New South Wales Supreme Court CITATION : ACN 002 804 702 (formerly Brooks Building) v McDonald (No. 2) [2009] NSWSC 638 HEARING DATE(S) : 3 July 2009 JUDGMENT DATE : 3 July 2009 JURISDICTION : Equity JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 3 July 2009 DECISION : Order that the defendant pay the plaintiffs' costs of the proceedings and that the plaintiffs' costs of the proceedings from 5 November 2008 be paid on the indemnity basis. CATCHWORDS : No question of principle ACN 002 804 702 Pty Ltd (formerly Brooks Building Pty Ltd) & Anor PARTIES : v Shane McDonald (No. 2) FILE NUMBER(S) : SC 5878/07 COUNSEL : Plaintiffs: H Altan Defendant: A Hill SOLICITORS : Plaintiffs: Cordato Partners Defendant: Palmers Solicitors & Attorneys IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WHITE J Friday, 3 July 2009 5878/07 ACN 002 804 702 Pty Ltd (Formerly Brooks Building Pty Limited) & 1 Or v Shane McDonald (No. 2) JUDGMENT 1 HIS HONOUR: The plaintiffs seek an order that the defendant pay its costs of the proceedings and that its costs from 21 October 2008 be paid on the indemnity basis. 2 The defendant submits there should be no order as to costs. The latter submission is put on the basis that I have found there were a number of breaches of the terms of settlement. It might also be added that one of the significant issues argued in the proceedings, namely the conclusiveness of the engineer's certificate, is an issue upon which the plaintiffs fail. 3 The plaintiff seeks indemnity costs on the basis of a without prejudice Calderbank offer made on 21 October 2008. After setting out in some detail the plaintiffs' contentions in the proceedings, the plaintiffs proposed the following: " 1. The plaintiff pays an amount of $45,000 in full and final settlement of the judgment debt; 2. The assessment of costs in the District Court proceeds to determination; 3. The proceedings before the Supreme Court of New South Wales be dismissed; 4. Each party pay their own including incidental costs of the Supreme Court proceedings; and 5. The parties enter into a deed of mutual release. " 4 The offer was not a formal offer of compromise under Div 3 of pt 42. 5 It is not suggested that there had been dealings between the parties, other than those which were the subject of the litigation which might be compromised by the deed of mutual release; so that the last term does not significantly affect the effect to be given on a costs application to the earlier terms. 6 I am told that the reference to "the assessment of costs in the District Court" is a reference to costs which the plaintiffs were ordered to pay as a result of an unsuccessful motion they brought in the District Court after the terms of settlement were reached, and, I infer, before these proceedings were commenced. 7 In substance, the plaintiff was offering to pay $45,000 to compromise the claim, with each party to pay his and its own costs of these proceedings. That offer involved a very substantial element of compromise. In the light of my findings the plaintiff has done significantly better than that. It is entitled to have the judgment set aside and prima facie is entitled to its costs. 8 The first question is whether it is unreasonable for the defendant not to have accepted that offer. The second is whether, in any event, the matters upon which the plaintiffs failed were such that either indemnity costs should not be ordered, or it should not receive any or some of its costs on the ordinary basis. 9 There was no time limited for acceptance of the offer. It does not appear whether any counter-offers were made which might have entailed a rejection of the offer. No evidence has been adduced of any response to the offer. There is no question of the defendant not having adequate time to consider the offer. 10 The reasonableness of the defendant's non-acceptance of the offer has to be assessed by reference to the matters which were and were not put in issue, and the outcome I have found. The defendant did not make a claim for damages or compensation for breach of the contract contained in the terms of settlement. He took his stand on the proposition that the contract was an entire contract or, if not, there had not been substantial performance. He failed on those issues. The fact that he was able to point to, in some cases, clear breaches of the terms of settlement, in my view did not reasonably justify his persisting with the proceedings in the light of the offer of compromise. 11 Nor in my view does the fact that the plaintiff failed on certain of the issues mean that there should be an adjustment of what would otherwise be the appropriate costs order. 12 I conclude that the defendant did not act reasonably in his failure to accept the offer. 13 The offer included an element of compromise in respect of costs incurred up to that point, but as, in the light of the conclusions I have reached, the defendant would not in any event be entitled to his costs up to that time, that does not affect my assessment of the reasonableness of his persistence with the defence of the proceedings. 14 In my view, the plaintiffs are entitled to their costs on the indemnity basis from a reasonable time after the service of the offer, which I would assess to be a period of fourteen days. 15 For these reasons, I order that the defendant pay the plaintiffs' costs of the proceedings and that the plaintiffs' costs of the proceedings from 5 November 2008 be paid on the indemnity basis. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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