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1. On 16 April 2026, the court delivered judgment in respect of a dispute about costs between legal practitioners and their former clients: Danthanarayana v Fogarty & Ronald [2026] ACTSC 99 (Danthanarayana). The appellants had challenged the payment of four invoices and appealed the assessment of those costs by a registrar of this court on 14 February 2023.

2. The substantive orders made on the appeal were: (1) The appeal is allowed. (2) The Certificate of Costs Assessment of the court dated 21 October 2022 is set aside and in lieu thereof the Court assesses the costs as follows: (i) The bills of costs of Karen Narelle Fogarty and James Charles McNair Ronald, being the first applicants in the proceeding, be allowed in the amount of $194,470.35 plus interest in the sum of $53,004.36. (ii) The bills of costs of Andrew John Greinke, the second applicant in the proceeding, be allowed in the amount of $11,495 plus interest in the sum of $6,112.67 plus any further interest payable pursuant to r 1620 of the Rules.

3. A timetable was set for any arguments on costs, of both the appeal and the assessment before the registrar. The parties have now filed submissions on that question and the matter of the appropriate orders for costs has been considered on the papers.

Costs of the appeal

4. The parties both agreed that the respondent to the appeal (being the solicitors) should pay the appellants’ costs of the appeal on a party and party basis up to and including 7 May 2024.

5. The parties disagreed as to the proper disposition of the costs of the appeal thereafter.

6. The appellants sought that the respondent be required to pay the appellants’ costs of the appeal on a solicitor and client basis from 8 May 2024. The basis for that submission was an offer made on 7 May 2024 which was rejected by the respondent. The appellants argued that: (a) It was an offer made under r 1002 of the Court Procedures Rules 2006 (ACT) (Rules), entitling the appellants to an order for solicitor/client costs in accordance with r 1010 of the Rules because the outcome was no less favourable to the appellant; or (b) The offer was a valid Calderbank offer (named after Calderbank v Calderbank [1975] All ER 333).

7. The respondent contended that there was no basis for any special costs in favour of the appellants and that the costs of the appeal should be payable on a party and party basis.

8. I have determined that the offer did not enliven the consequences under r 1010 of the Rules and further, to the extent that the offer made was an offer of compromise at common law, it was not unreasonable for the respondent to reject the offer. Accordingly, the costs of the appeal are payable on the ordinary basis.

Reasons why the offer was not effective under the Rules

9. It is significant here that, as stated in Danthanarayana at [6]-[8], the costs assessment that was being undertaken was pursuant to s 296 of the Legal Profession Act 2006 (ACT). It was not an assessment pursuant to Div 2.17.5 of the Rules.

10. The offer made on 7 May 2024 stated: The offer is made in accordance with the principles espoused in Calderbank … and/or Rule 1814 of the Court Procedures Rules 2006 (ACT). …

11. Rule 1814 deals with Calderbank offers made as between parties under Division 2.17.5 of the Rules. That is, the offer referred to the incorrect part of the Rules. It did not refer to it being made under Part 2.10 of the Rules, which applied pursuant to r 5001 of the Rules.

12. Rule 1002(2)(d) provides that an offer under the rule must state that the offer has been made in accordance with the part. The offer did not comply with that rule. A non-compliant offer is not effective to enliven r 1010 of the Rules.

13. There were other difficulties with the offer that would have required consideration, such as whether the time for which the offer was open for acceptance (3 days) leading up to the hearing of the appeal the following week was “reasonable”, and whether the judgment obtained was “no less favourable” to the respondents than the terms of the offer in circumstances where the assessed costs awarded payable to the respondents following the appeal were $194,470.35 plus interest in the sum of $53,004.36 and the offer the appellant made was to pay $175,000 inclusive of any interest and costs.

14. However, it is unnecessary to consider those matters at this point because the lack of reference to the offer being made under the relevant rule was fatal to it being effective under the Rules.

Reasons why it was not unreasonable for the respondent to reject the 7 May 2024 offer

15. The principles applicable to Calderbank offers have been set out in Hulanicki v Walton (No 2) [2015] ACTCA 45 at [13]-[16] and I have also referred to a number of the relevant considerations in Southwell v Staite (No 2) [2019] ACTSC 83 at [7]-[17] and in Marhaba v Chen (no 2) [2024] ACTSC 288 at [35]-[40].

16. The offer in question here had the following features: (a) It was marked “without prejudice save as to costs”. (b) It was made on 7 May 2024 and was open for acceptance until 10 May 2024 in circumstances where the appeal of the costs assessment was listed for hearing on 13 May 2024. (c) It offered to pay $175,000 inclusive of any interest and costs “on or before 15 September 2024”. (d) It contained further terms which included (among others): (i) that the parties agree not to enforce a costs order made in the appeal proceeding dated 26 April 2023 (but made on 2 May 2023) which was in the respondents’ favour; (ii) the first respondent withdraw all caveats, and release and/or waive its charge/securities at no cost to the appellants in relation to a number of properties; (iii) there be no orders as to costs of both the assessment and the appeal; and (iv) the parties filing orders releasing the security monies of $20,000 paid into court by the appellants pursuant to orders made on 2 May 2023, without specifying whether those monies would be released to the appellants or the respondents.

17. As the offer was inclusive of costs, the appellants included some information about what their costs were, apparently for the purpose of enabling the respondents to consider the true value of the offer. This is what was stated: Appellants’ Costs to Date The Appellants have been billed approximately $169,500 with ALCG for the costs assessment including a small component for travel and accommodation. This does not include the costs incurred with Slater & Gordon who were engaged in 2019 and 2020. In my estimation ALCG’s costs would equate to approximately $100,000 on a party and party basis. I consider this to be a reasonable calculation based on a 60% recovery, noting that counsel was not engaged by the Appellants. The Appellants have been billed $41,625 by ALCG for the appeal (not including the costs of seeking an extension of time to file the notice of appeal). Taking into account, fees rendered, WIP and Adero Law’s agents fees, the costs of appeal current sits at approximately $70,000. …

18. In order to rely on a Calderbank offer, the offer needed to first fulfill the formal requirements for it to constitute a genuine offer of compromise discussed in the authorities to which I have earlier referred. Then, on the substantive question, the appellants needed to establish at least two fundamental requirements: (a) The first was that the offer the appellants made was equal to or exceeded the amount of the assessed costs that the respondents succeeded in recovering on the assessment. (b) The second was that respondents unreasonably rejected the offer.

19. As it was the appellants who sought to rely on the offer, they bore the onus on these matters. They made two key submissions: (a) Notwithstanding that the assessed costs were $194,470.35 plus interest in the sum of $53,004.36 and the offer the appellants made was on its face less than that, being $175,000 inclusive of interest and costs, when the costs consequences of the appeal and the costs assessment (discussed below) are taken into account, the offer was more favourable because the net recovery for the respondents would be reduced to approximately $75,474.71. That figure was arrived at by the appellants estimating their costs on assessment and on appeal on the ordinary basis. (b) The requirement to withdraw the caveats in respect of the three properties was entirely reasonable because without the release of the caveats, the appellants could not make payment from the sale of any property.

20. The “all-in” approach adopted by the appellants of making their offer inclusive of costs and relying on estimates of their legal costs was not prohibited (see Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [115]-[116]) but it did make it difficult to assess the quantum of the offer and the separate costs component of that offer, particularly in the absence of the provision of the totality of those costs (Slater & Gordon’s costs on the assessment were not included).

21. The offer was also only open for three days, which might have been adequate time in the circumstances of an impending hearing if the quantum of the offer were clear. Here though, it was presented as a package deal and required the respondents to not only rely on an opposing solicitor’s estimates but to give up prior costs orders in their favour.

22. As to the terms requiring the withdrawal of caveats, the respondents argued that it was not unreasonable to reject an offer that contained such additional terms, where those obligations were outside the scope of the proceedings and would have resulted in a fundamental change to the commercial arrangements between the parties, namely that a secured debt to the solicitors (whatever its final quantum) became unsecured.

23. There is some force in that submission. While offers that include relief sought other than monetary claims are not excluded from consideration under the Calderbank principles, such offers may complicate the process of establishing the unreasonableness of any rejection.

24. The appellants may have considered withdrawal of caveats securing interests over assets that they needed to sell in order to pay the legal costs to be reasonable. However, the test is not whether the terms of the offer were reasonable, but whether the rejection of the offer was unreasonable. It is an important distinction.

25. It should also not be overlooked that the appellants were seeking extra time to pay their proposed settlement amount. The offer was made in May 2024 and one of its terms was that they would pay the amount “on or before 15 September 2024”.

26. Taken all those circumstances together, including the lack of clarity due to the costs inclusive nature of the terms, the short time for which the offer was open, the additional requirements included and the additional time to pay sought, the appellants have not established that rejection of the offer made on 7 May 2024 was unreasonable.

27. There were earlier offers made in various amounts, which were relied upon by the appellants as part of general unreasonable conduct. However, they were not effective for similar reasons, including that none of the offers made were equal to or better than the amount that the respondents succeeded in recovering, and each offer required the withdrawal of the caveats.

Costs of the Assessment

28. The appellants further submitted that the costs order made by the registrar on 14 February 2023 in respect of the costs assessment proceeding be set aside, and in lieu thereof, an order be made that the respondents pay the appellants’ costs assessment on a party and party basis.

29. The respondents argued that the costs of the assessment before the registrar should be found in favour of the respondents, relying on s 302(3) of the Legal Profession Act. Section 302 is in the following terms: Costs of costs assessment (1) The Supreme Court must determine the costs of a costs assessment. (2) Unless the Supreme Court otherwise orders, the law practice to which the costs are payable or were paid must pay the costs of the costs assessment if— (a) on the assessment the legal costs are reduced by 15% or more; or (b) the court is satisfied that the law practice failed to comply with division 3.2.3 (Costs disclosure). (3) Unless the Supreme Court otherwise orders, if the law practice is not, under subsection (2), liable to pay the costs of the costs assessment, the costs must be paid by the party ordered by the Supreme Court to pay the costs.

30. Although this section provides for a usual outcome (thereby enhancing consistency and reducing disputes), the Supreme Court retains discretion to “otherwise order”, thereby preserving the discretion to alter the usual outcome in accordance with other discretionary considerations that generally apply to the making of costs orders in civil litigation.

31. The circumstances of the present case included the following: (a) The solicitors’ unassessed costs were $161,007.83. Of that sum $146,121.71 was owing: Danthanarayana at [15]. (b) Following the appeal, the solicitors’ assessed costs were $137,908.47 with $123,022.35 owing.

32. While that component is approaching a reduction of 15%, there were components of the certified costs that were not the subject of appeal, including $30,000 in counsel’s fees which were paid by the solicitors: Danthanarayana at [119].

33. Critically though, the findings on appeal were that: (a) The respondents had failed to comply with their disclosure obligations under ss 269 and 276 of the Legal Profession Act (being located in Division 3.2.3 of the Legal Profession Act): Danthanarayana at [57], [79] and [89]; and (b) The 2013 Costs Agreement should be set aside because it was tainted by previous non-compliances: Danthanarayana at [102].

34. Applying s 302 of the Legal Profession Act, the respondents must pay the costs of the assessment unless the court orders otherwise.

35. Further, although the amount payable to the respondents was very similar to the amount assessed when assessed on a fair and reasonable basis, the appellants did establish that interest was only payable from the date of first assessment, being 18 October 2022 (with the certificate of assessment issued on 21 October 2022) and not from the dates the bills were issued to them. That reduced the interest payable by the appellants by $63,585.72. Contrary to the respondents’ submissions, this consequence was itself substantial success.

36. Applying the compensatory foundation for costs orders, the appellants here were successful not just in establishing statutory non-compliances by the respondents but in establishing that those non-compliances had a meaningful impact on the total amount being claimed by the respondents in pursuing the assessment.

37. In so finding, it is well-appreciated that the conduct of the assessment process was unduly protracted and the objections were many and detailed, requiring a line-by-line assessment process to be undertaken, which was manifestly the dominant feature of the assessment. Following that process, the bulk of those objections were dismissed and the assessment on a different basis on appeal did not change that outcome. Requiring the law practice to fully compensate the appellants would not be a just outcome in the circumstances of this particular assessment.

38. For those reasons, the court will “otherwise order” that the law practice (respondents) must pay 50% of the costs of the costs assessment. An approach of apportionment has been arrived at as the best fit for the assessment undertaken in total, including the issues before the assessor as identified in the objections, the breaches established and their level of materiality.

Orders

39. The orders of the Court are: (1) The respondents are to pay the costs of the appeal on the ordinary basis. (2) Pursuant to s 302(2)(b) of the Legal Profession Act 2006 (ACT), the court orders the respondents to pay 50% of the costs of the assessment.

I certify that the preceding thirty-nine [39] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice McWilliam. Associate: Date: