Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 3)

[2021] NSWSC 1537

Supreme Court

New South Wales

Medium Neutral Citation:

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 3) [2021] NSWSC 1537

Hearing dates:

On the papers

Decision date:

30 November 2021

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

See [170]

Catchwords:

COSTS — Lump sum or gross costs orders — Whether lump sum costs order should be made

COSTS — Party/Party — General rule that costs follow the event — Special costs order

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98

Evidence Act 1995 (NSW), ss 76, 135, 136

Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW), r 122

Uniform Civil Procedure Rules 2005 (NSW), rr 20.14, 20.26, 36.17

Cases Cited:

AM Stevens Pty Ltd v Australian Red Cross Society [2002] FCA 91

Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120

Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1993] FCA 673

Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006

Beach Petroleum NL v Johnson (1995) 57 FCR 119

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 2) [2021] NSWSC 1374

Bullock v London General Omnibus Co [1907] 1 KB 264

Calderbank v Calderbank [1975] 3 All ER 333

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353

Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629

Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197

Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398

Commonwealth v Gretton [2008] NSWCA 117

E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296

Evans Shire Council v Richardson (No 2) [2006] NSWCA 61

Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519

General Trade Industries Pty Ltd (in liq) v AGL Energy Ltd [2020] FCA 1562

Hamod v New South Wales [2011] NSWCA 375

Hancock v Arnold (No 2) [2009] NSWCA 19

Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213

Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298

Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375

Huntsman Chemical Company Australia Pty Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242

Idoport Pty Ltd v National Australia Bank [2005] NSWSC 1273

In the matters of Earth Civil Australia Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161

Jones v Bradley (No 2) [2003] NSWCA 258

King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Leichhardt Municipal Council v Green [2004] NSWCA 341

Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (unreported, 29 August 1995 in proceedings WAG66/1994)

MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236

Mitar v Mitar (No 2) [2017] NSWSC 1308

Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344

Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus [2007] FCA 1878

Norcast S.ár.L v Bradken Ltd [2012] FCA 765

Old v McInnes and Hodgkinson [2011] NSWCA 410

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121

Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278

Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368

Rinehart v Rinehart (No 2) [2020] NSWSC 235

Sanderson v Blyth Theatre Co [1903] 2 KB 533

Seafolly Pty Ltd v Madden (No 6) [2015] FCA 1369

Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd (No 2) [2017] NSWCA 340

SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323

Smoothpool v Pickering [2001] SASC 131

South Eastern Sydney Area Health Service v King [2006] NSWCA 2

Sze Tu v Lowe (No 2) [2015] NSWCA

Vale v Eggins (No 2) [2007] NSWCA 12

Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188

WLD Practice Holdings Pty Limited v Sara Stockham [2020] NSWSC 1354

Category:

Costs

Parties:

Broadway Proceedings 2016/00282940
Broadway Plaza Investments Pty Ltd (Plaintiff/First Cross-Defendant to First Cross-Claim/Cross-Defendant to Second Cross-Claim/First Cross-Defendant to Fifth Cross-Claim/First Cross-Defendant to Sixth Cross-Claim/Second Cross-Defendant to Seventh Cross-Claim/First Cross-Claimant to Eighth Cross-Claim)
Broadway Plaza Pty Ltd (Defendant/Cross-Claimant to First, Second and Fifth Cross-claims/Cross-Defendant to Third Cross-Claim/Second Cross-Defendant to Sixth Cross-Claim/First Cross-Defendant to Eighth and Ninth Cross-Claims)
Commonwealth Bank of Australia (Second Cross-Defendant to First Cross-Claim/Second Cross-Defendant to Fifth Cross-Claim/Cross-Claimant to Seventh Cross-Claim/Third Cross-Defendant to Eighth Cross-Claim)
Fouad Deiri (Third Cross-Defendant to Fifth Cross-Claim/First Cross-Defendant to Seventh Cross-Claim/Second Cross-Claimant to Eighth Cross-Claim)
Deiri Nominees Pty Ltd (Fourth Cross-Defendant to Fifth Cross-Claim/Fourth Cross-Defendant to Seventh Cross-Claim/Cross-Claimant to Ninth Cross-Claim)
Combined Projects (Gibbons) Pty Ltd (Fifth Cross-Defendant to Fifth Cross-Claim; Fifth Cross-Defendant to Seventh Cross-Claim)
Combined Property Investments Pty Ltd (Sixth Cross-Defendant to Fifth Cross-Claim; Sixth Cross-Defendant to Seventh Cross-Claim)
Combined Projects (Redfern) Pty Ltd (Seventh Cross-Defendant to Fifth Cross-Claim; Seventh Cross-Defendant to Seventh Cross-Claim)
Combined Projects Holdings Pty Ltd (Eighth Cross-Defendant to Fifth Cross-Claim/Eighth Cross-Defendant to Seventh Cross-Claim)
Deicorp Pty Ltd (Tenth Cross-Defendant to Fifth Cross-Claim; Cross-Claimant to Sixth Cross-Claim; Third Cross-Defendant to Seventh Cross-Claim)
Combined Projects (Arncliffe) Pty Ltd (Eleventh Cross-Defendant to Fifth Cross-Claim; Ninth Cross-Defendant to Seventh Cross-Claim)
HWL Ebsworth (First Cross-Defendant to Fourth Cross-Claim)
Moustafa Sayour (Second Cross-Defendant to Eighth Cross-Claim)
Matthews Street Pty Ltd (Ninth Cross-Defendant to Fifth Cross-Claim/Second Cross-Defendant to Ninth Cross-Claim)

Arncliffe Proceedings 2017/00180712
Sayour Holdings Pty Ltd atf Sayour 2 Family Trust (Plaintiff; First Cross-Defendant to the Third Cross-Claim)
Combined Projects (Arncliffe) Pty Ltd (First Defendant/Cross-Claimant to First Cross-Claim; Fourth Cross-Defendant to the Third Cross-Claim)
Deiri Nominees Pty Ltd (Second Defendant/Second Cross-Defendant to First Cross-Claim; Cross-Claimants to the Third Cross-Claim)
Fouad Deiri (Third Defendant/First Cross-Defendant to First Cross-Claim; Second Cross-Claimant to the Third Cross-Claim)
Konstructions Pty Ltd (Third Cross-Defendant to First Cross-Claim)
Moustafa Sayour (Second Cross-Defendant to the Third Cross-Claim)
Zapphire Investments Pty Ltd (Fourth Cross-defendant to First Cross-Claim)
Deicorp Properties Pty Ltd (Fifth Defendant to First Cross-Claim)
Deicorp Constructions Pty Ltd (Sixth Cross-defendant to First Cross-Claim; Cross-claimant to Second Cross-Claim)
Yesmine Sayour (Third Cross-Defendant to the Third Cross-Claim)

Representation:

Counsel:
Broadway Plaza proceedings 2016/00282940
NC Hutley SC with CN Bova SC, B Michael, D Reynolds (Plaintiff/First Cross-Defendant to First Cross-Claim/Cross-Defendant to Second Cross-Claim/First, Third and Fourth Cross-Defendants to Fifth Cross-Claim/First Cross-Defendant to Sixth Cross-Claim/Second Cross-Defendant to Seventh Cross-Claim/First Cross-Claimant to Eighth Cross-Claim)
DA Smallbone with JP Gatland (Defendant/Cross-Claimant on First, Second and Fifth Cross-Claims/Cross-Defendant to Third Cross-Claim/Second Cross-Defendant to Eighth Cross-Claim)
MLD Einfeld QC with P Jammy (Second Cross-Defendant to First Cross-Claim/Second Cross-Defendant to Fifth Cross-Claim/Cross-Claimant to Seventh Cross-Claim/Third Cross-Defendant to Eighth Cross-Claim)
TM Faulkner SC (First Cross-Defendant to Fourth Cross-Claim)
V Bedrossian SC with A Smith (Fifth to Eighth and Tenth to Eleventh Cross-Defendants to Fifth Cross-Claim)

Arncliffe proceedings 2017/00180712
DA Smallbone with J Wheeldon (Plaintiff and First Cross-Claimant to First Cross/Claim and Cross-Claimant to Second Cross-Claim/Second and Third Cross-Defendants to Third Cross-Claim)
V Bedrossian SC with A Smith (First Defendant and Fifth and Sixth Cross-Defendants to First Cross-Claim)
NC Hutley SC with CN Bova SC, B Michael and D Reynolds (Second and Third Defendants/First and Second Cross-Defendants to First Cross-Claim/Cross-Claimants to Third Cross-Claim)
J Morris SC (Third Cross-Defendant to First Cross-Claim)
H Woods (Fourth Cross-defendant to First Cross-Claim)

Solicitors:

Broadway Plaza proceedings 2016/00282940
Cornwalls (Plaintiff/First Cross-Defendant to First Cross-Claim/Cross-Defendant to Second Cross-Claim/First Cross-Defendant to Fiftth Cross-Claim/First Cross-Defendant to Sixth Cross-Claim/Second Cross-Defendant to Seventh Cross-Claim/First Cross-Claimant to Eighth Cross-Claim)
Adams Lawyers (Defendant/Cross-Claimant to First,Second and Fifth Cross-Claims/Cross-Defendant to Third Cross-Claim/Second Cross-Defendant to Eighth Cross-Claim)
Russells Sydney Partners (Fourth Cross-Defendant to Fifth Cross-Claim)
Kreisson Legal Pty Ltd (Fifth, Sixth, Seventh, Eighth, Tenth and Eleventh Cross-Defendants to Fifth Cross- Claim)
HWL Ebsworth (Second Cross-Defendant to First Cross-Claim/Second Cross-Defendant to Fifth Cross-Claim)

Arncliffe proceedings 2017/0018072
Adams Lawyers (Plaintiff and Cross-Claimant to First Cross-Claim)
Cornwalls (Second and Third Defendants/First and Second Cross-Defendants to First Cross-Claim/Cross-Claimants to Third Cross-Claim)
Jordan Djundja Lawyers (Third Cross-Defendant to First Cross-Claim)
Hajje Solicitors (Fourth Cross-Defendant to First Cross-Claim)
Construction Legal Pty Ltd (Fifth Cross-Defendant to First Cross-Claim)
Kreisson Legal Pty Ltd (Sixth Cross-Defendant to Fifth Cross-Claim)

File Number(s):

2016/00282940; 2017/00180712

Publication restriction:

Nil

Judgment

1. HER HONOUR: On 14 December 2020, I published my principal judgment in two sets of proceedings that had been heard together (the Broadway Proceeding and the Arncliffe Proceeding) (Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778) (the principal judgment) and stood the matter over for submissions on the final orders to be made. There were then notices of motion filed for the variation of the reasons in the principal judgment and, following a lengthy round of written and oral submissions (including consideration being given by the parties to tax issues not hitherto raised), on 28 October 2021 I published my reasons on those applications and made final orders (Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 2) [2021] NSWSC 1374) (the Orders judgment). However, even then that did not dispose of the matter because various of the parties had foreshadowed (in their submissions as to the final orders) the making of applications for special costs orders (and for gross sum costs orders).

2. On 28 October 2011, I made directions for the filing within a limited timeframe of submissions in relation to such further applications (with a view to those applications being dealt with on the papers). I now turn to those applications (and some further submissions as to amendments to be made to the last set of orders under the “slip rule”).

3. I do not propose here to revisit the background to the disputes between the respective parties (which is amply set out in the principal judgment); nor the findings made in the previous judgments. For ease of reference, I adopt the same definitions and abbreviations as used in the previous judgments.

Slip rule corrections

4. In the Arncliffe Proceeding, by notice of motion dated 4 November 2021, the Sayour Parties seek three corrections (under the slip rule – r 36.17 of the Uniform Civil Procedure Rules (UCPR)) to the orders made on 28 October 2021. Each of those corrections relates to interest.

5. First, as to Arncliffe Order 1, the Sayour Parties note that this order combines in one judgment the two payments made on 3 and 17 April 2018, respectively; and that the ongoing interest specified in the Order (of $81.32 per day) is on the later (lesser) amount. Interest on the 3 April 2018 payment has been omitted. The Sayour Parties say that this can be addressed by replacing “$81.32 per day” in Arncliffe Order 1 with the sum of “$894.52 per day”.

6. Second, the Sayour Parties point out that, although Arncliffe Order 4 gives judgment against Mr Deiri in respect of the payment to Zapphire, a corresponding order against Mr Deiri in respect of the payment to Konstructions was omitted. It is noted that (at [4458] of the principal judgment) I concluded that Mr Deiri was jointly and severally liable for the “Konstructions Fee”. The Sayour Parties say that this omission can be addressed by inserting the proposed Order 2A as set out in their 4 November 2021 notice of motion.

7. Third, that Arncliffe Order 5 (which gives effect to the finding at [4461] of the principal judgment) omits daily interest as from 16 April 2021; and that this can be addressed by adding provision for interest from 16 April 2021 to the date of payment at $595.31 per day.

8. As to the above, there is no opposition by any of the other parties to the above corrections (nor any suggestion that those corrections are not warranted under the slip rule). However, insofar as the proposed additional Order 2A is made in the Arncliffe Proceeding (i.e., against Mr Deiri in respect of the Konstructions Fee), the Deiri Parties submit that Mr Deiri’s liability should be expressed to be joint and several for the same reasons as they submit (see below) that Order 4 in the Arncliffe Proceeding should be amended (i.e., for clarification in order to avoid confusion given the orders for the appointment of a liquidator to Combined Projects Arncliffe), noting the finding made in the principal judgment (at [4458]).

9. As adverted to above, the Deiri Parties also invoke the slip rule in relation to the orders made in the Arncliffe Proceeding (see their notice of motion filed on 5 November 2021), seeking an order amending Arncliffe Order 4 to make clear that Mr Deiri’s liability in respect of the fee paid to Zapphire is joint and several with the liability of Zapphire for that same amount, noting that in the principal reasons I concluded (at [4459]) that in respect of the fee paid to Zapphire “there should be judgment against Zapphire and an order that Mr Deiri is jointly and severally liable for that amount”. As noted above, the Deiri Parties submit that this clarification is particularly warranted to avoid confusion given the orders for the appointment of a liquidator to Combined Projects Arncliffe.

10. Finally, in the Broadway Proceeding, the Deiri Parties point to a slip in Broadway Order 16 noting that (at [869]) I concluded that Plaza should “pay the cross-defendants’ costs of the sixth cross-claim on the ordinary basis” but that Plaza is a cross-defendant to the sixth cross-claim and was substantially unsuccessful. The Deiri Parties consider that it was intended that Plaza pay the costs of the cross-claimant on the sixth cross-claim. I agree.

11. I set out briefly in the Orders judgment (at [28]-[31]) the principles applicable when the slip rule is invoked and do not need here to repeat them. I accept that each of the above corrections is warranted under the slip rule and will make the orders in the Arncliffe Proceeding as sought by the Sayour Parties in their notice of motion dated 4 November 2021 (with the suggested amendment by the Deiri Parties to the additional Order 2A), as well as the amendment sought by the Deiri Parties to Order 16 in the Broadway Proceeding.

Special costs orders

12. I next turn to the special costs orders that have been sought – by CBA and the Sayour Parties, respectively. (In the Orders judgment, I have already addressed and rejected HWLE’s application for indemnity costs.)

CBA – indemnity costs

13. CBA had foreshadowed in its submissions on the final orders to be made that it intended to seek special costs orders. The orders made in the Broadway Proceeding (see the Orders judgment) included an order that Plaza pay CBA’s costs of the first cross-claim. CBA contends that a special costs order (for indemnity costs in favour of CBA) is warranted in light of an offer of settlement made by CBA on 15 November 2019 (see Annexure A to the affidavit sworn 25 March 2021 of its solicitor, Mr Timothy Chan). That offer was made at the end of the first week of the substantive hearing but before any of the principal witnesses had been cross-examined.

14. In that letter, which was marked “Without Prejudice Save as to Costs”, CBA (there rejecting an offer apparently made by Plaza on 13 November 2019 to accept payment in the sum of $8.5 million in order to resolve its claims against CBA in the first and fifth cross-claims) offered to pay Plaza the sum of $750,000 (on a without admissions basis) in full and final settlement of all claims made by Plaza against CBA in the proceedings. That offer was not accepted by Plaza and (as is obvious from the principal judgment) the hearing continued to its conclusion and final judgment.

15. CBA notes that Plaza’s claim against it was for $108,312,859.18, whereas ultimately CBA was ordered to pay Plaza the amount of $8,050.80 (which sum is itself recoverable by CBA from Investments under the seventh cross-claim).

16. The 15 November 2019 letter provided that any settlement of the proceeding as against CBA was “strictly conditional” on all of 7 specified events occurring, and that payment of the settlement amount would be made within 14 days of execution by all parties of the relevant Deeds reflecting those conditions (see below). The offer made was stated to remain open for acceptance in writing until 4pm on 19 November 2019. Since the hearing days between 15 November 2019 and up to 22 November 2019 were subsumed with evidentiary and administrative issues, the offer thus remained open until the substantive commencement of the hearing.

17. The events on which the offer was conditioned were: dismissal of the first, fifth and eighth cross-claims against CBA and dismissal of CBA’s seventh cross-claim, all with no order as to costs; and entry by CBA into an agreed Deed of Settlement and Release (containing CBA’s “usual terms” including mutual releases) with each of Plaza, the cross-defendants to the seventh cross-claim and the cross-claimaints to the eighth cross-claim.

18. As the letter contemplated (insofar as it foreshadowed contacting the cross-defendants to the seventh cross-claim and the cross-claimaints to the eighth cross-claim if Plaza accepted the CBA offer in principle), for a binding agreement for settlement to have been reached on the terms of this offer, it would have been necessary for other parties to the Broadway Proceeding to consent to entry into the anticipated deeds of settlement and release, namely, the cross-defendants to the seventh cross-claim and the cross-claimants to the eighth cross-claim. In particular, as to the latter, it required Investments and Mr Deiri (not parties in Plaza’s camp) to agree to the dismissal with no order as to costs of claims made by them against CBA and to enter into a deed of settlement and release in that regard.

19. As to the factors to be taken into account when assessing whether to make a special costs order for indemnity costs following the rejection of a settlement offer (see Rinehart v Rinehart (No 2) [2020] NSWSC 235 (Rinehart (No 2)) at [142]), CBA says that its offer was genuine and reasonable, pointing out that it was for an amount that was nearly 100 times more than that ultimately awarded against it and that, as it was in full and final settlement of the proceeding, if accepted, it would additionally have saved Plaza a substantial sum (in the order of hundreds of thousands of dollars) in respect of CBA’s costs. Pausing here, there can be no doubt that the offer of settlement was more favourable to Plaza than the ultimate outcome in the Broadway Proceeding even taking into account that there was to be no order as to costs, since Plaza was ordered to pay CBA’s costs, whereas it would not have bourne that liability had it accepted the offer.

13. Although made at a time after the hearing had commenced, CBA points to the fact that it was in response to an offer from Plaza made only two days earlier (to settle Plaza’s claims for $8.5 million) and that there was a period of time after the offer was made (after opening submissions and evidentiary rulings) when the hearing was adjourned before evidence commenced on 22 November 2019, giving Plaza a clear opportunity to consider the merits of the offer. It is also noted that at that stage, the hearing was still due to continue for at least five weeks.

14. CBA contends that in these circumstances a special costs order would recognise “the public policy considerations that underpin the making of favourable costs orders where a Calderbank offer has been made” (citing Rinehart (No 2) at [141], where reference was made to the decision of Beazley JA, as Her Excellency then was, in Commonwealth v Gretton [2008] NSWCA 117 (Commonwealth v Gretton)).

15. CBA says that the costs incurred by it following Plaza’s rejection of its offer were substantial (I interpose to note that although no quantification to those costs has been provided it seems safe to assume from the quantum of costs incurred by other parties that they will not be inconsiderable); and that those will be recovered only in part if no special order is made. Reference is made to the recognition that the purpose of costs awards is primarily compensatory not punitive (citing Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA concurred, in turn citing Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 542) and that the discretion is to be exercised in a manner which is primarily directed to the position of the successful party. CBA says that an award of indemnity costs in the present case would provide it with appropriate compensation (the Sayour Parties cavil with this – see below).

16. As to the conditions to which its offer was subject, CBA submits that these required no more than the resolution of CBA’s involvement in the various cross-claims. CBA says: that the offer would have resolved the claims made (though against it only, it must be said) in the first cross-claim; that, although CBA was a cross-defendant to the fifth cross-claim, no relief was sought against it in that claim; that, in the seventh cross-claim, CBA sought an indemnity from Investments for any amount it was ordered to pay Plaza (but CBA offered to have that cross-claim dismissed); and that, in the eighth cross-claim, Investments sought an indemnity from Plaza for any amounts it was ordered to pay CBA under the seventh cross-claim (which claim would have become academic had the CBA offer been accepted).

17. In circumstances where CBA’s offer was considerably higher than the judgment ultimately obtained against it by Plaza, CBA maintains that Plaza’s rejection of that offer was unreasonable; and it says that Plaza should be ordered to pay its costs on an indemnity basis from the date of the expiry of its offer (namely, 19 November 2019).

18. The Sayour Parties oppose CBA’s application for indemnity costs. They accept that the 15 November 2019 offer was a Calderbank offer but argue that it was not unreasonable for them to reject the offer (noting, and I do not understand this to be contested, that the onus is on CBA to show that it was unreasonable for Plaza not to accept the offer).

19. The Sayour Parties say that the outcome of the case would have been very different (and Plaza would have beaten the offer by a large margin) had the question of law concerning the legal elements of the bribery case been found in favour of Plaza; and that, although CBA was ultimately successful on that point, this was a point which was fairly open for debate on the authorities at the time of the trial (such that they submit that it would not have been reasonable at that time to expect Plaza to capitulate). Insofar as the amount offered was expressed as a lump sum in full and final satisfaction, it is said that it must be taken to have been inclusive of costs; and it is said that in those circumstances the offer was not so generous that it was unreasonable for Plaza not to accept it.

20. Further, the Sayour Parties say that an effect of the offer (by reference to the conditions which included the requirement for the Deiri Parties to discontinue their claims against CBA on the eighth cross-claim – which they say was predicated upon an award against Investments or Mr Deiri on the seventh or fifth cross-claims) was to require the Sayour Parties to capitulate on their claims against the Deiri Parties on the fifth cross claim and that the requirement for a second capitulation against a third party is also a reason why it was not unreasonable for the Sayour Parties not to accept CBA’s offer.

21. The Sayour Parties emphasise that the offer was expressed to be “strictly conditional” on satisfaction of all of the listed seven conditions (and that it was not put on a broader basis that it was open to consideration without strict satisfaction of every condition stipulated). It is noted in this regard that no evidence is led by CBA that could support a contention that all the conditions specified in its offer were likely to have been resolved; rather, the assumption is that the Deiri Parties would have co-operated.

22. The Sayour Parties further say that there is no evidence to support CBA’s submission that the current costs order (which is on the ordinary basis) would not properly compensate CBA for its costs at the hearing. It is submitted that it would be usual that the Sayour Parties’ liability to CBA for costs on the ordinary basis would adequately compensate CBA for its costs and disbursements incurred in the hearing and submissions at trial. In this regard, the Sayour Parties point out that CBA elected to call no witnesses at the hearing (though it had earlier served affidavits of proposed witnesses) and that it adduced no other evidence; instead electing to cross-examine Mr Deiri and Moustafa. Thus, it is contended that there would have been very little cost necessarily incurred after 19 November 2019, other than the appearance fees of counsel and the attendance by an instructing solicitor. The Sayour Parties say that those expenses will be appropriately assessed and appropriately compensated with the current costs order. (That submission, however, does not necessarily take into account costs incurred in matters such as preparation of submissions and the like during the hearing; nor does it take into account the costs incurred in the applications to vary the principal judgment and the submissions and reopening of argument on tax issues in relation to the final orders.)

23. Before dealing with CBA’s indemnity costs application, I turn to the corresponding application made by the Sayour Parties.

Sayour Parties – indemnity costs

31. For their part, the Sayour Parties seek special costs orders against the Deiri Parties, relying on without prejudice offers made by them to the Deiri Parties in the period from 28 November 2019 to 15 December 2019 to resolve the whole of the Broadway and Arncliffe Proceedings on a global basis (i.e., as a global settlement with all parties) by the payment to Plaza of a specified sum (varying in the range from $10 million to $9 million), together with Plaza to be paid the balance of the funds held in the Receiver’s control, and for the transfer to Plaza of the Matthews Street property free of any claim. Relevantly, the offers were made in without prejudice communications by email between Counsel during the course of the hearing (see the annexures to the affidavit affirmed 30 March 2021 of their solicitor, Mr Kenneth Ti). Each of those offers was rejected.

32. The first of the offers relied upon was made at 4.04pm on 28 November 2019. It provided for the payment of $10 million to Plaza and, apart from the other elements referred to above, included as terms of the offer that Sayour Holdings transfer its shares in Combined Projects Arncliffe to Deiri Nominees or its nominee; and that each party pay its own costs. That offer was expressed (in a later email of that day) to lapse when Mr Deiri took his oath at the hearing (which ultimately did not occur until 3 December 2019). The Sayour Parties’ solicitor (Mr Ti) has calculated the value of that offer at $16,509,428.05, subject to costs (see the calculations, and rationale therefor, in Mr Ti’s affidavit affirmed 4 November 2021).

33. On 28 November 2019 at 9.42pm, a counter-offer was made by the Deiri Parties, which in effect replicated the offer made by the Sayour Parties but excluded payment of any lump sum; which counter-offer was expressed to expire at 10am the following morning. That offer was rejected at 7.52am on 29 November 2019, with a further counter-offer (the second offer here relied upon) being made, which reduced the lump sum to be paid to Plaza to $9 million but otherwise was to the same effect; and again was to remain open until Mr Deiri took his oath at the hearing.

34. Mr Ti has calculated the value of the second (29 November 2019) offer at $15,509,428.05 subject to costs (see his 4 November 2021 affidavit).

35. A final offer was made by email at 12.46pm on Sunday, 15 December 2019 (well after Mr Deiri’s cross-examination had concluded); again marked without prejudice and succinctly expressed as being “9.5 million + the fund held by the Receiver + Matthews Street”; but it does not appear that reliance is here being placed on that offer.

36. Pausing here, the funds held by the Receiver were in the order or around $5,249,428.05 (less some $33,000 plus GST for unbilled WIP and unbilled legal fees) (as per an email dated 12 April 2021 sent from the Receiver’s solicitors and annexed to Mr Ti’s 4 November 2021 affidavit) and the Sayour Parties put the estimated value of the Matthews Street property (which was purchased in December 2011 for $531,360.42), as per the annexures to Mr Ti’s 4 November 2021 affidavit, at between $1.22 million and $1.5 million (though on the range set out in those appraisals the highest end appears to be $1.7 million).

37. Mr Ti has calculated the effective outcome of the respective proceedings (assuming that the Sayour Parties’ slip rule applications are successful – as they have been) at $17,456,878.18 subject to costs. In other words, the Sayour Parties have calculated the effective outcome of the respective proceedings as being more favourable to them than either of the two offers referred to above that the Deiri Parties rejected.

38. The Sayour Parties rely upon the making (and rejection) of these offers as altering the incidence of costs in the Broadway Proceeding adversely to Investments and in favour of Plaza from 29 November 2019; and altering the basis of assessment of costs in the Arncliffe Proceeding from 29 November 2019 to the indemnity basis in favour of the Sayour Parties. Further, the Sayour Parties submit that this supplies a basis for Bullock orders (referring to Bullock v London General Omnibus Co [1907] 1 KB 264) against the relevant Deiri Parties in respect of costs ordered to be paid by Plaza or Sayour Holdings in respect of the period from 29 November 2019 (on the basis that a settlement would have avoided those costs from being incurred).

39. The proposed costs orders sought by the Sayour Parties are as follows:

1.   An order that order (4) in the Broadway Proceedings (no. 2016/00282940) made on 28 October, 2021 be amended to read as follows:

(4)   Order Plaza to pay the costs of CBA of the first cross-claim and, in respect of the period up to 28 November, 2019, to pay 50% of the costs of Investments of the first cross claim on the ordinary basis, and that Investments pay the costs of Plaza from 29 November, 2019 of the first cross claim, including the costs that Plaza is ordered to pay to the CBA in respect of that period, on the ordinary basis.

2.   An order that order (8) in the Broadway Proceedings made on 28 October, 2021 be amended to read as follows:

(8)   As to the costs of the second cross-claim, order Plaza to pay 80% of Investments’ costs of the second cross-claim up to 28 November 2019 on the ordinary basis and order Investments to pay Plaza’s costs of the second cross-claim from 29 November 2019 on the ordinary basis.

3.   An order that order (10) in the Broadway Proceedings made on 28 October, 2021 be amended to read as follows:

(10)   Order Plaza to pay 80% of Investments’ costs of the third cross-claim up to 29 November 2019 on the ordinary basis and order Investments to pay Plaza’s costs of the third cross-claim from and after 30 November 2019 on the ordinary basis.

4.   An order that order (14) in the Broadway Proceedings made on 28 October, 2021 be amended to read as follows:

(14)   Order Plaza to pay the cross-defendants’ costs of fifth cross-claim up to 28 November 2019 on the ordinary basis and order Investments to pay Plaza’s costs of the fifth cross-claim from 29 November 2019 on the ordinary basis.

5.   An order that order (16) in the Broadway Proceedings made on 28 October, 2021 be amended to read as follows:

(16)   Order Plaza to pay the cross-defendants’ costs of the sixth cross-claim on the ordinary basis and order Investments to pay Plaza’s costs of the sixth cross-claim from 29 November 2019 (including the costs that Plaza is ordered by this order to pay in respect of that period) on the ordinary basis.

40. The Sayour Parties say that, to avoid the need for other parties to be involved, no Sanderson order (see Sanderson v Blyth Theatre Co [1903] 2 KB 533) is sought.

41. The Deiri Parties, unsurprisingly, oppose the variation of the costs orders sought by the Sayour Parties.

42. At the outset, complaint is made as to the reliance by the Sayour Parties on the without prejudice communications between Counsel in which the relevant settlement offers were made. On this basis the Deiri Parties object to the receipt of Mr Ti’s first affidavit (of 30 March 2021) and its annexures comprising those communications.

43. It is noted that those communications were all marked “without prejudice” and it is said that they gave no indication that they could or would be relied upon for the question of costs. Further, it is noted that the second set of communications in December 2019 was expressly stated to be “counsel to counsel”. Complaint is made that the disclosure to the Court of without prejudice communications between Counsel without consent is inconsistent with r 122 of the Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW) (Barristers Rules). The Deiri Parties say that candid discussions between Counsel would be compromised if they could subsequently be disclosed to the Court in circumstances where no warning of (or consent to) that course was given at the time. It is submitted that the circumstances in which these communications were made and the application of r 122 to them mean that a recipient of the communications could not reasonably have expected the communications would (or could) be relied upon on the question of costs; and hence that the attempt to adduce them is unfairly prejudicial to the Deiri Parties and should be rejected under ss 135 and 136 of the Evidence Act 1995 (NSW).

44. In any event, the Deiri Parties submit that the application by the Sayour Parties for special costs orders should be dismissed for the following reasons.

45. First, the Deiri Parties say that the offers were not Calderbank offers. They maintain that there was nothing in the correspondence with which the offers were enclosed or in the surrounding circumstance to indicate that they would be relied on in relation to the question of costs should a verdict more favourable than the offer be achieved (noting that this is the essence or an essential ingredient of a Calderbank offer – here citing Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188 (Whitney v Dream Developments) at, among others, [42] per Bathurst CJ with whom Beazley P, as Her Excellency then was, McColl JA and Emmett AJA agreed; and [57]; [60] per Barrett JA, with whom Beazley P and McColl JA agreed; and Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd (No 2) [2017] NSWCA 340 (Singapore Airlines v Principle International) at [32]-[40] per Beazley P, Meagher and Payne JJA).

46. Second, that a departure from the rule that costs follow the event, assessed on an indemnity basis, based on the non-acceptance of an offer (as sought by the Sayour Parties in the Arncliffe Proceeding) is warranted only where an offer of compromise was unreasonably rejected (citing In the matters of Earth Civil Australia Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161 at [94]); and, similarly, that where orders are sought for departure from the ordinary rule that costs follow the event, assessed on the ordinary basis, based on non-acceptance of an offer (as the Sayour Parties seek in the Broadway Proceeding), the central consideration is whether or not the non-acceptance was unreasonable.

47. The Deiri Parties contend that the unreasonableness (or otherwise) in rejecting the offer cannot here be evalutated because neither the current value of the Matthews Street property nor what amount Sayour Holdings will ultimately receive from Combined Projects Arncliffe as a 50% shareholder is known.

48. As to the first of those matters, objection is here taken to the printouts from real estate websites included as annexures to Mr Ti’s 4 November 2021 affidavit (which it is said contain opinion from a computer algorithm, not a human, that is inadmissible by reason of s 76 of the Evidence Act 1995 (NSW)). The Deiri Parties point out that no reasoning is disclosed, the facts on which the opinion is based are not identified and have not been proven, and there is no compliance with the expert witness code.

49. As to the second of those matters, it is said that it is not known what tax Combined Projects Arncliffe may pay on the judgment sums; nor what the GST position will be (for which Mr Ti’s affidavit makes no allowance). It is noted that the uncertainty as to the tax and GST issue was one reason why a liquidator was appointed to the company (see the Orders judgment); and that assumptions should not be made about those matters to assess the net outcome of the proceedings (in circumstances where I was not willing to factor into account those matters in the final award that was made in the proceedings). The Deiri Parties say that it may well be the outcome is lower than the lowest offer made by the Sayour Parties, in which case (even if this is by a small margin) no special costs order is warranted (citing Mitar v Mitar (No 2) [2017] NSWSC 1308 at [38] per Robb J).

50. Third, it is noted that the offers made were global offers encompassing both the Broadway Proceeding and the Arncliffe Proceeding. It is said that, in assessing the reasonableness of the offers and whether it was unreasonable to reject them, it is not simply a matter of netting the overall monetary award across both proceedings. The Deiri Parties criticise this as a simplistic approach which ignores the complexity of different factors in each proceeding which might justify compromising one proceeding but not the other. It is noted that: the two proceedings raised different issues; involved a number of different parties and claimants; involved different amounts at stake; and involved different remedial and practical consequences if the relief sought was granted. It is submitted that the two proceedings cannot readily be brought into account for the purposes of assessing a rejected offer.

51. Fourth (and seemingly related to the above), it is said that to find that it was unreasonable for the Deiri Parties not to accept the offers would involve a finding that they should have compromised the Broadway Proceeding (including giving up the prospect of recovering substantial costs) and that such a finding should not be made given that the Deiri Parties largely succeeded in the Broadway Proceeding.

40. Finally, it is noted that the offers were conditional upon resolution of both sets of proceedings with all parties (which included CBA, Konstructions and Zapphire), the prospects and terms of which the Deiri Parties say cannot readily be assessed.

Determination as to special costs orders

53. It is not disputed that there is a broad discretion in relation to costs orders (s 98 of the Civil Procedure Act 2005 (NSW)), which discretion is to be exercised judicially (see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22] per Gaudron and Gummow JJ).

54. In the present case, as noted above, the special costs orders sought by CBA and the Sayour Parties, respectively, are put forward by reference to the non-acceptance of without prejudice settlement offers (the relevant special costs applicants in effect invoking Calderbank principles – see Calderbank v Calderbank [1975] 3 All ER 333) (or simply the inherent jurisdiction as to the making of special costs orders). Whether or not the offer is characterised as a Calderbank offer, strictly so-called, is not determinative of the exercise of discretion (see below).

55. Where a Calderbank offer is unreasonably rejected, and the offeror succeeds in litigation, costs may be made on an indemnity basis at least from the date of the offer or thereabouts. It is accepted that the making of a valid Calderbank offer that is better than the result ultimately obtained at the conclusion of a contested hearing does not automatically result in an indemnity costs order (see Commonwealth v Gretton at [43]), nor does it raise a prima facie presumption that such an order should be made (see SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37]) per Giles JA; Jones v Bradley (No 2) [2003] NSWCA 258 (Jones v Bradley) at [7]-[9]; South Eastern Sydney Area Health Service v King [2006] NSWCA 2 (South Eastern Sydney Area Health Service) at [90]; see also Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519 (Favotto) at [28]; Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197 at [9] per Campbell and Macfarlan JJA and Handley AJA)). As noted above, the party seeking the special costs order bears the onus of demonstrating that the rejection of the offer was “unreasonable” in all the circumstances of the case (see Leichhardt Municipal Council v Green [2004] NSWCA 341 (Leichhardt Municipal Council v Gretton) at [19]; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] per Giles, Ipp and Tobias JJA).

56. In the present case, there is no issue raised as to the CBA offer amounting to a valid Calderbank offer, but there is an issue as to whether the offers relied upon by the Sayour Parties amount to valid Calderbank offers (or can otherwise be relied upon by the Sayour Parties). I will deal with those issues first, before turning to the question whether it was unreasonable for the respective offerees to reject the offers.

Can the Sayour Parties rely on the without prejudice correspondence?

57. The first issue to be considered in this context is as to whether evidence of the without prejudice communications between Counsel for the respective parties is admissible or, if so, whether it should be excluded on the basis that the disclosure of the communications is in breach of r 122 of the Barristers Rules referred to above. The issue arises perhaps most starkly in the December 2019 communications (on which reliance does not seem to be placed) which are headed “without prejudice – counsel to counsel” (a label which must surely have been intended to invoke the privilege from non-disclosure attaching to such communications in the absence of consent thereto; since otherwise it is difficult to see why the words “counsel to counsel” would have been necessary – that being obvious from the identity of the parties to the communication). However, the issue also arises in relation to the November 2019 communications in that they are expressed to be “without prejudice” and there is no express exclusion from the claimed privilege for costs issues (such as would have been the case had the email communications been headed “without prejudice save as to costs”, as the CBA offer was).

58. While it would surely have been well understood by litigation practitioners that the making of without prejudice offers of settlement might later be sought to be relied upon in relation to costs, and while I accept that there is a level of informality in email communications of this kind, I am troubled by the fact that these were email communications between Counsel expressly made on a without prejudice basis and without indication that the party or parties on whose behalf the offers were made was or were seeking to reserve the right to tender the correspondence on a future costs application. In that regard, I accept that the public policy in encouraging settlement of litigation and discouraging wasteful and unreasonable behaviour of litigants (see Leichardt Municipal Council), which underlies both the special costs order regime for offers of compromise and the making of settlement offers in accordance with Calderbank principles, may not be served if barristers (and solicitors, for that matter) are inhibited in their without prejudice exchanges by concern that their client’s position may be disadvantaged thereby.

59. It seems to me that, for this reason, it is necessary for such communications to make clear (if that be the case) that there is an intention (or reservation of right) to rely upon the communications on the issue of costs at a future stage in the proceeding should that become relevant having regard to the outcome of the litigation. I do not suggest that it is necessary for there to be a statement of the kind often found in more formal communication of offers of settlement (to the effect that, if the offer is not accepted, the letter may be tendered in evidence in support of an indemnity costs application (though of course that would put the matter beyond doubt). However, I do think an indication that the communication may be relied upon in relation to the question of costs should be made clear in the correspondence. Had there been such an indication in the present case, that may well have influenced – if not the ultimate response to the offers – at least the tenor of the response (and might have, perhaps, given rise to elaboration of the reasons for rejection of the offers that could have informed the present debate). Simply making the offer “without prejudice” (without reference to costs implications) would be consistent with the communication not being taken to be an admission of liability, for example.

60. Therefore, without entering into debates to whether their use in submissions was consistent with the Barristers Rules, I consider that the email communications on which the Sayour Parties here rely for the special costs orders they now seek should not be admitted into evidence. Lest I be wrong in that conclusion, I will nevertheless proceed to consider what the position would be having regard to those offers had they been received in evidence.

Are the Sayour Parties’ offers valid Calderbank offers?

61. Related to some extent to the first issue considered above, is the question whether the respective offers made by the Sayour Parties are valid Calderbank offers. As noted above, the Deiri Parties here invoke the observations made in Whitney v Dream Developments as to the essence of a Calderbank offer.

62. It will be recalled that in Whitney v Dream Developments, the issue arose in circumstances where an offer of compromise had purportedly been made pursuant to r 20.26 of the UCPR (as it then stood), the offer including a term that the defendant pay the plaintiff’s costs as agreed or assessed. The Court of Appeal held (at [60]) that the primary judge was in error in not following Old v McInnes and Hodgkinson [2011] NSWCA 410 (Old v McInnes) (which held that offers containing a term that the offeree pay the offeror’s costs as agreed or assessed were not offers which complied with r 20.26 of the UCPR because they were not exclusive of costs – see Meagher JA at [105]).

63. After considering, and rejecting, submissions that Old v McInnes was wrongly decided or inconsistent with earlier authority, the Court of Appeal considered the issue raised by a notice of contention, namely whether the (non-compliant) offer of compromise could take effect as a Calderbank offer.

64. Bathurst CJ pointed out (at [42]) that there was nothing in either of the offers to indicate that it was intended to have effect other than as an offer under r 20.26 of the UCPR. (That, of course, is not the issue here, since none of the offers in the present case purported to be an offer of compromise under the regime provided for in r 20.26 of the UCPR.) His Honour went on to say:

42.   … Further, there was nothing in the correspondence with which the offers were enclosed or in the surrounding circumstance to indicate they would be relied on in relation to the question of costs should a verdict more favourable than the offer be achieved. Such an indication, in my opinion, is the essence of a Calderbank offer.

43. That is not to say that the conduct of the parties during litigation, including the making of open offers, may not in certain circumstances be relevant to the appropriate manner in which a court’s discretion as to costs should be exercised. However, an offer made expressly pursuant to r 20.26 will not of itself take effect as a Calderbank offer unless there is something in it or in the surrounding circumstances to indicate that it is proposed to be relied upon on the question of costs, irrespective of its effectiveness as an offer under r 20.26.

44.   In the present case neither the correspondence nor the surrounding circumstances provide any such indication. It follows that the offer cannot take effect as a Calderbank offer.

65. Barrett JA similarily made clear (at [57]-[59]) that what was crucial (in determining whether the offer took effect as a Calderbank offer) was the manifested intention of the offeror. His Honour said that:

57.   An offer is of the Calderbank type only if the maker of it is shown to intend that the fact of its non-acceptance may be deployed as a basis for seeking a special costs order in the event of that party’s ultimate success in the action. Everything therefore depends on the message conveyed by the offer itself and any covering letter or other attendant circumstance.

66. Barrett JA referred (at [60]) to an essential ingredient of a Calderbank offer being an indication (expressly or by implication) of reservation of the right to rely on the offer on the question of costs. Emmett JA (at [76]), referring to the argument made in the notice of contention, also pointed to the significant matter in this regard as being the intention of the offeror as manifested in the relevant offer.

67. In Singapore Airlines v Principle International, the Court of Appeal approached the consideration of whether the offers in question were to be classified as Calderbank offers by reference to the question (adopting the language of Barrett JA in Whitney v Dream Developments) whether the offers conveyed the message that they were to be used as a basis to claim a special costs order (see at [33]-[35]); and held that they did not. Relevantly, the Court went on to say that:

37.   That does not mean that the court may not make a special costs order in the exercise of its discretion. In Old v McInnes Beazley JA considered, at [32], that although a Calderbank offer provided a readily recognisable basis for the court to exercise its costs discretion, the discretion is not confined to offers that are strictly characterised as or stated to be Calderbank offers.

38.   Although Beazley JA dissented in that case, the availability of that approach to costs in an appropriate case was not disavowed in Whitney v Dream Developments. Rather, whether the court will exercise its discretion in a given case depends upon the relevant factual circumstances, including the terms in which offers are made and the message that is conveyed …

68. Thus, whether the offer is indeed to be characterised as a Calderbank offer depends on the message it conveys (expressly or implicitly) as to the intention of the offeror. I have elsewhere considered (and rejected) an argument that, for an offer to be characterised as a Calderbank offer, it is necessary that it expressly identify the costs advantage sought to be achieved (see E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 (E Group (No 2)). The argument which was rejected in E Group (No 2) relied upon Huntsman Chemical Company Australia Pty Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 (Huntsman) (at 249) for the proposition that it was not sufficient merely to state that an offer is made under the Calderbank principles and will be relied upon for the question of costs; rather, that an offeror must make “expressly clear” the costs advantage sought to be achieved if the offer is rejected. As I explained in E Group (No 2) at [70], I do not understand Huntsman to be laying down a rigid or blanket rule in this regard. (Here, of course, there was no reference in the Sayour Parties’ offers to the Calderbank principles at all, let alone to any costs advantage that might be sought from the making of the offer.)

69. In the absence of any reference in the email communications as to costs (other than as a term of the offer); I cannot conclude that the email communications clearly manifested or conveyed the indication that the offer(s) would be relied upon in relation to the question of costs should the ultimate outcome of the proceedings be more favourable than the terms of the offer (even though an experienced litigator might well have suspected that this could be the case). In those circumstances, I am not satisfied that the email communications in question can be relied upon as Calderbank offers (though, as noted above, this does not of itself preclude an exercise of the inherent costs discretion in favour of making indemnity costs orders).

Genuine offers of compromise?

70. For completeness, I note that in order to enliven the discretion to make special costs orders by reference to the rejection of an offer of compromise, it is necessary that the offer in question amounts to a genuine offer of compromise (that was it unreasonable for the party against whom the order is sought not to accept) (see Herningv GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] per Handley, Basten and Beazley JJA, as Her Excellency then was; see also Hancock v Arnold (No 2) [2009] NSWCA 19 at [23] per Ipp, McColl and Basten JJA; Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8] per Basten JA (with whom Santow JA and Young CJ in Eq, as his Honour then was, agreed); Leichhardt Municipal Council at [23] per Santow JA (with whom Bryson JA and Stein AJA agreed)).

71. In the present case, both the CBA offer, on the one hand, and the Sayour Parties’ offers, on the other hand, involve a genuine element of compromise. CBA offered to settle the claims against it for a substantial sum ($750,000). True it is that the claims against it were for vastly more than that amount, but it could hardly be said that the amount offered was derisory (see Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [32] per Spigelman CJ, Beazley JA (as Her Excellency then was) and McColl JA) or that it invited no more than a capitulation or surrender on the part of Plaza. As to the Sayour Parties’ offers, in my opinion they too involved a genuine element of compromise, having regard to the claims made against the Deiri Parties (even if, as the Deiri Parties contend, the value of those offers cannot at this stage readily be compared with the effective outcome of the proceedings).

Was the rejection of the offers unreasonable?

72. Whether rejection of a Calderbank offer (or other offer of settlement) was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances (King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11]). It has been said that a finding of unreasonableness should not be made other than on clear grounds (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113]).

73. The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable (summarised in Favotto at [20]-[30]) include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; 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 (see Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA (with whom McColl and Campbell JJA agreed).

74. Factors that in other cases have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22]); the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192]); the offeror’s case changing after the making of the offer (South Eastern Sydney Area Health Service at [85]); the inclusion of conditions in the offer (Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (unreported, FCAFC, Spender, French and Lee JJ, 29 August 1995); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 242D).

CBA offer made 15 November 2019

75. Turning first to the CBA offer that was made in the present case, and considering the factors referred to above, I note as follows.

76. The offer was made on 15 November 2019, the fifth day of the trial, following a lengthy opening of the case by the Deiri Parties and shorter openings by others. The first of the witnesses was not called until 22 November 2019. Therefore, while it was at a late stage of the Broadway Proceeding overall, the offer was nevertheless made early in the course of the final hearing itself. Moreover, as noted, it followed an offer made two days earlier by Plaza, and hence (perhaps unsurprisingly) there has been no complaint that it was made at too late a stage for its non-acceptance to enliven the special costs principles (although the Sayour Parties do point out that by this time all that was left for CBA – since it chose not to call its available witnesses – was attendance by its representatives in court and the conduct of cross-examination – to which I would add, and submissions).

77. As to the time allowed to consider the offer, it remained open until 19 November 2019 (effectively 4 days, including the weekend). However, it is not suggested that there was insufficient time for consideration of the offer.

78. As to the extent of the compromise offered, I have already noted that I consider the offer constituted a genuine offer of compromise. It was for a not insubstantial sum (albeit only a fraction of the enormous amount sought by Plaza).

79. As to the offeree’s prospects of success assessed at the date of the offer, I accept that there was a reasonably available argument, based on the non-genuine signatures of Moustafa on various documents, as to the bribery allegations made by Plaza.

75. In that regard, it will be recalled that, by the first cross-claim, Plaza sought substantial sums from CBA alleging breach of its mandate and that CBA was liable in respect of payments made pursuant to forged signatures on facility agreements which funded the Broadway Development and cheques drawn on the CBA Partnership Account. There was certainly a reasonable basis to believe that the signatures on at least some of the relevant documents were not genuine signatures of Moustafa (and a live debate as to whether Jamil was authorised under various powers of attorney or otherwise to execute documents on behalf of Moustafa or the relevant corporate entities). Plaza disputed that various drawings on the CBA Partnership Account and on credit facilities were transactions of the Broadway Partnership, and contended that, once those transactions were falsified, CBA was in fact a substantial debtor of the Broadway Partnership. Again, there was a reasonable basis for the contentions that Plaza had raised (albeit that, by the conclusion of the hearing, various categories of drawings were no longer disputed). It is relevant in this regard to note (as Plaza emphasised at the hearing), the partnership winding up context in which Plaza put Investments and CBA to proof in relation to these partnership transactions arose out of a partnership winding-up and orders for account.

76. The fifth cross-claim (in respect of which no relief was sought directly against CBA) was primarily directed against Investments (and against CBA’s assertion of benefit to Plaza), by disputing the existence of a liability to Deicorp (or Deicorp Constructions) under the respective construction contracts; and the claims brought by Plaza against the Deicorp Entities on the fifth cross-claim overlapped significantly with claims brought against other cross-defendants, including Mr Deiri and Deiri Nominees.

77. Relevantly, among the allegations made in the fifth cross-claim, were allegations that certain payments by Investments or by various of the Deicorp Entities to Jamil (the making of which it is alleged was not disclosed to Plaza) constituted bribes and that, by virtue of those bribes (and the alleged non-disclosures), Jamil was induced to act in certain ways to the detriment of Plaza (including, among other things, to place his own signature on cheques drawing funds from the CBA Partnership Account in order to forge Moustafa’s signature on cheques drawing funds from that account). A number of the claims in the fifth cross-claim turned principally upon, and/or were predicated on, the bribery allegations.

78. It cannot be said that the bribery allegations were unarguable. No little space in the principal judgment was devoted to a consideration of the authorities in this regard. That said, it was the consistent stance of the Deicorp Entities, in particular, that Plaza’s approach to the Broadway Proceeding had been to make wide-ranging allegations (which had neither technical nor substantive merit behind them) in seeking reimbursement from Deicorp of the entirety of the moneys paid for the construction of the Broadway Development, notwithstanding that the Broadway Partnership (comprising Plaza and Investments) received more than $70 million worth of construction work from Deicorp (financed, I would add, by CBA).

79. Balancing those aspects of the matter, it seems to me fair to say that there was some unreality to a claim for over $100 million against CBA based on forged or non-genuine signatures on various finance documents, without also taking into account the substantial benefit gained from the finance that had been provided. (I do not here suggest that this is a comprehensive summary of the many and varied issues which arose in the proceeding as a whole. I simply suggest that it would not have been unreasonable to think that, whether or not the bribery allegations were made good, there might need in some way to be an account given for the undoubted benefit that the partnership obtained in the overall completion of the development.)

80. That said, I am of the view that it would not have been unreasonable for Plaza (and the Sayour Parties) to have considered there were reasonable prospects of success on various of the allegations made – though how that would translate in terms of an overall judgment would not have been so clear. I see this as a factor that would warrant careful consideration of any settlement offer made by CBA but, to the extent that the issues raised were complex issues of fact and law, this may tend to it being not unreasonable, at the time the offer was made (particularly when much of the cost of preparation of the proceeding had already been incurred), for the Sayour Parties to continue with the litigation (bearing in mind that the amount offered (though considerable) was nevertheless much less than the amount claimed).

81. As to the clarity with which the terms of the offer were expressed, no complaint is here made; and it seems to me to have been sufficiently clear on its face. True it is that the “usual terms” of the contemplated deeds of settlement and release were not specified, but there is no suggestion that Plaza would have been incapable of seeking elucidation of those terms had it been inclined to accept the offer.

82. As to whether the offer foreshadowed an application for indemnity costs if it were to be rejected, it did not do so expressly. However, it was labelled “Without Prejudice save as to costs”. In the context of modern litigation, I would have thought it would be well understood in the profession that this was foreshadowing a potential costs application if the offer were to be rejected (and the only likely costs application in that event would surely have been an application for indemnity costs). Therefore, I draw nothing from this adverse to CBA’s reliance on the offer.

83. Finally, there is the issue as to whether the offer was capable of acceptance (or, if it was, whether it was unreasonable for Plaza not to accept it) in circumstances where a condition of the offer (of which strict satisfaction was stipulated) involved the dismissal of a third party’s claim against CBA (the eighth cross-claim) and entry by that third party into a deed of settlement and release.

84. Clearly, in its terms, the offer could not have been accepted so as to give rise to a binding agreement offer without satisfaction of the conditions to which it was subject. That much seems to have been acknowledged by the reference in the letter to contacting other parties if the offer was acceptable in principle.

85. To my mind, therein lies the difficulty in concluding that it was unreasonable for Plaza not to accept the offer. The eighth cross-claim, insofar as it was brought against CBA, was predicated on Plaza being successful against the Deiri Parties in the fifth and/or seventh cross-claim. While it might have become academic were the seventh cross-claim by CBA to be dismissed (as the CBA offer contemplated), it is not clear that it would have become academic simply by reason of the dismissal of the fifth cross-claim as against CBA (even though no relief was sought against CBA in that cross-claim) because the prospect of the Deiri Parties having liability under the fifth cross-claim that might have been sought to be sheeted home against CBA by the Dieiri Parties under the eighth cross-claim or otherwise. Therefore I am not persuaded that the Deiri Parties’ consent to the proposed order in relation to the eighth cross-claim could be assumed, and I accept that it would be difficult to say that it was unreasonable for a party to reject an offer that contemplated some form of capitulation by a third party (and entry by that third party into a deed of settlement and release) where that third party was relevantly unconnected to the party to whom the offer of compromise was made.

86. Balancing the above factors, and with some hesitation having regard to the obvious disparity between the amount offered and the amount ultimately recovered (though I accept that this would be looking at the offer with the benefit of hindsight and that reasonableness or unreasonableness of non-acceptance of the offer is tested at the time of its rejection), I have concluded that it was not unreasonable for Plaza not to accept the offer. In that regard, I place most weight on the difficulty that the offer required satisfaction of a condition in relation to a third party.

87. I should add for completeness that I do not accept the proposition that it can be assumed that CBA will be adequately compensated by an order for costs on the ordinary basis. None of the solicitors who have expressed opinions as to the proportionate recovery of costs by a costs assessment process – see below – suggests that there would be recovery of 100% of the costs of the proceeding on an assessment absent an indemnity costs order. Therefore, one must assume that there will be some level of unrecoverable costs incurred by CBA in the conduct of the hearing from 19 November 2019 when the offer expired. In the context of complex litigation with a hearing over a number of weeks and then further applications and submissions upon submissions for some months thereafter, I would readily accept that that shortfall will not be insignificant.

Sayour Parties’ offers

93. Turning last in this context to the Sayour Parties’ offers (and noting that this issue only arises if I be wrong as to the conclusions reached above as to the proposed reliance on these offers), I address the question whether rejection of them was unreasonable by reference to the same factors addressed above in relation to the CBA offer.

94. First, however, as to the complaint made in relation to the manner in which the respective offers have been valued (and the effective outcome of the proceedings assessed), I accept the force of the criticism of the real estate website appraisals (though I do not understand those here to have been adduced as expert evidence). Unlike in the family provision jurisdiction, if value were to be in issue it would need to be established otherwise than by appraisals of this kind. Nevertheless, it is known that the purchase price of the Matthews Street property was around half a million dollars and it was acquired some years ago. It is not unreasonable to assume that the property would have increased in value since then. The precise value of the property need not be determined for present purposes. As to the import of the tax and GST considerations, I have discussed those matters in the Orders judgment. I accept that the precise outcome of the final orders on the tax position of the respective parties is unclear (though it is by no means apparent that the parties had focused on this issue at the time – so that in assessing the reasonableness or otherwise of rejection of the offer I have some difficulty placing weight on the uncertainty of tax/GST issues on which there was apparently no focus at the time). Nevertheless, for the purposes of the following analysis I proceed (without making any concluded findings) on the assumption that the offers made in November 2019, if accepted, would have produced a more favourable outcome for the Deiri Parties than the ultimate judgment.

95. As to the stage of the proceeding at which the offers were made, on 28 and 29 November 2019, respectively, at this point the hearing was well underway; Moustafa had been cross-examined for a number of days; and the time at which Mr Deiri went into the witness box (as it transpired, 3 December 2019) was by then not far off. By this stage, the parties were in a position to assess the way in which the evidence for the Sayour Parties had fallen out. Indeed, conventional wisdom might say that on one view this was the high point of the Deiri Parties’ case (in that the potential, once Mr Deiri was cross-examined, was that his case would not improve from the point at which the Sayour Parties’ case had closed). Whether or not that be the case, it can be noted that this was at an even later stage for the making of an offer than the CBA offer, but still not so late as to tend against the application of the discretion to award indemnity costs jurisdiction.

96. As to the time allowed to consider the offers, it was relatively short but understandably so given the imminent commencement of Mr Deiri’s cross-examination; and the response to the offers itself suggested that the prospects of settlement once Mr Deiri’s cross-examination started was not high. Moreover, by this stage it would be anticipated that all parties were well appraised of the issues in the proceedings and able to form a considered view as to prospects of success at least on the evidence as it had emerged to that stage. Where (as here) one might assume that the parties would have a well-informed view of the issues in dispute and the merits of the case, a short period of time for acceptance of the offer is not to my mind unreasonable.

97. As to the extent of the compromise offered, I have already noted that I consider the offers to have included a genuine element of compromise.

98. As to the offeree’s prospects of success assessed as at the date of the offer, the complexity of the issues in dispute and the intertwining of the respective proceedings in a global settlement are matters that to my mind tend towards a conclusion that it was not unreasonable to reject the offers at that stage.

99. As to the clarity with which the terms of the offers were expressed, there is nothing to suggest that the offers were not clearly understood by the Deiri Parties; and it is relevant in this context that they were made in the course of correspondence that indicates an understanding of the offers.

100. As to whether the offer foreshadowed an application for indemnity costs if rejected, I have dealt with this above.

101. Balancing all of the above, the fact that the offers contemplated a global settlement of both proceedings (and therefore required settlement to be reached with other claimants) makes it difficult to conclude that it was unreasonable for the Deiri Parties to reject the offers. Thus, had the issue arisen I would have concluded that the special costs jurisdiction was not enlivened.

Conclusion as to special costs orders

102. As I have concluded that neither of the applications for indemnity costs has succeeded, no variation to the costs orders made on 28 October 2021 will be made.

Applications for gross sum costs orders

103. As adverted to in various of the closing submissions, some of the parties have sought that their costs be assessed on a gross sum costs basis (in essence to avoid the cost and delay of embarking upon a costs assessment process).

Deicorp, Deicorp Construction and Deicorp Properties submissions

104. In the orders made on 28 October 2021, the following costs orders (all on the ordinary basis) were made in favour of one or more of Deicorp, Deicorp Construction and Deicorp Properties (here referred to collectively as the Deicorp Entities) (see [869] of the Orders judgment) as follows.

105. In the Broadway Proceeding, Plaza was ordered, pursuant to Orders 14 and 16, to pay Deicorp’s costs in respect of the fifth and sixth cross-claims. In the Arncliffe Proceeding, Sayour Holdings was ordered, pursuant to Order 10(v) to pay Deicorp Properties and Deicorp Construction’s costs of the first cross-claim; and pursuant to Order 12, to pay Deicorp Construction’s costs of the second cross-claim.

106. Each of the Deicorp Entities now seeks a gross sum costs order in respect of those costs, having regard to the principles that I summarise in due course below.

107. The Deicorp Entities point to the fact (and this can hardly be disputed) that all parties involved in both sets of proceedings were party to protracted, complex and hard-fought litigation (the Deicorp Entities referring to [1] of the Orders judgment in support of that proposition). The Deicorp Entities note that the Broadway Proceeding was commenced on 21 September 2015 and only concluded on 28 October 2021, some six years after the commencement and in circumstances where there were 28 sitting days for the hearing across both sets of proceedings (see [2] of the Orders judgment). Further, it is noted that there were various interlocutory applications in both sets of proceedings in respect of matters such as subpoenas, security for costs and amendments to pleadings, together with several cross-claims in each of the proceedings.

108. The Deicorp Entities understandably wish to avoid a lengthy, protracted and costly costs assessment process (referring to what was said in Idoport Pty Ltd v National Australia Bank [2005] NSWSC 1273 (Idoport) at [9] per Einstein J). It is submitted (and I agree) that, given the history of the proceedings, it is not unreasonable to suggest that any costs assessment process would similarly be protracted, complex and hard fought, particularly given the quantum of costs. Reference is made to [827] of the Orders judgment in which I observed that there would be a number of factors in this case which would point to the adoption of a gross sum costs regime and that the likelihood of “brief” written submissions being provided on any disputed issue in the proceedings was remote (although I interpose to note that there was pleasing compliance with the limits placed on the submissions for the present applications, so perhaps I was unduly cynical in that earlier observation).

109. In any event, the Deicorp Entities say that, having regard to the history of the proceedings and the time, cost and complexity associated with a conventional cost assessment (including the burden that such applications would place upon a costs assessor), the quantum of costs in respect of the costs orders made in their favour should be fixed by way of a gross sum costs order.

110. In support of their application, the Deicorp Entities relied on a number of affidavits: an affidavit sworn on 5 November 2021 by Mr Matthew Singh, an Associate Director of Kreisson Legal (which acted for the Kreisson Parties as defined in the earlier judgments); affidavits sworn 7 June 2019 and 28 June 2019 (relating to earlier security for costs applications) by Mr David Glinatsis, the Solicitor Director of Kreisson Legal; and an affidavit swon 5 November 2021 by Ms Jessica Rippon, Principal of Construction Legal (who acted for Deicorp Properties).

111. In the 2021 affidavits, evidence is given as to the costs incurred in the proceedings, including a breakdown of Counsel’s fees across the two matters. Among other things, Ms Rippon gives evidence that in her experience, the usual recovery for solicitor costs is about 75% and for disbursements, including Counsel’s fees about 85%.

112. As to the quantum sought, the Deicorp Entities seek the following:

1. the sum of $757,400 on behalf of Deicorp in respect of the fifth and sixth cross-claims in the Broadway Proceeding;

2. the sum of $248,200 on behalf of Deicorp Construction in respect of the first and second cross-claims in the Arncliffe Proceeding; and

3. the sum of $224,000 on behalf of Deicorp Properties in respect of the first cross-claim in the Arncliffe Proceeding.

113. The Deicorp Entities submit that the calculation of the amounts sought is consistent with the “broad brush assessment” approach adopted in Idoport at [82] and that the making of a gross sum costs order would be consistent with s 56 of the Civil Procedure Act. It is noted that the amounts sought by Deicorp and Deicorp Construction allow a 30% reduction in their solicitor costs (but the entirety of disbursements).

114. Further, it is noted that the amounts sought on behalf of Deicorp and Deicorp Construction are less than the total amounts outlined in the affidavits sworn by their solicitor, Mr Glinatsis, on 7 June 2019 and 28 June 2019 in respect of incurred costs and anticipated future costs as at that time.

Deiri Parties’ submissions re gross sum costs orders

115. The Deiri Parties (Investments, Deiri Nominees and Mr Deiri) rely on an affidavit affirmed 5 November 2021 of their solicitor, Mr Matthew Clayton Kennett, and parts of an earlier affidavit sworn by Mr Paul McCann on 7 June 2019 (namely, [5]-[7] as to his experience and [50] as to usual costs recovery). They seek orders that the costs payable to them in the Broadway Proceeding be specified gross sums noting that it is recognised that such a power may appropriately be exercised where a costs assessment would be protracted and expensive; and in circumstances where finality to the litigation is essential and in everyone’s interest.

115. The Deiri Parties submit that the present is an appropriate case for gross sum costs orders, noting (as did the Deicorp Entities) that the Broadway Proceeding has been lengthy and complex; was hard-fought; and ran over several years (with the first cross-claim having been filed on 12 October 2017). It is said that there is likely to be further dispute as to the amount recoverable on assessment. I would not cavil with that assessment of the likely situation.

116. The Deiri Parties’ estimated overall costs in the Broadway Proceeding were approximately $3,887,668.67 (see Mr Kennett’s affidavit at [15] and [34]). It is said that a costs assessment would undoubtedly be protracted and expensive; and that it is not in the interests of the just, quick and cheap resolution of the real issues in dispute (in accordance with s 56 of the Civil Procedure Act) that the parties be embroiled for a year or more in a complex and expensive costs assessment.

117. The Deiri Parties seek the gross sum costs orders set out in their notice of motion dated 5 November 2021 in the Broadway Proceeding:

1. that the amount payable by the Receiver to Investments pursuant to Orders 1 and 2 be $669,831.16;

2. that the amount payable by Plaza to Investments on the first cross-claim (Order 4) be $112,624.30;

3. that the amount payable by Plaza to Investments on the second and third cross-claims (Orders 8 and 10) be $245,666.34; and

4. that the amount payable by Plaza to Investments, Deiri Nominees and Mr Deiri on the fifth cross-claim (Order 14) be $1,640,264.10.

119. Mr Kennett, the Principal at Cornwalls who has had day-to-day carriage of the Broadway Proceeding under supervision of Mr Paul McCann since March 2019 (after Corrs ceased to act for the Deiri Parties), has explained the rationale for these figures in no little detail in his affidavit; and I do not propose here to set them out. Suffice it to note that Mr Kennett has indeed given a comprehensive analysis of the invoices and costs (constrained as he explains by the time available to do so). Corrs’ invoices totalled $879,714.27 to March 2019. Mr Kennett has estimated that the vast bulk of the time since then related to the work in respect of the fifth cross-claim.

120. Mr McCann’s affidavit, sworn in support of the security for costs application, deposes to his experience of taxation of costs as being that approximately 60%-70% of solicitors’ costs would usually be recoverable on the ordinary basis and that a significantly higher proportion of disbursements, including counsel’s fees, would be recoverable. In his June 2019 affidavit, Mr McCann set out the hourly rates for those involved in the matter.

121. The Deiti Parties submit that a broad brush approach is appropriate on the basis that to descend into the level of detail required on an assessment would defeat the purpose of a such an order (citing Idoport at [9]).

HWLE submissions on gross sum costs order

122. HWLE seeks an order for payment of its costs of the fourth cross-claim (which were ordered on the ordinary basis) to be fixed as a gross sum rather than as assessed, relying on the affidavit sworn 4 November 2021 of its solicitor, Mr Alexander Boyd Haslam of Gilchrist Connell lawyers (and Exhibit ABH-2 to that affidavit). At [44] of his affidavit, Mr Haslam deposes to his estimate that approximately 80% of solicitor costs and 100% of disbursements would be recoverable. At [45]ff, Mr Haslam deposes to the “frugality” with which he says the matter was conducted on behalf of HWLE (and I accept that, from my observation, concerted efforts were made to minimise the costs of court attendances during the hearing in this regard).

123. As to the considerations material to the exercise of the discretion, it is noted by HWLE that these principally include the following (see Hamod v New South Wales [2011] NSWCA 375 (Hamod v New South Wales) at [813]-[820] and Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121): the complexity of the proceedings in relation to their cost; whether the assessment of costs would be “protracted and expensive”, whether there is a risk that the unsuccessful party would not be able to meet a liability of the order likely to result from the assessment; and the relative responsibility of the parties for the costs incurred, especially where the costs incurred are disproportionate to the result of the proceedings.

124. HWLE says (and I would accept) that the costs incurred by it are not unexpectedly high in the context of proceedings of this nature. It is submitted that the costs incurred, both in terms of work performed and the rate charged, are reasonable.

125. In particular, it is noted that the Broadway Proceeding involved the substantive claim and nine cross-claims; and that there was also the Arncliffe Proceeding (with, it will be recalled, three cross-claims). HWLE says that a formal assessment of costs process will inevitably be delayed or protracted by the number of parties seeking to assess their costs, particularly where Investments is subject to a number of adverse costs orders.

126. In that regard, HWLE says that it is unclear whether it will have difficulty enforcing a costs order against Investments; and expresses the concern that the number of adverse costs orders made against Investments will adversely impact upon its financial position (and therefore its ability to meet its liability to an order likely to result from an assessment of HWLE’s costs). In such circumstances it is submitted that it would be unjust for HWLE to be required to incur the further time and expense associated with the costs assessment process (particularly in circumstances where the trial judge is familiar with the issues arising in the proceeding and is well placed to resolve the issue as to costs).

127. Further, and accepting the ruling already made in respect of its special costs application, it is said that Investments continued with the fourth cross-claim despite being aware of HWLE’s position that the pleaded causes of action had no reasonable prospects of success due to a limitation defence (here referring to my observations at [4444] of the principal judgment and the recognition that the fourth cross-claim “was instituted for Investments’ protection and in respect of which the limitation issues were apparent from the outset” in the Orders judgment at [797]).

128. HWLE says (and I accept) that it made numerous attempts to lessen their costs of the proceedings and notes that it sought (and obtained) accommodation from the Court to minimise the amount of time for attendance by its legal representatives at the hearing (see the Orders judgment at [839]); but that, nevertheless, HWLE was “dragged into multi-party litigation to cover off a contingency that never arose and, even if it had, would have been subject to an obvious limitation defence that was raised at the outset”.

129. Accordingly, it is submitted that this is an appropriate case for the exercise of discretion to order that HWLE’s costs be payable in a gross sum.

130. It is noted that Mr Haslam’s affidavit (at [39]-[46]) provides detailed information as to the actual costs incurred by HWLE. It is submitted that the likely amount HWLE would be awarded on the ordinary basis if the costs were assessed would be $236,399.84 exclusive of GST. However, HWLE accepts that a “broad brush” approach may be taken to determine an appropriate figure for gross sum costs.

Deiri Parties’ reply submissions re HWLE costs application

131. While the Deiri Parties do not oppose a gross sum costs order in favour of HWLE (at least as I read their submissions), they nevertheless contend that it is in an amount more than should be awarded.

132. The Deiri Parties calculate the estimated recovery as outlined in Mr Haslam’s affidavit of 4 November 2021 at [46] ($236,399.84 plus GST) as reflecting a 90.73% recovery rate across all costs, and 80% for solicitor fees. The Deiri Parties say that this is outside the ordinary range of 60-70% (referring to Mr McCann’s affidavit of 7 June 2019 at [50]). It is said that, applying the higher end of the range of 70%, a more appropriate gross sum would be $182,382.99.

133. Additionally, it is noted that HWLE paid for trial transcripts in the amount of $2,425.09 plus GST (see Ex ABH-2, p 91). The Deiri Parties say that there was a daily transcript paid for by the principal parties, circulated daily; and that HWLE should not recover for this expense.

134. Thus the Deiri Parties submit that a gross sum order of $180,000 plus GST is appropriate.

Sayour Parties’ opposition to gross sum costs orders

135. The Sayour Parties note that the applicants for gross sum costs orders bear the onus and they emphasise the statement by Giles JA in Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (Harrison v Schipp) (at [22]) that:

22.   …The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson at 123; Hadid v Lenfest Communications Inc at [27]). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available ( Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA). [emphasis as per submissions`]

136. The Sayour Parties say that, in the present case, justice would not be done between the parties by the making of gross sum costs orders.

137. First, it is said that fixed costs orders will not determine all costs matters; rather, that there will still be assessment required because the applications do not concern all the costs orders and issues. It is noted that the purpose of a gross sum costs order is to avoid the expense, delay, and aggravation involved in protracted litigation arising out of assessment (Hamod v State of New South Wales at [29], Idoport at [9], Beach Petroleum NL v Johnson (1995) 57 FCR 119 (Beach Petroleum) at 120). The Sayour Parties say that this purpose is not achieved where the aspects that are left out of the gross sum costs order overlap with the issues in the applications.

138. In particular, it is noted that the Sayour Parties have costs orders in their favour also. It is said that assessment will still be required, in which the allocation or apportionment of costs between the matters and orders will arise. The Sayour Parties say that the overlapping issues would thus be dealt with in two forums, on different materials, with the risk of inconsistent decisions. I consider that there is force to this criticism, which I deal with in more detail below.

139. Second, it is said that the evidence supporting the application lacks sufficient detail. Complaint is made that the costs applicants do not clearly identify the components of the costs incurred and how these are calculated. The Sayour Parties say that there cannot be confidence that justice will be done between the parties in these circumstances (referring to Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus [2007] FCA 1878 per Flick J at [26]). In this regard, the Sayour Parties say that the evidence relied on by the costs applicants is incomplete; noting that it is not based on evidence from any independent legal costs assessor (which the Sayour Parties say is accepted as the appropriate evidence to support this kind of application, citing Beach Petroleum; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629 (Charlick); AM Stevens Pty Ltd v Australian Red Cross Society [2002] FCA 91). I accept that the information provided is not as extensive as would be the case on a costs assessment but therein lies the force of the submission to the effect that, to require a quasi costs assessment process, would be to defeat the purpose of a gross sum costs order.

140. Further, the Sayour Parties object to the opinion evidence led from the solicitors in the various supporting affidavits. It is submitted that this evidence does not comply with the expert witness code and that the solicitors are not independent (reference being made to General Trade Industries Pty Ltd (in liq) v AGL Energy Ltd [2020] FCA 1562 (General Trade Industries) at [38]-[40] per Derrington J). The answer to that criticism is that, as I understand it, this is not being put forward as expert evidence, but, rather, as evidence of opinion from experienced solicitors based on their skill, expertise and knowledge in the conduct of litigation in superior courts. Such evidence is readily taken into account on costs applicatiosn of this kind.

141. The Sayour Parties say that one impact of this is that the discounts proposed by those witnesses are likely to be inadequate and unreliable (referring to Norcast S.ár.L v Bradken Ltd [2012] FCA 765 at [23] per Gordon J); General Trade Industries at [44]). Pausing here, having had cause to determine various security for costs applications and costs disputes over the years, my observation would be that the estimates of discounts here put forward are broadly consistent with those I have seen in other cases. In particular, the suggestion that solicitor costs would be recoverable at somewhere around 60%-75% of actual costs would not cause me any surprise – indeed, I can accept that in some cases it might be higher (at the level suggested by HWLE of 80%); and the recoverable rate for disbursements (the most significant component of which is likely to be Counsel fees) I would have put at closer to 85%-90% (indeed for reasonable Counsel fees the proportionate recovery may be highter). In any event, any issue as to the reliability of the estimates I have been given by the range of experienced solicitors in the present case should be solved by the course I propose to adopt in this regard (see below).

142. Complaint is made that the material relied on is vague and deficient (that it is not itemised, encloses estimates and that in many instances just the front page of an invoice). It is submitted that the material is such that it cannot be adequately interrogated (and that it would simply be guesswork). (I note that the Exhibit does not contain variations as to costs in some instances.)

143. The Sayour Parties say (and not surprisingly I have little hesitation in accepting this submission) that the Court should not be required to delve into or undertake a costs assessment process disguised as an application for a fixed sum (though I hasten to add that I do not accept that what the applicants are seeking to do is to have me undertake a disguised costs assessment process as such); and that to do so would be to defeat the real purpose of such an application (citing Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1993] FCA 673 at 5; Idoport at [9]).

144. Third, it is said that the costs are excessive and are claimed without context. The Sayour Parties complain that the fixed costs application attempts to side-step the disproportionate level of representation chosen by Mr Deiri and his entities (a matter of which complaint was consistently made throughout and after the hearing by the Sayour Parties). It is noted that the Sayour Parties were represented by one firm of solicitors, a single lead counsel and two juniors; and that this level of representation was against the representation for the Deiri Parties, Deicorp Parties and all other parties (identifying CBA, Konstructions and Zapphire, though one could also here add HWLE).

145. In particular, it is noted that Mr Deiri and his entities were represented by three firms of solicitors, and up to six counsel at hearing. Insofar as the Deiri Parties reiterated at the hearing that the Sayour Parties were the moving parties in most claims, bearing the evidentiary burden, the Sayour Parties say that it might be expected then that the costs of prosecuting rather than defending those claims would be higher. It is submitted that an assessor will be able to evaluate this difference on material that, in the time available, is not before the Court. It is also said that it is usual for a costs assessor to have the benefit of reference to the opponent’s costs in aid of evaluating the reasonableness of sums incurred, whereas here, there is no such contextual information.

146. I interpose here to note that, as I made clear at the hearing, I consider that there was a reasonable basis on which there was separate representation for the respective entities associated with the Deiri interests. As I noted in the Orders judgment, I considered that any issues as to duplication of costs (for which I agree that the Sayour Parties should not be responsible) should be addressed in the context of the costs assessment process. If I accede to the applications for gross sum costs orders, then I will put in place a process to permit submissions to be made as to duplication of costs or unreasonable levels of representation. However, at a perhaps too simplistic level, it seems to me that the trial judge is best placed to gauge inefficience or duplication of effort arising from the various parties’ levels of representation.

147. Fourth, it is said that the fixing of costs will create unfairness. The Sayour Parties say that they are entitled to a number of significant costs orders about which they seek assessment; and that the fixed costs orders would create an immediate liability while the Sayour Parties would have to await assessment of their costs orders. It is submitted that this, combined with the matters above, would be unfair. Again, that complaint would be met by participation by the Sayour Parties in the gross sum assessement process, rather than resistance thereto.

148. The Sayour Parties rely on an affidavit sworn 11 November 2021 from a specialist costs lawyer and appointed costs assessor, Ms Kerrie-Ann Rosati, the Principal of DG Thompson Pty Ltd trading as DGT Costs Lawyers (an incorporated legal practice which Ms Rosati has deposed specialises in the provision of legal costing services to the legal profession primarily in New South Wales, Queensland, the Australian Capital Territory and all Federal jurisdictions).

149. Ms Rosati has been provided with the notices of motion, affidavits and submissions by the applicants in support of gross-sum costs orders and has deposed that the evidence in the affidavits does not contain sufficient information for her to understand “crucial matters with respect to the costs incurred and claimed as a gross sum” (such as what work was actually performed; which fee earner performed the work; what hourly rates were charged by each of the fee earners; and whether that work was reasonably performed in the circumstances and whether that work was connected to a costs order in favour of the applicants).

150. Ms Rosati has deposed that she is unable to provide any proper assessment as to whether the costs claimed as a gross sum are fair, reasonable and proportionate (and that even if the information identified were provided to her it would take at least four weeks to consider the material and provide a meaningful and detailed response to the applications for gross sum costs orders). Ms Rosati does not comment on the various estimates by the solicitors as to percentage level of recovery of solicitor costs and disbursements (although I would have assumed she was well capable of so doing given her experience).

Determination of gross sum costs applications

151. There is no dispute here as to the power to make a gross sum cost order pursuant to s 98(4)(c) of the Civil Procedure Act; nor as to the relevant principles as to its exercise. The discretion conferred upon the Court is not confined (though it must be exercised judicially as per Oshlack at [22]) and it may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision (see Harrison v Schipp at [21]-[22]).

152. As emphasised by the Sayour Parties, the power should only be exercised when it is considered that this can be done fairly between the parties, (and that includes sufficient confidence in arriving at an appropriate sum on the materials available - see Harrison v Schipp at [22]).

151. The principles relevant to the exercise of the Court’s discretion were stated by Beazley JA, as Her Excellency then was, in Hamod v State of New South Wales (at [813]-[820]), to which reference has already been made.

152. Relevantly, it is recognised that the power conferred by s 98(4)(c) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment (and which may arise from the likely length and complexity of the assessment process - see Beach Petroleum at 120; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; Charlick).

153. The assessment of any lump sum to be awarded must represent a review of the successful party’s costs by reference to: the pleadings and complexity of the issues raised on the pleadings; the interlocutory processes; and the preparation for final hearing and the final hearing (Smoothpool v Pickering [2001] SASC 131).

154. It has been said that the specification of a gross sum is not the result of a process of taxation or assessment of costs but, rather, that the sum is to be fixed by taking a broad-brush approach, having regard to the information before the Court and the exercise will be necessarily be impressionistic. Nevertheless, as noted in Hamod v New South Wales, the approach taken to estimate the costs to be ordered must be logical, fair and reasonable. Reference was made in submissions to the summary of the relevant principles by Sackar J (at [8]-[11]) of WLD Practice Holdings Pty Limited v Sara Stockham [2020] NSWSC 1354.

155. It is also relevant to note that, ordinarily, where a gross sum costs order is made it will be appropriate to apply a discount to reflect the contingencies that may otherwise have arisen on a costs assessment. In Seafolly Pty Ltd v Madden (No 6) [2015] FCA 1369 (at [38]), Tracy J said that:

The discount is intended to take into account, not only of the inevitable reduction in the amount awarded as a result of a taxation on a party/party basis, but also to recognise that no such taxation has occurred and that any estimate of its outcome is just that and that a furher allowance may be necessary in order to ensure fairness to the party against whom the order is made. Both underestimation and overestimation are, to the extent possible, to be avoided.

158. It is perhaps ironic that the Sayour Parties here resist the making of gross sum costs orders whereas, in their submissions before the Orders judgment (as I noted in that judgment at [829]) the Sayour Parties submitted that, in a case where there are many cross-claims and various results between the different claims, it would be difficult on assessment to apportion costs between the different claims; and that this was a case where the appropriate approach, to avoid delay and complication, was to make a broad evaluation of the overall costs to be recovered. At that time, the Sayour Parties submitted that, recognising that Plaza’s cross-claims had had much less than the desired result but nonetheless some substantial success, the appropriate order would be that the Deiri Parties should pay 25% of Plaza’s costs incurred after 30 September 2016 (the date of the winding up order) until 28 November 2019; and in respect of CBA, the Sayour Parties submitted that the same approach be taken, but limited to 25% of Plaza’s costs of the first cross-claim. While I did not accede to those submissions at the time, it is relevant in my opinion that the Sayour Parties have recognised the complexity of the proceedings and that some form of broad evaluation of costs might be appropriate; though they now make no such application.

159. In my opinion, there can be little doubt that this is a case where the discretion to make gross sum costs orders would appropriately be exercised, in that: the two sets of proceedings, involving twelve separate (though some overlapping) cross-claims (and multiple parties), raised complex issues; the litigation was long-running and hard-fought; and the likelihood of expense, delay and aggravation in a contested costs assessment seems to me to be very real. I cannot see that the just, quick and cheap resolution of the real issues in dispute will be served by declining to exercise the gross sum costs discretion (however attractive that might be in order to avoid further court time being occupied by this litigation).

160. Nevertheless, I am acutely conscious of the requirement that there be confidence that the power can be exercised fairly between the parties; and I consider there to be force in the complaints made by the Sayour Parties as to any process that involves overlapping costs disputes being dealt with in two different fora, or which causes delay to some parties but not others. I also consider that the information before the Court is presently incomplete, at least to the extent that the opposing parties (the Sayour Parties) have not put information as to their costs before the Court, and where the Sayour Parties will wish to make submissions as to issues such as reasonableness of costs incurred in the level of representation of the Deiri Parties (and perhaps as to the impact of existing costs orders on interlocutory issues dealt with during the course of the matters).

161. I have concluded that the appropriate way to deal with the issue of costs is for all of the costs orders to be fixed on a gross sum basis (i.e., those in favour of the Sayour Parties as well as those against the Sayour Parties) and for the Court of its own motion (pursuant to r 20.14 of the UCPR) to refer to an independent professional with costs assessment expertise (Ms M Castle of Counsel) (to act as a court appointed referee) any issues on which costs assessment expertise would be of assistance in evaluating, on a broad brush basis, the gross sum costs to be awarded. The costs of that referee should be borne by the parties proportionately to the outcome of the costs awarded in the respective parties’ favour.

162. For that purpose, I will set a timetable for submissions identifying precisely what issues are now said to arise (such as any costs already covered by extant interlocutory orders to avoid overlap or as to duplication of costs or excessive representation or the like); and any submissions as to those issues, together with evidence and evidence as to the costs actually incurred by the Sayour Parties, so that the opposing costs information to which they have referred will then be before the Court. I should here make it clear that this is not intended to be a costs assessment process (disguised or otherwise); rather, it is an attempt to deal expeditiously and fairly with the need to finalise the costs disputes in the one forum and in an even-handed manner between the parties.

163. The one qualification I make to the above is this. I see no reason for HWLE (or, for that matter, CBA) to be embroiled any further in this process. The complaints that the Sayour Parties have raised as to the gross sum costs applications in essence relate to the position of the Deiri Parties and associated entities.

164. As to HWLE, there is evidence before me that in my opinion enables a logical, fair and reasonable approach as to the quantification of the costs to be ordered. I consider that there has been sufficient information put forward as to the actual costs incurred (professional costs of $129,736.50 and disbursements of $132,610.24, totalling $262,347.14) by reference to the material exhibited to Mr Haslam’s affidavit. The charge out rates for fee earners have been disclosed in Mr Haslam’s affidavit and the tax invoices and invoices for disbursements have been exhibited to Mr Haslam’s affidavit. The level of those costs is disproportionate to there being an ongoing dispute as to costs assessment or the like being incurred. Indeed, the costs incurred by HWLE are dwarfed by those estimated to have been incurred by the Deiri Parties (and I would assume also by the Sayour Parties), those being the principal protagonists in the proceedings.

165. The gross sum sought by HWLE ($236,399.83) assumes a 20% discount for professional costs (i.e., an 80% recovery as Mr Haslam has estimated) and no discout for disbursements (i.e., 100% recovery of disbursements, including Counsel’s fees. The range of percentage recovery for professional costs across the solicitors who have deposed to their experience in this regard is from 50-75% (Deicorp Entities); 60-70% (Deiri Parties) and 80% (HWLE). At the upper end of the range those estimates are broadly consistent, the average being 75%. (The difference between them may possibly be explicable by the fact that the solicitors for HWLE were acting on instructions via insurers, who Mr Haslam has deposed are extremely diligent in assessing and challenging tax invoices, such that he considers himself adept at running matters “leanly”.) The range of percentage recovery for disbursements appears to be between 85% and 100% (the average of which is 92.5%).

166. I note the criticism made by the Deiri Parties as to payment for trial transcripts. Since I am not privy to those arrangements I cannot comment on that criticism. However, to the extent that a discount is applied to the proposed gross sum award for any contingencies that might have arisen from a costs assessment process, this would cover the sum of $2,425.09 for the selected days’ transcript, of which complaint is here made.

167. On those figures, and on a broad brush basis, I propose to make a gross sum costs award in favour of HWLE in the amount of $200,000 (being, roughly calculated, 75% of the actual professional costs plus 90% of the disbursements less a 10% discount for contingencies that may have arisen in a costs assessments process; and rounding that figure up to $200,000). I note that this will finally dispose of the proceeding as against HWLE.

168. If CBA now wishes to adduce similar evidence as to its costs, I will make a gross sum costs order in its favour in similar fashion. I will make directions for that to occur. Otherwise, its costs will fall to be assessed on a gross sum basis (as will the Sayour Parties’ and other principal protagonists’ costs) in accordance with the proposed procedure for further evidence as to costs, submissions and referral out.

169. Finally, having regard to the complaints (expressly or impliedly) made as to the time allowed for submissions to date (and the estimate given by Ms Rosati as to her availability over her January break, lest the Sayour Parties need to consult her further) I will allow what I regard to be a more than generous timeframe for final evidence and submissions.

Orders

170. For the reasons above, I make the following orders:

1. In the Arncliffe Proceeding, order pursuant to UCPR 36.17 that:

1. Order 1 made on 28 October 2021 be corrected by replacing the words “$81.32 per day” in the last sentence with the words “$894.52 per day”;

2. Order 4 made on 28 October 2021 be amended to read:

4.   Order that there be judgment for Combined Projects (Arncliffe) Pty Limited against Mr Fouad Deiri in the sum of $9,101,439.11 (calculated as per order 3) plus additional interest from 16 April 2021 to the date of payment at the rate of $887.17 per day, and that such liability be joint and several with the liability of Zapphire Investments Pty Limited in order 3.

3. Order 5 made on 28 October 2021 be corrected by inserting the following words at the end of the order: “plus additional interest from 16 April 2021 to the date of payment at the rate of $595.31 per day”

4. The Orders made on 28 October 2021 be amended by inserting after Order 2 an Order (2A) in the following terms:

2A.   Order that there be judgment for Combined Projects (Arncliffe) Pty Limited against Mr Fouad Deiri in the sum of $9,126,791.31 (calculated as per order 2) plus additional interest from 16 April 2021 to the date of payment at the rate of $889.64 per day, and that such liability be joint and several with the liability of Konstructions Pty Limited in order 2.

2. In the Broadway Proceeding, order pursuant to UCPR 36.17 that Order 16 be amended to replace the words “pay the cross-defendants’ costs of the sixth cross-claim” with the words “pay the costs of the cross-claimant on the sixth cross-claim”.

3. In the Broadway Proceeding, amend Order 12 to add the words “and fixed in a gross sum at $200,000”.

4. Dismiss the application for special costs orders by Commonwealth Bank of Australia Ltd but give leave for it to file by 1 February 2022 an affidavit deposing to the actual costs and disbursements incurred by it (for the purpose of making a gross sum costs order on the papers in its favour).

5. Direct the Sayour Parties to file and serve an affidavit deposing to the actual costs disbursements incurred by them in the respective proceedings by 1 February 2022.

6. Direct the parties to file and serve by 1 March 2022 any further affidavit evidence and submissions in relation to the making of gross sum costs orders in place of all remaining costs orders made on 28 October 2021 (i.e., with the exception of HWLE’s costs and, should it take up the invitation above, those of CBA), with a view to the Court appointing an independent costs assessor as referee to assist the Court’s gross sum costs assessment for the purposes of the Court making final gross sum costs orders in place of the remaining costs orders made on 28 October 2021.

7. Stand over the respective applications for gross sum costs orders by notice of motion dated 5 November 2021 filed by Deicorp, Deicorp Constructions and Deicorp Properties and by notice of motion dated 5 November 2021 by Broadway Plaza Investments Pty Ltd, Deiri Nominees Pty Ltd and Mr Deiri for directions on 2 March 2022 at 9.30am.

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Decision last updated: 30 November 2021