Chung v Kilpatrick Holdings (NSW) Pty Ltd ACN 167311435 (No 2)

File Number(s): 2022/150971

Publication restriction: Nil

JUDGMENT

1. The principal judgment in this matter was published on 14 February 2025 (see Chung v Kilpatrick Holdings (NSW) Pty Ltd ACN 167311435 [2025] NSWDC 14 (‘the principal judgment’)).

2. The parties were given the opportunity to make submissions about costs, both in writing, and at a hearing on 31 March 2025. The parties also clarified a factual matter which affected the final orders, being the location of four export bins which were the property of the second plaintiff, THC Holding (NSW) Pty Ltd (‘THC’) but which had been taken to a yard occupied by the first defendant, Kilpatrick Holdings (NSW) Pty Ltd (‘KH P/L’).

Final orders

3. Four export bins which were the property of KH P/L were the subject of an action in conversion in the proceedings (see [149] – [157] and [277] – [289] of the principal judgment). The evidence of Mr Kilpatrick in his affidavit of 5 May 2023 was that the bins were taken from Lot 1 Old Port Road, Port Kembla NSW (Mr Chung’s property) to premises occupied by KH P/L at Lot 1 127 Military Road, Port Kembla NSW on about 23 October 2020 and stored there. It was not clear where the four bins were at the time of the hearing of the matter. The parties said, on 31 March 2025, that the bins remained in the possession of KH P/L, there having been no agreement as to an arrangement for their return.

4. Mr Chung has therefore made out his claim in conversion in relation to the four export bins, and KH P/L is liable to pay THC the sum of $60,500 which is the replacement cost of the bins.

Costs

The defendants/cross-claimants’ submissions

5. The defendants/cross-claimants referred to the principles in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (‘Bostik’) where the Court said, at [38]:

38 The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows:

• Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

• In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

• If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].

• Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

• A separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

• Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.

…

6. On 10 November 2023, by a letter from their solicitors to the plaintiffs’ solicitors, the defendants made an offer of settlement to the plaintiffs, the relevant part of which was in the following terms:

(a) Your client to make a payment of $80,000 to our client in full and final settlement of the Defendants’ Cross-Claim (including costs) (Settlement Sum);

(b) Within seven (7) days of receipt of the Settlement Sum in cleared funds into our office trust account, your client is to arrange collection of the four (4) storage bins from our client;

(c) Both the statement of claim and cross-claim are to be dismissed with no order as to costs;

7. The offer was made on the basis that it was open for acceptance until 5pm on 8 December 2023, at which time it would lapse.

8. The offer was expressed to have been made “in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333”.

9. The offer was not accepted.

10. The defendants submitted that the Court must decide whether the Calderbank offer represented a genuine compromise, and whether the offeree’s rejection of it was unreasonable. If the Court is satisfied on both of those matters, then consideration should be given to departing from the usual rule that costs follow the event, and costs may be awarded on an indemnity basis (see r 42.1 and r 42.2 Uniform Civil Procedure Rules 2005).

11. The defendants referred to the decision of the Court of Appeal in Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd (No 2) [2024] NSWCA 274 (‘Michael Hill Jeweller’) at [6]:

6. The Court in Miwa accepted six factors to be considered in determining whether the rejection of an offer was unreasonable:

12 In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 the Court of Appeal (Warren CJ, Maxwell P and Harper AJA) identified the factors relevant to determining whether the rejection of an offer was unreasonable as including the following:

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

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

(c) the extent of the compromise offered;

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

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

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

The list was not exhaustive, but no other factor was relied upon in the present case.

12. The defendants argued that, given that the value of the four export bins was $60,500 and the offer to settle involved payment by the plaintiffs to the defendants of $80,000, the offer amounted to an offer to accept $19,500 in satisfaction of the cross-claim.

13. It was Mr Kilpatrick’s evidence, in his affidavit of 7 March 2025 (of which only paragraphs 1 to 7 were read), that, at the time that the offer was made, the defendants had spent $110,000 on costs.

14. The defendants noted that the plaintiffs’ overall claim was for $182,747.40 comprising five separate claims, one of which was the conversion of the four export bins, in relation to which the plaintiffs succeeded to the value of $60,500. The plaintiffs failed in relation to the other four claims, which were the alleged breach of the lease by failing to make good the premises, the alleged damage to the plaintiffs’ fixtures, the alleged conversion of office items and the alleged damage to two export bins.

15. The defendants submitted that KH P/L claimed $161,983.22 and obtained judgment in the sum of $98,872.35. KH P/L was successful in relation to five of eight claims (62.5%).

16. The defendants argued that the plaintiffs were successful in 20% of their causes of action and obtained judgment amounting to 33% of their claims, whereas KH P/L was successful in 62.5% of its causes of action in the cross-claim and obtained judgment amounting to 61% of its claims.

17. The defendants submitted that, subject to the impact of the Calderbank offer, it would be appropriate to award the plaintiffs 50% of the costs of the Statement of Claim and award KH P/L 75% of its costs of the cross-claim.

18. As to the Calderbank offer, the defendants submitted that the offer was made after the unsuccessful mediation and at a time when all of the evidence had been served, except for Mr Kilpatrick’s affidavit in reply. The offer was open for a reasonable period of four weeks.

19. The defendant submitted that the offer was for $18,872.35 less than the judgment award without costs. It offered the return of the four export bins, which could be equated to the value of $60,500.

20. The defendants submitted that, at the time of the offer, the plaintiff was in a “superior position” to assess the parties’ prospects of success. The offer was clear and was expressed to be a Calderbank offer.

21. KH P/L sought indemnity costs from the date of the expiration of the offer, which was 5pm on the 8 December 2023.

22. The defendants relied upon the decision of Bowskill CJ in PFJV Pty Ltd v Bartter Enterprises Pty Ltd (No 2) [2024] QSC 145 at [7]:

The policy rationale for requiring the offeree to indemnify the offeror for costs incurred after the offeree’s unreasonable rejection of an offer is that, from the time of the unreasonable rejection, notionally the real cause and occasion of the litigation is the unreasonable attitude adopted by the offeree.

The plaintiffs/cross-defendants’ submissions on costs

23. The plaintiffs submitted that there should be no order as to the third defendant’s costs because there was no meaningful dispute as to whether the guarantee operated in the event that Mr Chung established his claim under the Lease Agreement.

24. The plaintiffs submitted that costs should follow the event in relation to the plaintiffs’ claim and in relation to the KH P/L’s cross-claim.

25. The plaintiffs argued that the costs of the cross-claim should not be awarded on an indemnity basis, because that part of the Calderbank offer with respect to the four export bins was not equivalent to a payment of the value of the bins and required the plaintiffs to go to considerable expense to achieve the return of property which belonged to the second plaintiff.

26. Alternatively, the plaintiffs suggested, each party should bear their own costs.

Consideration

27. There will be no order in relation to the third defendant’s costs on the basis put forward by the plaintiffs.

28. I decline to award indemnity costs to KH P/L on the basis of the Calderbank offer, because of the extent of the compromise offered. KH P/L had taken possession of the four export bins and retained possession of those bins over Mr Chung’s protest. In these circumstances, the component of the offer which contemplated that, within seven days after the receipt of the payment of the settlement sum by the plaintiffs to KH P/L, KH P/L could then, and only then, arrange for the collection of the bins was, understandably, not attractive to Mr Chung. The tactic of using the possession of the chattels of another party under protest as leverage in litigation is to be discouraged rather than rewarded. It was not unreasonable of Mr Chung to reject the offer. Costs will be awarded on the ordinary basis.

29. Having regard to the matters set out in Bostik and, in particular, the time spent by each of the parties in the preparation of the evidence in relation to each element of the claim and cross-claim (as reflected in the evidence adduced), the time spent in the trial on each element of the claim and cross-claim and the outcome of each element of the claim and cross-claim, the costs orders will provide as follows:

30. The first defendant is to pay 40% of the plaintiffs’ costs of the claim.

31. The plaintiffs are to pay 65% of KH P/L’s costs of the cross-claim.

Orders

30. The following orders will issue:

31. Judgment for the second plaintiff against the first defendant in the sum of $60,500.

32. The first defendant is to pay pre-judgment interest to the second plaintiff in the sum of $16,150.33.

33. The statement of claim is otherwise dismissed.

34. The plaintiffs’ claim against the second and third defendants is dismissed.

35. The first defendant is to pay 40% of the plaintiffs’ costs of the claim.

36. Judgment for the cross-claimant against the first cross-defendant in the sum of $58,245.00.

37. The first cross-defendant is to pay pre-judgment interest to the cross-claimant in the sum of $13,897.26.

38. Judgment for the cross-claimant against the second cross-defendant in the sum of $40,627.35.

39. The second cross-defendant is to pay pre-judgment interest to the cross-claimant in the sum of $10,713.28.

40. The cross-claim is otherwise dismissed.

41. The plaintiffs/cross-defendants are to pay 65% of the cross-claimant’s costs of the cross-claim.

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