Exel Drilling P/L v GLB Quarrying & Logistics P/L (No 2) [2013] QDC 263

DISTRICT COURT OF QUEENSLAND CITATION: Exel Drilling P/L v GLB Quarrying & Logistics P/L (No 2) [2013] QDC 263 PARTIES: EXEL DRILLING Pty Ltd (ACN 129 170 681) (plaintiff) v GLB QUARRYING & LOGISTICS Pty Ltd (ACN 131 402 910) (defendant) FILE NO/S: 4775/11 DIVISION: Civil PROCEEDING: Claim ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 18 October 2013 DELIVERED AT: Brisbane HEARING DATE: On the papers JUDGE: Dorney QC, DCJ ORDERS: Unless otherwise agreed between the plaintiff and the defendant, IT IS ORDERED THAT: 1. The defendant pay the plaintiff’s costs of the claim. 2. The plaintiff pay the defendant’s costs of the counterclaim. 3. One order for costs be set off against the other and execution issue for the balance only. CATCHWORDS: LEGISLATION: CASES CITED: Costs – whether offer was Calderbank offer – whether rejection of offer was so unreasonable or imprudent as to warrant a departure from the usual order as to costs. Uniform Civil Procedure Rules 1999 (Qld), r 681 Calderbank v Calderbank [1976] Fam 93 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 -- 1 of 7 -- 2 Lawes v Nominal Defendant [2007] QSC 103 Reeves v O’Riley [2013] QCA 285 Roberts v Prendergast [2013] QCA 89 Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd (No 2) [2011] QSC 156 Wright v KB Nut Holdings Pty Ltd [2013] QCA 153 Yara Nipro P/L v Interfert Australia P/L [2010] QCA 164 COUNSEL: Ms K Gothard for the plaintiff Mr H Scott-Mackenzie for the defendant SOLICITORS: JHK Legal for the plaintiff Wellners Lawyers for the defendant -- 2 of 7 -- 3 Introduction [1] On 4 October 2013, when giving judgment in this proceeding on both the claim and the counterclaim, it was ordered that each party file, and serve, submissions on costs, if any, by 4.00pm, 11 October 2013. Both parties have now filed submissions, with accompanying copies of relevant correspondence. [2] In the reasons for judgment (at [90]) I indicated that my preliminary view was that, given that one set of costs would be set off against the other (as with the judgments) and given the amounts of the prospective costs of preparation for, and conduct of, the assessment, no order as to costs should be made. But a complication has arisen which means that that preliminary view now needs to be revisited (in light of an Offer of Compromise and a Counter-Offer of Compromise, by the defendant and the plaintiff, respectively, on 7 June 2013 and 9 June 2013). Calderbank v Calderbank offer [3] The defendant’s Offer of Compromise was expressed to be “a Calderbank v Calderbank offer”, although, as pointed out by the plaintiff, neither was it marked “without prejudice” nor did it foreshadow an application for indemnity costs in the event that the offer was rejected. [4] In contrast, the plaintiff’s Counter-Offer of Compromise was both expressed to be “without prejudice” and “save as to costs”. The relevant letter also “noted” that the defendant’s offer was “not a Calderbank v Calderbank offer” on the plaintiff’s “understanding of that case”. [5] Although, as outlined by McColl JA in Elite Protective Personnel Pty Ltd v Salmon1, that appellation is given to a letter which conforms to the structure of that deployed in Calderbank v Calderbank2 (being one which is marked “without prejudice”, makes an offer of settlement, and warns that the letter will be relied upon on the question of costs if and when that arises), what is immediately relevant for present purposes is, as outlined by the Queensland Court of Appeal in Reeves v O’Riley3, that which the Victorian Court of Appeal held ought to be considered in such cases [see Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)4], namely:  the stage of the proceeding at which the offer was received;  the time allowed in the offer for the offeree to consider the offer;  the extent of the compromise offer;  the offeree’s prospects of success, assessed as at the date of the offer;  the clarity with which the terms of the offer were expressed; and  whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it; 1 [2007] NSWCA 322 at [97]. 2 [1976] Fam 93. 3 [2013] QCA 285. 4 (2005) 13 VR 435 at [25]. -- 3 of 7 -- 4 in a consideration of whether the rejection of any such characterised offer is “unreasonable”: at [4]. [6] As Reeves went on to observe, such a list is not exhaustive, stating that the “most important issue” in considering whether the refusal of the offer was “plainly unreasonable” is whether the offeree had any prospect of success: at [5]. Since, as observed in Reeves, one of the many factors to be considered is whether there was a foreshadowing of an application for indemnity costs (see Roberts v Prendergast5), it cannot be that there must be strict compliance with every aspect of the structure deployed in Calderbank v Calderbank before it is to be seen by the Courts as an appropriate vehicle for potentially affecting costs orders. Furthermore, the absence of a marking of “without prejudice” does not, on any particular document, make it decisive of the issue of a determination of relevant confidentiality, particularly where offers to settle are routinely seen as being “without prejudice” correspondence. As remarked by Margaret Wilson J in Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd (No 2)6, the waiver of this confidence is the gist of the third part of the Calderbank structure: at [7]. But, as here, its non-referencing cannot be seen as fatal in the particular context. [7] Accordingly, I conclude that the defendant’s Offer of Compromise was a relevant offer even though “not a decisive influence upon a determination of costs”, considering all its terms and considering its express reference to Calderbank v Calderbank. [8] In Lawes v Nominal Defendant7, Byrne J analysed the way in which Calderbank offers should be approached. Based upon the many decisions that he referred to in that judgment, he identified specific relevant factors as including: that the mere fact that the party making the offer obtains a judgment more favourable than the terms offered does not of itself, inevitably, demonstrate such “special” circumstances as would justify departure from the ordinary basis of a costs assessment; and that a pertinent consideration is whether it appears that the party sought to be made liable for costs on an indemnity basis has “imprudently or unreasonably failed to accept” such an Offer of Compromise: at folios 5 – 6. As he further indicated, such an approach will often involve an attempt to form a view about the relevant strengths and weaknesses of the case that ought to have been apparent to the parties when the offer was made: at folio 6. [9] As was remarked in Wright v KB Nut Holdings Pty Ltd8, costs on an indemnity basis are ordinarily not ordered “unless there is some unusual circumstance or unreasonable conduct other than mere non-acceptance of an offer to settle made before trial”: at [9] referring specifically to Yara Nipro P/L v Interfert Australia P/L.9 5 [2013] QCA 89 at [29]. 6 [2011] QSC 156. 7 [2007] QSC 103. 8 [2013] QCA 153 at [9]. 9 [2010] QCA 164 at [15]. -- 4 of 7 -- 5 Defendant’s submissions [10] On the basis of my acceptance of the relevant Offer of Compromise as being effective to bring the relevant principles and factors concerning Calderbank letters into play, the defendant has then sought orders that the parties each bear their own respective costs of the proceeding up to 9 June 2013 but that the plaintiff pay the defendant’s costs of the proceeding from 9 June 2013 on an indemnity basis – and, alternatively to the second such order, that the Court order that the plaintiff pay the defendant’s costs from 9 June 2013 on the standard basis. [11] The Offer of Compromise made on 7 June 2013 by the defendant essentially sought that each party discontinue its claim against the other and bear its own costs. But it was open for acceptance only until 9.00am on 10 June 2013 (being the day before the commencement of the trial). As pointed out by the plaintiff, 7 June 2013 was Friday and the offer was faxed at approximately 3.34pm. Additionally, 10 June 2013 was a Monday which was also a public holiday. [12] Given the limited time frame, it is obvious why the defendant did not use Chapter 9, Part 5 of the Uniform Civil Procedure Rules 1999 (“UCPR”). Factors which the defendant submits are relevant, besides those going to a Calderbank characterisation are:  the plaintiff was able to reject the Offer of Compromise and even made a Counter-Offer of Compromise;  the Offer of Compromise was “couched in clear terms”;  by the time the Offer of Compromise was made, the plaintiffs preparation for trial “must have been largely complete”, then being “ideally placed to assess the risks of the litigation and the reasonableness of the Offer”; and  “(n)othing emerged in evidence during the trial which was not apparent on the pleadings prior to the commencement of the trial”. Plaintiff’s submissions [13] Apart from the Calderbank characterisation, the plaintiff contended for the following as the relevant factors:  taking the actual days of the week and hours into account, “very little time” was afforded to the plaintiff to consider an offer at a stage when a significant proportion of expenses of the proceeding had already been incurred;  at 1.43pm on 7 June 2013, the plaintiff had sent a letter to the defendant, through their respective solicitors, requesting disclosure of a document previously referred to in correspondence, a document which was not disclosed until after the trial was adjourned on 12 June 2013 (to be continued on 24 June 2013);  at the time of the offer, the documentary evidence which had then been disclosed “did not substantiate the quantum of the defendant’s claim for damages”; and  the plaintiff was aware that the defendant was likely to be in possession of this undisclosed document. -- 5 of 7 -- 6 [14] The orders that the plaintiff sought were that each party should be awarded its costs on a standard basis but that, as both sets of costs would be set off against the other, it was appropriate, in order to avoid the costs and outlays associated with an assessment of costs and to achieve fairness in the circumstances, that there ought be no order as to costs of either side in this proceeding. Determination [15] The relevant rule under the UCPR is Rule 681(1) which, relevantly, states that the costs of the proceeding are in the discretion of the Court but follow the event, unless the Court orders otherwise. [16] Quite obviously, the factors relevant to Calderbank letters are a consideration in whether such orders might be “otherwise made”. [17] While the plaintiff’s Counter-Offer of Compromise is irrelevant in the terms of the offer it made, it still has some relevance to the assessment of the time allowed to the offeree to consider the original offer, because the plaintiff was able to formulate both a response (being a rejection) and its own counter-offer. [18] But the stage of the proceeding at which the offer was received was very late and, apart from the matter just mentioned, gave little business time for a proper consideration of the offer itself. Additionally, as is not disputed by the defendant, there was still a relevant undisclosed document. Furthermore, while it is relevant that the defendant’s offer did not foreshadow an application for indemnity costs based on a waiver of confidentiality, the document was expressed to be a Calderbank v Calderbank “offer”. As is amply demonstrated (in response) by the plaintiff, through its solicitors, the plaintiff knew exactly what a Calderbank offer was, and could, therefore, hardly be surprised about the later contended use of it in this way. [19] Given the relative complexity of the case as it was run at trial – particularly noting the incomplete stage at which the pleadings remained after evidence – this was not an easy case to predict what the outcome would be. [20] As remarked in Reeves, there were genuine questions involved and the arguments on both sides were “by no means hopeless”, even though some of them were “ultimately unsuccessful”: at [7]. [21] In light of all the considerations that I have undertaken in these Reasons, the plaintiff’s rejection of the defendant’s offer was not (plainly) unreasonable or imprudent; and there were no unusual features of this case which would warrant a departure from the usual order as to costs. -- 6 of 7 -- 7 [22] While I accept the reasoning behind the plaintiff’s submission that there be no order as to costs – it being my preliminary view in any event – since I am not in a position to determine the relative extent of each party’s costs or the extent of the costs of a proper assessment of them, I intend simply to make orders for relevant costs both on the claim and counterclaim and then set off one against the other. If the parties should be able to agree between themselves that there be no order as to costs, then they are to be left free to do so. -- 7 of 7 --