Construction & Design Australia Pty Ltd v Robinson

Supreme Court of NSW|2024-05-01|Before: Stevenson J

Solicitors: ZBA Lawyers (Plaintiff/Cross-Defendants) PDC Law (Defendants/Cross-Claimants) File Number(s): 2020/52689

JUDGMENT

I published my principal judgment in this matter on 11 April 2024. [1] I am now dealing with the costs of the proceedings. I shall use the same abbreviations as in the principal judgment.
On 19 April 2024, by consent, I made the following orders and notations: 1. Judgment for the plaintiff in the amount of $330,735.63 calculated in accordance with the terms contained in the notation below. 2. Judgment for the second and third cross-defendants. 3. Cross-claim otherwise dismissed. 4. Parties are to serve any evidence upon which they rely and written submissions not exceeding 8 pages setting out the costs orders they seek and the reasons why by 24 April 2024. 5. Parties are to serve any written submissions in reply not exceeding 3 pages by 1 May 2024. Notation 1. Note that the sum in Order 1 has been calculated as follows: Total Invoice Amounts due to Plaintiff $268,583.54 Interest on Invoices up to and including 19 April 2024 as per Annexure A $88,359.04 Less amount in favour of first cross-claimant as found -$26,206.95 Total $330,735.63

The cross-defendants acknowledge that the cross-claimants obtained $26,206.95 on their claim against the first cross-defendant for the purposes of any costs argument. 2. Note the agreement between the parties that the question of costs can be determined on the papers.
I have now received the submissions as to costs as referred to in orders (4) and (5) above.
The Builder seeks its costs of its claim, and the costs of the Owners' cross-claim, including on an indemnity basis from dates corresponding with a number of offers to which I will return.
The Owners accept that they must pay the Builder's costs of its claim, albeit on the ordinary basis, and submit that they should pay only 90% of the Builder's costs of their cross-claim.
As the notations to the 19 April 2024 orders show, the Builder succeeded on its claim. The Owners succeeded on their cross-claim to the extent of $26,206.95, being the agreed cost of the rectification of the bowed Rediwall. [2] The Owners were otherwise unsuccessful on their cross-claim. In that cross-claim the Owners alleged that the Builder had engaged in misleading or deceptive conduct by making the various representations to which I referred in the principal judgment. The Owners claimed over $1 million. [3] The Owners also alleged that the entire Rediwall, not merely that portion that had bowed, should be replaced. I rejected that claim. [4]
There was no dispute at the hearing as to the Builder's obligation to rectify the bowed wall, nor as to the cost of such rectification. The parties' experts agreed about this. Indeed, the Builder acknowledged the issue from the outset. The matter was discussed in an email exchange between Nerida and Daniel on 20 September 2019, [5] as follows: "[Nerida]: There is a building defect in the form of a bowed wall that you did not reveal and even after we commented on it, you have made no mention or attempt at rectification. [Daniel]: We discussed the wall with both you and Mark on site just days after the corefill was installed which is when the bow happened. On the day we didn't fill the wall with concrete so that we could straighten it and complete the concrete filling on the next pour. We have since straightened it. The remaining core filled was to be completed with our scheduled concrete pour last Monday which was cancelled."
I accept that the Owners must have incurred some cost to prove the cost of the rectification of the bowed wall. Nonetheless, the amount involved represents only some 1.15% of the amount claimed by the Owners on their cross-claim, and not such as to warrant a 10% reduction of the costs that the Owners must pay to the Builder in respect of the cross-claim. As the Owners propose no other reduction of the amount they should pay in respect of the Builder's costs of their substantially unsuccessful cross-claim, I propose to allow no reduction.
The matter of substance that divides the parties is whether the Builder should have any part of its costs of its claim and the Owners' unsuccessful cross-claim on an indemnity basis.
In that regard, the Builder served Calderbank offers on 23 April 2020, 26 November 2020, and 29 June 2023, offering to settle the proceedings, that is including its claim against the Owners and the Owners' cross-claim against it, for $264,000, $330,000 and $200,000 respectively. [6]
On 29 June 2023, the Builder also served on the Owners an Offer of Compromise pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 20.26, offering to compromise "the claim and cross-claim" in the proceedings on the basis of "judgment for the Plaintiff and the Cross-Defendants in the sum of $200,000".

The Calderbank offers

Turning first to the various Calderbank offers, it is common ground that the Builder must demonstrate that the offers contain a genuine offer of compromise, and that it was unreasonable for the Owners not to have accepted the offers, looking at the question at the time when the offers were made "and not with the benefit of hindsight resulting from an outcome recorded in a judgment". [7]

The 23 April 2020 offer

This offer was made at a very early stage of the proceedings. The Builder and the Owners had exchanged a List Statement and List Response, and the Owners had made their cross-claim. However, the Builder had not yet filed a defence to the cross-claim. No evidence had been served.
I cannot conclude that it was unreasonable of the Owners not to accept this offer at this early stage.

The 26 November 2020 offer

Again, this offer was made at a very early stage of proceedings.
The pleadings had closed, but the only evidence served was Gerard's affidavit of 4 November 2020 relating to the Builder's case in chief.
I cannot conclude that it was unreasonable of the Owners not to accept the offer in this letter at this early stage.

The 29 June 2023 offer

By now, the Owners were in receipt of all the lay evidence, other than a short affidavit that Daniel made on 23 November 2023, as well as all of the expert evidence, other than the joint reports.
That expert evidence included Mr Seeto's report of 21 July 2022, setting out what came to be his unchallenged evidence as to the value of the works performed by the Builder. This evidence proved to be critical on the question of whether the Owners had suffered any damage by reason of the misleading or deceptive conduct that they alleged. [8]
On behalf of the Owners, Mr Crossland submitted that it was not unreasonable for the Owners to have not accepted this offer because: "(a) on any view, the Owners' success in the proceedings was dependent, at least in part, on what the Court would find about contested conversations; (b) it was not unreasonable for the Owners to consider that there was a reasonable chance the Court would accept their version of those conversations, as well as their other submissions in relation to misleading or deceptive conduct; (c) [the Builder's] letter alleged that the cross-claim (as a whole) was 'misconceived and without merit' but gave no explanation for that position, and did not provide the Owners with any reason for why they should not consider that it was reasonable for the Court to accept their version of the contested conversations or otherwise press their cross-claim; (d) it was not reasonable for the Owners to reject an offer put on the unexplained basis that the cross-claim was without merit." (Emphasis in original.)
As to the submissions at pars (a) and (b), for the most part I did not accept the Owners' account of those conversations. I have found that, on the probabilities, the critical conversations did not occur as the Owners deposed. The Owners' contentions now appear to be that, nonetheless, it was not unreasonable of them to expect a different result; a curious submission bearing in mind that the Owners must know the true position.
As to the submissions at pars (c) and (d), whether there is a need for the offeror to descend to specificity as to why an offer should be accepted must depend upon a consideration of all the circumstances existing at the time of the offer. [9]
As Mr Crossland submitted, in the 29 June 2023 offer the Builder did not explain why it contended that the Owners' cross-claim was "misconceived and without merit".
However, it must have been obvious to the Owners, and those advising the Owners, that the Builder's contentions included that the critical conversations did not occur as the Owners deposed. It should also have been obvious, at least to those advising the Owners, that their evidence in support of the "alternative transaction" case was deficient. [10] It may, however, have been less obvious to the Owners, and those advising them, why their contentions as to the alleged written representations might fail, [11] and why the Court might conclude, in relation to their "no transaction" case, that by reason of Mr Seeto's evidence they had suffered no damage in any event. [12]
However, in effect, this offer invited the Owners to pay the bulk of the Builder's claim and to forego their cross-claim entirely. Overall, I am not satisfied that it was unreasonable of the Owners not to accept this offer.

The Offer of Compromise of 29 June 2023

The Offer of Compromise read: "The Plaintiff and Cross-Defendants offer to compromise the claim and cross-claim in these proceedings in the following manner: 1. Judgment for the Plaintiff and Cross-Defendants in the sum of $200,000.00. 2. This offer is open for acceptance for a period of 28 days. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005."
A question arises as to the proper construction of the offer in the Offer of Compromise that there be "judgment for the Plaintiff and Cross-Defendants" in the sum identified.
The Builder was the plaintiff and the first cross-defendant. Gerard and Daniel Turnbull were the second and third cross-defendants. The only monetary claim made by these parties was the claim made by the Builder as plaintiff. The reference in the offer to there being a judgment in the sum of $200,000 could only sensibly have been read and understood by the Owners and those advising them as relating to that claim and referring to a judgment for the Builder in that sum. The reference in the offer to there being a judgment for the cross-defendants could only sensibly have been read and understood by the Owners and those advising them as being judgment for all of the cross-defendants on the cross-claim; and not to a judgment that the cross-defendants be paid anything.
An offer of compromise under UCPR r 20.26 must be an offer to "compromise any claim in the proceedings" and must "identify … the claim … to which it relates". [13]
Mr Crossland submitted that the Offer of Compromise did not satisfy these requirements "because there was no identifiably separate offer in respect of either the claim or the cross-claim".
But there was.
The offer was to accept $200,000 on the claim and pay nothing on the cross-claim; both separately identifiable amounts.
It was, in any event, an offer to compromise "any" claim in the proceedings in that it was an offer to compromise all claims in the proceedings. It also identified "the claim … to which it relates"; both "the claim and cross-claim".
Next, Mr Crossland submitted that the Offer of Compromise did not contain an offer capable of acceptance because "it was not possible [for the Owners] to accept an offer which gave judgment for the cross-defendants … because the Court did not have power to give the cross-defendants (including the Turnbulls) a money judgment on the cross-claim at all". Assuming it is relevant to ask in this context whether the offer was capable of acceptance, the submission misunderstands the offer in the Offer of Compromise. The offer in the Offer of Compromise was capable of acceptance, namely by a judgment in favour of the Builder against the Owners in the sum of $200,000 and a judgment for the cross-defendants on the cross-claim.
An offer of compromise only enlivens an entitlement to indemnity costs if the offeror, as plaintiff, obtains a judgment "no less favourable" than the offer or, where the offeror is a defendant, the plaintiff achieves a judgment "no more favourable" than the terms of the offer. [14]
If those requirements are satisfied, the offeror is entitled to indemnity costs from the day following the day of the offer "unless the court orders otherwise". [15]
As I have set out above, the orders giving effect to my reasons comprise what Mr Crossland described as a "single judgment for the balance of [the] claim and countervailing cross-claim". Mr Crossland submitted that this was "presumably for the purposes of avoiding the complications that might otherwise arise from the enforcement of simultaneous countervailing judgments". In fact, this was simply because the parties, including the Owners, agreed that this reflected my reasons.
Mr Crossland submitted that, in these circumstances, it was not possible to determine whether the Builder had obtained on its claim a judgment against the Owners "no less favourable" than the offer, and whether the Owners had obtained a judgment on their cross-claim against the Builder which was "no more favourable" than the offer.
But the agreed notations to the orders make both matters clear. The notations reveal, leaving aside the question of interest, that the "single judgment" comprises the difference between the amount for which the Builder succeeded on its claim, $268,583.54, and the amount for which the Owners succeeded on their cross-claim, $26,206.95. That difference is, again leaving aside interest, $242,376.59. [16] The amount for which the Builder succeeded, $268,583.53, was "no less favourable" to the Builder than its offer of $200,000. The amount for which the Owners succeeded, $26,206.95, was "no more favourable" to the Owners than the offer of $200,000, because the net amount due to the Builder nonetheless exceeded $200,000.
Mr Crossland referred to the observations of Flanagan J in Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd, [17] who considered provisions in the Uniform Civil Procedure Rules 1999 (Qld) corresponding to UCPR rr 42.14 and 42.15. [18]
His Honour said: [19] "It follows … that an offer to settle both a claim and counterclaim can simultaneously engage rr 360 and 361. However, it is difficult to apply those rules to an offer to settle a claim and counterclaim that, by its terms, does not distinguish between the claim and counterclaim. What part of the offer relates to the claim and what part relates to the counterclaim for the purposes of undertaking the comparison required by the rules? Absent any breakdown of the offer, is the appropriate comparison between the offer and the net outcome of the trial? This difficulty was identified by Porter QC DCJ in Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd, [20] where his Honour considered offers of this kind: [21] 'It might be argued that the offers should be considered against the net outcome on the claim and counterclaim. That is plainly how it was put by the first defendant and is consistent with the form of the judgment. However, I cannot see how the fact that a judgment may be given for a net sum under Rule 173 permits the Court to ignore Rules 360 and 361 and to instead consider the offers as offers which ignore the claim and focus just on the net result of claim and counterclaim.'"
But here, for the reasons I have set out, it is possible to identify what part of the offer related to the claim and what part related to the cross-claim.
Further, because of the notations made to the 19 April 2024 orders, the problem identified by his Honour does not arise. That is because, although the "single judgment" represented the "net result of [the] claim and counterclaim", the parties' notations explained how that "net result" is calculated, thus enabling the analysis required by the rules. [22]
Mr Crossland did not point to any other circumstance which would warrant the Court ordering "otherwise". [23]
Accordingly, the Builder is entitled to its costs on an indemnity basis from the date following the date of the offer, that is, from 30 June 2023.
My order is that the defendants/cross-claimants pay the costs of the plaintiff and the cross-defendants of the claim and the cross-claim on the ordinary basis to 29 June 2023, and on an indemnity basis from 30 June 2023.

Endnotes

Construction & Design Australia Pty Ltd v Robinson (No 2) [2024] NSWSC 376.
See principal judgment at [336].
In respect of their cross-claim.
See principal judgment at [332]-[335].
Referred to in the principal judgment at [238].
The 23 April 2020 and 26 November 2020 offers were expressed to include GST.
For example, Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8], [11] (Basten JA, McColl and Campbell JJA agreeing).
See principal judgment at [317].
Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) at [12]-[13], citing with approval Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [27] (Warren CJ, Maxwell P and Harper AJA).
See principal judgment at [291] to [306].
See principal judgment at [29], [30], [254]-[285], [287], [288].
See principal judgment at [310]-[317].
UCPR, rr 20.26(1)-(2)(a).
UCPR, rr 42.14(1), 42.15(1).
UCPR, rr 42.14(2)(b), 42.15(2)(b).
$268,583.54 - $26,206.95 = $242,376.59
[2020] QSC 1.
See Uniform Civil Procedure Rules 1999 (Qld), rr 360-361.
At [41].
[2018] QDC 248 at [49].
There was a further complication that the offers were made by multiple defendants jointly.
See [35] above.
See [36] above. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 May 2024

See Uniform Civil Procedure Rules 1999(Qld)

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