Becker v Queensland Investment Corporation and Bovis Lend Lease Pty Ltd

3. The basis for this is that a letter was sent to each of the defendants (they were, until 20 December 2007, represented by separate solicitors) on 10 April 2006, in which Mrs Becker offered to settle the action against them for $50,000 damages plus costs. The offer was to remain open until 4.00 p.m. on 9 May 2006, four weeks after it was made.

4. The solicitor who appeared for the defendants when judgment was delivered was not aware of this offer, perhaps not unsurprisingly given its date. He sought time to consider the position of the defendants.

5. I gave leave to file any submissions as to costs within seven days and Mrs Becker leave to file any submissions in reply within seven days of receipt of the defendants' submissions.

6. I have not received any submissions on costs and accordingly now proceed to determine the application for costs by Mrs Becker.

7. I note that interlocutory judgment was entered against QIC on 21 July 2006 and that an amended defence filed by both QIC and Bovis on 19 December 2007 admitted liability. That does not appear to me to have any direct relevance to the issue of costs, though I do indirectly refer to it (at [20]).

8. The letters referred to above (at [3]) were expressed to be making the offer contained in them "pursuant to the principles in Calderbank v Calderbank". This is a reference to a decision of the Court of Appeal of England and Wales, Calderbank v Calderbank [1976] Fam 93, where (at 105-6) the Court endorsed the practice of offers of settlement being made in a form that was unable to be tendered in the proceedings save on an argument about costs. In that case, the letter of offer was marked "without prejudice" and that limitation had not been withdrawn so the letter could not be tendered when the court considered what costs order to make. The court there considered other forms of protection where a party wished to be protected when making a compromise and payment into court was not appropriate.

9. This led to letters containing offers of compromise of proceedings being written and marked "without prejudice" but in which was "reserved the right to bring it to the attention of the court after judgment on the question of costs": McDonnell v McDonnell [1977] 1 WLR 34 (at 38).

10. Though these cases were in the matrimonial jurisdiction, it was soon accepted that such a procedure could be used in all litigation: Computer Machinery Co Ltd v Drescher and Ors [1983] 1 WLR 1379 (at 1383). In that case, the formulation commonly now used was set out, namely marking the letter of offer as "without prejudice save as to costs". Similarly, such a letter became known as "a Calderbank letter": Cutts v Head and Anor [1984] Ch 290 (at 301).

11. The procedure has been accepted in this jurisdiction: Quirk v Bawden (1992) 112 ACTR 1 (at 5); Humphries v TWT Ltd (1993) 113 FLR 422 (at 426-7).

12. The procedure has been elaborated over time and extended by various cases, as is the common law system, but it seems that the current state of the law is as follows:

1. Such an offer may be made in a variety of ways:

(i) by marking the letter "without prejudice save as to costs": Computer Machinery Co Ltd v Drescher and Ors;

(ii) by attempting to follow a rule-based settlement procedure but failing in doing so completely or accurately: Schulte-Hordelhoff v Patons Brake Replacements Pty Ltd [1965] VicRp 49; [1965] VR 369 (at 371); Giller v Procopets (No 2) [2009] VSCA 72 (at [11]);

(iii) by referring to "Calderbank" as in, "a Calderbank letter" (Cutts v Head and Anor (at 301)) or "a Calderbank offer" (Cutts v Head and Anor (at 316)).

2. In general terms, it can be said that there are no formal requirements for such an offer. Justice Gillard said in MT Associates Pty Ltd v Aqua-Max Pty Ltd and Anor (No 3) [2000] VSC 163 (at [125]) that it is simply an offer "expressed to be without prejudice save to the question of costs and an indication that the letter will be adduced into evidence on the question of costs" and that there are "no other special features which make it a Calderbank offer". This approach has been adopted in the Victorian Court of Appeal: Giller v Procopets (No 2) (at [13]). This is reinforced by s 131(2)(h) of the Evidence Act 1995 (Cth): Bruinsma v Menczer (1995) 40 NSWLR 716.

In my view, the letters of 10 April 2006, by referring to "pursuant to the principles in Calderbank v Calderbank" are in the circumstances of this case sufficient to bring the relevant principles into play, notwithstanding that those principles as now known are not really found in that case but in the many extensions and elaborations that have been made to it.

3. The Calderbank offer may be used notwithstanding that there is a rule-based or other court recognised procedure (such as payment into court or offer of compromise) available: Messiter v Hutchinson (1987) 10 NSWLR 525, Quirk v Bawden. There is such a procedure available in this Territory.

4. The terms of the settlement offered must be unambiguously clear: John Goss Projects Pty Ltd v Thiess Watkins White Constructions Ltd (In liq) [1995] 2 Qd R 591 (at 595); Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154 (at 160). It must be capable of being accepted and thereby concluding the proceedings by creating a binding contract: MT Associates Pty Ltd v Aqua-Max Pty Ltd and Anor (No 3) (at [56]). The offer in this case was unambiguously clear.

5. Whereas formerly, where a Calderbank offer was unreasonably rejected, the courts tended to award the offeror costs on an indemnity basis almost automatically (Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568; Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 (at 233), the courts are now taking a more nuanced approach. Thus, it has been said that "it should not be assumed that the mere writing of a Calderbank letter generates [a] presumptive entitlement to indemnity costs": MGICA (1992) Ltd v Kenny and Good Pty Ltd (No 2) (1996) 70 FCR 236 (at 240).

In Kelson v David Syme & Co Ltd [1998] ACTSC 87, Crispin J found that, notwithstanding that an offer which the plaintiff had made was substantially less than the judgment ordered that the plaintiff be paid, and notwithstanding that the rejection of the plaintiff's offer was unreasonable, no order for indemnity costs should be made.

Nevertheless, commonly, where a Calderbank offer is unreasonably rejected and the party succeeds in the litigation more generously, costs orders are made on an indemnity basis at least from the date of the offer or thereabouts.

In Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, the Victorian Court of Appeal set out (at 442) a non-exhaustive list of factors a court might take into account in determining whether rejection of a Calderbank offer was unreasonable. They were:

(a) the stage of the proceedings 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;

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

13. In this case, Mrs Becker has obtained a very substantially larger award of damages than that for which she was prepared to settle the proceedings in accordance with her offer. This is a powerful factor in favour of an appropriate order for costs on an indemnity basis.

14. As noted above, I have not had submissions from QIC or Bovis on the matter of costs. The time limit for such submissions has long expired without any application for an extension of time or at all. I caused my associate to contact the solicitors for the defendants to see if they intended to file submissions. It appears that QIC and Bovis intend to appeal my decision, as is their right (though no notice of appeal has yet been filed), and that, as a result, they apparently considered that their costs submissions should be delayed.

15. No formal application in relation to or intimation of these matters has come before me and, perhaps, I should not have received the above information from my associate.

16. In any event, a pending appeal (which is not actually the case here at this stage) is not a good reason for a trial court not to proceed with making a costs order: Kingsley's Chicken Pty Ltd v Queensland Investment Corporation and Anor (No 2) [2009] ACTCA 11.

17. Accordingly, doing the best I can, I will proceed to deal with the question of costs.

18. I note that the offer was made in April 2006. Mrs Becker ceased work in June 2006. Before she did so, then, she suffered little by way of economic loss, though I did find that there were still substantial damages to which she was entitled for gratuitous services. These matters may have founded an argument from the defendants that, at that stage of the proceedings, it was not unreasonable to reject the offer. I note that, apparently, the offer, which remained open for one month, was not renewed.

19. In the absence of any submissions from the defendants, however, it is difficult to assess the position of the defendants and the reasonableness of their rejection of the offer, but I shall do my best as I have to do in the circumstances.

(1) The amount recovered by Mrs Becker substantially exceeds the amount for which she was prepared to settle her claim.

(2) The offer was made at a fairly early stage of proceedings, prior to the defendants' obtaining any of the medico-legal reports on which they relied at the hearing.

(3) The offer was made prior to Mrs Becker ceasing employment.

(4) The offer remained open for a reasonable period of time, namely four weeks.

(5) It is not easy to assess the extent of the compromise offered but it does appear as though there was a reasonable level of compromise given the significant level of gratuitous services provided to and ongoing pain suffered by Mrs Becker and that the likely compensation for these heads of damages may well have exceeded the offer.

(6) The likelihood that the defendants would be successful in the proceedings was not necessarily clear at that stage. They had not then admitted liability (the interlocutory judgment and amended defence coming after the expiry of the offer), so there was an element of compromise in that regard, though it seems likely that liability would have eventually been admitted. There may, however, have been some basis at that time for showing that the collapse was a result of a mere accident or perhaps that it was the responsibility of someone else for whom the defendants were not responsible.

(8) The offer did not foreshadow an application for indemnity costs. It does not seem to me that this is essential. I consider that it is now so common that a Calderbank offer would encompass an intention to seek indemnity costs that the reference to that case would bring that expectation with it without need for an express reference.

21. Not without some hesitation, especially as I have not had the benefit of submissions from the defendants, I consider that Mrs Becker is entitled to a special order for costs.

22. It is not entirely clear to me the date from which such an order should be made. In principle, it seems to me the relevant date is the date when the offer was rejected or, in the absence of rejection, when it expired, or in the event of no expiry date, a reasonable time after it was made. That seems to accord with practice: Heywood v Miller [2005] ACTSC 12 (at [10]).

1. The defendants pay the plaintiff's costs of the action:

2. The costs of this costs application are included in the costs of the action.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.

Counsel for the first and second defendants: Mr W Warton

Solicitor for the first and second defendants: Ken Cush & Associates (as agents for McCabe Terrill)