Descon Group Australia Pty Ltd v 35 Merivale Pty Ltd (No 2)

The matter before the Supreme Court of Queensland involved an application for an interlocutory injunction by Descon Group Australia Pty Ltd (Descon) against 35 Merivale Pty Ltd (Merivale). Descon sought to prevent Merivale from calling on security it had provided as part of their building contracts. The application was dismissed by the court. Subsequently, Merivale applied for costs, seeking an indemnity order against Descon for the costs incurred due to the unsuccessful application.

The court considered two primary issues: whether Descon, as the unsuccessful party, should pay Merivale's costs, and if so, whether these costs should be on a standard or indemnity basis. The court noted that the usual rule is that costs follow the event unless there is a reason to depart from it. The court found no reason to deviate from this rule, thus Descon should pay Merivale's costs. The second issue involved whether these costs should be on a standard or indemnity basis. The indemnity basis was sought by Merivale, which argued that Descon's conduct warranted such an order due to several reasons: extending the interlocutory application, the hopelessness of Descon's case, the lack of reasonable basis for allegations of unconscionable conduct, and the non-acceptance of a Calderbank offer.

The court examined each reason provided by Merivale. Regarding the extension of the interlocutory application, the court found that the delay in Merivale enforcing its rights was a consequence of Descon's conduct, but not a basis for indemnity costs. The court disagreed that Descon's case was hopeless, pointing out the complexity of the contractual documents and the legitimate arguments presented. As for the allegations of unconscionable conduct, while true that such allegations were made, the case largely turned on the construction of the contractual documents, which was a legitimate argument. Finally, the Calderbank offer, where Merivale offered to bear its own costs if Descon discontinued its proceedings, was not accepted by Descon.

The court concluded that while some reasons provided by Merivale might justify an indemnity order, the overall conduct of Descon did not warrant such a severe penalty. The court ordered that Descon pay Merivale's costs on the standard basis.