Federal Court of Australia

Touch for Health Pty Ltd as Trustee for Knight Superannuation Fund v Property Mentors Australia Pty Ltd (No 4) [2025] FCA 621

ORDERS

THE COURT ORDERS THAT:

1.    By 4:00pm on 20 June 2025, the parties are to submit a form of order that gives effect to these reasons.

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

REASONS FOR JUDGMENT

NESKOVCIN J:

1    On 16 December 2024, final orders were made in favour of the applicants, giving effect to the reasons in Touch for Health Pty Ltd as Trustee for Knight Superannuation Fund v Property Mentors Australia Pty Ltd (No 3) [2024] FCA 1381. In addition, a timetable was made for the filing of submissions on the questions of interest and costs, to be determined on the papers.

2    The applicants seek orders that the first, second and third respondents pay the applicants’ costs of and incidental to the proceeding on an indemnity basis from 7 June 2021, the date the proceeding was commenced, having regard to an offer made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank Offer). The applicants also sought orders for pre- and post-judgment interest on the award of damages.

3    The first and third respondents did not dispute that the applicants are entitled to: (a) costs on a party and party basis; (b) pre-judgment interest from the date of the proceeding was instituted, namely 7 June 2021; and (c) post-judgment interest. However, the first and third respondents disputed the applicants’ claim for indemnity costs and pre-judgment interest prior to the commencement of the proceeding. The second respondent did not file any submissions.

4    For the reasons set out below, there should be an order that the respondents pay the applicants’ costs of the proceeding on a party and party basis and pre-judgment interest from 7 June 2021.

5    Defined terms in Touch for Health have the same meaning in these reasons, unless otherwise stated.

INDEMNITY COSTS

6    The applicants sought an order that the respondents pay the applicants’ costs on an indemnity basis for the entirety of the proceedings, on the basis of a Calderbank Offer which the respondents did not accept.

7    The applicants are entitled to apply for an order of indemnity costs pursuant to r 40.02 of the Federal Court Rules 2011 (Cth), which provides:

40.02 Other order for costs

A party or a person who is entitled to costs may apply to the Court for an order that costs:

(a) awarded in their favour be paid other than as between party and party; or

(b) be awarded in a lump sum, instead of, or in addition to, any taxed costs; or

(c) be determined otherwise than by taxation.

Note 1: The Court may order that costs be paid on an indemnity basis.

Note 2: The Court may order that the costs be determined by reference to a cost assessment scheme operating under the law of a State or Territory.

Calderbank Offer

8    On 25 May 2021, the applicants’ solicitors made the Calderbank Offer by way of a letter to the respondents seeking full repayment of their $500,000 investment in the Secret Harbour Development together with a contribution of $25,000 towards legal fees that had been incurred to that point. The letter gave the respondents eight days to consider whether to accept the Calderbank Offer and attached a draft originating application and draft concise statement. The respondents did not accept the Calderbank Offer.

9    The letter included the following relevant passages:

3.    In about June 2015, the Applicants were induced to invest in a property development to be constructed on land at Cottesloe Crescent, Secret Harbour, Western Australia.

4.    The investment was promoted as having a likely duration of between 12 to 15 months with a return of approximately 30% over the life of the development. The property development was also promoted as having all permits in place. The promoters of the development were represented to the applicants as being highly experienced with property development of this kind.

5.    However, those representations were false or misleading or likely to mislead or deceive. The development was not completed in 12 to 15 months or at all. It was sold by a financier, and now the development will not proceed. The applicants have lost their money in the development.

6.    Our clients have a number of claims against the respondents as set out in the draft originating process and affidavit in support.

7.    Notwithstanding that our clients have substantial claims against the respondents, our clients are prepared to resolve the dispute with the respondents upon:

(a)    Repayment of their initial investment amounts comprising:

i)    First Applicant – Touch for Health - $160,000;

ii)    Second Applicants – Brian and Claire Knight - $90,000;

iii)    Third Applicant – Scoob - $50,000;

iv)    Fourth Applicant – Richard and Jennifer Segui - $125,000;

v)    Fifth Applicant – DW Super Fund - $50,000;

vi)    Sixth Applicant – DWT Assets - $25,000

Total = $500,000; and

(b)    A contribution of $25,000 towards their legal fees.

….

9.    Our clients will forgo the balance of their legal costs, recovery of their membership fees and claims for interest.

10.    Our clients will provide a release from any further liability arising from the Investment.

11.    If the offer set out in the preceding paragraphs is not accepted by you, our clients intend to issue legal proceedings for recovery of the full amount of their claims. In this regard, they will also pursue a claim for interest and for other heads of loss and damage that might be available.

12.    The offer is reasonable and ought to be accepted, because:

(a)    it allows a reasonable period of time for the respondents to raise cash, if cash is not presently available to them;

(b)    by the offer, the Applicants forego any claims in relation to membership fees paid by them to the First Applicant.

(c)    the legal costs burden of the proposed proceeding is lighter upon eight applicants than three active respondents (noting that it is not expected that the Fourth Respondent will play any active role, and is a proposed party largely for conformity purposes);

(d)    the Applicants’ claims, particularly those of conduct in contravention of s12DA of the ASIC Act, are strong. In particular, there is no good prospect of the respondents proving, as they are bound to do by s12BB, that there were reasonable grounds for the representation that the Investment could mature within 12 to 18 months, when the Land had not settled and, it would appear, no presales had occurred; and

(e)    settlement by the Offer would avoid scrutiny by the Court of the First Applicant’s representations, and the stress, time burden and expense of a proceeding.

13.    The Offer is open for acceptance in writing until 4:00PM on Wednesday, 2 June 2021 after which time the Offer will lapse without further notice to you. Absent acceptance, we hold instructions to immediately file and serve the documents.

14.    Should you not accept this offer and the Court determines the matters on terms either equal or more favourable to our clients, our clients reserve the right to rely upon this letter on the question of cost [sic] (pursuant to the principles enunciated in Calderbank v Calderbank [1976] Fam 93 and restated in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298).

[emphasis in original]

10    The principles relating to Calderbank offers are conveniently summarised in Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd (No 2) [2020] FCA 1083 at [5] (Davies J):

[5] 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.

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]. The party seeking the award of indemnity costs has the onus to prove that the rejection of a settlement 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).

11    The applicants submitted that they satisfied the following circumstances, which are to be taken into account in determining whether rejection of an offer was “unreasonable” as outlined in Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7] (Nicholas, Yates, and Beach JJ), citing Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] (Warren CJ, Maxwell P and Harper AJA); Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] (Mortimer J, as her Honour then was).

Stage of the proceeding

12    The applicants submitted that the offer was made immediately prior to commencement of the proceeding and at a time when the applicants had formulated their claims and where their main claims upon which they relied were ultimately successful at trial.

Time allowed to consider offer

13    The respondents were given eight days to accept the offer and a further 30 days to pay the settlement sum. The applicants submitted that this was a reasonable period of time.

Extent of compromise offered

14    The applicants submitted that the offer was reasonable and compromised on seeking interest on their capital investment, opportunity costs of alternative investments, a refund of their membership fees and further legal costs.

Prospects of success

15    The applicants submitted that the Calderbank Offer clearly identified why the applicants’ claims with respect to the Expected Timeframe and Expected Profit Representations were strong, and why the respondents did not have a reasonable basis for making them. They submitted that the respondents were in a position to assess the strength of the claims and, acting reasonably, they ought to have considered that the applicants’ claims had good prospects.

Clarity of expression

16    The applicants submitted that the Calderbank Offer was expressed in clear and unambiguous terms.

Whether offer foreshadowed an application for indemnity costs

17    The applicants submitted that the Calderbank Offer clearly foreshadowed that if the offer was not accepted by the respondents and the Court determines the proceeding in their favour on equal or more favourable terms, then the letter would be produced to the Court on the question of costs to seek a higher award of costs pursuant to the principles in Calderbank.

Consideration

18    Having considered the circumstances to be taken into account, as identified in Anchorage, I am not satisfied that it was unreasonable for the respondents not to accept the Calderbank Offer for the following reasons:

(a)    The Calderbank Offer was based on misrepresentation claims that were differently expressed from those pressed at trial and do not reflect the grounds on which the relevant claims were ultimately successful. The applicants’ concise statement was amended at the trial. The Calderbank Offer did not explain the reasons why Expected Profit Representation was misleading, other than to state that the Secret Harbour Development was not completed and would not proceed. As stated in Touch for Health at [107]–[122], the grounds on which the Expected Profit Representation was successful were differently expressed from the grounds pressed by the applicants in the Calderbank Offer and at the trial. Further, the Calderbank Offer does not adequately reflect the grounds on which the Expected Timeframe Representation was ultimately found to be misleading: see Touch for Health [84]–[94], [100]. While the Calderbank Offer referred to the fact that the land had not settled and no pre-sales had occurred, which were disclosed in the Information Memorandum, it did not refer to the fact that the building contract had not been executed and that the builder was to have 378 working days to complete the building works: see Touch for Health [85]–[93].

(b)    These matters were deficiencies in the Calderbank Offer which meant that the offer was not clearly expressed, and/or the respondents were unable to make an informed assessment of the strength of the applicants’ claim: NuLine Construction Group Pty Ltd v Fowler [2012] NSWSC 816 at [51] and [87] (Ward J, as her Honour then was).

(c)    The respondents were not legally represented and the eight day period was too short for them to assess their position in any event.

(d)    The Calderbank Offer contained no warning of the intention to seek costs on an indemnity basis, noting that the reference to authorities would have been meaningless to the respondents, who are not lawyers.

19    The Court has a broad discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth). In the exercise of the discretion under s 43 of the Federal Court Act, there will be an order that the respondents pay the applicants’ costs on a party and party basis, to be agreed or taxed, in default of agreement.

Interest

20    The applicants sought orders that the respondents pay the applicants’ pre-judgment interest on damages pursuant to s 51A(1)(a) of the Federal Court Act, calculated from the date of each of their investments in the Secret Harbour Development, in June 2015, until 15 December 2024. The applicants also sought post-judgment interest, pursuant to s 52(2)(a) of the Federal Court Act, r 39.06 of the Rules, and paragraph 3 of the Federal Court Practice Note GPN – INT, from the date of the judgment until the outstanding amounts are paid in full.

21    The first and third respondents did not dispute that the applicants are entitled to pre-judgment and post-judgment interest at the rate claimed by them. They submitted, however, that the applicants’ inordinate and unexplained delay in instituting the proceeding constitutes “good cause”, within the meaning of s 51A(1)(a) of the Federal Court Act, as to why pre-judgment interest prior to the proceeding should not be awarded: Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liquidation) (2011) 197 FCR 113; [2011] FCAFC 136 at [97] (Foster J, Greenwood and Rares JJ agreeing at [1]–[2]).

Pre-judgment interest

22    Section 51A of the Federal Court Act provides:

51A Interest up to judgment

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

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

(b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

23    The Court has a discretion under s 51A(1)(a) to award interest at such rate or rates as it thinks fit, for such period or periods as it thinks fit, on the whole or on part of the monetary award. The only constraint imposed by the language of s 51A(1)(a) upon the exercise of that discretion is that the period in respect of which interest may be awarded must begin no earlier than the date when the relevant cause of action arose and must end no later than the date of judgment: Kazar at [97] (Foster J, Greenwood and Rares JJ agreeing at [1]–[2]).

24    The applicants cause of action arose in June 2015, when they invested in the Secret Harbour Development, not when the Secret Harbour Development land was sold in December 2019, and the investment had failed, as submitted by the applicants: see Tang v Yu [2024] FCA 297 at [131], [136] (Stewart J). At the trial, the applicants led evidence about delays in the development and their awareness of problems with the development and the builder. That evidence indicated that, although the applicants initially held out hope that the development would proceed, they were attempting or considering how to recover their investments from the builder, and I find that the evidence did not adequately explain the applicants’ six year delay in commencing the proceeding against the respondents.

25    I am satisfied that the unexplained delay in commencing the proceeding constitutes “good cause” as to why the applicants should not be entitled to pre-judgment interest prior to commencing the proceeding.

Post-judgment interest

26    Section 52 of the Federal Court Act provides:

52 Interest on judgment

(1)  A judgment debt under a judgment of the Court carries interest from the date as of which the judgment is entered.

(2)  Interest is payable:

(a)  at such rate as is fixed by the Rules of Court; or

(b)  if the Court, in a particular case, thinks that justice so requires--at such lower rate as the Court determines.

27    The prescribed rate at which interest is payable under s 52(2)(a) of the Act is outlined in r 39.06 of the Rules.

28    The applicants’ entitlement to post-judgment interest arises under s 52(2)(a) of the Federal Court Act. The applicants sought interest at the rate fixed by the Rules. It is unnecessary to make an order that simply reflects the applicants’ entitlement to post-judgment interest under s 52(2)(a) of the Federal Court Act.

Conclusion

29    For the foregoing reasons, the applicant is entitled to orders for costs on a party-party basis and pre-judgment interest pursuant to s 51A(1)(a) of the Federal Court Act from 7 June 2021. The parties are to submit a form of order that gives effect to these reasons.

Associate:

Dated:    13 June 2025

SCHEDULE OF PARTIES