9 In support of the submission that VRL had made unwarranted allegations of fraud or dishonesty against Mr Ziegler, the Ziegler parties identified the "baseless and opportunistic attack on Mr Ziegler's credit" in relation to the employment agreement between Orrong and Mr Ziegler ("Employ.doc"). The Ziegler parties described the submission by VRL that Mr Ziegler had backdated the document to 1993 when it had actually been executed in 2003 as a "fraud allegation". In respect of that issue I had concluded that I was not satisfied to the relevant degree that the document had not been created in 1993.[4]
10 Counsel for VRL submitted that the Ziegler parties' approach to the question of costs was not correct. They first submitted that there was no reason to depart from the normal rule that costs should follow the event and that one did not complicate the question of costs by attempting to divide a case into various issues on which one or other of the parties had been successful. They submitted that an order for all of the costs of the claim and counterclaim was particularly appropriate where as here, VRL had successful defended a claim which at one time was said, completely without justification, as the Ziegler parties well knew,[5] to exceed $200 million and had obtained a judgment in its favour of more than $12 million, plus interest of another $4.5 million.
11 Secondly, it was submitted by VRL that it was not correct to say, as had the Ziegler parties, that VRL had lost all of the issues identified by them as "hopeless or baseless". Thus, reference was made to my finding that Mr Ziegler had breached his duty as a director in failing to disclose his claim to a 5% commission and thus participating in decisions in which he had a financial interest,[6] which meant that the sweeping assertion that VRL had unsuccessfully raised a "hopeless or baseless" issue, namely that Mr Ziegler had breached directors' duties owed by him, was simply not accurate.
12 Thirdly, counsel for VRL submitted that it was not correct to characterise the above issues raised by them as "hopeless or baseless" or "unmeritorious". For example, they submitted that the uncertainty defences were properly arguable even if they did not succeed in their entirety. They pointed out that in fact I had held that Orrong lost its argument that it was entitled to a shareholding in VRP pursuant to the 1997 Agreement[7] and that I had commented that there was "considerable difficulty with the wording of the declarations sought by Orrong with respect to its claim to a 7.5% interest in VRP".[8]
13 Fourthly, counsel for VRL submitted that with many of the remaining issues it was simplistic to look only at the end result and not at the issue as a whole in order to decide whether VRL should be denied costs for needlessly extending the length and complexity of the trial. By way of example, VRL referred to the Legal Practice Act defence. Here, a considerable time was spent receiving and analysing the evidence about whether Mr Ziegler on his own behalf or on behalf of Orrong was engaging in legal practice, which the Ziegler parties unsuccessfully denied. VRL only failed on this issue because it was unable to link the invoices sent by or on behalf of Orrong with the undoubted legal work done by Mr Ziegler.
14 This summary of the competing submissions illustrates the difficulty the Court faces when an issue by issue analysis is attempted. In my opinion, generally such an approach would only be appropriate in the clearest of cases, where the successful party has wholly failed in a separate and discrete issue or issues. I do not consider that this is the case here. All of the many issues relied on by the Ziegler parties were closely related to the other issues on which they lost.
15 Nevertheless, it does seem to me that in this case there should be some reduction in the costs otherwise ordered to be paid to VRL. I say this for two reasons. First, the misleading conduct and negligence arguments advanced by VRL failed, apart from any other reasons, because I held that it had made no attempt to prove that Mr Ziegler's conduct had caused it loss.[9] It was, or should have been, known that an essential part of these causes of action would not be, or be able to be, the subject of any attempt at proof. In those circumstances, in my opinion, it should have been understood that to persist with these causes of action was a fruitless exercise. Thus, it can be fairly argued, in my opinion, that the pursuit to judgment of these issues led to some costs being incurred unnecessarily, although I do not accept that it would be all of the costs said to result from these issues being raised as they had other relevance, such as whether the amount of the claimed termination bonus was justified by the alleged enormous benefit to VRL as a result of Mr Ziegler's work in arranging the relevant finance.
16 Secondly, I consider that some reduction should be made in respect of the Employ.doc issue. As VRL pointed out, some of the time taken up by this issue was due to the refusal by the Ziegler parties to act reasonably in relation to the discovery of the document (only undertaken under compulsion of an order by the Court) and to access to the electronic version of the document (again only provided under compulsion of an order by the Court). Nevertheless, although I upheld VRL's rights in this regard, its allegation that Mr Ziegler had fraudulently backdated the document and given false evidence about it was in the end rejected by me.[10] Further, as the Ziegler parties pointed out in their submissions, I had expressed the view that I was "strengthened in this conclusion by the lack of any apparent motive for Mr Ziegler to belatedly prepare an employment agreement between Orrong and himself and to back date it".[11] It therefore seems to me to be appropriate to reduce the costs otherwise payable to VRL to some extent in recognition of the fact that it had made an allegation of fraud against Mr Ziegler, which was not upheld.[12]
17 Just what reduction should be made is very difficult, and the parties appeared to accept that any figure was largely a matter of impression for the Court. As I have previously said, a single order offsetting the two costs order that would otherwise be made seems to me to be a sensible way to proceed. I also consider that the reduction should be applied across both the claim and counterclaim given their close inter-relationship. Doing the best I can, I have concluded that VRL should be entitled to an order that it be paid 90% of its costs of the claim and counterclaim.
The Calderbank Offer
18 The second issue was whether VRL's costs should be paid on some basis other than party and party given its "Calderbank" offer of settlement made by letter dated 16 February 2005 from VRL's solicitors to Orrong's solicitor. The relevant part of that letter read as follows: