Claire Rewais and Osama Rewais t/as McVitty Grove v BPB Earthmoving Pty Ltd (No 2)

The payment claim was not served by email in accordance with s 31(1)(d) of the Security of Payment Act and the Adjudicator was incorrect to conclude that the payment claim was served on 24 April 2024, but the payment claim was served on 11 June 2024 when the Rewaises were first made aware of it (Principal Judgment at [140]–[145]).

The s 17(2) notice was not served by email in accordance with s 31(1)(d) of the Security of Payment Act, the 17(2) notice was also not served in accordance with the requirements of s 31(1)(c) of the Security of Payment Act because it was sent by post addressed to the Rewaises’ residence and not the Rewaises’ ordinary place of business and it is to be regarded as having been received on 11 June 2024 (Principal Judgment at [146]–[150]).

Although BPB’s adjudication application was filed prematurely, the Determination is not void and will not be quashed on this basis (Principal Judgment at [164]–[170]).

The entire Property is a dwelling and the Contract is a contract for residential building work to which the Home Building Act 1989 (NSW) (HBA) applied (Principal Judgment at [205]–[214]).

As BPB did not have the required licence or insurance policy under the HBA, it has breached ss 4 and 92 of the HBA (Principal Judgment at [215]).

BPB is not barred by either ss 10 or 94 of the HBA from enforcing the Determination, by reason of their failure to comply with the licensing and insurance requirements of the HBA (Principal Judgment at [216]–[219] and [222]).

The Rewaises are to pay BPB’s costs of the proceedings on an ordinary basis up to 13 August 2024 and on an indemnity basis from 14 August 2024.

The Rewaises are to pay BPB’s costs of this application on an indemnity basis.

An award of costs rests on fairness between the parties, with the unsuccessful party bearing the liability for the costs of the proceedings.

The primary purpose of an award of costs is to indemnify the successful party, not to punish an unsuccessful party because, had the proceedings not been brought, the successful party would not have incurred the expense of them.

As a matter of policy, one beneficial by-product of the compensatory purpose may well be to instil in a party contemplating commencing the proceedings a sober realisation of the potential financial expense involved.

The reference in the order that the plaintiffs are to pay the defendant’s costs of the proceedings (Principal Judgment at [223]) is probably a reference to the first defendant’s costs because the second defendant filed a submitting appearance.

Within the time contemplated by r 36.16(3A) of the UCPR, BPB filed the notice of motion seeking to vary the costs order in the Principal Judgment. Although the motion refers to “the defendants’ costs”, the motion is only intended to be directed towards the costs of BPB as the first defendant.

The 14 August letter is a Calderbank letter containing a sophisticated offer to settle the present litigation and bears reading in full. The substance of the proposal includes:

By way of further explanation, BPB’s offer provided a solution to the “interim” dispute, being the question of validity of the Determination, on the basis of an “interim” monetary concession by BPB of $67,000 on the adjudication amount (from $277,000 to $210,000). The reference to the concession as being “interim” is made on the basis of sub-paragraph (d) of the offer in the 14 August letter. Additionally, the Rewaises would have the option to decide whether to accept BPB’s monetary concession as finally determining the dispute between them, or alternatively bringing proceedings to finally determine the parties’ respective rights. Meanwhile, the Rewaises would not be out of pocket (on the ordinary basis at least) in respect of the costs of the “interim” dispute.

The proposed “interim” concession is less than the amount the Rewaises would have been required to pay into court had the Rewaises applied to set aside the judgment, referring to s 25(4)(b) of the Security of Payment Act; or, as a matter of “established practice” to stay enforcement of the adjudication determination, citing A-Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144 at [15].

As indicated in the 14 August letter, the offer was a sensible attempt to resolve the “interim” dispute while leaving the Rewaises with the option to further agitate their “final” rights if they chose. The rejection by the Rewaises of the offer has done little other than prolong the substantive dispute between the parties and increase costs. The apparent likelihood is that one party or the other will be commencing proceedings to determine their separate rights, which could already be on foot if the Rewaises had accepted BPB’s Calderbank offer. In this context, the Rewaises’ rejection of the offer was unreasonable and they bear the responsibility for the costs incurred in these proceedings, citing Gretton at [121].

The result of the proceedings is more favourable to BPB than the proposed settlement, as it is open to BPB to enforce the full amount of the judgment debt, less any amounts which may have already been recovered.

If the court accepts that the Rewaises’ rejection of BPB’s offer was unreasonable and the result of the proceedings is more favourable to BPB than the proposed settlement, then the court should exercise its costs discretion to make an order for BPB’s costs on an indemnity basis rather than the ordinary basis.

The offer made by BPB listed two different sums of $220,822 at sub-paragraph (c) and $220,000 at sub-paragraph (d) of the 14 August letter and so the actual terms and sum of the settlement offer are unclear.

BPB’s offer was not strictly a Calderbank offer and should not be considered as one for the following reasons:

The court has discretion as to costs, citing s 98 of the CPA. The discretion to award costs under a Calderbank letter falls within this jurisdiction. Unlike the process in relation to an offer of compromise as outlined in the UCPR, there is no presumptive entitlement to costs resulting from a Calderbank letter, citing Abdi at [26].

The making and rejection of a Calderbank offer is one factor which may, but will not necessarily, cause the court in its discretion to order costs on the indemnity basis. The rejection of a Calderbank offer may cause the court to make such an order if it is satisfied that the offer was a genuine offer of compromise and that the rejection of the offer was unreasonable, citing Treloar Constructions Pty Ltd v McMillan (No 2) [2017] NSWCA 146 at [8]–[9].

The onus of demonstrating that the Rewaises’ rejection of BPB’s offer was unreasonable in all the circumstances rests on BPB, citing Abdi at [27].

In relation to the factors to which a court will have regard when considering whether the rejection of the offer was unreasonable, citing Abdi at [29], the following points are noted:

It was reasonable to reject BPB’s offer, made on the premise that the Rewaises were wrong in stating that the Contract was entered into in breach of the HBA, a position which was correct and ultimately established at the trial. Although the Rewaises were ultimately unsuccessful at trial, they were successful in establishing that BPB was in fact in breach of ss 4 and 92 of the HBA. Contrary to the 14 August letter, the Rewaises were correct to assert that “the Contract was entered into in breach of the HBA” and it was reasonable for the Rewaises to consider that BPB’s view was incorrect when assessing the offer.

While BPB indicated in the 14 August letter that it was written “without prejudice, save as to costs”, that it was made pursuant to the principles of Calderbank v Calderbank and that, in the event the offer was not accepted and the matter proceeded to hearing, BPB would tender a copy of the 14 August letter in support of any application for indemnity costs, it was missing the essence of a Calderbank offer. As made plain in SMEC Testing at [37] and Dream Developments at [60], that essence of a Calderbank offer is that it “would be relied on in relation to the question of costs should a verdict more favourable than the offer be achieved”. There is no such statement in the 14 August letter.

The 14 August letter refers to two inconsistent sums in the offer — $220,822 in sub-paragraph (c) and $220,000 in sub-paragraph (d). A Calderbank letter should be certain as to the sum that is required to be paid by the recipient as part of the offer. The 14 August letter did not contain such certainty.

Applying Abdi at [30], the explanation for the offer that is contained in the 14 August letter did not deal with the complexity of the issues in the proceedings. The assertion contained in the 14 August letter is, in essence, that the Contract was not one with to which the HBA applied. That is contrary to the finding I made in the Principal Judgment. Whilst the reference to the application in Brodyn was in accordance with my finding in the Principal Judgment, there was no attempt to explain what BPB’s position was in relation to any of the other issues that were live in the dispute on which I had to make determinations in the Principal Judgment.

Applying Abdi at [29], the extent of the compromise on offer in the 14 August letter as an “interim” measure was capable of producing a confusing outcome between the parties because it professed not to deal with the “underlying substantive position regarding the amount, if any, payable by [the Rewaises] to [BPB] in respect of the works”, stating that the offer was without prejudice to that position with both parties having reserved rights to deal with it. Yet by the Rewaises continuing to pursue the application, they were able to achieve an outcome favourable to them in the “underlying substantive position”, which is that the Contract was entered into in breach of the HBA. This was a potential outcome which made it reasonable for the Rewaises to refuse the offer.

Applying Abdi at [30], I do not think that a period of less than 48 hours for the Rewaises to consider the offer contained in the 14 August letter and either accept or reject it was a reasonable period of time in all the circumstances. This is particularly so when the Rewaises had prepared their evidence for the trial and BPB had not served any of its evidence in chief at the time the offer was made in the 14 August letter and did not complete doing so until 22 August 2024. This put the Rewaises in a position where they were not able to assess the strength of BPB’s evidence and therefore they were not able to make a proper assessment of the reasonableness of the offer contained in the 14 August letter.

Order that order (2) made on 10 October 2024 in these proceedings be varied to the following form:

The notice of motion filed 21 October 2024 by the first defendant (Motion) is dismissed.

The first defendant is to pay the plaintiff’s costs of the Motion.