Bailey v Kmar Engineering Pty Ltd (No 2)

1. [1]

   On 28 October 2025, the Court delivered reasons for judgment in these proceedings: Bailey v Kmar Engineering Pty Ltd [2025] NSWSC 1266 (“the primary judgment”). The plaintiff, Mr Bailey, was directed (at [423]) to file and serve short minutes reflecting the judgment.

2. [2]

   Having determined Mr Bailey’s claims, the Court permitted the parties to verify whether the “Court’s calculations of damages in accordance with the parameters set in this judgment are in all respects, accurate” (at [421]). One such adjustment was made to the judgment sum which was subsequently ordered.

3. [3]

   On 31 October 2025, orders were entered (“the orders”). They included judgment for Mr Bailey against KMAR in the sum of $1,481,354.44, and that the KMAR to pay the Mr Bailey’s costs on an ordinary basis, as agreed or assessed. There was no order concerning pre-judgment interest.

4. [4]

   To that extent, the orders reflected the Court’s “preliminary view” (at [422]) that “KMAR should pay Mr Bailey’s costs on an ordinary basis”. If that position was not agreed, the Court permitted the parties to file “applications for costs and submissions as to costs”.

5. [5]

   Subsequently, the first defendant, KMAR Engineering Pty Ltd (“KMAR”) sought a variation to the Court’s order for non-economic loss by application of the slip rule. In substance, KMAR contended that the Court’s orders for non-economic loss did not reflect its ruling that non-economic loss should be calculated at 30% of the most extreme case and that damages for non-economic loss should be corrected to $185,000, being 23% of the maximum amount that may be awarded for non-economic loss in accordance with s 16 of the Civil Liability Act 2002 (NSW) (“CLA”).

6. [6]

   The Court made an amended order in those terms on 10 November 2025, and in the result the total damages awarded by the Court was $1,425,154.44.

7. [7]

   By email dated 4 November 2025 to the Court, Mr Bailey applied to vary the orders in accordance with an unsealed Notice of Motion (“the motion”) in which Mr Bailey sought to set aside the order with respect to costs (under the leave given by the Court) and pre-judgment interest.

8. [8]

   Under the motion, Mr Bailey sought:

   1. (1)

      that KMAR pay Mr Bailey’s costs incurred before 3 July 2025 on an ordinary basis, and on an indemnity basis from 4 July 2025;

   2. (2)

      pursuant to s 100(1) of the Civil Procedure Act 2005 (NSW) (“CPA”), that interest be payable on the amount awarded for his past economic loss; and

   3. (3)

      “Interest on Costs”.

9. [9]

   The Application was accompanied by an affidavit of Carmine Santone, a bundle of “Calderbank Offers” and (undated) written submissions.

10. [10]

    Consistently with the motion, the submissions of Mr Bailey with respect to indemnity costs based on Calderbank offers was confined to the first offer made by Mr Bailey on 13 June 2025. Mr Bailey sought an award of indemnity costs from the date on which the first offer of compromise expired, being 3 July 2025.

11. [11]

    As noted above, KMAR did not oppose an order for costs on an ordinary basis but opposed an award of indemnity costs and pre-judgment interest.

12. [12]

    KMAR relied on the affidavit of Matthew Skelly dated 7 November 2025 and its annexures.

Terms of offers of compromise

1. [13]

   On 13 June 2025, Mr Bailey made an offer of compromise to the defendants, in writing. The document was sent to each of the defendants by email (“the first offer”).

2. [14]

   Mr Bailey stated that the first offer consisted of the following:

   1. (1)

      That the offer was made pursuant to the principles set out in Calderbank.

   2. (2)

      That the offer of compromise was in the sum of "$1.76 million, inclusive of costs, disbursements, and statutory repayments to the workers' compensation insurer".

   3. (3)

      That the offer was made pursuant to the principles set out in Calderbank v Calderbank [1975] 3 All ER 333 (“Calderbank”) remained open from the date of the offer until "4:00pm on 3 July 2025".

   4. (4)

      That should the offer not be accepted, and the defendants fail to obtain a judgment more favourable than the terms offered, Mr Bailey would seek to recover costs "to the fullest extent permitted by law".

3. [15]

   However, what was omitted in that description was the following component of the first offer:

4. [16]

   KMAR was correct to submit that the first offer was explicitly conditional and required the agreement of each defendant. The offer also required KMAR and the third defendant, Haworth Transport Services Pty Ltd, to agree to judgment for the second defendant, MMM Logistics Pty Ltd.

5. [17]

   By email dated 16 June 2025, KMAR notified Mr Bailey that it was unable to properly assess the reasonableness of the first offer.

6. [18]

   As was summarised at [24]-[32] of the primary judgment, the proceedings changed after mid-June 2025. Before (and during) trial, the parties to the proceeding changed, reflecting changes to Mr Bailey’s claims against each defendant and the defendants’ cross-claims against each other.

7. [19]

   The second and third offers were not the subject of any specific submissions by Mr Bailey in his primary submissions, and in any event, KMAR opposed any special costs order being made by reference to those orders.

8. [20]

   As mentioned, Mr Bailey did not specifically rely on the second and third offers in his primary written submissions. They were not the subject of submissions, and the orders sought by Mr Bailey relied only on the “circumstances of the First Offer” as the basis for the Court departing from the ordinary rule regarding costs. However, as will be mentioned below, Mr Bailey did rely on them, in a different way, in reply.

9. [21]

   On 14 August 2025, Mr Bailey made an offer of compromise to the defendants, in writing. The document was sent to the defendants by email (“the second offer”).

10. [22]

    The second offer specified as follows:

    1. (1)

       That the offer was made pursuant to the principles set out in Calderbank.

    2. (2)

       That the offer of compromise was in the sum of "$1.76 million, inclusive of Mr Bailey’s costs and disbursements".

    3. (3)

       That the offer remained open from the date of the offer until "5pm on 15 August 2025".

    4. (4)

       That, should the offer not be accepted, and the defendants fail to obtain a judgment more favourable than the terms offered, Mr Bailey would seek to recover costs "to the fullest extent permitted by law".

11. [23]

    It may be noted that KMAR was afforded less than 24 hours to consider the second offer.

12. [24]

    On 15 August 2025, Mr Bailey made a further offer of compromise, addressed only to KMAR, in writing. The document was sent to KMAR by email (“the third offer”).

13. [25]

    The third offer provided as follows:

    1. (1)

       That the offer was made pursuant to the principles set out in Calderbank.

    2. (2)

       That the offer of compromise ~as in the sum of "$1.725 million, inclusive of Mr Bailey’s costs and disbursements".

    3. (3)

       That the offer remained open from the date of the offer until "5pm on 18 August 2025".

    4. (4)

       That, should the offer not be accepted, and the defendants fail to obtain a judgment more favourable than the terms offered, Mr Bailey would seek to recover costs "to the fullest extent permitted by law".

Indemnity costs

1. [26]

   KMAR made submissions as to the applicable principles in considering Mr Bailey’s application for indemnity costs which may be accepted for the purposes of determining the issues in this judgment.

2. [27]

   The applicable principles on the exercise of the Court’s statutory costs direction under s 98 of the CPA are well-known. They include that costs orders are compensatory and not punitive in nature, and, the general rule (see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”)) is that costs follow the event.

3. [28]

   KMAR also accepted that the following principles summarised by Davies J in Fussell v Hanrahan t/as Dignan & Hanrahan Solicitors (No 2) [2025] NSWSC 129 at [20] – [23] (“Fussell”), were relevant:

4. [29]

   Various authorities have more fully addressed factors relevant to the issue of reasonableness. The principles and authorities were recently summarised by Slattery J in Gemi 193 v Zhu [2025] NSWSC 295 at [24] – [28], including to the following effect:

5. [30]

   Goldberg J stated in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [24]:

6. [31]

   As to the question of reasonableness, I further note the following:

   1. (1)

      As a “matter of principle … it is the offeror which must persuade the court that the rejection of the offer was, in the circumstances at the relevant time, unreasonable”: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [16] (per Basten JA, McColl and Campbell JJA agreeing).

   2. (2)

      The inquiry regarding the reasonability of an offeree’s rejecting a Calderbank offer “assumes that the offer was capable of acceptance by the offeree”: Vieira v O’Shea (No 2) [2012] NSWCA 121 at [10] (per Handley AJA, Basten JA and Meagher JA); Sahade v Bischoff (No 2) [2016] NSWCA 45 at [23] (per Basten JA, Gleeson JA and Beech-Jones J). The Court of Appeal has applied that reasoning to a Calderbank offer made jointly to multiple parties and approved authority to the effect that indemnity costs were inappropriate “where a joint offer is made to independent parties and it was not open to one party to accept the offer unless the other also accepted”: Sahade v Bischoff (No 2) [2016] NSWCA 45 at [23] (per Basten JA, Gleeson JA, and Beech-Jones J), citing Rafferty v Time 2000 West Pty Ltd [2010] FCA 873 (per Besanko J).

7. [32]

   Mr Bailey made the following submissions in support of indemnity costs based on the first offer:

8. [33]

   Those submissions need to be understood in the light of the submissions of Mr Bailey as to his costs. Those submissions were as follows:

9. [34]

   However, that submission needs to be adjusted in the light of the amendments to the orders for non-economic loss which result in the relevant judgment sum for comparison with the first offer to be $1,425,154.44 plus $362,777.01, being a total sum of $1,787,931.45.

10. [35]

    While Mr Bailey made a submission in reply, he did not engage with that amendment to the judgment sum. The following submissions were made in reply:

11. [36]

    The fundamental difficulties confronting Mr Bailey’s application for indemnity costs, with respect to the first offer, are as follows:

    1. (1)

       As earlier mentioned, the first offer was explicitly conditional. That offer was a Calderbank offer made on an all-inclusive basis to the three defendants who were parties to the proceedings. The first offer explicitly referred to the cross-claims. It follows that the defendants could not have reasonably accepted the first offer without agreements being reached between the defendants. There were multiple offerees with interrelated claims such that KMAR was, in my view, unable to properly consider the offer when it was made. It also properly sought but did not receive clarification.

    2. (2)

       The first offer was not on equal or better terms than the judgment entered by the court after the amendments referred to earlier. There are two reasons for this factor:

    3. (3)

       I agree with the submission of KMAR that the terms of the first offer lacked clarity. There are numerous elements to the first offer. However, the position was more complicated by the requirement that the defendants also agree to judgment in favour of the second defendant, with no costs order. The first offer (and other offers) were also complicated by an element concerning the third defendant, as the workers compensation insurer. In effect, any reduction in repayments under s 151Z of the Workers Compensation Act 1987 (NSW), which were agreed between Mr Bailey and the third defendant would change the true value of the first offer for KMAR and other offers.

12. [37]

    In reply, Mr Bailey sought to rely on the second and third offers, in circumstances where his primary submissions merely identified the contents of the second and third offers with no direct submissions made as to those offers and no orders sought on the basis of those offers. In that sense, KMAR has been deprived of a proper opportunity to deal with issues concerning the second and third offers.

13. [38]

    In any event, there were similar issues as to the first offer, infecting the second and third offers. For example:

    1. (1)

       The second offer was jointly made to all defendants and was made with an unreasonably short time to respond, namely, less than 24 hours.

    2. (2)

       The second offer was not capable of acceptance by KMAR without the agreement of the third defendant.

    3. (3)

       The second offer was addressed to the second defendant, despite the fact that Mr Bailey had already discontinued proceedings against the second defendant.

    4. (4)

       The third offer was made only to KMAR, but its value was contingent on the third defendant’s position regarding repayment of workers compensation benefits. That is, the third offer was made noting that “the third defendant may reduce their payback”, with attendant adjustments to the value of the offer.

14. [39]

    In those circumstances, I reject Mr Bailey’s application for indemnity costs. The order made by the Court on 31 October 2025 shall thereby stand.

Pre-judgment interest

1. [40]

   Mr Bailey made the following submissions with respect to pre-judgment interest:

2. [41]

   In reply, Mr Bailey submitted that:

   1. (1)

      Interest was claimed in the Further Amended Statement of Claim filed on 28 July 2023 (“FASOC”) and was not sought or referred to in the schedule of damages, because any such reference to interest is dependent upon award of a sum on account of past economic loss.

   2. (2)

      Contrary to KMAR’s submissions, there is authority for the Court granting interest on past economic loss in circumstances where the claim for interest was included in a statement of claim but not otherwise referenced, as the claimant is unable to calculate the precise amount of interest: See Monteleone v Thorn (No 10) [2021] NSWSC 729 (per Cavanagh J) (“Monteleone”).

   3. (3)

      The ordinary method of calculation of interest on past economic loss is to use the average rates of interest in s 100 of the CPA for half of the period on the entire amount or for the full period on half the amount: WJT v Trustees of the Marist Brothers; WXC3 v Trustees of the Marist Brothers; GAC v Trustees of the Marist Brothers (No 4) [2025] NSWSC 1017 (per Chen J). The average being 6.125% over the whole period and $288,398 being half of the past economic loss, therefore totalling $17,636.65.

3. [42]

   As Mr Bailey accepted, an award of pre-judgment interest is in the nature of damages, and is designed to compensate Mr Bailey. Mr Bailey bears the onus of establishing his entitlement and extent of the interest.

4. [43]

   As to pre-judgment interest, the following findings are made:

   1. (1)

      KMAR submitted that Mr Bailey’s application was made without him complying with r 6.12(6) of the UCPR which states that a claim for interest up to judgment “must be specifically pleaded”: State of New South Wales v Avery (2016) 92 NSWLR 141 at [54] (Sackville AJA). However, that submission should not be accepted because interest was claimed in the FASOC.

   2. (2)

      Pre-judgment interest was not particularised in Mr Bailey’s Schedule of Damages or Statement of Particulars. The question of interest was not addressed in written or oral submissions.

5. [44]

   The Court’s judgment did not consider the issue of interest, as the issue of interest was not raised by Mr Bailey. Accordingly, no such award was made, as reflected in the extant orders.

6. [45]

   Leave granted to the parties pursuant to the primary judgment was limited to the issue of costs, and any applications were to be filed “for costs and submissions as to costs”. No leave was given with respect to interest. However, in my view, the issue raised by Mr Bailey as to interest does not involve a re-opening of Mr Bailey’s case as the parties have been fully heard, and no issues of procedural fairness arise. In any event, whilst leave was not given to raise the issue of interest in the primary judgment, the orders of the Court made on 31 October 2025 (being the orders made in consequence of the judgment) gave the parties leave to “apply for different orders as to costs and interest within 7 days of the publication of this judgment”.

7. [46]

   The case relied upon by Mr Bailey as to this issue, is Monteleone, where Cavanagh J, after initially refusing any amount for interest for past economic loss because no such amount was included in the plaintiff’s schedule of damages and no submissions were made about interest, ultimately amended his judgment as to that issue pursuant to the slip rule. His Honour held that, in circumstances where interest was claimed in the statement of claim (at [14]):

   1. (1)

      The failure by counsel to refer to it during submissions was an omission resulting from the inadvertence of the plaintiff’s legal representative: L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) (1981) 151 CLR 590 at 594.

   2. (2)

      His Honour’s failure to refer to the statement of claim rather than simply Mr Bailey’s schedule of damages and submissions may also be viewed as an accidental slip or omission.

8. [47]

   In circumstances where there was otherwise no dispute that the plaintiff would have been entitled to interest on past economic loss, his Honour was satisfied that the sum agreed for interest should be added to the judgment (at [15]).

9. [48]

   In my view, an award for pre-judgment interest, confined to past economic loss, should be made in accordance with the aforementioned principles.

10. [49]

    In circumstances where it is not contended that Mr Bailey would not otherwise be entitled to pre-judgment interest with respect to past economic loss, I accept that Mr Bailey should receive pre-judgment interest as to past economic loss. I also accept Mr Bailey’s formula, in this respect, and hence the amount of $17,636.65 is awarded.

Costs associated with this judgment

1. [50]

   However, in the light of this judgment, KMAR should have costs of that part of the proceedings which concern the issues of costs and pre-judgment interest. KMAR has been successful in resisting Mr Bailey’s application for indemnity costs, and Mr Bailey’s application for pre-judgment interest was only agitated very late in the proceedings.

Conclusion

1. [51]

   The Court confirms its preliminary view that costs of the proceedings, other than that part of the proceedings concerning the issue of costs and pre-judgment interest, should be awarded in favour of Mr Bailey as against KMAR for ordinary costs.

2. [52]

   The Court makes an order for pre-judgment interest of $17,636.65.

3. [53]

   KMAR should have costs for that part of the proceedings concerning costs and pre-judgment interest.

ORDERS AND DIRECTIONS

1. [54]

   Accordingly, the Court confirms the orders made on 31 October 2025, as amended, and further orders as follows:

   1. (1)

      The plaintiff shall have pre-judgment interest of $17,636.65.

   2. (2)

      KMAR shall have the costs of these proceedings concerning the issues of costs and pre-judgment interest as against the plaintiff, as agreed or in default of agreement, as assessed.