GBAR (Australia) Pty Ltd & Ors v Brown & Anor

[1] On 21 February 2020, the applicants' claims were dismissed, judgment was pronounced for the respondents and reasons were published.[1] The parties agreed that short written submissions on costs would be provided sequentially.

[2] The respondents' written submissions were received on 21 February 2020 and the applicants' on 28 February 2020. To their written submissions, the respondents attached a copy of a letter dated 15 December 2017, passing between their solicitors and the solicitors for the applicants. It contained an offer to compromise the whole of the proceeding by discontinuance of the applicants' claim with each party bearing their own costs of the proceeding and with the applicants releasing the respondents from all claims (whether made in the proceeding or not). Evidently, the applicants did not accept that offer.

[3] The issue for decision is whether the court should award the respondents their costs on the indemnity basis for part of the proceeding.

[4] All parties accepted that the ordinary principle is that costs follow the event and that such costs, if not agreed, are assessed on the standard basis.

[5] However, the respondents submitted the rejection of their offer was "entirely unreasonable" and that the court should order the applicants to pay the respondents' costs on the standard basis to 30 December 2017, when the offer expired, and on the indemnity basis from 31 December 2017.

[6] The respondents pointed to the matters canvassed in the offer letter. These included: the reasons of Peter Lyons J, delivered on 14 October 2016, in the course of dismissing an application for interlocutory orders enforcing some of the restraints;[2] the approach adopted by the applicants' expert, Mr Cook, on the applicants' instructions; and issues about the applicants' pleaded case on causation. They also identified that the outcome of the trial was influenced by questions of credit, the effect of the evidence about trade of the two firms, the absence of evidence for parts of the applicants' case, the court's conclusions on the various restraint covenants and the alleged implied term. On the basis of all these factors, the respondents submitted the applicants' case had weak prospects.

[7] The applicants' written submissions identified that the respondents' offer to settle was not made in accordance with the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). Had it been made under the rules, the respondents would not have been entitled to indemnity costs, but only to their costs on the standard basis after the date their offer was served - and they would have had to pay the applicants' costs on the standard basis up to and including that date.[3]

[8] The applicants also contended that the respondents' offer did not include any element of commercial compromise on their part or any benefit to the applicants. In the circumstances, the applicants contended, it was not a genuine offer and it was reasonable for the applicants to reject it.

[9] Where a party has acted in the litigation in a way that is "plainly unreasonable", so as to have caused another party to incur increased costs, the court may redress the position by allowing the affected party to recover its costs on the more generous basis.[4] This question of unreasonableness encompasses the prosecution of the party's claim or the conduct of its defence,[5] and includes the imprudent refusal of an offer to compromise.[6] In such cases, other things being equal, the court may decide an award of costs on the standard basis would be insufficient to protect the successful party and an indemnity costs order is appropriate as a "means of achieving a fairer result".

[10] The purpose of a costs order in the context of an offer of compromise is the same, whether the offer is made under part 5 of the UCPR or in accordance with the well-known principles in Calderbank v Calderbank.[7] It is to encourage resolution of disputes without the necessity of a trial.[8]

[11] The respondents did not offer to pay any sum to the applicants or to refrain from any conduct for any period. Although the offer did not require the applicants to pay any of the respondents' costs, it did require a complete release of "all current and future claims arising from or in connection with" the subject matter of the proceeding or the various commercial agreements made by the parties. Such a release sought would cover matters outside the ambit of the proceeding.

[12] As Tamberlin J observed in Baygol Pty Ltd v Foamex Polystyrene Pty Ltd:

"A distinction has been drawn in the authorities between a genuine offer of a realistic compromise, and a demand to capitulate in circumstances where the case has some prospect of success. The question posed is whether the offer advanced by the party is designed merely to trigger costs sanctions, in which case it would not be treated as a genuine offer of compromise, or whether it is an offer of a significant benefit, in which case it could be so treated. A refusal to acknowledge any substance in the opposing party's case will usually not be sufficient of itself to warrant the making of a costs award on a solicitor client basis."[9]

[13] Although in the form of an offer of compromise, the applicants are correct to characterise the respondents' offer as one that "did not constitute any real or genuine compromise". The applicants' decision not to accept the offer, at that time, could not be fairly considered unreasonable.[10]

[14] By rejecting the offer, the applicants continued to involve the respondents in the proceeding, including a trial that lasted three days. As the respondents concede, the applicants are entitled to an order for their costs of the proceeding on the standard basis.

[15] The order of the court will be that the applicants pay the respondents' costs of the proceeding on the standard basis.

[1] GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14.

[2] GBAR (Australia) Pty Ltd v Brown [2017] 2 Qd R 256.

[4] Tector v FAI General Insurance Co Ltd [2000] QCA 426; [2001] 2 Qd R 463 at 464 [5] (McMurdo P, Pincus JA and White J).

[5] Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616C-D (Mason P).

[6] Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 231-232 (Sheppard J).

[7] [1976] Fam 93.

[8] Beardmore v Franklins Management Services Pty Ltd [2002] QCA 60; [2003] 1 Qd R 1 at 24 [106] (Ambrose J).

[9] [2005] FCA 1089 at [12].

[10] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at 442 [25] (Warren CJ, Maxwell P and Harper AJA), cited with approval in Reeves v O'Riley [2013] QCA 285 at [4] (Holmes and Muir JJA and Mullins J).