(a) On 13 April 1995 a formal offer of compromise was forwarded to Keddies upon the basis that they bear their own costs and that a consent verdict be entered in their favour. This was accompanied by a letter detailing the basis on which it was suggested that the claim against Taylor & Scott must fail, advising that the offer was open for twenty-eight days, and asking that it be treated in accordance with the Calderbank principle.
(b) On 26 May 1995 this offer was, in substance, repeated in a letter to Hunt & Hunt, in which notice was given that if the proceedings were pursued unsuccessfully against Taylor & Scott, then costs incurred henceforth would be sought on an indemnity or a solicitor and client basis.
(c) This offer was rejected by Hunt & Hunt on 11 August 1995.
(d) On 24 April 1996 the solicitors for Taylor & Scott again wrote to Hunt & Hunt, outlining in detail their case and advising that they were still prepared to settle on the basis of the offer of compromise, provided that settlement was achieved within twenty-eight days. Again, notice was flagged of an intention to seek costs on a solicitor and client or indemnity basis.
8 In those circumstances Taylor & Scott seek costs on a party and party basis up to 13 April 1995 and upon an indemnity basis from that time.
Keddies
9 In relation to Keddies, it was established that:
(a) On 28 February 1996 the solicitors for that firm wrote to Hunt & Hunt, making a without prejudice offer of $30,000, inclusive of costs, in full and final settlement of the matter, and setting out, in some detail, the problems that they saw in the way of the plaintiff's claim against them.
(b) This offer was effectively renewed by a reminder sent on 20 May 1996.
(c) A counter offer was made on 15 July 1997 by the plaintiff's solicitors to settle the proceedings for $280,000, inclusive of costs.
(d) On 7 August 1997 Keddies' Solicitors, withdrew their earlier offer and on 27 August 1997 they rejected the plaintiff's counter offer. They seek an order for costs on a party and party basis only.
10 Section 76 (1) of the Supreme Court Act 1970 (NSW) provides as follows:
"Subject to this Act and the rules and subject to any other Act -
(a) costs shall be in the discretion of the Court;
(b) the Court shall have full power to determine
by whom and to what extent costs are to be paid; and
(c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis."
11 The proceedings were commenced at a time when Supreme Court Rules Pt 52 were in force. Those rules were superseded effective from 1 July 1994 by Supreme Court Rules Pt 52A.
12 It is not necessary to enter into any inquiry whether this requires any difference of approach as to the costs of these proceedings or any part of them, since both sets of rules recognise the power of the Court to order costs on an indemnity basis (Pt 52 r 28A and Pt 52A r 37), and contain similar provisions in relation to offers of compromise (Pt 52 r 17 (4) and (5) and Pt 52A r 22 (4) and (6)). They provide, relevantly, that:
"Where a defendant has made an offer of compromise that is not accepted by the plaintiff, and the plaintiff has obtained an order or judgment that is not more favourable to the plaintiff than the terms of the offer, then the plaintiff, unless otherwise ordered, is to be entitled to party and party costs up until the day of the offer and the defendant is to be entitled to costs upon a party and party basis thereafter."
13 As Rolfe J observed in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, these rules do not expressly accommodate the situation where a defendant has made an offer and the plaintiff has failed entirely. Notwithstanding, his Honour held that there was a prime face presumption that an order for indemnity costs should be made, if an offer of settlement was made, rejected and not bettered in litigation, unless the party rejecting the offer establishes that it was reasonable for it not to accept the offer. Prime face, his Honour held unreasonableness would depend upon the failure of the offeree to accept the offer. The discretion to order indemnity costs, his Honour considered, should not be limited to those cases where there was no prospect of success, or where the rejection of the offer was plainly unreasonable, or where there was an element of misconduct on the part of the offeree.
14 With respect, I agree with the conclusion which his Honour reached and with the analysis which led to that result.
15 The present case may be approached upon the basis that a Calderbank letter is the equivalent of an offer of compromise and that its existence may properly enliven the discretion to order indemnity costs. The present case is also one in which, so far as Mirvac and Boral are concerned, the principles described by Cole J, as he then was, in State Authorities Superannuation Board v Property Estates (Queensland) Pty Ltd (Supreme Court of New South Wales, 8 February 1991) and by Rogers CJ Comm D in AWA Ltd v Daniels (Supreme Court of New South Wales, 8 October 1992) have particular application.
16 The plaintiff's claim against the primary parties (Mirvac and Boral) was always very weak and that weakness was only confirmed once the decision of the Court of Appeal in O'Brien was handed down, and once it became known what evidence Mr Collis would give if called as a witness. Each of Mirvac and Boral pointed out, in clear terms, the pitfalls in the way of the plaintiff, and each took sensible and commercial endeavours to be released from the litigation. I cannot see any reason why they should be burdened with the recovery of costs only up-on a party and party basis, once they had brought these matters to attention and had delivered a Calderbank offer.
17 Accordingly, I order that the plaintiff pay the costs of Mirvac on a party and party basis up to 18 November 1998, and upon an indemnity basis thereafter.
18 I order that the plaintiff pay the costs of Boral on a party and party basis up to 22 August 1995, and upon an indemnity basis thereafter.
19 The position in relation to Taylor & Scott and Keddies is somewhat more complicated, in that each firm, to some extent at least, encouraged the plaintiff to pursue litigation which, upon my assessment, was bound to fail. In the case of Taylor & Scott, they encouraged action against Mirvac and Boral, and also against the carpenters. In the case of Keddies, they encouraged continuance of the proceedings against Mirvac and Boral, and also advised action against Taylor & Scott for not joining the carpenters in time.
20 Even looked at in the most favourable light possible, the discharge by each firm of its retainer can only be described as dilatory and as unsatisfactory from a professional point of view. However, at least three problems stand in the way of the plaintiff in seeking the orders that he seeks: namely, that they be required to pay the costs that he now has to pay to Mirvac and Boral and, additionally, or alternatively, that they be deprived of their costs of defending the proceedings he has brought against them.
21 The problems are as follows:
(a) The proceedings were continued against Mirvac and Boral, and against Taylor & Scott and against Keddies, by two other firms of solicitors, once they had ceased to act for the plaintiff.