Bettar Holdings Pty Limited trading as Hunt Collaborative ACN 050061946 v RWC Brookvale Investments Pty Ltd as trustee for Brookvale Development Trust ABN 42359186969 ACN 670150437 no 2 (costs)

Category: Costs

Parties: Bettar Holdings Pty Limited trading as Hunt Collaborative (Plaintiff)
RWC Brookvale Investments Pty Ltd as trustee for Brookvale Development Trust (Defendant)

Representation: Counsel:
D Byrne (Plaintiff)
M Martin KC (Defendant)
Solicitors:
Pinsent Masons (Plaintiff)
Mills Oakley (Defendant)

File Number(s): 2024/00071395

JUDGMENT

1. The plaintiff in this matter was unsuccessful in its claim against the defendant for the payment of a debt under s 15(2)(a) of the Building and Construction Industry Security of Payment Act 1999 (‘the Act’). The principal judgment sets out the facts of the matter and I will not repeat them in detail (see Bettar Holdings Pty Ltd trading as Hunt Collaborative v RWC Brookvale Investments Pty Ltd as trustee for Brookvale Development Trust [2025] NSWDC 11).

2. The defendant now seeks costs, preferably on the indemnity basis with respect to the whole of the proceedings, or, otherwise, on the ordinary basis until 15 July 2024 and on the indemnity basis thereafter.

3. The plaintiff does not resist an order that the plaintiff pay the defendant’s costs of the proceedings on the ordinary basis. The plaintiff resists an order that any part of the costs be payable on the indemnity basis.

The defendant’s claim for costs

4. The defendant sent a two page letter to the plaintiff’s solicitors dated 31 January 2024, which pre-dated the filing of the proceedings. The letter, which responded to correspondence from the plaintiff setting out its claim, detailed the defects that the defendant perceived that the claim suffered from, including the absence of a concluded agreement between the parties within the meaning of the Act.

5. The statement of claim was filed on 23 February 2024.

6. On 25 July 2024, the defendant’s solicitors sent the plaintiff’s solicitors a further letter. In this letter, the defects in the plaintiff’s claim were set out in detail. The plaintiff’s case was described as “doomed to fail”. The letter said:

The payment response offered your client $33,000. We make that offer now in full and final satisfaction of your client’s proceedings. The offer is open for acceptance for a period of 14 days and made under the principles in Calderbank v Calderbank. It would be unreasonable for your client to reject that offer.

If your client does not accept his offer the defendant will be seeking its costs of the proceedings on the full indemnity basis.

7. The defendant argued that the plaintiff did not succeed in any of its arguments. In particular, it was submitted, the plaintiff failed “at the first hurdle” in that it could not establish any contract or arrangement which would support a payment claim under the Act. In addition, the payment claim had not been served upon the defendant in accordance with the Act. It was submitted that the plaintiff’s claim was futile.

8. The defendant relied upon the principles set out in In the matter of Ahmed & Associates (Aust) Pty Ltd [2021] NSWSC 631 at [6] – [7] where Black J said:

6. Second, the Defendants sought an order for costs on an indemnity basis by reason that the Plaintiffs’ case against them had been “without substance”, “groundless” or “fanciful or hopeless” or so weak as to be futile, within the language of Balderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4]. They rely on the issue as to AAA’s ownership of the plant and equipment also to submit that the Plaintiffs’ case against them was without substance, and point to the fact that the Liquidators could not articulate how AAA could have acquired the plant and equipment under a contract signed before it existed, without relying on the provision dealing with pre-incorporation contracts in s 131 of the Corporations Act 2001 (Cth), on which they ultimately did not rely.

7. It seems to me that an order for indemnity costs is warranted, both on the basis that the Plaintiffs’ rejection of the first offer made by the Defendants was unreasonable where AAA could not then (or ever) have established its ownership of the plant and equipment; and on the basis that the Plaintiffs’ case was so weak as to be futile, where it could only succeed if AAA owned the plant and equipment, and the contract to acquire that plant and equipment had been executed in the name of a different entity, at a time that AAA did not exist; and it is not apparent how the Plaintiffs could have established the matters necessary to rely on that contract as a pre-incorporation contract, even if they had sought to do so.

9. It was submitted that, taking into account the letters of 31 January 2024 and the Calderbank offer of 25 July 2024, which clearly ought to have been accepted, together with the futility of the plaintiff’s claim because of its obvious defects, the defendant should be awarded indemnity costs in relation to the entire proceedings. Alternatively, the award of costs should be on the ordinary basis until 25 July 2024 and the indemnity basis thereafter.

The plaintiff’s submissions

10. As I have said, the plaintiff opposes the making of a costs order on the indemnity basis.

11. The plaintiff submitted the following:

(a) a Calderbank offer does not give rise to a prima facie presumption in favour of indemnity if it is not beaten: Leichhardt Municipal Council v Green [2004] NSWCA 341. That is, it does not automatically result in the making of an indemnity costs order: Jones v Bradley (No 2) [2003] NSWCA 258, [8]; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, [37]; (b) the issuer bears the onus of establishing that it was unreasonable for the recipient not to accept an offer in all the circumstances: C & V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd (No 2) [2023] NSWCA 240, [31]; Evans Shire Council v Richardson [2006] NSWCA 61 at [26]; Commonwealth v Gretton [2008] NSWCA 117 at [43] – [44]. (c) all the circumstances of the case must be considered to determine whether or not an offer is a genuine offer of compromised or merely a demand to capitulate (Leichardt). An offer with no real element of compromise in it, which is designed merely to trigger cost sanctions, will not be treated as a genuine offer of compromise.

12. The plaintiff argued that the letter of 31 January 2024 does not “trigger an entitlement to indemnity costs” because it did not contain an offer of settlement, it was sent prior to the commencement of proceedings and the letter stated that if proceedings were commenced, an application for summary judgment would be made, but no such application was made.

13. The plaintiff argued that the letter of 31 January 2024 did not refer to Calderbank and did not explicitly warn that an application for indemnity costs would be made if proceedings were commenced.

14. As to the letter of 25 July 2024, the plaintiff pointed out that the offer was only open for 14 days.

15. The plaintiff submitted that it was reasonable for it not to accept the offer of $33,000 in the letter of 25 July 2024 because it was only open for 14 days, because the hearing, which was set for 6 November 2024, was more than three months away when the offer was made and because the defendant did not serve any evidence until 23 July 2024.

16. The plaintiff characterised the offer as a “demand to capitulate” rather than a genuine compromise. It relied upon the following statement of Giles J in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358:

Compromise connotes that a party gives something away. A plaintiff with a strong case, or a plaintiff with a firm belief in the strength of its case, is perfectly entitled to discount its claim by only a dollar, but it does not in any real sense give anything away, and I do not think that it can claim to have placed itself in a more favourable position in relation to costs unless it does so.

17. The plaintiff submitted, in its written submissions:

17. The basis for the $33,000 was said to be the amount that the Defendant had put in a (late) payment response which presumably was intended to be a reference to a payment schedule. In the event that the SOP Act applied and the payment schedule was valid, that was an amount that the Defendant was already obliged to pay pursuant to s 16 of the SOP Act. So in substance, there was no compromise in that claim.

18. The plaintiff argued that even though it was unsuccessful on all points of its claim, its contentions “had a proper basis and were reasonably arguable” and were not “doomed to fail”.

Consideration

19. The Uniform Civil Procedure Rules 2005 (UCPR) provide in rule 42.1:

42.1 General rule that costs follow the event

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

20. The principles applicable to the exercise of the discretion to award costs on a basis other than the ordinary basis are conveniently set out by Wigney J in ACCC v Colgate*-*Palmolive Pty Ltd (No 5) (2021) 151 ACSR 26; [2021] FCA 246 at [7] to [12]:

[7] The discretion to award costs on a basis other than as between party and party, including on an indemnity basis, is “unfettered, save that it must be exercised judicially and not arbitrarily or capriciously”: Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union (No 4) [2018] FCA 684 at [96]. The discretion must also be exercised in light of the requirement that the Court consider any failure by a party to comply with the overarching purpose of the civil practice and procedure provisions to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see ss 37N(4), 37M(1) of the FCA Act; LFDB v SM (No 2) [2017] FCAFC 207 at [7].

[8] The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Cirillo); Seven Network Ltd v News Ltd (2009) 182 FCR 160; 262 ALR 160; [2009] FCAFC 166 at [1102] (Seven Network); Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 2) [2017] FCAFC 116 at [5] (Melbourne City Investments).

[9] The purpose of a costs order is to compensate the successful party, not to punish the unsuccessful one: R v Yurisich (No 2) [2007] FCAFC 51 at [19], citing Latoudis v Casey (1990) 170 CLR 534; 97 ALR 45; Seven Network at [1099]. An award of indemnity costs is to “serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659; [2002] FCAFC 97 at [20] (Hamod); see also Kazal v Independent Commission Against Corruption (No 2) [2020] NSWSC 17 at [60]–[62]; Cirillo at [4]–[5]; Melbourne City Investments at [5].

[10] The circumstances in which it may be found to be unreasonable for the successful party to be subjected to the expenditure of any costs are not fixed or closed, but have been found to include, relevantly: where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77 at [7]); where the moving party “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303); where the applicant’s case was “always clearly foredoomed to fail” and “they ought to have known this to be so” (Smolle vPage 29Australian and New Zealand Banking Group Ltd (No 2) [2007] FCA 1967 at [25]); where an application is “wholly untenable and misconceived” (Henke v Carter [2002] FCA 492 at [22]); and where an applicant persists in prosecuting a proceeding without regard to the evidentiary difficulties in the case (Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685 at 693): see generally Melbourne City Investments at [5]; Seven Network at [1102]; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233; 118 ALR 248 at 256–7; 28 IPR 561 at 569–70.

[11] Two things should perhaps be noted about these descriptions of the types of cases in which an indemnity costs order may be warranted. First, they use expressions which suggest a high degree of certainty concerning the deficiencies in the losing party’s case. It would appear not to be enough that the losing party’s case was simply weak or tenuous. Second, and relatedly, the deficiencies must be sufficiently manifest and clear such that it can be inferred that the losing party would or should have appreciated them when the action was commenced or continued, at least if they had given proper consideration to, or been properly advised about, the merits of their case.

[12] In assessing whether a case can be said to “have no chance of success”, or to be “hopeless” or “foredoomed to fail”, and that the losing party should have known that to be the case, it is also necessary to be wary of reasoning with the benefit of hindsight. As Goldberg J said in Re Kingsheath Club of the Clubs Ltd (in liq) [2003] FCA 1589 at [5] (Kingsheath Club), it is “easy with hindsight to make an observation that an action has no chance of success, after the matter has been fully argued and has enjoyed considered attention of experienced solicitors and senior and junior counsel”.

21. The plaintiff’s arguments in relation to costs focussed upon the letters of 31 January 2024 and 25 July 2024. I reject the plaintiff’s submission that the letter of 25 July 2024 gave the plaintiff inadequate time within which to consider the offer of $33,000. In circumstances where the defendant set out in detail, in both of the letters in question, many of the critical defects in the plaintiff’s claim under the Act the period for which the offer remained open was adequate.

22. I also reject the plaintiff’s assertion that the offer was a “demand to capitulate.” The defendant made it clear in the letters of 31 January 2024 and 25 July 2024 that the plaintiff’s claim under the Act would not succeed and set out many of the reasons why. The defendant communicated its belief that the plaintiff would not be awarded any payment in its claim under the Act, so that the offer of $33,000 was not a “demand to capitulate”, but an offer considerably greater than the defendant believed, correctly, that the plaintiff was entitled to under the Act. The plaintiff, in its submissions (see [17] above), compares the offer to the amount that would have been payable had the Act applied. This is not the appropriate comparison. The appropriate comparison is what the plaintiff achieved in the proceedings, and the plaintiff’s claim was dismissed.

23. On the basis of the Calderbank offer, the defendant should be awarded costs on the indemnity basis from 25 July 2024. The question of costs in relation to the earlier part of the proceedings requires consideration of a more fundamental issue; whether the plaintiff’s case was “without substance”, “groundless”, “fanciful or hopeless”, “so weak as to be futile” or, as the plaintiff put it, “doomed to fail”.

24. In the primary judgment, the summary and conclusion was as follows:

90. Hunt bears the onus of proof on the balance of probabilities. Hunt has sued RWC for a debt under s 15(2)(a) of the Act.

91. Hunt has not proven that it had a contract with RWC to perform construction work as defined in the Act. The Act allows for a payment claim to be made under an “arrangement” falling short of a contract, but no arrangement was pleaded or established on the balance of probabilities. The estoppel arguments pleaded were not made out, as no promise or representation on the part of RWC and therefore no reliance on a promise or representation was established.

92. Had there been a “construction contract”, then Hunt needed to prove that a valid payment claim was served upon RWC and that no payment schedule was provided to Hunt by the respondent within the time provided by the Act, which is ten days from the service of the payment claim.

93. The 21 December claim did not comply with s 13(2) of the Act because it did not identify the services related to construction work to which the progress payment relates. The words “As per our various agreements and documentation between both parties” do not identify a construction contract. A heading of “construction/management services on Brookvale” does not identify the services provided.

94. In any event, RWC has not become liable to pay the claimed amount to the claimant because it has never been served with the 21 December claim (or any payment claim). The Act, in s 15(1), says that a right to recovery in debt under s 15(2) is predicated upon the respondent having become liable to pay the claimed amount. Hunt has failed to show that RWC has become liable.

95. The following order will issue:

1. The plaintiff’s claim is dismissed.

25. The plaintiff’s claim under the Act was doomed to fail. The 21 December 2023 claim, upon which the plaintiff’s claim under the Act was based, did not comply with the Act. It was not served upon the defendant as required by the Act. It could not, therefore, trigger an entitlement to payment under the Act. In addition, there was no proper basis for the claim under the Act because there was no agreement or arrangement between the parties as required by the Act.

26. The principal judgment sets out the purpose of the Act (see [7] – [9]). The Act sets out an administrative process which can trigger an entitlement to payment in a party who has an agreement or an arrangement to undertake construction work in the circumstances specified in the Act. It should have been clear to the plaintiffs prior to the filing of the statement of claim that a claim under the Act based on the 21 December 2023 claim could not succeed.

27. In these circumstances, the discretion in relation to costs should be exercised to award costs to the defendant on the indemnity basis in relation to the entire proceedings.

Orders

28. The following order will issue:

29. The plaintiff is to pay the defendant’s costs of the proceedings, including the costs of this costs application, on the indemnity basis.

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