Australian Building Insurance Services Pty Ltd v CGU Insurance Limited [2020] QCA 256

SUPREME COURT OF QUEENSLAND CITATION: Australian Building Insurance Services Pty Ltd v CGU Insurance Limited [2020] QCA 256 PARTIES: AUSTRALIAN BUILDING INSURANCE SERVICES PTY LTD ACN 162 498 599 (appellant) v CGU INSURANCE LIMITED ABN 27 004 478 371 (respondent) FILE NO/S: Appeal No 3110 of 2019 DC No 4368 of 2017 DIVISION: Court of Appeal PROCEEDING: Application for Leave s 118 DCA (Civil) – Further Order ORIGINATING COURT: District Court at Brisbane – [2019] QDC 18 (Koppenol DCJ) DELIVERED ON: 17 November 2020 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGES: Fraser and Philippides JJA and Crow J ORDER: The respondent pay the appellant’s costs of and incidental to the appeal and the proceeding below on the standard basis. CATCHWORDS: 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 the appellant relies upon three offers to settle the proceedings, one being made under the UCPR and two Calderbank offers – where the appellant seeks orders that the respondent pay the appellant’s costs of the proceeding below and the appeal on the indemnity basis, on the basis of the offer made under the UCPR – where the appellant alternatively submits that the respondent pay the appellant’s costs of the proceeding below on the indemnity basis (or on the standard basis until its first Calderbank offer and on the indemnity basis thereafter) and also seeks that the respondent pay the appellant’s costs of the appeal on the standard basis until its second Calderbank offer and on the indemnity basis -- 1 of 8 -- 2 thereafter – whether an order for indemnity costs for all or parts of the appeal and the proceeding below should be made Queensland Building Services Authority Act 1991 (Qld), s 67P Uniform Civil Procedure Rules 1999 (Qld), ch 9, pt 5 Australian Building Insurance Services Pty Ltd v CGU Insurance Limited [2019] QDC 18, related Australian Building Insurance Services Pty Ltd v CGU Insurance Ltd [2020] QCA 121, related Bulsey v State of Queensland [2016] QCA 158, considered Harbour Radio Pty Limited & Ors v Wagner & Ors [2020] QCA 83, considered Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, cited J & D Rigging Pty Ltd v Agripower Australia Limited & Ors [2014] QCA 23, considered Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15, cited Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331; [2014] HCA 31, cited COUNSEL: S Couper QC, with P Travis, for the appellant A Morris QC, with A Harding, for the respondent SOLICITORS: Axia Litigation Lawyers for the appellant MCK Lawyers for the respondent [1] THE COURT: On 5 June 2020, the appellant succeeded in its application for leave to set aside orders of the District Court made on 22 February 2019 and obtained orders allowing the appeal and setting aside the decision at first instance which dismissed the appellant’s claim for interest at the statutory penalty rate on late progress payments pursuant to s 67P of the Queensland Building Services Authority Act 1991 (Qld) (the Act). This Court entered judgment for the appellant in the amount of $242,032.14 and ordered that the respondent pay the appellant’s costs of and incidental to the appeal and the proceeding below on the standard basis, subject to further submissions being received from the parties.1 [2] The parties have filed further submissions. In its submissions, the appellant referred to three offers to settle that it had made as follows: (a) On 24 July 2018, the appellant made an offer to settle pursuant to ch 9, pt 5 of the Uniform Civil Procedure Rules 1999 (Qld) (the UCPR) open for acceptance for 14 days on the basis that the respondent pay to the appellant $150,000, together with costs.2 (b) On 18 January 2019 (between the first day of trial being 10 August 2018 and the second day of trial, being 1 February 2019), the appellant made a Calderbank offer open for acceptance until 30 January 2019 on the basis that the respondent 1 Australian Building Insurance Services Pty Ltd v CGU Insurance Ltd [2020] QCA 121 (Reasons). 2 On 7 August 2018, the respondent agreed to pay the sum of $21,798 claimed in the statement of claim without prejudice to the remainder of the appellant’s claims in the statement of claim and that sum was then paid to the appellant: Affidavit of Jennifer Raphael at [5]-[6], ex 3. -- 2 of 8 -- 3 pay the appellant the sum of $140,000 and there be no order as to costs3 (the first Calderbank offer). (c) On 13 September 2019, after the appeal had been commenced and the parties had exchanged outlines, a further Calderbank offer was made that was open for acceptance until 16 September 2019, the date that the appeal was heard. This was an offer to settle the appeal and the proceedings below on the basis that the respondent pay the appellant $175,000, plus costs of the appeal and the proceedings below to be assessed on the standard basis (the second Calderbank offer). [3] The appellant seeks orders that: (a) the respondent pay the appellant’s costs of the proceeding below and the appeal on the indemnity basis on the basis of the offer made under the UCPR; (b) alternatively, that the respondent pay: (i) the appellant’s costs of the proceeding below on the indemnity basis (or alternatively, on the standard basis up to 18 January 2019 and on the indemnity basis thereafter); and (ii) the appellant’s costs of the appeal on the standard basis until 13 September 2019 and on the indemnity basis thereafter. [4] The appellant argued that the offer under the UCPR contained a significant element of compromise, that it was ready, willing and able to carry out what was proposed by the offer and that the respondent had the material necessary to assess its risks when the offer was made.4 It was submitted by the appellant that the judgment given by this Court in its favour was no less favourable than the offer and was, in fact, 60 per cent more than that offer.5 Relying on the statement in Monie v Commonwealth of Australia (No 2)6 endorsed in Bulsey v State of Queensland,7 that “[a]n offer of compromise made under court rules at first instance can be a relevant factor to consider on the question of costs on appeal, even if that offer has no statutory effect under the rules on the costs of an appeal”, the appellant argued that the offer was a relevant consideration which favoured the making of an order that the respondent pay the appellant its costs of the proceedings below and this appeal on the indemnity basis. [5] The appellant also relied on the first Calderbank offer and submitted that it is not sufficient for the respondent to argue that its rejection of the first Calderbank offer was “not unreasonable”. Instead, it is necessary to at “least ... point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation”.8 The appellant referred to the following matters as being relevant: (a) the offer was made at a stage where the respondent should have been aware of the relevant facts and had time to assess the relevant law; (b) the time allowed was a reasonable time; (c) given the ultimate judgment, the offers involved a considerable compromise; 3 Affidavit of Jennifer Raphael at [9], ex 5. 4 Affidavit of Jennifer Raphael at [4]. 5 Taking into account that post offer interest is to be disregarded for the purposes of r 360: r 362(2). 6 [2008] NSWCA 15 at [71]. 7 [2016] QCA 158 at [80]. 8 Bulsey at [75] and [79], citing Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331 at 334 [4]. -- 3 of 8 -- 4 (d) as at the date of the offer, the respondent should have appreciated the difficulties it faced given it unsuccessfully raised points at trial that were not appealed and the point maintained by the respondent on appeal was weak; (e) the offer was clear and unambiguous; and (f) the offer foreshadowed an application for indemnity costs upon its refusal. [6] As to the relevance of the merits of the points that the respondent maintained on appeal, the appellant submits that their points are best characterised as being one of statutory “emphasis”. While the appellant and the respondent read s 67P of the Act in the same way, the respondent focused on selected parts of the Act as would justify an unorthodox application of principles in relation to contractual novation. The appellant submitted that it was relevant that the respondent conceded during oral argument at the hearing of the appeal that “the appellant undertook an obligation to ensure that the relevant building work was completed, including an obligation to rectify work done by Price Constructions” and that Price Constructions had no crystallised right to payment before novation.9 The appellant argued that once these concessions were made, a plain application of s 67P was practically inevitable. [7] The appellant’s offers to settle represented significant compromises that were less beneficial than the ultimate judgment it obtained on appeal, as it was forced to do to vindicate its rights. The appellant submitted that there would accordingly need to be significant considerations to deny the appellant its costs on the indemnity basis. [8] As to the second Calderbank offer, the appellant submitted that this offer also represented a very significant compromise and reflected the “reality” that the respondent’s contentions relied on an unorthodox approach to the ordinary principles of novation, which was, in the circumstances, weak. [9] Any suggestion that the respondent behaved reasonably in rejecting the various offers cannot be accepted given the eventual outcome of the case.10 [10] The respondent submitted that the relevant offer was the second Calderbank offer. Its case at trial involved a point of construction as to the proper interpretation of s 67P of the Act. The primary judge accepted the respondent’s argument as to the interpretation of that section11 and the respondent advanced the same construction argument on appeal to this Court. While the respondent’s contention was ultimately rejected, it was a point on which minds might reasonably differ and was not without reasonable prospects.12 Therefore, the appellant has not shown that the respondent acted unreasonably or imprudently in not accepting the Calderbank offer. Therefore, the appeal costs should be assessed on the standard basis. [11] In Bulsey,13 this Court had regard to the principles that applied to a Calderbank offer in the context of both a trial and an appeal. In that regard, McMeekin J (with whom Fraser JA and Atkinson J agreed) referred to the following principles set out by Holmes JA (as her Honour then was) with whom the other members of the Court agreed in J & D Rigging Pty Ltd v Agripower Australia Limited & Ors as follows:14 9 Reasons at [25]. 10 Bulsey at [81]. 11 Australian Building Insurance Services Pty Ltd v CGU Insurance Limited [2019] QDC 18 at [23]. 12 Respondent’s costs submissions at [6]. 13 Bulsey at [73]. 14 [2014] QCA 23 at [5]-[6] per Holmes JA (as her Honour then was), Applegarth and Boddice JJ agreeing. -- 4 of 8 -- 5 “The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs.15 The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances.16 The party seeking costs on an indemnity basis must show that the party acted ‘unreasonably or imprudently’ in not accepting the Calderbank offer.17 In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),18 the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters: ‘(a) the stage of the proceeding at which the offer was received; (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; (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.’” [12] McMeekin J also referred to Stewart v Atco Controls Pty Ltd (in liq) (No 2),19 where the High Court observed: “The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.” [13] In Bulsey, the appellants relied upon J & D Rigging as authority for the proposition that indemnity costs of an appeal can be awarded on the principles that apply when Calderbank offers are made in a claim and that the various factors listed in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)20 are relevant. In that respect, McMeekin J commented that he did not think that the Court in J & D Rigging should be taken to say that the approach was necessarily the same when appeal costs were under consideration. His Honour also observed:21 “There are other factors that impinge on the exercise of the discretion. One is that identified in Comgroup Supplies Pty Ltd v Products For 15 Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at 441 [20]; [2005] VSCA 298 at [20]. 16 At 441 [23]. 17 McBride v ASK Funding Ltd [2013] QCA 130 at [65]. 18 [2005] 13 VR 435 at 442 [25], an authority frequently cited with approval in this and other Australian courts. 19 (2014) 252 CLR 331 at 334 [4]. 20 (2005) 13 VR 435. 21 Bulsey at [76]. -- 5 of 8 -- 6 Industry Pty Ltd & Anor22 where this Court (McMurdo P, Atkinson and Mullins JJ) considered the effect of a successful Calderbank offer made by a respondent to an appeal. The Court cited Stewart v Atco Controls Pty Ltd (No 2)23 as setting out the relevant principles24 and observed: ‘[8] Although appeal courts are reluctant to encourage these Calderbank approaches in appeals for fear that it might stultify the development of the law, the court concluded that an examination of the merits of the proposed amended notice of appeal showed that it was bound to fail and did not raise any significant questions of law but rather the application of well-established principles of law to the facts of the case.’” [14] After considering the matters in Hazeldene’s Chicken Farm, McMeekin J stated:25 “In my view where a party has consistently offered to settle proceedings from before their commencement on a basis less beneficial than that eventually achieved and has been forced to appeal to vindicate their rights, there would need to be very significant considerations to deny them their costs on the indemnity basis. Here the factor mentioned in Comgroup Supplies Pty Ltd v Products For Industry Pty Ltd & Anor26 does not assist the respondent. There was no stultifying of the development of the law involved here. The decision involved the application of well-established principles of law to the facts of the case. Acceptance of the offers would have served to vindicate the appellants’ rights.” [15] Further, in Bulsey, McMeekin J referred to Monie27 where the New South Wales Court of Appeal considered the effect of a Calderbank offer on appeal costs as follows:28 “So far as the costs of the appeal are concerned, there is an additional reason why no order for indemnity costs should be made. It is that the Calderbank offer in question was made at the outset of the second trial, had expired by the time the appeal was instituted, and was not renewed for the purpose of the appeal. An offer of compromise made under court rules at first instance can be a relevant factor to consider on the question of costs on appeal, even if that offer has no statutory effect under the rules on the costs of an appeal: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410 per Gleeson CJ and Priestley JA; Fotheringham v Fotheringham (No 2) [1999] NSWCA 21; (1999) 46 NSWLR 194 at [33], 205 per Stein JA. There is no reason of principle why any different situation should apply concerning a Calderbank offer made at first instance. Such an offer operates as one factor able to be taken into account in exercise of the 22 [2016] QCA 130. 23 (2014) 252 CLR 331. 24 See [38] above. 25 Bulsey at [78]. 26 [2016] QCA 130. 27 [2008] NSWCA 15, cited with approval in Stewart v Atco Controls. 28 Bulsey at [80]. -- 6 of 8 -- 7 court’s discretion: Estate of Virgona v De Lautour (No 2) [2007] NSWCA 323 at [10]. However, the failure to renew for the purpose of an appeal a Calderbank offer that had been made for the purpose of trial is well recognised as a factor that tends against an award of indemnity costs for the appeal: Brymount Pty Ltd t/a Watson Toyota v Cummins (No 2) [2005] NSWCA 69 at [29]-[30]; Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 at [21]; Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd (No 2) [2006] NSWCA 379 at [10]-[17]. One factor that particularly tends to disincline an appeal court from making an order for costs of an appeal because of a Calderbank offer made for trial is if (as happened here) the Calderbank offer was not still open for acceptance when the appeal was instituted or before significant costs had been incurred in the appeal: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [8] to [9].” [16] In Harbour Radio Pty Limited & Ors v Wagner & Ors,29 this Court recently summarised the relevance of both offers under the UCPR and Calderbank offers thus:30 “Pursuant to r 681 of the [UCPR], costs are to be assessed on the standard basis unless the Court orders or the UCPR provides otherwise. Under r 703(1), the Court has a discretionary power to order that costs be assessed on the indemnity basis. The respondents rely upon the statement in Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2)31 that where a Calderbank offer has been made the courts are inclined to order indemnity costs as an incentive to parties to consider seriously offers to settle which are reasonably made. The mere non-acceptance of an offer to settle does not of itself warrant an order for indemnity costs.32 As the appellants submit, in J & D Rigging Pty Ltd v Agripower Australia Limited & Ors33 the Court held that non-acceptance of a Calderbank offer will justify ordering costs on an indemnity basis only where the party who did not accept the offer acted ‘unreasonably or imprudently’.” [17] In this case, the appellants were required to vindicate their rights on appeal in circumstances where they had made offers prior to the decision at first instance and the hearing of the appeal. [18] It is to be noted that the offer under the UCPR, being an offer made at first instance, did not apply to the question of costs of the appeal, although it remains relevant. As to the first Calderbank offer, there is merit in the respondent’s argument that it acted reasonably in rejecting that offer given the position it took as to the construction of the Act was accepted at first instance. That is, the primary judge accepted the respondent’s contention as to the proper construction of s 67P of the Act. [19] As to the second Calderbank offer, it was made after the appeal was commenced and outlines had been exchanged and after the respondent had been appraised of the 29 [2020] QCA 83. 30 Harbour Radio at [3] per Fraser JA (Morrison JA and Burns J agreeing). 31 [2009] 2 Qd R 287 at [15] (White AJA, McMurdo P and Holmes JA as the Chief Justice then was agreeing). 32 See Rider & Anor v Pix [2019] QCA 257 at [10] (Flanagan J, Sofronoff P and Morrison JA agreeing), citing Reeves v O’Riley [2013] QCA 285 and Deepcliffe Pty Ltd & Anor v The Council of the City of Gold Coast & Anor [2001] QCA 396. 33 [2014] QCA 23 at [5]. -- 7 of 8 -- 8 narrow ambit of the errors alleged in the judgment at first instance. It was, however, made only days before the appeal hearing and by which stage most costs were likely to have been incurred. The respondent’s argument on appeal, naturally enough, was based on the judgment in its favour, which although found to be erroneous, cannot be said to have been unarguable. It concerned an issue of statutory interpretation which was not an unmeritorious case, even when the respondent accepted during oral submissions that there was a novation of the contract in question and that Price Constructions’ right to payment had not crystallised before the novation. [20] In those circumstances, the costs order that was proposed in the substantive judgment should not be altered and the order of the Court is therefore that the respondent pay the appellant’s costs of and incidental to the appeal and the proceeding below on the standard basis. -- 8 of 8 --