Here, both parties had been successful on their claim and counterclaim respectively. Each party had made an offer to settle pursuant to Pt 5 of Ch 9 of the UCPR. Each offer was expressed as an offer to settle both the claim and counterclaim but stipulated a single amount payable that did not distinguish between the claim and counterclaim. The issue was whether r 360 or r 361 applied. As his Honour explained the party seeking to take advantage of rr 360 and 361 has the onus of showing that it is less favourable (r 360) or more favourable (r 361) than the order obtained on the claim or counterclaim. His Honour explicitly rejected the suggestion that the required comparison could be done on the net outcome of the trial. As it was not possible to ascertain the amount of each offer referable to the claim and counterclaim respectively neither r 360 or r 361 applied. Accordingly, his Honour applied the general rule in r 681 UCPR that costs follow the event.
31 January 2020
In March 2018, Flanagan J gave judgment for both Civil Mining & Construction Pty Ltd (“CMC”) on its claim, and Wiggins Island Coal Export Terminal Pty Ltd (“WICET”) on its counterclaim. . This note deals with the court’s consideration of what costs orders should be made. .
Each party had made offers to settle under Pt 5 of Ch 9 of the UCPR. The key issue was whether those offers triggered the cost consequences prescribed by rr 360 and 361. .
Whether rr 360 and 361 UCPR applied
Rules 360 and 361 of the UCPR provide, in essence, that if a plaintiff or defendant makes an offer that is not accepted by the other party, and that other party obtains an order no less favourable than the offer, then the other party must pay the plaintiff’s or defendant’s costs (unless it is shown that another order is appropriate in the circumstances). . These rules, where they apply, displace the usual rule in r 681 that costs follow the event. .
The difficulty in this case was that the formal offers of both parties were expressed as offers to settle both the claim and the counterclaim, and failed to distinguish between them. . The key issue was how the rules would operate in those circumstances.
His Honour considered that both rules required a comparison between the offer to settle and the “order” obtained by the plaintiff (on the claim or counterclaim, as the case may be). , . The claim and counterclaim in a proceeding are in form actually two separate claims, and the different cost consequences prescribed by rr 360 and 361 “can only work if that distinction is observed”. . Therefore, the “order” in the claim could not mean the net outcome of a trial (of both claim and counterclaim). . His Honour said (at ):
“where there is an offer to settle multiple claims, the comparison required by rr 360 and 361 must focus on the terms of the offer that relate to the claim under consideration. Here, both the CMC Formal Offer and the WICET Formal offer stipulated a single amount payable to CMC in settlement of both the claim and counterclaim (plus interest and costs). … However, it cannot be discerned from the terms of the offers the components of those amounts that were referable to the claim and counterclaim respectively.”
His Honour concluded that this uncertainty had the effect that neither party was able to demonstrate that its offer triggered r 360 or r 361. . His Honour explained (at ):
“In determining whether an offer is more or less favourable under rr 360 and 361, one must compare the part of the offer that relates to the claim under consideration with the orders obtained on the claim. That comparison is not possible in the present case. Accordingly, neither rr 360 nor 361 apply.”
What should be the orders as to costs?
Given rr 360 and 361 did not apply, his Honour began the general rule in r 681 UCPR that costs follow the event. . His Honour considered that there were two separate “events” for the purpose of r 681 – being the separate judgments entered for both the claim and counterclaim. As Jackson J observed in Gladstone Area Water Board v AJ Lucas Operations Pty Ltd  QSC 52, “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”. . Accordingly, unless any departure was justified, the general rule would mean that CMC receive its costs of the claim, and WICET receive its costs of the counterclaim. .
Notably, his Honour considered a submission by WICET that CMC’s rejection of its formal offer was a “matter that the Court should consider in exercising its discretion as to costs”. . However, his Honour considered the observations of the Victorian Court of Appeal in Marriner v Australian Super Developments Pty Ltd  VSCS 141 to be “broadly applicable here”. . In that case the Court unanimously decided that for an offer that is expressed to be made pursuant to the rules to be able to be relied on outside of the rules, there must be something in the offer itself, or the surrounding circumstances, to indicate that reliance would be placed on it as the basis for a “special order as to costs”, irrespective of its effectiveness under the rules. . His Honour considered that departure from the general rule would be a “special order”, but that there was nothing in WICET’s offer, or the surrounding circumstances, “to indicate that the offer was intended to have effect other than as an offer pursuant to Part 5”. .
His Honour considered that there was no reason to depart from the general rule in r 681. The orders were that WICET pay CMC’s costs of the claim, and CMC pay WICET’s costs of the counterclaim. .