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[2024] VSC 806
General information, not legal advice.
Supreme Court of Victoria
2024-12-20
Moore J
Original judgment source is linked above.
COSTS - Trustee's right of indemnity from trust property - Failure to execute trust with reasonable diligence and care - Expenses improperly incurred - Loss of trustee's right of indemnity - Di Benedetto v Kilton Grange Pty Ltd (2017) 16 ASTLR 463 - Hopkins v Edwards [2020] VSC 456.
COSTS - Where plaintiff successful in claim - Where defendant successful in counterclaim - Claim and counterclaim separate events - Costs to follow events - No special costs order - -
COSTS - Where plaintiff seeks indemnity costs from expiry of Calderbank offers - Calderbank offers not unreasonably refused - Terms uncertain and unclear - Defendant achieved more favourable result at trial - Costs awarded on standard basis - Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 - M T Associates Pty Ltd v Aqua-Max Pty Ltd & Anor (No 3) [2000] VSC 163 - Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 - United Petroleum Australia Pty Ltd v Herbert Smith Freehills (No 2) [2018] VSC 501.
1 These are the reasons for judgment of the Court in respect of liability for costs following the trial of the proceeding. In the result the plaintiff, Ms Amorosi, succeeded in her claims; however Mrs Robinson, the defendant and plaintiff by counterclaim, also succeeded in a counterclaim.
2 The beneficial ownership of the Boundary Road property[1] was the central issue in the trial of the proceeding. Ms Amorosi and Mrs Robinson are registered on the title of the property as tenants in common in equal shares. As at August 2024, its value was in the vicinity of $2.5 million.
3 In my reasons for judgment, I rejected Mrs Robinson's claims in respect of the Boundary Road property and determined that, subject to Ms Amorosi assuming sole responsibility for the mortgage over the property, Ms Amorosi was entitled to appropriate relief declaring that Mrs Robinson holds her interest in Boundary Road on a common intention constructive trust for the benefit of Ms Amorosi. I determined the other key controversies as follows:
(a) subject to assuming sole responsibility for all liabilities under the Westpac loan, Ms Amorosi was entitled to appropriate relief declaring that Llama holds its interest in the second US property on trust for her, and for orders that she be substituted in place of Llama as trustee of the Llama trust;
(b) Ms Amorosi was required to make restitution to Mrs Robinson in the amount of $650,000; and
(c) Ms Amorosi was required to pay Mrs Robinson $219,486.33 by way of interest in respect of the above restitutionary amount.
4 The Court gave effect to these conclusions in a judgment delivered on 9 September 2024 in the following terms:
THE COURT DECLARES THAT:
3. Upon and subject to:
(a) the plaintiff assuming sole liability for the debt owed to the Westpac Banking Corporation in respect of loan account 56-8813 (the WBC debt) secured by a mortgage over the property identified in volume 09670 folio 321 of the Register of Land (the Boundary Road property) in favour of the Westpac Banking Corporation and registered in dealing no. X415627A (WBC mortgage); and
(b) all persons who are guarantors of the WBC Debt or under the WBC mortgage being discharged from such guarantees or other obligations under the WBC debt and the WBC mortgage,
the first defendant will hold her legal estate in the Boundary Road property on trust for the plaintiff and the Boundary Road property shall vest in the plaintiff absolutely.
AND THE COURT ORDERS THAT:
Within 60 days of the Boundary Road property vesting in the plaintiff in accordance with the declaration in paragraph 3, the first defendant shall give possession of the Boundary Road property to the plaintiff.
5. The plaintiff pay the first defendant:
(a) $650,000;
(b) $219,486.33, being interest in respect of the sum referred to in subparagraph (a) for the period ending on 8 August 2024; and
(c) interest on the sum referred to in subparagraph (a) to which the first defendant is entitled under the Supreme Court Act 1986 in respect of the period from and including 9 August 2024.
6. The order in paragraph 5 is stayed until 31 March 2025.
Pursuant to s 48(1) of the Trustee Act 1958, the second defendant be removed as trustee of the Llama Investments Trust and the plaintiff be appointed trustee of the Llama Investments Trust in its place.
Pursuant to s 51(2)(a) of the Trustee Act 1958, the assets of the Llama Investments Trust, including the second defendant's interest in a property situated in West Hills, California, United States of America, as well as any claim the second defendant may have to a tax refund in connection with the sale of the property at 37 Saddlebow Road, Bell Canyon, California, United States of America, shall vest in the plaintiff as the new trustee of the Llama Investments Trust.
...
The parties shall do all things and sign all documents reasonably necessary to give effect to these orders.
13. Costs reserved.
14. Liberty to apply.
5 Ms Amorosi seeks that Mrs Robinson pay her costs of the proceeding on an indemnity basis from the expiry of an offer made on 5 August 2022, or alternatively from the expiry of later offer made on 3 October 2023, and otherwise on a standard basis.[2] She relied on an affidavit of her solicitor, Dominica Tannock, sworn on 17 September 2024.
6 The defendants' primary position on costs is that, as the former trustee of the Llama trust, Llama should have its costs on a trustee basis, and that the parties otherwise bear their own costs. Alternatively, in relation to the costs of Mrs Robinson and Ms Amorosi, it is submitted that Ms Amorosi should have her costs of the claim and Mrs Robinson should have her costs of the counterclaim, with those two sums being set off against each other. In support of her submissions, Mrs Robinson relied on two affidavits by her solicitor, Maxwell Gibson Davies Joy, affirmed on 6 October 2023 and 15 October 2024.
7 The resolution of the parties' competing positions in respect of costs depends on the determination of the following three questions:
(1) As the former trustee of the Llama trust, in the circumstances as found by the Court, is Llama entitled to be indemnified for its costs of the proceeding?
(2) Given that Ms Amorosi succeeded in her claim and Mrs Robinson succeeded in one of her counterclaims, should there be any departure from the default position that costs follow each event and, if so, in what way?
(3) If, in the exercise of the Court's discretion, Ms Amorosi is entitled to an order that Mrs Robinson pay her costs of the proceeding, should those costs be paid on an indemnity basis?
8 The general principles by reference to which these questions fall to be determined are well established and were uncontroversial. Unless expressly provided by an act or by any rules, the Court has a general discretion in respect of costs,[3] with the discretion to be exercised to facilitate both justice and efficiency in litigation.[4] The usual rule is that a successful party to litigation is entitled to an award of costs in its favour, with the unsuccessful party bearing the liability for the costs of the unsuccessful litigation.[5]
9 The defendants submitted that Llama had properly incurred costs as a defendant in the proceeding and it should have its costs of the proceeding on a trustee basis in accordance with its right of indemnity as trustee. Its right of indemnity as trustee was submitted to have survived its removal as trustee.[6]
The right of indemnity belongs to the trustee subject to circumstances being present which suffice to deny the right. As such, the position is more accurately stated as being that the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred.[9] Instances where that test has been met include where the trustee has acted beyond power, in bad faith or without the care and diligence of a person of ordinary prudence.[10] Similarly, a trustee is not indemnified where a liability is incurred as a result of conduct on the part of the trustee in breach of his or her duty to execute the trust with reasonable diligence and care.[11] On the other hand, a mere error of judgment may not suffice to show improper conduct.[12] The standard of care is that 'which might be expected of a trustee as objectively but not over-zealously enforced'.[13] What is 'proper' or 'improper' for this purpose is to be answered by reference to the duty with which the trustee was required to comply or the power the trustee was intending to exercise.[14]
...
The questions whether the proceeding was adversarial in nature or whether the trustee's personal interests were at stake are therefore not determinative of the matter of costs. In either case, the court must also consider whether the costs incurred by the trustee were properly incurred.
...
The finding that the proceeding was adversarial, involving two sides of the Di Benedetto family, did not suffice to warrant an order that costs should follow the event. That disposition was appropriate only if the applicant failed to demonstrate that the proceeding was properly commenced and conducted. The applicant had contended that the proceedings were necessary and the costs reasonably incurred. He had submitted that the question was not whether the applicant '"won or lost" the litigation but whether, in acting in his representative capacity, he was acting not unreasonably'. That submission was correct. The applicant submitted that the answer to this question depended on examining the relevant correspondence.
(1) the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred;
(2) this right of indemnity belongs to the trustee subject to circumstances being present which suffice to deny the right;
(3) the question of whether a cost, expense or liability was not improperly incurred depends on the duty upon, or power in, the trustee which resulted in incurring the cost;
(4) in the case of the costs of litigation or liabilities incurred in litigation, the relevant duty is likely to be whether in incurring the cost or liability the trustee failed to exercise the care and diligence that a person of ordinary prudence would exercise;
(5) even in proceedings involving a trustee which are adversarial in nature or where the trustee's personal interests are at stake, the court must consider whether the costs incurred by the trustee were not improperly incurred in the sense set out in (3) and (4) above; and
(6) a Court must be cautious before concluding such costs, expenses or liabilities were improperly incurred as to deprive a trustee of his or her right of indemnity.
In the context of legal costs, I note that these general principles are consistent with r 63.26 of the Rules set out above which gives rise to a prima facie entitlement to the trustees' costs of the proceeding, subject to the discretion of the Court.
12 For the following reasons, I consider that, insofar as Llama incurred legal costs and expenses in defending the proceeding brought by Ms Amorosi, those costs and expenses were improperly incurred.
13 By her amended statement of claim dated 6 April 2022 (by reference to which the trial was conducted), Ms Amorosi alleged that Llama held its property on constructive trust for her and that, as a consequence, the Court should appoint her as trustee of the Llama trust in its place.[17] These allegations were denied by Llama in its amended defence dated 24 February 2023, including on the basis that Ms Amorosi was not beneficially interested in any of the property held by the Llama trust.[18] On the second day of trial, the defendants were given leave to file a further amended defence in which they maintained their pleading that Ms Amorosi was not beneficially interested in any of the property held by the Llama trust. Although they also pleaded 'further and in the alternative' that they did 'not oppose' the Court appointing Ms Amorosi as trustee of the Llama trust upon various conditions, not only was this qualified change of position made belatedly, by maintaining their plea that Ms Amorosi was not beneficially interested in any of the property held by the Llama trust, the need for evidence to be led on the issue was not obviated.
14 Despite these pleas, it quickly became apparent at trial that there was no proper basis for the denial of Ms Amorosi's sole beneficial interest in the property of the trust. As I stated in the Reasons:[19]
...In cross-examination, Mrs Robinson acknowledged, without hesitation or qualification, that the Llama trust was set up to protect Ms Amorosi's assets, and that it was always intended to be for Ms Amorosi's benefit. Mrs Robinson gave evidence that she had no objection to Ms Amorosi controlling the Llama trust, subject to her also assuming responsibility for its loans. ...
Mr Robinson likewise gave evidence that he had absolutely no 'difficulty' with the plaintiff becoming trustee of the Llama trust.
15 It is therefore apparent that the position adopted by Llama in this proceeding was inconsistent with the true position in relation to the beneficial ownership of the property of the Llama trust which was well known by Mr Robinson and Mrs Robinson. Mr Robinson was the sole director of Llama, Mrs Robinson was its sole shareholder and formerly a director, as well as being the appointor of the trust. Given their current and previous positions in relation to Llama, the Llama trust and their long term spousal relationship, I am satisfied that Llama knew, or ought reasonably to have known, that the position it adopted in the proceeding in opposing the relief sought by Ms Amorosi did not accord with the true beneficial ownership of the property of the trust.
16 I am accordingly satisfied that, in exercising its powers in relation to the conduct of this proceeding, Llama acted unreasonably by failing to execute the trust with reasonable diligence and care. There accordingly exists circumstances which are sufficient to deny Llama its right of indemnity against the property of the Llama trust on the basis that any expenses and liabilities it incurred in relation to the legal costs of the proceeding were improperly incurred.
17 Ms Amorosi's counsel analysed the relevant claims and 'events' in the proceeding, insofar as they were relevant to costs, in following way:
(a) By her pleading, Ms Amorosi claimed ownership of Boundary Road and the assets of the Llama trust (subject to repayment of the Westpac loan).
(b) In her defence, Mrs Robinson relied on the alleged Narre Warren agreement to pay $650,000 at a later time.
(c) Ms Amorosi was wholly successful on her own claim and Mrs Robinson's defence was entirely rejected.
(d) In her counterclaim, Mrs Robinson made three claims: adverse possession of Boundary Road; that the $650,000 payment was 'moneys had and received'; or, alternatively, that it was 'money paid' to Ms Amorosi by reason of a 2015 request. Mrs Robinson failed in the first two claims, but succeeded on the third.
18 On this analysis of the relevant 'events', Ms Amorosi submitted that the default position was for the Court to order the defendants pay the costs of her claim. As to the counterclaim, because Mrs Robinson had only mixed success and the adverse possession issue was separate and distinct, as a default, it was submitted that Mrs Robinson would only receive a proportion of her counterclaim costs.
19 However, Ms Amorosi submitted that a departure from the default position was justified and that there were compelling reasons not to make separate costs orders in respect of the claim and counterclaim. This was because the costs referable to the claim in respect of the $650,000 payment all arose out of Mrs Robinson's defence and were therefore costs in Ms Amorosi's claim. There was no real incremental cost incurred by Mrs Robinson attributable only to her successful 'money paid' counterclaim. The costs spent dealing with the question of the $650,000 payment generally were either incurred in defence of Ms Amorosi's claim or, in the case of the argument about interest, were pursued jointly as part of the successful 'money paid' claim and the unsuccessful 'moneys had and received' claim. Given the mixed result at trial, there was no reasonable basis for the Court to make separate costs orders and to determine the proportion of Mrs Robinson's counterclaim costs that she should recover.
20 In support of the submission that the appropriate course was for Mrs Robinson to pay all of Ms Amorosi's costs, Ms Amorosi referred to the following matters:
(a) only two short paragraphs of the defence/counterclaim specifically related to the 'money paid' claim;
(b) no evidence was led relevant only to the money paid claim;
(c) the eight paragraphs devoted to interest in the defendants' closing outline of submissions went partly to the unsuccessful 'money had and received' counterclaim; and
(d) the defendants' short closing oral submissions on interest also went partly to the 'money had and received' counterclaim and, in any event, because the cost of counsel for the day was necessarily incurred in responding to Ms Amorosi's claim, no incremental cost was involved.
21 Counsel for Mrs Robinson characterised the relevant claims and 'events' in the proceeding, insofar as they were relevant to the issue of costs, as follows:
(a) Ms Amorosi abandoned a myriad of allegations in her original claim;
(b) after Ms Amorosi amended her statement of claim, three issues remained: the entitlement to beneficial ownership of Boundary Road; whether Mrs Robinson was entitled to restitution of $650,000; and whether Ms Amorosi was entitled to the property, assets and trusteeship of Llama;
(c) Ms Amorosi was successful in relation to her claim to beneficial ownership of Boundary Road, while Mrs Robinson's claims as to beneficial ownership and adverse possession failed; and
(d) Mrs Robinson was successful in her alternative claim for restitution and obtained substantial relief on this counterclaim.
22 On the basis of this analysis, it was submitted on behalf of Mrs Robinson that both the claim and counterclaim needed to be brought and both succeeded. The monetary value of each was substantial. Further, there was no good reason to apportion costs depending on what parts of which claim have succeeded and what have failed.
The principle that costs follow the event together with the recognition that the outcome of a counterclaim is a separate event from the outcome of a claim, underlie the usual order that the successful party on the counterclaim is awarded the costs of the counterclaim.
... a special order should be made as to costs because the issues are often very much interlocked, and the usual order of "judgment for plaintiff on claim with costs and for defendant on counterclaim with costs" does not always give a just result.
25 There is substance to the submission made on behalf of Ms Amorosi that the issues raised by the claim and counterclaim were interwoven. The force of this submission stems from the fact that the Narre Warren agreement as pleaded by Mrs Robinson in her defence,[24] being one of the legal vehicles through which the beneficial ownership of Boundary Road was determined at trial, was pleaded to include a term that, in consideration for receiving the property for her sole use and benefit, Mrs Robinson agreed to pay Ms Amorosi the sum of $650,000 upon Ms Amorosi's request. This term of the Narre Waren agreement was in turn relied upon by Mrs Robinson in her claim for restitution in relation to which she succeeded in her counterclaim.[25]
26 Despite this interconnectedness, I do not consider that a just result calls for a special costs order of the type sought by Ms Amorosi. The legal nature of the claims in relation to which each party succeeded were fundamentally different, but more critically, a special costs order would essentially overlook the substantial success which Mrs Robinson ultimately enjoyed in her counterclaim in which, on the judgment of the Court, she stands to benefit in a total amount of about $870,000. Ms Amorosi's concerns about the preponderance of time spent at trial in the determination of her claim, as distinct from the counterclaim, are addressed by the principle stated by the Court of Appeal in Yunghanns that:[26]
... the working out in practice of an order for 'costs of the counterclaim', to a party who has been successful on the counterclaim but failed on the claim, means that that party is limited to the amount by which the costs of the proceeding have been increased by the counterclaim. That is, the effect of the usual order made on a counterclaim is that the costs recoverable on the counterclaim are limited to the incremental costs incurred beyond the costs of the claim.
27 I will accordingly follow the usual course of treating the claim and counterclaim claim as separate events; Ms Amorosi is entitled to costs on her claim, and Mrs Robinson is entitled to costs on her counterclaim. Further, there was not a dominant or separable issue which would warrant the apportionment of costs by issue, [27] an approach which the High Court has observed that there are 'good reasons' not to encourage.[28]
28 Where awarded, costs will ordinarily be determined on a standard basis. Special circumstances may, however, justify costs being awarded on an indemnity basis. One such circumstance is where the losing party has unreasonably rejected an offer to settle.[29] Whether the rejection was 'unreasonable' depends on all the circumstances, which ordinarily include the stage the offer was made, the extent of compromise offered, the offeree's prospects of success (assessed as at the date of the offer), the clarity of the offer, and whether indemnity costs were foreshadowed.[30]
29 Ms Amorosi sought that Mrs Robinson pay her costs on an indemnity basis from the time of the expiry of an offer to settle the proceeding made on 5 August 2022, referred to as 'the Second Offer'[31] below or, alternatively, from the expiry of an offer to settle the proceeding made on 3 October 2023, referred to as 'the Third Offer' below.
30 Ms Amorosi's solicitors provided Mrs Robinson's solicitors with an offer to settle the proceeding in a letter dated 5 August 2022 (the Second Offer). The offer, which foreshadowed indemnity costs if it was not accepted and which expired on 26 August 2022, was as follows:
Joy to give control of Llama to Vanessa
Joy will appoint Vanessa's nominee as appointor of the Llama Trust, and will then resign from that position.
2. Joy will transfer her share in Llama to Vanessa's nominee.
Joy to request that Peter resign as director of Llama, in favour of Vanessa's nominee.
Joy to relinquish any claims on Llama or the Llama Trust
Joy to disclaim any entitlement to the income or capital of the Llama Trust.
Joy to forgive all outstanding loans to Llama (including the $100,159 loan pleaded in the ASOC).
Joy to release Llama (including as trustee of the Llama Trust) in respect of any liability it has or may have towards her.
Joy not to procure or encourage any beneficiary or person claiming to be a beneficiary of the Llama Trust (other than Vanessa) to make any claim on the Llama Trust.
Joy to have 50% of Narre Warren
Vanessa and Joy to recognise each other henceforth as tenants in common, in equal shares, of the Narre Warren property.
Vanessa to pay $300,000
Vanessa to cause Llama to seek payment of the IRS tax refund owing to Llama.
Within 7 days of the IRS money being received, Vanessa to cause Llama to pay Westpac $300,000 to reduce the mortgage over Narre Warren. (Note: this will leave approximately $300,000 still owing to Westpac).
Separation of property interests in Narre Warren
After the payment to Westpac, Joy to elect as between the following options:
(a) a sale of the property (by an agent to be agreed or else independently appointed), with the net proceeds to be used to pay off the remainder of the mortgage, and the residue split equally; or
(b) Joy to buy Vanessa out, by:
(i) paying Vanessa a sum of money representing 50% of the unencumbered market value of the property (as agreed or else as independently assessed), less a sum of money representing 50% of the remaining mortgage balance as at the valuation date;
(ii) taking full legal ownership of the property; and
(iii) taking over Vanessa's share of responsibility for the outstanding mortgage.
End of proceeding
Joy to agree to orders for the plaintiffs to discontinue the proceeding with no further orders as to costs.
Joy not to pursue her entitlement to costs under the orders made on 6 April 2022.
Finality
- The plaintiffs to release Joy and Peter Robinson from all claims, suits or actions they have or may have in relation to the subject-matter of the proceeding, including in relation to Joy and Peter's roles in the operation of Llama, the Llama Trust, Vanjoy, and the Vanjoy Family Trust.
- Joy to release Vanessa from all claims, suits or actions she has or may have in relation to the subject-matter of the proceeding.
- It be a prior condition to the performance of Vanessa's obligations under the settlement that Peter provide a full release from all claims, suits or actions which he has or may have in relation to the subject-matter of the proceeding, including in relation to the payment of the $710,970 into the Llama Trust (such as claims against Llama for restitution of moneys paid, or claims of equitable ownership of the Narre Warren property).
- The parties to keep the terms of settlement and the negotiations confidential.
31 In assessing the Second Offer, Ms Amorosi summarised the status quo prior to the litigation and the position after litigation as follows:
(i) on paper, Mrs Robinson had a half-share in a $2.5m property (Boundary Road), but she must have known that it would be difficult to maintain that position in equity (particularly since she did not contribute to the purchase price);
(ii) in practice, Mrs Robinson's interest in Boundary Road was unencumbered by the mortgage because she had not been making any interest repayments, and she could always satisfy the Westpac debt by causing the Llama trust (which she and Mr Robinson controlled) to sell the West Hills property;
(iii) Mrs Robinson had a reasonable claim to restitution of $650,000; and
(iv) on paper, Mrs Robinson was a beneficiary of the Llama trust (which on paper owed her $100,159 in undistributed distributions), although since she knew that the Llama trust was intended for Ms Amorosi's sole benefit she must have known that she could never vindicate that position.
(b) After the litigation, Mrs Robinson has or will have:
32 Ms Amorosi submitted that it was unreasonable for Mrs Robinson not to accept the Second Offer as it was generous, having regard to Mrs Robinson's prospects, and involved a large compromise by Ms Amorosi. The offer left Mrs Robinson with an asset worth about $1.25m (and with Westpac still likely having first recourse to Llama for the loan), and allowed her to stay in her home (and avoid moving costs) if she wished. The offer avoided Mrs Robinson having to contribute to Ms Amorosi's costs, which were likely large. All that Mrs Robinson had to give up in order to obtain the benefits of this offer, was her claim to specific performance of the Narre Warren agreement, and the small benefit of the costs order made on 6 April 2022.
33 Ms Amorosi submitted that the Second Offer, which foreshadowed indemnity costs if it was not accepted, was clear, made at an early stage when Mrs Robinson could properly consider it, and was open for a reasonable time (three weeks). It was capable of acceptance by the defendants immediately. They never queried it, or gave any indication that it was not understood.
34 Mrs Robinson submitted the Second Offer was not capable of acceptance so as to finalise the proceeding for two reasons.
(a) Paragraph 16 of the offer made it a condition precedent to the performance of Ms Amorosi's obligations that Mr Robinson provide a full release from all claims in relation to the subject matter of the proceeding, including the payment of $710,970 into the Llama trust. It was submitted by Mrs Robinson that the Second Offer was incapable of being accepted as Mr Robinson was not, and has never been, a party to the proceeding, rendering the Second Offer unenforceable against a non-party.
(b) Paragraph 11 of the offer required Mrs Robinson to elect between selling Boundary Road or buying Ms Amorosi's share, once several preconditions had occurred. If she decided to sell, this was to occur by an agent 'to be agreed or else independently appointed'. An agreement to agree at some time in the future was said to be unenforceable, and there was no mechanism to independently appoint an agent. Similarly, if Mrs Robinson elected to buy Ms Amorosi's share, the price was to be 50% of the market value 'as agreed or else independently assessed'. No method of independent assessment was specified, nor the identity of who was to determine that assessment, or how to appoint the person to make that assessment.
35 Mrs Robinson also submitted that rejection of the Second Offer was not unreasonable for the following reasons:
(a) It was doubtful Ms Amorosi would have achieved a more favourable outcome than the offer. The cost to Mrs Robinson of accepting it would have been the restitution sum of $650,000, accrued interest on that sum of $92,602.749, the $100,159 loan to Llama, as well as the benefit of the earlier costs order. Up to that date, Mrs Robinson's legal costs were about $124,382.82.10. The original statement of claim was 213 paragraphs extended over 38 pages and involved financial accounting over a long period; the amended statement of claim was only 10 pages and 39 paragraphs. The proportion of the $124,382.82 thrown away was unclear, but was likely to be significant. Allowing one-third of those costs ($41,460.94), Mrs Robinson's acceptance of the Second Offer would have cost her $884,222.68.11.
(b) The benefit of accepting the Second Offer was unclear. There was no evidence about the value of Boundary Road when the offer was made. The mortgage at that time was $603,947.12. The proposed $300,000 payment was conditional upon Llama receiving US$221,250 which had been withheld by the IRS since early 2015. This sum has never been received and it is unclear if or when it might be refunded.
36 Although the Second Offer was made at an early stage of the proceeding, open for a reasonable time and foreshadowed indemnity costs if it was not accepted, Ms Amorosi has not persuaded me that, in all of the circumstances, it was an offer which was unreasonable for Mrs Robinson to refuse. There are two matters of particular significance which, in all the circumstances of the case, lead me to conclude that it would not be appropriate to award Ms Amorosi indemnity costs by reference to Mrs Robinson's failure to accept the Second Offer.
37 First, assessing the reasonableness of a Calderbank offer by comparing the final outcome of a proceeding with the terms of the proposed compromise will generally be a significant matter in considering whether the rejection of the offer was unreasonable in all the circumstances.[32] As Elliott J stated in United Petroleum Australia Pty Ltd v Herbert Smith Freehills (No 2):[33]
Calderbank letters must represent a genuine compromise, as opposed to an invitation to capitulate. In the event that they do, they may give rise to a proper basis for awarding costs at a higher level in the event the offer is not accepted and the offeree does not achieve a more favourable outcome at trial.
38 Taking into account the claim and counterclaim, it is likely that Mrs Robinson achieved a more favourable result at trial than if she had accepted the Second Offer.
39 The principal benefit of the Second Offer, which was correctly characterised as a substantial compromise by Ms Amorosi, was for Mrs Robinson to effectively keep half of the interest in Boundary Road. Although the property may have been worth more when the offer was made, adopting a cautious approach, the evidence supports this benefit having a value of about $1.25 million. This also provided an intangible benefit to Mrs Robinson in allowing her to stay in her home at Boundary Road, as she wished, thereby avoiding moving and selling costs.
40 In estimating the value of this benefit to Mrs Robinson, counsel for Ms Amorosi invited the Court to disregard the mortgage over Boundary Road in favour of Westpac. The mortgage secured funds which Westpac had advanced to Llama. The Westpac loan was also secured by guarantees given by Ms Amorosi, Mrs Robinson and Mr Robinson. As at the date of the Second Offer, the Westpac loan account was in the amount of $603,947. There was evidence before the Court of Ms Amorosi's belief that, when the loan limit was reached at which time Westpac would demand payment of interest, Mr Robinson and Mrs Robinson were unlikely to satisfy that demand from their own funds, and would instead sell Ms Amorosi's home in the United States to satisfy the debt owed by Llama to Westpac.
41 Ms Amorosi's views about these matters do not alter the legal position. Westpac holds a mortgage over the property and the Westpac loan is otherwise secured by the guarantees to which I have referred. In assessing the value of the benefit to Mrs Robinson of the Second Offer, it therefore would not be appropriate to disregard the existence of the mortgage. After allowing for half of the estimated value of the mortgage when the Second Offer was made, the value of a half share in Boundary Road would be about $950,000.
42 The Second Offer also provided for a payment by Ms Amorosi of $300,000 to pay down the Westpac loan; in the context of the offer to Mrs Robinson, the value of this potential benefit was $150,000. However, the realisation of this benefit was expressly contingent upon Ms Amorosi recovering the tax refund from the Internal Revenue Service of the United States of America. There was scant evidence at trial about this matter. Although Ms Amorosi gave evidence that the refund had not been sought because it would be paid into Llama and she was concerned that Mrs Robinson and Mr Robinson would take the funds, rather than them being used to pay off the loan, there is no basis upon which the Court can form a view about the likelihood or timeliness of Ms Amorosi securing the refund. On the evidence before me, the proposed benefit to Mrs Robinson of a reduction in her share of the mortgage by $150,000 is contingent on an event the probability of which was unknown and essentially speculative.
43 An additional benefit for Mrs Robinson in accepting the Second Offer was avoiding the prospect of having to contribute to Ms Amorosi's costs in the event that Ms Amorosi succeeded at trial. Although Ms Amorosi's costs were then in the sum of $120,978, the value of the benefit to Mrs Robinson would likely be materially less when determined on a standard basis and, importantly, an allowance would need to be made for the fact that some portion of these costs would not be recoverable to the extent that they were referable to the extensive parts of Ms Amorosi's claim which she abandoned in April 2022. The evidence does not permit me to quantify the likely value of this benefit.
44 Having regard to the above matters, the value of the financial benefits to Mrs Robinson under the Second Offer was likely about $950,000, plus some amount in respect of costs as discussed in the previous paragraph.
45 Mrs Robinson would, however, have to give up potential benefits of substantial value to obtain this result. Most significantly, she would have to give up her claim to restitution in respect of the $650,000 payment, a claim which counsel for Ms Amorosi accepted was properly regarded as a reasonable claim prior to the litigation. There is also the loss of accrued interest in respect of this amount which was worth approximately $90,000. She would have also lost the benefit of the costs order in her favour made on 6 April 2022, the value of which would likely have been somewhere between $10,000 and about $40,000. The total value of the potential benefits Mrs Robinson would have foregone if she had accepted the Second Offer is therefore in the range of about $750,000 - $780,000.
46 In the final analysis then, taking into account the value of the potential benefits she would have had to forego if she had accepted the Second Offer, if Mrs Robinson had accepted the Second Offer, overall she would have likely received a net financial benefit in the range of about $200,000 - $300,000. Mrs Robinson did substantially better than this at trial, having obtained an order for restitution in the amount of $650,000, plus $219,486 in interest.
47 The second reason it would not be appropriate to award Ms Amorosi indemnity costs by reference to the Second Offer is because the offer was uncertain and unclear in a material respect.
... cannot be ambiguous or uncertain in its terms or involve further negotiation between the parties prior to the compromise being effected. The offer must be capable of being accepted thereby bringing into existence a binding contract.
49 Mrs Robinson's complaint directed at paragraph 16 of the Second Offer based on these principles is without substance. As was submitted on behalf of Ms Amorosi, the requirement for Mr Robinson to provide a release was a condition precedent to the performance by Ms Amorosi of her obligations under the proposed settlement, not a condition to be satisfied prior to Mrs Robinson's acceptance of the offer.
50 However, the other complaint raised on behalf of Mrs Robinson concerning paragraph 11 of the Second Offer is well-founded. The question is whether the processes there prescribed for the sale of Boundary Road, or for Mrs Robinson to 'buy-out' Ms Amorosi's interest in the property, were sufficiently certain in that, if the offer was accepted, there would be brought into existence a binding contract.
51 In order for an agreement to constitute a binding contract, it must contain all of the essential terms, or an 'adequate mechanism' for those terms to be to ascertained.[39] An agreement which is incomplete will not give rise to an enforceable contract. 'If the parties have not agreed on all essential terms, for example because they have left one such term to be settled by future agreement, the contract is incomplete no matter what the parties themselves may think'.[40]
52 These principles are encapsulated in the following statement by Gibbs CJ, Murphy and Wilson JJ in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd:[41]
It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future. Consequently, if the lease provided for a renewal "at a rental to be agreed" there would clearly be no enforceable agreement. On the other hand, it is also well established that the parties to a contract may leave terms - even essential terms - to be determined by a third person: ... In the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required of the parties. It is true that if they do agree upon that rental, then there is no occasion to resort to the independent mechanism that the lease provides. But, there being no such agreement, all that is required is that the President name a person to fix a figure being not less than the minimum rental operative during the original term. ...
53 Consistently with these principles, the difficulty with paragraph 11 of the Second Offer is that, in the event that the parties are unable to agree on the market value of Boundary Road or an agent to sell the property as the case may be, it does not identify the third party who will determine those matters, or the mechanism by which they are to be 'independently' appointed or assessed. The contention that, as a matter of construction, the paragraph means that the parties will approach the peak real estate body in Victoria and ask for the appointment of an agent/valuer, did not rise above assertion. Conceivably, there are other means by which an agent might be 'independently' appointed. As to the scenario where Mrs Robinson buys out Ms Amorosi and the value of the property is not agreed, the stipulation that the market value of the property be 'independently assessed' does not axiomatically require the appointment of an independent valuer. For example, an alternative construction which is arguably open would be for the engagement of a valuer by one of the parties' solicitors to explicitly 'independently assess' the value of the property. More generally, insofar as the submissions on behalf of Ms Amorosi in substance depended upon the implication of a term, that approach must fail as 'the law does not permit a court to imply a term into a bargain between parties for the purposes of making their bargain an enforceable contract'.[42] The implication of an obligation on the parties to cooperate to find a person to act as an independent agent or valuer does not overcome the above difficulties to ensure that the contract is complete in respect of all essential terms.
54 Ms Amorosi's solicitors provided Mrs Robinson with the Third Offer in a letter dated 3 October 2023 (the Third Offer). The offer was described as a Calderbank offer and expired three days later on 6 October 2024. It provided as follows:
(a) Judgment for Ms Amorosi in respect of her claim for orders pursuant to section 228 of the Property Law Act 1958 (Vic).
(b) The Registrar of Titles to amend volume 9670 folio 321 of the Register of Land to show Ms Amorosi as the sole registered proprietor of the Property;
(c) Mrs Robinson to vacate the Property by 31 March 2024, leaving it in good and tenantable condition;
(d) Ms Amorosi to sell the Property, and apply the net proceeds (after costs and discharge of the mortgage) first to discharge Llama's debt to Westpac, then to apply $300,000 in satisfaction of Mrs Robinson's liability for costs under order (f), then to pay $350,000 to Mrs Robinson, and then to retain the balance;
(e) Mrs Robinson to pay Ms Amorosi's costs in the sum of $300,000;
(f) The proceeding (including the counterclaim) otherwise be discontinued;
(g) Liberty to apply.
3. Mrs Robinson to transfer her shares in Llama to Ms Amorosi.
Mrs Robinson to request Mr Robinson resign as director of Llama in favour of Ms Amorosi.
5. Items 2-3 to be done as soon as reasonably practicable.
- Mrs Robinson disclaims any entitlement she has as a beneficiary of the Trust.
55 Ms Amorosi submitted that it was unreasonable for Mrs Robinson not to accept the Third Offer. Its terms were clear and indemnity costs were foreshadowed. Although it was only open for three days, this was reasonable given the proximity of trial, the fact that Mrs Robinson had access to all the information she would need to decide upon the offer (including outlines of evidence, the Court Book, etc.) and given that Mrs Robinson had retained solicitors and counsel who could advise her. Mrs Robinson was said to be in an excellent position to make a quick decision on the offer.[43]
56 Ms Amorosi submitted that, assessed at 3 October 2023, Mrs Robinson's prospects on the restitution claim were mixed. There was no contemporaneous evidence of her purpose in making the $650,000 payment. It was unlikely the Court would accept it was paid because of the alleged Narre Warren agreement. There was a real chance that the Court would find that the payment was either made in pursuit of Mrs Robinson's self-interest (as the payment reduced her exposure to Westpac), or else was a gift to Ms Amorosi.
57 Ms Amorosi acknowledged that her costs estimate of $300,000 referred to in paragraph 1(e) of the Third Offer was too high. Assuming that the true recoverable costs were $176,366, being the amount actually spent by Ms Amorosi to that date, the offer was fairly assessed as being equivalent to an offer to pay Mrs Robinson $526,366, subject to Mrs Robinson paying Ms Amorosi standard costs ($176,366). This was submitted to be a generous offer. It recognised the reality that Ms Amorosi would likely win both Boundary Road and Llama but, on an adjusted basis, offered Mrs Robinson 64% of the value of her restitution claim.
58 There are two principal reasons why it was not unreasonable for Mrs Robinson to refuse to accept the Third Offer so as to make it appropriate to award Ms Amorosi indemnity costs.
59 First, as counsel for Ms Amorosi explained in his submissions, the effect of the Third Offer was to provide for a net payment to Mrs Robinson of $350,000. However, analogously with the analysis in respect of the Second Offer in [46] and having regard to the principles discussed in [37] above, it is apparent that Mrs Robinson achieved a substantially more favourable result than this at trial.
60 Secondly, as submitted on behalf of Mrs Robinson, the Third Offer contained a serious misstatement. The term that Mrs Robinson 'pay Ms Amorosi's costs in the sum of $300,000' misrepresented the true position; Ms Amorosi's legal costs at that time were in fact $176,366.16. Although there was no suggestion that this error was intentional, its existence and its scale are fatal to the Court now finding that Mrs Robinson acted unreasonably in refusing the offer.
61 Counsel for Ms Amorosi sought an order certifying that it was reasonable for Ms Amorosi to be represented by two counsel at trial and that it was reasonable to pay senior counsel's fees for the period that they were above scale. The proposed certification is reasonable in all the circumstances. The evidentiary and legal issues raised in the proceeding were of a sufficient complexity to warrant two counsel. Senior counsel's fees were above scale for only a short period and they were below scale for trial.
[1] In these reasons for judgment, I use the abbreviations defined in the principal reasons for judgment, Amorosi v Robinson [2024] VSC 466 (the Reasons). These further reasons for judgment assume knowledge of the Reasons and are to be read together with them.
[2] Save in respect of an order made on 6 April 2022 that Ms Amorosi pay Mrs Robinson's costs of and occasioned by an amendment to the statement of claim.
[3] Supreme Court Act 1986, s 24; Supreme Court (General Civil Procedure) Rules 2015 (the Rules), r 63.13.
[5] Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164, 173 [25].
[6] See: DCT v Peter Sleiman Investments Pty Ltd as trustee for the Sleiman Family Trust [2016] NSWSC 1744 [15]; Fairfield Pastoral Holdings Pty Ltd as trustee of the Piney Ridge Trust v Van Niekerk [2023] FCA 1185 [24]; Jaken Properties Australia Pty Ltd v Naaman [2023] NSWCA 214 [28].
[7] (2017) 16 ASTLR 463 ('Di Benedetto').
[9] Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 308 [53] ('Nolan v Collie').
[11] Ibid; RWG Management Ltd v Cmr for Corporate Affairs [1985] VicRp 42; [1985] VR 385, 396.
[12] Nolan v Collie (n 9) 308 [55], 309 [57].
[14] Ibid 306 [51]. See also M Scott Donald, 'The "Proper" Approach to a Trustee's Right of Indemnity' (2014) 8 Journal of Equity 283 (arguing that the right of indemnity depends upon the trustee observing the trustee's obligations of conduct).
[15] [2020] VSC 456 ('Hopkins v Edwards').
[17] Amended Statement of Claim, [203(d)] - [206].
[20] McDonnell and East Ltd v McGregor [1936] HCA 28; (1936) 56 CLR 50, 62 (Dixon J).
[21] [2021] VSCA 15 [102] ('Yunghanns').
[24] Paragraph 25(a)(iv) of Further Amended Defence to the Amended Statement of Claim dated 6 April 2022 and Amended Counterclaim.
[27] See Mickelberg v State of Western Australia [2007] WASC 140 (S) [43]; Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328, 330‑1.
[28] Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; (2015) 327 ALR 192 [6].
[29] See Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, [23] ('Hazeldene').
[31] Ms Amorosi first offer of settlement (which is not relied upon for the purposes of an award of indemnity costs) was made to Mrs Robinson on 21 April 2021. In substance, the offer was that Ms Amorosi would compromise her claim if Mrs Robinson gave her all of Boundary Road (subject to the mortgage), the West Hills property, and the tax refund currently withheld by the Internal Revenue Service in the United States.
[32] Love v State of Victoria (No 2) [2009] VSC 531, [30].
[33] [2018] VSC 501 [18], citations omitted. Approved by the Court of Appeal in United Petroleum Australia Pty Ltd v Freehills [2020] VSCA 15 [125].
[34] Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 160 (Tadgell JA).
[38] See for example Kemp v Ryan [2012] ACTCA 12, [12], [13], [35].
[39] Delaney v Delaney [2022] VSCA 48 [57].
[40] Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 [63].
[41] [1982] HCA 53; (1982) 149 CLR 600, 604 (citations omitted).
[42] Australian & New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695, 701. See also Hookway v Hookway [2024] TASFC 3 [18]-[19].
Amorosi
Robinson
(1982) 149 CLR 600
(2005) 13 VR 435
(2019) 265 CLR 164
(2003) 7 VR 287
(1936) 56 CLR 50
(1994) 254 ALR 328
(2015) 327 ALR 192