Stewart v ATCO Controls Pty Ltd (In Liq) (No 2)

Stewart and others appealed to the High Court of Australia against a decision of the Court of Appeal of the Supreme Court of Victoria concerning costs. The dispute arose from the respondent's (ATCO Controls Pty Ltd (In Liq)) failure to accept a Calderbank offer made by the appellants, despite the appellants ultimately succeeding in their appeal to the High Court. The core issue was whether the respondent's rejection of the Calderbank offer was reasonable, and consequently, whether the respondent should be ordered to pay the appellants' costs on an indemnity basis.

The High Court was required to determine whether the respondent's refusal to accept the appellants' Calderbank offer was reasonable in the circumstances, particularly in light of the subsequent successful appeal by the appellants. This determination would then inform whether the court should exercise its discretion to award costs on an indemnity basis, rather than the usual party and party basis.

The Court reasoned that the respondent's non-acceptance of the Calderbank offer was unreasonable. The offer had been made in circumstances where the appellants had a strong prospect of success on appeal, and the terms of the offer were ultimately more favourable to the respondent than the outcome achieved by the appellants. Applying the principles governing Calderbank offers, the Court concluded that the respondent's failure to accept the offer meant it should bear the consequences of that decision, including the costs of the litigation on a more generous basis.

Consequently, the High Court varied its previous order of 7 May 2014. The order of the Court of Appeal of the Supreme Court of Victoria made on 25 June 2013 was set aside, and in its place, the appeal to that Court was dismissed with costs to be paid on an indemnity basis. The respondent was also ordered to pay the appellants' costs of the application to the High Court.