Claire Rewais and Osama Rewais t/as McVitty Grove v BPB Earthmoving Pty Ltd

RELEVANT FACTS

1. The relevant facts underlying the Rewaises' application are set out in full in the Principal Judgment at [7]-[108]. Set out below are additional facts that are not mentioned in the Principal Judgment but are relevant for the purposes of determining the issue of costs.
2. On 14 August 2024 at 6:15pm, BPB's solicitors, Stacks, sent a letter to the Rewaises' solicitors, Agility Legal, (14 August letter) headed "WITHOUT PREJUDICE, SAVE AS TO COSTS" setting out the factual bases upon which BPB had formed the view that the Contract was not for residential building work, asserting that the starting premise of the Rewaises' whole argument (namely that the Contract was entered into in breach of the HBA) was wrong. In addition, the 14 August letter also stated that Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [82]-[83] is authority for the proposition that BPB's: failure to have a [Home Building] licence could not be a ground on which the adjudicator's determination could be considered void, or for otherwise giving relief in respect of the determination.
3. The 14 August letter then expressed an offer in the following terms: (a) the current Supreme Court proceeding be dismissed; (b) [BPB] pay [the Rewaises'] costs of the Supreme Court proceedings as agreed or assessed on the ordinary basis up to the date of this offer; (c) [BPB] accept the sum of $220,822 in satisfaction of all of its rights under the Adjudication and District Court judgment that our client has now obtained in respect of the Adjudication (copy enclosed) (for clarity, this sum is made up of $210,000 for the works, $3,811 for interest on that amount calculated at the rate prescribed under section 101 of the Civil Procedure Act 2005 (NSW) from the due date determined by the Adjudication to the date of the Adjudication determination and $7,011 for half of the costs of the Adjudication paid by our client); (d) upon receipt of the sum of $220,000, our client will consent to an order under UCPR 36.15 setting aside the District Court judgment; (e) the foregoing will be without prejudice to, and both parties will reserve their rights in respect of, the underlying substantive position regarding the amount, if any, payable by your clients to our client in respect of the works; and (f) if your client takes no further action in respect of the underlying substantive position of the parties, our client will not take any further action in that regard either.
4. The 14 August letter stipulated that BPB's offer had been structured with the following matters in mind: The offer has been framed to seek to address the issue in this dispute, being the validity of the Adjudication and the amount to which [BPB] may be entitled to recover from [the Rewaises] in respect of that Adjudication, noting in particular the operation of s.32A of the Building and Construction Industry Security of Payment Act. Put simply, even if that part of the Adjudication Determination dealing with any residential building works is affected by jurisdictional error, that need not result in the whole of the Adjudication Determination being set aside. The offer has also been framed so as not to require any declaratory relief, or similar, from the Court, which the Court is not able to grant without a substantive hearing. The offer has also been deliberately framed to reserve the parties' respective rights regarding the underlying substantive position in respect of [the Rewaises'] liability to [BPB] for the works, given that is not an issue that the current proceeding will, or can, resolve. In other words, we have sought to make a practical proposal that enables the present proceeding to be settled, by [BPB's] significant compromise, without affecting the parties' underlying rights. For that reason, this offer is a valid and effective offer of compromise for the purpose of enlivening the Court's discretion as to costs if the offer is not accepted.
5. The 14 August letter concluded by noting that the offer was open for written acceptance by the Rewaises until 4:00pm on Friday 16 August 2024, after which it would lapse, and further stating: Obviously, this offer represents a significant discount on the amount [the Rewaises] will be required to pay if [BPB's] List Response is successful and is a genuine attempt to resolve this dispute. This offer is made pursuant to the principles of Calderbank v Calderbank [1975] 3 WLR 586. In the event that this offer is not accepted and the matter proceeds to a hearing, we will tender a copy of this letter in support of any application for indemnity costs.
6. The Rewaises did not accept BPB's offer contained in the 14 August letter.
7. In accordance with the directions made by Ball J on 19 July 2024, BPB had until 16 August 2024 to serve any evidence on which it intended to rely at the hearing. BPB's evidence was then provided in the form of one affidavit of 15 August 2024, two affidavits of 16 August 2024, four affidavits of 17 August 2024, one affidavit of 20 August 2024 and one affidavit of 22 August 2024.

Power to vary order

1. Rule 36.16 of the UCPR relevantly provides that the court has power to set aside a judgment or order in the following circumstances: … (2) The court may set aside or vary a judgment or order after it has been entered if - (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it - (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. … (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.

Discretion to award costs

1. The principal statutory provision containing the court's powers as to costs is s 98 of the Civil Procedure Act 2005 (NSW) (CPA), which relevantly states: (1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to - (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. …
2. The discretion to award costs under s 98 of the CPA is broad and the section itself is to be construed liberally: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, Gaudron and Gummow JJ at [21]. The discretion is, however, subject to the rules of court, including the UCPR.
3. Rules 42.1, 42.2 and 42.4 of the UCPR relevantly provide: 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. 42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis. … 42.4 Power to order maximum costs (1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another. …
4. A number of observations regarding the exercise of the discretion to award costs made by McHugh J in Oshlack at [67]-[68] should be kept in mind, as summarised below: 1. An award of costs rests on fairness between the parties, with the unsuccessful party bearing the liability for the costs of the proceedings. 2. The primary purpose of an award of costs is to indemnify the successful party, not to punish an unsuccessful party because, had the proceedings not been brought, the successful party would not have incurred the expense of them. 3. As a matter of policy, one beneficial by-product of the compensatory purpose may well be to instil in a party contemplating commencing the proceedings a sober realisation of the potential financial expense involved.

Indemnity costs based on a Calderbank letter

1. The principles relating to the awarding of indemnity costs based on the failure of a party to accept an offer of compromise contained in a Calderbank letter were set out in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Giles JA at [37] saying: … The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure. …
2. In Commonwealth of Australia v Gretton [2008] NSWCA 117, Beazley JA (Mason P agreeing and Hodgson JA substantially agreeing) at [44]-[45] indicated that there are two general requirements to justify making an order for costs on an indemnity basis following a Calderbank offer, stating: [44] Two general 'rules' have emerged relating to Calderbank offers, namely, that to justify the making of an order for costs on an indemnity basis, the offer must be a genuine offer of compromise, which it is unreasonable for the appellant not to accept: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4]-[5]; Leichhardt Municipal Council v Green at [21]-[24], [36]. However, as this Court (Santow, Bryson JJA, Stein AJA) pointed out in Leichhardt Municipal Council v Green at [8], the 'common law principles' that have been developed in relation to costs "operate merely as guides to how the discretion might appropriately be exercised". The principles or rules to which I have just referred fall within that category. [45] The discretion is to be exercised having regard to all the relevant circumstances in the case. The question that had been raised in Leichhardt Municipal Council v Green was whether there had been a genuine offer of compromise. As the Court said at [21]: "There is little appreciable difference between saying that an offer should not in the court's discretion attract costs sanctions in the circumstances and saying that an offer is not a genuine offer of compromise in the circumstances. Both depend upon a value judgment of the offer and the conduct of the parties in the circumstances of the claim."
3. In Whitney v Dream Developments (2013) 84 NSWLR 311; [2013] NSWCA 188, Barrett JA (Beazley P and McColl JA agreeing) at [57]-[60], in making additional remarks to the reasons of Bathurst CJ, considered several matters relevant to the determination of whether an offer took effect as a Calderbank offer, noting that it is crucial to determine the manifested objective intention of the offeror, stating: [57] An offer is of the Calderbank type only if the maker of it is shown to intend that the fact of its non-acceptance may be deployed as a basis for seeking a special costs order in the event of that party's ultimate success in the action. Everything therefore depends on the message conveyed by the offer itself and any covering letter or other attendant circumstance. [58] The possibility that an ineffective or deficient offer purportedly made in accordance with the rules might take effect as a Calderbank offer has been recognised in several cases. It is sufficient to refer to Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 in which Ipp JA (with the concurrence of Mason P and McColl JA) said (at [27]): "Calderbank offers are simply offers that do not comply with the relevant rules of court relating to the making of offers of compromise: Jones v Bradley (No 2) [[2003] NSWCA 58] (at [5]). Whether an offer, intended to be an offer under the Uniform Civil Procedure Rules but which is ineffective because it does not comply with those Rules, operates as a Calderbank offer, depends upon the intention of the offeror as revealed by the terms of the offer. The offer may disclose an intention that it should take effect only if it complies with the Uniform Civil Procedure Rules. On the other hand, it may disclose a general intent to make an offer, irrespective of whether it takes effect under the Uniform Civil Procedure Rules or no." (emphasis added) [59] As this passage makes clear, the crucial matter is the manifested intention of the offeror. In the present case, the message conveyed by the making of each offer in the context in which it was made was that the plaintiff intended to have resort to the r 20.26 regime. In the absence of any intimation (for, example, in a covering letter) that the plaintiff intended its offer expressly founded on r 20.26 to have some secondary or alternative significance, the fact that the plaintiff's attempt to act under r 20.26 miscarried neither required nor justified any assumption of intended secondary or alternative significance. Faced with an offer that purported to have significance under r 20.26 (and not otherwise) but which, on its face, exhibited a feature inconsistent with that rule, the correct course for the defendant to adopt was to regard the purported offer as having no force at all. The defendant was not required to speculate about some alternative intention on the part of the plaintiff; nor was the defendant justified in doing so. [60] The plaintiff did not indicate, either expressly or by implication, that, if the offer did not take effect under the rules, the plaintiff still reserved the right to rely on it on the question of costs. An essential ingredient of a Calderbank offer was therefore absent: see Calderbank v Calderbank (above) at 596. The correct characterisation in this case corresponds with that which, in Old v McInnes, commended itself to Meagher JA (at [106]) and Giles JA (concurring).
4. In Dream Developments, Bathurst CJ (Beazley P and McColl JA agreeing) at [42] concluded that the essence of a Calderbank offer is an intention that the offer (or the circumstances in which it was conveyed) indicated that it would be relied on in relation to costs, should a verdict more favourable than the offer be achieved, saying: In the present case all that there was, were the offers of compromise, the second seeking a greater amount by way of settlement than the former. There was nothing in either of the offers to indicate that they were intended to have effect other than as offers under r 20.26. Further, there was nothing in the correspondence with which the offers were enclosed or in the surrounding circumstance to indicate they would be relied on in relation to the question of costs should a verdict more favourable than the offer be achieved. Such an indication, in my opinion, is the essence of a Calderbank offer.
5. In Abdi v Abdi (No 2) [2022] NSWSC 582, Ward P at [27]-[30] provided a statement of the principles relating to an award of indemnity costs following the rejection of a Calderbank offer as follows: [27] The party seeking the special costs order bears the onus of demonstrating that the rejection of the offer was "unreasonable" in all the circumstances of the case (see Leichhardt Municipal Council at [19]; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] per Giles, Ipp and Tobias JJA). [28] Whether rejection of a Calderbank offer (or other offer of settlement) was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances (King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11] per Young JA with whom Campbell and Hodgson JJA agreed). It has been said that a finding of unreasonableness should not be made other than on clear grounds (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113] per Basten JA with whom Giles JA and Young CJ in Eq agreed). [29] The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable (summarised in Favotto at [20]-[30]) include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it (see Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA with whom McColl and Campbell JJA agreed). [30] Factors that have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22] per Beazley JA); the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192] per Allsop P with whom Beazley and McColl JJA agreed); the offeror's case changing after the making of the offer (South Eastern Sydney Area Health Service at [85] per Hunt AJA); the inclusion of conditions in the offer (Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (unreported, FCAFC, Spender, French and Lee JJ, 29 August 1995); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 242D per Lindgren J). (Other than the first, it is difficult to see that any of these factors is here applicable.)

SUBMISSIONS

1. The submissions of BPB can be summarised as follows: 1. The reference in the order that the plaintiffs are to pay the defendant's costs of the proceedings (Principal Judgment at [223]) is probably a reference to the first defendant's costs because the second defendant filed a submitting appearance. 2. Within the time contemplated by r 36.16(3A) of the UCPR, BPB filed the notice of motion seeking to vary the costs order in the Principal Judgment. Although the motion refers to "the defendants' costs", the motion is only intended to be directed towards the costs of BPB as the first defendant. 3. The 14 August letter is a Calderbank letter containing a sophisticated offer to settle the present litigation and bears reading in full. The substance of the proposal includes: 1. The litigation be dismissed. 2. BPB would pay the Rewaises' costs of the litigation on the ordinary basis. 3. BPB would accept $220,822 (which included $210,000 referable to the value of the building works) in satisfaction of all of its rights under the adjudication and the subsequent judgment based upon the Determination which has been registered in BPB's favour, and would consent to an order setting aside that judgment. 4. Acceptance of the offer was without prejudice to, and the parties will reserve their rights in respect of, the underlying substantive position regarding the amount, if any, payable by the Rewaises to BPB in respect of the works. 5. If the Rewaises decide to take no action in relation to the underlying substantive position of the parties, BPB will not take any action in that regard either. 1. By way of further explanation, BPB's offer provided a solution to the "interim" dispute, being the question of validity of the Determination, on the basis of an "interim" monetary concession by BPB of $67,000 on the adjudication amount (from $277,000 to $210,000). The reference to the concession as being "interim" is made on the basis of sub-paragraph (d) of the offer in the 14 August letter. Additionally, the Rewaises would have the option to decide whether to accept BPB's monetary concession as finally determining the dispute between them, or alternatively bringing proceedings to finally determine the parties' respective rights. Meanwhile, the Rewaises would not be out of pocket (on the ordinary basis at least) in respect of the costs of the "interim" dispute. 2. The proposed "interim" concession is less than the amount the Rewaises would have been required to pay into court had the Rewaises applied to set aside the judgment, referring to s 25(4)(b) of the Security of Payment Act; or, as a matter of "established practice" to stay enforcement of the adjudication determination, citing A-Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144 at [15]. 3. As indicated in the 14 August letter, the offer was a sensible attempt to resolve the "interim" dispute while leaving the Rewaises with the option to further agitate their "final" rights if they chose. The rejection by the Rewaises of the offer has done little other than prolong the substantive dispute between the parties and increase costs. The apparent likelihood is that one party or the other will be commencing proceedings to determine their separate rights, which could already be on foot if the Rewaises had accepted BPB's Calderbank offer. In this context, the Rewaises' rejection of the offer was unreasonable and they bear the responsibility for the costs incurred in these proceedings, citing Gretton at [121]. 4. The result of the proceedings is more favourable to BPB than the proposed settlement, as it is open to BPB to enforce the full amount of the judgment debt, less any amounts which may have already been recovered. 5. If the court accepts that the Rewaises' rejection of BPB's offer was unreasonable and the result of the proceedings is more favourable to BPB than the proposed settlement, then the court should exercise its costs discretion to make an order for BPB's costs on an indemnity basis rather than the ordinary basis.
2. The submissions of the Rewaises can be summarised as follows: 1. The offer made by BPB listed two different sums of $220,822 at sub-paragraph (c) and $220,000 at sub-paragraph (d) of the 14 August letter and so the actual terms and sum of the settlement offer are unclear. 2. BPB's offer was not strictly a Calderbank offer and should not be considered as one for the following reasons: 1. Although the offer was stated to be made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333, this statement was qualified by the assertion that the letter would be relied upon in support of an application for indemnity costs if the offer was not accepted and the matter proceeded to hearing. There was no reference to the fact that the offer would be relied on as to costs if it were not accepted and a judgment more favourable than the offer was achieved - the "essence" of a Calderbank offer, citing Dream Developments at [42] and [57]-[59]. 2. The offer was not a real compromise or attempt to settle the dispute as it repeatedly emphasised that the offer was without prejudice to the respective rights of both parties, which were reserved, in respect of the underlying substantive position regarding the amount (if any) payable by the Rewaises to BPB in respect of the works. 1. The court has discretion as to costs, citing s 98 of the CPA. The discretion to award costs under a Calderbank letter falls within this jurisdiction. Unlike the process in relation to an offer of compromise as outlined in the UCPR, there is no presumptive entitlement to costs resulting from a Calderbank letter, citing Abdi at [26]. 2. The making and rejection of a Calderbank offer is one factor which may, but will not necessarily, cause the court in its discretion to order costs on the indemnity basis. The rejection of a Calderbank offer may cause the court to make such an order if it is satisfied that the offer was a genuine offer of compromise and that the rejection of the offer was unreasonable, citing Treloar Constructions Pty Ltd v McMillan (No 2) [2017] NSWCA 146 at [8]-[9]. 3. The onus of demonstrating that the Rewaises' rejection of BPB's offer was unreasonable in all the circumstances rests on BPB, citing Abdi at [27]. 4. In relation to the factors to which a court will have regard when considering whether the rejection of the offer was unreasonable, citing Abdi at [29], the following points are noted: 1. Stage of the proceeding at which the offer was received: The offer was received approximately a week before the final hearing of the matter, after significant measures had been taken by the Rewaises to prepare their case for trial. 2. The time allowed to the offeree to consider the offer: The 14 August letter was sent to the Rewaises' solicitors by email at approximately 6:15pm on 14 August 2024 and was due for acceptance by 4pm on 16 August 2024, leaving only (if not less than) two business days for the Rewaises to consider and respond to BPB's offer. 3. The extent of the compromise offered: The offer was expressed in contradictory terms as preserving the "underlying substantive position" of the parties in respect of the Rewaises' liability to BPB, but also stated that if the Rewaises decided to take no action in relation to that substantive position then neither would BPB. The offer contained no real compromise because it essentially invited the Rewaises to pay BPB either $220,882 or $220,000 to discontinue the current proceedings, while expressly contemplating further proceedings in relation to the same dispute; an unreasonable offer in the circumstances. 4. In addition, the Rewaises' claim in the proceedings was, if established, sufficient to significantly resolve the "underlying substantive position": the claim under the HBA to set aside the Determination on the basis that BPB did not have the necessary licence or insurance to do the works (which was established at trial, referring to the Principal Judgment at [215]) was also relevant to BPB's ability to seek payment for the works in relation to the "underlying substantive position". Irrespective of the validity of the Determination, the established breaches of ss 4 and 92 of the HBA result in the preclusion of BPB under ss 10 and 94 of the HBA from enforcing any remedy in respect of the building works. By pressing its claim and rejecting the offer, the Rewaises have substantially, if not conclusively, resolved the "underlying substantive position" of the parties. 5. The offeree's prospects of success assessed as at the date of the offer: None of BPB's evidence in chief had been finalised when the offer was made, a factor weighing against the making of favourable costs orders, citing Vale v Eggins (No 2) [2007] NSWCA 12, Beazley JA (McColl JA agreeing) at [22]. Because the offer was made on 14 August 2024, before the deadline of 16 August 2024, and expired on 16 August 2024, before service of the last affidavit filed by BPB of 20 August 2024, the Rewaises were limited in their ability to assess the strength of BPB's case on an evidentiary basis and consequently, the reasonableness of the offer. The issue as to timing was of BPB's own making, which was then exacerbated by the short window of acceptance of less than two business days. BPB should not be permitted to benefit from this conduct. 6. The clarity with which the terms of the offer were expressed: The amounts of the offer were unclear, as recited above. 7. Whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it: The offer was qualified by the assertion that the letter would be relied upon in support of an application for indemnity costs. 1. It was reasonable to reject BPB's offer, made on the premise that the Rewaises were wrong in stating that the Contract was entered into in breach of the HBA, a position which was correct and ultimately established at the trial. Although the Rewaises were ultimately unsuccessful at trial, they were successful in establishing that BPB was in fact in breach of ss 4 and 92 of the HBA. Contrary to the 14 August letter, the Rewaises were correct to assert that "the Contract was entered into in breach of the HBA" and it was reasonable for the Rewaises to consider that BPB's view was incorrect when assessing the offer.

CONSIDERATION

1. In my opinion, for many of the reasons put forward by the Rewaises, the 14 August letter does not give cause for me to vary the costs order that I made on 10 October 2024. Importantly, those reasons which I regard as having the greatest weight in arriving at this decision are as follows: 1. While BPB indicated in the 14 August letter that it was written "without prejudice, save as to costs", that it was made pursuant to the principles of Calderbank v Calderbank and that, in the event the offer was not accepted and the matter proceeded to hearing, BPB would tender a copy of the 14 August letter in support of any application for indemnity costs, it was missing the essence of a Calderbank offer. As made plain in SMEC Testing at [37] and Dream Developments at [60], that essence of a Calderbank offer is that it "would be relied on in relation to the question of costs should a verdict more favourable than the offer be achieved". There is no such statement in the 14 August letter. 2. The 14 August letter refers to two inconsistent sums in the offer - $220,822 in sub-paragraph (c) and $220,000 in sub-paragraph (d). A Calderbank letter should be certain as to the sum that is required to be paid by the recipient as part of the offer. The 14 August letter did not contain such certainty. 3. Applying Abdi at [30], the explanation for the offer that is contained in the 14 August letter did not deal with the complexity of the issues in the proceedings. The assertion contained in the 14 August letter is, in essence, that the Contract was not one with to which the HBA applied. That is contrary to the finding I made in the Principal Judgment. Whilst the reference to the application in Brodyn was in accordance with my finding in the Principal Judgment, there was no attempt to explain what BPB's position was in relation to any of the other issues that were live in the dispute on which I had to make determinations in the Principal Judgment. 4. Applying Abdi at [29], the extent of the compromise on offer in the 14 August letter as an "interim" measure was capable of producing a confusing outcome between the parties because it professed not to deal with the "underlying substantive position regarding the amount, if any, payable by [the Rewaises] to [BPB] in respect of the works", stating that the offer was without prejudice to that position with both parties having reserved rights to deal with it. Yet by the Rewaises continuing to pursue the application, they were able to achieve an outcome favourable to them in the "underlying substantive position", which is that the Contract was entered into in breach of the HBA. This was a potential outcome which made it reasonable for the Rewaises to refuse the offer. 5. Applying Abdi at [30], I do not think that a period of less than 48 hours for the Rewaises to consider the offer contained in the 14 August letter and either accept or reject it was a reasonable period of time in all the circumstances. This is particularly so when the Rewaises had prepared their evidence for the trial and BPB had not served any of its evidence in chief at the time the offer was made in the 14 August letter and did not complete doing so until 22 August 2024. This put the Rewaises in a position where they were not able to assess the strength of BPB's evidence and therefore they were not able to make a proper assessment of the reasonableness of the offer contained in the 14 August letter.
2. For these reasons, applying Gretton at [44]-[45] and Abdi at [27], BPB has failed to discharge its onus to demonstrate that it was unreasonable for the Rewaises not to accept the offer contained in the 14 August letter.

ORDERS

1. For the reasons set out above, I have determined that I will not award any part of BPB's costs on an indemnity basis in relation to these proceedings. I will, however, make a small variation to the order that I made on 10 October 2024 to make it clear that the reference in the order should be to the "first defendant".
2. BPB has failed in the notice of motion filed 21 October 2024 seeking an award of indemnity costs. As costs of that application should follow the event, the Rewaises should have their costs of it.
3. Accordingly, I make the following orders: 1. Order that order (2) made on 10 October 2024 in these proceedings be varied to the following form: The plaintiffs are to pay the first defendant's costs of the proceedings. 1. The notice of motion filed 21 October 2024 by the first defendant (Motion) is dismissed. 2. The first defendant is to pay the plaintiff's costs of the Motion.

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