Love v State of Victoria & Anor

2 Since the delivery of judgment, issues have arisen between the parties about costs. They are not insignificant issues. The parties say that they have spent millions of dollars in costs. The costs issues have been the subject of a large quantity of affidavit evidence, detailed written submissions and, subsequently, an oral hearing lasting an entire court day and more.[2]

3 One thing is common ground: subject to all existing costs orders and subject to an issue about the costs of discovery, the plaintiff must pay the costs of both defendants of the proceeding. The plaintiff was effectively obliged to acknowledge that much, because he was unsuccessful on every point decided in the proceeding and because he does not suggest that any conduct on the part of either defendant, or any other matter, would justify depriving either defendant of any part of its general costs of the proceeding. It is also common ground that the award of costs to the first defendant, State of Victoria, will comprehend the costs incurred by Ministers Thwaites and Batchelor prior to the State being substituted for them on the defendants' side of the proceeding.

4 The outstanding issues as to costs are as follows:

As between the plaintiff and the first defendant, the State of Victoria

• Should the State be awarded solicitor-client costs, as distinct from party-party costs, from about the time it made a "Calderbank offer" to the plaintiff in April 2006?
• If so, from what precise date?
• Should I certify for senior counsel and two junior counsel for the State?

As between the plaintiff and the second defendant, the Roads Corporation

• Should the Roads Corporation be awarded solicitor-client costs, as distinct from party-party costs, from the outset of the proceeding?
• Alternatively, should the Roads Corporation be awarded solicitor-client costs from about the time it made a "Calderbank offer" to the plaintiff in March 2006?
• If so, from what precise date?
• Should the plaintiff's costs of discovery and the Road Corporation's costs of discovery be excluded from the Court's present orders as to costs and remain in abeyance pending the outcome of related proceedings in this Court between the plaintiff and the Roads Corporation?
• Alternatively, should the costs of the Roads Corporation's discovery be carved out of any award of solicitor-client costs and be awarded to the Roads Corporation on a party-party basis only?
• Should I certify for senior counsel and two junior counsel for the Roads Corporation?

5 As can be seen from the above statement of the issues, only the Roads Corporation seeks an order for higher costs as from the outset of the proceeding. It does so by reference to three matters: a claim that the proceeding had no prospect of success, claims as to specific conduct on the part of the plaintiff (including the alleged making of unfounded allegations of impropriety) causing loss of time and adding unduly to costs, and the sending of its Calderbank letter on 29 March 2006. The State of Victoria takes a different approach It confines its claim for higher costs to the period commencing from the time it sent its Calderbank offer and it relies entirely on the plaintiff's failure to accept that offer, in all of the circumstances then obtaining, to justify its claim for solicitor-client costs. Despite some faint suggestions in oral argument, neither defendant distinctly applied for indemnity costs, as distinct from solicitor-client costs. I proceed accordingly.

6 Subject to the question of the costs of this dispute as to costs, I have arrived at the following conclusions:

(a) The plaintiff should be required to pay the State of Victoria's costs (including costs of transcript and reserved costs) of the proceeding[3], to the extent incurred up until 4.00 pm on 2 May 2006 (being the time of expiry of the State's Calderbank offer) on a party-party basis and, to the extent incurred thereafter, on a solicitor-client basis;

(b) The plaintiff should be required to pay the Roads Corporation's costs (including costs of transcript and reserved costs) of the proceeding[4], to the extent incurred up until 4.00 pm on 13 April 2006 (being the time of expiry of the Roads Corporation's Calderbank offer) on a party-party basis and, to the extent incurred thereafter, on a solicitor-client basis.

7 The Roads Corporation has failed to persuade me that the plaintiff should pay its costs on a solicitor-client basis from the outset. However the plaintiff has failed to persuade me that the costs of the Roads Corporation's discovery in this proceeding should be excluded altogether from the present orders as to costs or that they should be carved out from the solicitor-client costs order where they would otherwise fall within it.

8 I propose to leave the taxing officer free to decide whether or not to allow senior counsel and two junior counsel for either or both of the State of Victoria and the Roads Corporation.

9 As to the costs of the dispute as to costs, my present inclination, subject to any submissions to the contrary, is to order that the plaintiff pay the State's costs thereof on a solicitor-client basis; and to order that the plaintiff pay 50% of the Roads Corporation's costs thereof on a party-party basis.

10 It will be convenient to begin by stating shortly my understanding of the relevant general principles as to costs; then to set out the facts relating to the defendants' respective Calderbank offers; then to indicate my understanding of the relevant Calderbank principles; then to explain why I consider that the offers were reasonable and that their refusal was unreasonable; then to explain why, having regard to the offers and to the circumstances generally, I consider that solicitor-client costs should be awarded to both defendants as from the time of (the expiry of) their Calderbank offers; then to explain why I am not persuaded by the Roads Corporation to extend that order back to the outset in its case; then to deal with the discovery matter; then the question of certification for senior counsel and two counsel; and lastly (in a provisional way) the costs of the dispute as to costs.

11 Costs are always in the discretion of the Court.[5] Normally, costs follow the event.[6] Usually, awards of costs should be made on a party-party basis.[7] However the Court has power to order that costs be awarded on a solicitor-client basis[8] or on an indemnity basis.[9] Putting aside situations covered by particular statutory provisions or court rules, something special or unusual must be demonstrated to justify a departure from awarding costs on a party-party basis.[10] The unreasonable refusal of a reasonable "Calderbank" offer of compromise may be regarded as a special circumstance and may thus warrant an award of solicitor-client or indemnity costs.[11]

12 On 29 March 2006 the solicitors for the Roads Corporation sent a letter marked "Confidential. Without prejudice save as to costs" to the plaintiff's solicitors, in the following terms[12]:

"We refer to your client's claim against VicRoads in Supreme Court Proceeding Number 4504 of 2003 ('the acquisition validity proceeding').

The parties to the acquisition validity proceeding have incurred and are continuing to incur enormous costs and expenses as a result of the proceeding. To date our client has incurred legal costs in the order of $1.5 million on a solicitor-client basis.

In addition to the substantial legal costs, VicRoads has suffered loss and damage of approximately $3.44 million as a direct result of the injunction obtained by Mr Love. Particulars of that loss and damage have been provided to your client and are contained in the Affidavit of Trevor Raymond Boyd sworn 17 December 2004. Our client continues to suffer loss and damage as a result of the injunction. Recently, Abigroup has served our client with a further claim for delay costs for the amount of $661,483.

Mr Love has provided an undertaking in respect of VicRoads' damages which has been secured by an unconditional bankers guarantee provided by Bendigo Bank Limited dated 3 August 2005 for $2,990,364. VicRoads will seek to recover the loss and damage it has suffered as a result of the injunction obtained by Mr Love once the acquisition validity proceeding has been concluded should the proceeding fail to be resolved as proposed in this letter.

Our client also has the benefit of four costs orders against Mr Love in this proceeding:

• On 28 February 2003, Justice Nettle ordered Mr Love to pay VicRoads' costs of his application for an interlocutory injunction. We estimate these costs to be in the order of $50,000.
• On 24 September 2004, Justice Osborn ordered Mr Love to pay VicRoads' costs of the hearing and further pay the costs of VicRoads occasioned by the setting aside of the Court order of 6 August 2004. We estimate these costs to be in the order of $10,000.
• On 22 and 29 October 2004, Justice Smith ordered Mr Love to pay VicRoads' costs on a party-party basis relating to your client's summons of 15 October 2004. We estimate these costs to be in the order of $25,000.
• On 20 March 2006, Justice Williams ordered Mr Love to pay VicRoads' costs taxed on a party-party basis in relation to his wholly unsuccessful application to amend his statement of claim. We estimate that these costs will exceed $250,000 taxed on a party-party basis.

We are aware that on 14 December 2004, his Honour Justice Bongiorno made an order for costs against VicRoads. We estimate that your client's costs relating to that application would be in a similar range to those incurred by VicRoads in relation to your client's summons of 15 October 2004 and accordingly in our opinion the two orders relating to 14 December 2004 and 22 and 29 October 2004 effectively cancel each other out.

Offer

VicRoads wishes to avoid the further unnecessary expense and inconvenience to its core business operations caused by this litigation.

We are instructed to make the following offer, without admission of liability to Mr Love, in full and final settlement of his claims against VicRoads in the acquisition validity proceeding:

(a) VicRoads and your client must each bear the legal costs they have incurred in the acquisition validity proceeding. Specifically, VicRoads will not seek to obtain the benefit of the costs orders against Mr Love of 28 February 2003, 24 September 2004 and 20 March 2006 which amounts to a sum in the order of $310,000. VicRoads will also forego its entitlement to its legal costs incurred to date in this proceeding which on a party-party basis we estimate to be in the order of $1 million and which would be recovered by VicRoads at the culmination of the proceeding. VicRoads will also forego its right to claim the loss and damage it has incurred as a result of the injunction obtained by Mr Love in respect of the Protected Area which amounts to a sum in the order of $4.1 million. Accordingly in making this offer our client is foregoing the opportunity to obtain from your client costs and damages in the sum of approximately $5,410,000; and

(b) VicRoads will consent to the discharge of the unconditional bankers guarantee provided by Bendigo Bank Limited of 3 August 2005 for $2,990,364, held as security for Mr Love's undertaking as to damages.

In return, Mr Love will:

(a) formally discontinue the acquisition validity proceeding against VicRoads with no orders as to costs;

(b) consent to an order discharging the injunction ordered on 6 March 2003 and varied on 4 June 2003;

(c) execute a deed of release which releases VicRoads from all actions, suits, claims, demands, costs and other liabilities of any nature which your client now has or at any time may have against VicRoads and its present or past officers and employees, that is in any way connected with the claims made in the acquisition validity proceeding or VicRoads' acquisition of your client's land save for his claims for compensation under the Land Acquisition and Compensation Act 1986.

(d) undertake to prevent anyone acting in his name or on his behalf or his successors or assignees, from bringing any actions, suits, claims and demands in any way connected with the claims made in the acquisition validity proceeding or VicRoads' acquisition of your client's land save for his claims for compensation under the Land Acquisition and Compensation Act 1986, and will continually indemnify VicRoads and its successors against any such actions, suits, claims and demands;

(e) undertake to keep the terms of the settlement confidential and Mr Love must not disclose the terms of this settlement to anyone else without the written consent of VicRoads. This does not apply to a disclosure required by law.

We attach proposed Minutes of Consent Order for execution by your client.

Our client's offer is open for acceptance until 4.00pm 13 April 2006.

This offer is made pursuant to the principle in Calderbank v Calderbank [1975] 3 All ER 33.

If your client does not accept this offer and the Court determines or makes an order or award on your client's claim that is no more favourable then [sic] this offer, our client will seek an order that Mr Love pay VicRoads' costs from the date of this offer on a solicitor-client or on an indemnity basis. This letter will be relied upon in support of such an application.

We await your response to our client's offer."

13 No response to the letter was made by or on behalf of the plaintiff.

14 On 19 April 2006, before the substitution of the State of Victoria for Ministers Thwaites and Batchelor[13], the Victorian Government Solicitor's Office, acting for the Ministers, sent a letter[14] marked "without prejudice save as to costs" to the plaintiff's solicitors, in the following terms[15]:

"We refer to your client's claim against Ministers John Thwaites and Peter Batchelor in Supreme Court proceeding No 4504 of 2003.

The parties to this proceeding have incurred and are continuing to incur enormous costs and expenses.

Our clients have the benefit of the following costs orders against the plaintiff in this proceeding:

• On 28 February 2003, Justice Nettle ordered that the plaintiff pay the Ministers' costs of his unsuccessful application for an injunction.
• On 24 September 2004, Justice Osborn ordered that the plaintiff pay the Ministers' costs of that day and any costs thrown away by reason of the vacation of the trial of a preliminary question.
• On 22 and 29 October 2004, Justice Smith ordered that the plaintiff pay the Ministers' costs of his Summons filed 15 October 2004.
• On 20 March 2006, Justice Williams ordered that the plaintiff pay the Ministers' costs of his Summons filed 17 September 2004.

We estimate that these costs orders will be taxed in the order of $100,000.

The Ministers wish to avoid the further unnecessary expense and inconvenience caused by this litigation.

We are instructed to make the following offer, without admission of liability to the plaintiff in full and final settlement of his claims against the Ministers in this proceeding:

(a) the Ministers and your client must each bear the legal costs they have incurred in this proceeding. This would involve the Ministers agreeing not to seek the benefit of the costs orders obtained against your client.

(a) formally discontinue the proceeding against the Ministers with no order as to costs;

(b) will execute a deed of release which releases the Ministers, their successors and employees or former employees of the State of Victoria from all actions, suits, claims, demands, costs and other liabilities of any nature which he now has or at any time may have against the Ministers, their successors and employees or former employees of the State of Victoria, that is in any way connected with the claims made in this proceeding.

(c) the plaintiff will undertake to prevent anyone from acting in his name or on his behalf or his successors or assignees, from bringing any actions, suits, claims or demands in any way connected with the claims made in this proceeding and will continually indemnify the Ministers and their successors against any such actions, suits, claims and demands;

(d) the terms of the settlement will be confidential and the plaintiff must not disclose the terms of settlement to anyone else without the written consent of the Ministers. This does not apply to a disclosure required by law.

Our clients' offer is open for acceptance until 4:00pm on 2 May 2006.

This offer is made pursuant to the principle in Calderbank v Calderbank [1975] 3 All ER 33.

If the plaintiff does not accept this offer and the Court determines or makes an order or award on your client's claim that is no more favourable than this offer our clients will seek an order that the plaintiff pay their costs from the date of this offer on a solicitor-client or on an indemnity basis. This letter will be relied upon in support of such an application.

We await your response. If you have any queries, please contact [contact details supplied]."

16 The letters of offer were similarly structured and, in parts, identically expressed. It seems certain that the author of at least one of the letters borrowed from the other letter somehow. However, in each case the plaintiff was invited to discontinue as against the particular offeror or offerors only, not to discontinue the entire proceeding. This seems strange, because the claims as against the respective defendants were inextricably intertwined. Nevertheless, the first offer (from the Roads Corporation) expired before the second offer (from the two Ministers) was made. Accordingly, strictly speaking, Mr Love did not at any time have the capacity to ensure that, merely by accepting an offer made, he could avoid paying anything to either defendant. Nor have the Roads Corporation or the State invited me to treat the offers as combined offers or as containing cumulative benefits. In other words, each defendant relied on their own offer alone as containing the whole terms of the compromise offered. I note that the offers were in similar form and were made within 3 weeks of each other and that Mr Love made no response at all to either offer, even by way of seeking an extension of time to consider the offer in either case. There is nothing in the evidence or in the circumstances to indicate that either of the defendant parties would have been resistant to a request for an extension to enable Mr Love to consider the two offers together. Nevertheless I put that consideration aside, because neither defendant squarely raised it.

17 It is common ground that, in Victoria, authoritative guidance as to the principles relevant to the determination of an application for a special costs order, to the extent that it is based on a Calderbank offer, is to be found in the judgments of the Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[16] and Berrigan Shire Council v Ballerini (No 2)[17].

18 In Hazeldene, it was established that there is no presumption that the party rejecting a Calderbank offer should pay the offeror's costs on a special basis if the offeree receives a less favourable result. Rather, the correct approach is to treat the rejection of a Calderbank offer as a matter to which the court should have regard when considering whether to order indemnity costs.[18] The Court of Appeal identified and weighed up competing policy objectives relevant to the exercise of the costs discretion where a Calderbank offer has been made, principally the desirability of promoting settlement and reducing litigation costs as against the undesirability of discouraging potential litigants from bringing their dispute to the courts.[19] It settled upon what it called a "test of unreasonable rejection". It said[20]:

"In our view, these competing considerations can be sufficiently accommodated by a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as 'manifestly' or 'plainly' unreasonable."

19 The Court of Appeal proceeded to set out a non-exhaustive list of six matters to which a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard.[21] I will return to the list.

20 The Court rejected an argument that the Calderbank offer must set out, with specificity, "the basis for the offeror's contention that the offeree should accept the compromise - for example, because the offeree's case was hopeless or because the offeree had no reasonable prospects of doing better in the proceeding than was being offered in advance".[22]

21 Further, the Court indicated expressly that "the unreasonable refusal of an offer of compromise is, by itself, a proper ground for the award of indemnity costs or - in the present case - the award of solicitor-client costs".[23] It followed, the Court said[24], that it is not necessary for an applicant for such an order to establish matters which might be relevant to other, well-recognised grounds for indemnity costs, such as misconduct by the offeree or that the offeree acted with "wilful disregard of known facts or clearly established law" or that it acted with "high-handed presumption".[25] The Court said that it agreed with Redlich J[26] in Oversea-Chinese Banking Corporation v Richfield Investments Pty Ltd[27] ("OCBC") that such conduct is not a prerequisite for a finding that the rejection of a Calderbank offer was unreasonable.

22 These several observations in Hazeldene reveal error in the submissions made on behalf of Mr Love that there has been a "convergence of jurisprudence"[28] in the Calderbank and non-Calderbank cases and that "the power to award costs on an indemnity or solicitor/client basis is exercised quite rarely and it is only exercised in clear cases where the court is entirely satisfied that the commencement or, [in the Calderbank context], the continuance [of the proceeding] is highly or grossly unreasonable having regard to what the litigant knows or ought to know about its prospects of success at the relevant time".[29] In truth, it is necessary to treat cases involving Calderbank offers as falling within a specific category of the overall jurisprudence relating to the discretion to order that costs be paid on a solicitor-client or indemnity basis.[30] It is not necessary to show that the rejection of the Calderbank offer was "highly" or "grossly" unreasonable.[31]

23 In Ballerini[32], Nettle JA said in relation to rejected Calderbank offers:

"The question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable, and the answer to that question turns in each case on all the circumstances of the case. The making of an offer and its rejection are but two albeit important circumstances to which the court will have regard in the exercise of its costs discretion. As the court explained in Hazeldene's Chicken Farm:

'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 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;

(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 [order] in the event of the offeree's rejecting it'.[33]"

24 I note also, and express my respectful agreement with, the following observations made by reference to Hazeldene by Byrne J in Foster v Galea (No 2)[34], including, in particular, the sentences which I have emphasised:

"[9] [In Hazeldene] it was held that the mere fact that the result achieved was less than the offer made does not shift the burden to the offeree to prove reasonableness. Rather, the onus lies always on the offeror to demonstrate unreasonableness in the offeree [His Honour then referred to the six circumstances which the Court of Appeal said in Hazeldene were matters which a trial judge should ordinarily have regard to in such a case.]

I remind myself that the Judges of Appeal was not there engaging in a kind of judicial legislative process; they were simply giving a direction that these are the matters which the trial judge should ordinarily have regard to, in addition to such other matters as the judge might consider relevant. And, having had regard to these matters, it is for the judge to give to each such weight, if any, as seems appropriate. The fact remains that the discretion as to costs conferred by statute is an unqualified one and must, therefore, be exercised judicially having regard to the circumstances which the trial judge considers to be relevant to the particular case before him or her. I am mindful of the warning of Fullagar J in 1991 against any judicial attempt to fetter such a discretion.[35]

[10] I was referred to authority in this court where trial judges have accepted that an unaccepted defendant's offer of compromise was a relevant factor in considering the offeror's application for a special costs order[36] and to my own early decision in Mutual Community Ltd v Lorden Holdings Pty Ltd.[37] In each of these cases the unaccepted offer was considered a significant factor warranting an order for costs more severe than a party and party costs order. Most of them, however, were decided before the Hazeldene's Chicken Farm case. In that case the Court of Appeal laid down the principle that a special order should not be made for non-acceptance of a Calderbank offer unless the offeror demonstrates that the offeree's failure to accept the offer was unreasonable.

[11] This apparently simple test contains its own difficulties. The offeror, who bears the burden of establishing this, is very often not in a position to demonstrate that the response of the offeree was or was not unreasonable. Whether this is so may depend upon the legal advice given to the offeree and to evidentiary uncertainties known only to that party. The offeror cannot know these matters without piercing the veil of professional privilege. Moreover, what is meant by unreasonable in this context? It is certainly not that the offeree's case was so hopeless that it might be struck out as an abuse of process. The clue to its meaning must be found in the policy behind the court's acceptance that an offer may be used in this way. This is of course to compel the offeree to consider seriously the offer by introducing into its decision-making process the prospect that a failure to accept it may in the appropriate circumstances attract a cost penalty. Where a party makes a Calderbank offer which is reasonable in all the circumstances, especially in comparison to the offeree's prospects of success or where the offeree's prospects of success were not good[38], the Court has displayed a readiness to make a special order. As I observed in the Lorden Holdings case, the policy of the court is to encourage litigating parties to undertake genuine settlement negotiations and, for the purpose, to face up to serious offers of settlement."

25 It will be recalled that in Ballerini Nettle JA said that "[t]he question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable ...". Despite that phraseology, and despite his Honour's later statement[39] that "the question is not to be judged only by reference to the reasonableness of the offer but also by reference to the reasonableness of the refusal of the offer", I do not think that Nettle JA[40] intended to say that completely separate consideration needed always to be given to whether the offer was "reasonable" and to whether the rejection of it was "unreasonable". I do not think his Honour intended to depart in this respect from Hazeldene, in which, as I read the judgment, the Court of Appeal subsumed any question about the reasonableness of the offer under the rubric of the question whether the rejection of the offer was unreasonable. No threshold requirements in respect of the offer itself were expressly specified in Hazeldene.[41]

26 On the other hand, if it is necessary in this case to consider separately or as a threshold matter whether the offer was reasonable, three matters that were raised (one way or another) by Mr Love may be relevant in that regard. First, did the offer involve any real and genuine element of compromise? (The extent of any such compromise would, on this approach, fall for consideration again later as a Hazeldene factor relevant to the second stage.) Second, was the outcome of the case better or worse for the offeree than the compromise offered? Those two issues were closely intertwined, especially in respect of the State of Victoria's offer, which was essentially an offer that the proceeding be discontinued and that the State of Victoria be released, with the offeror and the offeree to bear their own costs. The substantive result was of course equivalent to the offer made. The third matter raised by Mr Love which could be treated as a "threshold" matter concerned the very nature of the proceeding. Mr Love submitted that where a case involves a private citizen challenging the legality or propriety of acts or decisions of the State that affect the private citizen, the Court should not apply Calderbank principles against the plaintiff or should apply them less strictly.

27 As to the first point, in New South Wales, the question whether a Calderbank offer[42] involves any real and genuine element of compromise has often been treated as a threshold matter.[43] In that regard, there has been considerable discussion in that State as to whether an offer by a defendant (who has no counterclaim) to "walk away" and bear its own costs can ever amount to a real and genuine offer of compromise. The general view in New South Wales is that such an offer is capable of doing so, but would do so only rarely.[44] It has been said that there will rarely be any opportunity for a real and genuine offer of compromise in an "all or nothing" case, such as a case turning completely on an issue of contractual interpretation.[45]

28 However that may be, in Victoria a more flexible approach has been held to be appropriate. In OCBC[46], in a considered and elaborate judgment which was given before Hazeldene and Ballerini but which (at least as to several parts) was the subject of approving references in Hazeldene, Redlich J said (omitting footnotes)[47]:

[76] The degree of compromise offered in a Calderbank letter may bear upon the reasonableness of both the offer and its rejection. In its written submission the Defendant made reference to the elements of compromise contained within each of the Plaintiffs' Calderbank offers. It described MKIC's offer of one apartment as modest. Aljade offered only to bear its own costs and I have understood the Defendant's argument to be that this amounted to no offer at all. Although the submission was not explored in oral argument I have treated the submission as a contention that the proposals made by each Plaintiff contain insufficient elements of compromise to make it unreasonable for the Defendant to have rejected it.

[77] A compromise involves a party in giving something away: Hobartville Stud Pty Ltd v Union Insurance Co Ltd. Authorities differ as to whether an offer to settle a case by abandoning, withdrawing or dismissing the claim with each party bearing its own costs constitutes a genuine offer of compromise.

[78] An offer to settle by dismissing the claim with no order as to costs is sometimes viewed as insufficient to constitute a genuine offer to settle or as being no offer of compromise at all.

[79] In Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd the Plaintiff offered to discount its claim by a nominal amount. Habersberger J adverted to the policy which underlies the rules relating to offers of compromise and observed that policy considerations are not advanced where the offer of compromise is not a genuine one which viewed objectively would hold any attraction for the offeree.

[80] In different circumstances Courts have regarded offers that a party will bear all or part of its own costs as constituting a sufficient and genuine offer of compromise. The extent of the offer of compromise must be viewed in conjunction with all of the relevant circumstances to determine whether the rejection of the offer was unreasonable.

[81] It is undesirable to attempt to define when terms of an informal offer of compromise will constitute a sufficient or genuine offer. The willingness of Aljade to forego its costs in exchange for the abandonment of the claim against it, should be viewed as genuine. The offer of Aljade was made at a time when the costs savings for the Defendant would have been substantial. Both Plaintiff's offers called for serious consideration by the offeree."

29 It is true that in Ballerini the Court of Appeal refused two separate applications for the payment of indemnity costs based on the rejection of so-called Calderbank offers, one of which was, in substance, a "walk away" proposal. The Court characterised the "offers" as demands to capitulate rather than reasonable offers of compromise. However the offers had been made at appellate level only and the facts in each instance were in other ways quite different from the present case.[48] In my view, nothing was said that would indicate disagreement with the statements of principle made by Redlich J in OCBC set out above, which were themselves supported by numerous other prior authorities cited by his Honour. Further, in Towie v Medical Practitioners Board of Victoria[49], which was decided by the Court of Appeal (Redlich and Weinberg JJA and Mandie AJA) after Ballerini, the Court was prepared to acknowledge[50] that even an offer "that a party will bear a very small proportion of its own costs may in particular circumstances be viewed as a sufficient offer of compromise to make a rejection of the offer unreasonable", although in such cases, the Court said, it will "generally be the surrounding circumstances which support the order for indemnity costs".

30 Turning to the second possible "threshold" factor, which is related to the first, it seems to me that a comparison between the final outcome of the case and the terms of the compromise offered would generally be a significant matter in assessing the "reasonableness" of the offer. At the risk of stating the obvious, I would observe that an offer of something considerably better than was ultimately obtained from the court, though not necessarily to be characterised as a reasonable offer, is more likely to be so characterised than an offer of something less than was ultimately obtained. Indeed, until the law for Victoria was clarified in Hazeldene, it was arguable that the question whether the offeree had "beaten" the Calderbank offer, even by $1, was something of a touchstone (in the sense of something that altered the burden of persuasion), just as it had been (and remains) a touchstone (in that sense) in relation to offers of compromise made under the rules of court. On the other hand, I note in passing that in his very recent decision in Kalenik v Apostolidis (No 3)[51], Hargrave J rejected a submission that a plaintiff who obtains a judgment which is $1 more than the amount of a Calderbank offer remains entitled to an order for costs unless there are factors other than the Calderbank offer which justify departure from the usual rule. His Honour expressed the view that where a plaintiff obtains a judgment that marginally exceeds a Calderbank offer the offer is not necessarily irrelevant. He said:

"Depending on the circumstances of the case, it may be relevant in the exercise of the court's discretion as to costs."

31 As to the third "threshold" factor, I note that counsel for Mr Love did not cite any authority that clearly supported its existence nor did they advance any developed argument in support of it. In their written submissions, counsel said that when on 20 June 2007 Osborn J granted Mr Love leave to amend his statement of claim his Honour "ruled" that the usual principles concerning the disposition of applications for leave to amend:

"fall to be applied in a context involving allegations of arbitrary and unlawful acts of the State towards a private citizen and in my view, there is a public interest strongly supporting the application of the general principles I have stated in the circumstances of this case in a relatively generous manner."[52]

"Mr Love submits that it would be inappropriate for the Court's 'relatively generous' approach in the public interest to amendment of a plaintiff's pleading in such cases to be coupled with the strict application of the principles governing the award of special costs orders for which the Roads Corporation contends."

32 During his oral submissions[53], Senior Counsel for Mr Love referred to the observation I had made in Thomopoulos v Faulks (No 2)[54] that "it may just be that in certain kinds of cases (such as the present) there is little or no room for relevant compromise and so the ordinary party-party rule may be very difficult to displace by the sending of a Calderbank letter". Picking up that theme, Senior Counsel proceeded to submit[55] that administrative law cases are not easily managed by the Calderbank process, because the citizen is complaining about the conduct of the State or an arm of the State. The citizen is saying that the conduct is unlawful and improper and should be set aside and that "various consequential things should follow". Senior Counsel submitted that if the defendants in this case were confident that they had acted lawfully and properly nevertheless they could have done something more by way of making a genuine offer of compromise, namely by offering to protect and preserve the Clonard homestead. But, Senior Counsel submitted, if that be an inappropriate suggestion, then Calderbank principles simply become very difficult, if not impossible, to apply in this case. His researches had not produced a single case in which a Calderbank offer had been made "in a pure administrative law context, let alone succeeded".

33 It seems to me that there are several answers to Mr Love's submissions on this third point.

34 As far as my own researches reveal, there is no direct authority for the specific proposition that in a proceeding by way of judicial review of administrative action a Calderbank letter (from either the plaintiff or the defendant) should or might be treated differently from the way in which it would be treated in other kinds of proceedings. It is true that support can be found from time to time for the view that, because the government is constitutionally required to act in the public interest, an administrative law proceeding is not simply a matter between contesting private litigants, and that therefore in such proceedings courts should not necessarily apply the general principle that costs follow the event in its full vigour.[56] However, as I have already mentioned, Mr Love does not suggest that the principle that costs follow the event should not apply in this case. So it is difficult to see why Calderbank principles should be regarded differently.

35 Mr Love does not submit that the case has resolved some important legal question, much less that some such question has been resolved in a fashion urged by Mr Love.[57] Moreover apart from cases affected by statutory provisions relating to costs[58], departures from ordinary costs principles are not the norm in administrative law proceedings.[59] Indeed, even when a court might otherwise be minded to absolve an unsuccessful applicant/plaintiff wholly or partly from liability for a government party's costs on the ground that the bringing of the litigation served the public interest in some particular way (itself not a view that is frequently adopted[60]), that step will generally not be taken where the applicant/plaintiff brought the litigation in his, her or its own interests, whether personal, proprietary or financial, to any significant extent.[61] This litigation appears to have been brought entirely in Mr Love's own personal, proprietary and financial interests, and he does not submit to the contrary.

36 Further, the present context is not "a pure administrative law context", to use the phrase adopted by Mr Love's Senior Counsel. From the outset, Mr Love has claimed not only declarations of invalidity and injunctions, but also damages. As at the time of the Calderbank offers, he was making, subject to foreshadowed further proposed amendments, claims in tort for millions of dollars in damages for alleged breach of statutory duty and negligence, among other things. He was also claiming exemplary and aggravated damages. The proceeding was not commenced under the Administrative Law Act 1978. No statement of reasons under that Act had been sought or given. Nor, despite the provisions of rr 56.01 and 56.02 of the Supreme Court Rules, was the proceeding commenced by originating motion under Order 56. Rather, the proceeding was commenced by writ, and it went forward on pleadings. It was an extremely fact-heavy case. In these respects the case is comparable with Qantas Airways Ltd v Cameron (No 3)[62] which involved a claim against airlines in relation to passive smoking. The applicant largely failed, but the Court considered that some weight should be given to the applicant's submission on costs to the effect that the litigation served the public purpose of elucidating the duty owed by airlines to those peculiarly vulnerable to environmental tobacco smoke. However the applicant had sought damages under statute and in tort as well as declarations and injunctive relief. This led the Court to characterise the proceeding as not having been brought and pursued purely in the public interest and the Court took that into account against the applicant in its overall assessment of the question of costs.

37 Closer still to the present case is Roads and Traffic Authority (NSW) v Refrigerated Roadways Pty Ltd (No 2)[63], a very recent decision of the Court of Appeal of New South Wales. There[64], an employee of the plaintiff was killed while driving a truck along a freeway in the southwest of Sydney when a concrete block, which had been deliberately dropped from an overhead bridge known as the Glenlee Bridge, penetrated the front windshield. The plaintiff employer brought an action in negligence against the RTA as the responsible roads authority claiming breach of a duty of care owed to road users by failing to screen the overhead bridge. The RTA was aware that there was a problem of people dropping objects from overhead bridges and had developed an order of priority for screening overhead bridges. Progress in screening the bridges was slow due to budgetary constraints and so the Glenlee Bridge had yet to be screened at the time of the incident. There was a mass of evidence before the trial judge about the internal workings of the RTA. The plaintiff employer succeeded at trial but the Court of Appeal allowed the RTA's appeal, holding that the RTA had not breached its duty of care to road users by failing to screen the bridge, taking into account the budgetary constraints under which the RTA operated, its decision-making processes and its expenditure priorities. It is true that the case was exclusively a tort case, rather than an administrative law case. There was no allegation of invalid decision-making. However, as in most claims against statutory authorities, there was a need to examine the statutory framework and to consider carefully the public duties and functions of the defendant. Mr Love's claim required a comparable exercise, albeit that it also involved his seeking to establish the existence of a novel duty of care (ie, a duty not to commit administrative law errors). On the fourth day of the trial in Refrigerated Roadways a large amount of relevant documentation came to light for the first time. The case had to be adjourned for several months to enable the parties to read it and deal with it. The RTA took the opportunity to send a Calderbank letter which offered a verdict for itself as the defendant and that the parties should bear their own costs. The offer was expressed to be open for 28 days. It was not accepted. As I have said, the plaintiff succeeded at trial (whereas, of course, Mr Love has failed). The RTA did not renew its offer or make any other offer concerning the appeal proceedings. Nevertheless, after the RTA succeeded in its appeal, it applied for indemnity costs for the trial from the time of the offer and for the appeal. Campbell JA (with whom McColl JA and Sackville AJA agreed) said[65]:

"The Respondent submits that there was little compromise involved in a 'walk away' offer. I do not agree. By the time the offer was made the RTA had incurred the pre-trial costs involved in taking statements from numerous witnesses, collating numerous documents, and qualifying experts. It had also incurred the costs of the four days hearing."

The Court was satisfied that "the terms of the offer reflected a genuine compromise in the circumstances".[66] Indemnity costs were awarded as sought in respect of the balance of the trial, but not in respect of the appeal.

38 I consider that Mr Love's reliance on the above-quoted passage from the ruling of Osborn J on the application for leave to amend the statement of claim is misplaced. Whether or not since the decision of the High Court in Aon Risk Services Australia Limited v Australian National University[67] it would still be appropriate in comparable circumstances to apply the general principles relating to the disposition of applications for leave to amend "in a relatively generous manner", different considerations arise when, after judgment, the Court is deciding what weight to give to a defendant's Calderbank letter. As Byrne J said in Foster v Galea (No 2)[68]:

"There is, too, the countervailing policy that plaintiffs should not be discouraged from bringing arguable claims to the court.[69] But I am not at all confident that this is a consideration which touches the present question. In this case, the plaintiff has brought an arguable claim and there is no court process which will prevent him from doing so or which will stop him from pursuing it. The policy which is pre-eminent, in these circumstances is that of providing an incentive for a party to address the offer in a serious way so that the court is not obliged to determine a case which reasonable parties ought to have resolved by settlement. This policy is equally applicable to the case where there is some uncertainty or risk as to liability as it is to the case where there is uncertainty or risk attending the quantification of the claim. In each case the plaintiff is encouraged by the court to accept an offer discounted to reflect these risks and uncertainty."

Similarly, in Leichhardt Municipal Council v Green[70], Santow JA (with whom Bryson JA and Stein AJA agreed) said:

"Where there is an adequate sum in court it obviously becomes less reasonable for a plaintiff to pursue its undoubted right to seek a remedy in court - a remedy involving significant costs and public expense - and thus the plaintiff should pay for its unreasonable conduct. Because the plaintiff certainly has a right to proceed to Court, any penalty for unreasonable conduct should lie only in the area of the court's general discretion on costs."

39 Mr Love has not persuaded me that Calderbank principles should not be applied in the usual way in this case.

The defendants' Calderbank offers were reasonable

40 Applying the principles referred to above, I am fully satisfied that both defendants' offers should be regarded as reasonable.

41 There can be no doubt that the Roads Corporation's offer involved a real and genuine element of compromise. In the letter it estimated that it was foregoing the opportunity to obtain from Mr Love costs and damages in the total sum of approximately $5,410,000. Mr Love now submits that that figure was not necessarily accurate. Perhaps it was not. If the Roads Corporation's damages claim has to be fought out, there will apparently be issues about quantum and causation. But the Roads Corporation was prepared to go on oath before Bongiorno J in late 2004 seeking additional security for the claim over and above the $2.9m it already held. Bongiorno J was not satisfied that additional security was required, but his Honour's judgment confirmed that there was substantial evidence in support of the Roads Corporation's assertion that it had incurred expenses in excess of that amount as a result of the interlocutory injunction granted by Nettle J. His Honour did not deny that this assertion might prove to be substantially accurate. In his ruling of 14 December 2004 Bongiorno J said:

"The parties are agreed that [the] sum held in the interest bearing account [in effect as security for the plaintiff's undertaking as to damages] is now about $2.9m and is increasing by about $100,000 per annum compounding. If the undertakings which VicRoads now seeks were given by the plaintiff, the amount in that trust account would increase to about $3.4m.

...

VicRoads relies upon a mass of material in support of its claim that the security put up by the plaintiff is now inadequate. That material deposes to various claims made by Abigroup Ltd upon it and its resolution or attempted resolution of those claims at a compromised sum of about $3.378m. However there are a number of assumptions inherent in the attribution of all of this sum to the disruption to Abigroup's work by the existence of the injunction which are by no means beyond argument. If this question ever has to be litigated I can confidently predict a serious argument on the issue of the causation of the loss sought to be compensated by Abigroup's claim, not to mention the part perhaps played by VicRoads itself and other extraneous factors in the possible causation of that loss. About all that can be said is that whilst VicRoads may establish the necessary causal nexus between all of its loss and the existence of the injunction, that is to say, a causal link between the increased cost of the roadwork which it must pay to Abigroup and the injunction, it may not. Questions of delay and the cause of it, the intervention of other possible causes, cost overruns and similar factors, may all play a part.

It is inappropriate on an interlocutory application of this kind that I analyse the evidence further or go directly to those parts of it in respect of which I think VicRoads may have difficulties of proof. To do so would tend to prejudice ultimate issues which may have to be appropriately determined upon a trial. I do no more than say that I am not sufficiently satisfied that the damage contended for by VicRoads at $3.378m will all necessarily be recovered from the plaintiff should his undertaking as to damages have to be called upon. I am not satisfied that the $2.9m already standing as security will be inadequate."

42 As to legal costs, the Roads Corporation's Calderbank letter offered to forego costs already ordered against Mr Love estimated at $310,000. The evidence before me[71] established that those costs were later taxed or agreed at $225,000. That alone was a very substantial concession. In addition, the Roads Corporation offered to bear all of the other costs it had incurred to date in the proceeding. In the letter it estimated those costs to be in the order of $1m on a party-party basis. In his affidavit before me, the Roads Corporation's solicitor, Mr Passarella, indicated that those costs had been estimated at $1.5m on a solicitor-client basis. Mr Love's Senior Counsel urges me to discount those figures, because they should be seen as reflecting the actual bills received by the Roads Corporation from its solicitors (being a large national firm), rather than a proper estimate of costs as they would be taxed on a party-party basis or even on a solicitor-client basis. Mr Passarella was not required for cross-examination. I accept the substance of his affidavit. I will assume nevertheless that Senior Counsel is correct in his comments on the figures. Still, the value of the additional claim for costs to be foregone would be very substantial, probably significantly in excess of $500,000. Added to the figure of $225,000 for costs already ordered, the Roads Corporation should be taken to have offered to give up at least $725,000 in legal costs. The sheer size of these concessions shows that a large element of compromise was involved even in relation to legal costs alone.[72] When combined with the concession in relation to damages in respect of the plaintiff's undertaking, the compromise offered was very considerable.

43 I am not moved by Mr Love's submission that the Roads Corporation could have offered to protect Clonard. The Clonard site was needed under the planning amendments for the O'Hern's Road full diamond interchange. As events proved, the Roads Corporation was fully justified in not offering to "protect" Clonard. The courts should not take an approach to applications for special costs orders that would induce defendants to "buy off" plaintiffs with inappropriate payments or concessions.[73] I note that, separately, the Roads Corporation has agreed to fully document Clonard and has offered from time to time to move the main buildings.

44 In my view, the Roads Corporation's Calderbank offer clearly involved a real and genuine element of compromise. If accepted, it would have been far more favourable to Mr Love than the result he obtained at the trial. The nature of the proceeding does not deprive the offer of its validity as a Calderbank offer. Accordingly, I find that the offer was reasonable.

45 The State of Victoria did not have the benefit of any undertaking as to damages and had no claim in that regard.

46 However, like the Roads Corporation, the State offered to forego the benefit of costs orders already made in its favour, being costs later taxed in the amount of $101,207.08.[74] In addition, it also offered to bear all of the other costs it had incurred to the time of the offer. The State's affidavit material before me does not give any estimate or indication of the value of those costs. However, as its Senior Counsel submitted, I can safely infer that those costs were heavy. The Ministers had been joined as defendants from the outset. The ramifications for the State had the plaintiff's claim succeeded would have been very serious. A great deal of interlocutory skirmishing had taken place prior to April 2006. Discovery was an enormous exercise, and it was mainly completed before the Calderbank offer was made.

47 Once again, I consider that the State's offer involved a real and genuine element of compromise. Again, the plaintiff would have been better off, at least in terms of costs, had he accepted the offer. The nature of the proceeding does not require that the offer be disregarded. I am satisfied that the State's offer was a reasonable Calderbank offer.

Each rejection by the plaintiff was unreasonable

48 In deciding whether the plaintiff's rejection of either offer was unreasonable, I must take into account all the circumstances of the case. I have already dealt with most of the matters on which the parties respectively relied. I have found that each offer was reasonable. I turn now to the six Hazeldene matters.

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

49 The offers were made after the proceeding had been on foot for over 3 years. They followed shortly after the delivery of a detailed judgment by Williams J refusing the plaintiff's application for leave to file and serve a proposed amended statement of claim. Several prior drafts of the amended statement of claim had previously been abandoned. The plaintiff had signalled clearly that he was not willing to go to trial on his original statement of claim, despite having secured an interlocutory injunction from Nettle J by reference to that pleading. Although Williams J had not been persuaded by the defendants to refuse the plaintiff a further opportunity to apply for leave to amend[75], the plaintiff had already had many opportunities to consider whether a viable case could be conducted. He had had the benefit of vast discovery. He was surely at a cross roads. The scale of the case he wished to bring was enormous. To go on would be likely to involve a vast amount of additional expense, time and trouble, as it did. The Craigieburn By Pass had been completed. It was being heavily used. Third parties were erecting business premises in the relevant vicinity. The plaintiff's prospects of obtaining an order that would actually restore the disputed land to him had disappeared, or virtually so.

50 It is true that the defendants did not renew their Calderbank offers or make any modified Calderbank offers after the plaintiff obtained leave in June 2007 to file and serve the amended statement of claim on which he ultimately went to trial. But that does not mean that the earlier offers were made at an inappropriate time. By June 2007 the defendants had no doubt incurred further heavy legal costs. The plaintiff had felt compelled to go back to a form of pleading that, though extraordinarily convoluted, was, in its essentials, similar to his original pleading (upon which, previously, he had not been prepared to proceed). For present purposes, I do not think it was incumbent on the defendants to make any further offer at or after the time when Mr Love obtained leave to amend. Rather, in my view, the offers were made at an appropriate time, indeed at a critical time. This factor contributes to the demonstration of unreasonableness on the plaintiff's part.

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

51 Mr Love does not suggest that the time allowed for consideration of either offer was too short. Neither side commented on the fact that the offers were not made in a co-ordinated, contemporaneous way.

52 I have already dealt with this matter in substance in considering whether the offers were reasonable. The offers were as large as they could possibly be, without extending to the payment of Mr Love's costs. The Roads Corporation's offer was of greater value than the State's offer in monetary terms, but both offers involved very significant monetary concessions.

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

53 As I have already indicated, the plaintiff's prospects of achieving his avowed main object, being the return of his land, were, on any reasonable view, either non-existent or negligible at the time of the offers.

54 In substance, his claim for damages was expressed to be quantified in the same way as in the pending by-pass compensation proceeding, save for the claim for aggravated and exemplary damages. It is hard to understand why he was not content to switch over completely to that proceeding, in which he had a comprehensive statutory right to compensation. In any event, he had had the benefit of discovery. Discovery had not thrown up any documents that significantly advanced his cause beyond the point it had reached on the documents that were in his possession before he issued the writ. At this time he was not prepared to proceed on his original statement of claim. He faced the limitations on the scope of judicial review to which I have referred in my substantive judgment.

55 Further, as his Senior Counsel acknowledged at trial, the plaintiff would have needed to make new law to succeed in his negligence claims based on an alleged duty of care to avoid administrative law error. The Privy Council had poured cold water on a similar suggestion in 1988 in Rowling v Takaro Properties[76]. There was no indication that any Australian court, much less a court of first instance, was likely to alter the law in that direction in the foreseeable future. There were sound reasons of legal policy why the courts were unlikely to do so.[77]

56 As at the time of the offers, the plaintiff's prospects of success should have been seen by any objective lawyer as very poor indeed.

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

57 Mr Love made no point about the clarity of the offers.

58 It is true that the offers did not state reasons why the case was unlikely to succeed, but the defendants had already made extensive submissions to Nettle J about the weakness of the case as originally pleaded, had filed detailed defences, and had made detailed submissions to Williams J about the weakness of the case as proposed to be pleaded. There would have been little point in repeating these matters in the letters.

(f) Whether the offers foreshadowed an application for an indemnity costs order in the event of the offeree's rejecting it

59 The letters duly foreshadowed that solicitor-client costs, or, indeed, indemnity costs would be sought if the offers were rejected.

60 In my view, the plaintiff acted unreasonably in each case in rejecting the defendants' Calderbank offers.

Solicitor-client costs should be paid from the expiry of the Calderbank offers

61 Taking all the circumstances of the case into account, I am satisfied that the defendants should be awarded solicitor-client costs as from the time of the Calderbank offers.

62 There was debate before me as to the precise date from which any such obligation should apply. Senior Counsel for Mr Love submitted that it was usual to allow time for the offer to be considered in fixing any such date.

63 Generally speaking, the provisions relating to offers of compromise in court rules envisage that the higher costs will be payable from the date of the (unaccepted) offer or a single day thereafter. The practice of the courts seems to vary in relation to Calderbank offers. I note that in Foster v Galea (No 2)[78], the relevant offer had been made on 15 December 2005 and it expired on 15 January 2006. Byrne J specified the date on which the offer had expired (15 January 2006) as the relevant date.

64 In the scheme of things, it should not make much difference in this case whether I pick the date of the offer or the date of expiry. On balance, I am inclined to follow the approach of Byrne J in Foster v Galea (No 2) and to nominate the expiry date in each case.

The Roads Corporation's further claim for solicitor-client costs from the outset does not succeed

65 In its first set of written submissions, in relation to the alleged absence of prospects of success, the Roads Corporation refers to the following statement by Nettle JA delivering the principal judgment of the Court in Murdaca v Maisano[79] wherein his Honour referred to the judgment of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchant Ltd[80] in the following terms:

"As Woodward J put it, it is appropriate to consider awarding solicitor/client costs or indemnity costs whenever it appears that a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established laws."

66 The Roads Corporation also relies on the following observations of French J (as his Honour then was) in J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA) Branch (No 2)[81]:

"It is sufficient, in my opinion, to enliven the discretion to award such costs that ... a party persists in what should on proper consideration be seen to be a hopeless case."

67 The Roads Corporation contends that at all times from the outset the plaintiff was properly advised and that therefore he knew or should have known that he had no chance of success.

68 In his written submissions in response, the plaintiff denies that he instituted or persisted with a proceeding and causes of action which had no prospect of success. He submits that his case was never without merit.

69 In support, the plaintiff submits that, in prior interlocutory hearings, both Nettle J and Osborn J expressed the opinion that the plaintiff had arguable claims.[82] The plaintiff submits that the decision of Williams J in February 2006[83] to refuse the plaintiff's application for leave to amend in terms of his then proposed amended statement of claim was based largely on dissatisfaction with the form of the pleading rather than on any view that the proposed allegations were unmaintainable.

70 Further, the plaintiff submits that his claims failed at trial primarily for want of proof and, in particular, because the Court declined to draw a number of inferences which the plaintiff submitted should be drawn from the documentary evidence. He says that in those circumstances the court must guard against the risk that it will "too readily embrace submissions that it was inevitable that the proceedings would fail"[84] The plaintiff submits that the appropriate approach is as follows:

"Mindful that the losing litigant and their advisors did not have the advantage of hindsight, a court may be able to determine whether the view was reasonably open to the losing litigant that it had sufficient prospects of success to justify its pursuit of litigation. If the answer is in the negative, the case may be treated as one that was 'hopeless' and warranting the making of a special costs order."[85]

71 The plaintiff submits that this was not a case where he "should have known that he had no chance of success"[86] He says that there were serious and genuine questions of fact to be tried and that, in such cases, a special costs order will not generally be imposed on the losing litigant.[87] Further, he submits, he was not in some special position to know the strength of his case when it was pleaded[88] - rather, he submits, the essential evidence at trial was the defendants' documents and the evidence of witnesses who had acted at the relevant times for and on behalf of the defendants (Mr Maclellan, Mr Craige and Mr Stella) or who were otherwise not "in Mr Love's camp" (Mr Masten). He says that, despite his best attempts, he was not able to obtain evidence from any potential material witnesses "in the defendants' camps" and that none of them was called by the defendants. He says that those witnesses included:

72 The plaintiff also submits that it is significant that the State of Victoria does not press for the making of any special costs order on the basis presently being discussed.

73 In its written submissions in reply, the Roads Corporation refers to Towie v Medical Practitioners Board of Victoria[89] where the Court of Appeal, referring to the decision in OCBC upon which the plaintiff's submissions rely, said:

"[41] ... The failure or unwillingness of the respondent to address the weakness of its position prior to the appeal, whether born of 'intransigence, careless indifference or an extended dismissive refusal'[90] warrants an order for special costs."

74 The Roads Corporation submits that those observations are applicable here.

75 More particularly, the Roads Corporation submits that the views of Nettle J in granting the interlocutory injunction speak for themselves:

"[23] It is I think unnecessary and undesirable that I say too much about the strength of the plaintiff's case or about the submissions advanced on behalf of the defendants. Suffice it to say for the present purposes that despite defendants' contention that the plaintiff's case is hopeless, I am persuaded by Dr Pannam's submissions that there is a serious question to be tried: as to whether the decision to effect amendment C 23 and the consequential decision under s 42 of the Transport Act 1983 compulsorily to acquire the plaintiff's land are vitiated in the respects identified by Dr Pannam.

[24] That is not to say, however, that I think that the case is likely to succeed at trial. Indeed as at present advised I am inclined to doubt it. It is simply to say that upon the low standard which I regard as applicable to the establishment of a serious question to be tried, I regard one as having been made out."

76 Next, the Roads Corporation submits that the fact that leave to amend was ultimately granted does not mean that the case was one which had merit. Indeed it submits that the grant of leave is not a material factor at all. It refers to the abovementioned observations of Byrne J in Foster v Galea (No 2)[91].

77 The Roads Corporation submits that the views expressed by Osborn J and Williams J upon the leave applications, where all that is required is that the claim be arguable,[92] proceed in each case on the assumption that the allegations found to be arguable and permitted to go forward were supported by the documents to which they refer and upon which they rely. Importantly, the Roads Corporation submits, the documents relied upon in the present case did not support the allegations relied upon to give rise to an arguable pleading. The Roads Corporation says that the same appears to be acknowledged in the following part of Mr Love's submissions:

"Mr Love's claims failed at trial primarily for want of proof and, in particular, because the court declined to draw a number of inferences which Mr Love submitted should be drawn from documentary evidence."[93]

78 The Roads Corporation further submits that it is plain from my reasons that I expressly rejected various assertions pleaded by Mr Love in his final amended statement of claim as to inferences to be drawn from and as to the interpretation and validity of documents in Mr Love's possession from the outset.[94]

79 Then the Roads Corporation submits that the documents from which the plaintiff sought to draw inferences were all documents which had been available to him from at least the date of the commencement of the proceeding. It says that this emerges from the affidavit of Mr Love sworn 19 February 2003 tendered during the course of the application for an interlocutory injunction before Nettle J.[95]

80 The Roads Corporation says that the plaintiff's assertion that despite his best attempts he could not obtain evidence from any potential material witnesses "in the defendant's camps" and that none of them was called by the defendants betrays that Mr Love's approach to the litigation was:

(a) in discovery, to pursue every possible document relating to every possible person who might, theoretically, have said or written something that might help the case Mr Love sought to advance;

(b) to blame the plaintiff's loss on the failure by the defendants to call witnesses.

81 The Roads Corporation submits that it must always have been clear to Mr Love that the burden was on him to adduce evidence, including, if he thought relevant, evidence from witnesses no matter in whose camp those witnesses may have been. It says that neither defendant had an obligation to call the 11 persons listed in Mr Love's submissions. It says that those potential witnesses were persons in respect of whom every conceivable document had been sought out by or on behalf of Mr Love and discovered. It relies also on the fact that Mr Love filed extensive interrogatories to which responses (described by the Roads Corporation as "detailed") were filed by the defendants, including as to the position of the Roads Corporation's employees Evans, Gray and Aleksic.

82 The Roads Corporation submits that it is not relevant that the State does not claim a special costs order on the same basis. It says that the claims made against the Corporation and those made against the State were not identical. It says that serious allegations of impropriety were never pleaded against the State whereas they were contained in the amended reply to the Corporation's defence. It further says that the pursuit of discovery against the Corporation, including electronic discovery, was significantly greater because the State had had and acted upon a policy of not retaining electronic documents after 7 years.

83 At the hearing, in relation to the overall prospects of success, the Roads Corporation essentially reiterated its written submissions on that point; and the plaintiff did likewise.

Conduct of the litigation and claims of serious impropriety

84 In its initial written submissions, the Roads Corporation submits that the conduct of the case by and on behalf of Mr Love caused loss of time to the Court and to the other parties. It refers to Degmam Pty Ltd (In Liquidation) v Wright (No 2)[96] in which Holland J awarded costs on an indemnity basis:

"... where the unsuccessful defendant had so conducted herself in the proceedings, by multiplying allegation upon allegation, and by prevaricating in the witness box, as grossly to prolong the litigation, thereby causing the other parties to incur costs far beyond what they could reasonably have expected to incur in litigation of the genuine issues."[97]

85 The Roads Corporation submits that an undue prolongation of a case by groundless contentions, of itself, is sufficient to found the order sought.[98] It says that that has happened here. It cites French J (as his Honour then was) in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd[99] as follows:

"When ... there is evidence of particular misconduct on the part of the party that causes loss of time to the Court and to other parties then an order for solicitor/client costs ... may be made."[100]

86 Separately and in addition, the Roads Corporation asserts that Mr Love made and pursued serious allegations which did not have any foundation and ought never have been made. In particular, it refers to allegations of abuse of process, of contempt and of misfeasance in public office. It submits that for such "high handed presumption"[101] and for the making of "wild and contumelious allegations"[102], an order for solicitor and client costs ought to be made. Indeed, it says, mounting and maintaining a case without merit is sufficient reason to order costs on a solicitor and client basis.[103]

87 I have given careful consideration to the respective submissions of the Roads Corporation and the plaintiff on this question. I am not persuaded that the plaintiff's claim should be characterised as having been "hopeless" from the outset. After all, the plaintiff did achieve an interlocutory injunction in 2003. It was, of course, achieved by reference to the documentary evidence then adduced, not merely by reference to the pleadings. As time went by, while neither attempts to amend nor discovery of documents were producing significant gains for the plaintiff, the plaintiff's prospects should have been assessed as getting bleaker and bleaker. By the time of the Calderbank offers, they should have been seen as very poor indeed. But the Roads Corporation will gain higher costs from that time forward. I do not think that the previous period should be regarded in the same way.

88 It is true that the plaintiff has not conducted this proceeding in an exemplary fashion. However most of the matters now complained of by the Roads Corporation have already been the subject of complaint by it from time to time during the course of the proceedings. Many of the matters complained of have already been taken into account in orders for costs previously made. At no time before now has the Roads Corporation applied for or been awarded solicitor-client or indemnity costs on the basis of unsatisfactory conduct by the plaintiff in this proceeding. The present application would impermissibly involve a revisiting of many prior costs orders. I do not consider that I should give much weight to this aspect of the Roads Corporation's submissions.

89 In the end, taking all the circumstances of the case into account, I am not satisfied that the plaintiff should be required to indemnify the Roads Corporation for its costs on a solicitor-client basis from the outset. Rather, I would specify the date of expiry of its Calderbank offer, as indicated above.

90 There is no merit in the plaintiff's contention that the costs of the Roads Corporation's discovery in this proceeding should be excluded to await the outcome of the by-pass compensation proceeding or otherwise carved out.

91 Originally, all discovery in Mr Love's various proceedings was done separately. It is true that, later, orders were made for combined lists of documents and to enable the use in particular proceedings of documents discovered in other proceedings. However, it was and remains the case that discovery was made in each proceeding by reference to the issues in that particular proceeding. All of the documents discovered in this proceeding remain identifiable separately as such. The fact that some or even all of them might be used in the by-pass compensation proceeding or another proceeding is not a sufficient reason to exclude the relevant costs altogether from the orders to be made now in this proceeding, nor to carve them out from the solicitor-client order where they would otherwise fall within it. I note in passing that the bulk of the discovery took place before the date from which the solicitor-client order will apply.

Costs for Senior Counsel and Two Junior Counsel

92 I accept Mr Love's submission that it is inappropriate for the Court to certify, as sought by each defendant, for senior counsel and two junior counsel. I agree that, conformably with the approach taken by Osborn J to an earlier application by the defendants, that is a matter that should be left to the discretion of the taxing officer.[104] In passing, I note that the defendants had announced some time prior to the trial that they would not be calling evidence. On the other hand, this case was still a particularly heavy case and much trial time was saved by efficient advocacy on all sides.

93 Apart from the relatively minor point as to certification, the State of Victoria has succeeded in its arguments about costs. My provisional view is that the plaintiff should pay the State's costs of the dispute accordingly; and that he should do so on a solicitor-client basis as a logical consequence of the proposition that he unreasonably rejected the State's offer of settlement in 2006 whereby the further proceedings in this matter (including the argument as to costs) were occasioned.

94 The Roads Corporation has been substantially successful too, but it did fail on its application for costs to be awarded to it on a solicitor-client basis from the outset. That application involved a significant amount of documentary evidence and it extended the hearing time of the costs argument. My provisional view is that these matters would appropriately be reflected in an order that the plaintiff pay 50% of the Roads Corporation's costs of the costs dispute on a party-party basis.

95 I will make orders accordingly, but will stay them for 7 days. I will order that if any party wishes to be further heard as to the costs of the costs dispute they shall notify my Associate to that effect within 7 days.

[1] [2009] VSC 215.

[2] Cf Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481 at 484 [11]- [13].

[3] Being costs not covered by existing costs orders.

[4] Being costs not covered by existing costs orders.

[5] Supreme Court Act 1986, s 24.

[6] See, generally, Bailey and Arthur, Civil Procedure Victoria [63.02.80]-[63.02.145].

[7] Supreme Court (General Civil Procedure) Rules 2005 r 63.27, 63.31; Bailey and Arthur, op cit [63.02.170] and cases there cited.

[8] Supreme Court (General Civil Procedure) Rules 2005 r 63.27, 63.28, 63.32.

[9] Supreme Court (General Civil Procedure) Rules 2005 r 63.27, 63.28, 63.30.1.

[10] PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 at [35]- [36]; Masha Nominees Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2006] VSC 56 at [9]; Thomopoulos v Faulks [2006] (No 2) VSC 286 at [5]-[7]; Macedon Ranges Shire Council v Thompson [2009] VSCA 209 at [13]- [15]; Chen v Chan [2009] VSCA 233 at [10]; Bailey and Arthur, op cit [63.02.180], [63.02.200]; Dal Pont, Law of Costs, 2nd edition, 2009 at [16.40].

[11] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435; Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65; Thomopoulos v Faulks (No 2) [2006] VSC 286 at [8]- [10]; Lollis v Loulatzis (No 2) [2008] VSC 35; Chen v Chan [2009] VSCA 233 at [17]; Dal Pont, op. cit at [13.42]-[13.69].

[13] The plaintiff takes no point about that.

[14] The letter was actually dated 18 March 2006, but it is common ground that it was so dated in error and that it was received by Mr Love's solicitors on 19 April 2006.

[16] [2005] VSCA 298; (2005) 13 VR 435.

[17] [2006] VSCA 65. See also Chen v Chan [2009] VSCA 233 at [17].

[18] [2005] VSCA 298; (2005) 13 VR 435 at 440-441 [17]- [20].

[25] Comparing Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 233.

[27] [2004] VSC 351 at [95].

[30] See also Thomopoulos v Faulks (No 2) [2006] VSC 286 at [8] and following; and Foster v Galea (No 2) [2008] VSC 331 at [11], set out below.

[31] See also Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 at [16]- [30], esp at [28].

[32] [2006] VSCA 65 at [33].

[34] [2008] VSC 331 at [9]- [11]. My emphasis. See also Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481 at 484 [11].

[35] Citing Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd [1992] VicRp 83; [1992] 2 VR 505 at 512-3 (discretion to grant or refuse leave to appeal against an arbitrator's award not to be fettered by the "Nema guidelines").

[37] (Unreported), 28 April 1993, BC9303878.

[38] Citing Porter v Lachlan Shire Council No 2 [2006] NSWCA 252 at [8].

[40] Or the other members of the Court, Callaway and Chernov JJA.

[41] See also Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 at [16]- [20]; but compare OCBC (which was decided before Hazeldene) at [76] and Foster v Galea (No 2), supra at [11].

[42] Or, where applicable, an offer made under rules of court.

[43] Leichardt Municipal Council v Green [2004] NSWCA 341, esp at [22]; Tarabay v Fifty Property Investments Pty Ltd [2009] NSWSC 951 at [33].

[44] Leichardt Municipal Council v Green [2004] NSWCA 341 at [22]- [60] esp at [37]-[39]; The Uniting Church v Takacs (No 2) [2008] NSWCA 172 at [9]- [11] per Hodgson JA with whom McColl JA agreed; cf per Basten JA (dissenting) at [21]-[28]; Hancock v Arnold [2009] NSWCA 19 at [17]; Tarabay v Fifty Property Investments Pty Ltd [2009] NSWSC 951 at [33]- [35]; Dal Pont, op cit [13.55].

[45] Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [29]- [31].

[46] [2004] VSC 351.

[48] Compare my comments in Thomopoulos v Faulks (No 2) [2006] VSC 286 at [15]- [18].

[49] [2008] VSCA 157. And see also Roads and Traffic Authority (NSW) v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 at [17] per Campbell JA with whom McColl JA and Sackville AJA agreed.

[51] [2009] VSC 475 at [24].

[52] Love v State of Victoria and Roads Corporation, ruling of 20 June 2007, p 2.

[54] [2006] VSC 286 at [18].

[56] See P Bayne, "Costs orders on review of administrative action" (1994) 68 ALJR 816 and cases there cited; Dal Pont, op cit at [9.27]-[9.28] and cases there cited.

[57] Compare Bodruddaza v Minister for Immigration and Multicultural Affairs [2007] HCA 14; (2007) 234 ALR 114 at [76]- [78]; Keo v Minister for Immigration (No 2) (2009) FMCA 16 at [25].

[58] Such as Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. See Smith v Airservices Australia [2005] FCA 997 at [60]- [62].

[59] See Sluggett v Human Rights and Equal Opportunity Commission [2002] FCA 1060 at [7]- [8] and cases there cited; Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (No 2) [2008] VSC 152 at [9] per Bell J.

[60] See, eg, Council of the Municipality of Botany v Secretary, Department of the Arts (1992) 34 FCR 412 at 416 per Gummow J; William Hollier v Australian Maritime Safety Authority [1998] FCA 975 (Heerey, Whitlam and North JJ); Smith v Airservices Australia [2005] FCA 997 at [63].

[61] See Dal Pont, op cit at [9.11] and cases there cited, especially Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (No 2) [2008] VSC 152; De Silva v Ruddock [1998] FCA 311 (Merkel J); Keo v Minister for Immigration (No 2) [2009] FMCA 16 at [22]- [26].

[62] [1996] FCA 1749; (1996) 68 FCR 387, discussed in Dal Pont, op cit at [9.13].

[63] [2009] NSWCA 336 (16 October 2009).

[64] This recitation of the facts is taken from the headnote to the substantive judgment: [2009] NSWCA 263.

[65] [2009] NSWCA 336 at [17].

[67] [2009] HCA 27.

[68] [2008] VSC 331 at [12].

[69] OCBC [2004] VSC 351 at [60], per Redlich J.

[70] [2004] NSWCA 341 at [11].

[71] See the affidavit of Mr Passarella sworn 16 July 2009, esp at [51].

[72] Compare Nolan v Nolan (No 2) [2003] VSC 136 at [77].

[73] Leichhardt Municipal Council v Green [2004] NSWCA 341 at [26].

[74] See the affidavit of Ms Hebiton dated 22 July 2009.

[75] [2006] VSC 57 at [122], [280].

[76] [1987] UKPC 2; [1988] AC 473 at 500-503.

[77] See now the passage cited from the Precision Products case in my substantive judgment in this matter: [2009] VSC 215 at [339].

[78] [2008] VSC 331 at [20].

[79] [2004] VSCA 123 at [40].

[80] [1988] FCA 202; (1988) 81 ALR 397.

[81] [1993] FCA 42; (1993) 46 IR 301. The Roads Corporation also cites Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7(vi)] per Harper J and GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296 at [18] per Robson J. And see now Macedon Ranges Shire Council v Thompson [2009] VSCA 209 at [13]- [15].

[82] The plaintiff refers to the rulings of Osborn J of 15 December 2006 and 20 June 2007, including the references by Osborn J in the ruling of 15 December 2006 to the approach previously adopted by Nettle J (in 2003) in relation to the plaintiff's applications for injunctive relief: see [2003] VSC 53 and [2003] VSC 60.

[83] [2006] VSC 57.

[84] OCBC [2004] VSC 351, at [36].

[85] OCBC [2004] VSC 351, at [43].

[86] Murdaca v Maisano [2004] VSCA 123, at [40]. The plaintiff contrasts his own position with the special position of the unsuccessful defendant in OCBC [2004] VSC 351, at [98].

[87] OCBC [2004] VSC 351, at [32].

[88] Cf OCBC [2004] VSC 351.

[89] [2008] VSCA 157.

[90] OCBC [2004] VSC 351, [103] (Redlich J).

[91] [2008] VSC 331 at [12].

[92] Commonwealth v Verwayen (1990) 170 CLR 394; Hall v National and General Insurance Co Ltd [1967] VicRp 41; [1967] VR 355 at 367.

[93] Plaintiff's submissions, [3(b)].

[94] These matters are detailed in an affidavit of the Roads Corporation's solicitor, Mr Passarella, of 16 July 2009 at paragraphs [18] to [19].

[95] The Roads Corporation refers to paragraphs [15]-[17] and [20]-[23] of the Passarella affidavit.

[96] [1983] 2 NSWLR 354.

[97] As recited in Ragata Developments Pty Ltd v Westpac Banking Corp (unreported, Federal Court, 5 February 1993) at page 2 per Davies J and the cases cited therein.

[98] Citing Auburn Council v Austin Australia Pty Ltd (in liq) [2007] NSWSC 286 at [9] per Einstein J; Ragata Developments Pty Ltd v Westpac Banking Corp (unreported, Federal Court, 5 February 1993) at page 2 per Davies J and Colgate-Palmolive v Cussons [1993] FCA 536; (1993) 118 ALR 248 per Sheppard J.

[99] Unreported, Federal Court, 3 May 1991 on page 6.

[100] The Roads Corporation also cites Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 at [7(iii)] and Main-Road Property Group v Pelligra & Sons Pty Ltd (No 2) [2009] VSC 174 at [36] per Bell J.

[101] Citing Australian Guarantee Corporation Ltd v De Jager [1984] VicRp 40; [1984] VR 483 at 502 per Tadgell J.

[102] Citing Shepherd v National Mutual Life Association of Australasia Ltd (Unreported, Supreme Court of Victoria, 15 November 1994) at page 6 per Hedigan J.

[103] Citing Main-Road Property Group v Pelligra & Sons Pty Ltd (No 2) [2009] VSC 174 at [36] per Bell J and Salfinger v Niugini Mining (Australia) Pty Ltd (No 4) [2007] FCA 1594 at [5] per Heerey J.

[104] Love v Minister for Planning & Ors [2007] VSC 176 at [24].