Plaintiffs v Defendants

2 On 23 August 2017, a proceeding was commenced by United and other related parties ("the United Parties"), including Avi Silver ("Silver") and Eddie Hirsch ("Hirsch") (together "the Founders").[1] The United Parties alleged, amongst other things, breaches of duty by Freehills in respect of the Public Offering ("the United Proceeding").[2] The former chairperson of United Holdings, Martin Hudson ("Hudson"), was joined to the United Proceeding as the second defendant on 30 October 2017. Broadly speaking, the United Parties alleged that Hudson breached his duties as a director of United Holdings in his dealings concerning the Public Offering.

3 The Fees Proceeding and the United Proceeding were heard together over 17 days between 26 March and 3 May 2018. On 26 June 2018, judgment was delivered in both proceedings ("the Principal Judgment").[3]

4 In the Fees Proceeding, judgment was entered in favour of Freehills. It was held that Freehills was entitled to recover all of its unpaid legal fees, together with interest, pursuant to a retainer entered into between Freehills and United in late August 2016.[4] As to the United Proceeding, it was dismissed on the basis that both Freehills and Hudson acted in accordance with their respective duties in relation to the Public Offering until it was abandoned by United on either 23 or 24 October 2016.

5 The United Parties were ordered to pay costs on a standard basis in both proceedings,[5] including reserved costs. Those orders were stayed for 14 days, subject to liberty to apply.

6 By summons filed 6 July 2018, Hudson sought an order that the United Parties pay his costs in the United Proceeding on the indemnity basis provided for in the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ("the Ordinary Indemnity Basis"),[6] including reserved costs, together with his costs of the application to join him to the United Proceeding ("the Hudson Application"). On 9 July 2018, a similar application for costs was filed on behalf of Freehills in both the Fees Proceeding and the United Proceeding ("the Freehills Application"). However, Freehills sought its costs on a complete indemnity basis, unconstrained by limits that would ordinarily be imposed.[7] Freehills sought costs on this basis both with respect to costs referable to when Freehills was acting for itself, and costs attributable to professional services provided to it by independent solicitors, Clyde & Co.[8]

(1) Freehills' costs in the Fees Proceeding will be awarded on the standard basis, up to and including 11.00 am on 20 June 2017, and thereafter on the Ordinary Indemnity Basis; but all costs awarded will be subject to taxation.

(2) Freehills' and Hudson's costs in the United Proceeding will be awarded on the Ordinary Indemnity Basis, but subject to taxation.

8 In seeking an award of complete indemnity costs in its favour, Freehills relied on certain conduct engaged in by the United Parties. First, Freehills submitted that the claims made by the United Parties in the United Proceeding lacked a proper basis and should never have been made. It was contended that the court ought to disapprove of unmeritorious claims being advanced which have the effect of exposing parties to the risk of reputational harm. Secondly, it was contended that the United Parties committed a contempt of court by intimidating a witness called by Freehills in the United Proceeding.[9] Finally, Freehills referred to the United Parties' rejections of offers of compromise made by Freehills, which were alleged to be unreasonable.

9 As for Hudson, costs on the Ordinary Indemnity Basis were sought on 2 grounds. First, Hudson submitted very serious allegations had been made against him that were entirely without merit. Hudson submitted the court ought to infer, because the case against Hudson was so hopeless, there must have been an ulterior motive for pursuing Hudson. In particular, emphasis was placed upon the fact that the United Parties applied to join Hudson as a defendant only after Hudson agreed with Freehills to the filing of his witness outline in opposition to the United Parties' case. Secondly, Hudson relied upon the rejection of offers of compromise, which rejection Hudson submitted was unreasonable.

10 Offers of compromise were made by Freehills in the Fees Proceeding, and by both Freehills and Hudson in the United Proceeding, as follows:

(1) Offer made by Freehills in the Fees Proceeding on 16 June 2017 ("the First Freehills Offer").[10] In full settlement, Freehills offered to accept $750,000.00 inclusive of goods and services tax, interests and costs. This offer included the proposed settlement of other Freehills' invoices that did not form part of the claims in the Fees Proceeding, together with interest. Regardless of whether the amount of the offer is reduced by the entirety of other claims and interest,[11] or only reduced by a pro-rata amount in respect of the other claims and interest (approximately 79 percent),[12] the offer referable to the claims made in the Fees Proceeding was less than the judgment amount awarded (not including interest) of $648,159.39 ("the Judgment Amount"). The First Freehills Offer, which was open for 10 days, was rejected by the United Parties on 26 June 2017.

(2) Offer made by Freehills in the Fees Proceeding on 9 August 2017, open for 14 days ("the Second Freehills Offer"). Freehills offered to accept $925,000.00 inclusive of interest, but exclusive of goods and services tax, on the basis that each party would bear its own costs.[13] Again, once the other matters the subject of this offer are excluded,[14] the amount of the offer referable to the claims in the Fees Proceeding was less than the Judgment Amount. No response was received in respect of the Second Freehills Offer.

(3) Offer made by Freehills in the United Proceeding on 13 September 2017, whereby Freehills offered to "walk away" and bear its own costs ("the Third Freehills Offer").[15] The covering letter set out extensively why the United Parties' case was "weak and very likely to fail". Some correspondence was exchanged, but the Third Freehills Offer was ultimately not accepted by the United Parties and lapsed after 14 days.

(4) Offer made by Hudson in the United Proceeding on 2 March 2018, whereby Hudson offered to "walk away" and bear his own costs, which costs then exceeded $150,000.00 ("the First Hudson Offer").[16] The First Hudson Offer was open for 14 days, and was not accepted.

(5) Offer made by Hudson in the United Proceeding on 6 April 2018, in substantially the same terms as set out in the First Hudson Offer ("the Second Hudson Offer"), except it was made late on a Friday afternoon, and was only open until 2.00 pm the following Monday.[17]

11 Freehills sought any award of costs be on a gross sum basis,[18] and, in so doing, relied upon an expert's opinion.[19] The costs expert estimated that bills of costs could take 2 months or more to prepare, at a cost of approximately $100,000.00, and that the taxation process might take up to 2 years to complete. The United Parties opposed the gross sum approach and sought an order that the usual approach to taxation be adopted. The United Parties contended that the nature of the proceedings were not such as to make them more complicated for the purposes of taxation than other matters generally dealt within the commercial court.

12 The principles relating to awarding indemnity costs are generally well settled. The court has full power to determine to what extent costs are to be paid,[20] subject to the Supreme Court Rules.[21] The court may order costs to be taxed on the standard basis, the indemnity basis or such other basis as it may direct.[22] Further, instead of ordering a taxation, the court may order that costs, in whole or in part, not be taxed but be paid on a gross sum basis or determined in such other manner directed by the court.[23]

13 Generally speaking, an order for costs seeks to indemnify the successful party, at least in part, for the costs incurred in prosecuting or defending the relevant proceeding.[24] Although the conduct of a party may be relevant to whether indemnity costs will be ordered, such an order is not intended to serve a punitive purpose.[25]

14 Under the Supreme Court Rules, an award for indemnity costs is distinguished from the award of costs on a standard basis. If an order is made for indemnity costs (referred to above as costs on the Ordinary Indemnity Basis),[26] the award will consist of "all costs ... except in so far as they are of an unreasonable amount or have been unreasonably incurred".[27] Further, unlike the position with respect to standard costs, if there is any doubt as to the (un)reasonableness of how the costs in question were incurred, or the amount of those costs, the issue is to be resolved in favour of the party to whom the costs are payable.[28] In short, the difference between the amount to be allowed for standard costs and for indemnity costs, under rr 63.30 and 63.30.1 respectively, is largely who bears the onus of establishing the costs claimed are reasonable (or unreasonable).[29]

15 The usual course is that costs will be ordered on a standard basis, unless the circumstances of the case involve some "special" feature to warrant indemnity costs being awarded.[30] Further, in addition to the Ordinary Indemnity Basis provided for in the Supreme Court Rules, the court has the power to order a greater level of indemnity up to a complete indemnity.[31]

16 Furthermore, although the statutory and regulatory provisions make it plain that the court is not confined to awarding costs on the Ordinary Indemnity Basis, in cases where an indemnity costs order is appropriate, ordinarily the court would not order costs that exceeded costs payable in accordance with r 63.30.1.[32]

17 There are several established circumstances that may warrant an award of indemnity costs. First, it may be appropriate to award indemnity costs against a party who should have known it had no real prospect of succeeding in its claims.[33] Such circumstances give rise to a presumption that the relevant proceeding was "commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law".[34] Secondly, indemnity costs may be appropriate in cases involving "the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions".[35] Thirdly, it may be appropriate to award indemnity costs where genuine offers of compromise have been made and imprudently or unreasonably refused.[36]

18 There has long been scope for parties to seek to protect themselves in relation to costs by serving Calderbank letters pursuant to the common law doctrine applicable to offers to compromise proceedings.[37] Calderbank letters must represent a genuine compromise, as opposed to an invitation to capitulate.[38] In the event that they do, they may give rise to a proper basis for awarding costs at a higher level in the event the offer is not accepted and the offeree does not achieve a more favourable outcome at trial.

19 In the exercise of the court's discretion, the unreasonable refusal to accept an offer of compromise provides clear grounds for indemnity costs to be awarded in favour of the offeror.[39] The offeror bears the onus of establishing that the offeree has acted unreasonably.[40] Whether the relevant rejection is unreasonable is a matter of judgment and impression, and requires consideration of the applicable circumstances at the time of the offer.[41] The following matters are, ordinarily, relevant to determining whether an offer of compromise has been unreasonably rejected:[42]

(1) The stage of the proceeding at which the offer was received.

(2) The time allowed to the offeree to consider the offer.

(3) The extent of the offer of compromise.

(4) The offeree's prospects of success as assessed as at the date of the offer.

(5) The clarity with which the terms of the offer were expressed.

(6) Whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

20 Offers of compromise may also be made pursuant to r 26.02(1) of the Supreme Court Rules, which provides that a party may serve an offer of compromise on another party on the terms specified in the offer. The same policy rationale underlies the special orders available where either form of offer of compromise has been made and rejected.[43]

21 Rule 26.08 sets out the costs consequences of a failure to accept an offer of compromise, as follows:

(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) ...

(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 am 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.

(3) ...

(4) Where an offer of compromise is made by a defendant and the plaintiff unreasonably fails to accept the offer and the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant, then unless the Court otherwise orders -

(a) the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim until 11.00 a.m. on the second business day after the offer was made, taxed on the ordinarily applicable basis; and

(b) the defendant shall be entitled to an order against the plaintiff in respect of the defendant's costs after the time referred to in paragraph (a) taxed on an indemnity basis.

(5) ...

(6) ...

(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.[44]

(8) ...

(Emphasis added.)

22 It is well established that, in some circumstances, a "walk away" offer[45] or an offer by a party to "bear a very small portion of its own costs"[46] may constitute a sufficient offer of compromise to make a rejection of the offer unreasonable. There have also been cases where such offers have been treated as offers to capitulate as opposed to genuine offers.[47]

23 Rule 63.34 of the Supreme Court Rules provides that, absent special grounds,[48] a legal practitioner for a party to whom costs are payable (whether on a standard or an indemnity basis) shall be entitled to costs in accordance with scale costs.

24 Freehills sought the payment of Freehills' costs on a complete indemnity basis; that is, calculated in accordance with the various hourly rates of the Freehills' solicitors engaged, and the daily and hourly rates of its Queen's counsel and its junior counsel, regardless of whether they were within or above the scale costs that would be allowed by the Costs Court if a taxation were conducted.

25 By way of example, at the relevant times the Supreme Court scale of costs set out the maximum daily fee in respect of trial appearances for senior and junior counsel.[49] An additional amount may be allowed having regard to certain relevant circumstances.[50] The rates for senior and junior counsel, as set out in an affidavit filed on behalf of Freehills, were above scale for senior counsel and below scale for junior counsel. Further, again only by way of example, the hourly rate charged by a Freehills' partner involved was nearly double the hourly rate charged by the partner from Clyde & Co.

26 The fact that Freehills acted for itself in the Fees Proceeding, and in the United Proceeding up until 19 January 2018, is no bar to Freehills recovering its costs.[51] Although, as a general rule, successful self-represented litigants are not entitled to be paid the costs associated with representing themselves,[52] litigants who are solicitors are entitled to recover their professional costs, even where they act for themselves, or their firms act for them.[53]

27 In Cachia v Hanes,[54] the High Court considered whether a self-represented defendant, who had a claim against him dismissed with costs in his favour, was entitled to recover for time spent as a litigant in the preparation and conduct of his case.[55] In deciding he could not, the majority made reference to the relevant principle, said to be free from doubt since 1278,[56] that any costs award is not intended to provide a comprehensive compensation for any loss suffered by a litigant, but rather is a partial indemnity for professional legal costs actually incurred in the conduct of the litigation.[57]

28 However, the majority were far less emphatic about the "somewhat anomalous exception" of a litigant,[58] who happens to be a solicitor,[59] being able to recover her or his costs. They also referred to the "somewhat dubious" justification for the exception[60] as articulated in London Scottish Benefit Society v Chorley.[61] In that case, the justification was expressed in the following terms:[62]

When an ordinary litigant appears in person, [she or he] is paid only for costs out of pocket. [She or he] cannot [herself or himself] take every step, and very often employs a solicitor to assist [her or him]: the remuneration to the solicitor is money paid out of pocket. [She or he] has to pay the fees of the court, that is money paid out of pocket; but for loss of time the law will not indemnify [her or him]. When, however, we come to the case of a solicitor, the question must be viewed from a different aspect. There are things which a solicitor can do for [herself or himself], but also [she or he] can employ another solicitor to do them for [her or him]; and it would be unadvisable to lay down that [she or he] shall not be entitled to ordinary costs if [she or he] appears in person, because in that case [she or he] would always employ another solicitor.

(Emphasis added.)

29 Similarly, in the same case, it was stated that it would be absurd to permit a solicitor to recover for the same work when it was done by another solicitor, and not permit the solicitor to charge for it when it was done by her or his own clerk.[63] It was also considered material that the court could measure the "costs" referable to the work of a solicitor, unlike others (so it was said).[64]

30 The majority in Cachia v Hanes questioned this earlier reasoning, and referred to the fact that, as a successful litigant, a solicitor not only receives the amount of the judgment, including costs, but actually profits from the conduct of the litigation.[65] Further, it was stated that costs awarded on this "limited and questionable exception" to the general rule concerning self-represented litigants[66] were not premised on the basis upon which costs were ordinarily awarded (as an indemnity for legal costs actually incurred), but rather on a truly exceptional basis.[67]

31 As long as 20 years ago, a trial judge of this court recognised the real prospect that this "relatively rare exception"[68] might be abandoned if the High Court were to revisit the issue.[69] However, this is yet to occur. Further, despite some authority to the contrary,[70] single judges of the trial division of this court have considered themselves bound by precedent to acknowledge the exception.[71]

32 Although, on these applications, neither the general rule, nor the exception, were challenged in submissions by any party, some further observations should be made about solicitors recovering the "costs" of acting for themselves.

33 At least in today's world of commercial litigation, it is incorrect to suggest it is axiomatic that a solicitor "would always employ another solicitor" if she or he were not able to recover the costs of being self-represented.[72] Self-evidently, by retaining another solicitor and incurring costs, the self-represented solicitor would be exposing herself or himself to a risk of not being able to recoup those costs if ultimately unsuccessful;[73] a risk to which she or he would not be exposed if the solicitor continued to act for herself or himself. Further, the considerations taken into account in London Scottish Benefit Society v Chorley,[74] in justifying the exception, did not include the important role that independent legal practitioners play in ensuring the conduct of commercial litigation is consistent with the interests of justice.[75]

34 On the premise that the general rule ought to be maintained, there may be sound policy reasons why, if the exception were ever revisited by the High Court, a solicitor who chooses not to obtain independent legal representation ought not be entitled to her or his "costs" (other than out-of-pocket expenses), particularly in light of the compensatory nature of costs awards and the existence of the overarching purpose.[76]

35 In any event, given there was no challenge to the general principle, or the exception, it is unnecessary to explore this issue further. That said, the above matters have been canvassed because, in my opinion, they are relevant to the question of the basis upon which Freehills' costs ought to be awarded, and also as to how any costs award ought to be assessed.[77]

36 Rule 63.07(2)(c) provides that the court may order that a party be entitled to a gross sum specified in the order, instead of taxed costs.

37 The identification of a gross sum differs from taxation in the sense that it involves a broader appraisal of the appropriate sum.[78] The power to make a gross sum order is not confined, but its exercise is subject to consideration of the particular circumstances and the court being satisfied that an appropriate sum may be determined fairly between the parties on the materials available.[79] A gross sum costs order may be made when it is apparent that any taxation is likely to be protracted and expensive.[80] However, there needs to be sufficient justification for the imprecision involved.[81]

38 The determination of costs on this basis must be undertaken in a manner that is logical, fair and reasonable.[82] It may be appropriate to apply a discount in the making of a gross sum costs order to offset the necessarily less precise nature of such an approach.[83]

39 The claim against Hudson in the United Proceeding was beset with difficulty from the outset. The possibility of a finding that Hudson unreasonably, or by reason of some breach of duty, had prevented the Public Offering from proceeding in 2016 was always extremely remote, at best.

40 Hudson, as the chairman and a non-executive director of United Holdings, was not, and had never been, involved in the day-to-day conduct, or the management, of the business intended to be the subject of the Public Offering. Only United had the ability to provide the critical information about the business to the non-executive directors and those advising them. The substantial, and entirely independent, failure of United itself to complete the necessary steps for the Public Offering to proceed in 2016 in accordance with the agreed (and previously extended) timetable meant that any conduct of Hudson was, at best, highly unlikely to have any causal connection with the failed attempt. This ought to have been apparent to the United Parties at all times.[84]

41 Further, the witness outlines filed by the other non-executive directors of United Holdings were wholly supportive of the position adopted by Hudson in relation to the Public Offering. In short, based on the position adopted by the other non-executive directors alone, the Public Offering could not have proceeded as planned regardless of the position of Hudson. This position of the other non-executive directors was not seriously challenged at trial (and could not have been in light of the uncontroversial facts).[85] Notwithstanding, the United Parties chose to press on regardless.

42 It is relevant that none of the other non-executive directors were joined to the United Proceeding, despite this having been foreshadowed in a proposed further amended statement of claim prepared on behalf of some of the United Parties. Senior counsel for the United Parties sought to justify these circumstances by reference to the "distinct and different position" of Hudson as the chairman of United Holdings. It was submitted that "the chairman, as has been recognised in this country, has very special and different duties". Whilst the point of distinction is valid, it has no bearing whatsoever on the entirely unmeritorious claims brought against Hudson.

43 It is unnecessary to rehearse the numerous findings that support this conclusion. In order to demonstrate the hopeless case against Hudson, it suffices to refer to the following.

44 The allegation that Hudson knew there was no basis to rationally believe that it was in the best interests of United Holdings not to approve the release of the draft prospectus ("Pathfinder")[86] to independent analysts at the board meeting scheduled for 23 October 2016 was held to be entirely without merit.[87] In fact, not only was there no reasonable basis, consistent with the best interests of United Holdings, for Hudson to believe that the Pathfinder could be released on 23 October 2016, but the facts overwhelmingly demonstrated that no director, acting in accordance with the duties imposed by statute[88] and the common law, could have approved the release of the substantially incomplete Pathfinder on that day.[89]

45 It follows that the United Parties ought to have known that the case against Hudson had no real prospect of success.[90] In my view, the case was so lacking of merit that that fact alone justifies an award of costs in favour of Hudson on the Ordinary Indemnity Basis, including reserved costs and Hudson's costs of the application to join him to the United Proceeding.[91] The fact that Hudson did not warn the United Parties he might seek indemnity costs with respect to the entire proceeding is of no real significance; the principal reasons for the comprehensive failure of the United Parties' claims were all within the knowledge of the United Parties.[92]

46 It also follows that the First Hudson Offer represented a genuine compromise, and its acceptance would have left the United Parties without the exposure to the significant costs incurred by Hudson to that point in time (being approximately 3 weeks before trial).[93] The covering letter to the First Hudson Offer demonstrated why the offer ought to have been accepted, including by referring to the outlines of evidence of the other non-executive directors and of a merchant banker experienced in such matters, each of which showed why the claim against Hudson was "bound to fail". It was entirely unreasonable for the United Parties to decline to accept the First Hudson Offer.[94] If costs had not been awarded on an indemnity basis for the reasons set out in the preceding paragraph, I would have awarded costs on the Ordinary Indemnity Basis from 11.00 am on 6 March 2018, being the second business day after the First Hudson Offer was made.[95]

47 There are 2 further observations that should be made with respect to the Hudson Application.

48 First, there is some substance to the allegation that it appears Hudson was being pursued by the United Parties for an ulterior purpose or with some ulterior motive. Although it is not necessary to establish such purpose or motive in determining an award for indemnity costs ought to be made, it is not readily apparent why the United Parties would otherwise have pursued Hudson in the manner in which they did.[96]

49 To explain, on 28 August 2017, a witness outline on behalf of Hudson was filed by Freehills in support of its defence to the United Proceeding. At that time, no witness outline had been filed on behalf of the other non-executive directors. Notwithstanding a key allegation against Hudson was that all the directors ought to have approved the Pathfinder for release to the analysts on 23 October 2016, neither of the other directors were joined as defendants. Moreover, the reaction of Silver to a former employee, Hayden Stockdale ("Stockdale"), agreeing to Freehills filing a witness outline in the United Proceeding on his behalf is instructive. Silver made serious and unwarranted threats against Stockdale in response to learning of the witness outline in question.[97]

50 It was plain from this, and other evidence before the court, that Silver did not take kindly to, and was most unaccepting of, anyone who crossed him with respect to the issues relating to these proceedings.[98]

51 Secondly, as the trial progressed and more and more evidence was led as to why there was no merit to the suggestion that the Pathfinder ought to have been approved by the United Holdings' board on 23 October 2016, the United Parties sought to pursue not only alternate and inconsistent, but substantially unpleaded, avenues of attack that were also of little merit.[99]

52 These additional observations fortify the conclusion that it is appropriate to award indemnity costs in favour of Hudson.

53 Although the claims made in the Fees Proceeding initially covered matters that were not the subject of any real contest,[100] the principal issue not resolved before trial, concerning which retainer applied during the relevant period, was far from straightforward. In relying on a letter dated 22 August 2016 as the document containing the terms of the retainer between Freehills and United, Freehills had to acknowledge that it had not obtained either of the Founders' signature to that document, and that there had not been any oral representation from the Founders after the letter was sent that its terms had been agreed. Accordingly, Freehills were required to rely upon the conduct of United after that letter had been provided to United in order to establish that a new agreement had been struck so as to replace the 2014 retainer that previously governed the relationship.

54 Whilst Freehills ultimately succeeded,[101] it did so on evidence which, in different circumstances, may not have established that an agreement as alleged had been reached. Indeed, had it not been for specific evidence to the effect that Silver was always intent on being across financial details,[102] which was borne out by further evidence of Silver's hands-on and controlling involvement in dealing with financial matters concerning United Holdings and the Public Offering,[103] the determination of the contractual issue may well have been resolved differently.

55 Accordingly, subject to considerations of the specific issues discussed below, including offers of compromise, Freehills should be awarded its costs in the Fees Proceeding on the standard basis.

56 Although an explanation has been given as to why Freehills will only be awarded standard costs from the commencement of the Fees Proceeding, there were some matters pleaded by United that need to be addressed.

57 First, United filed a defence alleging that they were not "large proprietary companies" within the meaning of s 45A(3) of the Corporations Act 2001 (Cth).[104] This was pleaded despite the fact that, on 29 June 2016, both Silver and Hirsch executed a guarantee and filed it with the Australian Securities and Investments Commission, a condition of which was that United Australia was not a small proprietary company.[105]

58 Despite Freehills threatening to apply to strike out that part of the defence, and corresponding with United's solicitors in that regard, the allegation was maintained. It was not until Freehills filed and served a strike out application, and production from United of relevant documents was sought by Freehills in support of that application and was ordered by the court,[106] that United abandoned the defence based on them not being "large proprietary companies". Accordingly, Freehills sought indemnity costs.

59 Whatever the merits, the application for indemnity costs on this issue has already been determined by the court. As referred to in the Principal Judgment,[107] on 19 May 2017 the Fees Proceeding was before Judd J. In addition to his Honour dealing with judgment on various outstanding invoices, a summons filed by Freehills was returnable before him that sought declaratory relief with respect to the issue of United not being large proprietary companies. As stated in the preceding paragraph, the relevant allegations were subsequently withdrawn by United, so Judd J was not required to deal with the matter.

60 Consequential orders were made by Judd J. As well as ordering that United were to file and serve any further amended defence by 30 June 2017 (which was not to include the offending allegations), his Honour ordered United pay Freehills' costs thrown away by reason of, and costs of and incidental to, the amended defence (which included the offending allegations). There was no suggestion those costs were on an indemnity basis, or that the basis on which costs might be ordered was reserved. On the contrary, in his ruling that day, his Honour "decline[d] to make any order for indemnity costs for reasons which [he had] briefly elaborated in the course of argument".[108] Accordingly, there is no proper basis for Freehills to seek to revisit this matter.

61 Secondly, Freehills referred to allegations in the counterclaim in the Fees Proceeding concerning misleading or deceptive conduct in trade or commerce and breaches of fiduciary duties. These allegations became substantially subsumed in the allegations made by the United Parties in the United Proceeding. Accordingly, they will be dealt with in that context,[109] and will not provide a basis for any award of indemnity costs in the Fees Proceeding.

62 As referred to above,[110] Freehills obtained judgment in the Fees Proceeding that was no less favourable than the terms of the First and Second Freehills Offers. In addition to the Judgment Amount of $648,159.39, interest was awarded in the amount of $54,032.74.

63 In the circumstances, there is no good reason why the court's discretion should not be exercised in accordance with the well-established principles concerning offers made without prejudice save as to costs.[111] Given the terms of the First Freehills Offer, and the facts referred to above concerning Silver's knowledge in August or September 2016 of the 22 August 2016 letter and the events that followed its delivery,[112] the rejection of the First Freehills Offer, viewed objectively as at the date of the offer,[113] was unreasonable.[114] Accordingly, it is appropriate that Freehills' costs be awarded on the standard basis up to 11.00 am on 20 June 2017 (being the second business day after the First Freehills Offer was made),[115] and on the Ordinary Indemnity Basis after that time.

64 Further, none of the matters relied upon by United in resisting this part of the application are persuasive. The claim was a simple debt claim for outstanding fees. The fact that further pleadings were subsequently filed and served, discovery had not been completed, and a mediation was held after the First Freehills Offer is of little significance in the circumstances. Furthermore, the First Freehills Offer, in its terms, did not lack clarity. Although the First Freehills Offer involved numerous components, including invoices not the subject of the Fees Proceeding, it was perfectly comprehensible. Moreover, the fact that the First Freehills Offer did not specifically identify all amounts attributable to costs did not give rise to any real ambiguity or make the essence of the offer unclear.[116]

65 Alternatively, if costs ought to have not been awarded on an indemnity basis pursuant to the First Freehills Offer, I would have awarded costs on the Ordinary Indemnity Basis pursuant to the making of the Second Freehills Offer, that offer having been made in accordance with the Supreme Court Rules, from 11.00 am on 11 August 2017 (being 2 business days after the Second Freehills Offer was made). For the reasons set out above, including and again taking into account the contents of the First Freehills Offer,[117] there is no reason for the court to otherwise order for the purposes of r 26.08(2). Without descending to the detail, the United submissions as to why the non-acceptance of the Second Freehills Offer are not persuasive.[118]

66 As to whether the level of indemnity costs ought to exceed the Ordinary Indemnity Costs Basis, that is more appropriately dealt with after addressing the costs issues concerning the United Proceeding.[119]

67 Freehills submitted, both at trial and at the hearing of the Freehills Application, that the United Proceeding "ought never to have been opened".[120] On this basis, Freehills sought its costs "to the greatest extent permitted".

68 For much the same reasons set out above with respect to the Hudson Application, the case against Freehills in the United Proceeding was devoid of merit. The position that confronted Hudson and the other non-executive directors on 22 and 23 October 2016, by reason of the failures of the United Parties, meant there could have been no realistic prospect of the Pathfinder being approved on 23 October 2016. In those circumstances, contrary to the allegations made by the United Parties, there was simply no proper basis for the United Parties to suggest that the conduct of Freehills in any way caused the Public Offering not to proceed in 2016.

69 Thus, because the case against Freehills in the United Proceeding was so lacking in substance, Freehills ought to be awarded its costs on an indemnity basis from the commencement of the proceeding, including reserved costs. For reasons already stated,[121] the absence of any warning that such a claim for indemnity costs might be made is of no moment.

70 Although that deals with the merits of the case generally, some matters should be referred to specifically:[122]

(1) The United Parties alleged a series of representations to underlie various causes of action. The evidence led on behalf of the United Parties from Silver himself substantially failed to establish even a prima facie case in relation to these representations.[123]

(2) Numerous allegations against Freehills were in direct conflict[124] with the express terms of the written retainers (whether the relevant retainer was contained in the 2014 letter or the 2016 letter).[125]

(3) Hirsch signed an overarching obligation certificate in relation to the commencement of the United Proceeding as the fifth plaintiff. The certificate stated:

In accordance with section 41 of the Civil Procedure Act 2010, I, the Fifth Plaintiff, certify to the Court that I have read and understood the overarching obligations set out in sections 16 to 26 of that Act and the paramount duty set out in section 16 of the Act.[126]

Despite this, Hirsch gave evidence at trial that he had not reviewed the pleadings in the United Proceeding (or the Fees Proceeding), had not given instructions to issue the United Proceeding, and had had "as little as possible to do with this litigation". In short, based on this evidence, there was no possible way Hirsch could have satisfied his obligations under s 41 of the Civil Procedure Act.[127]

(4) As with the case against Hudson, the United Parties pursued matters in closing submissions that were not pleaded, including making serious allegations which appeared to be an attempt to salvage something from the overwhelming body of evidence against their case. As explained in the Principal Judgment,[128] this approach gave rise to delay in the conduct of the trial, and consequentially the timing of the delivery of the Principal Judgment.[129]

(5) A number of issues on the pleadings were not pursued by the United Parties in closing submissions. The evidence made it apparent that those allegations should never have been made.[130]

(6) Silver gave evidence about his consternation upon being shown an email, produced as part of the discovery process, containing a direction from Ziegelaar at around 6.00 pm on 22 October 2016.[131] Silver said he was enraged when he was told by his solicitors that, on the "afternoon" of 22 October 2016, Ziegelaar had directed Mackinnon to cease work. He also said that when he heard this, it was like a kick in the gut.[132] In fact, that was not what the email said,[133] nor was it the consequence of the email being sent.[134]

(7) The belated commencement of the United Proceeding resulted in the initial trial in 2017 being adjourned, substantially increasing the costs associated with the litigation overall.

(8) As referred to above,[135] Silver threatened a witness, Stockdale, after it became apparent that Stockdale was likely to give evidence at trial. For the reasons discussed in the Principal Judgment,[136] it is not appropriate to say anything further on this issue beyond what is strictly necessary for the purpose of this application. Self-evidently, Silver's conduct was unsatisfactory and gave rise to, amongst other things, unnecessary costs and distraction from the resolution of the real issues in dispute.[137]

Accordingly, this conduct of the United Parties, in material respects, fortifies the basis of the underlying finding that the United Parties ought to pay Freehills costs in the United Proceeding on the Ordinary Indemnity Basis.[138]

71 Alternatively, if I had not been minded to award indemnity costs for all of Freehills' costs of the United Proceeding, I would have awarded indemnity costs from 11.00 am on 15 September 2017, being 2 business days after the Third Freehills Offer was made. The offer by Freehills to "walk away" and bear its own costs was a genuine offer to settle the proceeding. It was made approximately 2 weeks after the 2 days of the initial trial had been completed, during which both Freehills and the United Parties had opened their cases, and the parties had had the benefit of the witness outlines filed to that time.

72 The Third Freehills Offer's covering letter, which went into extensive detail for 7½ pages, referred to concessions that had already been made, properly, during the openings by the United Parties' senior counsel, together with various forthright observations by the previous trial judge, Judd J, during the openings. Further, the Third Freehills Offer was made at a time when:

(1) Freehills had filed its defence in the United Proceeding, and the United Parties had had nearly 3 weeks to consider its contents.

(2) Discovery, including inspection, had occurred.[139]

(4) The parties had filed and served witness outlines, including Freehills on behalf of Hudson.

(5) The parties had already incurred[140] "significant" costs.

73 In the circumstances, it was unreasonable for the United Parties to not accept the Third Freehills Offer during the 14 days it was open. Again, the fact that subsequent pleadings were filed does not alter the proper characterisation of the United Parties' conduct.[141] Further, to the extent the United Parties "relie[d] upon [their] submissions in the Fees Proceeding regarding the relevant matters and effectiveness of the Calderbank offer", those submissions have already been addressed and rejected.[142] The Third Freehills Offer was clear in its term, was open for acceptance for a reasonable period and foreshadowed indemnity costs would be sought if it were rejected.

74 Freehills submitted it ought to be treated like any other litigant when assessing the level of indemnity costs it ought to receive, regardless of whether the court was concerned with the self-represented component of its costs or otherwise. Further, Freehills' senior counsel submitted that there was necessarily an opportunity cost in Freehills devoting its resources to these proceedings.[143]

75 Dealing with the latter submission first, there was no evidence to support it. Further, absent some evidence demonstrating an actual opportunity cost, in a firm the size of Freehills it could not be properly inferred that any work that otherwise would have come to the firm during the relevant period would have been refused, lost or diminished.

76 As to the former submission, although there is no direct evidence, it must be inferred that the awards of costs referred to above would not only compensate Freehills with respect to out-of-pocket expenses and the pro-rata cost of remunerating its employee solicitors, but would also include a profit component.[144]

77 For the reasons explained above,[145] there is a real tension between the underlying principle pursuant to which costs are ordinarily ordered, and the exception applicable to solicitors who are self-represented litigants. The existence of this tension means that, if an order for costs were ever to be made in favour of a self-represented solicitor at a level greater than the Ordinary Indemnity Basis, it would have to be justified on a basis beyond merely responding to some "special" circumstances of the case.[146] Further, arguably, by seeking costs on a complete indemnity basis, Freehills are seeking an extension to the exception established in Guss v Veenhuizen (No 2).[147] In light of the comments of the High Court in Cachia v Hanes,[148] it would be entirely inappropriate to extend the formulation or operation of the exception.[149]

78 Indeed, such considerations might have been a basis for restricting Freehills' costs to the standard basis. When considering the issue strictly as a matter of principle, it might be thought that any award above standard costs would be inappropriate.[150] However, costs on the Ordinary Indemnity Basis have been treated as being within the exception.[151] Further, to base this ruling on a general proposition that only standard costs could be ordered in favour of a self-represented solicitor would be to undermine the applicability and operation of significant aspects of the current costs regime, including with respect to offers of compromise, with respect to cases involving self-represented solicitors. Furthermore, there is nothing in the Supreme Court Rules, or binding authority, which suggests this approach ought to be adopted.[152] Moreover, given the difference between standard costs and costs on the Ordinary Indemnity Basis is largely a matter of onus,[153] by awarding costs on the Ordinary Indemnity Basis there is, in substance, no expansion of the exception to the underlying principle.

79 Turning to the facts of this case, there is another tension in existence. It is difficult to reconcile Freehills' position, on the 1 hand, that the United Parties' case was so obviously hopeless that it ought never to have been brought with, on the other hand, the submission that Freehills ought to have been entitled to retain senior counsel, or use the services of a solicitor, who charges at a level in excess of scale, and then recover costs in that regard. Given the number of issues raised, it was entirely appropriate for 2 counsel to be retained. However, I am not satisfied that retaining senior counsel and agreeing to pay above and beyond scale was warranted, such that the actual costs involved ought to be recovered.[154] I am of a like mind with respect to the costs of any solicitor that charged at rates above scale.

80 Accordingly, no increase will be permitted above what would be recoverable on the Ordinary Indemnity Basis.[155]

D.2.4 Whether gross sum cost assessment appropriate

81 The broad brush approach involved in a gross sum assessment is not appropriate for a number of reasons. First, I am not satisfied that the complexity or size of the case makes taxation in the usual way anything other than appropriate. Secondly, in circumstances where Freehills will be claiming very significant sums for their own benefit, including profit, rather than on behalf of a client seeking to recoup its out-of-pocket expenses and costs, the process of taxation in the Costs Court will provide an important safeguard to the amount of costs ultimately awarded.

82 In summary, the limited evidence put forward on this issue[156] does not sufficiently justify an order for a gross sum assessment.

83 For these reasons, costs will be awarded in favour of Freehills in the Fees Proceeding on the standard basis up to 11.00 am on 20 June 2017, and thereafter on the Ordinary Indemnity Basis. In the United Proceeding, both Hudson and Freehills will be awarded their costs on the Ordinary Indemnity Basis. This will include Freehills' costs after 19 January 2018, but only insofar as those costs are referable to Freehills providing professional services that necessarily would otherwise have been provided by another solicitor.[157]

84 However, all costs awarded are to be assessed on the basis of scale as opposed to the actual rates of the solicitors and counsel acting for Freehills in each proceeding, to be taxed in default of agreement.[158]

[1] Initially, the plaintiffs in the United Proceeding were United Australia, United Petroleum, United Holdings, Silver and Hirsch. On 16 April 2018, an amended writ was filed adding Kinlee Pty Ltd (a company related to Silver) and Apson Pty Ltd (a company related to Hirsch) as plaintiffs.

[2] Broadly speaking, some of these claims were originally pleaded by the United Parties as a counterclaim in the Fees Proceeding.

[3] United Petroleum Australia Pty Ltd v Herbert Smith Freehills (2018) 128 ACSR 324. The Principal Judgment is lengthy. It is unnecessary to give a complete account of the many findings made or of all the arguments put on costs in this ruling: Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481, 484 [12] (Maxwell P and Kellam JA).

[4] It was admitted on the pleadings that Freehills was also retained by United Holdings: Principal Judgment, 417, [487].

[5] Orders were made on 26 June 2018. This is the usual basis of taxation of costs: Supreme Court (General Civil Procedure) Rules 2015 (Vic), rr 63.30, 63.31. See further par 15 below.

[6] See pars 14, 16 below.

[7] See pars 14, 16, 23-24 below. It is noted that no costs were sought with respect to the time spent in the preparation for, and the giving of, evidence by the 2 solicitors of Freehills directly involved in the events the subject of the proceedings.

[8] Freehills acted for itself at all times in the Fees Proceeding. In the United Proceeding, Freehills acted for itself until 19 January 2018, when Clyde & Co became solicitors on the record for Freehills. After 19 January 2018, in conjunction with Clyde & Co, Freehills continued to perform some of the legal services referrable to the United Proceeding.

[9] As to the circumstances relied upon, see the Principal Judgment, 406-408 [433]-[439].

[10] The First Freehills Offer was in the form of a letter marked "without prejudice save as to costs".

[11] As contended for by Freehills; these totalled $142,965.65 as at the date of the First Freehills Offer.

[12] Being the percentage derived from an offer of $750,000.00 on total claims of $950,240.44.

[13] The Second Freehills Offer was in the form of an offer of compromise served pursuant to part 2 of order 26 of the Supreme Court Rules, with a covering letter marked "without prejudice save as to costs".

[14] There was no suggestion that including matters outside the claims made in the Fees Proceeding, in itself, affected the efficacy of the Second Freehills Offer for the purposes of order 26 of the Supreme Court Rules: see r 26.02(1) and (2) and par 20 below. See also pars 64-65 below.

[15] The Third Freehills Offer was in a similar form to the Second Freehills Offer.

[16] The First Hudson Offer was in the form of an offer of compromise with a covering letter marked "without prejudice save as to costs".

[17] The Second Hudson Offer was in the form of an email marked "without prejudice save as to costs".

[18] Supreme Court Rules, r 63.07(2)(c). See also Civil Procedure Act 2010 (Vic), s 65C.

[19] Freehills stated it had obtained advice from Penny van den Berg of Mahlab Costing Pty Ltd. No report was provided. The evidence was hearsay, which was relied upon without objection.

[20] Supreme Court Act 1986 (Vic), s 24.

[24] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 75 [1] (Brennan CJ, dissenting), 89 [44] (Gaudron and Gummow JJ), 97 [67] (McHugh J, dissenting); Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 543.1 (Mason CJ), 567.1 (McHugh J). See also Quinn v Law Institute of Victoria Ltd (No 2) [2007] VSCA 132, [13] (Maxwell P, Chernov and Nettle JJA).

[25] Ibid. See also Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 562.10-563.1 (Toohey J).

[26] See par 6 above.

[27] Rule 63.30.1. In contrast, costs on a standard basis are "all costs reasonably incurred and of reasonable amount": r 63.30.

[29] Cf Hazeldene's Chicken Farm v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 439 [12] (Warren CJ, Maxwell P and Harper AJA).

[30] Oversea-Chinese Banking Corporation Ltd v Richfield Investments Pty Ltd [2004] VSC 351, [60] (Redlich J), cited with approval in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 441 [22] (Warren CJ, Maxwell P and Harper AJA). See also Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [7]-[8] (Harper J); Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233.4 (Sheppard J); Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd [1986] FCA 85; (1986) 10 FCR 177, 178.5 (Woodward J), citing Preston v Preston [1982] Fam 17, 39B (Brandon LJ).

[31] See par 12 above.

[32] Cf Barclays Australia Ltd v Dan (unreported, Supreme Court of New South Wales, 16 December 1981, Yeldham J) 3.6; but also see Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354, 356D-359F (Holland J); EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59, 64H-65E, 71A-D (Megarry VC). See also par 23 below.

[33] Murdaca v Maisano [2004] VSCA 123, [40] (Nettle JA), citing Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397, 401.3 (Woodward J). Cf Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd (No 3) [2018] VSCA 192, [13] (Whelan, Niall and Hargrave JJA); Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, 542E (Kirby P, with whom Hope and Samuels JJA agreed).

[34] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237, [545]-[546] (Warren CJ, Osborn JA and Macaulay AJA); Murdaca v Maisano [2004] VSCA 123, [40]; Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233.8 (Sheppard J).

[35] Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233.8.

[36] Ibid, 233.9. See also Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 442-443 [28]-[29] (Warren CJ, Maxwell P and Harper AJA).

[37] Calderbank v Calderbank [1976] Fam 93, 106F (Cairns LJ, with whom Scarman LJ and Sir Gordon Willmer agreed).

[38] Victorian WorkCover Authority v O'Brien [2017] VSC 68, [8] (J Forrest J), quoting Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398, [13]-[17] (Buchanan and Tate JJA and Sifris AJA). See further, par 22 below.

[39] Hazeldene's Chicken Farm v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 442 [28] (Warren CJ, Maxwell P and Harper AJA). See also Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141, [234]-[236] (Tate ACJ, Kyrou and Ferguson JJA).

[40] Defteros v Google Inc [2017] VSC 189, [8] (John Dixon J).

[41] Hazeldene's Chicken Farm v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 441-442 [23]-[24], 443 [30]; Victorian Workcover Authority v O'Brien [2017] VSC 68, [6]-[7] (J Forrest J); Premier Building & Consulting Pty Ltd v Spotless Group Ltd (No 13) [2007] VSC 516, [13] (Byrne J); Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65, [10] (Callaway JA), [33]-[34] (Nettle JA).

[42] Masters Home Improvement Pty Ltd v North East Solution Pty Ltd (No 2) [2017] VSCA 113, [2] (Santamaria, Ferguson and Kaye JJA), citing Hazeldene's Chicken Farm v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 442 [25] (Warren CJ, Maxwell P and Harper AJA).

[43] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 441 [21] (Warren CJ, Maxwell P and Harper AJA), referring to Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 164.7-165.5 (Hayne JA).

[44] There was no suggestion Freehills or Hudson were not willing to carry out the offers they made pursuant to r 26.02.

[45] Defteros v Google Inc [2017] VSC 189, [6], [15] (John Dixon J); Love v State of Victoria (No 2) [2009] VSC 531, [27]-[29] (Cavanough J); Roads and Traffic Authority of New South Wales v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336, [17] (Campbell JA, with whom McColl JA and Sackville AJA agreed). Cf Re Akron Roads Pty Ltd (in liquidation) (No 4) [2016] VSC 778, [7]-[9] (Robson J).

[46] Towie v Medical Practitioners Board (Vic) [2008] VSCA 157, [41] (Redlich and Weinberg JJA and Mandie AJA). See also Nolan v Department of Environment & Primary Industries (No 2) [2014] VSC 467, [35] (McMillan J).

[47] See fn 38 above. See also Re Akron Roads Pty Ltd [2016] VSC 778, [7]-[9] (Robson J); Williams v Katis [2014] VSC 471, [21]-[24] (J Forrest J); Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398, [17] (Buchanan and Tate JJA and Sifris AJA); Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65, [17] (Callaway JA).

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 30 per cent of the legal practitioner's charges allowed on the taxation of costs with respect to -

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

[49] Supreme Court Rules, Appendix A, item 19, which provided, for the period commencing 1 January 2018, a maximum daily fee of $8539.00 and $5693.00 for senior and junior counsel respectively.

[51] Noting that there is no exhaustive definition of costs in the Supreme Court Act, the Civil Procedure Act 2010 (Vic) or the Supreme Court Rules: cf comments in Wang v Farkas [2014] NSWCA 29; (2014) 85 NSWLR 390, 395-396 [20]-[22], 397 [27]-[28], 399 [35], [37] (Basten JA, with whom Bathurst CJ agreed and Beazley P relevantly agreed) about the need to consider the meaning of "costs" in the context of the relevant provisions; costs, of course, being a creature of statute.

[52] Leaving aside out-of-pocket expenses: see, for example, Cachia v Hanes (1991) 23 NSWLR 304, 319F-321F (Handley JA, with whom Clarke JA agreed). See also pars 27-30 below.

[53] Guss v Veenhuizen (No 2) [1976] HCA 57; (1976) 136 CLR 47, 51.4, 53.3 (Gibbs ACJ, Jacobs and Aickin JJ). Cf Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403, 412.3 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ); Cachia v Hanes (1991) 23 NSWLR 304, 317D (Handley JA).

[54] [1994] HCA 14; (1994) 179 CLR 403.

[55] Pursuant to the Supreme Court Act 1970 (NSW), 76(1) and the Supreme Court Rules 1970 (NSW), Part 52, r 23(2).

[56] At 410.8, citing the Statute of Gloucester, 1278 (UK) 6 Edw I, c 1.

[59] The reference to a solicitor, rather than a legal practitioner, is intentional as there has been an issue about whether the exception applies to barristers: Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150, [90]-[98], [100], [115]-[118] (Beazley ACJ, with whom Macfarlan JA agreed), [138]-[141] (Meagher JA, dissenting). See also RJ Desiatnik, "DIY - Its costly consequence for counsel" (2017) 44 Australian Bar Review 113.

[60] Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403, 411.3.

[61] (1884) 13 QBD 872.

[62] At 875.6 (Brett MR, with whom Bowen and Fry LJJ agreed). See also at 877.9 (Fry LJ).

[64] Ibid, 877.3. Cf Dobree v Hoffman (1996) 18 WAR 36, 42C (Parker J, with whom Rowland and Steytler JJ agreed).

[65] Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403, 412.3.

[68] To use the words of the majority in Cachia v Hanes, at 414.9.

[69] Brott v Almatrah [1998] 2 VR 83, 86.8-87.9 (Batt J). See further, Wilkie v Brown [2016] NSWCA 128, [27] (Beazley P, with whom McColl and Gleeson JJA agreed); Wang v Farkas [2014] NSWCA 29; (2014) 85 NSWLR 390, 394 [12], 396-397 [23]-[26], 397-399 [29]-[36] (Basten JA, with whom Bathurst CJ agreed and Beazley P relevantly agreed), and the cases there cited.

[70] Dobree v Hoffman (1996) 18 WAR 36, 39E-48F (Parker J, with whom Rowland and Steytler JJ agreed), upholding the decision at first instance (1995) 14 WAR 408 (Ipp J). But also see, contra, Soia v Bennett [2014] WASCA 27; (2014) 46 WAR 301, 321-322 [79]-[86] (Pullin JA, with whom Newnes and Murphy JJA agreed); for which special leave was refused: [2014] HCASL 248 (noting, however, that the solicitor acting in that case was a corporation, of which the litigant solicitor was the only director and shareholder: Soia v Bennett [2014] WASCA 27; (2014) 46 WAR 301, 322 [86]).

[71] Lee v Korean Society of Victoria Inc [2014] VSC 316, [21] (Dixon J); Winn v Garland Hawthorn Brahe (Ruling No 1) [2007] VSC 360, [4]-[7] (Kaye J); Brott v Almatrah [1998] 2 VR 83, 87.7 (Batt J).

[72] Cf par 28 above.

[73] Either in the proceeding altogether, or in failing to better any offer of compromise which might have been made.

[74] (1884) 13 QBD 872.

[75] See McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673, [71] (McCallum J); McIllraith v Ilkin [2007] NSWSC 1052, [25] (Brereton J); Dobree v Hoffman (1996) 18 WAR 36, 42E (Parker J, with whom Rowland and Steytler JJ agreed); cf Lee v Korean Society of Victoria Inc [2014] VSC 316, [21] (Dixon J).

[76] Civil Procedure Act 2010 (Vic), s 7. See also P Lynch, "Cachia v Hanes: The Resurgence of the Indemnity Principle in Australia" (1995) 13 Australian Bar Review 177, 200.4, 203.2.

[77] To be clear, these general observations are made with respect to the exception as a matter of principle, and in no way are intended to be a comment on the conduct of Freehills in the Fees Proceeding or the United Proceeding.

[78] Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, 743 [22] (Giles JA).

[79] Hamod v State of New South Wales [2011] NSWCA 375, [813] (Beazley JA, with whom Giles and Whealy JJA agreed); Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, 742-743 [21]-[22] (Giles JA).

[80] Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, 742-743 [21], and the cases there cited.

[81] ACN 074 971 109 v National Mutual Life Association of Australasia Ltd [2013] VSC 137, [15] (Wood AsJ).

[82] Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, 743 [22], citing Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, 123C (von Doussa J). See, more recently, Wilson v Bauer Media Pty Ltd [2018] VSC 161, [10] (John Dixon J), referring with approval to ACN 074 971 109 v National Mutual Life Association of Australasia Ltd [2013] VSC 137, [5] (Wood AsJ) and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [84] (Croft J).

[83] Stankovic v State of NSW (No 2) [2016] NSWSC 335, [16]-[17] (Davies J); Hamod v State of New South Wales [2011] NSWCA 375, [814] (Beazley JA, with whom Giles and Whealy JJA agreed) and the cases there cited.

[84] See, for example, Principal Judgment, 428 [534]-[539].

[85] See, for example, Principal Judgment, 393 [362]-[365], 419 fn 256.

[86] See Principal Judgment, 330 [35], 337 [81] for an explanation of the term Pathfinder.

[87] Principal Judgment, 457-458 [667].

[88] Corporations Act 2001 (Cth), ss 180, 181, 182, 183, 184.

[89] 23 October 2016 was the last day upon which the Pathfinder could have been approved by the board of United Holdings if the Public Offering were to proceed as scheduled in December 2016.

[90] For completeness, although Judd J granted leave for Hudson to be joined, he described certain aspects of the case as "arresting": United Petroleum Australia Pty Ltd v Herbert Smith Freehills (unreported, Supreme Court of Victoria, 16 October 2017), [1]. Further, Hudson's submissions in opposition to Hudson's joinder pointed out, correctly, why it was "impossible to imagine" a board acting in accordance with its duties would have approved the release of the Pathfinder on 23 October 2016.

[91] It was not in issue that these costs ought to form part of Hudson's costs of the United Proceeding.

[92] Cf Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [80]-[81] (Croft J).

[93] Cf Texxon Pty Ltd v Austexx Corporation Pty Ltd (No 2) [2013] VSC 343; (2013) 276 FLR 401, 406 [17] (Davies J).

[94] Cf Nolan v Department of Environment & Primary Industries (No 2) [2014] VSC 467, [35]-[38] (McMillan J).

[95] In the circumstances, it is unnecessary to consider the Second Hudson Offer.

[96] Cf Fountain Select Meats (Sales) Pty Ltd v International Produce Merchant Ltd [1988] FCA 202; (1988) 81 ALR 397, 401.4 (Woodward J), referred to with approval in Murdaca v Maisano [2004] VSCA 123, [40] (Nettle JA, with whom Buchanan JA agreed).

[97] Principal Judgment, 406-407 [433], 407 [437]-[438].

[98] See also ibid, 395 [379], 403 [418], 403 [420], 404 [426].

[102] George Svinos, the chief financial officer of United, and formerly a partner at KPMG, described Silver as the most detailed individual he had ever met. In so doing, Svinos was rebutting a suggestion put to him by Freehills' senior counsel that Svinos had told Ziegelaar that Silver "doesn't do detail".

[103] Cf Silver's self-serving evidence on his reading of the 22 August 2016 letter: Principal Judgment, 335 [69]. See also at 402 [414], 403-404 [424]-[425], 405-406 [429].

[104] This was pleaded as a premise for denying that each of United Australia and United Petroleum was a commercial client as defined in s 170 of Schedule 1 to the Legal Profession Uniform Law Application Act 2014 (Vic) and, therefore, seeking to avoid the exclusion of the applicability of Part 4.3 of that Act in order to impermissibly rely upon s 178 concerning non-compliance with disclosure obligations.

[105] See Corporations Act, s 45A(2).

[108] Herbert Smith Freehills v United Petroleum Australia Pty Ltd (unreported, Supreme Court of Victoria, 19 May 2017, Judd J), [9]. Having read the transcript of the hearing on 19 May 2017, it is clear that his Honour treated the application for indemnity costs to go to the issue at hand, although, at 1 point, and contrary to other submissions, Freehills' senior counsel suggested costs were only sought on the indemnity basis with respect to the summons.

[109] See especially par 70(1), (2) and (5) below.

[110] See par 10(1) and (2) above.

[111] See par 18 above.

[112] See par 54 above.

[113] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 443 [30] (Warren CJ, Maxwell P and Harper AJA).

[114] See par 19 above.

[115] The First Freehills Offer stated that Freehills would seek to have its costs paid on an indemnity basis from the date of the offer, however this did not allow United time to properly consider the First Freehills Offer. Although the First Freehills Offer was not made in accordance with r 26.02(1), in the circumstances the timing prescribed in r 26.08(2)(b) is an appropriate time for the offer to take effect.

[116] With respect to the claims that remained outstanding as at 16 June 2017, Freehills identified the precise amount of the debt (which was exactly the same amount as the Judgment Amount), together with exact amounts for the costs orders made by the court on 5 May 2017 and 19 May 2017 (and an explanation as to how those amounts were calculated), together with exact amounts for interest on the outstanding amounts or previously paid amounts.

[117] See Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141, [234]-[236] (Tate ACJ, Kyrou and Ferguson JJA).

[118] In light of the ruling with respect to the First Freehills Offer, it is not necessary to itemise each of the matters raised.

[119] See pars 74-80 below.

[120] There was no suggestion that such language was directed to counsel or solicitors acting for the United Parties.

[121] See par 45 above.

[122] This list does not purport to be exhaustive with respect to the matters that could properly be raised on this issue.

[123] Principal Judgment, 414-416 [472]-[485].

[124] Ibid, 331 [45]-[46], 418 [488]-[489], 418 [491], 424-425 [519], 425 [521], 425-426 [524]-[525], 426 [527]-[528]; cf 418-419 [492]-[493].

[126] Section 41(1) requires each party to personally certify that the party has read and understood the overarching obligations (which is defined to mean the obligations set out in ss 16-26) and the paramount duty (which is defined to mean the duty set out in s 16). Section 16 provides:

Each person to whom the overarching obligations apply has an overarching duty to the court to further the administration of justice in relation to any civil proceeding in which that person is involved, including ...

Relevantly, s 18(d) requires a person to whom the overarching obligations apply to not make any claim that does not, on the factual and legal material available to the person at the time of making the claim, have a proper basis.

[127] As to the relevance of the Civil Procedure Act to an award of costs, see further Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [19] (Croft J).

[130] Ibid, 412-413 [461]-[465]. See also 441 [599].

[135] See par 49 above.

[138] Freehills sought to rely on the media coverage of the case as an additional reason why indemnity costs ought to be awarded in its favour. In circumstances where Freehills received prominent media coverage as to its success in the proceeding, in which Freehills participated by providing quotes for the media to publish, I do not propose to take any adverse media coverage into account on the question of costs. Further, even if it were appropriate to consider this issue, there is no satisfactory basis for the court to measure the overall effect of the media coverage.

[139] At list of documents was not filed by Freehills until 2 days later, on 15 September 2017, but there had already been discovery of documents relevant to key issues by reason of discovery in the Fees Proceeding.

[140] In this context, "incurred" is also a reference to costs Freehills would be entitled to claim if ultimately successful at trial. The covering letter referred to the "established principle" that Freehills would be entitled to its professional costs and disbursements "incurred" in defending the United Proceeding.

[141] See par 64 above.

[142] See pars 64-65 above.

[143] Cf Atlas Corporation Pty Ltd v Kalyk [2001] NSWCA 10, [9] (Handley JA, with whom Meagher and Sheller JJA agreed). See also the reference to "profit costs" in Ogier v Norton [1904] VicLawRp 72; (1904) 29 VLR 536, 538.6 (Madden CJ, with whom A'Beckett and Hodges JJ agreed).

[144] Ibid. See also par 30 above.

[145] See pars 27-32 above.

[146] See par 15 above.

[147] [1976] HCA 57; (1976) 136 CLR 47. See par 26 above.

[148] [1994] HCA 14; (1994) 179 CLR 403. See pars 27-30. See also Lawrence v MD Nikolaidis & Co [2003] NSWCA 129; (2003) 57 NSWLR 355, 374 [58] (Hodgson JA, with whom Beazley JA agreed).

[149] See further pars 33-34 above.

[150] Cf Beling v Sixty International SA (No 2) [2015] FCA 355, [30]-[32] (Mortimer J); Beling v Sixty International SA [2015] FCA 250; (2015) 228 FCR 194, 209 [67]-[72], 211-212 [85] (Mortimer J).

[151] For example, Coshott v Barry [2017] NSWSC 1435, [12], [19] (Fagan J); McIlwraith v Ilkin [2007] NSWSC 1052, [10], [27] (Brereton J); cf McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673, [71] (McCallum J).

[152] By way of example only, order 26, concerning offers of compromise, was first introduced into the General Rules of Procedure in Civil Proceeding 1986 (Vic) on 1 January 1987, long after the decision of the High Court in Guss v Veenhuizen (No 2) [1976] HCA 57; (1976) 136 CLR 47, and there was nothing in the rule as introduced, or subsequently, which suggested it was not intended to apply to self-represented solicitors. A like observation may be made with respect to the introduction in 1986 of the Supreme Court Act.

[153] See par 14 above.

[154] Of course, it is a matter for Freehills if they choose to do so at their own cost. Further, the fact that the United Parties retained 2 senior counsel, both very experienced, does not alter the analysis set out above.

[155] There was no attempt by Freehills to show there were "special grounds" for the purposes of r 63.34(3): see par 23 above.

[156] See par 11 above.

[157] See, for example, Pentelow v Bell Lawyers Pty Ltd [2018] NSWCA 150, [108]-[110] (Beazley ACJ, with whom Macfarlan JA agreed) referring with approval to Ogier v Norton [1904] VicLawRp 72; (1904) 29 VLR 536, 538.7 (Madden CJ, with whom A'Beckett and Hodges JJ agreed).

[158] On the court being informed that an application was to be made for indemnity costs, the matter was listed, for directions only, on 10 July 2018. This was done on the court's own motion so that appropriate directions could be given to ensure any further costs and court time could be kept to a level proportionate with the remaining issues then outstanding. On the day before the directions hearing, Freehills filed 2 affidavits in support of the Freehills' Application. The first affidavit, filed in the United Proceeding, consisted of 61 pages, with 418 pages of exhibits. The second affidavit, filed in the Fees Proceeding, simply referred to and adopted the affidavit filed in the United Proceeding. At the directions hearing, I indicted that filing 479 pages of materials on a costs application seemed excessive and disproportionate. I stated that Freehills should consider whether shorter affidavits should be filed. Shorter affidavits were subsequently filed. Accordingly, as part of the final orders on costs, I will order that the costs of preparing, swearing and filing the first and second affidavit referred to above are not to be included in Freehills' taxable costs of the United Proceeding and the Fees Proceeding, respectively. A like order will be made with respect to an affidavit filed by a solicitor from Clyde & Co on 9 July 2018, which purported to rely on the first affidavit referred to above.