Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Edelbrand Pty Ltd v H M Australia Holdings Pty Ltd (No 2) [2012] NSWCA 217 Hearing dates: 11 November 2011 Decision date: 24 July 2012 Before: Bathurst CJ at [1]; McColl JA at [15]; Tobias AJA at [16] Decision: 1. Order that the respondent pay the costs of the appellant in the Court below up to and including 21 March 2011 on the ordinary basis and thereafter on an indemnity basis. 2. Order that the respondent pay the appellant's costs of the appeal on the ordinary basis. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: COSTS - general rule that costs follow the event - trial costs - appeal costs COSTS - indemnity costs - where Calderbank letter - reasonableness of rejection Legislation Cited: Building and Construction Industry Security of Payment Act (NSW) 1999 Supreme Court Rules Pt 22 Uniform Civil Procedure Rules r 20.26 Cases Cited: Jones v Bradley (No 2) [2003] NSWCA 258 SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 Category: Costs Parties: Edelbrand Pty Ltd (Appellant) H M Australia Holdings Pty Ltd (Respondent) Representation: Counsel DS Weinberger (Edelbrand Pty Ltd) P Folino Gallo, I Leong (H M Australia Holdings Pty Ltd) Solicitors Whittens Lawyers & Consultants (Edelbrand Pty Ltd) TK Legal Pty Ltd (H M Australia Holdings Pty Ltd) File Number(s): 2011/54792 Decision under appeal Citation: H M Australia Holdings Pty Limited v Edelbrand Pty Limited t/as Domus Homes & Anor [2011] NSWSC 604 Date of Decision: 2011-06-21 00:00:00 Before: Einstein J File Number(s): 2011/54792 Judgment 1BATHURST CJ: On 9 March 2012 this Court allowed this appeal with costs: Edelbrand Pty Ltd v H M Australia Holdings Pty Ltd [2012] NSWCA 31. It also ordered that the respondent pay the costs of the proceedings in the Court below. 2The appellant has now sought orders that the costs of the proceedings in the Court below from 22 March 2011, and those of the appeal, be paid on an indemnity basis. The application is founded on a Calderbank offer made by the appellant on 20 March 2011. 3The chronology leading up to this application may be shortly stated. On 14 February 2011 an adjudicator, Mr Phillip Davenport, made an order under the Building and Construction Industry Security of Payment Act 1999 that the respondent pay to the appellant an amount of $214,913.60 in respect of monies due to the appellant for work carried out on a development project pursuant to a contract dated 15 October 2008. 4On 18 February 2011 proceedings were commenced by the respondent to set aside the adjudication determination. 5On 22 March 2011 the appellant made an offer purportedly under Pt 22 of the Supreme Court Rules to compromise the claim by accepting payment of the sum of $200,000 plus costs. The appellant accepted that by virtue of the fact the offer referred to Pt 22 of the Supreme Court Rules and not to r 20.26 of the Uniform Civil Procedure Rules, it could not take affect as an offer of compromise under the Rules but only as a Calderbank offer. 6The offer was not accepted and the proceedings were heard on 14 June 2011. On 21 June 2011 the primary judge set aside the adjudication. 7The appellant successfully appealed from that decision, the appeal being heard on 11 November 2011 and judgment given on 9 March 2012. The costs of the trial 8The respondent submitted that it did not act unreasonably in not accepting the offer. It pointed to the fact that the proceedings raised complex issues of statutory interpretation and that the offer of $200,000 was very close to the amount ordered by the adjudicator. However, it did not contend that it was not a genuine offer of compromise. 9The manner in which offers of this nature should be considered has been discussed by the Court on a number of occasions. It is not necessary to go further than what was said by Giles JA in SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 at [37]: "The making of an offer of compromise in the form of a Calderbank Letter ... where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank Letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure." See also Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]. 10In the present case, in my view, it is appropriate that an order for indemnity costs in respect of the proceedings at first instance be made in respect of costs incurred from the date the offer was made, namely, 2 March 2011. Whilst it is true that the offer was close to the amount awarded by the adjudicator, in circumstances where the offer was not contended to be other than genuine, the respondent's failure to accept the offer was, in my view, unreasonable. The object of the service of payment claims under the Act is to ensure prompt (and full) payment for building works. The fact that the litigation raised some questions of statutory interpretation of a little complexity does not alter the position. Such complexity makes it all the more desirable in the interests of litigants that settlement be encouraged. 11For those reasons, in my opinion, indemnity costs should be ordered in respect of the proceedings in the Court below from 22 March 2011. The costs of the appeal 12The costs of the appeal fall into a different category. The respondent was, of course, successful at first instance in quashing the decision of the adjudicator. Thereafter there was no renewal of the offer by the appellant. The failure to renew the offer, in my opinion, is a relevant factor in determining whether or not to grant indemnity costs. 13In the present case in circumstances where the respondent had been entirely successful at first instance and where there was no attempt by the appellant to compromise the appeal, it does not seem to me appropriate in all the circumstances to make an order for indemnity costs in respect of it. 14In these circumstances the costs orders I would make are these: 1The respondent pay the costs of the appellant in the Court below up to and including 21 March 2011 on the ordinary basis and thereafter on an indemnity basis. 2The respondent pay the appellant's costs of the appeal on the ordinary basis. 15McCOLL JA: I agree with the Chief Justice. 16TOBIAS AJA: I agree with the Chief Justice. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 July 2012