Plaintiff v Defendants

COSTS - Mixed success on different claims against different parties - Similar factual basis to different claims in contract and for contraventions of the Competition and Consumer Law Act 2010 (Cth) sch 2 ('Australian Consumer Law') - Claims against company in contract for the most part unsuccessful - Claims against individuals for involvement in company's contraventions of the ACL successful - No claim against company for damages for contravention of the ACL - Company and individuals liable for 60% of costs of proceeding after consolidation - Plaintiff liable for 50% of costs against company prior to consolidation - Offset costs orders between plaintiff and company.

JUDGMENT - Stay of execution - Interim stay orders pending interlocutory application to Court of Appeal for interlocutory orders - Concerns about ability of plaintiff company to repay - Interim stay ordered on conditions.

JUDGMENT - Effect on orders for security for costs - Security for costs released - Other security for costs of enforcing Deeds of Indemnity not released.

1 In this proceeding, I delivered reasons for judgment on 9 March 2021.[1] I determined that Euromark was entitled to judgment against Smash in the sum of £37,318 for breaches of the Agreement (the 'contractual damages') and against Mr Harbinson and Mr Malone in the sum of £640,000 for contraventions of the ACL (the 'ACL damages'). I asked the parties for submissions on the issues of interest and costs. These reasons deal with those issues.

2 For the reasons that follow, I have concluded on the interest issue that:

(1) Euromark is entitled to interest on the contractual damages at the PIRA rate from the issue of this proceeding on 22 December 2015 until judgment, less the period of six months in which the proceeding was stayed by reason of Euromark's failure to provide security; and

(2) Euromark is entitled to interest on the ACL damages at the PIRA rate from the issue of proceeding S ECI 2018 01872 (the 'second proceeding') on 22 October 2018 until judgment.

3 Further, for the reasons that follow, I have concluded on the costs issue that:

(1) Smash is entitled to 50% of its standard costs of this proceeding from Euromark up to and including the order made on 17 May 2019 consolidating the second proceeding with this proceeding;

(2) Euromark is entitled to 60% of its standard costs of this proceeding from Smash, Mr Harbinson and Mr Malone from 18 May 2019 (being the day after the date of the order consolidating the second proceeding with this proceeding); and

(3) any costs entitlement of Smash against Euromark pursuant to (1) is to be set off against Euromark's costs entitlements against Smash pursuant to (2), such that only the net amount is to be enforced.

4 In addition, the defendants have sought a stay of payment of the judgment debts and costs pending an application to the Court of Appeal and an order, in effect, restraining the release of security for costs of $76,600 paid into Court by Euromark pending an application for leave to appeal. I propose to grant an interim stay of 28 days of the payment of the judgment debts and costs to provide the defendants with an opportunity to make an application to the Court of Appeal for an interlocutory stay, on the condition that the defendants prosecute that application with due expedition. I will not make any orders to restrain the release of security of $56,600 paid into Court by Euromark.

5 Given the nature of these issues, I have determined to issue short reasons for judgment consistent with the decision of the Court of Appeal in Luxmore Pty Ltd v Hydedale Pty Ltd.[2]

6 I have had regard to the evidence filed in these applications, namely:

(1) the affidavit of Ms Langridge affirmed on 10 May 2021;

(2) the affidavit of Mr Feder affirmed on 10 May 2021; and

(3) the affidavit of Mr Harrison sworn on 21 May 2021.

7 Further, at the hearing of the applications the subject of these reasons, I granted leave to the defendants to rely upon the affidavits of Mr Harbinson and Mr Malone affirmed on 24 June 2021. I note that Euromark initially sought an adjournment of the defendants' application for a stay to challenge the evidence of both Mr Harbinson and Mr Malone as to their inability to meet any judgment debt or costs orders against them. In the course of argument, the issue of a limited interim stay was discussed and resolved. However, I wish to record that Euromark reserved its right to challenge that evidence on any application for an interlocutory stay made to the Court of Appeal.

8 In reaching the conclusions set out above, I have read the primary submissions of Euromark dated 10 May 2021 and the reply submissions dated 21 May 2021. I have also read the primary submissions of the defendants dated 10 May 2021 and the reply submissions of the defendants dated 21 May 2021.

9 This proceeding has a long history. On 7 February 2013 Euromark commenced proceedings against Smash in the High Court of the United Kingdom ('UK High Court') for breaches of the Agreement. By application dated 5 April 2013, Smash sought a declaration that the UK High Court did not have jurisdiction to hear Euromark's claim on the basis of the exclusive jurisdiction clause in cl 25.1 of the Agreement. On 6 June 2013, Coulson J of the UK High Court granted that declaration and ordered that Euromark pay Smash's costs fixed in the sum of £22,500. That sum has been paid.

10 On 22 December 2015, Euromark issued this proceeding (S ECI 2015 00478) against Smash for breaches of the Agreement. The factual basis of the claims in the proceeding was Smash's attempts to solicit Euromark's customers to purchase Smash products directly from Smash without Euromark's knowledge in March 2012 and between September and late December 2012. These factual allegations formed a significant part of the Solicitation Conduct as referred to in the Reasons. Euromark alleged in summary that, by reason of this conduct, Smash breached the Agreement by:

(1) taking steps to effect direct supply of Smash products directly to Euromark's customers in the UK;

(2) dealing directly with Euromark's customers in the UK;

(3) soliciting or encouraging or attempting to solicit or encourage Euromark's customers to obtain supplies in the UK of Smash products directly from Smash;

(4) interfering with and impeding Euromark's distribution of Smash products in the UK or attempting to do so.

11 Euromark alleged that these breaches constituted a repudiation of the Agreement. Euromark also alleged that, by wrongfully purporting to terminate the Agreement in October 2012, Smash also repudiated the Agreement. In addition, it alleged that after retracting its purported termination on 3 December 2012, Smash continued to solicit Euromark's customers without informing Euromark. As a result of all these matters, Euromark alleged that, on 23 December 2012, it validly terminated the Agreement or accepted Smash's repudiation of the Agreement and claimed loss of bargain damages in the order of £3,787,295.

12 The claim against Smash also included claims in relation to Tesco, Wilkinsons and WH Smith, totalling in the order of £43,830 (noting that Euromark's claim in respect of WH Smith was unquantified at the time of filing its statement of claim because the relevant information to do so had not been provided by Smash).

13 Smash's defence filed 29 February 2016 included that Euromark was not ready and willing to perform its obligations under the Agreement by reason of, amongst others, offering its Zoom products in competition to Smash products which constituted a repudiation of the Agreement. It was pleaded that, as a result, Euromark was not entitled to accept any repudiation of the Agreement by Smash. In their defence, the defendants also pleaded that, if Smash's purported termination was wrongful and repudiatory, then Euromark did not accept the repudiation and elected to affirm the Agreement, or was estopped from terminating the Agreement, or waived its right to terminate the Agreement.

14 On 31 March 2016, orders were made by consent for Euromark to, by 15 April 2016, provide security for Smash's costs up to and including mediation in the sum of $56,600, failing which the proceeding would be stayed until further order. The security was not in fact provided until 5 August 2016, with the result that the proceeding was stayed. In his affidavit sworn on 21 May 2021, Mr Harrison deposed that the security was not provided by reason of an error of Euromark's bank. However, I am not satisfied in the circumstances that the reason for this delay should not lie at the feet of Euromark vis a vis Smash. There were then further delays relating to who should bear the costs of lifting the stay. On 4 August 2016, the Court ordered that the stay be lifted on the basis that Euromark pay Smash's costs of lifting the stay.

15 On 30 March 2017, further orders for security were made by consent. Euromark agreed to provide further security for Smash's costs of the directions hearing on 31 March 2017 and further interlocutory steps (i.e. witness outlines, witness statements and expert evidence) in the sum of $166,500 by way of a Deed of Indemnity provided by AmTrust Europe Limited ('AmTrust'). In addition, Euromark agreed to pay into Court the sum of $20,000 by 21 April 2017 as security for Smash's costs in respect of any claim or action taken by Smash in the UK to enforce any liability arising pursuant to the terms of the Deed of Indemnity.

16 There were further interlocutory steps in the proceeding in 2017 and early 2018, including discovery. Witness statements and outlines of evidence were filed in June and July 2017. A further witness outline of Mr Harrison was filed on 20 November 2017. Expert reports on behalf of Euromark and Smash were exchanged in late 2017 and early to mid-2018. By his second expert report dated 9 May 2018, Mr Blashki assessed Euromark's claim for loss of bargain damages at £2,653,527.

17 Further, on 8 June 2018, the Court ordered that Euromark, by 20 July 2018, provide further security for Smash's costs of the proceeding up to and including the trial in the sum of $300,000 by way of one or a combination of a Deed of Indemnity provided by AmTrust or payment into Court. Further, pursuant to that order, the proceeding was set down for trial on 18 February 2019 with an estimate of 10 days and orders were made in relation to the trial.

18 On 22 October 2018, Euromark issued proceeding S ECI 2018 01872 (the 'second proceeding') against Smash, Mr Harbinson, Dale Harbinson and Mr Malone. In summary, for the first time, Euromark made claims for misleading and deceptive conduct and unconscionable conduct against Smash and the individual defendants. These allegations were based upon the Planning Conduct, the Solicitation Conduct, the Performance Representation and the Affirmation Representations. As noted above, Euromark had previously alleged the Solicitation Conduct as giving rise to breaches of the Agreement which gave Euromark a right to terminate the Agreement. Based upon the reasons of Kennedy J dated 17 May 2019,[3] it would appear that the second proceeding was a result of information obtained during the discovery process of the proceeding and also concerns about Smash's ability to pay any judgment debt.

19 As a consequence of the issuing of the second proceeding, on 30 November 2018, the Court ordered that the trial date of 18 February 2019 in respect of the proceeding be vacated.

20 On 29 March 2019, Mr Harbinson, Dale Harbinson and Mr Malone applied to have the second proceeding be dismissed, struck out or permanently stayed. On 2 April 2019, Euromark applied to consolidate the two proceedings. Those applications were heard before Kennedy J in late April 2019. On 17 May 2019, Kennedy J refused the defendants' application and ordered that the second proceeding be consolidated with the first proceeding and continue as one proceeding. Kennedy J ordered that Euromark file and serve a consolidated statement of claim and the defendants file and serve a defence to the consolidated statement of claim. I note that no defence had been filed in the second proceeding, and no further steps were taken in the second proceeding after the consolidation order was made.

21 Euromark filed a consolidated statement of claim on 31 May 2019. It was the statement of claim upon which the trial proceeded. In summary, it alleged:

(1) breaches of the Agreement by reason of the Planning Conduct between February 2012 and 19 October 2012 and the Solicitation Conduct between 22 October and 23 December 2012,[4] which entitled Euromark to terminate the Agreement on 23 December 2012. It claimed loss of bargain damages in the sum of £2,467,850. I note that by the time of the trial, Euromark's claim for loss of bargain damages was reduced to £2,085,828 to £2,264,901 based upon the fourth expert report of Mr Blashki;

(2) contraventions of s 18 of the ACL by Smash, Mr Harbinson, Dale Harbinson and Mr Malone by reason of the Performance Representation and the Affirmation Representations or contraventions by reason of the involvement of Mr Harbinson, Dale Harbinson and Mr Malone in Smash's contravention; and

(3) contraventions of s 21 of the ACL by Smash, Mr Harbinson, Dale Harbinson and Mr Malone by reason of the Planning Conduct, the Solicitation Conduct, the Performance Representation and the Affirmation Representations or contraventions by reason of the involvement of Mr Harbinson, Dale Harbinson and Mr Malone in Smash's contravention.

22 Significantly, in the consolidated statement of claim, no claim was made against Smash for damages for the alleged contraventions of the ACL. Rather, Euromark only claimed damages against Mr Harbinson, Dale Harbinson and Mr Malone. It was not made clear to me in argument why no claim was made against Smash for damages for contraventions of the ACL in the consolidated statement of claim. I note that the damages for contraventions of the ACL by the individual defendants were not quantified in the consolidated statement of claim. This did not occur until Mr Blashki's report dated 19 December 2019.

23 The defendants filed a defence to the consolidated statement of claim and counterclaim on 5 July 2019. Euromark filed a reply and defence to counterclaim on 6 August 2019.

24 On 25 July 2019, Kennedy J ordered by consent in the consolidated proceeding that Euromark, by 30 August 2019, provide further security for the defendants' costs of the directions hearing on 26 July 2019, the defence to the consolidated statement of claim, the making of further discovery and the filing of further lay evidence and expert evidence in the sum of $60,000 by way of one or a combination of a Deed of Indemnity provided by AmTrust to Euromark or payment into Court. Security was not provided until 13 November 2019, as a result of which the proceeding was stayed.

25 On 4 December 2019, I ordered that the stay be lifted and made orders to prepare the proceeding for trial. The defendants did not file any further outlines of evidence in the proceeding. Euromark filed a further outline of Mr Harrison dated 24 December 2019.

26 On 31 January 2020, I fixed the trial for hearing on 17 March 2020 with an estimate of 10 hearing days. Further, on 21 February 2020 I ordered that, by 6 March 2020, Euromark provide further security for the defendants' costs in preparing for and appearing at the trial by way of a Deed of Indemnity provided by AmTrust in the sum of $200,000.

27 The trial in the consolidated proceeding commenced on 17 March 2020. On the third day of trial, the defendants sought leave to file an amended defence. On 23 March 2020, I granted the defendants leave to amend their defence to expand the 'ready, willing and able' defence relating to Zoom products. The defendants filed an amended defence to the consolidated statement of claim on 24 March 2020 (the 'amended defence'). The amendments related to the particular products which the defendants submitted were offered for sale by Euromark in competition to Smash products between late October and 23 December 2012 in breach of cls 7.2(i), 7.2(ii), 7.2(iii) and 11 of the Agreement. In Annexure A to the defence, Smash listed and compared over 16 Euromark Zoom products with Smash products

28 In particular, Smash alleged that these products were in breach of cl 11 of the Agreement which prevented Euromark offering products that were 'so similar to any of the Products that they could be confused with any of the Products'. Smash also relied upon conduct prior to October 2012 relating to the development of the Zoom products, including a 'June 2012 Tesco SS 2013 Presentation'.

29 The trial in this proceeding was heard over 17 days, including legal submissions. The hearing of the trial was disrupted by the COVID-19 pandemic. As noted at [25] of the Reasons, at a high level, the issues at trial related to:

(1) the contract claim (i.e. terms, breach and termination);

(4) damages entitlements for breaches of the Agreement and/or contraventions of the ACL.

30 As is evident, there was there was a clear overlap between the factual issues relating to the contract claim and the ACL claims. This is because Euromark alleged that the Planning Conduct and the Solicitation Conduct gave rise to breaches of the Agreement. Euromark also alleged that Mr Harbinson, Dale Harbinson and Mr Malone engaged in misleading conduct, or were involved in Smash's misleading conduct, on the basis of the Performance Representation (which was based upon the Planning Conduct) and the Affirmation Representations (which, in part, were based upon the Solicitation Conduct).

31 Further, Euromark also alleged that Mr Harbinson, Dale Harbinson and Mr Malone engaged in unconscionable conduct, or were involved in Smash's unconscionable conduct, based upon the Planning Conduct, the Solicitation Conduct, the Performance Representation and the Affirmation Representations.

32 Smash denied the alleged breaches of the Agreement. Further, as noted above, Smash's defence to the contract claim alleged that Euromark itself breached the Agreement by, amongst other things, presenting and offering for sale Euromark's Zoom products. Smash alleged that, as a consequence, Euromark repudiated the Agreement and was not ready, willing and able to perform its obligations under the Agreement, with the result that Euromark was not entitled to terminate the Agreement. The defendants also denied the alleged contraventions of the ACL.

33 As a result, the trial was a factual contest in relation to three principal issues. First, whether Smash engaged in the Planning Conduct between February and October 2012. Second, whether Smash engaged in the Solicitation Conduct between 22 October 2012 and 23 December 2012. Third, Euromark's response to the Solicitation Conduct and whether Euromark was in breach of the Agreement between late October and 23 December 2012, in particular by presenting or offering for sale the Zoom products depicted in Annexure A to the amended defence, or was otherwise prevented from terminating the Agreement.

34 There were also issues relating to whether Euromark suffered loss and, if so, what loss Euromark suffered by reason of the contractual breaches and/or ACL contraventions alleged.

35 There is one other point I wish to raise at this time. As the Reasons made plain, this proceeding was hard fought on each side and no quarter was given. The credit of each lay witness was severely attacked. There was only one lay witness for Euromark, Mr Harrison. Mr Harrison gave evidence in chief over three days on 18 and 19 March and 1 April 2020. He was cross-examined by counsel for the defendants over four days on 1, 2, 6 and 7 April 2020. That cross-examination related to his conduct during the period from 2010 until 2016. This included his conduct in response to the Solicitation Conduct up to 23 December 2012, Euromark's development of the Zoom products and attempts to sell non-Smash products between October and December 2012, and the basis of Euromark's claims for damages.

36 The defendants called only two witnesses whose evidence related the alleged Planning Conduct and the Solicitation Conduct issues to the end of December 2012. Mr Harbinson gave evidence in chief on 8 April 2020. He was cross-examined over the course of 8, 9 and 10 April 2020. That cross-examination related to his conduct during the period from 2010 until early 2013, focusing in particular on his knowledge and involvement in the alleged Planning Conduct and the Solicitation Conduct up to 23 December 2012. Mr Malone gave evidence in chief on 14 and 15 April 2020. He was cross-examined on 16 and 17 April 2020. That cross-examination also related to his conduct during the period from 2010 until early 2013 and also focused on his knowledge and involvement in the alleged Planning Conduct and the Solicitation Conduct up to 23 December 2012.

(1) Euromark had not established that Smash engaged in the Planning Conduct; and

(2) Smash engaged in the Solicitation Conduct between 22 October 2012 and 3 December 2012, and thereafter continued to take steps to distribute Smash products by seeking to secure the direct supply of Smash products to customers of Euromark without informing or consulting Euromark, including by soliciting or encouraging Euromark's customers to obtain direct supply.

38 As a result, I concluded in relation to the contract claim that:

(1) Smash committed repudiatory breaches of cl 3.1 or cl 8.2 of the Agreement between 22 October and 23 December 2012;

(2) Euromark did not affirm the Agreement or waive those breaches prior to terminating the Agreement on 23 December 2012. Nor was it estopped from relying on them;

(3) Euromark did not breach the Agreement by offering or presenting for sale the Zoom products in Annexure A and, in any event, Euromark was dispensed from its obligations under cl 11 and under 7.2(i) to promote Smash's products between 26 October and 3 December 2012 when Smash was in repudiatory breach of the Agreement;

(4) Euromark was not ready, willing and able to perform its obligations under the Agreement between 3 and 23 December 2012 as it was in breach of cl 7.2(i) by offering Euromark's products to Wilkinsons but failing to promote Smash products to Wilkinsons, with the result that Euromark's termination of the Agreement was invalid and it was not entitled to loss of bargain damages; and

(5) notwithstanding (4) above, Euromark was entitled to damages arising from Smash's breaches of the Agreement for the loss of profits on Smash stock purchased for Tesco in the sum of £9,877 and for Wilkinsons in the sum of £27,441, totalling £37,318.

39 Further, I concluded in relation to the ACL claims for misleading conduct that:

(1) Smash did not make the Performance Representation because it did not engage in the Planning Conduct;

(2) Smash engaged in misleading and deceptive conduct in making the Affirmation Representations but Euromark did not rely upon them in deciding not to terminate the Agreement earlier than it did;

(3) Mr Harbinson also engaged in misleading and deceptive conduct by making the Affirmation Representations or, alternatively, was involved in Smash's misleading conduct by reason of the Affirmation Representations; and

(4) Mr Malone was involved in Smash's misleading conduct by reason of the Affirmation Representations.

40 In relation to the ACL claims for unconscionable conduct, in summary, I concluded that Smash engaged in unconscionable conduct:

(1) by reason of the conduct referred to in [37(2)] above; and

(2) by making the Affirmation Representations by sending the December 2012 letters which were false and misleading.

41 As a result, I concluded that Smash engaged in conduct that was unconscionable in all the circumstances in contravention of s 21 of the ACL, which caused loss and damage to Euromark which I assessed in the sum of £640,000.

(1) Mr Harbinson personally engaged in conduct that was unconscionable conduct in all the circumstances in contravention of s 21 of the ACL and/or was involved in Smash's unconscionable conduct, with the result that he is liable for those damages; and

(2) Mr Malone was involved in Smash's unconscionable conduct, with the result that he is also liable for those damages.

43 Euromark sought interest on the judgment sums pursuant to s 60(1) of the Supreme Court Act 1986 (Vic) (the 'Supreme Court Act') at the rate prescribed by the Penalty Interest Rates Act 1983 (Vic) (the 'PIRA rate'). In summary, Euromark sought:

(1) judgment against Smash in the sum of $67,409 (being the Australian dollar equivalent of £37,318 together with interest at the PIRA rate from commencement of the first proceeding); and

(2) judgment against Mr Harbinson and Mr Malone in the sum of $1,156,069 (being the Australian dollar equivalent of £640,000 together with interest at the PIRA rate from the commencement of the second proceeding).

44 In contrast, the defendants submitted that interest on the judgment sums should be calculated pursuant to the official bank rates published by the Bank of England in the relevant period which on average was 0.44% (the 'UK bank rate'). I note that, on the evidence before me, the UK bank rate 'determines the interest rate [the Bank of England] pay to commercial banks that hold money with [the Bank of England]. It influences the rate those banks charge people to borrow money or pay on their savings'.[5]

45 The defendants submitted that, in the event the Court was to adopt the PIRA rate, then a period of six months should be excluded from the calculation of the relevant period of interest in light of Euromark's delays by reason of the stay ordered as a result of Euromark's failure to provide security between April and August 2016 and the delays occasioned by the late issue of the second proceeding.

46 Euromark submitted that, while the rate of interest to be awarded on a judgment is a matter for discretion, the PIRA rate provides the 'starting point'. Euromark relied, in particular, upon Australia Kunqian International Energy Co. Pty Ltd v Flash Lighting Company Ltd ('Australia Kunqian'), in which the Court of Appeal held that the mere fact that the PIRA rate exceeds market rates is not a sufficient reason not to apply the PIRA rate.[6]

47 It also relied upon the purpose of an award of interest, namely, to compensate a judgment creditor for the loss of use of its money, to deter judgment debtors from delaying proceedings, and to encourage settlement.[7] Euromark also referred to the comments of Ormiston JA in Hartley Poynton Ltd v Ali that 'the prescribed rate has usually been well in advance of what might be earned by its investment on the money market on a conservative basis'.[8]

48 Euromark submitted that there is no basis in this proceeding to apply a rate other than the PIRA rate as Euromark had been kept out of the use of its money for an extended period.

49 As to the contract claims, Euromark submitted that Smash deliberately decided not to pay contractual amounts owed to Euromark. Further, Euromark submitted that Smash applied the PIRA rate to the amount paid in respect of WH Smith claim. There is no relevant distinction between that claim and the claims in respect of Tesco and Wilkinsons.

50 As to the ACL damages, Euromark noted that it was awarded damages for loss of goodwill, that it had been deprived of the entire value of its business, and that it had been kept out of the use of the monetary equivalent of the value of its business for more than eight years.

51 I note that Euromark relied upon the fact that it had to borrow money at high interest rates to finance this proceeding. It relied upon the affidavit of Mr Harrison sworn on 21 May 2021, which records that Euromark took out two loans from the financier 'funding circle' in 2016 totalling approximately £180,000 to fund its legal costs on which it paid interest of 10.60% and 9.50% per annum, and paid an 'annual percentage rate' of 13.68% and 12.37% when loan fees were taken into account. Further, the directors have sold real estate to fund the proceeding and have paid ongoing costs for storage facilitates. The directors have loaned the proceeds of the sale of that real estate to Euromark at 7.5% per annum. In addition, Euromark has incurred substantial costs in obtaining the Deeds of Indemnity provided by way of security, including funding costs of between 10-15%, totalling in excess of $100,000. Euromark submitted that these funding costs supported an award of interest at the PIRA rate.

52 The defendants submitted that s 60(1) of the Supreme Court Act does not prescribe the rate that must be fixed, but prescribes the maximum rate that the Court can fix. The Court's power is discretionary, with such discretion to be exercised judicially having regard to the particular facts and circumstances of the case.[9]

53 The defendants submitted that the purpose of an award of interest is compensatory, rather than pecuniary.[10] Further, in their written submissions, the defendants submitted that, where a judgment is awarded in a foreign currency, the fixing of the interest rate at a rate associated with that foreign currency is reflective of the compensatory approach, relying upon Weatherbeeta Ltd v Hammersmith Nominees Pty Ltd (No 2) ('Weatherbeeta').[11]

54 The defendants also submitted that, in light of the factors in Weatherbeeta, a salient consideration is Euromark's lack of connection with Australia,[12] namely:

(1) Euromark is incorporated in the UK and its head office is in the UK;

(2) the business was operated by Mr Harrison, who also resides in the UK;

(3) the goods supplied by Smash to Euromark were supplied in respect of the UK and distributed in the UK and Europe;

(4) there is no evidence that Euromark borrowed money in Australian dollars;

(5) Euromark paid for the goods supplied by Smash in US dollars;

(6) there is no evidence that Euromark supplied goods to Australia or otherwise had business activity in Australia; and

(7) there is no evidence regarding where Euromark kept its money and the interest rate it received, if any.

55 Further, the defendants submitted that, as damages were awarded as a result of Euromark's goodwill rather than loss of profits which Euromark would have invested at the time, any interest awarded on this amount should be at the lower commercial interest rate payable in the UK.

56 The defendants submitted that, in all these circumstances, to allow interest at the PIRA rate of 9.5% to 10% per annum would go well beyond compensating Euromark and it would work an injustice to the defendants.

57 In reply, Euromark submitted that Weatherbeeta does not stand for the proposition contended for by the defendants. Rather, in the passages relied upon by the defendants, Connock J was merely stating a proposition advanced by a party. Euromark noted that Connock J rejected the submission that US interest rates should apply and instead applied Australian interest rates. In any event, Euromark submitted that Weatherbeeta is of limited assistance given that each case involves the exercise of discretion and turns on its own facts.

58 Section 60(1) of the Supreme Court Act provides that:

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.

59 The principles to be applied in determining the rate of interest were set out by the Court of Appeal in in Australia Kunqian.[13] While that case considered s 58(1), which deals with the interest to be allowed in a proceeding where a debt or sum certain is recovered, I consider that those principles also apply to s 60(1). The relevant language of s 58(1) is effectively the same as s 60(1). In summary, those principles are:

(1) the purpose of interest includes compensating the plaintiff for being kept out of his or her money and encouraging settlement;

(2) by incorporating the PIRA rate, s 60 recognises that such awards of interest may have a punitive effect;

(3) s 60 does not mandate the PIRA rate unless good cause to the contrary is shown. Rather, it designates those rates as the maximum rates that may be applied, leaving the Court with discretion to apply lower rates;

(4) the practice in Victoria is to treat the maximum rate as the starting point for the exercise of discretion;

(5) where a defendant contends that the facts and circumstances of the case warrant a lower rate, evidence is required as to the appropriate rate; and

(6) the mere fact that the PIRA rate is higher than market rates is not itself a sufficient reason to apply a lower rate.

60 In Amcor Ltd v Barnes [No 2], in applying Australia Kunqian in the context of s 60, Sloss J said:[14]

In my view, the labels which have been ascribed to the task to be performed by the Court when determining the applicable interest rate tend to distract from the task at hand. When the wording of s 60(1) is examined, it will be seen that the penalty rate is the only interest rate to which explicit reference is made - which is a maximum rate - and it is in that sense that the penalty rate may be regarded as providing a useful starting point for the inquiry to be undertaken by the Court. Indeed, as Hargrave J noted in Kalenik v Apostolidis (No 2), in practice, unless the defendant seeks to argue for a lesser rate, the penalty rate is the rate routinely awarded by the Court.[15] With that starting point in mind, however, each case must be assessed by reference to its individual facts and circumstances. The Court must exercise its discretion judicially and fix an interest rate in accordance with the terms of s 60(1) and by reference to the facts and circumstances the individual case, so as to further the purposes of an award of interest ... and accord justice to the parties.

61 In my view, the general practice in Victoria is to treat the maximum rate as the starting point. This is supported by the Court of Appeal in Australia Kunqian, which was decided after the decision of Connock J in Weatherbeeta. However, it is a starting point and not a prescribed rate of interest. The Court must exercise its discretion, with that starting point in mind, to determine an appropriate rate of interest on the particular facts and circumstances of the individual case.

62 For completeness, I do not agree with the defendants' submission that, as a matter of principle or fixed rule, where a judgment is awarded in a foreign currency the fixing of the interest rate at a rate associated with that foreign currency is reflective of the compensatory approach of the award of interest. However, I accept that the degree of connection between the successful plaintiff and Australia may be a factor to be taken into account in exercising the Court's discretion as to the appropriate interest rate.[16] Nevertheless, as Connock J concluded:[17]

there is no rigid or fixed 'rule' or principle of law that mandates that interest rates must be referable to the particular country of the foreign currency in question. The power under s 58(1) of the Act is discretionary, with such discretion to be exercised judicially having regard to the particular facts and circumstances under consideration.

63 As to the principles relating to the period for which interest is to apply, s 60(1) mandates that interest is to be awarded 'unless good cause is shown to the contrary ... from the commencement of the proceeding to the date of judgment'. The authorities make plain that the expression 'good cause to the contrary' is no more and no less than good reason according to the justice of the case for not allowing interest at all or for not allowing interest for the whole of the period marked out by the section.[18]

64 In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3), Gillard J stated that delay is a relevant factor to the award of interest.[19] His Honour quoted the Court's comments in Clarke v Foodland Stores Pty Ltd:[20]

Nothing put by counsel served to persuade us that delay on the part of the plaintiff, subsequent to the date from which interest might be allowed under s.58, is always irrelevant in allowing interest under that section. If, as we have said, interest is to be awarded, not to punish the defendant, but to compensate the plaintiff for being deprived of his money and the discretion arising out of the words 'unless good cause is shown to the contrary' is to be seen as existing in order to relieve against injustice to the defendant, the question will be whether the plaintiff's delay, such as it is in a given case, is seen as working such injustice, were the plaintiff to be allowed interest for the whole of the period available under s.58. On that issue, each case must turn upon its own facts and circumstances.

65 As to the rate of interest, I consider that Euromark is entitled to interest in accordance with the PIRA rate. This is because I am not satisfied based on the submissions of the defendants that I should depart from that starting point, let alone adopt the UK bank rate of, on average, 0.44% per annum.

66 In substance, the defendants submitted that the UK bank rate should be awarded because:

(1) the evidence is that Euromark did not conduct business in Australia;

(3) the Agreement related to amounts to be paid in US dollars.

This is in circumstances where the PIRA rate exceeded the UK bank rate during the relevant period in the UK.

67 In short, I am not satisfied that each of these factors provides a sufficient basis individually or in combination to depart from the starting point under s 60. This is in a context where I do not accept the submission that there is any general rule that, where a judgment is awarded in a foreign currency, the fixing of an interest rate at a rate associated with that foreign currency is reflective of the compensatory approach.

68 First, the fact that Euromark was required to pay Smash for Smash products in US dollars is, in my view, not relevant to the exercise of my discretion. In any event, I do not consider it a proper basis for ordering interest other than at the starting point under s 60 i.e. the PIRA rate.

69 Second, I do not consider the fact that Euromark is an English company which conducts business in England and countries other than Australia is, of itself, a basis for departing from the starting point under s 60, let alone ordering interest based upon the UK bank rate. This was not a claim for payment of unpaid invoices in US dollars or British pounds. Rather, it was a claim for contractual damages and ACL damages based upon breaches of Australian law where, at all relevant times, the registered office and directors of Smash resided in Australia and conducted business in and from Australia. There are real connections between Australia and the parties to the Agreement. The significance of the Australian connection to this proceeding is reflected in the fact that the Agreement itself provided that the relationship between the parties shall be governed by and in accordance with Australian law and the parties submitted to the exclusive jurisdiction of the Australian courts.

70 Third, the contractual damages awarded relate to damages for breach of contract which occurred in 2012. Euromark has been out of its money since that time. In my view, it is relevant to the exercise of my discretion that, when Smash finally paid the WH Smith claim that was the subject of this proceeding on 14 April 2020, it chose to pay interest at the PIRA rate by way of complete compensation. I refer to [746]-[749] of my Reasons.

71 Further, the ACL damages awarded represent a loss of goodwill as a result of the cessation of Euromark's business as a result of the defendants' unconscionable conduct. Indeed, at [1451] and [1452] of the Reasons, I concluded that, on the balance of probabilities:

(1) had the unconscionable conduct not occurred, Euromark's long-standing major customer, Tesco, would have continued to deal with and purchase products from Euromark; and

(2) had the unconscionable conduct not occurred, the business of Euromark would not have ceased.

72 In my view, the nature of this loss is significant and requires appropriate compensation that is best reflected by the application of the PIRA rate. In this regard, I reject the defendants' submission that, because the damages in relation to contravention of the ACL were not awarded for a claim for loss of profits which Euromark may have invested, Euromark is therefore not entitled to the PIRA rate. To the contrary, I consider that the nature of the damages in fact awarded in this case for contravention of the ACL is very relevant in determining whether the PIRA rate would give effect to the object of an award of interest, namely a compensatory focus although an award of interest may have some punitive effect.

73 Fourth, it is significant that the UK bank rate does not reflect the retail cost of borrowing or retail interest rates available in the UK payable for the deposit of funds. No evidence was submitted by the defendants to indicate what this might be.

74 Fifth and related to [72] and [73] above, I consider that it is relevant, that there is evidence before me as set out above that, in order to fund this litigation, Euromark has been compelled to borrow money from a third party at rates which are equivalent to or exceed the PIRA rate. Further, the directors have sold assets and on-lent some of the proceeds to Euromark at the rate of 7.5% per annum. I refer to [51] above.

75 In all these circumstances, I consider that the PIRA rate is the just and appropriate rate to award interest by way of compensation on the judgment debts in favour of Euromark. In any event, and for completeness, I am not satisfied that the application of the PIRA rate leads to an injustice in the circumstances of this case. Further, I am not satisfied that the UK bank rate upon which the defendants' submissions was based is an appropriate rate to apply in respect of those judgment debts.

76 As to the period of interest in respect of the contractual judgment, as noted above, the defendants submitted that there was a period of delay on the part of Euromark in prosecuting this proceeding, in particular, prior to issuing the second proceeding. As a result, the defendants submitted that the period of interest should be reduced by six months. I agree with this submission. I refer, in particular, to the delay between April and August 2016 and the delays to the contract claims brought about by reason of the issuing of the second proceeding. As a result, I consider that the period of time in which interest is payable on the contract judgment should commence from the issue of this proceeding on 22 December 2015 to the date of judgment, but should be reduced by six months.

77 As to the period of interest in respect of the ACL judgment, the delays relied upon by the defendants pre-dated the second proceeding which raised the ACL claims. As a result, I consider that interest on the ACL judgment should be from the issue of the second proceeding on 22 October 2018 to the date of judgment.

78 Each party submitted, in essence, that, given the mixed outcome in the proceeding, the Court should adopt a 'pragmatic' and 'broad-based' approach based upon an apportionment of the relevant claims in the proceeding. Each party agreed that this was on the basis of 'impression and evaluation, rather than attempt arithmetical precision on an issue by issue basis'.[21] However, both Euromark and the defendants sought orders based upon the causes of action in this proceeding.

(1) Smash pay Euromark's costs of the contract claims against Smash, or alternatively, Smash pay at least 80% of Euromark's costs of the contract claims against Smash;

(2) Smash pay Euromark's costs of the amendment application by Smash for leave to amend its defence in relation to its allegation that Euromark breached the Agreement by offering Zoom products;

(3) Mr Harbinson and Mr Malone pay Euromark's costs of the ACL claims in this proceeding and the second proceeding; and

(4) there be no order as to costs between Euromark and Dale Harbinson.

(1) Smash pay Euromark's costs of and incidental to the contract claims relating to Tesco and Wilkinsons;

(2) Mr Harbinson and Mr Malone pay Euromark's costs of and incidental to the unconscionable conduct claim in:

(a) the proceeding from 18 May 2019 (being the day after the date of the order consolidating this proceeding and the second proceeding); and

(3) Euromark otherwise pay the costs of Smash, Mr Harbinson and Mr Malone of this proceeding and the second proceeding; and

(4) Euromark pay Dale Harbinson's costs of this proceeding and the second proceeding.

81 In light of my analysis of the issues and the trial of the proceeding, I raised with counsel for Euromark and the defendants in oral arguments the difficulty in identifying the costs related to the contract claims and the ACL claims. Indeed, I expressed the view that any costs order based upon the causes of action in the proceeding would make the determination of those costs almost impossible. This is because of the significant factual overlap between each of these claims, namely the Planning Conduct and the Solicitation Conduct set out above.

82 In light of the broad discretion under s 24 of the Supreme Court Act, I suggested that the proceedings be treated as a whole and divided, in essence, as to the period of time before the consolidated proceeding and after the consolidated proceeding. It would then be possible to make orders which reflect the issues raised and the degree of success in relation to those issues in the proceedings both before and after that time. In summary, those issues relate to:

(1) findings as to the Planning Conduct and the Solicitation Conduct, and Euromark's conduct in response to the Solicitation Conduct; and

(2) the proper characterisation of that conduct for the purpose of both the contract claim and the ACL claims.

(1) Smash was entitled to 50% of its standard costs of the proceeding prior to consolidation from Euromark. This would reflect the work in the proceeding prior to consolidation which was relevant to the consolidated proceeding and the outcome of the consolidated proceeding; and

(2) Euromark was entitled to 60% of its costs of the proceeding from consolidation from each of Smash, Mr Harbinson and Mr Malone. This would reflect the work in the proceeding subsequent to consolidation and the outcome of the consolidated proceeding; and

(3) any costs entitlement of Smash against Euromark pursuant to (1) is to be set off against Euromark's costs entitlements against Smash pursuant to (2), such that only the net amount is to be enforced,

84 After giving the parties time to consider the Court's cost proposal, counsel for Euromark indicated they would not oppose such orders being made. Counsel for the defendants submitted that, while they would not oppose the Court's cost proposal, the apportionment of 60% of the costs of the proceeding since the consolidation was higher than it should be. I will address this further below. Before doing so, it is appropriate to refer to the power of the Court relating to costs orders.

85 Costs are generally in the discretion of the Court, but that discretion must be exercised judicially. Section 24(1) of the Supreme Court Act provides:

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.

86 In the ordinary case, costs follow the event. However, where there is a mixed outcome, amongst other matters, it is relevant to consider 'the importance of the matters upon which the parties have been successful or unsuccessful'.[22] The apportionment of the comparative importance of the relevant claims in the proceeding should ordinarily be carried out on a broad-based approach based on impression and evaluation, rather than arithmetic precision.[23]

87 In Mandie v Mehmart Nominees Pty Ltd ('Mandie'), the Court of Appeal held that the success of the appellants was 'decidedly mixed'. As a result, the Court considered it appropriate to 'adopt a pragmatic approach' with respect to an award of costs of the trial.[24] The Court referred to Paragreen v Lim Group Holdings Pty Ltd [No 2], where Tate, Kaye and Niall JJA stated:[25]

[I]t is recognised that where multiple issues have been agitated, and the successful party has only enjoyed mixed success in respect of some of them, a court may, in an appropriate case, adopt a pragmatic approach by which it awards the successful party a proportion of its costs, but not the full amount.

88 The Court held in Mandie that the proper approach, in the circumstances of the case, to the exercise of the Court's discretion as to costs was a 'broad-based one, based on impression and evaluation' rather than attempting 'arithmetical precision on a strictly issue-by-issue basis'.[26]

89 So too, in Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) ('Major Engineering'), the Court of Appeal said:[27]

[W]here there is a mixed outcome in the proceeding, such as here, the apportionment of the comparative importance of the relevant claims in the proceeding - here, the claim and the counter-claim - can only be carried out on a broad basis, it being primarily a matter of impression and evaluation rather than arithmetic precision.

90 In my view, consistent with the authorities, it is necessary to exercise my discretion in a broad-based and pragmatic way based upon my evaluation and impression of the factual and legal issues in this proceeding and the degree of success Euromark had in relation to them.

91 In light of the attitude of counsel for the parties to the Court's cost proposal, it is not necessary to say a great deal about the order for costs of the proceeding prior to consolidation. However, I will note that the determination of costs issues in this proceeding was complicated by the fact that the original proceeding was for breach of contract, which was unsuccessful, and the second proceeding was for breaches of the ACL, which was successful. Of course, the proceedings were consolidated in May 2019. In many respects, the consolidation of both proceedings was relevantly the commencement of the proceeding that was heard and determined at trial, given that the consolidated statement of claim formed the basis of the way in which the trial was conducted.

92 Relevantly, Euromark expanded its contractual claim to include the Planning Conduct and brought the ACL claims against the individual defendants. In all these circumstances, I have determined that it is appropriate to exercise my costs discretion to have regard to the costs of the proceedings both before and after consolidation.

93 As to the costs of the proceeding up to the date of consolidation, as noted above, I consider that in many respects the consolidation was relevantly the commencement of the proceeding that was heard and determined at trial. The costs of the proceeding to consolidation related to the unsuccessful contract claim. Further, costs were incurred by reason of the need to vacate the trial date in February 2019 by reason of Euromark issuing the second proceeding.

94 However, I note that the proceeding to that time included the provision of discovery which led to the second proceeding. Further as noted above, each of Euromark and Smash relied upon outlines of evidence at the trial of this proceeding before me which had been filed in the proceeding prior to the issue of the second proceeding. Indeed, Smash did not file any further witness outlines after July 2017.

95 As a result, I consider it appropriate that Smash is entitled to 50% of its costs of the proceeding up to the time of the consolidation. This is particularly so in light of the orders I propose to make in respect of the costs of the proceeding from the time of consolidation.

96 As to the costs since consolidation, when I raised the Court's cost proposal with the parties at the commencement of the oral hearing, I put forward some preliminary views I had formed on the proportion of time and effort spent on the various issues at trial which assisted me, in particular, in reaching the view that 60% may be the appropriate apportionment in favour of Euromark. I suggested that:

(1) the Planning Conduct took up approximately 25% of the trial;

(2) the Solicitation Conduct took up approximately 45% of the trial;

(3) Euromark's response to the Solicitation Conduct, in particular, by presenting or offering for sale the Zoom products depicted in Annexure A took up approximately 20% of the trial; and

(4) damages related issues took up approximately 10% of the trial.

97 As noted above, the defendants submitted that apportionment of 60% of the costs of the proceeding since the consolidation was higher than it should be. They submitted that 50% was more appropriate. This was on the basis that, given the span of period over which the Planning Conduct was alleged to have occurred (being approximately nine months), compared to the period over which the Solicitation Conduct was alleged to have occurred (being approximately two months), the amount of time and evidence related to the Planning Conduct which I suggested in argument was higher and the amount of time and evidence related to the Solicitation Conduct was lower.

98 I am conscious that seeking to apportion issues in a case such as this in any precise or accurate way is not possible or, on reflection, of great assistance. I accept that the apportionment I gave was evaluative and subjective and that different minds might form different views within a range. In finalising these reasons, I am conscious that the Planning Conduct may have taken a greater proportion of the time and effort at trial than I originally suggested. But, in my view, the Solicitation Conduct issues including Smash's decision to terminate the Agreement were more significant in terms of the time and effort at trial than the Planning Conduct.

99 Moreover, it is not the period of time of the relevant conduct that determines its significance. By way of example only, the particulars of the Planning Conduct were more limited focussing on particular events and documents. This is reflected in my analysis of the evidence of the Planning Conduct in my Reasons. By contrast, as my Reasons make plain, my analysis of the evidence in relation to Smash's purported termination of the Agreement in late October 2012 and the nature and extent of Smash's attempts from that time to secure direct supply of Smash products to customers of Euromark without informing or consulting Euromark was much more detailed and extensive than my analysis of the Planning Conduct.

100 In the circumstances of this case, given the overlap in the factual issues in respect of the contract claim and the ACL claims (in particular, the Solicitation Conduct issues as set out in [37(2)] above) and the ultimate success in fact obtained based primarily upon those Solicitation Conduct issues (namely, a judgment for contractual damages of £37,318 and damages as a result of unconscionable conduct in the sum of £640,000), I am of the view that Euromark is entitled to 60% of its costs since the consolidation of the two proceedings.

101 In reaching this conclusion, I am conscious that Euromark was not ultimately successful in its claim for loss of bargain damages and did not establish the Planning Conduct. However, it was successful in establishing breaches of contract by Smash by reason of the Solicitation Conduct issues. Further, Smash did not establish that Euromark either breached cl 11 or otherwise was not entitled to terminate the Agreement by reason of Euromark's conduct prior to 3 December 2012 as a result of Smash's own repudiatory breaches of the Agreement. Rather, as set out above, I concluded that Euromark was not entitled to terminate the Agreement because it failed to promote Smash products at a time when it was promoting Euromark's products to Wilkinsons between about 11 and 23 December 2012.

102 As to the ACL claims, I have had regard to the fact that Euromark established that Smash and Mr Harbinson engaged in unconscionable conduct and/or that Mr Harbinson and Mr Malone were involved in Smash's unconscionable conduct as set out in [40]-[42] above which gave rise to liability for damages in excess of $1 million. I have taken into account the fact that Euromark established that Smash and Mr Harbinson engaged in misleading conduct and/or that Mr Harbinson and Mr Malone were involved in Smash's misleading conduct as set out in [39] above. Further, I have had regard to the fact that no liability for damages was established for contravention of s 18 of the ACL. I have also taken into account the fact, as set out above, that no claim was made against Smash for damages for contraventions of the ACL. I will address this further below.

103 In all these circumstances, based upon my impression and evaluation of the outcome of the proceeding in light of the factual and legal issues raised, I have concluded that the appropriate order is that Euromark are entitled to 60% of its costs of the proceeding since the consolidation against Smash, Mr Harbinson and Mr Malone.

104 I am conscious that the costs order since the consolidation which I intend to make includes Smash and that no claim was made against Smash in respect of damages for the ACL claims. However, the Court's power under s 24 is not limited to a party to the relevant claim or proceeding and the Court has powers to make an order against non-parties. This is confirmed by the definition of parties in s 3 of the Supreme Court Act, which provides that a party includes 'every person served with notice of or attending any proceeding, whether named on the record or not'.[28]

105 The Court will only make costs orders against a non-party in exceptional circumstances. In particular kinds of applications, relevant factors have been identified.[29] However, in my view, as with all discretions, the categories of exceptional circumstances are not closed. I consider that in the exceptional circumstances of this case the interests of justice require that Smash also be liable for those costs. This is for a number of reasons.

106 First, Smash had an interest in the determination of the ACL claims given that it was alleged to have engaged in misleading and deceptive conduct and unconscionable conduct and that the individual defendants were involved in that conduct.

107 Second, the same factual matters which related to the contract claim formed part of the basis of the findings on the ACL claims. Indeed, the premise of the ACL claims was the Planning Conduct and the Solicitation Conduct allegedly undertaken by Smash. The Solicitation Conduct issues were established against Smash in the contract claim. Further, the same issues were relevant to establishing the Affirmation Representations and the unconscionable conduct findings against Smash.

108 Third, there was no separate representation at trial as between Smash and the individual defendants. Further, Smash took an active part in defending the factual allegations which formed the basis of the ACL claims. As a result, I consider it was a party to the ACL claims in critical and important respects.

109 Fourth and related to the third point, on the evidence before me, all the defendants made an offer of compromise to Euromark for all of the claims in the proceeding on 9 December 2019, which was relied upon by the defendants in the costs submissions to justify orders for costs in their favour. The offer was not divided into the contract claim and the ACL claims.

110 In all these circumstances, I consider that the interests of justice requires that Smash is also liable jointly with Mr Harbinson and Mr Malone for any costs order in favour of Euromark in this proceeding which I intend to make.

111 Further, to the extent that it is relevant, I am concerned that there may be an inability to satisfy a costs judgment in favour of Euromark from the individual defendants based upon the affidavits of Mr Harbinson and Mr Malone affirmed on 24 June 2021.

112 In all these circumstances, I am satisfied that there are exceptional circumstances to make a costs order against Smash together with Mr Harbinson and Mr Malone for Euromark's costs from the time of consolidation.

113 Further, I consider it is appropriate that there be a set off as between Smash's entitlement to 50% of its costs of the proceeding up to consolidation and Euromark's entitlement to 60% of its costs against, amongst others, Smash from the time of consolidation. An award of costs may be set off against an award of costs of the opposite party either as part of the Court's equitable jurisdiction or its inherent powers in relation to costs.[30] In my view, it would not be appropriate for Smash to take action to enforce its costs order against Euromark independently of Euromark's right to enforce its costs order against Smash.

114 For completeness, I do not consider it appropriate to make any specific order in relation to the costs of the successful claims for loss of profits for Tesco in the sum of £9,877 and for Wilkinsons in the sum of £27,441. Rather, I have taken Euromark's success in relation to these claims into account in the costs orders I have made.

115 Further, and related to the last point, I do not consider it necessary in light of the proposed orders I propose to make to consider r 63.24(1) of the Supreme Court (General Civil Procedure) Rules (Vic) (the 'Rules') or that r 63.24(1) has any application to this proceeding.

116 As is evident from these reasons, I do not consider it appropriate to order costs against Dale Harbinson. While he was a defendant, he took little or no part in the proceeding. He certainly took no part in the trial. I made no findings against him in the proceeding. Further, I am not satisfied that he separately incurred any costs in the proceeding which would form the basis of any order for costs. Nor do I intend to make any other order in relation to the costs of the second proceeding.

117 The defendants submitted that I should take into account an offer of compromise dated 9 December 2019 made by all defendants to Euromark in the sum of $450,000 plus fixed costs of $500,000. They submitted that the offer was much more reasonable than the damages award being sought by Euromark during the course of the proceeding. It is difficult to understand the basis of this submission. In my view, the outcome that Euromark achieved was better than the offer of compromise notwithstanding that no judgment for damages on the ACL claim was made against Smash.

118 Finally, the defendants submitted that I should take into account, based upon the decision in Major Engineering, the fact that Euromark substantially reduced its loss of bargain claim from 2015 until the trial of the proceeding in considering the measure of Euromark's success. While the Court of Appeal in that case considered the reduction of the amount of a counterclaim in considering costs, it appeared more relevant to the fact that the counterclaim was transferred from the Magistrates Court to the County Court, thereby significantly increasing the costs of trial. In any event, to the extent that the reduction in the amount claimed by Euromark in the course of the proceeding is of relevance to the exercise of my discretion, it does not cause me to change the conclusions which I have reached in relation to costs above.

119 The defendants sought an interim stay of the execution of the judgment for eight weeks on the basis of the time limit to file an appeal (42 days) and a further two weeks to allow the defendants to apply to the Court of Appeal to seek a further stay in the event that an appeal is filed. This was on the basis that:

(1) given that Euromark has not traded for some time and borrowed substantial sums to prosecute this proceeding, there was a real risk that if Mr Harbinson and Mr Malone are successful in any appeal they would not be restored substantially to their former position if the judgment against them is executed;[31]

(2) the payment of the judgment debt and costs orders may result in the bankruptcy of Mr Harbinson and/or Mr Malone;[32] and

(3) there were arguable grounds of appeal.[33]

120 Euromark opposed any stay of the damages judgment or costs judgment on the basis that special or exceptional circumstances has not been established.

121 Further, Euromark submitted that if the Court is minded to grant a stay, the stay should be made on the basis that the damages awarded are paid into Court or into an interest bearing trust account, pending any appeal, noting that orders to that effect were made in Challenge Charter Pty Ltd v Curtain Bros. (Qld) Pty Ltd.[34]

122 In the course of argument, I raised with counsel that it was not appropriate for me as the trial judge to comment on the proposed grounds of appeal that were in evidence before me. However, I expressed the view that it may be appropriate in the circumstances of this case for me to grant a short interim stay to allow an application for leave to appeal to be filed, and any application for a stay pending the hearing and determination of the leave application to be made to the Court of Appeal. Such an interim order would be made on the condition that the defendants prosecuted any such application for an interlocutory stay with all due expedition.

123 The parties did not oppose such an order and agreed 28 days was an appropriate time given the period of time since the Reasons had been published. However, Euromark expressly reserved its rights to challenge the matters relating to the financial position of Mr Harbinson and/or Mr Malone in their affidavits filed on 24 June 2021.

124 In light of the positions of the parties, I will briefly address the reasons why I propose to grant an interim stay.

125 Rule 66.16 of the Rules provides that the Court may stay execution of a judgment. The discretion of the Court under r 66.16 is wide.[35] If the Court is minded to grant a stay, execution of a judgment may be stayed for such time and on such terms of conditions as the Court thinks fit.[36]

126 The principles for granting a stay were summarised in Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd ('Cross Country Realty').[37] Relevantly:

(1) the prima facie position is that the successful party is entitled to have the judgment in its favour enforced without delay;

(2) the applicant for a stay bears the onus of proving that a stay is justified;

(3) the power to order a stay of execution is to be exercised only where special or exceptional circumstances exist;

(4) special or exceptional circumstances will exist where there is a real risk that the appeal, if successful, would be rendered nugatory. Generally, this will occur when, because of the respondent's financial position, there is no reasonable prospect of recovering any moneys paid;

(5) however, special circumstances are not limited to the situation in (4) and may exist where, for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to their former position if the judgement is executed;

(6) the prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment; and

(7) any other specific prejudice to the respondent arising from a stay must also be weighed in the balance.

127 In addition, the discretion of the Court to grant a stay is to be exercised according to the justice of the particular case.[38]

128 In my view, I consider that there are special circumstances to award an interim stay on the payment of the judgment debt until the defendants make an application to the Court of Appeal for a stay pending the hearing and determination of an application for leave to appeal and the determination of any appeal.

129 This is in circumstances where, as set out in [51] above, Euromark has ceased trading and now has substantial borrowings incurring high interest owed to the directors who borrowed money from third parties to fund the legal costs of the proceeding. If the judgment debt is paid, it seems likely, consistent with sensible commercial practice, that Euromark would apply those funds to repay third party loans and directors' loans to stop the high interest rates accruing.

130 Further, while ordinarily the prospects of success of an appeal are relevant, I do not consider it appropriate for me as the trial judge to review the grounds of appeal and form a view on the defendants' prospects of success on appeal. I consider that is best left to the Court of Appeal for their consideration.

131 In addition, the affidavit material of Mr Harbinson and Mr Malone discloses that each of them would have to sell their limited assets and may face bankruptcy to meet any judgment debt and costs. I am conscious that Euromark wishes to challenge the factual basis of this affidavit material. However, notwithstanding this, their evidence is of some relevance in granting the interim stay.

132 In all these circumstances, it is appropriate to grant a short interim stay of 28 days to allow an application for leave to appeal to be filed, and any application for a stay pending the hearing and determination of the leave application to be made to the Court of Appeal. Such an interim order is made on the condition that the defendants prosecute any such application for an interlocutory stay with all due expedition. I wish to acknowledge that I have not considered the merits of an interlocutory stay and, in particular, Euromark reserves its rights to challenge at any such interlocutory application the matters relating to the financial position of Mr Harbinson and/or Mr Malone in their affidavits filed on 24 June 2021.

133 As noted above, Euromark provided substantial security in the course of this proceeding both by way of payment into Court and Deeds of Indemnity. In its submissions dated 10 May 2021 and proposed minutes of order, Euromark sought in essence that all the security be released in light of the Reasons.

134 By contrast, in their submissions dated 10 May 2021, the defendants sought orders that the security for costs not be released to Euromark pending the outcome of costs orders and an application for leave to appeal. This was in circumstances where Euromark was incorporated outside Australia and there was no evidence that it had property within Australia to satisfy any costs order against Euromark following a successful appeal.

135 By the time these applications came on for argument, Euromark did not seek any orders for the release of the Deeds of Indemnity totalling $726,500. However, Euromark sought that the security for costs paid into Court pursuant to orders made on 31 March 2016 and 30 March 2017 in the amount of $76,600 be released to it. Euromark submitted that those orders provided that the relevant amounts were to be paid as security for Smash's costs of completing certain pre-trial steps, and not for Smash's costs of the trial or for the costs of the other defendants. Euromark submitted that there should be no order that Euromark pay any costs of Smash and, as a result, there is no rationale for the retention of those monies.

136 Euromark submitted that authority dictates that where a plaintiff pays money into court as security for the defendant's costs of the action, and is successful in the action, assuming no order requiring a successful plaintiff to meet the defendant's costs, the plaintiff is entitled to have that money paid out of the court as soon as judgment is entered. Euromark submitted that it is being kept out of its money as to the amount of $76,600 paid into Court.

137 The defendants opposed the orders for the release of $76,600. This was on the basis that, as set out in [134] above, the status quo ought to be preserved pending the outcome of costs orders and an application for leave to appeal. Further, the defendants submitted that pursuant to the orders made on 30 March 2017, $20,000 was paid as security for the defendants' costs of enforcing the Deed of Indemnity.

138 Rule 62.05 of the Rules provides that the Court may set aside or vary any order requiring the plaintiff to give security for costs. The Court also has inherent jurisdiction to order the return of any security ordered in the course of controlling its own process.[39] This is in the exercise of the Court's discretion depending upon all the circumstances of the case. However, if a plaintiff is entirely successful, ordinarily the exercise of discretion would be exercised in its favour to release the security.[40]

139 In the present case and in light of the costs orders that I have made, I am satisfied that the security for costs in the sum of $56,600 in favour of Smash pursuant to the orders made on 31 March 2016 should be released to Euromark. This is in circumstances where Euromark has obtained judgment for a substantial sum and an order for costs in its favour. In this context, based upon my experience, the orders for costs which I have made in favour of Euromark are likely to far exceed the orders for costs in favour of Smash. As a result, it seems very unlikely there would be a net amount owing to Smash in respect of which Smash might be able to call on the security for costs.

140 Further, to the extent that there are concerns about the recovery of such sum if the appeal is successful, it is very relevant that Euromark does not seek the release of the Deeds of Indemnity totalling $726,500.

141 Given that Euromark does not seek the release of the Deeds of Indemnity totalling $726,500, I consider it appropriate not to release to Euromark the security of $20,000 provided pursuant to the orders made on 30 March 2017. This is because, as the 30 March 2017 orders made plain, that security for costs relates to any enforcement costs in respect of the Deed of Indemnity.

[1] [2021] VSC 97 (the 'Reasons'). For convenience, I will use the terms defined in the Reasons.

[2] [2008] VSCA 212; (2008) 20 VR 481.

[3] [2019] VSC 299.

[4] The particulars refer to Smash's attempts to take steps to distribute Smash products by securing direct supply of Smash products to Euromark's customers without informing Euromark up to 22 December 2012.

[5] See Exhibit JAF-2 to Mr Feder's affidavit affirmed on 10 May 2021.

[6] [2020] VSCA 259, [42] ('Australia Kunqian').

[7] Relying upon Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2003] VSC 244, [61] ('Johnson Tiles').

[8] [2005] VSCA 53; (2005) 11 VR 568, 618 [106].

[9] Relying upon Weatherbeeta Ltd v Hammersmith Nominees Pty Ltd (No 2) [2019] VSC 713, [27] ('Weatherbeeta').

[10] Relying upon Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382, 396 ('Clarke').

[13] Australia Kunqian (n 6) [40]-[42].

[14] [2019] VSC 849, [84] ('Amcor').

[15] [2009] VSC 410, [36].

[18] Clarke (n 10), 394 (Fullagar Marks and J.D. Phillips JJ) applied in the context of s 60 in Amcor (n 14) [85]-[86].

[20] Clarke (n 10) 400, quoted in Johnson Tiles (n 7) [50].

[21] Plaintiff's submissions dated 10 May 2021 at [14], referring to Mandie v Mehmart Nominees Pty Ltd [2020] VSCA 320, [26] ('Mandie'). Defendants' submissions dated 10 May 2021 at [20], referring to Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [4] ('Major Engineering').

[22] Mandie (n 21) [24], quoting Chen v Chan [No 2] [2009] VSCA 233, [10(5)] (Maxwell P, Redlich JA and Forrest AJA).

[23] Mandie (n 21) [28]; Major Engineering (n 21) [5].

[25] [2020] VSCA 97, [5], quoted in Mandie (n 21) [27].

[28] See, also, definition of parties in r 63.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

[29] See, for example, Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178, 192-3 (Mason CJ and Deane J, Gaudron J agreeing).

[30] See Sivritas v Sivritas (No 2) [2008] VSC 580; (2008) 23 VR 349, 390 [22] where Kyrou J preferred the latter jurisdictional basis. See also Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712, 761 [164].

[31] Relying upon Cellante v G Kallis Industries Pty Ltd [1991] VicRp 99; [1991] 2 VR 653; Ribbera v Eagle Fuels Pty Ltd [2014] VSCA 173, [11].

[32] Relying upon Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195, [21]; Li v Herald & Weekly Times Pty Ltd [2008] VSCA 201.

[33] Relying upon JC Scott Constructions v Mermaid Waters Tavern Pty Ltd (No 1) [1983] 2 Qd R 243, 248.

[34] [2004] VSCA 66.

[35] Cross Country Realty Victoria Pty Ltd v Ubertas 350 William Street Pty Ltd [2015] VSCA 347, [81] ('Cross Country Realty').

[36] Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 1.14(1)(b).

[37] Cross Country Realty (n 35) [79]-[90].

[38] Ninety-Fourth Highwire Pty Ltd v State Electricity Commission (Vic) (Unreported, Ormiston J , 31 August 1991) 8, quoted in Neate v Thoroughbred International Marketing Pty Ltd [2012] VSCA 65; (2012) 34 VR 318, 320 [7].

[39] Ambridge Investments Pty Ltd v Baker [No 2] [2010] VSC 234, [12]-[13]; Ahrkalimpa Pty Ltd v Schmidt (No 2) [2018] VSC 68, [16] ('Ahrkalimpa').