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- Unreported Judgment
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Oaks Hotels & Resorts Limited v Knauer  QCATA 90
OAKS HOTELS & RESORTS LIMITED
ACN 113 972 366
NATASHA CORAL KNAUER
ORIGINATING APPLICATION NO/S:
10 June 2020
11 March 2020
Senior Member Aughterson
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS – APPEALS AS TO COSTS – QUEENSLAND – LEAVE GIVEN TO APPEAL – where appeal against costs order – whether error by tribunal – whether leave should be given – whether appeal tribunal should make order for costs – whether costs should be on indemnity basis – where there is a question as to the application of principles relating to Calderbank offers
Queensland Civil and Administrative Tribunal Act 2009 (Qld), ss 3(a), 9(1), 33(1), 34, 35(1), 36, 100, 102, 103, 104, 105, 146, 147, 224, Schedule 2 s 17(a)
Queensland Civil and Administrative Tribunal Rules 2009 (Qld), r 86
Uniform Civil Procedure Rules 1999 (Qld), Chapter 9 Part 5
Al-Bayati v NRMA Insurance for the Nominal Defendant (No 2)  NSWCA 14
Brittain v The Commonwealth (No. 2)  NSWCA 427
Calderbank v Calderbank  3 All ER 333
Cutts v Head  1 Ch 290
Danidale Pty Ltd v Abigroup Contractors Pty Ltd (No 2)  VSC 552
Dee Why Auto Clinic v Roads and Maritime Services (No. 2)  NSWSC 478
Dwyer Corporation Pty Ltd t/as Dwyer Quality Homes v Dunne  QCATA 193
Evans Shire Council v Richardson  NSWCA 61
Field v Commissioner for Railways (NSW) (1957) 99 CLR 285
Glengallan Investments Pty Ltd v Andersen  1 Qd R 233
Groves v Matt O’Connor & Associates Pty Ltd  NSWSC 817
House v The King (1936) 55 CLR 499
Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242
J&D Rigging Pty Ltd v Agripower Australia Pty Ltd  QCA 23
Johns Perry Industries Pty Ltd v International Rigging (Aust.) Pty Ltd  2 Qd R 556
Lyons v Dreamstarter Pty Ltd & Anor  QCATA 43
McAndrew v AAI Ltd (No 2)  QSC 317
McGee v Queensland Building and Construction Commission & Anor  QCATA 124
Neverfail Pty Ltd as Trustee for The Harris Siksna Family Trust & Anor v Radford (No. 2)  QCATA 73
Northbound Property Group Pty Ltd v Carosic (No 2)  QSC 189
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd; United States Surgical Corp v Hospital Products International Pty Ltd (1981) 148 CLR 457
Roberts v Prendergast  QCA 89
State of Queensland & Anor v Bell  QCATA 176
Wallis Lakes Fisherman's Co-Operative Ltd v ACN 079 830 595 t/as Jolly Joe's Fish 'n 'Chips (no. 2) (RLD)  NSWADTAP 29
Westpac Banking Corporation v Jamieson & Ors  QCA 84
Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311
Wojcic v Nominal Defendant (No 2)  VR 533
R Perry QC, with J Merrell instructed by Aitken Legal
D P O’Gorman SC, with R E Reed instructed by Maurice Blackburn
REASONS FOR DECISION
- By application for leave to appeal or appeal filed on 12 April 2019 (‘the Application’), the third respondent in this proceeding (‘Oaks’) applies for leave to appeal a costs order made by the learned Member below (‘the Member’) dated 5 March 2019 (‘the costs order’). The costs order was made against Oaks in favour of the respondent to the Application (who was the applicant below) (‘Ms Knauer’).
- The formal orders made by the Member were as follows:
- The Order of the Tribunal made 27 February 2013 continues in force.
- [Oaks] pay [Ms Knauer’s] costs of the proceeding on the standard basis up to 6 April 2016 and on an indemnity basis from that date.
- The costs of the proceeding include all costs of preparation for the first hearing and the costs of the first hearing from 18-20 February 2013 as well as the costs of preparation for the rehearing and the costs of the rehearing from 18, 19 and 20 May 2016 together with the costs of the submissions in relation to costs.
- The costs payable by [Oaks] be on the District Court Scale as agreed or failing agreement to be assessed at [Oaks’] expense.
- The proceeding had a protracted history leading up to the costs order. The matter was first heard on 18, 19 and 20 February 2013 (‘the first hearing’) and a decision issued on 24 August 2014. On 24 December 2015, the Appeal Tribunal (‘the original Appeal Tribunal’) ordered that this decision be set aside and the proceeding remitted to the Tribunal for rehearing in May 2016. The matter was dealt with by way of rehearing on 18, 19 and 20 May 2016 (‘the second hearing’) and a decision issued on 6 December 2016 after which the parties were ordered to make submissions in relation to costs. Oaks filed an appeal in the Appeal Tribunal, and in the Court of Appeal, in respect of the substantive matter but both found in favour of Ms Knauer. The question of costs was determined on the papers with the Tribunal issuing a decision on 5 March 2019 (‘the Decision’). This is the decision the subject of the application.
- The grounds of appeal are 17 in number.
- Mr Perry QC, who led Ms Merrell, for Oaks, informed the Appeal Tribunal that there was no challenge to the costs order to the extent that it provided for the costs of the second hearing (on the standard basis of assessment).
- Oaks’ challenge to the costs order may be summarised as involving two aspects (which we shall address in that order):
- (a)the order for costs in respect of the first hearing; and
- (b)the order for costs of the proceeding on the indemnity basis on and from 6 April 2016.
Leave to appeal
- There is no dispute that Oaks requires the leave of the Appeal Tribunal to appeal the costs order.
- The applicable principles in considering an application for leave to appeal are as follows:
- (a)Is there a reasonably arguable case of error in the primary decision?
- (b)Is there a reasonable prospect that the applicant will obtain substantive relief?
- (c)Is leave necessary to correct a substantial injustice to the applicant caused by some error?
- (d)Is there a question of general importance upon which further argument, and a decision of the appellate court or Tribunal, would be to the public advantage?
- In the context of a costs order, it has been said that the Tribunal will presume that the ‘generous margin of discretion’ was exercised properly, unless confidence in it can somehow be shaken to the point that allowing the order to stand might be substantially unjust in all the circumstances.
Costs of first hearing
- Oaks’ challenge to this aspect of the costs order may be summarised as involving two categories, first, that the costs of the first hearing were no longer a live issue following the original Appeal Tribunal’s decision, with the consequence that the Member had no power to make an order for costs in respect of the first hearing, and second, various challenges to specific findings by the Member in concluding that Oaks should pay Ms Knauer’s costs of the first hearing.
No power to order costs of first hearing?
- The decision in the first hearing was dated 29 August 2014. Oaks and the other Oaks’ company (being the first respondent) filed an application for leave to appeal that decision. At a directions hearing on 10 December 2015, the parties handed up a proposed consent order for the Appeal Tribunal’s consideration.
- That draft order was in the following terms:
- Appeal allowed.
- The decision of the Tribunal of 29 August 2014 in Case No. ADL005/12 is set aside.
- [Ms Knauer’s] application for relief is remitted to the Tribunal for re-hearing by a different member.
- Costs of the appeal are reserved.
- Costs of [Ms Knauer’s] application prior to the decision on 29 August 2014 are reserved.
- By its decision dated 24 December 2015, the original Appeal Tribunal considered the grounds of appeal and allowed the appeal. The original Appeal Tribunal made the following orders:
- Leave to appeal granted.
- Appeal allowed.
- The decision of 29 August 2014 is set aside.
- The proceeding is remitted to the tribunal, constituted by a different member, for rehearing.
- The original Appeal Tribunal did not make any express order in relation to costs of the first hearing.
- Oaks submits that in circumstances where the Appeal Tribunal opted not to reserve costs of the first hearing (despite draft consent orders proposing that the costs be reserved), there is no power in either the Rules or the QCAT Act to order costs of an earlier hearing upon ‘remittal’ from an Appeal Tribunal decision.
- Subsequent to the hearing, as directed by the Appeal Tribunal, each of the parties provided further authorities, including authorities that may address this issue.
- Oaks could not point to an authority concerning the specific position in the present case but noted that there was authority in ordinary civil litigation that where an Appeal Court does not make any orders as to the costs of a first trial, those costs are at the discretion of the Judge who hears the second trial: Wojcic v Nominal Defendant (No 2).
- Ms Knauer cited three cases: Brittain v The Commonwealth (No. 2); Dee Why Auto Clinic v Roads and Maritime Services (No. 2); Wallis Lakes Fisherman's Co-Operative Ltd v ACN 079 830 595 t/as Jolly Joe's Fish 'n' Chips (no. 2) (RLD). The first two of those cases address the ‘general rule’ that where a new trial is ordered, the costs of the first trial will follow the event of the new trial (absent some disentitling conduct by one of the parties). However, we do not consider that those cases are germane to the particular issue here. With respect to the third case, Wallis, that decision relevantly concerned a question of construction of the particular costs order made.
- In our view, the present question turns on the proper construction of the relevant provisions of the QCAT Act.
- In the reasons of the original Appeal Tribunal, the stated grounds for allowing the appeal were said to involve, respectively, questions of law and questions of mixed law and fact (although the respective bases were not individually identified in the reasons). However, it can be reasonably concluded that, for example, paragraphs  and  involved a question of law only, while paragraphs  and  involved a mixed question of law and fact.
- The QCAT Act contains separate provisions for appeals involving a question of law only and appeals involving a mixed question of law and fact (or question of fact).
- Section 146 deals with the former and provides:
In deciding an appeal against a decision on a question of law only, the appeal tribunal may—
- (a)confirm or amend the decision; or
- (b)set aside the decision and substitute its own decision; or
- (c)set aside the decision and return the matter to the tribunal or other entity who made the decision for reconsideration—
- (i)with or without the hearing of additional evidence as directed by the appeal tribunal; and
(ii) with the other directions the appeal tribunal considers appropriate; or
- (d)make any other order it considers appropriate, whether or not in combination with an order made under paragraph (a), (b) or (c).
- Section 147 deals with a question of fact only or a mixed question of law and fact and is in the following terms:
- (1)This section applies to an appeal before the appeal tribunal against a decision on a question of fact only or a question of mixed law and fact.
- (2)The appeal must be decided by way of rehearing, with or without the hearing of additional evidence as decided by the appeal tribunal.
- (3)In deciding the appeal, the appeal tribunal may—
- (a)confirm or amend the decision; or
- (b)set aside the decision and substitute its own decision; or
- (c)set aside the decision and return the matter to the tribunal or other entity who made the decision for reconsideration.
- In our view, the orders by the original Appeal Tribunal fell within the scope of each of s 146(c) and s 147(3)(c) respectively, namely, to ‘set aside the decision and return the matter to the tribunal … for reconsideration’ (notwithstanding the reference to the ‘proceeding’ rather than the ‘matter’, that it be ‘remitted’ rather than ‘returned’, and that it be remitted for ‘rehearing’ rather than ‘reconsideration’).
- Section 146 provides for an Appeal Tribunal to return the matter with ‘the other directions the appeal tribunal considers appropriate’; or to make ‘any other order it considers appropriate’, whether or not in combination with an order made under, relevantly, s 146(c). No corresponding provisions appear in s 147; rather, under s 147(3)(c) the relevant order that may be made is to set aside the decision and return the matter to the Tribunal (or other entity who made the decision) for reconsideration.
- Insofar as ss 146 and 147 provide for the return of the ‘matter’ for reconsideration (a term which is not defined), having regard to the QCAT Act as a whole, we consider that the term ‘matter’ refers to the subject matter for determination in a proceeding before the Tribunal (which it has jurisdiction to hear and determine).
- In our view, upon being set aside by the original Appeal Tribunal, the original decision ceased to have legal effect. The setting aside of the decision necessarily set aside that part of the original decision dealing with the issue of costs. As the original Appeal Tribunal’s reasons state, the decision on costs should be ‘set aside’. We consider that an express order was not needed to reserve the question of costs of the first hearing for determination on the ‘rehearing’; the issue of costs, along with the issues of liability and quantum, remained to be determined upon reconsideration of the matter by the Tribunal. In our view, the subject matter of the proceeding included the question of costs; it remained part of the ‘matter’ to be reconsidered. This is so regardless of whether, as in this case, the parties proposed a draft order which included an order that Ms Knauer’s costs of the application prior to the decision on 29 August 2014 be ‘reserved’.
- In our view, the question of costs would need to have been addressed if the original Appeal Tribunal had determined that it could substitute its own decision under s 146(b) or s 147(3)(b) of the QCAT Act. However, that is not the case here. The decision was set aside and the whole of the subject matter returned to the Tribunal for ‘rehearing’.
- We also reject Oaks’ argument that the original Appeal Tribunal made a determination consistent with the ‘statutory presumption’ (in s 100 of the QCAT Act) that no order for costs should be made. There is no indication in the Reasons that this was the intention of the original Appeal Tribunal. There are no grounds to infer that the Appeal Tribunal proceeded on that basis. While it is unnecessary to decide, it is arguable that the Appeal Tribunal had no power to make an order for costs below once it decided that the decision should be set aside and returned for reconsideration, at least insofar as the appeal was allowed pursuant to s 147(3)(c) (the position may be otherwise in relation to an appeal on a question of law only having regard to s 146(c)(ii) and (d)).
- For the above reasons, we conclude that the Member had power to deal with the costs of the first hearing. Oaks has not demonstrated any reasonably arguable error in the Member’s findings that the costs incurred up to and including the first hearing were costs in the proceeding (and remained a live issue) which the Member had power to determine.
Miscellaneous challenges to the order for costs of the first hearing
- Oaks contends that the Member erred in law in holding, at Reasons paragraph 23, that it was ‘irrelevant’ that Ms Knauer agreed that the Oaks respondents’ appeal from the first decision be allowed.
- The Member’s statement that she considered it irrelevant that Ms Knauer agreed with the appeal needs to be considered in context. Paragraph 23 of the Reasons states in full:
I consider it irrelevant [Ms Knauer] agreed with the [Oaks respondents’] appeal from the first decision. There is nothing to suggest [Ms Knauer] conceded her case was without merit. On the contrary the step appears to be a pragmatic one which would have had the effect of reducing the costs of the appeal for [Ms Knauer]. Remitting the proceeding for rehearing addressed problems in the treatment of evidence, paucity of reasons and a misstatement of s133 of the Anti-Discrimination Act 1991 (Qld) in the first decision. The appeal decision did not make any findings in favour of the [Oaks respondents] in relation to the merits of the matter which would justify denying [Ms Knauer] her costs of the proceeding leading to the first decision.
- In our view, on a reading of paragraph 23 as a whole, the Member’s reference to ‘irrelevant’ should be taken to mean that Ms Knauer’s consent to the allowing of the appeal did not warrant the denial of a costs order in favour of Ms Knauer in respect of the first hearing. This is particularly apparent from the last sentence of that paragraph. On the present Application, save for the first sentence, Oaks did not, as we apprehended its case, challenge any of the reasoning in the balance of paragraph 23 of the Reasons. Whilst the choice of the word ‘irrelevant’ was not ideal, the reasoning in paragraph 23 as a whole is sufficiently clear as we have indicated. Oaks has failed to make out that there was any reasonably arguable case of an error of law in relation to the conclusion reached in paragraph 23 (and even if an error could be demonstrated, we would have concluded that any such error did not cause substantial injustice to Oaks).
- Oaks contends that the Member erred in law in holding, at Reasons paragraph 24, that it would be unjust to ignore the costs incurred by Ms Knauer associated with the first hearing. Ground 4, as framed, raises not an error of law but an alleged error of fact or, perhaps, one of mixed fact and law.
- Again, this statement by the Member needs to be read in context. The Member said, at paragraphs 24 to 25 of the Reasons:
 I consider it would be unjust for such extensive costs to be ignored, particularly as the parties took a practical approach in seeking to limit the costs of the rehearing by utilising the evidence and transcript from the first hearing.
 To the extent that I order that the Third Respondent pay [Ms Knauer’s] costs of the proceeding, I include the costs related to the first hearing which were necessary and proper costs of prosecuting the matter. I exclude the costs of APL423-14 because they have not been sought.
- The Member found that the costs related to the first hearing were ‘necessary and proper’ costs of prosecuting the matter.
- Earlier in her Reasons, the Member said:
 By Order made 22 February 2016, material admitted into evidence at the rehearing included evidence and the transcript from the initial hearing. The decision dated 6 December 2016 sets out amendments to affidavit material and certain admissions in relation to the content of medical reports.
 The Third Respondent relied extensively on the transcript of the first hearing and [Ms Knauer’s] submissions at the time of the first hearing for the purpose of promulgating its argument that [Ms Knauer] was not a witness of credit.
 [Ms Knauer’s] material, evidence, conduct of the first hearing and submissions were all considered and formed an integral part of the rehearing and consequent decision. The fact that the decision arising out of the first hearing was set aside, does not change the necessity for the Applicant to incur those costs in the ultimate determination of this matter We additionally note that the order of 22 February 2016 was made by the consent of the parties.
- Mr Perry QC submitted that it was not adequate or appropriate to ‘simply blanket order’ the totality of the costs of the first hearing in a way that the Member did; in particular, counsels’ fees in conducting the first hearing could not be characterised as part of the preparation for the second hearing.
- However, Oaks did not identify any particular part of the material admitted by the Tribunal that was irrelevant to the second hearing, much less that any irrelevant material constituted a significant component of the evidence admitted. Further, Oaks has not demonstrated any arguable error in paragraphs 19 to 21 of the Reasons.
- Counsel for Ms Knauer were the same in the first and second hearings and we accept Ms Knauer’s submission that the evidence which was admitted (including cross- examination in the first hearing) was a result of the presence of Counsel at the first hearing.
- In our view, there can be no challenge to the conclusion that the costs incurred by Ms Knauer in relation to the first hearing formed part of the costs incurred in the ultimate determination of the matter and that there were ample facts to support the conclusion reached at paragraph 24 of the Reasons. Oaks has failed to make out that there was any reasonably arguable case of an error of law in relation to paragraph 24.
- Having rejected that challenge, we consider that this impacts the remaining complaints made by Oaks in relation to the costs of the first hearing. Given our view that the costs of that hearing properly fell to be considered in conjunction with the costs of the second hearing, it is difficult to identify why the former costs should be disallowed yet the latter costs order stand (as is now accepted by Oaks). Nevertheless, we will consider the remaining grounds concerning the costs of the first hearing.
- This ground is expressed in broad terms and seeks to generally challenge the exercise of the discretion to award costs to Ms Knauer in respect of the proceeding as expressed in paragraphs 26 and 36 of the Reasons. Oaks does not (now) seek to challenge that aspect of the orders below which concerned the costs of the second hearing (leaving aside the issue of awarding costs on the indemnity basis). Oaks does not identify the specific error of law said to vitiate the conclusion reached by the Member but it may be interpolated that, in reliance upon House v The King, Oaks is seeking to contend that such an order was unreasonable such that the Appeal Tribunal may infer that in some way there has been a failure to properly exercise a discretion reposed in the Member. For the reasons set out above in respect of Grounds 3 and 4 and those that follow, we reject any such contention.
- Oaks contends that the Member erred in law or, alternatively, in respect of a matter of mixed fact and law in holding, at Reasons 28(c), that Ms Knauer had a strong case. Oaks points to a number of matters in paragraphs 40 and 41 of its written submissions in support of the contention that the Oaks respondents’ cases at first instance were ‘not weak’.
- We consider that Oaks had what can be described as a reasonably arguable case. Ms Knauer does not suggest that Oaks’ defence was without substance. However, in our view, the fact that Oaks had a reasonably arguable case is not inconsistent with the Member’s conclusion that Ms Knauer had a ‘strong case’. As submitted on behalf of Ms Knauer, Oaks was not successful on any aspect of its defence. Oaks’ argument in respect of vicarious liability was unanimously rejected by the Queensland Court of Appeal. Otherwise, Ms Knauer successfully prosecuted her case in respect of liability and quantum, receiving a substantial award of compensation. The attacks on Ms Knauer’s credit were rejected. Ms Knauer was wholly successful and we find that the Member’s conclusion at Reasons 28(c) is unassailable.
- Oaks contends that the Member erred in law or, alternatively, in respect of a matter of mixed fact and law in holding, at Reasons 28(d), that the proceeding was complex. Oaks’ written submissions accept (we think inconsistently with this ground of appeal, as framed) that the dispute was ‘complex’. However, Oaks submits that the fact that Ms Knauer was successful does not, of itself, mean that it is in the interests of justice that Ms Knauer should be awarded costs. However, the Member did not find that the complexity of the proceeding, of itself, justified the costs order made. Rather, it was one of the factors that the Member relied upon in reaching her conclusion as to the appropriate order for costs. Oaks has not established any reasonably arguable ground of error in this regard.
- Oaks contends that the Member erred in law in holding, at Reasons 28(e) and (h), that the decision in State of Queensland & Anor v Bell (‘Bell’), when applied to the facts found by the Member, supported a finding that a refusal to order costs would diminish or exhaust the award in favour of Ms Knauer.
- We consider the particular gravamen of this complaint, as framed, is difficult to discern. In our view, the statement of the Member at Reasons 28(e) that a refusal to order costs would diminish or exhaust the award in favour of Ms Knauer amounts to a factual finding and the reference to the decisions cited at footnote 2 of that decision provide authority for the proposition that this may be a factor in assessing the question of costs.
- In oral submissions, Mr Perry QC submitted that paragraph 28(e) of the Reasons was ‘right’ but that would be the case at least in part in every matter and it also runs into the statutory presumption in s 100 of the QCAT Act.
- At paragraph 48 of Oaks’ written submissions, it is contended that while there is authority for the proposition that it may be in the interests of justice to award costs to avoid the success of litigation being eroded by the unrecovered cost of reasonably necessary legal representation, the award by the Tribunal on the second hearing is not modest and was in a (significant) amount of $291,983.67.
- In our view, the relevant paragraphs of the judgment of the Appeal Tribunal in Bell are incorrectly cited in footnote 2 of the Reasons. The relevant passages are cited correctly by Oaks at footnote 8 of its written submissions. Those passages are:
 On the basis that it is legitimate to have regard to developed practices and the way a particular type of hearing has been historically dealt with – including by a predecessor body operating under comparable costs provisions – the approach taken in Tamawood Ltd & Anor v Paans provides ‘guidance about the circumstances in which it may be in the interests of justice for this tribunal to award costs against parties’ under the QCAT Act.
 In that case, Keane JA postulated that, even in a ‘no cost’ regime and all other things being equal, it would be both irrational and inimical to the interests of justice to:
- deter legally unsophisticated or vulnerable parties from enforcing ‘just claims’ via complex adversarial litigation by denying them the costs of beneficial legal assistance; or
- allow success in litigation to be eroded by the unrecovered cost of ‘reasonably necessary’ (and invariably very expensive) legal representation; or
- treat as a disqualifying factor the choice of litigation as the means of redressing a wrong over other equally legitimate and available but not necessarily as effective alternative dispute resolution options. (footnotes omitted)
- In Bell, it was also said:
We consider the objectives of the anti-discrimination legislation under which the proceedings were commenced to have a human rights focus, intended to be socially beneficial. This legislation should not be seen as analogous to commercial claims where citizens seek redress for civil wrongs by way of financial compensation. Complainants with genuine claims of unlawful discrimination and harassment should not be discouraged in their pursuit of human rights based objectives by fear of adverse costs consequences, and granting costs to the respondent here is consistent with policy aims. (citation omitted)
- Oaks does not seek to challenge the principles espoused in Bell.
- While we accept that the award was a significant one, we consider it material to take into account the extent of the costs incurred by Ms Knauer, particularly given the nature of Ms Knauer’s claim.
- As submitted on behalf of Ms Knauer, given the duration of the first hearing and the second hearing, the retention of both senior and junior Counsel and the engagement of expert witnesses, there can be no serious doubt that Ms Knauer’s costs were significant. While the award of compensation was a large one, so too was the amount of costs that would have been incurred by Ms Knauer in prosecuting her claim. The Member accepted that the costs were ‘high’. In our view, in a case such as this, the potential erosion of a large award of compensation by a liability to pay a large amount of costs from such award was a material consideration for the Member to take into account and Oaks has not established any reasonably arguable ground of error in this regard. The Member did judge the case on its merits in this regard.
- Oaks contends that the Member erred in law in holding, at Reasons 28(f), that if the award of compensation to Ms Knauer was diminished by the need to meet her own costs, it would not be unreasonable to conclude the system of justice had failed her as a genuine applicant for relief.
- As we read Oaks’ written submissions, they do not specifically address, in terms, Ground 9 of the Application. In paragraphs 28 to 32 inclusive of the written submissions, Oaks submitted that it did not act in a way that unnecessarily disadvantaged Ms Knauer. Oaks also submitted that the length of the proceeding was not caused by the conduct of the Oaks’ respondents and that the interests of justice go both ways. In his oral submissions, Mr Perry QC submitted if it was not unreasonable to conclude that the system of justice had failed Ms Knauer, that did not provide a basis for ordering costs against Oaks in circumstances where the long delays in the case had nothing to do with his client’s conduct and that this was an irrelevant consideration and, further, it ‘infected’ the entirety of the Member’s approach to the question of costs, including indemnity costs. We immediately reject that part of the submission that contends that the Member’s order in relation to indemnity costs was infected by the observations made in paragraph 28(f). The Member addressed the question of indemnity costs discretely and her focus was on the settlement offer that was made and the impact of rule 86.
- As to the balance of the submission, we note that paragraph 28(f) of the Reasons states (in full):
the sexual assault giving rise to this proceeding took place on 1 December 2010. [Ms Knauer] has persevered in her claim over an extraordinarily long period of time. She has had to bear the stresses and difficulties of litigation over that period. If her award of compensation is diminished by the need to meet her own costs it would not be unreasonable to conclude the system of justice has failed her as a genuine applicant for relief; ...
- The Member did not attribute the delay in the litigation to Oaks. The Member accepted that the Oaks respondents did not act in a way that unnecessarily disadvantaged Ms Knauer and that they conducted their defence in a way open to them. The Member weighed that against other factors in reaching the decision. The Member said the following in this context:
 The Third Respondent submits that the First and Third Respondents did not act in a way that unnecessarily disadvantaged the Applicant. I accept that the First and Third Respondents at the earlier hearing and the Third Respondent at the rehearing conducted their defence in a way open to them.
 However, when weighed against the other factors which suggest that it is in the interests of justice that an order for costs be made, the fact that the Respondents may have conducted themselves appropriately is not a sufficient reason to refuse to award costs to the successful Applicant.
- In our view, the Member’s observations in subparagraph 28(f) need to be read in context, including the immediately preceding subparagraph 28(e) as well as subparagraph 28(h). The factual matters stated in the first three sentences of subparagraph 28(f) have not been disputed. As noted above, the erosion of costs in a case such as the present was a material consideration for the Member on the question of costs. Whilst we would not frame the consequences of denying Ms Knauer her costs as amounting to a failure of the system of justice, we accept that the factual matters mentioned by the Member formed part of the overall circumstances that she was entitled to have regard to in carrying out the balancing exercise of determining whether it was in the interests of justice to make an order for costs in favour of Ms Knauer.
- Regardless, we would not grant leave to appeal on this ground because, first, there is no reasonable prospect that Oaks will obtain substantive relief and, second, leave is not necessary to correct a substantial injustice to Oaks caused by the alleged error.
- We find that the other factors identified by the Member provide a proper basis for the award of costs of the second hearing. Oaks does not challenge the order insofar as the (standard) costs of the second hearing are concerned. In circumstances where the Member correctly concluded that the costs related to the first hearing were necessary and proper costs of prosecuting the matter, it was appropriate that those costs be awarded in favour of Ms Knauer in conjunction with the costs in respect of the second hearing, at least on the standard basis of assessment.
- Oaks contends that the Member erred in law in holding, at Reasons 29 and 30, that the fact that the Oaks respondents did not act in a way that disadvantaged Ms Knauer and conducted their defence in a way that was open to them, was not a sufficient reason to refuse to costs to Ms Knauer.
- Those paragraphs from the Member’s Reasons are set out at paragraph 59 above. We consider that this ground of appeal ignores the context of those reasons. The Member’s Reasons on the primary order for costs are addressed in paragraphs 26 to 36 inclusive. We consider that the Member’s reasons at paragraphs 29 to 30, properly construed, convey that the particular matters raised by Oaks were not, of themselves, sufficient to outweigh the competing factors and that a consideration of the circumstances as a whole suggested that it was in the interests of justice to award costs in favour of Ms Knauer.
- Oaks has not established any reasonably arguable ground of error in this regard.
- For the reasons set out above, Oaks has failed to demonstrate that the grant of leave is warranted insofar as the costs of the first hearing are concerned. Leave to appeal the decision in that respect is refused.
- We now address Oaks’ challenge to the award of indemnity costs which was the subject of Order 2 below.
- Grounds 11-17 of the Application address the issue of indemnity costs. The Member dealt with the question of whether costs should be awarded on the indemnity basis at Reasons - and concluded that such an order should be made from the date of the Offer (6 April 2016). The sole basis for the award of indemnity costs from that date was Oaks’ rejection of the Offer. The Member found that the Offer was more favourable than the ultimate decision and that it was ‘unreasonable’ of Oaks to reject the Offer.
- For the reasons that follow, we consider that leave to appeal should be granted. We consider that there is a reasonably arguable case of error in the Decision; that there is a reasonable prospect that Oaks will obtain substantive relief; that leave is necessary to correct a substantial injustice to Oaks based on the fact that it has been ordered to pay costs on the higher scale of indemnity costs; and this part of the Application raises questions of general importance upon which a decision of the Appeal Tribunal would be to the public advantage, namely the issues of without prejudice privilege (involving the form of the Offer) and also the intersection between the principles applicable to Calderbank offers and the operation of rule 86.
Without prejudice issue
- Ground 11 (and in part Ground 12) raises the question of whether the Offer was in the form of a Calderbank offer and whether the Member could properly have regard to it on the basis that it was headed ‘Without Prejudice’ rather than adopting the usual form of ‘Without Prejudice save as to costs’. Oaks submits that the communication is privileged and was not able to be aired at trial as it was ‘privileged’ and such privilege had not been waived.
- With respect to ‘without prejudice privilege’, as a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. Since the decision in Calderbank v Calderbank (‘Calderbank’), it has been permissible for a party to place before the Court, on the question of costs, an appropriately worded without prejudice offer of settlement. We accept that the usual manner in which this is done is by the inclusion of the phrase ‘Without prejudice save [except] as to costs’ in an offer of settlement. The question is whether the failure by Ms Knauer to include the words ‘save as to costs’ after ‘Without prejudice’, meant that the Offer was cloaked with without prejudice privilege.
The reference to the decision of Calderbank v Calderbank was intended to convey and does convey to a reader able to read the decision, that the counter-offer is ‘without prejudice except as to costs’. It is not necessary to say that the counter-offer is made without prejudice except as to costs because that is what reference to the principles in Calderbank v Calderbank means …
- In our view, it was clear from the reference to Calderbank in the Offer, coupled with a foreshadowed claim for costs in paragraph 6 of the Offer, that the Offer was one falling within the Calderbank exception such that it could be relied upon on the question of costs. We find that no error has arguably been shown in the conclusion reached by the Member that she was entitled to take the Offer into account in assessing whether indemnity costs could be awarded.
- Grounds 12 (in part) to 17 of the proposed grounds of appeal (and Oaks’ written submissions) raise various challenges to the Member’s approach to the Offer and the application of rule 86 of the Rules. It is convenient to commence with an analysis of rule 86.
- Rule 86 is headed ‘Additional power to award costs if particular offers to settle rejected’. It provides:
- (1)This rule applies if—
- (a)a party to a proceeding, other than a proceeding for a minor civil dispute, makes another party to the proceeding a written offer to settle the dispute the subject of the proceeding; and
- (b)the other party does not accept the offer within the time the offer is open; and
- (c)in the opinion of the tribunal, the decision of the tribunal in the proceeding is not more favourable to the other party than the offer.
- (2)The tribunal may award the party who made the offer all reasonable costs incurred by that party in conducting the proceeding after the offer was made.
- (3)If a proceeding involves more than 2 parties, this rule applies only if the acceptance of the offer would have resulted in the settlement of the matters in dispute between all the parties.
- (4)In deciding whether a decision is or is not more favourable to a party than an offer, the tribunal must—
- (a)take into account any costs it would have awarded on the date the offer was given to the other party; and
- (b)disregard any interest or costs it awarded relating to any period after the date the offer was given to the other party.
- Rule 86 is made under the authority of ss 105 and 224 of the QCAT Act. The subject matter of the Rules may include costs generally, including ‘additional circumstances’ for which costs may be awarded. Section 105 is headed ‘Other power to award costs’. It provides that the Rules may authorise the Tribunal to award costs in other circumstances, including, for example, the payment of costs in a proceeding if an offer to settle the dispute the subject of the proceeding has been made but not accepted. The phrase ‘other circumstances’ is not defined. Reading Division 6 of Chapter 2 as a whole, we consider that the phrase refers to circumstances other than those identified in ss 102, 103 and 104 respectively, each of which provides for an exception to the presumption set out in s 100 that each party to a proceeding must bear the party’s own costs for the proceeding. In particular, we consider that the combined operation of s 105 and rule 86 stands independently of the operation of s 102, such that it is unnecessary to establish that it is in the interests of justice to order costs in favour of one of the parties if an operative offer to settle was made falling within the scope of rule 86. If the operation of s 105 and rule 86 required a finding that it was in the interests of justice within the meaning of s 102 that costs be awarded, we consider that this would limit the operation of rule 86 in a manner not intended by the legislature.
- We make the following further observations about the operation of rule 86.
- First, it does not contain the same level of prescriptive provisions for offers to settle contained in Part 5 of Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld), particularly in relation to the costs ramifications of a failure to accept an offer under the Rules.
- Second, it provides, by subsection (1), three preconditions to its operation, there must be a written offer, by a party to a proceeding to another party to that proceeding, to settle the dispute the subject of the proceeding; the other party does not accept the offer within the time the offer is open; and in the opinion of the Tribunal, the decision of the Tribunal in the proceeding is not more favourable to the other party than the offer.
- Third, in deciding whether a decision is or is not more favourable to a party than an offer (as provided by sub-rule 86(1)(c)), sub-rule 86(4) prescribes two matters which the Tribunal must address; it must take into account any costs it would have awarded on the date the offer was given to the other party; and it must disregard any interest or costs it awarded relating to any period after the date the offer was given to the other party.
- Fourth, a written offer to settle made in accordance with the Calderbank principles (including an offer described as ‘Without prejudice save [or except] as to costs’) qualifies as an offer for the purposes of rule 86 regardless of whether it is expressed to be made under rule 86 and we reject Oaks’ submission that express reference to the rule is required. Rule 86 contains no such express requirement and there is nothing in its language that a statement of reliance on rule 86 is required.
- Fifth, if the Tribunal is satisfied that preconditions have been satisfied, a discretion arises as to whether costs should be awarded against the party failing to accept the offer. In our view, sub-rule 86(2) plays a dual role. In the first instance, it may provide a basis for ordering costs in favour of one party in circumstances where the usual order as to costs under s 100 would apply, absent the offer to settle. That is, costs may be awarded under rule 86 (by virtue of s 105) even if the interests of justice do not justify an award of costs under s 102. In the second instance, the Tribunal has a discretion whether to award such costs on the standard basis or on the indemnity basis. It is settled law in the Appeal Tribunal that the reference in rule 86(2) to ‘all reasonable costs incurred’ includes an order for costs on the indemnity basis. We are of the view that, if sub-rule 86(2) is engaged, the Tribunal is not required to award costs on the indemnity basis but may award costs on the standard basis. In the present case, the Offer was material to the question of indemnity costs only, the Member having found that it was in the interests of justice to award Ms Knauer the (standard) costs of the first and second hearings.
- Sixth, in exercising the discretion under sub-rule 86(2), we consider that the applicable test is whether the offeree acted unreasonably or imprudently in rejecting the offer and that the onus is on the offeror to demonstrate the unreasonableness of rejection by the other party (consistently with the principle applied to Calderbank offers). In determining this question under sub-rule 86(2), we also consider that, consistently with the approach adopted by the Queensland Court of Appeal in relation to Calderbank offers on appeal, account must be taken of all relevant considerations, including (without limitation):
- (a)the stage of the proceeding at which the offer was received;
- (b)the time allowed to the offeree to consider the offer;
- (c)the extent of the compromise offered;
- (d)the offeree’s prospects of success, assessed as at the date of the offer;
- (e)the clarity with which the terms of the offer were expressed; and
- (f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it.
- The factor in subparagraph (f) above will only be material to rule 86 in circumstances where, as here, costs are sought on the indemnity basis.
- It is convenient to commence with this matter in considering the challenges to the Member’s decision as to indemnity costs.
Indemnity costs not foreshadowed
- Oaks challenges the exercise of the Member’s discretion on the basis that the Offer failed to provide, as it should, that Ms Knauer intended that the non-acceptance of the Offer may be used as a basis for seeking indemnity costs (that is, there was no foreshadowing of an indemnity costs application).
- The Member, having found that rule 86(1) of the Rules was engaged, considered whether Ms Knauer should be awarded ‘all reasonable costs incurred in proceeding’ after the Offer was made (being costs on an indemnity basis).
- The Member said that rule 86 was only one of the matrix of circumstances to be weighed in exercising the discretion to award costs and noted that it was relevant to ask whether, in the circumstances, it was unreasonable of Oaks to reject the Offer. In this context, the Member set out the following ‘considerations’:
Even though Rule 86 is engaged, it is only one of the matrix of circumstances to be weighed in exercising the discretion to award costs. It is relevant to ask whether, in the circumstances, it was unreasonable of the Third Respondent to reject the offer of settlement. Considerations have been held to include the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree’s prospects of success assessed at the date of the offer; and the clarity with which the terms of the offer were expressed.
- The considerations listed in the above passage were drawn from the decision of the Appeal Tribunal in Neverfail.
- Paragraph  of the Reasons in Neverfail (being one of the paragraphs cited by the Member) was in the following terms:
The making of an order for costs does not automatically follow the rejection of an offer by a party who subsequently obtains a less favourable judgment. It is necessary to consider whether a party has acted unreasonably or imprudently in not accepting an offer. Relevant considerations include: a) the stage of the proceeding at which the offer was received; b) the time allowed to the offeree to consider the offer; c) the extent of the compromise offered; d) the offeree’s prospects of success, assessed as at the date of the offer; and e) the clarity with which the terms of the offer were expressed.
- The Appeal Tribunal cited Jamieson for those principles. As we read the judgment in Neverfail, it did not involve the question of indemnity costs which may explain the omission of the sixth relevant consideration set out in Jamieson. Nevertheless, that consideration was omitted from the considerations referred to by the Member in the Decision below. As a result, the Member did not refer to that matter as relevant to her consideration of whether the Offer justified an award of costs on the indemnity basis. We reject Ms Knauer’s contention that the relevant considerations were ‘comprehensively listed’ at Reasons .
- In our respectful view, the question of whether Ms Knauer foreshadowed an application for indemnity costs (in the event of Oaks rejecting the Offer) was a material consideration given, first (as we have found), rule 86 has a potential dual role in providing a basis for one or both of making an order for costs in favour of one party so as to displace the presumption in s 100 of the QCAT Act and making an order for costs on the indemnity basis; and second, that rule 86 provided the only basis for the Member to find that the Offer in the present case justified an order for indemnity costs (there was no suggestion of any other conduct on the part of Oaks (that is, other than the rejection of the Offer) that would justify an order for indemnity costs).
- In the present case, we consider that the question of whether the Offer foreshadowed an application for indemnity costs was a relevant consideration for the Member. In our view, the failure of the Member to consider same (seemingly because of reliance on the considerations set out in Neverfail) constituted an error of law as contemplated by House v The King. The failure was material because the Offer did not, in our view, put Oaks on notice that its rejection of the Offer may place it at risk of a costs order on the indemnity basis. In this regard, we observe that the Calderbank decision itself, which was referred to in the Offer, did not involve an entitlement to indemnity costs but rather whether costs should be awarded against the husband at all in matrimonial proceedings the subject of that case.
- Paragraph 6 of the Offer foreshadowed a ‘claim for costs’ should the matter not resolve but did not state that costs would be on the indemnity basis or that the costs would include ‘all reasonable costs incurred’ within the meaning of rule 86. A failure to put the opposing party on notice may not, of itself, be necessarily fatal to an application for costs on the indemnity basis but we consider it an important consideration where an offer to settle is relied upon not only to displace the presumption that each party bear his or her own costs but that the costs be awarded on the indemnity basis.
- As was said by Kirby P (as he then was) in the context of an unsuccessful appeal in Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd:
The merit of the present motion is that it calls attention to the distinctpossibility that, in some circumstances, a special costs order will be made,including for indemnity costs. If such an order is to be made, it would bepreferable that it should follow due and timely warning by the successfulparty to the unsuccessful that indemnity costs will be sought: cf Insurers' Guarantee Fund NEM General Insurance Association Ltd (In Liq) v Baker (Court of Appeal, 10 February 1995, unreported).
- The failure to warn of an intent to seek indemnity costs tipped the scale against making such an order in Danidale Pty Ltd v Abigroup Contractors Pty Ltd (No 2).
- In our respectful view, the failure of the Member to address a material consideration, namely the absence of notice of an intent to claim indemnity costs, means that the Decision, insofar as it concerns indemnity costs, was infected by an error of law. Given that there is no contest or dispute as to the materials forming the basis for the Decision, we consider the Appeal Tribunal is in a position to exercise its own discretion in relation to the issue of indemnity costs, consistently with the decision in House v The King.
- We have addressed above the issue of the failure of Ms Knauer to put Oaks on notice of a claim for indemnity costs if the Offer were not accepted. We consider that this is a factor which weighs against the grant of indemnity costs.
- We turn to other relevant considerations.
The stage of the proceeding at which the Offer was received/The time allowed to Oaks to consider the Offer
- Oaks addresses these two matters jointly at paragraphs 68 to 79 of its written submissions.
- The directions for the re-hearing of the matter were made on 22 February 2016. Ms Knauer was required to file and serve her further affidavit material and other evidence by 14 March 2016. Oaks was to file and serve any further affidavits and other evidence by 11 April 2016. Ms Knauer’s offer was made on 6 April 2016 (after Ms Knauer had served her further material) with the Offer expiring on 20 April 2016 (after the date that Oaks was required to serve its material). The three day second hearing was scheduled to start on 18 May 2016. The gravamen of Oaks’ complaint is to be that the Offer could and should have been made much earlier than 6 April 2016, it being served when Oaks was at an advanced stage of preparation for the second hearing.
- We reject the contention that the timing of the Offer tells against an order for indemnity costs. First, Oaks had the benefit of the first hearing in order to make a fair assessment of its prospects. Second, Oaks had made its own offer to settle on 15 March 2016 so must have formed a view of its prospects at that time. Third, Oaks had the opportunity to consider the further material relied upon by Ms Knauer in making an assessment of the Offer. Fourth, the Offer remained open after the time that Oaks was required to file its material so that it only partly overlapped with the preparation of its material. In any event, in our view, notwithstanding the asserted need to advance preparations for the second hearing, there is no evidence that Oaks did not have the resources to consider and provide instructions in relation to the acceptance or rejection of the Offer. Fifth, the Offer expired approximately four weeks prior to the commencement of the second hearing such that much of the costs of the second hearing could have been saved if accepted. Having regard to all these factors, we find that the timing of the Offer was at least reasonable, if not well-timed. Even if it were accepted that the Offer ‘could’ have been made much earlier than 6 April 2016, Oaks’ submissions do not make clear how such matter would deny the Offer made on 6 April 2016 the same effect it would have if made at some earlier date.
- The Offer was open for acceptance for 14 days. Given the previous history of the matter up to the time of the Offer and that the Offer remained open after the time for the filing of Oaks’ material, we consider that a 14 day period allowed sufficient time for a considered response by Oaks. It is also of significance that the 14 day period corresponded with the period allowed by Oaks in its own offer of settlement. Oaks’ submissions do not demonstrate that the 14 day period was insufficient.
The extent of the compromise offered/The clarity with which the terms of the Offer were expressed
- It is convenient to address these issues concurrently given that the manner in which the Offer was framed cuts across both issues and also feeds into Oaks’ complaint that the Member erred in finding that the decision was not more favourable to Oaks.
- The Offer was expressed to require payment of two amounts being $200,000.00 by way of general damages and $100,000.00 as a contribution to legal fees. Oaks’ offer of settlement was that Ms Knauer be paid the sum of $80,000.00 inclusive of compensation and costs (and execute a Deed in the usual terms). In relation to Ms Knauer’s Offer, Oaks submits that it is ‘unreal’ to argue that the words ‘by way of general damages’ are irrelevant, that the question of whether it was reasonable or not to refuse the Offer had to be looked at in the context of the express words used in the Offer, and that it was reasonable to refuse the Offer because the order for general damages was $80,000.00 at the first hearing and $70,000.00 at the second hearing and $200,000.00 was substantially in excess of those amounts and was ‘significantly inflated’ (and that the Offer was framed in this way to attract preferential tax treatment on the award).
- Ms Knauer submitted that one must look at the Offer in total and not be side-tracked by what the components are called; the labels given to the components are irrelevant (as was the speculative motives for such structure); and what is relevant is the total sums. Ms Knauer further submitted that pursuant to rule 86 there is no scope to consider part of ‘the offer’ and that the offer is the global sum.
- Ms Knauer’s Offer provided that the terms would be reduced to writing and that a settlement agreement would be executed. On our reading of the Offer, acceptance of the Offer would have necessitated Oaks executing an agreement which agreed or acknowledged that the payment of the $200,000.00 was by way of ‘general damages’. There was no submission by Ms Knauer that an award of that magnitude for general damages alone was a realistic one. Neither party made submissions in relation to the applicable tax treatment of a settlement payment described as one for general damages in contrast to a payment by way of compensation at large (with or without interest). Nevertheless, we accept Oaks’ argument that the words used cannot simply be ignored (nor, we would add, can they be interpreted as a general reference to compensation at large). Ms Knauer’s offer was expressly framed in terms of an award of $200,000.00 by way of general damages. In paragraph 6 of the Offer, a distinction is drawn between ‘general damages’, ‘special damages’ and ‘economic loss’. In addressing the question of unreasonableness, we consider that the express terms of the Offer made provide the basis for the comparison required under rule 86.
- We also reject Ms Knauer’s contention that by virtue of rule 86 the ‘offer’ in this case should be taken as a reference to the global (monetary) sum offered. Rule 86 refers to ‘a written offer to settle the dispute the subject of the proceeding’. The form of the offer may vary from case to case and may involve, as part of the offer, a non-monetary term. We can see nothing in the terms of rule 86 that would justify applying a different approach to a written offer to settle depending upon whether it is framed as a Calderbank offer or one said to be made under rule 86. The Offer was to accept two components, a payment of $200,000.00 as general damages and an additional payment of $100,000.00 as a contribution to legal fees. In our view, Ms Knauer’s position should not be viewed any differently than it would have been in if, for example, it had been framed as $200,000.00 for general damages together with costs to be assessed on the standard basis, if not agreed.
- In our view, the fact the $200,000.00 component was framed as ‘general damages’ is a material consideration to the question of the unreasonableness or otherwise of Oaks’ rejection of the Offer and is a factor telling against an order for indemnity costs, there being no suggested basis that an award of general damages of that magnitude was a realistic one. Confined to an award of general damages, there was no genuine element of compromise in the Offer made by Ms Knauer.
- There is a further element to the Offer, namely that Oaks would provide evidence of a written sexual harassment policy having been implemented, or proposed to be implemented. Oaks contended in its written submissions that the Tribunal refused to make an order that Oaks conduct sexual harassment education programs and this forms part of Oaks’ contention that the decision was more favourable to Oaks than the Offer. It was common ground that the relief sought by Ms Knauer did not seek any relief in respect of such a policy at the second hearing; the claim was limited to a money claim. As best we understood Oaks’ position on this issue at the hearing, the criticism of the Reasons was that the Member did not provide reasons as to why the absence of an order for relief in respect of a sexual harassment policy was not a factor to be taken into account in determining whether or not the Offer was unfavourable. At Reasons  the Member dealt with this issue. The Member concluded that this part of the Offer did not affect the analysis of whether the Offer is or is not more favourable than the ultimate decision. The reason for this conclusion is not, with respect, clear but appears to be predicated on the preceding sentence that states that such policies are ‘readily available and a commonplace part of the conduct of business’. It is not entirely clear to us how general availability of such policies impacts on the question of whether the Offer was in fact more favourable to Oaks. The fact that any such relief was not sought at the second hearing may be a relevant consideration. On the other hand, the inclusion of that requirement as part of the Offer does complicate a comparison of the Offer and the ultimate decision. Although it was not pressed at the second hearing, it was sought as part of the Offer. In our view, while not of itself decisive, we consider that the inclusion of such a term in the Offer compounds the problematic issues of the failure to warn of indemnity costs and framing the compensation as ‘general damages’. In this context, we consider that, in considering the unreasonableness or otherwise of rejection of an offer, the focus under rule 86 is on the circumstances as they existed at the date of the Offer.
Ms Knauer’s prospects of success, assessed as at the date of the Offer
- We have addressed the strength of Ms Knauer’s case above.
- We find that it is a factor which supports the grant of indemnity costs.
Conclusion as to indemnity costs
- For the reasons discussed above, the relevant considerations point both ways in terms of whether an order of indemnity costs is appropriate. However, we consider that, on balance, the Offer does not justify such an order. Given our view that rule 86 forms a dual role, we think it important that, if an order for indemnity costs is to be sought against the offeree, the offeree should be put on express notice that an order for costs on that basis will be sought in the event that the offer is not accepted. That is, the offeree should be made aware of such a risk when considering whether to accept or reject an offer of settlement. We consider this factor alone to be decisive in the present case. However, there is a further material factor telling against the award of indemnity costs, namely the framing of the component of the offer of compensation as ‘general damages’ for the reasons addressed above. There is the added complication of the inclusion of the term involving the sexual harassment policy. In short, we consider that the Offer was an unsatisfactory vehicle for the making of an award of costs on the indemnity basis.
- In our view, the appropriate order is that paragraph 2 of the Orders below be set aside and in lieu it be ordered that the Third Respondent (Oaks) pay the Applicant’s (Ms Knauer’s) costs of the proceeding on the standard basis.
Finding that rule 86 was engaged
- The above analysis has proceeded on the basis that rule 86 was engaged and the question turned on the exercise of the discretion to award indemnity costs under sub-rule 86(2). Sub-rule 86(1)(c) requires the formation of an ‘opinion’ of the Tribunal that the decision in the proceeding is not more favourable to the other party than the offer.
- In the context of sub-rule 86(1), as we read the Decision, the Member proceeded on the basis that the combined sum of $300,000.00 contained in the Offer could be compared with the total compensation of $287,836.46. The Member did consider the issue of the framing of the offer of $200,000.00 for ‘general damages’ but did so only in the context of the exercise of her discretion under sub-rule 86(2).
- In light of the Member’s approach and our conclusion in relation to the exercise of the Member’s discretion to award indemnity costs, it is unnecessary to reach a conclusion as to whether the Member correctly decided that rule 86 was engaged. However, we observe that for the reasons discussed above in relation to the framing of the component of $200,000.00 as ‘general damages’, coupled with the inclusion of the term concerning the sexual harassment policy, it is at least arguable that the Member’s conclusion in relation to the engagement of rule 86 was infected with error of the type identified in House v The King.
- For the above reasons, we make the following orders:
- The Applicant is granted leave to appeal limited to the issue of the award of costs on the indemnity basis from 6 April 2016 onwards;
- Otherwise leave to appeal is refused;
- The appeal is allowed;
- Paragraph 2 of the Orders of 5 March 2019 is set aside and in lieu it is ordered that the Third Respondent pay the Applicant’s costs of the proceeding on the standard basis.
- In light of the orders made, we will hear the parties on the question of costs. The parties shall file (and serve on the other party), within 14 days of the date of delivery of these orders, written submissions (no longer than five pages) in respect of the question of costs of the application for leave to appeal and appeal.
 T1-6 lines 4-10, 36-44; T1-11, lines 3-4; T1-16 lines 14-16.
 Section 142(3)(a)(iii) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’).
 Dwyer Corporation Pty Ltd t/as Dwyer Quality Homes v Dunne  QCATA 193 at  and the cases cited therein, per Senior Member Brown and Member Olding.
 State of Queensland & Anor v Bell  QCATA 176 at , per the President, Carmody J, and Member Dr Cullen (as she then was).
 Grounds of appeal, paragraphs 1 and 2.
 Grounds of appeal, paragraphs 3-10.
 Exhibit 2 (in the present Application).
  VR 533 at .
  NSWCA 427 at , -.
  NSWSC 478 at -.
  NSWADTAP 29 at -.
 See original Appeal Tribunal reasons .
 See e.g. ss 3(a), 9(1), 33(1), 34, 35(1) and 36.
 See the observations of Gibbs J (as he then was), albeit in a different context, in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd; United States Surgical Corp v Hospital Products International Pty Ltd (1981) 148 CLR 457 at 491-492.
 Paragraph .
 T1-10 lines 44-47.
 Reasons , .
 Reasons -.
 T1-13 lines 1-30.
 Paragraph 33.
  QCATA 176.
 T1-14 lines 9-19.
 At .
 Reasons .
 Cf Oaks’ written submissions .
 Written submissions .
 T1-14 lines 21-46; T1-16 lines 19-26.
 Reasons -.
 Oaks’ written submissions, paragraph 55(a).
 Field v Commissioner for Railways (NSW) (1957) 99 CLR 285 at 291–292, per Dixon CJ, Webb, Kitto and Taylor JJ; Glengallan Investments Pty Ltd v Andersen  1 Qd R 233 at -, per Williams JA, McPherson JA and Ambrose J agreeing.
  All ER 333.
 Reasons .
 Reasons .
 See Cutts v Head  1 Ch 290 at 307-308; Johns Perry Industries Pty Ltd v International Rigging (Aust.) Pty Ltd  2 Qd R 556 at 557-558.
 Section 17(a) of Schedule 2 of the QCAT Act.
 If a contrary view was expressed in Neverfail Pty Ltd as Trustee for The Harris Siksna Family Trust & Anor v Radford (No. 2) (‘Neverfail’)  QCATA 73 at , we respectfully reach a contrary conclusion. We consider the observations of the Appeal Tribunal in McGee v Queensland Building and Construction Commission & Anor (‘McGee’)  QCATA 124 at , per Senior Member Brown and Member Traves, are consistent with the view which we prefer.
 See Neverfail at .
 T1-24 lines 7-17. See McGee at .
 See sub-rule 86(2).
 This was accepted to be the operation of rule 86 by both parties: T1-51 line 43-T1-52 line 2 (Oaks); T1-44 lines 9-13 (Ms Knauer).
 Lyons v Dreamstarter Pty Ltd & Anor (‘Lyons’)  QCATA 43 at - (and the cases cited therein), per the President, DG Thomas J.
 Lyons at ; McGee at .
 Evans Shire Council v Richardson  NSWCA 61 at , per Giles, Ipp and Tobias JJA; McAndrew v AAI Ltd (No 2)  QSC 317 at , per McMeekin J; Northbound Property Group Pty Ltd v Carosic (No 2)  QSC 189 at , per McMeekin J; Al-Bayati v NRMA Insurance for the Nominal Defendant (No 2)  NSWCA 14 at , per Macfarlan JA and Barrett AJA. Insofar as the Appeal Tribunal in McGee said, at [38(a)], that the onus is upon the offeree of a Calderbank offer to persuade the Court or Tribunal that the offeree acted reasonably in not accepting the offer, we respectfully disagree and we adopt the reasoning in the above cases.
 Roberts v Prendergast  QCA 89 at , per Fraser JA; Westpac Banking Corporation v Jamieson & Ors (‘Jamieson’)  QCA 84 at , per Applegarth J, McMurdo P and Morrison JA agreeing; J&D Rigging Pty Ltd v Agripower Australia Pty Ltd  QCA 23 at , per Holmes JA (as she then was), Applegarth and Boddice JJ.
 Oaks’ written submissions, paragraphs 55(c), 60, 61, 62(c) and 63.
 Reasons -.
 Reasons .
 Reasons .
  QCATA 73.
 Ms Knauer’s written submissions, paragraph 66.
 (1936) 55 CLR 499. See also Groves v Matt O’Connor & Associates Pty Ltd  NSWSC 817 at , per Slattery J.
 (1995) 36 NSWLR 242. The case relied upon by Oaks in its written outline, Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311, is not directly on point as it involved the issue of whether an offer of compromise made expressly pursuant to the relevant New South Wales Uniform Civil Procedure Rules would itself take effect as a Calderbank offer unless there was something in it or in the surrounding circumstances to indicate that it was proposed to be relied upon on the question of costs, irrespective of its effectiveness as an offer under that rule.
  VSC 552, at , per Habersberger J.
 See Oaks’ submissions, paragraph 78.
 See Oaks’ submissions, paragraph 74.
 Exhibit 4. While this offer was also headed ‘WITHOUT PREJUDICE’, it also noted that the offer was a Calderbank offer (referring to Calderbank v Calderbank  3 All ER 333) and we consider it may be taken into account, particularly given Ms Knauer’s Offer was framed as a ‘counter-offer’ to Oaks’ offer and so provides some context.
 Exhibit 4.
 T1-25 line 9 - T1-26 line 12; Oaks’ written submissions, paragraphs 80-88.
 T1-40 line 40 - T1-41 line 34; Ms Knauer’s written submissions, paragraph 65.
 T1-43 lines 1-6. The transcript, we believe, erroneously attributes the submission to Mr Perry QC.
 Paragraphs 93-96.
 T1-28 line 41 – T1-29 line 6.
 T1-29 lines 8-36.
 See e.g. sub-rule 86(4).
 Reasons -.
 Reasons -.
- Published Case Name:
Oaks Hotels & Resorts Ltd v Natasha Coral Knauer
- Shortened Case Name:
Oaks Hotels & Resorts Ltd v Knauer
 QCATA 90
Senior Member Aughterson, Member Lumb
10 Jun 2020