Metricon Homes Pty Ltd as trustee for Metricon Homes Unit Trust v Lipari (No 2)

Case •

[2024] NSWSC 684

•

06 June 2024

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Metricon Homes Pty Ltd as trustee for Metricon Homes Unit Trust v Lipari (No 2) [2024] NSWSC 684
Hearing dates: On the papers; written submissions dated 30 May 2024
Date of orders: 06 June 2024
Decision date: 06 June 2024
Jurisdiction:Equity - Technology and Construction List
Before: Nixon J
Decision:

See [69]

Catchwords:

BUILDING & CONSTRUCTION – damages for rectifying defects – date of assessment of costs of rectification – whether interest payable

INTEREST – interest on outstanding balance of contract price for works – whether claim made for interest at rate specified in contract

COSTS – Calderbank offers made by each party – whether costs incurred after date of any such offer are payable on indemnity basis – general rule that costs follow the event – appropriate that parties bear their own costs

Legislation Cited:

Civil Procedure Act 2005 (NSW), s100

Senior Courts Act 1981 (UK), s 35A

Cases Cited:

Agusta Pty Ltd v Official Trustee in Bankruptcy as Trustee of Estates of Gustavo Ferella and Angelo Ferella [2009] NSWCA 129

Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873

Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 583

BHPB Freight Pty Ltd v Costco Oceania Chartering Pty Ltd (No 4) [2009] FCA 1448

Bull v Lee (No 2) [2009] NSWCA 362

Calderbank v Calderbank [1975] 3 All ER 333

Commonwealth of Australia v Gretton [2008] NSWCA 117

Despot v Registrar-General of NSW (No 2) [2013] NSWCA 332

Donnelly v Edelstein (1994) 49 FCR 384

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

Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322

French v Bremner [2020] NSWCA 339

Handberg v Smarter Way (Aust) Pty Ltd [2002] FCA 469

Insurance Australia Ltd trading as CGU Insurance v MOS Beverages Pty Ltd (No 2) [2021] FCAFC 192

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

Krishell Pty Ltd v Nilant (2006) 32 WAR 540

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

Rolls-Royce Holdings plc v Goodrich Corporation [2023] EWHC 2002 (Comm)

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

Tonna v Mendonca (No 2) [2020] NSWSC 306

Category:Costs
Parties: Metricon Homes Pty Ltd as trustee for Metricon Homes Unit Trust (Plaintiff/ First Cross-Defendant on First Cross-Claim/ Cross-Claimant on Second Cross-Claim)
Antonia Lipari (Defendant/ Cross-Claimant on First Cross-Claim)
Rafeletos Zanuttini Pty Ltd (Second Cross-Defendant on First Cross-Claim, Cross-Defendant on Second Cross-Claim)
Representation:

Counsel:
D Hume (Plaintiff/ First Cross-Defendant on First Cross Claim/ Cross-Claimant on Second Cross-Claim)
J O’Connor with D Thomas (Defendant/ Cross-Claimant on First Cross-Claim)
B Le Plastrier (Second Cross-Defendant on First Cross-Claim, Cross-Defendant on Second Cross-Claim)

Solicitors:
Salim Rutherford Lawyers (Plaintiff/ First Cross-Defendant on First Cross-Claim/ Cross-Claimant on Second Cross-Claim)
Barrak Lawyers (Defendant/ Cross-Claimant on First Cross-Claim)
Colin Biggers & Paisley Pty Ltd (Second Cross-Defendant on First Cross-Claim, Cross-Defendant on Second Cross-Claim)
File Number(s): 2021/95090
Publication restriction: Nil

JUDGMENT

  1. On 16 May 2024, I handed down my reasons for judgment in this matter: Metricon Homes Pty Ltd as trustee for Metricon Homes Unit Trust v Lipari [2024] NSWSC 566 (principal judgment). At that time, I indicated that the parties should confer about the form of final orders having regard to those reasons, including (if such matters could be agreed) in respect of interest and costs.

  2. On 30 May 2024, the parties informed the Court that they were unable to agree on the form of final orders. The parties exchanged submissions and their proposed orders, together with supporting evidence. The three main issues remaining for determination are as follows:

  1. the form of final orders to dispose of the claims in the proceedings, including regarding interest and set-off;

  2. whether there is, by reason of any of the Calderbank offers served by the parties, a basis for the award of indemnity costs in favour of any party from the date of such offer; and

  3. otherwise, what orders should be made as to the costs of the proceedings.

  1. This judgment assumes familiarity with the terms of the principal judgment and adopts defined terms used in that judgment.

Form of Final Orders

Competing positions

  1. Metricon’s position (which Zanuttini supports) is, in brief, that:

  1. Metricon is entitled to interest on the outstanding balance of the contract price, from the date when the final account was sent to her (28 May 2018) up to judgment, at the contractual rate of 12% per annum (resulting in Metricon being entitled, as at 30 May 2024, to judgment in the amount of $159,758.35 against Mrs Lipari in respect of its contractual claim);

  2. Mrs Lipari is entitled to interest on damages in respect of the concrete slab at the applicable Court rates from 23 May 2018 up to judgment (resulting in Mrs Lipari being entitled, as at 30 May 2024, to judgment in the amount of $73,100.11 against Metricon and Zanuttini on account of defects in the concrete slab); and

  3. Mrs Lipari is not entitled to interest on damages in respect of general defects, as these were assessed as at the date of trial (resulting in Mrs Lipari being entitled, as at 30 May 2024, to judgment in the amount of $54,845.00 against Metricon on account of general defects).

  1. Metricon submits that if Mrs Lipari elects to set off Metricon’s liability to her in respect of the slab and general defects (see paragraphs (2) and (3) above) against her liability to Metricon under the Contract (see paragraph (1) above), a net amount of $31,813.24 is payable by her to Metricon. Further, Metricon is entitled to judgment against Zanuttini for the amount of their joint liability to Mrs Lipari in respect of the concrete slab ($73,100.11), since this liability will have been fully discharged by the set-off, and Metricon is entitled to be indemnified by Zanuttini in respect of this liability (see principal judgment, [204]).

  2. Metricon submits that, alternatively, if Mrs Lipari elects to set off only Metricon’s liability to her for general defects against her liability to Metricon under the Contract, a net amount of $104,913.35 is payable by her to Metricon. Further, in those circumstances, Zanuttini will be liable to Mrs Lipari for the full amount of the liability in respect of the concrete slab ($73,100.11). The net result for Mrs Lipari under this alternative will be that she pays $31,813.24 more to Metricon than she receives from Zanuttini.

  3. That is, under either alternative (leaving to one side any issue of post-judgment interest), the economic outcome is the same.

  4. Mrs Lipari’s position is that:

  1. Metricon’s claim for interest on the outstanding balance of the Contract price should be rejected, such that Metricon is entitled, as at 30 May 2024, to a judgment in the amount of $93,257.10 against Mrs Lipari in respect of its contractual claim;

  2. Mrs Lipari is entitled to interest on damages in respect of the concrete slab at the applicable Court rates from 23 May 2018 up to judgment (resulting in Mrs Lipari being entitled, as at 30 May 2024, to judgment in the amount of $73,100.11 against Metricon and Zanuttini on account of defects in the concrete slab); and

  3. Mrs Lipari is entitled to interest on damages in respect of general defects at the applicable Court rates from 23 May 2018 up to judgment (resulting in Mrs Lipari being entitled, as at 30 May 2024, to judgment in the amount of $72,867.08 against Metricon on account of general defects).

  1. In her proposed form of orders, Mrs Lipari has elected to set off Metricon’s liability to her in respect of the slab and general defects (see paragraphs (2) and (3) above) against her liability to Metricon under the Contract (see paragraph (1) above), with the result that, first, a net amount of $52,710.09 is payable by Metricon to Mrs Lipari; and secondly, Zanuttini is liable to pay Metricon the amount of the judgment sum in respect of the concrete slab ($73,100.11).

  2. Given those competing positions, the issues which need to be resolved are as follows:

  1. first, whether Metricon is entitled to interest on the outstanding balance of the contractual price at the contractual rate of 12% per annum;

  2. secondly, whether Mrs Lipari is entitled to interest at Court rates on the sum which has been assessed for general defects; and

  3. thirdly, given Mrs Lipari’s election in respect of set-off, what orders should therefore be made.

Is Metricon entitled to interest on the outstanding balance of the contract price?

  1. The principal judgment set out (at [18]-[19]) the relevant contractual provisions relating to the payment of interest.

  2. Mrs Lipari submits that Metricon’s Amended Summons claims “Interest” (at prayer 3); that this should be read as a claim for interest pursuant to section 100 of the Civil Procedure Act (NSW); that Metricon does not advance a claim for interest pursuant to the Contract; and that in “failing to plead a contractual right to interest, at common law Metricon is precluded from being awarded interest on the sum awarded against Mrs Lipari” (citing Rolls-Royce Holdings PLC v Goodrich Corp and other companies [2023] EWHC 2002 (Comm)).

  3. In Rolls-Royce v Goodrich, Goodrich sought pre-judgment interest on a sum which had been awarded as due under a contract. Foxton J held that Goodrich had not pleaded any contractual right to interest, and therefore could not claim such interest. Further, section 35A of the Senior Courts Act 1981 (UK) prevented any award of interest at court rates “for a period during which, for whatever reason, interest on the debt already runs”. Having regard to that provision, Foxton J held that, since interest was already running on the debt pursuant to the terms of the contract (even though such interest was not claimed), interest could not be awarded at court rates. Foxton J stated (at [26]) that: “I have not reached this conclusion with any degree of enthusiasm, and do not find it particularly satisfying”.

  4. Section 100(3)(b) of the Civil Procedure Act provides that s 100 “does not authorise the giving of interest on a debt in respect of any period for which interest is payable as of right, whether by virtue of an agreement or otherwise”. It has been held that this provision means that the Court may not award interest at Court rates where a claim for interest is available at a contractual rate, in cases both where the contractual rate is higher or lower than the Court rates: see, for example, French v Bremner [2020] NSWCA 339 at [69] per Leeming JA (with whom Meagher and White JJA agreed), citing Agusta Pty Ltd v Official Trustee in Bankruptcy as Trustee of Estates of Gustavo Ferella and Angelo Ferella [2009] NSWCA 129 at [39]-[44]; Bull v Lee (No 2) [2009] NSWCA 362 at [28]-[29]; and Despot v Registrar-General of NSW (No 2) [2013] NSWCA 332 at [4]. I was not referred to any case where a Court has applied section 100(3)(b) in a similar manner to that in which Foxton J applied s 35A of the Senior Courts Act 1981, so as to deny any claim for interest where a contractual provision could have been, but was not, pleaded.

  5. In any case, the reasoning in the Rolls-Royce decision is not applicable here. I do not consider that by claiming “Interest” in the Amended Summons, Metricon elected to advance a claim for interest under section 100 of the Civil Procedure Act to the exclusion of a claim for interest at the contractual rate. Metricon specifically pleaded in its Technology and Construction List Statement that the terms of the Contract included the following provision:

“The Plaintiff was to charge the Defendant interest at the rate of 12% from the day on which an amount falls due to be paid to the Plaintiff up to and including the date that amount is paid.

Particulars

Clause 33 of the Contract.”

  1. Further, Metricon pleaded that Mrs Lipari had failed to make payment in accordance with the final progress claim of 23 May 2018, which specifically stated that there was an obligation to pay interest on any unpaid amount at the rate specified in the Contract (see principal judgment, [22]). Metricon pleaded that it had “suffered loss and damage being the monies due and payable under the Contract”, and particularised this claim by reference to the terms of the final payment claim.

  2. In addition, Metricon opened its claim on the basis that it had an entitlement to, and was seeking, interest at the contractual rate of 12% per annum up to judgment. In response, Mrs Lipari did not advance any submission that this was outside the pleaded case (and it plainly was not).

  3. For those reasons, I am satisfied that Metricon claimed, and is entitled to, interest on any unpaid balance at the contractual rate of 12% per annum from 28 May 2018 up to judgment.

Is Mrs Lipari entitled to interest on the judgment sum for general defects?

  1. Mrs Lipari claimed interest on the amount awarded against Metricon on account of general defects, from 23 May 2018 up to judgment. The claim for interest was made pursuant to section 100(1) of the Civil Procedure Act, which gives the Court a discretion to “include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit” on the whole or part of the money, and for the whole of part of the period from when the cause of action arose until the date when judgment takes effect.

  2. In response, Metricon submitted, and I agree, that the difficulty with Mrs Lipari’s claim for interest is that the quantum of damages on account of general defects has been calculated based on Mr Camenzuli’s estimates of the cost, as at the date of trial, of rectifying those defects.

  3. During the lengthy history of this proceeding, Mr Camenzuli’s estimates of the costs of rectifying those defects were updated over time, in order to reflect cost increases in the intervening period. For example, in a report of 1 December 2020, Mr Camenzuli stated that the labour rates adopted for all work undertaken in his estimates was $61.25 per hour for tradesmen. In contrast, in the Joint Report which Mr Camenzuli prepared with Mr Winton dated 8 June 2023, Mr Camenzuli adopted rates of $90 per hour for tradesmen. This represents an increase of around 47% in labour costs in the intervening period.

  4. Mrs Lipari could have chosen to, but did not, put forward an estimate of the costs of rectifying the general defects as at the date of practical completion. Instead, she put forward an estimate of the costs of rectifying defects as at the date of trial, and in the process of so doing took into account increases in costs of goods and services since practical completion. This resulted in significant increases for individual items. For example, Mr Camenzuli’s estimate of the costs of rectifying the first of the general defects (being the failure to secure the roof tiles) increased from $10,381.50 as at December 2020 to $16,020 as at June 2023, representing an increase of more than 54%. In those circumstances, I do not consider it appropriate for there to be any award of interest on the damages for general defects for the period from 23 May 2018 to the date of judgment.

Set-off

  1. For the reasons set out above, the position as at 30 May 2024, before any set-off, is as follows:

  1. Metricon is entitled to judgment against Mrs Lipari for the unpaid balance of the Contract price, plus interest at contractual rates, in the amount of $159,758.35;

  2. Mrs Lipari is entitled to judgment against Metricon and Zanuttini on account of defects in the concrete slab, together with interest at Court rates, in the amount of $73,100.11; and

  3. Mrs Lipari is entitled to damages for the costs of rectifying general defects in the amount of $54,845.00.

  1. Each party’s proposed orders envisage that set-off will take effect as at the date of final orders. In circumstances where the parties have each advanced calculations as at 30 May 2024; where final orders are being made shortly after that date; where each party has a liability which will have incurred interest between 30 May 2024 and the date of final orders (in amounts which differ, but to a relatively trivial degree); and where I have not been provided with any figures for the amount of interest accruing on a daily basis, I propose to make final orders as at today’s date based on the figures provided by the parties as at 30 May 2024. I note that each of the parties provided orders that proceeded on the basis that the figures as at 30 May 2024 would be used.

  2. Mrs Lipari has elected, in her proposed orders, to set off both Metricon’s liability to her on account of general defects and Metricon’s and Zanuttini’s joint liability to her on account of defects in the slab (totalling $127,945.11) against her liability to Metricon under the Contract for $159,758.35. By exercising this right of set-off, Mrs Lipari’s entitlement in respect of the concrete slab is discharged as against both Metricon and Zanuttini: Handberg v Smarter Way (Aust) Pty Ltd [2002] FCA 469 at [34]-[37] per Kenny J; Krishell Pty Ltd v Nilant (2006) 32 WAR 540 at [84]-[85]; [2006] WASCA 223 per Buss JA.

  3. The result will be, after set-off, a judgment for Metricon against Mrs Lipari for $31,813.24, and a judgment for Metricon against Zanuttini for $73,100.11 (being the amount of their joint liability on account of defects in the slab, which Metricon has met in full by way of the set-off).

Calderbank Offers

  1. Each party sought costs on an indemnity basis, by reason of the respective Calderbank offers which each had served. Those offers were as follows:

  1. an offer of a “walk away deal” made by Mrs Lipari to Metricon, by a letter dated 13 July 2018;

  2. an offer made by Metricon to Mrs Lipari, by a letter dated 1 March 2024, to settle all claims between them on the basis that Metricon would pay $250,000 to Mrs Lipari, and Mrs Lipari would indemnify Metricon against any claims by Zanuttini arising from the slab; and

  3. an offer made by Metricon and Zanuttini to Mrs Lipari, by a letter dated 5 April 2024, to settle all claims in the proceedings on the basis that Metricon and Zanuttini would pay, between them, an amount of $400,000 to Mrs Lipari, with all claims and cross-claims being dismissed with no order as to costs.

  1. The rejection of an informal offer of compromise does not give rise to a presumption that the offeree should pay the offeror’s costs on an indemnity basis: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]. Instead, the question is whether the rejection of the offer, in all the circumstances, justifies departure from the usual rule that party-party costs follow the event: SMEC Testing Services v Campbelltown City Council at [37] per Giles JA; Insurance Australia Ltd trading as CGU Insurance v MOS Beverages Pty Ltd (No 2) [2021] FCAFC 192 at [17] per Besanko and McKerracher JJ. The party seeking indemnity costs on the basis of such an offer must show that it was a genuine offer, which was capable of acceptance, and that it was unreasonable for the offeree not to accept it: E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 at [61] per Ward CJ in Eq.

Mrs Lipari’s offer

  1. Mrs Lipari’s offer may be briefly addressed. It was made by a letter sent by her solicitors to Metricon on 13 July 2018, prior to her taking possession of the house. At that time, no claim was advanced against Metricon in respect of defects. Instead, the only claim advanced by Mrs Lipari in this correspondence was that “the house as constructed by you is wrongly located”. This claim was plainly flawed in circumstances where the house was located on the Property in accordance with Variation 9, which was signed by Mrs Lipari, and in accordance with the Stamped Plans, which had been reviewed and approved by her (see principal judgment, [294]-[299]).

  1. Against the background of that claim, Mrs Lipari’s solicitor referred to Metricon’s claim for the unpaid balance of the Contract price, and made the following offer:

“our client is prepared to take possession of the house and to enter into a Deed of Settlement with you releasing you from liability for the above breach of contract / negligence and resultant damages on the basis of a walk away deal.”

  1. That is, Mrs Lipari proposed that Metricon give up its claim for the unpaid balance of the Contract price plus interest, in return for Mrs Lipari giving up her claim for damages in respect of the house being “wrongly located”.

  2. This offer did not involve Mrs Lipari giving up any claim in respect of defects. Further, Mrs Lipari has not achieved a result in the case better than the offer which she made, and has instead achieved a result where the balance due to Metricon has been reduced, but not eliminated, by her claim for defects.

  3. In those circumstances, the 13 July 2018 offer does not provide a basis for an award of indemnity costs in Mrs Lipari’s favour.

Metricon’s offer of 1 March 2024

  1. Metricon’s offer of 1 March 2024 referred to each of the claims made in the proceedings and summarised Metricon’s view regarding the current state of the evidence in relation to those claims. It then made the following offer in full and final settlement of all issues and claims as between Metricon and Mrs Lipari:

“(a)    Our client will discontinue its proceedings against your client with no order as to costs. That is, our client will forego the sum of approximately $157,857.45 plus costs;

(b)    Our client will pay your client the sum of $250,000 (inclusive of GST if applicable);

(c)    Your client will discontinue the proceedings against our client with no order as to costs. That is, our client will forego approximately $350,000 incurred in legal costs in this matter;

(d)    The parties enter into a deed of settlement and release reflecting the above terms and which shall include the following terms:

(i)    mutual releases between our respective clients;

(ii)    if your client wishes to continue pursuing her claim against Rafeletos Zannutini, your client shall indemnify our client and keep our client indemnified against any and all claims by Rafeletos Zanuttini arising from, or in connection with the Property or the slab”

  1. The letter provided the following explanation in relation to the proposed indemnity:

“The point of the indemnity would be to ensure that, if your client is successful against Rafeletos Zanuttini and recovers money from it, and Rafeletos Zanuttini then recovers from Metricon in contribution, then our client should be able to recover from your client. The effect is that Metricon no longer has financial exposure to the litigation, and your client would not be able to recover a net amount from Rafeletos Zanuttini in circumstances if the real exposure lies with Metricon. Of course, if your client settles with Rafeletos Zanuttini as well, this issue would go away.”

  1. This offer was said to remain open for a period of 14 days, until 15 March 2024, and was stated to be “made without prejudice, save as to costs, in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333 and Cutts v Head [1984] Ch 290”.

  2. Metricon submitted that it was entitled to indemnity costs from the date of the letter, or alternatively from the date that the offer in the letter closed, on the basis that “Metricon has done better, indeed substantially better, than the offer” and “[s]ignificant cost (and Court time) could have been avoided if that offer had been accepted”.

  3. Mrs Lipari submitted that it was not unreasonable for her not to accept Metricon’s offer for three reasons.

  4. First, acceptance of the offer would not have resolved the whole of the proceedings, but would have left Mrs Lipari’s claim against Zanuttini on foot, with Mrs Lipari being required to indemnify Metricon for any claim made against Zanuttini arising from the slab. Mrs Lipari submitted that to accept the offer “was to accept terms outside the scope of Mrs Lipari’s control and which expose her to potential undefined liability that is unclear, imprecise and unknown” (citing BHPB Freight Pty Ltd v Costco Oceania Chartering Pty Ltd (No 4) [2009] FCA 1448 at [13] per Finkelstein J). Mrs Lipari also submitted that it was not unreasonable “to reject a Calderbank offer that raised considerations as to a different party (Zanuttini) and not the party making the offer (Metricon)”, citing Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 583 at [73] per Einstein J.

  5. Secondly, Mrs Lipari submitted that, as at 1 March 2024, her costs “greatly exceeded” the amount of the 1 March offer, “meaning that acceptance would not have resulted in a net positive for Mrs Lipari”.

  6. Thirdly, Mrs Lipari submitted that “the offer was made too close to the hearing to be reasonable for acceptance”.

  7. The last of these matters may be dealt with briefly. It is not uncommon for offers to be made close to a hearing. The proximity of the trial does not, of itself, make the rejection of any such offer reasonable. Here, the offer was made some five weeks before the hearing, and was open for a period of two weeks thereafter. Offers made at such a stage allow an assessment of the strength of the parties’ respective cases on the basis of all of the available evidence, which may not have been possible at an earlier point in time (or at least not possible to the same level of detail).

  8. Further, although Mrs Lipari’s costs may have, as at the date of the offer, exceeded the amount of $250,000 which Metricon offered to pay (although there is no evidence to that effect), it does not follow that it was reasonable to reject the offer. The offer did not require the capitulation of Mrs Lipari. Instead, it proposed that a substantial payment be made to her. When account is taken, as it must be, of the outstanding balance of the Contract price which Metricon was proposing to forego, the benefit to Mrs Lipari would have been in excess of $400,000. There is no evidence, or submission, that Mrs Lipari’s costs of her claims against Metricon exceeded this figure at the date of the offer. Further, it was proposed that Mrs Lipari’s claims against Zanuttini in respect of the concrete slab would remain on foot.

  9. However, I accept that the terms of the proposed indemnity meant that it was difficult for Mrs Lipari to assess the effect of the offer. There was no limit on the quantum of the proposed indemnity. One possible outcome, if Mrs Lipari accepted the offer and continued (and was successful in) her claim against Zanuttini for rectification costs in respect of the concrete slab on a knock-down/rebuild basis (those costs being claimed to amount to $815,000) was that Zanuttini would pursue Metricon for contribution to that liability. It would have been difficult for Mrs Lipari to assess the level of any award for contribution, and there was a risk that the amount of any such contribution, together with the costs of that contribution claim, might significantly exceed the amount paid by Metricon to Mrs Lipari.

  10. Mrs Lipari, if she accepted the offer, would have therefore been left in a position where claims had been resolved with Metricon, but the proceedings would remain on foot against Zanuttini, with the prospect of Metricon being brought back into those proceedings, or pursued in subsequent proceedings, and Mrs Lipari facing a liability of uncertain extent in respect of any such claim.

  11. In those circumstances, I do not consider it was unreasonable for Mrs Lipari to reject the offer of 1 March 2024.

Joint Metricon and Zanuttini Offer of 5 April 2024

  1. The joint offer of Metricon and Zanuttini was made on the last business day before the hearing (Friday, 5 April 2024) and was only open until 9:00am on the first day of the hearing (Monday, 8 April 2024).

  2. The offer involved, in summary, the following elements:

  1. Payment of $150,000 by Zanuttini to Mrs Lipari within 28 days of the exchange a deed of settlement and release;

  2. Payment of $250,000 by Metricon to Mrs Lipari within 28 days of the exchange of a deed of settlement and release; and

  3. “Acceptance of the offer will be the subject of a deed of settlement and release”, including terms providing for mutual releases and for consent orders to be signed providing for the dismissal of all claims and cross-claims with no order as to costs.

  1. Although it is plain that Mrs Lipari would have fared much better if she had accepted the offer, it does not follow that it was unreasonable for her not to accept it. As Mrs Lipari submitted, a factor relevant to whether her non-acceptance of the offer was unreasonable includes whether she had an adequate opportunity to consider and deal with the offer: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99] per McColl JA, referring to Donnelly v Edelstein (1994) 49 FCR 384 at 396.

  2. The adequacy of the opportunity to consider the offer must be assessed not only in light of the period for which it was open for acceptance, but also the surrounding circumstances. In the present case, it is notable that the 5 April 2024 letter, in explaining why the offer should be accepted, placed particular reliance on a report of Mr Keighran and Mr Hartcher which had been served on the previous day (4 April 2024). For example, the letter stated as follows:

“Further, Mr Camenzuli has alleged that due to the foundation slab not fully complying with AS 2870 and the NCC for a Class H1 slab design, the slab’s capacity to resist ground movement, flexure, and “shrink and swell” strains, and the slab’s life expectancy, is reduced. As you will see from the joint expert report of Mr Hartcher and Mr Keighran dated 4 April 2024, this is refuted.”

  1. On the first morning of the hearing, Mrs Lipari argued that Metricon and Zanuttini should not be permitted to rely on this further report. Counsel for Mrs Lipari submitted that this report introduced new matters in response to Mr Camenzuli’s opinion, which were complicated, and that he had not had an opportunity, prior to the opening of the trial, to discuss those matters with Mr Camenzuli. I determined to allow this further report, but this was on the basis that Mr Camenzuli’s evidence on these issues would be deferred in order to allow an opportunity for a discussion to take place with him about the contents of that report, and that Mrs Lipari would have an opportunity to lead further evidence in chief from Mr Camenzuli in response to the report following that discussion (as subsequently occurred). Significantly, the matters raised in the joint report served immediately prior to the 5 April offer were material to my reasoning in respect of a number of issues regarding the concrete slab.

  2. In the light of those matters, I do not consider it was unreasonable for Mrs Lipari to reject an offer which was open for only one business day, and which referred to issues that had been raised in a joint expert report served on the previous day.

Form of Costs Orders

  1. For the reasons set out above, none of the three Calderbank letters provides a basis for an award of indemnity costs. Further, none of the parties advanced a submission that indemnity costs should be awarded on any other basis.

  2. The Court has a broad discretion in respect of costs. Underlying both the general rule that costs follow the event, and the qualifications to that rule is “the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs”: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] per Hodgson JA (Mason P agreeing).

  3. The general principle is that a successful party should be entitled to the whole of its costs, including on matters where it has been unsuccessful: Tonna v Mendonca (No 2) [2020] NSWSC 306 at [169] per Ward CJ in Eq. Nonetheless, there are cases where it has been considered appropriate to apportion costs as between particular issues in proceedings, where a party has succeeded on some, but not others, of multiple issues: ibid.

  4. In Tonna v Mendonca (No 2), Ward CJ in Eq made the following observations regarding the rationales underlying, respectively, the general principle and the departures from it (at [170]-[172]):

“The rationale underlying the general principle is reflected in the observation made by Jacobs J in [Cretazzo v Lombardi (1975) 13 SASR 4] at 16 that:

… trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

The rationale underlying a departure from the ordinary costs rule appears to be that, where there are multiple issues, the application of the general rule may involve hardship where a party succeeds on some issues but not others(see James v Surf Road Nominees Pty Limited (No 2) [2005] NSWCA 296 (James v Surf Road Nominees) at [32], per Beazley JA, as Her Excellency then was, Tobias, and McColl JJA).

However, it has been said more than once that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (see for example Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 at 220, per Fisher J; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12], per Tamberlin J).”

  1. Her Honour said (at [176]) that:

“Ultimately, as Finkelstein and Gordon JJ observed in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 (at [5]):

Costs are in the court’s discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied.”

  1. In the present case, Metricon submitted that costs should follow the event, and characterised the “event” as follows:

“Metricon has been successful. Its claim has been upheld, and a net amount is owing to it. Metricon successfully wholly resisted Mrs Lipari’s claim in respect of the swimming pool, which required substantial lay and expert evidence. Metricon substantially resisted Mrs Lipari’s claim in respect of the slab, and the position ultimately accepted was that advanced by Metricon. Other claims advanced by Mrs Lipari were abandoned or were unsuccessful, including the claims in respect of negligent misrepresentation and the claim in respect of the siting of the slab.”

  1. Mrs Lipari also submitted that costs should follow the event, with the relevant event being that “Mrs Lipari succeeded in her claim against both the first defendant (Metricon) and the second defendant (Zanuttini).”

  2. In determining the relevant “event”, it should be recognised that the only substantive defence raised by Mrs Lipari to Metricon’s claim for the outstanding balance of the Contract price was a set-off and counterclaim. That counterclaim included a claim for defects in the construction of her house. Metricon acknowledged that there were defects in respect of the slab as well as general defects. The issues in dispute at the hearing were the extent of the defects, the costs of rectification and the appropriate measure of damages.

  3. It is too simplistic to conclude that, simply because an amount was awarded to Mrs Lipari in respect of defects, she was successful in the proceedings. Similarly, it is too simplistic to conclude that because the total amount for defects did not exceed the outstanding balance (once contractual interest was added), Metricon was successful in the proceedings.

  4. The true position is that there was mixed success on all sides. Mrs Lipari established some, but not all, of the alleged defects. The general defects which were established included some which were disputed by Metricon, whereas the defects in respect of the concrete slab were essentially those which Metricon and Zanuttini conceded. The amount which Mrs Lipari has been awarded for general defects ($54,845.00) substantially exceeded the amount for which Metricon contended in opening submissions ($21,925.00). Mrs Lipari failed in her claim for costs of rectification of the concrete slab on a knock-down/rebuild basis ($815,000), but Metricon and Zanuttini failed in their claim that Mrs Lipari should receive no more than the additional amount which she paid for the purchase of an H1 class slab instead of the M class slab which was included in the Contract price ($5,850).

  5. Zanuttini referred to authorities to the effect that the Court may award costs in favour of a defendant where the plaintiff has obtained only nominal damages: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [70] per McHugh J, citing Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873. However, the award made in favour of Mrs Lipari – being a total amount, prior to set-off, of $127,945.11 – cannot be described as nominal or trivial. It is not to the point that this amount was less than the amount payable by her to Metricon. The fact is that the total award which she achieved was some 460% higher than the total amount which Metricon and Zanuttini contended in their opening submissions to be payable in respect of defects (namely, $27,775, comprising $21,925 for general defects and $5,850 for the defects in the slab).

  6. At the same time, there were significant parts of the case in respect of which Mrs Lipari was unsuccessful. For example, Mrs Lipari failed in her claims in respect of the swimming pool, which raised discrete issues and in respect of which there was discrete lay and expert evidence. Further, Mrs Lipari failed in establishing a significant number of the claimed defects in the concrete slab, which were the subject of extensive expert evidence, and failed, importantly, in establishing that there was any existing significant damage, or any real risk of future significant damage, to the slab or the house as a result of those defects which were established.

  7. Substantial time was spent at the hearing on the three main issues in the case. The evidence concerning the swimming pool claim (consisting primarily of oral evidence of Mrs Lipari and the valuation evidence) took around half a day. The concurrent evidence of Mr Winton and Mr Camenzuli concerning general defects took around a day. The concurrent evidence of Mr Camenzuli, Mr Keighran and Mr Hartcher regarding the concrete slab took around 1.5 days. All three issues were the subject of extensive written submissions.

  8. I do not consider it is desirable to make issues-based costs orders, as these will likely increase significantly the time and costs required for any assessment process, which is not in the interests of any of the parties.

  9. Ultimately, Mrs Lipari succeeded in establishing a larger number of defects than had been admitted, but fewer than the number for which she contended. Mrs Lipari succeeded in establishing an entitlement to damages in an amount significantly greater than the amount for which Metricon and Zanuttini contended, but significantly less than she sought.

  10. Having regard to the principles and considerations set out above, I have determined that there should be no order as to the costs of the proceeding. This reflects the mixed outcome for all parties to the proceedings.

Orders

  1. For the reasons set out above, I make the following orders:

  1. The Court declares that, prior to any set off by any party:

  1. Mrs Lipari is liable to pay Metricon $159,758.35 on account of the outstanding balance of the contract price, with interest calculated at 12% per annum from 28 May 2018 to 30 May 2024;

  2. Metricon is liable to pay Mrs Lipari $54,845 on account of general defects;

  3. Metricon and Zanuttini are jointly and severally liable to pay Mrs Lipari $73,100.11 on account of defects in the slab, with interest calculated at UCPR pre-judgment interest rates from 23 May 2018 to 30 May 2024; and

  4. Zanuttini is liable to pay Metricon such amount, if any, as Mrs Lipari recovers, by way of payment or set-off, from Metricon on account of the defects in the slab.

  1. The Court declares that Mrs Lipari has elected to set off the amount of $54,845.00 on account of general defects and the amount of $73,100.11 on account of defects in the slab against her liability to Metricon.

  2. Judgment for Metricon against Mrs Lipari in the sum of $31,813.24.

  3. Judgment for Metricon against Zanuttini in the sum of $73,100.11.

  4. There be no order as to the costs of the proceedings.

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Decision last updated: 06 June 2024

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