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[2015] QSC 322
General information, not legal advice.
Supreme Court of Queensland
2015-11-11
Peter Lyons J
Original judgment source is linked above.
[1] On the hearing of a separate question in advance of the trial, the defendant successfully established that a limitation clause formed part of its contract with the plaintiffs. Accordingly, the defendant obtained judgment against them. It now seeks its costs on the indemnity basis.
[2] The proceedings were commenced by claim on 27 November 2014. On 9 January 2015, the defendant filed its Defence, alleging that the contract included the limitations clause, which precluded the bringing of the proceedings. On 13 January 2015 the defendant made an offer to settle the proceedings on the basis that they be discontinued, with no order as to costs[1]. The offer was expressed to be made in accordance with the provisions of chapter 9, part 5 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). The offer was expressed to be open for acceptance for a period of fourteen days. The plaintiffs did not accept it within that period, and the offer lapsed.
[3] Subsequently, orders were made for the hearing mentioned at the commencement of these reasons.
[4] The defendant sought its costs on the standard basis up to 27 January 2015, and thereafter on the indemnity basis. It submitted that r 361 of the UCPR had no application; but that the offer should be treated as a Calderbank offer, and cited, in support of the proposition that it should have its indemnity costs as sought, a number of authorities: Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd[2] (Emanuel); Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2)[3]; and AKS Investments Pty Ltd (as trustee for the Smith Family Trust) v National Australia Bank[4]. Since the letter accompanying the offer drew the attention of the plaintiffs to Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd[5] (Hyder), where it was also held that the limitation clause in question was incorporated in a contract in somewhat similar circumstances, it was submitted that the plaintiffs should then have known that their claim had limited prospects of success. Accordingly, the indemnity costs order which the defendant sought should be granted.
[5] For the plaintiffs also, it was submitted that r 361 of the UCPR did not apply. The plaintiffs submitted the question whether the limitation clause formed part of the contract was one of some complexity, demonstrated by the way the hearing was conducted and determined. Notwithstanding the decision in Hyder, there was authority which supported a contrary conclusion in the present case. The defendant's offer did not involve any real compromise. However the plaintiffs accepted that they should pay the defendant's costs of the proceedings.
[6] In the defendant's submissions in reply, it was again submitted that the plaintiffs' prospects of success were sufficiently limited to justify an indemnity costs order as a result of the plaintiffs' failure to accept its offer. It also maintained that its offer was a genuine offer to compromise.
[7] The attention of the parties was drawn to the fact that r 361 had been amended by SL No 320 of 2014, from 19 December 2014. They were asked to provide submissions as to which version of the rule applied; and the consequences of the application of each version of the rule. Both parties submitted that the rule as amended was applicable. Accordingly, it is unnecessary to consider the application by reference to the rule as it stood before the amendment.
[9] It is convenient first to note the form of r 361, both before and after its amendment. Before the amendment, the rule included the following
(a) the defendant makes an offer to settle that is not accepted by the plaintiff and the plaintiff obtains a judgment that is not more favourable to the plaintiff than the offer to settle; and
(b) the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer.
(2) Unless a party shows another order for costs is appropriate in the circumstances, the court must -
(a) order the defendant to pay the plaintiff's costs, calculated on the standard basis, up to and including the day of service of the offer to settle; and
(b) order the plaintiff to pay the defendant's costs, calculated on the standard basis, after the day of service of the offer to settle."
[10] After the amendment, the rule was as follows
(a) the defendant makes an offer that is not accepted by the plaintiff and the plaintiff does not obtain an order that is more favourable to the plaintiff than the offer; and
(b) the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer.
(2) Unless a party shows another order for costs is appropriate in the circumstances, the court must -
(a) order the defendant to pay the plaintiff's costs, calculated on the standard basis, up to and including the day of service of the offer; and
(b) order the plaintiff to pay the defendant's costs, calculated on the standard basis, after the day of service of the offer."
[11] While I am conscious of the different conclusion reached in Carlyon, it seems to me there is some reason to think that the amended rule would apply when a defendant is wholly successful. The question might be of importance when a defendant makes an offer after the commencement of the trial. However, in the present case, if the rule applied, the effect of the defendant's submission is that another order for costs is more appropriate than that specified by the rule. The plaintiffs accept that to be correct, in relation to the costs of the proceedings up to the date of the offer. It seems to me that the question whether the defendant should have its costs on the indemnity basis thereafter gives rise to the same considerations, whether the question is considered by reference to the rule, or by the application of general principles. In view of the position adopted by the parties, I propose to proceed on the basis that the rule does not apply.
[12] The defendant's submissions identified one basis on which costs might have been ordered under the general principles previously referred to, namely the unreasonable refusal of an offer of compromise[7]. The defendant's submissions cited a case where it was said that when an offeror can show its offer was reasonable, and has greater success, then there is "at least a persuasive burden on the offeree to show that its rejection of the offer was not unreasonable"[8]. It was not a straightforward matter to determine whether the limitation clause was included in the contract between the present parties. For that reason alone, I consider that it was reasonable for the plaintiffs not to accept the defendant's offer. This conclusion is not altered by the fact that the defendant drew the plaintiffs' attention to Hyder. As I sought to point out in the earlier reasons, the question considered in Hyder was ultimately one of fact, and did not establish any rule of law to the effect that the limitation clause would be included in a particular class of contract[9]. There were factual differences between that case and the present case. In light of my conclusion, it is unnecessary to consider other matters raised in the submissions.
[13] Accordingly, the defendant has not established that an order for indemnity costs should be made.
[14] I am not prepared to make an order that the plaintiffs pay the defendant's costs of these proceedings, subsequent to its offer, on the indemnity basis. Accordingly, I propose to order that the plaintiffs pay the costs of the defendant of and incidental to these proceedings, to be assessed on the standard basis.
[1] Exhibit 1 to the affidavit of Julia Ann Davidson sworn 16 October 2015 (JAD 1), at p 4.
[7] Relying on AKS Investments at [11]; Hazeldene's Chicken Farm at [28]; and Paroz v Paroz [2010] QSC 157 at [62]; see also Aljade and MKIC v OCBC [2004] VSC 351 at [13].
[8] Rickard Constructions v Rickard Hails Moretti and Ors [2005] NSWSC 481 at [30].
[9] Surfstone Pty Ltd v Morgan Consulting Engineers [2015] QSC 290 at [68].
Surfstone Pty Ltd & Anor
Morgan Consulting Engineers Pty Ltd [
(2005) 13 VR 435
[8] For the defendant, it was submitted that the present case did not come within the provisions of r 361. A similar conclusion was reached in Carlyon v Town & County Pubs No 2 Pty Ltd T/A Queens Hotel Gladstone (No 2)[6] (Carlyon). Reference was made to sub rule (2)(a) which would have the consequence that, in a case like the present case, the defendant would be required to pay the plaintiff's costs up to the date of the offer, notwithstanding that it successfully obtained judgment. It was also submitted that the amendment to the rule would make no difference in the present case. The supplementary submissions for the plaintiffs were to similar effect.