IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Commercial Court

S ECI 2021 01025

AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED (ACN 000 004 320) & ORS (according to the attached Schedule)	Plaintiffs/Defendants by Counterclaim	
		
v		
		
CENTRAL PARK PHARMACY (SYDNEY) PTY LTD (ACN 155 798 397) & ORS (according to the attached Schedule)	Defendants/Plaintiffs by Counterclaim	

S ECI 2021 01012

AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED (ACN 000 004 320) & ORS (according to the attached Schedule)	Plaintiffs/Defendants by Counterclaim	
		
v		
		
CHRISTOPHER IAN LEMON & ANOR (according to the attached Schedule) 	Defendants/Plaintiffs by Counterclaim	

---

JUDGE:	ATTIWILL J	
WHERE HELD:	Melbourne	
DATE OF HEARING:	On the papers	
DATE OF RULING:	22 December 2021	
CASE MAY BE CITED AS:	Australian Pharmaceutical Industries Ltd v Central Park Pharmacy (Sydney) Pty Ltd; Australian Pharmaceutical Industries Ltd v Lemon (Costs Ruling)	
MEDIUM NEUTRAL CITATION:	[2021] VSC 862	

---

COSTS – Strike out application by plaintiffs/defendants by counterclaim – Summary judgment application by plaintiffs/defendants by counterclaim – Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.04 – Supreme Court Act 1986 (Vic) s 24 – Applicable principles on costs – Multiplicity of issues – Apportionment of costs - Exercise of discretion – Pragmatic approach – Impression and evaluation – Proportion of costs awarded.

HIS HONOUR:
Introduction
1	On 3 December 2021, the Court delivered reasons on the plaintiffs’ summonses filed 24 December 2020 (‘Primary Reasons’). I will assume familiarity with the Primary Reasons. Definitions and terms used in these reasons are the same as those used in the Primary Reasons. The issue now before the Court is what costs order the Court should make concerning the plaintiffs’ summonses.
2	The plaintiffs seek an order that the defendants pay their costs taxed on a standard basis.
3	The defendants initially sought an order that the plaintiffs pay 75% of their costs taxed on a ‘party-and-party basis’. This basis has been revoked and the defendants subsequently informed the Court that they sought an order that the plaintiffs pay 75% of their costs taxed on a standard basis.
Parties’ material
4	The plaintiffs relied upon a submission dated 13 December 2021. The defendants relied upon a submission dated 13 December 2021 and an affidavit of Chrystalla Georgiou sworn 13 December 2021 (‘Georgiou affidavit’). Both parties confirmed in correspondence to chambers that they consented to the issue of costs being determined by the Court in chambers on the papers.
Background and procedural history
5	The background and procedural history is set out in the Primary Reasons. 
6	On 10 June 2020, his Honour Judge Cosgrave ordered by consent, inter alia, in the Central Park proceeding and in the Manly proceeding:
3. 	By 4:00pm on 24 June 2020, the defendants are to serve a proposed amended defence and counterclaim addressing each of the plaintiffs' objections. The parties are thereafter to communicate in accordance with their obligations under the Civil Procedure Act 2010 with a view to reaching consent on the proposed amendments. 
7	The defendants served their proposed amended pleadings. Correspondence and discussions, including between counsel, then ensued between the parties concerning it. The defendants provided further proposed pleadings.
8	On 7 July 2020, his Honour Judge Cosgrave ordered by consent, inter alia, in the Central Park proceeding and in the Manly proceeding:
1.	The defendants have leave to amend their defence and counterclaim, in the form attached to the email from Levitt Robinson to HWL Ebsworth on 6 July 2020.
9	Under ‘How Obtained’ in these orders, it states:
In chambers (based upon signed consent orders emailed to the court on 6 July 2020 by the defendants' solicitors)
10	On 7 July 2020, the defendants filed their amended pleadings.
11	During the hearing of the plaintiffs’ summonses, counsel for the defendants, Mr Nekvapil, took the Court to paragraph 1 of the order of his Honour Judge Cosgrave made on 7 July 2020. Upon questioning by the Court as to whether that precluded the Court from striking out the defendants’ pleadings in the circumstances, Mr Nekvapil said:
Not that you can't, Your Honour, but that Your Honour would approach the whole exercise, bearing in mind those critical provisions of the Civil Procedure Act and having regard to the history of this matter, which really has already been through a process of looking at the proposed amendments and then agreeing to them being filed and then pleading to them and we then filed a reply to the amended defence.
So that – we don't say Your Honour couldn't do something about it, especially were Your Honour to be satisfied that they really don't know the case they have to meet, but we would say that Your Honour would treat that with some degree of scepticism in circumstances where, almost a year ago and I think at least six months before issuing the present summons – or maybe that's not right – five months – anyway, sometime before issuing the present summons, we'd already been through a whole process and they'd agreed it and then agreed to plead to it and then pleaded to it.
Parties’ submissions
12	In brief, the plaintiffs submitted:
(a)	the plaintiffs’ applications have been substantially successful;
(b)	where the plaintiffs’ applications were nominally unsuccessful, that was in most cases because the defendants’ pleadings were so incomprehensible that the applications could not properly be determined on the current state of the pleadings;
(c)	r 63.20 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’) was relevant and submitted that there are circumstances that justify departure from the ‘default position’ as to costs on an interlocutory application. The plaintiffs referred to and relied upon the decision of the Court of Appeal in Setka v Abbott (No 2). I note that this submission is misconceived as that part of the decision  in Setka v Abbott (No 2) concerned a different rule, namely r 63.20.1 concerning timing of a taxation of costs and not r 60.20; 
(d)	it would be wholly inapposite to reward the defendants for the deficiencies in their pleadings;
(e)	there is no evidence before the Court of any more efficient steps that otherwise could have been taken had the present controversy been raised sooner;
(f)	there is no licence in this instance to favour the defendants in respect of interlocutory costs on the basis that the defendants will ultimately be liable if the plaintiffs succeed at trial;
(g)	the defendants made clear by their correspondence and by their submissions that they did not accept that the pleadings were deficient; and
(h)	given the defendants’ resistance to the applications, it is open to the Court to conclude that the defendants would have similarly contested any challenge raised by the plaintiffs at the time of the amendment in July 2020, with substantially the same result in terms of cost and efficiency as presently seen.
13	In brief, the defendants submitted:
(a)	the plaintiffs agitated legal issues and were substantially unsuccessful on them;
(b)	the plaintiffs lost three ‘legal points’ (i.e. legal issues), won one and the fifth point was split;
(c)	the plaintiffs succeeded on one legal issue for reasons other than those given by the plaintiffs;
(d)	the plaintiffs partly succeeded on one legal issue, but that was the subject of limited submissions; 
(e)	the plaintiffs’ ‘pleading points’ were expressed in undeveloped and conclusory form and constituted perhaps a half-page of about 22 pages of submissions;
(f)	the time for raising pleading points of the kind that the plaintiffs ultimately succeeded upon was in May to July 2020;
(g)	the plaintiffs lost most points to which they actually directed submissions; and
(h)	to give the plaintiffs their costs would be to indemnify them against the costs of running unsuccessful arguments.
Applicable law
14	Pursuant to s 24 of the Supreme Court Act 1986 (Vic), the costs of and incidental to the plaintiffs’ summonses are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.
15	Rule 63.04 of the Rules provides:
63.04	 Costs of question or part of proceeding
(1) 	The Court may make an order for costs in relation to a particular question in or a particular part of a proceeding.
(2) 	Where the Court makes an order under paragraph (1), the Court shall by order fix the proportion of the total costs of the proceeding which is attributable to the particular question in or the particular part of the proceeding. 
16	In GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3), Robson J stated:
Based on these authorities, the general principles relevant to GT’s application in relation to costs are as follows.
1. 	The award of costs is in the discretion of the Court or Judge: s 24 Supreme Court Act 1986.
2. 	The discretion must be exercised judicially: Donald Campbell & Co v Pollak; Cretazzo v Lombardi.
3. 	The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation: Cretazzo v Lombardi; or the circumstances leading up to the litigation: Oshlack v Richmond City Council.
4. 	Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey.
5. 	As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim: Ritter v Godfrey; McFadzean v CFMBEU.
6. 	Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding: Woolf v Burmon; Cretazzo v Lombardi.
7. 	The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: McFadzean v CFMBEU.
8. 	It is not necessary that the issue concerned was raised unreasonably by the party: Rosniak v GIO. Although, a relevant consideration may include whether the issue was raised unreasonably: Mickelberg v Western Australia.
9. 	The court may, in its discretion, make an order that is a single order, fixing what proportion of a party’s costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs: Byrns v Davie; McFadzean v CFMBEU; Nolan v Nolan.
10. 	The caveat referred to by Jacobs J in Cretazzo v Lombardi may have less weight today than when it was decided: Primcom Pty Ltd v Sqarioto; Mickelberg v Western Australia; and Victoria v Master Builders Association of Victoria.
11. 	Although the quantum of damages recovered compared to that claimed may be a relevant consideration to the court in exercising its discretion, greater emphasis should be given to the failure or loss on discrete claims or issue and the time occupied in relation to them.
17	In Chen v Chan, the Court of Appeal stated:
The contentions of the parties raise a number of questions relevant to costs orders on appeal. The principles relevant to these questions can be summarised as follows:
(1) 	The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.
(2) 	The Rules of Court permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.
(3) 	Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.
(4) 	A Court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.
(5)	Where a Court determines to make an order apportioning costs, then it does so primarily as ‘a matter of impression and evaluation,’ rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.
…
18	In Nom De Plume Nominees Pty Ltd v Fingal Developments Pty Ltd, the Court of Appeal stated: 
The relevant principles for the resolution of the question as to the costs of the appeal, and in respect of any apportionment of the costs of the trial, are those set out by this Court in Chen v Chan. In short, for present purposes, while the general rule is that costs should follow the event, where there is a multiplicity of issues and mixed success has been enjoyed by the parties, the court may take a pragmatic approach in relation to costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Such an approach will be primarily a matter of impression and evaluation.
Analysis
19	The plaintiffs’ summonses were constituted by a number of separate applications concerning a multiplicity of issues. In brief, there was mixed success enjoyed by the parties. The result of those applications is as follows:
(a)	pleading challenges: the plaintiffs succeeded on most of their applications but did not succeed on one; and 
(b)	substantive legal challenges: the plaintiffs succeeded on one application and partly succeeded on another but did not succeed on four applications and partly did not succeed on another. 
20	The plaintiffs have, in part, been successful. Substantial parts of the defendants’ pleadings will be struck out with leave to replead certain matters and not others. 
21	As a result, this is a case in which an apportionment of costs is necessary to do justice between the parties. This is primarily a matter of impression and evaluation rather than arithmetical precision. 
22	For reasons I will shortly set out, taking a pragmatic approach in framing the order for costs, and the plaintiffs’ success and lack of success on an issues basis, I have determined that the plaintiffs are entitled to 50% of their costs of and incidental to their summonses filed 24 December 2020, taxed on a standard basis in default of agreement. I am satisfied that this accords substantial justice between the parties. 
Pleading challenges
23	The pleading challenges have resulted in a substantial part of the defendants’ pleadings being struck out with leave to replead certain matters and not others. 
24	These pleading challenges have determined important matters as the defendants’ pleadings were defective in material respects. Those pleadings concerned critical allegations in the proceedings, including that:
(a)	the third plaintiff contravened cl 5 of Sch 5F of the NSW Pharmacy Act; 
(b)	there is a nexus between the debts the subject of the plaintiffs’ claims and the allegedly void provisions of the agreements between the parties; and
(c)	certain provisions of the agreements between the parties are ‘unjust’ within the meaning of the Contracts Review Act.
25	I found that the pleadings may have prejudiced, delayed or embarrassed the fair trial of the proceedings. In brief, I found that the defendants’ pleadings:
(a)	are ambiguous and unintelligible in relation to essential parts of the defendants’ pleadings concerning cl 5 of Sch 5F of the NSW Pharmacy Act and therefore the whole of that claim was liable to be struck out;
(b)	failed to plead material facts necessary to establish a nexus between the debts the subject of the plaintiffs’ claims and the allegedly void provisions of the agreements between the parties; and
(c)	failed to plead material facts that are alleged to constitute the relevant circumstances why the provisions are ‘unjust’ for the purposes of s 7(1) of the Contracts Review Act.
26	The time spent on these pleading challenges and the ambit of the submissions made on them were less than on the substantive legal challenges. The pleading challenges were not complex. The pleading challenges were also, in part, developed during the hearing of the applications. 
27	I am also satisfied that some of the pleading challenges may have been able to be resolved by the parties prior to the plaintiffs filing the summonses on 24 December 2020. The pleading challenges were not the subject of any, or alternatively any substantial, complaint in correspondence from the plaintiffs’ solicitors dated 11 December 2020 that preceded the filing of the plaintiffs’ summonses on 24 December 2020. The correspondence from the plaintiffs’ solicitors dated 11 December 2020 concerned a number of the substantive legal challenges that subsequently became the subject of the plaintiffs’ summonses filed 24 December 2020.
28	The plaintiffs submitted that the defendants ‘made clear by their correspondence and by their submissions that they did not accept that the pleadings were deficient’ and they refer to the correspondence from the defendants’ solicitors dated 21 December 2020. That correspondence responded to the correspondence from the plaintiffs’ solicitors dated 11 December 2020 concerning a number of the substantive legal challenges. Further, at the hearing of the plaintiffs’ applications, the defendants’ counsel made a number of concessions, correctly, upon the key issues raised by the plaintiffs and by the Court concerning the defendants’ pleadings but proposed that this could be addressed by ‘confined amendments’ and also spelt out in another document.
29	As a result, I do not accept the plaintiffs’ submission that it is open to the Court to conclude that the defendants would have simply contested any further pleading challenges raised by the plaintiffs at the time of the amendments in July 2020 or, later, prior to the filing of the plaintiffs’ summonses on 24 December 2020. It is not possible to determine precisely what may have occurred if further pleading challenges were made. The defendants’ submissions dated 13 December 2021 sets out a chronology (based upon the Georgiou affidavit) but do not submit what would have occurred if such further pleading challenges were made. The fact is, the plaintiffs did not make such further pleading challenges but rather consented to the amendments to the pleadings in July 2020 and then did not raise any, or alternatively any substantial, pleading challenges until they filed their summonses. I am satisfied that some of the pleading challenges could have been resolved having regard to the concessions made by the defendants’ counsel at the hearing that I have already referred to. This may have narrowed the issues in dispute and saved some time and cost.
Substantive legal challenges
30	The plaintiffs succeeded on their application concerning the Victorian Pharmacy Act. In my view, the application was an important substantive legal challenge. However, this application was the least focus of the parties’ submissions on the substantive legal challenges. The plaintiffs also succeeded, in part, based upon matters raised by the Court with Mr McClelland QC upon which he then made submissions at the hearing of the applications.
31	The plaintiffs failed on their substantive legal challenges concerning the NSW Pharmacy Act. They failed as the Court was not in a position to summarily determine them as the relevant pleadings were unintelligible. As a result, no important matter was determined. However, the plaintiffs made the applications in circumstances in which the plaintiffs also submitted that the pleadings were ‘vague, unintelligible, too general and do not enable the plaintiffs to understand the defence that they will have to meet at trial’. The application concerning the claim for declaratory relief as a result of the alleged contravention of cl 5 of Sch 5F of the NSW Pharmacy Act was the main focus of the parties’ submission on the substantive legal challenges.
32	The plaintiffs failed on their application that the Supreme Court of Victoria did not have power to grant relief under s 7 of the Contracts Review Act. It was an important substantive legal challenge that was determined. It concerned matters of ‘jurisdiction’ and ‘power’ and the parties made extensive reference to authority. The application was also a substantial focus of the parties’ submissions on the substantive legal challenges. 
33	The plaintiffs succeeded on their application that relief was not available under the Contract Review Act in relation to the Manly proceeding but failed in relation to the Central Park proceeding. As a result, the parties enjoyed mixed success on these applications.
Conclusion and orders
34	As a result, I will order that the defendants pay 50% of the plaintiffs’ costs of and incidental to their summonses filed 24 December 2020, taxed on a standard basis in default of agreement.

SCHEDULE OF PARTIES

S ECI 2021 01025

BY ORIGINAL PROCEEDING	
		
AUSTRALIAN PHARMACEUTICAL INDUSTRIES 
LIMITED (ACN 000 004 320)	First Plaintiff	
		
PRICELINE PTY LTD (ACN 005 968 310)	Second Plaintiff	
		
NEW PRICE RETAIL SERVICES PTY LTD 
(ACN 100 732 750)	Third Plaintiff	
		
-and-		
		
CENTRAL PARK PHARMACY (SYDNEY) PTY LTD (ACN 155 798 397)	First Defendant	
		
CHRISTOPHER IAN LEMON	Second Defendant	
		
MARK ANTHONY MCHUGH	Third Defendant	
		
BY COUNTERCLAIM	
		
CENTRAL PARK PHARMACY (SYDNEY) PTY LTD (ACN 155 798 397)	First Plaintiff by Counterclaim	
		
CHRISTOPHER IAN LEMON	Second Plaintiff by Counterclaim	
		
MARK ANTHONY MCHUGH	Third Plaintiff by Counterclaim	
		
-and-		
		
AUSTRALIAN PHARMACEUTICAL INDUSTRIES 
LIMITED (ACN 000 004 320)	First Defendant by Counterclaim	
		
PRICELINE PTY LTD (ACN 005 968 310)	Second Defendant by Counterclaim	
		
NEW PRICE RETAIL SERVICES PTY LTD 
(ACN 100 732 750)	Third Defendant by Counterclaim	

S ECI 2021 01012

BY ORIGINAL PROCEEDING	
		
AUSTRALIAN PHARMACEUTICAL INDUSTRIES 
LIMITED (ACN 000 004 320)	First Plaintiff	
		
PRICELINE PTY LTD (ACN 005 968 310)	Second Plaintiff	
		
NEW PRICE RETAIL SERVICES PTY LTD 
(ACN 100 732 750)	Third Plaintiff	
		
-and-		
		
CHRISTOPHER IAN LEMON	First Defendant	
		
JENNIFER FAY LEMON	Second Defendant	
		
BY COUNTERCLAIM	
		
CHRISTOPHER IAN LEMON	First Plaintiff by Counterclaim	
		
JENNIFER FAY LEMON	Second Plaintiff by Counterclaim	
		
-and-		
		
AUSTRALIAN PHARMACEUTICAL INDUSTRIES 
LIMITED (ACN 000 004 320)	First Defendant by Counterclaim	
		
PRICELINE PTY LTD (ACN 005 968 310)	Second Defendant by Counterclaim	
		
NEW PRICE RETAIL SERVICES PTY LTD 
(ACN 100 732 750)	Third Defendant by Counterclaim