Value Constructions Pty Ltd v Badra (No 2)

[2024] NSWCA 212

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Value Constructions Pty Ltd v Badra (No 2) [2024] NSWCA 212

Hearing dates:

On the papers (last submission 19 August 2024)

Date of orders:

02 September 2024

Decision date:

02 September 2024

Before:

Leeming and Kirk JJA, Griffiths AJA at [1]

Decision:

(1) The appellant is to pay the first respondent’s costs of the appeal, save that the first respondent is to pay the appellant’s costs of his application for indemnity costs.

(2) The appellant is to pay the second and third respondents’ costs of the appeal.

Catchwords:

COSTS – Indemnity costs – Offer of compromise – Calderbank offer – Real and genuine element of compromise – Degree of compromise assessed cumulatively – No explanation as to significant costs asserted to have been incurred before exchange of submissions – No reason first respondent should obtain advantage of consensus later broken out to alter precise sums awarded

COSTS – Active role played by second and third respondents appropriate and useful

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 20.26(5)

Cases Cited:

Fabre v Lui (No 2) [2015] NSWCA 312

Krolczyk v Winner t/as J Winner Building Services [2022] NSWCA 196

Synergy Scaffolding Services Pty Ltd v Alelaimat (No 2) [2024] NSWCA 11

Category:

Costs

Parties:

Value Constructions Pty Ltd (Appellant)

Mohamad Badra (First Respondent)
MMM Cement Rendering 1 Pty Ltd (Second Respondent)
Workers Compensation Nominal Insurer (Third Respondent)

Representation:

Counsel:

J Sleight (Appellant)
RJM Foord (First Respondent)
A Combe (Second and Third Respondents)

Solicitors:

McMahons Lawyers (Appellant)
Withstand Lawyers (First Respondent)
Hicksons Lawyers (Second and Third Respondents)

File Number(s):

2023 / 364755

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Common Law

Citation:

[2023] NSWSC 1307 and [2023] NSWSC 1655

Date of Decision:

03 November 2023

Before:

Cavanagh J

File Number(s):

2021/213328

JUDGMENT

1. THE COURT: This Court handed down its judgment in this appeal on 31 July 2024: Value Constructions Pty Ltd v Badra [2024] NSWCA 181. In substance the appeal was dismissed. The orders made by the primary judge were varied somewhat to take account of this Court’s decision in Synergy Scaffolding Services Pty Ltd v Alelaimat (No 2) [2024] NSWCA 11 (Synergy No 2), which had been handed down subsequently to the final decision of the primary judge. The Court reserved the issue of costs, saying the following:

[77] Finally, in relation to costs, the only ground on which Value has succeeded is ground 4, which involved consensual adjustment of figures. It was MMM which filed the written submissions which led to the outbreak of consensus. The appropriate provision for costs would thus appear to be that Value should pay the costs of all respondents on the appeal. However, little was said in the course of the hearing about costs, although the Court noted that there were various possible outcomes of the appeal. In the circumstances the parties should have the opportunity to address on costs if they cannot agree on the appropriate order. The issue will then be determined on the papers unless any party establishes good reason to the contrary.

2. This judgment is directed to that issue. Each party filed written submissions. No party sought an oral hearing. Familiarity with the first decision will be assumed.

3. Two issues arise:

1. The first respondent, Mr Badra, seeks that the appellant (Value) pay his costs of the appeal on an indemnity basis from 1 March 2024. Value resists that application.

2. As regards the second and third respondents (the MMM parties), Value argues that they should pay its costs of the appeal, or alternatively each side should bear their own costs. The MMM parties claim their costs.

Mr Badra’s claim for indemnity costs

4. On 29 February 2024 Mr Badra served an offer of compromise, expressed to be open for 14 days, involving judgment for him in the amount of $806,000, no order as to costs of the appeal, and waiver of post-judgment interest. On the same date he served a brief Calderbank letter making the same offer. It is unnecessary to express any view as to the consequences of the offer of compromise only being left open for 14 days, despite its being served almost two months prior to the hearing of the appeal: cf UCPR r 20.26(5).

5. It is well-established that for an offer of compromise to be effective it must contain a real and genuine element of compromise: eg Fabre v Lui (No 2) [2015] NSWCA 312 at [6]. The same is true of a Calderbank offer: eg Krolczyk v Winner t/as J Winner Building Services [2022] NSWCA 196 at [212]. In the offer here there were three possible elements of compromise. The first related to the judgment amount. The primary judge had awarded $806,562.50 to Mr Badra as against Value. Mr Badra was offering to round that down by $562.50. That did not involve any real element of compromise. This Court later changed that amount to $839,869.04 but that was pursuant to Value’s own appeal, as part of working out the effects of this Court’s judgment in Synergy No 2. It was not pursuant to any cross-appeal by Mr Badra. The issue was not mentioned in the Calderbank letter. There is no reason Mr Badra should be able to take advantage of the consensus that later broke out to alter the precise sums awarded as between the three parties.

6. The second possible element of compromise was that there be no order as to costs of the appeal. Value’s notice of appeal had been filed on 8 January 2024. Its primary submissions were filed on 3 March 2024. Mr Badra’s submissions were filed on 15 March 2024. The Calderbank letter estimated that the costs of the appeal up to 29 February 2024 had been $20,000. No explanation was given as to how such significant costs had been incurred given that no submissions had been exchanged at that time, and the amount seems both unlikely and excessive: cf Fabre at [7].

7. The third possible element of compromise was waiver of post-judgment interest. The Calderbank letter estimated that to be $18,136.18 from the date of the relevant order of the primary judge. That represented some 2.2% of the judgment sum.

8. The degree of compromise must be assessed cumulatively. Adding together the $562.50 first element, say $5,000 for costs, and $18,136.18 for the third element, the sum is about $23,700, which constitutes just under 3% of the relevant first instance judgment sum. Taking account of all the circumstances of this case, including the time at which the offer was made and the nature of the issues raised, we do not consider either the formal offer or the Calderbank letter manifests a real element of compromise. We decline to award indemnity costs. There is no dispute that Mr Badra is entitled to his costs on the ordinary basis. However, he should pay Value’s costs with respect to his application for indemnity costs.

Costs between Value and MMM

9. In the appeal Value did not seek to challenge the 50:50 apportionment of liability between it and the MMM parties. However, ground 4 of its appeal did seek to alter the payment sums, with some correlative effect on the MMM parties. In the end, as explained in this Court’s first judgment, consensus broke out as to the appropriate orders to be made in light of Synergy No 2. That consensus was achieved when the MMM parties filed further supplementary written submissions after Value had filed its written reply. Both Value and Mr Badra accepted the position put in those MMM submissions, and it was that position which was reflected in this Court’s orders.

10. Value notes that as a result of those orders it is better off as regards its cross-claim against the MMM parties than it was under the orders of the primary judge. The irony is, however, that it was the clear exposition of the MMM parties which led to that result. As the MMM parties stated in their costs submissions:

Ground 4 was not addressed in the written submissions by the Appellant in a fashion that referred to the orders that should have been entered into or that reflected the final orders as proposed by [the MMM parties] in their supplementary submissions.

11. Further, by ground 5 of its appeal Value asserted that the primary judge “erred in the exercise of his discretion in ordering that the appellant pay in excess of 50% of the first respondent’s costs on an ordinary basis”. If it had succeeded on that ground then the MMM parties would have been disadvantaged. The MMM parties made written and oral submissions opposing the ground. The ground was abandoned by Value but only at the very end of the hearing.

12. In the circumstances the active role played by the MMM parties in the appeal was appropriate and useful. They should have their costs, including in relation to this costs dispute.

Orders

13. The orders of the Court will be as follows:

1. The appellant is to pay the first respondent’s costs of the appeal, save that the first respondent is to pay the appellant’s costs of his application for indemnity costs.

2. The appellant is to pay the second and third respondents’ costs of the appeal.

**********

Decision last updated: 02 September 2024