Supreme Court Act 1986, s 14C; Supreme Court (General Civil Procedure) Rules 2015 rr 26.08, 63.30, 63.30.1.

24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216; Bodycorp Repairers Pty Ltd v GDG Legal Pty Ltd [2018] VSCA 32; Hanlon v Brookes (1997) 15 ACLR 1626; House v The King (1936) 55 CLR 499; PCCEF Pty Ltd v Geelong Football Club Ltd [No 2] [2019] VSCA 148; Spotless Group Ltd v Premier Building and Consulting Pty Ltd [2008] VSCA 115; United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15.

COSTS - Whether judge erred in awarding indemnity costs - Finding proceeding had been instituted without merit - Whether proceeding must have been instituted in wilful disregard of known facts and clearly established law - Order may be made based upon what claimant ought to have known and advice it ought to have obtained.

Macedon Ranges Shire Council v Thompson [2009] VSCA 209; (2009) 170 LGERA 41 applied.

1. This is an application for leave to appeal a costs order.
2. The four applicants (together, the 'Viterra Parties'[1]) unsuccessfully defended a very substantial claim made against them by Cargill Australia Ltd ('Cargill'). In that proceeding, the Viterra Parties joined a number of third parties, including the four respondents.[2]
3. Cargill succeeded on claims against the Viterra Parties for misleading or deceptive conduct and in deceit. It recovered damages of $168.9 million, being the difference between the price which it paid the Viterra Parties for certain assets, $420 million, and the true value of those assets, $251.1 million. Damages in the nature of interest were awarded in the sum of approximately $124.2 million.
4. Cargill commenced the proceeding on 1 October 2014. By a third party notice dated 4 February 2015, the Viterra Parties made claims against a number of third parties, including the respondents. Relevantly, it was claimed, amongst other things, that if the Viterra Parties had misled or deceived Cargill, the Viterra Parties had in turn been misled or deceived by the third parties, or that the third parties had breached their contractual obligations to the Viterra Parties.
5. The assets acquired by Cargill from the Viterra Parties were the entire share capital of a company named Joe White Maltings Pty Ltd ('Joe White') and certain related assets. The respondents were employees of one of the Viterra Parties with executive roles in Joe White's business.
6. The third party claims against the respondents were unsuccessful.
7. The trial began on 18 June 2018, and initially concluded on 21 August 2019, after 111 sitting days. The Viterra Parties made two subsequent applications to re-open their case, one of which was successful and which led to a further hearing. The last sitting day of the trial was 4 June 2021.
8. The principal judgment was handed down on 28 January 2022.[3] The Viterra Parties appealed, and a judgment dismissing that appeal was handed down on 23 June 2023.[4] An application for special leave to appeal to the High Court was dismissed with costs on 9 November 2023.
9. At or around the time the trial commenced, each of the respondents made an offer of compromise under ord 26 of Supreme Court (General Civil Procedure) Rules 2015 (the 'Rules'), as follows:

(a) On 15 June 2018, Stewart offered to compromise the claim against him on the basis that no sum would be paid to him and that he would bear his own costs. This offer expired on 30 June 2018.

(b) On 21 June 2018, Youil and Argent each made an offer of compromise on the basis that the claims would be discontinued without any amount being payable and each party would bear its own costs. The period during which the offer was open for acceptance was 14 days.

(c) On 22 June 2018, Wicks made an offer of compromise to settle on the basis that both Wicks and the Viterra Parties bear their own costs and the claim against Wicks be discontinued without any payment. The offer was open for 14 days.

1. The Viterra Parties did not accept any of the offers of compromise made by the respondents.
2. The trial judge heard arguments as to costs in March and April 2022, and delivered a judgment on costs on 8 June 2022.[5] There were a number of issues which the judge was required to determine between the Viterra Parties and Cargill. Those matters are the subject of a separate application for leave to appeal.[6]
3. For the reasons set out by the primary judge in the costs judgment, on 8 June 2022, he ordered the Viterra Parties to pay the costs of each of the respondents of and incidental to the proceeding, including reserved costs, to be taxed on an indemnity basis in default of agreement.
4. In brief substance, the judge made those orders because:

(a) He concluded that the claims against the third party respondents had no real prospect of success in circumstances where that must have been apparent to the Viterra Parties at all relevant times. He concluded that the Viterra Parties had acted in wilful disregard of known facts and clearly established law in instituting and pursuing the claims against the respondents.

(b) Considered by reference to the inquiries which the Viterra Parties ought to have made and the legal advice it ought to have obtained, he concluded that the Viterra Parties ought not to have commenced the proceeding against the respondents or, having commenced it, ought to have discontinued it.

(c) In any event, the Viterra Parties ought to pay costs on an indemnity basis, based upon the unreasonable failure to accept the offers of compromise made by the respondents, from the respective dates provided for under r 26.08.

1. The Viterra Parties now seek leave to appeal on the following grounds:
   1. Ground 1: Case not hopeless from the outset

1.1 The Judge erred in finding that the Applicants' case was hopeless from the outset.

1.2 The Judge's decision was unreasonable or plainly unjust because there was no basis for such a finding, including by reason that the Judge failed to address the merits of the Applicants' contractual case against the Third Parties.

1. Ground 2: No wilful disregard of known facts or clearly established law

2.1 The Judge erred in finding that the applicants had commenced their proceeding in wilful disregard of known facts or clearly established law.

2.2 The Judge's decision was unreasonable or plainly unjust because there was no basis for such a finding, including by reason that the Judge failed to address the merits of the Applicants' contractual case against the Third Parties.

1. Ground 3: Offers of Compromise

3.1 The Judge erred in finding that the Youil Offer, the Wicks Offer, the Stewart Offer and the Argent Offer represented genuine compromises and that the Applicants' rejection of those offers was unreasonable, because in making that finding his Honour took into account irrelevant matters and mistook a number of material facts, in that:

3.1.1 the Judge took into account his finding, challenged in ground 1, that the Applicants' case was hopeless;

3.1.2 the Judge took into account the relative position of the parties and the imbalance between the Respondents (as third party individuals) and the Applicants (being large multinational corporate entities); and

3.1.3 to the extent to which the imbalance referred to by his Honour was financial: (a) there was no evidence to support the finding; and (b) there could be no such imbalance in circumstances where the third party individuals were indemnified for their costs of the proceedings.

1. Ground 4: Bias and pre-judgment

4.1 The Costs Orders ought be set aside on the basis that:

4.1.1 the Judge failed to bring an impartial mind to the Third Parties' application for indemnity costs; or

4.1.2 the Costs Reasons give rise to the appearance that the Judge failed to bring an impartial mind to the Third Parties' application for indemnity costs.

1. The costs judgment concerns both the position between Cargill and the Viterra Parties, and the position between the Viterra Parties and the respondent third parties. Some aspects of the costs judgment concern both matters, and some are confined to one or the other.
2. The judge set out the legal principles in relation to the awarding of costs generally.[7] There is no controversy about those principles, in particular as to the discretionary character of costs determinations.
3. The judge then turned to the principles which apply when application is made for indemnity costs. He referred to the fact that, under the Rules, the point of difference between costs on an indemnity basis and costs on a standard basis is who bears the onus of establishing that the relevant costs are reasonable or unreasonable.[8]
4. The judge referred to the fact that, usually, special circumstances must exist before a court will depart from the ordinary practice of awarding costs on the standard basis. The judge referred to this Court's decision in Macedon Ranges Shire Council v Thompson ('Macedon Ranges').[9]
5. The judge set out the relevant provisions of ord 26 of the Rules in relation to offers of compromise and in relation to the costs consequences which ordinarily flow from the non-acceptance of such an offer when a judgment no less favourable is subsequently obtained by the offeror. The judge referred to Hazeldene's Chicken Farm Pty Ltd v Victoria WorkCover Authority.[10]
6. The cost consequences provided for by r 26.08 apply unless the Court 'otherwise orders'.[11] As to the assessment required to be made when it is contended that the Court should 'otherwise order', the judge said:

The assessment is a question of judgment and impression, assessed at the time the offer of compromise was made, without the advantages of hindsight. It is not presumed that a refusal is unreasonable simply because the offered sum is higher than the ultimate award.

In some circumstances, a 'walk away' offer may constitute a genuine attempt to compromise the dispute, rendering a rejection of the offer unreasonable. In others, such offers may be treated as offers to capitulate, which would not be unreasonable for a losing party to have rejected. Such an offer will not attract protection on questions of costs.[12]

1. The judge set out the costs submissions of the respondents and the Viterra Parties in some detail.[13]
2. The judge observed that there was a difference between the Viterra Parties and the respondents as to the appropriate approach for the court to adopt in determining whether a proceeding had been instituted which was without merit. The Viterra Parties contended that the judge was required to be satisfied that the claim had been instituted in wilful disregard of known facts and clearly established law. The respondents contended that it was sufficient for the discretion to be exercised where it could be concluded that the claim had no chance of success, based upon not only what the party making the claim knew, but also what it ought to have known, including by reason of inquiries it ought to have made and advice it ought to have obtained.
3. The judge was of the view that the decision in Macedon Ranges establishes that in Victoria it is the latter approach, as contended for by the respondents, which is correct. He observed, however, that there was no need for him to resolve the issue because he had concluded here that there had been a wilful disregard of known facts or clearly established law.[14]
4. The primary judge reviewed the claims made against each of the respondents separately.
5. A common component of the judge's analysis of each of the separate claims was the significance he attributed to failed claims made by the Viterra Parties in relation to what was described as the 'warranty verification process'.
6. The 'warranty verification process' was a shorthand description for claims made by the Viterra Parties against the respondents based upon express representations allegedly made by them to Mr Joshua Wilson-Smith, a solicitor employed by the Viterra Parties, as to the accuracy of warranties in the sale agreement with Cargill. The Viterra Parties also made claims in relation to what were described as 'Undisclosed Matters'. The judge considered that the warranty verification process was also important in relation to those claims.
7. When dealing with the claim against Youil, the judge described the warranty verification process as the 'cornerstone of the case against him'. He indicated that that conclusion applied as well to Wicks, Stewart and Argent. In relation to Youil, he said that it was also the 'main plank of the reasonable expectation' that he would have disclosed the 'Undisclosed Matters'.[15]
8. In relation to Wicks, he described the warranty verification process as a 'large part of the claim'. In relation to Stewart, he said the claim against him was 'largely based on the purported Warranty verification process'.[16]
9. In relation to Argent, the judge observed that the flaws in the warranty verification process also represented a 'serious and patent deficiency' in the case against him, although the judge considered that the case against Argent had a more fundamental deficiency, being that there was no evidence, direct or inferential, that he was familiar with or knew of the existence of the matters which were central to all of the claims.[17]
10. The claims made by the Viterra Parties based upon the warranty verification process were founded on the evidence of one person: Mr Wilson-Smith.
11. There was no issue before the primary judge, or before us, that after Mr Wilson-Smith's evidence on day 55 of the trial, the claims based on the warranty verification process against the respondents could not succeed.
12. The judge's conclusions went further, however. He considered that before Mr Wilson-Smith's evidence - indeed, from the outset of the proceeding - it was clear that the claims founded on the warranty verification process were hopeless.
13. The judge said:

Long before the trial commenced, the Viterra Parties had access to Wilson-Smith and his account of the Warranty verification process. Wilson-Smith was a long-term employee who continued to be employed by Viterra Ltd after this proceeding had commenced, and after the third party claim was filed. As was readily apparent from his witness statement, Wilson-Smith could not provide any direct evidence of what he said to any of the Third Party Individuals as part of the Warranty verification process. It follows that the Viterra Parties must have been aware that the pleaded allegations, which were that representations had been made in precise contractual terms, did not square with Wilson-Smith's evidence that Youil was told about 'the substance of what the Warranty provided', which was then alleged to have been 'verified' orally.

More broadly, the discussions with each Third Party Individual were too short, and in some cases extremely short, relative to the information alleged to have been conveyed during them. Wilson-Smith did not provide or refer to the content of definitions intrinsic to the meaning of the Warranties during those discussions. As explained previously, it was utterly fanciful that any of the Third Party Individuals could have had any proper understanding of the Warranties they were alleged to have verified without having a proper explanation and understanding of the definitions. These matters were apparent on the face of the documents when read in conjunction with Wilson-Smith's witness statement.

Another glaring problem with the process was equally apparent from Wilson-Smith's witness statement. He stated that after telling each Third Party Individual the substance of the Warranty he then asked whether there was any inconsistent information in the Data Room. The obvious difficulty with this was that a number of the Third Party Individuals had nothing to do with the compilation of the Data Room. At the time he undertook the Warranty verification process, Wilson-Smith had not ascertained whether the Third Party Individuals, save for Argent, had any familiarity with the Data Room. This lack of knowledge must have been fully appreciated by the Viterra Parties, as the collation of material for the Data Room was conducted by Fitzgerald, Bickmore and, to a lesser extent, Wilson-Smith. Thus, it was a hollow exercise to ask persons with no knowledge of what was contained in the Data Room whether it contained any inconsistent information to what was stated in the Warranties.

Not only was the process patently inadequate, but the record of what occurred was also materially wanting. The note-taking was deficient on its face, Wilson-Smith had no recollection of what he actually said to the Third Party Individuals in relation to each Warranty, and the Viterra Parties never verified the purported responses with any of the Third Party Individuals.[18]

1. The judge was of the view that there were other fatal elements of the claims founded upon the warranty verification process, including the absence of any evidence establishing causation.[19]
2. The judge concluded that the Viterra Parties ought to pay the costs of the respondents on an indemnity basis from the commencement of the proceeding because the proceeding had been commenced in wilful disregard of known facts and clearly established law. In addition to the position in relation to the warranty verification process claims, the judge reached this conclusion on the following further bases:

(a) the inability of Viterra's counsel to adequately address what the judge considered to be manifest deficiencies in the claims made while refusing to withdraw those claims;[20]

(b) the fact that it was clear that each of Youil, Wicks and Stewart were not involved in the events leading up to the execution of the agreement with Cargill in any meaningful way;[21]

(c) what the judge considered to be 'misconceived' allegations of accessorial liability in relation to which the judge said that Viterra made 'no attempt to identify' how each of the respondents' conduct amounted to relevant involvement;[22]

(d) the fact that the pleaded case against Stewart could not have succeeded, even if the particulars given had been entirely accepted;[23]

(e) the fact that the Viterra Parties called Stewart as a witness, but asked him no questions relevant to the claims made against him;[24]

(f) the fact there was no evidence, direct or inferential, that Argent was familiar with, or knew of the existence of any of the matters allegedly undisclosed;[25] and

(g) the characterisation of senior counsel for Stewart that the respondents had been 'treated like pawns' in the proceeding by the Viterra Parties, which the judge accepted.[26]

1. Having concluded that the proceeding had been instituted and pursued in wilful disregard of known facts and clearly established law, the judge then observed:

For completeness, it obviously follows from what is stated above that if consideration is also given to the facts which ought to have been known by the Viterra Parties, the inquiries they ought reasonably to have made and the legal advice they ought reasonably to have obtained, then it is plain they ought to have not commenced the proceeding or, having commenced it, ought to have discontinued it. The Viterra Parties had available to them almost unlimited resources and highly qualified professional advice. This is not a case where it might be thought that there was a realistic possibility that the Viterra Parties were in ignorance or somehow mistaken about their prospects in relation to the claims discussed above. The entire case was being carefully scrutinised and directed by a highly experienced and senior in-house lawyer who monitored every step of the proceeding.[27]

1. Finally, in relation to each of the respondents, the judge concluded that their respective offers of compromise represented a genuine compromise, given that they were made at a point in time (June 2018) when substantial costs had been occurred by all parties, and when the Viterra Parties could readily have made a proper assessment of the weakness of their case.
2. The judge also said:

Further, the relative positions of the parties were relevant; Youil being an individual, and the Viterra Parties being a large multinational corporate entity. This imbalance is an additional reason why the Youil Offer could not be viewed as an invitation to capitulate, and rather demonstrated that it represented a genuine compromise on his part.[28]

That finding was repeated in respect of Wicks,[29] Stewart[30] and Argent.[31]

1. The judge found that the Viterra Parties' rejection of those offers was unreasonable.
2. The judge observed that if he had reached a different conclusion in relation to indemnity costs based on the absence of merit in the claims, he would have ordered indemnity costs pursuant to ord 26 of the Rules from the respective dates provided for in r 26.08.[32]

Leave to appeal an order as to costs - the relevant principles

1. A decision as to costs is a discretionary decision to which the well-known principles in House v The King apply.[33] In that case, Dixon, Evatt and McTiernan JJ explained as follows:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.[34]

1. In relation to costs decisions, this Court has repeatedly observed that appeals from orders as to costs are treated as exceptional and require this Court to exercise particular restraint. The authorities explain that the principal rationale for that caution is that the trial judge is almost always best placed to assess in whose favour and to what extent the discretion as to costs should be exercised.[35] That is particularly so after a long and complex trial.[36] The test is not whether we should have exercised the discretion in the same way as the judge did, but whether there was a ground on which he could reasonably have made the order in question.
2. Furthermore, pursuant to s 14C of the Supreme Court Act 1986 the Court retains a discretion to refuse to grant leave to appeal despite being satisfied that an appeal has a real prospect of success. Thus, the leave question may sometimes be approached by considering first whether there are discretionary considerations justifying the refusal of leave, irrespective of the proposed appeal's prospect of success. One example where that may occur concerns an application for leave to appeal from a costs order, because it is exceptional to grant leave to appeal from such an order.[37]

1. The Viterra Parties submitted that the judge had impermissibly used hindsight in assessing the question of whether the case against the respondent third parties based on the warranty verification process had been hopeless from the start.
2. They further submitted that the claims made at the outset had not been solely based on that process. There had also been a broad general claim based on the failure to disclose and a claim for breach of the respondents' employment contracts. They referred in particular to the allegation in sub-paragraph (v) of the particulars to paragraph 45 of the third party notice (an allegation against Joe White, which was incorporated into the claims against each of the respondents) and to the allegations in paragraphs 66 to 70 alleging breach of the employment agreements.
3. Senior counsel for the Viterra Parties conceded, in the course of argument, that by the time of trial, the claims against the respondents had been confined to the allegations based on the warranty verification process. The Viterra Parties submitted, however, that the judge had fallen into error by ignoring claims which had been made at the outset, which were not then able to be assessed as hopeless, notwithstanding that they were subsequently not pursued. Senior counsel accepted, with some qualification, that the warranty verification process had been 'the cornerstone' of the case against the respondents, but emphasised that that had not been the only basis of the claims initially made against them.
4. Senior counsel for the Viterra Parties did not cavil with the judge's conclusions that, by the end of the trial, the claim against the respondents lacked merit, but submitted that that had not been clear until Mr Wilson-Smith gave evidence on day 55 and the respondents then informed the Court that they were not going to give evidence themselves on day 61. The Viterra Parties submitted that the 'catalyst' for the third parties' decision not to give evidence had been Mr Wilson-Smith's 'implosion in cross-examination'.
5. The Viterra Parties submitted that the judge had 'fallen victim to the siren song ... of hindsight' in determining that the case had been hopeless from the outset. They submitted that whilst the judge had referred to the claims based on the failure to disclose, his Honour had made no reference at all to the contract claim. They further submitted that the faults in the warranty verification process did not provide an answer to the contract claim, because that claim was capable of being made out by the substance of the third parties' answers to Mr Wilson-Smith's questions. That substance, they submitted, was capable of giving rise to a breach of the third parties' obligations to act in the best interests of the Viterra Parties and to act ethically.
6. The Viterra Parties referred to an email sent by Mr Wilson-Smith on 3 August 2023 after he had spoken to the third parties and carried out the warranty verification process. They submitted that that email was an indication of the Viterra Parties' knowledge at the time, and was a reasonable basis to believe that the warranty verification process was sufficiently adhered to for the purpose of making the Viterra Parties' claim against the third parties.
7. In relation to the claim of bias, senior counsel explained that what was meant was that the judge had been unable to 'purge' from his mind things that had occurred during the trial when forming a view as to the position at the outset of the third party proceeding. It was suggested by the Court that this was not really a contention of bias, but rather, a contention that the judge had made an error of principle or had taken into account an irrelevant consideration. Counsel submitted that it constituted both, and that the judge's views of what had occurred during the trial had 'coloured' everything else.
8. The Viterra Parties submitted that it was not open to the judge to find that they actually knew at the outset that the warranty verification process was flawed and that the claims made were bound to fail. They submitted that the findings made by the judge had gone to the integrity of the Viterra Parties, and that that was also a reason why leave to appeal should be granted. They also submitted that the judge's finding implicitly involved the conclusion that there had been a contravention of the Civil Procedure Act 2010 by the Viterra Parties' solicitors, who had signed the proper basis certificate, and by counsel, who had signed the statement of claim.
9. The Viterra Parties submitted that the judge's conclusion concerning the offers of compromise had also been 'infected' by his conclusions as to the hopelessness of the claims from the outset. They submitted that his observations about 'imbalance' meant that he had taken into account an irrelevant consideration.
10. Returning to the proposed ground concerning bias, the Viterra Parties relied on the judge's acceptance of the contention that the third parties had been treated as 'pawns'. The Viterra Parties submitted that they had not been able to raise the contention that the judge had actual or apprehended bias at an earlier point in time because it only became apparent upon a reading of the costs judgment itself.

1. Counsel for the respondents submitted that leave to appeal should not be granted. They relied in particular upon the discretionary nature of the decision, and upon the Court's longstanding reluctance to grant leave to appeal from costs orders.
2. The respondents accepted that the judge had not referred in terms to the contract case that had been pleaded at the outset, but they submitted that that case had also been underpinned by the same facts as the claims for misleading or deceptive conduct, the 'cornerstone' of which was, in each case, the warranty verification process.
3. In relation to the offers of compromise, the respective counsel for the respondents, whilst accepting that greater costs were incurred in the subsequent long and complex trial, submitted that very substantial costs had been incurred by the commencement of the trial when the respective offers of compromise were made, and that those offers constituted a genuine compromise. Further, counsel for the respondents submitted that the judge's observation as to 'imbalance' was a valid one, given that the Viterra Parties constitute a very large multinational group and the respondents are individuals.
4. Counsel for the respondents otherwise supported the orders made for the reasons given by the trial judge, particularly in relation to the warranty verification process.

1. The claims founded on the warranty verification process depended entirely upon Mr Wilson-Smith. We have already quoted at some length what the judge said about Mr Wilson-Smith's account in the costs judgment. In the principal judgment, the judge dealt with the warranty verification process, and with Mr Wilson-Smith's evidence, in much greater detail.[38] It is unnecessary to repeat that detail here, but there were certain deficiencies in the warranty verification process which the judge considered that it was important to emphasise. The judge said:

Without being exhaustive, some of the key points to emphasise are:

(1) Wilson-Smith was a relatively junior lawyer ... tasked with conducting the Warranty verification process alone.

(2) Wilson-Smith was not very familiar with the Joe White Business.

(3) Wilson-Smith had never conducted a warranty verification process before and was generally unfamiliar with how to conduct such a process properly.

(4) The discussions with the Third Party Individuals were short or extremely short relative to the information alleged to have been conveyed during them.

(5) Wilson-Smith did not provide or refer to the content of the definitions intrinsic to the meaning of the Warranties during his discussions with the executives.

(6) Wilson-Smith did not read out the full text of the Warranties.

(7) Wilson-Smith assumed a level of familiarity on the part of the executives with the transaction and related steps, which assumption was predominantly incorrect (as the steps taken in the sale process were confidential and some of the executives had had very little to do with it). He did not raise or clarify this with them.

(8) Wilson-Smith did not record what he said to the executives in either version of his notes, only the executives' purported responses or nothing at all.

(9) Wilson-Smith had no independent recollection at all of what he actually said to the executives in relation to each Warranty.

(10) There were inconsistencies (some fundamental) between the responses attributed to the executives in the different versions of his notes.

(11) The Viterra Parties never verified the purported responses with any of the executives.

(12) With respect to Warranty 12, it was materially altered after the verification process.[39]

1. In the present context, it is also important to record what the judge said in the principal judgment about Mr Wilson-Smith's evidence. The judge said:

Wilson-Smith was a credible and forthright witness. He readily acknowledged the significant flaws in the process that he undertook. He endeavoured to answer questions posed to him (which were at times very pointed and critical) to the best of his ability. In a transaction involving hundreds of millions of dollars and a very tight timetable, Wilson-Smith was given the task of arranging for the verification of the Warranties, in circumstances where the finalisation of the transaction was imminent and where he had had limited involvement before that point.

Wilson-Smith was fully aware of the pressure under which he had been placed. At various points in his evidence, Wilson-Smith agreed that he was 'absolutely' under time pressure to complete the Warranty verification process; that he believed the signing of the Acquisition Agreement was 'imminent'; and that the Warranty verification process was 'extremely urgent'.

The Viterra Parties' suggestion, in closing submissions, that Wilson-Smith was 'palpably overborne', 'unnerved' or 'confused' by the process of giving evidence to the court did not reflect what occurred. On the contrary, in what must have been a difficult subject matter for him to address, Wilson-Smith was composed and measured while giving his evidence. True enough, he made a number of concessions in the witness box that weakened the Viterra Parties' case. However, those concessions reflected Wilson-Smith's actual recollections, beliefs or state of mind and were, in the circumstances, properly made. It was not contended by any party, including the Viterra Parties, that Wilson-Smith was an untruthful witness.[40]

1. For the purposes of this application, we have reviewed Mr Wilson-Smith's witness statement, the transcript of Mr Wilson-Smith's cross-examination on 24 September 2018, and the relevant documentary evidence concerning the warranty verification process.[41]
2. Our review has not revealed anything which suggests that the judge's analysis of the warranty verification process and of Mr Wilson-Smith's evidence, either in the costs judgment or in the principal judgment, involved any error of the kind described in House v The King.
3. The judge expressed the conclusion in the costs judgment (in the passage quoted earlier) that the Viterra Parties had had 'access' to Mr Wilson-Smith when the proceeding against the respondents was instituted. He was then a long-term employee, still employed. The judge concluded that the deficiencies he had identified in the warranty verification process were 'readily apparent' from Mr Wilson-Smith's witness statement and from the contemporaneous documents when read 'in conjunction' with that witness statement. Again, our review has not revealed anything which suggests that these conclusions involved any error of the kind described in House v The King. That is particularly so given the judge's conclusions that Mr Wilson-Smith's evidence was 'composed and measured', and that he was prepared to answer in a forthright manner to the best of his ability, readily acknowledging the flaws in the process he had undertaken.[42]
4. That being the case, we do not consider that the judge's conclusion that the claims founded on Mr Wilson-Smith's warranty verification process ought to have been assessed as hopeless at the outset arguably involves any error of the requisite kind.

1. Leave to appeal will be refused for the following reasons.
2. First, there is no real prospect of overturning the judge's decision concerning the offers of compromise. There is no error of the requisite kind in relation to the judge's conclusion that those offers did reflect a real compromise, as opposed to an invitation to capitulate, and that he would not 'otherwise order' under r 26.08.
3. Thus, the Viterra Parties must pay the respondents' costs on an indemnity basis for the more than 100 sitting days of the trial, together with all the related costs of a trial of that length and complexity. There is no issue as to the Viterra Parties' liability for the costs incurred prior to the trial on the standard basis. That being the position, what is in issue is confined to which party should bear the burden of proving the costs are reasonable or unreasonable in relation to the period prior to commencement of the trial. In the overall context of this litigation, the true ambit of the dispute is modest.
4. Secondly, in our opinion, the relevant principles concerning the award of indemnity costs by reference to the merits of the claim are those set out by this Court in Macedon Ranges. Accordingly, such an order may be made where a party ought to have known that the claim was baseless, including on the basis of inquiries that ought to have been made and legal advice that ought to have been obtained.
5. As indicated, we have reviewed the material concerning the warranty verification process ourselves. That process was the 'cornerstone' of the case against the respondents. We have also taken into account the fact that there were two claims (the failure to disclose the 'Undisclosed Matters' claim and the contract claim) which, at the outset at least, were not entirely based on that process.
6. We are unable to identify any error of the requisite kind in the judge's conclusion that the claims against the respondents ought to have been assessed as hopeless from the outset_._ Further, in our opinion, there is no reason in this case to depart from the Court's longstanding reluctance to grant leave to appeal from costs orders.
7. This matter is as compelling an instance of a trial judge being best placed to assess in whose favour and to what extent the discretion as to costs should be exercised as one can imagine.
8. The trial judge in this case actively managed the proceeding before the trial commenced. He presided over a complex trial which extended over more than a two year period, and he wrote judgments determining the issues between the parties of extraordinary length and complexity, exceeding in total 2,000 pages (not including rulings on interlocutory matters).
9. We acknowledge the validity of the concern that the judge's conclusion that the proceeding was instituted in wilful disregard of the facts and the law might be seen to implicitly involve a conclusion of contravention of the Civil Procedure Act 2010 by the Viterra Parties' solicitors and counsel. But that is not a matter the judge addressed and it would be wrong for his reasons to be interpreted in that way. There is no evidence of what instructions the solicitors and counsel had at that time. In any event, in circumstances where a conclusion on that issue would not change the outcome, because we are not persuaded that leave to appeal should be granted on the basis that there was an error of the requisite kind in the application of the principles as set out in Macedon Ranges, we do not consider that leave to appeal is warranted.
10. Finally, we do not consider that the Viterra Parties have any prospects of success in relation to their claim of actual or apprehended bias.[43] That claim relied principally upon the proposition that the judge had been unable to 'purge' from his mind the knowledge his Honour had accumulated as a consequence of the running of the proceeding. We do not accept that proposition. It is commonplace for the judge who hears a proceeding to make costs orders and, in so doing, to consider the state of the case at various points in time prior to the conclusion of the proceeding. In the present case the judge was plainly aware that he was not to apply hindsight reasoning in determining the question of costs,[44] and we do not consider that he did so.
11. Leave to appeal will accordingly be refused.

[1] In submissions little or no differentiation was made between the four applicant companies. For the purposes of this judgment, we adopt the same approach.

[2] Solely for ease of reference, where it is necessary to refer to individual respondents, we will refer to them by their surnames.

[3] [2022] VSC 13 (the 'principal judgment').

[4] [2023] VSCA 157.

[5] [2022] VSC 299 (the 'costs judgment').

[6] Cargill v Viterra [2023] VSCA 301.

[8] Costs judgment, [34]. See rr 63.30 and 63.30.1 of the Rules.

[9] Costs judgment, [36], discussing Macedon Ranges Shire Council v Thompson (2009) 170 LGERA 41; [2009] VSCA 209.

[10] Costs judgment, [38]-[44]. Hazeldene's Chicken Farm Pty Ltd v Victoria WorkCover Authority (2005) 13 VR 435; [2005] VSCA 298.

[12] Costs judgment, [45]-[46] (citations omitted).

[18] Costs judgment, [257]-[260] (citations omitted).

[27] Costs judgment, [292] (citations omitted).

[32] Costs judgment, [271], [276], [282], [289].

[33] (1936) 55 CLR 499.

[34] (1936) 55 CLR 499, 504-5.

[35] See, eg, United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15, [124] (Whelan, McLeish and Niall JJA); Spotless Group Ltd v Premier Building and Consulting Pty Ltd [2008] VSCA 115, [10]-[11] (Redlich and Dodds-Streeton JJA).

[36] Hanlon v Brookes (1997) 15 ACLR 1626, 1632 (Callaway JA).

[37] PCCEF Pty Ltd v Geelong Football Club Ltd [No 2] [2019] VSCA 148, [40]-[41] (Whelan, McLeish and Emerton JJA); Bodycorp Repairers Pty Ltd v GDG Legal Pty Ltd [2018] VSCA 32, [18] (Ferguson CJ, Whelan and McLeish JJA); 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216, [53] (Hansen, Ferguson, McLeish JJA).

[38] Principal judgment, [4951]-[5044].

[40] Principal judgment, [4953]-[4955].

[41] These were: (1) an email sent to Mr Wilson-Smith on Wednesday 31 July 2013 at 9:50 pm, requesting that he seek to verify each warranty 'during the course of Thursday'; (2) attached to that email, the text of the warranties and definitions as contained in the then current draft of the Acquisition Agreement at 31 July 2013; (3) Mr Wilson-Smith's handwritten notes of his discussions with Hughes, Argent, Youil and Stewart (this was the document with Mr Wilson-Smith's diagram on it); (4) Mr Wilson-Smith's email to Argent sent on 1 August 2013 at 10:24 am, forwarding the 31 July 2013 email and attachment (it was unclear from the evidence whether this was sent before or after Mr Wilson-Smith's meeting with Argent: Principal judgment, [4969] n 4362); (5) Mr Wilson-Smith's typed notes of his discussions with Hughes, Argent, Youil and Stewart, and the email to which those notes were attached; (6) Mr Wilson-Smith's handwritten notes of his discussion with Wicks; (7) Mr Wilson-Smith's typed notes of his discussion with Wicks, and the email to which those notes were attached; (8) a copy of the warranties, annotated with Mr Wilson-Smith's handwriting; (9) a copy of the warranties, annotated digitally by Mr Wilson-Smith, recording his discussions with Hughes, Argent, Youil, Stewart and Wicks; and (10) Mr Wilson-Smith's email to Mattiske, Fitzgerald, Rees and Mann explaining the verification process.

[43] At the outset of the hearing before this Court, the Court observed that ordinarily the ground alleging bias would be heard first. The Court observed that in this case the bias ground overlapped with the other grounds, rendering it desirable to deal with all grounds together. Senior counsel for the Viterra Parties agreed with that course, observing that he would have sought that course if the Court had not raised it.

[44] Costs judgment, [243], [250], [263].