Plaintiff v Defendants

Supreme Court of Victoria|2007-12-21|Before: Byrne J

PRACTICE and PROCEDURE - costs - Calderbank offer - offer by defendant to bear its own costs if plaintiff discontinues - complex litigation - whether failure to accept unreasonable - meaning of "unreasonable" - whether costs on indemnity basis or solicitor and client basis - whether costs should be apportioned to issues - party having no interest in certain issues at trial - whether party's costs should be reduced by unnecessary representation at trial dealing with those issues

There was no appearance for the fifthnamed Defendant (Keen Planning)

1 The trial of all issues other than quantum in these three proceedings, two in VCAT and one in the Court, ran for 75 days. Nearly all of the claims failed.

2 In the Court proceeding, Premier, as the owner of the Premier land, alleged that its land was polluted as a consequence of dry cleaning and laundry activities conducted by one or other of the Spotless Parties on the adjoining Spotless land between 1963 and 1983. Premier sued the Spotless Parties alleging that their activities amounted to common law nuisance, negligence and breach of various statutory duties. It sued McMullin Nominees which was associated with the Spotless Parties and was the owner of the Spotless land at the relevant time. It sued its successive planning consultants, Collie Planning and Keen Planning, for breach of duty owed to it. It sued, also, Moreland Council for a failure to comply with its obligations in enforcing its planning scheme. It sued Kilpatrick which provided a soil report with respect to the Premier land. Finally, it sued North Suburban, which has, since 1995, been the owner of the Spotless land. The causes of action alleged by Premier against these defendants in the Court proceeding are summarised in my judgment of 5 October 2007.[1] In the course of the trial, Premier settled with McMullin Nominees, Keen Planning and Moreland Council. All of its other common law claims and claims under the Trade Practices Act 1974 failed against the remaining defendants. It succeeded only in its claim against Spotless for compensation brought under s. 62A of the Environment Protection Act 1970. Its comparable claim against the other Spotless Parties failed. In the Premier VCAT proceeding, Premier failed in its claim against the Spotless Parties for damages under s. 15 of the Water Act 1989. It failed, too, against North Suburban in its claim under s. 62A of the Environment Protection Act and under s. 15 of the Water Act.

3 North Suburban also sought relief in the Court and in VCAT against the Spotless Parties. It succeeded in its s. 62A claim in the Court against Spotless but not against the other Spotless Parties; it failed in its claim against the Spotless Parties for damages pursuant to s. 15 of the Water Act in the North Suburban VCAT proceeding.

4 The parties now return for final orders and for orders as to costs.

5 The trial was on all issues other than quantum. There was some debate regarding the precise formulation of the deferred issues. In essence, this turned upon whether the amount of damages claimed should be included in the definition of these questions. It was generally accepted, however, that the enquiry should be at large on that aspect.

6 The order pursuant to R. 47.04 which I will make is that proffered by Premier. It is in the following terms:

(1) Order that the following questions be determined after the hearing and determination of all other questions in this proceeding:

(a) In respect of the claim made by the plaintiff pursuant to s. 62A(2) of the Environment Protection Act 1970, what costs were reasonable and incurred in good faith by the plaintiff in complying with the following cleanup notices given under s. 62A:

(b) In respect of the claim made by North Suburban pursuant to s. 62A(2) of the Environment Protection Act 1970 what costs were reasonable and incurred in good faith by North Suburban in complying with the following cleanup notices issued under s. 62A:

7 In this case, a number of Calderbank offers and open offers were made and were relied on in support of contentions by successful defendants that they should recover costs on an indemnity basis from or about the date of the offer. As with much of this case, these applications arose in litigation of considerable complexity and in unusual circumstances. It is convenient, therefore, that I make some general observations about the role of Calderbank offers in such circumstances and the way I have approached these offers in this case.

8 There are five distinct, but related, procedures available to a defendant which, confident of success, seeks to avoid incurring non-recoverable legal costs in defending the claims made against it.

(1) It may seek summary judgment under R. 23.01 or R. 23.03 where the case against it is plainly hopeless or where it has, on any view of the facts, a good defence on the merits.

(2) It may make an offer of compromise pursuant to R. 26.02 to pay a modest or even a nominal sum in satisfaction of the plaintiff's claim. Such a procedure has the advantage of confidentiality during the trial and the usual consequence that, if the plaintiff, not accepting the offer does not obtain a more favourable judgment, it will be ordered to pay the defendant's party and party costs from the date of the offer. This is of little comfort to a defendant which expects the plaintiff's claim would fail entirely because it would, in the event that its expectation is fulfilled, recover all of its costs on a party and party basis in any event. Furthermore, it does not recover the difference between the actual costs and those recoverable on a party and party basis. Moreover, if the offer is accepted the defendant would have to bear the plaintiff's party and party costs to the date of offer. A further disadvantage in a case such as the present is that O. 26 does not at all address the particular difficulties raised by apportionment proceedings.

(3) It may make an open offer to pay a modest or nominal sum or to bear its own costs if the plaintiff discontinues its claim. While experienced litigators would not necessarily see in such an offer a concession that the claim may have substance or an indication of a loss of confidence in its own claims defendants are, not surprisingly, reluctant to make such a public declaration of their position.

(4) It may make a Calderbank offer in terms of the open offer to which I have referred. Such an offer avoids the possibility of the open offer but, if not accepted, it may have a role to play in the debate about costs at the end of the trial. I shall return to this.

(5) It may submit at the end of the trial at which it has been successful that it should have its costs on a more comprehensive basis than party and party costs as would be the normal order. Such an order may be made by the Court where it appears that the plaintiff's claim was made frivolously or where the plaintiff, properly advised, should have known that it was without real prospect of success.[2] It is well established, however, that such a punitive order would be made only in cases with special and unusual features.[3]

9 I return to the Calderbank offer. This procedure, which takes its name from a family law case in England in 1975,[4] has been identified as a useful procedure to protect a party from the costs and risks of litigation, where that party was prepared to make a reasonable offer to compromise the matters in issue. It does this by providing an incentive for the offeree to address the offer seriously. If it does not do so, in the sense that its rejection of the offer was not reasonable in the circumstances, it will be at risk of a special costs order.[5] It should be emphasised that the procedure, like that under O 26, is intended to cause the offeree the address the offer seriously; it is not to punish a party for conduct of which the Court disapproves. To my mind the approach of the Court to such offers and the choice of the appropriate basis for the assessment of costs should reflect this essential difference between this procedure and that discussed in the Fountain Selected Meats case.[6]

10 A feature of an argument about costs where an unaccepted Calderbank offer has been made, is that it is conducted when the result is known. It will, almost inevitably, involve the offeror contending that, had the offer been accepted, the parties would have been spared a good deal of cost. This contention will normally be advanced in circumstances where the force of the argument depends upon the fact that the offeree has achieved a less favourable result than would have been the case if the offer had been accepted. In short, the offeree, in deciding not to accept the offer, has gambled and lost - it has invested the present benefit of the offer against the uncertain benefit that a better result will in due course be achieved. This analysis has led judges to say that, if a better result was not achieved, it is for the offeree to establish that its failure to accept the offer was not unreasonable.[7] From the point of view of a trial judge, this approach has the appeal that it shifts to the offeree, who is in the best position to offer the explanation, the task of explaining how its decision, albeit erroneous, was nevertheless a reasonable one. The rationale of this is that the costs incurred by the parties after the offer were the consequence of the offeree's decision not to accept it.[8]

11 This approach, however, has not prevailed. The Court of Appeal in Hazeldene's Chicken Farm case[9] has accepted that the failure to accept an offer which is not bettered by the outcome is but a matter which the Court should have regard to in exercising its discretion as to costs. Approving the judgment of Redlich J in Overseas-Chinese Banking Corporation Ltd v Aljade Development and Construction SDN BHD,[10] the Court of Appeal pointed to the objective that potential litigants should not be discouraged from bringing and, it would seem, pursuing their disputes in the courts.

12 The critical question, then, is whether the rejection of the offer was unreasonable in the circumstances. These circumstances will include the forensic context in which the offer is made.[11] The Court of Appeal in the Hazeldene's Chicken Farm case set out for the guidance of trial judges a list of matters which should ordinarily be had regard to in undertaking such an assessment of the decision of the offeree. The judges emphasised, however, that this was guidance for the exercise of a discretion. They did not seek to prescribe the reasoning of the judge, for this would be to undermine the very process of discretion.[12]

13 What, then, is meant by "unreasonable" in this context? A decision to accept or not an offer of this kind will ordinarily be based upon the offeree's perception of its ultimate chances of success, that is, it involves a prediction as to the likely outcome of the trial. At the time the debate about costs occurs the trial will normally be over; the event will have demonstrated that the prediction which underlay the decision was not fulfilled, that it was erroneous or even imprudent.[13] I put to one side the case where the decision was one based on factors other than the prospect of success. A decision to commence or to press on with litigation which is based on the desire to grind a less resourced opponent into capitulation or to put it out of competitive business could hardly be countenanced by the court. If an offeree sought to justify its decision to refuse an offer by reference to some consideration other than the prospect of success, this would be a matter for it to raise, leaving always the ultimate onus on the issue upon the offeror. In the same way that the failure to achieve a more advantageous result will not automatically put the offeree at risk, so too it is not sufficient for it to avoid the consequence of its erroneous prediction that it says only that the outcome was uncertain. The outcome of almost all litigation is uncertain. The erroneous prediction may not, however, be an unreasonable one if the predictor was not, at the time, for good reason in possession of sufficient information to make an assessment or if the circumstances upon which it was based later changed. It must be acknowledged that it is part of the ordinary function of a lawyer to make predictions of this kind. The lawyer must make them at the outset and during the litigation in order to enable the client to make responsible and informed decisions to commence the litigation, to pursue it and to make the various decisions in the course of the proceeding's progress to trial and judgment.

14 An offeror contending that the offeree's decision was unreasonable is entitled, in a case such as the present where a high level of legal representation was employed by all parties, to assume that the offeree was properly advised and that, in offering this advice, the lawyers could and did make assessments of the foreseeable risks ahead. For example, at the time some of the offers in this case were made, the offeree had had discovery and was in possession of the witness statements of the other parties and, if it was made after the trial commenced, the offeree had heard openings from all parties and had already a sense of how the trial was progressing.

15 A feature of this case was the large array of defendants. This may have been understandable at the outset because it is likely that Premier had little knowledge of the activities which had been conducted on the Spotless land and by whom they were carried on or, indeed, of those conducted upon its own land. It would have had little knowledge of the involvement of Kilpatrick or Moreland Council. It was probably better able to make a decision as to sue its own planning consultants. The decision of Premier to sue these parties, was, nonetheless, one which involved heavy, legal and commercial consequences to them and ought not to have been lightly made. And the responsibility of its lawyers in giving advice upon which that decision was made was also a heavy one.[14] Where parties are joined in circumstances such as the present, an equally heavy responsibility lies upon those parties for decisions not to abandon a claim which appears to have little prospects of success as the facts emerge. Another feature of this complex case was the enormous time and expense required for its preparation and presentation. It is one thing to say that a litigant should not be discouraged from bringing its dispute into court or from pursuing it; it is another where the litigant brings or pursues at great expense to all concerned a claim which is without reasonable expectation of success.

16 A further general matter concerns the timing and form of the Calderbank offer. The cases make it clear that the offer should have sufficient specificity to warrant a decision to accept it or reject it.[15] There is also a resistance to making a special costs order where the offer which is not accepted is one which in fact invites the plaintiff to capitulate.[16] And so, a defendant with an expectation of success cannot offer at the outset to consent to a judgment for the dismissal of the claim with costs. There is here no element of compromise. The acceptance by the court of such an offer as being one to be acted upon to give the defendant a right to a special costs order is unlikely.

17 There has, however, been more uncertainty about an offer by a defendant to settle on the basis that it pays nothing to the plaintiff but agrees to bear its own costs. In the Berrigan Shire Council case the view was expressed that such an offer was no more than an offer to accept capitulation by the plaintiff, so that a special costs order was not warranted.[17] Caution about giving effect to such an offer by making a special costs order is also said to be based upon the Court's apprehension that defendants will at the earliest opportunity make such an offer in every case in the hope that this will put added pressure on the plaintiff which would then be at risk of a special costs order if its proceeding failed. The position of such an offer, however, may be different where the defendant proposes to bear its own costs later in the proceeding, for in such a case there is an acceptance by the offeror of part of the burden of the proceeding. In this sense there is an element of compromise because the acceptance of the offer will mean that the plaintiff will not have to pay the defendant's costs previously incurred. This is of particular importance in a large case where the offer is made after considerable costs have been incurred by the offeror.

18 I have referred in this discussion to a special costs order. This is in contradistinction to the ordinary costs order which calls for an assessment on a party and party basis. In the course of argument submissions were made that I should make an order for indemnity costs. There is an essential difference between costs assessed on such a basis and those assessed on a solicitor and client basis,[18] the former being akin to costs assessed on a solicitor own client basis.[19] I would prefer a solicitor and client assessment in a case where the order is predicated upon an unreasonable rejection of a defendant's Calderbank offer. This better reflects the policy of the rule rather than the more severe order for indemnity costs which might be reserved for truly delinquent litigants.

19 The final general matter relates to the operation of the Calderbank procedure in cases of great complexity with a large number of parties. In such a case, the failure to accept an offer is likely to have more far-reaching implications than in a more straight-forward case. A decision of a party which leads to the unnecessary enlargement of the interlocutory processes such as discovery, witness statements and court book, imposes a burden on all parties as does the unnecessary prolongation of the trial. In this case, Premier sought $10.9m against the Spotless Parties and North Suburban and $14.9m against the other defendants. On any basis these are substantial sums. The trial which, at its beginning had 10 parties or groups of parties all with multiple counsel and teams of solicitors and consultants, must have confronted all parties with the prospect of costs running at an enormous sum per court day. If this was as little as $300,000 to which must be added the ancillary costs, it would seem that the amount at stake would soon enough be consumed. Add to this the fact that the value of the judgments in fact recovered by Premier and North Suburban will probably represent a very small part of the sums claimed. This will cause the Court to examine very carefully the costs implications of a plaintiff's response to a reasonable offer which might, if accepted have reduced that burden.

20 As indicated in my judgment, the orders with respect to these claims in the Court proceeding will be as follows:

Declare that the firstnamed defendant is liable, pursuant to s. 62A(2) of the Environment Protection Act 1970, to compensate the plaintiff for any costs incurred by it which are reasonable and which were incurred in good faith in complying with any or all of the following notices given under s. 62A:

2. Judgment for the third and ninthnamed defendants against the plaintiff.

3. The other claims against the first defendant are dismissed.

21 In the Premier VCAT proceeding the application will be dismissed.

22 As to the costs of these proceedings, Premier accepted that the costs of the deferred quantum issues should be reserved for the determination of the Master to whom these issues will be referred. Otherwise, Premier sought an order that Spotless pay its costs of the Court proceeding, including any reserved costs. Premier, further, sought an order that these costs be taxed on an indemnity basis. It sought, too, that there be no order for costs of its claim in the Court against Spotless Services and Ensign Aust and that there be no orders as to the costs of the Premier VCAT proceeding.

23 On behalf of the Spotless Parties, it was contended that:

(a) Premier should pay the costs of Spotless notwithstanding that it succeeded against that defendant because the basis upon which it succeeded was not pleaded and was not contended for until the very end of the trial. Upon the remaining issues, Premier failed.

(b) Premier should pay the costs of Spotless Services and Ensign Aust on the basis that the costs should follow the event.

(c) The Spotless Parties should have the costs of the unsuccessful Premier VCAT proceeding on the basis that the costs should follow the event.

24 It is correct to say that Premier failed on every issue which it pleaded against the Spotless Parties. The point upon which it was successful was one which North Suburban presented and which Premier opportunistically picked up at the very end of the trial.[20] But this is not to say that the issues which engaged the Court during the trial were of no moment. A very substantial part of the trial was involved in determining the nature, the extent and the source of the pollution on the Premier land. These issues were hard fought by the Spotless Parties and their defences failed. Having lost this factual issue, the Spotless Parties maintained that any pollution was not caused by any of them because the Spotless operations at the time were conducted by other companies within the group which were not defendants and which had been deregistered. This raised what I have called the corporate identity issue - an issue upon which the Spotless Parties were successful.

25 Although I was and remain critical in my judgment of certain aspects of the Spotless Parties' defence of the claims against them, I do not consider that their conduct was such as to warrant a punitive order for costs.

26 I mention, too, at this stage, a Calderbank offer made by the Spotless Parties by letter dated 12 October 2006. This letter contained an offer addressed to both Premier and North Suburban to settle their claims against the Spotless Parties for a payment to Premier of $3M all-in. A second Calderbank offer was contained in a letter dated 21 February 2007 written on behalf of the Spotless Parties to Premier alone. This was in effect a conditional offer to settle all claims for $4.5m all-in. No argument was presented that these unaccepted offers should cause me to make a special costs order in favour of the Spotless Parties.

27 My perception of the time occupied at trial with the various issues joined between Premier and the Spotless Parties is that very little time was occupied with the issues upon which the Spotless Parties were successful. Nearly 30% of the trial was concerned with opening and closing addresses[21] and about 50% with the issues as to pollution and its source to which I have referred.[22] About 15% was occupied by what was called the transactional issues which did not involve the Spotless Parties and in which they played a minor role at trial. Other issues such as remediation options and the quantification of costs fell away when the Premier land was sold and its particulars of damage moved in a different direction. I would estimate that about 5% of the trial was occupied with issues such as the corporate identity issue and other relatively peripheral issues. This is my perception of only the trial time involved, it does not involve any assessment of the pre-trial costs which, in this case, must have been very considerable. I indicated at an early stage of the trial that I would excuse counsel from attending at trial when issues which were of no interest to their client were being dealt with. Nevertheless, it was reasonable for the Spotless Parties, as the major defendants, to be present for the whole of the trial. In the circumstances, it seems to me unfair that Spotless, albeit an unsuccessful party, should bear the whole of Premier's costs of the trial, much of which was occupied in its unsuccessful claims against parties other than the Spotless Parties. The order will be directed to the costs of the successful claim so that the Taxing Master will not include those parts of the trial in which Spotless had no interest.

28 In the circumstances, I will order that Spotless pay Premier's costs of the successful claim on a party and party basis. I will direct that there be a discount of one quarter of Premier's costs of the much criticised and excessively large court book.

29 I will not make an order for the costs of the successful Spotless Parties. Their interests were represented by the legal team which represented all of the Spotless Parties.

30 I will make no order with respect to the costs of the Premier VCAT proceeding. Other than the pleadings, I estimate that no extra costs were involved by the bringing of this proceeding. I am mindful, too, of the provisions of s. 109 of the VCAT Act. In a case of this complexity, it may well have been appropriate to award costs in favour of the successful party in a VCAT proceeding but, in the circumstances of this case, I will not do so.

31 These claims, both in the Court proceeding and in the Premier VCAT proceeding, failed and North Suburban seeks its costs as successful party. If these claims were not seen as far-fetched when they were brought, this must soon have been apparent to those advising Premier. And yet they were pursued. On 14 November 2006, well into the trial, counsel for Premier made an open offer to agree to the dismissal of its claims against North Suburban if North Suburban would agree to bear its own costs. This offer was not accepted. In the circumstances, this was a very serious statement by Premier. If it represented Premier's assessment of its prospects of success against North Suburban as I think to be the case , its decision to proceed when the offer was not accepted must have been dictated by a hope that its assessment might prove to be inaccurate or that it might, in some way, avoid paying North Suburban's costs when that party succeeded. Premier was, of course, committed to proceed with the trial against the other parties; North Suburban, too, was committed to continuing with its claims against the Spotless Parties.

32 In any event, the trial rolled on. On 23 January 2007 North Suburban delivered a Calderbank offer to Premier. Two alternative proposals were offered. The first was that Premier withdraw its claims and pay the costs of North Suburban on a party and party basis. In the alternative, North Suburban offered to purchase the Premier land for $2.5m. These offers were not responded to and they lapsed or were withdrawn on 12 February 2007.

33 I refer to what I have written generally at the outset of these reasons about Calderbank offers in litigation of this complexity. The North Suburban letter of 23 January contained two alternative offers: the first was described as an invitation to Premier to capitulate; the second was an offer to purchase the Premier land for a sum which represented one-half of the sum for which Premier later sold the land to a Spotless company. At the time the second alternative offer was made the land was being offered for sale by tender with a tender closing date of 28 February 2007. It was not unreasonable for Premier not to accept it.

34 The position of Premier with respect to the first alternative is rather different. It was apparent as the trial proceeded, if not earlier, that its claims against North Suburban were problematic. Its own offer of 14 November 2006 showed that it had little confidence in them. It must be presumed, therefore, that Premier pressed on, perhaps in the hope that North Suburban would relent and offer to bear some part of its own costs. And, so, Premier required North Suburban to participate in the trial for months without a real prospect of its claim succeeding. Against this background, the North Suburban capitulation offer takes on a different light to a similar offer which might be made in different circumstances.

35 If, as I apprehend, Premier by 23 January 2007 continued to see its prospects of success against North Suburban as slender, why should it not seriously consider whether it should abandon the claim? Why should North Suburban be put to the trouble and expense of further defending it? If the offer were accepted, North Suburban would, even so, suffer a considerable costs penalty inasmuch as its party and party costs to date would not cover all of its solicitor/client costs. If the offer were not accepted, this penalty would continue for the remainder of the trial. As I have mentioned, an important function of a Calderbank offer is that it provides an incentive for the offeree to pause and assess its own position and its position vis-à-vis the offeror. It is a time for the offeree to make a serious decision whether to press on. The reasonableness of the decision to press on must have regard to its responsibility as a litigant to its opponent, to its own interests, and to the Court, which after all provides, at public expense, a forum for the resolution of complex disputes such as this. The parties ought not lightly pass up the opportunity to abandon such claims in total or in part so as to reduce these burdens.

36 I am persuaded that Premier's failure to accept, even a capitulation offer in the circumstances of this case, was unreasonable. North Suburban will have solicitor and client costs from 4 February 2007. I observed in the course of the trial that the representation of North Suburban was limited to junior counsel except for those days on which its interests were in play. I will not reduce its costs on the basis of excessive representation.

37 Premier failed against Collie Planning and Collie Planning seeks its costs. Premier resists this, contending that Collie Planning, notwithstanding its success, should not have its costs for the period 20 November 2006 to 12 December 2006. The reasons offered for this were that it would be contrary to the principle of fairness for Collie Planning to receive all of its costs of the trial and, further, an award for all of its costs would be contrary to the recognised principle that litigants should not engage in wasteful or unreasonable behaviour.

38 Collie Planning was added as a defendant by statement of claim dated 15 June 2004. As between Premier and this defendant, there were a number of offers to which I was referred:

(1) On 10 August 2004, Collie Planning made a Calderbank offer inviting Premier to abandon its claims on the basis that Premier pay 80% of the party and party costs of Collie Planning to that date. In the offer, the amount of these costs was fixed at $7,000. The offer was made on the date on which Collie Planning filed its defence.

(2) On 17 December 2004, Collie Planning made a second Calderbank offer to settle with Premier on the basis that Premier discontinue its proceeding against Collie Planning and that each party bear its own costs.

(3) On 13 November 2006, day 19 of the trial, Premier made an open offer to consent to the dismissal of its claim against Collie Planning on the basis that each party bear its own costs. This was, of course, the equivalent of the second Calderbank offer which Premier had rejected some two years previously.

(4) This offer was rejected by Collie Planning on 20 November 2006 by an open letter which contained a counter-offer that Collie Planning would agree to Premier abandoning its claims but on condition that it paid the costs of Collie Planning.

39 It was contended on behalf of Collie Planning that it should have its costs on an indemnity basis from 20 August 2004 when the first Calderbank offer expired. Given the timing of this letter of offer and the nature of its contents, I do not consider that it was unreasonable for Premier not to have accepted it. The offer was made on the date upon which Collie Planning delivered its defence. Nevertheless, in this letter the solicitors for Collie Planning set out in some detail the facts and circumstances which they contended would lead to the inevitable failure of the Premier claim against their client.

40 The second Calderbank offer made four months later was again accompanied by detailed reasons for which, it was put, the Premier claim would fail. Principal among these was the incontrovertible fact that Collie Planning ceased to be Premier's planning consultant at the end of June 2000. As to the basis for Premier's rejection of this offer, little is known other than what appears in a short letter from its solicitors of 16 February 2005 in which the offer was rejected. The letter then continues:

Further, we have not been instructed to provide a substantive advice as to the reason for our client's rejection of your client's Calderbank letter as we believe the Expert Witness Statement of Mr Lewis Sayer answers those points adequately.

An examination of Mr Sayer's report shows that he was critical of Collie Planning inasmuch as it ought to have explained to Premier the meaning and effect of the environmental overlay control over the Premier land but that it did not do so.[23] In the event, Mr Sayer was not called as a witness by Premier; he was called on 12 February 2007 by Kilpatrick. Nevertheless, section 10 of his report which contained these criticisms of Collie Planning were put in evidence at the behest of Premier. It may be presumed that the persons making decisions for Premier were, at the time the second Calderbank offer was made, instructing their lawyers that they were unaware of the requirement that there be a Certificate of Environmental Audit, at least until Collie Planning ceased to act and that, if they had been properly advised, they would have acted differently in response to this. It does not appear what was their attitude towards the causation and damages problems facing their claim against the defendant which was spelt out in the letter of offer and which were never overcome.

41 The case moved forward to trial with each of the parties incurring the expenses which were involved in this. On day 19, Premier made its open offer to abandon its claims against Collie Planning and to bear its own costs. By this stage of the trial, the directors of Premier had not given their evidence nor had any Collie Planning witness. It seems likely, however, that the offer was driven by a fresh appreciation of the difficulties facing Premier's case as it then stood and by a commendable effort by the lawyers to clear away the clutter of issues which threatened to prolong the trial.

42 The submission of Collie Planning was that I should make a special costs order as from 20 August 2004 when Premier rejected the first Calderbank offer, alternatively, from 16 February 2005 when it rejected the second Calderbank offer. It was pointed out that Premier, in the event, failed entirely against Collie Planning, so that it has not achieved a better result than it would have obtained by the acceptance of either offer.

43 In support of its contention that the rejection of these offers was not shown to be unreasonable, Premier offered four reasons:

(1) Premier had served its expert witness statement of Mr Sayer but that Collie Planning had not. Mr Sayer's statement is dated 25 January 2005. The statement of the Collie Party's expert witness, Mr Borelli, is dated 10 March 2006.

(2) The prospects of success turned, in part, upon the credibility of the two principal Premier lay witnesses, Mr Evans and Mr Simmonds, who were its directors.

(4) Premier's case involved issues as to the scope of the Collie Planning retainer and as to the state of knowledge of Premier as to environmental audit overlay requirements.

44 I am unpersuaded that, in the circumstances of this case, these matters take the question very far. As to the expert witness, Mr Sayer did not deal with Premier's causation and damages problems. In any event, Premier made no further response after it had Mr Borelli's report. If this had shed any light on the matters which had concerned Premier, it was always open to Premier to make a counter-offer. Insofar as Premier's assessment of its prospects depended upon material from its own witnesses, this is a matter for itself. Insofar as it required capitulation, for reasons already mentioned, I think there was an element of compromise in the second Calderbank offer.

45 The costs of Collie Planning of the unsuccessful claim will therefore be assessed on a solicitor and client basis from 16 February 2005.

46 It was then contended that Collie Planning was not interested in and did not participate in that part of the trial which concerned the fact and source of the pollution. I indicated at the outset of the trial that parties need not be present for those parts which were of no concern to them. Moreover, the presentation of the evidence was organised in a way to enable the party to know what matters were to be canvassed on any given day. I accept that this meant that an absent party might properly maintain counsel with a watching brief during these other periods. I shall therefore direct that the costs of Collie Planning of 50% of the trial be limited to the costs of one junior counsel.

47 Keen Planning joined McKenzie Group as a defendant with a view to seeking apportionment against that party in mitigation of its exposure to the Premier claims. Following the mediation early in the trial, Premier settled with Keen Planning. I have no knowledge of what consequent arrangements Keen Planning made with its adversary McKenzie Group. Following the settlement, Collie Planning and Kilpatrick pursued apportionment claims against McKenzie Group, alleging that it was in breach of a duty owed to Premier. These claims also failed. I am told that there is no issue as to costs between Kilpatrick and McKenzie Group. I will order that Collie Planning pay the costs of McKenzie Group from the date upon which it made its claim against that party.

48 Collie Planning now seeks a Bullock order against Premier in respect of those costs. In the context of the apportionment regime, I am of opinion that the party which joined the defendant and which made allegations against it should bear responsibility for its costs in the event of failure. It will be recalled that apportionment operates to dilute the recovery of the plaintiff from its selected defendants; in the sense that it benefits those selected defendants. Where the plaintiff does not itself make allegations, an order that it bear, even indirectly, those costs ought not be made unless some good reason be shown. In the present case, Collie Planning's decision to pursue the claim against McKenzie Group was for its own benefit. I will not pass the burden to Premier.

49 Again, there is no issue that Premier should pay the costs of Kilpatrick. Kilpatrick relies upon an unaccepted Calderbank offer of 13 November 2006 in support of its claim for indemnity costs from that date. On 14 November the solicitors for Premier acknowledged the offer but, in accordance with its terms, it lapsed without further response on 17 November 2006.

50 The letter of offer dated 13 November 2006 was sent on day 22 of the trial after the parties had been to mediation. The letter contains assertions of communications made in the course of the failed mediation. I shall have no regard to them. The offer was to settle on an all-in basis for $1.25m.

51 In their submissions on behalf of Premier, counsel argued that the five days during which the offer was open was unduly short and, further, that Premier's prospects of success against Kilpatrick were difficult to predict. As to the first, I have regard to the fact that the parties had been actively considering settlement for some time and a further five days to suggest this offer was adequate.

52 I am unmoved also by the other suggested reason. The difficulties facing the Premier case against Kilpatrick were apparent to all in court following the extensive opening on Kilpatrick's behalf at the commencement of the trial. I will make an order for Kilpatrick's costs of the unsuccessful claim but solicitor and client costs will run from 17 November 2006.

NORTH SUBURBAN'S CLAIMS AGAINST SPOTLESS PARTIES

53 North Suburban succeeded in its claims against Spotless but failed against the other Spotless Parties. For reasons which I have given in relation to the Premier costs, North Suburban should have a like order for costs against Spotless. I will not order costs against it in favour of Spotless Services or Ensign Aust.

54 North Suburban seeks indemnity costs from 5 February 2007 on the basis that Spotless unreasonably failed to accept its Calderbank offer dated 23 January 2007. The terms of that offer were directed to the s. 62A claim which North Suburban was making against the Spotless Parties. In summary, it offered to clean up the contamination on both Premier land and its own land, the Spotless land, if the Spotless Parties paid $3.9m. North Suburban would pay its own costs of its claims against the Spotless Parties.

55 The position, as things then stood, was that North Suburban alleged that its recoverable costs to date were $231,000. In addition, it sought declarations that future costs to be incurred in compliance with EPA notices should be reimbursed to it by the Spotless Parties. The amount of these costs was unknown. The offer did not include Premier's s. 62A costs incurred to date. Insofar as North Suburban were to assume liability for Premier's future clean up responsibilities, it is difficult to see how this might have been achieved without Premier's concurrence. I am not prepared to conclude that Spotless' failure to accept such an offer was unreasonable.

56 A further letter dated 26 October 2007 from the solicitors for North Suburban was referred to. I do not see that this has anything to do with the present issues.

57 Finally, I was referred to a letter from the solicitors for the Spotless Parties to the solicitors for North Suburban dated 12 October 2006. The letter contained an offer to settle both the Premier claims and the Spotless claims for $3m. The offer was inclusive of costs. It was not contended before me that this offer had any bearing on the question of the costs of North Suburban.

58 For reasons already given, there will be no order for the costs of the North Suburban VCAT proceeding.

59 A number of these claims were settled in the course of the trial. The parties before me all asked that these claims for apportionment or contribution, other than those which I have already dealt with, should be struck out with no orders as to costs. I will do so.

60 I propose, therefore, the following orders with all matters the subject of the present trial.

(1) Order that the following questions be determined after the hearing and determination of all other questions in this proceeding:

(a) In respect of the claim made by the plaintiff pursuant to s. 62A of the Environment Protection Act 1970, what costs were reasonable and incurred in good faith by the plaintiff in complying with the following cleanup notices given under s. 62A:

(b) In respect of the claim made by North Suburban pursuant to s. 62A of the Environment Protection Act 1970 what costs were reasonable and incurred in good faith by North Suburban in complying with the following cleanup notice issued under s. 62A:

(2) Declare that the firstnamed defendant is liable pursuant to s. 62A(2) of the Environment Protection Act to compensate the plaintiff for any costs incurred by it which are reasonable and which were incurred in good faith in complying with any or all of the following notices:

(3) Order that the question of the amount of such costs incurred to date be referred to a Master for enquiry and determination.

(4) Order that the firstnamed defendant pay to the Plaintiff the amount so determined.

(5) Liberty to apply with respect to this referral.

(6) Otherwise there be judgment for each of the defendants against the plaintiff.

(7) Declare that the firstnamed defendant is liable pursuant to s. 62A(2) of the Environment Protection Act to compensate the secondnamed defendant for any costs incurred by it which are reasonable and which were incurred in good faith in complying with any or all of the following notices:

(8) Order that the question of the amount of such costs incurred to date be referred to a Master for enquiry and determination.

(9) Order that the firstnamed defendant pay to the second defendant the amount so determined.

(10) Liberty to apply with respect to this referral.

(11) That the firstnamed defendant pay the costs of the plaintiff of its claim against that defendant including reserved costs. I direct that the Taxing Master allow the plaintiff only 75% of the costs of preparing the court book.

(12) That the plaintiff pay the costs of the secondnamed defendant of its claim against that defendant including reserved costs, such costs to be taxed on a party basis up to and including 4 February 2007 and thereafter on an solicitor and client basis.

(13) That the plaintiff pay the costs of the fourthnamed defendant of its claim against that defendant including reserved costs, such costs to be assessed on a party and party basis up to and including 16 February 2005 and thereafter on an solicitor and client basis. I direct that upon the assessment the fourthnamed defendant be allowed one junior counsel only for 38 days of the trial.

(14) That the plaintiff pay the costs of the seventhnamed defendant of its claim against that defendant including reserved costs such costs to be assessed on a party and party basis up to 17 November 2006 and thereafter on an solicitor and client basis.

(15) Order that the costs of the secondnamed defendant of its counterclaim including any reserved costs be paid by the firstnamed defendant.

(16) Order that the claims between defendants be dismissed.

(17) Order that the fourthnamed defendant pay the costs of the tenthnamed defendant for work done after the date of its Rule 11.15 notice against the tenthnamed defendant, including reserved costs.

[2] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 at 401, per Woodward J. See also Australian Guarantee Corporation Ltd v de Jager [1984] VicRp 40; [1984] VR 483 at 502, per Tadgell J.

[3] Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 233, per Sheppard J.

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

[5] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No.2) [2005] VSCA 298; (2005) 13 VR 435 at 441 [23].

[7] Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, per Rolfe J.

[8] Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR 721 at 724.

[11] McFadzean v Construction Forestry Mining and Energy Union [2007] VSCA 313 at [9].

[12] 13 VR 435 at 442 [27]. See, too, Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd [1992] VicRp 83; [1992] 2 VR 505 at 512-3, per Fullagar J, McGarvie and Ashley JJ concurring.

[13] Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 228, per Sheppard J.

[14] See Mutual Community Ltd v Lorden Holdings Pty Ltd (unreported, SC (Vic) 28 April 1993, BC 9303878) at p.3 and the cases there referred to.

[15] Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154 at 155, per Winneke P; at 161, per Tadgell JA.

[16] Berrigam Shire Council v Ballerini [2006] VSCA 65 at [17], per Callaway JA.

[17] [2006] VSCA 65 at [17], per Callaway JA; .at [20], per Chernov JA

[19] See EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 49 at 64, per Megarry V-C; Qantas Airways Ltd v Dillingham Corporation Ltd (unreported, Sup Ct(NSW), Rogers J, 14 May 1987, BC8701371)

At a glance

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Judgment (124 paragraphs)

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