ASCF Funding Solutions Pty Ltd v SL Property Maintenance Pty Ltd

1. [1]

   I delivered judgment in these proceedings on 26 March 2025, see ASCF Funding Solutions Pty Ltd v SL Property Maintenance Pty Ltd [2025] NSWSC 262. The Summons was dismissed. The parties were given an opportunity to make short written submissions about costs and agreed for the matter to be determined on the papers.

2. [2]

   Section 98(1) of the Civil Procedure Act 2005 (NSW) provides:

3. [3]

   Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides:

4. [4]

   It follows that the Defendant is entitled to an order for costs unless it appears to the Court that some other order should be made.

5. [5]

   The Plaintiff contends that given the way the case was conducted and the Defendant’s failure in respect of some of its arguments, the appropriate order as to costs is that the Plaintiff should pay two thirds of the Defendant’s costs on the ordinary basis as agreed or assessed.

6. [6]

   The Defendant contends that there should be no departure from the general rule, and seeks an order that the Plaintiff is to pay the Defendant’s costs of the proceedings on the ordinary basis up to and including 3 February 2025 and on an indemnity basis from 4 February 2025 onwards. The basis for the application for indemnity costs is a Calderbank letter dated 3 February 2025.

Arguments why the Defendant should receive less than 100% of its costs

1. [7]

   The Plaintiff submits that there should be a departure from the usual position because the Defendant ran every conceivable argument and did not focus its case. In particular, it submits that the Defendant ran two arguments which unnecessarily increased the costs of the proceedings. It contends that there should be a reduction in the costs awarded to the Defendant as the successful party because the Defendant has “unfairly, improperly or unnecessarily increased the costs”: Windsurfing International Inc v Petit (1987) AIPC 90-441 at 37,861-37,862.

2. [8]

   The relevant principles have been stated on many occasions. Nixon J recently expressed them in In the matter of Keybridge Capital Limited (No 3) [2025] NSWSC 423 as follows:

3. [9]

   The Plaintiff relied on Kumaran v Employsure Pty Ltd (No 2) [2022] NSWCA 247 at [12]–[14], which is in the following terms:

4. [10]

   The Defendant’s primary case concerned the question of construction of the Letter of Offer. It was successful on that case. The Defendant advanced two alternative cases, one relying on an alleged implied term and the other relying on the penalties doctrine. I addressed those alternatives briefly in my reasons, although strictly I did not need to do so given the Defendant’s primary case succeeded. I indicated that had I come to a different view about the Defendant’s primary case, I would have rejected its alternative cases.

5. [11]

   This case was conducted efficiently in the course of a single day. There was no cross-examination. Most of the argument during the hearing focused on the question of construction. The argument about the implied term took very little time and was related to the question of construction. The argument concerning whether or not there was a penalty took slightly longer. It was not entirely discrete from the question of construction because the argument was focused on the legal consequences that would flow from a particular construction of the contract. I concluded that the reliance on the penalties doctrine was misconceived (see [44]). However, I do not conclude that by maintaining the argument, the Defendant unfairly, improperly or unnecessarily increased the costs.

6. [12]

   It is also relevant that the Defendant made a Calderbank offer that was intended to dispose of the proceedings: see Michael Hill at [22]. That offer reflected an attempt by the Defendant to minimise costs in the proceedings.

The Calderbank letter

1. [13]

   By letter dated 3 February 2025, the Defendant made an offer to the Plaintiff to resolve the proceedings. The offer proposed that the proceedings be dismissed with no order as to costs on the basis that the Defendant would pay $10,000 to the Plaintiff. The offer was open for 14 days. It was expressed to have been made in accordance with the principles of Calderbank v Calderbank [1975] All ER 333.

2. [14]

   The letter included the following paragraph:

3. [15]

   The relevant question is whether it was reasonable in all the circumstances for the Plaintiff to have rejected the offer. A non-exhaustive catalogue of factors to be considered was stated in E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 at [59] by Ward CJ in Eq as follows:

4. [16]

   The Plaintiff submits that the offer was not a proper compromise in circumstances where the construction argument was relatively finely balanced. It submits that neither parties’ position was unassailable and that the offer of $10,000 with no order as to costs in a case where legal costs were limited was not indicative of the risks faced by the respective parties, where the full value of the claim was in the order of $250,000.

5. [17]

   I accept that the Defendant’s offer of $10,000 was modest. It did not represent a significant compromise. The Defendant did not call any witnesses and it was unlikely to have incurred substantial legal costs, and so an offer that it bear its own costs did not involve a significant compromise. While the Plaintiff was unsuccessful in the proceedings, its position on the question of construction was always reasonably arguable.

Conclusion

1. [18]

   Strictly speaking, there are distinct matters that I need to consider. They are: (1) whether it appears to the Court that some order other than an order that costs follow the event should be made, and; (2) whether costs should be paid on the ordinary or indemnity basis. However, while these matters are conceptually distinct, there is considerable overlap. That is because the existence of the Calderbank letter is a factor relevant to whether there should be a departure from the general rule that costs follow the event, and the contentions as to why costs should not follow the event are relevant to the question of whether there should be an order for indemnity costs.

2. [19]

   The Defendant failed on its alternative arguments. While the trial may have been slightly shorter without those arguments, the matter was still argued efficiently within a single day. The Defendant also took steps to try to avoid the need for a hearing by issuing a Calderbank letter, but the offer was so modest that it involved little compromise in a case where the question of construction that arose was reasonably arguable.

3. [20]

   Given this combination of circumstances, it does not appear to me that there should be a departure from the general rule that costs follow the event, but I do not consider that costs should be awarded on an indemnity basis.

Orders

1. [21]

   The Plaintiff is to pay the Defendant’s costs of the proceedings on the ordinary basis.