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Kloprogge v Queensland University of Technology (No. 2) QDC 118
DISTRICT COURT OF QUEENSLAND
Kloprogge v Queensland University of Technology (No 2)  QDC 118
JACOB TEUNIS KLOPROGGE
QUEENSLAND UNIVERSITY OF TECHNOLOGY
Application for Costs
District Court at Brisbane
12 May 2017
22 – 24 August 2016
PROCEDURE – COSTS – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS INDEMNITY COSTS – where the Plaintiff made an offer pursuant to Chapter 9 Part 5 of the UCPR – where the offer was not accepted by the Defendant – where the Plaintiff obtained an order no less favourable than offer – where the Plaintiff seeks indemnity costs pursuant to rule 360 of the UCPR – where the quantum of the Plaintiff’s claim increased subsequent to the UCPR offer – whether another costs order is appropriate in the circumstances
Uniform Civil Procedure Rules 1999 (Qld) r 355, r 360
Civil Proceedings Act 2011 (Qld) s 58
2040 Logan Road Pty Ltd v Body Corporate for Paddington Mews CTS 39149  QSC 65
Calderbank v Calderbank  3 WLR 586
Castro v Hillery & Ors  1 Qd R 651
Department of Business Innovation v Murdesk Investments Pty Ltd (No 2)  VSC 586
Lawes v Nominal Defendant  QSC 103
DD Keane for the Plaintiff
DP De Jersey for the Defendant
Aitken Whyte Lawyers for the Plaintiff
Minter Ellison for the Defendant
- On 1 March 2017 I delivered judgment in favour of the Plaintiff the sum of $663,000, being damages for breach of contract following a three day trial on 22-24 August 2016.
Application for costs
- Pursuant to section 360 of the Uniform Civil Procedure Rules (Qld), the Plaintiff now seeks an order that the Defendant pay his costs on an indemnity basis. The Defendant counters for their assessment on a standard basis.
- Rule 360 provides:
360 Costs if offer by plaintiff
- (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.
- On 12 November 2014, the Plaintiff made an offer to settle the proceedings, pursuant to Chapter 9, Part 5 of the UCPR (‘Plaintiff’s First Offer’). It remained open for 14 days after the date of service in terms of rule 355 of the UCPR, expiring on 26 November 2014 if not accepted. It relevantly provided:
‘Purely on a commercial basis and to prevent further protracted litigation of this mater, our client has instructed us that he will agree to settle the proceeding on terms acceptable to him. On this basis, our client offers to settle this proceeding on the following terms:
‘1. your client pays to our client:
- (a)the sum of $450,000; plus
- (b)interest pursuant to section 58 of the Civil Proceedings Act 2011, calculated from 31 May 2012 to the date of acceptance of this offer; plus
- (c)our client’s costs to be agreed or, failing agreement, to be assessed,
2. the parties take such steps as are necessary to discontinue the proceeding.’
- In terms of paragraph 1(b) of the Plaintiff’s First Offer interest calculated from 31 May 2012 to 26 November 2014, the date of the expiry of the offer, at the pre-judgment rate pursuant to section 58 of the Civil Proceedings Act 2011 (Qld) is $87,807.03.Hence, the total amount of the Plaintiff’s First Offer, including interest, was $537,807.03. This offer was not accepted. As I have said, on 1 March 2017 the Plaintiff was awarded $663,000 damages for breach of contract.
- 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.
- The Defendant relies on Castro v Hillery & Ors  1 Qd R 651, a decision of the Court of Appeal dealing with an offer under Order 26, rule 9 of the then Rule of the Supreme Court, which is in relevantly similar terms to UCPR rule 360. In that case, Williams JA said:
‘an Offer to Settle must be evaluated in the light of circumstances as they exist at the time the offer is made. If a plaintiff enlarges his case after an Offer to Settle is made and rejected, then there will be good reason for refusing the plaintiff indemnity costs notwithstanding that the judgment is better than the offer…a minor difference in the claim will not ordinarily have that consequence. But where the difference is significant, where the risk to the defendant is significantly altered, there would have to be careful analysis before a proper exercise of discretion could result in indemnity costs being ordered.’
- The Plaintiff’s original Statement of Claim and the Plaintiff’s Amended Statement of Claim filed 17 October 2014 (‘Amended Statement of Claim’) sought $505,000 as the value of the Plaintiff’s personal mineral collection he alleged to be missing (‘Mineral Collection’). So, the Plaintiff’s First Offer of 12 November 2014, which was not accepted, was made against a claim of $505,000. On 16 June 2015 the Defendant received further and better particulars of how the Mineral Collection had been valued at $505,000.
- On 12 August 2016, ten days prior to the trial, a second expert valuation report of the Plaintiff’s expert, Professor Stacey dated 12 August 2016 was disclosed. That report revalued the Mineral Collection from $505,000 to $650,000. Leave was granted to further amend the Amended Statement of Claim to reconcile the amount claimed with the second expert valuation report.
- 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.
- In response, the Plaintiff says the revaluation of the Mineral Collection at $650,000 was not an enlargement of the case but simply a reflection of the increase, with the effluxion of time, in the value of the Mineral Collection. It follows, the Plaintiff submits, there is no circumstance warranting deviation from his prima facie entitlement to indemnity costs pursuant to rule 360.
- Castro reinforces the basic principle with respect to offers of settlement that;
‘the recipient of the Offer to Settle must have an informed opportunity to assess the chances of either side doing better than the offer. Further, that issue must be decided on material disclosed in the proceedings; it is the claim as made in the proceedings which is under consideration.’
- In Castro, the respondent was in possession of additional relevant material about her case at the time an offer was made to the appellants but had not disclosed that information. Additional claims were made more than doubling the settlement offer. His Honour held that the appellants were entitled to respond to the offer in light of the particulars of damage as they stood at the date of the offer. In the circumstances, Williams JA held the appellants ought not to have to pay indemnity costs.
- The present case is not one where the Plaintiff has failed to disclose relevant material prior to his offer of settlement resulting in the value of the claim increasing after that offer was made but not accepted. Relevantly, in the second expert valuation report, Professor Stacey dated 12 August 2016 attributes the increase in the valuation of the Mineral Collection from $505,000 to $650,000 to changes in currency exchange rate, the general appreciation of mineral collections as well as the significant increase in the value of part of the Mineral Collection due to the source locations no longer being easily accessible.
- 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.
- The authorities to which I have been referred support the proposition that an offer to settle must be evaluated in the light of circumstances as they exist at the time the offer is made. When the offer was made to the Defendant, the Mineral Collection was valued at $505,000. That offer was not accepted. Subsequently, the value of the Mineral Collection was increased to $650,000. The rejection of the offer was in the light of the Mineral Collection being valued at $505,000. After the revaluation of the Mineral Collection, the quantum risk to the Defendant in continuing with the litigation increased significantly. It was now faced with a substantially higher quantum which attached to all causes of action pleaded. In these circumstances, it is not appropriate to visit the Defendant with indemnity costs for rejecting the initial offer to settle.
However, that is not the end of the matter. On 19 August 2016, some three days before the trial began, the Plaintiff made a further offer to settle the proceedings (‘Plaintiff’s Second Offer’) in the following terms:
‘While our client is confident in his claim on liability he is mindful of the risks of litigation. In this circumstances we have been instructed to make an offer on a commercial basis as follows:
- Your client pay our client the sum of $500,000 plus costs as agreed or failing agreement assessed on the indemnity basis;
- Payment is to be made within 21 days of acceptance of this offer;
- The proceedings be discontinued.
Our client is prepared to enter into any mutually acceptable Deed of Release.
This offer is open for acceptance until 4:00pm on Friday 19 August 2016, after which it expires automatically.’
- The Plaintiff says this offer constituted a Calderbankoffer and submits that, although not relevant to the exercise of discretion under rule 360 of the UCPR, it is nonetheless relevant to the discretion to award indemnity costs from the date of the offer dated 19 August 2016.
- 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. Reference is made in the Plaintiff’s Second Offer to seeking an award of indemnity costs in respect of the Plaintiff’s First Offer by way of an assertion of the Plaintiff’s solicitors that, ‘there is no doubt that he will obtain a result ‘no less favourable’ than his offer pursuant to rule 360 and therefore be entitled to costs on an indemnity basis for the entirety of the action’.However, the Plaintiff’s Second offer does not explicitly identify the costs advantages sought to be achieved if that was to be rejected, that is to say, no indemnity costs application was foreshadowed.
- Notwithstanding these omissions, 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.In this regard, I refer to the decision in Secretary, Department of Business Innovation v Murdesk Investments Pty Ltd (No 2)  VSC 586 where Emerton J held that it is necessary to have regard to the offeror’s intention in determining whether an offer of settlement is effective as a Calderbank offer. Her Honour said:
‘…it is not necessary for an offer of compromise to be accompanied by a letter expressing the intention that the offer operate as a Calderbank offer if it is incapable of operating under the Rules. In the absence of an express statement of intention in a covering letter, the intention of the offeror may be discerned by reference to the form and content of the offer itself to ascertain whether it is capable of operating as an offer more generally, and whether it was intended to be made “without prejudice save as to costs” and to be adduced in evidence on the question of costs if not accepted.’
- 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. In Lawes v Nominal Defendant  QSC 103 Byrne J (as he then was) said:
‘Among the pertinent considerations is whether it appears that the party sought to be made liable for costs on an indemnity basis has imprudently or unreasonably failed to accept a Calderbank offer of compromise.’
- A recent and helpful summary of general principle can be found in the decision of in 2040 Logan Road Pty Ltd v Body Corporate for Paddington Mews CTS 39149  QSC 65 where it was said:
 Where an offer to compromise a proceeding in terms more favourable than the eventual outcome has been made and refused, the following statement of principle from the Court of Appeal in J & D Rigging Pty Ltd v Agripower Australia Ltd will be apposite:
The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs. The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances. The party seeking costs on an indemnity basis must show that the party acted ‘unreasonably or imprudently’ in not accepting the Calderbank offer.
 In considering whether the rejection of a Calderbank offer was unreasonable or imprudent, the court should ordinarily have regard to 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 as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether an application for indemnity costs was foreshadowed in the event that the offeree rejected the offer.
- 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.
- I make the following orders:
- The Defendant to pay the Plaintiff’s costs on a standard basis.
 Affidavit of Robert Aitken sworn 3 March 2017, exhibit ‘RCA-1’.
 Affidavit of Robert Aitken sworn 3 march 2017, exhibit ‘RCA-3’.
  1 Qd R 651 at .
Castro v Hillery  1 Qd R 651 at  per Williams JA.
 Supplementary Expert Valuation Report of Professor George Stacey dated 12 August 2016.
 Affidavit of Robert Aitken sworn 3 march 2017, exhibit ‘RCA-2’.
Calderbank v Calderbank  3 WLR 586;  3 All ER 333; (1975) FLR Rep 113.
 Affidavit of Robert Aitken sworn 3 March 2017, exhibit ‘RCA-2’.
 See for example Assaf v Skalkos  NSWSC 935 .
  VSC 586 at .
St Clair v Timtalla Pty Ltd and Anor (No 2)  QSC 480.
  QSC 103 at 3.
- Published Case Name:
Kloprogge v Queensland University of Technology (No. 2)
- Shortened Case Name:
Kloprogge v Queensland University of Technology (No. 2)
 QDC 118
12 May 2017