Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3)

Valmont Interiors Pty Ltd (the appellant) and Giorgio Armani Australia Pty Ltd (the respondent) were parties to proceedings in the Supreme Court of New South Wales. The dispute concerned costs orders made by the primary judge. The appellant had been unsuccessful at first instance but subsequently succeeded on appeal. A key element of the appeal related to a Calderbank offer made by the appellant, which, if accepted, would have resulted in a more favourable outcome for the appellant at first instance than it ultimately achieved. The appeal was heard by Bell P, Macfarlan and Leeming JJA.

The central legal issue before the Court of Appeal was the appropriate allocation of costs for the proceedings at first instance, particularly in light of the appellant's Calderbank offer and its subsequent success on appeal. The court was required to determine whether the primary judge's costs orders, which were adverse to the appellant, should be upheld or varied, considering the principles governing the award of costs, including the impact of a settlement offer that was more advantageous than the final judgment.

The Court of Appeal reasoned that the primary judge had erred in making adverse costs orders against the appellant without adequately considering the appellant's Calderbank offer and the overall trajectory of the litigation. The court applied the principle that a Calderbank offer, even if not formally accepted, can be a relevant factor in determining costs, especially where it demonstrates a willingness to settle on terms more favourable than the eventual outcome. The court found that the appellant's offer indicated a reasonable attempt to resolve the dispute and that the respondent's refusal of this offer, in hindsight, led to further costs.

Consequently, the Court of Appeal set aside the orders made by the primary judge on 12 February 2021. In their place, the court ordered that, with the exception of adverse costs orders made against the respondent prior to 13 July 2020, there would be no order as to the costs of the proceedings at first instance up to and including 13 July 2020. However, the appellant was ordered to pay the respondent’s costs of the proceedings at first instance on an indemnity basis thereafter.