Plaintiffs/Defendants by Counterclaim v Defendant/Plaintiff by Counterclaim

3 Following delivery of the special referee's report, the Court required that the issue of the 'Unmatched Payments' be further investigated. To facilitate that course, the Court ordered that its consideration of the use of the special referee's report pursuant to r 50.04 be deferred and held over pending completion of a process directed towards interrogating the 'Unmatched Payments' and additional documents the defendant had subpoenaed from his bank, Westpac Banking Corporation. That process was completed by mid-August 2021.

4 At the hearing on 20 August 2021, having completed the process of interrogating the 'Unmatched Payments', and after hearing from counsel for the respective parties,[2] her Honour noted[3] it is clear that:

(a) there is no evidence that any of the cheques the subject of the Westpac subpoena or the Unmatched Payments were paid to the plaintiffs;

(b) there was no other ground advanced by the defendant as a basis for the Court to consider referring any matters to the Special Referee for further consideration and/or reporting;

(c) the plaintiffs have properly accounted for all moneys the subject of the business relationship between the parties; and

(d) there are no further moneys that the defendant can establish ought be considered by the Special Referee.

5 In those circumstances, counsel for the defendant acknowledged that both the minute of proposed orders and proposed form of judgment submitted by the plaintiffs were in a form appropriate to be made. Accordingly, orders were made adopting the special referee's report in whole and ordering that the defendant pay the plaintiffs their costs of and incidental to the reference and the special referee's report, and their costs of the summonses filed by the defendant on 21 January 2020 and on 30 March and 6 July 2021. The plaintiffs also sought, and obtained, judgment in the respective amounts claimed by Priceline, NPRS and API Victoria in the proceeding,[4] rather than the higher amounts determined by the special referee, together with interest and costs, and the defendant's counterclaim was dismissed.[5]

6 Paragraph 6 of the judgment provided for the parties to confer as to the appropriate basis for the taxation of the plaintiffs' costs in this proceeding, and in the absence of agreement, they were required to file submissions to enable the matter to be determined by the Court, as follows:

6. In the event that the parties cannot reach agreement by 4:00 pm on Friday, 3 September 2021 concerning the basis on which the plaintiffs' costs are to be assessed and paid (including the costs awarded in favour of the plaintiffs in the orders made on 20 August 2021):

(a) the plaintiffs shall file and serve any submissions concerning the basis on which their costs are to be assessed and paid, of not more than 5 pages, by 4:00 pm on Friday, 10 September 2021; and

(b) the defendant shall file and serve any submissions in reply concerning the basis on which the plaintiffs' costs are to be assessed and paid, of not more than 5 pages, by 4:00 pm on Friday, 17 September 2021.

The plaintiffs sought to have their costs assessed and paid on an indemnity basis

7 On 9 September 2021, the plaintiffs filed their submissions concerning the basis on which the plaintiffs' costs are to be assessed and paid by the defendant. Therein, the plaintiffs confirmed that the parties had been unable to reach agreement, and in those circumstances, they sought to have their costs assessed and paid on an indemnity basis. They also requested that the Court determine the matter 'on the papers'.[6]

No submissions were filed by or on behalf of the defendant

8 No submissions were filed by or on behalf of the defendant on 17 September 2021. However, as the defendant's solicitors had only recently filed a notice of ceasing to act dated 30 August 2021,[7] the Court wrote to the parties on 20 September 2021 and informed them that any submissions as to costs by or on behalf of the defendant must be filed by 4:00pm on Wednesday, 22 September 2021, failing which the Court would proceed to determine the issue 'on the papers'. As matters transpired, there was no response from the defendant, and his (former) solicitors responded, by email on 20 September 2021 , informing the Court that they no longer hold any instructions to act on behalf of the defendant.

The Court's discretion as to costs - general principles

9 Section 24(1) of the _Supreme Court Act 1986 (_Vic)[8] and Part 4.5 of the Civil Procedure Act 2010 (Vic) (which deals with the Court's powers as to costs) provide that the Court has a broad discretion in determining questions of costs.

The power and discretion of the Court as to costs under section 24 of the Act shall be exercised subject to and in accordance with this Order.

11 The Rules provide for taxation of costs and the bases on which they are to be taxed. Rule 63.28 provides that:

Subject to this Part, costs in a proceeding which are to be taxed shall be taxed on -

(a) the standard basis;

(b) the indemnity basis; or

(c) such other basis as the Court may direct.

12 The 'standard basis' and the 'indemnity basis' are described in Rules 63.30 and 63.30.1, respectively, as follows:

Standard basis

On a taxation on the standard basis, all costs reasonably incurred and of reasonable amount shall be allowed.

Indemnity basis

(1) Subject to paragraph (2), on a taxation on the indemnity basis all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.

(2) Any doubt which the Costs Court may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable.

13 Rule 63.31, which deals with the 'Usual basis of taxation', states:

Except as provided by these Rules or any order of the Court, including the Costs Court, costs shall be taxed on the standard basis.

14 In the recent decision in Bougainville Copper v RTG Mining (Costs), Mukhtar AsJ observed that the difference between the rule concerning indemnity costs and the standard costs rule 'is not crystalline clear'.[9] But his Honour went on, helpfully to explain what is the essential difference between the two bases, as follows:[10]

19. . . . It is thought the distinction lies in who bears the onus of proof on a question of reasonableness.[11] That is, in the case of indemnity costs, the onus is on the paying party to demonstrate that the receiving party's costs were unreasonably incurred or were unreasonable in amount.[12]

20. But more importantly, and to add another qualification, despite the distinction between standard costs and indemnity costs, the costs allowed on either basis are assessed on the same Supreme Court Scale of Costs in Appendix A of the rules ('the Scale'), with a power to increase on taxation. Rule 63.34 states (with my underlining):

(1) Subject to paragraph (3), a legal practitioner for a party to whom costs are payable (whether the basis of taxation is the standard basis or the indemnity basis) shall be entitled to charge and be allowed costs in accordance with the scale in Appendix A unless the Court or the Costs Court otherwise orders.

(2) Witnesses' expenses and interpreters' allowances shall be fixed in accordance with the scale in Appendix B.

(3) The Court may, on special grounds arising out of the nature and importance or the difficulty or urgency of the case, allow an increase not exceeding thirty per cent of the legal practitioner's charges allowed on the taxation of costs with respect to-

(a) the proceeding generally; or

(b) to any application, step or other matter in the proceeding.

(4) Where the Court so directs, the Costs Court shall have the same authority as the Court under (3) to allow an increase in the fees set forth in Appendix A.

21. There are additional powers to increase an allowance for costs on the Scale. Item 17 of the Scale allows an additional amount to be allowed having regard to the levels of skill, care and responsibility involved in the case. Outside the Scale, and more broadly, rule 63.72 states that 'In any particular taxation of costs, the Costs Court may increase or decrease the amount or value of any allowance or expense in Appendix A or Appendix B as the Costs Court thinks fit'.

22. There are three points to be taken from this overview. First, taxation of costs on the standard basis ought not be regarded as a minimalist or an economising 'entry level' measure. It is more generous than that. It appears to equate with the previous solicitor/client basis of taxation. Secondly, whatever the basis of taxation, the costs still fall to be taxed according to the Scale, with a power in the Costs Court to increase amounts allowed under the Scale. Thirdly, taxation on the indemnity basis does not mean the client will be indemnified from being out of pocket.

The Court's discretion to depart from the usual order and award costs on an indemnity basis

15 The issue of whether to award costs on other than the standard basis - that is on an indemnity basis or some other basis - is a matter that is in the discretion of the Court.[13]

16 In Oshlack v Richmond River Council,[14] McHugh J conveniently summarised the general position concerning the 'usual order as to costs', and the objectives the Court seeks to meet in exercising its discretion as to costs, as follows: [15]

67. The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party.[16] If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

...

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,[17] 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,[18] or the circumstances leading up to the litigation[19]. 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[20]; unnecessarily protracts the proceedings[21]; succeeds on a point not argued before a lower court[22]; prosecutes the matter solely for the purpose of increasing the costs recoverable[23]; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.[24]

17 More recently, in Northern Territory v Sangare,[25] the High Court described the discretion as to costs in the following terms:[26]

The discretion as to costs

24. It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation.[27] While the width of the discretion "cannot be narrowed by a legal rule devised by the court to control its exercise",[28] the formulation of principles according to which the discretion should be exercised does not "constitute a fetter upon the discretion not intended by the legislature".[29] Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power.[30]

25. A guiding principle by reference to which the discretion is to be exercised - indeed, "one of the most, if not the most, important" principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party.[31] The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. . . .

18 Accordingly, when considering how and in what manner to exercise its discretion as to costs, it is permissible for the Court to have regard to the conduct of the respective parties in the litigation.

19 The exercise of the discretion to award costs to the successful party over and above the ordinary or usual basis is generally reserved for those cases where the losing party has engaged in unmeritorious, deliberate or improper conduct or where the pursuit of the action was 'a high-handed presumption' (to adopt Tadgell J's description in Australian Guarantee Corp Ltd v De Jager[32]) such as to warrant the Court expressing its disapproval and doing what it can to ensure the successful party is not out of pocket over it.

20 In a similar vein, in Fountain Selected Meats (Sales) Pty Ltd v Int. Produce Merchants Pty Ltd, [33] Woodward J said:[34]

I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action had been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.

21 In Bougainville Copper,[35] Mukhtar AsJ, after referring with approval to Woodward J's statement of principle, outlined instances of 'other' circumstances that might justify the Court making a special costs order, as follows:[36]

24. There may be other considerations concerning the delinquent, irresponsible or counterproductive conduct of litigation by a party which led to prolongation or wastage or infliction of greater costs. Depending on the degree, that can justify the Court making a special costs order to show its disapproval of such conduct. The following circumstances have been identified as instances in which it could be proper to order indemnity costs:

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

(b) the making of an irrelevant allegation of fraud;

(c) conduct which causes loss of time to the Court and to other parties;

(d) the commencement or continuation of proceedings for an ulterior motive;

(e) conduct which amounts to a contempt of court; and

(f) the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.

25. The last of those considerations equates with the overarching obligation under s 18 of the Civil Procedure Act 2010 which obliges a person to not make any claim in a civil proceeding that does not, on the factual and legal material available to the person at the time of making the claim, have a proper basis. The Act states that, when it comes to exercising its discretion on costs, the Court can take into account any contravention of the overarching obligations.[37]

The plaintiffs' application for a 'special' costs order

22 In the present case, the plaintiffs seek a 'special' costs order in the form of an award of indemnity costs. Their application for indemnity costs is advanced on two alternative bases:

(a) from the commencement of the proceeding on 30 November 2018 until judgment, by reason of the application of general discretionary considerations; alternatively

(b) from 11:00am on Thursday, 1 August 2019 until judgment, by reason of the defendant's failure to accept the formal offer of compromise made by API on 30 July 2019.

The plaintiffs contend that general discretionary considerations warrant an order for indemnity costs

23 The plaintiffs' primary claim for their costs to be assessed and paid on the indemnity basis from the inception of the proceeding is advanced on the basis that they are 'the entirely successful parties in the Proceeding', judgment having been entered in their favour and the counterclaim having been dismissed.[38] They also rely upon the following matters:[39]

(a) prior to the commencement of the Proceeding, the defendant did not give any indication to the plaintiffs that he disputed the validity or enforceability of the Reference Agreement and the binding and conclusive nature of the Final Determination.[40] As a result, the only cause of action relied upon in the original Statement of Claim was the contravention by the defendant of the Reference Agreement by reason of his failure to pay to the first plaintiff the amount of the Final Determination, being $1,660,569.86,[41] and the first plaintiff alone was joined as the plaintiff to the Proceeding;[42]

(b) after the commencement of the Proceeding, the defendant, by his Defence, alleged for the first time a variety of issues which he said impinged on the efficacy and/or binding nature of the Reference Agreement and/or the Final Determination. As a result of those matters, the Writ and Statement of Claim were amended to permit the commencement of new claims against the defendant in the alternative to those which were originally brought in the Proceeding, and in order to properly bring those new claims, to join as additional parties to the Proceeding three additional companies as plaintiffs, each a related entity to the first plaintiff;

(c) at the directions hearing held on 20 March 2020, the plaintiffs pointed out that the Defence and Counterclaim did not allege any cause of action, at all, on the basis of which the defendant could allege that the plaintiffs were indebted to him. Despite this, the defendant persisted in those allegations;

(d) on 1 May 2020, the Court made orders by consent referring certain questions to a Special Referee. By her report dated 23 April 2021 (Report), the Special Referee concluded that the indebtedness of the defendant to the plaintiffs is significantly greater than the amounts claimed in the Amended Statement of Claim, and ranges from $7.108 million to $5.554 million[43] as at each of three dates;[44]

(e) prior to 8 November 2019, when the defendant amended his defence to include a Counterclaim, the defendant had not asserted that he had any claim available against the plaintiffs.[45] By the Counterclaim, the defendant, for the first time, claimed an amount against the plaintiffs in the sum of $1,790,409.32.[46] In the Report, the Special Referee concluded that the plaintiffs are not indebted to the defendant, at all;[47]

(f) the plaintiffs sought[48] and obtained the Judgment in the amounts claimed in the Proceeding, rather than the higher amount included in the Report. As a result of the Judgment:

(i) the plaintiffs have been entirely successful in the claims made by each of them against the defendant. Judgment has been entered in their favour for the total amount of $1,821,124.50, together with interest totalling $495,445.66, plus costs;

(ii) the Counterclaim has been dismissed; and

(iii) costs have been dealt with globally, in that the defendant is required to pay the costs of all the plaintiffs (including reserved costs), and therefore including the costs of the first plaintiff.

24 In those circumstances, the plaintiffs submit that their costs of the proceeding, including reserved costs and also the costs awarded in favour of the plaintiffs by the orders made on 20 August 2021, should be taxed and paid by the defendant on an indemnity basis from the commencement of the proceeding until judgment.

25 The plaintiffs contend that an award of costs on an indemnity basis is justified in the present case, because the defendant:[49]

(i) caused loss of time and inconvenience to the plaintiffs and the Court. He did so by changing his position after the commencement of the Proceeding, without explanation, concerning the validity and enforceability of the [earlier] Reference Agreement and the [earlier] Final Determination, having earlier insisted that each was valid and enforceable;

(ii) made baseless and unsubstantiated allegations to the effect that the plaintiffs are indebted to him, in circumstances where the Defence and Counterclaim never alleged a cause of action on the basis of which any such indebtedness could arise;

(iii) further to paragraph (ii), caused delay and the incurring of significant costs by the plaintiffs by causing the Proceeding to be referred to the Special Referee.

Consideration and disposition of plaintiffs' primary claim based on general discretionary considerations

26 When judgment was entered on 20 August 2021, the Court made a global costs order in favour of the plaintiffs, in circumstances where they were largely successful on their claims and on the counterclaim. I am not satisfied, however, that the conduct of the defendant in the proceeding is such as would warrant an order for those costs to be taxed and paid on the indemnity basis.

27 From an early point in the proceeding, the gist of Mr O'Neale's real complaint was that there was a lack of transparency about the manner in which his alleged indebtedness to API and its related entities, arising from the supply of pharmaceutical goods and services on credit to his pharmacy at Melbourne Central had been calculated, notwithstanding the completion of the reference to Mr Lavelle and the making of his final determination. Further, Mr O'Neale complained that the lack of clarity around his alleged indebtedness to API and its related entities was exacerbated by the fact that, without his knowledge, API had established an account '757D' and for some reason payments made by him were credited to this account and held in suspension for a period of time. He maintained that the effect of monies being held in suspense in account 757D was that API treated him as being behind in his payments with the result that he was denied rebates to which he was entitled, he was charged interest[50] on supposedly outstanding invoices and API made unexplained charges to his account and did not give credits to which he was entitled.

28 In those circumstances, the instructions provided to the special referee appointed by the Court noted the deficiencies in Mr O'Neale's pleading but also sought to capture the essence of his complaint, as follows:[51]

12. The legal basis on which the defendants by counterclaim are alleged to be indebted to Mr O'Neale is not pleaded in the D&C. However, Mr O'Neale asserts that the indebtedness of the API Group to him emerges in the following manner (noting that each of the following points are not conceded by API and may be the subject of submissions by the parties in due course):

12.1 The Plaintiffs traded with the Defendant.

Mr O'Neale says that it was agreed by letter on 7 December 2009 that Mr O'Neale could have a forward charge of 60 days on opening stock (i.e. payment was due in 60 days). API has not previously been informed by Mr O'Neale of the alleged significance of that letter. In due course, API will make submissions concerning this issue.

12.2 The Plaintiffs used three separate account numbers 2995, 757 and 757B to account for sales to the Defendant:

Account 2995 was for 'ethical' goods or prescription medications.

Account 757 was for API goods, cosmetics and other goods sold in pharmacies.

Account 757B was for administrative fees, advertisements, AMEX fees and interest (incorrectly according to Mr O'Neale) charged on his accounts.

12.3 Various payments were made by Mr O'Neale using AMEX accounts and cheques.

12.4 The payments (AMEX or cheque) did not reflect particular invoiced amounts or invoices.

12.5 A fourth account 757D was established by API in or about January 2010. This account was unknown to Mr O'Neale and for some reason payments made by Mr O'Neale were credited to this account and held in suspension for a period of time.

12.6 Mr O'Neale says that in January 2012 his AMEX facility was cancelled and he was put on COD terms by API. Mr O'Neale also says that $872,653.19 has been received by API and was held in account 757D and not brought to account more generally.

12.7 Mr O'Neale says that the effect of account 757D was that API determined that Mr O'Neale was behind in his payments and:

(a) was denied rebates to which he was entitled;

(b) API charged him interest on supposedly outstanding invoices; and

(c) API made unexplained charges to his account and did not give credits to which he was entitled.

12.8 The rebates form two types:

Mr O'Neale was entitled to a rebate:

(a) if API gave to Mr O'Neale instructions to reduce the price of a certain line of goods (i.e. sale or promotional items) then Mr O'Neale was entitled to receive a rebate on the volume of such stock actually sold ("Promotion Rebate");

(b) if Mr O'Neale was instructed to sell discontinued lines at a lesser price so as to move that line of stock ("Discontinued Line Rebate"). Mr O'Neale was entitled to a rebate in respect of the sale of such stock.

12.9 In the case of both rebate amounts, such amounts were to be calculated by API based on reported sales.

The Points of Sale equipment used at Mr O'Neale's retail premises would record sales and relay that information to API.

12.10 Mr O'Neale says that API must account for the rebates so that you can determine whether his accounts (on a global basis) were at various times in debit or credit.

Likewise, Mr O'Neale disputes the interest charged and says the compounding effect of interest being charged and rebates denied caused API to allege that Mr O'Neale's accounts were in debit. Mr O'Neale contends, on a full and correct accounting, his accounts were in credit.

12.11 Mr O'Neale says that there were also orders which were never actually delivered. Mr O'Neale has requested API provide proofs of delivery for account 2995 for the months of:

March to June 2012 (inclusive)

June 2013 to November 2013 (inclusive)

April 2015 (01/04/15 to 30/04/15)

API have declined to provide same, saying that there was a contractual time limit of 14 days within which Mr O'Neale was contractually required to raise any and all delivery related queries. Mr O'Neale's response is that if the deliveries never arrived, he never had an opportunity to query the non-deliveries.

12.12 Mr O'Neale contends that API should provide details of unexplained charges on Statements and demonstrate the basis upon which each charge was payable under the Franchise Agreement. The charges in questions are:

Mr O'Neale says that the basis of these charges needs to be established if the amounts are to be taken into account. API is not aware of the basis upon which Mr O'Neale disputes the amounts referred to. In the circumstances, whether those amounts should be taken into account will be the subject of submission in due course.

12.13 Mr O'Neale says that in order to account for the correct position (on a running account basis) that a monthly running balance be created and that it include:

(a) allowance for the initial 60 day payment term [see Clause 12.1];

(b) the totals of the monthly accounts for 2995, 757, 757B and 757D [see Clauses 12.2 and 12.5];

(c) less amounts paid (AMEX or cheque) [see Clauses 12.3 to 12.4];

(d) less rebates due [see Clause 12.8 and 12.9];

(e) less credits due and either provided or not provided [see Clause 12.11];

(f) less any unexplained charges [see Clause 12.12]; and

(g) plus interest on positive balances or interest on negative balances. If positive, the interest shall be in Mr O'Neale's favour. If negative, interest shall be in API's favour.

12.14 Mr O'Neale's accounting for the financial transactions for the entire period (2010-2016) between API and himself is set out in Schedule A**.** The table is complex and Mr O'Neale will provide an explanation to you in relation to same. As is explained elsewhere, API says that Mr O'Neale is out of time in now raising transactions that occurred prior to 9 November 2013 (being the date 6 years before the date of the D&C).

Account 757D

13. During the course of the Proceeding, Mr O'Neale has raised an issue concerning the API Group's use of an account numbered 757D. According to Mr O'Neale, the API Group's use of Account No. 757D meant that amounts which he paid to the API Group were not allocated to the accounts which he conducted with the API Group, being the accounts numbered 2995, 757 and 757B. As a result, Mr O'Neale contends that amounts which API Group claims were not paid, were in fact paid by him.

14. The API Group denies the matters asserted by Mr O'Neale in relation to Account No. 757D. Copies of relevant documents have been provided to you. The API Group says that Account No. 757D is an internal API Group account, commonly referred to as a 'suspense' account. That account has been used by the API Group on three occasions:

(a) first, on 31 December 2009, the API Group issued a statement for account number 757 dated 31 December 2009 which recorded the amount owing by Mr O'Neale in that account as $219,406.02 (being the amount recorded in the tax invoice numbered INV1087095 dated 28 January 2010). This amount was transferred to Account No. 757D on 28 January 2010 and was subsequently paid to the API Group by the API Group crediting the sum of $219,496.02 to Account No. 757D and debiting that amount to Mr O'Neale's American Express account. API says that this was done to provide Mr O'Neale with additional time to pay the sum of $219,406.02 (which was otherwise due for payment). Mr O'Neale denies this and refers to the API letter of 7 December 2009;

(b) second, on 31 January 2010, the API Group issued a statement for account number 757 dated 31 January 2010 which recorded the amount owing by Mr O'Neale in that account as $97,444.28 (being the amount recorded in the tax invoice numbered INV1119405 dated 26 February 2010). This amount was transferred to Account No. 757D on 26 February 2010 and was subsequently paid to the API Group by the API Group crediting amounts totalling $97,444.28 to Account No. 757D and debiting those amounts to Mr O'Neale's American Express account, namely $89,159.94 on 30 March 2010 and $8,284.34 on 30 July 2010. API says that this was done to provide Mr O'Neale with additional time to pay the sum of $97,444.28 (which was otherwise due for payment). Mr O'Neale denies this and refers to the API letter of 7 December 2009;

(c) third, in about early April 2012, Mr O'Neale did not pay amounts totalling $308,210.89 in relation to his American Express account. Because of Mr O'Neale's non-payment, American Express charged back this amount to the API Group, which the API Group was required to pay to American Express. The API Group subsequently debited the sum of $308,210.89 (being the amount which it paid to American Express) to Account No. 757D on 2 April 2012 by raising invoice number INV1970769. The sum of $308,210.89, which was debited to Account No. 757D on 2 April 2012, was paid to the API Group by Mr O'Neale in two tranches, $200,000 on or about 8 June 2012 and $108,210.89 on or about 13 June 2012. This is denied by Mr O'Neale.

29 Under the reference, the special referee was also instructed to follow the methodology set out in the instructions, which required the preparation of separate running accounts (including interest and rebates as would have been appropriate) for each of the three periods specified in the First Question, determined from the respective commencement dates until the date of the report.

30 The process undertaken by the special referee in preparing her report took longer than was anticipated, and occupied almost 12 months. Her report, and the Appendices, demonstrates that the task she undertook was not a simple or straightforward exercise.

31 Once the report became available, the Court and the parties spent a further period of (almost) four months on the process of interrogating and seeking to match the 'Unmatched Payments' the special referee had listed in Appendix H of her report. Until that process was completed, however, it was unclear whether or not there were additional payments that had been made by Mr O'Neale that had not been brought to account[52].

32 While Mr O'Neale has not been successful on either the claim or the counterclaim, his conduct in defending the claim and in questioning the calculation of his alleged indebtedness does not, in my view, fall within the description of unmeritorious, deliberate or improper conduct or a case where the defendant, properly advised, should have known that he had no prospects of success, such as to warrant the Court expressing its disapproval of his conduct. Nor, in my view, does his conduct fit within the 'other' circumstances outlined by Mukhtar AsJ in Bougainville Copper concerning the 'delinquent, irresponsible or counterproductive conduct of litigation by a party which led to prolongation or wastage or infliction of greater costs' that could justify the Court making a special costs order to show its disapproval of such conduct.[53]

33 Rather, the position is that once it became clear that the real dispute between the parties concerned an alleged lack of clarity around the manner in which Mr O'Neale's indebtedness to the respective plaintiffs had been calculated, both sides agreed to the use of the special referee process as a means of resolving what was essentially an accounting dispute between the parties. In my view, that special referee process was demonstrably an efficient and effective means of resolving the real issue in dispute between the parties, in the manner encouraged by the Civil Procedure Act 2010.

34 As Mr O'Neale was the unsuccessful party, the Court has ordered that he shall pay to the plaintiffs their costs of the proceeding, including reserved costs. That is because as McHugh J explained in Oshlack, '[a]s between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.'[54] In my view, no special order is warranted on general discretionary grounds and no occasion arises for those costs to be taxed and paid by the defendant on other than the standard basis.

Alternatively, the plaintiffs contend that an order for indemnity costs is appropriate in circumstances where the defendant failed to accept their offer of compromise

35 On 30 July 2019, the first plaintiff, who at that point in time was the sole plaintiff, made an offer of compromise pursuant to Order 26 of the Rules (Offer).[55] By the Offer, the first plaintiff offered to compromise the proceeding by accepting payment of the sum of $1,350,000 inclusive of costs and interest. The Offer, which was expressed to be served in accordance with Order 26[56] and to remain open to be accepted until the expiration of 14 days after service, remained open for acceptance until 13 August 2019. But the Offer was not accepted by the defendant by that date, or at all.

36 The plaintiffs contend that the Offer made by API 'was plainly a genuine attempt at compromise,[57] and the defendant has never suggested otherwise.'[58] Accordingly, counsel for the plaintiffs submitted that, pursuant to r 26.08(2)(b) of the Rules, the plaintiffs are entitled to orders for costs on the standard basis until 11:00am on Thursday, 1 August 2019, being 11:00am on the second business day following service of the offer of compromise, and thereafter on the indemnity basis.

Rule 26.08: Costs consequences of a failure to accept an offer of compromise

37 Rule 26.08 provides for the costs consequences of a party's failure to accept an offer of compromise, relevantly as follows:

26.08 Costs consequences of failure to accept

(1) This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.

(2) Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled -

(a) if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim taxed on an indemnity basis;

(b) in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis.

. . .

(5) Where a plaintiff obtains judgment for the recovery of a debt or damages and -

(a) the amount for which the Court pronounces judgment includes an amount for interest or damages in the nature of interest; or

(b) by or under any Act the Court awards the plaintiff interest or damages in the nature of interest in respect of the judgment amount -

for the purpose of determining the consequences as to costs referred to in paragraphs (2) and (3) the Court shall disregard so much of the amount recovered by or awarded to the plaintiff for interest or damages in the nature of interest as relates to the period after the day the offer of compromise was served.

(6) For the purpose only of paragraph (5), the Court may be informed of the fact that the offer of compromise was served, and of the date of service, but shall not be informed of its terms.

(7) Paragraphs (2), (3) and (4) shall not apply unless the Court is satisfied by the party serving the offer of compromise that that party was at all material times willing and able to carry out the party's part of what was proposed in the offer.

(8) Where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or the damages was not in dispute, but only the question of liability, paragraph (2) shall not apply unless the Court is satisfied that the plaintiff's offer was of a genuine compromise.

38 In Stevens v Spotless Management Services Pty Ltd (No 2),[59] the Court of Appeal outlined the proper approach to be applied under r 26.08 in order to determine the costs consequences of a failure to accept an offer of compromise, as follows:[60]

In determining the proper application of r 26.08, the first question is whether, in terms of r 26.08(8), the appellant's offer was' of a genuine compromise'. The onus lies on the plaintiff in that regard.[61] If that onus is discharged, the second question, which is not in issue in this matter, is whether the judgment obtained is no less favourable than the offer. The third issue is whether, notwithstanding an affirmative answer to the second question, the Court should order 'otherwise' than in the terms set out in r 26.08. In that regard, the onus lies on the defendant.

40 In Gamboni v Bendigo and Adelaide Bank Ltd,[62] when considering the notion of a 'genuine compromise', the Court of Appeal stated as follows: [63]

The question of whether an offer is 'of a genuine compromise' does not depend simply on the magnitude of the discount embodied in the offer. While that is clearly a relevant consideration - in the sense that a trivial, contemptuous or derisory discount would not involve a genuine compromise[64] - other factors are also relevant. They include the apparent strength of the defendant's case at the time the offer was made,[65] whether the case is an 'all or nothing' case which makes it difficult to select a discount based on an assessment of particular aspects of the case,[66] and the stage at which the offer was made.[67]

41 In the present case, at the time when the Offer was made, API was seeking in its statement of claim to recover a debt 'in the amount of $1,660,569.86 (Debt)' which it contended was owing 'pursuant to the [earlier] Reference Agreement' and as a result of Mr Lavelle's 'final and conclusive determination of the amount owing as between API and its related entities on the one hand, and Mr O'Neale (Final Determination)'[68]. In the alternative to its debt claim, API sought damages 'equivalent in amount to the Debt'[69]. The prayer for relief in the statement of claim was framed as follows:

AND THE PLAINTIFF CLAIMS AGAINST THE DEFENDANT:

A. $1,660,569.86.

B. Alternatively to paragraph A, damages.

C. Interest pursuant to statute.

D. Costs.

1. Such further or other order or relief as to this Honourable Court may seem appropriate.

42 In my view, the Offer represented a 'genuine compromise' insofar as it stated a preparedness on the part of API to accept payment of the sum of $1,350,000 inclusive of costs and interest rather than pursuing its claim and seeking to recover the sum of $1,660,569.86 plus interest pursuant to statute and costs. The sum of $1,660,569.86 that API claimed was the sum Mr Lavelle had determined under the expert determination process the parties had agreed would result in a 'final and conclusive determination' as the amount owing as between API and its related entities on the one hand and Mr O'Neale on the other. The compromise sum offered, of $1,350,000, represented a (non-trivial) discount on the face value of the amount determined by Mr Lavelle and was inclusive of costs and interest.

Was the judgment obtained no less favourable than the Offer?

43 Counsel for the plaintiffs submits that the judgment obtained is more favourable than the terms of the Offer.[70]

44 To understand that submission, in the context of the judgment that was entered on 20 August 2021, it is necessary to say something by way of background about the procedural events that took place following the making of the Offer through to the conclusion of the proceeding and entry of judgment.

45 Prior to making the Offer, the solicitor for API (then the sole plaintiff) filed a summons dated 12 July 2019 seeking leave to join API's related entities, Priceline, NPRS and API Victoria, as plaintiffs to the proceeding. The summons was listed for hearing on 2 August 2019. In his affidavit in support, Mr Peter Lucarelli, who is a partner at Baker McKenzie and the legal practitioner having the care and carriage of the proceeding on behalf of API, deposed that the application for joinder was being made so as 'to permit the commencement of new claims against [Mr O'Neale]' that are 'in the alternative to that which is currently bought in the Proceeding.'[71] Mr Lucarelli stated that he was also retained to act on behalf of Priceline, NPRS and API Victoria, and proceeded to outline the role performed by each of Priceline, NPRS and API Victoria within the API Group. He then went on to explain that, as a result of Mr O'Neale alleging for the first time in his Amended Defence dated 7 March 2019:

(a) 'a variety of issues which he alleges impinge on the efficacy and/or binding nature of the Reference Agreement and/or the Final Determination';[72]

(b) 'that API behaved unconscionably towards him';[73] and

(c) 'that certain terms of the Reference Agreement are void for uncertainty and ought to be severed',[74]

API's preference is now to 'allege and rely, alternatively to the claims made in reliance on the Reference Agreement, on the underlying agreements between API, Priceline, NPRS and API Victoria on the one hand, and Mr O'Neale on the other, as the basis of the indebtedness of Mr O'Neale.'[75] A copy of the proposed Amended Writ and Statement of Claim was exhibited to his affidavit.

46 Pursuant to orders made by consent on 2 August 2019, the Court ordered, inter alia, that Priceline, NPRS and API Victoria be added as plaintiffs, and gave leave to the plaintiff to amend its Writ and Statement of Claim substantially in the terms submitted. The Amended Writ and Amended Statement of Claim was filed and served on 5 August 2019.

47 On 8 November 2019, Mr O'Neale filed and served his Defence to the Amended Statement of Claim and Counterclaim. By his Counterclaim, Mr O'Neale contended that the plaintiffs were indebted to him in the sum of $1,790,409.32, which sum he sought to recover with interest and costs.[76] The Counterclaim was, or appeared to be, predicated on his (bare) claim made in paragraph 4A of the Defence 'that API Victoria and Priceline are indebted to the Defendant in the sum of $1,790,409.32', and particulars of the calculation of that sum were set out in Schedule A served with the Defence.

48 Pursuant to orders made on 1 May 2020, Mr O'Neale filed a Further Amended Defence and Counterclaim on 6 May 2020. Therein, the sum claimed by way of counterclaim was reduced to $1,609,350.44.[77]

49 The reference to the special referee took place by consent of the parties and was effected by orders made on 1 May 2020. Under those orders, the special referee was required to prepare a report, or reports, answering the following questions:[78]

Having regard to the Orders, the Pleadings, the Plaintiffs' Documents, the Defendant's Documents and any other material provided by the parties pursuant to either paragraph 2 or paragraph 5 of Annexure B:

First Question

(a) In respect of each month in each of the following periods, what is the amount (if any) owed:

(i) by the Defendant to the Plaintiffs and each of them (if any); and

(ii) by the Plaintiffs and each of them to the Defendant (if any),

in respect of all accounts (including, but not limited to, account number 757D) for the period from:

1. 30 September 2009 (being the date of the Credit Account Agreement);
2. 1 December 2012 (being the date 6 years prior to the commencement of the proceeding);

1. 9 November 2013 (being the date 6 years prior to the date of the D&C) -

to the date of the Report, with the opening balance being equivalent to the amount of the balance as at or about each of the dates referred previously in each of the following accounts recorded in the books and records of the Plaintiffs, being:

(aa) account number 2995;

(bb) account number 757; and

(cc) account number 757B?

Second Question

(b) On the basis of the accounting exercise performed in accordance with paragraph (a) above, what is the amount or amounts owed (if any) by:

(i) the Defendant to the Plaintiffs and each of them; or

(ii) the Plaintiffs and each of them to the Defendant -

as at the date of the Report when using each of the commencement dates referred to in paragraph (a)?

50 On 23 April 2021, the special referee caused her report to be provided to the Court and released to the parties. Relevantly, in her report, the special referee determined that the amount for which Mr O'Neale is indebted to the plaintiffs or one or more of them exceeds the amounts claimed in paragraphs A to Y of the prayer for relief contained in the Amended Statement of Claim dated 5 August 2019.

51 In advance of the hearing on 20 August 2021, under cover of an email from their solicitors dated 18 August 2021 (at 3:45pm) the plaintiffs provided the defendant and the Court with a minute of proposed orders and proposed form of judgment. In the proposed form of judgment (to be made on 20 August 2021) the solicitors for the plaintiffs recorded under 'Other Matters', inter alia:

3 The report filed by the Special Referee, Brittany Lincoln of KordaMentha, on 23 April 2021 determines that the amount(s) owed by the defendant to the plaintiffs exceed the amounts referred to in this judgment. The plaintiffs do not pursue the amount(s) determined by the Special Referee in so far as they exceed the amounts referred to in this judgment.

52 The position outlined above reflected the tenor of the plaintiffs' outline of submissions dated 19 May 2021, where counsel for the plaintiffs stated:[79]

26. The plaintiffs claim the amounts referred to in the Amended Statement of Claim (including interest thereon), and abandon the excess or difference between those amounts and the amounts found by the Special Referee in the Report.

53 The form of judgment the plaintiffs proposed be entered was framed as follows:

THE JUDGMENT OF THE COURT IS THAT:

1. The Defendant pay to the Second Plaintiff [Priceline] the sum of $1,628,140.01 plus interest in the sum of $442,943.30.

2. The Defendant pay to the Third Plaintiff [NPRS] the sum of $17,135.47 plus interest in the sum of $4,661.79.

3. The Defendant pay to the Fourth Plaintiff [API Victoria] the sum of $175,849.02 plus interest in the sum of $47,840.57.

4. The Counterclaim forming part of the Further Amended Defence and Counterclaim filed on 6 May 2020 is dismissed.

5. The Defendant pay to the Plaintiffs their costs of the proceeding, including reserved costs.

. . .

54 In their written outline of submissions dated 19 August 2021, counsel for the plaintiffs submitted 'it is appropriate that the Court should enter Judgment against the defendant in the form proposed by the plaintiffs' solicitors by email on Wednesday, 18 August 2021.'[80]

55 During the hearing on 20 August 2021, after the Court heard from counsel for the respective parties, counsel for the defendant acknowledged that the plaintiffs' minute of proposed orders and proposed form of judgment were in a form appropriate to be made. Accordingly, the Court made (ancillary) orders and proceeded to enter judgment as follows:[81]

THE JUDGMENT OF THE COURT IS THAT:

1. The defendant shall pay to the second plaintiff [Priceline] the sum of $1,628,140.01 plus interest in the sum of $442,943.30.

2. The defendant shall pay to the third plaintiff [NPRS] the sum of $17,135.47 plus interest in the sum of $4,661.79.

3. The defendant shall pay to the fourth plaintiff [API Victoria] the sum of $175,849.02 plus interest in the sum of $47,840.57.

4. The counterclaim forming part of the further amended defence and counterclaim filed on 6 May 2020 be dismissed.

5. The defendant shall pay to the plaintiffs their costs of the proceeding, including reserved costs.

. . .

56 By email to the Court on 24 August 2021, the plaintiffs' solicitor confirmed that the interest figures set out in the plaintiffs' proposed form of judgment were calculated from the commencement date of the proceeding (30 November 2018) to 20 August 2021, being the date of the mention (being 994 days at 10%).

57 Against that background, when seeking that their costs be assessed and paid on the indemnity basis, the plaintiffs submitted:[82]

3. In circumstances where judgment has been entered in their favour and the Counterclaim has been dismissed, the Court ought regard the plaintiffs as the entirely successful parties in the Proceeding. The plaintiffs also rely on the following matters:

. . .

(d) on 1 May 2020, the Court made orders by consent referring certain questions to a Special Referee. By her report dated 23 April 2021 (Report), the Special Referee concluded that the indebtedness of the defendant to the plaintiffs is significantly greater than the amounts claimed in the Amended Statement of Claim, and ranges from $7.108 million to $5.554 million[83] as at each of three dates;[84]

(e) prior to 8 November 2019, when the defendant amended his defence to include a Counterclaim, the defendant had not asserted that he had any claim available against the plaintiffs.[85] By the Counterclaim, the defendant, for the first time, claimed an amount against the plaintiffs in the sum of $1,790,409.32.[86] In the Report, the Special Referee concluded that the plaintiffs are not indebted to the defendant, at all;[87]

(f) the plaintiffs sought[88] and obtained the Judgment in the amounts claimed in the Proceeding, rather than the higher amount included in the Report. As a result of the Judgment:

(i) the plaintiffs have been entirely successful in the claims made by each of them against the defendant. Judgment has been entered in their favour for the total amount of $1,821,124.50, together with interest totalling $495,445.66, plus costs;

(ii) the Counterclaim has been dismissed; and

(iii) costs have been dealt with globally, in that the defendant is required to pay the costs of all the plaintiffs (including reserved costs), and therefore including the costs of the first plaintiff.

58 The total judgment sum referred to above, of $1,821,124.50, represents the sums of $1,628,140.01 (payable to Priceline), $17,135.47 (payable to NPRS) and $175,849.02 (payable to API Victoria), and likewise the total interest payable, of $495,445.66, represents the discrete sums of $442,943.30, $4,661.79 and $47,840.57 payable to Priceline, NPRS and API Victoria respectively. As will be apparent, however, no judgment sum was made payable to the first plaintiff, API. That is because the sum of $1,660,569.86 that API claimed in the statement of claim was the amount Mr Lavelle had determined was owing as between API and its related entities on the one hand and Mr O'Neale on the other, and once Priceline, NPRS and API Victoria were added as plaintiffs to the proceeding, their claims were new claims that were (as Mr Lucarelli deposed) made and pursued in the alternative to API's claim.[89] Accordingly, in my view, in circumstances where no judgment sum was made payable to API, the plaintiffs' submission that the judgment obtained is more favourable than the Offer cannot be sustained.

59 Relevantly, the position is that no offer of compromise was served by the successful plaintiffs, Priceline, NPRS and API Victoria.

Whether the Court should order 'otherwise' than in the terms set out in r 26.08

60 Given the (negative) answer to the second issue above, the third issue of whether, notwithstanding an affirmative answer to the second question, the Court should order 'otherwise' than in the terms set out in r 26.08 does not arise.

No basis for a special costs order is made out pursuant to r 26.08(2)(b)

61 For the reasons set out above, I am not satisfied that the plaintiffs, or any of them, have demonstrated an entitlement to a special costs order pursuant to r 26.08(2)(b) of the Rules.

62 For the reasons set out above, in the exercise of the Court's discretion, I do not propose to make any special order as to costs. Accordingly, I shall order that in respect of the plaintiffs' costs that are made payable by the defendant under paragraph 5 of the judgment dated 20 August 2021 (including reserved costs and the costs awarded by the ancillary orders made on 20 August 2021) those costs are to be taxed, in default of agreement, on the standard basis and paid by the defendant.

NEW PRICE RETAIL SERVICES PTY LTD (ACN 100 732 750)

[1] Australian Pharmaceutical Industries Ltd & Ors v O'Neale [2021] VSC 371.

[2] Mr T Di Lallo appeared for the plaintiffs and Mr P W Lithgow appeared for the defendant.

[3] See orders made on 20 August 2021, 'Other matters' at [23].

[4] Judgment has been entered in their favour in the total amount of $1,821,124.50, together with interest totalling $495,445.66.

[5] The judgment was authenticated on 27 August 2021.

[6] At the hearing on 20 August 2021, counsel for the plaintiffs foreshadowed that course.

[7] The plaintiffs' solicitors later contended that the notice was ineffective by reason of r 20.02(3)(c) of the Rules, the notice having been filed in the period of 28 days after the proceeding has been finally determined but without leave having first been obtained.

[8] Section 24(1) provides:

(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

[9] [2021] VSC 348, [19] (Bougainville Copper).

[10] [2021] VSC 348, at [19]-[22].

[11] See Williams, Civil Procedure Victoria, Vol 1 [63.02.174].

[13] See Williams, Civil Procedure Victoria, Vol 1, 5612.15-.16 at [63.02.180] and the cases cited therein, including Bass Coast Shire Council v King [1997] 2 VR 5 at 29.

[14] [1998] HCA 11; (1998) 193 CLR 72 (Oshlack).

[15] [1998] HCA 11; (1998) 193 CLR 72, at 97-98. While McHugh J dissented in the result in Oshlack, his Honour's statement of the relevant principles was not contrary to the reasoning of the majority.

[16] Latoudis [v Casey] [1990] HCA 59; (1990) 170 CLR 534 at 543 per Mason CJ; at 562-563, per Toohey J; at 566-567, per McHugh J; Cachia v Hanes (1994) 179 CLR 403 at 410, per Mason CJ, Brennan, Deane, Dawson and McHugh JJ.

[17] [1951] 1 All ER 873, at 874.

[18] King & Co v Gillard & Co [1905] UKLawRpCh 47; [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732, at 812.

[19] Bostock v Ramsey Urban District Council [1900] UKLawRpKQB 143; [1900] 2 QB 616.

[20] Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] UKLawRpKQB 143; [1900] 2 QB 616, at 622, 625, 627.

[21] Forbes v Samuel [1913] UKLawRpKQB 104; [1913] 3 KB 706.

[22] Armstrong v Boulton [1990] VicRp 20; [1990] VR 215, at 223.

[23] Hobbs v Marlowe [1978] AC 16.

[24] Jenkins v Hope [1896] UKLawRpCh 4; [1896] 1 Ch 278.

[25] [2019] HCA 25; (2019) 265 CLR 164 (Sangare).

[26] Ibid, at 172-173, [24]-[25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ).

[27] Donald Campbell & Co v Pollak [1927] AC 732 at 811-812; Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 539-540, 557, 561-562, 569; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96 [65], 120-121 [134].

[28] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 537; [1986] HCA 17. See also at 533.

[29] Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 541-542, see also at 558‑559; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96 [65], 121 [134].

[30] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 519; Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 541-542, see also at 558; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96 [65], 121 [134].

[31] Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] [1953] 1 WLR 1481 at 1484; [1953] 2 All ER 1588 at 1590. See also Harold v Smith [1860] EngR 516; (1860) 5 H & N 381 at 385 [157 ER 1229 at 1231]; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96‑97 [66]-[67], see also at 86 [35], 120-121 [134].

[32] Australian Guarantee Corp Ltd v De Jager [1984] VicRp 40; [1984] VR 483 at 502.

[35] [2021] VSC 348;

[36] [2021] VSC 348, at [24]-[25].

[37] Section 28(2), Civil Procedure Act 2010 (Vic).

[38] Plaintiffs' submissions concerning costs dated 9 September 2021, at [3].

[40] See the affidavit of Peter Michael Lucarelli sworn 12 July 2019, [12] (see page 5 of the bundle of supporting documents).

[41] Damages were sought in the alternative, and also interest and costs.

[42] In correspondence from the defendant's solicitors prior to the Proceeding, the defendant (in substance) expressly relied on the Reference Agreement and insisted that the plaintiffs should adhere to its terms. On 8 December 2017, the plaintiffs' solicitors wrote to the defendant's solicitors and served a Notice of Termination (see pages 11 to 13 of the bundle of supporting documents). On 18 December 2017, the defendant's solicitors wrote to Peter Sanguinetti of the first plaintiff disputing the validity of the Notice of Termination on the basis that the parties had agreed to accept the determination then still to be made pursuant to the Reference Agreement (see pages 14 and 15 of the bundle of supporting documents).

[45] The Counterclaim was subsequently amended to allege that a larger sum was owed by the plaintiffs to the defendant.

[46] The amount claimed by the Counterclaim was ultimately reduced to $1,609,350.44 by the further amended defence and counterclaim filed on 6 May 2020.

[48] See especially the plaintiffs' outline of submissions of 18 May 2021, [26]; see also the plaintiffs' submissions of 19 August 2021.

[49] Plaintiffs' submissions concerning costs dated 9 September 2021, at [4(b)].

[50] The applicable credit terms provided that interest was to be charged on the balance of overdue invoices, and would accrue daily at the rate of 16.9% per annum from the date when payment became due until the date of payment, calculated on daily rests.

[51] See Orders made on 1 May 2020, Annexure A: Letter of Instruction to Special Referee.

[52] For e.g., because one or other of the American Express account facilities was used to make payments or because deposit batch listings pertaining to the plaintiffs' bank accounts were not provided to the special referee.

[53] [2021] VSC 348, at [24].

[54] [1998] HCA 11; (1998) 193 CLR 72, at 97 [67].

[55] See pp 16-18 of the bundle of supporting documents attached to the plaintiffs' submissions concerning costs. Relevantly, the Offer stated:

TAKE NOTICE that the Plaintiff offers to compromise this proceeding by accepting payment of the sum of $1,350,000 inclusive of costs and interest.

THIS OFFER is served in accordance with Order 26 of the Rules of Court and remains open to be accepted until the expiration of 14 days after the service of this notice.

[56] The Offer was served under cover of a letter from its solicitors dated 30 July 2019, that was sent by email to the defendant's solicitors on Tuesday, 30 July 2019 at 3:18pm: see pp 16-18 of the bundle of supporting documents attached to the plaintiffs' submissions concerning costs.

[57] Citing Chatham & Anor v Coral Park Pre-Training & Breaking Pty Ltd (No 2) (Costs) [2021] VSC 44 per Daly AsJ at [12].

[58] Plaintiffs' submissions concerning costs dated 9 September 2021, at [7].

[59] [2016] VSCA 311 (Stevens).

[60] Ibid, at [22] (per Kyrou and McLeish JJA and Elliott AJA).

[61] Enerka [2002] VSC 409 [9] (Habersberger J).

[62] [2013] VSCA 282 (Gamboni).

[63] Ibid, at [41] (Tate JA and Kyrou AJA).

[64] Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd [No 2] [2002] VSC 409, [14] ('Enerka'); Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368, [26], [30] ('Regency').

[65] Enerka [2002] VSC 409, [14]; Regency [2009] NSWCA 368, [34].

[66] Enerka [2002] VSC 409, [13]; Regency [2009] NSWCA 368, [29].

[67] Regency [2009] NSWCA 368, [30].

[68] Statement of Claim, at [9]. According to the Statement of Claim, the dispute which gave rise to the Debt was alleged to have arisen as a result of the supply of goods and/or services by API and its related entities on credit to Mr O'Neale. The parties referred their dispute to Lavelle & Co, Chartered Accountants (Lavelle) for resolution by expert agreement (Reference Agreement), and that process resulted in a Final Determination that Mr O'Neale owed API the amount of the Debt. When Mr O'Neale refused to pay the amount of the Debt or any part thereof, API commenced this proceeding.

[70] Plaintiffs' submissions as to costs dated 9 September 2021, at [7].

[71] Affidavit of Mr Peter Lucarelli sworn on 12 July 2019 (Lucarelli affidavit), at [5] (emphasis in bold italics added).

[75] Lucarelli affidavit, at [17] (emphasis in bold italics added).

[76] See paragraphs [27]-[28], [4A] and the prayer for relief in the defendant's Defence and Counterclaim filed on 8 November 2019.

[77] See paragraphs [27]-[28], [4A] and the prayer for relief in the defendant's Further Amended Defence and Counterclaim filed on 6 May 2020.

[78] See paragraph [7] of the Orders relating to the reference under Order 50 of the Rules made on 1 May 2020.

[79] Plaintiffs' outline of submissions dated 19 May 2021, at [26].

[80] Plaintiffs' outline of submissions dated 19 August 2021, at [1].

[81] See Judgment entered on 20 August 2021.

[82] Plaintiffs' written submissions concerning costs dated 9 September 2021, at [3].

[85] The Counterclaim was subsequently amended to allege that a larger sum was owed by the plaintiffs to the defendant.

[86] The amount claimed by the Counterclaim was ultimately reduced to $1,609,350.44 by the further amended defence and counterclaim filed on 6 May 2020.

[88] See especially the plaintiffs' outline of submissions of 18 May 2021, [26]; see also the plaintiffs' submissions of 19 August 2021.