(a) The applicants submitted that costs ought to follow the event and contended that, given that they had been successful in overturning one of the judge's orders, they had been successful and that the respondents ought to pay their costs. Alternatively, they submitted that if the proper characterisation is that the parties had mixed success then the parties ought to bear their own costs.

(b) In contrast, the first, second and third respondents contended that, given the parties' success was properly characterised as mixed, they ought to have all their costs of grounds 1, 2, 3, and 5, leaving the costs of ground 4 as costs in the cause. In the alternative they submitted that they ought to have 90 per cent of their costs of the application for leave to appeal.

1. There can be no real dispute that the parties' success on the application for leave to appeal was mixed. The applicants succeeded on one ground, and as a consequence succeeded in having one of the three orders they challenged set aside. But they failed on the other four grounds. In contrast, the respondents succeeded on four grounds of appeal, and successfully defended two of the three orders made by the judge.
2. It is well established that, where a proceeding involves a multiplicity of issues and the parties have enjoyed mixed success, the court may take a pragmatic approach and order that one party pay a percentage of the other parties' costs, based on the Court's impression and evaluation of the extent of the success.[7]
3. In the present case, as noted above, the applicants failed on four of their five grounds of appeal. We consider that the grounds on which they failed were considerably more significant that the ground on which the applicants succeeded. Those four grounds occupied the great bulk of the applicants' various written submissions and a significant proportion of the applicants' oral arguments. Likewise, those four grounds occupied the great bulk of the first, second and third respondents' written submissions.
4. In contrast, the legal issue arising under ground 4, on which the applicants were successful, occupied only one paragraph of the applicant's written submissions, and very little attention in the first, second and third respondents' submissions, although we accept that ground 4 attracted somewhat more attention in the course of the hearing.
5. We consider that it is appropriate to make a costs order that reflects this mixed success. Contrary to the first, second and third respondents' submissions, we do not consider that it is appropriate to make an order that differentiates between the costs of the different grounds, because we consider that any precise allocation of costs to the various grounds of appeal is likely to be difficult and may generate still more costs. Rather, we will make a percentage based order.
6. Our evaluation of the application for leave to appeal, and its outcome, taking a pragmatic approach, has led us to conclude that the appropriate order is that the applicants ought to pay 80 per cent of the first, second and third respondents' costs of the application for leave to appeal on the standard basis.

Costs as between the applicants and the interveners

1. In relation to the costs as between the applicants and the interveners, the submissions were as follows:

(a) The interveners submitted that the applicants ought to pay their costs of the proceeding, given that they had been entirely successful on the grounds involving them. They further contended that they ought to receive indemnity costs from 8 May 2025, based on a Calderbank letter they had sent to the applicants on 2 May.

(b) The applicants accepted that they ought to pay the interveners' costs on the standard basis, but contended that there should be no order for costs on the indemnity basis. They contended that the Calderbank letter was invalid or, alternatively, that their rejection of it was not unreasonable.

1. The Calderbank letter contained an offer in the following terms:

1. the Leave Application is forthwith dismissed or otherwise discontinued, and will not be reagitated in any other forum, to the extent it concerns and otherwise seeks relief against Mr Martindale KC and Ms Willshire;

2. the Restraint Applications are dismissed or otherwise discontinued and will not be reagitated in any other forum;

3. all allegations made against our client and Ms Willshire in the Appeal Proceeding are fully and finally withdrawn, and will not be repeated by or on behalf of you, in any other legal proceedings;

4. you, Mr Martindale KC and Ms Willshire bear their own costs to date as against each other; and

5. each of you, Mr Martindale KC and Ms Willshire execute a confidential Deed of Settlement and Release as agreed between them ...

1. The Calderbank set out the reasons that the interveners said meant that the appeal proceeding lacked merit. It then said as follows:

5.1 In light of the matters set out ... above, we encourage you to give the Offer very serious consideration.

5.2 This is especially so in circumstances where Mr Martindale KC and Ms Willshire have already incurred significant costs in connection with the Appeal Proceeding, which they will seek to recover from you on an indemnity basis if and when they successfully defend the Appeal Proceeding.

5.3 If you accept the Offer, we will provide a deed of settlement to give effect to its terms.

5.4 If the Offer is not accepted in writing by 4:00 pm on 7 May 2025, it will be automatically withdrawn and we do not envisage that it will be repeated again.

5.5 The Offer is made in accordance with the principles applied in Calderbank v Calderbank (1975) 3 All ER 333 and applied by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR435.

5.6 If you do not accept the Offer and the Appeal Proceeding fails to the extent it concerns Mr Martindale KC and Ms Willshire, then they will rely on this correspondence on the question of costs, including to seek their costs from the date of this letter on an indemnity basis.

5.7 If the Offer is not accepted, then our client and Ms Willshire will take steps to make their respective applications seeking leave to intervene in the Appeal Proceeding.

5.8 Those applications and the steps that will follow when leave to intervene is granted stand to further increase your costs exposure to our client and Ms Willshire.

1. On 6 May 2025 (the day before the offer expired), Mr Martindale's solicitor telephoned the first applicant's telephone number and spoke with the second applicant. He told the solicitor that the applicants would not be accepting the offer.
2. We have concluded that the interveners are entitled to an order for costs on the standard basis before 7 May 2025 and on the indemnity basis thereafter.
3. First, we observe that it is well-established that an order for costs in favour of an intervener may be made when the intervention was necessary to protect the intervener's interests or where the intervener had a special or legitimate interest in the proceeding that was different to a party's interest.[8] That was so in the present case, given that the applicants sought costs orders against the interveners and made serious allegations concerning their professional conduct. The applicants did not dispute this. Rather, the dispute turned on whether the costs order ought to be one for indemnity costs (in part).
4. In relation to the validity of the Calderbank letter, the applicants contended that the offer to compromise as to costs was not a real offer to compromise. They relied on Wills v Chief Executive Officer of the Australian Skills Quality Authority, where the Full Court of the Federal Court said this:

there is significant support in the authorities for Mr Wills' submission that an offer of compromise on the basis simply that there be no order as to costs is not a genuine compromise for the purposes of r 25.01(1) of the FCR or the Calderbank principle.[9]

1. The Full Court then gave various examples of other authorities to that effect.[10] It concluded as follows:

However, it is not necessary to determine this question here. Quite apart from the question of whether there was any genuine offer of compromise for present purposes, we do not consider that Mr Wills' rejection of the offer of compromise was unreasonable in the circumstances ...[11]

1. It may be accepted that, in the ordinary course, an offer to compromise on the basis that a proceeding be withdrawn and there be no order as to costs will not constitute a genuine compromise. As Elliot J said in United Petroleum Australia Pty Ltd v Herbert Smith Freehills (No 2), a Calderbank letter 'must represent a genuine compromise, as opposed to an invitation to capitulate'.[12]
2. However, the present context is not ordinary. It involves two interveners, rather than the principal parties, against whom the only relief sought was an order that they pay the first applicant's costs of one of the summonses determined by the trial judge. Given this, there was no other outcome about which the parties could compromise. Furthermore, the Calderbank letter informed the applicants that the interveners had already incurred significant costs. They were thus offering to forego any entitlement to those costs that they would have should the applicants fail in their challenge to the judge's orders. In those circumstances, we consider that the Calderbank letter contained an offer of a genuine compromise. It was not merely an invitation to capitulate.
3. The applicants also sought to rely upon the fact that the Calderbank letter stated that the parties were to enter into a deed of settlement. This, it was said, made the offer too uncertain to be accepted because it was not clear what was to be included in the deed of settlement. They relied on the decision in Amorosi v Robinson (No 2), where Moore J said that an offer of compromise must be certain in its terms: it must be 'capable of acceptance and enforcement and be "unambiguously clear"'.[13] It cannot 'involve further negotiation between the parties prior to the compromise being effected'.[14]
4. Again, these principles may be accepted. It is also appropriate to refer to Godecke v Kirwan, where Walsh J quoted with approval the following passage from Von Hatzfeldt-Wildenburg v Alexander:

It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.[15]

1. In the present case, the Court's task is to decide whether, properly construed, paragraph 5 of the offer - namely, the statement that 'each of you, Mr Martindale KC and Ms Willshire execute a confidential Deed of Settlement and Release as agreed between them' - was a condition precedent to the parties making any agreement at all, or whether it was simply a promise to execute such a deed, as an expression of 'the manner in which the transaction already agreed to will in fact go through'.[16]
2. In our view, the incorporation of a requirement for a deed of release was an expression concerning the form in which the parties' agreement was to be documented - that is, paragraph 5 of the offer was a promise to execute such a deed and thus simply a term of what would be, if accepted, a binding agreement. That is supported by the statement on the final page of the Calderbank letter that 'If you accept the Offer, we will provide a deed of settlement to give effect to its terms'.[17]
3. More generally, the Calderbank letter did not make the parties' agreement conditional on entry into a deed. It contained no language indicating that the agreement was not to be binding until a deed was executed, such as 'subject to deed', or that the agreement was 'in principle'. Rather, paragraph 5 is best understood as a term of the proposed agreement, by which the parties would execute a settlement deed that reflected the terms set out at paragraphs 1 to 4. The language used did not suggest that the parties' agreement would be superseded by a later deed which would contain additional, but not yet agreed, terms.
4. Ultimately, the terms of the offer were clearly articulated in the Calderbank letter, and the stated intention that those terms be reflected in a deed of settlement did not render the offer uncertain or incapable of acceptance. This was not an offer to negotiate; it was an offer that contained clear terms and, had it been accepted, it would have been enforceable.
5. In the alternative to their argument that the Calderbank letter was invalid, the applicants contended that their refusal to accept it was not unreasonable. They relied on the two matters discussed above - the fact that the offer concerned only a compromise in relation to costs and the fact that it provided for a deed of settlement. In addition, they submitted that the 5 day time period for acceptance of the offer rendered the refusal not unreasonable, and they pointed to the fact that the offer was made by a non-party.
6. In Hazeldene's Chicken Farm v Workcover Authority (Vic) (No 2) this Court, when discussing the principles relevant to when a rejection of a Calderbank offer might be held to be unreasonable, said this:

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

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

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

(c) the extent of the compromise offered;

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

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

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.[18]

1. In the present case, considering each of these matters in turn:

(a) the offer was made early in the context of the dispute between the interveners and the applicants;

(b) the time allowed to the offeree to consider the offer was relatively short (five days), however when contacted about the offer the applicants did not indicate that they required more time to consider the offer, or to obtain advice about it - they simply stated that they would not be accepting it;

(c) the extent of the compromise was significant, given that the interveners had already incurred 'significant costs' and that they were offering to forgo their opportunity to recover any of those costs;

(d) the applicants' prospects of success, as at the date of the offer, were weak, given the interlocutory and discretionary nature of the orders in issue and given the state of the evidence on certain matters (as conceded by the applicants' counsel on the hearing of the application for leave to appeal), and the prospects of success were dealt with in the letter in some detail;

(e) the offer was expressed in very clear terms;

(f) the offer foreshadowed an application for an indemnity costs in the event that the applicants rejected it.

1. In all of these circumstances, we consider that the applicants' rejection of the offer in the Calderbank letter was unreasonable. Given that, we will make an order that they pay the interveners' costs on the standard basis up to 7 May 2025, being the date on which the offer expired, and on the indemnity basis from 8 May 2025.

[1] Lee v Yap [2026] VSCA 20 ('Appeal Reasons').

[2] Lee v Yap (No 2) [2024] VSC 730, [223].

[3] That is a reference to the implied legal obligation in that prevents parties from using documents obtained through compulsory court processes for any collateral or ulterior purpose: Hearne v Street (2008) 235 CLR 125; [2008] HCA 36.

[5] In light of their acceptance that they could not act, we refused the restraint application: Lee v Yap [2025] VSCA 260.

[6] Lee v Yap [2025] VSCA 260, [16].

[7] Nom de Plume Nominees Pty Ltd v Fingal Developments Pty Ltd [No 2] [2016] VSCA 233, [13]-[14] (Tate and McLeish JJA and Ginnane AJA).

[8] Naqebullah v State of Victoria [2024] VSCA 307, [114] (McLeish, Niall and Lyons JJA). See also Mandalinic v Stone (Liquidator) (No 2) [2023] FCAFC 176, [4]-[5] (Stewart, McElwaine and Button JJ).

[9] [2022] FCAFC 43, [30] (Logan, Griffiths and Perry JJ). See also Amorosi v Robinson (No 2) [2024] VSC 806, [37] (Moore J).

[10] Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192; (2002) 201 ALR 618, 631 [60]-[61] (Hill J); [2002] FCA 192 (cited with approval in Vasram v AMP Life Ltd [2002] FCA 1286, [12] (Stone J)); Nutrientwater Pty Ltd v Baco Pty Ltd (No 2) [2010] FCA 304, [31] (Kenny J).

[11] Wills v Chief Executive Officer of the Australian Skills Quality Authority [2022] FCAFC 43, [32] (Logan, Griffiths and Perry JJ).

[12] [2018] VSC 501, [18] (Elliott J).

[13] [2024] VSC 806, [48] (Moore J); referring to Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 160 (Tadgell JA); [1996] VSC 37.

[14] Amorosi v Robinson (No 2) [2024] VSC 806, [48] (Moore J); quoting M T Associates Pty Ltd v Aqua‑Max Pty Ltd & Anor (No 3) [2000] VSC 163, [56] (Gillard J).

[15] Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629, 638-9 (Walsh J); [1973] HCA 38; quoting Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, 288-9 (Parker J). See also discussion in Radovanovic v Stekovic [2024] NSWCA 129, [40]-[49] (Payne JA, Meagher JA agreeing at [1], Gleeson JA agreeing at [2]).

[16] Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629, 638-9 (Walsh J); [1973] HCA 38; quoting Von Hatzfeldt‑Wildenburg v Alexander [1912] 1 Ch 284, 288-9 (Parker J)

[18] (2005) 13 VR 435, 442 [25] (Warren CJ, Maxwell P and Harper AJA); [2005] VSCA 298.