Enkelmann v Stewart [No 3][2025] QSC 206

SUPREME COURT OF QUEENSLAND

1. [1]
   On 17 April 2025, I published reasons in respect of the claim and counterclaim (Reasons).^[1]
2. [2]
   On 27 June 2025, I published reasons and made final orders in respect of the claim and counterclaim (Final Orders).^[2]
3. [3]
   These reasons deal with costs in respect of the claim and the counterclaim. The defined terms in the Reasons and the Final Orders are used in these reasons, unless stated to the contrary.
4. [4]
   The first, second and third plaintiffs would be liable for any costs payable in respect of the plaintiffs’ claim.  However, only the first plaintiff and second plaintiff are parties to the counterclaim and, accordingly, only the first plaintiff and second plaintiff would be liable for any costs payable in respect of the counterclaim.
5. [5]
   In these circumstances, I consider that it is necessary and appropriate to consider the question of costs of the claim separately from the question of costs of the counterclaim.

Costs of the plaintiffs’ claim

6. [6]
   First, considering the costs of the plaintiffs’ claim.
7. [7]
   As considered in the Reasons, just prior to the hearing of final submissions the plaintiffs wholly abandoned their claim and agreed to the claim being dismissed.
8. [8]
   The defendants requested that the Reasons make some findings in respect of the claim.  This was done to the extent necessary for the consideration of the counterclaim, given the inter-relationship between the claim and the counterclaim.
9. [9]
   Relevantly, the Final Orders in respect of the plaintiffs’ claim order that the plaintiffs’ claim is dismissed.
10. [10]
    The plaintiffs concede that there should be an order that the plaintiffs pay the defendants’ costs of the claim on the standard basis.  The defendants seek an order that the plaintiffs pay the defendants’ costs of the plaintiffs’ claim on the indemnity basis.
11. [11]
    Under the Uniform Civil Procedure Rules 1999 (UCPR), the starting point in respect of costs is r 681 which provides:

“(1) Costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise.

2. Subrule (1) applies unless these rules provide otherwise.”

12. [12]
    There was no offer under the UCPR or an offer made pursuant to the principles in Calderbank v Calderbank^[3] in respect of the plaintiffs’ claim.  Accordingly, the issue of whether standard or indemnity costs are appropriate falls to be determined in the exercise of the Court’s discretion in respect of costs.
13. [13]
    The Court has a wide general discretion as to costs under r 681.  Costs would follow the event in the usual course.  Here, the plaintiffs have been wholly unsuccessful in respect of the plaintiffs’ claim and conceded as such prior to the final submissions. 
14. [14]
    Further, pursuant to r 702 UCPR, costs are to be assessed on the standard basis unless the UCPR or an order of the Court provides otherwise.
15. [15]
    The Court also has a wide power to award indemnity costs in accordance with the principles identified in the authorities.  What is required is something in the circumstances of the case to warrant a departure from “the usual course”.  It requires something more than the “demerit of a party’s case”.^[4] 
16. [16]
    While the categories are not closed, the authorities do recognise some circumstances that warrant the exercise of the discretion.  For example:

    1. The making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud.
    2. Evidence of particular misconduct that causes loss of time to the Court and to other parties.
    3. Proceedings commenced or continued for some ulterior motive.
    4. Proceedings commenced or continued in wilful disregard of known facts or clearly established law.
    5. The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
    6. An imprudent refusal of an offer to compromise.^[5]
17. [17]
    Even in respect of these categories of cases the question remains whether the particular facts and circumstances of the case warrant the making of an order for payment of costs other than on a standard basis.  It remains in the discretion of the judge.^[6]
18. [18]
    The defendants rely on the following matters in support of their submission that indemnity costs are appropriate in all of the circumstances:

    1. The whole trial was directly linked to the non-existent levees.  The plaintiffs bore the onus of proving that Levees 4, 5, 6 and 7 existed, especially Levees 4 and 5.  Further, the plaintiffs bore the onus of proving that all Levees (that is 1 to 7) materially impacted the flow of water across Mikandra and onto Riverview by concentrating and intensifying the flows.
    2. The Court not accepting the defendants’ evidence would not be sufficient for the plaintiffs to establish their case.  The plaintiffs would still need to discharge the onus on them.
    3. The defendants submit that the plaintiffs case involved a “concerted effort” by the first plaintiff, the second plaintiff and Brett Enkelmann to present a “false case” which led the defendant to incur substantial costs over a long period of time.
    4. The plaintiffs’ pleaded case was that the Levees alleged to have been built by the defendants increased water flows on the plaintiffs’ property.  This case was entirely dependent on expert evidence focused on a single point on the property which reported the maximum possible impact of the pleaded Levees. This aspect of the pleading was highlighted at the commencement of the trial and it was made clear that the defendants would be strictly holding the plaintiffs to their pleaded case.
    5. The claim and counterclaim were closely linked.  In particular, if Levees 4 to 7 were found not to exist or not to have the hydraulic impact claimed by the plaintiffs, the practical consequence was that the counterclaim could not be defended.  This position was amplified by the plaintiffs’ evidence at trial that the Temporary Levee would be removed as soon as the purported unlawful Levees were removed.
    6. The necessary consequence of the finding that Levees 4 to 7 never existed and could not reasonably have been thought to have ever existed is that the plaintiffs could not have been telling the truth about their observations of either the Levees or any change in floodwater behaviour.
    7. It is in all the circumstances that the defendants submit that the plaintiffs deliberately concocted many pages of affidavit evidence and false instructions to experts to maintain the claim.
19. [19]
    The defendants rely on a number of grounds informed by the authorities to support an indemnity costs order, including:

    1. Ground A: Making and persisting with allegations that Levees 4, 5, 6 and 7 existed or had existed and that Levees 1, 2 and 3 had and continued to have a material hydraulic effect (defined as the “False Allegations”), and seeking relief related to the False Allegations in wilful disregard to known facts or reckless indifference to the truth and when those matters were known to be false and inconsistent with unchallenged testimony.
    2. Ground B: Making and persisting with the claim when, if properly advised, the plaintiffs must have known the claim had no chance of success.
    3. Ground C: Making and persisting with the claim for an ulterior purpose of applying financial pressure to the defendants, including to pressure the defendants into selling their land to the plaintiffs.
    4. Ground D: The failure, without explanation, to cease persisting with the claim until written addresses were due to be filed and exchanged.
    5. Ground E: Misconduct in pursuit and preparation of the claim.
    6. Ground F: Imprudently refusing an offer of compromise in relation to the counterclaim.
    7. Ground G: Defending the counterclaim, including the amended counterclaim, when to do so was illogical, irrational, and inconsistent with pleaded facts and unchallenged testimony.
    8. Ground H: Altering the Temporary Levee during the trial causing the trial of the counterclaim to be unduly prolonged.
20. [20]
    Grounds F, G and H directly relate to the counterclaim and will be considered further, if necessary, in respect of the costs of the counterclaim.
21. [21]
    Ground C relies on the premise that there must be “some other purpose” for bringing and maintaining the proceeding.  The defendants contend that it can be inferred that the plaintiffs had an ulterior purpose of purchasing Mikandra from the defendants.
22. [22]
    I am not satisfied that there is a proper basis to draw the inference contended for by the defendants.  A party, properly advised, may think laterally when preparing for a mediation to identify commercial solutions.  This could foreseeably include purchasing the property that is said to be causing the issues the subject of the litigation.  This is consistent with the first plaintiff’s affidavit that the valuation of Mikandra was obtained on the suggestion of his legal advisors.
23. [23]
    Further, there is no evidence that the plaintiffs had a desire to purchase Mikandra.  This ground should be rejected.
24. [24]
    The matters raised in respect of Ground D are critical of the plaintiffs in abandoning the claim at a late stage in the trial.  I do not consider that this factor is of any assistance in considering whether the discretion should be exercised to award indemnity costs.  Consistent with r 5 UCPR, a party should identify the real issues in dispute and that should occur even at a late stage in the proceeding.  There was some efficiency in the plaintiffs’ concession in respect of the claim, saving time and expense in relation to the hearing of the final submissions, as well as court time in preparing the Reasons and the Final Orders. 
25. [25]
    In respect of Ground E, this raises a number of different matters going to alleged misconduct, including:

    1. Conferring with multiple witnesses at the same time.
    2. Witness collusion and/or tampering.
    3. Reconstructing the False Allegations based on historical aerial photography found online.
    4. Opening the case on the basis of the False Allegations.
    5. Tendering and maintaining expert reports known to depend on the False Allegations.
    6. Cross-examining witnesses based on the False Allegations.
    7. The delivery of an expert report of Mr Innes which was unreasonably and deliberately withheld until the last minute and concealed by the simultaneous delivery of a “draft” report which was known not to be a draft.
    8. The delivery of a draft order early in the trial containing alleged rectification works which were already known by that early stage to be unnecessary and based on the False Allegations; and
    9. The filing of an appeal and opposing an order to disclose a document which on the plaintiffs’ case never existed, where the supporting affidavit referred to concern as to the disclosure of a file note which the plaintiffs later contended never existed.
26. [26]
    The plaintiffs submit that these serious allegations have been made but have not been properly particularised.  Further, they submit that these are not factors that go to or warrant an assessment of costs on an indemnity basis.  Dealing with some of these issues in more detail.
27. [27]
    Considerations of conferring with multiple witnesses at the same time, witness collusion and/or tampering, and reconstructing the False Allegations based on historical aerial photography found online all go to the reliability and/or credibility of the witnesses involved.  That has been dealt with in the findings that have been made in the Reasons.  They may also be relevant to Ground B, but on their own in these particular circumstances, they do not warrant an indemnity costs order.
28. [28]
    Considerations of opening the case on the basis of the False Allegations, tendering and maintaining expert reports known to depend on the False Allegations, and cross-examining witnesses based on the False Allegations duplicate matters raised in respect of Ground A.  They may be relevant to Ground A, but are not a separate basis on their own to warrant an indemnity costs order.
29. [29]
    The production of a draft order identifying the claimed rectification works was produced as a result of a request from the Court in order to understand the ultimate relief sought by the plaintiffs by way of a mandatory injunction.  The plaintiffs now accept that the “Injunction Draft” document was wider than the plaintiffs’ case at that time, given the concession in respect of the southern works.  At worst it was a mistake and not dishonest as suggested.  This issue does not assist in the consideration of whether indemnity costs should be awarded.  To the extent that it is relevant to the case maintained by the plaintiffs, those considerations are dealt with under Grounds A and B.
30. [30]
    The issue about the appeal is also of little assistance.  The costs have been separately dealt with by the Court of Appeal.  The facts giving rise to the original decision and the appeal were narrow and confined and have been comprehensively dealt with.  There is no benefit in reopening them as they do not assist in the consideration of whether indemnity costs should be awarded.
31. [31]
    I am not satisfied that any of the matters raised in respect of Ground E are on their own relevant to the exercise of the Court’s discretion in all of the circumstances.  These matters are, however, relevant to the consideration of Grounds A and B.
32. [32]
    It is convenient to deal with Grounds A and B together as they are in many respects inter-related.
33. [33]
    In respect of Ground A the defendants refer to and rely on the findings in the Reasons at [64], [128] and [205].  The critical finding was that Levees 4, 5, 6 and 7 do not exist on Mikandra and have never existed.  Further, that there was “no credible evidence” that those levees had ever existed.
34. [34]
    Relevantly:

    1. At [128]: 

“The construction of the Temporary Levee was in response to a perceived risk of floodwaters with increased velocities from Mikandra as a result of works that were never done.  The scale of the alleged works on Mikandra was such that it is difficult to see how a reasonable person would think they had been done, when that was not reflected in what was actually occurring on the ground on Mikandra.”

2. At [205]:

“The claim in respect of those alleged levees has been wholly abandoned and there is no credible evidence that those levees ever existed.  At best, the plaintiffs had a belief or perception that Mikandra was causing a problem on Riverview which resulted in the Temporary Levee being built.  But no reasonable basis for the plaintiffs’ view is established.”

35. [35]
    The defendants ask the Court to infer that the plaintiffs could not have reasonably believed that Levees 4 to 7 ever existed.  Further, reasonable inquiries would have made this apparent, for example the inspections by the plaintiffs and their lawyers of Mikandra and also observations from public vantage points.
36. [36]
    The defendants contend that the plaintiffs undertook a process of reconstruction to support their case and their instructions to the experts were then directed to achieve an outcome in support of the plaintiffs’ case theory.  It is submitted that these allegations were maintained for many years, even after the plaintiffs received the First Markar Report dated 7 August 2020.
37. [37]
    In defence against the plaintiffs’ case theory, the defendants undertook considerable work to ascertain the historical contours of the relevant areas on Mikandra.  Mr Byrom obtained data from the 1991 aerial photographs and was able to use that to undertake a retrospective survey.  The defendants contend that the contrast in approaches is telling.
38. [38]
    The defendants contend that by the commencement of the trial the plaintiffs’ expert Mr Giles recognised that Levees 1, 2 and 3 and the Ring Tank were “not hydraulically effective”, but despite this their effect was still opened.
39. [39]
    In respect of Ground B, the defendants point to that the following factors:

    1. The plaintiffs were legally advised throughout the period.
    2. The plaintiffs’ claims were maintained for a period of 15 months after Brett Enkelmann gave evidence in cross-examination that during the site view mid-trial, he saw that Levees 4 and 5 were not there.
40. [40]
    Ultimately, the defendants contend that the plaintiffs made and persisted with a claim that they must have known had no prospects of success as their actions reflect a conscious decision to press a case that they knew had no foundation and was therefore hopeless.
41. [41]
    Further, there was no direct or contemporaneous documentary evidence, survey data or evidence independent of the plaintiffs that any of the disputed levees ever existed.  That is consistent with the findings in the Reasons.
42. [42]
    The evidence put forward by the plaintiffs was reconstructed in accordance with evidence which came out at the trial.  This is also consistent with the findings in the Reasons.
43. [43]
    It can be inferred from the findings in the Reasons that the plaintiffs had no reasonable basis for believing the Levees existed and that their beliefs were not supported by evidence or logic.  That is also consistent with the wider findings in the Reasons.
44. [44]
    It is submitted that the plaintiffs’ case was hopeless and was founded on an intentional falsehood.  The defendants contend that the evidence of the first plaintiff and Brett Enkelmann was knowingly false evidence about the existence of the Levees when they were obviously and demonstrably not there.  It is submitted that this is consistent with the Court not accepting their evidence unless it was contrary to the interests of the plaintiffs.^[7]
45. [45]
    The defendants say that no reasonable person could have believed that the alleged Levees existed and the most that the plaintiffs say in response is that the plaintiffs led admissible evidence.  Further, the defendants say that the plaintiffs sufficiently understood that the case they commenced and maintained could never have succeeded.  That is, the plaintiffs’ case was “so clearly doomed to fail” that it was unreasonable for them to have pursued and continued it.
46. [46]
    The defendants submit that they incurred significant costs in defending a lengthy trial involving the plaintiffs advancing facts that the plaintiffs knew, and any reasonable person in their position would have known, were baseless.
47. [47]
    The defendants ultimately submit that:

    1. Advancing a hopeless case is a sufficient base for the award of indemnity costs.^[8]
    2. Commencing and continuing proceedings making serious allegations knowing them to be false and in wilful disregard to known facts is also a sufficient base for the award of indemnity costs.^[9]
48. [48]
    The plaintiffs submit that:

    1. The existence of the Levees, in particular Levees 4 and 5, was central to the plaintiffs’ case.
    2. If their existence was established, then the plaintiffs’ claim was otherwise genuine and reasonably arguable.
    3. Admissible evidence was led in support of the plaintiffs’ claim.
    4. The defendants would need to establish that the plaintiffs gave evidence they knew to be false.
    5. There is no clear or cogent evidence to establish the False Allegations.
    6. The findings in the Reasons are that the first plaintiff and Brett Enkelmann were not reliable witnesses.  It is submitted that it is “quite another thing to say that those witnesses knowingly gave false evidence”.
    7. There was no concession by Brett Enkelmann that his evidence was false or contrived.
49. [49]
    In considering all of the factors:

    1. The factors identified by the defendants in respect of Ground A are particularly relevant to the exercise of the Court’s discretion and favour an award of indemnity costs.  Further, the matters identified at [25(a)] to [25(h)] above in respect of Ground E are consistent with, and magnify, the factors relevant to Ground A in favour of an award of indemnity costs.
    2. The factors identified by the defendants in respect of Ground B are particularly relevant to the exercise of the Court’s discretion and favour an award of indemnity costs.  Further, the matters identified at [25(a)] to [25(h)] above in respect of Ground E are consistent with, and magnify, the factors relevant to Ground B in favour of an award of indemnity costs.
50. [50]
    Further, consistent with the principles recognised in the relevant authorities, intentional dishonesty is not required before indemnity costs may be awarded.  The relevant categories to be considered in the current circumstances are:

    1. Proceedings commenced or continued in wilful disregard of known facts or clearly established law.
    2. The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
51. [51]
    It is necessary to provide some context to the findings that were made in the Reasons:

    1. The Reasons made findings that were necessary for the determination of the issues that remained live issues at the end of the trial in light of the abandonment of the plaintiffs’ claim and the continuation of the counterclaim.
    2. The findings in respect of the evidence of the first plaintiff and Brett Enkelmann were made mindful of:
       1. The constraints discussed at [7], [8] and [9] of the Reasons.
       2. Not making a finding that a witness had lied unless it was really necessary.^[10]
    3. The finding at [60] of the Reasons is:

“In any event, I do not accept the evidence of the first plaintiff and Brett Enkelmann unless it is contrary to the interests of the plaintiffs.  I find that their evidence was not reliable and was, in many respects, subject to later reconstruction.”

4. The finding needs to be understood in its entirety.  Not accepting the evidence “unless it is contrary to the interests of the plaintiffs” is a greater condemnation of the evidence than merely finding that the evidence was unreliable.  Further, there was express recognition that the evidence had been “in many respects, subject to later reconstruction”.

52. [52]
    In respect of the key aspect of the plaintiffs’ claim, findings of fact were made that were relevant to the underlying facts of the counterclaim, many of which were common facts. These findings in the Reasons included:

    1. At [64]:

“In respect of the topography of Mikandra, I make the following findings:

1. The topography of Mikandra includes the Irrigation Infrastructure admitted by the defendants at [6(a)] of the Amended Defence and Counterclaim.
2. In respect of the “Works” defined in [6] of the 4FASOC:
   1. Levees 4, 5, 6 and 7 do not exist on Mikandra and have never existed; and
   2. Levees 1, 2 and 3 and the Ring Tank have no adverse effect on the flow of flood waters through Mikandra and onto Riverview.
3. The topography of Mikandra is reflected in the modelling of Dr Markar.
4. The topography of Mikandra is reflected in the drainage map [DEF.014.001.0027] prepared by Mr Byrom based on 2012 LIDAR data.”

2. At [128] to [130]:

“[128]  The construction of the Temporary Levee was in response to a perceived risk of floodwaters with increased velocities from Mikandra as a result of works that were never done.  The scale of the alleged works on Mikandra was such that it is difficult to see how a reasonable person would think they had been done, when that was not reflected in what was actually occurring on the ground on Mikandra.

[129] Further, it is difficult to see how construction of the Temporary Levee could be no more than reasonably necessary when it is founded on an unreasonable belief or perception of what needed to be addressed or protected against.  What is reasonably necessary must be related to the reasonableness of what gives rise to the necessity itself. 

[130] Here, the plaintiffs in effect took action to construct the Temporary Levee causing their own farming business harm, and also physical harm to their own property, to deal with a perceived threat of increased water velocities caused by works claimed to have been done on Mikandra.  That is not rational given the water flow from Mikandra to Riverview had historically occurred and was not changed between flood events, other than each flood being unique.”

3. At [202] to [205]:

“[202]  The Temporary Levee was built before the proceedings were commenced.  However, it is clear from the evidence of the first plaintiff and Brett Enkelmann that the concerns reflected in the claim commenced in 2016 existed, at least to some extent, in 2013 when the Temporary Levee was first constructed.

[203] Again, the plaintiffs’ case for years was that the Temporary Levee was only necessary because of the alleged works on Mikandra, and it caused loss and damage to the plaintiffs as reflected in the claims for the costs of building and removing the Temporary Levee and the diminution in value of Riverview.

[204] On the plaintiffs’ own evidence, some impacts on Mikandra from the Temporary Levee were known and the Temporary Levee was only to remain until the alleged levees on Mikandra were removed.^[[11]] 

[205] The claim in respect of those alleged levees has been wholly abandoned and there is no credible evidence that those levees ever existed.  At best, the plaintiffs had a belief or perception that Mikandra was causing a problem on Riverview which resulted in the Temporary Levee being built.  But no reasonable basis for the plaintiffs’ view is established.”

53. [53]
    It was not strictly necessary to make findings beyond those made to determine the issues then before the Court.  However, now in respect of costs, the parties are seeking to deploy the findings in the Reasons to suit their contentions as to whether there is a basis to award indemnity costs.
54. [54]
    At the hearing in respect of costs the first plaintiff was further cross-examined.  The first plaintiff’s evidence included as follows:

“And when did [the Levees] disappear?‑‑‑They haven’t disappeared.

They’re still there now, are they?‑‑‑Yes.

…

Now, the evidence that you gave a few moments ago was that the levees are still there?‑‑‑Yes.

Can you tell me, please, what levees do you stay are still there?‑‑‑Four, 6 and 7.

Not 5?‑‑‑Five is there in a minor way, but it’s not a levee, as such, like it was.”^[12]

55. [55]
    The recent evidence of the first plaintiff is illustrative of the position of the plaintiffs in respect of the maintenance of the plaintiffs’ claim.  There is an inability or an unwillingness to engage with proven facts, even at this late stage.
56. [56]
    To the extent that it is necessary to clarify or supplement the findings in the Reasons for the purpose of determining the issue of costs of the plaintiffs’ claim, I make the following supplementary findings:

    1. The allegations that Levees 4, 5, 6 and 7 had existed were not established and there was no credible, independent, or objective evidence consistent with those allegations.
    2. At best the plaintiffs had a belief that the Levees existed, but there was no reasonable basis for that belief.
    3. The proceedings were commenced and continued, including the defence of the counterclaim, in wilful disregard of facts (consistent with the findings in the Reasons) which ought to have been known to the plaintiffs on reasonable enquiries.
    4. Lengthy and protracted litigation resulted from the making of the allegations for which there was no logical or rational basis.
    5. The plaintiffs pursued and maintained the claim which was doomed to fail on an understanding of facts which the plaintiffs ought to have been aware of if they had made reasonable enquiries, such that it was unreasonable for the plaintiffs to have pursued the claim.
57. [57]
    In all of these circumstances, I am satisfied that it is appropriate to exercise the discretion to award costs on the indemnity basis in respect of the plaintiffs’ claim.
58. [58]
    The appropriate order is that the plaintiffs pay the defendants’ costs of the plaintiffs’ claim on an indemnity basis.

Costs of the defendants’ counterclaim

59. [59]
    Turning to consider costs of the defendants’ counterclaim.
60. [60]
    Consistent with the Reasons and the Final Orders, the defendants have been wholly successful in respect of the counterclaim.^[13]
61. [61]
    Consequently, pursuant to r 681 of the UCPR, costs are in the discretion of the Court and follow the event unless the Court orders otherwise.  Further, pursuant to r 702 UCPR, costs are to be assessed on the standard basis unless the UCPR or an order of the Court provides otherwise.
62. [62]
    The plaintiffs accept that they should pay the costs of the counterclaim but submit they should be payable on the standard basis.
63. [63]
    The defendants submit that that the plaintiffs should pay the defendants’ costs on the indemnity basis pursuant to r 703(1) UCPR.  Several reasons are relied on by the defendants to support an order for costs on the indemnity basis.^[14] 
64. [64]
    The primary reason is reliance on the offer by the defendants to settle the counterclaim on 28 March 2023 by a formal offer of settlement pursuant to Chapter 9 Part 5 of the UCPR (Formal Offer) and an offer made pursuant to the principles in Calderbank v Calderbank^[15] (Calderbank Offer) (in the alternative).
65. [65]
    It is convenient to start with a consideration of the Formal Offer and then to consider, if necessary, the Calderbank Offer and the other bases.
66. [66]
    Rule 360 UCPR governs costs if an offer is made by a plaintiff.  In respect of the counterclaim, the defendants were in the position of plaintiffs and therefore r 360 is the relevant rule.
67. [67]
    Rule 360 UCPR was amended by the commencement of the Uniform Civil Procedure (Offers to Settle) Amendment Rule 2023 on 23 June 2023.  Rule 1003 UCPR is the transitional provision and provides:

“(1) Rules 360 and 361, as in force immediately before the commencement, continue to apply in relation to an offer made before the commencement as if the Uniform Civil Procedure (Offers to Settle) Amendment Rule 2023 had not commenced.

2.  Rules 360, 361 and 361A, as in force from the commencement, apply only in relation to an offer made after the commencement.”

68. [68]
    Accordingly, r 360 UCPR as at 28 March 2023 when the Formal Offer was made is the applicable version of the rule.
69. [69]
    At the time, r 360 UCPR provided as follows:

“(1) If –

1. 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
2. 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.” (emphasis added)

70. [70]
    Relevantly here:

    1. The Formal Offer was made by the defendants pursuant to Chapter 9 Part 5 UCPR.
    2. The Formal Offer was not accepted by the first and second plaintiffs, being the defendants to the counterclaim.
    3. There is no evidence to establish that the defendants were not at all material times willing and able to carry out what was proposed in the offer.
71. [71]
    It is necessary to consider the Formal Offer in more detail before further considering the application of r 360 UCPR.
72. [72]
    The Formal Offer provides as follows:

    1. Offers to settle the whole of the counterclaim.
    2. Judgment in favour of the defendants in accordance with an attached draft judgment which provides:

“1.  Judgment in favour of the First Defendant and the Second Defendant on the Counterclaim filed 19 December 2022.

2. Within 60 days of this Judgment the First Plaintiff and the Second Plaintiff must remove the Temporary Levee and reinstate Riverview at the location of the Temporary Levee to the Natural Ground Level.
3. There be no order as to costs in respect of the Counterclaim.”
   3. There be no order as to costs.
   4. The offer is open for 21 days.
   5. The offer can be accepted in writing.
   6. If the offer is not accepted the defendants will rely on r 360 UCPR.

73. [73]
    The Formal Offer can be understood as providing for the removal of the Temporary Levee by reference to the Second Byrom Report, which was the relevant report at that time.
74. [74]
    The defendants contend that:

    1. By virtue of the Reasons the defendants have obtained a result at least as favourable as what was offered in the Formal Offer. 
    2. The form of judgment in the Formal Offer is less onerous than the plaintiffs’ proposed draft judgment dated 28 April 2024,^[16] together with the concession by the plaintiffs that they should pay the defendants’ costs of the counterclaim on the standard basis.
75. [75]
    The plaintiffs submit that the rejection of the defendants’ offer is not a basis for ordering that the costs of the counterclaim be payable on the indemnity basis irrespective of whether the offer is considered as a formal offer under the UCPR or as an offer made pursuant to the principles in Calderbank v Calderbank.^[17]
76. [76]
    The plaintiffs submit that r 360 UCPR provides that a defendant may demonstrate that an order, other than an order for indemnity costs, is appropriate.
77. [77]
    The plaintiffs point to a number of factors in support of their contention, including:

    1. The offer was made only about six weeks before the start of the first tranche of the trial.
    2. The offer invited the first plaintiff and the second plaintiff to “capitulate completely” on the relief sought in the counterclaim.  It sought the removal of the whole of the Temporary Levee and in exchange the defendants agreed to bear their own costs.
78. [78]
    The making of the offer six weeks before trial does not, in my view, count against the effectiveness of the Formal Offer.  The plaintiffs in fact should have been in the best position to objectively evaluate the offer.  The proceedings were being managed on the Supervised Case List and there was a timetable in place for the completion of steps prior to the trial.
79. [79]
    Further, offers to settle under the UCPR can be made at any time and costs consequences as specified in the UCPR may flow from a decision not to accept a formal offer.  The plaintiffs’ contention that the offer was “too late to be effective” misses the effect of the offer. 
80. [80]
    An effective formal offer may operate to shift the risk of costs from that point in time. That is, the potential reallocation of the costs risk was as set out in r 360 UCPR if the plaintiffs did not practically achieve a better outcome than the Formal Offer.
81. [81]
    The second factor raised by the plaintiffs is whether there was a sufficient element of compromise in the Formal Offer.  The plaintiffs recognise that the concession made was in respect of costs that the defendants had incurred in pursuing the counterclaim but submit that was the only concession.
82. [82]
    However, this fails to recognise that the concession as to costs may be a considerable concession in the circumstances.  The defendants had sought their costs and if they had been successful on the counterclaim they would have been entitled – like now – to at least their costs of the counterclaim on the standard basis.  When considering the Formal Offer, the offer for each party to bear their own costs was the defendants foregoing their entitlement to costs on the standard basis to that point.
83. [83]
    The plaintiffs commenced the claim on 14 December 2016.  The counterclaim was first raised on 19 December 2022.  At the time of the Formal Offer, the relevant pleadings were the Third Further Amended Statement of Claim (filed 24 November 2022), the Amended Defence and Counterclaim (filed 19 December 2022), and the Reply to the Defence and Counterclaim (filed 17 January 2023).  There were amendments to the counterclaim during the trial.
84. [84]
    It is also relevant that the plaintiffs’ defence to the counterclaim relies on the matters pleaded in the statement of claim.  This is considered at [31] and [32] of the Reasons and will not be repeated here.
85. [85]
    The Formal Offer was made on 28 March 2023 and the counterclaim had been on foot for a reasonable period of time by that stage.  The defendants’ offer to forego costs was likely to be significant, and those advising the plaintiffs should have been able to provide some guidance as to the likely value of that costs component.
86. [86]
    While there must be an element of compromise, the authorities do not specify the degree of compromise required to be an effective offer under the UCPR.  An offer that sought the relief sought in the claim (or counterclaim) plus costs would not be an effective offer.^[18]  However, that is not what was offered here.  The Formal Offer was the relief sought in the counterclaim, being the removal of the Temporary Levee, plus no liability to pay the defendants’ costs.  That is a sufficient degree of compromise to be an effective offer.
87. [87]
    The key issues for consideration are:

    1. Whether the defendants have obtained “an order no less favourable than the offer”.
    2. Whether the first and second plaintiffs have shown that “another order for costs is appropriate in the circumstances”.
88. [88]
    Consideration of this second issue includes consideration of whether the rejection of the offer was reasonable.
89. [89]
    Considering whether the defendants have obtained “an order no less favourable than the offer”:

    1. It was not contentious that the defendants were entitled to judgment on the counterclaim in light of the Reasons.
    2. It was not contentious that the defendants were entitled to a mandatory injunction on the counterclaim in light of the Reasons, at least in the form of what is contained in the Formal Offer.^[19]
    3. The plaintiffs conceded that the defendants would be entitled to their costs of the counterclaim on the standard basis.  This would include the defendants’ costs up to the date of the Formal Offer, which the defendants offered to forego entitlement to in the Formal Offer.
    4. The Final Orders include more onerous orders in comparison to the Formal Offer, including the appointment of an Agreed Surveyor and the preparation of a Survey Report at the expense of the first plaintiff and the second plaintiff for compliance purposes.^[20]
    5. The Final Orders are more favourable to the defendants than the Formal Offer in that the orders are more prescriptive as to what constitutes the Remedial Works and include a compliance verification procedure.
90. [90]
    In the circumstances, I am satisfied that the defendants have obtained an order “no less favourable” than the Formal Offer.
91. [91]
    In respect of whether the first and second plaintiffs have shown that “another order for costs is appropriate in the circumstances”, the plaintiffs contend that the defence of the counterclaim was reasonably arguable and that it was “reasonable to reject an offer inviting almost complete surrender”.
92. [92]
    Whilst the Formal Offer did only deal with the counterclaim, the claim and counterclaim were closely linked.  The plaintiffs pleaded the Temporary Levee as part of their claim and the first plaintiff and the second plaintiff relied on those very same matters in defence of the counterclaim.  The plaintiffs were perhaps in the best position to be able to weigh up the advantages and disadvantages and the strengths and weaknesses of the respective claims.
93. [93]
    What is required is an objective evaluation of the strengths and weaknesses involved in continuing to defend the counterclaim.  As ultimately reflected in the Reasons, the rejection of the Formal Offer was not reasonable.  This conclusion is not reached with the benefit of hindsight, but rather considering the factual findings which underpin the conclusions reached in the Reasons and reflected in the Final Orders.  In particular, the findings at [64], [128] and [205] of the Reasons.
94. [94]
    Accordingly, the first plaintiff and the second plaintiff have not shown that another order for costs is appropriate in the circumstances.  Rule 360 UCPR therefore mandates that the first plaintiff and the second plaintiff pay the defendants’ costs of the counterclaim on the indemnity basis.
95. [95]
    If I am wrong about the Formal Offer being an effective offer under r 360 UCPR, it is appropriate to give brief consideration to the Calderbank Offer.
96. [96]
    The Calderbank Offer was made simultaneously with the Formal Offer on 28 March 2023.  The 21 page letter and one page attachment sets out comprehensive extracts from the evidence in support of the defendants’ offer of compromise.  The Calderbank Offer follows the Third Markar Report dated 8 March 2023 which shows the effect the Temporary Levee had on water flow on Mikandra.
97. [97]
    As identified in the Calderbank Offer, the reports of Mr Giles as at that date did not address this issue and there was no evidence contrary to the opinion of Dr Markar on the effect of the Temporary Levee.
98. [98]
    The Calderbank Offer was in the same terms as the Formal Offer but outlined in the lengthy letter why it was unreasonable for the first plaintiff and the second plaintiff to reject the offer.  The Calderbank Offer stated that the construction and maintenance of the Temporary Levee was:

    1. unreasonable in all of the circumstances, including the effect it was likely to have and did have on Mikandra;
    2. the cause of an unreasonable interference with the defendants’ use and occupation of Mikandra; and
    3. an actionable nuisance to Mikandra for which the first plaintiff and the second plaintiff are liable.
99. [99]
    These propositions were ultimately consistent with the findings in the Reasons.
100. [100]
     A helpful summary of the principles in respect of offers made pursuant to the principles in Calderbank v Calderbank^[21] is contained in the reasons of Cooper J in the Queensland Court of Appeal decision of  McGee v Independent Assessor & Anor [No 2].^[22]
101. [101]
     The relevant principles include:

     1. The discretion provided by r 681 UCPR is wide but is informed by the statement of principle that the usual exercise of the discretion is that costs follow the event.^[23]
     2. A recognised circumstance in which the Court may exercise its discretion to order costs on the indemnity basis is where a party unreasonably rejects or fails to accept a Calderbank offer.^[24]
     3. There is no presumption or predisposition in favour of ordering an assessment on the indemnity basis simply because a party rejects an offer and subsequently obtains a less favourable judgment.^[25]
     4. 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 critical question is whether the rejection of the offer was unreasonable in the circumstances. The party seeking the order must show that the other party acted unreasonably or imprudently in not accepting the offer.^[26]
     5. The consideration of whether the rejection of an offer was unreasonable should ordinarily have regard to at least the following matters:^[27]
        1. the stage of the proceeding at which the offer was received;
        2. the time allowed for the offeree to consider the offer;
        3. the extent of the compromise offered;
        4. the offeree’s prospects of success, as assessed at the date of the offer;
        5. the clarity with which the terms of the offer were expressed; and
        6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
     6. The non-acceptance of a Calderbank offer may in some cases be a strong factor to be taken into account on an application for indemnity costs.^[28]
     7. If the offeree makes a submission that rejection of the offer was not unreasonable, then it should at least point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.^[29]
102. [102]
     The Court is to consider whether the rejection of the Calderbank Offer was unreasonable by considering, among other relevant circumstances, the strengths and weaknesses of the relevant party’s case respectively at the time the offer was made and that the first plaintiff and the second plaintiff ultimately failed in respect of the counterclaim.
103. [103]
     Briefly considering the factors:

     1. The Calderbank Offer was made six weeks before trial.  The proximity of the trial weighs in favour of the Calderbank Offer being made at a time when it could be properly evaluated.
     2. The Calderbank Offer was open for 21 days, and therefore was open for a reasonable time.  While the first plaintiff and the second plaintiff submit that the pleadings raised complex issues, the parties would have been preparing for trial so the issues should have been front of mind at that time and the three week period was reasonable to consider the strengths and weaknesses of the relevant party’s case respectively at the time.
     3. While the offer was for the removal of the Temporary Levee, a degree of compromise was included in the Calderbank Offer by the defendants offering to forego any entitlement to costs to the date of the offer.
     4. The defendants’ prospects of success were strong at the time of the Calderbank Offer given the lack of expert evidence from the plaintiffs’ expert in respect of the effect of the Temporary Levee.
     5. The terms of the Calderbank Offer were expressed clearly and the letter clearly articulated the evidence in support of the offer.
     6. The Calderbank Offer foreshadowed an application for indemnity costs in the event of the first plaintiff and the second plaintiff rejecting it.
     7. While the first plaintiff and the second plaintiff contend that the rejection of the Calderbank Offer was not unreasonable, they do not point to a reason for not accepting the Calderbank Offer beyond the usual prospects of being successful in litigation or that they had an arguable case.
     8. The first plaintiff and the second plaintiff’s case ultimately failed for reasons consistent with the matters identified in the Calderbank Offer.

104. [104]
     If the defendants’ costs of the counterclaim fall to be determined by a consideration of the Calderbank Offer:

     1. I am satisfied that the first plaintiff and the second plaintiff’s rejection of the Calderbank Offer was unreasonable and justifies a departure from the general costs rule in r 681 of the UCPR.^[30]
     2. It would be appropriate to order that the first plaintiff and the second plaintiff pay the defendants’ costs on and from 28 March 2023 on an indemnity basis.
105. [105]
     Further, if the defendants’ costs of the counterclaim fall to be determined by a consideration of the general discretion in respect of costs, the defendants’ Ground G and Ground H are relevant.  Both Grounds G and H favour an award of indemnity costs from a point around the date that the first tranche of the trial concluded.  By that stage the plaintiffs’ case had been conducted and it was prior to the work to the Temporary Levee, which resulted in the amendments to the counterclaim.

Costs of the dispute as to the form of final orders

106. [106]
     The defendants have been largely successful in respect of the dispute as to the form of the Final Orders.  It is appropriate that the plaintiffs pay the defendants’ costs in that respect.  The usual order is that the costs would be payable on the standard basis and there is no reason to depart from that position.
107. [107]
     Accordingly, the order is that the plaintiffs pay the defendants’ costs of and incidental to the Final Orders on the standard basis.

Orders

108. [108]
     Accordingly:

THE ORDER OF THE COURT IS THAT:

1. The plaintiffs pay the defendants’ costs of the plaintiffs’ claim on the indemnity basis.
2. The first plaintiff and the second plaintiff pay the defendants’ costs of the defendants’ counterclaim on the indemnity basis.
3. The plaintiffs pay the defendants’ cost of and incidental to the Final Orders on the standard basis.