Stern v Addbuild Master Builders Pty Ltd

Calderbank offer

Since it was filed first in time, I will determine the builder's application for costs. This application is based on a Calderbank offer made on 29 March 2023 which was a Wednesday. The hearing took place on 3 April which was the following Monday. I find that the owner had 3 business days to consider the offer, assuming that it was received first thing on 29 March. The builder offered to pay the owner $50,000.00 and to contribute $15,000.00 towards his legal costs. It was proposed that if the offer was settled a deed be entered into to record the settlement.
On 31 March 2023 the owner's solicitors replied rejecting the builder's offer. The following matters were relevantly stated: 'Your letter of 29 March 2023 is the first time your client has engaged in any settlement discussions with our client since the filing of this renewal of proceedings application, being three business days prior to the hearing. This is despite your client having the benefit of reviewing our client's evidence served to date and concessions being made by your client's own expert. As indicated in our client's evidence, his total claim against your client in these proceedings, as well as his legal costs, are significantly greater than the amounts offered by your client to settle the proceedings. We finally note that our client has already incurred significant legal costs towards the preparation for hearing on 3 April 2023 and remains confident that he is likely do better at hearing than what is being offered by your client.'
The builder has referred to an email of 22 March 2023 which enquired whether the there was any utility in the parties having discussions to resolve the proceedings. I find that the email is not relevant to the question of costs.
In Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 ('Miwa') Basten JA (with whom McColl and Campbell JJA agreed) identified two questions which are relevant to a 'Calderbank' offer and a claim for indemnity costs. They are whether: 1. there was a genuine offer of compromise, and 2. it was unreasonable for the offeree not to accept it.
The owner's solicitors pointed out that the builder's offer was received 3 business days before the hearing and that the owner had incurred significant amounts of money in preparing his case for the hearing. I note that the owner did not state that the short period of time from receipt of the offer to the hearing was a factor in rejecting the offer because it could not be assessed in that period.
The builder's offer of $50,000.00 exceeded the amount that the owner recovered in the proceedings. But that in itself is not decisive. I find that in making an offer in which the builder conceded that its liability could be as high as $50,000.00 after a contested hearing, the builder should have known that the owner had prepared his case for hearing and would have expended legal and expert fees in that process, most likely in excess of $15,000.00. In addition the builder should have known that if the owner secured an order of $50,000.00 he would have the opportunity to apply for his costs of the proceedings.
I find that having regard to the situation on 29 March 2023, the owner did not act unreasonably when he rejected the Calderbank offer stating that he had expended legal costs which were significantly greater than the amount offered by the builder. I find that the amount offered by the builder as the costs component of its Calderbank offer, viewed at 29 March was not reasonable.
The builder's application for indemnity costs is rejected for the reasons provided.
At [4(b)] of its submissions the builder claims the costs of the proceedings from 29 March 2023 on the ordinary basis. The builder's submissions do not develop the basis for this aspect of its claim, concentrating instead on a dissection of the decision and the items of claim that the owner was not successful on. In that regard, an Appeal Panel in Rekrut and Scott v Champion Homes Sales Pty Ltd; Champion Homes Sales Pty Ltd v Rekrut and Scott [2018] NSWCATAP 97 stated at [23]: 23 Unless a particular issue or 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 - Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38].
The builder has made no submission of a dominant or separable issue which would disentitle the owner to his costs of the proceedings, or which would justify a different cost order being made. I find that even though the owner was not successful on all issues he raised in the proceedings, the rule referred to in the extract above should apply because there was no group of issues that were clearly dominant or separable. It follows that I reject the builder's claim for the costs of the proceedings from 29 March 2023 on the ordinary basis.

The general law position

The general law position is that a successful party has a 'reasonable expectation' of being awarded costs against the unsuccessful party Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72 at [67] and at [134].
At [67] of the judgement, McHugh J. stated 'The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.'
At [134(2)] of the judgement, Kirby J. stated: '2. Notwithstanding the width of the statutory language by which the discretion was conferred on the trial court, it came to be said in civil non-jury trials that a successful party, in the absence of special circumstances, had a reasonable expectation of obtaining an order for costs in its favour unless "for some reason connected with the case" a different order was specially warranted. Any departure from this expectation would require that there should be material upon which the adverse discretion could be properly exercised. It could not be exercised by reference to idiosyncratic notions or to facts and circumstances irrelevant to the case. Yet, until the discretion had been exercised and a costs order made in favour of a successful party, that party had no right to the order of costs, notwithstanding its success in the litigation'
A more recent High Court decision which is substantially to the same effect as the position stated in Oshlack v Richmond River Council is Northern Territory v Sangare [2019] HCA 25 where the court stated at [24] - [25], footnotes excluded: 'It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion "cannot be narrowed by a legal rule devised by the court to control its exercise", the formulation of principles according to which the discretion should be exercised does not "constitute a fetter upon the discretion not intended by the legislature". Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power. A guiding principle by reference to which the discretion is to be exercised - indeed, "one of the most, if not the most, important" principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the "just resolution of the real issues in civil proceedings with minimum delay and expense", that might have been taken into account to justify refusing the appellant an order for its costs.' (Emphasis added)
I find that the owner in obtaining an order that the builder pay him $44,432.18 with an opportunity to apply for his costs, was the successful party in the proceedings. I also find that there is no basis for finding that there is any conduct on his part which would disentitle him to an order for costs. As a result I find that the owner as the successful party in the proceedings is entitled to the costs of the proceedings. I will make an order in his favour that the builder must pay his costs of proceedings HB 22/43030 on a party/party basis, such costs if not agreed to be assessed on the basis set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.

At a glance

Court

Decision date

Before

Source

Judgment (6 paragraphs)

Parties

Cases Cited (5)