Morgan v RHS Hotel Investments Pty Ltd t/as (rec and man app) as trustee for the Rushcutters Unit Trust (No 2)

1. [1]

   I delivered judgment in these proceedings on 5 November 2025: see Morgan v RHS Hotel Investments Pty Ltd [2025] NSWSC 1295 (PJ). These reasons assume familiarity with and maintain the same definitions as in the PJ.

2. [2]

   In the PJ, I determined that Ms Morgan’s claim failed and that the contract for sale of land should be specifically performed. I ordered that Ms Morgan pay the Vendors’ costs as agreed or assessed. Immediately after the PJ was handed down, counsel for the Vendors made an application for indemnity costs. A bundle of correspondence was tendered in support of the application. Having seen the correspondence, senior counsel for the Ms Morgan indicated that he was not then in a position to deal with the application for indemnity costs and directions were made for brief written submissions to be provided by both parties, which has occurred.

3. [3]

   These reasons deal with the application for indemnity costs. The parties have, commendably, agreed that the application for indemnity costs can be dealt with on the papers.

The offers relied on

1. [4]

   The Vendors relied on four offers made. In chronological order they are as follows.

2. [5]

   First, by letter dated 2 June 2025 – that is 10 days before the commencement of the proceedings – the solicitors for the Vendors sent a “without prejudice save as to costs” letter to the solicitors for Ms Morgan making the following offer:

3. [6]

   The offer was stated to be open for seven days. It was not accepted.

4. [7]

   Second, by letter dated 11 September 2025 marked “without prejudice (save as to costs)” the solicitors for the Vendors wrote to the solicitors for Ms Morgan offering to resolve the proceedings on the basis of either of two options. The first option was for the parties to complete the Contract within 28 days of the Vendors, at their expense, replacing the stone and finishes at the Property, which were incorrectly installed with stone of the correct colour as stipulated in clause 15 of the Contract. The second option was for the Contract to be completed within 28 days of the date of the offer subject to a reduction of $48,000 to the purchase price specified in the Contract. The offer was stated to be conditional on the parties executing a deed of settlement and release which will, among other things, include a term disposing of the proceedings on the basis that the parties bear their own costs of and incidental to the proceedings. The offer was stated to be open until Friday 12 September 2025, and to be made in accordance with the principles set out in Calderbank v Calderbank.

5. [8]

   Email correspondence tendered (by consent) by the Vendors as part of their reply submissions, establishes that the second offer was sent by email at 9.29 am on 11 September 2025 and was rejected at 3.29 pm on 12 September 2025.

6. [9]

   The third offer was made by the solicitors for the Vendors to the solicitors for Ms Morgan by letter dated 24 September 2025, offering to resolve the proceedings on the basis that the parties complete the Contract on the basis that the Vendors, at their expense, replace the stone at the Property with stone of the correct colour as stipulated in clause 15 of the Contract. The offer was stated to be conditional upon the parties executing a deed of release which will, among other things, include a term disposing of the proceedings on the basis that the parties bear their own costs of and incidental to the proceedings. The offer was stated to be open until 5pm on 8 October 2025.

7. [10]

   The fourth offer was made on the morning of the hearing – 21 October 2025 – and was in identical terms to the third offer and was stated, for the avoidance of doubt, to be an open offer, not treated as confidential.

Overview of the contentions

1. [11]

   The Vendors sought an order for indemnity costs for the entirety of the proceedings based on the rejection of the first offer. Alternatively, the Vendors sought indemnity costs from 11 September 2025 by reason of the rejection of the second offer.

2. [12]

   A variety of responses were raised by Ms Morgan.

3. [13]

   In relation to the first offer, it was contended that the offer was not stated to be a Calderbank offer or to carry costs consequences and should not be treated as a Calderbank offer. Even if it were to be so treated, it was contended that it offered no significant offer of compromise, offering only a token $10,000 reduction in purchase price.

4. [14]

   In relation to the second offer, although stated to be a Calderbank offer and it being accepted that Ms Morgan would be in a better position than she now is, had she accepted the offer, it was contended that the offer was only open for acceptance for approximately one day which was not reasonable.

5. [15]

   As regards the third and fourth offers, neither were said to be Calderbank offers, nor were they stated to be “without prejudice save as to costs”. It was contended that they clearly were not Calderbank offers and hence could be disregarded.

6. [16]

   By way of reply submissions, the Vendors contended in relation to the first offer, that it was not necessary for offers to stated that they are in accordance with Calderbank v Calderbank, and that $10,000 was, in the context of the present case, a genuine compromise.

7. [17]

   In relation to the second offer, reliance was placed on the email communications in relation to the second offer, which shows that the offer was in fact rejected within the period that it was stated to be open for acceptance.

8. [18]

   As regards the third and fourth offers, it is accepted that they were not expressed as Calderbank offers, because they were open offers.

Relevant principles

1. [19]

   Understandably none of the submissions contained any detailed discussion of the relevant legal principles. Those principles are well understood. I summarised the principles in Joudo v Joudo (No 2) [2024] NSWSC 469 at [12]-[15].

Consideration

1. [20]

   I am not satisfied that an indemnity costs order should be made by reason of the rejection of the first offer. In light of the small reduction in purchase price offered, I am not satisfied that rejection of the offer was unreasonable.

2. [21]

   I am satisfied that an indemnity costs order should be made by reason of the rejection of the second offer. The only basis put forward by Ms Morgan opposing an indemnity costs order by reason of the rejection of the second offer, is the limited period of time for which the offer was open. That objection may have had some basis if the offer simply lapsed or if Ms Morgan asked for it to be extended and it was not. Ms Morgan obviously had no difficultly dealing with the offer within the time that it was open for acceptance. She rejected the offer prior to the expiry of it. In these circumstances, given my rejection of the only matter raised in opposition to the application for indemnity costs, I do not see any reason why indemnity costs should not be paid on and from 11 September 2025.

Conclusion and orders

1. [22]

   For the reasons set out above, indemnity costs will be payable by Ms Morgan on and from 11 September 2025.

2. [23]

   The orders of the Court are:

   1. (1)

      Vacate order 3 made on 5 November 2025.

   2. (2)

      Order the plaintiff to pay the second defendant’s costs of the proceedings on the ordinary basis up to and including 10 September 2025, and on the indemnity basis thereafter.