Plaintiff v First Defendant Second Defendant

2 The plaintiff seeks an order for costs on an indemnity basis and the defendants submit that there should be no order as to costs or that the defendants should pay a percentage of the plaintiff's costs (for example, 50%) on a standard basis.

3 The plaintiff submits that an indemnity costs order is justified on the basis of:

(a) the deliberate non-disclosure of the CMJ Contract; and

(b) other conduct causing loss of time and inconvenience to the Court.

4 With respect to 'deliberate non-disclosure of the CMJ Contract', the plaintiff submits that the defendants falsely denied the existence of the CMJ Contract and did not give specific discovery of it. It was submitted that this was part of a deliberate policy by the defendants not to disclose the existence of the CMJ Contract.

5 The plaintiff submitted that the other conduct causing loss of time and inconvenience was as follows:

(a) The cross-examination of Mr Konstandellos as to his credit.

(b) The defendants' claim of privilege over a paragraph in the document subpoenaed from Contour.

6 The plaintiff further relied upon the following offers made prior to this proceeding:

(a) A letter dated 13 August 2015 in which the plaintiff offered to pay the balance of the deposit of $990,000 upon registration of the plan of subdivision (subject to it being held in trust until settlement); confirmation that the defendants would meet all the conditions set out in the relevant planning permit; the plaintiff would pay the relevant authorities charges subject to deduction at settlement; and special condition 8 being deleted.

(b) A letter dated 13 October 2015 in which an offer was made on the basis that the plaintiff would pay the costs of meeting the conditions of the planning permit; special condition 8 of the contract being deleted; and the proceedings at that time being discontinued.

(c) On 11 July 2016, the plaintiff's solicitor said that the plaintiff was amenable to paying the bonds if the vendors were prepared to extend the settlement date.

(d) By email dated 20 July 2016, the plaintiff's solicitor made proposals regarding the payment of the bonds and entry into s 173 agreements.

7 Further, after the commencement of the proceeding, the plaintiff made the following further offers:

(a) On 30 March 2017, the plaintiff's counsel informed the Court that the plaintiff made an open offer to purchase the Land, being both Lots 1 and 2, for a total sum of $5 million.

(b) By email of 2 April 2017, the plaintiff made a detailed offer that the plaintiff would purchase the Land for the sum of $4.23 million with arrangements made with respect to costs, the GAIC amount and the bond payments.

8 Further, the plaintiff submitted that, although it had failed in its claims under the Australian Consumer Law and the claim for damages, it was successful on the principal issue of specific performance.

(a) The non-disclosure of the CMJ Contract did not increase the costs that were incurred in the proceeding.

(b) The cross-examination of Mr Konstandellos was properly directed to the issue of the absence of readiness or willingness.

10 With respect to the 'offers', the defendants submitted as follows:

(a) The first two offers were to resolve the proceeding before Sloss J which, as a result of the decision of the Court of Appeal, was decided adversely to the interests of the purchaser.

(b) The offer in the conversation of 11 July 2016 was not capable of acceptance and was made three days after the vendors had made an offer for the purchaser to pay the bonds and deduct the amount from settlement.

(c) The offer of 20 July 2016 required the vendors to accept a liability which on a true construction of the contract was not theirs.

(d) The offers made by senior counsel in Court and the open offer on 2 April 2017 were not directed at resolution of the proceeding, but rather a commercial settlement of the acquisition of the Land.

11 In summary, the defendants submitted that the offers relied upon by the plaintiff:

(a) were too remote from the conduct of the trial; and

(b) involved invitations to resolve the commercial dispute.

12 The defendants further submit that there should be no order as to costs because on 8 July 2016 the defendants offered to permit the plaintiff to pay the referral authority fees and withhold those sums from the balance due under the contract of sale. The offer was repeated by an affidavit sworn by Mr Bisognin on 7 September 2016.

13 Further, the defendants allege that the plaintiff should be denied costs for the following reasons:

(a) The misleading and deceptive conduct claim was unsuccessful.

(c) The plaintiff filed inordinate amounts of material that were unnecessary.

(d) Arguments as to subpoenas and other matters were unnecessarily prolonged.

14 With respect to the offers made by both parties, I do not consider that it has been established that, at the time that the offers were made, the receiving party acted unreasonably in refusing to accept such offers; and in particular I am unable to make any assessment as to whether the defendants would be in a better position if they had agreed to sell the whole of the Land as offered by the plaintiff.

15 Further, I do not consider that the conduct of counsel for the defendants in the cross-examination of witnesses is properly subject to criticism. Neither do I consider the material filed by the solicitors for the plaintiff to be unnecessarily prolix nor were the post-trial arguments as to orders and subpoenas unnecessarily prolonged.

16 Although the plaintiff's claim based on misleading and deceptive conduct and the claim for damages were dismissed, I consider that the plaintiff was substantially successful in obtaining a judgment for specific performance. Accordingly, I consider that the defendants should pay the plaintiff's costs.

17 The principles to be considered on an application for a special costs order were discussed by Harper J in the much cited decision of Ugly Tribe Co Pty Ltd v Sikola.[2] His Honour emphasised that special circumstances were required to justify an indemnity costs order and set out that such special circumstances could include:

(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud;

(ii) The making of an irrelevant allegation of fraud;

(iii) Conduct which causes loss of time to the Court and to other parties;

(iv) The commencement or continuation of proceedings for an ulterior motive;

(v) Conduct which amounts to a contempt of court;

(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law;

(vii) The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.[3]

The categories of special circumstances are not closed. The cases must not, therefore, be read "in an endeavour to establish a set of inflexible guidelines which should thereafter be determinative of the manner in which the Court's discretion is to be exercised [for this] would be to fetter the Court's discretion".[4]

19 In National Australia Bank Ltd v Petit-Breuilh [No 2],[5] Balmford J considered an application for indemnity costs in circumstances where the bank had sworn an affidavit of documents which was 'significantly incomplete'.[6] Her Honour considered that the documents were 'highly relevant in assisting the Court as to the particular matters which were necessary to be decided';[7] and she had 'no reason to doubt, that had that file been produced in the normal course of discovery ... this case ... could have been significantly shorter, and might well not have proceeded to a hearing at all'.[8] Her Honour imputed no more than 'incompetence in the preparation of its case' to the bank but considered that in the context of the case the circumstances were special and ordered that the bank pay costs to be taxed on an indemnity basis.[9]

20 In this case, the defendants' misconduct is set out in paras [91] to [104] of Hera Project Pty Ltd v Bisognin [No 3] delivered on 22 May 2017.[10] In summary, the defendants have undertaken a course of conduct to deliberately conceal the existence of the CMJ Contract. In particular, the defendants have made no attempt to justify the failure to discover the CMJ Contract after the application for specific discovery, in proceeding S CI 2015 04285,[11] or the blatant denial by the defendants of having had any communications with any other person concerning the sale of Adrian Street between October 2014 and 25 August 2015 (the CMJ Contract was executed on 6 and 9 July 2015).

21 The significance of the CMJ Contract to the issues in this case extended beyond providing the defendants with a strong financial incentive to bring about the termination of the 2015 contract. By its terms, the obligations under the CMJ Contract were in direct conflict with the defendants' best endeavours obligations under the 2015 Contract.

22 I consider that, if the defendants had disclosed the CMJ Contract, it is likely that a trial in this proceeding would have been avoided. The significance of the non-disclosure of the CMJ Contract to the defendants' perception of their prospects of succeeding in this claim is indicated by the lengths to which they were prepared to go to avoid its disclosure (as set out in paras [91] to [104] of the Reasons for Judgment).[12] These steps included the destruction of the former solicitors' file and the withholding of instructions about the CMJ Contract from their own counsel and their current solicitors.

23 I do not accept the defendants' submissions that the non-disclosure of the CMJ Contract had no significant effect on the conduct of this proceeding. It was not explained how the defendants could have sensibly defended these proceedings in circumstances where their obligations under the CMJ Contract were in direct conflict with the vendors' best endeavours obligations under the 2015 Contract.

24 In my opinion, the defendants' decision to defend this proceeding, without disclosing the existence of the CMJ Contract, could properly be described as 'high-handed' and 'the Court ought to do what it can to ensure that [the purchaser] is not out of pocket over it'.[13]

25 Accordingly, I will order that the defendants pay the plaintiff's costs of the proceedings including reserved costs up to and including today; and that the costs be taxed on an indemnity basis.

[1] Hera Project Pty Ltd v Bisognin [No 3] [2017] VSC 268 (Riordan J). In these reasons, I adopt the same defined terms.

[2] [2001] VSC 189.

[5] [1999] VSC 395.

[10] Hera Project Pty Ltd v Bisognin [No 3] [2017] VSC 268 ('Reasons for Judgment').

[11] Bisognin v Hera Project Pty Ltd [2016] VSC 75.

[12] Bisognin v Hera Project Pty Ltd [2017] VSC 268.

[13] Australian Guarantee Corporation Ltd v De Jager [1984] VicRp 40; [1984] VR 483, 502 (Tadgell J).