V-Flow Pty Limited v Holyoake Industries

REASONS FOR JUDGMENT 1 On 20 February 2013, the Court published its reasons for its conclusion that the appeal should be upheld in part. The parties were directed to make written submissions as to the orders that should be made to reflect the Court's conclusions and to make submissions in relation to costs. The Court has now received and considered written submissions from both parties. 2 In our earlier reasons we indicated that, in order to save the costs of a further hearing, it may be appropriate to permit Holyoake to make an election as to the relief it seeks. Holyoake indicated in its written submissions that, having regard to the Court's conclusions, it would elect for equitable compensation in the sum of $1,046,923. In the circumstances, the appropriate orders would be that order 1 made by the primary judge on 14 June 2012 be set aside and that judgment be entered for Holyoake against the appellants in the sum of $1,046,923 together with interest. On 9 August 2012, the appellants paid $125,000 in partial reduction of their liabilities under the primary judge's orders. 3 The parties agreed that, after taking account of the partial reduction in the judgment debt, the pre-judgment interest payable under s 51A of the Federal Court of Australia Act 1976 (Cth) up to 1 March 2013 amounted to $161,355.76. It is convenient to treat that as the date on which Holyoake's election should take effect. Judgment should be entered in the proceedings below for Holyoake against all the appellants as at 1 March 2013 based on the following calculation: (a) Equitable compensation for loss of opportunity $ 1,046,923.00 (b) Less payment made on 9 August 2012 $ 125,000.00 (c) Plus agreed interest on the net amount outstanding under (a) and (b) above up to 1 March 2013 $ 161,355.76 Judgment debt $ 1,083,278.76

4 The individual appellants sought that the separate orders made below, requiring them to pay additional sums in respect of the benefits they received as a result of their contraventions of the Corporations Act, be set aside. They asserted that this followed because of Holyoake's election to receive judgment for equitable compensation for loss of opportunity. 5 However, that argument is misconceived. The claims that Holyoake made against the individuals were separate from the claims it made against all the appellants in the alternative for an account of profits, statutory compensation or equitable compensation for loss of opportunity. The Full Court rejected in its primary reasons the individual appellants' appeals in respect of their individual and separate liabilities: V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC 16 at [88]. Holyoakes'claims, and the primary judge's orders, against the individual appellants for contraventions of the Corporations Act were independent of the joint claim against all of the appellants that gave rise to Holyoake's right to elect between remedies. Accordingly, the primary judge's orders against the individual appellants were correctly made. 6 The appellants have asked for an order that Holyoake pay their costs of the appeal up to 26 October 2012 on the party-party basis and thereafter on an indemnity basis. They rely on an offer of compromise made on 24 October 2012. The offer was to pay the sum of $1,725,000, without any additional amount for costs. The appellants say that it was unreasonable for Holyoake not to accept that offer. 7 The refusal or rejection of an offer does not, of itself, automatically mean, or give rise to a presumption, that the Court should make an order on an indemnity basis where the result is less favourable to the offeree than the offeror. It is necessary for the Court to conclude that it was unreasonable, in all of the circumstances, for the offeree to reject the offer (Software AG v Racing and Wagering (WA) (2009) 175 FCR 121 at 138). 8 As indicated, the offer that was made by the appellants to Holyoake was an offer inclusive of costs. It is necessary, therefore, to have regard to the costs orders that were made by the primary judge, which included indemnity costs for the liability stage of the proceeding and party-party costs for the relief stage of the proceeding. It is clear that the costs of the proceeding have not been insignificant. Further, there was no challenge to the assessment by the primary judge of equitable compensation for loss of opportunity and the orders made by the primary judge in relation to payments made to the individual appellants remain undisturbed. In addition, the offer involved payments spread out until July 2015. Accordingly, it would be necessary to discount the money value of the offer. In the circumstances, it is by no means clear that the offer made by the appellants was more favourable to Holyoake than the result. 9 Further, there were other conditions imposed in the offer. Thus, there was a requirement that the appellants be released from an undertaking to the Court not to dispose of assets, an undertaking that was given in response to Holyoake's application for a freezing order. In addition, the offer was subject to a condition that Messrs Aloe and Matkovic finalise an arrangement between themselves. Further, the offer was made before the appellants abandoned grounds of appeal in relation to the liability findings. In all of the circumstances, it was not unreasonable for Holyoake not to accept the offer. 10 In addition, it is clear that the appellants were not entirely successful in the appeal. Some part of the time taken for the appeal was directed to issues in respect of which the appellants were unsuccessful. In all of the circumstances, the appropriate costs order is that the respondent pay 85 per cent of the appellants' costs of the appeal. There should be no variation of the orders for costs made by the primary judge. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Emmett, Edmonds and Rares.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (2 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (3)