In the matter of Azzurri Group Holdings Pty Ltd (No 3)

Catchwords: COSTS – party/party costs - where Calderbank offer made – whether indemnity costs order should be made – whether unreasonableness in conduct of defence to cross-claim – whether appropriate to make a gross sum costs order – no issue of principle
INTEREST – whether interest should be awarded where no dispute about entitlement to sum, or where claims compromised at hearing – no issue of principle

Legislation Cited: Civil Procedure Act 2005 (NSW) ss 98, 100
Uniform Civil Procedure Rules 2005 (NSW) r 42.1

Cases Cited: Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009
Calderbank v Calderbank [1975] 3 All ER 333
Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364
Gabrielle v Abood (No 4) [2023] NSWCA 100
Haines v Bendall (1991) 172 CLR 60; [1991] HCA 15
Hamod v State of New South Wales & Anor [2011] NSWCA 375
In the matter of Azzurri Group Holdings Pty Ltd (No 2) [2025] NSWSC 1064
In the matter of Azzurri Group Holdings Pty Ltd [2025] NSWSC 607
Jun International Property Pty Ltd v Fullerton Property Pty Ltd [2019] NSWSC 450
Kwanchi Pty Ltd v Kocsis (1996) 40 NSWLR 270
Lahoud v Lahoud [2011] NSWSC 994
Lorenzato v Lorenzato & Anor (No 2) [2011] NSWSC 790
Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWC 344
Nine Network Australia Pty Ltd v Birketu Pty Ltd [2016] NSWSC 694
Salmon v Albarran (No 2) [2025] NSWCA 115
State of New South Wales v Avery (2016) 92 NSWLR 141; [2016] NSWCA 147
White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303
Woollahra Municipal Council v Secure Parking Pty Ltd (No 2) [2015] NSWSC 452
Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA

Category: Costs

Parties: Peter Martino (First Plaintiff)
2B6 Enterprises Pty Ltd (Second Plaintiff)
Azzurri Group Holdings Pty Ltd (First Defendant)
Azzurri Concrete Group Pty Ltd (Second Defendant)
MPD Developments Pty Ltd (Third Defendant)
Mr Donato D’Angola (Fourth Defendant)
Sogase Pty Ltd (Fifth Defendant)
Mr Mario D’Angola (Sixth Defendant)
Balli Constructions Pty Ltd (Seventh Defendant)
Azzurri Concrete Enterprises Pty Ltd (Eighth Defendant)
Azzurri Concrete Pty Ltd (Ninth Defendant)

Representation: Counsel:
A P Cheshire SC / J Cook (Plaintiffs/Cross Defendants)
E A J Hyde SC (Defendants/Cross-Claimants)
Solicitors:
AJL Legal (Plaintiffs)
Paradise Charnock Hing (Defendants)

File Number(s): 2023/00151182

Publication restriction: Nil

JUDGMENT

1. On 18 September 2025, I delivered reasons for judgment and made orders in this proceeding: In the matter of Azzurri Group Holdings Pty Ltd (No 2) [2025] NSWSC 1064 (Primary Judgment). This judgment assumes familiarity with, and adopts defined terms from, the Primary Judgment.

2. In the Primary Judgment, I determined that the First Plaintiff, Mr Peter Martino, had succeeded in establishing his claim that the Fourth Defendant, Mr Donato D’Angola, and the Sixth Defendant, Mr Mario D’Angola, had breached the Shareholders Agreement in relation to Azzurri Concrete by compulsorily acquiring Mr Martino’s shares in that entity for a sale price which was not determined in accordance with that agreement. I was also satisfied that this conduct constituted oppressive conduct within the meaning of s 232 of the Corporations Act 2001 (Cth).

3. In respect of the Cross-Claim, the parties agreed, on the final day of the hearing, that the Cross-Claimants were entitled to judgment against Mr Martino in the sum of $300,000.

4. At the time of delivering the Primary Judgment, I directed the parties to bring in short minutes of order to give effect to the reasons for judgment, and, if such orders could not be agreed (including as to interest and costs), to provide submissions on the matters which remained in dispute.

5. The parties have agreed the form of orders that should be made in respect of judgment and interest for Mr Martino’s claim regarding the compulsory acquisition of his shares. In particular, the parties agree that, in accordance with the findings made in the Primary Judgment, there should be an order that Mr Donato D’Angola and Mr Mario D’Angola pay Mr Martino the amount of $1,163,000, together with pre-judgment interest on that amount from 9 August 2023 to the date of final orders (the amount of such interest being, as of the date of these reasons for judgment, $211,204).

6. The matters which remain in dispute, and which are addressed below, are:

7. whether Mr Martino is entitled to interest in respect of an amount described below as the “Balli Sum” (noting that there was no dispute at the hearing as to Mr Martino’s entitlement to that sum);

8. whether the Cross-Claimants are entitled to an award of interest on the agreed judgment sum of $300,000 in respect of the Cross-Claim;

9. the form of costs orders that should be made and, in particular, whether the Defendants/Cross-Claimants are entitled to an award of costs on an indemnity basis from 14 July 2025, by reason of a Calderbank offer served shortly before the commencement of the hearing; and

10. whether the Defendants/Cross-Claimants are entitled to a gross sum costs order.

Interest on Balli Sum?

7. Mr Martino seeks pre-judgment interest in relation to the sum of $124,292.50 (the Balli Sum) that was paid to him on 1 August 2025.

8. This sum represents part of the proceeds from the sale of a property in Balgownie, New South Wales (Balgownie Property), which was owned by the Seventh Defendant, Balli Constructions Pty Ltd.

9. Balli Constructions was an investment vehicle within the Azzurri Group: see Primary Judgment at [8]. Mr Martino held an 18% interest in this entity, through the Second Plaintiff and the 2B6 Enterprises Trust: Primary Judgment at [7].

10. In the Second Further Amended Statement of Claim (at paragraphs [30Q]-[30R]), Mr Martino pleaded that Balli Constructions had wrongfully, and in breach of its obligations, refused or failed to distribute the proceeds of the sale of the Balgownie Property to Mr Martino, in circumstances where Balli Constructions has distributed the proceeds of that sale to each of Mr Donato D’Angola and Mr Mario D’Angola.

11. At the hearing, the Court was informed that there was no dispute that Mr Martino was entitled to the Balli Sum: Primary Judgment at [17]. This sum was paid to Mr Martino the day after the hearing concluded (that is, on 1 August 2025).

12. Mr Martino seeks pre-judgment interest on the Balli Sum from the date of the sale of the Balgownie Property to the date of the payment of the Balli Sum.

13. Section 100 of the Civil Procedure Act 2005 (NSW) provides, relevantly, as follows:

(2) In proceedings for the recovery of a debt or damages in which payment of the whole or a part of the debt or damages has been made after the proceedings commenced but before, or without, judgment being given, the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit--

(a) on the whole or any part of the money paid, and

(b) for the whole or any part of the period from the time the cause of action arose until the time the money was paid.

14. An award of pre-judgment interest under s 100 is discretionary: Lahoud v Lahoud [2011] NSWSC 994 at [31] (per Campbell J); Jun International Property Pty Ltd v Fullerton Property Pty Ltd [2019] NSWSC 450 at [39] (per Ward CJ in Eq, as her Honour then was).

15. Until the exercise of such discretion, a plaintiff has no accrued entitlement to pre-judgment interest: State of New South Wales v Avery (2016) 92 NSWLR 141; [2016] NSWCA 147 at [81] per Sackville AJA (McColl and Simpson JA agreeing); Jun International at [39].

16. An award of interest up to the date of judgment is an award in the nature of damages: Haines v Bendall (1991) 172 CLR 60 at 66 (Mason CJ, Dawson, Toohey and Gaudron JJ); [1991] HCA 15. It is designed to compensate the plaintiff for being kept out of money theoretically due to the plaintiff from a time prior to the delivery of a judgment: Avery at [52].

17. I have determined that there should be no award of pre-judgment interest on the Balli Sum, by reason of the following matters:

18. the Balgownie Property was sold on 31 May 2023;

19. on the following day, 1 June 2023, the solicitor for Balli Constructions transferred the total sale proceeds of $909,654.49 to Balli Constructions’ bank account with National Australia Bank (the NAB Account);

20. on around the same date, Mr Martino contacted NAB and a “block” was placed on the NAB Account, such that the signature of each of Mr Martino, Mr Donato D’Angola and Mr Mario D’Angola was required to withdraw any funds (Mr Donato D’Angola or Mr Mario D’Angola were, at the time, unaware of these communications between Mr Martino and NAB);

21. on 7 June 2023, Mr Donato D’Angola and Mr Mario D’Angola sent a letter to Mr Martino, on behalf of Balli Constructions, stating that he was to receive the amount of $124,292.50 (being the Balli Sum) as his share of the net proceeds of the sale of the Balgownie Property, and requesting Mr Martino’s bank account details so that this payment could be made;

22. on 31 July 2023, Mr Donato D’Angola and Mr Mario D’Angola became aware of the block on the NAB Account, when they attended the bank to sign the form to transfer the Balli Sum to Mr Martino. They indicated to NAB that they wished for this block to be removed, so that the Balli Sum could be paid;

23. in opening submissions, Senior Counsel for the Plaintiffs stated that there was no dispute about Mr Martino’s entitlement to the Balli Sum and that this matter was “being dealt with between the parties”; and

24. during the course of the hearing, Mr Martino contacted NAB to have the block on the NAB Account lifted and the Balli Sum was then paid to him.

25. In short, there has not been, since the sale of the Balgownie Property, any dispute about Mr Martino’s entitlement to the Balli Sum, and the delay in the payment of this sum to Mr Martino is due to his own conduct in taking steps to have a block imposed on the NAB Account, and in not lifting that block until the hearing. In those circumstances, there should be no order for interest in respect of the Balli Sum.

Interest on judgment sum in respect of Cross-Claim?

19. The Cross-Claimants seek an award of pre-judgment interest on the amount of $300,000, being the agreed judgment sum in respect of the Cross-Claim (see paragraph [3] above).

20. Mr Martino denies that the Cross-Claimants have any entitlement to pre-judgment interest, submitting that the agreement reached between the parties during the course of the hearing was that the whole of the Cross-Claim (other than the issue of costs) would be resolved on the basis that judgment would be entered for $300,000.

21. The relief claimed in the Amended Statement of Cross-Claim was as follows:

“1. Damages.

2. Interest.

3. Costs.

4. Such further or other orders as the Court thinks fit.”

22. The Amended Statement of Cross-Claim pleaded that the Cross-Claimants had suffered damage as a result of Mr Martino’s failure, in breach of the Shareholders Agreement and in breach of his duties as an employee and as a director:

23. to reimburse the expenses in Schedule A to the Cross-Claim (which total $398,286.39);

24. to rectify or remedy the “Points Transfer”, being the redemption of some 19.643m reward points on Azzurri Concrete’s credit card account in return for Qantas frequent flyer points which were credited to Mr Martino’s personal account (those points having an approximate value of $80,000: Primary Judgment at [131]); and

25. to reimburse an amount of $62,837 which had been debited to Azzurri Concrete’s Amex account in respect of a deposit which was paid by Mr Martino to Porsche Retail Group Pty Ltd for a motor vehicle.

26. Accordingly, the total amount claimed in the Cross-Claim was around $540,000, plus interest and costs.

27. In the course of closing addresses, and after the luncheon adjournment on the final day of the hearing, the Court was informed as follows:

“[COUNSEL FOR DEFENDANTS/CROSS-CLAIMANTS]: Your Honour, can I start the afternoon with some good news. The cross‑defendant will consent to judgment on the cross‑claim [in] the sum of $300,000.

HIS HONOUR: Yes.

[COUNSEL FOR DEFENDANTS/CROSS-CLAIMANTS]: That's acceptable to my side.

HIS HONOUR: Yes. Should I make orders to that effect now, or simply when the judgment's made?

[COUNSEL FOR DEFENDANTS/CROSS-CLAIMANTS]: I wouldn't ask for orders to be made now. It's just to avoid any issue that‑‑

HIS HONOUR: Yes, because otherwise, there might be an issue about enforcement prior to whatever I determine.

[COUNSEL FOR PLAINTIFFS/CROSS-DEFENDANT]: There's also, your Honour, some various other bits of money which your Honour's heard about that are in various points, and so there may need to be adjustments made when your Honour comes to the issue of enforcement. …

…

HIS HONOUR: But otherwise, I can determine the cross‑claim on the basis that there be judgment for the cross‑claimants in the amount of $300,000?

[COUNSEL FOR PLAINTIFFS/CROSS-DEFENDANT]: Yes.

HIS HONOUR: Is there any agreement about costs in that respect?

[COUNSEL FOR PLAINTIFFS/CROSS-DEFENDANT]: No. There may be issues about costs overall that may need to be discussed. I think we'll have to discuss that at the end.

[COUNSEL FOR DEFENDANTS/CROSS-CLAIMANTS]: Your Honour will have seen from my submissions that we seek to be heard in relation to costs separately because there are a number of machinations in relation to it …”

25. As at the date of these statements (31 July 2025), the amount of pre-judgment interest which would have been payable on an amount of $540,000 from 5 May 2023 onwards (being the period for which the Cross-Claimants now seek interest) was around $99,000. That is, the total amount claimed by the Cross-Claim as at 31 July 2025, by way of damages and interest (but excluding costs), was around $639,000.

26. In seeking interest in respect of the sum of $300,000, the Cross-Claimants relied on Kwanchi Pty Ltd v Kocsis (1996) 40 NSWLR 270 at 276, where Clarke JA (with whom Priestley JA agreed) observed that if a defendant pays the amount claimed after service of a statement of claim, but prior to judgment, the plaintiff can maintain its claim for interest. An example is provided by the decision of Hammerschlag J (as his Honour then was) in Nine Network Australia Pty Ltd v Birketu Pty Ltd [2016] NSWSC 694. In that case, the plaintiff (Nine) sued the defendant (Birketu) for the amount of $1.1m, which was claimed to be owing pursuant to the terms of a written contract. Birketu paid this sum to Nine one week after the proceeding was commenced, and before the first return date. His Honour said (at [17]-[18]) that:

“In my opinion, it may safely be inferred that Birketu’s capitulation was because it had no defence. There was a contractually fixed time for payment, which Birketu deliberately, and in anticipation, chose not to meet. Nine then demanded payment, and Birketu ignored the demand. The suggestion that it is relevant that officers of Birketu were otherwise engaged in the WIN and Nine proceedings rings hollow.

Nine was fully entitled to commence proceedings for what is a substantial sum of money, and there is no reason why it should not be awarded interest to compensate it for the loss it has suffered as a consequence of Birketu’s breach.”

27. Neither of those decisions was dealing with a situation where a claim was compromised for a sum significantly less than the total amount claimed. Instead, each of those authorities stands for the proposition that where a plaintiff sues a defendant for a particular amount plus interest, and the defendant capitulates after the commencement of the proceeding and pays the claimed amount in full, the plaintiff can maintain the claim for interest on that sum up to the date of payment.

28. In the present case, the Cross-Claimants brought a claim for damages of around $540,000, plus interest and costs and, on the last day of the hearing, the Court was informed that:

29. the parties had agreed that there be judgment on the Cross-Claim in the amount of $300,000; and

30. there remained, following this agreement, an issue to be determined regarding the costs of the Cross-Claim.

31. Having regard to those matters, I accept the Plaintiffs’ submission that the agreed judgment sum of $300,000 represented judgment in respect of the claims in the Cross-Claim other than in respect of costs: that is, it was an agreed judgment sum in respect of the claims for damages and interest. It follows that the Cross-Claimants cannot now pursue a claim for interest on that judgment sum.

Costs Orders

Submissions of the parties

30. The Plaintiffs/Cross-Defendant submitted that costs should follow the event, such that:

31. the Defendants should pay the Plaintiffs’ costs in relation to the Second Further Amended Statement of Claim; and

32. Mr Martino should pay the Cross-Claimants’ costs in respect of the Cross-Claim.

33. The Defendants/Cross-Claimants submitted that the Court should make the following orders in respect of costs:

34. the Defendants are to pay Mr Martino’s costs in respect of the Second Further Amended Statement of Claim on the ordinary basis up to and including 13 July 2025;

35. Mr Martino is to pay the Defendants’ costs of the Second Further Amended Statement of Claim on an indemnity basis from 14 July 2025;

36. the Second Plaintiff, 2B6 Enterprises, is to pay the Defendants’ costs of the Second Further Amended Statement of Claim:

(a) on the ordinary basis up to and including 13 July 2025; and (b) on an indemnity basis thereafter.

4. Mr Martino is to pay the Cross-Claimants’ costs in respect of the Cross-Claim:

(a) on an indemnity basis; or, alternatively, (b) on an ordinary basis up to and including 13 July 2025, and on an indemnity basis thereafter.

32. The claim for indemnity costs in respect of the Cross-Claim was advanced on the basis that there had been “relevant delinquency” by Mr Martino in his conduct of the defence to that claim. The claim for indemnity costs in respect of the proceedings from 14 July 2025 onwards was advanced on the basis of a Calderbank offer which was made on that date, and which was said to have been unreasonably rejected.

33. It follows that there are three main issues to determine:

34. first, whether any costs order should be made in respect of the costs of 2B6 Enterprises’ claims in the Second Further Amended Statement of Claim;

35. secondly, whether, having regard to the conduct by Mr Martino of the defence to the Cross-Claim, costs should be awarded against him on an indemnity basis; and

36. thirdly, whether, by reason of the Plaintiffs’ rejection of the Calderbank offer, the Defendants/Cross-Claimants should be awarded their costs of the proceedings on an indemnity basis from the date of that offer.

2B6 Enterprises

34. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides that if the Court makes any order as to costs, the Court is to order that costs follow the event, unless it appears to the Court that some other order should be made as to the whole or any part of the costs.

35. The "event" typically refers to the event of the claim or counter-claim, 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 & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA).

36. The Second Further Amended Statement of Claim advanced allegations that:

37. “the affairs of the Azzurri Group of Companies had been conducted in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against 2B6 Enterprises” (paragraph [74]); and

38. “the Court can under s 233 of the Act, and should, make an order that Mario D’Angola and Sogase Pty Ltd purchase the shares held by 2B6 Enterprises Pty Ltd in Azzurri Group Holdings Pty Ltd and MPD Developments Pty Ltd at a fair price” (paragraph [79]).

39. 2B6 Enterprises failed to establish those claims: Primary Judgment, [485]-[490].

40. Nonetheless, the Plaintiffs submitted that:

“There should be no reduction of the Plaintiffs’ costs recoverable in relation to the Second Plaintiff’s claim, in respect of which no relief has been granted. The facts and issues relating to that claim are not distinct from those arising from the First Plaintiff’s claim.”

39. This issue of overlap could be addressed by framing the costs orders in respect of the Second Further Amended Statement of Claim in the following manner (subject to the question of the Calderbank offer, which is addressed below):

40. the Defendants pay the Plaintiffs’ costs of the Second Further Amended Statement of Claim, save for those costs which are solely referrable to the claims advanced by 2B6 Enterprises; and

41. 2B6 Enterprises pay the Defendants’ costs of the Second Further Amended Statement of Claim which are solely referrable to the claims advanced by 2B6 Enterprises.

42. However, this is likely to lead to complications in the assessment of costs, which have the potential to exceed the quantum of costs involved. Further, Mr Martino is the sole shareholder of 2B6 Enterprises and the sole unitholder of the 2B6 Enterprises Trust, such that the economic reality is that any amount paid by 2B6 Enterprises will reduce the amount recovered by Mr Martino in respect of the costs of the proceedings.

43. Having regard to those matters, and having regard to the minimal time spent on issues relating to 2B6 Enterprises at the hearing, and the minimal evidence filed specifically in relation to the position of 2B6 Enterprises, I have determined that the Court should apply a broad-brush approach and order that the Defendants pay 95% of the Plaintiffs’ costs of the Second Further Amended Statement of Claim, as agreed or assessed.

Mr Martino’s conduct of the defence to the Cross-Claim

42. Section 98(1)(c) of the Civil Procedure Act empowers the Court to award costs on an ordinary or indemnity basis.

43. Costs may be awarded against a party on an indemnity basis where the party’s conduct of the case is plainly unreasonable or amounts to “relevant delinquency” by the party as a litigant: Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009 at [45] (per Ward CJ in Eq as her Honour then was) and the authorities there cited.

44. In this context, “relevant delinquency” does not mean a moral delinquency or ethical shortcoming, but instead delinquency bearing upon the conduct of the case: White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 at [11] (per McDougall J).

45. Circumstances in which indemnity costs may be awarded include where a party has made allegations that ought never to have been made; where an action has been commenced or continued where a party, properly advised, should have known that they had no chance of success; and where proceedings have been commenced with wilful disregard of known facts or clearly established law: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; [1988] FCA 364; Bale v Kimberley Developments at [45].

46. An award of indemnity costs serves the purpose of compensating a party fully for costs incurred when the Court takes the view that it was unreasonable for the party against whom the order was made to have subjected the innocent party to the expenditure of the case: Bale v Kimberley Developments at [45].

47. In seeking a costs order in respect of the Cross-Claim on an indemnity basis, the Cross-Claimants submitted as follows:

“For the reason set out in the Judgment at [130] to [150], the position adopted by Mr Martino in his defence to the Cross-Claim and maintained all the way up to his ultimate capitulation in cross-examination was conducted with a wilful disregard of the known facts. There can be no real doubt that Mr Martino intentionally and unnecessarily put the Cross-Claimants to significant expense (see Costs Affidavit at [68]) in prosecuting a case that should never needed to have been prosecuted.”

48. Paragraphs [130]-[150] of the Primary Judgment were primarily concerned with Mr Martino’s contentions that he had not breached the Shareholders Agreement in the manner asserted in the Breach Notice issued on 5 May 2023 or, alternatively, that any such breaches were addressed by the Breach Notice Response which was issued on 30 May 2023. I rejected those contentions, particularly because I found that he had breached the Shareholders Agreement by the redemption and transfer of the reward points. In reaching those findings, I observed that Mr Martino had denied, in his defence to the Cross-Claim, that the transfer of those points was made without the knowledge or approval of the other shareholders of Azzurri Concrete and that, when taken to these denials, he acknowledged that this was “just wrong” (at [148]-[149]). I observed that the maintenance of these denials, up until the point in time when he was presented with documents showing that the assertion of authority was false, told against his credit (at [150]).

49. I do not consider that those matters provide a sufficient basis for an award of indemnity costs in respect of the Cross-Claim, particularly in circumstances where the claim in respect of the reward points represented less than 15% of the total amount claimed by the Cross-Claim, and where it was reasonable for Mr Martino to defend at least some of the remaining claims in the Cross-Claim (having regard to the fact that the Cross-Claimants have ultimately agreed that judgment should be entered for a sum that is less than half the amount claimed).

50. Accordingly, subject to the issue of the Calderbank offer which is addressed below, I have determined that the Cross-Claimants should be awarded their costs of the Cross-Claim on the ordinary basis, as agreed or assessed.

Calderbank offer

51. In seeking an order for their costs of the proceedings on an indemnity basis from 14 July 2025 onwards, the Defendants/Cross-Claimants relied upon a letter sent on that date (14 July Letter) which set out an offer that was expressed to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333.

52. The 14 July Letter was marked “Without Prejudice save to Costs”. It referred to an earlier offer made by a letter sent by the Defendants’ solicitors on 19 June 2025 (19 June Letter). The 19 June Letter had raised the following issues regarding the expert report of Mr Clifford of RSM Australia Pty Limited dated 19 May 2025, which had been served by the Plaintiffs in May 2025:

“2.5 Further, there are deficiencies in the RSM report with respect to its valuations. RSM will have difficulty persuading the Court that its methodology is sound, as various aspects of the valuations are not supported by the contemporaneous financial records.

2.6 As such, if the Court is required to calculate damages, the deficiencies in the RSM report will result in the value of Azzurri Concrete Group Pty Ltd (ACG) as at the relevant date being significantly lower than the valuation of RSM.

2.7 It is likely the Court will find that:

(a) RSM erred in valuing ACG on a fair value basis as opposed to market value basis;

(b) even if fair value is adopted, there are deficiencies in the basis of which RSM has valued ACG, including the multipliers used;

(c) RSM has not considered the loan between ACG and Azzurri Group Holdings Pty Limited (AGH) when valuing the shares of 2B6 Enterprises Pty Limited (2B6) in ACG; and

(d) the valuations based on the purported Bespoke Financial documents (referred to by RSM as ‘MB Financial Statements’ or “MBFS”) are to be disregarded.”

53. The 19 June Letter was sent before the Defendants’ served, on 4 July 2025, their expert evidence in response to the RSM Report.

54. Following the service of this evidence, the Defendants’ solicitor sent the 14 July Letter, which stated as follows:

“1.4 The content of our letter dated 19 June 2025 and the reasoning outlined regarding the June Offer continues to apply. Since that date, our clients have served the report of Sapere Forensic Accounting dated 4 July 2025 (Sapere Report).

1.5 The Sapere Report further exemplifies why the June Offer was a significant compromise made by our clients and why your clients were unreasonable to not accept that offer.”

55. Having made those observations, the 14 July Letter set out the following offer:

“2.1 Without any admission of liability, we are instructed to make an offer on the following terms:

(a) The Defendants pay the Plaintiffs the amount of $1,500,000 (inclusive of costs and interest) comprised as follows:

(i) $1,400,000 to the First Plaintiff; and

(ii) $100,000 to the Second Plaintiff;

(b) The parties enter into a Deed of Release containing mutual releases for all matters related to the issues in the FASC and Cross-Claim;

(c) The Deed of Release contains confidentiality and non-disparagement provisions applicable to all parties; and

(d) Upon payment of the settlement sum as outlined in paragraph 2.1(a) above, the parties enter into consent orders dismissing the Proceeding with no order as to costs.”

56. The Court’s discretion to make a special costs order in favour of a party who does better than an offer of compromise made by that party will commonly be enlivened where the offer was a genuine offer of compromise and where it was unreasonable for the offeree to not accept it: Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWC 344 at [6]; Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA at [68]-[69].

57. There is a dispute between the parties as to whether the outcome achieved by the Plaintiffs/Cross-Defendant in the proceeding was less (or more) favourable than the outcome that would have been obtained if the offer in the 14 July Letter had been accepted.

58. The 14 July Letter offered the Plaintiffs/Cross-Defendant a lump sum of $1.5m, on the basis that all claims in the proceedings be released.

59. As matters eventuated, the parties have agreed that the Cross-Claimants are entitled to judgment in the amount of $300,000 (which I have determined is inclusive of any claim for interest), and I have found that Mr Martino is entitled to judgment in the amount of $1.163m plus pre-judgment interest. The amount of such interest, up to 14 July 2025, would have been around $186,000. Accordingly, the net amount recovered by Mr Martino, including interest calculated up to 14 July 2025, is around $1,049,000 (being $1,163,000 plus $186,000 minus $300,000).

60. However, any comparison of the outcome which would have been achieved if the offer had been accepted and the outcome which has, in fact, been achieved is complicated by two further matters.

61. First, it was a term of the offer made by the 14 July Letter that the proceedings be dismissed with no order as to costs.

62. The difficulty with a costs-inclusive offer made by a defendant is that the actual amount offered to settle the plaintiff’s claim can only be ascertained by deducting the plaintiff’s costs from the amount of the offer. The amount of the plaintiff’s recoverable costs may not be known and, more significantly, the deduction is likely to reveal that the offer is not nearly as generous as it appears to be: Woollahra Municipal Council v Secure Parking Pty Ltd (No 2) [2015] NSWSC 452 at [34] (Ball J).

63. As matters have eventuated, I have determined that the Plaintiffs are entitled to 95% of their costs of the Second Further Amended Statement of Claim, and the Cross-Claimants are entitled to their costs of the Cross-Claim, in each case on the ordinary basis.

64. There is evidence from the Plaintiffs’ solicitor, Mr Laface, that the total amount of fees and disbursements incurred by the Plaintiffs in the proceedings up to the date of the 14 July Letter was $1,081,912.40. Mr Laface does not attempt to apportion those costs between the Second Further Amended Statement of Claim and the Cross-Claim (and, as I explain below, any such apportionment is likely to be complicated).

65. The Defendants submitted that, for the purpose of comparing the offer in the 14 July Letter with the outcome in the proceedings, it should be assumed that 20% of the Plaintiffs’ total costs of the proceedings related to the Cross-Claim. There is no basis given for that assumption and it is difficult to see how that assumption could be made without a review of the files of the Plaintiffs’ solicitor (to which the Defendants do not have access). If a 20% reduction were applied, the result would be that the Plaintiffs’ costs of the main proceedings were, as at 14 July 2025, around $860,000.

66. As regards the Cross-Claimants’ costs of the Cross-Claim, there is evidence from their solicitor, Mr Paradise, that the total amount of the fees and disbursements incurred by his clients in the proceedings up to the date of the 14 July Letter was $764,809.43. Mr Paradise expresses the view that “the costs incurred by the Defendants in these proceedings in the preparation of affidavit evidence related to the Cross-Claim outweighed the costs incurred with respect to the Second Further Amended Statement of Claim”, but says that, for the purpose “only” of an application for gross sum costs, he is “willing to allocate the Defendants’ aggregate costs in these proceedings on the following basis”:

67. solicitors’ fees, counsel’s fees and disbursements (other than the Sapere invoices) are equally apportioned as between the Second Further Amended Statement of Claim and the Cross-Claim; and

68. 100% of the Sapere invoices are allocated to the Second Further Amended Statement of Claim.

69. According to Mr Paradise, this allocation would result in the total amount of the Cross-Claimants’ fees and disbursements, in respect of the Cross-Claim, up to the date of the 14 July Letter being $351,375.85.

70. In order to compare the offer in the 14 July Letter with the outcome of the proceedings, it is necessary to determine the Plaintiffs’ recoverable costs in respect of the Second Further Amended Statement of Claim, as well as the Cross-Claimants’ recoverable costs in respect of the Cross-Claim (which Mr Martino is required to pay the Cross-Claimants), so as to ascertain the net amount that Mr Martino will recover by way of costs as a result of the matter proceeding to judgment.

71. The Defendants submit that:

72. the recoverable costs of the Cross-Claim up to the date of the 14 July Letter should be assessed on the basis advanced in the gross sum costs application which is considered below (namely, 65% of solicitors’ fees and 100% of counsel’s fees and disbursements), resulting in the Cross-Claimants being entitled to recover $247,105 in respect of their costs up to 14 July 2025 on the ordinary basis (representing more than 70% of their total fees and disbursements); and

73. the Plaintiffs’ recoverable costs of the Second Further Amended Statement of Claim should be assessed on the basis that the Plaintiffs recover only $400,000 (representing only 46% of their total fees and disbursements).

74. There is no reason, on the evidence before the Court, to conclude that there would be any such disparity between the extent to which each party’s respective costs were recoverable. The statement by Mr Laface that “the Plaintiffs would recover, on a very conservative basis, 50% of the total costs incurred” does not amount to any concession in this regard.

75. If a similar approach for assessing recoverable costs were applied to the Plaintiffs’ costs as is proposed for the Cross-Claimants’ costs, and allowance is made for the fact that I have determined that the Plaintiffs are entitled to recover 95% of their costs, the difference between the Plaintiffs’ recoverable costs and the Cross-Claimants’ recoverable costs as at 14 July 2025 (and therefore the net amount which Mr Martino stands to receive by way of the costs orders in respect of costs to that date) would be around $350,000 to $400,000. If this amount were added to the net amount recovered as a result of the orders for judgment, the amount recovered by Mr Martino in the proceedings would be around $1.40m-$1.45m, whereas the amount offered by the 14 July Letter was $1.5m.

76. There is, however, considerable uncertainty regarding those figures in respect of costs, given the uncertainty regarding the extent to which the costs of each set of parties are referrable to, respectively, the main claim and the Cross-Claim (as discussed further below, in the context of the gross sum application).

77. Secondly, the offer in the 14 July Letter proposed that there be “mutual releases for all matters related to the issues in the [Further Amended Statement of Claim] and Cross-Claim”.

78. I accept the Plaintiffs’ submission that a release of that width would appear to encompass a release of any claim by Mr Martino in respect of the Balli Sum, since Mr Martino’s claim to that sum was a matter related to the issues in the Second Further Amended Statement of Claim and, in particular, the failure of the Defendants to distribute the sale proceeds from the Balgownie Property.

79. The Defendants submitted that any uncertainty as to whether a claim to the Balli Sum would have been released as a result of the Calderbank offer being accepted could have been resolved by communications between the parties. However, I consider that the offer is clear in its terms, namely, that the Plaintiffs were being offered a total amount of $1.5m in return for agreeing to release “all matters related to the issues” in the pleadings (which would include the pleaded claim to a share of the sale proceeds of the Balgownie Property). The question for determination is whether it was unreasonable for the Plaintiffs to reject this offer. The question is not whether it was unreasonable for the Plaintiffs to fail to engage in negotiations with a view to obtaining a different and better offer.

80. For those reasons, the Defendants have not established that the outcome that has been achieved by the Plaintiffs as a result of the matter proceeding to a final hearing (once the Balli Sum is taken into account, and recoverable costs are taken into account) is less favourable than the amount that would have been achieved if the offer in the 14 July Letter had been accepted.

81. Finally, the Plaintiffs noted that the Calderbank offer in the 14 July Letter was only open for two days, and that it therefore expired in advance of the Plaintiffs receiving, on 22 July 2025, the joint expert report. I accept the Plaintiffs’ submission that the unavailability of the joint expert report impacted upon the Plaintiffs’ ability to undertake a proper assessment of the offer. In particular, in the joint report, Mr Clifford accepted a number of the matters proposed by Ms Conoulty regarding the valuation of Mr Martino’s interest in Azzurri Concrete. As a result, whereas Mr Clifford had, in his report in chief, assessed that the mid-point of the fair value of Mr Martino’s shareholding in Azzurri Concrete as at 5 June 2023 was (on the basis of Azzurri Concrete’s signed financial statements) $6.077m, Mr Clifford expressed the view, in the joint report, that the mid-point of the fair value of this interest as at that date was $2.97m.

82. Having regard to those matters, it has not been established that it was unreasonable for the Plaintiffs not to accept the offer made in the 14 July Letter and, therefore, the application for indemnity costs on the basis of that offer must be rejected.

Conclusion – form of costs orders

79. For those reasons, I have determined that the appropriate costs orders are that:

80. the Defendants pay the First Plaintiff 95% of the Plaintiffs’ costs of the Second Further Amended Statement of Claim, as agreed or assessed; and

81. the Cross-Defendant pay the Cross-Claimants’ costs of the Cross-Claim, as agreed or assessed.

Gross Sum Costs Order

80. By a Notice of Motion dated 1 October 2025, the Defendants/Cross-Claimants seek a gross sum costs order in respect of their costs of the Cross-Claim, and also in respect of their costs of an interlocutory application which I determined on 11 June 2025. The Plaintiffs oppose this application.

Relevant Principles

81. Section 98 of the Civil Procedure Act enlivens a broad power to award costs, including a power to award costs in a specific gross sum instead of assessed costs (s 98(4)(c)).

82. In Hamod v State of New South Wales & Anor [2011] NSWCA 375 at [816], Beazley JA, with whom Giles and Whealy JJA agreed, observed that:

"The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act ..., suggest that factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred ...; the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability ..."

83. In Gabrielle v Abood (No 4) [2023] NSWCA 100 at [6], the Court (Bell CJ, Kirk and Adamson JJA), referred to Hamod and said that:

“The power to make a gross sum costs order provided by s 98(4)(c) of the Civil Procedure Act 2005 (NSW) is discretionary. Authority establishes that the discretion is not confined and may be exercised whenever the circumstances warrant its exercise; it should only be exercised when the Court considers that it can do so fairly between the parties, and that includes having sufficient confidence in arriving at an appropriate sum on the materials available; courts have typically applied a discount in assessing costs on a gross sum basis; and the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment...”

84. An award of gross sum costs should be “based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills)”: Hamod at [820]. The approach to be taken in arriving at the estimate must be logical, fair and reasonable.

85. In adopting a broad-brush approach, the Court will typically apply a discount to the amounts claimed in assessing costs on a gross sum basis: Lorenzato v Lorenzato & Anor (No 2) [2011] NSWSC 790 at [3] (Black J). In the recent decision of Salmon v Albarran (No 2) [2025] NSWCA 115, the Court of Appeal (Ward ACJ, Leeming and Ball JJA) applied not only a reduction in respect of solicitors’ fees in line with the evidence in that case that such costs are normally reduced by 20-30%, but also a 10% discount to counsel’s fees, “reflecting that the assessment of party/party costs is less than a full indemnity” (at [29]). The Court then applied a further discount of 10% to the total costs, which was “required, to reflect the fact that there will be no assessment, and [the party against whom the costs order is made] is losing the opportunity of doing better on assessment than on the gross sum costs assessed by this Court” (at [30]). Their Honours observed that:

“Another way of putting this is that the approach of this Court is not to do the best it can to determine the likely outcome of a costs assessment, but instead to determine an amount of which it can be said with a measure of confidence that any assessment would yield a greater amount.”

Determination

86. For the reasons that follow, I am not satisfied that the Court should make a gross sum costs order in respect of the costs of the Cross-Claim.

87. First, I do not have sufficient confidence in arriving at an appropriate sum on the materials available, such that the Court is able to undertake the exercise fairly to both parties.

88. In order to determine an appropriate gross sum for the Cross-Claimants’ costs of the Cross-Claim, it would be necessary first to identify the amount of costs which they have incurred in respect of the Cross-Claim. This is not a straightforward matter.

89. Mr Paradise deposes that the costs of the Defendants in relation to both the Second Further Amended Statement of Claim and the Cross-Claim “have been invoiced to the Defendants under the one matter”. He explains that each invoice may therefore contain work performed for the Second Further Amended Statement of Claim, or for the Cross-Claim, or for both.

90. Mr Paradise exhibits to his affidavit the first page of each of those invoices. However, the Defendants have not put into evidence on this application any of the narratives for those invoices, which would provide a detailed description of the work undertaken in respect of each invoice.

91. Mr Paradise expresses the view, based on a “review of the invoices issued”, that the work required for the Cross-Claim was “disproportionately higher” than the work required for the Second Further Amended Statement of Claim. In support of this statement, he refers to a review which he has undertaken of two of the thirty-one invoices issued by the Defendants’ solicitors (being the fifth and twelfth invoices, dated 30 September 2023 and 31 August 2024 respectively). Mr Paradise deposes that:

“On my review of the invoices referred to at paragraph 37 above, the approximate split of work streams for each invoice is:

a. Invoice 20112131 –

i. Both Second Further Amended SOC and Cross-Claim – 46.67%

ii. Second Further Amended SOC – 20.31%; and

iii. Cross-Claim – 33.02%

b. Invoice 20112653 –

i. Both Second Further Amended SOC and Cross-Claim – 41.08%

ii. Second Further Amended SOC – 34.85%; and

iii. Cross-Claim – 24.07%.”

92. As noted above, Mr Paradise states that:

“For the purpose of the Application only, I am willing to allocate the Defendants’ aggregate costs in these proceedings on the following basis:

a. 50% of PCH’s professional fees relate to the Second Further Amended SOC;

b. 50% of PCH’s professional fees relate to the Cross-Claim;

c. 50% of Counsel’s fees relate to the Second Further Amended SOC;

d. 50% of Counsel’s fees relate to the Cross-Claim;

e. 100% of disbursement invoices of Sapere relate to the Second Further Amended SOC; and

f. All other disbursements are allocated on a 50/50 basis between the Second Further Amended SOC and the Cross-Claim.”

93. The fact that the Cross-Claimants’ solicitor is “willing” to accept a particular allocation does not establish that this is a fair allocation so far as the Cross-Defendant is concerned.

94. Mr Paradise seeks to support this allocation by an analysis of the extent (by number of pages) to which the affidavits filed by his clients between June and September 2024 addressed issues arising on the Cross-Claim. Mr Paradise expresses “the view that the costs incurred by the Defendants in these proceedings in the preparation of affidavit evidence related to the Cross-Claim outweighed the costs incurred with respect to the Second Further Amended Statement of Claim”.

95. However, the preparation of affidavit evidence over a period of some months in 2024 represents only a portion of the work undertaken in the proceedings, which extended for over two years, and the bulk of the costs in the proceedings were incurred after the affidavits were prepared. I am not satisfied that a page-count of the affidavit evidence provides an adequate basis for concluding that an allocation of 50% of the Defendants’ costs of the proceedings to the Cross-Claim is fair to both parties.

96. Further, any assessment of such an allocation is complicated by the fact that the evidence on the Cross-Claim was also relevant to the issues arising on Mr Martino’s claim. In particular:

97. in the Second Further Amended Statement of Claim, Mr Martino asserted that the breaches alleged in the Breach Notice (and, in particular, his failure to repay the expenses listed in the Schedule to the Breach Notice and to return the reward points) were not in fact breaches of the Shareholders Agreement, or alternatively were remedied by the Breach Notice Response; and

98. in the Cross-Claim, the Cross-Claimants pleaded that Mr Martino’s failure to repay the expenses listed in the Breach Notice and his failure to return the reward points constituted breaches of the Shareholders Agreement.

99. In addition, the Cross-Claimants have chosen to proceed with their application for a gross sum costs order:

100. without obtaining any expert evidence from an independent costs consultant regarding the reasonableness of the fees charged, the split of work between senior and junior practitioners, the proportionality of the fees charged to the work performed, or the appropriate allocation of fees and disbursements as between the Cross-Claim and the Second Further Amended Statement of Claim; and

101. without putting any of the narratives for the relevant invoices into evidence, which thereby limited the ability of the Plaintiffs to make submissions, or the Court to undertake an assessment, of such matters.

102. Finally, irrespective of whether any gross sum costs order is made in respect of the Cross-Claim, there will need to be an assessment (if agreement is not reached) of the Plaintiffs’ costs in respect of the Second Further Amended Statement of Claim. It is likely that any such assessment will need to deal with issues which are also relevant to the determination of costs in respect of the Cross-Claim, such as the appropriate methodology for allocating costs as between the Cross-Claim and the Second Further Amended Statement of Claim (including where work was undertaken that was relevant to both claims). Given those matters:

103. there is unlikely to be any significant saving of time by making a gross sum costs order in respect of only the costs of the Cross-Claim; and

104. there is a real risk that if a gross sum order is made at this point in time in respect of the Cross-Claimants’ costs of the Cross-Claim, it might be made on the basis of a methodology for allocating work as between the Second Further Amended Statement of Claim and the Cross-Claim which turns out to be different from, and possibly even inconsistent with, whatever methodology is adopted in assessing the Plaintiffs’ costs of the Second Further Amended Statement of Claim.

105. For those reasons, I reject the application for a gross sum costs order in respect of the costs of the Cross-Claim.

106. Separately, the Defendants seek a gross sum costs order in respect of the costs of the Plaintiffs’ application for leave to rely on the RSM report (Leave Application). I made a costs order in favour of the Defendants in respect of the Leave Application on 11 June 2025: In the matter of Azzurri Group Holdings Pty Ltd [2025] NSWSC 607.

107. In his affidavit in support of this application, Mr Paradise identifies the amount invoiced in respect of this application as follows:

“The Defendants costs in relation to the Leave Application were as follows:

a. PCH’s professional fees - $22,603.00 (excl. GST);

b. Counsel’s fees - $29,450 (excl. GST); and therefore

c. Total costs - $52,053.00 (excl. GST).”

102. The Defendants seek a gross sum amount of $52,053 in respect of this application. That would represent a complete indemnity. There is no basis for such an award.

103. Further, I consider that an amount of $52,053 is excessive for an application which was relatively confined (namely, whether the time for the service of an expert report should be extended), and which was argued within the space of around 90 minutes.

104. Finally, it is likely that, in dealing with the Leave Application, time was spent on tasks, which were also relevant to the main proceeding. For example, counsel’s fees claimed in respect of the Leave Application include entries for the review of the “expert report”, which is presumably the report of Mr Clifford that was subsequently tendered at the hearing. Accordingly, I am not confident that the costs claimed relate solely to the Leave Application.

105. Given those matters, I decline to make any gross sum costs order in respect of the Leave Application.

ORDERS

106. For those reasons, I make the following orders:

107. The Fourth and Sixth Defendants pay the First Plaintiff the amount of $1,163,000 plus interest of $211,204.

108. The Second Further Amended Statement of Claim be otherwise dismissed.

109. Judgment for the Cross-Claimants against the Cross-Defendant in the amount of $300,000.

110. The Defendants pay the First Plaintiff 95% of the Plaintiffs’ costs of the Second Further Amended Statement of Claim, as agreed or assessed.

111. The Cross-Defendant pay the Cross-Claimants’ costs of the Cross-Claim, as agreed or assessed.

112. The Notice of Motion dated 1 October 2025 be dismissed.

113. The Defendants pay the Plaintiffs’ costs of the Notice of Motion dated 1 October 2025 as agreed or assessed.

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