1155 Nepean Highway Pty Ltd (ACN 630 087 428) v Promax Buildings Pty Ltd (ACN 630 303 801) (and others according to the attached schedule) [No 2]

[2020] VSCA 263

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2020 0075

1155 NEPEAN HIGHWAY PTY LTD (ACN 630 087 428)	Appellant
v
PROMAX BUILDINGS PTY LTD (ACN 630 303 801) (and others according to the attached schedule) [No 2]	Respondents

---

JUDGES:	BEACH, KYROU and McLEISH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	6 October 2020
MEDIUM NEUTRAL CITATION:	[2020] VSCA 263
JUDGMENT APPEALED FROM:	[2020] VSC 398 (Digby J)

---

COSTS – Unsuccessful appeal – Rejection of Calderbank offer – Offer made after filing of application for leave to appeal and written case – Whether rejection of offer unreasonable – At time of offer, proposed appeal could be thought to have prospects of success – Even allowing for contested damages, offer represented discount of approximately 12 per cent of claim – Not shown that rejection unreasonable – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (2005) 13 VR 435, applied – Standard costs awarded.

---

WRITTEN SUBMISSIONS:	Counsel	Solicitors
For the Appellant	Mr A Rollnik	Arnold Bloch Leibler
For the First Respondent	Mr JAF Twigg QC with	Corrs Chambers Westgarth
Mr AR Morrison

BEACH JA
KYROU JA
McLEISH JA:

1. The Court granted leave to appeal in this matter and dismissed the appeal on 25 September 2020.[1]  The parties are in agreement that the appellant should pay the first respondent’s costs of the application for leave to appeal and of the appeal.  However, they differ as to the basis upon which the costs are to be assessed.  The first respondent submits that the appellant should pay its costs on the indemnity basis, as the result of what it says was the unreasonable rejection of a Calderbank offer. 

   [1]1155 Nepean Highway Pty Ltd v Promax Buildings Pty Ltd [2020] VSCA 253.

1. In our view, costs should be payable on the standard basis.  When the guiding factors set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2][2] are considered it has not been shown that the rejection of the Calderbank offer was unreasonable.  The key considerations are the appeal’s prospects of success and the size of the offer.  We address those factors briefly below.

   [2](2005) 13 VR 435, 442–3 [25]–[29] (Warren CJ, Maxwell P and Harper AJA).

1. The offer was made on 18 August 2020.  In a covering letter, the first respondent identified alleged deficiencies in the appellant’s case, based on a draft written case it had filed on about 27 July 2020 and the appellant’s subsequently filed application for leave to appeal.  At that time, in our opinion, the proposed appeal could reasonably be thought to have some prospect of success.  Although the appellant developed its grounds in the course of oral submissions, it was apparent from the written case that the brevity with which the adjudicator had expressed himself in his determination provided scope for legal argument as to its effectiveness, and that minds might legitimately differ as to the outcome of that argument.

1. At the date of the offer, the first respondent’s claim was composed of $2,041,582.15, being the adjudicated amount, together with $211,637.44 by way of interest calculated to 17 August 2020.[3]  The total amount of the claim, exclusive of costs, was therefore $2,253,219.59.

   [3]The adjudicated amount consisted of the upheld payment claim of $2,017,382.15 together with adjudicator’s fees of $24,200.  In its Calderbank letter, the first respondent calculated the interest figure at the slightly lower amount of $211,409.76 but adopted the higher figure in its written submissions on costs.

1. The offer was that the first respondent would accept payment of $2,027,692.72, exclusive of legal costs, in full and final settlement of the first respondent’s right to payment of the adjudicated amount plus interest, and all claims and rights to damages contemplated by paragraph 5 of an order made by the trial judge on 31 July 2020.  By that order, the judge reserved all issues arising under or in relation to whether any damages were payable in relation to undertakings given in connection with earlier orders he had made.  The first respondent stated in its Calderbank offer that the damages in question included lost and/or compromised business opportunities and other direct losses suffered by reason of the giving of the undertakings.  In particular, it was said that legal costs had been incurred in preparing, submitting and resubmitting its payment claim every nine business days since March 2020 in order to preserve the status quo while judgment was pending in the Trial Division.  It was said that these damages exceeded $50,000 plus GST.  The appellant contests the first respondent’s submissions in this regard, in particular as to causation.

1. It is not necessary or appropriate for this Court to enter into the question of damages in respect of the undertakings given in the Trial Division.  We instead assume, in the first respondent’s favour, that damages in the sum of approximately $50,000 may have been payable.  At the same time, we are in no position to evaluate the potential strength of that claim.  The assumption in the first respondent’s favour is therefore a generous one.

1. Leaving the damages claim to one side for a moment, the offer of $2,027,692.72 represented a discount of $225,526.87 on the claim of $2,253,219.59, or approximately 10 per cent of the claim.[4]  If considered in the wider context of a dispute including $50,000 in damages, the offer represented a discount of $275,526.87 on a claim of $2,303,219.59, or approximately 12 per cent of the total amount in dispute. 

   [4]Based on the interest calculation in the Calderbank letter, the offer was exactly 10 per cent of the claim.

1. In our opinion, it has not been shown that it was unreasonable to reject this offer.  In a case of some difficulty, where the appellant had quite respectable arguments, the offer to accept a discount of approximately 10–12 per cent, while not quite being derisory or an invitation to capitulate, was one which a reasonable litigant in the position of the appellant could sensibly reject.

1. For that reason, the first respondent has not discharged its onus to show that it was unreasonable for the appellant to reject the offer.  The appellant will therefore be ordered to pay the costs of the first respondent on the standard basis.

- - -

SCHEDULE OF PARTIES

1155 NEPEAN HIGHWAY PTY LTD (ACN 630 087 428)	Appellant
v
PROMAX BUILDINGS PTY LTD (ACN 630 303 801)	First Respondent
JOHN McMULLAN	Second Respondent
RIALTO ADJUDICATIONS PTY LTD	Third Respondent