FEDERAL COURT OF AUSTRALIA

Wyzenbeek v Australasian Marine Imports Pty Ltd (No 3) [2019] FCA 439

ORDERS

THE COURT ORDERS THAT:

1.    The first respondent pay the first and second applicants $65,664 in interest in respect of the damages awarded by paragraph 1 of the orders of 10 October 2018.

2.    Subject to orders 9 and 10, the first respondent pay the first and second applicants 80% of their costs of the proceeding against the first respondent, save for costs arising from those parts of the applicants’ case which were abandoned by the amendments made in the third further amended statement of claim.

3.    The applicants’ claims against the fifth respondent be dismissed.

4.    As between the third applicant and the respondents, there be no order as to costs.

5.    Subject to orders 9 and 10, as between the first and second applicants and the second to fifth respondents there be no order as to costs.

6.    Subject to orders 7, 9 and 10, the first and second applicants pay the sixth respondent’s costs of the proceeding.

7.    The sixth respondent pay the first and second applicants’ costs of the sixth respondent’s interlocutory application filed on 18 October 2016 as amended by an amended interlocutory application filed on 23 November 2016.

8.    Subject to orders 9 and 10, the first and second applicants pay the seventh respondent’s costs of the proceeding.

9.    The first and second applicants are to pay the respondents’ costs of the interlocutory application filed 5 October 2017 to amend the second further amended statement of claim.

10.    The first and second applicants are to pay the respondents’ costs thrown away by reason of the making of the amendments arising from the application of 5 October 2017, limited to one day.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    Reasons for judgment following a trial of separate questions in this matter were handed down on 10 October 2018: Wyzenbeek v Australasian Marine Imports Pty Ltd (No 2) [2018] FCA 1517 (Wyzenbeek (No 2)) (the principal reasons). Orders were made for submissions on costs, interest and any other final orders. These reasons deal with those matters.

2    A central difficulty which arises in determining the several questions on costs is the existence of seven respondents to the proceedings. Whilst the interests or entitlements to some of the respondents can be aggregated, there are multiple potential orders with respect to various groups of respondents.

3    For the sake of consistency, abbreviations used in Wyzenbeek (No 2) are adopted in these reasons.

4    Whilst orders for costs usually fall within the broad discretion of the Court, and substantial reasons are not usually required nor appropriate, given the propensity of some of the respondents in this litigation to take every point on every matter regardless of its veracity, it is appropriate to set out the reasons for costs at some length. In that respect, I note that for the hearing of the costs question 80 pages of written submissions were filed, and oral argument extended over one day from 9.30 am to almost 5.00 pm.

5    As the offers to compromise raised are said to be inclusive of costs, these reasons deal first with the position on interest and costs in the absence of the offers to compromise before considering whether any such offer gives rise to a different entitlement to costs.

Interest payable by AMI on the judgment against it

6    There did not seem to be any dispute about the quantum of interest which should be awarded on the judgment of $168,300 given against AMI. Interest should be awarded for the period from 30 June 2012 to 10 October 2018 at the relevant rates in the Practice Note GPN-INT. The applicants’ calculation in their written submissions can be accepted in the absence of any opposition, and the resulting amount is $65,664. Judgment should be given to the applicants against AMI for that amount also. In total the amount of judgment, inclusive of interest, is $233,964.

Applicants’ claim for costs against the first respondent, AMI

7    The first and second applicants, the Wyzenbeeks, succeeded in the action against AMI to some extent. The third applicant, Eaglehat, had advanced a claim in contract in the alternative to the Wyzenbeeks’ claim. Further, the Wyzenbeeks pursued an action against AMI for misleading or deceptive conduct and that claim failed.

8    Mr Leopold SC for the applicants submitted that the contract claim was “closely intertwined” with the misleading conduct claim. This was because the contract case was essentially under the statutory implied term in s 71 of the TPA concerning fitness for purpose, and much of the evidence relevant to that issue was also relevant to the misleading conduct claim. On the other hand, AMI submitted that, without the misleading or deceptive conduct claim, the hearing would have lasted only two days. There is no substantive basis for that latter submission. As indicated in the principal reasons, the respondents took every conceivable point in this case including issues as to the existence and quantum of damage. A large part of the contract claim concerned whether the vessel supplied to the applicants was fit for its purpose and substantial evidence was called in relation to that.

9    Mr Forde, for AMI, submitted that the case pleaded against AMI was of relatively limited compass, being whether the vessel was fit for purpose. On that basis he said that the applicants should not have their costs against AMI of the ACL/TPA claim. An unusual aspect of this was that, on behalf of AMI, the respondents admitted that the purpose to which the vessel was to be put, namely crossing oceans, was made known to AMI. That involved the occurrence of discussions between Mr Wyzenbeek and Ryan and Dean that this was the intended use and, effectively, an acknowledgement by Ryan and Dean that it could be so used. However, despite AMI’s admission in that respect, the other respondents denied that the Wyzenbeeks had said that was the purpose for which they wished to use the vessel. That was unusual given that Ryan and Dean were the recipients of information for AMI and acted on its behalf. This rather tends to support the applicants’ submission that the respondents were attempting to shift liability onto AMI, which was insolvent.

10    The reality was that the contract cause of action was closely intertwined with the ACL/TPA claim. As Mr Leopold SC submitted, the damages component of the ACL/TPA claim covered substantially the same ground as the claim for damages on the basis that the vessel was not fit for purpose. The evidence in that respect was extensive. Further, each claim raised issues of the representations which were in fact made in the course of conversations; whether there was reliance on the skill or judgment of the respondents; and the damage suffered.

11    It follows that, on the basis that the two causes of action were significantly intertwined, no specific reason emerges for discounting the successful applicants’ costs on that basis.

12    AMI further submits, however, that the applicants ought to have known that the ACL/TPA claim based on a no transaction case was unsustainable, or hopeless. Whilst the claim ultimately failed, it was advanced in good faith on a view of the nature of causation and damage in cases of this kind. There also existed some arguments to the effect that certain consequential losses might have been recovered. The ACL/TPA claim was not hopeless and nor was it irresponsible to pursue it. That is particularly so given that it was an adjunct to another substantive claim. In those circumstances there is no reason to discount the order for costs against AMI in some manner.

13    Mr Forde submitted that the applicants should not obtain a costs order in relation to the claims which were abandoned by the delivery of the third further amended statement of claim and that submission ought to be accepted. The applicants had made substantial claims in relation to the lack of merchantable quality of the vessel and, having abandoned them late in the litigation, they should not obtain the costs. It is not particularly clear why those claims were abandoned although it probably had to do with AMI’s insolvency and that the merchantable quality claim did not overlap with the remainder of the action. Mr Forde submitted that AMI ought to have the costs of that claim especially given the large number of defects particularised by the applicants. Whilst there is some force in that submission, it is countered somewhat by the fact that the merchantable quality claim had a substantial connection with the fitness for purpose claim which the applicants were required to litigate through to trial in order to vindicate their rights. It is also correct to say, as Mr Leopold SC submitted for the applicants, that many of the defects relied upon in the merchantable quality claim were picked up in the ACL/TPA damages claim. It would be difficult to disentangle the costs associated with each matter.

14    Nevertheless, the overreaching by the applicants in relation to the merchantable quality claim and the ACL/TPA claim requires some alteration to the standard order for costs. A reduction of 20% is warranted to take into account the added costs of AMI (and the parties represented by the same lawyers) in dealing with the abandoned claim.

15    It follows that AMI ought to pay the first and second applicants’ costs of the proceedings, discounted by 20% for the causes of action abandoned at the early part of the trial. The order in this respect should be:

Subject to orders 9 and 10, the first respondent pay the first and second applicants 80% of their costs of the proceedings against the first respondent, save for costs arising from those parts of the applicants’ case which were abandoned by the amendments made in the third further amended statement of claim.

The third applicant – Eaglehat

16    Eaglehat was the third applicant in the proceedings. It was apparently included because it was initially a party to the contract of purchase. Subsequent variations to the agreement had the result that Mr and Mrs Wyzenbeek became the purchasers. This gave rise to a question of the identity of the proper claimant in respect of the various causes of action.

17    Ordinarily, any applicant in a proceeding in which claims are advanced in the alternative might reasonably be held liable for the costs of claims on which it does not succeed. However, in this case a number of different issues must be considered.

18    The circumstances here are somewhat unusual. At an early stage of the proceedings an issue was raised between the parties as to the identity of the purchaser of the vessel for the purposes of the causes of action advanced. Although it was pellucid that there had been a novation of the original contract between AMI and Eaglehat, it is apparent that the respondents sought to keep the matter of the purchaser in issue. So much appears from the content of a case management hearing before Rares J on 16 June 2016. Despite that, by the time of trial the respondents seemingly accepted that Mr and Mrs Wyzenbeek were the actual purchasers. That practice of refusing to admit even the most obvious points in the case was the hallmark of the respondents’ conduct in these proceedings. That is discussed further below.

19    Mr Forde, on behalf of the first and second respondents, argued that the applicants had kept Eaglehat in the proceedings despite the fact that it had been admitted that there had been an acknowledgement of the identity of the ultimate purchaser of the vessel. There is some force in this submission, to the extent that Eaglehat was not removed as a party to the proceedings. However, the respondents’ acknowledgement was not completely unqualified, and they were content to leave some uncertainty around their exact position on this issue. If, as Mr Forde submitted, there had been an acknowledgement that Eaglehat had no claim, it must necessarily follow that the respondents could not have believed that it would have been able to obtain judgment against them.

20    Mr Forde relied on the fact that in the submissions in closing it was advanced by the applicants that, in reliance on the representations, Eaglehat entered into the transaction to purchase the vessel as evidence that it was still agitating a claim. That cannot be accepted. By the time of trial, if not well before it, all parties recognised that Eaglehat was not advancing a claim on the contract or under the ACL or TPA. Its entry into the contract to purchase was a necessary part of the narrative of the claim made by Mr and Mrs Wyzenbeek. It, through the Wyzenbeeks, relied on the representations and entered into the contract to purchase Cadeau. That agreement was subsequently adopted by the Wyzenbeeks who assumed all of its obligations. There was no issue between the parties that the expenses which had been incurred prior to the Wyzenbeeks taking over the contract were not recoverable by them. The simple reality of the litigation was that, although Eaglehat remained a party, it was not actually asserting any claim which might result in damages or judgment.

21    Mr Robertson, for the seventh respondent, Lloyds, submitted that Eaglehat retained substantial importance in the action despite the parties accepting the novation of the original contract of purchase. When pressed to identify the liability to Eaglehat his client or its insureds might possibly incur in the hearing he was unable to articulate any. It was beyond obvious that the contract of purchase had been amended or novated such that Eaglehat, the original purchaser, had been removed from the agreement and the Wyzenbeeks had been substituted. They were the ones who purchased the vessel, effectively paid the purchase price, expended money on it, caused it to be repaired and lost the use of it. On no account could it be said that anyone really regarded Eaglehat as having any substantive claim to relief. Whatever doubt there may have been in the early stages of the litigation, that was only temporary, and the respondents must have been aware that Eaglehat retained no substantive claim.

22    The manner in which the respondents conducted the litigation has been commented on in previous decisions in this action. Rather than playing with their cards “on the table”, they held them close to their chest. Indeed, the element of surprise was a recurring part of their strategy. It was generally the opposite of that required by ss 37M and 37N. In those circumstances, the applicants’ reluctance to take for granted anything said or done by the respondents, such as an acceptance that the agreement had been novated, may well have been a prudent course.

23    In any event, no party really believed that Eaglehat was pursuing any real claim against the respondents. It was merely included at the commencement of the proceedings as a matter of caution. None of the respondents made any serious submission on the costs hearing that they apprehended Eaglehat was advancing any claim and indeed that seemed to be the position from around June 2016. Mr Forde identified some amounts in the schedule of damages which he said might have been claimed by Eaglehat, although the reality is that they were, in fact, claimed by the Wyzenbeeks.

24    In the unusual circumstances of this case I accept the submission that no order for costs should be made in favour of or against Eaglehat. The order ought be:

As between the third applicant and the respondents, there be no order as to costs.

Costs as between the Wyzenbeeks and GCCM and Ryan and Dean

25    The central issue in the costs debate concerned the costs of what became the main cause of action in the proceedings: the claim by Mr and Mrs Wyzenbeek against GCCM and Ryan and Dean in respect of their misleading or deceptive conduct. The claim failed and the usual rule is that costs follow the event. However, the particular circumstances of this matter warrant a different order.

26    Mr Leopold SC submitted that in this exceptional case the applicants, who were completely unsuccessful against GCCM and Ryan and Dean, ought to have a portion of their costs paid by them. Such a suggestion is antithetical to the general principle that costs follow the event. Moreover, it might be perceived that such an ambit submission was designed to set the boundaries of the debate rather wide in the hope that a “wisdom of Solomon’s” order will be less severe than it might otherwise be. However, the behaviour of the respondents in this case certainly gives succour to Mr Leopold’s submission, and it is not beyond the exercise of the Court’s discretion to make that type of order in an appropriate case.

27    Mr Leopold SC placed emphasis on the impact of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). Whilst there is no need to discuss the cases which have considered the “overarching purpose” which those sections prescribe, being the facilitation of the resolution disputes as “quickly, inexpensively and efficiently as possible”, care must be taken to ensure that such statutory provisions are given their full effect else they be reduced to the level of mere “motherhood statements”. Indeed in determining costs, the Court must take account of any failure to comply with the duty imposed on parties by those provisions: s 37N(4). The change which the introduction of those sections was intended to have on the conduct of proceedings in this Court was dramatic. Unless the sections are enforced according to their terms there is a danger that the effluxion of time will diminish their efficacy and the conduct of parties and of the profession will revert to that which was so prevalent in the latter quarter of the last century.

28    Mr Leopold SC emphasised the criticisms which were made of GCCM’s, Ryan’s and Dean’s conduct of their defence in the proceedings. He also relied on Stefanovski v Digital Central Australia (Assets) Pty Ltd (No 2) [2018] FCAFC 113 (Stefanovski) at [14] where the Full Court, when considering the relevance of ss 37M and 37N and the determination of the question of costs, said:

For instance, where a party has been successful in the litigation generally but has failed to comply with the requirements of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth), they can have no cause for complaint if they are denied an order for costs in their favour.

That principle was approved of by a subsequent Full Court in Kimber v Owners Strata Plan No 48216 [2018] FCAFC 181 (Kimber) at [86].

29    To a similar effect the applicants referred to the decision of Maestrale v Aspite [2014] NSWCA 182, where Beazley P (with whom Macfarlan and Barrett JJA agreed) said:

[79] A successful party may be deprived of costs if guilty of conduct that makes it appear to the court that some other order should be made: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries [1951] 1 All ER 873 at 874 per Devlin J; Oshlack v Richmond River Council [1998] HCA 11 ; 193 CLR 72. The conduct may relate directly to the litigation or to the circumstances leading up to the litigation: see Oshlack at 97 per McHugh J.

[80] Conduct in the litigation that may cause a court to exercise the discretion to make some other order than costs follow the event includes where the successful party “unnecessarily protracts the proceedings”: Oshlack at 97 per McHugh J. Although McHugh J dissented in the decision in Oshlack there was no disagreement in the High Court as to these general principles: see Mannix v Loumbos [2000] NSWCA 32 at [14] per Foster AJA.

30    Reference should be made to the observations of Burchett J in Australian Conservation Foundation Inc v Forestry Commission of Tasmania (1988) 81 ALR 166 at 169, where his Honour said in relation to the advancing of defences which do not succeed:

A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment.

31    The observation that a defendant is not to be hampered in the defence of a claim is as correct today as it was in 1988, however, it cannot be denied that the changes wrought by ss 37M and 37N, and cognate provisions in other jurisdictions, have the result that defendants must apply some degree of consideration to the defences which are advanced.

32    The respondents referred to the decision of Toohey J in Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10, where it was noted that, ordinarily, costs follow the event in the absence of special circumstances justifying some other order. That said, Toohey J also accepted there were circumstances in which the usual order is not appropriate and some apportioning between issues is required. The Full Court in Kimber observed that the general rule that costs follow the event may have been eroded even further by the effect of ss 37M and 37N:

[86]    In relation to that last point, it is relevant to note that in the 32 years since Hughes, much has changed in the nature of litigation and the obligations of litigants and practitioners in the area of ensuring that cases are heard expeditiously and with a minimum of expense. Legislative changes, such as ss 37N and 37M of the Federal Court Act 1976 (Cth), have the effect of requiring the parties to bring to Court for adjudication the real issues in dispute. Their failure to do so should have consequences and, at a minimum, a reduction in an entitlement to costs on issues which were unnecessarily agitated. In circumstances of that nature an apportionment of costs reflecting a litigant's success in relation to the real issues in dispute is appropriate: Stefanovski v Digital Central Australia (Assets) Pty Ltd (No 2)[2018] FCAFC 113.

33    The manner in which the respondents conducted their defence was identified in the principal reasons and, that in mind, a question arises as to the extent, if at all, some discounting or apportioning of costs ought to occur. Certainly, an order allowing only a percentage of the costs incurred may be appropriate in circumstances such as the present: Stefanovski at [6] and Kimber at [86]. In that respect reference should be made to the observations of Greenwood J in NV Sumatra Tobacco Trading Co v British American Tobacco Services Ltd [2011] FCA 1295, which I respectfully adopt:

[17] The question of apportionment ought to take account of the substance of the outcomes; whether a considerable part of the trial is taken up in determining issues upon which a party fails; whether the evidence relevant to the matters on which the party failed nevertheless overlapped with other issues in the controversy upon which the party was successful; whether it was reasonable to agitate the issue even though the party was unsuccessful; and, not cast undue analysis upon whether a successful party has been unsuccessful on “particular issues” in the context of its predominant success in the controversy overall. As to success on particular issues, Goldberg J said this in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [54]:

[A] court should be reluctant to embrace the proposition that, as a general rule, it is appropriate to undertake an [i]nquiry as to who was successful in relation to particular issues in a case to determine whether there should be an apportionment of costs against a successful party. A court should not be too ready to disallow costs simply because a party has failed upon an issue, unless it be quite a separate and distinct issue from the issues in respect of which it succeeded or unless there be some element of unreasonableness or inappropriate conduct in relation to that issue.

34    In relation to the above principles, the applicants submit that the manner in which the respondents conducted the whole trial process, and not just the hearing, had the consequence that it was unnecessarily protracted. This submission can be accepted and it is merely a reflection of the findings made in the principal reasons.

35    The applicants also relied upon the comments of Macfarlan JA in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425, to the effect that where there are multiple issues in a case the Court does not usually attempt to differentiate between the issues on which a party succeeds and those on which they fail. His Honour identified that the position may well be different where there is an issue or group of issues which is clearly dominant or separable. At [27] his Honour referred to authority that it may be “appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial either by way of evidence or argument”: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, [38]. It was submitted that such was the case here and that the division of issues in relation to the ACL/TPA claim was between those of causation and damage on the one hand and the remainder of issues on the other.

36    In relation to this Mr Leopold SC made two substantive submissions. First, that the respondents did not have substantial success in the proceedings. Secondly, that their non-compliance with ss 37M and 37N precluded them from obtaining a costs order against the applicants and, indeed, that the applicants should recover some of their costs from the respondents.

37    In relation to the first matter, the parties sought to promote various aspects of the respondents’ success or lack of it. Whilst the applicants acknowledged that GCCM, Ryan and Dean were successful in the sense that they defeated the claim for misleading or deceptive conduct, they submit that this was only because the applicants fell at the last hurdles of causation and damages. Mr Leopold SC submitted that the applicants had substantial success in establishing all but those elements of their claim. They established the making of the representations, that the representations were misleading, that the representations were relied upon, and that they induced the applicants to purchase the vessel, Cadeau. Particular emphasis was placed on the success by the applicants of establishing the defective nature of the vessel. This latter point consumed a substantial portion of the hearing time. However, the applicants’ complaint is not merely that they succeeded on a number of issues but that, to a large extent, the respondents’ defence of a number of those issues was inappropriate. The principal reasons for judgment support that latter submission.

38    That is not to say that the respondents did not have “predominant success in the controversy overall”, as Mr Sullivan QC submitted. There is no doubt that they, or at least the second to fifth respondents, did in relation to the claims against them. It was correctly observed that the point of litigation is to succeed on an action and not just parts of it. Whilst that can be accepted, the above authorities disclose that there are circumstances where a discretion may be legitimately exercised against allowing the successful party their costs. That includes cases, such as the present, where the defendants’ conduct in the defence of the claims warrants it. It might also be said that the overall picture has to be considered. In this respect, at trial, the first to fifth respondents were represented by the one set of solicitors and Counsel. No differentiation was made between them. On the costs hearing, Mr Sullivan QC with Mr Lloyd represented Ryan, Dean and Mr Gay but not the two corporate respondents who were represented by Mr Forde. Mr Sullivan QC submitted that his clients had been totally successful and that was technically correct. However, that omits the fact that the first to fifth respondents together fought all of the claims and the first respondent failed to successfully defend the contract claim. It is artificial to approach the matter on the basis that the second to fifth respondents were successful on everything when they, together with the first and second respondents, collectively fought all of the applicants’ claims including that on which the applicants were successful.

39    Moreover, it is not correct to say, as do the respondents, that the “events” on which costs follow are the causes of action advanced by the applicants. The event can be any of the “issues” or “heads of controversy” as units of the litigation: per Bowen LJ in Forster v Farquhar [1893] 1 QB 564, 569-570: or “identifiable parts of the litigation”: per Thomas J in Colburt v Beard [1992] 2 Qd R 67, 70. As P Lyons J said in McDermott v Robinson Helicopter Co (No 2) [2015] 1 Qd R 295 of the rules of the Supreme Court of Queensland:

[30] It appears to me to follow from the decision of the Court in Interchase and by reference to the language of rr 681 and 684, that, under the current rules, events in an action are to be identified by reference to individual issues or questions in the action, and the event is not simply the result or outcome of the action; and, at least by implication, that the predilection for making orders for costs by reference to success on individual events within the action remains. In that case, no ground for depriving the fourth defendant, successful in the action, of his costs, other than his failure on a number of issues, was identified.

40    Dean and Ryan had denied making the representations that the vessel sold to the applicants would be suitable for trans-ocean crossing, however, that denial was disingenuous as the evidence and cross-examination revealed. It can be accepted that the respondents’ defences to the allegations of the making of the representations or that they were only intermediaries passing on information, or that they had a reasonable basis for making them were, at best, wildly optimistic. It confirmed the view generated by the respondents’ conduct of the litigation generally, that they sought to take any point in defence of the claim regardless of its worth. The same extended to their defence of the claim that the vessel was capable of being used to traverse oceans. The expert witnesses advanced on their behalf were most improbable and, under cross-examination, their credibility quickly evaporated.

41    It can be said from the above analysis that the applicants succeeded on the issues which dominated the proceedings and which are separable from those on which they did not succeed.

42    That is not to say that the respondents were not entitled to defend the claims. The contrary is true. The applicants had originally made a wide and inflated claim against them and if it were successful in the terms advanced, it would have been ruinous for the respondents. Persons in their position ought not be inhibited from reaching for any reasonable defence to such a claim. The difficulty here is that the litigation became complex and prolonged because the respondents sought to defend the claim on wholly unmeritorious grounds. That led to the conclusion in the principal reasons that:

6.    The respondents vigorously fought every issue in the matter. In their defences they denied allegations which their witnesses freely admitted whilst giving evidence. They argued points of law which were not genuinely sustainable. Indeed, the overwhelming portion of the trial was taken up considering issues which, in the light of the evidence, were not truly in contest. The defences filed did more than merely put the applicants to proof, they contained denials which were very regularly shown to be disingenuous. Ultimately, the respondents’ success turned on the questions of causation and damage which, in the scheme of the case, were both fairly narrow issues.

43    The applicants sought to buttress that statement from other parts of the reasons where criticism was made of the respondents’ defence. A reconsideration of the principal reasons disclosed that to be true. Reference can be made to the following paragraphs of those reasons: [32], [35], [67], [74], [86], [96], [99], [103], [108], [116] - [117], [119], [133], [148], [158], [163]-[166], [178]-[180], [183]-[188], [192]-[193], [198], [200], [204] and [205]. There is no need to repeat them in these reasons but a consideration of those passages provides a sufficient indication of the respondents’ strategy in the litigation, which was to take every point possible regardless of its merit or lack thereof. As the principal reasons indicate, some of the defences advanced could never have succeeded and there was no sustainable basis on which they were advanced.

44    The applicants seek to support their submissions by an analysis of the hearing and evidence which was undertaken by Dr Silberstein, the solicitor for the applicants. In his affidavit, on which there was no cross-examination, he provided a dissection of the time or effort consumed by the defences on which the respondents had success. Care must be taken to accept evidence of that nature, as a trial judge is in as good a position as anyone to form a general view about the manner in which the trial was conducted. Precise analysis is not necessarily required. That said, Dr Silberstein’s evidence supports the conclusion in the principal reasons that “the overwhelming portion of the trial was taken up considering issues which, in the light of the evidence, were not truly in contest.” Whilst it can be accepted, as Mr Sullivan QC submitted, that the respondents were successful on the causation and damages issues (the latter of which included a schedule of alleged losses) the actual time taken at trial in relation to these was relatively small. Although in the course of submissions Mr Sullivan QC reminded the Court that not insubstantial work was involved in dealing with a number of these damages claims, it nevertheless remained the fact that this was a minor part of the trial and pre-trial skirmishing and the overwhelming portion of the hearing was devoted to issues on which the respondents did not succeed and in respect of which their defence was futile.

45    The applicants submitted that the respondents’ conduct of their defence in the manner described was exacerbated by the fact that in the interlocutory stages Rares J had previously warned them about pursuing such a strategy. In the material relied upon by the applicants on the cost hearing a transcript of part of a discovery application heard on 8 April 2016 was adduced. It concerned the email of 20 September 2011 from Mr Chen to Dean and copied to Ryan and others. In it, Mr Chen of Hampton Yachts, the manufacturer of Cadeau, eschewed the suggestion that the Endurance range of vessels were capable of trans-ocean crossing. He fortified that by advising that in order for such vessels to be so used they would have to have a different certification which involved different design criteria and construction methods. Somewhat unusually, that email had not been produced by the respondents pursuant to its obligation to make discovery. The following exchange took place between Rares J and Counsel for the respondents:

HIS HONOUR: …Your client puts in issue this question of making a false representation about it being an ocean-going vessel. It knew all the time that the manufacturer was saying it wasn’t. And that whole issue should not have been made an issue because your client knew it wasn’t. And they [the applicants] have had to go around and find the material from third parties and subpoenas and get that altogether and now it turns out that your client knew all along that the representation was untrue… And that causes the whole – you know, a lot of expense to be undertaken in circumstances where that was totally unnecessary; the admission could have been made.

…And you specifically deny that and then you make all these allegations that they were told by your client that they would be suitable for extended passage on ocean going in 13(b)(iv) and you say that all these representations are denied in a general way, except this vague and ambulatory statement of “we passed some stuff on”. Well, the very thing that’s in issue here is: is it an ocean-going vessel? The manufacturer says, “We never sell it as an oceangoing vessel. It’s not,” and you say, “Well, we passed the manufacturer's information on and we deny making the representation,” and your client’s email says, “That’s how we sold it.” Now, that seems to me to be putting on a defence that doesn’t seem to raise the real issues and the discovery kept that email out. I mean, it's pretty important and your client … must have known how it sold this stuff because that email written is saying, “We always sell Hampton stuff as ocean-going,” and there’s a denial in the defence that that representation was made. Now, hello, how does that happen? …

So why shouldn’t I order your client to put on a verified defence now when they give their discovery and [verify] what they’re saying, so that I know somebody is putting their oath to this. I’m not going to get a defence that’s putting up issues and making the plaintiff go to proving issues that do not need to be proved.

…

Well, some of the expert evidence is going to be unnecessary. I mean, it’s clear that it’s not an ocean-going vessel and it was sold as one. Well, you don’t need a whole lot of expert evidence on that.

MR FORDE: Well, sorry, your Honour. I’m not prepared to concede that the vessel is not an ocean-going – it may not have the —

HIS HONOUR: Well, that’s what your client’s email – it was told by the manufacturer it wasn’t sold as one.

MR FORDE: Well, it may not be sold as one, but that doesn’t mean it’s not capable or complies with whatever standards are required of an ocean-going vessel.

46    During the course of the hearing, Dean gave evidence that when he received the email from Mr Chen he believed its contents. In other words, he was prepared to instruct his solicitors to vigorously contest the issue of the suitability of the vessel to be used for crossing oceans when he believed, on good authority, that it was not so suited. As the principal reasons for judgment show, the experts which he called to support the case advanced on this point were of extremely poor quality. Their inadequacies were assayed in the principal reasons and there is no need to repeat any of them now. It suffices to observe that the deficiencies in their evidence and credibility would have been obvious to those representing the respondents yet their evidence was advanced in any event. It might be assumed that had there been any reputable expert who might have supported the respondents’ case, they would have been called. This underscores the conclusion that the strategy of the respondent was not to fight the dispute on the real issues, but to put the applicants to the expense of dealing with every conceivable point which might arise in an action for misleading or deceptive conduct.

47    Mr Sullivan QC relied upon the observations of Wigney J in Rush v Nationwide News Pty Ltd (No 5) [2018] FCA 1622 to the effect that merely because an expert had a prior relationship to a party, their evidence on a topic requiring expert evidence is not inadmissible because of that fact. However, here the evidence was not excluded. It was received but rejected because of its complete implausibility. As the principal reasons disclose, the evidence of the respondents’ experts did not comply with the Federal Court’s Expert Witness Code in almost any respect and that should have been apparent to anyone who cared to examine it. In the case of Mr Akacich, his failure to comply with those requirements seemed to be connected with his close and continuing personal relationship to the respondents.

48    It is unfortunate that the strategy for which Rares J admonished the respondents persisted throughout the course of the litigation. That seems to have been promoted by significant enmity between the parties. However, if a party chooses to ignore the requirements of ss 37M and 37N merely because they feel animosity towards the other party, the consequences which are identified in Stefanovski and Kimber will almost inevitably follow.

49    Mr Forde for the first two respondents submitted that the ACL or TPA claims should never have been advanced by the applicants because, as a matter of law, they were never going to be able to establish that they suffered damage as a result of entering into the contract. That submission was supported by Mr Sullivan QC for Ryan and Dean who sought to argue that the action was not maintainable and, by reference to the observations in Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457, submitted that the pleading lacked the essential allegations which were necessary for a successful outcome. Whilst it is true that, in relation to the ACL/TPA claims, the applicants failed on causation and the measure of damages, still it cannot be said that the case was hopeless from the beginning. The legal analysis advanced in support of it was not wholly unarguable. Although Mr Sullivan effectively submitted the case was doomed to failure, if that were so, it is worth observing that no application was made to have it summarily dismissed. I pause to note that Mr Sullivan QC was not involved in any part of the trial process.

50    Mr Forde also submitted that the applicants overreached in their claim in relation to the damage which they alleged they had suffered. There is force in that submission also, but that was part of an erroneous view as to the proper measure of damages and, ultimately, the overreaching did not take up any significant part of the trial even if it is recognised that not insubstantial work was required by the parties in dealing with it before the trial commenced. In any event, the overreaching by the applicants has been accounted for in the reduction in the amount which Ryan and Dean’s co-respondent, AMI, has been ordered to pay in respect of costs.

51    The applicants urged on the Court that the respondents’ conduct of the defence of this matter warranted the making of an order that they pay the applicants 25% of their costs and that the first to fourth respondents receive no order for costs in their favour. It was said that would be a generous outcome to the respondents. Whilst there is some force in that submission, it fails to give due credit to the fact that the respondents were obliged to defend the proceedings and were ultimately successful. When all matters are taken into account, as between the Wyzenbeeks on the one hand and GCCM, Dean and Ryan on the other, the respondents’ success is counterbalanced significantly by the manner in which they conducted the proceedings. Mr Sullivan QC submitted that, at most, the respondents’ conduct of the defence should only result in there being some reduction in the usual order that costs follow the event. But that understates the extent to which the respondents ignored their obligations under ss 37M and 37N. By taking every conceivable point in defence of the claim, regardless of whether those points were good or bad, they extended the time and cost of the proceedings substantially. Moreover, many of the points taken were shown to be without any merit whatsoever.

52    Mr Donaldson SC for Chubb made the submission that the litigation in general could be described as “an unedifying exercise on both sides of the ledger.” By this he sought to identify, amongst other things, that the manner in which the applicants conducted their case was also inappropriate and, in particular, by the manner in which their claim was overstated and the extent of the damages claimed substantially exceeded any legitimate boundary. There is some force in this observation and it has been observed that the applicants’ claim was optimistic and inflated. That said, I accept that the basis on which the damages claim was advanced, being the present value of the vessel less the amount which was spent on it, was honestly advanced even if not correct in law. That is a significant point of difference between the conduct of the applicants and that of the first to fifth respondents.

53    Taking all of the above matters into account, the weight of the considerations results in the most appropriate order being that there be no order as to costs as between the Wyzenbeeks and the second to fourth respondents.

54    Mr Forde for GCCM submitted that it should be awarded costs for the contract claim which was pleaded against it in the same manner as AMI but which failed against GCCM. However, it is apparent that the substance of the case was that AMI was the contracting party and it has received a reduction in the costs which it was ordered to pay to take into account the abandoned merchantable quality claim and the overreaching by the applicants. Although the fitness for purpose claim against GCCM failed, it was closely intertwined with the misleading or deceptive conduct claim, and that has been considered above. In addition, the first to fifth respondents were represented by the one set of solicitors and Counsel at trial, so no additional costs were incurred and there need be no further alteration.

Offers of compromise

55    The above is subject to any qualifications arising from the making of offers of settlement which passed between the parties.

Offer of compromise of 20 September 2017

56    By a letter of 20 September 2017, from the firm Clyde & Co to Silberstein & Associates, an offer of settlement of the proceedings was made. The letter enclosed a formal offer of settlement the effect of which was the proceedings be dismissed and the respondents would pay the applicants $300,000 in total inclusive of costs. The offer was said to be open for a period of 14 days after service. It was made jointly on behalf of the first to seventh respondents but this gives rise to some difficulty as to its efficacy in the present case where there has been substantial success against one of the seven respondents.

57    The sixth respondent, Chubb, submitted that the impact of the applicants’ failure to accept this offer falls to be considered under r 25.14(1) of the Federal Court Rules 2011 (Cth) (the Rules). That is not necessarily correct, at least insofar as it relates solely to the respondents against whom the action was dismissed. Sub-rule (1) pertains to the situation where the applicant obtains judgment in its favour albeit on terms less favourable than the offer which had been made. Where the applicant’s claim is dismissed, r 25.14(2) is apposite for considering the consequences of the applicants’ non-acceptance of the offer: Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141, [14] (Kooee Communications). In that respect the relevant question is whether the offer was unreasonably rejected.

58    The applicants say that the offer of 20 September 2017 must be construed as an offer by each respondent to pay one seventh of $300,000 or $42,857. No authority was offered in support of such a proposition and it is not appropriate to artificially so limit the offer.

59    However, the offer was made “jointly” on behalf of all parties. This seems to be accepted by the respondents. Whilst the Wyzenbeeks did not obtain judgment against the second to fifth respondents, they obtained judgment against AMI. In that respect the effect of the offer might be determined by the application of r 25.14(1). That process requires a comparison of the judgment obtained with the benefit which would have been secured under the joint offer. To some extent this necessitates an analysis of the collective benefit and detriments of the result of the proceedings. However, because the offer was made jointly, it is not possible to compare the benefits of the offer with only part of the orders which were made. This complication perhaps emphasises the difficulties which arise when offers to settle are made on behalf of multiple respondents.

60    The applicants did succeed against AMI in the sum of $233,944, being the amount of the judgment of $168,300 and interest up to 10 October 2018 in the amount of $65,644. As at the date of offer on 20 September 2017, taking into account only interest charged prior to that date, that amount would have been just in excess of $224,000. The applicants, therefore, argue that the offer, at most, comprised an offer of a capital sum plus approximately $76,000 in respect of costs. The applicants are also entitled to an order that AMI pay their costs of the action or, at least, a substantial proportion of them. At the time of the delivery of the offer, the applicants had incurred expenses in excess of $1 million in the prosecution of their claim and it would seem that a not insignificant portion of that will have been incurred in the preparation and prosecution of the action against AMI such that the costs order against AMI is likely to be significant. To that extent the judgment obtained is substantially better than the terms of the offer.

61    In other parts of these reasons it has been concluded that there be no order for costs as between the applicants and the second to fifth respondents. That would make no difference to the evaluation of the benefits of the offer and judgment. However, it has also been determined that the applicants are to pay the costs of the sixth and seventh respondents. That adds a further difficulty into the equation because there is no indication as to what those costs might be or the extent to which they will reduce the benefit of the costs order against AMI. The sixth and seventh respondents were insurers who did not play any significant part in the proceedings and the lawyers attending were essentially engaged on a “watching brief”. Given their minimal participation in the proceedings, their costs will be relatively small by comparison to the applicants’ costs.

62    The reality of the above is that it is not possible to be satisfied that the judgment obtained was less favourable than the offer of 20 September 2017 so as to engage r 25.14(1). The offer made was inclusive of costs and at that time substantial costs had been incurred. It can be accepted that it is most likely that the applicants have obtained, against AMI, judgment on more favourable terms when one takes into account the amount of the judgment together with interest and the order for costs. It is also possible that, overall, the applicants were not better off as a result of the judgment, but it is not possible to tell either way. This being so there is no need to consider whether resort should be had to r 1.35 of the Rules although in the unusual circumstances of this case the submission that the Court should do so was not unreasonable.

63    If the matter was analysed on the basis that the offer was several as well as joint, the position in respect of the second to seventh respondents is more difficult. In relation to those parties against whom the action was dismissed it may well be that the offer falls to be considered under r 25.14(2). If that is the correct approach, the question which arises is whether the applicants unreasonably failed to accept the offer. That, however, is merely a presumptive position and it can be overridden by the Court’s discretion depending upon the circumstances of the case: Kooee Communications at [14].

64    On the basis of the findings referred to above where the applicants appear to be in a better position in terms of the judgment obtained against the first respondent than they would have been under the terms of the offer, it is difficult to reach the conclusion that its rejection at the time was unreasonable. That is, had the offer been accepted, the applicants would not have been able to obtain the judgment which it did against AMI. As it is not possible to evaluate the quantitative benefits of the other costs orders, it is difficult to reach the conclusion that rejection of the offer was unreasonable.

65    It should be observed that the rule requires a consideration of the relative benefits of the offer and the judgment. It does not appear that extraneous issues such as the ability to enforce the offer or indeed any judgment obtained can or should be taken into account. Nor should the Court now take into account the possibility that the applicants will be worse off by refusing to accept the offer because it incurred additional costs in prosecuting its action against the other respondents. It should be mentioned that the parties paid very little attention in the submissions to the manner in which comparisons might be made between a judgment and the terms of an offer. No submission was made relating to the manner in which the court might assess the “value” of a judgment order as opposed to a judgment sum.

66    The applicants submitted that were they to have accepted the offer they would have been unable to recover the costs of a failed interlocutory application pursued by Chubb. The impact of that entitlement was not made clear during the course of the hearing and the submission ought to be rejected.

67    Similarly, they submitted that the offer was not comprehensible by them because the respondents’ liability was not joint and several but disparate, yet the offer was made jointly on behalf of all of them. The proposition that the applicant could not reasonably choose to accept the offer because it related to claims against different respondents in different amounts is erroneous. The offer does not have to conform to the existence of any specific claim in any specific amount. There was nothing preventing the applicants from accepting an offer in compromise of the several claims made against all respondents.

68    The applicants further submitted that had they accepted the offer they would have forgone the possibility of recovering costs in the proceedings to a significant extent. They submitted they had a reasonable expectation of recovering those costs regardless of the outcome of the action. That submission is also somewhat unlikely. Even if a party to litigation is required to engage with issues they do not believe are worthy of merit, it is a big step to assuming that they will be entitled to the costs of those issues regardless of the outcome of the proceedings. Perhaps the more relevant submission made by Mr Leopold SC was that the manner in which the respondents had conducted the proceedings to 20 September 2017 was such that vast amounts of unnecessary costs had been incurred needlessly by the applicants. The consequence of that was that it entrenched the applicants into a position whereby the offer made was derisively small in relation to the costs which had already been incurred, let alone in relation to the claim.

69    The applicants also submitted they were entitled to assume their causes of action had reasonable prospects of success. Put in other terms, they had no reason to believe that their claim was hopeless or doomed to fail. That can be accepted for the purposes of the argument.

70    The second to fifth respondents, by Mr Sullivan QC, submitted that the position should be assessed on the basis that judgment was obtained against AMI, which is insolvent. It is apprehended that the tacit submission is that the applicants are not likely to be able to recover the judgment sum or costs. However, there is no evidence about that one way or the other. Mr Sullivan QC told the Court that the applicants obtained leave to proceed against AMI on the basis that recourse might be had to an insurance policy but that the policy did not cover the liability arising by the judgment. Whether that is so or not is not to the point so far as the exercise in r 25.14 is concerned. The extent to which a judgment obtained is enforceable would seem to be beyond the scope of the rule. There was, in any event, an absence of evidence as to what recoveries will occur in the liquidation of AMI, including whether any actions against its directors exist or can be pursued.

Conclusion on offer of 20 September 2017

71    It follows that if the offer of 20 September 2017 is considered under r 25.14(1), the respondents have not established that the applicants obtained a judgment that was less favourable in terms of the offer. If the matter is considered under r 25.14(2), the respondents have not established that the applicants unreasonably failed to accept it. For the same reasons, the principles in Calderbank v Calderbank [1975] 3 WLR 586 would not vary the result.

Calderbank offer of 10 October 2017

72    A further offer to settle the proceedings was made in a letter of 10 October 2017 from Clyde & Co to Silberstein & Associates. That offer was also made on behalf all of the respondents. By its terms the respondents offered to pay the applicants a total of $150,000 inclusive of GST with each party bearing their own costs.

73    It is to be kept in mind that between 20 September 2017 and 10 October 2017 substantial costs had been incurred by both parties as the matter had been called on for trial, an opening delivered, objections taken by the respondents and a hearing about amendments ensued. The offer provided it would expire on 11 October 2017, being less than a day after its making and on the day on which an application to amend the statement of claim was heard.

74    The short time limit which was provided for acceptance of the offer is probably reflective of the respondents’ expectation that it would not be accepted. In the context of an action where the respondents have unnecessarily driven up the costs incurred by the applicants its rejection was not unreasonable. The conclusions reached in relation to the offer of 20 September 2017 are equally applicable to this offer. Indeed, as Mr Leopold SC for the applicants submitted, the judgment obtained against the first respondent was more than the amount of the offer without taking into account costs. It can be accepted that its rejection was not unreasonable.

Conclusion as to costs between the applicants and the second, third and fourth respondents

75    It follows that the offers made by the respondents to settle the matter were such that the applicants’ failure to accept them does not alter the conclusion reached above that, as between the applicants and the second, third and fourth respondents, there be no order as to costs of the proceedings.

The position of the fifth respondent, Mr Gay

76    The trial of this matter was first called on for hearing on 3 October 2017. After Mr Giles SC for the applicants completed his opening, the respondents sought to attack the veracity of the statement of claim. The trial was aborted and adjourned to the following week for the hearing of an application by the applicants for leave to amend. The respondents sought to strike out parts of the proposed pleading or, at least, to disallow the amendments relating to the claim against Mr Gay. In part, the respondents’ attack on the pleading was justified. That was particularly so in relation to the claim against the fifth respondent, Mr Gay. The applicants had sought to make amendments to the pleading of that cause of action by a proposed amended statement of claim which was said to tidy up some “infelicities” in the existing pleading. That understated the remediation which the pleading against Mr Gay required. The case as originally pleaded against him was not able to be sustained. In the decision on the two applications which was handed down on 7 December 2017, Wyzenbeek v Australasian Marine Imports Pty Ltd [2017] FCA 1460 (Wyzenbeek (No 1)), consideration was given to the proposed amendments. It was concluded that even the proposed amended pleading could not sustain a cause of action against Mr Gay for being knowingly concerned in any breach of the TPA. There was no allegation that he had any knowledge of any representation which was relied upon by the applicants in entering into the agreement to acquire Cadeau. It was not suggested that he knew any representation was false nor that he was wilfully blind to its inaccuracies. The pleading had been drawn without any consideration given to the requirements identified in Yorke v Lucas (1985) 158 CLR 661. As a result the proposed pleading against Mr Gay was disallowed.

77    However, those reasons also identified (at [100]) that no step had been taken by the respondents over an extended period to strike out the relevant part of the pleading. The cause of action was allowed to remain on foot and any real complaint about how the matter was pleaded was only made at the commencement of the trial.

78    As a result the claim did not proceed against Mr Gay, although the question of the costs of that application and the costs more generally in relation to Mr Gay were reserved. It is appropriate to formally make an order that the action be dismissed as against Mr Gay.

79    Naturally enough, Mr Gay now seeks an order for costs in his favour. In most circumstances the making of such an order might be axiomatic. However, the applicants suggest another form of order is appropriate.

80    First, the applicants point to the fact that Mr Gay has been represented by the same set of solicitors as the first to fourth respondents. The initial defences (being the defence and the amended defence) were each a single defence filed on behalf of the first to fifth respondents. Further, Mr Gay’s second further amended defence, which was filed only on his behalf, raised many of the same issues as did the other respondents. That is to say it put in issue a large number of matters which, from the respondents’ point of view, could not be sustained. The fact that Mr Gay was represented by the solicitors and Counsel for the first to fourth respondents is significant. It would be extraordinarily difficult to disentangle the amount of any costs solely incurred by him. Even where the costs concerned such matters as the filing of a defence on his behalf only or the preparation of a statement by him, necessarily, given the complete overlap of issues, much of that work would have been done anyway. This tends heavily towards an order for costs in the same terms as that which has been made as between the applicants and the first to fourth respondents. That view is fortified by the fact that the issues raised by Mr Gay’s defence mirrored those of the other respondents. They included those issues which the respondents must have known were unsustainable but which were maintained by him up until the point when the action against him was dismissed.

81    Mr Sullivan QC on behalf of Mr Gay submitted that he may have incurred some costs of his own such that he is entitled to an order for costs and, whether he can recover them ought to be determined on an assessment. With respect to this argument it is very difficult to see just how Mr Gay could have any significant costs which were not otherwise expended for the purpose of the defence of the claim by the first to fourth respondents. The claim against him was derivative upon the ACL and TPA claims against AMI and GCCM and intertwined with the claims against Ryan and Dean.

82    In resisting any order for costs in favour of Mr Gay the applicants rely upon the manner in which the proceedings against Mr Gay were struck out. They submit, quite accurately, that the lack of veracity in the pleaded cause of action against Mr Gay was identified by the Court and then taken up by the respondents. Additionally, it appeared that the respondents had adopted a deliberate tactic of allowing an obviously demurrable pleading to subsist against Mr Gay until the trial of the action. Whilst it can be accepted that the applicants ought to have provided particulars of the allegations when requested, it can also be said that their failure to do so ought to have prompted some action at least by the respondents. As it is, they did nothing, and allowing an erroneously pleaded claim to be agitated until the trial was generally consistent with their overall tactic. Mr Sullivan QC submitted on behalf of Mr Gay that the applicants had threatened to seek costs if an application was brought to strike out the action and, he says, for that reason no application was made. That was, perhaps, a hopeful submission, given the paucity of the pleading against Mr Gay. As the reasons for judgment in Wyzenbeek (No 1) reveal, the pleading of the cause of action obviously failed to meet the criteria for a valid cause of action. Moreover, as the letter from the solicitors for the respondents of 4 November 2016 shows, the respondents were well aware of the deficiencies in the pleading. The suggestion that the respondents were deterred by the applicants’ threat to seek costs is not consistent with the aggressive manner in which they actually conducted their case.

83    As mentioned in the reasons for judgment in which the claim against Mr Gay was struck out, the above comments do not throw onto the respondents the burden of telling the applicants what case to run. The respondents are entitled to defend the action in any manner they see fit, but only to the extent that is consistent with their obligations in ss 37M and 37N. That liberty does not extend to playing some costly and stressful litigious game where the rules are used to prevent the real issues in dispute being determined. In relation to Mr Gay, the position appeared to be that whilst the applicants strongly suspected that he was involved in the making of the misrepresentations, that was not the case and, once the evidence was adduced, probably obviously so. At the very least, it seemed that there was an absence of evidence on which the applicants could rely to establish the matters necessary to sustain a case of “knowing involvement”. This makes it all the more strange that the respondents did not seek to strike out the action against Mr Gay earlier than they did.

84    Mr Sullivan QC also submitted that the allegation against Mr Gay was a very serious one, being akin to an allegation of fraud because it involved an allegation that Mr Gay was aware of the falsity of the representations which were made by Ryan and Dean. On that basis it was said that indemnity costs ought to be awarded. That submission was entirely at odds with the respondents’ submission in the applicants’ application to amend their statement of claim where it was said that the pleading against Mr Gay failed because of the absence of any allegation that he was aware of the representations or their falsity. Having accepted that submission for the purposes of that application and having struck out or disallowed the pleading on that basis it cannot now be accepted that a tacit allegation to the effect identified by Mr Sullivan QC did exist. No basis exists for the making of any indemnity costs order.

85    In the above circumstances and, in particular, given that the respondents were all represented by the same lawyers, that they ran substantially the same defences, many of which were without merit, and that it would be all but impossible to differentiate any significant costs separately incurred by Mr Gay, no different costs order should be made. The orders which ought to be made in relation to Mr Gay are:

1.    The applicants’ claims against the fifth respondent be dismissed.

2.    There be no order as to costs in respect of the proceedings by the applicants against the fifth respondent.

Cost of Chubb’s amended interlocutory application

86    These costs arise in a most unusual way. By an order of this Court on 19 August 2016, Chubb and the seventh defendant, Lloyds, were ordered to be joined to the proceedings. Subsequently, on 18 October 2016, Chubb filed an interlocutory application which, as amended, sought to set that joinder aside. In the alternative, summary judgment was sought. In general terms it claimed that the policy issued by it did not cover the damage claimed by the applicants. Further, it was submitted that there was no justiciable controversy because it had conditionally agreed to indemnify Dean, Ryan and Mr Gay. Extensive written submissions were filed and served by the parties and the application was heard on 20 December 2016 and subsequently on 21 February 2017. There is a lack of clarity as to how the hearing of the application progressed. No judgment was delivered and, as far as can be ascertained, no substantive orders were made in relation to it. That said, Chubb was required to put on a defence which it had not done to that point in time, and was required to participate in the proceedings. It was not removed from the proceedings and nor was it granted summary judgment. In that latter respect it is apparent from the transcript of the hearing that Rares J considered that the issue of whether the policy responded to the claims made by the applicants was not something which ought be determined at an interlocutory stage. Further, his Honour considered there was a justiciable issue with respect to the coverage of the Chubb policies, there being two. That being so he did not grant the orders which Chubb sought on its application

87    The applicants claim that although no formal orders were made on the application, save that the costs of it were reserved, Chubb did not succeed such that they ought to have their costs.

88    Conversely, Chubb submitted that as no orders were made dismissing the application, the applicants cannot claim that they had success with respect to it. As Mr Donaldson SC put it, the application did not succeed and nor did it fail. He said that after substantial argument no substantive order was made on the application and “everyone lived with it”. He further submitted the result was there was no “event” which costs might follow because nothing was decided. He submitted that in those circumstances the costs should be costs in the cause.

89    Whilst I accept that there is some force in Mr Donaldson SC’s submissions, ultimately the application was made and agitated but, in substance, was not successful. It would appear that, in the face of reluctance from the judge hearing the matter, the application was effectively abandoned by Chubb. In those circumstances the appropriate order is that Chubb pay the applicants’ costs of the application. The appropriate order is:

The sixth respondent pay the first and second applicants’ costs of the sixth respondent’s interlocutory application filed on 18 October 2016 as amended by an amended interlocutory application filed on 23 November 2016.

Costs against the sixth and seventh respondents – Chubb and Lloyds

90    Subsequent to the handing down of the principal reasons, the applicants accepted that the appropriate substantive order in relation to the sixth and seventh respondents was that the action against each of them should be dismissed. Such orders were made on 28 November 2018. Further, the applicants acknowledge that Chubb and Lloyds ought have their costs of the proceedings generally though subject to the order for costs made in relation to the application filed by Chubb on 18 October 2016. The applicants’ concession was rightly made. That said, it is not at all clear why the insurers needed to participate in the hearing of the dispute between the applicants and the respondents. Mr Donaldson SC for Chubb told the Court that indemnity had been granted to a number of the respondents subject to the usual caveats and because of that it might have an interest in the facts which were found as between the respondents and the applicants, although nothing specific was identified. Nevertheless, the presence of the insurers was not of their making. Indeed, they did what they could to avoid being present in the action but they failed because of the opposition of the applicants.

91    To their credit, the insurers’ Counsel did not take any significant part in the proceedings and nor did they unduly prolong it. Generally, their involvement in the ventilation of the substantive issues was brief, targeted and effective.

92    Chubb and Lloyds each sought to rely upon the offers made by the seven respondents jointly on 20 September 2017 and 10 October 2017. The entitlements of other respondents have been dealt with in this respect above. Similar reasons apply in relation to Chubb and Lloyds. It might be accepted that those respondents did not participate in the substantive defence of the applicants’ claims in the manner in which the first to fourth respondents did. Nevertheless, it was not established that the applicants had not obtained judgment on more favourable terms, even though it was only against the first respondent. Nor was it shown that the applicants had unreasonably rejected the offer. Chubb and Lloyds participated in the making of a joint offer and it can only be assessed on that basis.

93    However, Chubb also seeks to rely upon a Calderbank offer which was set out in a letter sent to the applicants on 20 February 2017. In that letter Chubb offered to resolve the matter on terms that the claim against it be dismissed and that the applicants and the sixth respondent each bear their own costs in respect of the applicants’ claim against the sixth respondent.

94    It is relevant to note that this offer was sent to Silberstein & Associates at 5.01pm on 20 February 2017. That was the day before Chubb’s application to set aside service on it or to obtain summary judgment was to be heard. The offer was open for acceptance until 9.15am on 21 February 2017. The applicants submit that the offer was open for acceptance for a period of only 16 hours, most of which were outside normal business hours. Mr Donaldson SC for Chubb submitted that the offer should be seen in the light of the long history of correspondence between the parties in the course of which Chubb had asserted that its joinder was “unnecessary and inappropriate”. He submitted that the applicants would have been well aware of the issues as between them and the insurers, such that the time to consider the offer was reasonable in the circumstances. Whilst Mr Donaldson SC’s submission that the reasonableness of the time available for the consideration of an offer must be assessed the light of the surrounding circumstances can be accepted, in this case the allowing of 15 minutes of time during normal business hours was inadequate. Even assuming the offer was seen shortly after it was sent and received, the ability of the applicants’ solicitors to assess and advise on it and for the applicants to properly consider it was non-existent. It was, as Mr Leopold SC submitted, a mere “costs protective measure” and not a genuine offer which the applicants might properly evaluate. In those circumstances the applicants’ submission that the time available for considering the offer was insufficient ought to be accepted: Thomopoulos v Faulks (No 2) [2006] VSC 286, [13]-[14] (Thomopoulos). Whilst there is no minimum period for which a Calderbank offer might be left open, in determining whether the party receiving it acted reasonably in not accepting it, consideration must be given to the length of time allowed for its acceptance. In this case it could not be seriously suggested that the length of time was reasonable. That is so despite the fact the parties had the issues in question in mind given the imminent hearing of Chubb’s application. Nevertheless, any genuine offer of settlement must necessarily avail the person receiving it of sufficient time to take advice upon it and to consider its consequences. That did not occur in the present case. For that reason alone it has not been shown that the applicants acted unreasonably in not accepting the offer.

95    The applicants also submitted that Chubb obtained a worse outcome than that which was proposed in the offer. It was submitted that because Chubb has been ordered to pay the costs of its application its position is diminished. However, that submission cannot be accepted. The question is whether or not, from the applicants’ point of view, the non-acceptance of the offer was unreasonable. Given that the applicants acknowledge they are responsible for Chubb’s costs of the proceedings, it is apparent that they would have been better off overall had the offer been accepted.

96    The applicants further submitted that because the offer was of a “walk away” nature there was no genuine offer of compromise. In Thomopoulos at [16], Cavanough J referred to various authorities which suggested that offers of this nature were not genuine offers of compromise. That issue was not fully argued on this application and there is no need to reach any conclusion about it. However, it is doubtful that a defendant against whom no liability will attach, and who has a prima facie right to recover some of the costs incurred in defending an action, is not offering a compromise by agreeing to bear its own costs if the action is discontinued.

97    In the result, had Chubb provided some reasonable period of time for the applicants to consider their offer of 20 February 2017, the circumstances would have been quite different. As it is, in the circumstances of this somewhat complex case, the refusal to accept the offer in the Calderbank letter was not unreasonable. It follows that no variation to the costs ordered in favour of Chubb should be made.

Costs of applicants’ interlocutory application of 5 October 2017 and the costs thrown away

98    The next issue which arises is as to the costs arising from the applicants’ interlocutory application to amend dated 5 October 2017. It was heard on 11 October 2017 and judgment given on 7 December 2017 in Wyzenbeek (No 1).

99    As the reasons for judgment demonstrate, the application to amend had to be made in order for the applicants’ claim to proceed. This was admitted by Counsel for the applicants. It was a late application made in response to the late challenges to the applicants’ case advanced by the respondents. Despite concerns with the respondents’ tactics in raising the matters which they did at the commencement of the trial, nevertheless, it was the applicants’ inadequate pleading which necessitated the making of the application to amend. The applicants were largely successful in their application although not entirely so and the respondents were legitimately entitled to oppose it. Because the application was necessitated because of the inadequate pleading, there can be no real disputation that the applicants should pay the costs of it.

100    In the circumstances the applicants must pay the respondents’ costs of the application to amend filed 5 October 2017. They ought also pay the costs thrown away by reason of the making of the amendment. Given that the trial subsequently proceeded it is not likely that such costs could be great and they ought to be limited to one day.

101    The orders should be:

The first and second applicants are to pay the respondents’ costs of the interlocutory application filed 5 October 2017 to amend the second further amended statement of claim.

The first and second applicants are to pay the respondents’ costs thrown away by reason of the making of the amendments arising from the application of 5 October 2017, limited to one day.

Cross claims

102    At the hearing of the costs argument an issue arose as to whether the cross claims of the first to fifth respondents against the insurers, being the sixth and seventh respondents, should be dismissed. This arises because, when the matter came to my docket, a trial of certain issues had already been ordered or directed and it proceeded in that manner. However, the determination of those issues would not conclude all matters between the parties. Now the applicants have appealed against the orders made in Wyzenbeek (No 2), and the remainder of the issues in the action are yet to be dealt with. Mr Donaldson SC correctly observed that the dismissal of the cross-claims might have significant ramifications in the event the appeal is successful. That is a perspicacious observation and it is not appropriate that the orders sought be made until all questions which need to be determined are dealt with.

Stay pending appeal

103    The applicants sought relief in the nature of a stay of the orders made pursuant to these reasons save to the extent to which they relate to Mr Gay. This was on the basis the applicants have sought to appeal the orders made pursuant to the reasons in Wyzenbeek (No 2). The foundation of that argument is that costs will be wasted if the parties pursue the assessment of costs whilst that appeal progresses. That of itself is not a sufficient reason to stay the orders which are made herein. The parties in whose favour the orders are made ought to be able to enforce them. The application for a stay of the orders ought to be refused.

Associate:    

Dated:    3 April 2019

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