DISTRICT COURT OF QUEENSLAND

1. [1]
   On 28 May 2012 I dismissed the third and fourth defendants’ application for summary judgment. The plaintiffs seek an order for costs of and incidental to the application be assessed on the indemnity basis against the third and fourth defendants who brought the unsuccessful application for summary judgment, and also against the first and second defendants who did not bring an application, but appeared at the hearing of the application to submit that if the third and fourth defendants’ application was successful then the plaintiffs’ claim against the first and second defendants should also be dismissed.

2. [2]
   The plaintiffs submit an order for costs against the first and second defendants is appropriate because they supported the application made by the third and fourth defendants and counsel for the first and second defendants foreshadowed they would make a further application in the event the application was successful.

3. [3]
   The first and second defendants submit, although they appeared on the application and made submissions on a point of law, they were not a party to the application and their presence did not add to the costs of the plaintiffs. The third and fourth defendants do not submit the first and second defendants should share their costs.

4. [4]
   The plaintiffs submit the third and fourth defendants should pay indemnity costs for a number of reasons including: the plaintiffs’ disregard for the rules of evidence by relying on deficient affidavit material to support the application; that there was insufficient evidence before the court to support the application; that the defendants rejected a written offer of compromise made by the plaintiffs prior to the hearing, and that the application for summary judgment was always destined to fail.

5. [5]
   The third and fourth defendants submit that any order for costs should be on the standard basis because the main reason for the dismissal of the application was the court’s determination that issues of legal complexity surrounding the covenant over the land required the matter to be determined at trial.

6. [6]
   The application for summary judgment was heard on 23 April 2012. The plaintiffs’ solicitor sent a letter to the third and fourth defendants’ solicitors on 18 April 2012.^[1]  The letter referred to alleged defects in the affidavit material that the third and fourth defendants intended to rely upon on the summary judgment application.  The letter notified the third and fourth defendants’ solicitors that, in the plaintiffs’ view, the affidavits of Mr Treherne and Mr Roberts were defective and inadmissible and therefore would not assist them in their application.  The plaintiffs also maintained in this letter that the material issue before the court was whether certain representations were made by the third and fourth defendant prior to execution of the contract, and that this issue remained in dispute therefore the application must fail.

7. [7]
   The plaintiffs’ solicitors framed the letter on the basis it was a “proposal to settle application” and a “Calderbank offer”^[2].  The plaintiffs’ proposal to resolve the summary judgment application was on the basis that the parties consent to orders that the third and fourth defendants’ summary judgment application be dismissed and costs of and incidental to the summary judgment application be reserved. The letter also stated that, if the offer was not accepted, the plaintiffs would seek costs on the indemnity basis.               

Costs

8. [8]
   Although the court has a general discretion to order costs, in the absence of special circumstances, costs are awarded to a successful party on a standard basis. An order for indemnity costs is exceptional,^[3] and should only be made where the particular facts and circumstances of the case warrant the making of such an order.^[4]

9. [9]
   The offer in the present case was an open offer, that the summary judgment application be dismissed, with the costs of the application reserved. Strictly speaking, it was not a Calderbank offer, because that term is applied to a without prejudice offer in which the offeror reserves the right to waive the confidential nature of the offer to rely on it for the purposes of making an application for indemnity costs.^[5]  It is similar in effect.  Although there is no provision for such an offer under the UCPR, a court may take into account the making and rejection of such an offer for the purposes of exercising its general jurisdiction as to costs under r 681.^[6]

10. [10]
    The making and refusing of the Calderbank-type offer of compromise does not inevitably result in an order for indemnity costs, although it is a relevant consideration; such orders require some unusual feature to justify them, such that the conduct of the party against whom the order is sought is plainly unreasonable.^[7]  One established ground for ordering indemnity costs is the unreasonable refusal to accept an offer of settlement, which indicates that indemnity costs will ordinarily only be ordered when it was unreasonable to refuse the Calderbank offer.^[8]

11. [11]
    The relevant principles and authorities were considered by the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 435.  In that matter it was said that the critical question is whether the rejection of the offer was unreasonable in the circumstances, bearing in mind the stage of the proceeding at which the offer was received, the time allowed to consider the offer, the extent of the compromise offered, the offeree’s prospects of success assessed as at the date of the offer, the clarity with which the terms of the offer were expressed, and whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejection of it.^[9] 

12. [12]
    In the present case the application had been served some two weeks before the offer was made, about two weeks before the application was returnable. The offer was expressed to require acceptance by 11 am on the following day.  It is difficult to see that much in the way of compromise was offered, even in relation to costs; the proposal was that the application be dismissed, and that the costs of the application be reserved, which would have left it open to the plaintiffs to have applied for costs on a later date.  It seems that nothing in particular happened after that date which might have clarified the third and fourth defendants’ prospects of success on the application.  There was no lack of clarity in the terms of the offer, and an application for indemnity costs if it were rejected was clearly foreshadowed.  It was noted that counsel had already been briefed and that some expense had been incurred, so that this was not a case where the acceptance of the offer would have resulted in a significant saving in costs.

13. [13]
    The very short time allowed to consider the offer, and the absence of any significant compromise contained in it, both tell against a conclusion that the third and fourth defendants acted unreasonably in not accepting it. On the other hand, apart from the failure to accept the offer, there was another factor which supports the making of a costs order on the indemnity basis. There were serious deficiencies in the affidavit material relied on in support of the application, so that ultimately the application was dismissed for the immediate reason of inadequacy in the affidavit material relied on in support of it. In this respect it was doomed because of the applicants’ own actions or failures.

14. [14]
    If the only relevant consideration was the failure to accept the offer, I would not consider that that conduct was so unreasonable as to justify the making of an order for indemnity costs. In the same way, although there were significant deficiencies in the material on the basis of which this application was advanced, I would not consider that that was sufficiently serious to justify the making of an indemnity costs order on the basis of misconduct or misbehaviour on the part of one of the parties.^[10] However, these two factors really operate cumulatively in this case, particularly in circumstances where the offer drew attention to deficiencies in the affidavit material relied on by the third and fourth defendants.  I appreciate that an order for indemnity costs is regarded as an exceptional course, and courts should not readily make such orders.^[11]  Nevertheless, in the present case I consider that such an order is justified, because of the combination of these factors, and the seriousness of the deficiencies in the affidavit material in support of the application.

15. [15]
    I order the third and fourth defendants pay the costs of and incidental to the application on the indemnity basis to be assessed.