Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd (No 2)

The New South Wales Court of Appeal considered an application for costs following an appeal in proceedings between Michael Hill Jeweller (Australia) Pty Ltd (appellant) and Gispac Pty Ltd (respondent). The dispute concerned the allocation of costs of both the appeal and the trial, particularly in light of a *Calderbank* offer made by the appellant and the partial success of the appellant on appeal.

The primary legal issues before the Court of Appeal were whether the appellant's *Calderbank* offer was a reasonable compromise that should influence the costs order for the appeal, and how to apportion costs of the trial where the respondent had been partly successful but the appellant had also achieved some success on appeal. The court also had to determine whether issues on which the respondent succeeded on appeal were dominant or separable for the purpose of apportioning costs, and whether to apply any cost reduction to the portion of costs incurred before the rejected offer.

The Court of Appeal reasoned that the appellant's *Calderbank* offer, made before the appeal hearing, was substantial and represented a reasonable compromise. The rejection of this offer by the respondent was therefore considered unreasonable, justifying an order for indemnity costs for the appeal from the date the offer was made. Regarding the trial costs, the court found that while the respondent had achieved some success, the appellant had also succeeded on certain issues, and the conduct of the defendant (appellant) had not been entirely unreasonable. Consequently, the court ordered that the respondent pay 84% of the appellant's appeal costs incurred before the *Calderbank* offer, and 100% of the appellant's appeal costs incurred after that date on an indemnity basis. Furthermore, the defendant was ordered to pay 40% of the plaintiff's trial costs.