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[2025] ACTSC 217
Supreme Court of the ACT
2025-05-23
Ainslie-Wallace AJ
Original judgment source is linked above.
Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: Pavey-Dray v Weomany Pty Ltd trading as Zaab Braddon (No 2) Citation: [2025] ACTSC 217 Hearing Date: Decided on the papers Decision Date: 23 May 2025 Before: Ainslie-Wallace AJ Decision: (1) The First Defendant is to pay the Second, Third, Fourth and Sixth Defendants’ costs of the proceedings from 4 April 2023 on a solicitor and client basis. Catchwords: CIVIL LAW – PRACTICE AND PROCEDURE – Costs – special costs order sought by Second to Sixth Defendants (Third Parties) against First Defendant – where Third Parties joined in proceedings by Third Party Notice – verdict entered for Third Parties against First Defendant – where misrepresentations made by First Defendant likely led to joining of Third Parties in the proceeding – two offers of compromise not accepted by First Defendant – unreasonable for First Defendant not to have accepted second offer of compromise where her evidence given the previous day absolved Third Parties of liability Legislation Cited: Court Procedures Rules 2006 (ACT) Pt 2.10, rr 20, 301, 316, 1002, 1012, 1752 Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Marhaba v Chen (No 2) [2024] ACTSC 288 Pavey-Dray v Weomany Pty Ltd trading as Zaab Braddon [2025] ACTSC 65 Parties: Emma Pavey-Dray (Plaintiff) Weomany Pty Ltd t/as Zaab Braddon (First Defendant) Nicholas James Lourandos (Second Defendant) Aikaterina Yiannakopoulos (Third Defendant) Georgina Yiannakopoulos (Fourth Defendant) Stephania Lourandos (Sixth Defendant) Representation: Counsel W Reynolds (Plaintiff) D Shillington (First Defendant) J Moffett (Second to Sixth Defendant) Solicitors Maliganis Edwards Johnson (Plaintiff) Holman Webb Lawyers (First Defendant) Mills Oakley (Second to Sixth Defendant) File Number: SC 447 of 2022 Ainslie-Wallace AJ: Introduction
On 21 November 2019 Emma Pavey-Dray (the Plaintiff) was injured when she fell down stairs at a restaurant known as Zaab Thai Restaurant in Braddon. The Plaintiff’s fall and subsequent injuries occurred when her foot became impeded by the pitted and uneven surface of the stairs leading from the restaurant to the footpath a little below.
The restaurant was operated by Weomany Pty Ltd trading as Zaab Braddon. Becky Khanthavongsa is the sole director of Weomany Pty Ltd. Ms Khanthavongsa ran the restaurant. The restaurant occupied part of a larger whole of which Nicholas Lourandos, Aikaterina Yiannakopoulos, Georgina Yiannakopoulos and Stephania Lourandos were the leaseholders.
The Plaintiff commenced proceedings in negligence against Weomany Pty Ltd (the First Defendant) by a Statement of Claim filed on 22 November 2022 (the primary proceedings). On 4 April 2023, the First Defendant commenced Third Party proceedings against the leaseholders. In the defence to the Third Party proceedings, the Third Parties counterclaimed against the First Defendant. In July 2023 the Plaintiff joined the Third Parties as Defendants to the proceedings.
At a time before the First Defendant took occupation of the premises, the stairs leading from the footpath to the restaurant were tiled. Before the restaurant opened the tiles had been removed leaving the surface of the stairs pitted and uneven.
In the primary proceedings a finding was made that the First Defendant had caused the tiles to be removed from the stairs and had made no attempts to smooth over the surface of the stairs or to lay other tiles on them. The First Defendant was found to be negligent and responsible for the Plaintiff’s injuries and consequential loss: (Pavey-Dray v Weomany Pty Ltd trading as Zaab Braddon [2025] ACTSC 65).
The Third Parties were found not liable for the state of the stairs and, it follows, the Plaintiff’s injury, and a verdict for the Third Parties against the First Defendant was entered. The question of costs as between the Third Parties and the First Defendant was to be the subject of written submissions without the necessity of a further hearing.
Shortly before the hearing commenced, the Plaintiff settled her claim against the Second, Third, Fourth and Sixth Defendants. The Fifth Defendant was not an active party to the proceedings. The First Defendant maintained its claim against the Third Parties which, as I have said, was ultimately unsuccessful. The Costs Claim
The Third Parties seek a special (indemnity) costs order against the First Defendant and primarily contend that the order should commence from 4 April 2023, the date on which the Third Party proceedings were commenced.
The submissions on behalf of the Third Parties contain a useful procedural chronology, parts of which I include here to give context to the determination of the question of costs.
The claim commenced by the Plaintiff on 22 November 2022 did not join the leaseholders as defendants. The claim alleged, relevantly, that the First Defendant (as it ultimately became) failed to take steps to remove or reduce the risk of injury from the stairs by removing the exposed grout and adhesive and failed to replace the tiles within a reasonable timeframe.
The defence filed on 13 February 2023 admitted that the First Defendant was the occupier of the premises on which the accident occurred but denied the particulars of negligence. The First Defendant claimed that the steps did not form part of the premises over which the First Defendant had control and claimed that it was the leaseholders (as they then were) who were responsible for the condition of the steps and for which the First Defendant was not liable.
It is relevant here to note that Ms Khanthavongsa as the sole director of the First Defendant provided the information and instructions to the lawyers acting on the First Defendant’s behalf.
On 4 April 2023 the First Defendant joined the leaseholders to the proceedings as Third Parties, claiming that the accident occurred outside the area covered by the sub lease to the First Defendant for which the First Defendant was responsible. The First Defendant further asserted that the Third Parties were wholly responsible for the stairs and had attended to the removal of the tiles from the stairs leaving exposed grout and adhesive on them, and had failed to replace the tiles within a reasonable time frame.
On 20 June 2023 the Third Parties sought particulars of the claim from the First Defendant and asked on what basis the First Defendant alleged that the Third Parties were wholly responsible for the stairs, to which the First Defendant responded on 4 July 2023 and claimed that the Third Parties removed the tiles from the stairs.
The Plaintiff joined the Third Parties as Defendants on 7 July 2023.
The Plaintiff delivered interrogatories to the First Defendant in which it was asked on what date the tiles were removed from the stairs and when they were replaced. On 18 July 2023 Ms Khanthavongsa, on behalf of the First Defendant affirmed the answers and said that she did not know when the tiles were removed other than to say it was in 2016. She said the tiles were not replaced.
The Third Parties’ Defence, filed on 23 January 2024 contended that the First Defendant was in possession of the restaurant premises from 19 May 2016 and caused the stair tiles to be removed and failed to properly maintain the stairs.
On 13 March 2024 the Third Parties issued a Notice to Admit Facts to the First Defendant in which it asked the First Defendant to admit that it caused work to be conducted on the shop front of the premises, including the removal of pre-existing stair tiles; that the work occurred between 5 August and 12 October 2016 and was effected without Development Approval, and Development Approval was never obtained for the works including the removal of the tiles. The First Defendant denied these asserted facts.
The hearing of the suit commenced on 8 October 2024. In her evidence in chief, Ms Khanthavongsa said the stair tiles were removed but she did not know who arranged that work. It was in cross examination that she ultimately admitted that she had authorised work on the front of the restaurant premises which included the removal of the existing tiles and that while she had been advised to “make good” the stairs following the removal of the times, she had not done so.
On being cross examined on behalf of the Third Parties, Ms Khanthavongsa agreed that earlier assertions made by her solicitors on her instructions and in the documents in respect of which she affirmed the truth of the contents, that she did not cause the tiles to be removed from the stairs, were entirely inconsistent with her evidence given in court.
Ms Khanthavongsa was shown documents which revealed that on 1 August 2016 she received an email from the certifier of the building works proposed to be effected by her on the restaurant premises before she opened which noted; “[a]s previously advised the front façade will require a DA from ACTLPA. When this is approved we will issue a second BA for the remainder of the works.”
The documents demonstrated that Ms Khanthavongsa caused the tiles to be removed from the stairs after she had taken possession of the premises in May 2016. On 10 October 2016 Ms Khanthavongsa contacted the ACT Land Planning Authority (ACTLPA) to enquire about the progress of her Development Application to do work on the front façade including on the steps, to be told that no Development Application had been sought. It is clear that at this time the work had already taken place. On receiving that information, Ms Khanthavongsa emailed the occupier of the neighbouring shop asking whether the work she had done to the front area of her part of the premises could be included on their Development Application rather than her going to the expense of applying for a Development Application to cover the work she had done. She received no reply from her neighbour and took no further action.
The obvious point being that at least in August 2016 the First Defendant understood that any work to the front façade including the steps needed approval, that Ms Khanthavongsa on behalf of the First Defendant had conducted that work without approval and did not seek any approval. The work done included removing the tiles from the stairs leading to the restaurant from the footpath below with the result that the stair surface was left with exposed grout and adhesive.
Ms Khanthavongsa’s assertions in the pleadings and other documents that she did not know who or when the tiles were removed and her assertions that they were removed by the Third Parties were palpably untrue.
It is in my view tolerably clear that Ms Khanthavongsa’s denials of removing the tiles and asserting that they were removed by the leaseholders, led to the joining of them as Third Parties. It is significant that in July 2023 after the First Defendant’s defence was filed, that the Plaintiff joined the leaseholders as Defendants to the actions, no doubt because of the First Defendant’s denials in this regard.
It is against this background that I turn to consider the Third Parties’ application for a special costs order.
Special Costs Order
The application for a special costs order is brought in reliance on Pt 2.10 and r 1752 of the Court Procedure Rules 2006 (the Rules) and based on the rejection by the First Defendant of two offers of compromise in the form of “Calderbank offers” (Calderbank v Calderbank [1975] 3 All ER 333). The First Defendant opposes any special order for costs and contends that costs in the usual form should be awarded. The First Defendant raised other objections to the Third Parties’ claim for a special costs order to which I will return.
The Court may make an order that costs against a party be assessed on a solicitor and client basis, a “special costs order” (r 1752). Whether such an order is made is a matter in the exercise of discretion. The fundamental purpose of such an order is to compensate the successful party where it is reasonable and just that the party who has caused the other party to incur costs be called on to reimburse the other.
The circumstances in which a special costs order may be made have often been discussed. Here there is perhaps no better place to start than with Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 where Sheppard J considered the authorities and at 231 said: French J dealt with the matter again in J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) (1993) 46 IR 301). He referred (at 303) to Fountain and his earlier decision in Tetijo (supra). In relation to Fountain he said (at 303): "Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case. …”
His Honour continued and suggested circumstances in which such an order might be made including, relevantly here, where proceedings were commenced with wilful disregard of known facts (at 233). So too in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 Woodward J, in the course of awarding indemnity costs, referred to an application being “commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.”
In Marhaba v Chen (No 2) [2024] ACTSC 288, McWilliam J set out the principles governing an offer of compromise made under the Rules which I gratefully adopt and summarise.
The offer must be a genuine offer of compromise and be clear and certain in its terms. The judgment obtained must be no less favourable to the offeree than the offer and, where the offer is made within 2 months of the hearing, the offer must be open for acceptance for a reasonable period.
Where an offer is said to be made in accordance with r 1002, it must comply with the provisions of that rule.
Where the claim for special costs is based on the rejection of a Calderbank offer, a primary consideration is whether it was unreasonable for the offeree to refuse to accept it.
The offers
The Third Parties made two offers of compromise to the First Defendant in reliance on the Rules and as a Calderbank Offer.
The first was by letter dated 17 September 2024 and was in the following terms: We are instructed to offer to settle the entirety of your client’s Third Party Notice as against our clients on the following terms: 1. Judgment for the First, Second, Third and Fifth Third Parties as against the First Defendant. 2. The Court notes the Fourth Third Party is not an active party in these proceedings. 3. No order as to costs. This offer is made in accordance with part 2.10 of the Court Procedures Rules 2006 (ACT). This offer is open to 4.00pm on 25 September 2024. In the event this offer is found not to be made in compliance with Court Procedures Rules 2006 (ACT) this offer is made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333
The offer was not accepted.
The second offer was made on 9 October 2024 (during the proceedings and after Ms Khanthavongsa had given evidence). It said: We are instructed to offer to settle the entirety of your client’s Third Party Notice as against our clients on the following terms: 1. Judgment for the First, Second, Third and Fifth Third Parties as against the First Defendant. 2. The Court notes the Fourth Third Party is not an active party in these proceedings. 3. The First Defendant to pay the First, Second, Third and Fifth Third Parties’ costs of the proceedings on an ordinary basis to 31 January 2024. 4. The first Defendant to pay the First, Second, Third and Fifth Third Parties’ costs of the proceedings on a solicitor client (indemnity) basis from, and including 1 February 2024. This offer is made in accordance with part 2.10 of the Court Procedures Rules 2006 (ACT). This offer is open to 12.00pm on 10 October 2024. In the event this offer is found not to be made in compliance with Court Procedures Rules 2006 (ACT) this offer is made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333.
This offer was not accepted.
It is useful to set out the rule relevant to making an offer of compromise. 1002 Making offer (1) A party may, by written notice, make an offer to another party to compromise any claim in proceedings, either in whole or in part, on stated terms. (2) An offer under this rule must— (a) identify— (i) the claim or part of the claim to which it relates; and (ii) the proposed orders for disposal of the claim or part of the claim including, if a monetary judgment is proposed, the amount of the judgment; and (b) if the offer relates only to part of the proceedings, include a statement— (i) for an offer by the plaintiff—stating whether the remainder of the proceedings will be abandoned or pursued; or (ii) for an offer by a defendant—stating whether the remainder of the proceedings will be defended or conceded; and (c) not include an amount for costs or state that it is inclusive of costs; and (d) state that the offer has been made in accordance with this part; and (e) state the period of acceptance. Compliance with r 1002
Before turning to the Third Parties’ arguments on the issue of whether a special costs order should be made, it is as well to consider the First Defendant’s contentions that the offer of 17 September 2024 did not comply with r 1002. It was argued that it did not comply with rr 1002(2)(a)(i) and (b)(ii) and, further, that the offer did not identify the proposed orders for the disposal of the claim as between the Third Parties as Defendants to the Plaintiff’s claim.
The offer in its terms clearly identified that it was in relation to the First Defendant’s Third Party Notice and is, on its face compliant.
As to r 1002(2)(b)(ii), the Third Parties argued that the resolution of the claim as between the First Defendant and the Third Parties leaves no part of those proceedings unresolved.
Part 2.5 of the Rules governs Third Party proceedings, and in particular r 301 is to the effect that a Third Party Proceeding starts on the day the Third Party Notice is filed in court. Rule 316 permits the Court to sever the hearing of a Third Party claim from the proceedings to be determined separately, and r 317 provides that the Court may make an order as to the extent to which a third party is bound by the judgment as between the Plaintiff and the Defendant.
I accept the argument that the effect of these rules is that the Third Party proceedings were separate from the proceedings between the Plaintiff and the Defendant and were able to be resolved entirely separately. I do not accept that the offer does not comply with r 1002(2)(b)(ii).
For the same reasons, I do not accept that the notice is non-compliant because it fails to propose orders to dispose of the claim as between the Third Parties as Defendants to the Plaintiff’s action. The offer sought to dispose of the whole of the Third Party proceedings and the orders provide for that. The Third Parties were joined as defendants to the Plaintiff’s action and the acceptance by the First Defendant of that offer would not have disposed of the issues as between the Plaintiff and the Third Parties as defendants. However, in my view having determined that the Third Party proceeding was a separate and severable proceeding, the offer by its terms, had it been accepted, would have completely disposed of it.
Next, the First Defendant argued that nonetheless, the Third Parties are not entitled to rely on r 1002 to seek a special costs order because r 1012 concerns offers made by a defendant to a plaintiff and not to offers as between defendants.
Rule 20(2) concerns proceedings on a counterclaim or third party notice and says: (a) a reference in these rules to the plaintiff includes a reference to the party who files and serves the process and (b) a reference in these rules to the defendant includes a reference to the person on whom the process was served.
I accept the argument that the Third Parties were, for this purpose, defendants to the Third Party notice served by the First Defendant.
Thus, I conclude that the offers of compromise comply with r 1002.
The First Defendant further argued that the Plaintiff joined the Third Parties as Defendants alleging that the Third Parties as lessors of the whole of the premises owed the Plaintiff a duty of care and alleging negligence in exposing the Plaintiff to a risk of injury and, in those circumstances the Third Party action taken by the First Defendant did not impact on the proceedings as between the Plaintiff and the Third Parties as Defendants.
It was after the First Defendant joined the Third Parties alleging their breach of duty of care by removing the tiles and leaving the steps with exposed grout and adhesive, that the Plaintiff joined them as Defendants. It is a reasonable assumption that the Plaintiff’s amendment to her Statement of Claim to include the Third Parties as defendants sprang directly from the First Defendant’s assertion that it was them and not it who removed the tiles. I accept the submission of the Third Parties that but for the First Defendant wrongly asserting that the Third Parties removed the tiles, the Plaintiff would probably not have joined them as Defendants.
Next it was argued that settling the Plaintiff’s claim against them demonstrated that the Third Parties as defendants “clearly indicat[ed] an acceptance on the part of the other defendants to a risk of judgment being entered against it in the proceedings”. True it is that the Plaintiff settled her claim against the Third Parties as defendants. Counsel for the Third Parties argued it was not open to the First Defendant to infer the intention of the parties underlying the settlement. Even if it were appropriate to attempt to go behind the settlement reached, and that inference was accepted, it is to be recalled that the settlement was reached at a time when Ms Khanthavongsa maintained her denial of removing the tiles, a position recanted in cross examination. Any apprehension of risk of an adverse judgment against the Third Parties was, perhaps, due to the First Defendant’s incorrect assertions.
Consideration
Having concluded that the Offers of Compromise complied with the provisions of r 1002, and the First Defendant having achieved a verdict less favourable than the offer, the provision of r 1012 is engaged.
Rule 1012 provides: 1012 Offer not accepted and judgment no less favourable to defendant (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer. (2) Unless the court orders otherwise— (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in relation to the claim, to be assessed on a party and party basis, up to the time when the defendant is entitled to costs under paragraph (b); and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in relation to the claim, assessed on a solicitor and client basis— (i) if the offer was made before the first day of the trial—on and from the day after the offer was made; and (ii) if the offer was made on or after the first day of the trial—at and from 11 am on the day after the offer was made.
Thus, in compliance with r 1012 the Third Parties would be entitled to their costs on a solicitor and client basis from 18 September 2024, being the day after the first offer was made and on the usual basis up until that time.
Calderbank Offer
As I have said, the Third Parties rely on the First Defendant’s rejection of the offers of compromise to warrant a special order for costs from the date on which the proceedings against them were commenced. While many of the same legal principles apply to the awarding of a special costs order in reliance on the rules as where reliance is placed on the rejection of a Calderbank Offer, in considering the rejection of a Calderbank offer, the Court must be satisfied that the First Defendant was unreasonable in rejecting the offer.
For the following reasons, I am satisfied that the First Defendant was unreasonable in rejecting the offer knowing that Ms Khanthavongsa’s evidence and assertions of about the stairs were false.
The Third Parties contend that they should be entitled to their costs on a solicitor and client basis from the commencement of the Third Party Proceedings against them because, they argued, the First Defendant’s Third Party Notice was based on a falsity, namely that the First Defendant did not cause the tiles to be removed from the stairs and to be left in an uneven and pitted condition but, rather, as the Third Party Notice asserted, the area of the stairs was within the control of the Third Parties who caused that work to be done. This denial of responsibility, it was argued, was maintained in the answers to interrogatories given under affirmation by Ms Khanthavongsa as director of the First Defendant, and in other correspondence.
As I have indicated, Ms Khanthavongsa agreed that she had caused the tiles to be removed and had failed to “make good” the stair surface as she had been advised, leaving them rough and pitted. Her admission to removing the tiles was supported by documents she was shown during her cross examination which showed that she knew the work on the street front and building façade required Development Approval which she never obtained.
The Third Parties submitted that in these circumstances the First Defendant’s Third Party Notice was doomed from the outset. In the light of Ms Khanthavongsa’s admissions in evidence, that is undoubtedly true.
It is not suggested that those acting for the First Defendant are in any way to be criticised nor was it said that they knew that Ms Khanthavongsa was being untruthful in her instructions to them and in her sworn answers to interrogatories.
The Third Parties however argue that because of her false assertions, they were joined to the action in circumstances where they bore no liability to the Plaintiff nor were they liable for any contribution to the Plaintiff’s damages. Thus, the Third Parties seek a special costs order from the date on which the proceedings were commenced against them, that is from 4 April 2023.
It is, in my view clear that the First Defendant maintained a false position up to the time she was cross examined when she, for the first time, admitted to having removed the tiles from the stairs.
The Third Parties argued this, of itself is sufficient to warrant a special order for costs in relation to the joinder of the Third Parties.
The first offer was made on 17 September 2024 and was expressed to be open for a period of 8 days. It was argued for the Third Parties that at the time of this offer, the parties would be preparing for the hearing and it offered a verdict for the Third Parties with no orders as to costs. The second offer was made after Ms Khanthavongsa had given evidence and admitted her role in removing the stair tiles, and it was argued for the Third Parties that at this time the case against them was “utterly demolished”.
Was it unreasonable for the First Defendant not to accept the offer? The determination of this questions calls for the consideration of the circumstances of the party receiving the offer at the time it was made, including the strengths of each party’s case at the time the offer was made.
At the time the first offer was made on 17 September 2024, and indeed at all material times, the First Defendant knew that Ms Khanthavongsa had removed the tiles from the stairs and her assertions to the contrary were false.
The second offer was made on 9 October 2024, after Ms Khanthavongsa had given her evidence and admitted her role in removing the tiles from the stairs and had admitted that her previous denials were false.
In all of the circumstances including the Third Parties’ defence which squarely denied the removal of the tiles, the rejection of the offer of 17 September 2024 was unreasonable. Given that the second offer of 9 October 2024 was made after the First Defendant had admitted her falsehoods and that it sought a relatively limited period of time in which indemnity costs were to be awarded, it was unreasonably rejected.
Both offers having been rejected and the First Defendant having received a judgment no more favourable than either of the offers, the Third Parties are entitled to seek a special order for costs.
I am comfortably satisfied that on account of the First Defendant’s persistent and false assertions denying her actions in creating the risk on the stairs and the rejection of the offers of compromise, it is appropriate to make a special costs order in favour of the Third Parties to date from the time that the Third Party Notice was filed, that is 4 April 2023.
Orders
I certify that the preceding seventy-three [73] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Acting Justice Ainslie-Wallace. Associate: Date: 26 May 2025
Pavey-Dray
Weomany Pty Ltd trading as Zaab Braddon
(1993) 46 FCR 225
(1988) 81 ALR 397
(1993) 46 IR 301