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Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd[2018] QDC 248

Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd[2018] QDC 248

DISTRICT COURT OF QUEENSLAND

CITATION:

Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd & Anor [2018] QDC 248

PARTIES:

CHAPEL OF ANGELS PTY LTD (ACN 154 327 867)

(Plaintiff)

AND

HENNESSY BUILDER PTY LTD (ACN 117 587 998) IN ITS OWN CAPACITY AS TRUSTEE FOR THE HENNESSEY FAMILY TRUST (ACN 45 515 151 376)

(First Defendant)

AND

JOHN PAUL HENNESSEY

(Second Defendant)

FILE NO/S:

4124/14

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

11 December 2018

DELIVERED AT:

Brisbane

HEARING DATE:

29 November 2018

JUDGE:

Porter QC DCJ

ORDER:

  1. The Court declares that by the written Building Contract between the plaintiff and the first defendant dated 6 December 2012, the first defendant undertook to carry out building work for which the first defendant did not hold a contractor’s licence of the appropriate class under the Queensland Building Services Authority Act 1991 (Qld).
  2. The plaintiff pay the first defendant/counterclaimant the amount of $85,989.86 inclusive of interest.
  3. The plaintiff’s claims against the first and second defendants otherwise be dismissed.
  4. The first defendant’s counterclaim be otherwise be dismissed.
  5. The plaintiff pay the second defendant’s costs of the proceedings including reserved costs on an indemnity basis.
  6. The plaintiff pay 75% of the first defendant’s costs of the proceedings including reserved costs, such costs to be determined on the standard basis for costs incurred up to 23 May 2018 and thereafter on the indemnity basis.
  7. The Court also orders by consent that the sum of $101,184.94 paid into this Court on 10 February 2015 at 14:31:42 (receipt number 4269621) by the plaintiff be paid out as follows:
  1. $85,989.86 to the first defendant in satisfaction of the judgment of the Court for that amount; and
  2. The balance, including any accretions, to the plaintiff.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – OFFERS OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES – WHAT CONSTITUTES VALID OFFER  – where the first defendant seeks costs on an indemnity basis because of the failure of the plaintiff to accept formal offers made by the first defendant under the Rules – whether the offers are valid offers under the UCPR – whether the offers are effective as Calderbank offers – whether the offers whether the plaintiff should pay the first defendant’s costs of the proceedings on an indemnity basis.

Cases

Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd [2016] QCA 130

Gladstone Area Water Board v AJ Lucas Operations Pty Ltd [2015] QSC 52

J & D Rigging Pty Ltd v Agripower Australia Limited & Ors [2014] QCA 23

Northbuild Constructions Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525

Schofield v Hopman (No. 2) [2017] QSC 324

Legislation

Competition and Consumer Act 2010 (Cth), Schedule 2, Australian Consumer Law s 236

District Court of Queensland Act 1967 (Qld) ss. 68, 69

Queensland Building Services Authority Act 1991 (Qld) s 42

Uniform Civil Procedure Rules 1999 (Qld) rr 173, 184, 360, 361, 681, 684  

COUNSEL

S Di Carlo for the plaintiff

P Travis for the defendants

SOLICITORS:

Irish Bentley Solicitors for the plaintiff

Axia Litigation Lawyers for the defendants

Introduction

  1. [1]
    I delivered reasons in this matter on 12 November 2018.[1] These reasons assume familiarity with those reasons and use the defined terms employed therein.
  2. [2]
    At [202], I summarised the consequences of my reasons as follows:
    1. (a)
      The plaintiff had succeeded on its claim to recover the payments made under the Building Contract;
    2. (b)
      The plaintiff was entitled to appropriate orders to give effect to the invalidity of the adjudication decision;
    3. (c)
      The plaintiff failed on its claims for damages for breach of the Building Agreement;
    4. (d)
      The plaintiff abandoned its claims for damages under s. 236 Australian Consumer Law;
    5. (e)
      Hennessey was entitled to be paid for the work undertaken by it on the Chapel and surrounds on a quantum meruit basis; and
    6. (f)
      Hennessey failed on its claim for payment under the Building Contract and for orders under the charge contained therein.
  3. [3]
    I identified the following issues as arising in relation to the form of orders to be made:
    1. (a)
      The plaintiff’s claims against Hennessey and Mr Hennessey for damages under s. 236 needed to be dismissed;
    2. (b)
      Questions of the form of any money judgment arise in circumstances where both parties have had material success but where there is a net sum due;
    3. (c)
      The appropriateness of the form of declaratory relief in relation to the adjudication needed to be considered and orders which properly finalise that matter (including the fate of the funds paid into Court) needed to be made;
    4. (d)
      Issues arose in respect of the calculating of interest; and
    5. (e)
      Costs had to be dealt with.
  4. [4]
    Written submissions were received from the parties and a hearing on the question of orders to be made occurred on 29 November 2018. 

Form of the money judgment

  1. [5]
    The plaintiff is entitled to recover from the defendant the sum of $632,615.32[2] as payments made under the Building Contract in circumstances where the breach of s. 42(1) QBSA Act made that contract unenforceable at the suit of the first defendant. On the other hand, the first defendant established an entitlement to restitution on a quantum meruit basis in the amount of $700,108.20.
  2. [6]
    While I do not accept that the quantum meruit claim was pleaded as a defence by way of set-off, Rule 184 UCPR permits the entry of judgment for the balance of the sums due. The first defendant sought a judgment in that form and the plaintiff advanced no reason why that should not occur. Accordingly, I will order judgment in favour of the first defendant for the net sum of $67,492.88 plus interest.

Interest on the judgment sum

  1. [7]
    The first defendant sought interest on the judgment sum from 25 March 2014, the date upon which the plaintiff alleged Practical Completion was achieved of the work under the Contract. While the effect of my reasons was that the Building Contract was not enforceable by the first defendant, the plaintiff did not dispute that date as an appropriate one to identify the date that the restitutionary cause of action of the first defendant arose. On that basis, the parties agreed that interest is payable on the judgment sum in the amount of $18,496.98, giving a total for the money judgment in favour of the first defendant of $85,989.86.

The adjudication decision and consequent judgment

  1. [8]
    The first defendant has the benefit of the adjudication decision referred to at [78] of my reasons. As noted at [128], the first defendant rightly accepted that the adjudication decision must be invalid where the first defendant has breached s. 42(1) QBSA Act in the manner identified in my reasons.
  2. [9]
    The effect of my reasons is that the adjudication decision was invalid as having been given without jurisdiction. Whether this Court has power to make declarations of invalidity of the adjudication decision and consequential orders necessary to give effect to that declaration is an interesting one. It might be thought that, whatever the precise nature of the power exercised by the Supreme Court when dealing with a purported adjudication decision given beyond power,[3] this Court has similar powers arising under s. 69 District Court of Queensland Act 1967 (Qld) where such orders are necessary for the purpose of exercising the jurisdiction conferred by s. 68 of that Act (for example where a payment has been made under a judgment based on an invalid adjudication decision: see the next paragraph of these reasons). However, the parties have not sought any specific order to deal with the adjudication decision and judgment given in the Magistrates Court based on that decision and accordingly I make no specific orders in that regard.  I will however make a declaration as to the breach of s. 42(1) QBSA arising from entry into the Building Contract, which ought to facilitate any subsequent orders required to deal with the adjudication decision.

The payment into Court

  1. [10]
    It would of course be necessary to deal with the adjudication decision and the judgment in the Magistrates Court proceedings if payment have been made in those proceedings to the first defendant. In those circumstances, it seems to me that the plaintiff would be entitled to restitution of that amount from the first defendant on the basis that it was another sum paid, in effect, by reason of enforcement by the first defendant of its rights arising out of the Building Contract. However, that is not what has occurred.
  2. [11]
    Rather, the plaintiff paid the adjudication amount into this Court in its proceedings to have the adjudication decision declared invalid. The sum paid into Court was $101,184.94, paid on 10 February 2015 at 14:31:42 (receipt number 4269621).  The parties are in agreement that I should order that the sum be paid out as follows:
    1. (a)
      $85,989.86 to the first defendant; and
    2. (b)
      The balance, including any accretions, to the plaintiff.
  3. [12]
    A further sum of $40,000 was paid into Court by the plaintiff on the same day (receipt number 4269624) by way of security for costs. To avoid doubt I make clear that that sum, plus any accretions referable to that sum, should not be paid out until resolution of costs issues.

Costs of the proceedings against the second defendant

  1. [13]
    The proceedings against the second defendant were abandoned on the eve of trial.  The second defendant is entitled to costs of those proceedings on a standard basis on any view. The second defendant sought that those costs be ordered on an indemnity basis. The plaintiff did not oppose that order. Given the offers made by the defendants to which I refer next, the weak nature of the case against the second defendant (reflected in its abandonment at trial) and the lack of opposition by the plaintiff, I will order that the second defendant’s costs be paid on an indemnity basis.

Costs of the proceedings as between the plaintiff and the first defendant

  1. [14]
    The main point of contention between the parties is what costs order ought to be made in respect of the proceedings as between the plaintiff and the first defendant. Resolution of this matter requires that the nature of the success of each party is precisely identified.
  2. [15]
    In that regard the plaintiff succeeded as follows:
    1. (a)
      It established that the work undertaken to be done under the Building Contract was unlicensed and consequently that the contract was unenforceable at the suit of the first defendant;
    2. (b)
      It followed from success on that issue that the plaintiff:
      1. Established entitlement to restitution of the sums paid under the Building Contract;
      2. Defeated on this basis the first defendant’s claim for further payment under the Building Contract;
      3. Established that the adjudication decision was invalid; and
      4. Defeated the first defendant’s claim in relation to the security under the Building Contract.
  3. [16]
    The first defendant succeeded as follows:
    1. (a)
      It made good an entitlement to restitution on a quantum meruit basis for the work actually undertaken, proving in that process that almost all of the work actually undertaken was licensed work;
    2. (b)
      It defeated the first defendant’s claims under the Building Contract (such as remained in issue by the end of the trial being the variation “damages” claim and the challenge to the $15000 amount claimed: see reasons [173] to [199]);
    3. (c)
      It succeeded, of course, on the numerous claims abandoned by the plaintiff under the Building Contract and the Australian Consumer Law. The extent of the abandoned claims was significant. Ultimately, by the end of the trial, the plaintiff had abandoned its entire Australian Consumer Law case and all of its contract claims except two: the variation “damages” claim and the challenge to the $15000 amount.
  4. [17]
    Rule 681(1) UCPR provides relevantly that the costs of a proceeding are in the discretion of the Court but follow the event unless the court otherwise orders. The identification of the event can give rise to some difficulty, particularly in a case involving a claim and counterclaim.
  5. [18]
    In that context, Jackson J observed in Gladstone Area Water Board v AJ Lucas Operations Pty Ltd [2015] QSC 52 (footnotes omitted):

[11] Although UCPR, r 681(1) speaks of costs following the “event”, that is not a word which is given any particular meaning in either the UCPR or other statutory provisions. However, the use of that word in the context of the court’s power to make an order for costs has a rich history, explained in the context of UCPR, r 681(1) (then numbered r 689(1)) by McPherson JA in Interchase Corporation Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 3). For the purpose of making an order for costs, the court has the power to treat each separately determined issue as an event. The power to separate the events in a proceeding for the purpose of making an order for costs is further informed by UCPR, r 684, under which the court may make an order in relation to a particular question in or particular part of a proceeding.

[12] Further, in the context of a trial of a claim and counterclaim in a civil proceeding, where there may be a verdict and judgment in favour of one party on the claim and there may be a verdict and judgment in favour of the other party on the counterclaim, it has long been recognised that the judgment of the claim may be treated as one event and the judgment on the counterclaim may be treated as another event.

The parties’ submissions

  1. [19]
    The plaintiff’s submission as I apprehend them are as follows:
    1. (a)
      First, the plaintiff submits that the defendant’s success on the net sum payable does not reflect success overall because the defendant sought to vindicate its success on the adjudication to (the extent of some $90,000) but only recovered some $67,000 on the quantum meruit claim;
    2. (b)
      Second, that the plaintiff submits (in effect) that it won the “event” comprised in the issue of whether the work undertaken to be done under the Building Contract was unlicensed and that that issue took up a not insubstantial part of the trial;
    3. (c)
      Third that the plaintiff’s offer to settle on 14 September 2018, 2 days after commencement of the trial, should be taken into account. That involved an offer by the plaintiff to the first defendant to pay it $90,000, and the first defendant only obtained an order for $85,989.86; and
    4. (d)
      Fourth, the first defendant’s offer to pay, in effect, a net sum of $70,592.47 should not give rise to any order for indemnity costs for any part of the costs of the trial because the offer was an all up in one, rather than comprising distinct offers in respect of the claim and the counterclaim. Given the different consequences flowing under Rules 360 and 361 respectively for plaintiffs and defendants, the Rules cannot properly be applied to that offer.
  2. [20]
    The plaintiff did not articulate the costs order for which it contended as between the plaintiff and the first defendant, though I infer at the least it opposed costs being ordered in favour of the first defendant.
  3. [21]
    The first defendant submitted as follows.
  4. [22]
    First, it submitted that the costs of the proceedings as a whole should be the first defendant’s because:
    1. (a)
      The plaintiff persisted in the abandoned claims right up to trial and in some cases continued them at trial. The first defendant contended I should find these claims to be groundless;
    2. (b)
      The plaintiff’s success on the licensing issue translated into very little  substantive success given the result on the quantum meruit claim was only some $30,000 less than the contract claim;
    3. (c)
      The plaintiff’s success on the licensing issue had only one substantive consequence for the defendant’s contract case: that is that its straightforward debt claim under the Building Contract failed. That claim involved very little pre-trial resources or trial time; and
    4. (d)
      The plaintiff acted unreasonably in the preparation of its case for trial.
  5. [23]
    Second, the first defendant submitted that it ought to have its costs on an indemnity basis because “[p]roperly advised, the Plaintiff should have realised at a very early stage that it had no reasonable prospect of success with respect to its claims, except for its licence point.”[4]
  6. [24]
    Third, the first defendant seeks costs on an indemnity basis because of the failure of the plaintiff to accept formal offers made by the first defendant under the Rules. 
  7. [25]
    Relevantly, the first defendant relies on two offers:
    1. (a)
      An offer of 1 February 2016 (the First Offer);
    2. (b)
      An offer of 24 November 2016 (the Second Offer); and
    3. (c)
      An offer of 9 May 2018 (the Third Offer).
  8. [26]
    The Second and Third offers were in the form of an offer under Chapter 9 Part 5 UCPR. All three offers were marked “Without Prejudice save as to costs”.

The “event”

  1. [27]
    As noted by Jackson J, the outcomes on the claim and the counterclaim may be treated as separate events. However, it can be seen that both the plaintiff and the first defendant had success and failure on parts of each of the claim and counterclaim;
    1. (a)
      The plaintiff won its licensing point and the claims for relief consequent thereon but lost or abandoned its own contract claims and abandoned its misleading conduct claims against the first defendant;
    2. (b)
      The defendant won its counterclaim for quantum meruit, but lost its counterclaim based on enforcement of the Building Contract.
  2. [28]
    In that context, I do not consider that focus on the claim and counterclaim overall as separate events is a useful manner of approaching the exercise of the discretion to award costs. 
  3. [29]
    The plaintiff seeks to focus attention on its success on that part of its claim concerned with the licensing issue as an event in the proceedings. It is correct to identify this issue as a distinct one which underpinned a number of the causes of action advanced by the claim.  Further, I do not accept the first defendant’s submission that success on that issue should have no consequence for the costs orders:
    1. (a)
      The first defendant fought the issue vigorously presumably with a view to succeeding on its contract claims including the claims for a declaration as to its security under the Building Contract and interest on the adjudication sum;
    2. (b)
      The licensing issue caused the parties to incur the costs of substantial expert evidence which ultimately proved to support the plaintiff’s case. In fact the first defendant did not call its expert or rely on its expert report in opposition to the plaintiff’s expert;
    3. (c)
      No aspect of the plaintiff’s conduct in pursuing its contention that the work was unlicensed appears to me to have been unreasonable; and
    4. (d)
      The effect of success by the plaintiff on this issue was that the plaintiff ended up paying less than it would have done if it had failed on this issue and had to pay on the first defendant’s contract claim.
  4. [30]
    In my view, some allowance should be made in the costs order between the first defendant and plaintiff for the plaintiff’s success on this issue.  However, I do not think it appropriate to make distinct orders for costs of different events. Rather, I think the better course is to allow for the plaintiff’s success by ordering costs in favour of the first defendant at a level which takes account in broad terms of the plaintiff’s limited success.
  5. [31]
    In determining the appropriate allowance recognition must be given to the extent and manner of the plaintiff’s failure at trial. It failed entirely on its other claims, including abandoning many of them in the shadow of the trial. The work done by the first defendant before the trial dealing with those abandoned issues will plainly have been significant. It also failed in its defence on the counterclaim based on quantum meruit.  The magnitude of that failure must take into account that the plaintiff’s position on the pleadings was not to admit that the first defendant had any entitlement to payment on a quantum meruit basis. The plaintiff forced the first defendant to prove up every dollar of its quantum meruit claim.
  6. [32]
    Further, only a modest part of the time taken up at trial was taken up with the licensing issue. As noted, only one expert was called and he was not cross examined at length. The evidence of the other witnesses did not significantly focus on the factual issues relating specifically to the licensing issue.
  7. [33]
    In the circumstances, I intend to allow for the plaintiff’s limited success on the licensing issue by ordering that the plaintiff pay 75% of the first defendant’s costs of the proceedings.

Indemnity or standard costs?

The plaintiff’s offer

  1. [34]
    I do not accept that the plaintiff’s offer made on 14 September 2018 (the Friday of the first week of the trial) justifies any order favourable to the plaintiff. By that offer, (according to Mr Di Carlo’s submissions) the plaintiff offered to pay $90,000 to the first defendant. Although that was about $5000 more than the net sum awarded to the first defendant, it appears from the plaintiff’s submissions that it was an offer inclusive of costs.  Once that is realised, it is plain that the first defendant did much better than that offer on its counterclaim as costs by that stage would have been very significant.
  2. [35]
    This offer was not in evidence and only generally described in submissions from the plaintiff’s counsel.  I could identify no admission of the making, or terms, of the offer by the first defendant.  I therefore was unable effectively to analyse the offer any further. 

The first defendant’s offers

The First Offer

  1. [36]
    The First Offer was made on 1 February 2016 by the first defendant to settle the whole of the proceedings on the basis that the plaintiff consent to release of all money which had been paid into Court to the first defendant (some $141,184.94) with mutual releases of all claims.  At that time the plaintiff did not advance the licensing claim.

The Second Offer

  1. [37]
    The Second Offer was made on 24 November 2016.  It was marked without prejudice save as to costs.  It comprised a four page letter and enclosed a Formal Offer to Settle marked as made under Chapter 9 Part 5.
  2. [38]
    The letter made the following relevant points:
    1. (a)
      First, it was responding to an offer by the plaintiff to settle the proceedings on the basis that the defendant’s pay $600,000.  It pointed out that that outcome would result in the plaintiff paying on $32,615.64 for the Chapel;
    2. (b)
      Second, it referred to Ms Pryce telling Mr Hennessey that she had advice that her case was very strong.  It contended if that advice had been given it was unrealistic;
    3. (c)
      Third, it supported that proposition by explaining the improbability of Mr Hennessey agreeing to construct the extensive varied work in the car park for the original price;
    4. (d)
      Fourth, it challenged the claim for completion of incomplete work where the plaintiff took the work out of the defendant’s hands;
    5. (e)
      Fifth, it referred to the lack of evidence of defective work which had been filed; and
    6. (f)
      Sixth, it noted the introduction of the allegation of unlicensed work and contended that even if that was so, the first defendant was entitled to a very significant payment for labour and materials.
  3. [39]
    My reasons and the course of the trial demonstrate the prescience of each of those contentions.
  4. [40]
    The formal offer provided as follows, relevantly:
    1. (a)
      For the first defendant and the plaintiff to share equally the funds paid into Court (some $70,592.47) in full discharge of all rights in the proceedings (including the claims against the second defendant), with the parties to bear their own costs; and
    2. (b)
      Thereafter the first defendant would release the caveat.
  5. [41]
    There were other provisions but they comprised mechanics to give effect to that offer.

The Third Offer

  1. [42]
    The Third Offer was made on 9 May 2018.  It was marked without prejudice save as to costs.  It comprised a two page letter and enclosed a Formal Offer to Settle marked as made under Chapter 9 Part 5.
  2. [43]
    The letter made the following relevant points:
    1. (a)
      First, it reiterated the contention that it was improbable Mr Hennessey agreed to constructing the extensive varied work in the car park for the original price;
    2. (b)
      Second, it contended again that even if work undertaken to be done under the Building Contract was unlicensed, the first defendant was entitled to a very significant payment for labour and materials, and relied on the affidavit of Mr Carey which had been delivered;
    3. (c)
      Third, it referred to the fact that Mr Dixon’s evidence supported defects valued at only $12,746.86.  (I note that that remained the position at trial);
  3. [44]
    Again my reasons and the course of the trial demonstrate the reasonableness of each of those contentions.
  4. [45]
    The formal offer provided as follows, relevantly:
    1. (a)
      For the plaintiff to be paid some $72,000 from the funds then paid into Court;
    2. (b)
      For the first defendant to be paid seem $69,000 (the balance of the funds then paid into Court);
    3. (c)
      Each party receive those sums in full discharge of all rights in the proceedings (including the claims of the second defendant), with the parties to bear their own costs; and
    4. (d)
      Thereafter the first defendant would release the caveat.
  5. [46]
    There were other provisions but again they comprised mechanics to give effect to that offer.  They do not affect the validity of the offers as offers under Chapter 9 Part 5.

Are the offers valid offers under the UCPR?

  1. [47]
    Mr Di Carlo contended that the Second and Third offers could not take effect under Chapter 9 Part 5 UCPR because they comprised a single offer by the first defendant, not a distinct offer on the claim and on the counterclaim.  He pointed to the oddity that the consequence of beating the offer by the first defendant was different depending on whether it succeeded as defendant on the claim or plaintiff on the counterclaim.  
  2. [48]
    His submission assumes that the claim and counterclaim must be treated as separate for the purpose of assessing an offer to settle under Chapter 9 Part 5.    That might not be so where the plaintiff has failed completely.  In that case, Rule 361 would be not applicable and the costs of the claim would fall to be dealt with on ordinary principles: Schofield v Hopman (No. 2) [2017] QSC 324.  However, that is not this case.  The plaintiff succeeded on its claim in part, securing repayment of funds paid under the Building Contract, though that victory was largely pyrrhic.  Thus in theory, the offer would be ineffective from the claim, though effective from the prospect of the counterclaim.   That outcome makes it difficult properly to apply Rules 360 and 361.  That outcome is also inconsistent with the appropriate costs order for this matter which I have set out in [33] above.
  3. [49]
    It might be argued that the offers should be considered against the net outcome on the claim and counterclaim.  That is plainly how it was put by the first defendant and is consistent with the form of the judgment.  However, I cannot see how the fact that a judgment may be given for a net sum under Rule 173 permits the Court to ignore Rules 360 and 361 and to instead consider the offers as offers which ignore the claim and focus just on the net result of claim and counterclaim. 
  4. [50]
    There is another difficulty with the offers being effective as offers under Chapter 9 Part 5: the offers were by the defendants jointly. 
  5. [51]
    In the circumstances, I do not consider that either the First or Second Offer were effective to attract Rule 360 or Rule 361.
  6. [52]
    The mechanism under Chapter 9 Part 5 is inapt to deal with all up offers by multiple defendants in a context like this.  That does not mean, however, that the offers ought simply to be ignored.  The First Offer was not in the form of an offer under the Rules in any event.

Are the offers effective as Calderbank offers?

  1. [53]
    Where an attempt to make an offer under Chapter 9 Part 5 fails, the offer may take effect as a Calderbank offer if it is marked without prejudice except as to costs.  The Second and Third Offers were both so marked.
  2. [54]
    In  J & D Rigging Pty Ltd v Agripower Australia Limited & Ors [2014] QCA 23, the Court held:

[5] 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.

[6] In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2), the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:

  1. the stage of the proceeding at which the offer was received;
  2. the time allowed to the offeree to consider the offer;
  3. the extent of the compromise offered;
  4. the offeree’s prospects of success, assessed as at the date of the offer;
  5. the clarity with which the terms of the offer were expressed;
  6. whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.”
  1. [55]
    In Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd [2016] QCA 130, the Court of Appeal observed:

[2] The basis on which the respondents seek their costs on an indemnity basis is because they made an offer to the applicant pursuant to the principles in Calderbank v Calderbank which was not accepted. The law with regard to costs when a Calderbank offer has been made was set out by the High Court in a joint judgment in Stewart v Atco Controls Pty Ltd [No 2] where the court held at [4]:

“This Court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.”

  1. [56]
    At the time the First Offer was made the plaintiff’s pleading advanced only claims that were either abandoned or dismissed at trial.  However that offer sought a payment to the defendant of the whole of the monies paid into Court, some $140,000.  The defendant did not ultimately succeed that that extent at trial.  Given the stage at which the offer was made, and the subsequent outcome of the trial, I do not think it unreasonable for the plaintiff not to have accepted that offer and would not in any event exercise my discretion to order indemnity costs on the basis of that offer given the ultimate outcome of the trial.
  2. [57]
    Although the matter is finely balanced, I am not persuaded it was unreasonable for the plaintiff to reject the Second Offer either.  It is sufficient to note that at that time, no evidence had been delivered which made good the proposition that the first defendant was entitled to a very substantial sum by way of restitution on a quantum meruit basis.  Further, the plaintiff had not obtained its own evidence as to the extent and value of the defective work.  
  3. [58]
    Neither of those matters assist the plaintiff in respect of the Third Offer.  By that time it had in hand its report from Mr Dixon which did not assist it to make good more that some $12,000 worth of defects (claims which were ultimately not made good at trial).  Further, it had in hand Mr Carey’s report, which should have made clear to the plaintiff that very little of the actual work undertaken was unlicensed and that the first defendant was likely to recover most if not all of the payments up to the Contract Sum on a restitutionary basis.  The plaintiff never sought any contrary evidence until late efforts at trial which were in any event ineffective.  The Third Offer was made when the parties were (or should have been) ready for trial.  The plaintiff had no reason for optimism that circumstances would materially change before trial.
  4. [59]
    Considerable weight should also be given to the obvious weakness in the plaintiff’s claims based on the notion that the first defendant undertook to do the expanded scope of work for the Contract Price.  The plaintiff’s position on that matter was not tenable in the face of the documents, as was shown at trial.
  5. [60]
    It is true that the effect of the Third Offer was that the plaintiff paid the first defendant $69,000 and the first defendant recovered only $67,000 plus interest.  When it comes to the money sum offered, the first defendant only did better than the Third Offer by reason of interest accrued to the date of the offer.   However, that dramatically under-states the true position.  The Third Offer provided for all parties to bear their own costs.  That is not what has occurred at trial.   Taking into account the first defendant’s standard costs, the Third Offer was very substantially bettered by the first defendant. And that conclusion follows without taking into account the position of the second defendant, who was also a party to the offer.
  6. [61]
    In addition, the Third Offer expressly warned of a claim for indemnity costs, and was open for acceptance for 14 days.
  7. [62]
    In my view, it was unreasonable for the plaintiff to reject the Third Offer.  I therefore order the plaintiff to pay 75% of the first defendant’s costs on the standard basis up to 23 May 2018 (the day the offer expired) and thereafter on an indemnity basis.

Conclusion

  1. [63]
    The orders of the Court are:
    1. (a)
      The Court declares that by the written Building Contract between the plaintiff and the first defendant dated 6 December 2012, the first defendant undertook to carry out building work for which the first defendant did not hold a contractor’s licence of the appropriate class under the Queensland Building Services Authority Act 1991 (Qld)
    2. (b)
      The plaintiff pay the first defendant/counterclaimant the amount of $85,989.86 inclusive of interest;
    3. (c)
      The plaintiff’s claims against the first and second defendants otherwise be dismissed;
    4. (d)
      The first defendant’s counterclaim be otherwise be dismissed;
    5. (e)
      The plaintiff pay the second defendant’s costs of the proceedings including reserved costs on an indemnity basis;
    6. (f)
      The plaintiff pay 75% of the first defendant’s costs of the proceedings including reserved costs, such costs to be determined on the standard basis for costs incurred up to 23 May 2018 and thereafter on the indemnity basis.
  2. [64]
    The Court also orders by consent that the sum of $101,184.94 paid into this Court on 10 February 2015 at 14:31:42 (receipt number 4269621) by the plaintiff be paid out as follows:
    1. (a)
      $85,989.86 to the first defendant in satisfaction of the judgment of the Court for that amount; and
    2. (b)
      The balance, including any accretions, to the plaintiff.

Footnotes

[1]Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd & Anor [2018] QDC 218.

[2]All figures are GST inclusive.

[3]Northbuild Constructions Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525.

[4]Defendant’s Cost Submissions at [67].

Close

Editorial Notes

  • Published Case Name:

    Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd in its own capacity as trustee for the Hennessey Family Trust and John Paul Hennesey

  • Shortened Case Name:

    Chapel of Angels Pty Ltd v Hennessy Builder Pty Ltd

  • MNC:

    [2018] QDC 248

  • Court:

    QDC

  • Judge(s):

    Porter DCJ

  • Date:

    11 Dec 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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