Eaves v Dr Allan J. Bond & Associates Pty Ltd (No 2) [2024] QSC 299

SUPREME COURT OF QUEENSLAND CITATION: Eaves v Dr Allan J. Bond & Associates Pty Ltd (No 2) [2024] QSC 299 PARTIES: KIRSTY LEE EAVES (first plaintiff) JAMES RICHARD HANNON (second plaintiff) v DR ALLAN J. BOND & ASSOCIATES PTY LTD ACN 092 748 319 (defendant) FILE NO/S: BS 10444 of 2023 DIVISION: Trial Division PROCEEDING: Originating Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 2 December 2024 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers. Plaintiffs’ submissions on costs filed on 15 November 2024. Defendant’s submissions on costs filed on 15 November 2024. Plaintiffs’ submissions in reply on costs filed on 20 November 2024. JUDGE: Cooper J ORDER: 1. The defendant pay the plaintiffs’ costs of and incidental to the proceeding (including any reserved costs) to be assessed on the standard basis. 2. The costs to be paid to the plaintiffs under order 1 are not to be assessed as if the proceeding had been started in the District Court. 3. Once the costs to be paid by the plaintiffs to the defendant pursuant to r 692(2) of the UCPR and claimed in the costs statement served by the defendant on 8 July 2024 have been assessed or agreed, those costs are to be set off against the costs payable by the defendant under order 1 -- 1 of 11 -- 2 CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES – WHAT CONSTITUTES VALID OFFER – where the plaintiffs’ claim succeeded at trial and the defendant’s counterclaim was dismissed – where the plaintiffs made an offer pursuant to the Uniform Civil Procedure Rules 1999 and pursuant to the principles in Calderbank v Calderbank to settle the proceedings on 17 June 2024 that was rejected by the defendant – where the plaintiffs submit that pursuant to r 360 the defendant should pay their costs on the standard basis from 17 June 2024 and on the indemnity basis from 18 June 2024 – where the defendant submits that the plaintiffs’ offer did not engage r 360 because, inter alia, it was subject to a “suitably worded” deed of settlement, the terms of which were not disclosed in the offer – where the defendant made an offer pursuant to the Uniform Civil Procedure Rules 1999 and the principles in Calderbank on 26 July 2024 which the plaintiffs rejected – where the defendant submits that pursuant to r 361 the defendant should pay the plaintiffs’ costs on the standard basis up to and including 26 July 2024 and that the plaintiffs should pay the defendant’s costs on the indemnity basis from 27 July 2024 – where the plaintiffs submit that the defendant’s offer did not engage r 361 because, inter alia, the defendant had not established that the judgment was less favourable to the plaintiffs than the offer – whether the offer made by either party was an offer to settle for the purposes of the Uniform Civil Procedure Rules 1999 PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – INFORMAL OFFERS AND CALDERBANK LETTERS – UNREASONABLE REFUSAL OF OFFER – where each party submits that the rejection of its offer by the other party was unreasonable – where the relief obtained by the plaintiffs was within the jurisdiction of the District Court – whether either party acted unreasonably in rejecting the other party’s offer and, if not, whether either party established a basis for departing from the general rule that costs on the standard basis should follow the event – whether, otherwise, the costs should be assessed as if the proceeding had been started in the District Court Uniform Civil Procedure Rules 1999 (Qld), r 360, r 361, r 681, r 697 Armstrong v Mitchell-Smith and Allianz Australia Insurance Limited (No 2) [2012] QSC 370, cited -- 2 of 11 -- 3 Balnaves v Smith [2012] QSC 408, cited Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No 2) (2023) 15 QR 142, cited Calderbank v Calderbank [1976] Fam 93, cited Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2020] QSC 1, cited Collins v Carey [2002] QSC 417, cited Jones v Millward [2005] 1 Qd R 498, cited Kenny v Eyears [2004] QSC 59, cited McCracken v Phoenix Constructions (Qld) Pty Ltd [2013] 2 Qd R 27, cited S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2) [2020] QSC 323, applied COUNSEL: D Williams for the plaintiffs T Duhig for the defendant SOLICITORS: Tusk Law for the plaintiffs Shand Taylor for the defendant [1] On 8 November 2024, I gave judgment in this matter granting declaratory relief to the plaintiffs in respect of their termination of a contract for sale in the defendant’s development and their entitlement to the return of the deposit they had paid under that contract, together with accrued interest. The defendant’s counterclaim was dismissed. [2] At the request of the parties, directions were made for the filing of written submissions on the issue of costs. Plaintiffs’ position [3] In their initial submissions, the plaintiffs sought indemnity costs pursuant to r 360 of the Uniform Civil Procedure Rules 1999 (UCPR) based on the defendant’s rejection of offers made, purportedly under Chapter 9 Part 5 of the UCPR, on: (a) 31 August 2023; or (b) alternatively, 17 June 2024. [4] In their submissions in reply, the plaintiffs conceded that the offer made on 31 August 2023 did not have effect under Chapter 9 Part 5 of the UCPR or as a Calderbank offer.1 There is no need to consider that offer further. [5] Ultimately, the plaintiffs submit that pursuant to r 360 the court should order the defendant to pay their costs calculated: (a) on the standard basis up to and including 17 June 2024; and (b) on the indemnity basis from 18 June 2024. 1 Calderbank v Calderbank [1976] Fam 93 (Calderbank). -- 3 of 11 -- 4 [6] The plaintiffs accept that the amount they are required to pay the defendant for costs thrown away by reason of amendments to their statement of claim prior to trial must be set off against the costs to be paid to them by the defendant as a consequence of the outcome of the proceeding.2 Defendant’s position [7] The defendant submits that the offer made by the plaintiffs on 17 June 2024 has no bearing on the question of costs because that offer did not engage r 360. [8] The defendant relies on the plaintiffs’ failure to accept an offer it made on 26 July 2024 to submit that pursuant to r 361 the court should order that: (a) the defendant pay the plaintiffs’ costs calculated on the standard basis up to and including 26 July 2024; and (b) the plaintiffs pay the defendant’s costs calculated on the indemnity basis from 27 July 2024 onwards. [9] The defendant further submits (and, as already noted, the plaintiffs accept) that the amount it is entitled to be paid for costs thrown away by earlier amendment of the statement of claim should be set off against the costs it must pay to the plaintiffs following the determination of the proceeding. [10] Finally, the defendant submits that the relief the plaintiffs obtained could have been given by the District Court. Consequently, the costs the plaintiffs are entitled to recover should be assessed as if the proceeding had been started in the District Court.3 Offers made under Chapter 9 Part 5 of the UCPR [11] Rule 353(1) provides: “A party to a proceeding may serve on another party to the proceeding an offer to settle 1 or more of the claims in the proceeding on the conditions specified in the offer”. [12] The effect of such an offer is set out in rr 360 and 361: “360 Costs if offer by plaintiff (1) This rule applies if— (a) the plaintiff makes an offer that is not accepted by the defendant; and (b) the plaintiff obtains an order no less favourable than the offer; and (c) the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer. 2 The assessment of the costs thrown away has not concluded. On 8 July 2024, the defendant served a costs statement claiming costs thrown away of $27,574.36. On 29 July 2024, the plaintiffs filed a notice of objection claiming that the costs thrown away should be assessed as $3,842.93. 3 UCPR, r 697(3) and (4). -- 4 of 11 -- 5 (2) Unless the defendant shows another order for costs is appropriate in the circumstances, the court must order the defendant to pay the plaintiff’s costs— (a) calculated on the standard basis, up to and including the day of service of the offer; and (b) calculated on the indemnity basis, after the day of service of the offer. 361 Costs if offer by defendant—order obtained by plaintiff (1) This rule applies if— (a) the defendant makes an offer that is not accepted by the plaintiff; and (b) the plaintiff obtains an order that is less favourable to the plaintiff than the offer; and (c) 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— (a) the court must— (i) 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 (ii) order the plaintiff to pay the defendant’s costs, calculated on the indemnity basis, after the day of service of the offer; and (b) the plaintiff is not entitled to any costs after the day of service of the offer. ….” [13] The use of mandatory language in rr 360 and 361 (“the court must order”) means that, where the rules are engaged, they apply according to their terms and the court may not exercise the general discretion in respect of costs conferred by r 681(1).4 The plaintiffs’ offer [14] The plaintiffs’ offer was expressed to have been made pursuant to Chapter 9 Part 5 of the UCPR and the principles in Calderbank. It was open for acceptance for 14 days after it was served. It notified the defendant that, if it did not accept the offer, the plaintiffs intended to rely on it in support of an application for indemnity costs. It stated that the plaintiffs’ costs would likely exceed $150,000 assessed on the indemnity basis. 4 Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No 2) (2023) 15 QR 142, 150 [18] -- 5 of 11 -- 6 [15] In that context, the plaintiffs offered to resolve the plaintiffs’ claims and the defendant’s counterclaim on the following terms: “(a) Within 14 days of the parties entering into a suitably worded deed of settlement, your client agrees to: (i) refund the Deposit of $46,850 to our clients; and (ii) pay our clients’ costs of the proceeding on the standard basis to be agreed or assessed; (b) Within 7 days of your client carrying out the terms in subparagraph (a) above, our clients will file a notice of discontinuance in the proceeding, discontinuing the whole of our clients’ claim and your client’s counterclaim.” Did the plaintiffs’ offer engage r 360? [16] The defendant submits that the plaintiffs’ offer did not engage r 360 for three reasons: (a) by demanding all of the relief sought by the plaintiffs together with costs, the proposal was not in truth an offer to settle; (b) the inclusion of a condition that the parties enter a deed of settlement on terms which were not disclosed in the offer means it was not an offer to settle for the purposes of Chapter 9 Part 5 of the UCPR; (c) because the offer ignored the plaintiffs’ liability to pay the defendant the costs thrown away by earlier amendments to the statement of claim, the plaintiffs could not establish that the judgment was no less favourable than the offer. [17] I do not accept the defendant’s first argument. It is correct that a proposal which demands nothing less than all the relief sought in the claim plus costs is not in truth an offer to settle for the purposes of Chapter 9 Part 5 of the UCPR;5 but that is not what occurred in this case. [18] The plaintiffs’ proposal did not seek all the relief to which they claimed to be entitled. As the plaintiffs pointed out in the offer itself, their proposal entailed a concession as to their entitlement to receive interest on the deposit they had paid under the sale contract. The quantum of that interest was said to be at least $3,300. When the quantum of the interest which the plaintiffs offered to forgo is considered against the quantum of the deposit which was in dispute, I am satisfied that the concession as to interest was sufficient to characterise the plaintiffs’ proposal as a genuine offer of compromise. [19] The defendant’s second argument concerning the inclusion of non-monetary terms that were not disclosed in the offer has greater substance. The issue arises from the requirement that the parties enter into a “suitably worded” deed of settlement. [20] I accept that the inclusion of the condition that the parties enter a deed of settlement on terms which were not disclosed in the offer means it was not an offer to settle for 5 Jones v Millward [2005] 1 Qd R 498, 500. -- 6 of 11 -- 7 the purposes of Chapter 9 Part 5 of the UCPR. There are two reasons for that conclusion. [21] First, an offer which is conditioned on the parties entering into a suitably worded deed of settlement, but which does not disclose (at least in outline) the proposed terms of such a deed, is not an offer to settle the proceeding “on the conditions specified in the offer” as required by r 353(1).6 [22] Secondly, acceptance of such an offer would not necessarily resolve the proceeding and therefore cannot be described as an offer to settle. The inclusion of the words “suitably worded” raises a question about which party must be satisfied that the wording of the deed is “suitable”. If the offer is construed as meaning suitable to both parties, what constitutes a “suitably worded” deed might prove to be contentious.7 The parties might not ultimately agree the terms of the deed and the offer (if accepted) contained no agreed mechanism to settle them.8 In that event, acceptance of the offer would not resolve the proceeding. [23] For these reasons, I am not satisfied that the plaintiffs’ offer was an offer to settle which engaged r 360. It is not necessary to consider the defendant’s third argument on that issue. The defendant’s offer [24] The defendant’s offer was also expressed to have been made in accordance with Chapter 9 Part 5 of the UCPR and the principles in Calderbank. It was open for acceptance for 14 days after it was served. It notified the plaintiffs that, if they did not accept the offer, the defendant intended to rely on it in support of an application for indemnity costs. [25] The defendant offered to settle the proceeding on the following terms: “(a) in satisfaction of the claim, the defendant will direct Munro Thompson Lawyers to pay the deposit of $46,850.00 together with any interest accrued to your clients; (b) in satisfaction of the counter-claim, there be a payment of $NIL; (c) our client will not seek to enforce its claim for costs thrown away which are claimed in the amount of $27,574.36; (d) there be no order as to costs in the proceedings; 6 Binaray Pty Ltd (ACN 119 724 211) as Trustee for the Allen Family Trust v RAMS Financial Group Pty Limited [2019] QSC 280, [38]; Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2020] QSC 1, [37]. I do not understand this conclusion to be inconsistent with the observation in Trouton v Trouton (No 2) [2023] QSC 29 at [52] that “[t]he inclusion of a non-monetary term of ‘mutual releases’ and a ‘formal deed of settlement’ do[es] not necessarily result in the UCPR offer being non-compliant with r 353 UCPR” (my underlining). To the extent it is inconsistent with my conclusion, I would respectfully disagree with that observation. 7 Armstrong v Mitchell-Smith and Allianz Australia Insurance Limited (No 2) [2012] QSC 370, [10]. 8 Taske v Occupational & Medical Innovations Ltd [2007] QSC 147, [15]-[16]. -- 7 of 11 -- 8 (e) the parties will be immediately bound on acceptance but will enter into a deed of settlement on fuller, more precise terms, to reflect these terms of settlement including: (i) the discontinuance of the proceedings within seven days of the date of acceptance of this offer; (ii) confidentiality (except for legal and taxation advice); and (iii) full mutual releases between each party and each other party in relation to any and all claims (including those referred to in the present proceedings), causes of action, costs between the parties, and those facts that are known and unknown to each party (except from claim [sic] to enforce the terms of settlement).” Did the defendant’s offer engage r 361? [26] To establish that its offer engaged r 361, the defendant must demonstrate (among other requirements) that the judgment was less favourable to the plaintiffs than the offer. This requires a comparison between the nature and extent of the advantages (and any disadvantages) arising from the judgment with the situation that would have been obtained had the offer been accepted.9 [27] The defendant submits that this requirement is satisfied because, if the plaintiffs had accepted the offer, they would not have to pay the defendant the costs thrown away by the earlier amendments to their statement of claim. The judgment did not confer that advantage. So much may be accepted, but I do not accept that this reflects a proper comparison of the plaintiffs’ position after the judgment and the situation they would have been in if they had accepted the offer. The comparison requires consideration of the overall effect of the judgment and the offer.10 [28] The difficulty with the defendant’s submission is that it fails to take account of the fact that, if the plaintiffs accepted the offer, they would have to bear the whole of their own costs of the proceeding. One advantage of the judgment is that the plaintiffs, having succeeded in the proceeding, would ordinarily be entitled to recover their costs on the standard basis unless the defendant could point to some reason why the court should exercise its discretion to make some other order under r 681(1). [29] Aside from the plaintiffs’ rejection of the offer, which logically cannot figure into the comparison undertaken to determine whether r 361 has been engaged, the defendant does not point to any reason why, following the judgment, the costs of the proceeding should not follow the event. [30] The proper comparison is between: (a) the plaintiffs’ position after the judgment, where they are liable to pay to the defendant’s costs thrown away by the earlier amendments but otherwise are entitled, subject to the court exercising its discretion to the contrary, to payment of their costs of the proceeding on the standard basis; and 9 Balnaves v Smith [2012] QSC 408, [20]. 10 Trouton v Trouton (No 2) [2023] QSC 29, [68]. -- 8 of 11 -- 9 (b) the position the plaintiffs would have been in if they had accepted the offer, where they would not have been liable to pay the defendant’s costs thrown away but also would have no entitlement to payment of any of their own costs. [31] Although the dispute over the amount of the costs thrown away has not yet been determined (see footnote 2 above), even if the comparison is undertaken based on the figure of $27,574.36 which the defendant claims for those costs, I cannot see how that figure could exceed the plaintiffs’ costs of the proceeding on the standard basis. [32] When the judgment and the offer are compared in that way, I am satisfied that the judgment is more favourable to the plaintiffs than the defendant’s offer. Consequently, I find that the defendant’s offer did not engage r 361. How should the general discretion as to costs be exercised? [33] Having concluded that neither the plaintiff’s offer nor the defendant’s offer engaged the relevant rule in Chapter 9 Part 5 of the UCPR, the award of costs must be determined by the exercise of the general discretion conferred by r 681(1). That rule provides: “Costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise.” [34] The general rule that costs follow the event should only be departed from in special or exceptional circumstances. That is because costs are not awarded to punish an unsuccessful party, but as a means of indemnifying the successful party.11 [35] Further, the usual rule is that where the court orders the costs of one party to be paid by another party, those costs are to be assessed on the standard basis.12 [36] One feature which may justify a departure from the usual rule as to the basis on which costs are to be assessed is the rejection of a Calderbank offer. However, as Bond J (as his Honour was then) observed in S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2):13 “… it is wrong to think that an offeree’s rejection of a Calderbank offer gives rise to a presumption that the offeree should pay the offeror’s costs on an indemnity basis if the offeree obtains a less favourable result than contained in the offer. Rather, the correct approach is to consider whether the rejection of the Calderbank offer, in all the circumstances, justifies a departure from the usual rule.” [37] The critical question is whether the offeree’s rejection of the offer is unreasonable in all the circumstances. In S.H.A,14 Bond J provided the following non-exhaustive list of the considerations which a court considering that question should ordinarily have regard to: “(a) the stage of the proceeding at which the offer was received; 11 Courtney v Chalfen [2021] QCA 25, [4]. 12 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 325, [11]. 13 [2020] QSC 323, [12] (S.H.A.). 14 S.H.A., [14]. -- 9 of 11 -- 10 (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree’s prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.” [38] In seeking an order that the defendant pay their costs from 18 June 2024 on the indemnity basis, the plaintiffs submit that the defendant’s rejection of their offer was unreasonable in all the circumstances. [39] I do not accept that submission. I have accepted that the plaintiffs’ concession as to their entitlement to be paid interest which had accrued on the deposit meant their offer was a genuine offer of compromise. Nevertheless, given the relatively limited extent of that compromise, I am not satisfied that the defendant acted unreasonably in rejecting the plaintiffs’ offer. That is reinforced by the fact that the plaintiffs’ offer would have deprived the defendant of its entitlement to the costs thrown away by the plaintiffs’ earlier amendments to their statement of claim. [40] The absence of any binding authority on s 13(4) of the Land Sales Act 1984 at the time the defendant was considering the offer is also relevant. I accept the defendant’s submission that both parties had an arguable case on the questions of statutory construction addressed in the judgment, and that it was not unreasonable to pursue those cases in the absence of binding authority.15 [41] In all the circumstances, I am not satisfied that the defendant acted unreasonably in rejecting the plaintiffs’ offer. That rejection does not justify a departure from the usual rule that costs the court orders the defendant to pay to the plaintiffs should be assessed on the standard basis. [42] Nor am I satisfied that the plaintiffs’ rejection of the defendant’s offer was unreasonable in all the circumstances. That rejection does not justify depriving the plaintiffs of part of their costs, much less requiring them to pay part of the defendant’s costs on the indemnity basis. [43] The defendant’s submission to the contrary does not sit comfortably with its submission set out at [40] above which was expressed as applying to both parties equally. There is no principled reason why the plaintiffs’ decision to pursue what the defendant accepts (and the judgment established) was an arguable case in the absence of binding authority on the relevant statutory provision should be characterised any differently to the defendant’s decision to take that course. [44] Further, for the reasons set out at [28]-[32] above, I am not satisfied that the plaintiffs acted unreasonably in rejecting an offer which would have required them to bear the whole of their costs of the proceeding. 15 Citing McCracken v Phoenix Constructions (Qld) Pty Ltd [2013] 2 Qd R 27, 44-45 [60]. -- 10 of 11 -- 11 [45] I am not persuaded that either party has established a basis to depart from the general rule that costs should follow the event and that those costs should be assessed on the standard basis. Should the plaintiffs’ costs be assessed as if the proceeding had been commenced in the District Court? [46] Rules 697(3) and (4) of the UCPR provide: “(3) Subrule (4) applies if the only relief obtained by a plaintiff in a proceeding in the Supreme Court is relief that, when the proceeding began, could have been given by the District Court, but not a Magistrates Court. (4) The costs the plaintiff may recover must be assessed as if the proceeding had been started in the District Court, unless the court orders otherwise.” [47] In this case, the relief obtained by the plaintiffs was within the jurisdiction of the District Court.16 Accordingly, r 697(4) applies and the plaintiffs bear the onus of demonstrating that an order other than that specified in the rule is appropriate.17 [48] The complexity of the issues required to be litigated in a proceeding is a factor that might warrant such a course.18 In circumstances where there was no binding authority on the construction of s 13(4) of the Land Sales Act, and the complexity of the statutory construction arguments that were advanced in the parties’ submissions and resolved by the judgment, I am satisfied that the plaintiffs were justified in commencing the proceeding in the Supreme Court. Accordingly, the costs to be paid to the plaintiff should not be assessed as if the proceeding had been started in the District Court. Orders [49] The orders will be: 1. The defendant pay the plaintiffs’ costs of and incidental to the proceeding (including any reserved costs) to be assessed on the standard basis. 2. The costs to be paid to the plaintiffs under order 1 are not to be assessed as if the proceeding had been started in the District Court. 3. Once the costs to be paid by the plaintiffs to the defendant pursuant to r 692(2) of the UCPR and claimed in the costs statement served by the defendant on 8 July 2024 have been assessed or agreed, those costs are to be set off against the costs payable by the defendant under order 1. 16 District Court of Queensland Act 1967, ss 68(1)(a)(i) and 69(2)(a). 17 Collins v Carey [2002] QSC 417, [3] and the cases cited therein. 18 Kenny v Eyears [2004] QSC 59, [13]. -- 11 of 11 --