Westpac v Commissioner of State Revenue [2004] QSC 19

INTEREST - RATE OF INTEREST - Whether interest should be awarded for entire period

PROCEDURE - COSTS - GENERAL RULE COSTS FOLLOW THE EVENT - COSTS OF WHOLE ACTION - OFFER OF COMPROMISE MADE - Calderbank Offer - Indemnity costs sought

Duties Act 2001

Judicial Review Act 1991, s 12, s 30

Taxation Administration Act 2001, s 61

Taxation Administration Act Regulation 2002, s 7

Batchelor v Burke [1981] HCA 30; (1981) 148 CLR 448, followed

Bennett v Jones [1977] 2 NSWLR 355, followed

BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] WLR 783, cited

Brittain v Commonwealth of Australia [2003] NSWSC 270, cited

Calderbank v Calderbank [1975] 3 All ER 333; [1976] Fam 93, applied

Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382, cited

Commissioner of Stamp Duties v MIM Holdings Limited [2001] 1 Qd R 294, considered

Cullen v Trappell [1980] HCA 10; (1980) 146 CLR 1, cited

Duke Group Ltd (in liq) v Pilmer [1999] SASC 97; (1999) 31 ACSR 213, cited

Ex parte Xenon Pty Ltd [1984] 1 Qd R 232, cited

General Tire & Rubber Co v Firestone Tyre & Co Ltd [1975] 1 WLR 819, cited

Interchase Corporation Limited v ACN 010 087 573 [2000] QSC 13, followed

Interchase Corporation Limited (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 3) [2003] 1 Qd R 26, followed

Jones v Bradley (No 2) [2003] NSW CA 258, cited

MBP (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657, cited

MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd [1996] FCA 862; (1996) 70 FCR 236, considered

MT Associates Pty Ltd v Aqua-Max Pty Ltd [2000] VSC 163, cited

Multicon Engineering Pty Ltd v Federal Airports Corp (1996) 138 ALR 425, followed

Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) [1998] QSC 18; [1999] 1 Qd R 518, cited

O'Sullivan v Commissioner of Stamp Duty [1984] 1 Qd R 212, cited

Pirrotta v Citibank Ltd (1998) 72 SASR 259, considered

Property Unit Nominees (No 2) Pty Ltd v Commissioner of Stamp Duties [1981] Qd R 332, considered

Serisier Investments Pty Ltd v English [1989] 1 Qd R 678, distinguished

Smec Testing Services v Campbell Town City Council [2000] NSWCA 323, considered

Tate & Lyle Food Distribution Ltd v Greater London Council [1981] 3 All E R 716, cited

Tector v FAI Insurance Company Limited [2000] QCA 426; [2001] 2 Qd R 463, distinguished

Thakral Fidelity Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 428, followed

Westpac Banking Corporation v Commissioner of Stamp Duties [1994] 1 Qd R 99, cited

[1] The applicant ("Westpac") brought two applications pursuant to the Judicial Review Act 1991 (Qld) to review decisions by the respondent, the Commissioner of Stamp Duties ("the Commissioner"), as the office was then known, requiring Westpac to furnish a duly completed statement in Form S(a) in respect of the acquisition by Westpac of a division of Chase AMP Bank Limited and to issue a default assessment made on 18 September and 16 October 1992 respectively.

[2] Judgment was given on 24 September 2003. Counsel were to settle the terms of the order and make submissions about interest and costs. That has taken some time. The final submission by the Commissioner was received on 30 January 2004.

[3] The terms of the order concerning the substantive applications proposed by Westpac are not opposed. They generally reflect the proposed orders in the judgment.

"1. The decision of the Respondent of 18 September 1992 to require the Applicant to furnish a duly completed Form S(a) under s 54A of the Stamp Act 1894 in respect of an alleged acquisition by the Applicant of a business that existed in Queensland be set aside.

2. The decision of the Respondent of 16 October 1992 to assess under s 22A of the Stamp Act 1894 the duty which in his opinion ought to be charged on the Form S(a) in respect of an alleged acquisition by the Applicant of a business that existed in Queensland be set aside.

3. The default assessment purportedly issued by the Respondent under s 22A of the Stamp Act 1894 dated 16 October 1992 be set aside.

4. It is declared that the Applicant was not required by or under s 54A of the Stamp Act 1894 to deliver a statement in respect of the acquisition by the Applicant of certain assets of Chase AMP Bank Limited on or about 4 July 1991 and the Respondent was not entitled to assess duty pursuant to s 22A of the Stamp Act 1894 in respect of any failure to deliver such statement."

[4] The Commissioner accepts that an order sought by Westpac may be made that he pay to Westpac the amounts of $5,560,404.15 and $1,167,684, in respect of duty and penalty respectively, paid by Westpac to the Commissioner on 9 December 1992 and interest at the rate of 5.5% per annum on each of those amounts from the date of the order until paid. He contends that interest should not be paid from

9 December 1992 but that the period should be reduced by two years because of delay by Westpac in prosecuting the proceedings.

[5] The Commissioner accepts that he should be ordered to pay Westpac's costs of and incidental to the applications including reserved costs but resists Westpac's claim for costs on the indemnity basis from the date of the refusal to accept a first offer of settlement, alternatively a second offer of settlement.

[6] Accordingly the issues for resolution are the period in respect of which interest ought to be ordered and whether the Commissioner should be ordered to pay any part of the costs on the indemnity basis.

[7] The Commissioner does not dispute liability to pay interest consequent upon an order made pursuant to the Judicial Review Act 1991 setting aside certain of his decisions, Thakral Fidelity Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 428 at 439-40 per McPherson JA and Commissioner of Stamp Duties v MIM Holdings Limited, [2001] 1 Qd R 294 at 316 per Chesterman J. Neither does the Commissioner contend for a rate other than 5.5% per annum sought by Westpac by analogy with the rate which would have applied under s 24(4A) of the Stamp Act 1894 had the matter been dealt with pursuant to the case stated procedure in s 24 of that Act, Thakral at 441, rather than at a higher rate pursuant to the Supreme Court Act 1995.

[8] The question is whether interest should be ordered for the whole period or for some lesser period to reflect what the Commissioner contends is Westpac's delay in prosecuting its applications for relief. The Commissioner argues that while an analogy with s 24(4A) of the Stamp Act 1894 is apt in respect of the rate of interest ordered to be paid it is not so in assessing the period. The Stamp Act 1894 is now repealed having been replaced by the Duties Act 2001 which must be read with the Taxation Administration Act 2001 which provides in s 61 for interest on overpayments following a decision of this Court. Interest is an annual rate equal to the bank bill yield rate, s 7 Taxation Administration Act Regulation 2002. Section 24(4A) of the Stamp Act provided, relevantly for the payment of interest,

"... for the period from the date of payment of the duty, fine or penalty to which the refund relates until the date the refund is made."

[9] Because there were perceived disputed issues of fact in this matter, the Court of Appeal upheld Westpac's contention that the case stated procedure in s 24 of the Stamp Act was not an adequate provision under which a tax payer was entitled to seek a review of the matter by the Supreme Court within the meaning of s 12(b) of the Judicial Review Act, Westpac Banking Corporation v Commissioner of Stamp Duties [1994] 1 Qd R 99. Westpac contends that since of necessity it had to avail itself of the review process it was "deprived" of the automatic entitlement to interest for the whole period which would have been the case under the case stated procedure.

[10] Westpac has not sought interest at the rates applied from time to time under s 47 of the Supreme Court Act 1995 which, throughout the period, have been significantly greater that 5.5%. McPherson JA in Thakral at 437-8 did not find the expressions "where judgment is given ... for the payment of money in a cause of action" in

s 48(1) of the Supreme Court Act 1995 nor similar expressions in s 47(1) to be insurmountable obstacles to ordering the payment of interest under the Judicial Review Act, on duty paid. However, in light of certain complicating factors, which it is not necessary to elaborate, his Honour did not attempt to dispose of the matter by reference to the provisions of the Supreme Court Act 1995. Since Westpac does not seek any other rate than 5.5% and the Taxation Administration Act 2001 appears to cover the field on interest nothing more need be said. The practice of the Court in stamp duty matters has been, since the Judicial Review Act procedure was recognised as an appropriate way of appealing the Commissioner's decisions, to fix interest at 5.5%, Thakral per McPherson JA at 439.

[11] The starting point for a consideration of the period in respect of which interest should be ordered is s 30(1)(d) of the Judicial Review Act which gives the Court power to direct any of the parties "to do ... anything that the Court considers necessary to do justice between the parties." The Commissioner submits that

s 24(4A) is not appropriate as a guide because the case stated procedure was prompt unlike the review process. Alone that is not a compelling argument but neither is the corollary. The enquiry must be whether on a consideration of all of the relevant material it is just to order interest over the whole period. The only issue might be whether a party otherwise entitled to interest carries the onus or the party alleging disentitlement should do so. That it is a question of justice can be seen from the observation of Douglas J with whom W B Campbell and Williams JJ agreed in Property Unit Nominees (No 2) Pty Ltd v Commissioner of Stamp Duties [1981]

"Having regard to modern business methods, and the high interest rates prevailing the above amount if paid from capital would have prevented the appellants earning considerable monies; if borrowed it would have meant the payment of considerable interest by them. In either event, if successful, the appellants encounter a loss through no fault of their own. In my opinion it would be just and equitable to provide in the relevant statue for the payment of interest by the Commissioner on amounts of assessed duty held by him pending an appeal in which he is ultimately unsuccessful."

[12] Interest was allowed for the first time on duty ordered to be repaid by the Commissioner in amendments to the Stamp Duty Act in 1989 recognising that most States and Territories by then paid interest, second reading speech of the Minister for Finance, Hansard 5 April 1989 p 4133. The amendment is unlikely to have been inserted because of the promptness of the case stated procedure. The rate selected was well below that granted on judgments under the applicable provisions of the Common Law Practice Act 1867 since replaced by s 47 of the Supreme Court Act 1995.

[13] In MIM Holdings Limited v Commissioner of Stamp Duties, Chesterman J described the discretion to award interest under s 30(1)(d) as a wide one. Decisions about interest on judgments are of assistance in the approach to s 30(1)(d) of the Judicial Review Act. Although observations about the purposes of an award of interest have been made in mostly personal injury claims they are apt for other situations.

The award of interest is to compensate a party for the distinct detriment of being kept out of money, Thompson v Faraonio (1979) 54 ALJR 231 at 233; Cullen v Trappell [1980] HCA 10; (1980) 146 CLR 1 at 18; Batchelor v Burke [1981] HCA 30; (1981) 148 CLR 448 at 455; MBP (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657 at 663. That proposition has been applied in non-personal injury cases, Clarke v Foodland Stores Pty Ltd [1993]

2 VR 382 at 396; and Duke Group Ltd (in liq) v Pilmer [1999] SASC 97; (1999) 31 ACSR 213 at 313.

[14] In Batchelor v Burke Gibbs CJ with whom the other members of the court agreed, said at 455

"In accordance with the principle which has been accepted in this Court and in the Privy Council it would therefore not be right to award interest in respect of that portion of the award which represents damages for earnings lost before trial but replaced by payment of workers' compensation. It would not be consistent with that principle to award interest simply to discourage defendants from delaying the settlement of claims. The interest is awarded to compensate the plaintiff for the detriment he has suffered by being kept out of his money and not to punish the defendant for having been dilatory in settling the plaintiff's claim."

See also General Tire & Rubber Co v Firestone Tyre & Co Ltd [1975] 1 WLR 819 per Wilberforce LJ at 836 and Salmon LJ at 844. Forbes J in Tate & Lyle Food Distribution Ltd v Greater London Council [1981] 3 All E R 716 at 722 observed

"... I do not think the modern law is that interest is awarded against the defendant as a punitive measure for having kept the plaintiff out of his money. I think the principle now recognised is that it is now all part of the attempt to achieve restitutio in integrum".

See also Robert Goff J in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979]

[15] Thomas J (as his Honour then was) with whom Kneipp and Derrington JJ agreed in Serisier Investments Pty Ltd v English [1989] 1 Qd R 678, referred to the public policy of having claims brought and determined promptly as a reason for denying interest over the whole period where a plaintiff has been guilty of unreasonable delay in prosecuting a claim. The Commissioner relies on this decision. In Bennett v Jones [1977] 2 NSWLR 355 at 367 Moffitt P observed at 371 that unless the award of interest would be likely to have some relevant detriment to the defendant it would be irrelevant that the plaintiff had not proceeded with complete promptness or that he or his solicitor had not properly and fully complied with all court procedures. His Honour was concerned to distinguish that circumstance from deliberate delaying tactics in which there was likely to be a financial detriment to one of the parties. In Interchase Corporation Limited v ACN 010 087 573 [2000] QSC 13, judgment on interest of 18 April 2000, I quoted from a comment by

Mr D I Cassidy QC in an article in the Australian Law Journal which may be apposite here.

"The plaintiff is as much out of its money (and the defendant has had the use of it) whether the delay is caused by the plaintiff's activity, that of the plaintiff's attorney or the state of the court lists. It is no longer in vogue in Australia." Interest Revisited (1997) 71 ALJ 514 at 521.

[16] In Interchase interest was awarded to the plaintiff pursuant to s 47(1) of the Supreme Court Act 1995 for the entire period from the date at which the cause of action accrued on 21 July 1988 to the date of judgment on 18 April 2000 notwithstanding a period of almost six years before the proceedings were commenced. An aspect of the appeal concerned the award of interest, Interchase Corporation Limited (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 3) [2003] 1 Qd R 26. McPherson JA with whom McMurdo P and Thomas JA agreed said at [61]

"It is, to my mind, not immediately apparent why, as a matter of justice that delay should operate to defeat or reduce a plaintiff's right to receive interest as compensation for damages for the whole of the period during which the amount was not paid. Quite apart from the loss to the plaintiff, the defendant has had the benefit of the money, and may be assumed to have put it to good use."

His Honour referred to the observations of Thomas J in Serisier. His Honour recognised, as did Thomas J in Serisier, that it was an area in which the trial judge "must be allowed wide discretion".

[17] The Commissioner does not indicate any particular detriment due to the pace at which these proceedings have proceeded. The Commissioner has had the use of Westpac's money for some 11 years. The Commissioner has not suggested by any evidence that there will be any net loss so far as interest is concerned.

[18] The Commissioner relies on two periods of delay, a 13 month period between October 1994 and November 1995 and approximately 15 months for a second period between August 1999 and November 2000. Mr Michael Quinlan, solicitor for Westpac, and Mr Brian O'Shea, counsel in the office of the Crown Solicitor have both sworn affidavits referring to significant events and chronologies.

During the first period Westpac says that it was preparing numerous affidavits for use in the proceedings and needed to re-establish contact with deponents, provide material to them and fit in with their timetables for the preparation of the affidavits. The response by the Commissioner is somewhat carping. The pages of the affidavits have been counted and the limited nature of their subject matter noted. These were affidavits in reply to the Commissioner's material. The Commissioner was critical that there was no chronology of the steps taken to obtain those affidavits, nor any solicitors' timesheets "to corroborate the otherwise extraordinary implication that more than 12 months was required to prepare those affidavits."

[19] It would be most unfortunate if submissions about interest were to become a significant issue in litigation and the source of costly disputation. The deponents were in several states in Australia. They were busy commercial people who were being asked to recall with some particularity events which has occurred some years previously and needed to refresh their memories by the perusal of other materials. The point is that the action was progressing and there was no application by the Commissioner, nor so far as the material reveals, complaint that time was passing.

[20] The second period of delay was said to be unreasonable because Westpac took between 9 and 15 months to file further affidavits in response to affidavits from the Commissioner which had not been provided, it might be noted, any too promptly to Westpac. Mr Quinlan deposes that a number of the deponents to the affidavits which were prepared were not or were no longer employees or former employees of Westpac and again they needed time to consider matters before finalising the affidavits. Mr Quinlan deposes that the task of preparing those affidavits in reply was time consuming partly because many of the witnesses had moved since the original affidavits were prepared three years earlier. Again the Commissioner complains that for all the delay the affidavits were, relatively speaking, quite short. The Commissioner complains that the explanation for the delay "is wholly inadequate" and is critical of the failure to include a chronology or timesheets to explain why these affidavits took so long to be prepared and served.

[21] There is no suggestion that Westpac sat on its rights or deliberately engaged in delaying tactics. Throughout the whole period matters were moving, albeit from time to time, rather slowly. Until after the Court of Appeal decision in May 1993 upholding the use of the Judicial Review Act procedures which the Commissioner contended could not displace the s 24 procedure, the proceedings could hardly get under way. There is nothing in the submissions of the Commissioner or otherwise in the material which would cause me to exercise the discretion to award interest other than for the whole period.

[22] The order is that the Commissioner pay to Westpac interest on the amounts of $5,560,404.15 and $1,167,684 at the rate of 5.5% per annum from 9 December 1992.

[23] The Judicial Review Act provides in s 49(4) that the rules of court made about costs apply to a proceeding under the Act. Rule 689 of the Uniform Civil Procedure Rules provides that costs follow the event unless the court considers another order is more appropriate. Rule 703 provides that unless the court otherwise orders costs are assessed on the standard basis. Rule 704 allows the court to order costs to be assessed on the indemnity basis. Rule 704(2) of which identifies certain situations in which the court may order indemnity costs is of no assistance in setting parameters to the general power to order that costs may be assessed on the indemnity basis. Courts have been ready to entertain an application for indemnity costs where a Calderbank type offer of settlement has been made outside the scheme for offers in the rules of court. It might be noted that Calderbank v Calderbank [1976] Fam 93 did not concern indemnity costs.

[24] The Commissioner does not dispute that Westpac should have its costs of the proceedings but disputes that it should have any costs on the indemnity basis. Westpac submits that it should have its costs on the standard basis up to and including the 15 April 1993, the date of the rejection of a first offer to settle, and on the indemnity basis thereafter. In the alternative Westpac seeks its costs on the standard basis up to and including 10 September 2002, the date of the rejection of a second offer and on the indemnity basis thereafter. The Commissioner contends that neither of the offers of settlement would justify the making of an order for costs in the way sought by Westpac.

[25] On 5 April 1993 Westpac's solicitors sent a detailed letter to the Crown Solicitor "without prejudice save as to costs" setting out the basis upon which it had advised that Westpac would be successful in the litigation. At the end of the letter the solicitors wrote

Although Westpac does not believe that it has any liability in relation to the matter, it does recognise that both Westpac and the Commissioner have incurred and will continue to incur significant costs, including the costs of the Commissioner's appeal from the decision of Mr Justice Ryan, if the dispute between the parties continues to be litigated. Substantial costs will also be incurred by both parties in examining, in detail, the considerable quantity of documentation, which is contained in the Bank's internal files, and relates to its business.

We have advised our client that it can expect to insure legal costs in the litigation in excess of $400,000 and no doubt your client's legal costs will be of the same order.

Your client will also incur a liability for an order for costs against it if, as we have advised our client, our client is successful in the same litigation.

In the interests of both parties avoiding the incurring of substantial additional legal costs, Westpac is prepared to offer $100,000 inclusive of costs to settle the matter. This offer will remain open for 14 days."

By letter dated 15 April 1993 the Crown Solicitor wrote

"I advise that I have received instructions that the Commissioner of Stamp Duties has considered the matter and that notwithstanding the additional information you have provided together with submissions contained in the letter of 5 April 1993 the Appeal lodged by the Commissioner is to proceed.

I have also received instructions that the Commissioner is not prepared to accept the offer of settlement as detailed above and contained in your abovementioned letter."

[26] By letter dated 26 August 2002 Westpac's solicitors wrote to Crown Law headed "without prejudice save as to costs" noting that the proceedings had been set down for a six week hearing towards the end of the year and the substantial legal costs which had been incurred over a long period of time. Westpac indicated that it wanted to offer an opportunity to the Commissioner to settle the claim before the necessary final steps were taken to prepare for the hearing so that the expense and delay associated with the six week hearing might be avoided. The writer set out in some detail the case which Westpac ran at trial. An offer to settle was in these terms

"If the matter proceeds to a hearing and Westpac succeeds your client will be ordered to reimburse to Westpac a total of $10,265,311.08 (comprising duty of $5,560,404.15; penalty of $1,167,684 plus interest calculated in the manner set out in schedule A) and costs.

While Westpac denies that it was liable to pay the duty which is in dispute (or any part of it) in the interests of saving the costs associated with a lengthy hearing, Westpac is prepared to take a commercial approach and to settle these proceedings on the following basis:

(a) In full and final settlement of its claim Westpac to accept a sum of $6,728,088, exclusive of costs, and each party to pay its own costs;

(b) The parties to execute a mutual release embodying the terms of settlement prepared by Westpac.

If the above terms are acceptable to your client, Westpac proposes that a notice of discontinuance be filed with the Court giving effect to these terms.

This offer will remain open until 4.00pm on Tuesday 10 September 2002. At that time, the offer will lapse.

We draw your attention to the fact that this offer is made without prejudice to costs, in accordance with the principles of Calderbank v Calderbank [1975] 3 All ER 333. Therefore, in the event that this offer is not accepted and the matter proceeds to hearing and your client fails to recover a judgment against our client which is substantially better than this offer, we put you on notice that this letter will be tendered and a special costs order sought that, as from the time of the expiry of the offer, your client pay Westpac's costs on an indemnity basis."

[27] Westpac contends that the conduct of the Commissioner in rejecting both offers was unreasonable. With respect to the first offer, Westpac submits that the Commissioner had conducted a thorough investigation of the transaction prior to issuing the default assessment in the exercise of his statutory powers.

Westpac notes that neither its case nor that of the Commissioner changed from inception until conclusion, although as noted in the reasons for judgment some concessions were made by the Commissioner. Westpac provided the Commissioner with the opinion of its senior counsel, dated 11 June 1992 in July 1992.

Westpac notes that at trial primary facts were not seriously challenged by the Commissioner only the inferences to be drawn in support of its claim for indemnity costs. Conversely the Commissioner submits that this makes his conduct in not accepting the offer reasonable since minds might differ on what inferences would be drawn from those facts.

[28] Westpac further submits that the Commissioner should have applied for a declaration as to the meaning and operation of the relevant provisions of s 54A of the Stamp Act rather than issuing a default assessment. The Commissioner is obliged to issue default assessments of duty if he is of the opinion that an instrument or transaction is dutiable, O'Sullivan v Commissioner of Stamp Duty [1984] 1 Qd R 212 at 228-9 per Williams J; and Ex parte Xenon Pty Ltd [1984] 1 Qd R 232 at

236-7. The Commissioner did not regard this as in the nature of a test case. At the time of the first offer no affidavits had been filed.

[29] Westpac submits that the conduct of the Commissioner in rejecting the second offer made in August 2002 was unreasonable in all the circumstances. By then all the affidavit evidence from Westpac had been filed and served so that the Commissioner was in a position to assess the strength of its case and Westpac's case. The parties had recently conducted a lengthy mediation. Westpac submits that the offer was a significant concession and represented a genuine effort to resolve the dispute without a lengthy and expensive trial. Westpac notes that much of the Commissioner's evidence was the opinion evidence of an expert accountant the large part of whose evidence was either inadmissible or not accepted.

Westpac submits that weaknesses in the Commissioner's expert's evidence should have been apparent at the time the second offer was made.

[30] There is a conflict of authority in Australia as to the proper approach which should be taken to Calderbank type offers of settlement. Such offers are a well recognised means of making offers of settlement in circumstances where the party making the offer seeks a costs advantage if the offer is not accepted outside the regime of offers of settlement in the rules of court. Whether a court will make an order for indemnity costs when a Calderbank type offer is made is a matter of discretion. The decision of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corp (1996) 138 ALR 425 represents what was said by Debelle J in Pirrotta v Citibank Ltd (1998) 72 SASR 259 at 267 to be "the high water of decisions in Australia courts" on this topic. Rolfe J held at 451

"The proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of making the offer."

His Honour said that "the unreasonableness" was the failure to accept the offer demonstrated by the result. That proposition has been followed in MT Associates Pty Ltd v Aqua-Max Pty Ltd unreported decision of Gillard J of 3 May 2000

(VC 200002334), Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) [1998] QSC 18; [1999] 1 Qd R 518 and Brittain v Commonwealth of Australia [2003] NSWSC 270.

[31] Lindgren J in MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd [1996] FCA 862; (1996) 70 FCR 236 took a different approach. His Honour said

"It is important, however, to appreciate that the mere making of an offer by a Calderbank letter and its non-acceptance followed by a result more favourable will not automatically lead to the making of an order for payment of costs on an indemnity basis".

His Honour noted that the manner of exercising the discretion will depend on all relevant circumstances of the case. Similarly Debelle J in Pirrotta at 267 said

"The writing of a Calderbank letter should be one of the factors, albeit a significant factor, to be weighed by a court when considering whether to order indemnity costs...the complexity of litigation standing alone should not necessarily preclude the operation of the rule. The rule is designed to promote settlement of both complex and straightforward litigation and the court will have regard to all relevant circumstances in determining whether the penalty rule as to costs should apply".

[32] To similar effect are observations of Giles J in Smec Testing Services v Campbell Town City Council [2000] NSWCA 323 at [37]

"The making of an offer of compromise in the form of a Calderbank letter, where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs.

All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 53 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235."

See also Jones v Bradley (No 2) [2003] NSW CA 258.

[33] Westpac relies on a statement of the Court of Appeal in Tector v FAI Insurance Company Limited [2000] QCA 426; [2001] 2 Qd R 463 at 464.

"The ordinary rule is that costs when ordered to be paid in adversary litigation are to be recovered on the standard basis and should only be departed from where the conduct of the party against whom the order is sought is plainly unreasonable..."

Tector concerned an application for indemnity costs of an appeal in light of an offer to settle the appeal made prior to the hearing of the appeal. The rules of court relating to offers to settle did not apply to appeals. The introduction of "plainly" adds nothing to "reasonable" and does not depart from the proposition reflected in cases like Pirrotta and Smec Testing Services that all of the circumstances must be considered in deciding whether an order should be made. The reason to give effect to Calderbank type offers is to encourage settlement to save public costs and private costs both financial and personal associated with litigation by indemnification of a party who makes an offer to settle which is not less favourable in the judgment. This is to be encouraged. Where, as in Tector, the ultimate difference between the offer and the outcome on appeal was only a few dollars it could not be said to be unreasonable to reject the offer.

[34] It can be readily accepted that the Commissioner was entitled to want to look at the detail of the evidence that the many Westpac and Chase AMP deponents would give about the structure of the Consumer Bank operation of Chase AMP Bank which Westpac had acquired and how it was dealt with after acquisition. It was not unreasonable in any relevant sense to await the production of that material.

After the receipt of all the material together with the advice of senior counsel which had been received earlier and which was clear and unequivocal in its analysis, together with the failure to have any expert banking evidence to support his position it was then unreasonable in the Commissioner not to accept the offer.

The Commissioner was desirous of testing the "adverse" inferences which he drew from many of the facts. He could, of course, do so but with the knowledge that he was "at risk" of an indemnity costs order. When the second offer was made the parties were expecting to engage in a six week trial. This was a genuine and not unrealistic attempt by Westpac to save adding to the very large amount of costs.

It was prepared to forego interest, which as this judgment shows was considerable, on the duty paid. I would order indemnity costs from the date of the second letter of refusal.

1. The decision of the Respondent of 18 September 1992 to require the Applicant to furnish a duly completed Form S(a) under s 54A of the Stamp Act 1894 in respect of an alleged acquisition by the Applicant of a business that existed in Queensland be set aside.

2. The decision of the Respondent of 16 October 1992 to assess under s 22A of the Stamp Act 1894 the duty which in his opinion ought to be charged on the Form S(a) in respect of an alleged acquisition by the Applicant of a business that existed in Queensland be set aside.

3. The default assessment purportedly issued by the Respondent under s 22A of the Stamp Act 1894 dated 16 October 1992 be set aside.

4. It is declared that the Applicant was not required by or under s 54A of the Stamp Act 1894 to deliver a statement in respect of the acquisition by the Applicant of certain assets of Chase AMP Bank Limited on or about 4 July 1991 and the Respondent was not entitled to assess duty pursuant to s 22A of the Stamp Act 1894 in respect of any failure to deliver such statement.

(a) Pay to the Applicant the amount of $5,560,404.15 and $1,167,684, in respect of duty and penalty respectively paid by the Applicant to the Respondent on 9 December 1992; and

(b) Pay to the Applicant a further sum of $4,145,516.14 being interest on the sums referred to in order 5(a) at the rate of 5.5% per annum on each of those amounts during the period from 9 December 1992 to 20 February 2004; and

(c) Pay to the Applicant interest on the sums referred to in order 5(a) at the rate of 5.5% per annum on each of those amounts from the date of this order until paid.

6. The Respondent to pay the Applicant's costs of and incidental to the applications, including any reserved costs, to be assessed on the standard basis up to and including 10 September 2002 and on the indemnity basis thereafter.