Plaintiff/Defendant by Counterclaim v Defendant/Plaintiff by Counterclaim

2 In the result Sim Development is entitled to the net amount of $133,260 and judgment in its favour in the Caveat Proceeding.

3 The remaining argument is about costs. Sim Development claims its costs, and the costs of the counterclaim, on the standard basis. Costs are also sought by Mr Cai who was a defendant to the counterclaim. In relation to the Caveat Proceeding, Sim Development claims costs on an indemnity basis.

4 Greenvale submitted that, notwithstanding the result, it was entitled to indemnity costs from 17 September 2016 because of the unreasonable refusal on the part of Sim Development to accept the Calderbank offers made by Greenvale. Greenvale has accepted liability for such costs on the standard basis up to 16 September 2016. In relation to the Caveat Proceeding, Greenvale offers to pay Sim Development's costs until 22 February 2016 on the standard basis. After this date - the date Cavanough J referred the matter to the Commercial Court - it was submitted that there should be no order as to costs. As an alternative, Greenvale submitted that the costs could be approached on an "issues" basis. As a final alternative, Greenvale submitted that there be no order as to costs.

5 In order to resolve the issue of costs it is necessary to examine the Calderbank offers.

6 Following the Court ordered mediation held on 6 September 2016, the First Calderbank Offer sent 9 September 2016 by Greenvale's solicitors to Sim Development's solicitors offered to resolve all disputes in both proceedings, including its counterclaim, for the sum of $270,000 "all in", i.e. inclusive of costs. The $270,000 was stated in paragraph 10 of the offer to be comprised of:

(b) $155,000 for hourly fees claimed in the Sim Development invoice;

(d) nothing for Sim Development's claim for a 20% profit share (for reasons set out in the letter which are consistent with the Court's reasons); and

7 Paragraph 7 of the First Calderbank Offer is in the following terms -

If the offer is agreed to by your client, it will need to be recorded in terms of settlement drafted by this firm and which are satisfactory to our client, which terms will contain clauses recording the above arrangements, standard mutual releases, mutual non-disparagement clauses and a confidentiality clause.

8 The First Calderbank Offer remained open for acceptance until 4pm on 16 September 2016. The offer set out in detail the reasons why it was entirely reasonable and should be accepted.

9 Sim Development did not accept the above offer and its solicitors served a responsive Calderbank Offer dated 23 September 2016 containing two alternative settlement offers:

(a) first, payment by Greenvale of $360,000 plus costs on the standard basis;

(b) alternatively, payment of $430,000 "all in", i.e. inclusive of costs.

10 The responsive Calderbank Offer included proposed releases and included the following paragraph 4 -

If the offer above is accepted our clients are prepared to consider more fully documenting the settlement in terms acceptable to the parties which may also include non-disparagement clause and a confidentiality clause.

11 Greenvale did not accept Sim Development's offer and then restated its first offer by letters dated 26 September 2016 and 18 November 2016. The 26 September 2016 letter contained detailed reasons in paragraph 5 as to why it was reasonable for Greenvale to have rejected Sim Development's offer. The Second Calderbank Offer made on 26 September 2016 remained open for acceptance until 5pm on 4 October 2016.

12 It is clear from the correspondence and the trial that the critical main "sticking point" in settling the litigation was Sim Development's insistence that it could claim its hourly rate, plus a 20% profit share, without bringing to account the monthly fees totalling $85,000 which had been paid by Greenvale. As the Calderbank offers and the Judgment made clear, this was an untenable claim. It failed.

13 The First and Second Calderbank Offers made by Greenvale satisfy the relevant matters referred to in Hazeldene's Chicken Farm v VWA (No 2)[2] for determining whether Sim Development acted unreasonably in not accepting the offers in that:

(a) the offers were made after mediation and at a time when the issues between the parties were well known, as is apparent from the detailed reasons in the First Calderbank Offer;

(b) Sim Development was given sufficient time to consider the First Calderbank Offer, as it came shortly after the mediation - at any rate, the same offer was then restated twice;

(c) the offer involved a significant compromise by Greenvale and was far more than the ultimate award by the Court;

(d) Sim Development's prospects of success on its cumulative claim for a 20% profit share, in addition to its hourly rate claim and its claim for monthly fees, were poor for the reasons set out in the First Calderbank Offer;

(e) the First Calderbank Offer was very clear in what Greenvale was offering and why; and

(f) the First Calderbank Offer foreshadowed an application for indemnity costs.

14 In response to the argument based on the Calderbank offers, Sim Development submitted that the Calderbank offers were not capable of acceptance, or more precisely if accepted no agreement would eventuate because the parties still needed to negotiate on a number of matters as contemplated by paragraph 7 of the First Calderbank Offer. It was submitted that the matters referred to were not boiler plate type clauses and it was conceivable that agreement would not be reached.

15 Next it was submitted that the Calderbank offers were based on matters discussed in the mediation which was held a few days before the First Calderbank Offer. It was contended that this was most improper.

16 Finally, it was contended that in any event Greenvale did not beat the offer because of the various matters in paragraph 7 that still required negotiation and agreement.

17 I am not attracted by any of these submissions. As the authorities demonstrate Calderbank offers need to be considered very carefully and resort should not be had to unnecessarily technical or procedural matters.

18 The first submission is not compelling. Whatever category of Masters and Cameron,[3] there is every reason to believe that the parties would have reached agreement on the paragraph 7 matters. The correspondence and the various offers indicated as much. It was in both parties' interests to agree on the remaining matters referred to in paragraph 7 and it is more probable than not that they would have agreed.[4]

19 The same may be said of the second point. It is not unusual to make a Calderbank offer following a mediation. On the contrary it is entirely appropriate and usually opportune to do so. Of course there may be specific information that is provided solely for the purpose of endeavouring to resolve the matter at mediation. It may, depending on the circumstances, be improper to use such specific information. However, having an understanding of the parameters of the other party's position, is different. In my opinion there was nothing improper in the making and content of the Calderbank offers.[5]

20 Finally, I do not accept that Greenvale did not beat the Calderbank offers because of paragraph 7. As I have said it was more probable than not, in fact I think it entirely likely that the paragraph 7 matters would have been agreed to.

21 In my opinion there is substance in Greenvale's submissions. The Calderbank offers meet all of the requirements and criteria set out in the leading case of Hazeldene's Chickens. The First Calderbank Offer or the Second Calderbank Offer should have been accepted. In my opinion it was unreasonable not to accept either offer and particularly the Second Calderbank Offer. Sim Development has done no better in running the case. In fact it has self-evidently done worse. Accordingly any order for costs must take account of the Calderbank offers.

22 In all of the circumstances, I consider that the Second Calderbank Offer should have been accepted. It responded to the responsive Calderbank Offer of Sim Development. After the chain of Calderbank offers it was, in my view, unreasonable for Sim Development not to accept the Second Calderbank Offer. Accordingly, it is entirely appropriate that Sim Development pay the costs from 5 October 2016, the day after the expiry of the Second Calderbank Offer.

23 The remaining question is whether costs should be awarded on a standard or indemnity basis. Although it is not uncommon for costs to be ordered on an indemnity basis there is no presumptive entitlement to such an order unlike the position relating to offers of compromise under the Rules of the Court. The Court retains its usual wide discretion in relation to costs. An applicant for indemnity costs in these circumstances, such as Greenvale, is still required to show why indemnity costs should be ordered.[6]

24 In the exercise of my discretion I propose to order costs on the standard basis from 5 October 2016, the day after the Second Calderbank Offer expired. It ought in the circumstances to have been accepted. Costs prior to this date (including costs of the Caveat Proceeding) should be paid by Greenvale on the standard basis.

25 I do not, however, consider that costs from 5 October 2016 should be ordered or awarded in respect of the claim on an indemnity basis. Despite the offers, Greenvale continued running what I consider to be an extravagant counterclaim. It had little merit as formulated and no more than token damages were awarded. It also did not concede the legitimate basis of the caveat claim, and argument was necessary. Further, in all of the circumstances, in my opinion Greenvale should not recover or be awarded the costs of the Caveat Proceeding or its costs of its counterclaim. No order should be made in relation to these costs. Finally, as noted, Greenvale should have its costs of the main proceeding (other than the counterclaim) from 5 October 2016 on the standard basis.

26 Orders will be made in accordance with these reasons.

[1] Sim Development Pty Ltd v Greenvale Property Group Pty Ltd [2017] VSC 335. ('Judgment' or 'Reasons').

[2] [2005] VSCA 298; (2005) 13 VR 435 at 442 [25].

[3] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353.

[4] It was of course open to Sim Development to endeavour to agree with these clauses. Indeed, there may have even been an obligation on its part. See Noor Abdiaziz Mohamed v State of Victoria [2007] VSC 538 at [37].

[5] See Forsyth v Sinclair (No 2) [2010] VSCA 195 at [14].

[6] See Law of Costs, G. E. Dal Pont; 3rd Edition LexisNexis at [13.60]-[13.62] and the authorities referred to.