ACT Commercial Builders Pty Ltd v BBSJ Partners Pty Ltd
[2023] ACTMC 31
•31 August 2023
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | ACT Commercial Builders Pty Ltd and Anor v BBSJ Partners Pty Ltd and Anor |
Citation: | [2023] ACTMC 31 |
Hearing Date(s): | 8-11 September 2020; 27-28 April 2021 |
DecisionDate: | 31 August 2023 |
Before: | Magistrate Stewart |
Decision: | See [30] and [42]. |
Catchwords: | CIVIL JURISDICTION – commercial construction – costs -multiple offers including Calderbank offers and offers of compromise pursuant to Rule 1002 – claim for indemnity costs - question of whether exceptional circumstances arise |
Legislation Cited: | Court Procedures Rules 2006 |
Cases Cited: | ACT Commercial Builders PTY LTD and Anor v BBSJ Partners PTY LTD [2021] ACTMC 17 Calderbank v Calderbank [1975] 3 All ER 33 Faris v Savage (No 3) [2021] ACTSC 60 Jones v Walker [2013] ACTSC 71 Pires v Dibbs Parker Canberra Pty Limted [2014] ACTSC 283 Xiao v ACT Commercial Builders PTY LTD [2023] ACTSC 44 |
Parties: | ACT Commercial Builders Pty Ltd ( First Plaintiff) Ian Hoare (Second Plaintiff) BBSJ Partners Pty Ltd ( First Defendant) Qian Xiao (Second Defendant) |
Representation: | Counsel D Robens ( Plaintiffs) M Noakhtar (8-11 September 2020); J Moffett (27-28 April 2020) ( Defendants) |
| Solicitors Harrington Hall ( Plaintiffs) McInnes Wilson ( Defendants) | |
File Number: | CS 43 of 2019 |
MAGISTRATE STEWART:
Introduction and issues
This is a decision on the basis of costs to be awarded to the first and second plaintiffs against the first and second defendants.
The hearing comprised six days over two listings of four days and two days.
This Court found in favour of the first and second plaintiffs[1] and allowed their claims in the sum of $107,030.72 as follows:
- $32,924.00 (inc GST) for the final contract payment sum;
- $22,059.08 for interest on that sum;
- $31,354.00 (inc GST) for variations;
- $20,693.64 interest on variations.
The first and second defendants’ defences and counter claims were dismissed in their entirety. The Plaintiffs were successful in all their claims but for a refusal to order a little over $12,000 in further claims for variations under the contract.[2]
The Court received written submissions from the parties in accordance with orders setting out a timetable for submissions from the first and second plaintiff, the first and second defendant in reply and the first and second plaintiffs in reply. They chose not to submit anything further this month.
Part of the decision was unsuccessfully appealed by the second defendant. That decision was published on 14 March this year.[3] It now remains for a decision on costs from the original hearing to be made.
Submissions
It is not disputed that five different offers were made by the first and second plaintiffs. The first and second plaintiffs submit that the first in time should be enlivened and the subject of a costs order. They submitted that the other four offers were also valid but should be accepted in the alternative in a rolling chronological order should any earlier offer fail to satisfy the Court.
The first and second defendants submitted that the fifth and final offer should be accepted by the court and a costs order reflecting that offer be imposed.
The first written offer dated 11 October 2016
The first offer was made by letter dated 11 October 2016. The offer was made prior to the hearing and prior to a statement of claim being filed with the Court. By its content it purports to be a Calderbank offer.
The first and second defendants dispute such a categorisation on the following grounds. Firstly, they submit that the offer was not a genuine offer. They further submit that even if it was a genuine offer it was not unreasonable to reject the offer because:
a. The offer was made on 11 October 2016 and required acceptance by 5.00 pm 21 October 2016;
b. If the offer was accepted, payment was required to be made within that 10 day period;
c. The offer was silent as to costs and disbursements and that silence created an ambiguity; and
d. Clause 25 of the contract specifically provided for steps to be taken for dispute resolution and the first and second plaintiff did not follow the contract in that regard.
Firstly, there is nothing about the content of the offer which might put it into a category of not being genuine. I find that it contains “a real and genuine element of compromise” in that it included a reduction in variations and sought no costs or contractual interest.
Secondly, in terms of measuring compliance and reasonableness, in Pires v Dibbs, Refshauge J repeated the principles surrounding Calderbank letters:[4]
The letter of offer is commonly called, therefore, a “Calderbank letter”, though there are some principles surrounding such letters and not just any letter of offer will suffice. I have set out some of these principles in Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 at [24]-[46]. They may briefly, not exhaustively, be summarised as follows:
· the letter must be either an open letter or marked “without prejudice save as to costs” and thus be able to be tendered at any hearing or an application for costs;
· the offer in the letter must be a genuine compromise;
· the offer must be in clear terms and be a final offer, not subject to any further negotiation;
· generally an offer should not be “inclusive of costs”, though the authorities are not uniform on this issue;
· the letter must state expressly that, if the offer is not accepted, then a special order, such as for indemnity costs, will be sought;
· the offer must be open for a reasonable period, which is generally, though depending on the circumstances of each case, about 14 days;
· the offer must give the offeree a reasonable chance to consider the strength of the offeror’s case, so that the earlier in the proceedings the offer is made, the more information about the strength of the offeror’s case and the weakness of the offeree’s case should be provided;
· the Court, when asked to take into account the rejection of an offer made in a Calderbank letter, has a wide discretion and is not bound to make a special costs order;
· a very important consideration is whether the judgment is more favourable to the offeror than the offer in the Calderbank letter and the extent to which it is more favourable; and
· an almost equally important factor is whether, in all the circumstances, the offeree’s rejection of the offer was reasonable; that may involve a consideration of the extent of the compromise as compared to the strength of the cases of the offeree and the offeror.
It seems to me that the first letter of offer fails to satisfy one of these threshold requirements - it does not set out anywhere that it will be used as a means from which to seek a special order such as indemnity costs. Rather, it states at paragraph 3.4:
This is a genuine offer of compromise made pursuant to the well established Calderbank principles. This letter will be relied upon on the questions of costs in the event proceedings are commenced.
There should be no ambiguity in a Calderbank offer about what type of costs order will be sought in the absence of acceptance and a more favourable result for the offeror. Put another way, it is not sufficient to rely upon a perceived general understanding of the “Calderbank principles” without taking care to define what type of special cost order is to be sought.
The first and second defendants’ submission about the length of the acceptance period is also well made. If the first defendant was to properly consider the offer that process required consultation between multiple directors. The quantum sought was not insignificant.[5] It is not clear to me why 14 days or greater should not have been afforded to the first and second defendants to allow them to consider what was (properly) termed to be a “final offer”.
I reject the first and second defendants’ submission about an ambiguity created by the absence of a claim for costs. This offer was made in the early stages of the dispute. It did not purport to be an “all in” offer. The offeror sought only payment of the balance of the contract price and 75% of the variations. No claim for costs or contractual interest was made. No clarification needed to be sought in those circumstances – the quantum of the offer was crystal clear.
In consideration of the submission about clause 25 of the contract, I note the first and second plaintiffs’ submission in reply that the contract was repudiated by the first and second defendants’ own conduct in (at least) locking out the builder so that he could not complete. I agree and reject the submission.
The failure to stipulate the special cost order sought and the shorter than usual acceptance period give rise to a finding that it was not unreasonable for the first and second defendants to reject this offer in all of the circumstances.
The second written offer dated 12 August 2020
The first and second plaintiffs rely on this letter of offers in the alternative to the first offer. The second offer relies upon it purportedly being an offer of compromise pursuant to Part 2.10 and Rule 1002 of the Court Procedures Rules 2006.
The first and second defendants submit that it was not unreasonable for them not to accept the second offer for three reasons:
a. 23 days for acceptance was allowed for in the offer (12 August 2020 to 4.30 pm on 4 September 2020 and this was too short to properly consider the offer;
b. The plaintiff’s evidence was served on the same day as the letter of offer and it was substantial and it departed from the previously pleaded case. The first and second defendants submit that this meant they could not properly assess and formulate their case against the plaintiffs as their own evidence would not be finalised and served for a further three weeks.
c. The offer was not in compliance with the rules as it sought to preserve indemnity costs from the date of the offer rather than on the date on which the offer ended.
The hearing was listed to commence on 9 September 2020. I note that on 4 September 2020 the first and second defendants made a counter-offer by letter. Within that letter (being sent on the last day to accept the second offer from the first and second plaintiff) lies an answer as to whether 23 days to consider the second offer was reasonable in the circumstances of this matter and offered a chance for a proper assessment of the case:
“Having reviewed the totality of the evidence that is now before the parties, we are instructed to make an offer to settle this matter on the following terms…”
The content of that counter-offer amounts to an admission on 4 September 2020 that 23 days was both reasonable and sufficient in the circumstances. That finding is supported by the fact of the commencement of the hearing some five days later – by 4 September the parties should have been well and truly across all facts and issues.
I turn now to the submission about non-compliance with the rules. Rule 1002 of the Court Procedures Rules 2006 is as follows:
1002Making offer
(1) A party may, by written notice, make an offer to another party to compromise any claim in proceedings, either in whole or in part, on stated terms.
(2) An offer under this rule must—
(a) identify—
(i) the claim or part of the claim to which it relates; and
(ii) the proposed orders for disposal of the claim or part of the claim including, if a monetary judgment is proposed, the amount of the judgment; and
(b) (not relevant)
(c) not include an amount for costs or state that it is inclusive of costs; and
(d) state that the offer has been made in accordance with this part; and
(e) state the period of acceptance.
(3) An offer under this rule may propose—
(a) a judgment in favour of the defendant—
(i) with no order as to costs; or
(ii) despite subrule (2) (c), with an order that the defendant will pay to the plaintiff a stated amount for the plaintiff's costs; or
(b) that the costs as agreed or assessed up to the time of the offer will be paid by the person making the offer; or
(c) that the costs as agreed or assessed on a party and party basis or indemnity basis will be paid out of a stated estate or fund identified in the offer.
(4) Not relevant
(5) The end of a period of acceptance for an offer—
(a) for an offer made 2 months or more before the date set down for the start of the trial—must be not less than 28 days after the day the offer is made; and
(b) in any other case—must be after a period that is reasonable in the circumstances.
(6) Unless the notice of offer otherwise provides, an offer providing for the payment of money or doing of an act is taken to provide for the payment or doing of the act within 28 days after the offer is accepted.
(7) Unless the notice of offer otherwise provides, an offer is made without prejudice.
(8) A party may make more than 1 offer in relation to the same claim.
(9) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.
(10) A notice of offer purporting to exclude, modify or restrict rule 1010 or rule 1011 is invalid.
The second offer reads inter alia:
2. This is an offer of Compromise made pursuant to Part 2.10 and Rule 1002 of the Court Procedures Rules 2006.
3. This Offer of Compromise relates to:
a. the whole of our clients’ claim set out in the amended statement of claim dated 10 July 2019 (Claim); and
b. the whole of your clients’ counterclaim, as set out in the Amended Defence and Counterclaim dated 14 August 2019 (Counterclaim).
4. Without admissions, our clients offer to compromise the Claim and Counterclaim in accordance with Part 2.10 of the Court Procedures Rules 2006 as follows:
a. Judgment to be entered for the first plaintiff, ACT Commercial Builders Pty Ltd, on the Claim and Counterclaim in the sum of $30,000.00.
b. The period of acceptance is from the date of this letter until 4.30pm on Friday 4 September 2020.
5. Should this matter proceed to hearing and our client obtain a result that is more favourable than this offer, we intend to apply for an order that your client pays our client’s costs on an indemnity basis from the date of this offer and we will rely on this letter in support of such an order…
The second offer did not engage Rule 1002 (5)(a) as the offer was made less than two months before the hearing (or trial) commenced on 9 September 2020. I can only see further compliance with Rule 1002 in this second letter of offer.
Given that the ultimate award was more favourable to the first and second plaintiffs as it exceeded the $30,000 offer in the second offer, Rule 1010 was engaged:
1010 Offer not accepted and judgment no less favourable to plaintiff
(1) This rule applies if an offer is made by the plaintiff in relation to a claim, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in relation to the claim—
(a) if the claim is a personal injury claim—assessed on a solicitor and client basis for the whole of the proceeding; or
(b) in any other case—
(i) assessed on a party and party basis up to the time when the costs are to be assessed on a solicitor and client basis under subparagraph (ii); and
(ii) assessed on a solicitor and client basis—
(A) if the offer was made before the first day of the trial—from the day the period for acceptance of the offer ends; and
(B) if the offer was made on or after the first day of the trial—at and from 11 am on the day after the offer was made.
The first and second defendants submit that the second letter of offer should not be accepted by the Court because it seeks indemnity costs from the date of the letter rather than from the day the period of acceptance ended. No authorities were provided in support of such a proposition.
I cannot see how such an argument should be accepted. The letter of offer seeks to preserve the basis for an ultimate order that the Court might impose if it chose not to embrace the default position under Rule 1010(2)(b) and order “otherwise” to that default position.
If such a demand had not been included the first and second defendants would (rightly) criticise the letter for not making it expressly clear that a costs order out of the ordinary would be sought. It cannot give rise to a sustainable submission that it was not unreasonable to accept the offer, particularly in circumstances where acceptance of the offer would have made that subparagraph redundant.
I find that the second offer was sound at law and should result in a costs order. There is no need for me to consider the third letter of offer or any other remaining offer.
Indemnity Costs?
The only remaining issue is whether or not indemnity costs are appropriate or an order pursuant to the default formula in Rule 2010 is to be made.
I will not attempt to better Loukas-Karlsson J’s summary of the relevant authorities on indemnity costs as set out by her Honour in Faris v Savage (No 3):[6]
49. Despite the costs discretion conferred upon courts, it is settled practice that, absent any special circumstances, a successful litigant is entitled to recover their costs from the opposing party: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 (Oshlack) at [34]-[36]; Pires v DibbsBarker Canberra Pty Limited[2014] ACTSC 283 at [92]. An order to this effect is commonly described as “costs follow the event”: Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521 at [5] per Gaudron J. Ordinarily, costs follow the event and are awarded on a party/party basis: r 1751 of the Rules. See Hulanicki v Walton (No 2) at [11].
50. Costs are in the discretion of the Court: r 1721 of the Rules. The discretion is wide and must be exercised judicially, in accordance with established principle and the statutory context: Oshlack at [35]; [65]. The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party: EMI Songs Australia Pty Ltdv Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].
51. Indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs: Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA at [57]; Dunstan v Rickwood (No 2)[2007] NSWCA 266; 38 Fam LR 491 at [44]. Indemnity costs may be ordered where an offer is made under the Rules, or where a Calderbank offer is made.
52. The Court must consider whether there is an offer made under the Rules: Rule 1010. Offers of compromise should not be view with excessive formality or technicality, but rather with a view to giving effect to the spirit of the Rules. The Court does not look to the form of the orders, but rather to their substance: Pettitford v Whicker[2005] NSWCA 370 at [15]; Re Williams; Smith v Thwaites (No 2)[2017] VSC 771 at [29].
53. The Court must also consider the question of Calderbank offers. See Hulanicki v Walton (No 2) at [13]-[16]. Specifically, at [13] the Court stated the following:
The acceptance of reasonable offers of compromise is in the interests of litigants and the public; it minimises the personal and financial costs to litigants and it enables the courts to focus resources on claims that are not amenable to compromise. “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”: Stewart v Atco Controls Pty Ltd (In Liquidation) (No 2)[2014] HCA 31; (2014) 252 CLR 331 at [4]. On the other hand, it is critical that litigants have ready access to justice and do not feel unreasonably constrained to compromise cases.
No direct submission was made on indemnity costs under the second offer by the first and second defendants. Submissions were made about why an indemnity costs order should not be granted later in the submission relating to the fifth offer[7]. They may be summarised as:
i. There was nothing in the conduct of the defendants that should give rise to an order for indemnity costs. It was submitted that, for example, there was no issue of non-compliance with court procedures or timetable that delayed or elongated the proceedings.
ii. Such an order is a matter of discretion. It involves balancing access to justice and litigants not feeling unreasonably confined or constrained in compromising cases.
iii. The defendants had a reasonable measure of success by succeeding in their liquidated damages claim and many of the variation claims sought by the first and second plaintiffs.
No authorities were submitted to advance those submissions.
In their initial submissions, the first and second plaintiffs accepted that an order for indemnity costs arises only in an exceptional case. They submitted in summary that:
“The Builder refers to the terms of the Judgment to show its success and to show the Owners have acted unreasonable (sic) in pursuing their defence and counterclaim. The owners removed the Builder prematurely from the site denying the opportunity to remedy any defects. Nearly all of the issues were resolvable by reading the unambiguous wording of the contract.”
I agree that the first and second defendants were successful in defeating about one third of the value of the variation claims at hearing. I think that, of itself, that partial success would be enough to erode any claim that the matter was exceptional.
I disagree with the contention that the first and second defendants’ liquidated damages claim succeeded – it was completely eroded by the delays that they had themselves caused. Essentially the first and second defendants ran their case and lost (but for the variation claims they succeeded in having refused). Again, there is nothing exceptional about that.
The ordinary costs order under the Rules does not result in indemnity costs.
I have not been made aware of the practical effect of an indemnity costs order by the first and second plaintiff.[8]
I do not see anything about the conduct of the first and second defendants, or the manner of how the hearing progressed, or the outcome, that would persuade me to find that exceptional circumstances exist. I find that an order for indemnity costs would amount to a punitive measure rather than a judicial exercise of discretionary power and decline to make such an order.
I also find no reason to make an order that further departs from the default position under Rule 1010 (ie backdating solicitor and client costs to prior to 4 September 2020). No direct submission was advanced as to why such a departure should be made. I decline to make such an order.
Ruling on costs
I order costs against the first and second defendant in favour of the first and second plaintiff as per Rule 1002 in the following terms:
A. Party and party basis up to 3 September 2020; and
B. Solicitor and client basis from 4 September 2020 (but not including costs in relation to the appeal).
C. These orders do not take effect for a period of 14 days and, if any party notifies my associate by email (copied to the other party) that it wishes to be further heard in relation to costs, does not take effect until further order of the Court.
| I certify that the preceding fourty-two [42] numbered paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate Stewart Associate: Jonathan Pears Date: 30 August 2023 |
[1] ACT Commercial Builders PTY LTD and Anor v BBSJ Partners PTY LTD [2021] ACTMC 17
[2] $31,354 out of $43,539.32 was allowed for variations.
[3] Xiao v ACT Commercial Builders PTY LTD [2023] ACTSC 44
[4] Pires v Dibbs Parker Canberra Pty limited [2014] ACTSC 283 at paragraph 97
[5] $63,393.89
[6] [2021] ACTSC 60
[7] See page three of the first and second defendants’ submissions at paragraphs 21-25
[8] See Jones v Walker [2013] ACTSC 71 at paragraph 31
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