Federal Court of Australia

Butler v Total Tools Holdings Pty Ltd (Costs) [2026] FCA 106

ORDERS

THE COURT ORDERS THAT:

1.    By 4pm on 24 February 2026 the parties confer and provide to the Chambers of the Honourable Justice Anderson a form of orders to give effect to the reasons for judgment on costs delivered on 17 February 2026: Butler v Total Tools Holdings Pty Ltd (Costs) [2026] FCA 106.

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

COSTS JUDGMENT

ANDERSON J:

INTRODUCTION

1    Following judgment in Butler v Total Tools Pty Ltd [2025] FCA 1225 (Judgment) on 9 October 2025 and the Court’s Orders of that date (9 October Orders), the defendant, Total Tools Holdings Pty Ltd, by its interlocutory application dated 19 December 2025 (Costs Application), seeks orders that:

(a)    the costs of the action awarded by paragraph 2 of the 9 October Orders are assessed on the indemnity basis from 20 November 2024; and

(b)    if the parties cannot agree upon the quantum of those costs within one month from the Court’s orders upon the Costs Application, a lump-sum assessment process under the directions set out in the Costs Application will occur.

2    Total Tools seeks indemnity costs from 20 November 2024 on the basis of:

(a)    Total Tools’ offers to Michael Butler, the Plaintiff, to settle the proceeding and identifying the difficulties in his case, of which it was unreasonable to refuse at least its 19 November 2024 offer; and

(b)    (if necessary) the fact that those difficulties in the Plaintiff’s case must have been obvious to the Plaintiff at all times, on the facts in the Judgment.

3    Total Tools relies upon two affidavits of its solicitor, Merryn Jill Quayle, the first dated 19 December 2025 and its annexure “MJQ-4” (First Quayle Affidavit) and the second dated 9 February 2026 and its annexure “MJQ-5” (Second Quayle Affidavit).

4    The Plaintiff opposes the costs of the proceeding awarded by paragraph 2 of the 9 October Orders being assessed on an indemnity basis from 20 November 2024. The Plaintiff does not object to costs being assessed on a lump sum basis.

5    The Plaintiff submits that he did not act imprudently, nor was it unreasonable for him to not accept, on 3 December 2024, an offer of $650,000 (incl GST) in full and final settlement of his claim to shares in Total Tools, which he alleges had a value of up to $8.8 million.

Should costs be awarded on an indemnity basis from 20 november 2024?

Principles

6    Under r 40.02(a) of the Federal Court Rules 2011 (Cth), a party who has an entitlement to costs, as Total Tools does in view of the 9 October Orders, may apply to have those costs paid other than as between party and party.

7    The principles relevant to an award of costs on an indemnity basis may be relevantly stated as follows for present purposes:

(a)    the Court has, under s 43 of the Federal Court of Australia Act 1976 (Cth) and r 40.02 of the FC Rules an unfettered discretion as to costs, which must be exercised judicially and in accordance with established principles: Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 at 152 (Black CJ), 156 (Cooper and Merkel JJ); and

(b)    the question is always “whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis”, the default position being costs on a party and party basis and some special or unusual feature of the case being required to order otherwise: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (Sheppard J); Re Wilcox (1996) 72 FCR 151 at 153 (Black CJ), 156–157, 158 (Cooper and Merkel JJ).

8    Subject to the points above, indemnity costs have frequently been awarded where:

(a)    a party refuses an offer to settle the claim which they do not beat at trial, where the refusal was unreasonable in all the circumstances, under the principles in Calderbank v Calderbank [1976] Fam Law 93 as explained in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2), (2005) 13 VR 435; [2005] VSCA 298 (Hazeldene’s) at [19]-[24] (Warren CJ; Maxwell P and Harper AJA); and

(b)    a claim was sufficiently misconceived or lacking in merit, in particular where that is or ought to have been known to a party: Re Wilcox at 158-159 (Cooper and Merkel JJ)

9    As to the basis where a party refuses an offer to settle the claim, Hazeldene’s explains at [25] that, while relevant circumstances are not closed, they include at least:

(a)    the stage of the proceeding at which the offer was received;

(b)    the time allowed to the offeree to consider the offer;

(c)    the extent of the compromise offered;

(d)    the offeree’s prospects of success, assessed as at the date of the offer;

(e)    the clarity with which the terms of the offer were expressed; and

(f)    whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.

The chronology in relation to the offers

10    Total Tools first offered to settle the proceeding on 17 September 2024, around two weeks after it had filed its Concise Response and well after the proceeding commenced on 3 July 2024. It was a “walk away” offer. Total Tools proposed that:

(1)    all claims by the Plaintiff in relation to the subject matter of the proceeding were to be released;

(2)    the proceeding would be discontinued; and

(3)    the parties would bear their own costs.

11    The offer was expressed to be a Calderbank offer, open until 5:00 pm on 1 October 2024 (two weeks), and indicated that indemnity costs would be sought if it were refused and the Plaintiff did not achieve a better outcome.

12    The 17 September 2024 letter referred to Total Tools’ Concise Response and identified that the claim was likely to fail because (i) the Shareholders’ Resolution (as defined in the Judgment) reposed discretion in the Board and did not give rise to a binding contractual commitment and (ii) the estoppel argument then being run was inconsistent with the text, context and purpose of the Shareholders’ Resolution. The offer lapsed without response, although the Plaintiff sent a letter about it on 11 October 2024.

13    Following amendments to the Plaintiff’s Concise Statement made on or about 1 November 2024, Total Tools made a second Calderbank offer on 19 November 2024, a few days after it had filed its Amended Concise Response on 14 November 2024. The offer was that:

(1)    Total Tools would pay the Plaintiff $650,000 (incl GST) and make no admissions;

(2)    Total Tools would make no admissions in respect of the claims in relation to all matters the subject of the Proceeding;

(3)    the Plaintiff would release all claims in relation to the proceeding and discontinue the proceeding; and

(4)    the parties would bear their own costs.

14    The offer was again expressed to be a Calderbank offer, open until 5:00 pm on 3 December 2024 (two weeks), and indicated that indemnity costs would be sought if it were refused and the Plaintiff did not achieve a better outcome at trial.

15    In the letter which set out the above offer, Total Tools’ solicitors explained why the claim was bound to fail, including that:

•    for Mr Butler’s contractual claim to succeed, he must establish that the 24 October 2018 Shareholders’ Resolution (Shareholders’ Resolution) amounted to an immediately binding contractual commitment by Total Tools Holdings Pty Ltd (Total Tools) to Mr Butler that Mr Butler would be offered shares in Total Tools. The Shareholders’ Resolution does not support any such binding commitment, for the reasons explained to your client on many occasions previously, including in our client’s position paper for the mediation, the 17 September Letter, and in our client’s Amended Concise Response;

•    the Heath Subscription Agreement (as defined in your Amended Concise Statement at paragraph [21C]) is irrelevant to the proper construction of the Shareholders’ Resolution. Mr Heath, and Heath Nominees (Aust) Pty Ltd as trustee for the Heath Family Trust, are third parties to the earlier contract alleged between Mr Butler and Total Tools. The subsequent Heath Subscription Agreement is irrelevant to the contractual construction exercise; …

16    The Plaintiff never responded to this offer.

17    By this stage, the Plaintiff had served his main affidavit dated 30 September 2024. Total Tools’ evidence had not been served.

18    The Plaintiff abandoned his case based on estoppel by amendments first proposed on 22 May 2025.

Application to facts

19    Total Tools submits the application of the principles leads to an award of indemnity costs from 20 November 2024 – being the day after Total Tools made its second offer to the Plaintiff to settle the claim.

20    Total Tools relies on the fact that the Court has dismissed the claim for substantially the reasons Total Tools gave in [2(b)] of its Concise Response on 5 September 2024, its Amended Concise Response on 14 November 2024, and its Further Amended Concise Response on 13 June 2025, that:

[O]n its proper construction, the Shareholders’ Resolution did no more than confer upon the Board of directors of Total Tools the discretion to create and allot to Mr Butler or his nominee, at some point in time in the future of the Board’s choosing, an equity-based instrument in Total Tools or an unidentified successor entity, conditional upon the successful financial close of a trade sale or IPO.

21    The Court held that this followed from the text of the Shareholders’ Resolution and that of the Explanatory Memorandum (Judgment [159]–[163]), the context (Judgment [164]–[167]), and the evident commercial purpose (Judgment [168]–[172]). The essential reasoning in substance adopts Total Tools’ pleaded case in the Concise Response.

22    Total Tools submits that these matters have always been central. Total Tools submits that regardless of how the Plaintiff formulated his claim, unless he could show that the Shareholders’ Resolution created an obligation to issue shares, he was bound to fail.

23    Secondly, Total Tools rely on the substance of the Court’s reasoning – that the Shareholders’ Resolution does not give rise to any obligation to issue shares – which has always been known to the Plaintiff, including from his own drafting of the resolution. The Court found:

(a)    it was the Plaintiff who substantially drafted the Shareholders’ Resolution by his 27 September 2018 email (which was omitted from his evidence in chief). The email said, in terms, that the purpose of his new draft was that: “We don’t want to get tangled up in loans, share price, structures etc etc”: Judgment at [134]; and

(b)    the Plaintiff gave Mr Heath an explanation of his drafting, to send on to Mr Callahan, on 28 September 2018, which said in terms that the purpose of his draft was that it “does not imply that the instrument ultimately decided upon would be Ordinary Shares. Indeed it is highly likely not to be Ordinary Shares” and “gives the board the flexibility and authority to structure and issue whatever equity based instrument is ultimately found to be most appropriate (performance rights, ZEPOs, options, shares etc) and in whichever IssueCo is most appropriate”: Judgment [44]–[45]; and

(c)    the Plaintiff was told as soon as 2 March 2023, in a fully reasoned letter from Metcash Limited’s chief legal, risk and compliance officer and company secretary, that he had no legal entitlement to shares from the Shareholder Resolution: Judgment [67]. One reason given, again reflecting the Court’s dispositive reasoning, was that the Board had never issued any shares pursuant to the Shareholders’ Resolution.

24    Total Tools submits that it is apparent that, on both 17 September and on 19 November 2024, it made an offer to compromise that the Plaintiff failed to beat at trial. Total Tools submits that it was unreasonable for the Plaintiff not to accept at least Total Tools’ 19 November 2024 offer.

25    Total Tools submits that the offer of 19 November 2024 explained once more why the Plaintiff’s case would fail on the necessary and central point of construction. Those matters were contemporaneously known to the Plaintiff. In any case, they had been brought home to the Plaintiff by Metcash in March 2023 and, again, by Total Tools’ pleadings.

26    Total Tools further submits that the wider circumstances also indicate that the Plaintiffs failure to accept Total Tools’ offer was unreasonable, including for the following reasons:

(a)    Stage of proceedings: The 19 November 2024 offer was made after the proceedings had been on foot for approaching five months, once the central issue of construction of the Shareholders’ Resolution had been identified and Total Tools’ position fully explained. The Plaintiff could not reasonably expect anything to change in his favour.

(b)    Time allowed: Total Tools allowed two weeks to consider the offer, which was ample. The Plaintiff never responded, to seek further time or otherwise.

(c)    Extent of compromise: The 19 November 2024 offer reflected real compromise. Total Tools offered a substantial amount ($650,000 incl GST) and to forgo its entitlement to costs after nearly five months of litigation. On Total Tools’ case, as has been accepted, the Plaintiff was entitled to nothing and would have to pay costs.

(d)    Offeree’s prospects of success as at date of offer: The Plaintiff’s prospects have been the same at all times: they turn on the construction of a document the Plaintiff partly drafted and has had since before the proceeding began. Any sober analysis leads directly to the conclusion the Court has reached.

(e)    Clarity of the offer: The 19 November 2024 offer was clear: Total Tools would pay real money and bear its own costs (without admitting liability) if the proceeding were discontinued and claim released.

(f)    Whether indemnity costs foreshadowed: The 19 November 2024 offer (like the 17 September 2024 offer) was expressly a Calderbank offer and foreshadowed that Total Tools would seek indemnity costs if the Plaintiff did not accept and did not beat it.

27    Total Tools submits that it is striking that the Plaintiff never replied to the 19 November 2024 offer. This, in Total Tools’ submission, confirms that nothing in the surrounding circumstances means that the Plaintiff acted other than unreasonably.

28    Total Tools submits that costs should be awarded on an indemnity basis from 20 November 2024.

The Plaintiff’s response to the application for indemnity costs

29    The Plaintiff relies on the following additional legal principles as to why indemnity costs should not be ordered in this case as follows:

(a)    The mere refusal of an offer does not of itself warrant an order for indemnity costs. Rather, it must be established that the rejection of the offer was imprudent or plainly unreasonable: Alexander v Australian Community Pharmacy Authority (No. 3) [2010] FCA 506 at [22] (Bromberg J); Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7] (Sundberg and Emmett JJ); see also Hardingham v RP Data Pty Ltd (No 2) [2021] FCAFC 175 (Greenwood, Rares and Jackson JJ) at [19].

(b)    The rejection of an offer is not unreasonable just because the offeree ultimately achieves a less favourable outcome: Axent Holdings Pty Ltd v Compusign Australia Pty Ltd (2020) 158 IPR 92; [2020] FCA 1835 (Kenny J) at [50].

(c)    If an offer constitutes a capitulation rather than a genuine compromise then rejecting the offer is not unreasonable, particularly if the offeree has incurred significant costs:

Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108 (Greenwood J) at [76].

(d)    A distinction is drawn in the authorities between a genuine offer of a realistic compromise, and a demand to capitulate where the case has some prospect of success. If the offer is advanced merely to trigger costs sanctions, it would not be treated as a genuine offer of compromise: Baygol Pty Ltd v Foamex Polystyrene Pty Ltd [2005] FCA 1089 at [12] (Tamberlin J).

(c)    The question of “unreasonableness” is judged having regard to the circumstances faced by the offeree at the time that the offer was made: Camm Cattle Company Pty Ltd v Acumen Finance Pty Ltd (No 3) [2021] FCA 1611 (Downes J) at [13], citing Hardingham (at [26]).

(e)    Even if hindsight may show that it would have been prudent to accept an offer, that does not necessarily mean that a party’s conduct in rejecting the offer was imprudent or unreasonable at the time: Diakyne Pty Ltd v Ralph (No 2) [2009] FCA 780 (Jagot J) at [9]-[11].

30    The Plaintiff submits that at the time of the close of the 19 November 2024 offer, on 3 December 2024 he had:

(a)    already invested significant time and funds engaging with Total Tools since he first asked the executive chairman of Total Tools, Mr Laidlaw, to look into the issue in October 2022. The Plaintiff’s total costs of that process at the time of the offer were approximately $726,000 (incl GST). Total Tools’ offer was less than the Plaintiff had already spent to get to that stage; and

(b)    prepared, filed and served detailed affidavit evidence;

31    The Plaintiff further submits that at the time of the close of the 19 November 2024 offer, on 3 December 2024, Total Tools had:

(a)    not yet filed any evidence;

(b)    failed to provide documents that the Plaintiff reasonably believed were consistent with his case, including that Total Tools had been ordered to produce the minute book or other formal record of the Shareholders’ Resolution by 28 November 2024. Total Tools did not comply with that order, contending, at that time, it was unable to locate such a document. The trial proceeded without the minutes of the meeting, which may well have assisted the Plaintiff’s case; and

(c)    not raised defences relied upon by Total Tools at trial, including the defence of standing.

32    The Plaintiff submits that having regard to the costs the Plaintiff had already incurred and the potential value of his claim, the offer made by Total Tools on 19 November 2024 was a “paltry” amount, tantamount to capitulation, and not a genuine compromise.

33    The Plaintiff submits that there must be some special or unusual feature in a case to justify departing from the usual practice and instead ordering indemnity costs. The Plaintiff submits losing a case on a question of construction is neither a special nor unusual feature. The Plaintiff submits there is a significant difference between a claim being unsuccessful and a claim being “clearly foredoomed to fail” as in Smolle v Australia and New Zealand Banking Group Ltd (No 2) [2007] FCA 1967 (Weinberg J) (see [25]).

34    The Plaintiff submits that the fact the Court ultimately preferred Total Tools’ construction does not mean this should have been obvious to the Plaintiff in November 2024.

Consideration

35    Before turning to the application of principles to the facts of this case, there are two points of principle raised by the Plaintiff that require clarification.

36    First, in relation to the Plaintiff’s contention that it must be established that the rejection of the offer was “imprudent or plainly unreasonable”. In Hardingham, the Full Court said the following:

[19] Different Full Courts have stated slightly differently the general law test applicable to determining whether an offeree who fails to accept an offer of settlement (not being made as an offer of compromise under Pt 25 of the Rules or its analogues) can be ordered to pay the offeror’s costs on an indemnity basis if the offeror obtains a better result than that contained in the offer. The differing versions of the test are that the rejection must be either “imprudent or unreasonable” or “imprudent or plainly unreasonable” (emphasis added).

[20] In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7] , Sundberg and Emmett JJ said:

The mere making of an offer of compromise and its non-acceptance, followed by a result more favourable to the offeror, does not automatically lead to an order for payment of costs on an indemnity basis: John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201 at 204 206 ; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 239 . The applicant for a more generous award must show that the rejection of the offer was imprudent or plainly unreasonable: NMFM Property Pty Ltd v Citibank Ltd (No 2) (NMFM) (2001) 109 FCR 77 at 98 ; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [28] ; Sydney Markets Ltd v Sydney Flower Market Pty Ltd [2002] FCA 283 at [16] –[17] and [23] .

(emphasis added)

[21] They added that, ordinarily, an offer made outside provisions in Rules of Court , such as offers of compromise under Pt 25, will be unlikely to attract an indemnity costs order if the offeree fares worse than the offer unless the offer is, first, reasonable and, secondly, contained a statement why the offeree’s case will fail. As Buchanan J observed in Keays v J P Morgan Administrative Services Australia Ltd (No 2) [2011] FCA 547 at [7] –[20] , this difference is not substantive and the word “plainly” is not necessary to qualify “unreasonably”: Rares J applied this view in Mount Isa Mines Ltd v The Ship “Thor Commander” (No 2) [2018] FCA 1702 at [9] [14] .

[22] However, there is no inflexible rule that an offeror must give a reasoned explanation as to why the offeree ought accept an offer to settle. That is because the discretionary power to make such an order is contained in s 43(1) of the Federal Court of Australia Act 1976 (Cth). That discretion must be exercised judicially but is otherwise unconfined and includes, as s 43(3)(g) provides, power to order that costs “be assessed on an indemnity basis or otherwise”. The note to s 43, which forms part of the Act, refers to, among other provisions, s 37N(4) as being relevant to the making of an order for costs.

[23] Relevantly, s 37N(1) requires the parties to a civil proceeding (including an appeal) to “conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose”, being to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible (s 37M(1)). In exercising its discretion to award costs, s 37N(4) requires the Court to take account of any failure of a party to comply with s 37N(1).

37    Further, in Celand v Skycity Adelaide Pty Ltd (2017) 256 FCR 306; [2017] FCAFC 222, Logan, Bromberg and Charlesworth JJ said at [165]:

In the context of justifying an order for indemnity costs in favour of a person who has made a Calderbank offer, the rejection of the offer need not be “plainly unreasonable” and an “especially high standard of unreasonableness” is not to be adopted because that would operate to diminish the effectiveness of the Calderbank offer as an incentive to settlement: Black v Lipovac [1998] FCA 699 at [218] (Miles, Heerey and Madgwick JJ); Alexander v Australian Community Pharmacy Authority (No 3) [2010] FCA 506 at [22] (Bromberg J). Accordingly, in that context the word “unreasonable” may be used synonymously with “imprudent”: Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224 at [11] (Weinberg J). It denotes an act which is not guided by or based upon good sense or sound judgment.

38    Second, the Plaintiff’s statement of principle from Jultstar that it is not unreasonable to reject an offer which is a capitulation rather than a genuine compromise, particularly if the offeree has incurred significant costs, is taken out of its full context. Greenwood J goes on to say:

[77] Where the proceeding (like the principal proceeding) is a “fact-intensive” case, a respondent party drawn into such case that contends it has the merits on the facts (for example, on the question of whether particular oral representations were made or not), might well elect to risk-manage its exposure to irrecoverable costs by putting a nominal monetary offer to the claimant, supported by an explanatory letter (setting out the detailed basis for the view on the merits) coupled with an offer to absorb its costs incurred to the date of the offer should the claimant see the strength of the merits of the respondent’s position, failing which the respondent, in ultimately vindicating its position, would seek to recoup from the claimant the otherwise irrecoverable costs of the proceeding, through an indemnity costs order.

[78] …The so-called capitulation offer may well be entirely appropriate in all the prevailing circumstances and one an applicant ought reasonably accept, and correspondingly not unreasonably fail to accept.

…

[80] The real point, of course, is not whether the offer can be characterised as a capitulation offer or some other like construct, but whether the applicant has unreasonably failed to accept the offer in all the circumstances, and that will depend in large part (at the date of refusal) on the state and nature of the proceedings; the matters drawn to the attention of the applicant in the explanatory merits letters; the material available to the applicant in terms of diaries, notes, emails, correspondence and other documents enabling the applicant to test his or her own recollection of events as a principal actor in the contended events (informing the applicant of the most likely detailed view, from the applicant’s side, of those events); securing access to the discovered documents of the respondents to further the forensic analysis of the most likely sequence of events; and the applicant properly coming to grips with the merits of the claim and the strengths and weaknesses of the case the applicant seeks to continue to make throughout the proceeding, after the offer, against the relevant respondent.

39    Whilst this case does not fall into the category of a ‘fact-intensive’ case, nonetheless the critical point is that the unreasonableness of rejecting an offer is to be considered in all the circumstances.

40    I find that the Plaintiff, in not accepting the Total Tools 19 November 2024 offer, acted unreasonably in the circumstances which were known to him, or ought to have been known to him at that time. I am of this opinion for the reasons that follow.

41    First, I found in the Judgment that, on its proper construction, the Shareholders’ Resolution did no more than confer upon the board of directors of Total Tools the discretion to create and allot to the Plaintiff, or his nominee, at some future point in time of the board’s choosing, an equity-based instrument in Total Tools or an unidentified successor entity, conditional upon the successful financial close of a trade sale or Initial Public Offering. That was substantially the reasoning Total Tools gave in [2b] of its Concise Response on 5 September 2024, its Amended Concise Response on 14 November 2024, and its Further Amended Concise Response on 13 June 2025. I found that this followed from the text of the Shareholders’ Resolution and the Explanatory Memorandum (Judgment [159]-[163]), the context (Judgment [164]-[167]), and the evident commercial purpose (Judgment [168]-[172]). The Judgment in substance accepted the case as pleaded by Total Tools. Unless the Plaintiff could satisfy me that on its proper construction the Shareholders’ Resolution created an obligation to issue shares, the Plaintiff was always bound to fail. I was not persuaded for the reasons given in the Judgment.

42    Second, the Plaintiff was told as soon as 2 March 2023, in a detailed letter from Metcash’s chief legal risk and compliance officer and company secretary, that he had no legal entitlement from the Shareholders’ Resolution. The reasoning in this letter was in substance the same as the reasoning in the Judgment.

43    Third, the rejection of the 19 November 2024 offer was imprudent or unreasonable having regard to the clear text of the Shareholders’ Resolution and the Explanatory Memorandum (Judgment [159]-[163]), the context (Judgment [164]-[167]), and the evident commercial purpose (Judgment [168]-[172]). With respect to the commercial purpose, I observed at Judgment [170]:

On Mr Butler’s case, he would be entitled to the “equity-based instrument” if he had resigned the day after the Shareholders’ Resolution and Total Tools concluded a trade sale for an IPO at any time thereafter. That demonstrates the commercial absurdity of the construction contended for by Mr Butler. It would, in effect, be a gift that diluted other shareholders for no reciprocal benefit.

44    Fourth, I do not accept the Plaintiff’s submission that to accept the 19 November 2024 offer was to capitulate and that the offer did not represent a genuine compromise by Total Tools. Whilst the evidence establishes that the Plaintiff at the time of the offer, had expended approximately $726,000 (incl GST) of his own costs, realistically assessed, there was a high prospect that the Plaintiff’s preferred construction would fail at trial, resulting in the Plaintiff receiving nothing and being liable to pay Total Tool’s costs. The offer was genuine and represented a real compromise.

45    Notwithstanding the amount spent by the Plaintiff on his legal costs as at the date of the 19 November 2024 offer, the Total Tools offer of $650,000 (incl GST) was not, in the circumstances, a trivial or nominal sum merely advanced to trigger costs sanctions. In my view, it was a genuine offer of compromise which offered both real money and the surrender of costs, the rejection of which was unreasonable or imprudent.

46    Fifth, the Plaintiff’s claim realistically was not worth $8.8 million, but considerably less. On the evidence in the Plaintiff’s first affidavit (Butler Affidavit), dated 30 September 2024, he would have received 30,000 shares, following Total Tools’ resolution to split shares by multiplying each class of shares by 1,000: Butler Affidavit at [116]. The Plaintiff deposed that there were three tranches whereby the share sale to Mitre 10 Australia Pty Ltd was to occur: 70% at approximately $57,000,000, equating to $26.963 per share; 15% at $59,400,000, equating to $126.562 per share; 15% at approximately $101,500,000, equating to $$224.068 per share: see Butler Affidavit at [120], [123], [131].

47    As Total Tools submits, if all 30,000 shares were sold at the first tranche value of (ie $26.963 per share), the claim was worth approximately $800,000. If the shares were sold in proportion with the three tranches, namely 70%, 15%, 15% of the overall breakdown of the shares sold to Mitre 10, the Plaintiff’s claim was worth approximately $2.1 million.

48    Total Tools submits that the Plaintiff was aware before the date of rejection of the offer (3 December 2024), that the majority of shares in Total Tools had been sold to Mitre 10 for a significantly lower price in earlier tranches under the Share Sale Agreement (as that term is defined in the Judgment). This serves to highlight, in all the circumstances, why the rejection of the offer of $650,000 (incl GST) was unreasonable or imprudent.

49    For the reasons given, I will order that the costs of the proceeding awarded by paragraph 2 of the 9 October Orders are assessed on an indemnity basis from 20 November 2024.

Carve-outs or exclusions from the costs order

50    The Plaintiff submits that the Court may have regard to the parties’ conduct in the proceeding when determining whether to impose indemnity costs: Colgate-Palmolive at 233.

51    The Plaintiff submits that Total Tools delayed and subjected the parties to unnecessary costs in the proceeding. The Plaintiff submits that the losing litigant ought not to be required to bear that proportion of the successful party’s costs which is attributable to conduct of the successful party which unduly protracted the length of the trial. The Plaintiff points to those parts of the proceeding that include:

(a)    costs relating to searches for Total Tools’ minute book;

(b)    substantial time and costs expended making and disputing the extensive redactions and confidentiality requirements insisted on by Total Tools with respect to the Mitre 10 SSA;

(c)    the leading at trial of evidence after the making of the Shareholders’ Resolution; and

(d)    the trial being deferred from its initial trial date in order for Total Tools to put on four further affidavits going to Total Tools’ “counterfactual”.

52    Total Tools submits that this is a consideration for the lump assessment, but that in any case the submission lacks merit.

53    Shepard J said at 233 in Colgate, in respect of circumstances that warrant the exercise of the discretion to order indemnity costs:

…the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the Court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; an imprudent refusal of an offer to compromise and an award of costs on an indemnity basis against a contemnor. Other categories of cases are to be found in the reports.

(Citations omitted.)

54    As the docket judge supervising the interlocutory steps in the proceeding leading up to the trial, and then as the trial judge, I do not accept the Plaintiff’s submission that steps were taken by Total Tools which were unreasonable or were motivated by attempts to delay the proceeding or incur additional unwarranted costs. The position adopted by Total Tools in facing the substantial claim of some $8.8 million was proportionate and reasonable in my opinion. I will not order that there be any carve out or exclusions from the costs to be assessed on a lump sum basis.

55    The Plaintiff submits that as he has exercised his statutory entitlement to appeal, there is a question raised as to the efficient utilisation of the Court’s resources to assess costs at this time. I reject this submission. The principle that an appeal does not operate as a stay reflects that the Court proceeds on the basis that the judgment is correct. The quantification on a lump sum basis of costs ought to be done as soon as reasonably practical.

Should directions be given for costs to be assessed on a lump sum basis?

56    Under the FC Rules r 40.02(b), a party who has an entitlement to costs may apply to have those costs awarded in a lump sum instead of by taxation.

57    As is trite, “the Court’s preference, wherever it is practicable and appropriate to do so, is to make a lump-sum costs order in order to finalise the costs issue and avoid, where possible, potentially expensive and lengthy taxation of costs hearings”: Royal v El Ali (No 3) [2016] FCA 1573 at [10] (Davies J), citing Federal Court of Australia, Costs Practice Note (GPN-COSTS) (25 October 2016) [3.3], [4.1].

58    In the present case, Total Tools submits that a lump sum costs order would facilitate the just resolution of the dispute as to costs as quickly, inexpensively and efficiently as possible, as required by s 37M of the FCA Act.

59    The Plaintiff does not object to costs being assessed on a lump sum basis. The Plaintiff submits where he has exercised his statutory entitlement to appeal there is a question raised as to the efficient utilisation of the Court’s resources to assess the costs at this time. I reject this submission. Total Tools has been successful in defending the proceeding brought against it and is entitled to a costs order. Furthermore, it is undesirable that the Plaintiff appeal the judgment and the Full Court not have the benefit of a costs order being made by the trial judge. I will make directions for costs to be assessed on a lump sum basis as proposed by Total Tools in its application at paragraph [2]-[3].

COSTS OF THE APPLICATION

60    Total Tools submits that it has been forced to make this application by the Plaintiff’s refusal to engage in relation to the basis upon which costs should be paid and the process for this. Total Tools notes that the Plaintiff rejected its offer to settle its entitlement to costs and otherwise says only that costs should not be dealt with until after the Plaintiff’s appeal has been heard.

61    In all the circumstances, the Plaintiff should pay Total Tools’ costs of the application on a party-party basis.

DISPOSITION

62    I direct that the parties confer and submit a form of orders to give effect to these reasons for judgment on costs.

Associate:

Dated:    17 February 2026