Springfield City Group Pty Ltd v Pipe Networks Pty Ltd (No 2)

[2022] QSC 299

SUPREME COURT OF QUEENSLAND

CITATION:

Springfield City Group Pty Ltd v Pipe Networks Pty Ltd (No. 2) [2022] QSC 299

PARTIES:

SPRINGFIELD CITY GROUP PTY LTD

ACN 055 714 531

(plaintiff)

v

PIPE NETWORKS PTY LTD

ACN 099 104 122

(defendant)

FILE NO:

BS 2798 of 2016

DIVISION:

Trial Division

PROCEEDING:

Claim

DELIVERED ON:

23 December 2022

DELIVERED AT:

Brisbane

HEARING DATE:

Decision on the papers: written submissions received from the defendant dated 1 December 2022 and from the plaintiff dated 8 December 2022

JUDGE:

Bond JA

ORDER:

The plaintiff must pay the defendant’s costs of the proceeding, including reserved costs, to be assessed on the standard basis.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – INFORMAL OFFERS AND CALDERBANK LETTERS – UNREASONABLE REFUSAL OF OFFER – where the plaintiff brought claims against the defendant for, amongst other things, breach of contract,  misleading and deceptive conduct, unconscionable conduct, breach of statutory duties, trespass and conversion, and breach of fiduciary duties – where the plaintiff completely failed on all of their claims against the defendant – where the defendant by way of a letter made an offer to the plaintiff to settle before trial – where the plaintiff rejected the offer – whether the defendant’s letter was a Calderbank offer – whether, the plaintiff having absolutely failed at trial, the plaintiff’s rejection of the defendant’s offer to settle should be regarded as so unreasonable as to justify an order that the plaintiff pay the defendant’s costs on the indemnity basis

Uniform Civil Procedure Rules 1999 (Qld), r 361

Anderson v AON Risk Services Australia Ltd [2004] QSC 180, cited
Calderbank v Calderbank [1975] 3 All ER 333, discussed
Emanuel Management Pty Ltd (in liquidation) v Foster's Brewing Group Ltd [2003] QSC 299, cited
Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, cited
S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2) [2020] QSC 323, applied
Springfield City Group Pty Ltd v Pipe Networks Pty Ltd [2022] QSC 255, discussed

Wiggins Island Coal Export Terminal Pty Ltd v Civil Mining & Construction Pty Ltd (2021) 7 QR 1; [2021] QCA 8, followed

COUNSEL:

G Handran KC, with W LeMass, for the plaintiff

D de Jersey KC for the defendant

SOLICITORS:

McBride Legal for the plaintiff

RBG Lawyers for the defendant

Introduction

1. These reasons rely on the facts found and analysis expressed in my judgment published on 18 November 2022: see Springfield City Group Pty Ltd v Pipe Networks Pty Ltd [2022] QSC 255.

2. I will assume that the reader of these reasons is familiar with that judgment.  I will continue to use the terminology there expressed.

3. At the time judgment was published, Senior Counsel for PIPE advised me that PIPE sought to advance an argument that it should be awarded indemnity costs, having regard to an offer to settle which it had made on 31 May 2019.  I adjourned the hearing to enable the parties to determine how that issue should be dealt with.

4. Consequent upon the parties having reached an agreement on the appropriate course, by order made on 24 November 2022, I set a timetable for the delivery of written submissions and material to be relied on and ordered that the issue of costs would be determined on the papers.

5. For the following reasons, my decision is that SLC must pay PIPE’s costs of the proceeding, including reserved costs, to be assessed on the standard basis.

PIPE’s argument for an indemnity costs order

1. On 16 March 2016, SLC commenced the current proceeding by claim and statement of claim.  By order made 13 February 2017, by which time pleadings had closed, the proceeding was placed on the commercial list.  Pleadings were amended from time to time and in November 2020 the trial commenced, ran for two weeks, adjourned to permit expert opinion evidence on quantum to be finalised, and resumed in August 2021.  Final oral submissions were received on 31 August 2021 and final written submissions on 13 September 2021.  In my judgment published on 18 November 2022, I gave judgment in favour of PIPE on all SLC’s claims.

2. PIPE’s argument in support of an indemnity costs order turned on the fact that on 31 May 2019 it had offered to settle the proceeding for $500,000 plus costs to be agreed or, failing agreement within 14 days of acceptance of the offer, to be assessed on the standard basis.  The offer was open to be accepted for 14 days, but was not accepted.  SLC should be treated as having rejected the offer.

3. PIPE seeks to have me treat the 31 May 2019 offer as a Calderbank offer.  It argues that, SLC having absolutely failed at trial, SLC’s rejection of an offer of $500,000 plus costs should be regarded as so unreasonable as to justify an order that SLC pay PIPE’s costs of the proceeding, including reserved costs, on the indemnity basis.  PIPE points to (and I accept) the unchallenged evidence before me that it had the financial capacity to pay the amounts the subject of the offer, if the offer had been accepted.

4. I summarised the relevant principles in relation to Calderbank offers deriving from judgments of intermediate courts of appeal in S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2) [2020] QSC 323 at [8]-[14] in these terms (footnotes omitted):

   The relevant considerations were identified in J & D Rigging Pty Ltd v Agripower Australia Limited [2014] QCA 23 at [5] to [6] per Holmes JA and Applegarth and Boddice JJ, and in Hadgelias Holdings and Waight v Seirlis [2014] QCA 325 at [11] to [12] per Holmes JA with whom Gotterson and Morrison JJA agreed. In each case, the Queensland Court of Appeal followed the approach taken by the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435.

   The following propositions may be distilled from those appellate decisions.

   First, the usual rule is that where the Court orders the costs of one party to litigation to be paid by another party, the order is for assessment of those costs on the standard basis.

   Second, the Court will depart from the usual rule where the circumstances of the case warrant that course.

   Third, one feature which may justify a departure from the usual rule is the rejection of a Calderbank offer to compromise.  However, it is wrong to think that an offeree’s rejection of a Calderbank offer gives rise to a presumption that the offeree should pay the offeror’s costs on an indemnity basis if the offeree obtains a less favourable result than contained in the offer.  Rather, the correct approach is to consider whether the rejection of the Calderbank offer, in all the circumstances, justifies a departure from the usual rule.

   Fourth, the balance between the competing policy considerations of, on the one hand, appropriately encouraging settlement and, on the other, not discouraging potential litigants from bringing their disputes to the courts, is found by applying a test of “reasonableness”.  The policy rationale for requiring the offeree to indemnify the offeror for costs incurred after the offeree’s unreasonable rejection of an offer is that, from the time of the unreasonable rejection, notionally the real cause and occasion of the litigation is the unreasonable attitude adopted by the offeree.

Fifth, deciding the critical question of whether the offeree’s rejection of the offer is unreasonable in all the circumstances will always involve matters of judgment and impression.  However, the discretion as to costs must be exercised judicially and is subject to review in accordance with the principles set out in House v The King (1936) 55 CLR 499 at 505. Without being exhaustive concerning the considerations which should be taken into account, a court should ordinarily have regard to at least the following matters:

(a)            the stage of the proceeding at which the offer was received;

(b)            the time allowed to the offeree to consider the offer;

(c)            the extent of the compromise offered;

(d)the offeree’s prospects of success, assessed as at the date of the offer;

(e)            the clarity with which the terms of the offer were expressed; and

(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

Consideration

1. SLC contended that PIPE’s argument must fail for two reasons.

2. First, authority binding on me required me to conclude that PIPE’s offer could not be treated as a Calderbank offer. It must be analysed solely as an offer to settle the proceeding under Chapter 9 Part 5 of the Uniform Civil Procedure Rules 1999 and, on that basis, would provide no justification for departure from the usual rule.

3. Second, if, contrary to the first reason, PIPE’s offer can be treated as a Calderbank offer, I should conclude that PIPE had failed to persuade me that SLC’s rejection of the offer should be regarded as unreasonable in the relevant sense.

4. I develop my consideration of each contention separately below.

Can the offer be treated as a Calderbank offer?

1. PIPE’s offer was conveyed by email between solicitors dated 31 May 2019, which attached a letter bearing the same date and its enclosure.  The covering email stated that it was “without prejudice except as to costs”.

2. The letter itself was also marked “without prejudice except as to costs”.  Apart from that marking, it stated only:

   We enclose, by way of service, our client's Offer made under Chapter 9 Part 5 of the Uniform Civil Procedure Rules 1999 dated 31 May 2019. In the event that this Offer is not accepted, we will rely upon it on the issue of costs.

3. The enclosed offer was a single page document containing the court heading and a heading “offer to settle”, and which provided:

   To: The Plaintiff

   TAKE NOTICE that pursuant to Chapter 9 Part 5 of the Uniform Civil Procedure Rules 1999, the Defendant offers to settle your claim on the following terms:

   1.     The Defendant pay to the Plaintiff the sum of $500,000.00.

   2.     The Defendant pays the Plaintiff’s costs of the proceeding to be agreed or, failing agreement within 14 days of acceptance of this offer, to be assessed on the standard basis.

   This Offer to Settle will remain open for a period of 14 days after the date of service but will then lapse.

   Acceptance of this offer may be effected by serving a written notice on the Solicitors for the Defendant.

4. It is plain on the face of both the letter and its enclosure that the offer purported to be an offer made “under” and “pursuant to” Chapter 9 Part 5 of the UCPR. No reference was made to the possibility of the offer having any effect in relation to costs other than the effect which was provided in that part of the rules.

5. The relevant rule governing such offers if made by a defendant was r 361 which provided:

   (1)   This rule applies if—

   (a) the defendant makes an offer that is not accepted by the plaintiff and the plaintiff does not obtain an order that is more favourable to the plaintiff than the offer; and

   (b) the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer.

   (2)   Unless a party shows another order for costs is appropriate in the circumstances, the court must—

   (a) order the defendant to pay the plaintiff’s costs, calculated on the standard basis, up to and including the day of service of the offer; and

   (b) order the plaintiff to pay the defendant’s costs, calculated on the standard basis, after the day of service of the offer.

6. It was common ground before me that r 361 did not apply where a plaintiff completely fails. That conclusion had been established by a line of authority which preceded the date of the offer. In this regard it suffices to cite Emanuel Management Pty Ltd (in liquidation) v Foster's Brewing Group Ltd [2003] QSC 299 per Chesterman J (as his Honour then was) at [36]-[39] and Anderson v AON Risk Services Australia Ltd [2004] QSC 180 per McMurdo J (as his Honour then was) at [10].

7. Notably, despite their Honours’ respective conclusions that r 361 did not apply because a plaintiff had completely failed, Chesterman J and McMurdo J each applied Calderbank logic to conclude that offers had been unreasonably rejected so as to justify indemnity costs orders in relation to offers made under the rules. 

8. SLC, however, relies on the subsequent decision of Wiggins Island Coal Export Terminal Pty Ltd v Civil Mining & Construction Pty Ltd (2021) 7 QR 1 (WICET) to persuade me to take a different course.  The relevant effect of the decision has been correctly summarised in the headnote of the authorised report in these terms (reference to other authorities omitted):

   (3) (Holmes CJ; Philippides JA and Brown J agreeing) That to be effective as a Calderbank offer, the making of the offer must indicate an intention to seek something other than the usual costs order. The seeking of a “special costs order” must be intimated. [68], [83], [84].

   …

   (4)   (Holmes CJ; Philippides JA and Brown J agreeing) That:

   (a) in determining whether the purported offer to settle under Ch 9, Pt 5, could take effect as a Calderbank offer, the point of the enquiry was to establish whether there was some reasonable basis for regarding the offer as intended to have an effect independent of its operation under the Rules; [69], [83], [84];

   (b) a mere use of the words “without prejudice save as costs” was not sufficient to indicate that an offer is to be relied upon as a Calderbank offer where the offer enclosed is one purportedly under Ch 9, Pt 5; [69], [83], [84];

   (c) the words used in the covering letter in the present case in conjunction with the advice that the offer was made pursuant to Ch 9, Pt 5 made no suggestion that it was made pursuant to anything else; [69], [83], [84];

   (d) the trial judge was correct in rejecting the proposition that the offer could take effect as a Calderbank offer. [70], [83], [84].

   …

   (5)   (Holmes CJ; Philippides JA and Brown J agreeing) That as to whether the offer could nevertheless be taken into account under r 681 in exercising the discretion to award costs:

   (a) a party receiving an offer purporting to be made under Ch 9, Pt 5 and not otherwise, is entitled to regard it “as having no force at all”. That is to say, it is without effect for any purpose, including reliance on it as supporting an application for a favourable exercise of discretion, whether by way of an order for indemnity costs or any other costs order departing from the usual rule; [71], [83], [84];

   (b) the recipient of such an offer is entitled to disregard it. It would be an odd result if it were later to be taken into account to his disadvantage in the formulation of a costs order; [72], [83], [84];

   (c) the Rules prescribe a specific regime for offers to settle; it is not inconsistent with their spirit to require that parties wishing to take advantage of that regime comply with the relevant rules. There is a value to providing parties with certainty. A party who receives an offer expressed to be made under the Rules, and conveying no intent that it be used for any other purpose, should be entitled to rely on what it represents. If it fails to meet the requirements of the rules under which it purports to be made, it cannot be unreasonable for that party then not to act on it. It does not amount to any limitation on the costs discretion to say a costs order whose only identified purpose is as a Rules offer, but which does not comply with the Rules, will be ineffective; [74], [83], [84];

   (d) the offer was not effective for any purpose. [75], [83], [84].

9. In the present case, the 31 May 2019 offer was plainly made under the rules. There is no factual basis on which to distinguish the conclusion expressed in WICET that the use of the words “without prejudice except as to costs” could not be regarded as intimating an intention to rely on the offer other than in the way it might have been relied on under Chapter 9 Part V of the rules. For the same reason, it seems to me that the general words in the covering letter stating “[i]n the event that this Offer is not accepted, we will rely upon it on the issue of costs” must be regarded as adding nothing to the previous formulation. In context, those words would be taken only to intimate an intention to rely on the offer for the effect it might be given under Chapter 9 Part V of the rules. The only effect it could ever have been given under the rules was to justify a standard costs order in PIPE’s favour after the date of the offer, if SLC obtained a judgment in its favour, but one less favourable than $500,000 plus costs.

10. If PIPE had wished to put SLC on risk of an indemnity costs order if SLC had absolutely failed, WICET would suggest that PIPE should have made that clear by making specific reference to that possibility and to its intention to seek such an order in such circumstances. 

11. I agree with SLC that WICET is binding on me.  The offer cannot be regarded as a Calderbank offer.  On that basis, it cannot be used as a justification for departure from the usual rule as to costs.

If the offer could be regarded as a Calderbank offer, was rejection of the offer unreasonable in the relevant sense?

1. If the offer was to be regarded as a Calderbank offer, it would be necessary to have regard to the matters identified at [9] above.

2. In the present circumstances, the time allowed to the offeree to consider the offer and the extent of the compromise offered would not sound against PIPE’s contention.   The problem for PIPE lies in the other considerations.

3. First, the offer did not foreshadow an application for indemnity costs in the event of SLC rejecting it. The analysis in WICET strongly suggests that the offer could only be interpreted as putting SLC on notice of the effect which the offer might have had under the UCPR and, as I have previously explained, the only effect it could ever have been given under the UCPR was to justify a standard costs order in PIPE’s favour after the date of the offer, if SLC obtained a judgment in its favour, but one less favourable than $500,000 plus costs.

4. Second, as to SLC’s prospects of success, assessed as at the date of the offer:

   (a)I accept the submission advanced by PIPE that by the time the offer was made SLC should have been in a position to assess the prospects of success and thereby to weigh the merits of accepting the offer.

   (b)However, SLC correctly points out that the prospects to be assessed were of the issues which then existed on the face of the pleadings as they then stood.  The pleadings changed after the date of the offer and before trial in ways which raised issues which had an impact on the trial.  PIPE’s argument pays no regard to that consideration.

   (c)Further, the offer contained no explanation at all as to the basis for PIPE’s contention that SLC should accept what was effectively a low-ball offer.  The offer contained no explanation as to why PIPE’s case should be regarded as hopeless or incapable of rising higher than the amount of the offer, even if it succeeded in some respect.  Indeed, as SLC points out, on the face of it at the time of the offer, the conversion claim alone had a quantum in excess of the offer, but the issues on the face of the pleadings at that time were hardly informative as to the nature of the dispute between the parties.

   (d)In Hazeldene’s Chicken Farm the Victorian Court of Appeal at [26]-[27] stated (emphasis added, footnotes omitted):

   It has been argued on occasion that the maker of a Calderbank offer should not be entitled to costs unless the offer sets out, with some reasonable specificity, the basis for the offeror’s contention that the offeree should accept the compromise – for example, because the offeree’s case was hopeless or because the offeree had no reasonable prospects of doing better in the proceeding than was being offered in advance. 

   Once again, we think it neither necessary nor desirable to lay down any general rule in this regard.  We agree with what Redlich J said in [Aljade and MKIC v OCBC [2004] VSC 351 at [87]], as follows:

   Any attempt to prescribe the reasoning which must accompany [a Calderbank] offer should be resisted. Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted must depend upon a consideration of all of the circumstances existing at the time of the offer.  The extent to which the weakness of a party’s position is exposed through the pleadings, affidavits and the various communications between the parties during the course of the litigation may bear upon the significance of the absence of specificity in the informal offer.

   (e)PIPE has not drawn my attention to material justifying the conclusion that the weakness of SLC’s position on all of the causes of action which it advanced should have been regarded to have been exposed to it at the time of the offer was made.  In the circumstances of this case, I think that the lack of an explanation in the offer as to why SLC should not place any confidence in being able to obtain an outcome more favourable to it than the low-ball offer, sounds strongly against the conclusion that its failure to accept the offer was unreasonable in all the circumstances.

   (f)On analysis, PIPE’s argument invites me to conclude merely from the fact that SLC’s claims at trial failed that it must have been unreasonable for them to be progressed beyond the stage of the offer.  I find that approach unpersuasive.

1. It is for PIPE to demonstrate that in all the circumstances the rejection of the offer should be regarded as justifying a departure from the usual rule.  It has not so persuaded me.

Conclusion

1. There being no justification for departure from the usual rule, SLC must pay PIPE’s costs of the proceeding, including reserved costs, on the standard basis.