Babylon Aluminium Pty Ltd v Khazma Aluminium Windows & Doors Pty Ltd
[2020] NSWDC 936
•16 October 2020
District Court
New South Wales
Medium Neutral Citation: Babylon Aluminium Pty Ltd v Khazma Aluminium Windows & Doors Pty Ltd [2020] NSWDC 936 Hearing dates: On the papers Date of orders: 16 October 2020 Decision date: 16 October 2020 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: The Court orders (if need be under Pt 36 r 16(3A) and (3B) of the Uniform Civil Procedure Rules 2005) that the plaintiff’s/cross-defendant’s costs the subject of order 3 made on 2 October 2020 be assessed on an indemnity basis on and from 7 November 2019.
Catchwords: COSTS — Party/Party — Exceptions to general rule that costs follow the event — Offers of compromise/Calderbank offers – Cost inclusive offer – Offer makes provision for payment of costs
Legislation Cited: Uniform Civil Procedure Rules 2005, r 20.26, r 36.16, r 42.13, r 42.14, r 42.15, r 42.24
Cases Cited: In the matter of Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liquidation) [2016] NSWSC 575
Keramaniakis v Wagstaff [2005] NSWDC 14
LGS v Barbagallo [2013] NSWSC 68
Whitney v Dream Developments Pty Ltd [2013] NSWCA 188
Category: Principal judgment Parties: Babylon Aluminium Pty Ltd (plaintiff/cross-defendant)
Khazma Aluminium Windows & Doors Pty Ltd (defendant/cross-claimant)Representation: Counsel:
Solicitors:
Mr D P O’Dowd (plaintiff/cross-defendant)
Mr D Allen (defendant/cross-claimant)
Trump Lawyers (plaintiff/cross-defendant)
Sterling Legal (defendant/cross-claimant)
File Number(s): 2018/00268258 Publication restriction: None
Judgment
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Babylon Aluminium Pty Ltd applies for indemnity costs from Khazma Aluminium Windows & Doors Pty Ltd. The basis of the application is a letter attaching an offer of compromise. The letter refers to the decision in Calderbank and the intention to rely upon the offer on the question of costs.
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The only resistance to the order is that the offer is said not to be a Calderbank offer because:
“For an offer to be a Calderbank offer, the offer must attempt to persuade an offeree to accept the offer because the merits of doing so are set out”.[1]
1. Defendant’s submissions, 6/10/20 at [2].
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The respondent refers to LGS v Barbagallo,[2] where McDougall J held that the reason why a Calderbank offer did not enliven the discretion was because the reasons for it had not been explained. Thus, the passage by McDougall J does not support the contention advanced by Khazma: in Barbagallo, the offer was accepted to be a Calderbank offer[3] so the status of it being a Calderbank offer was not in issue.
2. [2013] NSWSC 68 at [43]-[45].
3. See at [41].
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In this case, the offer refers to the Calderbank decision and provides that:
“If the offer is not accepted and your client obtains a judgment no more favourable than the terms of this offer, our client intends to rely upon this letter on the question of costs and seek an order that your client pays the costs of the proceedings on an indemnity basis from the date of this letter.” [4]
4. Covering letter dated 6/11/19 attached to plaintiff’s submissions of 2/10/20.
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A reference to relying upon the offer to seek a special costs order is the essence of a Calderbank offer. [5]
5. See Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 at [43].
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Perhaps a more significant point, and indicated by the passage in Barbagallo, is that some reasons why the offer should be accepted may be necessary[6] in order for a Calderbank offer to secure a special costs order.
6. See Barbagallo at [43].
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The circumstances in this case were different from those in Barbagallo. As indicated, the offer here carried two essential indicia of a Calderbank offer: a reference to Calderbank; and a reference to the costs consequences of refusal. Neither of those was present in Barbagallo. These matters, coupled with the weakness of the defence being obvious in this case, and the significant extent of the compromise in the offer, showed the offer of compromise to be genuine and sufficient to enliven the discretion. In my view, it was unreasonable for Khazma not to accept the offer. The indemnity costs order in respect of costs should be made.
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I note the comments in Barbagallo were obiter,[7] and, even were they to be part of the ratio, this Court would not be bound by them. [8] I do not regard Barbagallo as authority for the proposition that an application for a special costs order based on a Calderbank offer must fail if no reasons are expressed in the letter of offer. The expression of reasons may be a relevant factor to consider, however.
7. See [37].
8. Keramaniakis v Wagstaff [2005] NSWDC 14.
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There is another matter that impacts upon my order: the applicant had previously sought to rely on an offer of compromise in the Calderbank letter as an offer under r 20.26 of the Uniform Civil Procedure Rules 2005. If that were the case, it would enliven the costs consequences under r 42.14. The offer was intended to be an offer under r 20.26 and expressly referred to that provision.
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I previously indicated a view against the application of r 42.24 because of the need for a r 20.26 offer to be exclusive of costs. But r 42.13, a provision not referred to previously, implies that costs provisions can be expressed in the offer, without taking an offer outside the ambit of r 20.26. Nor does the prohibition in r 20.26(2)(c) against including an amount for costs or making a costs‑inclusive offer take this offer outside the rule, since this offer has neither of those characteristics, at least so long as a costs‑inclusive offer requires the identification of an amount “inclusive of costs”.
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Further, the rules allow that an offer may provide that costs are to be paid by the offeror[9] and yet remain an offer of compromise under the rules. The expressio unius [10] maxim of construction might arguably preclude an offer providing for payment of costs to the offeror. On balance, I no longer think it does. The offer does not purport to restrict rr 42.14 or 42.15 (see r 20.26(12)) and is not outside the provision on that ground.
9. UCPR 20.26(3)(b), and other like provisions in r 20.26(3).
10. Expressio unius est exclusio alterius.
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The matter was considered by his Honour Black J In the matter of Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liquidation),[11] where his Honour decided that an offer by a plaintiff fell outside r 20.26 if it included a component that the defendant pay the plaintiff’s costs as agreed or assessed, a feature shared by the present offer. The Alsafe decision was given on the current provisions, provisions which were amended after the Court of Appeal decision in Whitney v Dream Developments. [12]
11. [2016] NSWSC 575 at [6].
12. [2013] NSWCA 188.
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As I said, in the absence of careful submissions about this point on the last occasion, perhaps understandably since the order was not formally opposed or the subject of contrary submissions by Khazma, I indicated a view to the same effect as that expressed by Black J. After further reflection, I incline to the view that the plaintiff was also entitled, under the rules, to an order for costs on an indemnity basis. As I am not persuaded that the decision in Alsafe was clearly wrong on that point, and as there is no reason to express a final opinion on the matter given that the offer operates also as a Calderbank offer, it is best that I express no final view. I note that, in view of Black J’s decision about the offer in Alsafe being a Calderbank offer,[13] his decision on the application of r 20.26 was obiter.
13. See at [7].
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The Court orders (if need be under Pt 36 r 16(3A) and (3B) of the Uniform Civil Procedure Rules 2005) that the plaintiff’s/cross-defendant’s costs the subject of order 3 made on 2 October 2020 be assessed on an indemnity basis on and from 7 November 2019.
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Endnotes
Decision last updated: 29 July 2022
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