Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141

PRACTICE AND PROCEDURE - Email sent to original trial judge setting out parties' agreed position on effect of a settlement payment made by another party on damages to be awarded to plaintiff - Issues remitted to another judge following successful appeal to Court of Appeal - Email not referred to or tendered at remitter trial - Whether, after publication of remitter judge's reasons, defendants required leave to reopen their case in order to rely on email on quantum of damages - Dangers of informal communications with court discussed.

COSTS - Plaintiff ultimately succeeded in recovering small proportion of damages claimed in original trial - Whether issues-based costs order appropriate - Whether an invalid offer of compromise can be treated as a Calderbank offer - Whether defendants acted unreasonably in not accepting that offer - Costs orders affirmed.

1 Since 2005, the parties to this litigation have spent millions of dollars and have used up valuable court resources, both at trial and on appeal, over a relatively small amount of money. There have been multiple claims and a complex counterclaim, an appeal and cross appeal, a second trial on issues remitted by the Court of Appeal and now there is an application for leave to appeal from orders made at the second trial. The parties' pursuit of litigation instead of endeavouring to reach a reasonable, proportionate, and timely, commercial compromise is greatly to be regretted.

2 The disputed events took place in 2000 and 2001 and relate to a property development joint venture between entities associated with David Marriner and entities associated with the Construction and Building Unions Superannuation Fund ('CBUS'). The joint venture commenced in 1993 and came to an end on 3 November 2000. Its projects included the development of the Laguna Quays resort in North Queensland ('Resort').

3 The key individuals and entities and their roles are as follows:

(a) Australian Super Developments Pty Ltd ('ASD') was the joint venture company. It was previously known as Staged Developments Australia Pty Ltd.

(b) United Super Pty Ltd was the trustee of CBUS and, in that capacity, owned 50 per cent of the shares in ASD until 3 November 2000.[1] After that time, it was the ultimate owner of all the shares. At relevant times, its directors included Ralph Willis and George Wason.

(c) Goldworthy Pty Ltd was a company controlled by Mr Marriner and, until 3 November 2000, owned 50 per cent of the shares in ASD.

(d) At relevant times, Mr Willis, Mr Wason and Barrie Frost were the nominees of United Super Pty Ltd on ASD's board of directors ('ASD's board'). Until 3 November 2000, Goldworthy Pty Ltd's nominees were Mr Marriner, Ian Court and Garry Weaven. Mr Marriner was also the CEO of ASD until 3 November 2000. Ian Patience became the CEO on 17 November 2000, initially in an acting capacity. Graham Spence was the Resort project manager.

(e) ASD Laguna Investments Pty Ltd was, until 17 April 2002,[2] a wholly owned subsidiary of ASD. It was responsible for the Resort project.

(f) LQ Management Pty Ltd was a wholly owned subsidiary of ASD Laguna Investments Pty Ltd and conducted the day-to-day operations of the Resort project as agent for ASD Laguna Investments Pty Ltd.

(g) Cumberland Management Pty Ltd was a subsidiary of ASD which operated the Cumberland Lorne Resort.

(h) Laguna Australia Pty Ltd, Laguna Australia Airport Pty Ltd ('Laguna Airport'), Stage Design Pty Ltd and Fulham Holdings Ltd were companies controlled by Mr Marriner.

(i) Peter Jephson and John Whalley were associates of Mr Marriner who served as joint company secretaries of ASD and some of its subsidiaries. Mr Jephson resigned his position on 19 January 2001 and Mr Whalley resigned on 27 February 2001. After their resignations, they continued to work for entities controlled by Mr Marriner ('Marriner Group') for some time.

(j) S R Wallace & Wallace ('W&W') is a firm of solicitors in Mackay, Queensland, which acted for ASD in relation to the Resort in 2000 and 2001. Paul Penridge was a partner of the firm.

(k) Leo Erbacher was the owner of land near the Resort. A contract for ASD to purchase that land was replaced by a contract in which Laguna Airport was the purchaser.

(l) JJ McDonald & Sons Engineering Pty Ltd ('JJ McDonald') was a contractor which performed some work at the Resort.

(m) The WS Group was a firm of consulting surveyors which was engaged in various aspects of the Resort project.

4 We will refer to ASD, United Super Pty Ltd, Mr Willis, Mr Wason, Mr Frost and Mr Patience as 'the ASD parties'. We will refer to Mr Marriner, Goldworthy Pty Ltd, Laguna Australia Pty Ltd, Laguna Airport, Stage Design Pty Ltd and Fulham Holdings Ltd as 'the Marriner parties'.

5 The original trial involved claims by ASD against the Marriner parties and W&W. ASD alleged that Mr Marriner had exceeded his authority in relation to certain capital expenditure at the Resort ('capital expenditure claim'). ASD also alleged that W&W had committed a breach of trust in relation to funds that it held on trust for ASD as a result of the cancellation of a bank bond,[3] by disbursing those funds to third parties at the direction of persons who were not authorised by ASD. The unauthorised directions to W&W were made by Mr Jephson allegedly at Mr Marriner's request, save for a direction which Mr Marriner made personally on 22 May 2001 that $80,000 be paid to the WS Group. ASD claimed that Mr Marriner was liable for the unauthorised disbursement of the trust funds by W&W pursuant to the Eaves v Hickson[4] principle because he had knowingly induced or immediately procured the breach of trust by W&W ('bond monies claim').[5] ASD's claims against the other Marriner parties were based on Mr Marriner's knowledge and conduct.

6 The Marriner parties raised a number of affirmative defences and counterclaimed against the ASD parties. The defences and the counterclaim relied on the same or similar facts and included allegations that the ASD parties had acted unconscionably and had engaged in misleading and deceptive conduct.

7 It appears that W&W claimed indemnity from the Marriner parties.

8 The original trial took place before Byrne J over 20 sitting days between 18 August and 18 September 2009. On 31 July 2009, 18 days prior to the trial, ASD settled its claim against W&W in the amount of $350,000 ('W&W settlement payment') and W&W consented to the dismissal of its claim against the Marriner parties. However, the W&W settlement payment did not obviate the need for ASD to establish that W&W had committed a breach of trust and that Mr Marriner had knowingly induced or immediately procured that breach.

9 Byrne J published his reasons in respect of ASD's claims on 26 February 2010[6] and subsequently published his reasons on the Marriner parties' counterclaim on 16 April 2010.[7] He found that W&W had not committed a breach of trust because Mr Penridge believed that Mr Jephson and Mr Marriner were authorised by ASD to give instructions on its behalf, and therefore the bond monies claim could not succeed against the Marriner parties.[8] Byrne J found in favour of ASD in respect of part of the capital expenditure claim - assessing damages at $412,113 - and rejected the Marriner parties' defences and counterclaim. He made an order: that there be judgment for ASD against Mr Marriner in the amount of $412,113 plus interest in the amount of $224,336.25; that there be judgment for ASD on the counterclaim; that Mr Marriner pay ASD's costs on the claim; and that there be no order for costs on the counterclaim.

10 The Marriner parties appealed against Byrne J's order. ASD brought a cross appeal in respect of Byrne J's rejection of the bond monies claim. ASD also filed a notice of contention regarding the quantum awarded by Byrne J in respect of the capital expenditure claim.

11 On 3 August 2012, the Court of Appeal (Neave and Mandie JJA and Judd AJA) allowed the appeal and allowed the cross appeal in part.[9] The Court held that the judge had erred in concluding that Mr Marriner had breached a capital expenditure cap because, on the construction adopted by the Court of Appeal, the relevant agreement did not impose an expenditure limit on Mr Marriner but rather a limit on the extent of ASD's liability.[10] The Court also found that a trustee can be liable for an innocent breach of trust and that Byrne J had erred in holding that W&W had not committed a breach of trust.[11] As Byrne J had not fully dealt with the issue of whether any of the Marriner parties were liable for the breach of trust on the basis of the directions that had been given by Mr Jephson and Mr Marriner to W&W, the Court decided to remit that part of the case for determination by a judge in the Trial Division.[12] The Court also found that Byrne J did not provide adequate reasons for rejecting the Marriner parties' affirmative defences and counterclaim and decided to remit those issues also.[13]

12 The order that the Court of Appeal made on 3 August 2012 was as follows:

1 The appeal be allowed in the manner that follows.

2 The Orders made by the Honourable Justice Byrne on 16 April 2010 be set aside.

4 The following issues be remitted to be determined by a judge of the Trial Division and, subject to any contrary order of that trial judge, on the basis of the evidence already adduced in the trial:

• the liability of [Mr] Marriner for the breaches of trust committed by [W&W], including the applicability of any defences and related counterclaims;

• the liability of Goldworthy Pty Ltd, Laguna Australia Pty Ltd, and Stage Design Pty Ltd for the breaches of trust committed by [W&W], including the applicability of any defences and related counterclaims; and

• liability for the costs of the hearing before the Honourable Justice Byrne.

13 On 5 December 2012, the Court of Appeal (Neave JA and Judd AJA) published separate reasons in respect of costs.[14] It ordered that the ASD parties pay 80 per cent of the Marriner parties' costs of the appeal on a party and party basis and that there be no order for the costs of the cross appeal.

14 The remitter trial was conducted on the basis of the evidence adduced in the original trial and occupied six days before Sloss J in August and September 2013. On 19 September 2014, Sloss J upheld part of ASD's claim against Mr Marriner, rejected the Marriner parties' affirmative defences and dismissed their counterclaim.[15] Further hearings took place on 3 December 2014 and 25 February 2015 in relation to quantum and costs issues. On 30 June 2015, Sloss J decided: that ASD was entitled to judgment for $80,000 against Mr Marriner but not against any of the other Marriner parties; that the Marriner parties' counterclaim be dismissed; that the Marriner parties pay ASD's costs of the claims and counterclaim in the remitter proceeding and of the claims and counterclaim in the original trial before Byrne J; and that some of those costs be paid on an indemnity basis.[16] On 23 July 2015, Sloss J made an order reflecting the above decision. The order also required Mr Marriner to pay ASD interest of $87,920.73.

15 It should be noted that, by ordering the Marriner parties to pay ASD's costs of the claims and counterclaim in the original trial before Byrne J, Sloss J effectively varied that part of Byrne J's order that specified that there be no order for costs on the counterclaim.[17]

16 The Marriner parties now seek leave to appeal against the judgment for $80,000 and the costs orders. Leave to appeal is not sought in respect of the dismissal of the counterclaim. The Marriner parties rely on seven proposed grounds of appeal.

17 Grounds 1 and 2 raise the issue of whether Sloss J erred in finding that, in directing W&W to pay $80,000 from the firm's trust account to the WS Group on 22 May 2001, Mr Marriner knowingly induced or immediately procured a breach of trust by W&W and was thus liable to pay that amount to ASD.

18 Grounds 3 and 4 raise the issues of whether Sloss J erred in finding that:

(a) the parties had agreed that ASD must give credit for the W&W settlement payment of $350,000 by reducing the amount sought to be recovered by ASD;

(b) the Marriner parties required leave to reopen their case for the purpose of relying on an email which was said to record an agreement between the parties that the W&W settlement sum of $350,000 was to be deducted from any damages awarded to ASD; and

(c) there were no exceptional circumstances justifying the reopening of the Marriner parties' case and thus they were precluded from relying on the abovementioned email.

19 Grounds 5, 6 and 7 relate to costs and raise the issues of whether Sloss J erred in finding that:

(a) the costs orders of Byrne J should not be disturbed save that Byrne J's order that there be no order for costs of the counterclaim in the original trial should be replaced by an order that the Marriner parties pay ASD's costs of the counterclaim in that trial;

(b) the Marriner parties must pay ASD's costs of the remitter trial; and

(c) the Marriner parties must pay ASD's costs incurred after 8 March 2013 on an indemnity basis.

20 For reasons that follow, we have concluded that the application for leave to appeal should be granted but that the appeal should be dismissed.

21 As the proposed grounds of appeal raise three main issues, we will deal with them in three separate parts. Part A will deal with Grounds 1 and 2, Part B will deal with Grounds 3 and 4 and Part C will deal with Grounds 5, 6 and 7. In each part, we will set out: the grounds with which the part deals; the facts relevant to those grounds; the legal principles relevant to those grounds; Sloss J's findings that relate to those grounds; the parties' submissions on those grounds; and our decision on those grounds.

PART A: GROUNDS 1, 2: MR MARRINER'S KNOWLEDGE

1. [Sloss J] erred in finding that, in directing [W&W] to pay $80,000 from a trust account linked to file no. 96989 (Erbacher purchase file), on 22 May 2001, Mr Marriner knowingly procured or induced a breach of trust and was thus liable to pay $80,000 to ASD. [Sloss J] should have found that, given the lack of direct evidence, there was insufficient evidence to support a finding that Mr Marriner was aware that the funds in the relevant account belonged to ASD.
2. [Sloss J] failed to accord sufficient weight to the finding by the trial judge, Byrne J (who saw and heard the witnesses) on the same evidence as was before [Sloss J] that there was no evidence Mr Marriner knew the WS Group account for $80,000 was paid from third tranche funds. Had [Sloss J] done so she would have either found there was no reason for her to depart from the finding of [Byrne J] or, alternatively, there was insufficient evidence to support a finding that Mr Marriner was aware that the funds in the relevant account belonged to ASD.[18]

23 Grounds 1 and 2 require consideration of the evidence that was relevant to Mr Marriner's knowledge. Ground 2 also requires consideration of Byrne J's findings. We will first deal with the evidence concerning Mr Marriner's knowledge. Ground 2 will be discussed separately after our conclusions in respect of Ground 1.

24 Sloss J's primary findings of fact are not in dispute. However, the Marriner parties challenge some of the inferences that she drew from those facts. Set out below are the primary facts that are relevant to Ground 1. The full factual background and context of the litigation can be found in the reasons published by Byrne J, the Court of Appeal, and Sloss J, and will not be repeated here.

25 The working relationship between Mr Marriner and Mr Jephson was as follows:

(a) Mr Jephson had worked for the Marriner Group since January 1994. He joined the joint venture team of ASD in 1996 and served as company secretary of ASD, ASD Laguna Investments Pty Ltd, LQ Management Pty Ltd and Cumberland Management Pty Ltd until he resigned from these positions on 19 January 2001. Prior to his resignation, Mr Jephson assisted Mr Marriner in the day to day management of the development of the Resort. One of Mr Jephson's duties was the payment of ASD's accounts.

(b) From about 22 January 2001 until about 19 November 2001, Mr Jephson was an employee of Stage Design Pty Ltd, and was located in the same office suite as Mr Marriner. He was company secretary of Stage Design Pty Ltd from 17 September 1996 until 19 October 2001, of Laguna Australia Pty Ltd from 5 February 2001 until 19 October 2001 and of Laguna Airport from 4 October 2000 until 19 October 2001. One of Mr Jephson's duties was the payment of the Marriner Group's accounts. He gave evidence that the Marriner Group was 'always pressed for money' and that he 'was always pressed hard for moneys.'

(c) Although Mr Jephson reported to Mr Marriner, he worked with little or no supervision from Mr Marriner. Mr Marriner gave evidence to this effect. Mr Jephson's evidence was that he operated autonomously in relation to the payment of accounts, that no one supervised him and that he did not need supervision or guidance. Mr Whalley gave evidence that Mr Marriner had instructed executive staff that he expected that they would inform him of matters on a 'needs basis' but not on issues of detail, and that they should discharge their responsibilities without constant referral back to him.

Establishment of bank bond for $1.61 million and release of first two tranches

26 In August 1997, ASD and Village Roadshow Ltd entered into a joint venture to purchase the Resort. In March 1999, ASD acquired Village Roadshow Ltd's interest in the Resort.

27 Village Roadshow Ltd had previously provided a bank bond of $1.61 million to secure payment of a sum which would become due to the Mackay Electricity Board ('MEB') if the Resort failed to consume a certain amount of electricity. On 11 March 1999, at a meeting of ASD's board, Mr Marriner informed board members that $1.61 million would be required to cover the bond.

28 Prior to a new bond being issued, Mr Marriner sought to negotiate more favourable terms with MEB than those under which the previous bond had been issued. He sought to persuade MEB to accept a deposit of $1.61 million as sufficient security. Although MEB insisted upon a bank bond, Mr Marriner succeeded in persuading MEB to agree to the bond being reduced in three tranches if the consumption of electricity by the Resort was sufficient.

29 On 21 May 1999, the Bank of Queensland ('BOQ') issued the new bond for LQ Management Pty Ltd in favour of MEB ('Bond'). Funds to provide security for the Bond were sourced from CBUS and were deposited in a set-off account with BOQ in the name of LQ Management Pty Ltd ('Bond Monies').

30 The minutes of an ASD board meeting held on 22 June 1999, at which Mr Marriner was present, recorded that MEB had 'agreed to release $400,000 from the total deposit of $1.61 million' and that '[t]hese funds would be applied in part to the cost of sealing a section of the Midge Point Road adjacent to the resort.'

31 On 2 December 1999, the amount required by MEB as security for electricity consumption by the Resort was reduced and a first tranche of the Bond Monies in the amount of $330,170 became available in the BOQ set-off account. This amount was paid to ASD's account on the instruction of Mr Jephson.

32 On 28 July 2000, Mr Marriner, purportedly acting on behalf of ASD, entered into a contract with Mr Erbacher to purchase from Mr Erbacher land located near the Resort. However, ASD's board had not approved the purchase of this land. Consequently, on 8 December 2000, Mr Marriner and Mr Erbacher agreed to terminate the contract for the sale of land. On the same day, Mr Marriner and Mr Erbacher executed a deed of indemnity by which Mr Marriner agreed to indemnify Mr Erbacher for any stamp duty that may be payable on the terminated contract. Also on the same day, replacement contracts were executed by Mr Marriner on behalf of the purchaser, Laguna Airport, and by Mr Erbacher, for part of that land, described as Lot 32 and part of Lots 16 and 33. Mr Penridge gave evidence that this land was required for the construction of a runway extension as part of Mr Marriner's plans to construct an airport to service the Resort and the surrounding area.

33 The contract for the purchase of part of Lots 16 and 33 ('Erbacher Land') specified a purchase price of $82,000. It provided that settlement would take place on the date of registration of a plan of subdivision and that Laguna Airport was responsible for undertaking a survey and arranging the registration of the plan of subdivision. As stated at [67] below, settlement took place on 19 July 2001 or shortly after that date.

34 In late 2000, electricity consumption by the Resort was such that it became possible for a second tranche of the Bond Monies in the amount of $426,600 to be released from the BOQ set-off account.

35 On 24 October 2000, Mr Jephson, as company secretary of LQ Management Pty Ltd, sent a fax to BOQ requesting that it arrange to issue a new bond for the lower amount of $853,200 in favour of Ergon Energy (the successor of MEB) and liaise with Ergon Energy as necessary. The fax also instructed BOQ to transfer the amount of the second tranche of the Bond Monies to the account of ASD. Later that day, Mr Jephson sent a letter to BOQ varying his initial instructions and instructing BOQ to pay the second tranche as follows:

(b) $270,000 to Cumberland Management Pty Ltd to reimburse that company for payments it had previously made to JJ McDonald for work performed at the Resort.

36 The second tranche of the Bond Monies in the amount of $426,600 did not become available in the BOQ set-off account until 22 November 2000. BOQ made payments to JJ McDonald and Cumberland Management Pty Ltd as instructed by Mr Jephson on 30 November 2000.

37 Mr Marriner and Mr Jephson denied that Mr Marriner directed Mr Jephson to instruct BOQ to make the above payments out of the second tranche funds. Mr Jephson gave evidence that he did not discuss any of these payments with Mr Marriner or inform him of them and that he had no reason to believe that Mr Marriner was aware of them at the time. Mr Marriner gave evidence that he had no involvement in, and did not know at the time, how and when the second tranche funds were recovered and applied.

Release and disbursal of third tranche of Bond Monies

38 Following the payment of the second tranche of the Bond Monies, the balance remaining in the BOQ set-off account was $853,200.

39 On 24 January 2001, David Graham, an investment banker assisting Mr Marriner, requested Mr Penridge of W&W to provide him with a brief summary of the bonds held in relation to the Resort. In correspondence dated 29 January 2001, Mr Penridge set out advice on the bonds, including the Bond in favour of Ergon Energy.

40 Mr Marriner gave evidence that he told Mr Penridge to arrange to have the whole of the residual amount released from Ergon Energy and that Mr Penridge said, in effect, that he would do whatever was necessary to arrange that. At this time, Mr Marriner was no longer the CEO or a director of ASD. He did not tell ASD of his communication with Mr Penridge.[19]

41 According to a file note that Mr Penridge prepared on 12 February 2001, he had been instructed to make arrangements for Mr Marriner to meet with Ergon Energy on 6 February 2001 to discuss cancellation of the Bond. On that day, he telephoned the Connection and Pricing Manager at Ergon Energy, Mr Greg Edwards. Mr Edwards told Mr Penridge: that a decision on cancellation of the Bond did not have to be made by the Ergon Energy board; that the relevant officer could make that decision; that Mr Edwards could make a recommendation; and that, having regard to the current electricity usage, Mr Edwards could not see why the Bond could not be cancelled. Mr Penridge told Mr Edwards that he would not bother about a meeting and that he would make a written submission to Mr Edwards that the Bond be cancelled.

42 Mr Penridge then telephoned Mr Marriner. Mr Penridge's file note dated 12 February 2001 records that he 'phoned David and told him [what Mr Edwards had said] and he agreed that there was little point in having a meeting'. Mr Penridge gave evidence that he probably told Mr Marriner that cancellation of the Bond was more or less a formality. Mr Marriner gave evidence that he did not recall the conversation with Mr Penridge but did not dispute the accuracy of Mr Penridge's file note. He said that it was his understanding that 'there wasn't really an issue with the bond moneys being returned.'

43 On 6 February 2001, Mr Penridge sent a letter to Mr Edwards on behalf of 'the owners of [the Resort]' to 'formally request' the cancellation of the Bond and 'immediate release' of the balance of the Bond Monies of $853,200 'to our client.' The basis for the request was that 'the long term operation of the resort and the maintained [electricity] consumption levels now warrant release of these monies.'

44 Mr Penridge gave evidence that he sent the letter to Mr Edwards on the basis of instructions received from Mr Marriner. He could not recall whether he also received those instructions from Mr Jephson and/or Mr Spence. Mr Penridge said that, based on what he had been told by Mr Marriner and Mr Whalley (and perhaps also Mr Spence) possibly in June 2000, it was his understanding at that time that the Marriner Group was buying the Resort on an 'as is, where is' basis and that, under the acquisition arrangements, the Marriner Group was entitled to the benefit of any bonds.

45 On 13 February 2001, Mr Penridge received a message to call Mr Jephson. Mr Jephson gave evidence that he did not recall any conversation with Mr Marriner before making the call to Mr Penridge but he conceded that he may well have spoken with Mr Marriner. When Mr Penridge returned the call, Mr Jephson said that he would arrange for the release of the third tranche of the Bond Monies to the W&W trust account and that he would provide Mr Penridge with a list of accounts into which those monies were to be paid. At this time, Mr Jephson was no longer the company secretary of ASD or an employee of any of its subsidiaries. He was an employee of the Marriner Group.

46 By letter dated 13 February 2001, Ergon Energy instructed BOQ to cancel the Bond and authorised the release of the Bond Monies. As a result, the Bond was cancelled and the third and final tranche of the Bond Monies in the amount of $853,200 became available in the BOQ set-off account.

47 On 14 February 2001, Mr Penridge received a copy of the letter from Ergon Energy to BOQ dated 13 February 2001. Mr Penridge forwarded a copy of this letter to Mr Jephson. On the same day, Mr Jephson sent a fax to BOQ instructing it to pay the Bond Monies to W&W. The fax was on LQ Management Pty Ltd letterhead even though Mr Jephson was no longer company secretary of that company. Mr Jephson denied that this fax was written under Mr Marriner's instructions. He said that he wrote the letter of his own accord. Mr Marriner similarly denied that he had spoken with Mr Jephson about sending the letter to BOQ. He said 'No, I wouldn't have been talking to [Mr Jephson] about this at all.'

48 On 17 February 2001, a lengthy meeting took place at the Resort between Mr Penridge, Mr Marriner, Mr Blackwell from the WS Group, Mr Whalley and Mr Spence. Mr Penridge's handwritten file note recorded the matters discussed and included the notations: 'lease/bonds' (one hour) and 'No bonds avail[able]'. Mr Penridge could not recall any discussions about the Bond taking place at that meeting. He gave evidence that, if it had been discussed, 'some note would have been there.'

49 On 19 February 2001, Mr Jephson sent a fax to W&W attaching a spreadsheet of payments that W&W was required to make from the third tranche of the Bond Monies. The spreadsheet contained three columns respectively titled 'Payee', 'Amount' and 'Reference'. The spreadsheet relevantly included:

(a) a payment of $85,000 to 'Larkins McCarthy Trust Account';

(b) a payment of $8,150 to 'Goldworthy Pty Ltd'; and

(c) a payment of $83,200 to the W&W trust account. In the 'Reference' column corresponding with this payment, the following notation was written: 'Settlement funds for Erbacher transaction.'

50 Mr Jephson's fax was on Stage Design Pty Ltd letterhead. The fax: requested that W&W provide confirmation when the payments were made; noted that 'the Larkins McCarthy funds transfer is urgent and must be designated as "Clear Funds"'; and requested that Mr Penridge call Mr Jephson. Mr Jephson gave evidence that he did not believe he sent the fax after speaking to Mr Marriner. He said that no one told him which payments to include in the spreadsheet; they simply represented invoices that needed to be paid. Mr Marriner gave evidence that he did not discuss the spreadsheet with Mr Jephson.

51 On 20 February 2001, Mr Jephson sent a fax to W&W requesting, among other things, that the payment to the Larkins McCarthy Trust Account be increased by $1,500 (to $86,500) and the payment to Goldworthy Pty Ltd be decreased by $1,500 (to $6,650).

52 Larkins McCarthy was a firm of solicitors in Colac which acted for Mr Marriner. Mr Whalley gave evidence that the payment to Larkins McCarthy was for the purchase of property in Victoria by Goldworthy Pty Ltd.

53 Mr Jephson gave evidence that Mr Marriner did not direct him to recover the third tranche of the Bond Monies and that he did not tell Mr Marriner that the third tranche had been released or what was to be done with it. He said that tasks of this nature were left to him in the ordinary course of his duties and that he did not discuss with Mr Marriner his fax dated 19 February 2001 to W&W.

54 The W&W trust records show that the third tranche of the Bond Monies in the amount of $853,200 was received from BOQ on 21 February 2001. The records also show that that money was credited to five W&W files as follows:

Laguna Australia Airport Pty Ltd purchased from ASD

55 In total, payments were made disposing of all of the third tranche of the Bond Monies other than $555.34. The payments that were made are discussed below.

56 The Bond Monies distributed to Files 95925 and 98444 were applied in payment of W&W accounts addressed to Laguna Airport. The Bond Monies distributed to File 96835 were applied in payment of a W&W account addressed to ASD.

57 File 96978 was described as the 'General Advices' file. Its account ledger stated that the client for the file was ASD. The Bond Monies transferred to this file were disbursed progressively between February and June 2001 on instructions from Mr Jephson to meet debts owed to third parties. Mr Jephson gave evidence that he alone determined to whom the funds were to be distributed and that he did not communicate with Mr Marriner regarding the distribution of any of the third tranche Bond Monies. He said that he chose to make payments from funds in W&W's trust account because 'the money was just sitting there.' These instructions were sometimes given by fax on Stage Design Pty Ltd letterhead, on two occasions by fax on Goldworthy Pty Ltd letterhead and on a number of occasions simply by Mr Jephson's endorsement of an instruction to pay on a copy of the account to be paid. Mr Penridge gave evidence that every time Mr Jephson gave instructions to make a payment, he made it. The payments of $86,500 to Larkins McCarthy and $6,650 to Goldworthy Pty Ltd, which were the subject of Mr Jephson's request set out at [51] above, were made on 21 February 2001 and 23 February 2001, respectively, from the funds credited to File 96978.

58 File 96989 related to the purchase of land from Mr Erbacher described at [32]-[33] above ('Erbacher File'). The client for the file was ASD. As at 22 May 2001, $85,200 was credited to that file, comprising:

(a) $83,200 of the Bond Monies credited to the file on 21 February 2001; and

(b) $2,000 transferred to the file from File 96978 on 5 April 2001 at Mr Jephson's request. This amount was for the payment of stamp duty arising out of the original terminated contract for the purchase of land from Mr Erbacher by ASD.[21]

59 The third tranche of the Bond Monies was received by W&W in its capacity as solicitors for ASD and ASD was the beneficiary of those funds.[22] Accordingly, the funds credited to the Erbacher File were held by W&W on trust for ASD.[23]

Mr Marriner's instruction for disbursal of $80,000 from trust funds

60 On 22 May 2001, the amount of $80,000 was withdrawn from funds held in W&W's trust account for the Erbacher File and was used to purchase a bank cheque for $80,000 payable to the WS Group following a conversation between Mr Penridge and Mr Marriner on that day ('WS Group payment'). Mr Penridge prepared a file note dated 22 May 2001 in relation to his conversation with Mr Marriner. The file note was headed '[ASD] Purchase Erbacher' and contained the file number 96989. The file note stated:

I spoke with David Marriner who authorised me at 2.30 this afternoon to draw a cheque for the sum of $80,000.00 from [the] Erbacher file made payable to WS Group. The cheque was to be converted to a bank cheque and then deposited into WS Group's account with the National Australia Bank.

61 Mr Penridge gave evidence that he did not recall what was said during his conversation with Mr Marriner on 22 May 2001. He stated that he could not say why money from the Erbacher File was to be paid to the WS Group. He said 'I can't say why. I just know that WS Group were owed some costs in relation to works they performed for Laguna Quays Resort and those monies were used for that purpose.' He agreed that the reason he made the payment was that Mr Marriner had instructed him to do so. He added that '[i]f I recall, that's the only one that he did give me any instructions on.' Mr Penridge also said that, as at 22 May 2001, he knew that Mr Marriner was no longer a director or the CEO of ASD and that he believed that, on that day, he 'did not connect the trust funds credited to the Erbacher file with the bond funds received from [BOQ].'

62 Mr Marriner gave evidence that he did not recall any conversation with Mr Penridge regarding the disbursement of funds from a trust account to pay WS Group in May 2001 but that he could not doubt Mr Penridge's file note because he did not know. Later, he said that he did not speak to Mr Penridge at that time. He said that Mr Penridge raised the WS Group payment at some later point and Mr Marriner told him that he 'had no knowledge of it whatsoever.' Mr Marriner added that he responded to Mr Penridge by saying that 'in the normal course our policy has been that some party would have had to give some written instruction and follow up on this' and Mr Penridge was unable to say why that did not occur in this instance. Mr Marriner maintained that position when he was taken to the evidence Mr Penridge had given, stating that he could not recall the telephone discussion of 22 May 2001, and reiterated that Mr Penridge's normal practice was to send something in writing and ask for a signature before he would perform any transaction.

63 In cross-examination, Mr Marriner was asked whether he was aware as at May 2001 that W&W were holding monies in respect of the Erbacher File for settlement of that file. He responded as follows:

I would have been perhaps aware of it in principle, Mr Anderson, but you fail to see that I was not involved in the day to day accounting and financial matters. I was involved in seeing that financial accounts were brought together and concluded and audited. I was involved in sitting in on reports to the relevant parties that sat around the table at an informal Board meeting. I did not stand over that on a day to day basis.

64 More broadly, Mr Marriner said that he was not informed by Mr Penridge, nor any other person, and did not know that the third tranche of the Bond Monies had been released by Ergon Energy prior to those funds being disbursed from the W&W trust account. He also stated that he did not know prior to their disbursal that those monies had been deposited into the W&W trust account. He said he was not involved in and did not give instructions to any person, including Mr Penridge, as to how the third tranche funds were to be applied, and he did not know that all or any of those funds had been applied in any particular way. He also said that he 'had no involvement whatsoever' in instructing Mr Jephson to send the faxes to Mr Penridge between February and June 2001 directing that payments be made. Mr Marriner's evidence was that he believed that Mr Jephson, as administrative officer within the scope of his duties, would have decided how best to disburse the funds according to his understanding of the appropriate use.

65 Mr Marriner also gave evidence that the Marriner Group was under 'enormous pressure' in relation to the Resort in 2001 and that 'there was generally quite an extensive ... mixing bowl of where funds were coming in, going to, coming out of.'

66 In para 53(a) of their further amended defence and counterclaim, the Marriner parties admitted that Mr Marriner gave 'an oral instruction ... to Penridge ... on 22 May 2001 to apply $80,000 of the sum of $83,200 in the [W&W] Trust account in respect of Erbacher purchase monies to accounts of [the] WS Group'.[24]

67 On 26 June 2001, Laguna Airport executed a transfer for the acquisition of the Erbacher Land and Mr Marriner witnessed the affixation of that company's common seal in his capacity as director. On 3 July 2001, the Marriner Group deposited with W&W $82,000 for the credit of the Erbacher File to enable the purchase from Mr Erbacher to be completed. It appears that settlement took place on 19 July 2001 or shortly after that date. The client on the file was still shown as ASD even though the purchaser was now Laguna Airport.

68 On 9 August 2001, Mr Penridge sent a letter to Mr Patience confirming that the sum received into the W&W trust account was $853,200, of which only the sum of $555.34 remained, pending further instructions.

69 It was common ground at the remitter trial that, as the breach of trust by W&W was innocent and Mr Marriner did not receive any part of the trust funds, neither limb of Barnes v Addy[25] was applicable. It was also common ground that, notwithstanding that the breach of trust was innocent, Mr Marriner, as a stranger to the trust relationship, could be liable pursuant to the principle emanating from Eaves v Hickson[26] if ASD could establish that he knowingly induced or immediately procured the breach.

70 Sloss J found that the adverb 'knowingly' applies to both the inducement and procurement limbs.[27] She also found that the knowledge requirement could be satisfied by any of the first four categories of notice set out in Baden v Societe Generale pour Favoriser le Developpement du Commerce et de L'Industrie en France SA[28] which have been held to apply to the second limb of Barnes v Addy. Adapted to the claim against Mr Marriner, those categories are as follows:

(a) where Mr Marriner had actual knowledge of the breach of trust;

(b) where Mr Marriner wilfully shut his eyes to the obvious;

(c) where Mr Marriner had wilfully or recklessly failed to make inquiries that an honest and reasonable person would make; and

(d) where Mr Marriner had knowledge of circumstances that would have indicated the facts to an honest and reasonable person, even if the moral obtuseness of Mr Marriner prevented him from recognising the breach of trust.

71 Sloss J also found that the fifth category of notice referred to in Baden did not apply to liability under the Eaves v Hickson principle. That category is engaged where a third party has knowledge of circumstances which would have put an honest and reasonable person on inquiry as to whether a breach of trust was being committed.

72 The above principles are consistent with High Court authority: see Consul Development Pty Ltd v DPC Estates Pty Ltd[29] and Farah Constructions Pty Ltd v Say-Dee Pty Ltd.[30] The principles are also consistent with the observations made by the Court of Appeal in deciding the appeal against Byrne J's orders.[31] The correctness of the principles has not been disputed by any of the parties to the present application for leave to appeal.

73 A party seeking to establish that an inference ought to be drawn must demonstrate that that inference is the more probable one which arises from the established facts.[32] The inference must be based on evidence rather than speculation.[33]

74 In Holloway v McFeeters,[34] in the context of a claim for damages for a death caused by a vehicle collision, Williams, Webb and Taylor JJ explained the process the court will undertake when drawing inferences in the following often cited passage:

Inferences from actual facts that are proved are just as much part of the evidence as those facts themselves. In a civil cause 'you need only circumstances raising a more probable inference in favour of what is alleged ... [W]here direct proof is not available it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference; they must do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is mere matter of conjecture... All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood'.[35]

75 The questions of whether an inference is open as a matter of probability and whether that inference is the more probable one are to be determined by considering the combined weight of all the relevant established facts rather than by considering each fact sequentially and in isolation from the other facts.[36]

76 Whether one inference is more probable than another may be affected by the judge's view of the facts relied upon to support or contradict the competing inferences and why any evidence which is important to any of those inferences should be accepted or rejected.[37]

77 A judge's finding as to the most reasonable and probable explanation for a state of affairs, if it is a correct finding, remains correct notwithstanding that other possible explanations for the known facts cannot be excluded.[38]

78 Where the inference propounded by a party involves allegations of impropriety or some other serious matter, s 140(2)(c) of the Evidence Act 2008 requires the court to take into account the 'gravity' of the matters alleged in deciding whether the inference is the more probable one. Section 140(2)(c) reflects the principles in Briginshaw v Briginshaw,[39] namely, that the strength of the evidence necessary to establish a fact on the balance of probabilities may vary according to the nature of what it is sought to prove.[40] While the standard of proof remains the balance of probabilities, the more serious an allegation is, the greater the degree of confidence the court must attain before being satisfied that the allegation is made out.

79 At para 361 of her principal reasons, Sloss J stated that, in the face of their uncontradicted evidence about the third tranche of the Bond Monies, she was not satisfied that it was appropriate to draw any inferences that, from mid to late February 2001, Mr Marriner was aware of the manner in which Mr Jephson had directed Mr Penridge to disburse those monies. Accordingly, she was not satisfied that Mr Marriner directed Mr Jephson to apply the third tranche funds as he did. She concluded that Mr Jephson applied the funds to such of the creditors with whom he was dealing as he saw fit.

80 Sloss J then considered Mr Marriner's instruction to Mr Penridge on 22 May 2001 to make the WS Group payment and concluded as follows:

The position is different, however, with the direction given by Mr Marriner to Mr Penridge on 22 May 2001. In the context of those dealings, I am satisfied that there is a proper basis for inferring that from at least 22 May 2001 or thereabouts, Mr Marriner must have had relevant knowledge of the action taken by Mr Jephson or the directions that he had given. As is explained below, this is because Mr Marriner made contact with Mr Penridge on 22 May 2001 and personally gave him instructions to disburse monies held on trust on the Erbacher file and make a payment of $80,000 to [the] WS Group.

... [I]t is most unlikely that Mr Penridge would have communicated any information to Mr Marriner about the source of those funds.

...

Given the contemporaneous evidence in the form of Mr Penridge's file note, I am satisfied that the conversation between Mr Marriner and Mr Penridge took place in the manner and to the effect recorded in the file note.

Mr Penridge's file note makes clear that when Mr Marriner contacted him on 22 May 2001 he knew that [W&W] held monies in its trust account for the Erbacher purchase. There was no evidence that Mr Marriner or any of the Marriner entities had separately deposited any monies with [W&W], in trust, pending settlement of the purchase of the Erbacher land. If, as Mr Marriner said when giving evidence at the trial, he had no knowledge of the manner in which Mr Jephson had directed Mr Penridge to disburse the third tranche bond monies, it is not apparent why Mr Marriner would make contact with Mr Penridge at all, let alone to arrange payment of the $80,000 from the Erbacher file. In making that observation, I am not (and should not be taken to be) relying on any aspect of constructive notice as traditionally understood. I am simply pointing to the absence of any obvious, or indeed logical, basis for Mr Marriner to make contact with Mr Penridge and discuss arrangements for the disbursement of monies from the firm's trust account.

Furthermore, I note that knowledge on the part of Mr Marriner that [W&W] held monies in its trust account for the Erbacher purchase is consistent with what is pleaded in paragraph 53(a) ... of the Marriner parties' Defence ...

In cross-examination, it was put to Mr Marriner that he was aware as at May 2001 that [W&W] were holding monies in respect of the Erbacher file for settlement. He responded in terms that he 'would have perhaps been aware of it in principle' but he was 'not involved in the day to day accounting and financial matters.' If he was aware 'in principle' that funds were held in the Erbacher file with [W&W] pending settlement, then in my view the inference is open that Mr Marriner must have known that those funds were not his to deal with as he saw fit. As I have noted, there was no evidence that he or any of the Marriner entities had deposited those monies with [W&W]. Nevertheless, knowing that funds were held in trust by [W&W] on the Erbacher file, Mr Marriner gave instructions to Mr Penridge to pay the sum of $80,000 to [the] WS Group.

In my view, the demonstrated knowledge on the part of Mr Marriner that [W&W] held monies in its trust account on the Erbacher file, taken together with the evidence of his awareness 'in principle' permits a strong inference to be drawn that Mr Jephson must have informed him of that fact or conveyed information to him at some stage that would lead him to believe that.

In order to prove knowledge of circumstances that would indicate the facts to an honest and reasonable person, ASD is not required to establish actual knowledge on the part of Mr Marriner that the funds he directed be paid were sourced from the third tranche bond monies. It is sufficient to establish moral obtuseness of the kind described by Gummow J in Elders Trustee or the Full Court in Grimaldi if the facts permit the Court to infer objectively and on the balance of probabilities that Mr Marriner knew the funds were ASD's (or were otherwise funds to which he had no entitlement) but he nevertheless directed their disbursement.

I am satisfied that Mr Marriner 'knew' in the relevant sense that he had no authority to deal with the monies held by [W&W] on the Erbacher file. Nevertheless, Mr Marriner proceeded to instruct Mr Penridge to pay $80,000 of those trust monies to [the] WS Group. In so doing, he knowingly induced or immediately procured the innocent breach of trust by [W&W].

Accordingly, in respect of the direction given by Mr Marriner on 22 May 2001, I am satisfied that Mr Marriner had knowledge of circumstances which would indicate to an honest and reasonable person that the monies he directed Mr Penridge to pay to [the] WS Group from the monies held on the Erbacher file in [W&W's] trust account were not his to use as he saw fit. In my view, knowledge of the nature of the funds necessarily carries with it knowledge that the payment Mr Marriner induced or procured is a breach of trust, and that is so even if his moral obtuseness prevented him from recognising the impropriety involved.

...

I have based the inference drawn (namely, that Mr Marriner knew the money on the Erbacher file being disbursed by Mr Penridge on his instruction was not his to deal with as he saw fit) on the admissions made in paragraphs 53(a) and 59(i) of the Marriner parties' Defence coupled with the absence of any demonstrated or logical basis for holding a belief that [W&W] held money in trust for the Marriner parties.[41]

81 As stated at [14] above, on 23 July 2015, Sloss J gave judgment for ASD against Mr Marriner in the amount of $80,000 plus interest in the sum of $87,920.73 and made an order dismissing the Marriner parties' counterclaim.

82 Mr Marriner submitted that there was an insufficient evidentiary foundation to enable Sloss J to infer that Mr Marriner knowingly induced or immediately procured a breach of trust by W&W in relation to the WS Group payment. He submitted that, on the established facts, this inference was no more probable than other inferences which were exculpatory and that the choice between the competing inferences was a mere matter of conjecture. The exculpatory inferences were said to include that Mr Marriner was not aware that the trust funds to the credit of the Erbacher File stemmed from the third tranche of the Bond Monies or that Mr Marriner assumed or believed that the funds belonged to the purchaser of the Erbacher Land for whom W&W then acted, namely, Laguna Airport, a Marriner Group company.

83 In support of these submissions, Mr Marriner focused on paras 369-375 and 377 of Sloss J's principal reasons[42] in which she stated that she relied on three matters in drawing the impugned inference. The first matter was Mr Marriner's evidence that he may have been aware 'in principle' that the funds held by W&W were held in respect of the Erbacher File for settlement of that file.[43] Mr Marriner submitted that Sloss J erroneously treated his qualified statement as an acknowledgement that he was in fact aware that the funds were trust funds held by W&W in respect of the Erbacher File.

84 The second matter upon which Sloss J relied was the admission made in para 53(a) of the Marriner parties' further amended defence and counterclaim.[44] Mr Marriner submitted that, read in context, para 53(a) did not constitute an admission that he was aware at the time of his conversation with Mr Penridge on 22 May 2001 that the funds credited to the Erbacher File were held on trust for ASD.

85 The third matter upon which Sloss J relied was the absence of evidence that the Marriner Group had made any payment to W&W to be held on trust for the purchase of the Erbacher Land. Mr Marriner submitted that Sloss J erred in using the absence of such evidence as a means of filling evidentiary gaps in ASD's case that he was aware that the funds credited to the Erbacher File were held on trust for ASD.

86 In his oral submissions, senior counsel for Mr Marriner relied on a puttage issue which was not mentioned in Mr Marriner's written case. Senior counsel submitted that the limited cross examination to which Mr Marriner was subjected regarding his conversation with Mr Penridge on 22 May 2001 and ASD's failure to put to him crucial matters contributed to the absence of a sufficient evidentiary foundation to enable Sloss J to draw the impugned inference. Senior counsel gave the following examples of questions that could have been - but were not - put to Mr Marriner:

(a) 'Did you know how the money got into that trust account for Laguna Airport?';

(d) 'Why did you think you were entitled to give a direction for it to be used to pay a ... Resort bill?';

(e) 'Were you in fact aware [that funds were held in the Erbacher File pending settlement]?'; and

(f) 'Did you know whose file [the Erbacher File] was?'

87 Senior counsel made the following further oral submissions about puttage:

It was not put to Mr Marriner [that] he knew there was $80,000 in trust before he telephoned [Mr Penridge]. It was not put to him that the purpose of his call was to instruct the $80,000 be paid to [the] WS Group. It was not put to him that he knew where the $80,000 came from. It was not put to him that neither he nor any company of his had put the $80,000 into the trust account. It wasn't put to him that the funds to settle the Erbacher transaction had not come from one of his companies. It wasn't put to him, 'Explain how there was $80,000 in this trust account then'.

It wasn't put to him that the only basis for his contacting Mr Penridge to give the instruction was that he knew there was $80,000 in trust and he must have known where it had come from. ... It wasn't put to him that his statement 'I would perhaps have been aware of it in principle' was not true and that he was in fact actually aware of it. ... It wasn't put to him [that] he knew the funds weren't his. It wasn't put to him [that] he knew the funds weren't his to deal with as he saw fit.

It wasn't put to him that [Mr] Jephson must have told him there was $80,000 in this trust account. It wasn't put to him [that] he must have asked [Mr] Jephson where this money came from, how did it get into the trust account. It wasn't put to him that he turned a blind eye as to who owned these funds and was morally obtuse or anything of that sort, even in layman's language, as to where the $80,000 he was spending had come from and who owned it. It wasn't put to him that he had no basis to assume that he could deal with those funds.[45]

88 Senior counsel contended that if the above matters had been put to Mr Marriner, Sloss J would have been in a more informed position to determine whether the impugned inference should be drawn. Senior counsel also contended that the absence of such puttage deprived Byrne J of the opportunity to observe Mr Marriner's demeanour when responding, which would have been relevant to the fact-finding task. Senior counsel clarified that it was not being contended that the lack of puttage created unfairness in the Browne v Dunn[46] sense.

89 According to Mr Marriner, Sloss J erred in drawing the impugned inference in that she failed to have regard to the gravity of the allegation against him - that he knowingly induced or immediately procured solicitors to commit a breach of trust - in determining whether the civil standard of proof had been satisfied. Mr Marriner submitted that, although Sloss J referred to s 140(2)(c) of the Evidence Act 2008 and Briginshaw v Briginshaw[47] in her general discussion of the relevant legal principles in paras 306-307 of her principal reasons, she ultimately formulated - and applied - the following erroneous test:

[W]hat ASD must demonstrate is that the inference it seeks to draw, namely that Mr Marriner had knowledge of circumstances that would have indicated the relevant facts to an honest and reasonable person, is the more probable one which arises from the established facts.[48]

90 Mr Marriner also contended that it was not legally possible for him to be liable to ASD pursuant to the Eaves v Hickson principle because the beneficiary of the funds held by W&W in relation to the purchase of the Erbacher Land was Laguna Airport rather than ASD. As we understand it, this submission proceeded along the following lines:

(a) On the basis that the Bond Monies belonged to ASD, W&W committed a breach of trust on 21 February 2001 when it credited $83,200 of those monies to the Erbacher File which, at that time, related to the purchase of the Erbacher Land by Laguna Airport rather than by ASD.

(b) Mr Marriner had no involvement in or knowledge of the breach of trust on 21 February 2001.

(c) From 21 February 2001, the funds credited to the Erbacher File belonged to the active client on that file, namely, Laguna Airport, even though W&W's records continued to show ASD as the client.

(d) No breach of trust was committed by W&W on 22 May 2001 when it transferred $80,000 from the funds credited to the Erbacher File to the WS Group at the request of Mr Marriner because he had authority from Laguna Airport to deal with its money.

91 Mr Marriner argued that there is nothing in the principal reasons of the Court of Appeal that precludes the above submission being maintained in the present application. According to Mr Marriner, the Court of Appeal's statement at para 146 of its principal reasons related to the funds in W&W's 'ASD; General Advices' file rather than the Erbacher File. That paragraph was relevantly as follows:

[W]e do not consider that there is any basis for disturbing [Byrne J's] finding that the third tranche was held on a solicitor's trust for ASD. Our view is reinforced by the fact that the question whether ASD was the beneficiary of the solicitor's trust was raised only in Marriner's submissions in reply. Furthermore, and this is probably decisive, as regards the file involved, the bulk of the third tranche moneys paid to [W&W] were paid into account 96978 and [W&W's] trust ledger for that file showed the client as ASD.[49]

92 ASD submitted that the factual findings made by Sloss J were sufficient to justify the drawing of an inference that Mr Marriner knowingly induced or immediately procured a breach of trust by W&W in relation to the WS Group payment. In its written submissions, ASD listed the most pertinent of those factual findings. We will not list them here, but will incorporate them below in our reasons for rejecting Ground 1. ASD contended that, while Sloss J relied upon Mr Marriner's evidence that he may have been aware 'in principle' that the relevant funds constituted trust funds and upon the Marriner parties' admission in para 53(a) of their further amended defence and counterclaim, she took into account all of the factual findings that supported the drawing of the impugned inference.

93 According to ASD, Sloss J did not rely upon the absence of evidence that, prior to 22 May 2001, the Marriner Group had made any payment to W&W for the purchase of the Erbacher Land in order to fill any evidentiary gaps in ASD's case that Mr Marriner was aware that the funds credited to that file were held on trust for ASD. Rather, so it was said, Sloss J drew the inference about Mr Marriner's knowledge from other facts and merely stated that the absence of evidence of payment by the Marriner Group reinforced the correctness of that inference.

94 ASD submitted that, when Sloss J's principal reasons are read as a whole, it is clear that she applied s 140(2)(c) of the Evidence Act 2008 and the principles in Briginshaw v Briginshaw in drawing the impugned inference.

95 Finally, ASD submitted that para 146 of the Court of Appeal's principal reasons contains a general finding that W&W held all of the third tranche funds on trust for ASD and that this finding forecloses any submission by Mr Marriner that any part of those funds was held on trust for Laguna Airport.

96 The principles summarised at [69] to [72] above, as they apply to the WS Group payment of $80,000 on 22 May 2001, required Sloss J to determine whether the facts as found by her enabled her to infer that at the time that Mr Marriner requested Mr Penridge to make the payment, he had knowledge of circumstances which would have indicated to an honest and reasonable person (as distinct from merely putting that person on inquiry) that the payment would be made from monies held on trust for ASD and would thus const[50]ute a breach of trust.50 As such an inference would have reflected on Mr Marriner's integrity, its seriousness had to be taken into account in deciding whether the inference was the more probable one based o[51]the established facts.51

97 The above issue had to be considered by Sloss J in the context of her finding that Mr Marriner did not have prior knowledge of or involvement in the various requests that Mr Jephson made to W&W for the disbursal of the third tranche of the Bond Monies. In our opinion, it was arguably open to Sloss J to find that the evidence of Mr Marriner and Mr Jephson concerning the lack of communication between them regarding Mr Jephson's requests to W&W was implausible and that Mr Marriner had knowledge of those requests. However, as this issue was not the subject of a notice of contention by ASD, our analysis proceeds on the basis that Sloss J's finding is correct.

98 In determining whether Sloss J erred in drawing an inference that, as at the time Mr Marriner requested Mr Penridge to make the WS Group payment, Mr Marriner had knowledge of circumstances which would have indicated to an honest and reasonable person that the payment would be made from monies held by W&W on trust for ASD and would thus constitute a breach of trust, it is necessary to examine what Mr Marriner knew as at that time.

99 First, on 11 March 1999, Mr Marriner knew that MEB required ASD to establish a bond in the amount of $1.61 million. As a director and the CEO of ASD, Mr Marriner knew that the Bond had been established with funds sourced from CBUS and that $1.61 million had been deposited in a set-off account with BOQ. As he directly negotiated with MEB, he also knew that the Bond could be reduced in three tranches.[52]

100 Secondly, on 22 June 1999, Mr Marriner knew that MEB had agreed to release the first tranche and that these funds would be used for works relating to the Resort.[53] As a result of his experience with the release of the first tranche, Mr Marriner was aware that the approval of ASD's board was required in order to deal with the Bond Monies.[54]

101 Thirdly, Mr Marriner knew that, during the course of 2000 and 2001, W&W acted as solicitors for ASD on various matters relating to the Resort.

102 Fourthly, on 28 July 2000, Mr Marriner knew that he had executed a contract on behalf of ASD to purchase land from Mr Erbacher. He knew that W&W acted for ASD in relation to that contract because the contract named W&W as ASD's solicitors. Mr Marriner also knew that the abovementioned contract was terminated on 8 December 2000 because ASD's board did not approve the purchase. Further, Mr Marriner knew that, on 8 December 2000, Laguna Airport executed a contract to purchase the Erbacher Land for $82,000. As Mr Marriner signed that contract on behalf of Laguna Airport, he knew that W&W was named as that company's solicitors and that settlement would not take place until a new plan of subdivision was prepared and registered.[55]

103 Fifthly, Mr Marriner knew that, upon his resignation as a director and the CEO of ASD on 3 November 2000, he no longer had authority to deal with ASD's property unless he was specifically authorised to do so.

104 Sixthly, Mr Marriner knew that, between 29 January 2001 and 6 February 2001, he had instructed Mr Penridge to arrange to have the whole of the residual amount of the Bond Monies released and that he had not informed ASD of this instruction. This was at a time when Mr Marriner knew that the Bond had been established by ASD and that he no longer had authority to deal with the Bond on behalf of ASD. Mr Penridge's file note dated 12 February 2001 establishes that Mr Marriner was prepared to meet with Ergon Energy on 6 February 2001 to discuss cancellation of the Bond and that he agreed that such a meeting was not necessary as a result of the discussion between Mr Penridge and Mr Edwards of Ergon Energy. Without any authority from ASD to do so, Mr Marriner instructed Mr Penridge to write to Ergon Energy to request cancellation of the Bond and the release of the third tranche of the Bond Monies. Mr Marriner understood at this time that the third tranche of the Bond Monies would be released and that Mr Penridge was the person who was arranging the release.[56] Mr Marriner informed Mr Jephson of the substance of his conversation with Mr Penridge.[57] Mr Marriner depended upon Mr Jephson having up to date and accurate information about available funds to pay amounts owed by the Marriner Group to its creditors.[58]

105 Seventhly, prior to 22 May 2001, Mr Marriner knew that the Marriner Group had cash flow problems in relation to the Resort and that funds were being sourced from wherever they were available to meet demands from creditors. Mr Marriner also knew that the transfer for the acquisition of the Erbacher Land had not yet been executed and that settlement had not yet been scheduled. He also knew that the WS Group was a firm of consulting surveyors which was engaged in various aspects of the Resort project.[59]

106 Mr Penridge's file note of his conversation with Mr Marriner on 22 May 2001 is set out at [60] above. As it is critical to the outcome of Ground 1, we set it out again:

I spoke with David Marriner who authorised me at 2.30 this afternoon to draw a cheque for the sum of $80,000.00 from [the] Erbacher file made payable to WS Group. The cheque was to be converted to a bank cheque and then deposited into WS Group's account with the National Australia Bank.

107 The file note does not indicate who initiated the telephone call. As it does not record discussion on any other topic, it can be inferred that no other substantive issue was discussed. As such, it is unlikely that Mr Penridge called Mr Marriner to discuss the use of '$80,000.00 from the Erbacher file', as there was no reason for him to do so at that time. It is more likely that Mr Marriner called Mr Penridge. On this basis, it is more likely that Mr Marriner knew prior to making the call that funds were held by W&W in its trust account for the purchase of the Erbacher Land than that he called to inquire whether W&W held trust funds that he could use. There is nothing to suggest that Mr Marriner would make an unexpected call to Mr Penridge to make such a general inquiry. Sloss J found that, when Mr Marriner contacted Mr Penridge, he knew that W&W held monies in its trust account for the purchase of the Erbacher Land.[60] That finding was clearly open to her.[61] Sloss J also found that it was most unlikely that Mr Penridge would have communicated any information to Mr Marriner about the source of the funds.[62] Sloss J made a further finding that Mr Jephson was the source of Mr Marriner's prior knowledge that there were trust funds credited to the Erbacher File.[63] This finding is discussed at [129]-[130] below.

108 At the hearing of the present application, Mr Marriner submitted that Sloss J erred in construing his guarded evidence that he 'would have been perhaps aware ... in principle'[64] that W&W was holding monies in respect of the Erbacher File for settlement of that file, as an acknowledgement that he was in fact aware of this information in principle. In our opinion, in view of the matters discussed at [107] above, this submission lacks merit. In any event, as an experienced business person, particularly in the acquisition and sale of land, Mr Marriner must have known that when a solicitor receives money to hold for a client - as distinct from paying the solicitor's fees - the money must be held in a trust account for that client. It follows that Sloss J was correct in concluding that, as at 22 May 2001, Mr Marriner was aware that any funds held by W&W for the purchase of the Erbacher Land constituted trust funds and that the client on whose behalf those funds were paid to W&W was the beneficial owner of the funds.

109 In order for Sloss J to find that Mr Marriner was liable to ASD under the Eaves v Hickson principle in respect of the WS Group payment of $80,000 from trust funds held by W&W, it was not necessary for her to infer that Mr Marriner knew that those funds were held on trust for ASD. All that was required was for Sloss J to be satisfied that an honest and reasonable person who had the same knowledge as Mr Marriner would have concluded that the funds were held on trust for ASD. In our opinion, Sloss J was entitled to be so satisfied.

110 In the light of the subject matter of the Erbacher File for which the trust funds were held - the purchase of the Erbacher Land - the only potential beneficiaries of the trust funds were ASD and Laguna Airport.

111 Based on the facts known to Mr Marriner, ASD was by far the most likely beneficiary of the trust funds. Those facts included the following:

(a) Mr Marriner had instructed Mr Penridge to procure the release of the third tranche of the Bond Monies and understood as at 6 February 2001 that there would be no difficulty in those monies being released.

(b) The Erbacher File was created at a time when the Erbacher Land was to be acquired by ASD and therefore, at its inception, the client on that file was ASD.

112 Based on the facts known to Mr Marriner, it was extremely unlikely that Laguna Airport was the beneficiary of the trust funds. Those facts included the following:

(a) The Marriner Group, including Laguna Airport, was experiencing cash flow problems in relation to the Resort and funds were obtained from any available source to meet demands from creditors.

(b) As at 22 May 2001, settlement of the purchase of the Erbacher Land had not yet been scheduled and therefore there was no need for scarce funds from within the Marriner Group to be used to provide to W&W the substantial amount of $83,200 to be held on trust for the purpose of a future settlement and to lie idle until they were needed for that settlement. The fact that Mr Marriner instructed Mr Penridge to use trust funds of $80,000 indicates that he knew that the funds were not yet required for settlement.

113 Accordingly, even if Mr Marriner's moral obtuseness prevented him from recognising that the trust funds were held by W&W on behalf of ASD, an honest and reasonable person who knew the facts of which Mr Marriner was aware would have known that ASD was the beneficiary of those funds. That person would have concluded that Mr Penridge had succeeded in having the third tranche of the Bond Monies released and that some of those monies were held by W&W for ASD in connection with the Erbacher File. That person would also have concluded that the WS Group payment would constitute a breach of trust.

114 We accept that the above conclusions are serious, as they reflect on Mr Marriner's integrity. However, the facts overwhelmingly support them. Moreover, a conclusion that Mr Marriner was prepared to utilise for the benefit of the Marriner Group funds held on trust for ASD is not surprising given that Mr Marriner actively pursued the release of the third tranche of the Bond Monies at a time when he knew that the monies belonged to ASD and that he had no authority to deal with those monies on behalf of ASD.[65]

115 It follows from the above that Sloss J was correct to infer that Mr Marriner knowingly induced or immediately procured the breach of trust by W&W. The established facts strongly supported that inference and thus the principles in Briginshaw v Briginshaw, as reflected in s 140(2)(c) of the Evidence Act 2008, were satisfied.

116 We now deal specifically with Mr Marriner's submissions in support of Ground 1.

117 We reject Mr Marriner's submission that the inference that Mr Marriner knowingly induced or immediately procured a breach of trust by W&W in relation to the WS Group payment was no more probable than other available inferences which were exculpatory. As we have already discussed, there was no evidentiary foundation for the only possible exculpatory inference, namely, that the trust funds credited to the Erbacher File were provided by or on behalf of Laguna Airport and were held for that company.

118 There is no substance to Mr Marriner's submission that, in drawing the inference that Mr Marriner knowingly induced or immediately procured a breach of trust by W&W in relation to the WS Group payment, Sloss J relied only on the following:

(a) Mr Marriner's evidence that he may have been aware 'in principle' that the funds were held in respect of the Erbacher File for settlement of that file.

(b) The admission made in para 53(a) of the Marriner parties' further amended defence and counterclaim.

(c) The absence of any evidence that Mr Marriner or any entity in the Marriner Group had made any payment to W&W for the purpose of the purchase of the Erbacher Land.

119 Although Sloss J emphasised these matters in her principal reasons, it is clear from those reasons as a whole that she acted in accordance with the principles set out at [73]-[77] above by relying on all the factual findings that she made insofar as they were relevant to each of her conclusions. Each of the matters set out at [99]-[105] above was the subject of uncontradicted evidence or specific findings by Sloss J and formed part of the factual matrix that informed her conclusion that Mr Marriner was liable to ASD in the amount of $80,000.

120 We have already dealt with Mr Marriner's evidence about his knowledge 'in principle' that the funds held by W&W were held in respect of the Erbacher File for settlement of that file.[66]

121 In our opinion, the admission in para 53(a) of the Marriner parties' further amended defence and counterclaim supported the accuracy of Mr Penridge's file note dated 22 May 2001. Sloss J was entitled to take it into account, particularly since Mr Marriner's evidence was contradictory as to whether he had spoken to Mr Penridge at all on that day as distinct from not being able to recall the conversation.[67] The admission also assisted ASD's case because it reinforced what otherwise could be inferred from the evidence, namely, that Mr Marriner knew that the source of the WS payment of $80,000 was W&W's trust account.

122 The absence of any evidence that the Marriner Group had made any payment to W&W for the purchase of the Erbacher Land was also a relevant consideration. While the absence of that evidence could not, on its own, establish any particular fact, insofar as it was consistent with an inference otherwise available from other evidence, it could enable the drawing of such an inference with more confidence. In the present case, the conclusion that an honest and reasonable person would know from the facts of which Mr Marriner was aware that the funds credited to the Erbacher File were held by W&W on behalf of ASD is supported by the absence of evidence that those funds were provided to W&W by the Marriner Group.

123 We reject Mr Marriner's submission that the limited cross examination to which he was subjected and ASD's failure to put to him particular matters contributed to the absence of a sufficient evidentiary foundation for Sloss J's conclusion that he knowingly induced or immediately procured a breach of trust by W&W. In circumstances where he consistently stated that he had no involvement in the disbursal of the third tranche of the Bond Monies and that he did not recall his conversation with Mr Penridge - and at one stage even denied that it took place - there would have been limited utility in pressing him about what was said and the context in which it was said. In any event, the objective evidence to which we have referred at [99]-[105] above provides a strong evidentiary foundation in support of Sloss J's conclusion.

124 We also reject Mr Marriner's contention that Sloss J did not apply the principles in Briginshaw v Briginshaw, as reflected in s 140(2)(c) of the Evidence Act 2008, in finding that he was liable to pay $80,000 to ASD. In paras 306-307 of her principal reasons, Sloss J expressly referred to s 140(2)(c), Briginshaw v Briginshaw and other cases on the need to have regard to the gravity of an allegation in determining whether the civil standard of proof has been satisfied. The fact that Sloss J did not repeat these references in para 310 where she set out what ASD had to prove does not mean that she failed to take into account the gravity of the allegation against Mr Marriner in determining that the allegation had been proved. A fair reading of the reasons as a whole indicates that Sloss J did so. For example, in para 324 of her principal reasons, Sloss J said that it was necessary 'to look at all of the established facts together and then to see what are the probable inferences to be drawn, bearing in mind the gravity of the matters alleged.'[68]

125 In our opinion, Mr Marriner's submission that the beneficiary of the funds held by W&W in relation to the purchase of the Erbacher Land was Laguna Airport rather than ASD is foreclosed by the decision of the Court of Appeal. In para 146 of its principal reasons, the Court made a general finding that the third tranche of the Bond Monies was held by W&W on trust for ASD.[69] The Court's observation about the identity of the client in W&W's trust ledger in the context of the 'ASD; General Advices' file applies equally to the Erbacher File. Furthermore, in para 126 of its principal reasons, the Court of Appeal referred to para 10 of Byrne J's reasons on the counterclaim, stating that, in that paragraph, Byrne J 'reiterated his finding that the third tranche moneys were held by [W&W] in their capacity as solicitors for ASD.'

126 However, even if the submission were not foreclosed, it is misconceived. The Bond Monies belonged to ASD and no breach of trust was committed by W&W when it credited $83,200 of those monies to the Erbacher File because the client for that file on whose behalf the funds were credited in W&W's trust account was ASD. The fact that work was being performed on that file for another entity cannot have the effect of somehow transferring beneficial ownership of the relevant funds from ASD to that other entity. Such a result can only be brought about after obtaining the authority of the client (ASD) and complying with formal trust account procedures.

127 As ASD did not at any time authorise W&W to transfer ownership of the trust funds of $83,200 that were credited to the Erbacher File to Laguna Airport and W&W took no steps to effect such a transfer of ownership, those funds continued to be held on trust for ASD and no breach of trust was committed prior to 22 May 2001. The same analysis applies to the $2,000 that was initially credited to the 'ASD; General Advices' file and which was subsequently transferred to the credit of the Erbacher File on 5 April 2001.

128 Finally, we deal with Mr Marriner's submission that Sloss J's conclusion that Mr Marriner had knowingly induced or immediately procured W&W's breach of trust in relation to the WS Group payment was inconsistent with her finding that Mr Marriner did not instruct Mr Jephson in relation to the disbursal of any other component of the third tranche of the Bond Monies. In our opinion, there is no inconsistency between the two findings. The fact that Mr Marriner did not know of the instructions that Mr Jephson had given to W&W about the third tranche has no logical bearing on whether he independently gave a separate instruction to W&W or on the objective facts referred to at [99]-[105] above that Mr Marriner knew at the time he gave that instruction.

129 Further, Sloss J's finding that Mr Jephson must have informed Mr Marriner that W&W held funds to the credit of the Erbacher File is not inconsistent with her conclusion that there had not been any communication between the two of them about Mr Jephson's instructions to W&W to use third tranche funds to pay various creditors. That finding was clearly open to Sloss J in the light of her findings that Mr Marriner had prior knowledge of the existence of the trust funds and that it was unlikely that Mr Penridge was the source of that knowledge.[70] The only logical source was Mr Jephson. The fact, as found by Sloss J, that Mr Jephson had not told Mr Marriner that third tranche funds were being used to pay some creditors is not inconsistent with Mr Jephson telling Mr Marriner that W&W held trust funds to the credit of the Erbacher File. Mr Jephson would not have told Mr Marriner that the funds were sourced from the Marriner Group because Mr Jephson knew that they were part of the third tranche of the Bond Monies.

130 The finding that Mr Jephson informed Mr Marriner that W&W held trust funds to the credit of the Erbacher File added to the evidentiary foundation for the inference that Sloss J drew that Mr Marriner had knowingly induced or immediately procured W&W's breach of trust in relation to the WS Group payment. However, the analysis set out at [99]-[115] above as to why Sloss J correctly found Mr Marriner liable to ASD does not require any reliance on that finding.

131 For the above reasons, Ground 1 is not made out.

Ground 2: Weight to be given to Byrne J's findings

132 It will be recalled from [22] above that Ground 2 is as follows:

1. [Sloss J] failed to accord sufficient weight to the finding by the trial judge, Byrne J (who saw and heard the witnesses) on the same evidence as was before [Sloss J] that there was no evidence Mr Marriner knew the WS Group account for $80,000 was paid from third tranche funds. Had [Sloss J] done so she would have either found there was no reason for her to depart from the finding of [Byrne J] or, alternatively, there was insufficient evidence to support a finding that Mr Marriner was aware that the funds in the relevant account belonged to ASD.[71]

133 In the original trial, ASD's bond monies claim covered both the second tranche of $426,600 and the third tranche of $853,200 of the Bond Monies. In the context of the second tranche, Byrne J said that he had 'considerable scepticism' about the evidence of Mr Jephson and Mr Marriner that Mr Jephson made decisions about the disbursal of the amount of $426,600 without any reference to Mr Marriner.[72] However, notwithstanding his reservations, Byrne J acted on 'the uncontradicted evidence of both Mr Marriner and Mr Jephson' and concluded that 'Mr Marriner did not direct Mr Jephson to apply the second tranche funds as he did.'[73] Byrne J made the following observations about Mr Marriner:

My impression of Mr Marriner's manner of dealing with creditors and the money of companies under his control is that he was involved in every aspect of his various projects, including Laguna Quays. It was he who planned the strategies required and he who actively participated in their implementation. I am satisfied, however, that his eye was on the big picture rather than the fine detail and that this applied particularly to his dealings with his creditors. So far as this project, at least, was concerned, creditors appear to have been an on-going problem. This caused Mr Marriner to conduct his dealings with them with little regard to the niceties of corporate identity. When money was required he was content to take it from any company which had it available, leaving the detail to be picked up by the accounting staff in the inter-company loan accounts. It seems, too, that Mr Jephson, whose task it was to deal with the creditors, was allowed to pursue, or at least not discouraged from pursuing, a similar approach. ... And it was consistent with Mr Marriner's lack of concern for detail or, perhaps, by a conscious decision on his part not to know too much about these matters, that he gave Mr Jephson a fairly free rein.[74]

134 In relation to the third tranche of the Bond Monies, Byrne J stated that, as he had concluded that W&W had not committed a breach of trust in disbursing the relevant funds in accordance with the instructions the firm received from Mr Jephson and Mr Marriner, the claim against Mr Marriner pursuant to the Eaves v Hickson principle must fail.[75] However, he went on to consider the position on the assumption that W&W had committed a breach of trust. He concluded that ASD's claim must fail for the following reasons:

I now consider the position on the assumption that [W&W] were in breach of the solicitor's trust in disbursing the third tranche funds in accordance with Mr Jephson's directions. For reasons which I have ventured to set out in some detail, I am unable to find that, in his dealings with the third tranche funds, Mr Jephson acted in accordance with Mr Marriner's specific instruction. He had a general mandate to pay creditors as and when necessary from such funds as were available within the ASD group of companies. ...

[T]he claim against Goldworthy, Laguna [Australia Pty Ltd], Laguna Airport and Stage Design [Pty Ltd], based on their inducing or assisting [W&W] to breach their trust, with respect to the third tranche funds, must also fail. This case depends entirely upon the conduct of these companies with respect to the disbursements. There was no evidence that these companies had any involvement in the disbursements other than having received accounts from creditors which were unpaid. Cheques from [W&W] in payment for these accounts were sent directly to the creditors. The case of inducing and assisting, then, by these companies is no stronger than that against Mr Marriner for the same conduct. It must meet the same fate.

The final cause of action with respect to the third tranche funds is that Goldworthy, Laguna Australia [Pty Ltd], Laguna Airport and Stage Design [Pty Ltd], were knowing recipients of the proceeds of the breach of trust. The critical aspect of this claim is their guilty knowledge. This must be the knowledge of Mr Marriner, as no other person or entity was suggested to have had such knowledge. What then is said to be Mr Marriner's knowledge? I have found that he did not concern himself with matters such as the source of funds within the corporate group for payment of creditors. He certainly knew that substantial sums were due to many if not most or all of the creditors which received payments from [W&W]. He was doubtless content that the debts should be paid. There is no evidence, however, that he knew that they were paid from the third tranche funds. There is no evidence that he knew at the time of payment that these creditors had in fact been paid. In these circumstances, the knowledge of the companies within the Marriner group, which benefited from the payments, cannot be greater than his. This claim against those companies must therefore fail.

I mention at this point that Mr Marriner's unauthorised instruction of 22 May 2001 directing [W&W] to apply $80,000 of ASD's funds is not the subject of a separate claim. I say nothing further about it.[76]

135 It is to be noted that, after concluding in para 154 of his principal reasons that the claim that the companies were in known receipt of the proceeds of a breach of trust should fail, in para 155 Byrne J described the amount of $80,000 that was paid to the WS Group as 'ASD's funds'. Earlier, in para 126, he stated that 'the third tranche funds were received by [W&W] for its clients ASD and Laguna Airport'. In para 10 of his reasons on the counterclaim, Byrne J stated that he had found in para 126 of his principal reasons that the third tranche of the Bond Monies was paid to W&W who 'were then acting as solicitors for ASD.'

136 In Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [No 8],[77] Heerey J considered how a judge to whom a proceeding is remitted should treat factual findings made in the original trial. In that case, the Full Court of the Federal Court of Australia remitted a proceeding to the primary judge, Heerey J, for a further hearing at which evidence from three experts which had been wrongly excluded at first instance could be adduced.[78]

137 Heerey J stated the following in his reasons following the further hearing:

Since the order I made dismissing Cadbury's application was set aside, [my previous] findings ... have no legal binding effect. Nor do they create any presumptions. ... However, it is clear from the repeated orders of the Full Court that there was not to be a new trial and the further evidence was to be limited to the three Cadbury experts and such opposing experts as Darrell Lea wished to call. Some of the findings could be the subject of rejection or modification (or enhancement) in the light of the evidence given by Cadbury's experts, or indeed evidence given at the earlier hearing ... Most of the findings, however, are findings of primary fact.

The findings should be regarded for present purposes as tentative or provisional. As directed by the Full Court, the trial is to be treated as continuing. Not infrequently a judge will indicate that he or she has reached tentative conclusions and states them for the benefit of counsel. The findings in the earlier judgment will be treated on the same basis, as an analytical framework. Of course, this does not exclude the possibility of further findings which may be warranted by the evidence of the Cadbury experts or evidence given at the earlier hearing.[79]

138 In circumstances where a remitter judge was not the primary judge, guidance can be obtained from the principles that apply to a rehearing by an appellate court.

139 In Fox v Percy,[80] the High Court held that a court of appeal conducting an appeal by way of rehearing is obliged to conduct a real review of the trial which includes weighing conflicting evidence and drawing its own inferences and conclusions.[81] While the court is bound to make due allowance for the advantages that a primary judge enjoys in seeing and hearing the witnesses give their evidence, if the primary judge has fallen into error, the appellate court should substitute its own contrary finding.[82]

140 Gleeson CJ and Gummow and Kirby JJ in Fox v Percy cited[83] the following passage from Warren v Coombes:[84]

[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.[85]

141 There is a distinction to be made between the approach of an appellate court to assessing, on the one hand, a finding of fact which depends upon a view taken of conflicting testimony, and on the other hand an inference drawn from uncontroverted facts.[86] In the former context, the fact that the appellate judges have not seen the witnesses puts them in a 'permanent position of disadvantage as against the trial judge'.[87] In order to reverse a primary judge's finding, it must be: contrary to incontrovertible facts or uncontested testimony, glaringly improbable, or contrary to compelling inferences.[88] In the latter context, the appellate court 'can, and must, overturn a factual finding where, after a review of all of the evidence, [it] considers that an incorrect inference has been drawn from undisputed facts, facts incontrovertibly established, or facts as found by the trial judge.'[89]

142 Sloss J held that Cadbury[90] provided 'useful guidance' on the weight to be given to Byrne J's findings.[91] She decided to treat Byrne J's findings as 'tentative or provisional' rather than binding for the following reasons:

In my view, the position in the present case is not dissimilar. The Court of Appeal has remitted the matter essentially because of an absence of consideration by [Byrne J] of issues 3, 4 and 5, and so as to give the parties an opportunity to fully ventilate those matters. To the extent that his Honour made any findings about these issues (save to the extent that they were upheld by the Court of Appeal) they are clearly not binding. But his Honour did have the benefit of seeing the witnesses, and I readily acknowledge the 'natural limitations' that exist in a judge of the trial division proceeding to make findings based wholly on the record, particularly where serious allegations are involved. Accordingly, I propose to regard the findings reached by his Honour 'as tentative or provisional', and whilst clearly not binding, I consider them available to me as part of the analytical framework for determining the issues as raised and argued by the parties on the remitter.[92]

143 Mr Marriner submitted that, in para 154 of his principal reasons, Byrne J found that there was no evidence that Mr Marriner knew that any creditors of the Marriner Group had been paid from the third tranche of the Bond Monies. According to Mr Marriner, para 155 of Byrne J's principal reasons was subsumed within para 154. On that basis, so it was said, the observation of Byrne J in para 155 that he would 'say nothing further' about Mr Marriner's 'unauthorised instruction of 22 May 2001 directing [W&W] to apply $80,000 of ASD's funds' meant that Byrne J had nothing further to add to what he had already said in para 154.

144 Mr Marriner contended that Byrne J's finding in para 154 of his principal reasons was a significant finding in his favour which the Court of Appeal did not disturb. He submitted that in the light of this and the fact that Byrne J had the advantage of observing the witnesses give evidence, Sloss J was required to give the finding considerable weight, particularly since no additional evidence was adduced at the remitter trial. According to Mr Marriner, Sloss J erred by treating the finding as merely 'tentative or provisional' and by departing from it.

145 ASD submitted that paras 154 and 155 of Byrne J's principal reasons were independent of each other and that, in para 155, Byrne J simply observed that he need not make any finding in relation to the WS Group payment because it was not the subject of a separate claim. ASD contended that, even if para 155 were treated as being subsumed within para 154, by setting aside Byrne J's order and remitting to the remitter judge the issue of Mr Marriner's liability in respect of the WS Group payment, the Court of Appeal effectively negated the finding in that paragraph. In circumstances where Byrne J's finding had not survived the appeal to the Court of Appeal, Sloss J was said to have been justified in not giving it much weight.

146 The first issue to be considered is whether Byrne J made any findings in relation to the WS Group payment of $80,000. This depends on whether the findings made by Byrne J in para 154 of his principal reasons apply to his statement in para 155 that the WS Group payment is not the subject of a separate claim and that he would not say anything further about it.[93] The findings in para 154 were that there was no evidence that Mr Marriner knew that payments were made to creditors of companies in the Marriner Group from the third tranche of the Bond Monies or that he knew at the time of payment that those creditors had in fact been paid.

147 In our opinion, para 155 of Byrne J's principal reasons is independent of para 154 and is to the effect that the WS Group payment need not be considered because there was no separate claim in relation to it. This conclusion is borne out by the structure of paras 152-155. Paragraphs 152-154 deal with the pleaded claims based on Mr Jephson's instructions to W&W to disburse the third tranche of the Bond Monies held by that firm. Having expressed his conclusions in respect of those instructions, and Mr Marriner's knowledge in relation to them, Byrne J then turned specifically to the sole instruction given by Mr Marriner to W&W and concluded that he did not need to reach a conclusion in relation to it because it was not the subject of a separate claim.

148 Our conclusion is consistent with the Court of Appeal's previous analysis. The Court said:

Because [Byrne J] found that [W&W] did not breach the trust, the claim against [Mr] Marriner for procuring or inducing that breach necessarily failed. As a consequence, his Honour dealt only briefly with the question whether, assuming there had been a breach of trust, [Mr] Marriner had knowingly procured or induced it. ...

In the case of the $80,000 which [Mr] Marriner had personally directed [W&W] to pay to the WS Group ... for work done on the [Resort] project, his Honour simply remarked that this was not the subject of a separate claim and that he would say nothing more about it.

...

[W]e do not have the assistance of any fact-finding or analysis by [Byrne J] on the question whether [Mr] Marriner procured or induced the innocent breach of trust by [W&W].[94]

149 In the above passages, the Court of Appeal did not treat Byrne J as having made any finding in relation to the WS Group payment. Further, in para 6 of its costs reasons, the Court of Appeal stated that Byrne J 'stopped short of reaching any conclusion' on the issue of 'whether [Mr] Marriner was ... liable for ... a payment of $80,000 which [Mr] Marriner directed [W&W] to pay to [the] WS Group.'

150 As Byrne J did not make any finding in relation to the WS Group payment, there was no relevant finding which Sloss J was required to take into account in determining whether Mr Marriner was liable to ASD for that payment.

151 Even if we are wrong in our conclusion that Byrne J's findings in para 154 of his principal reasons do not apply to the WS Group payment, Sloss J did not err in treating those findings as 'tentative or provisional'. In the unusual circumstances of this case, she was entitled to do so for the following reasons:

(a) This was not a case where the credit of witnesses was central to the outcome of the proceeding. As many of the witnesses did not have clear recollections of what had occurred in 2000 and 2001, the contemporaneous documentary evidence was accorded significant weight. Accordingly, although Byrne J had the distinct advantage of seeing and hearing the witnesses,[95] which Sloss J did not have, this was not critical.

(b) As Byrne J had found that W&W had not committed a breach of trust, he did not analyse in detail the question of whether Mr Marriner would have been liable to ASD if a finding of breach of trust had been made.

(c) The setting aside of Byrne J's order by the Court of Appeal had the effect of negating any findings of fact made by Byrne J that were inconsistent with the reasons of the Court of Appeal. As the Court of Appeal expressly remitted the question of Mr Marriner's liability to ASD in respect of the WS Group payment, it is clear that the Court of Appeal contemplated that the parties would 'fully ventilate' that issue before the remitter judge and that the remitter judge would make an independent decision in relation to it on the same evidence that was before Byrne J.[96]

152 For the reasons we have already discussed above in the context of Ground 1, on the whole of the evidence before her, and giving some limited weight to Byrne J's findings, Sloss J was entitled to find that Mr Marriner was liable to ASD for the WS Group payment.

PART B: GROUNDS 3, 4: EFFECT OF PAYMENT BY W&W

1. [Sloss J] erred in deciding or finding ... [that] the parties were agreed that ASD must give credit for the sum of $350,000 and reduce accordingly the amount sought to be recovered, and in the absence of exceptional circumstances justifying the re-opening of the Marriner parties' case in order to tender the affidavit of James Murray Pergl sworn 10 December 2014, the Marriner parties were precluded from advancing contentions to the effect that the agreement was that the sum of $350,000 was to be deducted from any sum to which ASD was otherwise entitled in respect of the third tranche bond monies. [Sloss J] should have found that: there was no 'agreement' of the sort to which [she] refers; and ASD's departure from its previous position, viz. that it was required to deduct the sum of $350,000 from the amount it recovered, provided the exceptional circumstances to which the relevant authorities refer.
2. [Sloss J] erred in finding that the Marriner parties required leave to re-open their case for the purpose of relying on the email exhibited to the affidavit of James Murray Pergl sworn 10 December 2014. [Sloss J] should have found that the relevant email recorded an agreement by the parties sent to ... Byrne J's chambers on 15 September 2009 for the purpose of explaining the parties' agreement concerning the effect of ASD's receipt of $350,000, which agreement the parties jointly asked the Court to give effect to, and that effect should be given to it in the remitter hearing without the need for the email to be formally put in as evidence or pleaded.[97]

154 Following publication of Sloss J's principal reasons on 19 September 2014, a hearing was held on 3 December 2014 to enable the parties to make submissions on the final orders to be made and in relation to costs. Apart from advocating for different costs orders, the parties' submissions raised a dispute as to whether the W&W settlement payment of $350,000 had to be set-off against ASD's entitlement to be paid $80,000 so that no damages could be awarded in its favour.

155 In order to provide context for Grounds 3 and 4, it is necessary to refer in detail to the circumstances of the W&W settlement payment and the oral and written submissions of the parties - and other communications with the Court - at the various stages of the litigation.

156 The W&W settlement payment was made pursuant to a settlement agreement that was signed on behalf of ASD, W&W and the Marriner parties on 31 July 2009 ('W&W Settlement Agreement'), 18 days prior to the original trial. The W&W Settlement Agreement relevantly provided that:

(a) W&W will consent to the dismissal of its claim against the Marriner parties with no order as to costs;

(b) the Marriner parties agree not to make any costs claims against W&W consequent upon the withdrawal of the W&W claim;

(c) the costs incurred by the Marriner parties in respect of the W&W claim 'are to be agreed, or failing agreement, taxed and once agreed or taxed are to be costs in the cause as between [ASD] and the Marriner Parties in these proceedings';

(d) a release will be given by W&W in favour of ASD and the Marriner parties; and

(e) a release will be given by ASD and the Marriner parties in favour of W&W.

157 Neither the W&W settlement payment nor the W&W Settlement Agreement was pleaded by any of the parties even though ASD and the Marriner parties amended their pleadings after the agreement was executed.[98]

158 When the original trial began, Byrne J was informed that ASD had settled its claim against W&W. On the third day of the trial, on 20 August 2009, the following exchange took place between Byrne J and senior counsel for ASD during counsel's opening address:

HIS HONOUR: [Y]ou have settled with [W&W] and maybe you have recovered some money from them, in which case what loss would ASD have suffered? It's not the $1.2 million any more.

MR ANDERSON: No, it has to be net, the figure.[99]

159 A day prior to the 18th day of the original trial, on 15 September 2009 at 3.17 pm, junior counsel for ASD (Mr Broadfoot) sent an email to Byrne J's associate ('disputed email') which stated:

Would you please inform his Honour that the parties are agreed that the Court should proceed on the basis that any amount of damages or compensation to which [ASD] may be entitled in respect of the 'third tranche' of funds which went from [BOQ] to [W&W], is to be reduced by $350,000.

160 The disputed email was copied to senior counsel for the Marriner parties (Mr Bick QC) and to junior counsel for those parties (Mr Heath). Byrne J's associate responded by email at 4.47 pm on 15 September 2009 stating, 'Thank you for this information which I have provided to his Honour.' The disputed email was not tendered at the original trial and no reference to it was made by any party in any pleading, written submissions or other document. Similarly no reference was made to it on the appeal from Byrne J's orders.

161 However, on the day after the disputed email was sent, 16 September 2009, in the course of his closing address before Byrne J, senior counsel for the Marriner parties said the following about the W&W settlement payment:

MR BICK: [Y]our Honour was informed jointly by the parties through your Honour's associate yesterday that the sum of $350,000 was to be deducted from any liability in respect of the third tranche of bond moneys by reason of a contribution made by or on behalf of [W&W].

HIS HONOUR: Now what does that mean? I guess that's something for Mr Anderson but I'm not told anything about it other than I'm to deduct $350,000.

MR BICK: Yes, your Honour.

HIS HONOUR: So whether that represents a particular transaction or some sort of global paying off to avoid the risk or what.

MR BICK: Certainly true it is that your Honour hasn't been told the nature or the reasons for the payment. However, your Honour, for what your Honour has to decide that deduction is significant in that it reduces the liability in respect of the third tranche of bond moneys to $553,000[100] and the total liability in respect of both tranches of bond moneys to less than the $950,000 that Laguna Australia reimbursed ASD for the purchase of the converted leasehold land ...

...

So we say that if you take $350,000 off the third tranche and reduce it to $553,200, that together with the $426,000 from the second tranche is less than [$950,000] and that's the end of the case.

...

[I]t has been agreed that [the W&W settlement payment] comes off the damages in respect of the third tranche of bond moneys.[101]

162 On the final day of the original trial on 18 September 2009, the following exchange took place between Byrne J and senior counsel for ASD:

HIS HONOUR: I am contemplating the situation [where] the amount recovered might be less than $350,000. If that were to happen is that just a bonus for you or is that brought to account elsewhere?

MR ANDERSON: No, your Honour, we can't double-dip. It would have to be brought to account.

HIS HONOUR: So if I was to find that the liability under the third tranche was, say, $150,000, so there's $200,000 surplus available, although you did get that for presumably - no, that's from the solicitors so it only deals with that claim. Could that be brought to credit against Mr Marriner's other liabilities?

MR ANDERSON: No, it can only deal with the [W&W liability], your Honour.

HIS HONOUR: So you could theoretically make a profit.

MR ANDERSON: Well, [W&W] paid an amount of money, your Honour.

HIS HONOUR: That's right, and they may have paid too much.

MR ANDERSON: They may have paid too much. Your Honour is correct. It could be your Honour may find we get less but we have received 350. So be it.

HIS HONOUR: And if it's more then you might be able to recover it from Mr Marriner. That is to say if your loss is greater than 350 he might be able to cover that surplus.

MR ANDERSON: Yes, your Honour.[102]

163 The orders sought by ASD in its notice of cross appeal dated 26 March 2010 included the following:

1. An order that the [Marriner parties] pay compensation to [ASD] in the sum of $929,800 (being the sum of $426,600 [the second tranche funds] and $853,200 [the third tranche funds] less $350,000 received from [W&W]) plus interest pursuant to statute.

164 Prior to the remitter trial, the parties filed written submissions. ASD's written submissions dated 8 July 2013 contained the following statement:

1. ... Subject to any possible defences or offsetting counterclaims there should on the basis of the submissions set out above be judgment against Mr Marriner for the whole of the third tranche amount of $853,200. As ASD has already received as a settlement $350,000 from [W&W] it will agree not to enforce the judgment against Mr Marriner to that extent.

165 In their responding written submissions dated 26 July 2013, the Marriner parties relevantly stated:

1. During the First Trial the parties reached an agreement in respect of this payment and how it would impact on the assessment of damages, if any, payable to ASD. The parties agreed that, if ASD succeeded on any claims relating to the disbursement of the third tranche funds, the relevant Marriner parties were entitled to a credit of $350,000.00 in the assessment of damages. In his closing address, senior counsel for the Marriner parties related this agreement to Byrne J in the following terms ...[103]
2. This agreement is also reflected in ASD's Notice of Cross-Appeal dated 26 March 2010 (under the heading 'Orders Sought'). The relevant order sought is expressed in these terms: ...[104]
3. It follows that, if it is found that one or more of the Marriner parties must pay damages to ASD, the sum of $350,000.00 must be deducted from the amount awarded. This deduction is consistent with (1) the agreement described in paragraph 98, above and (2) the principle against double recovery. In summary, if ASD enjoys complete success against the Marriner parties in this stage of the litigation, the liability of the Marriner parties could not exceed $503,200.00 plus interest and costs.
4. The Marriner parties refer to the last two sentences in [66] of ASD's submissions. In substance, in relation to any judgment sum in its favour, ASD suggests that no deduction of $350,000 is required. By reference to the matters set out in the preceding paragraphs, that suggestion is wrong.

166 ASD's submissions in reply dated 13 August 2013 responded as follows:

1. Having regard to the $350,000 received from [W&W] it is accepted (as submitted by the [Marriner parties] at [100]) that ASD cannot recover more than $503,200, plus interest and costs from Mr Marriner.

167 The remitter trial was conducted by reference to a Court Book that was prepared by the parties. The Court Book did not include any documents relating to the settlement with W&W.[105] No evidence about the W&W settlement or its terms was tendered by any party at the remitter trial.[106]

168 In opening ASD's case at the remitter trial, senior counsel for the ASD parties explained the effect of the W&W settlement payment as follows:

MR O'BRYAN: [W&W] were innocently in breach of trust, which is not an answer unfortunately for them because it doesn't matter whether a trustee is innocently in breach of trust, the trustee is in breach of trust, it's strict liability, so they were strictly liable in respect of their breach of trust, and of course they were proceeded against, Your Honour, and settled for an amount which of course we must credit and we do credit towards our claim against the Marriner interests. I think it is $350,000.

HER HONOUR: I think you have noted that in your written submissions. I read that somewhere.

MR O'BRYAN: Yes. It is connected a little bit with Mr Bick's so-called all or nothing defence, but we will come to that in due course, Your Honour. We say yes, of course we give credit for $350,000 but that still leaves us out of pocket $503,000 because it was a total of 853 plus interest over a very long period of time, et cetera.[107]

169 Senior counsel for the Marriner parties stated the following:

MR BICK: Can I now draw Your Honour's attention to the fact that the maximum liability for Mr Marriner and his companies in respect of the third tranche bond moneys is, of course, the full amount of $853,000. By agreement of the parties, there is to be deducted from any amount Your Honour may find liability for the sum of $350,000, which was an amount received by ASD by way of settlement of its claims against [W&W].

HER HONOUR: I think that is addressed in the reply submissions of Mr O'Bryan. Reference was made to the form of an order that was being sought and rather than entering judgment for the whole amount, the 853,200, it was acknowledged that it would be for the lesser sum, taking away the [350,000].

MR BICK: Yes. There's no dispute about that. ...[108]

170 In her principal reasons, Sloss J said the following about the W&W settlement payment:

Of these pleaded claims, ASD has since settled its 'claim against [W&W] for unauthorised disbursement of trust funds' for the sum of $350,000. The parties are agreed that ASD must give credit for that sum and reduce accordingly the amount now sought to be recovered from the Marriner interests.[109]

171 ASD filed submissions dated 8 October 2014 in relation to final orders. It sought judgment against Mr Marriner for $80,000 plus interest, an order that the Marriner parties' counterclaim be dismissed and an order that the Marriner parties pay its costs of the claims and counterclaim in both the original trial and the remitter trial.[110]

172 The Marriner parties filed submissions dated 17 October 2014 in which they contended that there should be no judgment sum ordered against Mr Marriner in favour of ASD. They argued that, in the light of the W&W settlement payment of $350,000, a judgment in favour of ASD would involve double recovery and would also be contrary to an agreement (described as the '$350,000 credit agreement') that the parties had reached about the effect of the W&W settlement payment. The agreement was said to be that 'if ASD succeeded on any claims relating to the disbursement of the third tranche funds, the relevant Marriner parties were entitled to a credit of $350,000 in the assessment of damages.' The Marriner parties' submissions did not mention that they had searched for but were unable to find correspondence with the Court about the effect of the W&W settlement payment. The Marriner parties proposed alternative costs orders, including that there should be issues-based costs orders in respect of both trials, with ASD being required to pay 65-75 per cent of the Marriner parties' costs of both trials.

173 On 24 October 2014, ASD filed submissions in reply in which it denied that the parties had reached the agreement alleged by the Marriner parties. Those submissions were accompanied by an affidavit of David Atkin, the CEO of United Super Pty Ltd, which was affirmed on 24 October 2014 ('Atkin affidavit'). Mr Atkin deposed that he was responsible for giving instructions about the proceedings. In relation to the Marriner parties' assertion that the parties reached an agreement during the original trial 'that any liability for damages found against any of the Marriner parties would be credited with the sum of $350,000', Mr Atkin deposed that 'no such agreement was ever reached' and that he never gave instructions to ASD's lawyers to enter into any such agreement. The W&W Settlement Agreement was exhibited to the Atkin affidavit.

174 At the hearing on 3 December 2014, the Marriner parties relied on the '$350,000 credit agreement' referred to at [172] above. Reflecting their written submissions, their oral submissions did not mention that they had searched for but were unable to find correspondence with the Court concerning the effect of the W&W settlement payment.

175 ASD tendered the Atkin affidavit without objection from the Marriner parties but subject to the making of submissions on relevance and weight.

176 On 10 December 2014, the solicitor for the Marriner parties, James Pergl, sent an email to Sloss J's associate, which was copied to ASD's solicitor, seeking leave to file a summons and an affidavit sworn by him on 10 December 2014 ('Pergl affidavit'). The proposed summons sought the following orders:

1. The [Marriner parties] have leave to file, serve and rely on [the Pergl affidavit].
2. Such further or other order including as to the costs of the application as the Court considers appropriate.

177 The Pergl affidavit stated that, at the hearing on 3 December 2014, counsel for the ASD parties (Mr Broadfoot) 'disputed the existence of an agreement that the Marriner Parties would be given a $350,000 credit by reason of the settlement reached by ASD with [W&W] in 2009.' Mr Pergl deposed that prior to the hearing on 3 December 2014, both his firm and senior and junior counsel for the Marriner parties 'searched for but were unable to locate correspondence relating to the $350,000 credit agreement reached in September 2009.' The Pergl affidavit continued:

On 4 December 2014 I was informed by Mr Bick QC that with considerable difficulty, he had been able to locate on 4 December 2014 from archived and deleted emails from September 2009, emails relating to the $350,000 credit agreement from Mr Broadfoot to Mr Bick copied to Mr Anderson SC for ASD and Mr Heath for the Marriner Parties, and from Mr Bick to Mr Broadfoot in response sent on 15 September 2009 at 10.29 am, 12.24 pm and 3.17 pm (two emails). In addition, Mr Bick located an email from Mr Broadfoot to Mr John Molloy, Associate to the Honourable Justice Byrne, copied to Mr Bick, Mr Anderson and Mr Heath, sent at 3.17 pm on 15 September 2009, and Mr Molloy's response acknowledging receipt sent to Mr Broadfoot, and copied to Mr Bick, Mr Anderson and Mr Heath at 4.47 pm on 15 September 2009.

178 Mr Pergl then produced (as exhibit 'JMP-1') the disputed email[111] and (as exhibit 'JMP-2') the response from Byrne J's associate acknowledging receipt.[112] Mr Pergl deposed that the Marriner parties wished to rely on those emails 'in connection with their submissions to the Court on costs made on 3 December 2014, and, if necessary, seek leave to do so.' He then added:

It is my belief that the email provided to the Honourable Justice Byrne on 15 September 2009 was likely to have been placed on the Court file at the time by reason of the fact that exhibit 'JMP-1' was an email sent by Mr Broadfoot to the Court on behalf of both ASD and the Marriner Parties, recording what was stated in the email to be an agreement between the parties concerning a credit to be given to the Marriner parties arising from the settlement between ASD and [W&W].

179 In his email to Sloss J's associate dated 10 December 2014, Mr Pergl stated that the Marriner parties desired to place before the Court the disputed email and the response to that email by the associate to Byrne J. The solicitors for ASD sent an email to Sloss J's associate on 10 December 2014 stating that ASD objected to the Marriner parties being granted leave to file supplementary material given that the hearing had concluded.

180 The Marriner parties' application for leave to file the proposed summons and the Pergl affidavit was heard on 25 February 2015.

181 As the Marriner parties' proposed summons did not seek leave to reopen their case, discussion took place at the hearing on 25 February 2015 as to whether such leave was required. The following exchange took place between Sloss J and counsel:

MR BICK: If Your Honour ultimately concludes that it's necessary for us to apply for leave to reopen our case, well, then we do, and our learned friend Mr O'Bryan said, 'In reality that's what they're doing'.

HER HONOUR: Well, no application has been made and I don't see how that would arise unilaterally from the court. No submission has been made that I should even give consideration to reopening. Mr O'Bryan said no application is made so he's not requiring one to be made and you're not making one. So that seems to be the end of that point, doesn't it?

MR BICK: No, Your Honour. That overstates the position we took, but if I haven't made it clear I'll make it clear now. We don't believe that it's a matter where we require leave to reopen because the parties chose to put their agreement before the court in a non-evidentiary form, but if we do need to reopen then in the alternative we'll apply - we do apply, sorry.

MR O'BRYAN: Your Honour - - -

HER HONOUR: That's a different submission to the one that you made before you sat down this morning.

MR BICK: No, with respect, Your Honour, I would submit that's not right, but let me make it quite clear. Order 1 of our summons seeks leave to file, serve and rely on the affidavit of Mr Pergl. That was the application I endeavoured to make this morning. My learned friend says that's, in effect, an application for leave to reopen. My submission this morning as I intended to make it, and thought I had made it, was if we need leave to reopen then we apply for it, but I made primary submissions, I would hope, forcefully that no leave was required.

Because the document we seek to rely on was never intended to form part of the evidence in the case, rather, it was intended to record an agreement between the parties the court was invited to act on, and should act on, which Your Honour correctly and accurately summarised. And it remains our primary position this is not a situation where we need to apply for leave to reopen our case. It's simply to put before the court that which the trial judge had before him, both parties being bound by the way in which they conducted the trial in that regard and every other regard for that matter.[113]

182 ASD submitted that the Marriner parties required leave to reopen their case and that leave should be refused because it would require a fresh hearing with witnesses being called on whether the agreement upon which the Marriner parties relied was made.

183 The relevant underlying legal principle governing the assessment of compensatory damages is that a plaintiff cannot recover in the aggregate more than the amount of his or her total loss.[114] Thus, where a plaintiff sues more than one defendant in respect of the same loss and obtains judgment for that loss against all of the defendants, the total amount that the plaintiff can recover from them cannot exceed the amount of the loss.[115] This is often referred to as the principle against double recovery or double satisfaction.

184 In Inspector-General in Bankruptcy v Bradshaw,[116] Kenny J summarised the circumstances in which a court may grant a party leave to reopen his or her case, as follows:

The authorities indicate that, broadly speaking, there are four recognised classes of case in which a court may grant leave to re-open, although these classes overlap and are not exhaustive. These four classes are (1) fresh evidence (Hughes v Hill; Smith v New South Wales Bar Association [No 2]); (2) inadvertent error (Brown v Petranker (application to recall a witness); Murray v Figge (application to tender answers to interrogatories); Henning v Lynch (application to re-open)); (3) mistaken apprehension of the facts (Urban Transport Authority of NSW v NWEISER); and (4) mistaken apprehension of the law. In every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open ...[117]

185 Where a case has been closed and judgment reserved, exceptional circumstances will be required for a court to allow the case to be reopened.[118] This rule applies with even greater force where reasons for judgment have already been delivered but final orders have not yet been made. The rule is necessary to ensure finality in litigation and the efficient administration of justice, and to avoid a reopened hearing being 'bedevilled by arguments about ... the scope of the re-opened proceeding'.[119]

186 Exceptional circumstances will similarly be required in order for a party to introduce an issue for the first time on appeal. In Coulton v Holcombe,[120] Gibbs CJ and Wilson, Brennan and Dawson JJ stated that '[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial.'[121] Their Honours quoted with approval the following statement from University of Wollongong v Metwally [No 2]:[122]

It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[123]

187 Gibbs CJ and Wilson, Brennan and Dawson JJ then referred to the underlying reasons for the above principle. The reasons were: the finality of litigation; the difficulty of inducing an appeal court to consider new facts; the undesirability of encouraging tactical decisions to keep an issue in reserve for an appeal rather than presenting it at first instance; and the need to avoid injustice to a party having to meet new factual or legal issues for the first time on appeal.[124]

Sloss J's findings relating to Grounds 3 and 4

188 Sloss J refused to give leave to the Marriner parties to rely on the Pergl affidavit. This meant that the disputed email did not become evidence in the remitter trial. Sloss J gave the following reasons:

In my view, the present circumstances do not satisfy the high hurdle of 'exceptional circumstances'. The Marriner parties have waited until the eleventh hour, and then some, to raise directly what they now appear to contend was always their view of the effect of the settlement monies paid by [W&W], notwithstanding that they have never pleaded it or addressed it by way of evidence before the original trial judge or on the remitter. That is, they now contend, and for the first time with any real clarity, that the legal effect of the email exchange is that unless ASD is successful in having judgment entered for more than $350,000 then it cannot recover any sum from Mr Marriner. That contention calls into question both the utility of the remitter of Issue 4 by the Court of Appeal and also the finding made on the remitter about the effect of the settlement monies paid by [W&W]. Furthermore, in circumstances where the Court of Appeal ordered that the remitted issues were to be determined, subject to any contrary order, 'on the basis of the evidence already adduced in the trial', if this Court were to permit a fresh issue to be agitated now, the boundaries of the re-opened issues would be difficult to delineate - for example, because there is no reference in the pleadings to the payment of the settlement monies by [W&W] as giving rise to a 'real issue' between the parties - and it is likely that the ASD parties would be severely prejudiced by a re-opening and a further continuation of the remitter hearing.

Moreover, the proceedings between these parties have been on foot for 10 years. The original trial occupied 20 sitting days, the appeal was heard over two days with a further day for submissions on costs and final orders, and the remitter hearing occupied some six days, and a further day and a half of Court time has been taken up with submissions on costs and final orders and the hearing of the application for leave. The Civil Procedure Act 2010 (Vic) requires the Court to seek to give effect to the overarching purpose of facilitating the just, efficient, timely and cost effective resolution of the real issues in dispute between the parties when exercising any of its powers (s 7). Under s 9, when making any order the Court is expressly required to further the overarching purpose by having regard to certain stated objects, which relevantly include:

(a) the just determination of the civil proceeding;

...

(c) the efficient conduct of the business of the court;

(d) the efficient use of judicial and administrative resources;

...

(f) the timely determination of the civil proceeding.

As the plurality of the High Court observed in Aon Risk Services Aust Ltd v Australian National University, in the context of an application to amend the pleadings at a late stage in the proceeding, for an issue to be regarded as a 'real issue', 'the relevant dispute or controversy must exist at the time of the application' for it is only then that 'it is necessary for the court to allow it properly to be raised to enable a determination upon it.' And while the courts do not take an unduly narrow approach to what are the real issues in controversy, even though they are not, or are not sufficiently expressed in the pleading, here, the Court has already made a determination in the remitter decision by reference to the submissions that were made at the remitter hearing. To the extent that any issue in contention between the parties, real or otherwise, was raised it has been decided.

Furthermore, as ASD points out, no application for leave to re-open was made directly by the Marriner parties. ...

To the extent that such an application may be regarded as having been made indirectly, by the Marriner parties seeking leave to file and rely upon the [Pergl affidavit], in the circumstances outlined above and for the reasons stated, the application is refused. In my view, when the relevant circumstances are viewed as a whole, 'the justice of the case' (to adopt the expression used by Kenny J in Bradshaw) would not favour the grant of leave to re-open. If the Marriner parties had wished to place further evidence before the Court for the purposes of the remitter hearing they had the opportunity to seek to do so. I am not satisfied that their conduct in the present circumstances could be regarded as 'inadvertence' in the relevant sense.

The position is that findings have now been made on the remitter on the basis of the evidence presented and submissions made. The notion of 'the justice of the case' must address the position of all parties. The issues remitted by the Court of Appeal having now been heard and determined, any re-opening would, in my view, be productive of unfairness to the ASD parties. Furthermore, when regard is had to the Civil Procedure Act 2010, and the matters set out in subsections 9(a), (c), (d) and (f) in particular, the overarching purpose would not be furthered if the Marriner parties were given leave to re-open their case.[125]

189 Sloss J also decided that, due to the manner in which the Marriner parties had conducted their case, they should not be permitted to contend that the parties had reached an agreement which had the effect of requiring the W&W settlement payment to be deducted from the assessed damages of $80,000 and thus deprive ASD of judgment for any amount. Sloss J's reasons were as follows:

ASD submits that if the Court of Appeal had considered ASD was precluded from recovering the $80,000 by reason of any 'agreement' reached before the original trial judge of the kind now contended for by the Marriner parties, there would have been little or no point in the Court remitting the question of Mr Marriner's liability for the $80,000 payment as a separate issue. I agree with that submission. ...

...

It should also be noted that the Marriner parties never advanced any 'agreement' between the parties of the kind they now contend for, as a reason why there would be no utility in the Court of Appeal remitting 'Issue 4'. In that regard, ASD also points to the letter from Mr Marriner's solicitors dated 16 October 2012, sent by way of response to the Calderbank offer it made dated 3 October 2012. This exchange of correspondence took place after the Court of Appeal had heard and determined the appeal and cross-appeal, and pronounced orders for the remitter. ASD submits that if an agreement of the kind contended for by the Marriner parties had been reached, having the effect on the remitter proceeding now contended for, one would expect reference to have been made to it in that correspondence. After all, if it were the case that there was an agreement concerning the manner in which the $350,000 was to be dealt with as between the parties, and the practical effect of that agreement was that ASD had to recover more than $350,000 in order to be entitled to recover anything from Mr Marriner, such that 'Issue 4' was of no utility as a stand-alone issue, it is surprising that such an agreement was not mentioned as a relevant factor in the context of the Marriner parties' rejection of the offer. Indeed, at the first hearing concerning final orders, Senior Counsel for the Marriner parties accepted that it would have been 'a good point to raise.' However, he said the fact that the Marriner parties did not refer to the rule against 'double recovery' and the agreement they contend for 'does not mean there was no such agreement.'

Given the long history of this matter before the Court, it is both surprising and a cause for real concern that at this late stage in the remitter hearing this matter is now being put forward as a substantive defence and not merely an issue that would affect the exercise of the Court's discretion as to costs. It is not mentioned in the pleadings. It was only touched on in the outline of contentions and oral submissions and was not articulated in a way that exposed what is now contended to be the real effect of the so-called agreement.

For the reasons set out above, in my view, the parties are bound by the finding made in paragraph 234 of the remitter judgment and no exceptional circumstances have been demonstrated that would permit any re-opening of the case. Further, having regard to the orders made by the Court of Appeal concerning the conduct of the remitter hearing, I do not propose to allow any further evidence to be adduced concerning the so-called agreement.

But even if a different view were to be taken, when regard is had to all of the evidence now sought to be placed before me, I am not persuaded that an agreement of the kind contended for by the Marriner parties is made out, essentially for the reasons that have been advanced by ASD.[126]

190 Sloss J also decided that, in respect of the third tranche of the Bond Monies, ASD could not recover in total more than $853,200 and that, having received $350,000 from W&W, ASD could not recover from Mr Marriner more than the net amount of those monies remaining. She added that the W&W settlement payment did not mean that Mr Marriner was entitled to set off the partial recovery against his separate liability to ASD.[127]

191 Sloss J also decided that the rule against double recovery did not operate so as to prevent ASD from recovering the amount of $80,000 from Mr Marriner. She stated:

In my view, there is no element of 'double recovery' in the present case. The Court of Appeal found (at [146]) that there was no basis for disturbing Byrne J's finding that the third tranche bond monies were held on a solicitor's trust for ASD. Having settled with [W&W] in respect of the claims made against [W&W], ASD was entitled to pursue the separate claims it had made against the Marriner parties in respect of the third tranche funds, with a view to recouping the remainder and achieving a full recovery. What was required, however, was that ASD should bring the $350,000 to account, thereby reducing the sum sought to be recovered from the Marriner parties to $503,200.[128]

192 Mr Marriner submitted that the disputed email constituted an agreement between the parties which was communicated to the Court for the purpose of the Court relying upon it in assessing any damages to which ASD may be found to be entitled. The email was said not to amount to evidence and therefore Sloss J erred in finding that the Marriner parties were required to persuade the Court that there were exceptional circumstances justifying the reopening of their case. According to Mr Marriner, even if there was a need to reopen the case, ASD's unconscientious departure from the joint position set out in the email and the innocent explanation for the late production of the email before Sloss J constituted exceptional circumstances. Mr Marriner contended that Sloss J's reliance on s 7 of the Civil Procedure Act 2010 ('CPA') overlooked the important object in s 9 of that Act, namely, 'the just determination of the civil proceeding'.

193 According to Mr Marriner, the agreement between the parties was clear and open to only one interpretation, namely, that the W&W settlement payment of $350,000 had to be deducted from any damages awarded to ASD. Mr Marriner described this as the 'off the bottom' interpretation. Mr Marriner contended that the Marriner parties had consistently maintained before Byrne J and Sloss J that this was the effect of the agreement and that Sloss J erred in making the finding set out at [170] and [190] above.

194 In oral argument, senior counsel for Mr Marriner conceded that if this Court found that the meaning of the disputed email was ambiguous, Ground 3 must fail.

195 ASD submitted that the disputed email was merely a communication to the Court and cannot itself constitute an agreement. Logically, so it was said, if any agreement had been made, it would have been concluded prior to the sending of the email and there was no evidence before the Court as to what that agreement may have been. ASD disputed that an agreement of the type contended by Mr Marriner had been made and submitted that if he wished to rely on such an agreement, it was necessary for the Marriner parties to reopen their case and adduce evidence in support of the alleged agreement.

196 ASD also submitted that the disputed email was ambiguous and that it did not make any commercial sense to interpret it in the manner contended by Mr Marriner. This was because that interpretation would have the effect of ASD giving up $350,000 in respect to any entitlement to damages when there was no legal or commercial reason to do so. According to ASD, it would accord with the principle of 'double recovery' and commercial sense to interpret the email as reflecting an agreement requiring the W&W settlement payment to be deducted from the total amount claimed by ASD in respect of the third tranche of the Bond Monies. ASD described this as the 'off the top' interpretation.

197 By agreement of the parties, the disputed email was sent to Byrne J's associate on the afternoon of 15 September 2009 and it was duly provided to Byrne J on the same afternoon. Furthermore, when the hearing resumed on 16 September 2009, the sending of the email and its subject matter were raised with Byrne J by senior counsel for the Marriner parties. The issue of the effect of the W&W settlement payment was addressed again later during the hearing. Thus, the issue was dealt with in open court and Byrne J was assisted by the parties making submissions on the issue. The parties adopted an informal, cost-effective way of bringing to the attention of Byrne J a matter which may have been relevant to the relief to which ASD may have been entitled. The informality of the parties' communication with the Court did not pose any difficulty while the proceeding was before Byrne J. Of course, Byrne J's rejection of the bond monies claim meant that he did not need to consider the effect of the W&W settlement payment.

198 Once the appeal from Byrne J's order was instituted, the informality of the initial communication with Byrne J's associate concerning the effect of the W&W settlement payment became problematic. That is because there was nothing in the documents filed by the parties on the appeal or in the oral submissions that they made to indicate that the amount of the W&W settlement payment may have to be deducted from any damages awarded to ASD for the bond monies claim and that, accordingly, ASD would have to recover more than that amount in order to be awarded damages for that claim.

199 The Court of Appeal was clearly oblivious to this possibility when it formulated the issues to be remitted to the Trial Division, as its reasons expressly contemplated that ASD may be awarded damages of only $80,000.[129] If the Court of Appeal had been informed of the parties' contentions on the effect of the W&W settlement payment - as it should have been - then it may have adopted a different approach to the question of remitter or to the formulation of the remitted issues. We also note that the Court of Appeal stated that, '[i]n its cross-appeal, ASD seeks an order that [Mr] Marriner pay it the sum of $929,800',[130] which represents the total amount of the second and third tranches of the Bond Monies less $350,000.

200 Following the appeal, the parties compounded the problem. They failed to bring the disputed email to the attention of Sloss J until very late in the proceeding. As noted at [167] above, the Court Book in the remitter trial did not contain any documents relating to the settlement with W&W and certainly did not include the disputed email. In fact, Sloss J did not know that the email existed. This may have resulted from the parties having forgotten about the email between the time that it was submitted to Byrne J's associate on 15 September 2009 and the commencement of the remitter trial just under four years later on 19 August 2013. Be that as it may, particularly where the remitter judge was someone other than the original trial judge, it was incumbent on the parties to bring the email to the attention of Sloss J at the earliest opportunity. If this had been done, the dispute that emerged about the meaning and effect of the disputed email would have been exposed on a timely basis. The pleadings could have been amended and resolution of that dispute could have formed part of the remitter trial before Sloss J delivered her principal reasons.

201 Regrettably, that is not what happened. Consequently, in her principal reasons, Sloss J made a finding on the effect of the W&W settlement payment without knowing of the disputed email. The application by the Marriner parties for leave to rely on the disputed email wasted valuable court time and added to the costs of the litigation because it resulted in a further hearing on 25 February 2015 and, in effect, required Sloss J to decide whether to reconsider her earlier finding.

202 In a formal sense, the proposed summons that the Marriner parties submitted to Sloss J's associate on 10 December 2014 was tantamount to an application for leave to reopen their case because they sought to rely on the Pergl affidavit that was not before Sloss J at the remitter trial. In substance, however, the Marriner parties desired to rely on the disputed email which was exhibited to the Pergl affidavit. That email was a document which communicated to the Court the terms of an agreement the parties had reached on an issue before the Court and which the parties desired that the Court take into account in its deliberations. Viewed in this light, we doubt whether the Marriner parties needed leave to reopen their case in order to rely on the disputed email. It follows that there is some substance to Ground 4 although we do not consider that any error committed by Sloss J in this respect was material to the disposition of the remitter trial, or to the appeal to this Court.

203 Even if the Marriner parties' application were treated as an application for leave to reopen their case, it would have been appropriate for Sloss J to have granted the application to the extent necessary to place her in the same position as Byrne J had been on the question of what effect the W&W settlement payment had on ASD's bond monies claim. Given that the Court of Appeal's order dated 3 August 2012 required the remitter judge to decide the remitted issues on the basis of the evidence already adduced in the original trial unless the remitter judge ordered otherwise, it would have been appropriate for Sloss J to have had regard to the disputed email and the oral submissions that were made before Byrne J, as well as those which had already been made before her during the remitter trial, on the effect of the W&W settlement payment. In view of the course that the proceeding took before the Court of Appeal and subsequently before Sloss J due to the failure of the Marriner parties to incorporate the contents of the disputed email in the formal documents before the Court, it would have been appropriate to preclude them from relying on any further evidence or from making any new submissions on the effect of the W&W settlement payment.

204 In our opinion, however, the disputed email did not prevent Sloss J from awarding damages of $80,000 to ASD in relation to the bond monies claim.

205 The disputed email was open to the two opposing interpretations for which the parties contended. The first interpretation - the 'off the top' interpretation - was that the amount for which ASD was entitled to claim damages or compensation in respect of the third tranche of the Bond Monies had to be reduced by the W&W settlement payment of $350,000. The second interpretation - the 'off the bottom' interpretation - was that the amount of any damages or compensation awarded to ASD for the bond monies claim had to be reduced by the W&W settlement payment of $350,000. That both interpretations were open is borne out by the fact that both sides made written and oral submissions before Byrne J and Sloss J which were arguably consistent with each of the interpretations.

206 Examples of submissions made by the Marriner parties which are consistent with the 'off the top' interpretation include the statements by Mr Bick QC at the original trial that the W&W settlement payment 'reduces the liability in respect of the third tranche of bond moneys to $553,000' and that 'if you take $350,000 off the third tranche and reduce it to $553,200, that together with $426,000 from the second tranche is less than [$950,000]'.[131]

207 Examples of submissions made by the Marriner parties which are consistent with the 'off the bottom' interpretation include the following:

(a) The statement by Mr Bick QC at the original trial that 'it has been agreed that [the W&W settlement payment] comes off the damages in respect of the third tranche of bond moneys'.[132]

(b) The statement by Mr Bick QC at the remitter trial that '[b]y agreement of the parties, there is to be deducted from any amount Your Honour may find liability for the sum of $350,000'.[133]

(c) The statement 'the sum of $350,000.00 must be deducted from the amount awarded' in the Marriner parties' written submissions dated 26 July 2013.[134]

208 It is also clear from the exchange between Mr Bick QC and Byrne J that is set out at [161] above that Byrne J was unsure of the meaning of the disputed email.

209 As stated at [194] above, senior counsel for Mr Marriner conceded that if this Court finds that the disputed email is ambiguous, Ground 3 must fail. That concession was appropriate.

210 The disputed email did not constitute the agreement between the parties. At best, it was some sort of record of the agreement that they had already reached. To the extent that it recorded the terms of the agreement, the meaning of those terms must be determined by what a reasonable businessperson would have understood them to mean.[135] While a literal reading of the disputed email favours the 'off the bottom' interpretation, the 'off the top' interpretation is to be preferred because the 'off the bottom' interpretation neither accords with legal principle nor makes any commercial sense.

211 ASD's bond monies claim in relation to the third tranche of the Bond Monies was for the amount of $853,200. That is the maximum amount of damages that could have been awarded to ASD for that claim. Originally, that claim was brought against multiple defendants, including Mr Marriner and W&W. Once ASD received $350,000 from W&W pursuant to the W&W Settlement Agreement, the principle against double recovery would have prevented ASD from recovering more than $503,200 from Mr Marriner (or any of the other Marriner parties).

212 In these circumstances, it made sense for counsel for ASD to agree with counsel for the Marriner parties that credit would have to be given for the W&W settlement payment of $350,000 in respect of the bond monies claim of $853,200. ASD's counsel did not need specific instructions to reach this agreement because it did not involve ASD giving up any legal entitlement or making any concession. The agreement simply reflected the legal outcome required by the principle against double recovery.[136]

213 On the other hand, it would have made no sense for counsel for ASD to agree with counsel for the Marriner parties that the W&W payment of $350,000 must be deducted from any damages amount that would otherwise have been awarded to ASD in respect of the bond monies claim. That is because such an agreement would have nothing to do with the principle against double recovery and would adversely affect ASD's entitlement to damages by $350,000. It would have absolved Mr Marriner of liability for any damages which did not exceed $350,000 due to a payment made by an independent third party (W&W) pursuant to a settlement agreement which did not contain releases as between ASD and the Marriner parties, and which concerned a different (although related) cause of action. It is inconceivable that counsel for ASD would have reached such an agreement without first seeking specific instructions from ASD.

214 The oral submissions made before Byrne J[137] and the written submissions made before Sloss J[138] indicate that the parties' contentions about the effect of the W&W settlement payment were made in an endeavour to avoid contravention of the principle of double recovery. The parties used varying formulations in their attempts to encapsulate this principle. The wording of the disputed email is one such formulation. The email was badly worded but, viewed in the context set out above, it is sufficiently clear that it sought to convey that the parties agreed that, in assessing the damages or compensation which ASD was entitled to claim in respect of the bond monies claim, the Court should take into account the W&W settlement payment of $350,000 and, if necessary, reduce the amount awarded to avoid double recovery.

215 It follows from the above that Sloss J arrived at the correct conclusion that the W&W settlement payment did not prevent ASD from being awarded the amount of $80,000 against Mr Marriner.

216 In circumstances where we have rejected Ground 3, the fact that we have held that there is some substance to Ground 4 is insufficient to enable Mr Marriner to succeed on appeal.

PART C: GROUNDS 5, 6, 7: COSTS

1. Given the limited success of ASD in ... respect of the claims the subject of the first trial, [Sloss J] erred [in] holding [that] the costs orders of Byrne J should not be disturbed. Like the Court of Appeal in [Marriner v Australian Super Developments Pty Ltd [No 2] [2012] VSCA 290], as a matter of fairness, and in order to do justice, [Sloss J] should have made an issues-based costs order.
2. Given the limited success of ASD in respect of the claims the subject of the remitter trial, [Sloss J] erred in deciding that the Marriner parties must pay ASD's costs of that trial. As a matter of fairness, and in order to do justice, [Sloss J] should have made an issues-based costs order.
3. [Sloss J] erred in deciding that the Marriner parties should pay ASD's costs on an indemnity basis after 8 March 2013. Her Honour should have found that: the relevant Offer of Compromise did not constitute an effective Calderbank offer; and, in any event, the refusal of the offer therein was reasonable.[139]

218 As stated at [9] above, Byrne J ordered that Mr Marriner pay ASD's costs on the claim and that there be no order for costs on the counterclaim.

219 The Court of Appeal set aside Byrne J's order. The Court remitted the question of the costs of the original trial rather than determining those costs itself because 'a number of potentially significant issues have been remitted ... which might, following their determination, substantially change the outcome as between the parties'.[140]

220 On 3 October 2012, after the Court of Appeal had published its principal reasons but before it had published its reasons on costs, ASD made a Calderbank[141] offer to settle all of ASD's claims and the Marriner parties' counterclaim ('2012 Calderbank offer'). The 2012 Calderbank offer was that the Marriner parties pay to ASD $70,000 and that each party bear their own costs, including the costs of the appeal.

221 The letter from ASD's solicitors which communicated the 2012 Calderbank offer stated that the 'legal costs incurred by both parties now dwarf the relief to be determined by the trial judge.' The letter stated that ASD's legal costs to that point, excluding the appeal, exceeded $2.5 million. The letter set out detailed reasons why ASD considered that it was 'almost certain to succeed at least in part' and why it would be unreasonable for the Marriner parties to reject the 2012 Calderbank offer. The letter predicted that ASD would be awarded at least $80,000 but added that, due to the inherent risks of litigation, ASD was willing to offer to resolve the dispute on a commercial basis. The letter also stated that, if the Marriner parties did not accept the 2012 Calderbank offer and ASD was successful on the remitter, ASD would be seeking costs on an indemnity basis from the date of the offer.

222 The Marriner parties rejected the 2012 Calderbank offer by letter dated 16 October 2012 from their solicitors to ASD's solicitors. The letter set out detailed reasons for the rejection but did not refer to the W&W Settlement Agreement, the disputed email or any right of set-off based on the W&W settlement payment.

223 On 22 February 2013, after publication of the Court of Appeal's costs reasons and well before the commencement of the remitter trial, ASD served an offer of compromise purportedly under O 26 of the Supreme Court (General Civil Procedure) Rules 2005 ('2005 Rules'). The offer of compromise was that ASD would pay 'zero dollars' to the Marriner parties and required, as a term of the offer, that the Marriner parties 'consent to orders being made for the dismissal of the proceeding (including the counterclaims).' The offer was expressed to be open for acceptance for 14 days.

224 The offer of compromise was served under cover of a letter dated 22 February 2013 and was also accompanied by proposed minutes of consent orders. The covering letter was marked 'Without Prejudice Save as to Costs' and stated that the 'enclosed consent orders and the offer of compromise operate in unison'. The letter also stated that if the Marriner parties accepted the offer of compromise and signed the consent orders then 'the end result will be that both parties walk away from the proceeding with no order as to costs and the claims and counterclaims will be dismissed.' The letter also confirmed that if the Marriner parties accepted the offer of compromise, ASD would not seek costs and the Marriner parties would not be entitled to costs against the ASD parties other than pursuant to the costs order made by the Court of Appeal. The letter concluded that if the Marriner parties did not accept the offer of compromise and did not 'better [the] offer at trial', ASD would seek its costs on an indemnity basis from the date of the offer and reserved the right to produce the offer, the minutes of consent orders, and the letter, as evidence on the question of costs.

225 The minutes of consent orders provided that the proceeding and the counterclaim be dismissed and that there be no order as to costs.

226 The Marriner parties did not accept the offer of compromise.

227 After Sloss J published her principal reasons, ASD sought an order that the Marriner parties pay ASD's costs of the claims and counterclaim in both trials on a standard basis insofar as they were incurred on or before either 18 October 2012 or 22 February 2013, and on an indemnity basis insofar as they were incurred after those dates.

Legal principles relevant to Grounds 5, 6 and 7

228 It is a well-established principle that costs follow the event, that is, that the unsuccessful party is usually ordered to pay the successful party's costs.[142] This is so even if the successful party failed in establishing all its claims.[143] However, where the successful party made multiple claims and failed in respect of some of them or pursued distinct issues upon which it achieved mixed success, in an appropriate case, the court can award that party only part of its costs or make an order that reflects the measure of success achieved by each party on the issues in dispute.[144]

229 Rule 63.31 of the 2005 Rules (which is in the same terms as the Supreme Court (General Civil Procedure) Rules 2015 ('2015 Rules')) provides that the usual basis upon which an unsuccessful party is ordered to pay a successful party's costs is the standard basis.[145] Where a party unreasonably refuses to accept a Calderbank offer and the outcome of the litigation is not more favourable for that party than the offer, the court may award costs on an indemnity basis.

230 This Court has previously held that 'all in' offers - that is, offers which are inclusive of costs - could not be made under the offer of compromise provisions set out in O 26 of the 2005 Rules as they were in force prior to 1 September 2013.[146]

231 The court may, in the exercise of its general costs discretion, be prepared to pay some regard to an offer of compromise which purports to be in accordance with the 2005 Rules or the 2015 Rules but which, for some reason, is technically deficient.[147] In certain cases, an ineffective or deficient offer purportedly made in accordance with the relevant court rules may take effect as a Calderbank offer.[148] Relevantly for the present application, although an 'all in' offer may have previously been defective under the 2005 Rules, such offers were (and remain) permissible in the form of Calderbank offers.[149] An offer made pursuant to O 26 of the 2005 Rules or the 2015 Rules can take effect as a Calderbank offer if there is something in it or in the surrounding circumstances to indicate, either expressly or by implication, that it is proposed to be relied upon on the question of costs irrespective of its effectiveness as an offer under the relevant rules.[150] The Trial Division has, on a number of occasions, treated defective 'all in' offers of compromise as Calderbank offers which are relevant to the discretionary determination of costs.[151]

232 A Calderbank offer is no more than an offer that: is expressed to be without prejudice save as to the question of costs; and indicates that the offer will be adduced as evidence on the question of costs.[152] The offer must also be capable of acceptance by the offeree.[153] It has been held that a technical approach should not be taken in determining whether a Calderbank offer has been made.[154]

233 There is no requirement that all of the details of a Calderbank offer be set out in a single, self-contained document. Rather, those details can be set out in two or more documents which are intended to be read together.

234 In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2],[155] the Court of Appeal held that the rejection of a Calderbank offer is a matter to which the court should have regard when considering whether to order indemnity costs.[156] The Court said that the critical question is whether the rejection of the offer was unreasonable in the circumstances.[157] The Court emphasised that the discretion with respect to costs must be exercised taking into account all relevant considerations and that, in deciding whether the rejection of a Calderbank offer was unreasonable, the court 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 indemnity costs in the event of the offeree's rejecting it.[158]

235 Relevantly for the purposes of this application, the Court refused to lay down a general rule that the maker of a Calderbank offer should not be entitled to a special costs order unless the offer sets out, with some reasonable specificity, the basis for the offeror's contention that the offeree should accept the compromise.[159] The Court instead agreed with the following reasons of Redlich J in Oversea-Chinese Banking Corporation Ltd v Richfield Investments Pty Ltd:[160]

Any attempt to prescribe the reasoning which must accompany [a Calderbank] offer should be resisted. Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted must depend upon a consideration of all of the circumstances existing at the time of the offer. The extent to which the weakness of a party's position is exposed through the pleadings, affidavits and the various communications between the parties during the course of the litigation may bear upon the significance of the absence of specificity in the informal offer.[161]

236 Consistent with the above principles, where more than one Calderbank offer is made, in determining the reasonableness of a rejection of any one of them, it may be appropriate in some cases for the court to have regard to the contents of a preceding offer and the reasons set out in that offer as to why the offer should be accepted.

Sloss J's findings relating to Grounds 5, 6 and 7

237 On 23 July 2015, Sloss J made the following costs orders:

1. The [Marriner parties] pay the costs of and incidental to [ASD's] claims and the counterclaims, including the costs of the proceeding before the Honourable Justice Byrne.
2. Such costs are to be taxed (in default of agreement) on a party and party basis up until 4:00 pm on 8 March 2013 and thereafter on an indemnity basis.

238 With one exception, Sloss J decided not to disturb Byrne J's costs order for the original trial. The exception relates to the costs of the Marriner parties' counterclaim: whereas Byrne J made no order as to those costs, Sloss J made an order that the Marriner parties pay ASD's costs of the counterclaim. She did so for the following reasons:

[T]he Court of Appeal remitted to the trial judge hearing the remitter the question of liability for the costs of the original hearing because, it seems, their Honours apprehended that despite the Marriner parties' apparent success on appeal, the resolution of the substantive issues remitted could effect a substantial change in the overall outcome of the proceeding. The position is that the ASD parties have been successful on their claim and on the Marriner parties' counterclaim. In the circumstances, I see no reason to depart from the orders Byrne J made on the primary claim, however, in the case of the counterclaim, an award of costs should also be made in ASD's favour.[162]

239 Sloss J decided that the Marriner parties should pay ASD's costs of the remitter proceeding for the following reasons:

There was, in my view, a considerable overlap between the factual matters pertaining to the remitted issues on ASD's claim and those concerning the defences and counterclaims brought by the Marriner parties. Each counsel spent some considerable time taking me through the factual matters on which they relied to make good those claims.

I am not persuaded that it would be appropriate for me to deal with the question of costs of the remitter hearing on an 'issues basis' referable to the causes of action pleaded. Much has already been said by the original trial judge and the Court of Appeal about the unsatisfactory state of the pleadings in this matter. Suffice it to say that the lack of clarity in the pleadings in this case has not assisted in the resolution of the issues between the parties.

ASD has succeeded on the main issue, albeit only to the extent of $80,000 rather than the entirety of the third tranche funds. Because the claim for the $80,000 that Mr Marriner directed [W&W] to pay was itself a component of the third tranche funds, and all of the defences raised regarding the third tranche funds responded to it, it could not reasonably be said that significantly less evidence or submissions would have been required on that claim alone. In my view, the remitter hearing was conducted efficiently by both sides, and most, if not all, of the time spent in Court on ASD's claim in chief was required for it to make good the claim for the $80,000.

Similarly, with the Marriner parties' counterclaim. Much of this part of the case was put forward as a defence to ASD's claim in chief, as well as being a counterclaim. Having considered the issues raised at some length in the remitter reasons, I determined that each of those claims must fail in their entirety.

ASD contends that the Court should treat Mr Marriner's characterisation of the counterclaims as 'defensive' as being an acknowledgment of the fact that there was a significant overlap on the facts between the claims brought by ASD (including those on which it did not ultimately succeed, namely the second tranche and capital expenditure claims and the third tranche claims except for the $80,000) and the counterclaims. I tend to agree with the submission made by the ASD parties to the effect that the overlap between the counterclaims (on which they succeeded) and the claims on which ASD did not succeed favours an award of costs in favour of ASD because the factual underpinnings of ASD's claims had to be addressed in the counterclaims.

When viewed against the final outcome on the remitted issues, it is clear that the ASD parties have enjoyed considerably more success than the Marriner parties. That is, the ASD parties have succeeded on both the primary claim and on the counterclaim. In my view, as the successful party, it is appropriate that the ASD parties be awarded their costs of the remitter.[163]

240 Sloss J held that it was not unreasonable for the Marriner parties to reject the 2012 Calderbank offer.[164] ASD has not sought to challenge that finding.

241 Sloss J held that the offer of compromise did not comply with O 26 of the 2005 Rules and was not capable of acceptance in accordance with those rules.[165] However, she decided that the offer should be treated as a Calderbank offer ('deemed Calderbank offer') and that it was unreasonable for the Marriner parties not to accept the offer. On this basis, she determined that the Marriner parties should pay ASD's costs on an indemnity basis insofar as they were incurred after the time the deemed Calderbank offer expired at 4.00 pm on 8 March 2013. Sloss J's reasons were as follows:

Aside from the non-compliance with the [2005] Rules, the offer ASD made - to walk away completely and with the Marriner parties retaining the benefit of the costs order made by the Court of Appeal - was, in my view, an attractive one. Whilst the covering letter did not set out all of the reasons why ASD contended the offer was attractive and should be accepted, the basis for doing so had been canvassed at some length in the earlier Calderbank letter. I do not propose to re-visit each of the matters discussed under paragraphs (a) to (f) above in relation to the [2012 Calderbank offer]. Importantly, the Marriner parties were no longer required to pay $70,000 to ASD and they were entitled to retain the benefit of the costs order made in their favour by the Court of Appeal. Had they accepted, the ongoing litigation risk would have ceased and they would also have avoided the costs and expenses of the remitter hearing, and the prospect of them facing an adverse costs order from the original trial. In that regard, I note that in the Court of Appeal's costs reasons, their Honours observed that Mr Marriner's success on the appeal 'was, to a significant extent, based on an argument about the effect of the alleged expenditure cap which was not advanced at trial.'

With the introduction of the Civil Procedure Act in 2010, the legislature made clear, if it was not already, that the parties to litigation, the practitioners representing them, and the Court are each required to promote the just, efficient, timely and cost effective resolution of the real issues in dispute. Viewed objectively, the substance of the offer ASD made was directed to furthering those objectives, in circumstances where the costs incurred by the parties in running the proceeding had reached the point where they now dwarfed the quantum of the relief to be determined on the remitter. In my view, the offer as made, even though not one that fell strictly within Order 26, was nevertheless one that invoked the principles discussed in decisions such as Calderbank.

... [T]he very reason why ASD made offers to settle the proceedings [was because it recognised] that little would be gained from pursuing the litigation in circumstances where the costs incurred had dwarfed the sums capable of being recovered.

In the present case, I am satisfied that the overarching purpose would be furthered by treating the offer of compromise made by ASD on 22 February 2013 as being effective as a Calderbank offer. In the circumstances, I am also satisfied that it was not reasonable for the Marriner parties not to accept the offer. Although the offer was not one that conformed strictly with Order 26, when the offer, the proposed orders and the covering letter were read together, the gist of what was being put forward for consideration by ASD was clear, as was the reason why it was put forward. If the Marriner parties were in any doubt, it would have been sensible for them to seek clarification.

In circumstances where ASD, by making an offer, has taken appropriate and timely steps in the litigation that were directed to furthering the overarching purpose, but the offer was not accepted by the Marriner parties even though it would have been reasonable for them to do so, it follows that any costs ordered to be paid by the Marriner parties are to be assessed on an indemnity basis. Under Calderbank offer principles, the indemnity costs would ordinarily be payable from the date of expiry of the offer, being 4.00 pm on 8 March 2013, rather than from 22 February 2013, being the date the offer was made, as would apply under Order 26. Accordingly, any costs ordered to be paid by the Marriner parties are to be assessed on an indemnity basis from 4.00 pm on 8 March 2013.[166]

242 Mr Marriner submitted that Sloss J erred in awarding the entire costs of both trials to ASD because, after those trials and an appeal to the Court of Appeal, ASD's damages award of $80,000 was less than 10% of the amount originally claimed by it. According to Mr Marriner, having regard to the multiple and distinct claims that ASD had brought, its success in respect of only one of those claims warranted the making of an issues-based costs order which reflected each side's relative success in the overall litigation.

243 In relation to the offer of compromise, Mr Marriner submitted that Sloss J erred in treating that offer as a Calderbank offer having regard to the fact that it did not set out any reasons as to why the Marriner parties should accept it. According to Mr Marriner, even if Sloss J did not err in this respect, she was wrong to conclude that the Marriner parties acted unreasonably in not accepting the deemed Calderbank offer for the following reasons:

(a) The Marriner parties were justified in being confident that they would succeed at the remitter trial having regard to the favourable findings of fact that were made by Byrne J and which were not disturbed by the Court of Appeal. ASD had a weak circumstantial case regarding the third tranche of the Bond Monies and the Marriner parties were entitled to a set-off in respect of the W&W settlement payment.

(b) The deemed Calderbank offer was not an attractive offer because it would have required the Marriner parties to bear their own substantial costs in circumstances where they had good prospects of achieving a much better outcome at the remitter trial.

(c) The remitted issues involved allegations which reflected on Mr Marriner's integrity and thus he was justified in proceeding with the litigation in order to vindicate his reputation.

(d) Sloss J erred in relying on the CPA because her approach did not pay sufficient attention to the justice of the case, which is an important requirement in s 7 of the CPA.

244 ASD submitted that, as it succeeded in obtaining damages, it was entitled to its costs of both trials pursuant to the principle that costs follow the event. An issues-based costs order was said to be inappropriate as the claims in respect of which ASD was unsuccessful were intertwined with the claim in which it succeeded and the Marriner parties' defences and counterclaim in respect of which ASD also succeeded.

245 In relation to the offer of compromise, ASD submitted that Sloss J appropriately characterised it as a Calderbank offer and correctly held that the Marriner parties acted unreasonably in not accepting it. ASD contended that, as the deemed Calderbank offer was made soon after the 2012 Calderbank offer, the two offers should be considered together. When the offers were so considered, they were said to provide strong reasons why the deemed Calderbank offer should be accepted.

246 In our opinion, Sloss J did not err in relation to the costs of the original trial.

247 As stated at [5] above, the original trial involved ASD's capital expenditure claim and bond monies claim and the Marriner parties' defences and counterclaim. ASD failed in relation to the bond monies claim on a basis that the Court of Appeal found was erroneous and, following the remitter trial, ASD was partly successful in respect of that claim. ASD was awarded part of the damages it claimed in relation to the capital expenditure claim but this damages award was set aside on appeal on a ground that had not been argued before B[167]e J.167 The Marriner parties' defences and counterclaim were dismissed and this remained the position following the appeal to the Court of Appeal and the remitter trial.

248 Having regard to the matters set out at [247] above, the principle that costs follow the event justified ASD being awarded its costs of the bond monies claim and the counterclaim. At first glance, it might be thought that ASD should not be awarded its costs of the capital expenditure claim because that claim ultimately failed in its entirety. However, in the light of the fact that that claim succeeded in part before Byrne J and ultimately failed on a ground that had not been argued in the original trial, it is appropriate that the Marriner parties be required to pay ASD's costs in respect of that claim.

249 In circumstances where the issues raised by the Marriner parties in their unsuccessful defences and counterclaim overlapped with the issues raised by ASD in its unsuccessful capital expenditure claim,[168] we do not consider that an issues-based costs order for the first trial was either viable or appropriate.

251 We now consider the costs of the remitter trial. The principal issues dealt with at that trial were ASD's bond monies claim for the net amount of $503,200 (representing the amount of $853,200 for the third tranche of the Bond Monies less the W&W settlement payment of $350,000) and the Marriner parties' defences and related counterclaim. ASD was successful in resisting the Marriner parties' defences and counterclaim and was awarded $80,000 in respect of the bond monies claim. Although that award was approximately 16 per cent of the amount claimed, pursuant to the principle that costs follow the event, ASD would be entitled to all of its costs unless the interests of justice required otherwise, such as where an issues-based order would be more appropriate.

252 In order to arrive at her decision that ASD was entitled to damages of $80,000 in respect of the bond monies claim, Sloss J was required to consider in detail all of the evidence relating to the establishment of the Bond in the amount of $1.61 million and the events relating to the release of the funds in the set-off account in the three tranches. As found by Sloss J, there was considerable overlap between the factual matters pertaining to the remitted issues on ASD's claim and those concerning the Marriner parties' defences and counterclaim.[169] This was not a case where the amounts in respect of which ASD was unsuccessful raised discrete evidentiary or legal issues such as to justify an issues-based costs order.

253 Although ASD was not successful against the Marriner parties other than Mr Marriner, the claims against the other Marriner parties depended on the conduct and knowledge of Mr Marriner and did not raise separate substantive issues. Those claims took up only a very small portion of the remitter hearing.

254 In these circumstances, Sloss J was justified in requiring the Marriner parties to pay ASD's costs of the claims and counterclaim in the remitter proceeding.

256 Finally, we turn to Sloss J's conclusion that the offer of compromise was capable of being treated as a Calderbank offer, her finding that the Marriner parties acted unreasonably in failing to accept that offer and her order that those parties must pay the costs incurred by ASD after 8 March 2013 on an indemnity basis.

257 The offer of compromise was intended to be read in conjunction with the covering letter and the minutes of consent orders. Viewed in this light, it contained the following usual features of a Calderbank offer: it set out an offer to settle the entire proceeding which was expressed clearly and was capable of acceptance; it was expressed to be made without prejudice save as to costs; it stated that the offer may be used in evidence on the question of costs; it was open for acceptance for a reasonable period; and it put the Marriner parties on notice that an indemnity costs order would be sought if the offer was not accepted within that period.

258 The fact that the offer of compromise did not set out any reasons as to why the Marriner parties should accept it does not preclude the offer from being treated as a deemed Calderbank offer. The inclusion of such reasons and their cogency are matters that go to the court's assessment of the reasonableness of non-acceptance of the offer rather than to its validity.

259 In any event, the absence of any reasons in the deemed Calderbank offer as to why the Marriner parties should accept it is of no consequence in the present case because detailed reasons were set out less than five months earlier in the 2012 Calderbank offer. The only change in the parties' circumstances between the making of the two offers was the Court of Appeal's costs order dated 5 December 2012, which was taken into account in the deemed Calderbank offer. The Marriner parties addressed the reasons set out in the 2012 Calderbank offer in its response to that offer but did not respond to the deemed Calderbank offer. This is not surprising, as the merits of the respective cases of the parties had been canvassed extensively in the context of the 2012 Calderbank offer.

260 Sloss J discussed in detail the criteria in Hazeldene's in relation to the 2012 Calderbank offer. She adopted that discussion for the purposes of the deemed Calderbank offer without addressing those criteria afresh. In our opinion, she was entitled to do so, as the two offers had much in common.

261 The three criteria in Hazeldene's that are of particular relevance in the present case are: the stage of the proceeding at which the deemed Calderbank offer was made; the extent of the compromise offered; and the Marriner parties' prospects of success assessed as at the date of the offer.

262 The deemed Calderbank offer was made on 22 February 2013, which was a short time after the making of the Court of Appeal's costs order on 5 December 2012 and well before the commencement of the remitter trial on 19 September 2013. By that stage, the litigation had been extant for more than seven years and had resulted in two sets of reasons for decision by each of Byrne J and the Court of Appeal. The parties had incurred significant costs and the amount remaining in dispute was now very modest. The parties had the benefit of findings by Byrne J and the Court of Appeal and their respective analyses in the 2012 Calderbank offer and the Marriner parties' response to that offer. Thus, the Marriner parties were well placed to assess their prospects of success on the issues to be determined by the remitter judge.

263 The deemed Calderbank offer contained an extremely generous offer of settlement as it would have enabled the Marriner parties to avoid potential liability in respect of the remitted issues and the costs of the remitter trial - effectively absolving the Marriner parties of any liability for damages or costs - while retaining the benefit of the Court of Appeal's costs order. It made good commercial sense for the Marriner parties to accept the offer.

264 As for the prospects of success, viewed objectively, the Court of Appeal's principal reasons indicated that Mr Marriner was at considerable risk of being found liable to ASD in respect of the WS Group payment. At the time the deemed Calderbank offer was made, it was not in dispute that Mr Marriner had instructed W&W to make that payment. In circumstances where the Court of Appeal found that the third tranche of the Bond Monies was held by W&W on trust for ASD and that W&W had committed a breach of trust in respect of those monies, Mr Marriner's instruction clearly exposed him to liability pursuant to the Eaves v Hickson principle.

265 In the light of the above considerations, Sloss J was correct in finding that the Marriner parties had acted unreasonably in not accepting the deemed Calderbank offer.

266 In our opinion, Sloss J was correct in taking into account the provisions of the CPA in determining whether the Marriner parties acted unreasonably in not accepting the deemed Calderbank offer. That Act contains overarching obligations which seek to encourage parties to civil litigation to settle such litigation and to ensure that legal costs are reasonable and proportionate having regard to the amount in dispute.[170] It must follow that provisions such as these may, in an appropriate case, inform the question of whether non-acceptance of a Calderbank offer was unreasonable. In the light of the long and tortuous history of the present litigation and the alarmingly large costs that had been expended on it, this was an appropriate case for proportionality considerations to be taken into account. Those considerations were relevant to the overarching purpose of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.[171]

267 The Marriner parties were misguided in basing their assessment about the outcome of the remitter trial on the findings that Byrne J made in relation to Mr Marriner's involvement with the disbursal of the third tranche of the Bond Monies. As discussed at [146]-[147] above, Byrne J did not make any finding in relation to Mr Marriner's liability to ASD in respect of the WS Group payment.

268 For the reasons set out at [204]-[216] above, the Marriner parties were also misguided insofar as they believed that ASD had to prove an entitlement to damages exceeding $350,000 in order to obtain judgment.

269 We reject Mr Marriner's submission that his desire for vindication had any bearing on whether the Marriner parties acted unreasonably in not accepting the deemed Calderbank offer. The remitted issues were framed by the Court of Appeal in neutral terms for the purpose of establishing the parameters of the remitter trial. It is true that Mr Marriner's interests would be adversely affected if those issues were determined against him but that could not justify the rejection of a generous offer of settlement and pressing on with the litigation. If it were otherwise, any party who felt aggrieved by the nature of the allegations against him or her and who desired vindication would be justified in rejecting any offer of settlement that did not involve vindication. Clearly, that cannot be correct. If a party wishes to press on stubbornly with expensive and prolonged litigation on a point of principle which is unconnected to the legal merits of the party's case, and refuses to accept a reasonable Calderbank offer, that party should expect to be visited with appropriate costs consequences.

270 For the above reasons leave to appeal will be granted but the appeal will be dismissed.

[1] For the purposes of this judgment, it is not necessary to distinguish between ownership of the shares by United Super Pty Ltd and ownership by its wholly owned subsidiary, United Super Investments Pty Ltd. It is also not necessary to refer to the ASD Unit Trust.

[2] On 17 April 2002, entities controlled by Mr Marriner purchased the Resort from ASD. The sale transaction, which commenced with Heads of Agreement dated 30 June 2000 and had a chequered history after that date, is not directly relevant to the issues in the present application for leave to appeal.

[3] As discussed below, funds held in a set-off bank account to secure a bank bond in favour of an electricity company were released in three tranches. The third and final tranche of $853,200 became available when the bank bond was cancelled on 13 February 2001.

[4] [1861] EngR 849; (1861) 30 Beav 136; 54 ER 840.

[5] As discussed at [133] below, ASD's claims against Mr Marriner pursuant to the Eaves v Hickson principle were not confined to the third tranche of the bond monies. ASD also alleged that payments totalling $426,600, which represented the second tranche of the bond monies, to persons other than ASD constituted a breach of trust by LQ Management Pty Ltd and that Mr Marriner had knowingly induced or immediately procured that breach of trust and was liable to ASD for that amount. However, as the claim relating to the second tranche is not directly relevant to the present application for leave to appeal, we will treat the bond monies claim as being confined to the third tranche.

[6] Australian Super Developments Pty Ltd v Marriner [2010] VSC 41 ('Byrne J's principal reasons').

[7] Australian Super Developments Pty Ltd v Marriner [No 2] [2010] VSC 66 ('Byrne J's reasons on the counterclaim').

[8] Byrne J's principal reasons [150]-[151].

[9] Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171 ('Court of Appeal's principal reasons').

[10] Court of Appeal's principal reasons [209], [229], [246].

[11] Court of Appeal's principal reasons [147].

[12] Byrne J had retired prior to 3 August 2012.

[13] Court of Appeal's principal reasons [293], [296]-[297].

[14] Marriner v Australian Super Developments Pty Ltd [No 2] [2012] VSCA 290 ('Court of Appeal's costs reasons'). Mandie JA had retired prior to 5 December 2012.

[15] Australian Super Developments Pty Ltd v Marriner [2014] VSC 464 ('Sloss J's principal reasons').

[16] Australian Super Developments Pty Ltd v Marriner [No 2] [2015] VSC 315 ('Sloss J's quantum and costs reasons').

[17] Sloss J's quantum and costs reasons [155].

[19] Sloss J's principal reasons [327].