Plaintiff v First Defendant Second Defendant

2 On 31 May 2019, I heard from the parties with respect to final orders and the costs of the proceeding.

(a) judgment for the plaintiff against the first and second defendants in the sum of $100;

(b) the plaintiff's claims are otherwise dismissed;

(c) the plaintiff pay 25 per cent of the defendants' costs of the proceeding on the standard basis, such costs to be taxed in the absence of agreement; and

(d) the freezing orders made on 17 September 2018 are to be discharged on 24 June 2019.

4 In summary, Rozenblit made two primary claims against the Vainers.

5 The first claim related to the transfer by Rozenblit of his shares in VRT Global to Dr Vainer. Rozenblit alleged that he only agreed to transfer his direct shareholding in VRT Global to Dr Vainer, in return for Dr Vainer providing collateral security to support a loan to VRT Global in the sum of $400,000 or $600,000. Vainer caused the transfer of Rozenblit's shares to his father, but Dr Vainer provided nothing in return. The remedy sought was the value of the shares (the Share Transfer Claim).

6 The second claim (which comprised three related issues) related to the allegation by Rozenblit that VRT Global was liquidated by the Vainers as part of a dishonest and fraudulent plan to remove him (as well as other minor investors), so that Vainer could operate the former joint enterprise through his new wholly-owned corporate vehicle, Polymeric. The remedy sought was compensation for destruction of the value of Rozenblit's unit holding in the Unit Trust, whose only asset was (through VRT Operations) its 50 per cent indirect interest in VRT Global (the VRT Liquidation Issue).

7 Rozenblit alleged that he and Vainer were in a 'quasi-partnership' relationship arising from their Oral Agreement. Vainer was prohibited from profiting from opportunities that arose within the scope of that relationship. He was prohibited from favouring his personal interest over that of Rozenblit. In establishing and operating Polymeric (which was in effect a successor to VRT Global that used its technology), it was alleged Vainer acted in breach of his fiduciary duties to Rozenblit. The remedy sought was the value of the benefit, gain or profit which Vainer derived by breaching his fiduciary duties: namely, the current value of his Polymeric shareholding. A claim for accessorial liability was brought in relation to that breach against Dr Vainer (the Polymeric Issue).

8 Rozenblit and the Vainers each called expert evidence in relation to the value of the shares of VRT Global at 2 November 2011, 7 December 2011 and 27 November. Rozenblit called Rose, who determined that the market value of VRT Global as at 2 November 2011 was $4,253,226 and as at 7 December 2011 was $4,244,447. He also determined that the market value as at 27 November 2012 was $3,979,717. Fettes determined that VRT Global had a value of between $Nil and $180,740 as at 7 December 2011 and a $Nil value as at 27 December 2012 (the Valuation Issue).

(a) On the Share Transfer Claim, I found in favour of Rozenblit. He established that Vainer and Dr Vainer engaged in misleading or deceptive conduct and unconscionable conduct. Dr Vainer was also liable in restitution. Rozenblit did not succeed on Vainer's alleged breaches of the Implementation Agreement or fiduciary duty. Accordingly, on the Share Transfer Claim, Rozenblit was entitled to damages from Vainer (and restitution from Dr Vainer) - which damages are nominal. I refer to the Valuation Issue.

(b) On the VRT Liquidation Issue, I found in favour of the Vainers. VRT Global was effectively insolvent as at 27 November 2012. The liquidation of VRT Global was an entirely logical and unremarkable consequence of the financial position and performance of the company. As a consequence, Vainer did not induce VRT to act in breach of trust by resolving to appoint an administrator to VRT.

(c) On the Polymeric Issue, I found in favour of the Vainers. Vainer did not owe fiduciary duties to Rozenblit. The Implementation Agreement had been superseded. It also was not established that Polymeric was relevantly a continuation of VRT Global.

(d) On the Valuation Issue, I found in favour of the Vainers. Having entirely rejected Rose's valuation I relied on the (negligible) valuation opined by the Vainers' expert, Fettes.

10 Ultimately, I found that VRT Global was either effectively insolvent or had no more than a nominal value to be ascribed to its shares. As noted, Rozenblit is entitled to nominal damages which I fix in the amount of $100.

11 The Court has a broad and unfettered discretion to award costs in the exercise of power conferred upon it by s 24(1) of the Supreme Court Act 1986 (Vic).[2] The usual rule is that costs follow the event, and in the absence of special circumstances, a successful litigant should receive their costs from the unsuccessful litigant.[3]

12 The 'event' to which the usual rule refers is generally construed to be the ultimate outcome of the case. As such the effect of this rule is that the party who succeeds on the whole of the action is usually entitled to the costs of the action, even if they have been unsuccessful on alternative issues or heads of their claim. The usual rule is, however, subject to the power of the Court to make such orders as the justice of the case may require.[4] This includes a costs order, made in an appropriate case, reflecting the litigants' relative successes and failure in the conduct of the proceeding.[5]

13 Section 65C of the Civil Procedure Act 2010 (Vic) (CPA) provides:

(1) In addition to any other power a court may have in relation to costs, a court may make any order as to costs it considers appropriate to further the overarching purpose.

(2) Without limiting subsection (1), the order may -

(a) make different awards of costs in relation to different parts of a proceeding or up to or from a specified stage of the proceeding;

(b) order that parties bear costs as specified proportions of costs;

14 Rule 63.04 of the Supreme Court (General Civil Procedure Rules) 2010 (Vic) (Rules) provides:

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

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

15 An issue by issue approach to the question of costs may be employed where the issues are distinct, separate and severable - allowing the Court to craft an award in the same manner as if separate actions had been brought in respect of each of the issues agitated.[6] Where those issues involve a degree of overlap or common facts which go in separate directions in relation to different issues it will usually be undesirable to engage in an issue by issue analysis.[7]

16 In Spotless Group Ltd v Premier Building and Consulting Pty Ltd, the trial judge held that it would be unfair for Spotless Group to bear the whole of Premier's costs of the trial, as the trial also involved unsuccessful claims made by Premier. The costs order in favour of Premier was limited to its success. Likewise, the trial judge did not order that Premier should pay Spotless Group's costs in relation to the unsuccessful parts of their claim.[8] The Court of Appeal (Redlich and Dodds Streeton JJA) dismissed the appeal against the trial judge's orders and said:[9]

[14] In certain cases it is apposite for a trial judge to apportion costs having regard to the multiplicity of parties, actions, issues and the mixed success enjoyed by the plaintiffs. Under r 63.04, the judge may award costs in relation to particular questions or parts of the proceeding. The rules of court are wide enough to permit an apportionment of costs according to issues or causes of action, which enable a court to look at the realities of the case and attempt to do substantial justice.

[15] Thus a pragmatic approach may be taken in cases where no party is wholly successful and there are clearly practical difficulties in awarding costs on an issue by issue basis. In exercising its discretion as to costs the court is entitled to take into account the failure of a party on certain "issues". "Issue" is not used in the technical pleading sense, but refers to any disputed question of fact of law. In Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd this Court observed:

In cases where neither party is wholly successful there are clearly practical difficulties in awarding costs on an issue by issue basis which would involve making separate costs orders. His Honour took a pragmatic approach, which has much to commend it, of apportioning the costs between the parties.'

[16] A trial judge may find that despite the complex nature of the case it remains entirely possible to identify the disputed issues which were resolved, and the evidence adduced specifically with respect to them so as to conclude that particular issues dominated the trial. ...

17 In McFadzean v CFMEU,[10] the Court of Appeal (Warren CJ, Nettle and Redlich JJA) dismissed an appeal against costs orders. There were a large number of parties and mixed degrees of success. Ashley J (as his Honour then was), ordered the plaintiffs to pay 40 per cent of the defendants' costs and apportioned individual liability for those costs between the plaintiffs. He explained the 40 per cent figure as follows:[11]

[32] ...why 40 per cent? The answer is that it is my best attempt at synthesis of a series of considerations pertinent to the plaintiffs' claim: The success of some plaintiffs on some causes of action; the failure of some plaintiffs altogether; the success of some defendants altogether; the fact that even the successful plaintiffs failed upon many causes of action; the fact that the causes of action upon which some plaintiffs succeeded represented only a small fraction of the causes of action which were pleaded; the fact that there were very many issues joined upon which the plaintiffs failed, including issues pertinent to most of the causes of action upon which some plaintiffs ultimately succeeded; the fact that the plaintiffs succeeded upon some issues joined even though that did not always mean that a cause of action was established; and the fact that any additional costs payable by the plaintiffs to [the deceased defendant's] estate would involve, in the overall scheme of things, a very small amount.

18 In dismissing the appeal, the Court of Appeal said:[12]

[153] The judge below acknowledged that in the normal course, a plaintiff who was only successful on one of a number of pleaded causes of action would be entitled to costs. In our view, the reasons his Honour gave for departing from this course were sound. The Rules of Court are wide enough to permit an apportionment of costs according to issues or causes of action. Importantly, the judge regarded the case brought by the successful appellants as a "substantial failure ... whether assessed by references to causes of action or issues." His Honour observed that the plaintiffs had been successful in eight of the 63 causes of action they had brought, and that, assessed as a proportion of the disputed questions of fact resolved in their favour, the success of the plaintiffs was substantially less than that. In these circumstances, there was clearly a reasonable basis for his Honour's conclusion that a "substantial injustice" would result from an award of costs in favour of the successful plaintiffs.

19 In GT Corp Pty Ltd v Amare Safety Pty Ltd (No 3), Robson J engaged in an extensive review of the authorities. His Honour helpfully summarised the relevant principles as follows:[13]

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

Departure from the general rule and disentitling conduct

20 The Court may also depart from the usual rule by declining to award costs to a successful party or by ordering a successful party to pay the costs of an unsuccessful party.[14] In Donald Campbell & Co v Pollak, Viscount Cave LC explained that:[15]

... A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to costs unless and until the Court awards them to him, and the Court has an absolute and unfettered discretion to award or not award them. This discretion, like any other discretion, must of course be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connected with the case. ...

21 To deprive a successful party of its costs is an exceptional measure, justified only by 'special circumstances'.[16] As to the circumstances, exceptions or factors the Court may take into account, in Oshlack v Richmond River Council, McHugh J said:[17]

[69] The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:

No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.

'Misconduct' in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.

22 Where a litigant is successful on the question of liability, but is unable to establish loss of monetary significance, nominal damages may be awarded. In Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2), Hodgson JA (with Allsop P and Macfarlan JA agreeing) said:[18]

[14] When a plaintiff establishes a breach of contract but obtains only nominal damages, this generally justifies an order that the plaintiff pay the defendant's costs, unless the finding of breach amounts to a vindication of rights of some significance: Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [100], and cases there cited.

23 Bell J dealt with this question at length in Actrol Parts Pty Ltd v Coppi (No 3). His Honour said as follows:[19]

[90] Historically, nominal damages were regarded as 'a mere peg on which to hang costs'. In those days, the rule of awarding costs in favour of the successful party was applied strictly. This reflected the rather determinist notion that an award of even token damages in favour of a party represented the nomination of that party as the successful party for the purposes of the application of the rule.

[91] A review of the authorities reveals that a party obtaining an award of nominal damages is no longer automatically regarded as a successful party for the purposes of costs. So held Robson J in this court in NCON Australia v Spotlight Pty Ltd (No 7). I would follow his Honour's decision, with which I respectfully agree.

...

[93] ... The judgment of McClure P, Newnes and Murphy JJA [in Motium Pty Ltd v Arrow Electronics Australia Pty Ltd] contains a helpful discussion of the concept of nominal damages. On the basis of this discussion, their Honours summarised the principle thus:

While each case must depend upon its own facts, where it is not a primary purpose of proceedings simply to establish or vindicate some legal right but the primary purpose is to recover substantial damages, ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings ... In such a case, the party has obtained something of no real use to them and something which, if they had known it was all that was available, they would not have brought proceedings to recover. It would be contrary to modern notions of the efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantively failed in the action.

[94] The Full Court of the Federal Court of Australia has also rejected the relevance of the general rule in modern circumstances. Spender, Nicholson and Finn JJ discussed the authorities in Nexus Minerals NL v Brutus Constructions Pty Ltd and Kozyrski. Their Honours referred to the modern rule in England, citing with approval the following passage from the judgment of Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd:

No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a 'successful' plaintiff. In certain cases he may be, eg, where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case.

Spencer, Nicholson and Finn JJ went on to approve of the judgment of Stephenson LJ (Griffiths and Purchas LJJ agreeing) in Alltrans Express Ltd v CVA Holdings Ltd who stated that nominal damages 'was not the event at which the plaintiffs were aiming' and did not enable the plaintiffs to be regarded as successful. Stephenson LJ considered that the analysis of Devlin J in Anglo-Cyprian had 'the force of common sense'. After referring to these English cases, Spencer, Nicholson and Finn JJ in Nexus Minerals stated:

An award of nominal damages ought not today be regarded as a 'peg on which to hang costs': cf Beaumont v Greathead [1846] EngR 257; (1846) 2 CB 494 at 499; see McGregor on Damages, paras 404-405, Sweet & Maxwell, London, (1988, 15th ed); see also Burrows, Remedies for Tort and Breach of Contract, 269-270, Butterworths, London (2nd ed 1994).

[95] As can be seen, in making that statement, Spencer, Nicholson and Finn JJ adopted the analysis in the 15th edition of McGregor on Damages. The learned author of that text ends his analysis of this subject in the 17th edition by citing the judgment at first instance in Hyde Park Residences Ltd v Yelland where Jacob J stated plainly:

It seems to me that the whole question of nominal damages is at the end of this century far too legalistic. A plaintiff who recovers only nominal damages has effectively lost and in reality the defendant has established a complete defence.53

[96] The leading Australian text is Law of Costs. Referring to the old rule that an award of nominal damages was a peg on which to hang an order for costs, the learned author states:

In more recent times, however, courts have doubted whether a plaintiff who recovered only nominal damages should, for the purposes of exercising the costs discretion, be regarded as successful.

Emphasising the fact-intensive nature of the inquiry, the author goes on to say:

The matter ultimately rests on the facts of each case. The award of nominal damages will not necessarily deny success for costs purpose if some other right is vindicated by the judgment. For instance, if the aim of the suit is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained, a plaintiff who recovers nominal damages may, to that extent, properly be regarded as a successful plaintiff. But in other circumstances, especially if the aim of the suit is to secure a substantial award of damages, an award of nominal damages may be seen as a failure by the plaintiff to establish the claim.56

[97] In cases where the aim of the proceeding is to establish a legal right, I think the award of damages is not necessarily a mere peg upon which to hang costs. The damages, although nominal, might represent vindication of the right. This is reflected in the description of nominal damages given by Lord Halsbury in The Mediana:

Nominal damages' is a technical phrase which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgment because your legal right has been infringed.

[98] The function of nominal damages as vindication is potentially important in some cases. Examples might include actions in tort for personal assault where the damages are nominal but the injury to dignity is not or actions to establish a legal right that is of present and continuing significance to the claiming party but does not yet sound in significant damages. (footnotes omitted)

24 In Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd,[20] Stevenson J found that Newcrest had breached a confidentiality agreement, but the breach caused no loss and did not enable Newcrest to derive a profit. Likewise, Newcrest had engaged in misleading or deceptive conduct, but that conduct did not occur 'in trade or commerce.' His Honour held that the plaintiff was to bear the costs of the proceeding.

25 Stevenson J referred to the authorities which made clear, that where a plaintiff establishes liability and obtains an order for payment of nominal damages, the plaintiff is usually not regarded as the successful party to the action.[21] While the issue of liability (the question of breach - on which the plaintiff succeeded) was separable from and distinct to the issues on which it failed (causation and remedy)[22] - his Honour could not conclude the issue was 'clearly dominant' and justified departing from the usual order as to costs. Stevenson J said:[23]

[33] However, I find it more difficult to conclude that GCR succeeded on a "clearly dominant" issue or issues that would warrant departure from the usual order as to costs. The issues on which it succeeded were certainly important. But Newcrest emphasised, throughout the hearing, that a central issue in the case was the one on which it succeeded; namely that even if it was in breach of the Confidentiality Agreement (or any other duty of confidence), and even if it had engaged in misleading or deceptive conduct, such conduct did not cause it to make a profit, or GCR to make a loss. Such conduct, it was submitted, made no difference to the Department's consideration of Newcrest's applications to renew its exploration licences. In oral submissions, GCR also accepted that "causation is a huge issue in this case". Indeed, that issue took up a considerable proportion of the hearing time before me.

[34] Another issue which took much hearing time was the dispute between the parties' experts as to the fair market value of Newcrests' exploration licences; particularly those which Newcrest would have been obliged to relinquish had it not satisfied the Department as to "special circumstances". Cross-examination of those witnesses took a full day (in a four day trial) and occupied more than half the time devoted to oral testimony. This evidence was relevant to the profit allegedly made by Newcrest and the loss allegedly suffered by GCR. Because GCR failed in relation to the equitable confidence issue, and causation, it also failed in relation to these issues.

[35] To succeed, it was necessary for GCR to do more than show a breach by Newcrest of the Confidentiality Agreement. It had to show that breach had some consequence. I see both these issues as having, at least, equal significance.

26 I dealt with a question of this kind in Nicholson v Hilldove Pty Ltd (No 4),[24] in relation to a plaintiff who established liability on the part of the defendants but was entitled only to nominal damages. The plaintiff, while 'properly regarded as the loser', had won 'a critical part of the case, which was the main focus of the liability stage of the trial.'[25] That plaintiff was ordered to pay cost on some issues, but did not receive his costs on others. I did not order the plaintiff to pay the defendants cost of the liability stage of the trial, notwithstanding the fact that he ultimately received nominal damages. As I emphasised there, 'each case must depend on its own facts.'[26] Further:[27]

[28] ... In some cases it would not be appropriate that a party recover any costs having effectively substantially failed in the proceeding. In fact, as the cases demonstrate, depending upon the facts of a particular case, that party may be required to pay the costs. For the reasons given this is not such a case. ...

27 Although an issue by issue approach may be appropriate in the circumstances of this case, ultimately it does not matter. Given the overall outcome, and in particular the award of nominal damages and the conduct of the Vainers, that outcome would be very similar to an overall assessment of costs.

28 Although there is a degree of overlap, insofar as the allegations of breach of fiduciary duty and of the Implementation Agreement are concerned, these were issues which would have been raised by Rozenblit in any event, in his attempt to successfully prosecute the causes of action which related to the VRT Global Liquidation Issue and Polymeric Issue. I do not consider the existence of this overlap to preclude me from considering this case on an issue by issue basis. It is a useful and desirable approach in this case.

29 Rozenblit was successful, notwithstanding the award of nominal damages (which is referred to below) on the first of the claims. The defendant was successful on the second claim. It cannot be said that an inordinate amount of time was spent, or evidence adduced in respect of any one of the issues.

30 In my opinion Rozenblit should not be awarded costs for his 'success' on this issue. He should not, however, as the successful party be ordered to pay the costs of the defendants in relation to this claim.

31 Although Rozenblit was awarded nominal damages, in light of the authorities referred to above, I do not regard him as being the 'successful' party in respect of the Share Transfer Claim, 'unless the establishment of a legal right independent of damages was one of the primary purposes of the proceeding'.[28]

32 I am not satisfied that this claim was brought for vindication, at least not in the relevant sense. Of course, Rozenblit sought moral vindication for the wrongful transfer of his shares. For the reasons explored in the Judgment, the conduct of the Vainers was unconscionable. However, in my opinion, this is not the proper form of 'vindication' that would regard him as having been successful. The claim was pursued primarily or solely with the aim of seeking monetary compensation or restitution commensurate with the perceived value of the shares. Each cause of action comprising the Share Transfer Claim had this as its objective. Were Rozenblit aware that the shares were worthless, or that this would have been the outcome, the claim would probably not have been made.

33 Further, in the exercise of my discretion I have had regard to certain aspects of the conduct of the plaintiff's claim. As recognised in the Judgment, it was necessary to depart from Rozenblit's pleaded case - notwithstanding the fact that his statement of claim has been through numerous and extensive amendments. As Toohey J has said, 'Axiomatic though it may be to say it, the primary function of pleadings is to define the issues for decision in the litigation'.[29] I say this with no criticism intended - the subject matter of this case, and the various issues involved, were indeed complex and difficult - but it was not entirely clear that the pleadings fulfilled this purpose.

34 Likewise, issues that were the subject of submissions should have been given greater consideration, yet were not. Rozenblit relied on certain matters which were 'too vague and general to be of any assistance.'[30] While this makes the task of the Court more difficult, it more importantly obstructs a proper identification of the 'real issues' to be considered, determined and responded to by the defendants.[31]

35 In the final analysis Rozenblit was profoundly misled by Vainer and the victim of unconscionable conduct engaged in by Vainer and Dr Vainer. I say this to disavow any suggestion that he should pay the costs of the Vainers in respect of the Share Transfer Claim. Further, in light of the conduct issues referred to below, I would not order costs against Rozenblit in relation to the Share Transfer Claim.

The VRT Global Liquidation Issue, Polymeric Issue and Valuation Issue

36 In my opinion, Vainer is not entitled to recover all of his costs despite success on these issues. As the authorities referred to make clear, the conduct of a party may disentitle such party to an order for costs in circumstances where they would otherwise be entitled to such an order. There are two principal conduct issues which, in my opinion, affect the entitlement of Vainer to recover his costs: his repeated untruthfulness in the witness box and non-compliance with his discovery obligations.

37 Such conduct is entirely inconsistent with, and contrary to, the principles enshrined in the CPA. I am satisfied that by engaging in the conduct referred to below, Vainer breached ss 16, 17, 20, 21 and 26 of the CPA. These too are considerations that I may take into account in exercising my discretion with respect to costs.[32] As the Court of Appeal has previously observed, 'Judicial officers must actively hold the parties to account.'[33]

38 As I noted in the Judgment, Vainer's evidence was 'unrealistic, implausible and in my view, untruthful.'[34] His suggestion that Dr Vainer's willingness to provide security created the relevant risk and was the relevant consideration was 'self-evidently implausible, illogical and contradicted by the documents and Gelberg.' It was also strenuously repeated by him despite him being contradicted by documents and other witnesses.[35] Similarly, his belated suggestion that the Share Transfer represented consideration for Dr Vainer's previous purchase of $400,000 for 10 per cent of the shares, was also entirely implausible - and in my view, a complete and utter fabrication or recent invention.[36]

39 The fact of the matter is that Vainer deliberately gave untruthful and self-serving evidence in an attempt to frustrate Rozenblit's claims. Rozenblit was put to the time and expense of having to dispute the 'consideration' contended (or formulated) by Vainer.[37]

40 The other primary issue which reflected badly on Vainer was discovery.[38] He did not discover documents he clearly had or had access to, and the explanations given by him for their absence were entirely unpersuasive. It is a duty of all litigants to disclose the existence all documents of which they are aware, and which they ought to consider are critical to the resolution of the dispute.[39] The effect being that Rozenblit is put to the time and expense of seeking out those documents which he deemed to be necessary from alternative sources, such as the accountants and liquidators of VRT and VRT Global. Although, more importantly, such conduct frustrates the court process and proper administration of justice.

41 As counsel for Rozenblit identified, the plaintiff was left with no option but to engage in a series of interlocutory steps, as well as ongoing correspondence with the Vainers' solicitors seeking particular discovery of documents they suspected of having been withheld. In this respect:

(a) Orders for particular discovery were made on three separate occasions - preceded by correspondence between the parties - and requiring the drafting of submissions, applications and supporting affidavits.

(b) Rozenblit was required to issue at least 18 subpoenas to various third-parties in order to locate evidence - much of which could likely have been obtained from Vainer.

(c) Rozenblit was put to the time and effort of various internet searches - which revealed information that had been in Vainer's possession - and which added to the total litigation burden of the plaintiff.

42 Further, and while I refrained from making a finding on the matter - there was also the curious case of the doctored minutes that were somehow referred to by Vainer in his witness statement.

43 In all of the circumstances, I am satisfied that notwithstanding his success, Vainer is not entitled to recover all of his costs on any of the three latter issues comprising the second claim. In my opinion he is only entitled to one half of his costs in relation to the second claim.

44 Doing the best I can, I assess this to constitute 25 per cent of the costs of the trial,[40] and subject to what is set out below, order accordingly.

45 While Dr Vainer was not entirely forthcoming with his evidence, I am not satisfied that he was - at least to the degree of Vainer - deliberately untruthful or otherwise sought to frustrate Rozenblit's claim. As noted, he did not enthusiastically support Vainer's implausible contentions as to the 'consideration' for the Share Transfer. However, and also as noted, he was not forthcoming in relation to many matters, and especially the funds that he provided to Polymeric, which he eventually characterised as a 'loan to his son'.

46 Dr Vainer was content to allow his son, Vainer, to take carriage of the defence to Rozenblit's claims and acquiesced to what Vainer considered to be appropriate.

47 As noted above, I do not consider that Dr Vainer is entitled to the costs of his defence to the Share Transfer Claim.

48 This leaves only the costs of his defence in relation to the VRT Global Liquidation Issue and Polymeric Issue. These relied on his contended accessorial liability to Vainer's alleged breach of fiduciary duty. Neither of these claims were made out.

49 However, in the exercise of my discretion, I consider that for similar reasons Dr Vainer should only receive 25 per cent of his costs of the trial.[41]

50 In the final analysis and notwithstanding the conduct issues referred to, the defendants were successful and should have part of their costs on the standard basis. The 25 per cent recognised their failure in relation to the first claim and a reduction of the costs that would otherwise have been recoverable in relation to the second claim. I do not propose to interfere with existing costs orders in favour of either party. However, in relation to costs reserved, they are not to be included in the costs recoverable by the defendants. In relation to those costs each party should bear their own costs.

51 I propose to keep the freezing order in place until Monday, 24 June 2019, being approximately two weeks from the date of this Judgement.

[1] Rozenblit v Vainer & Anor [2019] VSC 316 (Judgment).

[2] Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355; (2010) 31 VR 46 [13] (Maxwell P, Tate JA and Habersberger AJA) ('Kheirs').

[3] Kheirs [2010] VSCA 355; (2010) 31 VR 46 [15] (Maxwell P, Tate JA and Habersberger AJA).

[4] Ibid [27] (Maxwell P, Tate JA and Habersberger AJA).

[5] Spotless Group Ltd v Premier Building & Consulting Pty Ltd (recs apptd) [2008] VSCA 115 [13] (Redlich and Dodds Streeton JJA) ('Spotless'); Pricom Pty Ltd v Sgarioto (Unreported, Supreme Court of Victoria, Eames J, 10 April 1995).

[6] See e.g. Orrong Strategies Pty Ltd v Village Roadshow Ltd (No 2) [2007] VSC 205 [14] (Habersberger J); GT Corp Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296 [31] (Robson J); Nolan v Nolan [2004] VSCA 134 [6] (Ormiston, Chernov and Eames JJA); NSW Coal Compensation Board v Nardell Colliery Pty Ltd [2004] NSWCA 35 [99] (Hodgson JA).

[7] See e.g. Re Madden as Official Liquidator of Aquanaut Constructions Pty Ltd (in liq) [2001] NSWSC 1051 [4] (Hamilton J).

[8] Spotless [2008] VSCA 115 [6] (Redlich and Dodds Streeton JJA).

[9] Ibid [14]-[16] (Redlich and Dodds Streeton JJA).

[10] [2007] VSCA 289 (Warren CJ, Nettle and Redlich JJA) ('McFadzean'). Endorsed by the Court of Appeal (Neave and Redlich JJA and Vickery AJA) in Tayles v Davies [2010] VSCA 107 at [17].

[11] McFadzean v CFMEU (No 2) [2004] VSC 480 [32] (Ashley J).

[12] McFadzean [2007] VSCA 289 [153] (Warren CJ, Nettle and Redlich JJA).

[13] [2008] VSC 296 [59] (Robson J).

[14] See e.g. The Tubby Troup Pty Ltd v Sailbay Pty Ltd (1994) ATPR 26-120 [90] (Drummond J).

[15] Donald Campbell & Co v Pollak [1927] AC 732, 811-812.

[17] [1998] HCA 11; (1998) 152 ALR 83, 102 [69] (McHugh J).

[18] [2011] NSWCA 171 [14] (Hodgson JA). While Hodgson JA referred to a breach of contract, the principle is, as demonstrated below, not confined to claims in contract.

[19] [2015] VSC 758 [90]-[98] (Bell J).

[20] [2013] NSWSC 345 (Stevenson J) ('Gold & Copper').

[21] Gold & Copper [2013] NSWSC 345 [23] (Stevenson J).

[24] [2013] VSC 578 [9]-[28] (Sifris J) ('Nicholson').

[25] Nicholson [2013] VSC 578 [18] (Sifris J).

[28] Witcombe v Talbot & Olivier (No 2) [2009] WASC 173 [22]-[24] (Beach J).

[29] Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 92 ALR 53, 71 (Toohey J).

[31] For example, the defendants made responsive closing submissions on the law relating to the unauthorised use of confidential information. These submissions were unnecessary and irrelevant given the real issues in this case. They were, however, understandably raised given the direction that Rozenblit's case appeared to be heading in relation to the intellectual property of VRT Global or Polymeric.

[32] Civil Procedure Act 2010 (Vic) s 28(1) and (2). I note that it is also open to me to make an order under s 29 of that Act.

[33] Yara Australia Pty Ltd v Oswal [2013] VSCA 337 [26] (Redlich, Priest JJA and Macaulay AJA).

[37] I refer to the observations of Senior Member J Lucy in Abughazaleh v Commissioner of Police, NSW Police Force [2018] NSWCATAD 30 at [33]: 'Where a party brings proceedings which are based upon evidence the Tribunal finds to be untruthful, the party is using the tribunal processes for fraudulent ends. The other party is put to the time and expense of responding to proceedings which are, to some extent at least, not brought and pursued in good faith.' Of course, these observations are equally applicable to defence based on evidence found to be false. See also Australian Securities and Investments Commission (ASIC) v Cassimatis (No 9) [2018] FCA 385 [80] (Dowsett J); Papadellis v Commissioner of Police, NSW Police Force [2018] NSWCATAD 293 [21] (K Ransome Senior Member).

[38] Rozenblit referred to the eleven Deakin quarterly reports as an example. These were of significance to the VRT Global Liquidation Issue and Polymeric Issue. Vainer produced three of the eleven reports: those which he believed demonstrated the research project had been a failure. Amongst the withheld reports was the eighth quarterly report, which Vainer himself dubbed 'the glamorous report.'

[39] Civil Procedure Act 2010 (Vic) s 26.