Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets (No 2)

1. [1]

   As I explained in the principal reasons for judgment in this matter delivered on 23 December 2025 (Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2025] NSWSC 1597) (PJ), the plaintiff (Seymour) sued the defendant (Liberty) for damages for indemnity or breach of contract under an insurance policy (the Policy) issued by Liberty to Seymour on 7 December 2016. Seymour claimed that the Policy covered what amounted to Seymour’s costs of safely dealing with a large volume of asbestos-contaminated soil in the course of performing its obligations under a construction contract with VicRoads.

2. [2]

   The central issue was whether various types of “Loss” (as defined in the Policy) claimed by Seymour “arose from” what the Policy calls “Pollution Conditions” caused by Seymour’s operations. I concluded in the principal judgment that Seymour’s claim was not made out, save in one respect: Seymour was entitled to recover as Loss its costs referable to taking legal advice as to what certain “Improvement Notices” issued to it by WorkSafe Victoria on 17 August 2017 required (the Improvement Notices Advice Loss). I directed the parties to attempt to agree the quantum of that Loss, failing which they were to file submissions on the issue. I also directed a timetable for submissions as to the costs of the proceedings. Subject to those issues, I dismissed the summons.

Disposition of the summons

1. [3]

   The parties have now agreed that the quantum of the Improvement Notices Advice Loss is $9,214 (exclusive of GST). However, the Policy has a deductible of $50,000. That being so, Seymour does not dispute Liberty’s submission that the order dismissing the proceedings should be made unconditional. I propose to make that order.

Costs

1. [4]

   Costs on the ordinary basis would ordinarily follow the event, being the dismissal of the summons: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. However, Liberty seeks an order that its costs be paid on an indemnity basis: Civil Procedure Act 2005 (NSW), s 98(1)(c). Liberty relies on offers made in correspondence and on the principles in Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333, as explained below.

2. [5]

   Seymour had stated in writing that it did not wish to make any submissions in relation to costs. It confirmed that position after Liberty served the affidavit and submissions referred to below. The question of costs falls to be determined on that basis.

3. [6]

   The basic principles are uncontroversial. They were recently discussed in Chalik v Chalik [2025] NSWCA 136 at [137], where Bell CJ, Payne and Free JJ said:

4. [7]

   The stage of the proceedings at which an offer was made, and the question whether the offeree was in a position to make an informed assessment of the facts on which the claim is based, are both matters that may be relevant to the reasonableness of the offeree’s failure to accept an offer. So too may be the extent to which the proceeding raised a serious issue about a point of law or its application to the facts of the case: see, e.g., in the context of a rule of court giving an entitlement to indemnity costs where “an applicant unreasonably fails to accept the offer and the applicant’s proceeding is dismissed”, Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [18]-[19].

5. [8]

   Liberty relies on an affidavit of its solicitor, Mr Patrick Mead, made on 18 March 2026. Mr Mead puts into evidence various offers of compromise exchanged between the parties, both before and after the commencement of the proceedings. Liberty relies on offers made by its letters dated:

   1. (1)

      24 February 2022 — in support of its claim for costs on an indemnity basis for the whole of the proceedings; and

   2. (2)

      31 July 2025 — in support of its alternative claim for costs on the usual basis until that date, and on an indemnity basis thereafter.

6. [9]

   Neither offer was accepted.

7. [10]

   In order to determine whether Liberty’s two letters contained genuine offers of compromise, and whether it was unreasonable for Seymour not to accept them, it is necessary to understand something about one aspect of Seymour’s claim and the way in which I determined it. That was the claim for the amount charged to Seymour by the developer of the Alphington site for the removal of asbestos-contaminated fill stockpiled on that site by Seymour. By the time of the hearing, this claim (which had originally been for $297,952.55) was reduced to $252,502.16: PJ [115].

8. [11]

   Following the hearing, I sought (and received) further submissions from the parties in respect of that claim as follows.

9. [12]

   I found that this claim was not established for the following reasons at PJ [117]-[124].

10. [13]

    By the 24 February 2022 letter, Liberty had offered to pay Seymour the sum of $247,952.55 (being the amount originally claimed with respect to the Alphington stockpiles — $297,952.55 — less the $50,000 deductible) in full and final discharge of Liberty’s obligations to Seymour in respect of Seymour’s claim under the Policy. There was no offer to pay any legal costs. The offer was open for 42 days.

11. [14]

    The letter included the following statement relevant to the Alphington claim:

12. [15]

    The assumption made in favour of Seymour in the first sentence of that paragraph elides the point I made as to “Loss” (on the evidence before me) at PJ [121], namely, that any liability Seymour had in tort to Alphington Developments was not “required by Environmental Laws”.

13. [16]

    However, the second sentence of the paragraph quoted above from the 24 February 2022 letter correctly identified the “difficult question” whether Seymour’s liability arose from “Pollution Conditions” (i.e., “from the ‘emission, discharge, dispersal, migration, release or escape’ of the asbestos material”). As to the words “arising from”, the letter went on to say that this language “invites careful analysis of the required proximity between the Pollution Condition and the Loss”, and that it was “necessary to identify whether the criterion is satisfied in any particular circumstances in light of the terms of the Policy as a whole and any other relevant context.”

14. [17]

    With respect to the stockpiles, Liberty said in its 24 February letter:

15. [18]

    That was similar to my conclusion on that issue at PJ [68]-[73].

16. [19]

    The 24 February 2022 letter set out reasons why the alleged Losses other than that with respect to Alphington were not recoverable. In particular, the letter asserted that the other losses claimed were not recoverable because they did not arise from Pollution Conditions caused by Seymour’s operations. That was consistent with my conclusions in the primary judgment, save with respect to the Improvement Notices Advice Loss.

17. [20]

    As to the costs of any future proceedings, Liberty said:

18. [21]

    Liberty now submits as follows.

19. [22]

    (The reference to “earlier correspondence” appears to be to two offers made by Seymour to Liberty, which had canvassed “what Seymour perceived to be the issues dividing the parties”.)

20. [23]

    Liberty submits that in the circumstances, Seymour’s failure to accept the 24 February 2022 offer was unreasonable, and that Seymour should pay the whole of Liberty’s costs on an indemnity basis. I do not accept those submissions.

21. [24]

    For present purposes, it is relevant that the 24 February 2022 letter:

    1. (1)

       acknowledged that the Policy language threw up difficult questions of interpretation and degree, as explained above;

    2. (2)

       effectively conceded liability with respect to the Alphington claim, which was the only amount the letter offered to pay;

    3. (3)

       did not acknowledge any liability for, or offer to make any payment with respect to, what became the Improvement Notices Advice Loss.

22. [25]

    In light of (2), Liberty was in effect offering to pay that which it effectively conceded it was liable to pay. Notwithstanding that my decision was ultimately more favourable to Liberty than the position Liberty adopted in the 24 February 2022 letter, it is thus doubtful whether the letter on its face contained any real element of compromise.

23. [26]

    In any event, in light of (1) and (3), and in circumstances where the offer was made before proceedings were commenced, I am not persuaded that it was unreasonable of Seymour not to have accepted it.

24. [27]

    The 31 July 2025 letter was sent when the proceedings had been on foot for more than two years. The letter was headed “Without prejudice save as to costs”. But it did not offer to settle the whole of Seymour’s claim and it was not expressed to be a Calderbank offer. Instead, as will be seen, its purpose appears to have been to give Liberty a measure of costs protection with respect to Seymour’s claim concerning the stockpiles at the Alphington site.

25. [28]

    The letter pointed out that the Alphington claim was quantified in the Commercial List Statement as $262,198, and that after the $50,000 deductible the claim would be worth $212,198.

26. [29]

    Liberty offered to pay Seymour (on a “without admission” basis, and upon proof that Seymour had paid the claimed amounts to Alphington Development):

    1. (1)

       the sum of “$212,198 by way of indemnity in respect of the costs incurred by [Seymour] in connection with the remediation of the stockpiles as claimed in [Commercial List Statement] [35]”; and

    2. (2)

       interest at the rate prescribed for the purposes of s 57(2) of the Insurance Contracts Act 1984 (Cth) from the date of payment of the invoices received in respect of those costs.

27. [30]

    There was no offer to pay any legal costs. Instead, it was a term of the offer that Seymour “waives all and any rights to make any application for recovery from Liberty of any part of its costs of the Proceedings in reliance upon, or on the basis of any alleged liability of Liberty to indemnify [Seymour] in connection with the remediation of the Stockpiles”.

28. [31]

    The 31 July 2025 letter referred to four previous offers Liberty had made with respect to the cost of removal of the stockpiles (including the 22 February 2022 letter, which Liberty said had made an offer in accordance with Calderbank principles). The 31 July 2025 letter then said: “In the circumstances, in the event that [Seymour] were to be successful in recovering any amount referable to the Stockpiles, it is most unlikely to recover costs associated with that claim.” Liberty argued that, accordingly, the term requiring Seymour to waive any right to apply for any part of its costs of the proceedings on the basis of any liability of Liberty to indemnify with respect to the stockpiles “involve[d] no meaningful compromise on the part of [Seymour].”

29. [32]

    There are several difficulties with that reasoning, and more generally with the proposition that it was unreasonable for Seymour not to accept the 31 July offer at the time it was made.

    1. (1)

       The reasoning contains an element of circularity. A successful plaintiff is ordinarily entitled to its costs: they follow the event. In order to depart from the ordinary rule, Liberty as defendant would need to show that it had obtained a judgment no less favourable than the terms of its offer. It could do so only if no costs order was made in favour of Seymour, notwithstanding the success of its claim: that is, if the Court departed from the usual rule. But departure from the usual rule is the very outcome this reasoning seeks to achieve.

    2. (2)

       The 31 July 2025 offer made no allowance for Seymour’s costs of the Alphington claim incurred before 31 July 2025. Liberty’s position appears to have been that Seymour would not be able to recover those costs because of Liberty’s four earlier offers. That argument begs the question whether the earlier offers would have had that effect. At least as to the 24 February 2022 offer, for the reasons given above, that should not be assumed.

    3. (3)

       If Seymour were also successful on other aspects of its claim (i.e., in addition to the Alphington claim), it would likely seek its costs of the whole proceedings. But if it accepted the 31 July offer (which concerned only the Alphington claim), Seymour would be required to waive the right to make any application for recovery from Liberty of any part of its costs of the proceedings on the basis of any liability of Liberty in connection with the remediation of the stockpiles. That segmentation of the claim from a costs perspective would complicate and potentially frustrate any application Seymour might make to recover its costs.

    4. (4)

       The language of the waiver was very broad: “on the basis of any alleged liability of Liberty to indemnify [Seymour] in connection with the remediation of the Stockpiles”. That might open up an argument that Seymour had forgone the right to recover costs of other (i.e., non-Alphington) aspects of its claim where the “basis” of Liberty’s liability to indemnify Seymour turned on the same reasoning as supported the Alphington claim.

30. [33]

    In any event, it seems clear that the 31 July 2025 offer was directed to the situation where (1) the proceedings went to judgment, (2) Seymour succeeded with respect to the Alphington claim, but (3) Seymour otherwise failed in the proceedings. The offer seems to have been intended to put Liberty in a position to argue that in that situation, as a matter of discretion, the Court should not order Seymour to pay Liberty’s costs (whether of the Alphington claim or at all), notwithstanding any finding that Seymour was entitled to indemnity with respect to the Alphington claim. Liberty could then argue that Seymour should pay Liberty’s costs of the proceedings (or perhaps Liberty’s costs of the proceedings other than those associated with the Alphington claim).

31. [34]

    That is a very different outcome from the purpose to which the 31 July 2025 letter is now sought to be put. Liberty submits that “Seymour should pay indemnity costs from the date of the 31 July 2025 letter which offered a substantial indemnity. It was unreasonable to reject that offer and to pursue a claim that was ultimately entirely unsuccessful.”

32. [35]

    Again, I do not accept those submissions.

33. [36]

    The 31 July 2025 letter referred to costs: (a) in the header, “Without Prejudice save as to costs”; (b) in the term requiring Seymour to waive the right to apply for any part of its costs of the proceedings on the basis of any alleged liability of Liberty to indemnify Seymour in connection with the remediation of the Alphington stockpiles; (c) in the reference to Calderbank principles in connection with the 24 February 2022 letter; and (d) in asserting that Seymour would be unlikely to recover its costs associated with the Alphington claim.

34. [37]

    It is notable that the 31 July 2025 letter (unlike the 24 February 2022 letter) did not refer to indemnity costs, and was not itself expressed to be a Calderbank offer. Nor did the 31 July 2025 letter refer to reasons why any part of Seymour’s claim (whether the Alphington or the non-Alphington aspects of the claim) was likely to fail. That is not surprising, given that the letter did not offer to compromise the whole proceedings.

35. [38]

    In light of the matters at [32]-[37] above, and for the following reasons, I am not persuaded (a) that it was unreasonable for Seymour not to accept the 31 July 2025 offer, or (b) that, even if it had been unreasonable of Seymour not to accept the offer (which concerned only the Alphington claim), it would be appropriate to order that Liberty have its costs of the whole proceedings after 31 July on an indemnity basis.

    1. (1)

       As to the claim as a whole, the primary judgment itself shows that the difficult questions of interpretation and degree thrown up by the Policy language were no less difficult in 2025 than they had been at the time of the 24 February 2022 offer.

    2. (2)

       Notwithstanding that the offer was said to be made without admissions, the 31 July 2025 letter was effectively premised on the proposition (which it did nothing to refute) that Liberty was liable to indemnify Seymour for the alleged Alphington Loss. It is again doubtful whether the letter on its face contained any real element of compromise.

    3. (3)

       The letter did not acknowledge any liability for, or offer to make any payment with respect to, what became the Improvement Notices Advice Loss.

36. [39]

    In the result, I consider that the appropriate order is that Seymour pay Liberty’s costs of the proceedings on the ordinary basis.

Orders

1. [40]

   To the intent that the order made on 23 December 2025 dismissing the proceedings be made unconditional, I order:

   1. (1)

      The summons is dismissed.

   2. (2)

      The plaintiff is to pay the defendant’s costs of the proceedings on the ordinary basis.