Flynn v PPK Mining Equipment Pty Ltd

Facts

1. In October 2014, the Share Purchase Agreement was executed and the cash component of the purchase price was paid. The earnout conditions for the second tranche of shares were, relevantly, that the business' net profit after tax (NPAT) exceed $250,000 in the second year. In May 2015, PPK agreed to vary the Share Purchase Agreement such that the earnout condition was changed from NPAT of $250,000 to revenue of $1 million. The variation was not, however, properly recorded and, given the substantial changes in PPK's senior management in what appears to have been turbulent times, was lost to corporate memory. In October 2015, the first tranche of PPK shares was issued to the plaintiffs, albeit the shares were then suspended from trade on the Australian Securities Exchange (ASX) and remained suspended for 19 months.
2. In October 2016, time came to assess whether the plaintiffs had satisfied the earnout conditions for the second tranche of PPK shares. A dispute arose as to whether the Share Purchase Agreement had been varied and, if so, whether revenue exceeded $1 million. The plaintiffs agitated their position in 'fits and starts'. While PPK's shares resumed trade on the ASX in August 2017, the plaintiffs' appetite to take the matter further was likely impacted by the low share price at the time.
3. Ultimately, in January 2019, the plaintiffs commenced these proceedings. By Summons and Commercial List Statement, the plaintiffs contended that the Share Purchase Agreement had been varied from NPAT to revenue, and that the revenue threshold of $1 million had been met. The pleadings did not specify precisely how it was said that revenue exceeded $1 million; this issue was 'fleshed out' by affidavits of the first plaintiff, Daniel Flynn, progressively filed as the matter progressed to trial.
4. The trial was listed for hearing for four weeks but completed in 10 hearing days. The number of witnesses called to give evidence was significant, being 18 lay witnesses and four expert witnesses. The expanse of the documentary tender was considerable, comprising some 5,000 pages. Obviously, this allocation of resources was unwarranted on a $500,000 claim but perhaps justified on the multi-million dollar claim which the plaintiffs asserted their case to be.
5. In December 2022, I gave judgment, declaring that the Share Purchase Agreement had been varied but otherwise dismissing the plaintiffs' claims: Flynn v PPK Mining Equipment Pty Ltd (No 2) [2022] NSWSC 1640. As to costs, I considered at [198]: "Although the plaintiffs have succeeded in obtaining declaratory relief in respect of the variation of the Share Purchase Agreement, the evidence on this issue was confined and uncontentious. It was a legal question on which the principles were clear. Success on this part of the case has also been for nought where the earnout benchmark was not achieved in any event. … I consider that 80% of the costs of the proceedings should be paid by the plaintiffs.
6. The plaintiffs filed a Notice of Appeal on 1 March 2023. In what I assure the reader will become relevant, the defendants filed a motion seeking a gross sum costs order in respect of the trial costs to be paid by the plaintiffs. In support of the application, the defendants filed an affidavit by solicitor Patrick Kaluski and an expert report by costs consultant Peta Solomon. Mr Kaluski detailed the long and complicated procedural history of the matter, which had led to the expenditure of $1,190,624 on solicitors, $304,122 on senior counsel, $529,135.53 on junior counsel and $460,220.64 on expert witness, Campbell Jackson of Ernst & Young. The total expenditure was $2,542,383.16. A gross sum was sought in the amount of $1,786,424.12, being the midpoint of the range of costs which Ms Solomon considered would be recoverable on a costs assessment. If this was 80% of the defendants' costs of the proceedings, then it follows that the defendants' costs on an ordinary basis were in toto some $2.23 million.
7. The defendants' motion was listed before me for directions on 31 March 2023, when I queried the utility of such an application where an appeal was on the foot. I also enquired as to why a lump sum costs order should be made for such a sizeable amount unless there was some practical reason to do so, for example, if it were the case that the plaintiffs were not able to pay assessed costs in any event. I was informed by the plaintiffs' counsel that the plaintiffs were not in a position to pay the amount of $1.7 million. I was also informed by the defendants' counsel that they understood and accepted the risk that obtaining a lump sum costs order may be futile if the appeal was successful, but the defendants wished to proceed in any event. I made directions for the defendants to put on evidence in respect of the motion but, ultimately, the parties agreed on consent orders. On 19 April 2023, by consent, I ordered the plaintiffs to pay the defendants' gross sum costs in the amount of $1,786,424.12, such costs order to take effect seven days after judgment was delivered in the appeal proceedings.
8. In August 2023, the plaintiffs' appeal was allowed in part: Flynn v PPK Mining Equipment Pty Ltd [2023] NSWCA 201. PPK's notice of contention was unsuccessful. PPK was ordered to pay the costs of the appeal.
9. On 2 November 2023, whilst an application for special leave to appeal to the High Court was on foot, PPK served a Calderbank letter with the following offer: "(a) PPK Parties will pay to the Flynn Parties the sum of $1,000,000 in full and final settlement of all claims for relief of the following proceedings: (i) Supreme Court of New South Wales numbered 2019/00011615. (b) PPK Parties will pay to the Flynn Parties reasonable costs in the amount of $1,000,000 in full and final satisfaction of all costs in the following proceedings: (i) Supreme Court of New South Wales numbered 2019/00011615; (ii) Court of Appeal Proceedings numbered 2022/00384592; and (iii) High Court of Australia Proceedings numbered S144/2023. (c) The whole of any current proceedings are dismissed. (d) The payments in … (a) and 2(b) above to be made by equal monthly instalments within 12 months. (e) The parties enter into a mutually satisfactory Deed of Settlement and Release."
10. The offer was not accepted. The application for special leave to appeal to the High Court of Australia was refused. On the remitter, I assessed contractual damages at some $350,000. I concluded that it was not just to confine the plaintiffs to this remedy in the circumstances but ordered specific performance of PPK's obligation to issue $500,000 worth of PPK shares to the plaintiffs.
11. Ms Hammond analysed the transcript of the trial, the affidavits and documentary evidence to identify what portion of the hearing and evidence related to the issues on which the plaintiffs succeeded, being whether the Share Purchase Agreement was varied and the revenue item on which the plaintiffs succeeded on appeal, called "FLP-1", sufficient to get the plaintiffs 'over the line' of $1 million revenue. Mr Rogers took a broader approach when undertaking the same analysis and arrived at slightly higher figures. The solicitors' analyses are summarised as follows, where the higher figure is that of Mr Rogers: Variation issue FLP-1 issue Total Transcript 5.5% or 9% 8% or 10% 13.5% or 19% Affidavits 6% or 8% 7% or 8.5% 13% or 16.5% Documents 1% 6% 7% Average 5% 7.5% 12.5%

1. Neither solicitor considered the transcript, affidavits or documents which dealt with the issue of damages, for which some allowance may also need to be made. The parties' counsel agreed that the time spent on the damages issue was less than that taken on the variation issue. Assuming in the plaintiffs' favour, for the purposes of the analysis, that the time taken was the same as the variation issue, then the total portion of the trial occupied by the issues on which the plaintiffs succeeded was some 17.5%.

Submissions

1. The plaintiffs sought their costs of the proceedings on the ordinary basis. There was said to be no basis to award only a portion of the plaintiffs' costs, where the plaintiffs succeeded on all issues: whether there was a variation to the Share Purchase Agreement; whether revenue exceeded $1 million in the relevant period; whether the plaintiffs were entitled to the issue of $500,000 of shares; and at what date that should be calculated or whether damages should be awarded. The costs should follow the event, where the "event" generally refers to the claim or cross-claim and the result of such a claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15]. Unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (per Beazley, Ipp and Basten JJA). No such issues arose in this matter.
2. The plaintiffs submitted that it could not be said that $1 million paid over 12 months were better than $500,000 in shares issued now, particularly given the volatility in the share price. Nor was there any evidence as to the plaintiffs' costs of the three proceedings, such that an assessment could be made as to whether $1 million for the costs put the plaintiffs in a better position than not accepting the offer. The defendants were not able to establish that they did better than the offer of 2 November 2023, such that there was no basis to vary the usual order as to costs: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344; Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816.
3. The defendants submitted that the plaintiffs should only be awarded a portion of their costs, where they had succeeded on only some of the many issues advanced. The issues on which the plaintiffs failed were said to be dominant or separable, and took up a significant part of the trial. Apart from the variation issue, each of the components of extra revenue sought were discrete, relying upon evidence which largely related to that component alone. The plaintiffs succeeded only in establishing that the Share Purchase Agreement was varied and that revenue in respect of "FLP-1" components should be included in the earnout calculation. The defendants submitted that Ms Hammond's analysis of the amount of hearing time and related evidence taken up with these two issues should be accepted. The defendants ought pay no more than 50% of the plaintiffs' party-party costs.
4. In addition, the defendants relied on the Calderbank letter, which was served after an Application for Special Leave in the High Court was filed but before the outcome of that application was known. Although the plaintiffs had succeeded on the FLP-1 issue in the Court of Appeal, the best the plaintiffs could hope to achieve was an order compelling PPK to issue $500,000 worth of PPK shares. Where the plaintiffs obtained an award of $500,000 worth of PPK shares, the plaintiffs did no better in the end. Although the offer was made very late in the proceedings, the Court could still exercise its discretion to award indemnity costs by reason of the plaintiffs' unreasonable refusal to accept it: Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816 at [9]-[15].

Portion of costs

1. The Court has wide discretionary powers to apportion costs where a case involves multiple issues and a party succeeds on some issues but fails on others. For example, a plaintiff may obtain judgment in their favour but the defendant may have succeeded on issues that occupied the bulk of the time taken by the proceedings. The successful plaintiff may not only be deprived of the costs of those issues but may be ordered as well to pay the defendant's costs in respect of such issues: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]-[36] (per Beazley, Tobias and McColl JJA).
2. As the Court of Appeal observed in Ryde Developments Pty Ltd v Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 at [6]: "Section 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs. Under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) the general rule is that the Court is to order that costs follow the event. The 'event' may be characterised in more than one way. Generally the 'event' refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] per Ward, Emmett and Gleeson JJA. Where there has been a mixed outcome in the proceedings, and it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the Court: Doppstadt at [19]; James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22."
3. Similarly, apportionment of costs between issues has been described as "very much a matter of discretion, [where] mathematical precision is illusory": Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 86 ACSR 119; [2011] NSWCA 256 per Campbell JA (with whom Macfarlan and Young JJA agreed) at [84].
4. There were, broadly, eight issues to be determined at trial.
5. First, was the Share Purchase Agreement varied? This was a short point, where PPK accepted that chief executive officer, Peter Barker, had agreed with Mr Flynn to amend the contract but contended that, absent recording the amendment in writing, it was ineffective: cll 19.2 and 19.3, Share Purchase Agreement. I found in the plaintiffs' favour on this issue at trial, which was not challenged on appeal.
6. Second, did the Court has jurisdiction to determine whether the earnout conditions were satisfied, given an expert determination clause in the Share Purchase Agreement? This was also a short point which received little attention in the parties' submissions. I found in the plaintiffs' favour on this issue at trial. PPK filed a Notice of Contention in the appeal but was unsuccessful.
7. Third, what Accounting Standards, if any, applied to the calculation of revenue? This turned on the construction of the Share Purchase Agreement and consideration of the competing views of the accounting experts, Suzanne Delbridge of Delbridge Forensic Accounting for the plaintiffs and Mr Jackson of Ernst & Young for PPK. Both parties enjoyed a measure of success on this issue at trial. I accepted the plaintiffs' contention that the definition of Accounting Standards focussed on the standards applicable to the business sold, rather than the Accounting Standards applicable to PPK. However, I concluded that there was no relevant difference between the applicable accounting principles. I rejected the plaintiffs' contention that "transfer pricing" was a generally accepted accounting principle pertaining to the business sold. While the way in which the issues at trial were classified on appeal differed somewhat, I think it is fair to say that the plaintiffs' arguments on this issue on appeal, as part of the fourth issue (see below), were together successful.
8. The remaining issues concerned various amounts which the plaintiffs contended should be included in the calculation of revenue, such that the $1 million threshold was met. The accounting experts agreed that the business had revenue of $743,689 in the second year after sale. It was thus necessary for the plaintiffs to prove a further $256,311 in revenue, to achieve the earnout condition. This issue was hard-fought. Each item of revenue involved different lay witnesses and documents as well as distinct issues for the various experts. I agree that each of the revenue items were clearly dominant or separable: Mobis Parts Australia Pty Ltd v XL Insurance Co SE (No 2) [2019] NSWCA 19 at [5] (Beazley P, Meagher and Leeming JJA).
9. The largest contentious revenue item, being the fourth issue, was revenue for "internal jobs", where a job required labour and parts from the plaintiffs' business and also other divisions of PPK. The plaintiffs claimed revenue of $317,319 for "internal jobs", of which the bulk came from making a component called "FLP-1". PPK's Group Financial Controller, Fiona Wilson, gave uncontentious evidence on this subject as to how PPK accounted for "internal jobs", while the expert accountants were strongly at odds on this issue. I found against the plaintiffs on this issue, but the plaintiffs succeeded on appeal. This was enough to get the plaintiffs 'over the line' of $1 million revenue.
10. The fifth issue was whether a deposit of $51,579 should be included as revenue. This issue was of limited evidentiary compass, concerning limited oral evidence from Ms Wilson and a few documents. I found against the plaintiff on this issue. The plaintiffs appealed but lost.
11. The sixth issue was whether the business, when sold, included a 'hydraulics overhaul' business, such that revenue earned from this activity ($161,794) should be included. This issue was of wide evidentiary compass, involving contested evidence from Mr Flynn, hydraulic designer Constantino Theodoridis and the expert evidence of Mr Dunlop on behalf of the plaintiffs. PPK relied on the evidence of director Dale McNamara, engineering consultant Patrick Schweizer, electrical engineer Joshua Partridge and former General Manager of Engineering of Exlec's former client, Caledon Resources Ltd, Manfred Luttenberger. A large amount of documentary material was involved, including invoices and quotes said to support the existence of a 'hydraulics overhaul' business before the Share Purchase Agreement. I found against the plaintiff on this issue, where I was not satisfied that the business included a 'hydraulics overhaul' business. The plaintiffs did not challenge this finding on appeal.
12. The seventh issue was the extent to which use of the business' certifications, called "Certificates of Recognition", had the consequence that revenue earned in other PPK workshops should be included and contributions made by other PPK divisions to work undertaken in the business' workshop should be ignored. This involved three sub-issues, which it is necessary to detail, and revenue of $258,846. The "Certificates of Recognition" issue involved probably the largest number of witnesses and documents. The witnesses included Mr Flynn, Mr Partridge, operations manager Mark Hall, electrical co-ordinator Richard McLean and electronics production supervisor Andrew Pearce. I found against the plaintiff on this issue. On appeal, Stein JA concluded that such revenue should have been included whilst Leeming and Michelmore JJA expressed no view.
13. The eighth issue was damages, which I determined on the remitter. Evidence on this issue was given by Mr Flynn and wife Rebekah Flynn, together with expert evidence from stockmarket analyst Roy Shackley. Mr and Mrs Flynn's affidavits on this issue were brief. Mrs Flynn was not required for cross-examination. Cross-examination of Mr Flynn on this issue was negligible. Mr Shackley was cross-examined; the transcript of his evidence comprises six pages. Mr Shackley's evidence was not contentious, where PPK (rightly) considered it to be irrelevant.
14. I consider that this is a classic case in which the costs of the trial should be apportioned. Notwithstanding that the plaintiffs have ultimately obtained a remedy, the trial was dominated by multiple issues on which they failed. As can be seen from the analysis undertaken by the parties' solicitors, roughly 80% of the trial was occupied by the issues on which the plaintiffs did not succeed. Aside from the issues which focussed on a proper construction of the Share Purchase Agreement, the bulk of these issues involved distinct categories of documents and different witnesses who spoke to that material. The defendants were put to substantial cost in defending each of those issues. The plaintiffs should not have all their costs so as to reflect the limited extent to which the plaintiffs succeeded as well as the hearing time of the Court and the expense to which the defendants were put in meeting issues on which the plaintiffs did not succeed.
15. I cannot now improve on my assessment of the portion of the relative success of the parties on the issues as determined at trial, being 20% in the plaintiffs' favour and 80% in the defendants' favour. The plaintiffs' success at that point was on the first, second and third issues as I have identified those issues at trial to have been, where success on the third issue (Accounting Standards) was partial. Obviously enough, the degree to which the plaintiffs succeeded must now be re-visited. Some allowance must be made for the plaintiffs' further success in respect of Accounting Standards and the consequential success in respect of "internal jobs" and, ultimately, damages.
16. However, while the plaintiffs succeeded on damages in the sense that a remedy was granted, it is difficult to view the result as a success given how high the plaintiffs 'pitched' their case. The way that the plaintiffs characterised their damages case on this application is too modest. The plaintiffs sought specific performance of the defendants' obligation to issue $500,000 worth of shares but as if the shares had been issued some years earlier, in November 2016 or February 2017, together with the distribution of all dividends attached to the shares in the intervening years. The plaintiffs thereby sought to capture the uplift in the PPK share price since the second anniversary of the sale, by calling in aid various equitable and common law doctrines or a blend of same: Flynn v PPK Mining Equipment Pty Ltd (No 3) [2024] NSWSC 663 at [77], [82]. As I understood the argument, the plaintiffs' claim calculated in this fashion at the height of the PPK share price ($21.04) was some $72 million! The final result was some distance from the plaintiffs' claim, said to be "about $8 or $9 million" in opening and reduced somewhat to between $4.4 million and $6.4 million in closing.
17. In the result, the plaintiffs obtained the remedy for which PPK contended in the event that PPK's defences otherwise failed. Indeed, if the plaintiffs had sought $500,000 in PPK shares from the outset, these proceedings would have commenced in the District Court and - one would like to think - would have been readily resolved, or at least resolved at a fraction of the time and costs expended, including by this Court, the Court of Appeal and the High Court. Overall, I struggle to see the result on the issue of damages as one on which the plaintiffs succeeded in the true sense of the word.
18. Noting that this exercise ought be carried out "on a relatively broad brush basis, and largely as a matter of impression", and where "mathematical precision is illusory", I consider that the defendants' position that the plaintiffs should have 50% of the costs is more than fair. That is, the result which the plaintiffs have obtained in these proceedings is the issue of $500,000 worth of PPK shares and an order that the defendants pay half of the plaintiffs' costs of the proceedings. It is against this 'baseline' that the Calderbank offer must now be compared.

Calderbank letter

1. There is no "presumptive entitlement" to indemnity costs flowing from a failure of a party who has rejected a Calderbank offer to achieve a better outcome than provided for in the offer. Rather, the offeror must establish that the Calderbank offer involved a real and genuine element of compromise and that non-acceptance of the Calderbank offer was unreasonable: CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] (per Moore, Finn and Jessup JJ); Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]-[9] (per Basten JA, McColl and Campbell JJA agreeing).
2. The offeror bears the onus to establish to the Court's satisfaction that, in all the circumstances, failure to accept the offer was unreasonable: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] (per Giles, Ipp and Tobias JJA). Unreasonableness is to be judged by reference to the circumstances facing the offeree at the time of the offer, and not with the benefit of hindsight: CGU at [75]; Miwa at [11]. The factors which the Court may take into account include the stage of the proceeding at which the offer was received, the time allowed to the offeree to consider the offer, the extent of the compromise offered, the offeree's prospects of success (assessed as at the date of the offer), the clarity with which the terms of the offer were expressed and whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it: Miwa at [12].
3. A relatively low offer may support an indemnity costs order: Owners Corporation Strata Plan 61288 v Brookfield Multiplex Ltd [2012] NSWSC 1586 per McDougall J at [27]. Against this, the reasonableness of the refusal of a Calderbank offer may also be affected by the complexity of the proceedings. For example, in LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72, Barrett J declined to order indemnity costs despite finding that a defendant's Calderbank offer was reasonable, as the "case was not clear cut … with a myriad of issues of some complexity on which it would have been by no means easy to predict the outcome in advance of full presentation of evidence and full argument": at [53]-[55].
4. The plaintiffs did not suggest that the Calderbank offer was not open for a reasonable period of time to enable proper consideration. Nor did the plaintiffs dispute that the offer involved a real and genuine element of compromise. Rather, the plaintiffs' submission focused on the inability to ascertain whether the plaintiffs had done better or not, when compared with the Calderbank offer, where the quantum of the plaintiffs' costs was not known. The only evidence on costs was in respect of the defendants' costs following the trial, from it was sought to extrapolate what the plaintiffs' costs might be.
5. I have a couple of problems with the plaintiffs' submission. First, the only parties who know what the plaintiffs' costs are, unsurprisingly, the plaintiffs. The plaintiffs put on two 'rounds' of affidavits on this application, being an affidavit from Mr Rogers in chief and one in reply. In neither affidavit did Mr Rogers touch upon the quantum of the plaintiffs' costs. It was, of course, open for the defendants to issue notices to produce to the plaintiffs, seeking production of their costs agreement and invoices. But where the issue of the plaintiffs' costs was a subject which was going to be canvassed on this application, the plaintiffs' silence may be thought telling. I have, however, refrained from inferring that evidence of the plaintiffs' legal costs would not assist them on this application, where the onus is on the defendants to satisfy the Court that an indemnity costs order is appropriate in all of the circumstances: Evans at [26].
6. Second, I do not consider that the defendants' trial costs are an indication of the plaintiffs' costs, where the amount of resources allocated to these proceedings by the defendants was obviously far greater than those expended by the plaintiffs. The defendants called the bulk of the lay witnesses. The defendants' expert accountant, Mr Jackson of Ernst & Young, likely cost a great deal more than Suzanne Delbridge of Delbridge Forensic Accounting of Hamilton East, having regard to the quality of their reports. This is not to criticise the plaintiffs; likely, their available resources were far less. I also do not know, for example, whether the plaintiffs had a speculative fee agreement with their legal representatives, such that costs were only payable in the event of success and, perhaps, then as a percentage of the favourable result.
7. Assuming, without accepting, that the defendants' trial costs are an indication of the plaintiffs' costs, I have already noted that the defendants' costs of the trial on a party and party basis were some $2.23 million. I have already concluded that the plaintiffs are only entitled to 50% of their costs of the proceedings. Half of $2.23 million is $1.115 million.
8. In order to compare the Calderbank offer with how the plaintiffs have fared, the plaintiffs were awarded the costs of the appeal, which I can see from the Court of Appeal's judgment took two days and where the plaintiffs were represented by two junior counsel. Allowing for a two-day appeal and two days' preparation, and proceeding on the basis that the plaintiffs' instructing solicitor charged fees in roughly the same amount as two junior counsel, the plaintiffs' party and party costs of the appeal were likely some $38,400. The costs of the application for special leave likely involved far less work and I have allowed $9,600 for this. The total of these costs is $48,000.
9. To this should be added the $500,000 worth of PPK Shares, bringing the result which the plaintiffs have obtained in all three proceedings to a total of $1.663 million in either shares or costs. I consider that this figure significantly overstates the result which the plaintiffs have obtained where, for reasons earlier stated, the plaintiffs' costs of the proceedings are most likely far less than I have assumed for the purpose of this exercise. Even making this assumption in the plaintiffs' favour, accepting the Calderbank offer of $2 million for both damages and costs of the three proceedings would have given the plaintiffs a better outcome than they have ultimately achieved.
10. The remaining question is whether the plaintiffs' non-acceptance of the Calderbank offer was unreasonable, having regard to the principles earlier outlined. At the time the Calderbank offer was made, the complexity of the proceedings was substantially distilled. What remained was the assessment of damages and a re-exercise of the Court's discretion in respect of the costs of the trial. Of course, there was also a risk that the application for special leave to the High Court would be granted, in which case the remaining issues to be resolved would increase.
11. The offer was made at a point in time where the plaintiffs were well able to consider the merits of their damages claim and the generosity (or otherwise) of the offer before them. The defendants offered double what they maintained the plaintiffs should receive on the remitter for damages. The defendants also offered a substantial sum for costs. Where the most likely result was that the plaintiffs would obtain $500,000 in PPK shares - not with the benefit of hindsight but simply stated in the Share Purchase Agreement - this left $1.5 million for the costs of the trial, appeal and application for special leave. At the time of the offer, the plaintiffs continued to face the risk that they would not be awarded their costs of the trial in toto given their failure on many of the issues advanced below. Viewed in the whole, I consider that failure to accept the offer was unreasonable in the circumstances.
12. I note also that making an indemnity costs order from the date of the Calderbank letter will have limited ramifications for the plaintiffs' ability to recover costs, where an indemnity costs order will only take effect from after dismissal of the appeal. That is, such an order would only apply to whatever remained of the application for special leave to appeal, the remitter for damages (on which the costs were likely minimal, where the issue was be determined on the papers) and costs (which occupied an hour and a half hearing time).
13. For these reasons, I make the following orders: 1. Order the defendants to pay 50% of the plaintiffs' costs of these proceedings on a party and party basis from commencement of the proceedings until 2 November 2023. 2. Order the plaintiffs to pay the defendants' costs of these proceedings on an indemnity basis from 2 November 2023 on.

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