Plaintiff v Defendant

COSTS - Apportionment of costs - Relevant principles - Apportionment of costs appropriate where failure to make out claim - r 63.04(1) Supreme Court (General Civil Procedure) Rules 2005

COSTS - Bullock and Sanderson orders - General principles - Bullock or Sanderson order refused

COSTS - Calderbank offer - General principles - Calderbank offer not reasonable - Offer made too early in the proceeding - Offer did not constitute a compromise - Indemnity costs not awarded

For the plaintiff on the claim and the first defendant on the cross claim

For the defendant on the claim and plaintiff on the cross claim

1 On 9 August 2011, I delivered judgment in this proceeding, finding for Mr Harpur on Lord Buddha's claim against him; finding for Mr Harpur on his counterclaim against Lord Buddha; and finding for Forvale on Mr Harpur's counterclaim against it. I ordered that, pursuant to s 82 Trade Practices Act 1974 and s 159 Fair Trading Act 1999 (Vic), Lord Buddha pay Mr Harpur the sum of $425,000 and damages in the nature of interest.

2 On 24 and 31 August 2011, submissions were made by the parties on costs and interest. As set out below, I have determined the appropriate costs and interest orders as follows:

1. Lord Buddha pay Mr Harpur the sum of $134,367.25 in the nature of interest as at the date of judgment of 9 August 2011;

2. Forvale pay the costs of the day in relation to hearing of the Calderbank offer on 31 August 2011;

3. Mr Harpur pay the costs of the 12 April 2011 adjournment;

4. Lord Buddha pay 75 per cent of Mr Harpur's costs of the proceeding, including any reserved costs, but excluding those of the 12 April 2011 adjournment and the costs of the day of 31 August 2011, on a party/party basis up to and including 15 September 2009 and on an indemnity basis thereafter; and

5. Mr Harpur pay Forvale's costs of the proceedings, including any reserved costs, but excluding the costs of 31 August 2011, on a party/party basis.

3 By an originating process dated 15 August 2008, Lord Buddha alleged breach of contract by Paul Harpur in relation to a contract for the sale of land and sought orders for damages; further or alternatively the fourth instalment of the contract; interest pursuant to the contract; interest pursuant to statute; and costs.

4 By counterclaim dated 10 October 2008, Paul Harpur alleged that Lord Buddha, and its agent Forvale, had engaged in misleading and deceptive conduct and had committed various breaches of the Sale of Land Act 1962. Mr Harpur also claimed, by way of defence, that he was at a special disadvantage or disability in his dealings with Lord Buddha, which was known to Lord Buddha, and which Lord Buddha unfairly or unconscientiously took advantage of in procuring the benefit of the contract ( an "Amadio-style claim" of diminished capacity).

5 Mr Harpur sought orders against Lord Buddha for rescission of the contract; repayment of the deposit sum of $425,000; further or alternatively damages; further or alternatively equitable compensation; further or alternatively damages pursuant to s 82 of the Trade Practices Act 1974 and/or s 159 of the Fair Trading Act 1999; further or alternatively orders pursuant to s 87 of the Trade Practices Act 1974 and/or s 158(2) of the Fair Trading Act 1999; interest pursuant to statute, or alternatively, compound interest; costs; and such further or other order as the Court thinks fit.

6 Mr Harpur sought orders against Forvale for payment of the sum of $425,000; further or alternatively damages; further or alternatively equitable compensation; further or alternatively damages pursuant to s 82 of the Trade Practices Act 1974 and/or s 159 of the Fair Trading Act 1999; further or alternatively orders pursuant to s 87 of the Trade Practices Act 1974 and/or s 158(2) of the Fair Trading Act 1999; interest pursuant to statute, or alternatively, compound interest; costs; and such further or other order as the Court thinks fit.

7 The matter was heard before me over a number of days in April, May and June of 2011. In publishing my reasons on 9 August 2011, I found that Lord Buddha did engage in misleading and deceptive conduct in relation to four representations made by Lord Buddha to Paul Harpur about the land in question. I found that five allegations of misleading and deceptive conduct were not made out. Four further representations which had been alleged by Mr Harpur in his counterclaim were not pursued at trial. I found that Forvale Pty Ltd did not engage in misleading and deceptive conduct nor did it aid or abet such conduct. I found that Mr Harpur did not satisfy me that he was suffering under a special disadvantage or disability or that Forvale or Lord Buddha knew about it. I did not find it necessary to deal with the alleged breaches of the Sale of Land Act 1962.

8 As the above précis reveals, Mr Harpur was successful in only some of his claim against Lord Buddha, and was unsuccessful in his claim against Forvale.

9 On 24 and 31 August 2011 I heard argument as to costs. The need for a hearing on 31 August 2011 arose after the solicitors for Forvale discovered, a day after the hearing as to costs, that a Calderbank offer was made by Forvale to Mr Harpur on 12 February 2009. Thus it was necessary to reconvene the Court to hear further argument as to costs in relation to the Calderbank offer.

10 At the first hearing as to costs, on 24 August 2011, Mr Harpur was asked to provide short minutes of orders for the consideration of the Court and the parties. Mr Harpur sought orders that Lord Buddha pay Mr Harpur $425,000 together with interest in the sum of $134,367.25; Lord Buddha pay Mr Harpur's costs of the proceeding on a party and party basis up to and including 15 September 2009 and on an indemnity basis after 15 September 2009 (due to an offer of compromise); and that Lord Buddha pay Forvale's costs of the proceeding on a party/party basis.

11 At the hearing as to costs on 31 August 2011, Forvale sought orders that the counterclaim brought by Mr Harpur against Forvale be dismissed; that Mr Harpur pay Forvale Pty Ltd's costs of the proceeding on a party and party basis from 10 October 2008 to 26 February 2009 and then on an indemnity basis from 26 February 2009 (pursuant to the Calderbank offer of 12 February 2009).

12 Five distinct issues arose during oral argument as to costs. They were:

(3) Where the costs of the adjournment on the second day of the hearing should lie;

(4) Whether a Bullock or Sanderson Order should be made in relation to the costs of Forvale; and

(5) The issue of the Calderbank offer and the delay in bringing it to the Court's attention.

13 On delivery of judgment, I ordered that Lord Buddha pay Mr Harpur the sum of $425,000 and damages in the nature of interest on that sum. At issue is the date from which interest should be calculated.

14 Counsel for Lord Buddha submits that the figure of interest provided by Mr Harpur, being $134,367.25,[1] is from the date of the issue of the originating motion. Counsel for Lord Buddha argues that interest should only be calculated from the date of the issue of the counterclaim as it was the claim upon which the action for damages was based. On Lord Buddha's calculations, the amount of interest should therefore be $126,830.94.

15 Counsel for Mr Harpur contends that the correct date from which interest should be calculated is the commencement of the proceeding, namely the originating motion, as the counterclaim on which the action for damages was based was brought within that proceeding. Counsel for Mr Harpur points to s 30 of the Limitations of Actions Act 1958 whereby a counterclaim is deemed to be a separate action and to have commenced on the same date as the action in which it is pleaded.

16 In reply, counsel for Lord Buddha contends that the counterclaim exists as an independent proceeding that, if the original claim fails, still continues. Counsel for Lord Buddha accepts that there is a deeming provision in the Limitations of Actions Act 1958 relating to counterclaims but argues that the relevant section clearly states that that provision is only for the purposes of that Act.

17 Section 60 of the Supreme Court Act 1986 states:

60 Interest in proceedings for debt or damages

(1) The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.

18 The question, therefore, is what constitutes the 'commencement of the proceeding' in this case.

19 In Hosking v Ipex Software Service Pty Ltd (No 2),[2] Habersberger J outlined the purposes of the statutory power to award interest. He stated that the purposes were recognised to be twofold:

(a) to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money and deprived of its use during the relevant period; and

(b) to encourage the early resolution of litigation.[3]

20 In Braeside Bearings Pty Ltd v H J Brignell & Associates (Boronia),[4] the Court of Appeal considered an appeal from a decision where the trial judge awarded interest in a proceeding that commenced in 1984 on a head of damage that was not raised or pleaded until 1994. The trial judge appeared to regard the commencement of the proceeding within the meaning of s 60(1) of the Supreme Court Act 1986 as being the amendment of the statement of claim in 1994 to provide particulars of the head of damage that ultimately succeeded. The Court of Appeal rejected the contention that 'commencement of the proceeding' in s 60(1) meant the commencement of the cause of action in which the plaintiff had succeeded. Tadgell JA, with whom Phillips and Callaway JJA agreed, held that 'a proceeding is to be understood to mean not the subject of a justiciable dispute but the means or the vehicle by which the subject matter of a dispute is brought before the court for adjudication.'[5] In other words, interest might run from the commencement of the writ in 1984 despite the cause of action not being raised until 1994. Subsequent cases have followed this decision.[6]

21 In this case, the means or the vehicle by which the subject matter of the dispute was brought before the court for adjudication was the originating motion. Accordingly, taking into account this construction of s 63(1) and the statutory purpose of the award of interest, I find that interest should be calculated from the date of the issue of the originating motion, being 15 August 2008, to the date of judgment, being 9 August 2011, inclusive. Interest should therefore be the sum of $134,367.25.

22 It was argued at the hearing as to costs that, as Mr Harpur made a number of claims that were resolved against him, this is a case in which it would be appropriate to make only a proportionate costs award in favour of him. In arguing for an apportionment of costs, counsel for Lord Buddha sought to differentiate between the interlocutory proceedings in this matter and the trial proceedings.

23 Counsel for Lord Buddha argues that, in relation to the Amadio-style claim of diminished capacity in which Mr Harpur was unsuccessful, costs in relation to the claim at an interlocutory step, where orders were made and costs reserved, should be disallowed. Counsel for Lord Buddha argues that the interlocutory proceedings involved applications for discovery which related primarily to Mr Harpur's medical condition and, as Mr Harpur was unsuccessful on this point, costs for the interlocutory stages as a whole should be reduced by 50 per cent.

24 Counsel for Lord Buddha also argues, in relation to the trial proceedings, that costs should be reduced by 25 per cent to take into account the time spent pursuing the failed Amadio-style claim and also to take into account the allegations of misleading and deceptive representations which were abandoned, or which Mr Harpur was not successful on. Counsel for Lord Buddha points out that some of those representations were not abandoned until towards the end of the trial and argues that there should be some adjustment as to costs in pursuing claims that were abandoned so late in the proceeding.

25 Counsel for Mr Harpur submits that, on the matter of the misleading and deceptive conduct, the evidence relating to the representations, including those representations which were not made out, all went to the one issue: misleading and deceptive conduct. The evidence about the various alleged instances of misleading and deceptive conduct was mixed and it would be very difficult to separate out which pieces of evidence went to each specific allegation of misrepresentation. Counsel for Mr Harpur argues that, because Mr Harpur was successful on the overall issue of misleading and deceptive conduct, therefore the costs should follow the event.

26 Counsel for Mr Harpur also argues, in relation to the medical evidence presented on his behalf that dealt with his disability, that this evidence was led not only to show the extent and nature of Mr Harpur's medical condition, but also to demonstrate why a successful businessman such as Mr Harpur would rely on what the agent, Mr Turner, had told him about the Portland land. The evidence given by Dr McArdle as to the 'gullibility' of Mr Harpur showed why Mr Harpur had relied on Mr Turner's representations and therefore was not solely used to make out the Amadio-style claim.

27 Counsel for Mr Harpur further argues that the amount of time spent dealing with the issue of Mr Harpur's disability was much less that the percentage proposed by Lord Buddha, given that the disability evidence was also used to prove the misleading and deceptive conduct claim. Counsel for Mr Harpur argues that the time spent on the Amadio-style claim was in the region of 5 per cent, and if there is to be any reduction in the costs awarded to Mr Harpur it should be only a 5 per cent reduction.

28 Counsel for both Mr Harpur and Lord Buddha refer to an analysis of the time spent on various issues as shown by the transcript as providing support for their costs estimates.

29 The jurisdiction of the court as to costs is conferred by s 24(1) of the Supreme Court Act 1986, in the following terms:

(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

30 This general discretion must be exercised in accordance with Order 63 of the Supreme Court (General Civil Procedure) Rules 2005.

31 Order 63.04 of the Supreme Court Rules refers to costs of a question or part of a proceeding. The rule states:

(1) The Court may make an order for costs in relation to a particular question in or a particular part of a proceeding.

(2) Where the Court makes an order under paragraph 1, the Court shall by order fix the proportion of the total costs of the proceeding which is attributable to the particular question in or the particular part of the proceeding.

32 In Chen v Chan,[7] Maxwell P, Redlich JA and Forrest AJA set out the principles relevant to the making of an order for costs where there is the possibility of a proportionate costs award. Those principles (relevant to the current proceeding) are:[8]

(1) The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.

(2) The Rules of Court permit significant flexibility in determining questions of costs. In particular, the court is entitled to examine the realities of the case and will attempt to do "substantial justice" as between the parties on matters of costs.

(3) Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.

(4) A court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.

(5) Where a court determines to make an order apportioning costs, then it does so primarily as "a matter of impression and evaluation," rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.

...

(7) Usually, an order for costs will be made on a party/party basis. But an order for costs on a solicitor/client or indemnity basis may be made where special or unusual circumstances have been demonstrated, for example, by establishing misconduct in the proceeding, that the proceeding was brought for an ulterior purpose, or that it was patently unreasonable to institute, or maintain, the proceeding. Special circumstances may also include the making of an allegation of fraud which is not proved. (citations omitted)

33 In GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3),[9] I set out the general principles in relation to costs and apportioning costs as follows:[10]

1. The award of costs is in the discretion of the Court or Judge: s 24 Supreme Court Act 1986.
2. The discretion must be exercised judicially: Donald Campbell & Co v Pollak;[11] Cretazzo v Lombardi.[12]
3. The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation: Cretazzo v Lombardi;[13] or the circumstances leading up to the litigation: Oshlack v Richmond City Council.[14]
4. Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey.[15]
5. As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim: Ritter v Godfrey;[16] McFadzean v CFMBEU.[17]
6. Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding: Woolf v Burmon;[18] Cretazzo v Lombardi.[19]
7. The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: McFadzean v CFMBEU.[20]
8. It is not necessary that the issue concerned was raised unreasonably by the party: Rosniak v GIO.[21] Although, a relevant consideration may include whether the issue was raised unreasonably: Mickelberg v Western Australia.[22]
9. The court may, in its discretion, make an order that is a single order, fixing what proportion of a party's costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs: Byrns v Davie;[23] McFadzean v CFMBEU;[24] Nolan v Nolan.[25]
10. The caveat referred to by Jacobs J in Cretazzo v Lombardi[26] may have less weight today than when it was decided: Primcom Pty Ltd v Sqarioto;[27] Mickelberg v Western Australia;[28] and Victoria v Master Builders Association of Victoria.[29]
11. Although the quantum of damages recovered compared to that claimed may be a relevant consideration to the court in exercising its discretion, greater emphasis should be given to the failure or loss on discrete claims or issue and the time occupied in relation to them.

34 It seems to me that the circumstances of this case justify an apportionment under r 63.04(1). Although referral to the transcript and judgment alone does not suffice in quantifying the amount of time and preparation put into a particular legal argument, it can provide a guide to the time spent in court in dealing with a particular legal issue, and I am grateful for counsel's attempts to quantify in percentages the apportionment of costs.

35 In relation to the issue of the misleading and deceptive conduct claim, I do not think this claim should be subject to an apportionment. Although Mr Harpur did not succeed in making out all of the representations alleged by him, he did succeed on the claim overall. Much of the evidence in relation to each individual representation was, as was pointed out by Mr Harpur's counsel, mixed in with evidence of the other representations and thus cannot easily be separated out. An attempt to do so is likely to be a wasted effort, as the evidence of meetings and exchanges going to representations which weren't made out is often the same evidence used to support the representations which were made out. As such, I do not propose to make any apportionment orders in relation to the misleading and deceptive conduct claim.

36 I do, however, propose to make an adjustment for costs in relation to the evidence relating to Mr Harpur's health condition and the Amadio-style claim. In reaching a percentage by which Mr Harpur's costs should be reduced, by reason of Mr Harpur failing to make out his claim of diminished capacity, I have taken into account that some of the evidence about Mr Harpur's health was used in the reliance limb of the misleading and deceptive conduct claim. I have also taken into account, however, that I made no findings regarding Mr Harpur's health in relation to the matter of reliance for the misleading and deceptive conduct claim.

37 I propose to order that Mr Harpur's costs be reduced by 25 per cent. In doing so I make a single order obviating the need to make cross orders reducing the costs recoverable by Mr Harpur and an order in favour of Lord Buddha: Byrns v Davie;[30] McFadzean v CFMBEU;[31] and Nolan v Nolan.[32]

38 I therefore propose to order that Lord Buddha pay 75 per cent of Mr Harpur's costs of the proceeding on a party/party basis up to and including 15 September 2009 and on an indemnity basis after 15 September 2009.

39 The trial was adjourned on the second day of proceedings, 12 April 2011, in order to allow Lord Buddha to consider an expert witness statement, relating to medical evidence, filed by Mr Harpur. Counsel for Mr Harpur concedes that Mr Harpur was late in filing that expert witness statement and only provided it two weeks before trial. An affidavit was deposed by Mr Harpur's solicitor which explained that the delay in providing the statement was a result of Mr Harpur's medical condition, which causes him to be forgetful, and which in relation to the medical evidence caused him to forget the appointment with the medical expert. Counsel for Mr Harpur argues that the late filing was therefore not because of a contumelious disregard of a court order, but rather an inadvertence on Mr Harpur's behalf.

40 Counsel for Mr Harpur also states that at the time of supplying the expert witness statement, Lord Buddha was offered an adjournment of the trial. This offer was not taken up by Lord Buddha, who instead objected to the introduction of the evidence at trial. Counsel for Mr Harpur states that it was only after the Court made a ruling allowing the medical evidence to be led that Lord Buddha then sought an adjournment of the trial. Counsel for Mr Harpur further argues that there were a number of minor points decided on the second day, prior to the adjournment, which meant that the day itself was not wholly wasted. For these reasons counsel for Mr Harpur argues that Mr Harpur should not have to pay the costs of that day which were thrown away.

41 Lord Buddha argues that it was the late service of the report that was the cause of the interruption of the trial. The offer of adjournment was made close to the date set for starting the trial and therefore even if the offer of adjournment had been taken up, this action still would have had a cost consequence. The fact that the adjournment did not take place until the second day of the trial does not remove the fact that the delay was due to Mr Harpur, and he should therefore bear the costs liability for the adjournment.

42 I have referred already to s 24(1) of the Supreme Court Act 1986 and Order 63.04 of the Supreme Court Rules which provide me with discretion as to costs, and allow me to make a costs order in relation to a particular part of a proceeding.

43 In the circumstances of this case, I propose to order that the costs of the adjournment be paid by Mr Harpur. Mr Harpur was late in filing his witness statement, and the offer of an adjournment made at that time, had it been taken up, would likely have resulted in a costs order against him. In addition, the late witness statement related to medical evidence which was used to support Mr Harpur's claim of diminished capacity. As noted above, Mr Harpur failed to make out this claim. For these reasons I propose that Mr Harpur pay the costs of the adjournment.

44 Mr Harpur raises the issue of Bullock and Sanderson orders in relation to the costs owed to Forvale in this matter. These orders may arise where the plaintiff is not successful against each defendant, as has occurred in this case.

45 The general principle where a plaintiff does not succeed against each defendant is that costs follow the event: that is, the plaintiff pays the costs of the successful defendant, and is the recipient of a costs order against the unsuccessful defendant.[33] In some circumstances, however, a court may order that the unsuccessful defendant reimburse the plaintiff for the costs of the successful defendant (a Bullock order) or order that the unsuccessful defendant pay the costs of the successful defendant (a Sanderson order). The making of such an order is matter of judicial discretion, which must be exercised judicially according to the justice of the case.[34] The rationale for making such an order is that in the circumstances it would be more just for the successful plaintiff who sued two or more parties to be indemnified by the unsuccessful party for the costs incurred in proceeding against the successful party, for example, where the allocation of responsibility between potential defendants is uncertain making it necessary to bring proceedings against both.

46 Mr Harpur argues that it was necessary for him to join Forvale to the proceedings in pursuit of a claim under s 84 of the Trade Practices Act 1974 because of the nature of the claims that were made against the two defendants. Section 84 of the Trade Practices Act 1974 states that where there is misleading or deceptive conduct engaged in by the agent of a body corporate acting within the scope of its actual or apparent authority, that conduct shall be deemed to have also been engaged in by the body corporate.

47 Mr Harpur argues that his claim of misleading and deceptive conduct is founded on the basis of things said to him by Mr Turner and that Mr Harpur had no knowledge at the time of making his claim whether those representations where made by Mr Turner on his own account, or whether they were made by Mr Gibbs and then communicated by Mr Turner acting as a conduit. Although my conclusions on the evidence were that Mr Turner was acting as a conduit for information given by Mr Gibbs, and Mr Harpur was aware of this, Mr Harpur nevertheless argues that at the time of making the claim there were representations which could possibly have been made by Mr Turner alone and thus it was necessary to join Forvale in the proceeding.

48 Mr Harpur further argues that there was no admission by Lord Buddha in its pleading that Forvale was acting as its agent. Counsel for Mr Harpur argues that Lord Buddha did not plead to the allegation that Forvale was its agent and only admitted the agency once the statement of issues, agreed between the parties, was prepared, on the second day of the trial. Counsel for Mr Harpur says that therefore there was a possibility that the issue of agency might be raised at trial. I disagree.

49 Under the pleadings, Mr Harpur alleged that Forvale was at all material times acting as agent of Lord Buddha and within the scope of its authority from Lord Buddha.[35] Lord Buddha admitted the allegation that Forvale was acting as agent of Lord Buddha but did not admit that Forvale was at all material times acting within the scope of its authority from Lord Buddha.[36] Accordingly, Lord Buddha could not raise any defence to the claim that Forvale was acting within the scope of its authority.[37] Mr Harpur would be merely left to his proof on this issue.

50 As the matter of Forvale's authority to act on behalf of Lord Buddha was not an issue, Lord Buddha argues that the claim against Forvale was not essential, nor successful, and that the matters raised against Forvale could have been done by way of subpoena to give evidence. Counsel for Lord Buddha argues that it would have been necessary for Lord Buddha to call on Forvale to give evidence, given the nature of the claims by Mr Harpur, and therefore Mr Turner's evidence would have been given to the Court, without the need for joinder. Lord Buddha says that the joinder of Forvale was a tactical decision, made by Mr Harpur, and thus Lord Buddha should not bear any of the Forvale costs.

51 Forvale, in turn, opposes the making of a Sanderson order, but is silent on the issue of the Bullock order in relation to its cost.

52 Subject to what follows, I propose to order that Mr Harpur pay Forvale's costs of these proceedings.

53 As to the issues of a Bullock or Sanderson order, I have found that Mr Turner was a conduit, passing the information that I found to misleading from Lord Buddha to Mr Harpur, and that Mr Harpur knew that this was the role that Mr Turner was fulfilling. As such, and pursuant to s 84 of the Trade Practices Act 1974, there was no need to join Forvale in this proceeding. It is not open for Mr Harpur to contend that because Lord Buddha did not expressly admit in its pleadings that Forvale was acting as its agent, this issue could remain live at trial. As discussed above, the authority of Forvale as agent for Lord Buddha was not an issue Lord Budda could contest with Mr Harpur.

54 It is true that it was largely due to Mr Hutchins comprehensive evidence that Mr Harpur was successful in this proceeding. This does not, however, lead to the conclusion that Forvale needed to be joined as a party in order for this evidence to be given. For these reasons, I do not propose to make a Bullock or a Sanderson order.

The Calderbank****[38] offer

55 Counsel for Forvale seeks an order that Mr Harpur pay Forvale's costs of the proceeding by counterclaim on a party/party basis up to 26 February 2009, and on an indemnity basis from 26 February 2009, pursuant to a Calderbank offer made on 12 February 2009. The terms of the Calderbank letter were that each of Paul Harpur and Forvale walk away from the proceeding bearing their own costs to that date.

We consider that your client's case against our client is weak, including inter alia in relation to the following:

• special condition 1 of the contract of sale as it relates to planning issues, and special condition 2 concerning warranties;
• notice 1 and paragraph 2 of the section 32 statement concerning permitted used, attaching the relevant planning certificates;
• disclosures made in the plaintiff's information memorandum for the property;
• the dearth of evidence particularly independent evidence, in support of the representations which your client claim were made to him; and
• your client's involvement in all facets of the acquisition proposal, including during discussion prior to the signing of the original contract and as evidenced by your client's project plan which deals with rezoning issues and alternate feasibility plans.

57 Forvale says that it received no response to its Calderbank letter. Forvale submits that Mr Harpur has not prevailed against Forvale in this proceeding, and Mr Harpur has not obtained a result at trial that is more favourable than the terms of the Calderbank offer.

58 The general principles that apply when a party rejects a Calderbank offer, enlivening the issue of whether indemnity costs should be ordered, are set out in the Court of Appeal's decision in Hazeldene's Chicken Farm v Victoria WorkCover Authority (No.2).[39] Warren CJ, Maxwell P and Harper AJA stated in their joint judgment:

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

[24] Of course, deciding whether conduct is "reasonable" or "unreasonable" will always involve matters of judgment and impression. These are questions about which different judges might properly arrive at different conclusions. As Gleeson CJ said recently, "unreasonableness is a protean concept". But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this.[40] (citations omitted)

59 Under the heading "Factors relevant to assessing reasonableness", the Court of Appeal said:

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

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

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

(c) the extent of the compromise offered;

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

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

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.[41]

60 Following these principles, counsel for Forvale submitted that it was unreasonable for Mr Harpur to reject the Calderbank offer. While referring to the checklist in Hazeldene's Chicken Farm, Counsel for Forvale submitted that the checklist is not a legislative prescription and I am therefore not precluded from considering any other matter I consider relevant, given that my discretion as to costs is unfettered.

61 Counsel for Forvale noted that the Calderbank offer was made on 12 February 2009. As this proceeding was initiated in August 2008, counsel for Forvale conceded that this might appear to be a very early offer. Forvale submitted, however, that at this time, between Forvale and Mr Harpur, a defence had been served and Forvale had already given discovery. Therefore, it was submitted, the Calderbank offer was made in circumstances where Mr Harpur could assess it in the context of the defence and discovery.

62 Forvale submitted that Mr Harpur was given 14 days to accept the Calderbank offer, which it argues was a reasonable period of time. Counsel for Forvale also submitted that the offer was one in which Mr Harpur was given the chance to walk away from the proceedings brought against Forvale without having to pay any of Forvale's legal costs at that time. Forvale, it was submitted, had commenced incurring costs of the filing of its notice of appearance on 20 October 2008 and by the date of the offer this included costs of taking instructions, filing the defence, perusing documents and preparing and filing an affidavit of documents. Costs, it was submitted, were accruing quickly and therefore the Calderbank offer should not be equated with a demand to capitulate such that it was reasonable not to accept, but rather constituted a genuine offer of compromise.

63 Forvale further submitted that at the time of the offer Mr Harpur was aware of Forvale's defence, being the defence dated 16 January 2009. That defence, it was submitted, includes Forvale's admission that it acted as a real estate agent for, and within the scope of its authority from, Lord Buddha to sell the Portland property. The defence also includes a denial by Forvale that it had made the representations alleged by Mr Harpur and that any information that Forvale passed to Mr Harpur was based on instructions, communications and documentation. Thus, Forvale submitted, Mr Harpur was aware that Forvale's defence was one of being a mere conduit passing on information. In addition, the defence also stated that Forvale denied being liable for aiding, abetting, counselling, procuring, inducing or being in any way directly or indirectly knowingly concerned or a party to or conspiring with others to affect the contraventions of the Trade Practices Act 1974.

64 Forvale submitted that in the light of this defence Mr Harpur should have assessed his prospects against Forvale as being weak, and accepted the Calderbank offer. Counsel for Forvale also submitted that the Calderbank offer was clearly and unambiguously expressed, and foreshadowed an application for indemnity costs in the event that the offer was rejected.

65 In light of these circumstances, Forvale submitted that Mr Harpur's refusal to accept the Calderbank offer was unreasonable.

66 In response, counsel for Mr Harpur submitted that it was not unreasonable for Mr Harpur to refuse the Calderbank offer at the time it was made. Counsel for Mr Harpur submitted that the offer enlivened the discretion of the court to make an order adjusting the costs between the parties but that there was no presumption in favour of costs simply by means of a Calderbank offer. Mr Harpur argues that the burden was on Forvale to show that the offer was reasonable, and on Mr Harpur to show that it wasn't unreasonable to refuse it.

67 Counsel for Mr Harpur submitted that the relevant time for considering whether a Calderbank offer was reasonable is when the offer is made, not with the benefit of hindsight. Thus the result at trial itself does not demonstrate the reasonableness or otherwise of accepting or rejecting an offer. In addition, counsel for Mr Harpur took me to a text book contention that the stage in the proceedings at which an offer is made can be relevant to the assessment of that offer's reasonableness, as the earlier an offer is made, the less likely there is to be sufficient information relevant to assessing the reasonableness of the offer.[42]

68 Mr Harpur submits that the timing of the Calderbank offer, 12 February 2009, was very early in the proceeding; less than a month after Forvale had filed its defence, and two weeks prior to a mediation that was to take place. The offer expired on the day of the mediation.

69 Mr Harpur submits that subsequent to the expiration of the offer there were many amendments to the pleadings and issuing of further affidavits, as well as various interlocutory proceedings. It was submitted that this illustrated that at the time of the offer the proceedings were in their very early stages, and it was therefore difficult to make an informed assessment on the merits of the offer. Counsel for Mr Harpur submits that the offer, made early in the proceedings and when the case for Forvale was not strong, did not therefore show the required elements of a compromise but rather constituted a 'walk away' offer by the defendant at an early stage. It was submitted that in order for the offer to be taken into account on costs, there needs to be a real compromise.

70 Counsel for Mr Harpur states that while 14 days is the timeframe on an offer of compromise under the rules, there is authority for the fact that, in relation to Calderbank offers, the earlier in a proceeding you put forward the offer, the longer it should be left open. For this reason, the 14 days which Mr Harpur was given to respond to the offer was an unreasonably short timeframe.

71 Mr Harpur argues that although Forvale, in its defence, alleged that at all material times it acted as Lord Buddha's selling agent for the property within the scope of its authority, Lord Buddha did not go so far as this; rather it admitted by its defence that Forvale was retained as its agent by terms of an agency agreement but otherwise denied the allegations made in the statement of claim. Counsel for Mr Harpur submits that this position was maintained in subsequent versions of the reply, including the amended reply, the amended defence to the counterclaim and the second amended reply and second amended defence, filed as late as 2 February 2011, and up unto the commencement of the trial. This failure to plead, it was said, left Mr Harpur in the position of not knowing whether or not the defence that was being put forward by Forvale would be made out. I have dealt with this issue above. It is enough here to say I reject this argument.

72 Counsel for Mr Harpur also submits that the terms of the offer were not such that it would have been unreasonable for Mr Harpur not to agree to it. The offer, it was submitted, stated that Mr Harpur's case against Forvale was weak, including there being a dearth of evidence in relation to the representations which Mr Harpur claimed were made. Counsel submits that as I found at trial that some of the alleged representations were made, there clearly wasn't a dearth of evidence in relation to them. Counsel submits that the matters raised in the offer as to why it was reasonable for Forvale to make the offer were not the matters which made Forvale successful at trial. It was further submitted that the defence of Forvale, that it was just acting as a conduit, is not even raised in the Calderbank letter. Thus it was not unreasonable for Mr Harpur to refuse the offer.

73 Counsel for Mr Harpur took the court to a number of cases on the issue of Calderbank offers.

74 It was submitted that Foster v Galea was authority for the general principle that the question to be asked in relation to Calderbank offers was whether or not a party acted unreasonably in not accepting an offer that was made.[44] Byrne J referred to the six matters set out in Hazeldene's Chicken Farm which his Honour said he must have regard to, and used these to assess the offer in issue.[45] It was submitted that the facts of Foster v Galea, in which the rejection of the offer was held to be unreasonable, were different to the facts in this case in that the offer was made when the proceeding had been on foot for two years; the offer was judged to be a 'handsome one'; and 'the offeree's prospects of success were largely dependent on the evidence of witnesses which he might have called' but did not.[46]

75 Counsel for Mr Harpur refers to this case as authority for the submission that, of itself, the final result in a case was not determinative of the reasonableness of a Calderbank offer. McDougall J stated:

there appears to be an increasing tendency for defendants who have made Calderbank offers and achieved a better outcome to seek indemnity costs from the date of the Calderbank offer, relying on the outcome to show that rejection of the offer was unreasonable. That is hindsight analysis. Whilst every application must be considered and dealt with on its particular facts, I do not think that it follows necessarily from the adverse outcome that rejection of the offer was relevantly unreasonable. The search is always, in the context of the particular case, for "sufficient circumstances to displace the general rule that only party and party costs can be recovered by the successful defendant". (citations omitted)[48]

76 The case was also cited as authority for the proposition that where the question to be considered is whether an offer was reasonable, or its rejection was unreasonable, attention is to be given to the objective, rather than subjective circumstances.[49]

77 Counsel for Mr Harpur also took me to the passage in the judgment in which the judge states:

... it does not follow from the fact that the reasoning process relied upon to decide to reject the offer was, or may be inferred to be, wrong, that the rejection of the offer was thereby unreasonable.

The offer was not a "walk away" offer, but in reality it was not far removed. It did not require total capitulation; but, even accepting that $100,000 is a substantial amount of money, it did not offer a significant increment of Rickard Constructions' claim.

...

Thus viewed, the offer may be regarded as one the acceptance of which would require near total capitulation; or, to put it another way, as an optimistic offer.[50]

79 Despite these findings, on the particular facts of the case, the judge found that the although the offer was 'optimistic' or even 'bullish', this did not mean 'that it lacked any genuine element of compromise'.[51] The judge found the offer was reasonable and the rejection unreasonable.[52]

80 Counsel for Mr Harpur refers to the facts of this case, in which a Calderbank offer to discontinue a proceeding was made within a month of the defendant being served an originating motion, and within what was concluded to have been a very short time since the defendant's solicitors received instructions.[54] The judge stated[55]:

the offer was made very early in the proceedings. All that the defendant was offering to give away was his costs up to the date of the offer. The defendant's solicitors had been instructed in the matter for a very short time, probably about two weeks, and had entered an appearance and delivered a defence ... their costs would have been extremely modest in the context of a $60,000 case in which liability was in issue. By the time of the offer, the plaintiff was already out of pocket in relation to her... expenses and her own costs as between solicitor and client up to that time. The offer would have left her liable for those amounts: all she might have saved was a liability for the defendant's costs as between party and party up to the date of discontinuance, had she chosen to discontinue the action at that time. In the circumstances, the element of compromise contained in the Calderbank offer seems to me to have been negligible.

It is also relevant that the offer was to be open only for 14 days, which seems to me a very short period to expect a plaintiff to make a considered decision to discontinue her action, particularly in the absence of any explanation as to why it is being put to her that the action is doomed to failure.

82 I find that the Calderbank offer made by Forvale to Mr Harpur is not reasonable. It is perhaps unnecessary to state, therefore, that I find that it was not unreasonable for Mr Harpur to reject it. The offer came at a very early stage of the proceedings, before mediation had taken place, and gave Mr Harpur very little time to respond. It was, in effect, not a compromise, but rather an offer to walk away from proceedings at a time at which the nature of those proceedings were still being explored. For these reasons, I find that Mr Harpur should pay Forvale's costs on a party/party basis.

83 Given the lateness in raising the Calderbank offer issue, by Forvale, and the need to reconvene the court to hear argument on this issue, the costs of the day in relation to the Calderbank issue shall be against Forvale.

1. Lord Buddha pay Mr Harpur the sum of $134,367.25 in the nature of interest as at the date of judgment of 9 August 2011;

2. Forvale pay the costs of the day in relation to hearing of the Calderbank offer on 31 August 2011;

3. Mr Harpur pay the costs of the 12 April 2011 adjournment;

4. Lord Buddha pay 75 per cent of Mr Harpur's costs of the proceeding, including any reserved costs, but excluding those of the 12 April 2011 adjournment and the costs of the day of 31 August 2011, on a party/party basis up to and including 15 September 2009 and on an indemnity basis thereafter;

5 Mr Harpur pay Forvale's costs of the proceedings, including any reserved costs, but excluding the costs of 31 August 2011, on a party/party basis.

[1] No issue was taken with the calculation itself.

[2] [2004] VSC 343.

[3] Ruby v Marsh [1975] HCA 32; (1975) 132 CLR 642 at 652-653 per Barwick CJ; Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382 at 396 per Fullagar, Marks and J D. Phillips JJ; MBP(SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657 at 663 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ; Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 at [16] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ and at [29] per Kirby J; Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 at [69], [92] and [109] per Kirby J.

[4] [1996] VicRp 3; [1996] 1 VR 17.

[6] Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2003] VSC 244 at [47]; Whiley Investments (Qld) Pty Ltd v Pet's Paradise Franchising (Qld) Pty Ltd [2009] VSC 144 at [19]; Slaveski v Victoria [2010] VSC 569 at [42].

[7] [2009] VSCA 233.

[9] [2008] VSC 296.

[11] [1927] AC 732.

[12] (1975) 13 SASR 4.

[14] [1998] HCA 11; (1998) 193 CLR 72 per McHugh J at 97.

[15] [1990] HCA 59; (1990) 170 CLR 534 per Mason CJ at 543, per Toohey J at 562 - 563, per McHugh J at 566 - 567.

[16] (1920) 2 KB 47.

[17] [2007] VSCA 289.

[18] (1939) 13 ALJR 431 (HC).

[19] (1975) 13 SASR 4 at 12.

[20] [2007] VSCA 289.

[21] (1997) 41 NSWLR 608.

[22] [2007] WASC 140 (S) at [43] - [46] per Newnes J.

[23] [1991] VicRp 93; (1991) 2 VR 568 at 571 per Gobbo J.

[24] [2007] VSCA 289 at [153]- [158].

[25] [2004] VSCA 134 at [6].

[26] (1975) 13 SASR 4 at [48] and [136]; Jacobs J sounded 'a note of cautious disapproval' of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial.

[27] (Unreported, SCV, Eames J, 24 April 1995).

[28] [2007] WASC 140 (S) at [30] - [35].

[29] (Unreported, SCV CA, 15 December 1994, BC 9408430).

[30] [1991] VicRp 93; (1991) 2 VR 568 at 571 per Gobbo J.

[31] [2007] VSCA 289 at [153]- [158].

[32] [2004] VSCA 134 at [6].

[33] Dal Pont, G.E.; Law of Costs, 313.

[35] Amended defence and counterclaim of 12 December 2008, [38(b)(ii)].

[36] Defence to amended defence and counterclaim of 19 December 2008, [to paragraph 38].

[37] Byrd v Nunn (1877) 7 Ch D 284; The King v Hay [1924] VicLawRp 13; [1924] VLR 97.

[38] Calderbank v Calderbank [1976] Fam 93.

[39] [2005] VSCA 298; (2005) 13 VR 435.

[40] Ibid 441-442. See also Spagnolo v Body Corporate Strata Plan [2007] VSC 423 and Re Centaur Mining & Exploration (No 2) [2008] VSC 625.

[42] Dal Pont, G.E.; Law of Costs, 379.

[43] (No 2) [2008] VSC 331.

[47] Rickard Constructions v Rickard Hails Moretti and Ors [2005] NSWSC 481.

[53] [2005] ACTSC 133.