PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
COSTS – INDEMNITY COSTS – RELEVANT CONSIDERATIONS
GENERALLY –
where the plaintiffs’ claims in contract against the defendant were
Source
Original judgment source is linked above.
Catchwords
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –COSTS – INDEMNITY COSTS – RELEVANT CONSIDERATIONSGENERALLY –where the plaintiffs’ claims in contract against the defendant weredismissed – where the defendantseeks costs on the indemnity basis –where the defendant made three offers to resolve the primary proceedings whichwere notaccepted by the plaintiffs – whether the defendant can establishspecial circumstances – whether the defendant shouldbe awarded costs onthe indemnity basisUniform Civil Procedure Rules 1999 (Qld),rr 681, 703Calderbank v Calderbank [1975] 3 All ER333Clarke Energy (Australia) Pty Ltd v Power Generation Corporation(Trading as Territory Generation) [No 2] [2025] QSC 111Sino DragonTrading Ltd v Noble Resources International Pte Ltd (No 2) [2016] FCA1169
Stephenson & Anor v Dental Corporation Pty Ltd [2025] QSC
82
Wiggins Island Coal Export Terminal Pty Limited v Civil Mining &
Construction Pty Ltd [2021] QCA 8
(2021) 7 QR 1
Judgment (12 paragraphs)
[1]
[1] On 1 May 2025 I delivered judgment in this matter, dismissing the plaintiffs' claims. My reasons for judgment are contained in Stephenson & Anor v Dental Corporation Pty Ltd[2025] QSC 82 (the "primary reasons"). These reasons concern the costs orders. The parties made written submissions. No party asked for a further hearing.
[2] I will use the defined terms as contained in the primary reasons.
[3] The first plaintiff, Dr David Stephenson, is a dentist who carried on a dental practice at Albany Creek between 1991 and 2008. Originally, he did so personally, but in 1997 he incorporated the second plaintiff and, at a later time, entered into a Services Agreement between himself and the second plaintiff for the provision of dental services.
[4] In June 2008 the defendant, Dental Corporation, purchased the Albany Creek practice. Dr Stephenson remained working at the practice until 2013. The primary proceeding related to a claim for damages brought by the first and second plaintiffs against the defendant which was said to have arisen as a result of the defendant purporting to terminate its contractual arrangements with the plaintiffs.
[5] The defendant made multiple offers to resolve the primary proceedings, each of which were not accepted. Accordingly, the defendant seeks an order that the plaintiffs pay the defendant's costs:
[2]
(a) on the standard basis until 4 August 2022, and thereafter on the indemnity basis;
(b) alternatively on the standard basis until 2 December 2023 and thereafter on the indemnity basis; or
(c) otherwise on the standard basis.
[3]
[6] The plaintiffs oppose any order other than an order that the plaintiffs pay the defendant's costs to be assessed on the standard basis.
[7] In a proceeding such as this, costs will ordinarily be awarded against an unsuccessful party on the standard basis unless the successful party can establish special circumstances.[1] As Kelly J recently observed:
[4]
"The phrase 'special circumstances' is not a prescriptive proviso but rather 'a convenient label to describe any and all relevant circumstances that might justify an indemnity costs order, recognising that the Court's discretion is at large'."[2]
[5]
[8] The usual position therefore is for standard costs to be ordered except where the circumstances otherwise warrant it.
[9] By letter dated 4 August 2022 the defendant made the first offer, on a "without prejudice" basis, to resolve the plaintiffs' claims by making a payment of $100,000 (gross), inclusive of costs and interest to the plaintiffs. The offer was said to be made under Part 5 Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), and remained open for acceptance until 19 August 2022. The defendant reserved the right to rely upon the offer in relation to costs.
[10] The first offer was not accepted.
[11] The defendant's second offer made on 23 November 2022 was to pay a sum of $150,000 (gross) inclusive of costs and interest, to be paid to one of, or divided between, the plaintiffs. Again, the offer was made expressly in accordance with Part 5 Chapter 9 of the UCPR. It remained open until 7 December 2022.[3] The offer reserved the defendant's rights to rely upon it in relation to the question of costs.
[12] The second offer was not accepted.
[13] The plaintiffs submit that the first offer and the second offer have no bearing on the question of costs because each of them were made on pleadings that did not raise the issue on which the defendant was ultimately successful. The plaintiffs contend, correctly, that this court found that the DC Services Agreement which was then on foot between the parties was mutually terminated by 1 May 2013 based on Dr Stephenson's conduct and communications.[4] Further, the plaintiffs contend that the court found that no new contract was concluded after that date, and that the defendant's termination letter of 2 September 2013 was either unnecessary or invalid as Dr Stephenson had repudiated any ongoing agreement by failing to perform his obligations.
[6]
"... it is also an undeniable fact, manifest from Dr Stephenson's sworn evidence served in these proceedings, but supported by the contemporaneous documents, that Dr Stephenson asserts and accepts that from 1 May 2013 he ceased his engagement as Practice Principal at the Albany Creek Dental Practice ..."
[7]
[20] The plaintiffs assert that the third offer was not an offer of genuine compromise because it in fact represented a complete capitulation of the plaintiffs' case, whereas a true offer of compromise involved a meaningful concession by both sides.[6]
[21] The plaintiffs' reliance upon Wiggins' case is misplaced. Whilst the mere use of the words "without prejudice" is not sufficient to indicate that an offer is to be relied upon as a calderbank offer, in the present case the third offer went much further than that. The letter was marked "without prejudice, save as to costs". The letter set out, at some length, the basis for the defendant's confidence that the plaintiffs' proceedings would be dismissed. The letter relied heavily upon the plaintiffs' own affidavit evidence, ultimately being the basis upon which the claim was in fact dismissed. In this way, the basis for the defendant's change of position from offering a settlement sum, to offering to walk away, was explained.
[22] Second, the offer provided a period of 14 days within which for the plaintiffs to consider the offer, a reasonable period of time to so consider in the circumstances.
[23] Third, the offer explained that the defendant had incurred approximately $63,000 of external legal costs, and that those costs, and further costs incurred, would be sought against the plaintiffs if the action were unsuccessful.
[24] Fourth, the offer described that the defendant intended to rely upon the offer on the issue of costs and in accordance with the principles in Calderbank v Calderbank.[7]
[25] In the circumstances, had I not otherwise ordered in respect of the first offer, or indeed the second offer, I would have found that the third offer was sufficient to constitute special circumstances justifying an order for indemnity costs against the plaintiffs.
[26] In the circumstances the order of the court is that:
The plaintiffs pay the defendant's costs up to and including 4 August 2022 on the standard basis; and
The plaintiffs pay the defendant's costs from 5 August 2022 on the indemnity basis.
[2]Clarke Energy (Australia) Pty Ltd v Power Generation Corporation (Trading as Territory Generation) [No 2][2025] QSC 111 at [4] citing Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2)[2016] FCA 1169 at [4].
[10]
[3] The dates here do not align with the defendant's submissions as contained in paragraph [5](b) above, however for the reasons I set out, nothing turns on this.
[11]
[6]Wiggins Island Coal Export Terminal Pty Limited v Civil Mining & Construction Pty Ltd[2021] QCA 8; (2021) 7 QR 1 at [48], [66].
[14] The plaintiffs contend that the defendant's plea based on termination was introduced, for the first time, in the second further amended defence filed 25 July 2023, some five years after the commencement of the proceedings.
[15] Whilst it is correct to assert, as the plaintiffs do, that the defendant's reliance upon the termination of the agreement arose only in the second further amended defence filed 25 July 2023, that amended defence was only filed after the first plaintiff filed and served an affidavit in the proceedings (in accordance with a direction to do so), setting out his evidence in relation to the contractual arrangements with the defendant. It is a reasonable inference that the first plaintiff's evidence in his affidavit was the evidence which he was always in a position to give - and must have known that he would give. Properly advised, the first plaintiff must have known that his own evidence plainly gave rise to a termination of the contractual arrangements on 1 May 2013, as found by the court.
[16] It follows in my view that when the first offer and the second offer were made to the plaintiffs, properly advised, the plaintiffs ought to have realised that the offers constituted a genuine compromise which, in their own interests, they ought to accept. The plaintiffs must have known, based on the first plaintiff's own evidence, that the claim being advanced was untenable.
[17] Therefore, the failure to beat an offer of settlement, which represents a genuine compromise of the proceeding, can constitute a special circumstance leading to the making of an order other than standard costs.
[18] In the circumstances, the order ought to be that the plaintiffs pay the standard costs of the proceedings up to the date of the first offer, 4 August 2022, and thereafter on the indemnity basis.
[19] For completeness I deal with the defendant's third offer of settlement. That was an offer of 1 December 2023, which offer was made after the plaintiffs' affidavit had been delivered, and after the defendant's second further amended defence had been filed on 25 July 2023. On that date, the defendant offered to compromise the proceeding on the basis the proceedings be dismissed, and each party pay their own costs of the proceeding. In part, that offer observed: