Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [No 2] [2023] QCA 140 (2023) 15 QR 142

SUPREME COURT OF QUEENSLAND CITATION: Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [No 2] [2023] QCA 140 PARTIES: BUILT QLD PTY LIMITED ACN 108 064 099 (appellant) v PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LIMITED (FORMERLY KNOWN AS AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LTD) AS TRUSTEE FOR THE PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (BRS SPRING HILL) TRUST ACN 163 479 221 (respondent) FILE NO/S: Appeal No 14730 of 2021 SC No 5426 of 2017 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal – Further Orders ORIGINATING COURT: Supreme Court at Brisbane – [2021] QSC 224 (Williams J) DELIVERED ON: 14 July 2023 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGES: Morrison and Dalton JJA and Bradley J ORDERS: 1. The judgment given by Williams J on 26 November 2021 be set aside. 2. Judgment is given for the appellant against the respondent in the amount of $5,702,929.83. 3. The respondent pay the appellant’s costs of the claim in the trial division agreed or assessed on an indemnity basis. 4. The respondent pay the appellant’s costs of the counterclaim in the trial division agreed or assessed on a standard basis from 9 May 2019. 5. The respondent pay the appellant’s costs of the appeal agreed or assessed on the standard basis. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND -- 1 of 9 -- 2 SETTLEMENTS – OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT, PURSUANT TO RULES – GENERALLY – where the trial judge and this Court gave no separate judgments on the claim and counterclaim – where the appellant made an offer to settle on 14 June 2018 which was rejected by the respondent – where the appellant made a second offer to settle on 19 August 2020 which was rejected by the respondent – where on its claim, the appellant obtained a judgment “no less favourable” than the offer made – whether the respondent is to pay the appellant’s costs of the claim in the trial division on an indemnity basis – whether r 360 of the Uniform Civil Procedure Rules 1999 (Qld) applied PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – ISSUES AND COUNTERCLAIMS – GENERALLY – where the respondent counterclaimed – where the respondent threatened to call on an unconditional performance bond it held as security under the contract – where the appellant paid the respondent an amount equal to the value of the bond – where the respondent did not obtain any order on the counterclaim – where from the time of that payment the respondent had more of the appellant’s money than the respondent recovered on the counterclaim – whether another order for costs is appropriate within the meaning of r 361 of the Uniform Civil Procedure Rules 1999 (Qld) Uniform Civil Procedure Rules 1999 (Qld), r 181, r 353, r 360, r 361, r 362, r 684 Balnaves v Smith [2012] QSC 408, cited BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2) [2009] QSC 64, cited Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2022] QCA 266, related Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2019] QSC 108, related Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No 2) [2021] QSC 301, related Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224, related Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2020] QSC 1, cited Keeley & Ors v Horton & Anor [2016] QCA 253, cited MacKinnon v Petersen, unreported, Supreme Court of New South Wales, Cole J, 19 April 1989, cited Mickelberg & Ors v The State of Western Australia & Ors [2007] WASC 140 (S), cited Yara Nipro Pty Ltd v Interfert Australia Pty Ltd [2010] QCA 164, cited -- 2 of 9 -- 3 COUNSEL: P L O’Shea KC, with M J Steele and B A Reading, for the appellant T P Sullivan KC, with M J Doyle, for the respondent SOLICITORS: Clayton Utz for the appellant Thomson Geer for the respondent [1] THE COURT: On 20 December 2022, this Court allowed an appeal by the appellant from orders made after a trial in the trial division.1 This Court directed the parties to calculate the amount in which this Court ought to order judgment. The parties have agreed that judgment should be in favour of the appellant in an amount of $3,424,888.90, plus interest of $2,084,628.23 to 12 January 2023, with additional interest of $1,056.90 per day accruing from 12 January 2023. [2] This Court also directed the parties to attempt to agree an appropriate order as to costs. The parties have agreed that this Court should order the respondent to pay the appellant’s costs of the appeal on a standard basis. They have not agreed on the appropriate orders for costs of the proceeding in the trial division. The balance of these reasons deals with that topic. Proceeding in the Trial Division [3] On 31 May 2017, the appellant commenced the proceeding in the trial division, seeking to recover $5,257,165.22 pursuant to a design and construct contract, or as damages for breach of the contract. On 9 August 2017, the respondent defended, denying the claim, and counterclaiming for an order for specific performance compelling the appellant to rectify 24 items of allegedly defective work which were identified by brief descriptions in annexure 4 to the pleading. The respondent pleaded that if the appellant did not rectify the allegedly defective works then the respondent “may carry out the necessary work to have the defects rectified or engage others to do so and claim damages or a debt under the Contract for the cost of that work.” [4] On 11 April 2019, the respondent threatened to call on an unconditional performance bond it held as security pursuant to the contract. The appellant sought to restrain the call. On 9 May 2019, a restraining order was refused.2 That day, by agreement, the appellant paid the respondent $834,150.68, an amount equal to the value of the bond.3 [5] After this, in June 2019, the counterclaim was amended so that it claimed: (a) $507,030.14 as damages for breach of contract in respect of the alleged defects, rather than an order that the appellant rectify work, and (b) liquidated damages under the building contract.4 The amount of $507,030.14 was particularised as the cost of the necessary rectification work less the amount of the payment made by the appellant on 9 May 2019. As to the claim for defective work, pursuant to a part of the judgment of the trial judge which was not the subject of appeal, the respondent recovered no award on the counterclaim; in fact it was ordered to repay $151,203.09 of the cash 1 Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2022] QCA 266. On 13 April 2023, the High Court dismissed Pro-Invest’s application for special leave to appeal: Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd v Built Qld Pty Ltd [2023] HCASL 42. 2 Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2019] QSC 108. 3 Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No 2) [2021] QSC 301, [10]-[14]. 4 Second amended defence and counterclaim filed 27 June 2019. -- 3 of 9 -- 4 paid on 9 May 2019, together with interest.5 On appeal this Court was substantially against the respondent on its liquidated damages claim. The respondent had to refund over $1.2 million in respect of liquidated damages. [6] The judgment given by the trial judge was in favour of the appellant in an amount of $459,354.38 plus interest. This was the only judgment or (relevant) order made by the court below. It was a “judgment for the balance” within the meaning of r 184 which provides that “if a defendant establishes a counterclaim against the plaintiff and there is a balance in favour of 1 of the parties, the court may give judgment for the balance”. That is, the trial judge gave no separate judgments on the claim and counterclaim. Likewise, the judgment which both parties agreed to this Court entering as a result of the appeal, is a judgment for the balance owing to the appellant; there are not separate judgments on the claim and counterclaim. Both at trial and on appeal, the amount awarded in respect of the appellant’s claim overwhelmed any amount found owing to the respondent in respect of the subject matter of its counterclaim. Chapter 9 Part 5 Offers [7] The costs dispute between the parties centres around two offers made by the appellant pursuant to Chapter 9 Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). 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”. The effect of an offer served under the rules is set out in rr 360 and 361: “360 Costs if offer by plaintiff (1) If— (a) the plaintiff makes an offer that is not accepted by the defendant and the plaintiff obtains an order no less favourable than the offer; and (b) the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer; the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances. (2) If the plaintiff makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule. 361 Costs if offer by defendant (1) This rule applies if— (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. 5 Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224, [650]. -- 4 of 9 -- 5 (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. (3) However, if the defendant’s offer is served on the first day or a later day of the trial or hearing of the proceeding then, unless the court otherwise orders— (a) the plaintiff is entitled to costs on the standard basis to the opening of the court on the next day of the trial; and (b) the defendant is entitled to the defendant’s costs incurred after the opening of the court on that day on the indemnity basis. (4) If the defendant makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule.” [8] In this case, for the purpose of r 361, the appellant was to be treated as the defendant on the counterclaim, see r 181(1). The First Offer [9] On 14 June 2018, the appellant made the following offer: “The plaintiff makes the following offer to settle under Part 5 of Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld): 1. The plaintiff offers to settle all of the claims and counterclaims in this proceeding on the conditions set out in this offer. 2. In full and final satisfaction of all claims made by the plaintiff in this proceeding, the defendant will pay to the plaintiff: (a) the sum of $3,100,000; and (b) the plaintiff’s costs of the proceeding, as assessed, on the standard basis. 3. In full and final satisfaction of all counterclaims made by the defendant in this proceeding, the plaintiff will provide an irrevocable undertaking to rectify the defects listed in Schedule 1 to this offer, in accordance with the terms of the Contract entered into between the parties on 29 April 2015. 4. This offer is open for acceptance until 14 days after the day of service of the offer, at which time it will lapse automatically.” [10] At that point in time, the proceeding had been on foot for 12 months; the respondent was seeking only specific performance in its counterclaim, and the threat to call on the performance bond had not been made. The work which the respondent offered to rectify was not all the work the subject of the counterclaim. The parts which the -- 5 of 9 -- 6 respondent offered to rectify were set out in a schedule to the offer which used the words of annexure 4 to the counterclaim to identify the work the subject of the offer. [11] The respondent did not accept the first offer. The Second Offer [12] On 19 August 2020, the appellant made a second offer: “The plaintiff makes the following offer to settle under Part 5 of Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld): 1. The plaintiff offers to settle all of the claims and counterclaims in this proceeding on the conditions set out in this offer. 2. In full and final satisfaction of all claims made by the plaintiff in this proceeding, the defendant will pay to the plaintiff: (a) the sum of $3,600,000.00; and (b) the plaintiff’s costs of the proceeding, as assessed, on the standard basis. 3. This offer is open for acceptance until 14 days after the day of service of the offer, at which time it will lapse automatically.” [13] This offer was made after the payment by the appellant to the respondent in lieu of the security bond, and after the respondent had amended its counterclaim to make only a money claim. [14] The respondent did not accept the second offer. Comparison of offers with Judgment [15] Rule 362 provides that in applying rr 360 and 361, the Court must disregard interest relating to the period after the day of service of the offer. Applying that rule here, the relevant judgment sum for comparison purposes at the date of the first offer (14 June 2018) is $3,887,989.87 and at the date of the second offer (19 August 2020) is $4,698,658.65. [16] In those circumstances the appellant’s submission was that, “For the purpose of r 360 on the appellant’s claims, the appellant has obtained an order ‘no less favourable than the offer’” and “for the purpose of r 361 on the respondent’s counterclaims, the respondent has not obtained an order ‘that is more favourable’ than the appellant’s offer”. The appellant therefore seeks orders that the respondent pay the appellant’s costs of its claim in the trial division on an indemnity basis, and that the respondent pay the appellant’s costs of the counterclaim in the trial division on a standard basis.6 Application of rr 360 and 361 [17] On its claim, the appellant has obtained a judgment “no less favourable” than both the offers it made pursuant to Chapter 9 Part 5 of the rules. In those circumstances, 6 See paragraph 3 of its written submissions. The latter part of this submission accepts that r 360(1) is engaged only in relation to the appellant’s claim and it is r 361 which is engaged with respect to the counterclaim, see Yara Nipro Pty Ltd v Interfert Australia Pty Ltd [2010] QCA 164, [12]. -- 6 of 9 -- 7 r 360(2) provides that it is the first offer which is to be considered in applying r 360. Rule 361(4) is to the same effect so far as r 361 is concerned. The remainder of this judgment therefore deals with the first offer made by the appellant. [18] The language of rr 360(1) and 361(2) is that where those rules apply, this Court “must” make the orders there set that out unless it is shown that “another order for costs is appropriate in the circumstances”. This is in a context where r 681 recognises that this Court has a wide discretion in awarding costs, but that costs follow the event unless this Court otherwise orders. Rule 681(2) provides that r 681 applies “unless these rules provide otherwise”. In our view, the mandatory nature of the language in rr 360 and 361 is a provision “otherwise” within the meaning of r 681(2), so that if rr 360 and 361 are engaged they apply according to their terms. Clarity [19] It may be accepted that to comply with the rules an offer must be clear in its terms.7 The respondent submitted that the first offer was not clear in its terms, because it was “unclear what was actually being proposed” by way of rectification of defective work. The first offer dealt with the work to be performed using the same words as the then counterclaim. We cannot see that the term of the offer to rectify the defects “in accordance with the terms of the contract” made the offer unclear. It is true that in the proceeding the appellant denied liability in respect of any of the defects, but it is sophistry to suggest that denial made the terms of a without prejudice offer unclear. There is no merit in this submission. [20] A second submission was that the offer was not clear in its terms because it did not state how much of the $3.1 million was offered in payment of the claim, and how much was interest on the claim. This submission is also without merit. The offer was to settle the claim by accepting a single payment and costs. It could not have been clearer. Indivisible Offer [21] The respondent submitted that the first offer was indivisible; it was not possible to accept only the offer to settle the claim, or only the offer to settle the counterclaim. In our view the appellant’s costs submissions assumed that, and we accept it as correct. The respondent then argued that, “If only one of the two component parts of the June 2018 offer engages rr 360 or 361, [the appellant] should not be entitled to the special costs consequences in those rules because it was not open to [the respondent] to accept one offer but not the other”. It is not necessary to decide whether or not that argument is correct for, in our view, the two component parts of the first offer engaged rr 360 and 361 respectively. [22] It was accepted by the respondent that the offer contained in paragraph 2 of the first offer did engage r 360. [23] By paragraph 3 of the first offer to settle the appellant offered to satisfy some of the respondent’s then claim for specific performance. Had the respondent ultimately obtained a judgment on the counterclaim in a money sum, it may have been impossible to make an evaluation of the relative benefits and burdens of the offer and that money judgment.8 However, here the respondent did not obtain any order on the 7 Balnaves v Smith [2012] QSC 408, [21], Byrne SJA. 8 To use the language from [21] of Balnaves, above. -- 7 of 9 -- 8 counterclaim which was more favourable to it than the offer to perform work at paragraph 3 of the first offer; it did not obtain any order on the counterclaim at all. In those circumstances, r 361 is engaged in favour of the appellant.9 While it is true to say that the respondent was successful in establishing at trial that the appellant was liable for some defective work, the monetary consequences of that were as described at [5] and [6] above. Arguments about whether that meant that the respondent wholly failed on its counterclaim are irrelevant when the words of r 361(1)(a) (“obtain an order”) are considered. [24] We add that the fact that the respondent was successful in proving that there was some defective work does not convince us that “another order for costs is appropriate in the circumstances” – r 361(2). At all times after 9 May 2019 the respondent had received (more than) the costs of the defective work, and persisted with claims which were largely unsuccessful, in themselves, but also as a defence to the money claims brought by the appellant. That is, the balancing of claims favoured the appellant on the counterclaim viewed separately, and viewed as part of the litigation as a whole. Costs Order according to Questions or Parts [25] Rule 684 provides that the court may make “an order for costs in relation to a particular question in, or a particular part of, a proceeding”. Rule 684(2) provides that a court may declare “what percentage of the costs of the proceeding is attributable to the question or part of the proceeding to which the order relates”. [26] The respondent submitted that even if this Court found that rr 360 and 361 applied, the court would be persuaded that another order for costs would be appropriate in the circumstances, namely that the respondent pay 80% of the appellant’s costs of the claim, to be assessed on the standard basis, and order the appellant to pay 60% of the respondent’s costs of the counterclaim, to be assessed on the standard basis. These figures fall out of a very detailed analysis of the parties’ respective successes on 48 separate issues in the claim and counterclaim, sworn to by the respondent’s solicitors. [27] In a case with multiple issues, the court will not generally attempt to differentiate between issues on which a party was successful, and those on which it failed, unless a particular issue or group of issues is clearly separable and occupied a significant part of a trial.10 Thus the respondent’s very detailed analysis of issues, all of which were closely connected, did not demonstrate that this case was a suitable one for making costs orders according to separable questions or parts. Moreover, there is authority to the effect that, particularly in complex disputes, the court will not enter into a detailed analysis of the often numerous disputes between parties to litigation, but will award costs according to the “ultimate sum due from one to another”.11 [28] Further, we accept the appellant’s submissions that where r 360 or r 361 applies, the cost results specified by those rules will normally obtain, and it will be more difficult for a party to show that a costs order which has regard to separate parts or questions in litigation is appropriate. 9 This seems to us to be consistent with the position summarised by Flanagan J in [44] of Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2020] QSC 1 and [33] of the appeal from that decision at [2021] QCA 8. 10 BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2) [2009] QSC 64, [7]-[9]. 11 MacKinnon v Petersen, unreported judgment, Supreme Court New South Wales, Cole J, 19 April 1989, [5]-[6], cited in Mickelberg & Ors v The State of Western Australia & Ors [2007] WASC 140 (S), [35]-[43], and the other authorities cited there. -- 8 of 9 -- 9 Reasonableness [29] The respondent made submissions to the effect that it was reasonable for it not to accept the offers made by the appellant. The costs results prescribed by rr 360 and 361 should be applied according to their terms; concepts such as reasonableness, which may be relevant to assessing the consequences of Calderbank offers, should not be imported into this application.12 That is enough to dispose of this argument. [30] For completeness, in this case, the parties conducted the litigation in accordance with a system designed to enable them to make informed decisions early. Each was well-resourced and represented by competent and experienced counsel and solicitors. The matter was on a supervised case list, and so was the subject of regular review and direction. It is appropriate to assume that it was within the power of the respondent to assess the merits of its counterclaim and the appellant’s claim, and measure the worth of the appellant’s first offer. A year into the proceeding, the respondent ought to have had an informed view of the appellant’s claim, its defence, its counterclaim, the issues, the available evidence, the evidence it needed to adduce, and the matters of law that were likely to be important to the outcome of a trial. We cannot see that the respondent raises anything which makes a costs order other than those prescribed by rr 360 and 361 appropriate in these circumstances. Final Disposition [31] For the foregoing reasons, pursuant to r 360(1) the respondent should pay the appellant’s costs of the claim in the trial division on an indemnity basis. [32] Read literally, the provisions of r 361(2) would lead to an order that the appellant pay the respondent’s costs of the counterclaim up until the date of the first offer and then that the respondent would pay the costs of the counterclaim thereafter. Both sets of costs would be on a standard basis. Rule 361(2) provides that this is to be the order, “unless a party shows another order for costs is appropriate in the circumstances”. Here, in the circumstances discussed at [5] and [6] above, the order prescribed by r 361(2) is not an appropriate order. While the respondent did establish some aspects of its defective work claim, from the time of the 9 May 2019 payment it had more of the appellant’s money than was required to pay for those defects. A similar situation obtained in respect of its liquidated damages claim. It seems to us appropriate that there be no order as to costs on the counterclaim before the first offer was made. [33] This Court makes orders that: 1. The judgment given by Williams J on 26 November 2021 be set aside. 2. Judgment is given for the appellant against the respondent in the amount of $5,702,929.83. 3. The respondent pay the appellant’s costs of the claim in the trial division agreed or assessed on an indemnity basis. 4. The respondent pay the appellant’s costs of the counterclaim in the trial division agreed or assessed on a standard basis from 9 May 2019. 5. The respondent pay the appellant’s costs of the appeal agreed or assessed on the standard basis. 12 Keeley & Ors v Horton & Anor [2016] QCA 253, [19]. -- 9 of 9 --