GPP Arundel Pty Ltd v Basford Pty Ltd

PROCEDURE - COSTS - INDEMNITY COSTS - RELEVANT CONSIDERATIONS GENERALLY - where the applicants' claim was dismissed - where the respondents made a Calderbank offer to settle the claim on the basis that the applicants pay 75% of the respondents costs up to the date of the offer on the standard basis and the claim be dismissed - where the applicants did not accept that offer - where the respondents submitted they should be awarded indemnity costs from the date of the offer - where the applicants submitted that they did not act unreasonable or imprudently in not accepting the offer given the limited extent of the compromise offered by the respondents and their prospects of success assessed at the date of the offer - whether the costs of the proceeding should be awarded on the indemnity basis from the date of the offer

Australian Building Insurance Services Pty Ltd v CGU Insurance Ltd [2020] QCA 256, cited.

Bulsey v Queensland [2016] QCA 158, cited.

Calderbank v Calderbank [1976] Fam 93, cited.

Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd [2016] QCA 130, cited.

Doerr v Gardiner (No 2) [2024] QCA 21, cited.

GPP Arundel Pty Ltd v Basford Pty Ltd [2025] QSC 165, cited.

Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, considered.

J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23, applied.

Leichhardt Municipal Council v Green [2004] NSWCA 341, cited.

McBride v ASK Funding Ltd [2013] QCA 130, cited.

Midland Metal Overseas Pte Ltd v Australian Cablemakers Association Ltd (No 2) [2018] NSWSC 1128, cited.

Pensini v Tablelands Regional Council [2012] QCA 137, cited.

Stewart v Atco Controls Pty Ltd (in liq) (No 2) [2014] HCA 31; (2014) 252 CLR 331, cited.

Uniform Civil Procedure Rules 1999 (Qld) r 692, r 698.

• [1] On 21 July 2025, the applicants' claim for specific performance of a letter of offer setting out terms for the grant of a new lease to the applicants was dismissed.[1] That was the consequence of the applicants' failure to establish that the respondents' agent, Mr McCarthy, had authority to bind the respondents to the terms of the letter of offer, whether by signing that document on the respondents' behalf or by communicating the respondents' acceptance of the proposed terms by signing the document and returning it to the applicants' agent, Mr Buckley.
• [2] The orders made on that date did not dispose of the respondents' counterclaim. The parties are agreed that the counterclaim should also be formally dismissed because it was defensive in nature and became superfluous when the applicants' proceeding was dismissed. I will make an order to that effect.
• [3] The remaining issue is that of costs. The parties have provided written submissions on that issue.
• [4] The applicants accept that costs should follow the event. They submit that they should be ordered to pay the respondents' costs of and incidental to the proceeding to be assessed on the standard basis.
• [5] The respondents accept that the applicants should be ordered to pay their costs on the standard basis up to and including 28 February 2025 but seek their costs on the indemnity basis thereafter. They submit an order for indemnity costs is warranted in circumstances where the applicants did not accept an offer made pursuant to the principles in Calderbank v Calderbank.[2]

• [6] On 28 February 2025, the solicitors for the respondents wrote to the solicitors for the applicants in the following terms:

"We write in light of the evidence now filed in this proceeding.

Although there is no point in attempting to litigate the merits in correspondence, and your clients will of course take their own advice, our view is that your clients' claim is doomed to fail because it will not overcome at least one of the many hurdles it faces. Express authority for Mr McCarthy to bind the respondents will not be found. Ostensible authority is, at best, very unlikely. These problems are overlaid, and exacerbated, by the difficulties with parties to the alleged agreement and the concurrent lease to the third respondent.

Despite the above, both parties will obviously incur substantial costs if the matter proceeds to trial and a significant proportion may be unrecoverable even with a favourable costs order. We are instructed by our clients therefore to offer to settle the proceeding on the basis that the parties consent to orders to the effect that:

(b) your clients pay 75% of our clients' costs up to the date of this offer on the standard basis.

In case it assists your clients' consideration of the offer, we estimate that our total costs and disbursements up to the date of this offer are approximately $215,000, including counsels' fees (but exclusive of GST).

In light of the proximity of the trial dates, and extensive further work thus required, the offer is open for acceptance in writing until 4pm Friday, 7 March 2025. Acceptance is intended to create a binding settlement agreement.

The offer is made in accordance with the principles in Calderbank v Calderbank and subsequent authorities applying those principles. If the offer is not accepted and the claim is dismissed, our clients will seek indemnity costs in reliance inter alia on the offer."

• [7] The principles which govern the exercise of the costs discretion in circumstances where a Calderbank offer is not accepted were summarised in J & D Rigging Pty Ltd v Agripower Australia Ltd,[3] 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.[4] 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.[5] The party seeking costs on an indemnity basis must show that the party acted 'unreasonably or imprudently' in not accepting the Calderbank offer.[6]

[6] In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[7] 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.'"

• [8] The High Court addressed the effect of a refusal to accept a Calderbank offer in Stewart v Atco Controls Pty Ltd (in liq) (No 2),[8] as follows:

"This Court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation."

• [9] In Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd,[9] the Court of Appeal accepted that passage as setting out the law with regards to costs when a Calderbank offer has been made.
• [10] Of the matters identified in Hazeldene's Chicken Farm, the applicants accept that: the offer was made at a time when sufficient evidence had been filed to considers its merit; the time allowed for them to consider the offer was reasonable; the terms of the offer were intelligible; and, that the offer foreshadowed an application for indemnity costs in the event the applicants rejected it.
• [11] The applicants oppose an order for indemnity costs on the basis that they did not act unreasonably or imprudently in not accepting the Calderbank offer given the limited extent of the compromise offered by the respondents and the prospects of success of the applicants' claim for specific performance, assessed at the date of the offer.

• [12] The compromise offered by the respondents was a reduction of 25% of the costs they had incurred up to the date on which the offer was made and might seek to recover on the standard basis if the proceeding was dismissed.
• [13] I accept the respondents' submission that this amounted to a genuine offer of compromise. That submission is supported by authorities which recognise that, in the circumstances of a particular case, an offer to forego an entitlement to costs may amount to a genuine offer of compromise,[10] particularly where the proceeding does not involve a claim for damages or compensation[11] but is an all or nothing claim such as a claim for specific performance.[12] However, I still regard the extent of the compromise offered in relation to costs incurred to the date of the offer as limited.
• [14] I also have regard to the benefit which would have flowed to the applicants if they had accepted the offer and brought the litigation to an end. Neither the applicants nor the respondents would have risked further costs.[13] With the benefit of hindsight, the applicants would have avoided being exposed to payment of the respondents' costs incurred after the offer was not accepted, including the respondents' costs of the trial. Whether this further benefit ought to have been regarded as a sufficient incentive for the applicants to accept the Calderbank offer requires consideration of the second matter upon which the applicants rely.

The applicants' prospects of success, assessed as at the date of the offer

• [15] The respondents submit that the applicants' assessment of their prospects at the time the offer was made (after affidavit evidence had been filed) ought to have been to the same effect as the subsequent assessment of the court following the trial. That is, an objective examination of the parties' affidavit evidence should have revealed to the applicants that:

(a) the respondents had a strong case that Mr McCarthy had no actual authority to bind the respondents to a new agreement, and that there was no relevant holding out by the respondents of Mr McCarthy as having authority to bind them to a new agreement;

(b) the applicants' own evidence would not establish reliance by them on any holding out of Mr McCarthy by the respondents as having authority to sign the letter of offer or to communicate their acceptance of the offer.

• [16] While that was the conclusion ultimately reached in dismissing the applicants' claims, I am not persuaded that this should have been apparent at the time the applicants received the offer. I certainly do not consider that the applicants should have come to the view that their claim was "doomed to fail" as the respondents stated in the offer. As Morrison JA and Livesay AJA observed in Doerr v Gardiner (No 2),[14] few parties are in a position to predict with certainty the outcome of litigation. For that reason, some latitude must be afforded to parties in pursuit of their legal rights.
• [17] It is important not to lose sight of the fact that the applicants were considering the offer in circumstances where there was no dispute that Mr McCarthy (the agent engaged by the respondents to negotiate the proposed terms of a new lease) had signed a copy of the letter of offer in a manner which, on its face, indicated the respondents' acceptance of the proposed terms. The issue of Mr McCarthy's authority to bind the respondents to the terms of the letter of offer was always critical, but, having considered the evidence and the parties' submissions at trial, I am not persuaded that, at the date of the offer and without the benefit of hindsight, the applicants should have assessed their prospects of success on that issue as anything less than arguable.

Did the applicants act unreasonably or imprudently in failing to accept the offer?

• [18] In determining whether to award indemnity costs after the rejection of a Calderbank offer, the test of reasonableness is applied to balance the objective of encouraging settlement with the competing and equally important objective of not discouraging potential litigants from bringing their dispute to the courts.[15]
• [19] Ultimately, in balancing those considerations, I am not persuaded that the applicants acted unreasonably or imprudently in not accepting the Calderbank offer. To accept the offer the applicants would have had to abandon their claim for specific performance; a claim which was at least arguable. Given those prospects of success, the benefits of accepting the offer, being both the limited compromise offered in respect of costs the respondents had occurred to the date of the offer as well as avoiding exposure to payment of the respondents' costs thereafter, were limited when compared to the price of foregoing the right to pursue the claim for specific performance. Those benefits were not such a financial incentive that a reasonable person in the applicants' position would have accepted the offer. Put another way, it was not unreasonable for the applicants to seek to have their claim for specific performance determined at trial rather than accepting the offer.
• [20] I will order that the applicants are to pay the respondents' costs of and incidental to the proceeding to be assessed on the standard basis if not agreed. For the avoidance of doubt, this includes payment to the respondents of their costs of the counterclaim, their costs thrown away by reason of the adjournment granted on 25 March 2025 for the applicants to amend the originating application and statement of claim,[16] and their costs of pleading in response to those amendments and putting on further evidence.[17]

[1] GPP Arundel Pty Ltd v Basford Pty Ltd [2025] QSC 165.

[2] [1976] Fam 93 (Calderbank).

[3] [2014] QCA 23, [5]-[6] (J & D Rigging).

[4] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at

441 [20]; [2005] VSCA 298 at [20].

[6] McBride v ASK Funding Ltd [2013] QCA 130 at [65].

[7] [2005] 13 VR 435 at 442 [25], an authority frequently cited with approval in this and other Australian

[8] [2014] HCA 31; (2014) 252 CLR 331, 334 [4] (Stewart).

[9] [2016] QCA 130, [2]. See also Bulsey v Queensland [2016] QCA 158, [75]; Australian

Building Insurance Services Pty Ltd v CGU Insurance Ltd [2020] QCA 256, [12].

[10] Leichhardt Municipal Council v Green [2004] NSWCA 341, [36]-[37].

[11] Midland Metal Overseas Pte Ltd v Australian Cablemakers Association Ltd (No 2) [2018] NSWSC 1128, [19].

[12] Pensini v Tablelands Regional Council [2012] QCA 137, [67].

[14] [2024] QCA 21, [18].

[16] Those costs were reserved when the adjournment was ordered and, pursuant to r 698 of the Uniform Civil Procedure Rules 1999 (Qld), follow the event unless the court orders otherwise.

[17] Pursuant to r 692(2) of the Uniform Civil Procedure Rules 1999 (Qld) costs thrown away by an amendment must be paid by the party who makes the amendment unless the court orders otherwise.