The Owners – Strata Plan No 31337 v Balacco (No 2)

What happened

This is a short judgment dealing with the costs of an appeal, rather than deciding the underlying personal injury dispute afresh. The substantive appeal had been determined in an earlier judgment, delivered on 9 April 2026. The Court allowed the owners corporation’s appeal in part, set aside the District Court judgment for $385,484.78, and substituted judgment for Ms Balacco in the amount of $250,499.06 ([1]). The costs question was left for written submissions.

The appeal involved eight substantive grounds. The owners corporation succeeded on the lighting issue but failed on whether the speed hump was an obvious risk, whether it had breached its duty of care, and whether that breach caused Ms Balacco’s injury. Its challenge to contributory negligence also failed. It did, however, succeed on grounds 8 and 9, which resulted in deductions for future economic loss and future domestic assistance ([3]).

The parties agreed that this partial appellate success did not justify changing the first-instance costs position. They also accepted that the appeal costs should not simply follow the event, because Ms Balacco had nevertheless achieved substantial success ([2]). Their disagreement concerned the appropriate costs order in the Court of Appeal. Ms Balacco sought all her appeal costs, including indemnity costs for the hearing day, or alternatively an issue-based order. The owners corporation sought no order as to appeal costs ([4]).

The Court rejected both parties’ primary positions. It ordered the owners corporation to pay one third of Ms Balacco’s appeal costs, as agreed or assessed. That order also covered the further submissions on costs ([17]).

Why the court decided this way

The first question was whether a $250,000 offer, served shortly before the appeal hearing, should affect costs. It was served at 11:03 am on the day before the appeal and was open until 10:15 am the next day ([5]). The Court identified two formal defects under UCPR r 20.26: the offer did not say that it was made pursuant to the rules, and it did not identify the orders sought. The latter mattered because the offer proposed payment and dismissal of proceedings, while dismissal of the appeal proceedings would leave the District Court judgment in place ([5]).

The Court also considered the short acceptance period. The owners corporation’s solicitors asked for clarification at 11:29 am, but there was no indication that Ms Balacco’s solicitors replied. The offer was open for less than a day, and the Court was not satisfied that the acceptance period was reasonable in the circumstances for the purposes of r 20.26(5)(b) ([5]). The judgment does not say that an offer made shortly before a hearing can never attract costs consequences. Rather, it says that if a party seeks the benefit of the rules’ default consequences, the offer must not have deficiencies of the kind present here.

The Court then considered the possibility that the offer might be treated as a Calderbank letter despite not engaging the rules. It doubted whether the offer conveyed that intention. But even on the assumption most favourable to Ms Balacco, the owners corporation was not unreasonable in declining it. The Court pointed to four circumstances: the offer was unclear, the clarification request went unanswered, the offer remained open for less than a day, and the offer material did not explain its basis. In particular, Ms Balacco’s brief written submissions did not address grounds 8 or 9, which were among the grounds on which the owners corporation succeeded ([6]). Accordingly, the late offer did not affect the costs discretion ([7]).

The separate offer of $308,000, made on 18 February 2026, was for more than the judgment ultimately obtained after the appeal. The Court held it irrelevant to the costs discretion ([8]).

The Court then had to choose between no order, all of Ms Balacco’s costs, an issue-based order, or a proportionate order. It rejected no order because Ms Balacco retained a substantial judgment. Although the owners corporation succeeded on lighting, success on that issue alone would not have displaced the judgment against it. Leaving Ms Balacco to bear all her appeal costs would therefore fail to reflect the practical result she achieved ([14]). Conversely, an order for all her costs would fail to reflect her losses on substantial issues and the deficiencies in her submissions ([15]).

The Court also declined an issue-based order. It contrasted this appeal with the Zurich litigation, which involved multiple parties, numerous notices of appeal and cross-appeal, a four-day hearing, and a list of issues that made allocation practicable ([10]-[11]). Here there were two parties, a half-day hearing, and relatively small costs. The Court considered that issue-by-issue allocation would introduce complication and expense ([12], [16]). It chose a broad-brush proportional order, considering the respective successes, the concise appeal, and the limited assistance provided by Ms Balacco’s submissions. One third of her costs was ordered payable ([17]).

Before and after state of the law

The judgment does not announce a new general rule of costs law. It applies the Court’s discretion to the specific results and procedural circumstances of this appeal. The starting point was that the ordinary rule that costs follow the event could be departed from where the outcome was mixed and the respondent had achieved substantial success ([2]).

On offers of compromise, the Court applied the requirements it identified in UCPR r 20.26. It treated the offer’s failure to state that it was made pursuant to the rules and its failure to identify the orders sought as substantive defects, not mere technicalities ([5]). The short period for acceptance and lack of clarification also informed the Court’s view. The judgment therefore illustrates that the formal presentation, clarity, timing and supporting explanation of an offer may all matter when a party seeks costs consequences.

The Court also considered the possibility of treating an offer outside the rules as a Calderbank letter. It referred to Whitney v Dream Developments Pty Ltd and Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd (No 2) in discussing that possibility ([6]). Its analysis was conditional: even if the offer were treated as a Calderbank letter, non-acceptance was not unreasonable in the circumstances identified.

For appellate costs, the judgment reinforces a practical distinction between issue-based and broad-brush allocation. The Court did not reject issue-based orders as a category. It accepted that they had been appropriate in the Zurich proceedings, where the scale and structure of the litigation enabled the Court to allocate costs among issues without great difficulty ([10]-[11]). It found those circumstances absent here. The broad-brush approach, supported by Doppstadt and James, was preferred as less costly and less likely to generate further disputes over quantification ([16]).

Accordingly, the judgment’s contribution is principally an application of established approaches: it shows how offer deficiencies and the scale of an appeal can shape the exercise of costs discretion. The supplied judgment does not establish a new formula for selecting a proportion, and it gives no general numerical benchmark for similar cases.

Key passages with plain-English translation

At [5], the Court said it was “not satisfied” that the offer’s short acceptance period was “reasonable in the circumstances” under r 20.26(5)(b). In plain English, the offer was open for too little time, given its defects and the need for clarification, to attract the relevant rule-based treatment.

At [6], the Court identified why non-acceptance was not unreasonable even on the assumption that the offer could be treated as a Calderbank letter. The practical message is that the Court examined the whole context, not only the dollar amount: the terms were unclear, the inquiry was unanswered, the time was short, and the basis for the offer was not explained.

At [14], the Court observed that a no-costs order would not reflect Ms Balacco’s success in retaining a judgment of $250,499.06. In other words, the owners corporation’s partial appeal success did not erase the fact that Ms Balacco retained a substantial award.

At [16], the Court said there was “no occasion for the complication and expense in an issue-based costs order”. That does not mean issue-based costs orders are disfavoured in all appeals. It means the Court considered detailed allocation disproportionate in this short appeal between two parties.

At [17], the Court stated that the owners corporation should pay one third of Ms Balacco’s costs. The proportion reflected several considerations together: partial success for each side, the concise appeal, and the limited assistance provided by Ms Balacco’s submissions.

What fact patterns trigger this precedent

The reasoning is most directly relevant to appellate costs disputes where both sides have achieved meaningful, but incomplete, success. Here, the respondent retained a substantial judgment, while the appellant succeeded in reducing the award and prevailed on some grounds. The Court’s approach shows that success is not necessarily assessed as a simple winner-takes-all result. The practical effect of the successful grounds also mattered: success on lighting alone would not have displaced the judgment ([3], [14]).

The offer analysis is relevant to cases involving an offer served close to a hearing where the offering party later seeks rule-based costs consequences or relies on the offer as a Calderbank letter. The particular combination here included formal non-compliance, uncertainty about the orders proposed, a very short period for acceptance, an unanswered clarification request, and little explanation of the offer’s basis ([5]-[7]). The Court’s reasoning turns on that combination; the judgment does not establish that any one of those features will invariably decide the question.

The costs-allocation analysis is relevant to relatively short appeals with few parties, modest costs, and no practical need to allocate every expense to particular issues. In those circumstances, the Court considered a broad-brush proportionate order preferable to the extra work involved in assessing both parties’ costs and then dividing them issue by issue ([12], [16]).

The judgment itself cautions against treating its approach as a universal substitute for issue-based orders. The Court distinguished the multi-party Zurich proceedings, where the issues and litigation structure made allocation more practicable ([10]-[11]). Scale, issue structure, and the likely cost of allocation are therefore important features of the comparison drawn in this judgment.

How later courts have treated it

The supplied text contains no decisions that post-date this judgment and does not describe any later judicial treatment of it. The judgment is dated 13 May 2026, and the source provided here cannot establish how subsequent courts have cited, applied, distinguished or reconsidered it.

The judgment itself explains its use of earlier authorities. It refers to Whitney and Singapore Airlines Cargo when discussing whether a non-rule offer may be treated as a Calderbank letter ([6]). It distinguishes the trial-costs decision in Windsurfing International from the present appellate costs question ([9]). It also distinguishes the circumstances in Zurich, where an issue-based order could be allocated without great difficulty ([10]-[11]).

For broad-brush apportionment, the Court relies on Doppstadt and James, referring to the value of simplifying quantification and avoiding further disputes ([16]). Those are the authorities the judgment itself identifies as supporting its approach. The provided material does not establish any subsequent development beyond those references.

Still-open questions

The judgment does not specify a general threshold for what constitutes a reasonable acceptance period under UCPR r 20.26(5)(b). It explains why less than a day was not reasonable in this case, given the offer’s other defects and the unanswered clarification request ([5]-[6]), but it does not set a minimum period for other circumstances.

Nor does it define when a non-compliant offer sufficiently indicates an intention to operate as a Calderbank letter. The Court doubted that intention was conveyed here, then proceeded on the assumption most favourable to Ms Balacco ([6]). The decision therefore does not need to resolve precisely what features would be sufficient in another case.

The one-third apportionment is fact-specific. The judgment identifies the considerations behind the figure but does not provide a formula for calculating a proportion in later appeals ([17]). It also does not quantify the costs or state how the parties might resolve any disagreement in assessment beyond the orders that costs be as agreed or assessed.

Finally, the judgment’s comparison with Zurich leaves open how courts will approach issue-based orders in appeals that fall between the two examples. It contrasts a complex, multi-party, four-day proceeding with a short, two-party, half-day appeal, but does not identify a precise point at which the administrative burden of issue-based allocation becomes disproportionate ([10]-[12], [16]).

This is general legal information, not legal advice. Zoe can make mistakes. Before acting on, relying on, or using this analysis, have a qualified Australian lawyer check it.