Stone (liquidator), in the matter of Ironbark Blacksmithing Pty Ltd (in liq) v Mizzi

Stone (liquidator), in the matter of Ironbark Blacksmithing Pty Ltd (in liq) v Mizzi - [2024] FCA 927 - FCA 2024 case summary — Zoe

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A. Introduction 1 On 28 June 2024, I made orders in these proceedings providing for judgment in favour of the plaintiffs on the claims that they had advanced against two former directors of the second plaintiff (Company) and published reasons for judgment: Stone (liquidator), in the matter of Ironbark Blacksmithing Pty Ltd (in liq) v Mizzi [2024] FCA 696 (Primary Judgment or PJ). 2 I also made orders that the parties were to seek to reach agreement as to both costs and interest and provide agreed short minutes of order to my Associate, failing which they were to file submissions and any evidence in support of the orders that they sought and any outstanding issues would be determined on the papers, unless a party requested an oral hearing. 3 The parties were not able to reach an agreed position on the costs of the proceedings or pre-judgment interest and subsequently filed submissions in support of the orders that they now seek. Neither the plaintiffs nor the defendants requested an oral hearing. 4 The orders that I made on 28 June 2024 giving effect to my reasons for judgment were as follows: 1. Judgment against the first defendant in the amount of $98,097.69 for loans that are due and payable to the second plaintiff. 2. Judgment against the second defendant in the amount of $188,309.88 for loans that are due and payable to the second plaintiff. 3. Pursuant to s 1317H of the Corporations Act 2001 (Cth) (Act), an order for compensation in favour of the second plaintiff against the first and second defendants in the amount of $89,056.96. 4. Pursuant to s 588M(2) of the Act, the defendants are to pay to the first plaintiff, as a debt due to the second plaintiff, the amount of $339,436.92. 5 Orders 1 and 2 were made with respect to shareholder loans advanced by the Company to the first and second defendants, respectively, prior to 30 June 2014 (Loan Advances). 6 Order 3 was made with respect to loans that the defendants authorised or permitted the Company to make to them in the period between 30 June 2014 and the winding up of the Company on 6 February 2015, in breach of their duties as directors of the Company. These alleged breaches were first advanced by the plaintiffs in their amended statement of claim that was filed on 17 June 2021 (Restated Directors' Duties Contraventions). 7 Order 4 was made with respect to debts that the defendants caused the Company to incur between 29 April 2013 and the winding up of the Company, at a time when the Company was insolvent (Insolvent Trading Claims). 8 The plaintiffs seek pre-judgment interest from (a) the date on which the most recent of the Loan Advances was made to the defendants, and (b) the date of the winding up of the Company, with respect to both the Restated Directors' Duties Contraventions and the Insolvent Trading Claims. 9 The defendants seek an order that pre-judgment interest is only to be payable on the amounts specified in Orders 1 to 4 of the orders made on 28 June 2024, for the period from 17 June 2021 (being the date on which the plaintiffs filed the amended statement of claim) until the delivery of the Primary Judgment on 28 June 2024. 10 The plaintiffs seek their costs of the proceedings, and on an indemnity basis from 27 July 2021 on the basis of a Calderbank offer made on that date (Calderbank Letter) or alternatively, from 11.00 am on Tuesday, 22 February 2022, being the second business day after offers of compromise were served on each of the defendants on Friday, 18 February 2022 (Offers of Compromise), pursuant to r 25.14(3) of the Federal Court Rules 2011 (Cth) (Rules). The plaintiffs rely on an affidavit of their solicitor, Raymond John Roser, affirmed on 26 July 2024, in support of their application for indemnity costs. 11 The defendants contend that the appropriate costs order is that they pay 60% of the plaintiffs' costs of the proceedings and only on a party and party basis. 12 The competing submissions of the parties raise for determination (a) the date from which pre-judgment interest in proceedings commenced by liquidators against former directors of a company should run, (b) the circumstances in which a Court will make a proportionate costs order, and (c) the reasonableness of the defendants' failure to accept a Calderbank offer and an offer of compromise under the Rules. 13 In my view, for the following reasons, the plaintiffs are entitled to the costs of the proceedings, including on an indemnity basis from the second business day after making the Offers of Compromise, and to pre-judgment interest from the date demands were made for repayment of the Loan Advances and for compensation with respect to the Insolvent Trading Claims, and from the date of the filing of the amended statement of claim for the Restated Directors' Duties Contraventions.

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B.1. Statutory provisions and legal principles 15 Section 51A(1) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) provides: (1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest. 16 The date from which the Court should exercise its discretion to award interest in proceedings brought by liquidators has been considered in previous authorities. 17 In Spedley Securities Ltd (in liq) v Western United Ltd (in liq) (No 2) (1992) 7 ACSR 721, in the context of a liquidator's recovery of an unfair preference, McLelland J said at 722: I am not proposing any inflexible rule, but in the ordinary run of cases, and particularly in the present case, it seems to me that it would not be proper to allow interest in respect of any period prior to a demand by the liquidator that any particular payment was in fact recoverable as a preference. 18 In Ferrier and Knight (as Liquidators of Compass Airlines Pty Ltd) v Civil Aviation Authority (1994) 55 FCR 28, a Full Court of this Court concluded at 93 (Beaumont, Gummow and Lindgren JJ) that in proceedings seeking to recover a preference payment in the "ordinary course", interest ought to be allowed only from the date of demand by the liquidators. The Full Court's decision was reversed on appeal, but not on this issue. Their Honours stated at 92: As McLelland J pointed out in Spedley Securities Ltd (in liq) v Western United Ltd (in liq) (No 2) (1992) 10 ACLC 887, a preference is void only as against the liquidator so that until a liquidator is appointed there can be no cause of action. His Honour concluded (at 887-888): As a matter of principle and logic it is very difficult to see any proper basis for an award of interest in respect of a period prior to the accrual of any relevant cause of action. His Honour also said that rarely would it be appropriate to allow any amount for interest in respect of a period prior to a demand being made for the recovery of a preference. His Honour said (at 888): I am not proposing any inflexible rule, but in the ordinary run of cases, and particularly in the present case, it seems to me that it would not be proper to allow interest in respect of any period prior to a demand by the liquidator that any particular payment was in fact recoverable as a preference. McLelland J also pointed out (at 888) that s 94 of the Supreme Court Act 1970 (NSW) (which relevantly corresponds to s 51a) was "the only foundation for the inclusion of interest in any event". 19 Their Honours also observed at 93, that a position had been reached in the United States that was broadly the same, namely that in the absence of a specific demand, interest should run from the commencement of the proceedings, being itself a demand, citing Re Roco Corp 37 BR 770 at 774 (D RI 1984) and Re Art Shirt Ltd Inc 93 BR 333 at 341-342 (ED Pa 1988). Their Honours stated that the rationale for the general rule that applied in the United States was that until the trustee exercises their election and makes a demand for repayment or retransfer, the preferred creditor could not be said to hold the property wrongfully, citing Smith v Mark Twain National Bank 805 F 2d 278 at 291 (8th Cir, 1986). 20 In the context of uncommercial transaction cases, Gordon J observed in Capital Finance Australia Ltd v Tolcher (2007) 164 FCR 83; [2007] FCAFC 185 at [150], that "in the ordinary course, interest is and should only be allowed from the date of the demand" on the basis that the relevant transactions were not uncommercial or preferential until challenged. Her Honour referred with approval to the decision of Cole JA in Star v O'Brien (1987) 40 NSWLR 695 at 706, that to "select as the date of commencement for the payment of interest the date of appointment of the liquidator presumes that demand for recovery will successfully be made". 21 In addressing a claim for interest in an insolvent trading claim, Olsson J (with whom Duggan and Williams JJ agreed) in Powell v Fryer (2001) 159 FLR 433; [2001] SASC 59, stated at [115]: As [counsel for the respondent] pointed out, the making of a demand is not a pre-requisite to a cause of action pursuant to s588M. Further, unlike proceedings related to undue preferences (where the transaction remains valid unless and until it is avoided), s588M gives rise to liability, as and when each debt is inappropriately incurred and is not satisfied according to its terms. Theoretically, interest ought, as a matter of logic, to be computed as from when each relevant debt fell due and was not met. As a matter of convenience, interest has been allowed to run from the date of appointment of a liquidator. This is consistent with Re Mike Electric (Aust) Pty Ltd (In Liq) (1983) 7 ACLR 600 and a series of authorities stemming from it. These cases all related to preference claims. There is an even greater reason to apply the practice to a claim such as that now before the Court. 22 In Kazar (Liquidator) v Kargarian; Re Frontier Architects Pty Ltd (In Liq) (2011) 197 FCR 113; [2011] FCAFC 136, a Full Court of this Court was concerned with a claim for pre-judgment interest with respect to an unreasonable director-related transaction, not a preference payment. Justice Foster (with whom Greenwood and Rares JJ agreed) nevertheless stated at [93]-[94] that the general rule in Ferrier that pre-judgment interest should run from the date of a relevant demand by a liquidator is sound, but found in that case that pre-judgment interest pursuant to s 51A(1)(a) of the Federal Court Act should not run until the commencement of proceedings, which in that case was when the liquidator first demanded payment, because a putative defendant is entitled to know (a) whether any particular action by the liquidator will, in fact, be pursued, (b) the basis upon which that cause of action will be pursued, and (c) the quantum of the claim to be made against them. 23 In Aquisite Pty Ltd v Moss (No 2) [2023] FCA 727 at [4], McElwaine J cited Powell in support of the proposition that an award of pre-judgment interest in an insolvent trading claim is made from the date of the appointment of a liquidator who succeeds on an insolvent trading claim. His Honour did not refer to Kazar or Ferrier in his reasons for judgment. 24 The reasoning of the Full Court of this Court in Ferrier was also recently applied in the context of unreasonable director-related transactions by O'Sullivan J in Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liq) v CEG Direct Securities Pty Ltd (Costs) [2024] FCA 120 in which his Honour concluded at [30] that pre-judgment interest should run from the date that the liquidator made a demand with respect to a director-related transaction.

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B.2. Submissions 25 The plaintiffs submit that they are entitled to interest on the Loan Advances from the date when the cause of action arose until the date judgment was entered by reason of s 51A(1)(a) of the Federal Court Act. They submit that a cause of action accrues at the time the loan is made if no time is specified for repayment or where a loan is repayable on demand, citing Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566 (Dixon CJ, McTiernan and Taylor JJ). 26 The plaintiffs submit that although all the Loan Advances were made at various dates prior to 30 June 2014, for convenience, and to the benefit of the defendants, they only seek interest from the most recent date and not from when each advance was made. They calculate that the interest payable by the first defendant is $55,501.85 and the interest payable by the second defendant is $106,542.22. 27 The plaintiffs submit that as a matter of convenience, they should receive interest from the date of the winding up of the Company, citing Fryer at [115] and Cooper at [17], with respect to the Insolvent Trading Claims. They calculate the interest payable on the amount of $339,436.92 from 6 February 2015 to be $178,688.15. 28 Similarly, the plaintiffs also submit that as a matter of convenience, they seek interest from the date of the winding up of the Company with respect to the Restated Directors' Duties Contraventions. They calculate the interest payable on the amount of $89,056.96 from 6 February 2015 to be $46,881.83. 29 The defendants submit that in the present case, the appropriate order is for interest on all judgment sums to run from 17 June 2021 until judgment was delivered on 28 June 2024, for the following reasons. 30 First, although Ferrier, Spedley and Capital Finance concerned insolvent trading claims of a different nature (unfair preferences and uncommercial transactions), the principle has equal force in the present context. Moreover, while the claims by the first plaintiff (Liquidator) against the defendants included a substantial claim for insolvent trading, which might suggest that interest should run from the date of liquidation, that proposition would be inconsistent with the Ferrier line of authority. The defendants submit that the winding up of the Company on 6 February 2015 could not trigger the accrual of interest, as that presumes that demand for recovery will successfully be made, citing Star v O'Brien at 706 (Cole JA). 31 Second, the accrual of interest from the commencement of the liquidation (or earlier) would cause considerable injustice to the defendants in light of the more than five year delay between the commencement of the winding up on 6 February 2015 and the commencement of the proceedings on 30 June 2020. The defendants submit that the delay is far more pronounced than a reasonable period for investigative actions. 32 Third, even after the commencement of the proceedings, at least a proportion of the claims of the Liquidator and Company remained imprecisely identified. The defendants submit that it was not until the amended statement of claim was filed on 17 June 2021 that the precise scope of the Liquidator's claims was revealed. They submit that consequently, it is that date which should be taken to be the first occasion upon which the Liquidator made demand upon the defendants for the claims ultimately pursued to trial.

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B.3. Consideration 33 I have concluded that the defendants should only be required to pay pre-judgment interest on the Loan Advances and the Insolvent Trading Claims in the period between when demands for repayment of the Loan Advances and demands for compensation with respect to the Insolvent Trading Claims were first made, and the delivery of judgment. In my view that conclusion is consistent with the reasoning of the Full Court of this Court in Ferrier which has subsequently been generally approved or applied in Kazar, Capital Finance and Cooper. 34 The first demand for the repayment of the Loan Advances was made by the former liquidator of the Company, Peter Marsden of RSM Australia Partners, on 30 November 2015. Mr Marsden sent letters of demand on that date seeking repayment from the defendants of the loan balances recorded as outstanding to each of them in the MYOB files of the Company. 35 The first demand for compensation with respect to the Insolvent Trading Claims was made by the Liquidator pursuant to letters written by his solicitors, Roser Lawyers, on 14 February 2020, to the defendants alleging that each had contravened s 588G(2) of the Corporations Act 2001 (Cth) (Corporations Act) by allowing the Company to trade while insolvent and sought compensation with respect to debts that had been incurred in the six month period before 6 February 2015, in an amount of $415,517. Although the amount ultimately claimed by the Liquidator in these proceedings was $396,845.44, in my view the difference is not material and the demands made by the Liquidator were made by reference to the same records of the Company, and on the same basis, as the Insolvent Trading Claims. 36 I do not accept that there is any reason in principle why the reasoning in Ferrier should not also extend to the accrual of pre-judgment interest on insolvent trading claims brought by liquidators against former directors of companies. I do not accept that the reasoning in Ferrier should be confined to proceedings brought by liquidators involving preference claims and unreasonable director-related transactions. The underlying rationale for the reasoning in Ferrier is that until a liquidator makes a demand against a former director for compensation arising from an alleged contravention of the Corporations Act, no cause of action can relevantly be said to have arisen for the purposes of s 51A(1) of the Federal Court Act. In my view, that rationale is equally applicable to insolvent trading claims. Consistently with the reasoning in Kazar, a director is entitled to know that a liquidator intends to proceed with an insolvent trading claim, the period in which it is alleged that a company was insolvent and the debts that it is alleged were incurred in that period. It is only on the making of a demand by a liquidator or the commencement of proceedings that a director can have these matters brought to their attention and an entitlement to pre-judgment interest commences to accrue in order to compensate creditors, if the claim is ultimately successful, for not receiving the compensation sought at the time it was demanded. To the extent that Powell or Aquisite might suggest that there is any general or inflexible rule that pre-judgment interest should run from the date of the appointment of a liquidator, I respectfully consider those decisions were incorrect and contrary to the reasoning of the Full Court in Ferrier, as approved or applied in Kazar, Capital Finance and Cooper. 37 The following pre-judgment interest is therefore payable by the defendants with respect to the Loan Advances and the Insolvent Trading Claims: (a) $46,656.93 payable by the first defendant referrable to the Loan Advances (as calculated in "Annexure A1" annexed to these reasons); (b) $89,563.38 payable by the second defendant referrable to the Loan Advances (as calculated in "Annexure B1" annexed to these reasons); and (c) $82,199.21 payable by the defendants referrable to the Insolvent Trading Claims (as calculated in "Annexure C1" annexed to these reasons). 38 Further, I have concluded that it was not until the filing of the amended statement of claim on 17 June 2021 that the payments the subject of the Restated Directors' Duties Claims were advanced with sufficient specificity to constitute a demand to enliven an entitlement to pre-judgment interest, consistently with the reasoning in Ferrier and Kazar. 39 It follows that the pre-judgment interest payable by the defendants referrable to the Restated Directors' Duties Contraventions is $16,397.93 (as calculated in "Annexure D1" annexed to these reasons).

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C.1. Costs of the proceedings 40 The defendants contend that although they were ultimately unsuccessful in the proceedings they should only be required to pay 60% of the plaintiffs' costs, on a party and party basis, for the following reasons. 41 First, the defendants submit that whilst it may be accepted that costs ordinarily "follow the event", any award of costs should reflect the extent to which the plaintiffs have failed in their claims against the defendants (and thus, the extent to which the defendants have been successful in defending the proceedings). They submit that the plaintiffs' award of $714,907.45 represents approximately only 65% of the total claim of $1,097,282.96 advanced against the defendants at trial. Further they submit that proportion (65%) represents the outcome of the proceedings against both defendants and suggests that the plaintiffs were more successful than they in fact were. They submit that the plaintiffs secured judgment against the first defendant for $526,591.57 which is less than half of the amount claimed against him. Similarly, they submit, the judgment of $616,803.76 against the second defendant represents about 56% of the amount claimed against him. 42 The defendants submit that it follows that the plaintiffs' measure of success fell far short of the outcome they sought to achieve. They submit that consequently, and consistently with the principles described in Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127; [2015] FCA 750 at [37] (White J), the award of costs to the plaintiffs ought to reflect that portion of the claim for which they have been successful. They submit that adopting a broad-brush approach to this discretionary assessment, a figure of 60% is appropriate in the circumstances of this case. 43 Second, the defendants submit that the plaintiffs' partial success in the proceedings is also evident from the discrete findings made by the Court and issues upon which the plaintiffs failed. The defendants point to the following specific failures: (a) the failure to establish that credit card repayments recorded in the MYOB accounts related to personal purchases by the defendants (PJ [142], [144]); (b) the failure to establish that the defendants had knowledge of the insolvency of the Company at any time in the relevant period (PJ [342]); (c) the failure to establish the alleged debts to Australian Super, CBUS Super and Central Monitoring Services for the purpose of their insolvent trading claims against the defendants (PJ [362]); and (d) the failure to establish the quantum of the claimed debt to the ATO (necessitating a deduction from $257,174.24 as claimed, to $211,022.77 as found) (PJ [366]-[368]). 44 I am not persuaded that the ordinary rule that costs follow the event should be displaced. 45 As Derrington J observed in Key Logic Pty Ltd v Blue Groper Investments Pty Ltd [2019] FCA 275 at [14], after referring to a recent decision of this Court, including the reasoning of the Full Court of this Court in GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Ltd v Generic Partners Pty Ltd (No 2) [2018] FCAFC 100 at [5]-[7] (Middleton, Nicholas and Burley JJ): It is apparent that a judge exercising their discretion to award costs is not to slavishly adhere to the rule that costs follow the event in all cases, but that does not mean that some minute dissection ought take place of the issues on which the parties respectively succeeded. Such an analysis is not called for and nor is it appropriate: see in the appellate context Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270, 271 [6]. A rather more broad brush approach must be adopted. 46 The plaintiffs were successful in each of the causes of action they advanced. Their relevant lack of success was with respect to quantum, not liability. I do not accept, at least in the circumstances of this case, that it is appropriate or consistent with authority to apply a percentage reduction to an award of costs to reflect a failure by a liquidator to obtain judgment and orders for compensation in the full amount sought in contested proceedings brought against former directors. The limited and at times conflicting books and records of the Company that the Liquidator was able to procure, combined with the defendants' professed ignorance of the Company's financial records and the absence of any evidence from the Company's accountant or bookkeepers, made any determination of the specific amounts the subject of the Loan Advances, the Restated Directors' Duties Contraventions, and Insolvent Trading Claims inherently problematic. 47 Further, I am equally not persuaded that there should be any discount to reflect the plaintiffs' failure to establish the specific issues referred to at [43] above. None of those matters precluded the plaintiffs from obtaining judgments and orders for compensation and each was of comparatively limited significance to the contentions advanced by the plaintiffs in the proceedings. In particular, a failure to prove actual knowledge of insolvency was not determinative given the alternative, objective reasonable person test in s 588G(2)(b) of the Corporations Act, and the credit card component was only $31,500 of the aggregate $1,097,282.96 claimed against the defendants. 48 For the foregoing reasons, I am satisfied that the appropriate costs order is that the defendants pay the plaintiffs' costs of the proceedings. I turn now to consider the plaintiffs' claims for indemnity costs.

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C.2.2. Legal principles 52 It is well established that an unreasonable or imprudent failure by an unsuccessful party to accept an offer to settle proceedings may lead to an order for indemnity costs: Calderbank v Calderbank [1976] Fam Law 93 (Cairns, Scarman LJJ and Sir Gordon Willmer); Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7] (Sundberg and Emmett JJ); Hardingham v RP Data Pty Ltd (No 2) [2021] FCAFC 175 at [19] (Greenwood, Rares and Jackson JJ); Hill v Forteng Pty Ltd (2019) 138 ACSR 344; [2019] FCAFC 105 at [76] (Kerr, Bromwich and Wheelahan JJ). 53 The significance to be attributed to a rejected Calderbank offer for the purposes of awarding costs is to be determined by reference to "criteria of reasonableness". The onus is on the offeror to show that the conduct of the offeree was unreasonable: Taleb v GM Holden Limited [2011] FCAFC 148 at [49] (Bennett and Finn JJ, Dowsett J agreeing). 54 As Wigney J recently explained in Edwards v Nine Network Australia Pty Ltd (No 6) [2024] FCA 758 at [10]: In considering whether the rejection of the offer to settle was unreasonable, the matters that the Court may have regard to include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it: Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7]. It may also be necessary to have regard to the likely party and party costs incurred at the time the offer was made: Hill v Forteng at [80]. 55 In Koolan Iron Ore Pty Ltd v Infrassure Ltd (No 4) [2024] FCA 894, Jackson J recently considered the principles with respect to "all up" offers which did not stipulate any separate component of the offer to deal with costs or interest. His Honour said at [12]: In my respectful view, the law in relation to such offers was encapsulated by French J in Gray (No 21) at [34]-[35], as follows: I accept that the making of a rolled up offer inclusive of costs and interest may detract from the weight to be given to its refusal in the exercise of the discretion. Finn J referred to authorities on the point in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 at [34]. His Honour cited single judge decisions to the effect that such offers ought not to be a relevant consideration on the question of costs and would not be considered in the same way as a Calderbank letter. His Honour was invited to depart from that line of first instance authority. However he was not prepared to say it was clearly wrong. Notwithstanding that, in the circumstances of the case he had to decide, his Honour found that: The fact that the offer gave no indication at all of the breakdown … between the claim, interest and costs blunts significantly the weight to be given the offer. While respecting the general approach to rolled up offers reflected in the cases to which Finn J referred, such approaches cannot be calcified into rules of law which fetter a general discretion. They simply reflect a common sense proposition that generally speaking such an offer is not unreasonably refused. There may, however, be circumstances where a rolled up offer, refused by an applicant who is unsuccessful, may support a claim for indemnity costs.

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C.2.4. Consideration 63 In my view the plaintiffs have not established an entitlement to indemnity costs with respect to the Calderbank Letter, for the following reasons. 64 First, the offer in the Calderbank Letter was only marginally below the judgment sums and compensation obtained by the plaintiffs and only if pre-judgment interest is included. The offer made in the Calderbank Letter of $800,000 (inclusive of interest but exclusive of costs) needs to be considered against the sum of $822,582.12, comprising: (a) $127,309.10 payable by the first defendant referrable to the Loan Advances (comprising the judgment sum of $98,097.69 and interest in the period between 30 November 2015 and 11 August 2021 of $29,211.41 (as calculated in "Annexure A2" annexed to these reasons)); (b) $244,384.57 payable by the second defendant referrable to the Loan Advances (comprising the judgment sum of $188,309.88 and interest in the period between 30 November 2015 and 11 August 2021 of $56,074.69 (as calculated in "Annexure B2" annexed to these reasons)); (c) $361,271.29 payable by the defendants referrable to the Insolvent Trading Claims (comprising the compensation order pursuant to s 588M(2) of $339,436.92 and interest in the period between 14 February 2020 and 11 August 2021 of $21,834.37 (as calculated in "Annexure C2" annexed to these reasons)); and (d) $89,617.16 payable by the defendants referrable to the Restated Directors' Duties Contraventions (comprising the compensation order pursuant to s 1317H of $89,056.96 and interest in the period between 17 June 2021 and 11 August 2021 of $560.20 (as calculated in "Annexure D2" annexed to these reasons)). 65 Second, the judgment sums and compensation obtained by the plaintiffs against each defendant was less than the offer of $800,000 in the Calderbank Letter in circumstances where the Loan Advances amounts sought against them were different and there was a single undifferentiated offer. 66 In my view, in assessing the reasonableness of a decision not to accept a Calderbank offer, the "rolled up" principle explained by French J in University of Western Australia v Gray (No 21) (2008) 249 ALR 360; [2008] FCA 1056 at [34]-[35] is equally applicable to an offer which is made to more than one person or entity, at least where the amounts claimed against them are materially different and the amount recovered against each person was less than the offer in the Calderbank Letter. 67 In the case of the first defendant, his total liability under the judgment and compensation orders, together with interest up to 11 August 2021, being the last date for acceptance of the offer in the Calderbank Letter, was $578,197.55 ($127,309.10 + $361,271.29 + $89,617.16). 68 In the case of the second defendant, his total liability under the judgment and compensation orders, together with interest up to 11 August 2021, was $695,273.02 ($244,384.57 + $361,271.29 + $89,617.16). 69 The $800,000 offer in the Calderbank Letter was thus higher than the sums and compensation obtained by the plaintiffs against the defendants individually. Given the amounts sought by the plaintiffs against each defendant referrable to the Loan Advances were for different loans for different amounts, the defendants could not simply assume that the offer was in substance seeking the payment of $400,000 from each of them. 70 Further, to the extent that the offer concerned amounts that were jointly claimed against the defendants for the Insolvent Trading Claims and the Restated Directors' Duties Contraventions, it was not apparent whether the stated compromise in the offer was advanced on the basis that the cases against each were of equal strength. This further complicated any assessment of the reasonableness of the decision by each defendant to reject the offer in the Calderbank Letter. 71 Third, moreover, the alleged strengths of the plaintiffs' case outlined in the Calderbank Letter were considerably overstated. As events transpired, the plaintiffs did not lead any evidence from the Company's accountant and the plaintiffs' specific contentions concerning the basis on which they were able to prove the case they were advancing ultimately proved overly simplistic and the amounts sought were not substantiated in the amounts or manner outlined in the Calderbank Letter. 72 For the foregoing reasons, I have concluded that the plaintiffs have not established that the defendants' rejection of the offer in the Calderbank Letter was unreasonable.

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C.3.3. Consideration 78 The defendants have not displaced the rebuttable presumption in favour of an award of indemnity costs with respect to their failure to accept the Offers of Compromise. 79 The offers made in the Offers of Compromise, each in the sum of $150,000 (inclusive of interest but exclusive of costs) need to be contrasted with the following sums: (a) $129,457.85 payable by the first defendant referrable to the Loan Advances (comprising the judgment sum of $98,097.69 and interest in the period between 30 November 2015 and 22 February 2022 of $31,360.16 (as calculated in "Annexure A3" annexed to these reasons)). (b) $248,509.33 payable by the second defendant referrable to the Loan Advances (comprising the judgment sum of $188,309.88 and interest in the period between 30 November 2015 and 22 February 2022 of $60,199.45 (as calculated in "Annexure B3" annexed to these reasons)); (c) $368,706.36 payable by the defendants referrable to the Insolvent Trading Claims (comprising the compensation order pursuant to s 588M(2) of $339,436.92 and interest in the period between 14 February 2020 and 22 February 2022 of $29,269.44 (as calculated in "Annexure C3" annexed to these reasons)); and (d) $91,567.88 payable by the defendants referrable to the Restated Directors' Duties Contraventions (comprising the compensation order pursuant to s 1317H of $89,056.96 and interest in the period between 17 June 2021 and 22 February 2022 of $2,510.92 (as calculated in "Annexure D3" annexed to these reasons)). 80 In the case of the first defendant, his total liability under the judgment and compensation orders, together with interest up to 22 February 2022, being the second business day after the Offers of Compromise were served, was $589,732.09 ($129,457.85 + $91,567.88 + $368,706.36). 81 In the case of the second defendant, his total liability under the judgment and compensation orders, together with interest up to 22 February 2022, was $708,783.57 ($248,509.33 + $91,567.88 + $368,706.36). 82 The judgments and compensation orders obtained by the plaintiffs against each defendant were thus substantially more favourable than the terms of the offers provided to the defendants in the Offers of Compromise.

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