[31] In these circumstances, I did not consider I was able to form any adverse inference against 29Metals based on Jones v Dunkel[32] on which the Sellers' case was partly based.[33]

68 As a result of the primary reason, I was unable to conclude that:

(a) 29Metals 'intended' to induce or procure EMR6B to breach the Share Mortgage;[34] or

(b) 29Metals 'induced or procured' EMR6B to enter into the CCH SSPA or the 29Metals Escrow Deed based on the 'bald allegation of inducement in the FADCC' and the absence of any evidence.[35]

69 Significantly, I concluded that in this transaction it was EMR6B that arranged or procured for 29Metals to be incorporated for the purpose of acting as the new holding company under these agreement, not the other way round.[36] That is to say, the concept of 29Metals procuring a breach of contract by EMR6B was not logically sound.

70 Finally, I concluded that the Sellers were not entitled to rely upon the Tuck statement given they were put on notice that the Sellers intended to rely upon that statement in support of the claim against 29Metals until the Sellers' written closing submissions, thereby depriving 29Metals of the opportunity to cross-examine Mr Hallion about it or call other evidence. As a result, I excluded it under s 135(a) of the Evidence Act 2008 but concluded in any event that it was insufficiently probative to establish sufficient knowledge to ground an intention to interfere with contractual rights.[37]

71 As a result of all these matters in the Reasons, I have concluded that for the purpose of considering this costs issue, the claim against 29 Metals had no reasonable prospects of success. In my view, that was evident at the latest by 6 October 2023, just before the commencement of the trial. As a result, it is appropriate to order costs in favour of 29Metals in respect of that counterclaim on an indemnity basis from 6 October 2023, and on a standard basis before that time. It follows that, in my view, the costs associated with the pursuit by the Sellers of that claim against 29Metals after that time were not reasonably incurred.

72 It follows from my comments in [59] that I do not accept the Sellers' submissions that, given 29Metals were represented by the same solicitors and counsel as EMR6B, I should limit the costs payable to 29Metals to those costs which, but for the existence of the counterclaim, would not have been incurred. Rather, I have limited the costs entitlement of 29Metals to the claims against it for inducing breach of contract.

Relief concerning Receivership, Collateral and Consideration Shares

(a) a declaration that the Collateral under the Share Mortgage includes the Consideration Shares;

(b) a declaration that the Sellers' appointment of Mr Jeremy Nipps and Mr Clifford Rocke (later retired) over the Collateral on and from 21 June 2021 was valid; and

(c) an order that the plaintiffs deliver up:

(i) to the Receivers, all share certificates and other documents of title in respect of the Consideration Shares, and a blank share transfer form in respect of the Consideration Shares; and

(ii) to the Agent, all share certificates and other documents of title in respect of 10 per cent of all Entity Marketable Securities (as defined in the 2018 SSA), and a blank share transfer form with respect of 10 per cent of all Entity Marketable Securities (as defined in the 2018 SSA).

74 EMR6B did not appear to oppose the first two declarations or delivery up of 'title' documents in relation to the Consideration Shares. However, EMR6B opposed any order for delivery up of 10 per cent of all Entity Marketable Securities. Rather, the plaintiffs contended that the Sellers should be held to paragraph E of the prayer for relief in the FADCC, namely (emphasis added):

E. An order for the delivery up to the Secured Parties of:

(i) all share certificates and other documents of title in respect of the Consideration Shares, and a blank share transfer form in respect of the Consideration Shares;

(ii) in the alternative, all share certificates and other documents of title in respect of 10% of all Entity Marketable Securities (as defined in the 2018 SSA), and a blank share transfer form with respect of 10% of all Entity Marketable Securities (as defined in the 2018 SSA).

75 In reply, the Sellers contended that while the Consideration Shares would have been sufficient to satisfy EMR6B's primary obligations when the counterclaim was issued, there has since been a decline in the share price. Therefore, the Sellers contended that the release of both the Consideration Shares and the Entity Marketable Securities/CCH Shares is required to enforce the Sellers' security over the Collateral and they have a right to enforce their security over all the Collateral. In the absence of this relief, the Sellers foreshadowed that the judgement debt of $12,500,000, interest and costs may not be able to be satisfied by the plaintiffs and may result in further litigation.

76 I am conscious that I have granted some latitude in entering judgment for the Earnout Payment when that relief was not sought in the FADCC. However, I am unwilling to make an order for delivery up of the 'title documents' to 10 per cent of all the Entity Marketable Securities/CCH Shares on the basis of this submission filed by the Sellers after the Reasons were delivered. This issue was not raised, or the subject of evidence and submissions at trial. Further, I am not satisfied, based on the matters raised in the Sellers' submissions after the Reasons, that I should make such an order. Based on those submissions, the Sellers have not established that the judgement debt of $12,500,000, interest and costs may not be able to be satisfied by the plaintiffs and may result in further litigation.

77 In all these circumstances, I decline to make any order in relation to the title documents to the Entity Marketable Securities.

78 In their written submissions, the Sellers seek a declaration that:

EMR6B is liable to indemnify and keep the Sellers indemnified in respect of all Taxes and reasonable Costs incurred by the Sellers and the Receiver in accordance with cl 11.6 of the Share Mortgage and that those sums form part of the Secured Money under the Share Mortgage.

79 In the FADCC, the Sellers only sought a declaration that EMR Capital is liable to indemnify the Secured Parties in respect of all reasonable 'Costs' incurred in the attempted exercise of their powers under cl 11.6 of the Share Mortgage. This is consistent with the pleading of cl 11.6 in [9.3.13] of the FADCC.

80 In their written submissions dated 31 January 2025, the Sellers address this indemnity issue after dealing with costs. The Sellers submitted that 'whether the Court makes an order for costs, the Sellers intend to exercise their rights under cl 11.6 to recover their reasonable Costs incurred in consequence of the Event/s of Default (including both the costs of the Receivers' appointment and the costs incurred in relation to this proceeding) ...'.

81 EMR6B submitted in substance that they was no utility in making a declaration of the kind sought as appropriate costs orders dealing with the costs of this Proceeding. There was no dispute the obligation under cl 11.6 was in force which can be enforced in respect of other costs. This is in light of the findings made as to the occurrence of an Event of Default in this Proceeding and the concessions of the plaintiffs set out in the next section.

82 Further, EMR6B raised a point of construction, submitting that there is no requirement to indemnify under cl 11.6 until a demand is made and from which point EMR6B is obliged to 'indemnify and keep indemnified' the Sellers and Receivers. EMR6B appears to concede that a demand was made on 2 August 2021. In response, the Sellers submitted that, on the proper construction of cl 11.6, the temporal restriction of the kind submitted by EMR6B does not arise and that it is not a matter for the Court to determine in exercising its discretion as to costs.

83 I have formed the view that I should make a declaration in respect of the indemnity in cl 11.6 of the Share Mortgage. This is because, regardless of any costs orders made in this Proceeding, I consider there are likely to be additional costs of the Sellers and Receivers in the exercise of their powers unrelated to the Proceeding, for example, costs incurred by the Receivers prior to the issuing of this Proceeding on 9 September 2021. However, in my view, the contractual indemnity in cl 11.6 must be read subject to the costs orders made in this Proceeding. It follows that any costs of the Sellers relating to this Proceeding (ie the claims or counterclaims) which are not recoverable by reason of the orders I make are not recoverable under cl 11.6. It is appropriate that I reflect this as part of a declaration relating to cl 11.6 of the Share Mortgage.

84 Further, for completeness, I do not accept EMR6B's construction of cl 11.6 pursuant to which the obligation to indemnify would only arise from the time the demand was made. Clause 11.6 refers to 'on demand', not 'from demand'. In my view, the proper construction of cl 11.6 is that the obligation to indemnify arises in respect of costs incurred in exercise of the Sellers' and Receivers' powers in respect of all relevant costs, once a demand has been made. In my view, given the nature of the obligation and the language used, it would not be a commercial construction to limit the obligation to indemnify from the time demand was made.

85 Finally, I have formed the view that a declaration ought be made but only in terms which mirror paragraph D in the prayer of relief.

86 In light of these conclusions in relation to relief and costs, I will now address the outstanding issues from the Reasons.

87 Issue 10 relates to whether the Consideration Shares formed part of the Collateral under the Share Mortgage, from 7 June 2021. In their submissions dated 10 February 2025, the plaintiffs conceded that the answer to issue 10 is Yes. In light of that concession and for the reasons set out in [569] of the Reasons, the answer to issue 10 is 'Yes'.

88 Issue 11 relates to whether the failure by EMR6B to deliver up title to the Consideration Shares immediately after 7 June 2021 constituted an Event of Default under cl 6.2(b) of the Share Mortgage by reason of a breach by EMR6B of cll 5.2(g) or 5.2(h) of the Share Mortgage. In their submissions dated 10 February 2025, the plaintiffs also conceded that the answer to issue 11 is 'Yes'. In light of that concession and for the reasons set out in [571] of the Reasons, the answer issue 11 is 'Yes'.

89 Issue 13 relates to whether the first defendant has an entitlement to be indemnified for his costs of enforcement of the Share Mortgage under cl 11.6 of the Share Mortgage. I have addressed this issue when dealing with cl 11.6.

90 Issue 14 relates to the relief to be ordered. I have addressed the substance of this issue in these reasons.

91 As a result, I propose to make orders and declarations as follows:

(a) an order that the plaintiffs' claims be dismissed;

(b) an order that there be judgment on the counterclaim for the first defendant as Agent for the Sellers against EMR6B for the sum of $12.5 million with interest to accrue at the rate of 6 per cent from 17 June 2021 until the date of judgment;

(c) an order that the first plaintiff pay 75 per cent of the costs of the first defendant of each of the plaintiffs' claims and the first defendant's counterclaim against the first plaintiff on a standard basis to be taxed in default of agreement;

(d) an order that the first defendant pay the costs of the second plaintiff in respect of the counterclaim against it for inducing breach of contract on a standard basis until 6 October 2023 and on an indemnity basis after that time, to be taxed in default of agreement;

(e) a declaration that the Collateral under the Share Mortgage includes the Consideration Shares;

(f) a declaration that the Sellers' appointment of Mr Jeremy Nipps and Mr Clifford Rocke (later retired) over the Collateral on and from 21 June 2021 was valid;

(g) an order that the plaintiffs deliver up all share certificates and other documents of title in respect of the Consideration Shares, and a blank share transfer form in respect of the Consideration Shares; and

(h) a declaration that the first plaintiff is liable to indemnify and keep the Sellers indemnified in respect of all reasonable Costs incurred by the Sellers and the Receivers in accordance with cl 11.6 of the Share Mortgage, save for the costs in respect of the costs of the plaintiffs claims and of the first defendant's counterclaims which are the subject of orders (c) and (d) above.

92 I will not pronounce formal orders now. It is my intention to do so on Thursday 27 March 2025. The Sellers are requested to prepare and circulate a form of orders consistent with these reasons as soon as reasonably practicable. Further, the parties are requested:

(a) to confer about the form of orders in accordance with these reasons; and

(b) provide to the Court by 4:00pm on Monday 24 March 2025 an agreed form of orders or, if agreement cannot be reached, a form of orders with areas of disagreement marked up.

I expect the parties to work co-operatively in seeking agreement on the form of orders in accordance with these reasons.

93 Further, I have received an application by the plaintiffs for a stay of any order made. I will hear that application on Thursday 27 March 2025. Once again, I expect the parties to cooperate in seeking to agree the terms of a stay in light of the Reasons and these reasons. To the extent that the parties cannot agree on the terms of a stay, any submissions not exceeding four pages are to be filed by 2:00pm on Tuesday 25 March 2025.

[1] EMR Capital Investment (No. 6B) Pte Ltd v Carl Hallion [2024] VSC 805 (the 'Reasons'). For convenience, I will adopt the terms defined in the Reasons.

[2] (1982) 148 CLR 658, 664 (Murphy, Wilson, Brennan, Deane and Dawson JJ).

[3] Further Amended Defence and Counterclaim dated 2 March 2022, [56].

[4] Plaintiffs' submissions on relief dated 10 February 2025, [25].

[5] Relying on Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382, 396-7 (Fullagar, Marks and JD Phillips JJ).

[6] [2021] VSC 393, [59]-[64] (Lyons J).

[7] Being the dates by which the respective offers lapsed.

[8] Calderbank v Calderbank [1976] Fam 93 (Cairns, Scarman LJJ and Sir Gordon Willmer) ('Calderbank').

[9] Plaintiffs' submissions on relief dated 10 February 2025, [16], citing Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 440-441 [19]-[20] (Warren CJ, Maxwell P and Harper AJA).

[11] I note the costs of which were reserved by Order of 24 August 2022.

[12] Relying upon defendants' closing submissions dated 14 November 2023, [128]. In fact, the submissions provided that the Court could take comfort from the evidence of Mr Dawson.

[13] Plaintiffs' submissions on relief dated 10 February 2025, [18].

1. [14] Chen and Xu v Kevin McNamara & Son Pty Ltd (No 2) [2012] VSCA 229, [8], [10] (Redlich JA, Maxwell P

agreeing at [1] and Robson AJA agreeing at [22]).

[15] [2005] VSCA 298; (2005) 13 VR 435, 441 [20] (Warren CJ, Maxwell P and Harper AJA) ('Hazeldene's Chicken Farm').

[16] Ibid 441 [23]-[24] (Warren CJ, Maxwell P and Harper AJA).

[17] Ibid 442 [25] (Warren CJ, Maxwell P and Harper AJA).

[18] Mandie v Mehmart Nominees Pty Ltd [2020] VSCA 320, [24] (Tate, Niall, Emerton JJA) ('Mandie'), quoting Chen v Chan [No 2] [2009] VSCA 233, [10(5)] (Maxwell P, Redlich JA and Forrest AJA).

[19] Mandie [2020] VSCA 320, [28] (Tate, Niall, Emerton JJA); M_ajor Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2_) [2006] VSCA 114, [4] (Chernov and Ashley JJA, Mandie AJA) ('Major Engineering').

[20] Mandie [2020] VSCA 320, [23] (Tate, Niall, Emerton JJA).

[21] Ibid [26] (Tate, Niall, Emerton JJA).

[22] [2020] VSCA 97, [5] (Tate, Kaye and Niall JJA), quoted in Mandie [2020] VSCA 320, [27] (Tate, Niall, Emerton JJA).

[23] Mandie [2020] VSCA 320, [28] (Tate, Niall, Emerton JJA).

[24] M_ajor Engineering_ [2006] VSCA 114, [5] (Chernov and Ashley JJA, Mandie AJA).

[27] Sellers' submissions on relief dated 31 January 2025, [10(8)].

[28] Relying upon Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397, 401 (Woodward J).

[32] [1959] HCA 8; (1959) 101 CLR 298.