Deane Projects Building Pty Ltd v Kinda Kapers Holdings Pty Ltd

District Court of NSW|2021-06-01

COSTS Judgment

On 28 April 2021 judgment was entered in this matter following the parties' agreed adoption of a referee's report which quantified the parties' respective claims. The referee's report was made following a hearing on liability, which occurred between 6 and 9 October 2020 and findings made by me in a judgment delivered on 19 October 2020 (Deane Projects Building Pty Ltd v Kinda Kaper Holdings Pty Ltd [2020] NSWDC 622).
In essence, the plaintiff (and cross-defendant) ('Deane Projects) obtained a damages award in the sum of $38,461.16 on the statement of claim and the cross-claimant (and defendant) (' Kinda Kapers'') obtained a damages award in the sum of $254,810.63.
The parties were given the opportunity to make submissions on costs, being the only remaining issue.
Kinda Kapers applies for the following costs orders: 1. In respect to the statement of claim: 1. each party bear their own costs in respect of the statement of claim up to 25 September 2020; and 2. Deane Projects pay Kinda Kapers' costs in respect of the statement of claim on an indemnity basis from 25 September 2020. 1. Deane Projects pay Kinda Kapers' costs of the cross-claim: 1. on the ordinary basis up to 25 September 2020; and 2. on an indemnity basis from 25 September 2020.
This application is founded upon Kinda Kapers' service of a rules offer it served on Deane Projects on 25 September 2020 and, on the same date, a Calderbank offer in materially similar terms.
Deane Projects' position is that: 1. In respect to the statement of claim, it agrees with Kinda Kapers' order in 4(a)(i) above, but disagrees that it should pay Kinda Kapers' costs in relation to that claim on an indemnity basis from 25 September 2020. 2. In respect to the cross-claim, it agrees with Kinda Kapers' order in 4(b)(i), but disagrees that it should pay Kinda Kapers' costs in relation to that cross-claim on an indemnity basis from 25 September 2020.

THE OFFER OF COMPROMISE

The terms of the rules offer made on 25 September 2020 were: "(1) In relation to the Plaintiff's claim: Judgment in favour of the Defendant; No order as to costs; (2) In relation to the Cross-Claim: (a) Judgment in favour of the cross-claimant in respect of its cross-claim against the Cross-Defendant in the amount of $125,000. (3) This offer is made in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (4) This offer will remain open for acceptance until 12:00 noon on 1 October 2020."
In the letter (expressed to be 'without prejudice save as to costs' and without admission) which served the rules offer, the solicitor for Kinda Kapers argued certain points to sustain its view that the offer represented a genuine compromise, being that: 1. Deane Projects' 'prior conduct claim' was bound to fail as an attempt to avoid the contractual regime on variations; 2. Whatever success that Deane Projects' might obtain on its variations claim was likely to be overwhelmed by Kinda Kapers' quantified claim which was substantially likely to exceed any amount recovered for variations.

Consideration

As indicated, the issues are what costs orders should be made, on the respective claims, from 25 September 2020.

The Statement of Claim

Deane Projects submits that, on the statement of claim, it obtained a better result than what was offered for this part of the offer of compromise, or Calderbank letter. The parties should bear their own costs on the statement of claim, for the entirety of the proceeding, and not just up to 25 September 2020.
Kinda Kapers argues that after concessions made by it, for those items of property adjudicated by the referee, Deane Projects went backwards.
I do not accept Deane Projects' submission (which was directed to the costs of the cross-claim, as to which see below) that r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') is necessarily antithetical to having two claims separately identified within the terms of an offer. However, an offeror who proposes to use the rule for the purposes of attempting to compromise more than one claim is taken to be astute to the possibility that there may be contrasting outcomes, in the end result, in each claim.
In this regard, as Deane Projects submits, it was not the case that it achieved a 'no more favourable outcome' on the statement of claim than what was offered in the rules offer (and the Calderbank offer).
In my view, it does not matter that the sum that Deane Projects obtained was procured through eventual concessions by Kinda Kapers. The latter did not consent to a judgment on the statement of claim (to be stayed pending the outcome of the cross-claim). The former was put to the expense of proving its claim; and it bettered the result offered for it, on this part of the offer of compromise and Calderbank letter.
The appropriate result is that each party bear their own costs on the statement of claim.

The cross-claim

Deane Projects submits that the rules offer was invalid for several reasons. First, it was not open for a reasonable period of time (per r 20.26(5) of the UCPR). In fact, the rules offer was only open for 6 days. This was unreasonable in the absence of explanation for why it could not have been served earlier.
Secondly, the terms of the offer required the parties to enter into a settlement deed (including release), which, it is said, is contrary to r 20.26 of the UCPR.
Thirdly, the rules offer was not capable of being accepted other than by accepting the offer on more than one claim. This was also said to be contrary to r 20.26(2)(a) of the UCPR. As I understand the submission, it is not permissible to roll-up in a single rules offer compromises of multiple claims.
Kinda Kapers argues, first, that the period for acceptance was reasonable in the circumstances. Citing Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No.2) [2008] NSWCA 85 at [20], it argues that although it was only open for acceptance for 5 days, the parties had commissioned extensive expert reports on the variation and defect claims and ample opportunity to assess that claim.
In my opinion, given the proximity of the offer to the commencement of the hearing, it served as a distraction to Deane Projects from its intense preparation for the hearing. Further, because the offer was rolled-up to deal with the two claims, whose quantum was ultimately adjudicated by a referee (subsequent to the offer), it would have been a difficult exercise for Deane Projects to confidently compare the global amount offered against its own assessment. In the circumstances, it was not unreasonable for it to reject the offer.
I accept, therefore, Deane Projects' first submission. It is unnecessary to consider its second and third submissions.
The rules offer was invalid.
That leaves the Calderbank offer for consideration. Deane Projects did not separately make submissions about that offer. However, as Kinda Kapers' reference to authority on Calderbank offers recognise, the time allowed for consideration of the offer, and the stage of the proceeding, are also relevant considerations to this type of offer; as well as the extent of the compromise offered.
Here, the compromise was one-sided. Kinda Kapers offered nothing for the plaintiff's claim. It offered a sum on its cross-claim which it subsequently bettered, but, as indicted, it took a referral to bring about that result.
In my view, it was not unreasonable for Deane Projects to reject the Calderbank offer.
This being so, the appropriate costs order on the cross-claim is that Deane Projects should pay Kinda Kapers' cross-claim on the ordinary basis, as agreed or assessed.

Security for costs

Kinda Kapers obtained a consent order on 26 July 2019 that Deane Projects provide security for its costs in the sum of $60,000. Following its loss on the statement of claim, Kinda Kapers applies for release of that sum.
Deane Projects resists that application. It submits that the security should be retained by the Court until conclusion of the costs assessment.
In my view, the status quo should hold until the costs assessment; which will preserve the interests of both parties until the assessment process is completed.

Orders

For the above reasons, the Court makes the following orders: 1. Each party should bear their own costs on the statement of claim. 2. Deane Projects is to pay Kinda Kapers' costs on the cross-claim on the ordinary basis, as agreed or assessed.

Amendments 01 June 2021 - Fixed typo 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: 01 June 2021

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Judgment (8 paragraphs)

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