Davis v Perry O'Brien Engineering Pty Ltd [2026] QSC 70

(a) the Sellers pay the Buyers' costs of and incidental to the account ordered by paragraph 3 of the judgment to be assessed on the indemnity basis;

(b) the Sellers pay the Buyers' costs of and incidental to the amended application to be assessed on the indemnity basis;

(c) the Sellers pay the Buyers' costs of and incidental to the 5 June application to be assessed on the indemnity basis.

[4] The amended application had variously sought:

(a) by paragraph 1, a declaration that the Sellers' debt to the Buyers the subject of paragraph 2 of the judgment was reduced or extinguished by set-off in equity of the sum of $910,710.06 plus interest of $388,265.07 up to and including 11 December 2023, being the amount which the Company was required to account to the Sellers;

(b) in the alternative to paragraph 1, by paragraph 2(a), a declaration that the sum of $350,000 plus interest of $149,216.29 up to and including 11 December 2023 be set off in equity against and reduced or extinguished the Sellers' debt to the Buyers in paragraph 2 of the judgment;

(c) in the alternative to paragraph 1, by paragraph 2(b), a further order in the Court's inherent jurisdiction that the sum of $560, 710.66 plus interest of $239,048.75 up to and including 11 December 2023 be set off against the Sellers' debt to the Buyers in paragraph 2 of the judgment;

(d) further to paragraphs 1 and 2, by paragraph 3(a), further orders in the Court's inherent jurisdiction that the Company's debt to the Sellers in paragraph 1 of the judgment of $299,152 plus interest of $127,538.14 up to and including 11 December 2023 be set off against the Sellers' debt to the Buyers in paragraph 2 of the judgment;

(e) further to paragraphs 1 and 2, by paragraph 3(b), further orders that the Company's obligation to pay costs in paragraph 7 of the judgment, and the balance of the Company's debt to the Sellers in paragraph 1 of the judgment after the set-off referred to in sub-paragraph 3(a) of the amended application, be set off against the Sellers' obligation to pay the Buyers' costs in paragraph 8 of the judgment.

[5] The 5 June application had been returnable on 17 June 2025 and sought the determination of the separate questions as well as a stay of execution. The consent orders made on 17 June 2025 identified, and set down for hearing, the separate questions. The consent orders included an order, "costs in the proceeding".

[6] In relation to the further costs orders, the Buyers relied upon a letter dated 12 March 2025 marked "Without Prejudice Save as to Costs" sent by the Buyers' lawyers to the Sellers' lawyers ("the Calderbank letter").

[7] The Calderbank letter relevantly provided as follows:

"We have instructions to make a commercial offer to resolve the account ordered by paragraph 3 of the judgment dated 11 December 2023 (the Account), and the plaintiffs amended application dated 31 January 2025 (the Application).

The second and third defendants hereby offer to resolve the Account and the Application by agreeing to the following orders:

1. A declaration that the plaintiffs' debt to the second and third defendants in paragraph 2 of the judgment dated 11 December 2023 is reduced by set off of the sum of $350,000.00 plus interest of $149,216.29 up to and including 11 December 2023, being the amount that the first defendant is required to account to the plaintiffs pursuant to paragraphs 3 and 4 of the judgement dated 11 December 2023.
2. The Application otherwise be dismissed.
3. There be no order as to the costs of the Account or the Application.

We make the following observations as to why we regard the above offer as reasonable and one prudently to be accepted:

1. As you are aware, the second and third defendants contend that the Account should be limited to sum of $79,544.54. This contention is supported by significant evidence filed on behalf of the defendants.
2. In any event, the maximum amount that can be set off pursuant to the Account is $350,000.00, being the balance of the Settlement Loan that was repayable under the 9 December Deed following completion of the sale. This was accepted by Justice Applegarth in his Honours reasons dated 1 November 2023 (at paragraphs [182], [396], [488], [495]-[496] and [513]) and his Honours further reasons delivered 8 December 2023 at [32] and [67], and was also accepted by the Court of Appeal in its reasons dated 28 February 2025 at [35], [74] and [77]. We consider it is not open for the plaintiffs to contend that the account can be for an amount in excess of $350,000.00.
3. As to the remainder of the Application, it effectively seeks to re-enliven the set-off argument which was determined by Justice Applegarth in his reasons delivered 8 December 2023. In that regard, we understand the plaintiffs will contend that the liquidation of the first defendant enlivens the Court's inherent jurisdiction to reconsider this matter. We disagree - the absence of mutuality was a significant factor in the decision of Justice Applegarth dated 8 December 2023 and nothing has changed in that regard.
4. Should the second and third defendants successfully oppose the Application, they will be entitled to a costs order.

Having regard to the above matters, we consider the second and third defendants' offer represents a significant compromise on the part of the second and third defendants given their good prospects of reducing the Account to an amount significantly less than $350,000.00 and otherwise succeeding in having the Application dismissed.

The above offer remains open for acceptance until 4.00pm on Friday 28 March 2025. This offer is made under chapter 9 part 5 of the Uniform Civil Procedure Rules 1999 and in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333.

In the event the plaintiffs do not accept this offer prior to its expiry and the second and third defendants are ultimately successful in having the Account reduced below $350,000.00 and/or having the Application otherwise dismissed, it is the second and third defendants' to rely upon the plaintiffs' rejection of this offer in support of an application that the plaintiffs pay the second and third defendants' costs of the Account process and the Application on the indemnity basis."

[8] The Sellers resist the further costs orders sought by the Buyers. The Sellers submit:

(a) as to the account, the Buyers should pay the Sellers' costs of the account up to and including 12 March 2025 on the standard basis and the Sellers should pay the Buyers' costs after 12 March 2025 on the standard basis;

(b) as to the amended application:

(i) in respect of the relief sought by paragraphs 1 and 2 of that application, the Buyers should pay the Sellers' costs on the standard basis up to 12 March 2025 and the Sellers should pay the Buyers' costs of the application after 12 March 2025 on the standard basis.

(ii) in respect of the relief sought by paragraph 3 of that application, the costs have already been dealt with by the costs order made on 10 March 2026

(c) as to the 5 June application, a costs order has already been made on 17 June 2025.

[9] In McGee v Independent Assessor & Anor [No 2],[2] Cooper J (with whom Dalton and Bond JJA agreed) outlined the following principles relevant to Calderbank offers:

"[21] Rule 766(1)(d) of the UCPR provides that this Court may make an order as to 'the whole or part of the costs of an appeal it considers appropriate'. The wide discretion conferred by this rule is informed by the same principle which governs the award of costs at first instance pursuant to s 681 of the UCPR: that is, the usual exercise of the discretion is that the costs of an appeal follow the event.

[22] The first respondent accepts that a recognised circumstance in which the Court may exercise its discretion in favour of ordering that costs be assessed on the indemnity basis is where the party against whom the order is sought unreasonably rejects or fails to accept a Calderbank offer. That is, a party's rejection of an offer to settle does not of itself warrant an order for indemnity costs. There is no presumption or predisposition in favour of ordering assessment on the indemnity basis simply because a party to an appeal rejects an offer to settle and subsequently obtains a less favourable judgment.

[23] The principles which govern the exercise of the discretion in circumstances such as those in the present appeal were summarised in J & D Rigging Pty Ltd v Agripower Australia Ltd, as follows:

'[5] The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs. The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances. The party seeking costs on an indemnity basis must show that the party acted 'unreasonably or imprudently' in not accepting the Calderbank offer.

[6] In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2), the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:

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

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

(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 an indemnity costs in the event of the offeree's rejecting it.'"

[10] I will deal first with the costs of the account the subject of paragraph 3 of the judgment. Paragraph 3 of the judgment should not be viewed in isolation from paragraph 4 of the judgment. Although the company was ordered to account, the effect of the set off provided for by paragraph 4 of the judgment meant that the real and practical dispute as to the amount of the account was a dispute as between the Sellers and the Buyers. The account was, in substance, a remedy provided for the benefit of the Sellers as against the Buyers, the final amount of the account being set off against the Sellers' liability under the judgment obtained by the Buyers pursuant to paragraph 2 of the judgment. Notably, the solicitor for the Buyers had "the active conduct of this matter on behalf of the defendants". In my consideration, in the ordinary course, the Buyers would pay the costs of the account. I say the ordinary course because, in this case, the Calderbank letter has intervened. The offer contained in the Calderbank letter allowed the Sellers the maximum amount that they could expect to receive on the account. The offer made no claim for costs and involved the balance of the relief claimed in the amended application, all of which related to claims made by the Sellers regarding the set off and the account which were not ultimately vindicated, being dismissed. The offer was clear in its terms and represented a significant compromise. I am satisfied that it was imprudent of the Sellers to reject the offer and that their refusal of the offer was, in the circumstances, unreasonable. The Buyers should pay the Sellers' costs of the account until 12 March 2025 on the standard basis and the Sellers should pay the Buyers' costs of the account from 12 March 2025 on the indemnity basis.

[11] I am not satisfied that any further order as to costs in relation to the amended application is warranted. The Sellers sought their costs of paragraphs 1 and 2 of the amended application up to and including the date of the Calderbank letter. However, the Sellers did not establish any entitlement to the relief sought by paragraphs 1 and 2 of the amended application. As to paragraphs 1, 2 and 3 of the amended application, I am not satisfied that any further order for costs is required to be made in the Buyers' favour in addition to the costs orders which have already been made in their favour on 10 March 2026 and in relation to the account.

[12] As to the costs of the 5 June application, I am not prepared to make any further costs order in relation to those costs. By the consent orders made on 17 June 2025, the parties agreed to an order for costs in relation to that application. The consent order relevantly provides "costs in the proceeding". It may be observed that a proceeding starts when the originating process is issued by the Court.[3] The proceeding BS 5928 of 2016 was started by an originating application. Directions were later made for the filing and service of pleadings which would include a counterclaim. Paragraph 7 of the judgment provided that the Company pay 70% of the Sellers' costs of and incidental to the claim to be assessed on the standard basis. Paragraph 8 of the judgment provided that the Sellers pay 90% of the defendants' costs of and incidental to the counterclaim to be assessed on the standard basis. The amended application and the 5 June application were filed and served after the judgment. The amended application and the 5 June application were not originating processes.[4] They were each filed within proceeding BS 5928 of 2016. After the judgment which included paragraphs 7 and 8, the parties agreed to consent to an order "costs in the proceeding". I am not prepared to go behind the parties' agreement to now fashion some new order in relation to the costs of the 5 June application.

(a) The second and third defendants shall pay the plaintiffs' costs of the account the subject of paragraph 3 of the judgment filed 20 December 2023 (court file index 80) up until 12 March 2025 to be assessed on the standard basis.

(b) The plaintiffs shall pay the second and third defendants' costs of the account the subject of paragraph 3 of the judgment filed 20 December 2023 (court file index 80) from 12 March 2025 to be assessed on the indemnity basis.

[1] The separate questions had been identified by earlier orders made on 17 June 2025.

[2] [2024] QCA 7.

[3] Uniform Civil Procedure Rules 1999 (Qld) ('UCPR'), r 8(1).