FEDERAL COURT OF AUSTRALIA

Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Bluewood Industries Pty Ltd (No 2) [2020] FCA 1082

ORDERS

THE COURT ORDERS THAT:

1.    It is declared that the payments made by Gunns Limited (In Liquidation) (Receivers and Managers Appointed) (ACN 009 478 148) (Gunns Limited) to the Defendant between 15 May 2012 and 25 September 2012 inclusive are a single transaction which was an unfair preference within the meaning of s 588FA of the Corporations Act 2001 (Cth) (Act) in the sum of seven hundred and seventy-eight thousand, three hundred and fifty-five dollars and sixty one cents ($778,355.61), an insolvent transaction within the meaning of s 588FC of the Act, and a voidable transaction within the meaning of s 588FE of the Act.

2.    Pursuant to s 588FF of the Act, the Defendant pay the Plaintiffs the sum of seven hundred and seventy-eight thousand, three hundred and fifty-five dollars and sixty-one cents ($778,355.61).

3.    Pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), the Defendant pay the Plaintiff pre-judgment interest on the amount payable pursuant to Order 2 above, in the amount of one hundred and ninety-seven thousand, seven hundred and eighty-eight dollars and sixty-five cents ($197,788.65) calculated as follows:

(a)    pursuant to paragraph 3.2 of the Plaintiffs’ Amended Originating Process, pre-judgment interest of $153,157.45 on the sum of $575,382.53 (being the quantum of the unfair preference referred to in Order 1 above in respect of the transactions that occurred between 3 July 2012 and 25 September 2012) calculated from 4 August 2015 until 27 May 2020 on the following basis:

(i)    $14,092.93 for the period between 4 August 2015 and 31 December 2015, calculated at a rate of 6.00% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(ii)    $17,167.15 for the period between 1 January 2016 and 30 June 2016, calculated at a rate of 6.00% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(iii)    $16,632.64 for the period between 1 July 2016 and 31 December 2016, calculated at a rate of 5.75% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(iv)    $31,646.04 for the period between 1 January 2017 and 31 December 2017, calculated at a rate of 5.50% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(v)    $31,646.04 for the period between 1 January 2018 and 31 December 2018, calculated at a rate of 5.50% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(vi)    $15,692.97 for the period between 1 January 2019 and 30 June 2019, calculated at a rate of 5.50% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(vii)    $15,227.93 for the period between 1 July 2019 and 31 December 2019, calculated at a rate of 5.25% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(viii)    $11,051.75 for the period between 1 January 2020 and 27 May 2020, calculated at a rate of 4.75% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(b)    pursuant to paragraph 3.3 of the Plaintiffs’ Amended Originating Process, pre-judgment interest of $44,631.20 on the sum of $202,973.08 (being the quantum of the unfair preference referred to in Order 1 above in respect of the transactions that occurred between 30 March 2012 and 2 July 2012) calculated from 12 May 2016 (being the date of the Plaintiffs’ Amended Originating Process) until 27 May 2020 on the following basis:

(i)    $1,630.44 for the period between 12 May 2016 and 30 June 2016, calculated at a rate of 6.00% per annum pursuant to paragraph 2 of the now revoked Federal Court Practice Note CM16; and

(ii)    $5,867.36 for the period between 1 July 2016 and 31 December 2016, calculated at a rate of 5.75% per annum pursuant to paragraph 2 of the now revoked Federal Court Practice Note CM16 and paragraph 2 of Federal Court Practice Note GPN-INT;

(iii)    $11,163.52 for the period between 1 January 2017 and 31 December 2017, calculated at a rate of 5.50% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(iv)    $11,163.52 for the period between 1 January 2018 and 31 December 2018, calculated at a rate of 5.50% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(v)    $5,535.88 for the period between 1 January 2019 and 30 June 2019, calculated at a rate of 5.50% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT;

(vi)    $5,371.84 for the period between 1 July 2019 and 31 December 2019, calculated at a rate of 5.25% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT; and

(vii)    $3,898.64 for the period between 1 January 2020 and 27 May 2020, calculated at a rate of 4.75% per annum pursuant to paragraph 2 of Federal Court Practice Note GPN-INT.

4.    Pursuant to s 52 of the Federal Court Act, the Defendant pay the Plaintiffs post-judgment interest on the amount payable pursuant to Order 2 above from 27 May 2020 and continuing to accrue at that rate until the date of the Defendant’s payment of the amount payable pursuant to Order 2 above.

5.    Pursuant to r 40.02 of the Federal Court Rules 2011 (Cth), the Defendant pay to the Plaintiffs eighty percent (80%) of the Plaintiffs’ costs of and incidental to this proceeding on:

(a)    a party and party basis up to and including 11.00am on 18 February 2019; and

(b)    an indemnity basis from 11.00am on 18 February 2019.

6.    Within 14 days of the date of this order, the parties are to confer with a view to agreeing the amount of costs payable by the Defendant pursuant to Order 5 above.

7.    In the absence of agreement in respect of the costs payable by the Defendant pursuant to Order 6 above, the Plaintiffs have liberty to apply to a Registrar of this Court for the taxation of their costs.

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

REASONS FOR JUDGMENT

DAVIES J:

1    On 27 May 2020, the Court delivered judgment in Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Bluewood Industries Pty Ltd [2020] FCA 714 and proposed orders giving effect to the reasons have been submitted to the Court. The defendant (Bluewood) does not dispute that it is liable to pay the plaintiffs the sum of $778,355.61 (judgment amount) pursuant to s 588FF of the Corporations Act 2001 (Cth) (the Act) but there are three aspects of the proposed orders in issue:

(a)    Bluewood disputes the amount of pre-judgment interest sought by the plaintiffs on the judgment amount;

(b)    Bluewood opposes the order sought by the plaintiffs that it pay the plaintiffs’ costs of the proceeding on an indemnity basis after 28 August 2015; and

(c)    Bluewood claims there should be an apportionment of costs.

2    The parties were directed to provide written submissions as to the outstanding issues, with a decision to be made on the papers.

Pre-judgment interest

3    The plaintiffs’ proposed orders include pre-judgment interest on the amount of $778,355.61 pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth). Section 51A(1)(a) provides:

(1)     In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:

(a)     order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

…

4    Bluewood accepts it is liable to pay pre-judgment interest calculated from the date the cause of action first accrues, which, in the case of a preference claim, is when a demand is made. Until a demand is made, it cannot be said that the payments made were unfair preferences: Star v O’Brien (1996) 40 NSWLR 695 at 706 per Cole JA, 707 per Beazley JA; Capital Finance Australia Limited v Tolcher [2007] FCAFC 185; 164 FCR 83 at [149]–[153] per Gordon J (Heerey J agreeing at [1], Lindgren J agreeing at [84]). The short point in dispute relates to when the demand in the present case was made.

5    In this case, a demand was made by the plaintiffs on 4 August 2015 in relation to the eight payments that Gunns made to Bluewood between 3 July 2012 and 24 September 2012, totalling $1,089,314.81. On 12 May 2016, following the conditional grant of leave by Middleton J on 6 May 2016, the plaintiffs amended their statement of claim to add further payments made between 2 April 2012 and 29 June 2012, including three payments made between 16 May 2012 and 29 June 2012 totalling $265,000.00. It was not disputed by the plaintiffs at trial that there was a continuing business relationship between Gunns and Bluewood between 16 May 2012 and 24 September 2012 and, by operation of s 588FA(3) of the Act, that each of the 11 payments ultimately pressed at trial formed part of a “single transaction” for the purposes of s 588FA(1) of the Act. Bluewood argued that where the judgment is in respect of a “single transaction” for the purposes of s 588FA(3) of the Act, the right to pre-judgment interest does not accrue until a demand is made in respect of that single transaction. As that did not happen until 12 May 2016 (upon the plaintiffs’ amendment of the statement of claim), in Bluewood’s submission, no interest is recoverable prior to that date on the judgment amount. The plaintiffs, on the other hand, argued they are entitled to pre-judgment interest on the amount of $575,383.53 as from 4 August 2015, being the portion of the judgment amount referrable to the eight payments in respect of which a demand was made on that date. With respect to the balance of the judgment amount, the plaintiffs accept that pre-judgment interest runs from 12 May 2016, when the statement of claim was amended to add the three further payments made between 16 May 2012 and 29 June 2012.

6    I accept the plaintiffs’ submission. Bluewood’s contention ignores the fact that although s 588FA(3) applies to treat the payments as a single transaction for the purpose of s 588FA(1), the date that the relevant cause of action accrued for the purposes of s 51A(1)(a) in respect of the eight payments the subject of the claim as originally formulated was the date that the demand was made for the return of those monies. The fact that the claim was amended to include additional amounts does not gainsay there was a demand for recovery of those amounts giving rise to the cause of action sued on, albeit that the single transaction for the purposes of s 588FA(3) was subsequently enlarged by the amendments to the statement of claim to add further payments, of which three were ultimately included in the single transaction constituting the unfair preference paid by Gunns to Bluewood.

Indemnity costs

7    Bluewood does not dispute that it should pay the plaintiffs’ party/party costs of the proceeding (subject to an apportionment order for which it contends), but opposes an order that it pay costs on an indemnity basis after 16 September 2015 or the alternative dates claimed by the plaintiffs. The basis upon which the plaintiffs contend they are entitled to an indemnity cost order is a Calderbank offer that Bluewood rejected. The plaintiffs alternatively rely on three other Calderbank offers and a formal offer to compromise, all of which Bluewood rejected.

Calderbank offers

8    It is well established that a failure to accept a Calderbank offer may justify the exercise of the Court’s discretion to award costs on an indemnity basis if, having regard to all the circumstances, the failure to accept the offer was unreasonable. As the Full Court explained in Kooee Communications Pty Ltd v Primus Telecommunications (No 2) [2011] FCAFC 141 at [19] (cited with approval in Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 19 at [21]):

… The purpose of the principles governing Calderbank offers and offers of compromise in accordance with court rules is to ensure that, when one party makes another an offer that contains a genuine element of compromise, the recipient of the offer is compelled to give real consideration to the costs and benefits of prosecuting its claim by reason of the prospect of suffering an indemnity costs order should its failure to accept the offer prove unreasonable.

9    The circumstances the Court can take into account in determining whether the rejection of a settlement offer was “unreasonable” are not exhaustive, but may include the state of the proceeding in which the offer was received, the time allowed to the offeree to consider the offer, the extent of the compromise offered, the offeree’s prospects of success (assessed as at the date of the offer), the clarity with which the terms of the offer were expressed and whether the offer foreshadowed an application for an indemnity costs order in the event of the offeree rejecting it: Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7]. Where a party has made more than one Calderbank offer over the course of the litigation, when determining whether it was reasonable to reject any one of them, the Court may take into account the terms of the preceding offer: Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [236]. The party seeking the award of indemnity costs has the onus to prove that the rejection of a Calderbank offer was unreasonable in the circumstances of the case: see eg Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; 41 WAR 1 at 9 [21]–[23] per Buss JA (Wheeler JA agreeing).

10    The first offer was made by letter dated 16 September 2015 (the first offer) and was an offer by the plaintiffs to compromise their claims for the sum of $450,000 inclusive of interest and costs, paid in instalments, and to release Bluewood from any further claims in relation to the “payments the subject of [the plaintiffs’] letter dated 4 August 2015”. The 4 August 2015 letter identified the eight payments the subject of the original claim. The second offer was made by letter dated 15 March 2016 (the second offer) and was an offer by the plaintiffs to compromise their claims for the sum of $580,000 with each party bearing their own costs, plus a release “from any claims in relation to the Proceeding”. The letter also put Bluewood on notice that the plaintiffs intended to amend their claim to add eight more payments totalling $809,197.32. A third offer was made by letter dated 22 April 2016 (the third offer) and was an offer by the plaintiffs to compromise their claims for the sum of $465,000, with each party bearing their own costs, and the same release described in the second offer. A fourth offer was made by letter dated 29 November 2018 (the fourth offer) and was an offer by the plaintiffs to compromise their claims for the sum of $400,000 inclusive of costs. The plaintiffs submit it was unreasonable for Bluewood not to accept any of those offers. Bluewood argues that it was not unreasonable for it to reject those offers. I agree with Bluewood’s submissions in relation to all four Calderbank offers.

11    The first offer was made one day prior to the proceedings being commenced, when Bluewood’s understanding of the case against it and its prospects of success was at an early stage and thus limited. Further, contrary to the plaintiffs’ submission, the offer did not promise to release Bluewood from any further preference claims, as the proposed release was confined to the payments “the subject of [the plaintiffs’] letter dated 4 August 2015”, and as noted above, further claims were later added. I accept that those factors mitigated against the reasonableness of that offer in circumstances where the plaintiffs contended that Gunns was insolvent “from at least 3 July 2012”, leaving open the possibility of a claim of insolvency as from an earlier date, and further preference claims in respect of payments that Gunns made to Bluewood during the relation-back period prior to 3 July 2012. This eventually was what happened.

12    The second offer lacked sufficient clarity for Bluewood to determine the extent of the offer and release. The plaintiffs in their letter foreshadowed a possible amendment to their pleadings to introduce a claim for new payments, however the offer only provided a release to Bluewood from the “proceedings”, defined by the Federal Court case number. Thus, the terms of the release being offered by the plaintiffs were not made clear. Again, the offer was made at a very early stage of the proceedings. Moreover, it was also made after the expiration of the limitation period for the new claims that the plaintiffs sought to add, but the letter did not address at all why those payments should nonetheless be claimable.

13    The third offer also was made at an early stage of the proceedings and again suffered from the same lack of clarity regarding the scope of the release, in circumstances where the plaintiffs had indicated an intention to add further payments to the claim but had not at that time done so. Also, it cannot be said at that time, in my view, the deficiencies and weaknesses in Bluewood’s defence ought to have been readily apparent to Bluewood. The plaintiffs’ second tranche of discovery, which included internal correspondence between Gunns employees of their accounts/perceptions of their dealings with Bluewood, had not yet happened. Although the Court ultimately found that the good faith defence did not succeed, at the time of the third offer Bluewood was unaware of critical Gunns documents that told against the good faith defence. Further, the defence also relied on matters of law on issues where the law was not settled and which, if found in Bluewood’s favour, had the potential to impact significantly on the amount recoverable by the plaintiffs.

14    The fourth offer was put on the basis that the best case scenario for Bluewood, on a running account basis was between $1.35 million and $778,000, having regard to when a break – if any – occurred in the running account calculation. In my view, the fourth offer did contain a real compromise by the plaintiffs. However, I do not think it was unreasonable for Bluewood to reject it. Viewed objectively, there were still a number of uncertainties in relation to potential outcomes which depended on complex factual matters and issues of law that were unsettled at the time, and would have an impact on each party’s prospects of success. It also cannot be said in my view that Bluewood ought fairly to have known at the time that its defences were more likely than not to fail.

Notice of offer to compromise

15    Additionally, the plaintiffs served a formal offer to compromise pursuant to r 25.01(1) of the Federal Court Rules 2011 (Cth) (the Rules) dated 14 February 2019 on Bluewood (the fifth offer), approximately one month before trial. The fifth offer was an offer by the plaintiffs to compromise their claims for the sum of $728,355.61 – calculated on the basis of the plaintiffs’ assessment of Bluewood’s best case scenario of $778,355.61, less a commercial discount of $50,000 – plus costs in the amount of $200,000. There was no dispute that the notice of offer to compromise complied with the requirements in r 25.01(1) or that the plaintiffs ultimately obtained a judgment more favourable than the terms of the offer.

16    By r 25.14(3), if an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is presumptively entitled to an order that the respondent pay the applicant’s costs on an indemnity basis after 11.00am on the second business day after the offer was served. However, the Court has a discretion to dispense with the rule (r 1.35 of the Rules) where there are proper reasons for doing so. The onus is on the party seeking to avoid an order for indemnity costs to satisfy the Court that the prima facie position should be departed from: IFTC Broking Services Limited v Commissioner of Taxation [2010] FCAFC 31; 78 ATR 606 (IFTC Broking Services) at 609-10 [9]. Significantly, the difference between a Calderbank offer and an offer of compromise is that the reasonableness of the refusal to accept the offer is not a compelling reason by itself to displace the presumption: IFTC Broking Services at 610 [12]. As the cases illustrate, an order pursuant to r 1.35 is an “exception” to the prima facie presumption, and there must be reason for departing from the prima facie position prescribed by r 25.14, such as a significant change in the way in which a case is advanced after the offer is made (Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (No 2) [2016] FCA 783 (Rakic) at [37]), where a plaintiff significantly amends his or her case at trial (Rakic at [42], citing Shaw v Jarldorn (1999) 76 SASR 28 (Shaw v Jarldorn) at 34 [37] per Perry J), or where the entire basis of the dispute between the parties changes – for example, by reason of evidence served after the offer has been made (Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [37], [41]).

17    Bluewood’s submissions focussed on the “reasonableness” of its rejection of the fifth offer. It was submitted that in assessing the reasonableness of its rejection of the offer to comprise, the Court should have regard to the following facts:

(a)    the fifth offer did not contain any real compromise by the plaintiffs because up until the time when the offer was made, the plaintiffs’ costs had been shared across multiple defendants. It was therefore not unreasonable for Bluewood to consider that any compromise in the offer was nominal or non-existent; and

(b)    the fifth offer was made at a stage of the proceedings when: key documents relating to a particular invoice, the date of which was disputed, had not yet been produced; the plaintiffs had not yet conceded that there was a continuing business relationship between the parties during the relevant period; and the issue of whether the peak indebtedness rule applied – about which, Bluewood submitted, there was “significant legal doubt” – had yet to be determined.

18    These matters are not sufficient reasons to justify the exercise of the Court’s discretion to make an order inconsistent with the presumption in r 25.14(3) of the Rules. First, contrary to Bluewood’s submission, the fifth offer was capable of evaluation as a genuine compromise, but in any event, whether it was or was not reasonable for Bluewood to consider that any compromise in the offer was nominal or non-existent is not a factor which would displace the presumption prescribed by r 25.14. Secondly, r 25.14 “is not predicated on parties having a complete state of knowledge of the evidence; it is silent as to the time at which an offer may be made”: Robinson v Kenny (No 2) [2015] FCA 2 at [26]. The rule operates as an offer of compromise at any stage of the proceedings, whatever the state of the evidence: Visscher v Teekay Shipping (Australia) Pty Ltd (No 2) [2014] FCAFC 19 at [7]. It is not to the point that documents relating to a particular invoice had yet to be produced. Bluewood was on notice that the date of the invoice was in dispute, even if the particular evidence upon which the plaintiffs relied had not yet been produced. It certainly cannot be said that the “entire basis of the dispute” between the parties changed when those documents were produced. Thirdly, the plaintiffs’ decision to concede that there was a continuing business relationship between the parties did not rise to the level of “such a significant change in the manner in which the [plaintiffs’] case [was] presented at the trial… that it might fairly be said that the full dimensions of the [plaintiffs’] entitlement could not possibly have been foreseen before the hearing commenced”: Shaw v Jarldorn at 34 [36] per Perry J (Doyle CJ and Mullighan J agreeing), cited with approval in the context of r 25.14 of the Rules in Rakic at [37]. Indeed, the quantum of the fifth offer was calculated on the assumption of the best case scenario that Bluewood would succeed on this issue. Finally, whether or not it was reasonable for Bluewood to reject the offer because of the “significant legal doubt” about whether the peak indebtedness issue applied is not sufficient reason of itself to displace the operation of the rule: IFTC Broking Services at 610 [12].

19    I am not persuaded that there are any special features of this case that justify a departure from the presumption in r 25.14(3) of the Rules. The circumstances do not disclose an injustice against Bluewood that must be remedied by the exercise of the discretion in r 1.35 of the Rules. Accordingly, the plaintiffs are entitled to an order for indemnity costs from 11.00am on 18 February 2019.

Apportionment

20    Bluewood seeks an order for costs in its favour in respect of the question of whether there existed a continuing business relationship between Gunns and Bluewood during the relation-back period by reason that the plaintiffs, at the start of the trial, announced they did not press the allegation there had been a break in the continuing business relationship, the effect of which, Bluewood, said, was to abandon $1,120,156.52 of their claims. Alternatively, Bluewood seeks an order of costs thrown away by reason of the plaintiffs’ abandonment of that part of its case.

21    The relevant principles to apply in considering whether an apportionment of costs is appropriate were recently set out in PKT Technologies Pty Ltd (formerly known as Fairlight.au Pty Ltd) v Peter Vogel Instruments Pty Ltd (No 2) [2020] FCAFC 46 where the Full Court said at [14]–[15]:

… Under s 43 of the Federal Court of Australia Act 1976 (Cth), costs are in the discretion of the Court. The discretion is broad but is to be exercised judicially. The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party. In general, a successful party will obtain an order for costs in its favour. However, a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. If the apportionment of costs is appropriate, the object is not mathematical precision but a result that best reflects the interests of justice in the overall circumstances of the case. See EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].

However, the mere fact that a court does not accept all of a successful party’s arguments does not make it appropriate to deal with costs on an issue by issue basis: The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8]. A court will be reluctant to adopt an approach of apportioning costs between different issues depending on success or failure on those issues where it is likely to be difficult, if not impossible, to allocate items of costs between the different issues. See Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd (No 2) [2015] FCAFC 155 at [16] citing Cretazzo v Lombardi (1975) 13 SASR 4 at 16; and Chevron Australia Holdings Pty Ltd v Commissioner of Taxation (No 5) [2015] FCA 1310 at [15].

As the authorities indicate, it does not necessarily follow that apportionment is appropriate because a plaintiff is only partially successful in proceedings. Other factors of relevance include the extent to which the evidence and submissions concerning the issues upon which the plaintiff failed overlap with those on which it succeeded.

22    In the present case, the facts pertinent to the question as to whether there was a continuing business relationship between Gunns and Bluewood at all relevant times during the relation-back period had a substantial overlap with the facts pertinent to Bluewood’s good faith defence. As there was a common substratum of facts to both issues, the trial steps taken, such as discovery, and the evidence which each party presented on the continuing business relationship issue would, in large part, still have been necessary anyway by reason of Bluewood’s good faith defence. Accordingly, it seems to me that this is the kind of case where apportioning costs is likely to be difficult, if not impossible, because of the material and significant factual overlap concerning the issues.

23    I also do not think it appropriate to order costs in favour of Bluewood in respect of its costs “thrown away” by reason that the plaintiffs did not press at trial that there was no continuing business relationship or alternatively, if there was, there was a break in that relationship. In Industrial Galvanizers Corporation Pty Ltd v Safe Direction Pty Ltd (No 2) [2018] FCA 1612, a case relied on by Bluewood in support of its submission, Burley J made such an order by reason of the abandonment by the respondent of part of its claims late in the proceedings. However, cases turn on their particular facts and, in this case, in view of the factual interrelationship of the issues, I do not think that such costs order is appropriate. More appropriate, in my view, is a reduction in the costs to which the plaintiffs are entitled as a form of compensation to Bluewood for the costs incurred in relation to the continuing business relationship issue. In my view, a reduction of twenty percent, so that Bluewood is only liable for eighty percent of the plaintiff’s costs, is appropriate.

Associate:

Dated:    30 July 2020