Costs: indemnity or not following UCPR and without prejudice offer

Kloprogge v Queensland University of Technology (No 2) [2017] QDC 118

Searles DCJ

The plaintiff obtained judgement for damages of $663,000 for breach of contract. The plaintiff sought an order that the defendant pay its costs on an indemnity basis while the defendant sought their costs to be assessed on a standard basis.

Legislation

Rule 360 of the Uniform Civil Procedure Rules 1999 (Qld):

(1) If—

(a) the plaintiff makes an offer that is not accepted by the defendant and the plaintiff obtains an order no less favourable than the offer; and

(b) the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer; the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.

(2) If the plaintiff makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule.

Discussion

The plaintiff’s first offer, totalling $537,807.03, was open from 12 November 2014 for 14 days. The offer was not accepted and judgement was entered for the plaintiff for $663,000 in March 2017. Searles DCJ went on to state:

[6] Prima facie, rule 360 of the UCPR entitles the Plaintiff to recover costs on an indemnity basis. Once rules 360(1)(a) and (b) are satisfied, the onus shifts to the defendant to show that in the circumstances, a costs order, other than indemnity costs is appropriate. The Defendant submits the appropriate order is that the Defendant pay the Plaintiff’s costs on a standard basis. There is no issue that, in terms of rule 360(1)(b), the Plaintiff was, at all material times, willing and able to carry out what was proposed in the offer.

[10] Relying on Castro, the Defendant submits that the Plaintiff’s case was significantly enlarged after the Plaintiff’s First Offer was made but not accepted. Accordingly, the argument runs there is good reason for refusing the plaintiff indemnity costs notwithstanding the judgment obtained by the Plaintiff at trial was no less favourable than the Plaintiff’s First Offer of $450,000.

[15] However, I am of the view that the circumstances as at the date of the Plaintiff’s First Offer on 12 November 2016 changed significantly after that offer was not accepted. Up until ten days prior to the trial, the Mineral Collection was valued at $505,000. With the second valuation report of 12 August 2016, the value rose to $650,000, almost a 29 percent increase.

Finding that it was not appropriate to assess costs on an indemnity basis for rejecting the first offer, his Honour went on to consider whether the second offer by the plaintiff was a Calderbank offer:

[18] Although the Plaintiff’s Second Offer was headed ‘WITHOUT PREJUDICE SAVE AS TO COSTS’, the terms of the offer lacked certain defining features usually found in Calderbank Offers. There is no specific mention of the offer being one in accordance with the principles enunciated in the decision of Calderbank v Calderbank….

[19] I am satisfied on balance, that the form of the Plaintiff’s Second Offer was sufficient to alert the Defendant that it was dealing with what would otherwise be a Calderbank offer…

[20] The weight of authority favours the view that a Calderbank offer does not lead to a presumptive entitlement to indemnity costs, but rather to the exercise of a discretion to which the existence of such an offer carries considerable weight. As such, the right to indemnity costs is not automatic where a Calderbank offer is rejected and the final judgment exceeds such an amount…

Finding that the rejection of the second offer was not unreasonable, his Honour concluded that the defendant pay the plaintiff’s costs on a standard basis:

[22] In all of the circumstances, I do not consider the Defendant’s refusal of the Plaintiff’s Second Offer unreasonable. Although on its face, the Plaintiff’s Second Offer can be considered to contain a genuine element of compromise, the Plaintiff has not pointed to any imprudent or unreasonable conduct by the Defendant in refusing it. Despite any reference to rule 360 UCPR, an indemnity costs application was not foreshadowed by the Plaintiff in the event the Plaintiff’s Second Offer was rejected. The offer was made on Friday 19 August 2016, with the trial due to begin the following Monday 22 August 2016. Further, the Defendant was given only five hours to consider its position and provide a response, with the offer expiring at 4pm the same day. The Defendant’s refusal of the Plaintiff’s Second Offer does not justify the award of indemnity costs from the date of that offer.

 

David Cormack – Brisbane Barrister & Mediator

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