Chan v Acres

The costs orders sought

1. The plaintiffs seek the following costs orders: 1. that Mr Acres and the Council jointly and severally pay the plaintiffs' costs of the proceedings; 2. that costs payable by Mr Acres be assessed on the ordinary basis up until 2 September 2014, alternatively 3 March 2015, and on the indemnity basis thereafter; 3. that the costs payable by the Council be assessed on the ordinary basis up until 12 August 2014, alternatively 10 July 2015, and on the indemnity basis thereafter; 4. a Bullock order (Bullock v London General Omnibus Co [1907] 1 KB 264) as between the plaintiffs and Mr Acres, in respect of any costs that the plaintiffs may be ordered to pay MHE; and 5. a Sanderson order (Sanderson v Blyth Theatre Co [1903] 2 KB 533) against the Council in respect of any costs that the plaintiffs may be ordered to pay MHE.
2. The plaintiffs accept that, as between them and MHE, costs should follow the event. They submit that those costs should be assessed on the ordinary basis only.
3. Mr Acres has made no submissions in respect of costs. Indeed, Mr Acres appears to have dropped out of sight. An affidavit sworn by the plaintiffs' solicitor on 20 September 2016 suggested that his present whereabouts were unknown, and that a "skip trace" made by a private inquiry agent had failed to locate him.
4. MHE sought the usual order, that the plaintiffs pay its costs. It sought, further, that those costs should be assessed on the indemnity basis from 18 February 2014, or 10 March 2014, or 23 May 2014, or 29 June 2015.
5. MHE sought an order that Mr Acres pay its costs of his cross-claim against it.
6. The Council accepted that some costs order should be made against it. It submitted that those costs should not include: 1. costs referable to the plaintiffs' damages claim, as initially propounded, that the house should be demolished and rebuilt; or 2. costs included by the plaintiffs in their claims against Alpha and MHE.
7. The Council reserved its position in respect of any costs order sought by Mr Acres (none has been sought to date).
8. The Council opposed the plaintiffs' claim for indemnity costs, and for a Sanderson order in respect of costs payable by the plaintiffs to MHE.
9. The active parties (the plaintiffs, MHE for costs purposes, and the Council) provided written submissions in chief and in reply in support of the costs orders that each sought, and in relation to the costs orders sought against them. In addition, those parties sought and were given an opportunity to make oral submissions on the question of costs.
10. I do not propose to add to the amount of paper that has been required for the resolution of the very numerous disputes in these proceedings by setting out the various submissions in any detail.

Decision - the costs orders sought by the plaintiffs

1. In principle, the plaintiffs should have their costs against Mr Acres and the Council. They succeeded against each. Although costs are in the discretion of the Court (Civil Procedure Act 2005 (NSW), s 98), the general rule is that costs follow the event (Uniform Civil Procedure Rules 2005 (NSW), r 42.1).

Carve-out of particular costs?

1. The first question to be considered is the Council's application for a "carve-out" of certain costs. I start with the costs relating to the damages case initially advanced by the plaintiffs: namely, that the house should be demolished and rebuilt.
2. The procedural history of this litigation is unsatisfactory in many respects. One of the respects in which it was extremely unsatisfactory is that the expert evidence was not finalised before the hearing commenced. Thus, at the time the hearing commenced, the experts had not all conferred and produced their joint reports (one for each of the several disciplines involved).
3. The plaintiffs' case had been that the defects were so extensive that repair was not practicable. They said, and intended to call evidence to prove, that the most economical solution (and the only one that offered any guarantee of permanency) was to demolish everything and rebuild.
4. That position changed on the eve of the hearing, when the plaintiffs' engineering expert agreed that total demolition was not necessary. He accepted that the older part of the works (those that Mr Acres had not substantially altered or reconstructed) could be retained, and that all that needed to be demolished (in part) and rebuilt were the defective extension works carried out by Mr Acres. The experts agreed that this could be done safely, although it would require that the plaintiffs should vacate their house whilst those works were carried out.
5. Once that agreed position had been reached, the costing experts got to work (again). They produced costings, which were not always consistent, of the revised scope of works.
6. There can be no doubt that the plaintiffs incurred costs in relation to the abandoned damages claim. Why should the Council defray those costs?
7. McHugh J said in Latoudis v Casey (1990) 170 CLR 534 at 567 - 568 that costs are ordered to indemnify a successful party for the costs it incurred in the proceedings, because it is just and reasonable that the party who caused the other to incur the costs of litigation should reimburse it for those costs. Of course, generally (and in the absence of a special costs order) there will be no complete indemnity or reimbursement.
8. In the present case, it could be said (properly), at least at a level of some generality, that the Council caused the plaintiffs to incur the costs of running their case against it. But its liability for those costs, in my view, should relate to the case that ultimately was put, not to the case that was dropped.
9. I do not seek to express any general view. The cases on apportioning costs to reflect success or failure on individual issues, and the insistence on those issues being clearly dominant or severable before such apportionment will be undertaken, go to a different point. My point is simply that, on the particular facts of this case, it is not just and reasonable, as between the plaintiffs and the Council, that the Council should pay the plaintiffs' costs incurred in mounting a case as to damages that, ultimately, was abandoned.
10. The second proposed carve-out relates to costs incurred by the plaintiffs referable to their claims against the other defendants. Even as against Alpha, those costs were substantial (as earlier submissions put by the plaintiffs, on a different issue, accepted). No doubt, also, there were costs incurred by the plaintiffs specifically in their claim against Mr Acres or their claim against MHE, that would not have been incurred if the case had been run only against the Council.
11. In my view, that problem can be dealt with by limiting the costs payable by the Council to those in respect of the plaintiffs' claim against it. It will then be a matter for some unfortunate assessor to decide what costs were, and were not, incurred in respect of the plaintiffs' claim against the Council.
12. Ms Castle of Counsel, who appeared with Mr Davis of Counsel for the plaintiffs on the costs application (but had not otherwise appeared) submitted that the question of apportionment could be dealt with by analogy with the "rule of thumb" discussed by Einstein J in Currabubula v State Bank NSW [2000] NSWSC 232. By reference to that rule of thumb, she submitted, costs could be apportioned on a rational basis. Ms Castle submitted that this was an exercise that costs assessors were amply qualified to carry out and, indeed, one that they did routinely carry out.
13. Einstein J discussed the so called rule of thumb, and cases referring to it, in Currabubula at [89] to [107]. As his Honour explained, the rule (which is of course a rule of practice, or an approach commonly taken to the exercise of the costs discretion in appropriate cases, and not some inflexible principle of the law) applies "between a partially successful plaintiff and variously successful and unsuccessful defendants" (see his Honour's reasons at [95]). His Honour considered that the rule did not apply for the benefit of unsuccessful plaintiffs (see at [100] to [106]).
14. I discussed the rule, and cases bearing on it (including a number of decisions given since 2000) in James v Royal Bank of Scotland (No. 2) [2015] NSWSC 970. I said in that case at [53], [54]: [53] In my respectful view, Einstein J was correct to recognise that in all cases, the search is for the way in which, on the facts of the particular case, the costs discretion is to be exercised so as best to conform with the interests of justice as between the parties. [54] To my mind, the authorities are of limited utility, particularly since the exercise of the costs discretion is fact-dependent. The earlier English cases appear to have been decided on the basis of "practices" that were thought to have been established for too long to be susceptible of change. That is not the contemporary approach to the exercise of a discretion which is fettered only by the requirement that it be exercised judicially. By contrast, the more recent Australian authorities make it clear that to the extent that there may be "rules of thumb" or "general rules", they should not be applied mechanically. In all cases, the discretion is to be exercised in accordance with the requirements of justice in the particular case.
15. At [55], I concluded that the authorities "in the end … yield no clear principle, capable of general application".
16. In the present case, neither Ms Castle nor Mr Bambagiotti put submissions at any level of detail on the rule of thumb, or the numerous cases in which it has been discussed. In those circumstances, I do not feel inclined to depart from what I said in James (No. 2).
17. However the rule of thumb is to be regarded, and whatever its application may be in any particular case, it is clear that, at least originally, the rule was not directly applicable to cases such as the present. Nonetheless, I accept that the process of apportionment embodied in the rule of thumb could enable a costs assessor to deal with costs in a way that could do practical justice between the parties. The way in which that might happen could be as follows.
18. By analogy with the rule of thumb, it would be open to an assessor to determine what (if any) costs incurred by the plaintiffs had nothing to do with their claim against the Council, and to exclude those costs. He or she could then identify costs incurred solely in respect of the plaintiffs' claim against the Council, and (subject to assessment of their amount) allow them. Finally, he or she could deal with common costs (that is, costs incurred as against the Council and one or more of the other defendants) and undertake some exercise of apportionment of those costs as between those defendants.
19. Although it would be open to an assessor to perform the process of assessment on the basis just described, there may well be other ways in which he or she could properly perform the task. Thus, what I have said must not be read as attempting to limit in any way the discretion to be exercised by the assessor in assessing the costs payable by the Council to the plaintiffs. The only relevant limitation is, as I have said, that those costs should be referable to the plaintiffs' claim against the Council (of course, excluding costs in relation to the abandoned claim for damages based on total demolition and reconstruction).

Costs against Mr Acres

1. I turn to the plaintiffs' claim for costs against Mr Acres. Although Mr Acres did not appear or put submissions, it seems reasonable that the costs order to be made against him should contain the like limitations. Whether or not this will have any significance is doubtful, for at least two reasons. One is that Mr Acres has said on more than one occasion that he is totally without means (indeed, he represented himself throughout the hearing). The other, as I have indicated, is that he seems to have disappeared.

Indemnity costs - the Council

1. I turn to the claim for indemnity costs against the Council. The plaintiffs rely on a Calderbank offer (Calderbank v Calderbank [1976] Fam 93) dated 12 August 2014, in respect of the first alternative. They rely on an offer of compromise made in accordance with UCPR r 20.26, dated 10 July 2015, in relation to the alternative date.
2. The forms of those offers were not in evidence. Nonetheless, Mr Bambagiotti of Counsel, who appeared for the fourth defendant (as he has done throughout) did not suggest that there was any formal defect in the way either of the offers was expressed.
3. The essential dispute between the plaintiffs and the Council, in respect of each offer, was whether it was relevantly unreasonable for the Council to reject or not accept the first offer, or whether in all the circumstances the Court should "order otherwise" in respect of the second offer.
4. The Calderbank offer was to settle on the basis that the Council pay the plaintiffs the sum of $475,000.00 inclusive of costs. That may be compared with the judgment ultimately entered, which was for $43,000.00 solely payable by the Council and a further $467,000.00 payable by the Council jointly and severally with Mr Acres. If one were to combine those two figures (and the effect of what I have earlier decided is that as between the Council and Mr Acres, the Council is ultimately liable for the whole of the larger sum), the plaintiffs recovered in total $510,000.00 against the Council. Thus, the plaintiffs bettered the first offer that they made, particularly as that offer was inclusive of costs.
5. Jumping ahead for a moment: that conclusion is even clearer in the case of the offer of compromise, which offered to settle on the basis of judgment against the Council in the sum of $300,000.00.
6. I note at this point that there is some tension in the plaintiffs' submissions as to indemnity costs. In support of each way that their claims are put, they submit that, at the time each of the offers was made, the offerees had sufficient information to enable them to make a rational assessment of the offer so as to decide whether to accept or reject it. However, as to three of the offers made by MHE to the plaintiffs in 2014 (on 18 February, 10 March and 23 May 2014), the plaintiffs submit that "the state of the pleadings and evidence were such that they could not properly ascertain the parameters of the dispute". It is not easy to reconcile those submissions.
7. Returning to the Calderbank offer: I do not think that it was relevantly unreasonable for the Council to reject, or not to accept, the offer. The joint reports of the engineering experts were not available. At the time the Calderbank offer was made, the plaintiffs' damages case was that they were entitled to the full cost of demolition and reconstruction of the entire building. As I have said, that position did not change until the eve of the hearing. In my view, it was relevantly reasonable for the Council to approach the case on the basis that the damages claim was inflated, because it was pressed on the basis of full demolition and reconstruction.
8. Further, at the time the Calderbank offer was made, the evidence was not complete. The evidence from MHE and the Council was not ultimately served until late December 2014.
9. In 2015, between April and September, there were further flurries of evidence. On 24 September 2015, the plaintiffs propounded an amended list statement (the amendments relating only to the Council). The hearing commenced on 29 September 2015. On 6 October 2015, the plaintiffs served yet further expert evidence from their costing witness, Mr Iskowicz. Between 29 September and 6 October, the valuers, the regulatory consultants, the costing experts and the engineers produced further joint reports.
10. Much of this history is as relevant to the offer of compromise as it is to the Calderbank offer. I have set it all out at this point because it makes good what I said earlier as to the unsatisfactory way in which the proceedings were conducted. In essence, the conclusion to be drawn from what I have just said is that the true nature of the plaintiffs' case as to damages (both as to the basis on which damages should be assessed and as to the detail of that assessment) emerged only shortly before the hearing started and during the hearing itself.
11. In those circumstances, to suggest that it was relevantly unreasonable for one party to reject the Calderbank offer made more than a year before the hearing started is unsustainable.
12. Essentially for the same reasons (although accepting that, rather than the plaintiffs being required to demonstrate that a rejection or non-acceptance was unreasonable, it is the Council that must demonstrate that whichever of those things happened was reasonable), I conclude that it was relevantly reasonable for the Council not to accept the offer of compromise. There is no doubt that the plaintiffs bettered significantly the position that they put to the Council in that offer. However, they did so after a course of events that, relevantly, included a very substantial reconstruction (if the pun may be pardoned) of their damages claim.
13. I accept that assessment of the reasonableness or otherwise of a decision to reject, or not accept, an offer of compromise is to be made on the basis of material then available to the offeree, and what the offeree might reasonably think was to come in in the future. I accept, further, that some of what I have said might not have been within the reasonable contemplation of the Council, as offeree, as at 10 July 2015. However, the procedural history up to that time indicates very clearly that the case was far from fully prepared. It was reasonable for the Council and its legal advisers to think that there would be further developments. Even if it be assumed that they had no reason to foresee the extent of the way in which the plaintiffs' damages case was reconstructed, they could not reasonably have thought that the evidence was complete, so as to allow them to make a reasoned assessment of the Council's position both on liability and on damages.
14. The question is not (in terms at least) whether it was relevantly reasonable for the Council to reject, or not to accept, the offer of compromise. It is, rather, whether for the purposes of r 42.15A(2), the costs consequences prescribed by that sub-rule should be deflected by the Court's "ordering otherwise". In my view, the combination of circumstances, coupled with the characterisation of the Council's position as "reasonable", do make it proper to order otherwise.
15. I take into account, also, that acceptance of the offer of compromise would not have extracted the Council from the proceedings, because it would remain a cross-defendant at the suit of Mr Acres. Thus, from the Council's perspective, acceptance of the offer of compromise would not have prevented the no doubt substantial expenditure on costs that were incurred following the date of service of the offer of compromise. (To the extent that it is relevant, the same may be said, as to the earlier Calderbank offer made to the Council.)
16. I conclude that the plaintiffs have not made good their claim to indemnity costs against the Council.

Indemnity costs - Mr Acres

1. I turn to the special costs orders sought by the plaintiffs against Mr Acres. Although Mr Acres did not appear or put submissions in opposition to those orders, nonetheless, in my view, the Court cannot simply grant them without considering the merits of the bases on which they are sought.
2. The first of the alternative claims is based on a Calderbank offer made on 2 September 2014, offering to settle on payment of $350,000.00 inclusive of costs. The second alternative is based on: 1. a Calderbank offer made on 3 March 2015, offering to settle on payment of $300,000.00 with costs as agreed or assessed; or 2. an offer of compromise made pursuant to r 20.26, also on 3 March 2015, offering to settle on the basis of a judgment against Mr Acres for $300,000.00.
3. At a global level, the factors to which I have referred already are relevant also as between the plaintiffs and Mr Acres. But there are further considerations to bear in mind. The first is that, had Mr Acres accepted any of the offers, he would have incurred a liability to pay the amount in question (and, in some cases, costs). However, at each of the times the offer was made, neither MHE nor the Council had indicated that it admitted any liability on Mr Acres' cross-claim; quite the contrary. Thus, acceptance of any of the offers would have left Mr Acres exposed. Acceptance would fix him with a significant monetary liability. But his prospects of recoupment of that liability would still depend on success on his cross-claim.
4. Another way of looking at this is to say that acceptance of any of the offers would not have extracted Mr Acres from the proceedings unless he had decided to abandon his cross-claim against MHE and the Council, or had been able to negotiate some settlement of that cross-claim.
5. In those circumstances, for the purposes of the two Calderbank offers, I do not think that it was relevantly unreasonable for Mr Acres to reject, or not to accept, them. Further, and again accepting the reversal of onus to which I have referred, I do think that it was reasonable for Mr Acres not to accept the offer of compromise.
6. In my view, looking at the offer of compromise in terms of r 42.15A(2), the combination of the circumstances to which I have referred makes it appropriate for the Court to "order otherwise" than as set out in that sub-rule.

Bullock and Sanderson orders

1. I turn to the plaintiffs' claims for Bullock and Sanderson orders. The principles
2. Bullock orders and Sanderson orders may be made in cases where more than one defendant is sued, and the plaintiff succeeds against some only of those defendants who are sued. A Bullock order, if made, would require the unsuccessful defendant to pay to the plaintiff the costs that the plaintiff is liable to pay to the successful defendant. A Sanderson order, if made, would require the unsuccessful defendant to pay directly to the successful defendant the costs that the plaintiff is ordered to pay that defendant. See Council of the City of Liverpool v Turano (No. 2) [2009] NSWCA 176 at [10] (Beazley, Hodgson and McColl JJA in joint reasons).
3. A Bullock order or a Sanderson order may be made where there is conduct on the part of the unsuccessful defendant that makes it fair and reasonable to impose on it, either indirectly or directly, the costs incurred by the successful defendant. See Turano at [14] to [22] where the authorities are reviewed. See, also, Bostik Australia Pty Ltd v Liddiard (No. 2) [2009] NSWCA 304 at [11] to [17] (Beazley, Ipp and Basten JJA in joint reasons).
4. Those authorities, and the authorities that they discuss, show that a Bullock order or a Sanderson order may be made if two conditions are satisfied: 1. it must have been reasonable for the plaintiff to sue the successful defendant; and 2. there must have been some conduct on the part of the unsuccessful defendant, over and above denying liability, that makes it fair in all the circumstances to impose on that defendant a liability for the successful defendant's costs.
5. In Bostik, the Court made it clear at [29] that it was not necessary that the unsuccessful defendant should have engaged in misconduct. Their Honours said: The requirement that a party's conduct is relevant to determining whether a Sanderson [I add, or Bullock] order should be made is not a requirement that the party engage in misconduct. Rather, it is whether, given its conduct, it is fair to impose such an order on it.
6. In Gould v Vaggelas (1985) 157 CLR 215, the Court (in separate reasons) made it clear that the way in which the unsuccessful defendant not only denied liability but sought to direct blame to the successful defendant, by suggesting that it was the successful defendant's advice that caused the plaintiff to act the way she did, justified the Bullock order that had been made.
7. Giles J said, in Sved v Council of the Municipality of Woollahra (1998) NSW Conv R ¶ 55-842 at 55,605-55,606, that such conduct "more widely has been found in the unsuccessful defendant telling the plaintiff in one way or another that it should look to the successful defendant for its remedy".
8. The cases to which I have referred illustrate ways in which the discretion to make Bullock and Sanderson orders have been exercised and some general themes emerging from those cases. They do not constrain the discretion, nor the circumstances that may justify its exercise in favour of a partially successful plaintiff. Mr Acres
9. As against Mr Acres, the plaintiffs relied not only on his pleading but also on evidence contained in his affidavit. In substance, so far as it concerns MHE, that affidavit suggested that the inspecting engineer from MHE visited the site far more often than the three occasions when (on my findings) MHE was formally retained to inspect and certify (22 April 2008, which is not relevant; 20 June 2008; and 1 December 2008). Mr Acres said that the inspecting engineer visited very regularly, in effect whenever he was in the area, to check on works and to assure Mr Acres that everything was progressing in a satisfactory way. I did not accept that evidence.
10. Nonetheless, on Mr Acres' evidence, the case against MHE at the factual level (specifically, as to breach of any duty owed) was far stronger than the case that was proved.
11. That evidence of Mr Acres had been served well before MHE was joined as a defendant (which happened after the matter was transferred to this Court in October 2013). Given that Mr Acres also raised a proportionate liability defence, naming MHE and the Council as concurrent wrongdoers, it is in my view clear that he did more than deny liability. He sought actively to deflect responsibility to MHE and the Council. Effectively, it remained Mr Acres' case throughout that although he might have had legal responsibility pursuant to s 18B of the Home Building Act 1989 (NSW) (I might say, a proposition with which he appeared disposed to disagree), nonetheless actual responsibility should be attributed to those people who supposedly knew what they were doing and supposedly were heavily involved in the inspection and certification of the works: MHE and the Council.
12. In those circumstances, I think, it is fair, and thus in accordance with the interests of justice, that Mr Acres should be ordered to indemnify the plaintiffs for the costs that they will have to pay MHE. It was in a real sense Mr Acres' evidence (based on his pleaded case) that indicated to the plaintiffs the real risk that if they proceeded against him alone, they might not recover the whole of their damages. The Council
13. As against the Council, the position is less clear. MHE and the Council were joined at the same time. It cannot be said that there was anything in the Council's pleading or evidence that caused or contributed to the plaintiffs' decision to join MHE.
14. It is correct that the Council named MHE as a concurrent wrongdoer, and sought to shift responsibility to it. But the Council was faced with a situation where it was one of four defendants, and where two at least of the other defendants were asserting that it was a concurrent wrongdoer, proportionately responsible for the plaintiffs' loss.
15. The Council pleaded, and through the inspecting officer sought to prove, that it relied on MHE's certificates in performing its functions as PCA. No doubt, those certificates were shown to the inspecting officer. However, for the reasons I have given, there was nothing in them that indicated any relevant breach of duty on the part of MHE. Thus, the case of reliance failed, or at least failed to achieve the result that the Council had hoped. In any event, that case of reliance was one as between the Council and MHE, perhaps relevant to apportionment of loss between them should they both be found to have been concurrent wrongdoers. It was thus of limited relevance as between the Council and the plaintiffs (although, I accept, not entirely irrelevant to the present question).
16. In those circumstances, I do not think that the Council's conduct, in maintaining in its defence assertions that MHE was a concurrent wrongdoer and was proportionately responsible for the loss, was such as to make it fair that, MHE having escaped liability, the Council should meet, and pay direct, the plaintiffs' costs of suing MHE.

Summary

1. In summary, on the plaintiffs' costs application, I conclude that: 1. the plaintiffs should have costs orders in their favour against Mr Acres and the Council; 2. those costs orders should be qualified in the way indicated at [14(1)] above; 3. those costs should be assessed on the ordinary basis only; 4. the plaintiffs should have a Bullock order against Mr Acres; and 5. the plaintiffs should not have a Sanderson order against the Council.

Decision - the indemnity costs order sought by MHE

1. MHE relied on three offers it made to settle the plaintiffs' claim. The first offer (letter of 18 February 2014) was lengthy - 6 pages - and detailed. It dealt with the existence of a duty of care; breach of any duty owed; causation; reliance and contributory negligence; proportionate liability; and quantum. Under each heading, it set out reasons why (in the author's view) on the evidence and the law as it then stood the plaintiffs' case must fail. In essence, the letter correctly predicted both what in due course I decided on the first two points and, in brief, the more important reasons why I so decided.
2. As to reliance and contributory negligence, the letter predicted correctly the ultimate conclusion to which I would come: namely, that the plaintiffs had not established reliance. I do however note that the reasons that were given in the letter differed from those that I gave.
3. As to proportionate liability, the letter took a more optimistic view than I did. It suggested that, if MHE were held to have any liability, it would be limited to 25% of the overall liability. By contrast, I concluded that if apportionment were necessary, MHE should bear 60% of the common liability.
4. As to quantum, the letter predicted the outcome with remarkable accuracy: a maximum recoverable amount (in round figures) of $912,000.00. However, the way in which the author came to that figure was very different to the way in which, ultimately, I held that damages should be quantified.
5. Against that background, the letter set out MHE's offer to pay the plaintiffs $210,000.00 inclusive of costs, on the basis of a "confidential Deed of Release". It is not in dispute that the plaintiffs either rejected or did not accept that offer.
6. The second offer (letter of 10 March 2014) referred to the matters stated in the first offer, and added a reference to Mr Acres' pleadings. It stated, accurately, that the scope of any duty of care owed by MHE to the plaintiffs could not exceed the scope of its contractual duty to Mr Acres.
7. The second letter offered in substance to pay $117,500.00 with costs, on the basis that the claim against MHE be dismissed. The letter stated: 1. that it was written (as the earlier letter had been) "without prejudice save as to costs"; and 2. that it was an offer of compromise made in accordance with r 20.26.
8. The third offer (letter of 23 May 2014) referred to the recent history of negotiations. Against that background, it offered to settle on the basis that MHE would pay $300,000.00 inclusive of costs; that the proceedings would be dismissed with no order as to costs; and that there would be a deed including a release and indemnity in favour of MHE. That part of the letter was undoubtedly a Calderbank offer.
9. Additionally (or, as the author expressed it, "concurrently"), the letter offered to settle on the basis that the claim be dismissed, that MHE pay the plaintiffs $160,000.00, and that it pay the plaintiffs' costs up to the date of the offer. That concurrent offer was expressly stated to be an offer of compromise in accordance with r 20.26.
10. The fourth and final offer (letter of 29 June 2015) was framed "concurrently" as a Calderbank offer and as an offer of compromise under r 20.26. It offered to settle with the plaintiffs and Mr Acres on the basis that MHE would pay the plaintiffs $335,000.00 and one-third of their costs to date, and would pay half Mr Acres' costs of his cross-claim. The terms of the offer included that the plaintiffs' claim against MHE be dismissed with "an appropriate release", and that Mr Acres dismiss his cross-claim against MHE with "an appropriate release".
11. It is convenient to start with the fourth offer. Ms Castle submitted (correctly) that it was an offer made to both the plaintiffs and Mr Acres. Thus, she submitted, it could not be accepted by one without the other. Specifically, she submitted, a purported acceptance by the plaintiffs would be of no contractual force unless Mr Acres also accepted the offer.
12. Mr Elliott submitted that the offer was open for acceptance by the plaintiffs individually, or independently of Mr Acres.
13. In my view, Ms Castle's submission is correct. The offer was addressed to Ms Ceccato of the plaintiffs' solicitors and Mr Howard of Mr Acres' (then) solicitors. It said, after preliminaries, that: … our client offers to settle the proceedings commenced against it by your respective clients on the following terms…
14. There then followed the four terms to which I have referred.
15. The letter concluded: In the event that the offer is not accepted and our client achieves a more favourable result at trial, our client will rely upon this letter in respect of an application for indemnity costs.
16. In my view, reading the letter as a whole, it is an offer made to both offerees, and contains terms that both must accept before either of them can hold MHE, the offeror, to its offer. No doubt, it may have been possible for the plaintiffs (or, that matter, Mr Acres) to negotiate an individual offer and then to tender an individual acceptance. But in terms, the letter was one offer ("our client offers to settle the proceedings…"), only capable of acceptance by both offerees ("in the event that the offer is not accepted").
17. There is no evidence that Mr Acres ever tendered an acceptance of the offer. Thus, even if the plaintiffs had done so, it is my view that no binding contract would have emerged, as between them and MHE.
18. Of course, the letter included also an offer cast as an offer of compromise. It is by no means clear that an offer of compromise under r 20.26 in favour of separate parties (i.e., not an offer to plaintiffs jointly, or to one class of defendants jointly, but to parties in different interests) falls within the rule ("any party may… make an offer to any other party…"). However, since the point was not argued, I express no concluded view. Whether or not the offer did comply with the requirements of the rule, it was not in my view capable of acceptance by one only of the offeree parties, so as to bring about a concluded compromise between that party and the offeror.
19. Before I leave this fourth offer, I should note that Ms Castle did not submit that a document purporting to be an offer of compromise that was comprised in a letter and not in the usual form of offer was, for that reason only, ineffective.
20. I return to the three letters written in the first half of 2014. I observe that they were written within a period of between 4 and 7 months after the proceedings were transferred from the District Court to this Court, and MHE and the Council were added as defendants.
21. There can be no doubt that each of the letters was framed (in the case of the last two, alternatively) as a Calderbank offer. Each stated the consequences of refusal, in the event that MHE bettered the offer made by it. Ms Castle made no complaint as to the form of any of those letters, considered as a Calderbank offer.
22. The next point to note is that the first letter set out in detail reasoned arguments why, in the author's view, the plaintiffs' claim against MHE would fail. That letter drew the reader's attention to the central importance of vulnerability, and to the related question of reliance. Although the High Court's decision in Brookfield Multiplex Ltd v Owners - Strata Plan No 61288 ([2014] HCA 36; since reported as [2014] 88 ALJR 911 and (2014) 254 CLR 185) was not handed down until 8 October 2014, the central importance of those concepts was clear, on the basis of the authorities before that date. Equally, in my view, it was clear that any continuing authority of Bryan v Maloney (1995) 182 CLR 609 was likely to be confined to its particular facts.
23. In those circumstances, the first letter required very careful consideration. There is no evidence from the plaintiffs as to what, if anything, they did, or thought, about that letter. I accept that it is for MHE to make good its case for indemnity costs. I accept, further, that in so far as MHE relies on the first three letters as Calderbank offers, it is for MHE to make good the proposition that the rejection or non-acceptance of the offers contained in them was unreasonable. Nonetheless, the fact that MHE bears the onus does not mean that the plaintiffs have neither right nor need to give evidence.
24. Equally, what was said, as to the merits of the plaintiffs' case, in the first letter should be taken as referable to the second and third letters also. The second letter referred expressly to the first, and to what had been said in it as to "our client's position in detail". Likewise, the third letter referred to and in effect adopted what had been said in the first letter.
25. Ms Castle did not submit that any of the three letters, considered as a Calderbank offer, did not offer a genuine compromise. Had she so submitted, I would disagree. Each letter, in its Calderbank guise, offered a substantial sum of money. Although the first and third offers were inclusive of costs (the latter, in its Calderbank guise), the second offer, although proposing a lesser payment, did offer payment of the plaintiffs' costs up to the date of the offer. Having regard to the force of the matters put in the first letter (matters that should have been appreciated at the time), none of the offers could be characterised as derisory, or devoid of a real element of compromise.
26. Further, Ms Castle did not submit that, at the various times they were written, any of those letters allowed insufficient time for consideration of the offer contained in it. Nor did she submit that there was any defect of form or content that was relevant to consideration of MHE's application based on those letters.
27. If the only parties were the plaintiffs on one side and MHE on the other, I would conclude that it was unreasonable of the plaintiffs to reject, or not to accept, the first offer, and that MHE should have its costs on the indemnity basis from the date of that offer. In my view, the unexplained failure of the plaintiffs to respond to (or, on the evidence, to consider in any serious way) genuine offers of settlement, embodying a real element of compromise, could not be classed as reasonable having regard to five of the six factors discussed in the letter. But this is not a case where the only parties are the plaintiffs and MHE.
28. Had the plaintiffs accepted the first offer (or, for that matter, the second or the third) it would have brought the dispute between them and MHE to an end. However, acceptance of any one of those offers would not have terminated MHE's involvement in the proceedings. To achieve that, MHE needed to negotiate a settlement with Mr Acres. Perhaps it could have done so, but the evidence is silent on this point. I shall return to this.
29. More significantly, in my view, acceptance of any one of the offers would have left the plaintiffs in an exposed and potentially dangerous position. As I have noted, each of Mr Acres and the Council raised defences under Pt 4 of the Civil Liability Act. Each alleged that MHE was not only a concurrent wrongdoer but, in truth, the principal cause of the plaintiffs' woes. It will be seen from my first judgment that, at the level of the fact (and leaving aside the presently irrelevant complication that I did not hold MHE to be a concurrent wrongdoer), the second of those arguments was powerful.
30. Of course, MHE was held not to be a concurrent wrongdoer for two reasons, each of which had been forecast in the letter of 18 February 2014. It was held not to have owed any duty of care to the plaintiffs, and in any event, assuming that there were a duty of care equivalent to its duty owed to Mr Acres, not to have breached that duty in any relevant way.
31. MHE's case on those points was strong, and should have been perceived at the time to be strong. Nonetheless, had the plaintiffs settled with MHE, and had either Mr Acres or the Council (or both) made good the proportionate liability defence, the likelihood is that the plaintiffs would have lost in damages far more than the net value to them (allowing for costs, in the first and third cases) of the offers that had been made.
32. In all the circumstances, and bearing in mind in particular that the Council's evidence of fact was not served until about seven months after the third of the offers was made, I do not think, on balance, that it can be said that the rejection or non-acceptance of each of the offers was unreasonable. Accordingly, I conclude, MHE has not made good its claim for indemnity costs, based on those letters in their character as Calderbank offers.
33. There is however another issue in relation to the offers made on 18 February and 23 May 2014 (the latter, only insofar as it comprised a Calderbank offer).
34. The letter of 18 February 2014 stipulated, as a condition, that the parties should enter into "a confidential Deed of Release". The Calderbank component of the letter of 23 May 2014 stipulated that the parties should enter into "a Deed of Release which included [sic] both a release… [and]… an indemnity from your clients in favour of our client…". Although it is not of present relevance, that theme reappeared in the offer of 29 June 2015, which stipulated for "an appropriate release" (from both the plaintiffs and Mr Acres).
35. The scope of the release (or of the release and indemnity) was not fully explained. On one view of things, a lawyer advising a client in the position of MHE would recognise that his or her client remained exposed, because the client remained a party to the proceedings, as a cross-defendant at the suit of Mr Acres. In those circumstances, that lawyer, acting competently, would be likely to advise his or her client to require the deed to include an indemnity against any liability that the client may later incur in the proceedings.
36. The stipulation for a deed of release (in the offer of 23 May 2014) referred to "any subsequent claim… made against [MHE] by a third party". Mr Acres' cross-claim was not then filed (it was filed on 28 November 2014). Thus, if the plaintiffs had accepted the offer, they would have been liable to indemnity MHE in respect of that cross-claim. In those circumstances, acceptance of the offer and provision of the appropriate release and indemnity would lead to a situation where the benefit obtained by the plaintiffs might be clawed back, in whole or in part, in the event that such a third party, having brought a claim against MHE, succeeded.
37. Further, although the letter of 18 February 2014 did not stipulate in terms for such an indemnity, it is in my view at least likely that MHE's legal representatives would have advised that the release to be given (if the offer were accepted) should include an appropriately drafted indemnity. In that case, also, the plaintiffs would be exposed to the risk of claw-back.
38. Those considerations are not farfetched, fanciful or improbable. They reflect the fact that, unless and until MHE was able to extract itself completely from the proceedings, a settlement with one party that did not protect MHE from liability at the suit of other parties would offer, at best, only minimal certainty. Thus, as I have said, I think it likely - indeed, highly probable - that MHE's legal advisers would have stipulated for such an indemnity.
39. For those reasons also (although acknowledging that they are subsidiary to what I have said already), I think that it was not unreasonable for the plaintiffs to reject or not to accept the offers. However, since there was no stipulation for a release or indemnity in the offer of compromise made pursuant to the letter of 10 March 2014, or that made concurrently in the letter of 23 May 2014, those considerations do not bear on the question under r 42.15A, whether the Court should order otherwise.
40. I add that, if I were wrong in what I have said as to the inability of the plaintiffs by themselves to accept the offer made in the letter of 29 June 2015, I would conclude, by reference to the considerations that I have just outlined, that in any event it was not unreasonable for the plaintiffs to reject, or not to accept, that offer.
41. Before leaving this topic, I should deal with a specific submission put by Ms Castle, in opposition to the claim for indemnity costs based on the third letter (but only in its capacity as a Calderbank offer) and the fourth letter. She noted that each called for a deed to be executed that would contain appropriate releases (and, in the case of the third letter, appropriate indemnities). In those circumstances, she submitted, the offers were not capable of immediate acceptance, so as to give rise to an immediately binding contract.
42. Mr Elliott pointed to the decision of the Full Court of the Federal Court of Australia (Spender, French and Lee JJ) in Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd (Full Federal Court 29 August 1995, unrep). In that case, the primary judge had made an indemnity costs order based on a Calderbank offer that imposed conditions including the execution of a deed of release, and something that their Honours referred to as "a confidentiality requirement".
43. It was submitted to the Full Court that the letter "should have been disregarded in view of the conditions sought to be imposed by it" at [75]. Their Honours noted that the primary judge had considered those and other objections. Without further discussing the conditions, their Honours said that there had been "no error of principle shown in the primary judge's exercise of discretion" at [76].
44. Since it is not necessary that I express a concluded view on this point, I shall do no more than observe that in the ordinary way, deeds of release and indemnity consequent on the settlement of litigation need not be complex. If it is agreed that releases and indemnities should be given, the deeds could well be regarded as documents that, in the ordinary way, solicitors would agree among themselves. I observe, further, that if the conditions as to a deed of release (or release and indemnity) were seen to be serious, they could have been raised at the time. There is no evidence that they were.
45. Nonetheless, it not being necessary to do so, I do not decide the application on this point.
46. I turn to the alternative characterisation of the two later 2014 letters, as offers under r 20.26. Ms Castle did not submit that the letters were not formally effective in that capacity. Thus, there is a presumption in favour of indemnity costs (r 42.15A), and it is really, at the persuasive level at least, for the plaintiffs to show why the Court should otherwise order.
47. The considerations each way are, essentially, the matters that I have discussed already at [98] to [117]. I accept that simply to characterise a party's position as not unreasonable for the purpose of dealing with an indemnity costs application based on a Calderbank offer does not mean necessarily that the Court should order otherwise for the purposes of r 42.15A, to the extent that the offers have effect also as offers of compromise under r 20.26. In other words, I accept as a possibility that it may be possible for the Court to conclude that rejection of such an offer in its Calderbank capacity is not unreasonable (or, even perhaps, reasonable); but that, nonetheless, it should not otherwise order to the extent that the offer is cast also as one made under r 20.26.
48. However, in this case, balancing the considerations as best I can, I do think that the Court should order otherwise. I reach that view principally because, as I have said, acceptance of the offers would leave the plaintiffs seriously exposed, by reason of MHE's continuing involvement in the case both as a cross-defendant and as a party said to be a concurrent wrongdoer and a very (or the most) significant contributor to the plaintiffs' loss.
49. I conclude that MHE has not made good its claim for indemnity costs, however that claim is put. It follows that the costs order as between the plaintiffs and MHE should simply be that the former pay the latter's costs of their claim against it.

Decision - the Council's costs application

1. I have dealt with most aspects of this already. The only remaining question relates to the costs of Mr Acres' cross-claim against the Council.
2. On the face of things, that cross-claim having succeeded (to the extent of Mr Acres' and the Council's common liability for damages), Mr Acres should have his costs: r 42.1. He was notified of the Court's directions for any costs applications to be articulated and decided, and was notified of the date for hearing of the costs application. However, Mr Acres did not make any claim for costs. In those circumstances, I think, Mr Bambagiotti's submission is correct: there should be no order as to costs.

Conclusions and orders

1. It follows from the conclusions I have expressed that each party has failed to achieve all the costs orders that it sought, and thus conversely that each party has been successful in resisting some of the costs orders sought against it. In those circumstances, and on the basis that "enough is enough", I conclude that each party should bear its own costs of and relating to the various applications for costs that are dealt with in these reasons.
2. I make the following orders: 1. order the first defendant to pay the plaintiffs' costs of their claim against him; 2. order the fourth defendant to pay the plaintiffs' costs of their claim against it; 3. order that the costs payable under orders (1) and (2) not include any costs incurred by the plaintiffs referable to their claim that the subject residence should be demolished and reconstructed in its entirety; 4. order the plaintiffs to pay the third defendant's costs incurred in defending the plaintiffs' claim against it; 5. order the first defendant to indemnify the plaintiffs for the costs so payable by them to the third defendant; 6. make no order as to costs as between the first defendant as cross-claimant and the fourth defendant as cross-defendant on the first cross-claim; 7. direct that the costs payable to orders (1) to (5) not include any costs referable to the parties' applications for costs, to the intent that each party pay his, her or its own costs relating to those applications; and 8. direct that the exhibits on the hearing and on the costs applications be returned.

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