Hughes Bros v The Trustees of the Roman Catholic Church

New South Wales Supreme Court CITATION : Hughes Bros v The Trustees of the Roman Catholic Church [1999] NSWSC 1051 revised - 29/10/99 CURRENT JURISDICTION : Equity Division Construction List FILE NUMBER(S) : 55003/89 HEARING DATE(S) : 28 July 1999 JUDGMENT DATE : 25 October 1999

Hughes Bros Pty Limited (Plaintiff) The Trustees of the Roman Catholic Church for the Archdiocese of Sydney PARTIES : (First Defendant) Kevin J Curtin & Partners ( Architects) Pty Limited (Second Defendant) Morrison Whitten & Nicey Pty Limited (First Cross Defendant) JUDGMENT OF : Foster AJ

P: Mr F C Corsaro COUNSEL : D1: Mr C J Stevens QC D2: Mr G Ellis 1XD: Mr W Muddle P: Clayton Utz SOLICITORS : D1: Makinson & d'Apice D2: Colin Biggers & Paisley 1XD: Phillips Fox CATCHWORDS : Costs; lengthy and complicated proceedings; claims and cross-claims, indemnity costs; Calderbank offer; whether costs should follow the event or be awarded having regard to result of individual issues; interest on costs; should order for interest be made before costs assessed by Assessor; Sanderson or Bullock orders. Trade Practices Act 1974 (Cth), s52 Fair Trading Act 1987, s42 ACTS CITED : Law Reform (Miscellaneous Provisions) Act 1946, s5 Supreme Court Act 1970, ss76,76E,95(4) Supreme Court Rules 1970, Pt 52A r22(4) Renard Construction (ME) P/L v Minister for Public Works (1992) 26 NSWLR 234 Waters v B P C Henderson (Aust) P/L (C/A, unreported, 6/7/94) Maitland Hospital v Fisher [No.2] (1992) 27 NSWLR 721 CASES CITED : McWilliams Wines P/L v Liaweena (1993) 32 NSWLR 190 Woodward v Sydney City Council (Einstein J, unreported, 21/12/98) Multicon Engineering P/L v Federal Airports Corp (1996) 138 ALR 425 Black v Lipovac (FC of Aust, unreported, 4/6/98) DECISION : See para78

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CONSTRUCTION LIST

Monday, 25 October 1999 55003/89 - HUGHES BROS. PTY LIMITED v THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY & ANOR

JUDGMENT 1 HIS HONOUR: This litigation arose out of a dispute relating to the construction of an Archbishop's residence, Cathedral School and car parking facility on a site adjoining St Mary's Cathedral in Sydney ("the building project"). The plaintiff, Hughes Bros. Pty Limited ("HBL"), commenced proceedings by the filing of a Summons in the Construction List in August 1989. Since then, the proceedings have become complex, with the addition of parties and claims and cross-claims. There have been numerous Court hearings, including two appeals to the Court of Appeal and a rejected application for special leave to appeal to the High Court. There have been two lengthy references to a referee, Mr T M McDougall ("the Referee"). The Referee's reports have been considered by the Court upon motions for their adoption, with the result that questions of liability as between the parties, quantum of damages and interest on such damages have previously been determined. The question before me is what orders should be made in relation to the costs of the parties to the proceedings, having regard to these prior determinations. I have found it necessary to consider the history of the proceedings, which is long and complex. I set out, by way of background, what appear to be the salient aspects of that history.

HISTORY OF THE PROCEEDINGS 2 In August 1988, following a tendering process, HBL entered into a written contract ("the written contract") with the first defendant, The Trustees of the Roman Catholic Church for the Archdiocese of Sydney ("STM"), to complete the building project for a fixed sum of $18million. The second defendant, Kevin J Curtin & Partners (Architects) Pty Limited ("KJC"), was the architect for the building works and the appointed superintendent under the written contract. 3 HBL's initial Summons, filed 9 August 1989, sought relief entitling it to suspend the building works and requiring, inter alia, that STM and KJC provide HBL with certain plans, drawings and other information specified in paragraph 8 of the Summary of Plaintiff's Contentions accompanying the Summons. Paragraph 10 of the Summary of Plaintiff's Contentions made the following complaint: "The consequences of [HBL] not having these documents and information are that it is unable to comply with its contractual obligations ... and is being denied the benefit of the contract." 4 Paragraph 10 then continued with seven particular allegations as to how this was so. Two paragraphs later there followed a reference to repudiatory conduct: "In the absence of the documents and information referred to in paragraph 8, [KJC's] direction [requesting HBL to proceed with the works] is a requirement for [HBL] to perform work in a manner which is inconsistent with the contract and which, if insisted upon by [STM] , would amount to a repudiation of the contract by [STM] ." 5 On 25 August 1989, HBL filed an Amended Summons in which, inter alia, a declaration was sought that STM was obliged under its building contract with HBL to appoint a reasonably competent superintendent to carry out its duties with reasonable diligence, skill and care. A new issue now considered likely to arise was "[w]hether another person should be appointed as the Superintendent". Also, a new paragraph 8 was added to the Plaintiff's Summary of Contentions which contended that, insofar as HBL was aware, KJC at the time of formation of the contract between HBL and STM to complete the building project significantly amended the plans and specifications for the building project that had previously been approved by the Sydney City Council without obtaining Council approval for these subsequent changes. 6 During September 1989, STM, in purported exercise of cl 44.1(a) of the written contract, took over the building works, excluded HBL from the site, and engaged another builder to complete the balance of the works. As grounds for the exclusion of HBL from the building project, STM asserted that the formwork subcontractor, Bimezi Constructions Pty Ltd ("Bimezi"), had brought proceedings to wind up HBL. 7 Following its exclusion from the building project, HBL filed a Further Amended Summons dated 11 September 1989 by which the proceedings were recast to challenge the validity of STM's conduct. HBL now sought remedies rendering STM's purported exercise of cl 44 of the written contract void and restraining STM or anyone else from excluding HBL from the site, conducting works HBL contracted with STM to perform on the building project and interfering with HBL's building materials, tools, and equipment. HBL also sought a declaration that STM had not validly revoked HBL's licence to go onto the site of the building project. It also sought an order restoring HBL's full possession of the site for the purpose of completing the building works. Further or in the alternative HBL claimed "a declaration that [STM] has repudiated the Contract". 8 On 21 September 1989, Giles J determined the questions raised by the Further Amended Summons, except for the question of repudiation, separately from the other issues in the proceedings (Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (Giles J, 21 September 1989, unreported)). His Honour held that STM's exclusion of HBL was validly effected pursuant to cl 44 of the written contract and dismissed the claims for relief added by the Further Amended Summons save for that portion dealing with repudiation. Part of his Honour's reasoning in coming to this decision was his finding that an exercise of cl 44 of the written contract was not restricted by any implied obligation that the power under cl 44.7 must be exercised reasonably. His Honour ordered HBL to pay the costs of the determination. 9 A notice of appeal from this determination was filed with the Court of Appeal on 19 October 1989. The proceedings were then stood over in the Construction List at various times to await the result of the Notice of Appeal. 10 On 17 May 1991, HBL filed in this Court a Second Further Amended Summons pursuant to leave granted on that day by Brownie J. This Amended Summons recast HBL's claim. Now HBL as against STM claimed damages for breach or repudiation of contract and sought the value of excavations and other variations to the work under the written contract carried out by HBL. It also sought an order referring the proceedings in whole or in part to a referee, as well as orders for interest and costs. The breaches alleged against STM were that STM failed to ensure that KJC provided HBL with: (1) relevant drawings, information and approvals within a reasonable time to complete the works and comply with legislation; (2) additional drawings within a reasonable time after request; and (3) all necessary directions regarding the performance of the work by nominated sub-contractors or suppliers, for which provisional sums were included in the written contract, and the selection and supply of materials therefor. HBL also claimed that STM breached its obligations to issue or cause to be issued copies of drawings, specifications and other information, and its obligation to ensure that KJC exercised its powers, duties, discretions and authorities as superintendent fairly, reasonably and with reasonable diligence, care and skill. 11 The excavations and variations arose out of HBL's execution of works, upon the instruction of KJC as superintendent. HBL claimed the value of these works which KJC, in breach of the written contract, had failed to value. HBL further claimed that STM had breached a contractual requirement to ensure earthworks were completed prior to HBL coming on to the building site which, compounded with HBL having to complete all or some of those earthworks, resulted in delay and disruption to HBL's performance of the written contract. 12 As against KJC, HBL claimed damages for breaches of duty and negligence, for failure by KJC to perform those tasks STM contracted with HBL to ensure KJC would perform. 13 On 2 July 1991, Staff AJ made an order pursuant to Pt 72 of the Supreme Court Rules ("SCR") referring the whole of the proceedings to the Referee for inquiry and report. The proceedings progressed slowly. In the interim, the building project was completed on 17 January 1992, costing STM in excess of $34million. 14 On 6 March 1992, Giles J ordered the parties to arrange a conference with the Referee by not later than the end of March 1992 to discuss a timetable and other arrangements. His Honour desired to appoint a date toward the end of that month for the submission of the Referee's report. There followed a number of notices of motion brought in relation to issues such as discovery and security for costs. 15 HBL issued another Amended Summons on 10 March 1992. This amended pleading claimed an additional breach of contract being that STM failed to provide drawings to HBL, prior to the written contract being entered into, which accurately described the work to be carried out. The Amended Summons widened HBL's claim to include actions for misleading and deceptive conduct pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987, for representations of a continuing nature made by STM and KJC to HBL, prior to entering into the written contract, that the structural design was complete or virtually complete and that structural construction drawings would be released in a timely manner to facilitate the completion of the building project. In relation to variations, HBL claimed it was further entitled to payment in respect of site allowances payable for the works. The Amended Summons also provided additional particulars of HBL's claim. 16 Ultimately, the parties, on 10 April 1992, arrived at a timetable for proceeding with the matter. The hearing before the Referee was scheduled to commence on 31 August 1992 and run for three months. However, on 12 March 1992, the Court of Appeal handed down its decision in Renard Construction (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 which, even on a narrow view of it, implied into standard form building contract NPWC Edition 3 (1981), the obligation to act reasonably when seeking to exercise a power of exclusion. The written contract between HBL and STM was in the same form. Subsequently, the Court of Appeal granted HBL leave to appeal against the decision of Giles J of 21 September 1989. The hearing of the reference was postponed and the matter was variously stood over for directions, pending the decision of the Court of Appeal. 17 The Court of Appeal gave its decision on 15 July 1993 dismissing the appeal: Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91. A majority of the Court of Appeal (Kirby P, Priestley JA, Meagher JA (dissenting in part)) held that there was an implied obligation to exercise reasonably a power of exclusion under cl 44 of the written contract. For example, Kirby P (as he then was) states at p 93: "The decision of the primary judge (Giles J) was given before Renard was decided. It appears that his Honour was following an approach to the NPWC contract common in the Commercial Division at the time before the decision in Renard established the contrary." 18 However, the majority reached the view that STM was not in breach of the obligation of reasonableness and had therefore rightfully excluded HBL from the building project. As Kirby P explained at p 94: "Most relevant to my conclusion [that STM acted reasonably in excluding HBL] is the fact that nominated sub-contractors had not been paid by [HBL] , statutory demands had been served upon it and winding up proceedings were on foot …The [written contract] gave [STM] the right, after affording [HBL] the opportunity to show cause within a specified period, to act as [STM] acted here." 19 HBL subsequently applied for special leave to appeal to the High Court. The matter was stood over in the Construction List until 6 May 1994 to await the outcome of that application. 20 On 11 April 1994, HBL's application for special leave to appeal was refused. In the following eighteen months, cross-claims were instituted, witness statements were filed and served and general preparations were made for the hearing of the reference. Numerous interlocutory applications were brought including an application to strike out certain paragraphs of the Amended Summons and for separate determination of the proceedings. This was heard before Giles J (Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (Giles J, 30 March 1995, unreported)). In that decision, Giles J dismissed, inter alia, a Notice of Motion brought by STM seeking to strike out of HBL's Summons certain paragraphs which were, in essence, a claim for damages by HBL equivalent to the difference between the amount HBL would have been paid had it completed the project and the certified cost to STM of actually completing the project, which was an item STM was seeking to claim against HBL. 21 On 3 June 1994, KJC brought the First Cross-Claim against Morrison Whitten & Nicey Pty Ltd ("MWN"), the engineer for the building project. The cross-claim sought contribution from MWN, as joint tortfeasor, should it be determined that KJC was liable to HBL in negligence. KJC alleged that MWN, by failing to fulfil agreements it made with STM to provide structural engineering services and engineering drawings for the building project, breached certain duties it owed HBL to provide the contractor with structural drawings, directions and other information to enable it to complete the building project. KJC also claimed that MWN had made a number of negligent misrepresentations to KJC which were the basis for representations HBL alleged KJC had made to it. Finally KJC pleaded that MWN negligently breached its duty to provide KJC with engineering drawings and other information within a reasonable time during the course of the building project. 22 On 20 June 1994, STM brought a Second Cross-Claim against HBL. STM claimed against HBL, in essence, damages for losses caused by breaches of contract and/or misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) for representations made by HBL prior to acceptance of its tender for the building project. A claim was made, with reference to cl 44.4 of the written contract, for a contractual payment of the difference between the certified actual cost of the works to STM and the amount HBL would have been paid had it completed the building project ("the difference"). STM also sought payment of liquidated damages for the period from 6 February 1990, the date specified in the written contract for completion of works by HBL, to 17 January 1992, the date upon which the building project was actually completed. STM's cross-claim was in excess of $18million. 23 STM also instituted a Third Cross-Claim against KJC. In its final form, this Cross-claim sought from KJC indemnity or contribution, as joint tortfeasor, for damages payable by STM should it be held that STM was liable to HBL. Further or in the alternative, STM claimed against KJC damages for any losses of HBL for which STM should be found to be liable and which arose out of acts of negligence by KJC as architect and superintendent. 24 The hearing of the reference finally commenced on 3 October 1995. During the hearing, a dispute arose as to the hearing of the question of interest. It eventuated that the Referee delivered two reports: one covering the whole of the proceedings except for interest ("the Referee's original report") and a second inquiring into the question of interest ("the Referee's second report"). 25 Also, the Referee, on 12 October 1995, granted HBL leave to file and serve a Further Amended Summons. This was the final Summons relied upon. It amended the previous Summons by formally claiming damages against STM and KJC for breaches of s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987, which were contained in the Summary of Plaintiff's Contentions in the previous Summons, and provided further particulars. HBL also expanded its claims in relation to variations and excavation work seeking the costs of further alleged variations to the written contract by KJC and STM and claiming that such variations and delays in excavations entitled HBL to an extension of time for the completion of the works. 26 A useful summary of the conduct of the reference is contained in STM's written submissions in these proceedings: "3 October 1995 Commencement of reference.

9 October 1995 Plaintiff seeks leave to amend Further Amended Statement of Claim.

12 October 1995 Plaintiff granted leave to further amend Statement of Claim.

15 February 1996 Conclusion of Plaintiff's claim (day 60).

12 March 1996 Commencement of First Defendant's Cross Claim (day 61).

1 August 1996 Conclusion of evidence in relation to Cross-Claim (day 86).

12 August 1996 Plaintiff serves Offer of Compromise [to STM and KJC which is ultimately rejected] .

15 August 1996 Plaintiff and First Defendant exchange written submissions on their respective claims/cross claims.

4 February 1997 Reference resumes as to interest at which time objections is taken to Plaintiff's evidence on interest.

12 February 1997 Further evidence on interest - Referee adjourns proceedings to obtain Court ruling on admissibility of evidence of John Cassidy, witness for the Plaintiff.

14 November 1997 Decision of His Honour Mr Justice Giles restricting scope of cross-examination of witnesses David Walker and John Cassidy on behalf of Plaintiff." 27 The adoption of the first report was considered by this Court over four days in March 1997 by Giles CJ of CommD (as he then was): Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (Giles CJ CommD, 16 October 1997, unreported). HBL sought the adoption of the Referee's original report "with modest exceptions" while STM and KJC opposed the adoption of the report "in different and substantial respects and on different grounds". The Referee's original report was adopted by the Court with some significant variations. The decision of 16 October 1997 had the following results: 28 (1) HBL had substantial success upon the further amended summons. Although it failed completely in relation to the claims for misleading and deceptive conduct it was awarded $1,979,633.72 for work done, excavations/variations and damages for breach of contract. The breaches of contract by STM, committed prior to the exclusion of HBL from the building project, were held to be, inter alia, that the building site was insufficiently prepared for HBL to engage in construction work and that HBL was not given sufficient documentation properly to perform the works (judgment at pp 28-54). It was noted that STM had validly excluded HBL from the building project but that the underlying cause of such exclusion was that HBL was suffering a liquidity problem. It was further held that STM's breaches had causally contributed to HBL's liquidity problems (see, eg, pp 49 and 53 of the judgment). His Honour, therefore, adopted the Referee's finding that STM's breach of contract causally contributed to HBL's liability to pay STM "the difference". 29 As STM had validly excluded HBL from the project, STM was entitled upon the Second Cross-Claim to "the difference". His Honour set off this award against HBL's entitlements under the Further Amended Summons including its successful claim for the same amount. STM failed on all other grounds of the Second Cross-Claim. Accordingly, STM achieved no real success in pursuing the second cross-claim. His Honour stated the final outcomes of the Further Amended Summons and Second Cross-Claim as follows (at p 86): "… as between HBL and STM HBL is entitled to judgment for $6,856,565.51 on the further amended summons and STM is entitled to judgment for $4,876,931.79 on the second cross-claim: unless it be submitted to the contrary, these amounts should be set off against each other to result in one judgment for $1,979,633.72 in favour of HBL." 30 I note that the award of $1,979,633.79 was later discovered to contain a mathematical error and was corrected on 27 May 1998 to judgment for $2,024,168.22 in favour of HBL on the Further Amended Summons. 31 I further note that in relation to the time taken at the hearing of the reference in respect of the claims for misleading and deceptive conduct in the Further Amended Summons Giles J (at p 71) stated: "The referee made no findings as to how HBL relied on the representations in entering into the contract. It was common ground that HBL had not called evidence from anyone responsible on its side for entry into the contract, and at one point before me it was said that "the whole s 52 case received the scantiest of attention" . That seems borne out by the manner it was dealt with in the report." 32 (2) As between HBL and KJC judgment was awarded to KJC on the further amended summons. The report as varied and adopted by the Court upheld that HBL failed completely in its claims against KJC. Giles J (at p 63) said: "In para BB 48 the referee ascribed responsibility for the slow delivery of drawings "primarily" to STM, together with "some" responsibility for the inadequacy of the tender documentation. It is unclear whether KJC, MWN or someone else had the secondary and other responsibilities." 33 (3) As between STM and KJC on the Third Cross-Claim, judgment was awarded to KJC. STM completely failed in its claim. Though it was not decided it may be noted that Giles J (at pp 74-75) indicated that STM's claim for indemnity or contribution from KJC, as a joint tortfeasor, pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 might not have been available, having regard to the causes of action pleaded in the Further Amended Summons. 34 At this point, it is necessary to consider events in relation to the First Cross-Claim, between KJC and MWN, which, in the circumstances of the case, was before his Honour in only a limited way. On 23 August 1995 MWN sent a letter to KJC containing an offer of compromise of the First Cross-Claim ("the first offer of compromise"). This offer was not accepted by KJC. It was made approximately five weeks before commencement of the hearing of the reference. 35 One month after the commencement of the reference hearing Hunter J heard an application by MWN seeking security for its costs from KJC: Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (Hunter J, 7 November 1995, unreported). At that time KJC was "hopelessly insolvent". Its legal costs were being funded by its professional indemnity insurer and that insurance cover provided its only capacity to meet an order for costs against it. There were also concerns that the professional indemnity insurer might abandon its support of KJC in the litigation. In these circumstances, Hunter J made a conditional order, that if MWN renewed its offer of compromise to KJC and such offer was not accepted, then security for costs in the sum of $250,000 was to be provided by KJC within fourteen days of the expiration of such renewed offer. If the security for costs was not provided, then the proceedings on the First Cross-Claim would be stayed. It was further ordered that the renewed offer be in the same terms as the first offer of compromise, except that it was not to impose any requirement upon KJC in respect of costs of MWN incurred since 23 August 1995. 36 In consequence of these orders, MWN on 10 November 1995 forwarded to KJC a second offer of compromise ("the second offer of compromise"). This was not accepted, security for costs was not paid by KJC and, consequently, the proceedings on the first-cross claim were stayed with effect from 5pm, Friday 7 December 1995. 37 In relation to the stay of proceedings the Referee noted the following (at para B52 of Volume 1 of the original report): "Consequently the hearing proceeded after 7 December 95 on the basis of the HBL further amended summons, ie. "main" claim and the second and amended third cross-claims only, and all evidence taken in the hearing relates to these matters." 38 In the present proceedings KJC submits that the first and second offers of compromise were not valid "Calderbank" and could have no effect in relation to the imposition of an indemnity costs order. I examine the validity of this submission latter in these reasons. 39 On 5 December 1997 Giles J ordered that KJC's cross-claim against MWN be dismissed. The question of costs was reserved. 40 I return, then, to the history of the proceedings. The question of interest on damages was referred back to the Referee for further hearing. He furnished his report to the Court on 31 August 1998. By the decision of Rolfe J of 10 December 1998 the Referee's second report was adopted (Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (Rolfe J, 10 December 1998, unreported)). I note that the Referee's second report concluded at p 33: "It is my view that interest on the full judgment amount of $2,024,168.22 should be calculated on the Hungerfords v Walker basis, using ANZ overdraft rates up to 22 December 89 and SBNSW rates thereafter. Allowance should be made for the fact that all but $44,534.50 of this amount was paid on 22 December 97." 41 The outstanding $44,534.50 was paid by STM to HBL on 23 June 1998. This amount and the payments of 22 December 1997 were paid as interim payments pursuant to s 76E of the Supreme Court Act 1970. By order of Rolfe J on 11 December 1998 judgment, inclusive of interest thereon, was entered for HBL against STM in the sum of $5,859,671.95. 42 On 24 December 1998 STM filed and served a notice of appeal from the decision of Giles CJ Comm D of 16 October 1997 as to the adoption of the Referee's original report, the interlocutory judgment of his Honour of 14 November 1997 restricting the scope of cross-examination on interest and from Rolfe J's decision of 10 December 1998 regarding adoption of the Referee's second report. The appeal is currently awaiting hearing in the general list of the Court of Appeal. 43 It is in the context of this long history of litigation that the question of costs came before me on 28 July 1999. I turn now to the substantive arguments raised by the parties as to the appropriate orders for costs in these proceedings, to the extent that such orders have not previously been made, and the issue of interest payable upon such costs.

COSTS AS BETWEEN HBL AND STM 44 HBL seeks an order that STM pay its costs of the Further Amended Summons and the Second Cross-Claim up to and including 12 August 1996 on a party/party basis and thereafter on an indemnity basis, as a result of the non-acceptance of a Calderbank offer. It submits that the Further Amended Summons and Second Cross-Claim involved issues which "were bound together in the factual matrix of the case" and that the results in respect of each should not be viewed in isolation. On this basis, it is submitted that it would be inappropriate for separate costs orders to be made in respect of the Summons and the Cross-Claim. 45 The further submission is made that insofar as HBL was successful on the majority of the claims it pursued against STM, it would be inappropriate to make separate costs orders relating to specific issues. Reliance is placed upon statements made in the judgments of the Court of Appeal in Waters v B P C Henderson (Australia) Pty Ltd (Kirby P, Mahoney and Priestley JJA, CA40678/91, 6 July 1994, unreported). The appeal was from a decision by Cole J in the Commercial Division in which there had been a reference to a referee. It was not a construction case but was a dispute involving a number of issues. Each party was partly successful in relation to matters that were before the Referee. Cole J had treated the matter as if it were "a construction dispute" and had said "it is simply not possible, nor would it be efficient for the Court to seek to isolate each of the multitudinous issues which arise in construction disputes and try and make an appropriate order for costs in respect of each particular item". Mahoney JA (at p 3) indicated that he did not "differ from (Cole J) in relation to the principle in question". His Honour went on to say (at pp 3-4): "In the present case, it has been submitted, in effect, that the reason why the Court should intervene is that different parties were successful in relation to different issues or successful to different degrees and that the judge should, therefore, have differentiated between the different issues and made different orders as to costs. It was suggested that the matter could be divided into three or four separate issues and orders made accordingly, and that the judge was wrong in dealing with the matter as if there were numerous issues. In my opinion the principles in this regard are properly stated in the Supreme Court Act and Rules. S76 of the Supreme Court Act provides that the Court has a discretion with full power to determine by whom and to what extent costs are to be paid. In the Rules, Pt52 R11 provides that: 'If the Court makes any order as to costs, the Court shall, subject to this Part, order that the costs follow the event, except where it appears to the Court that some other order should be made as to the whole or any part of the costs.' In the notes to the Rules, Pt52.11.2, the following appears: 'Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.' Reference is made to cases, some of which I have considered. They appear generally to support the principle which is stated in the Practice. I think that was the principle to which his Honour had regard in the present case. I do not think that it would have been appropriate for his Honour to attempt to determine which issues were won by particular parties, to what extent they were won, and what was the amount of time spent on each of the issues so as to apportion costs accordingly. I think that would have been contrary to the trend of decision in relation to the exercise of discretion as to costs." 46 HBL relies upon these principles, whilst acknowledging that it failed on a large number of the claims that it brought. On the other hand, STM submits that HBL should not be awarded its costs in respect of the claims upon which it was unsuccessful or in respect of which it substantially lost. In the affidavit evidence before me, both HBL and STM produced schedules indicating claims made, together with the success or failure of those claims. It may be noted that the schedules did not completely agree. This very fact, in my view, indicates the propriety of following the principles outlined above in the present case. I decline to make any orders based upon success or failure of either party in respect of particular issues. 47 I have set out above the passage from the judgment of Giles CJ Comm D, where his Honour sets off the amount established by STM in its cross-claim against the amount established by HBL in its claim, resulting in the balance awarded to HBL. For HBL, it is submitted that I should treat this result as being, in effect, an overall verdict in favour of HBL which would carry with it, the costs of the claim and cross-claim. On behalf of STM, however, it is submitted that, as the cross-claim was partially successful, the whole or part of the costs of the cross-claim should be awarded to STM. This argument, as developed, related to "the difference". STM had obtained a relevant certificate indicating that the costs of completion of the building project after the exclusion of HBL from the site had exceeded the contract price for which HBL was to complete the work by an amount of some $16million. This amount was claimed in the Second Cross-Claim as damages pursuant to cl 44 of the written contract. To this claim, HBL raised two defences: (a) any amount recoverable by STM from it, in this regard, was ultimately attributable to breaches by STM of the written contract which had resulted in HBL's inability to pay its sub-contractor, with the result that any amount established in this Cross-Claim would become part of HBL's damages recoverable against STM in its claim; (b) the costs of completion were excessive. 48 In the result, HBL succeeded in respect of defence (a) and was substantially successful in defence (b) in that it was determined that the reasonable cost of completion was in the order of $4million. It is clear that a substantial number of hearing days in the reference were taken up in determining the issues involved in defence (b). It was submitted that, in the light of HBL's success in defence (a), these days were wasted because HBL was merely engaging in some sort of "frolic", insofar as whatever was to be awarded to STM on the Second Cross-Claim, the identical amount was to be recovered against it by HBL on the claim. Accordingly, it was submitted on behalf of STM, it should have the whole of the costs of the Second Cross-Claim, including, as I understand it, the costs of items in respect of which it failed. 49 In my view, there is no substance in this submission. Although HBL was successful in respect of defence (a), the point was not conceded, it being argued that, as a matter of construction of cl 44 and in the events which happened, HBL was not entitled to claim "the difference" as damages against STM. Indeed, I was advised, during the hearing, that this point will be argued on appeal. Consequently, it was, in my view, entirely reasonable that HBL should call evidence and raise arguments directed to reducing the amount claimed as "the difference". 50 I am satisfied that the issues of the Further Amended Summons and the Second Cross-Claim were in fact so intertwined as to make it reasonable to follow, in respect of the costs orders, what was done by his Honour, in respect of the award of damages, namely, to regard the balance in favour of HBL as being the final result in its favour. In such circumstances, it is, in my view, inappropriate to make separate costs orders in respect of claim and cross-claim. Subject to the question of indemnity costs resulting from a Calderbank offer, I am satisfied that STM should pay HBL's costs of the Further Amended Summons and the Second Cross-Claim. I turn then to consider the Calderbank offer. 51 On 12 August 1996, HBL made an offer of compromise within Pt 52A r 22(4) of the Supreme Court Rules, to STM. The offer was that HBL would accept the sum of $370,000 together with costs to be agreed or assessed. There was some discussion between the solicitors as to the amount of costs. It appears that these discussions went nowhere. However, in my view, the offer remained open. In the absence of agreement as to the amount of costs, the plaintiff was prepared to accept an assessment in accordance with the Rules. 52 The offer was made in the form of a Calderbank letter. No point is taken as to there being any technical deficiency in the making of the offer. In my view, it is correctly stated, in the written submission of HBL, that: "As an incentive to making and accepting offers of compromise, Part 52A r 22(4) of the Supreme Court Rules provides that where a Plaintiff makes an offer not accepted by the Defendant, and the Plaintiff obtains a judgment no less favourable that that offer, then, unless the Court otherwise orders, the Plaintiff is entitled to costs from the Defendant on an indemnity basis from the date on which the offer was made, and costs on a party/party basis before the date of that offer." 53 There can be no doubt that the plaintiff's offer was far more favourable to the first defendant than the judgment ultimately entered against it in favour of the plaintiff in the sum of $5,859,671.95. 54 The principles in relation to the application of Pt 52A r 22(4) were considered by the Court of Appeal in Maitland Hospital v Fisher [No.2] (1992) 27 NSWLR 721. The Court said (at p 725): "The decision to award or withhold indemnity costs where a plaintiff's settlement offer has been made but not accepted, involves a discretion to be exercised by reference to all of the circumstances of the case, not by applying a fixed mathematical formula. … The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances, the litigant or its advisers mis-judge the prospects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case." 55 Obviously, a number of discretionary matters enter into the awarding of costs on an indemnity basis. In the present case, it is obvious that the proceedings were extremely complex, and, no doubt, the situation at the completion of the reference was very far from clear. However, the offer that was made was pitched at a level, having regard to the ultimate outcome, that clearly required that it be given very serious consideration. So far as the evidence indicates, it was brushed aside on the basis that no agreement could be reached as to a proper figure for costs. Having regard to the obvious purpose of the provision, I am satisfied that this is an appropriate case for its discretionary application. I can see no sufficient reason, consistent with that purpose, for the rejection of the offer. Accordingly, costs will be ordered on an indemnity basis from the time of its making. 56 The next question to be considered is whether an order, in the nature of a Sanderson or Bullock order should be made in favour of the plaintiff against the first defendant in respect of the costs of the second defendant. HBL, the plaintiff, failed in its action instituted by the Further Amended Summons against the second defendant, KJC. There is no apparent reason why, in these circumstances, HBL should not be liable to KJC for its costs of defending HBL's action. The question is whether HBL is entitled to an order requiring that, directly or indirectly, STM pay those costs. The principle is quite clear. The question is whether, in the circumstances, it was reasonable for HBL to sue KJC. It may be noted that it did not take this course at a late stage in the proceedings, KJC having been included as a defendant in earlier manifestations of HBL's Summons. 57 KJC was the architect with the responsibility for the building project and was also the superintendent of that project, appointed under the written contract. As I understand it, it is STM's contention that there was no necessity for HBL to join KJC because KJC was acting, in all respects, as HBL's agent with the result that, if KJC was guilty of any breaches of duty to HBL, then STM would be liable to HBL as principal. Having regard to the complex issues of this litigation, not only initially but as they developed, I am quite satisfied that this contention is no answer to HBL's claim. Although, with hindsight, especially having regard to the fact that HBL ultimately failed against KJC, it might be said that there was in fact no need to make the joinder, I am not persuaded that it was anything but reasonable on the part of HBL to sue KJC. Admittedly, there was no privity of contract between them, but KJC had professional duties at common law and, arguably, had made representations, referred to in the pleadings, pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987. I am satisfied that it was reasonable for HBL to have taken the proceedings against KJC and for the Court to make appropriate orders for the payment to KJC by STM of its costs of defending the action. 58 It has been made clear in these proceedings that HBL is not in a sound financial situation. In my opinion, it would be unsatisfactory to make a Bullock type order in these circumstances. Accordingly, I find that it is appropriate that a Sanderson type order be made. This will be reflected in the orders that I ultimately make. 59 I should add that I accept the plaintiff's submissions that it was inevitable, having regard to the overall factual matrix of this matter that HBL would join KJC, as it in fact did. In those circumstances, having regard to the fact that the plaintiff's claims against both defendants, stated generally, were that there was a failure to prepare the site and provide, in an appropriately timely manner, the relevant and necessary documentation, the joinder of both in the one proceedings was appropriate. 60 The next question to be considered is whether I should make an appropriate order providing for the payment by STM of interest upon the costs awarded to HBL and KJC. In this regard, I am satisfied that s 95(4) of the Supreme Court Act 1970 and also s 76 of that Act enables the making of such an order. I am satisfied that s 95(4) can and should be given retrospection operation The principles upon which such an order may be made are, in my view, founded upon common sense and justice. In circumstances where a successful party has outlaid, from an early stage and often continuously, amounts of money, by way of payments to his legal representatives to finance the conduct of the litigation, he will, manifestly, be significantly out of pocket if he receives, by way of reimbursement of his payments, only an amount of taxed or assessed costs at a far later stage, after he has successfully prosecuted the litigation to finality. Such a financial detriment can only be compensated by the making of an appropriate award of interest to be paid in respect of those payments, providing, of course, that the relevant payments can be properly allocated to the successful outcome of the litigation in whole or in part. I consider that the foregoing is the effect of statements made by Rogers CJ Comm D in McWilliams Wines Pty Ltd v Liaweena (1993) 32 NSWLR 190. 61 I do not understand there to be, in these proceedings, any contest as to the existence of these principles. However, it has been asserted that no order should be made at the present stage because, in the nature of things, no precise orders as to the payment of costs and the amount of such costs can be made. Such precision must await the attention of an Assessor appointed pursuant to the Legal Profession Act 1987. The contention advanced on behalf of STM is that the question of interest must await the primary determination of the Assessor as to the amount of costs payable by STM. Only after appropriate costs orders are made can the matter be returned to this Court for the consideration of appropriate orders for interest to be made in respect of those orders. I do not accept this submission. If accepted, it would lead to quite unnecessary delay which would be inimical to the policy of the Construction List, which requires that all aspects of litigation be determined as quickly as reasonably possible. 62 The affidavit of Darrell Hendry filed on behalf of the plaintiff, the admissibility of which was deferred for consideration in these reasons, is, in my view, admissible to demonstrate that HBL has since 1989 paid significant amounts on account of costs to its legal representatives. The affidavit does not indicate the way in which individual payments can be ascribed to particular areas of the litigation. It may well be that an Assessor will have to determine whether particular amounts are properly recoverable and therefore susceptible to an order for interest. I am satisfied, however, that this does not present any impediment to my making, for the guidance of an Assessor, an order that interest should be payable, where appropriate, upon amounts of costs paid by HBL to its legal representatives from 1989 onwards. It may well be that evidence will be required to assist the Assessor in making appropriate decisions. I do not think it desirable that I say anything further on this aspect. I propose, however, to make what I consider to be an appropriate order in relation to the payment of interest. I should add that these considerations apply as well to applications for interest made by other successful parties in this litigation. 63 So far as the proceedings between HBL and STM are concerned, there remains for consideration three submissions raised by STM. I shall deal with them in order. 64 The first is a submission that a cost order favourable to STM should be made in respect of the number of earlier Summonses issued by HBL in these proceedings. The blanket submission was made that between the commencement of the proceedings in 1988 and the commencement of the reference, HBL should have been able to get its pleadings in order. Its failure to do so occasioned costs to STM in relation to the consideration, by its legal advisers, of earlier abandoned or modified pleadings. I am not prepared to accede to this submission. Whilst it is true that HBL's pleadings underwent many changes and modifications, they did so in the context of the development of the dispute between the parties as detailed earlier in these reasons. It is to be remembered that significant changes in that dispute occurred when STM took steps to exclude HBL from the site of the building project. Applications to the Court and consequent appeals, in my view, altered the litigious landscape significantly, requiring appropriate changes to be made in the shape of the litigation. I do not see any satisfactory basis upon which the orders sought by STM can be made. I refuse them. 65 The next submission by STM is that it should be awarded the costs of one and a half days of hearing occurring shortly after the commencement of the reference, during which amendments sought by HBL to its Summons were the subject of debate. These amendments were allowed in part. The Referee, who acknowledged that he had no power to make any order for costs, indicated that, in his view, it was an appropriate occasion for the costs occasioned by the amendment to be awarded to the other parties. I mean no disrespect to the learned Referee when I say, as he himself acknowledged, that his remarks in this regard can have no binding effect upon this Court. Having regard to the lengthy and complex history of the litigation, I would not be prepared to make such an order unless it was demonstrated to me that it was, in all the circumstances, appropriate. No such demonstration has been occurred. I refuse to make the order. 66 A further submission was made, based upon remarks made by the Referee at the conclusion of the hearing before him. These were to the effect that, in his view, justice would be done if all parties "walked away" from the litigation and paid their own costs. It appears to have been submitted, but faintly, that I should base some costs order upon this expression of view. That is not possible. I also reject this submission.

COSTS AS BETWEEN STM AND KJC OF THIRD CROSS-CLAIM 67 KJC obtained judgment against STM on the Third Cross-Claim. It would appear that STM failed against KJC on the same basis that HBL failed. I consider that KJC is entitled to an order for costs against STM in respect of the Third Cross-Claim. However, I would expect that it would recover very little under this order as there must be an avoidance of duplication between the costs recovered under this order and those recovered against HBL and payable by STM via the Sanderson order to be pronounced. 68 In my view, it is appropriate that I make an order that interest be payable in respect of these costs.

COSTS AS BETWEEN KJC AND MWN OF THE FIRST CROSS-CLAIM 69 As already indicated, KJC's Cross-Claim against MWN was ultimately dismissed after its having been stayed by order of Hunter J. MWN, accordingly, seeks an order for costs against KJC. It seeks that part of its costs be paid on an indemnity basis because of non-acceptance of a Calderbank offer made by it. KJC does not dispute that there should be an order for costs but asserts that it should not be required to pay any part of the costs on an indemnity basis. I shall consider this matter later. However, KJC asserts against STM that it should be the recipient of a Sanderson type order in relation to the costs payable by it to MWN. It seeks that STM be ordered to pay those costs directly to MWN. 70 I consider that KJC is entitled to a Sanderson type order. It was joined in the proceedings, not only by its being an original defendant to the Further Amended Summons brought by HBL, but also by way of the Third Cross-Claim brought by STM against it. The main thrust of the plaintiff's claim against STM related to failure to have the site ready for HBL to commence the building project and also failure to supply to HBL, in a complete and timely fashion, the documentation to which reference has already been made. This claim had been "passed on" to KJC on the basis that it had both a common law and contractual duty to see that these matters were attended to, arising from its position as architect and superintendent for the project. KJC had no contract with MWN which contracted directly with STM. However, it was asserted that MWN had the responsibility of providing engineering drawings, including drawings referred to as "structural" drawings, in a timely fashion. It was KJC's contention that it had failed in this responsibility. It, therefore, joined MWN claiming indemnity and/or contribution from it pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946. I am satisfied that this was a reasonable course for KJC to follow. It is, therefore, in my opinion, entitled to a Sanderson type order against STM requiring the latter to pay directly to MWN the amount of its costs (subject to any modifications resulting from the Calderbank offer). I consider that a Sanderson type order should be made rather than a Bullock order. The latter order, would, in the circumstances of this case, lead to unnecessary costs and delay. I turn, then, to a consideration of MWN's Calderbank offer. 71 MWN, in fact, made two such offers. The first on 23 August 1995 before the commencement of the reference and the second on 10 November 1995, as a result of the orders of Hunter J referred to above. The offers were made by letters which were in identical terms, the relevant portion being as follows: "… we are instructed to make the following offer of settlement. In return for a verdict and judgement being entered in MWN's favour on the Cross-Claim filed by Curtin against MWN, MWN agrees to: 1. Pay to Curtin the sum of $50,000.00 This sum represents what we consider to be the costs incurred by Curtin to date on the Cross-Claim calculated on a party/party basis.

2. Subject to paragraphs 3 and 4, in the event that a judgment is entered against Curtin in the proceedings, MWN agrees to contribute to that judgment the first $425,000.00 in satisfaction of, but not exceeding, such a judgment. However, MWN will only contribute to a judgment where the loss to which such a judgment applies arose from the alleged failure of MWN to provide structural documents as pleaded in the Amended Summons filed by HB in the proceedings.

3. In the event that a dispute arises in respect of any matter referred to in paragraph 2 between Curtin and MWN following a judgment, such dispute will be referred to the referee in the proceedings for his determination, which determination will be final and binding on both Curtin and MWN.

4. In the event that HB and/or the Church rejoins MWN to the proceedings, or in the event that HB and/or the Church commence separate proceedings against MWN which involve the same or substantially the same facts and circumstances surrounding the proceedings, paragraphs 2 and 3 will have no effect and will be deemed never to have had any effect. This offer is conditional upon Curtin agreeing to enter into a Deed of Release to be drafted by us. This offer will remain open for 14 days from the date of this letter. In the event that this offer is not accepted and Curtin obtains a judgment or order on the Cross-Claim which is no more favourable than the terms of this offer, we put you on notice that MWN will rely upon this letter in support of its application for indemnity costs." 72 Neither offer was accepted. Insofar as the First Cross-Claim was dismissed, KJC's position would have been, obviously, more favourable had the offer been accepted. In these circumstances, MWN seeks indemnity costs from the date of expiry of the first offer. 73 The principles and authorities relating to the imposition of indemnity costs failing an offeree's acceptance of an offer of compromise have already been referred to. In addition, reference may be made to the judgment of Einstein J in Woodward v Sydney City Council & Anor (55060/97, unreported, 21 December 1998). His Honour made reference to the decision of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, setting out a passage from the judgment in that case. He also referred, inter alia, to the judgment of the Full Court of the Federal Court of Australia in Black v Tomislav Lipovac bhnf Maria Lipovac & Ors (unreported, 4 June 1998 (at p 46)) in which it was said: "In reality there is not a substantial difference between the two views; both accept that the reasonableness of the conduct of the offeree, viewed in the light of the circumstances which existed when the offer was rejected, is relevant to the exercise of the discretion to award indemnifying costs. To the extent there is a difference we would prefer the by now well established line of authority in decisions of single judges of this court. However we would not, with respect, necessarily endorse the view of Sheppard J in Sanki that the conduct of the offeree has to be 'plainly unreasonable'. To adopt an especially high standard of unreasonableness would operate as a fetter in the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement. There is in our view force in the comments of Byrne J in the Supreme Court of Victoria in Mutual Community Ltd v Lorden Holdings Pty Ltd (Unreported, Supreme Court of Victoria, 28 April 1993) at 12-13 that 'the policy of the Court is to encourage litigating parties to undertake genuine settlement negotiations and for that purpose, to face up to serious offers of settlement'." 74 I am guided by the principles expressed in those passages. It is clear that what I have to consider is the reasonableness or otherwise of the conduct of the offeree having regard to the circumstances obtaining at the time when the offer was made and rejected. In this case, it is submitted on behalf of KJC that both the nature of the offers and the circumstances in which the offers had to be considered produced the result that it was not unreasonable for either of the offers to have been rejected. 75 The first offer was received in circumstances where KJC had received a claim for damages on behalf of HBL, which was detailed and extensive. Additionally, there was evidence in the case which comprised twenty-six volumes of witness statements and expert reports in various fields of expertise. It may be accepted that KJC was faced with a significantly difficult task in evaluation of its position. It is also clear that it was in difficult financial circumstances and had only limited insurance cover. The offer, itself, was far from straight forward. As can be seen, it was significantly conditional. It could cease to have effect in the event of MWN being retained in the litigation or joined by the other parties after settling with KJC. Moreover, it was to be consummated by a deed of release drafted by MWN's legal advisers. It is clear that this document would have required very careful consideration by KJC and that, apparently, it was to contain the final agreement between the parties. Although I have had some hesitation in the matter, I have come to the conclusion that it was not unreasonable for KJC to refuse to accept the offer on either occasion that it was made, if, indeed, it could be construed as an offer capable of acceptance. 76 I therefore decline to make the indemnity costs order sought. I shall make, however, an order for costs on a party/party basis which will, of course, be caught up in the Sanderson type order to which I have already made reference. I consider, also, that KJC is entitled to the costs of the present hearing against MWN, as the only issue between them was the effect of the Calderbank offer. 77 I also consider that, having regard to the period of time over which the proceedings were in existence, it is appropriate that I make an order for the payment of interest on MWN's costs. This interest accretion will also be caught up under the Sanderson order. 78 I have been much assisted by counsel, who, at my request, have furnished me with suggested forms of order to be made on the basis of findings that I might make in this case. In conformity with the reasons that I have given and the findings that I have made and, having regard to counsel's suggestions, I make the following orders:-

That the First Defendant pay the costs of the Plaintiff in respect of the Further Amended Summons and the Second Cross-Claim (except those costs which are subject to previous costs orders made against the plaintiff in favour of the First Defendant) as either agreed or assessed up to and including 12 August 1996 on a party/party basis and thereafter on an indemnity basis.

That the First Defendant pay to the Plaintiff interest on the costs so agreed or assessed at the rates applicable under Schedule J to the Rules from the dates on which such amounts were paid by the Plaintiff to its solicitors until the date of the Assessor's Certificate, the quantum of such interest to be determined by the Assessor.

That the First Defendant pay the Plaintiff's costs of the hearing on the issue of costs on a party/party basis.

That the First Defendant pay the costs of the Second Defendant in respect of the Further Amended Summons and the Third Cross-Claim on a party/party basis.

That the First Defendant Pay interest to the Second Defendant on the costs so agreed or assessed at the rates applicable under Schedule J to the rules from the dates on which such amounts were paid by the Second Defendant to its solicitors until the date of the Assessor's Certificate, the quantum of such interest to be determined by the Assessor.

That the First Defendant pay the Second Defendant's costs of the hearing on the issue of costs on a party/party basis.

That the First Defendant pay the costs of the First Cross-Defendant in respect of the First Cross-Claim on a party/party basis.

That the First Defendant pay interest on the costs so agreed or assessed to the First Cross-Defendant at the rates applicable under Schedule J to the Rules from the dates on which such amounts were paid by the First Cross-Defendant to its solicitors until the date of the Assessor's Certificate, the quantum of such interest to be determined by the Assessor.

That the Second Defendant pay the First Cross-Defendant's costs of the hearing on the issue of costs on a party/party basis. **********

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