The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd trading as Buildcorp Interiors (No 2) (Costs)

1. [1]

   HER HONOUR: This judgment is about what costs orders should be made following protracted and, ultimately, fairly disastrous proceedings. The proceedings were fairly disastrous in two senses. First, the plaintiffs (Star Casino) may have sued the wrong defendant (being the builder as opposed to the architect). Second and relatedly, Star Casino sought some $4 million in damages but was awarded only $285,662.

2. [2]

   The full scale of this disaster is now revealed by the parties’ affidavits relied on in support of costs. Star Casino’s costs of this litigation were $2,470,424.14. The builder’s costs were $1,963,813.69. The architect did not disclose its legal costs but one could be forgiven for being apprehensive, given the “microscopic focus” on events relevant to the architect at trial: The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd trading as “Buildcorp Interiors” [2026] NSWSC 27 at [68] (primary judgment). Clearly enough, the parties’ total legal costs exceed the amount in issue.

3. [3]

   As at trial, the parties argued for very different orders supported by multiple submissions and a very large amount of evidentiary material. In crafting costs orders to appropriately reflect the outcome of these proceedings, and the parties’ efforts to resolve the proceedings before trial, four issues warrant specific consideration:

4. [4]

   To address these considerations, it is necessary to digress into some facts and procedural history. Nothing in what follows should be taken as any criticism of lead counsel of the Star Casino team, who was briefed a month before trial. Nor can I begin to know the multitude of reasons why one party is sued and not another.

Facts

1. [5]

   Star Casino sued its builder for damages in respect of three refurbishment projects undertaken from 2014 to 2016. In the course of these works, aluminium composite panels (ACPs) were installed on the external façade of two buildings. In 2017, after the catastrophic fire at the Grenfell Tower in London, the NSW Government required Star Casino to remove the ACPs, and it did.

2. [6]

   In April 2020, Star Casino commenced these proceedings against the builder in respect of the first project. The damages sought for this project were some $3.4 million. (This project ultimately accounted for some 85% of the total damages sought in the proceedings, after the second and third projects were added.) The causes of action pleaded were:

3. [7]

   Star Casino ultimately failed on the contractual claim, as the contract was “Construct Only” and expressly provided that the builder had no “Design Responsibility”. Star Casino failed on its alternative claim under s 54 of the Australian Consumer Law, as it was not a “consumer” under s 3(1).

4. [8]

   In September 2020, Star Casino amended its pleading to:

5. [9]

   Star Casino (sensibly) abandoned its claim in negligence in its reply submissions.

6. [10]

   Star Casino sought some $286,000 in damages for the second project, which was some 7.5% of the total damages ultimately claimed. Star Casino failed on its contract claim in respect of the second project at trial, not because of the same problems with the contractual terms but because it failed to establish that those terms were breached. Specifically, Star Casino’s expert fire engineer took the view that the ‘attachment exception’ in the relevant Building Code of Australia (BCA) was not actually an exception, while the insurers’ expert fire engineer opined that the exception applied (and was accepted).

7. [11]

   In December 2020, the builder filed its Technology and Construction List Response. In short:

8. [12]

   In addition, the builder sought to reduce any liability it may have in light of the responsibility of others. For the first project, concurrent wrongdoers were said to be:

9. [13]

   For the second project, concurrent wrongdoers were said to be:

10. [14]

    The builder also contended that Star Casino was contributorily negligent. This allegation was not pressed at trial.

11. [15]

    In March 2021, Star Casino filed a reply, contending that the builder was not entitled to rely on the proportionate liability provisions of the Civil Liability Act 2002 (NSW). The builder accepted this at trial, save for the claim under the Design and Building Practitioners Act 2020.

12. [16]

    In June 2021, the builder filed a cross-claim against the architect, Philip Chun, AECOM, WSP and Ausrise in respect of the first and second projects. Relevantly:

13. [17]

    The builder’s cross-claim against Philip Chun and AECOM was later resolved on the basis that the claim was dismissed with no order as to costs. The builder settled its cross-claim against WSP, without admissions, on payment of $250,000 by WSP.

14. [18]

    This brings us to the first Calderbank offer. In February 2022, Star Casino was about to let a contract for the removal and replacement of the ACPs. On 21 February 2022, when the builder’s legal costs were some $132,000, the builder sent a letter marked without prejudice save as to costs. The builder offered to remove all ACPs and any combustible insulation and sarking which had been installed on the second project and to instal replacement compliant materials, at its own cost. In return, the builder sought to be released from Star Casino’s claim in respect of the second project. The offer was conditional on entry into a settlement deed and a works agreement for carrying out the works. The builder advised that it intended to produce this letter to the Court and seek an order for costs on an indemnity basis in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333.

15. [19]

    On 24 February 2022, Star Casino entered into a contract with Shape Australia Pty Ltd to undertake remediation work. On 4 March 2022, Star Casino’s solicitors replied without prejudice save as to costs, asking the builder to provide the proposed terms of the works agreement to enable Star Casino to consider the offer. The builder was also asked to extend the date for a response to the offer until one week after a draft works agreement had been provided. On 7 March 2022, Star Casino’s solicitor made a ‘follow-up’ call to the builder’s solicitor.

16. [20]

    On 11 March 2022, the builder’s solicitor agreed to the requested extension of time and advised that they would provide a draft works agreement shortly. In the next three weeks, Star Casino’s solicitors contacted the builder’s solicitor on at least four occasions to follow up on the draft works agreement. After the fourth attempt, Star Casino’s solicitor sent a letter on 1 April 2022, requesting the draft works agreement as a matter of urgency. This was because the remedial works to remove and replace the ACPs which were the subject of the offer commenced at the end of March 2022. Star Casino’s solicitors advised that they did not want the parties to be in a position where, by reason of the builder’s delay in providing the works agreement, the remedial works the subject of the offer were completed before Star Casino was able to consider that offer.

17. [21]

    On 14 April 2022, the builder’s solicitor advised that they expected to circulate a draft settlement deed and construction contract shortly. To enable preparation of the latter, Star Casino was asked to provide its project requirements. On 27 April 2022, Star Casino’s solicitor replied, asking why the builder had waited until now to request this information. The builder was asked to finalise a draft works agreement so far as possible and provide this with a list of all information required to complete it. There was no response to this letter, nor draft deed of settlement or works agreement provided.

18. [22]

    On 3 July 2022, the solicitors for Star Casino and the builder spoke. Star Casino’s solicitor advised that the remedial works the subject of the areas in the settlement offer were not programmed to begin until December 2022. However, on 4 August 2022, Star Casino’s solicitor advised the builder’s solicitor that the construction programme had changed. Star Casino’s solicitors had only been informed of the revised construction programme that day. Replacement of the ACPs on the Darling Hotel had been brought forward where sustained and heavy rain, and the discovery of ACP backpans, had prevented works proceeding on Level 17 of the Astral Tower in accordance with the previous programme. Early commencement of works to the Darling Hotel was thought to avoid delay to the completion of the works and associated delay costs.

19. [23]

    There was no response to this letter, which Star Casino’s solicitor’s followed up with another letter on 10 August 2022, stating “So that your clients do not incur any avoidable costs in preparing a draft construction contract for the works the subject of the Offer, we wish to confirm that works have now commenced to the cladding the subject of the Offer.” Star Casino advised that it remained willing to consider any revised or further offer.

20. [24]

    On 18 August 2022, the builder’s solicitors replied, advising that the builder had been somewhat taken by surprise by these events, and that the builder remained ready, willing and able to carry out the works and still intended to rely on their offer as a Calderbank letter.

21. [25]

    Star Casino’s solicitor noted that the builder had not provided a draft settlement deed or draft works agreement since their offer was made five months’ prior. Star Casino was ready and willing to negotiate a settlement, with a focus on efficiently settling the matter given the anticipated remedial works taking place that year. Star Casino was genuinely considering the offer but could not properly consider it without the draft settlement deed or works agreements. The builder had many months to provide these documents before the remedial works took place.

22. [26]

    I reject the builder’s submission that it is entitled to its costs on an indemnity basis from the date of its Calderbank letter. As Star Casino submitted, no indemnity costs order should be made given its repeated efforts to engage with the builder on its Calderbank offer and the builder’s failure to respond. This was particularly so as the offer was not monetary and required cooperation between the parties to determine how the offer to rectify the cladding the subject of the second project was to be put into effect. Star Casino was entitled to understand the offer before accepting it. In any event, the offer was confined to rectifying the cladding on the second project, which comprised a tiny portion of Star Casino’s overall claim.

23. [27]

    Returning to the unfolding of these proceedings, on 17 March 2023, Star Casino amended their pleading to seek damages from the builder in respect of the third project: The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd [2023] NSWSC 241. The damages sought for the third project was some $286,000, representing some 7.5% of the total damages claimed. (Star Casino succeeded on this claim; the builder did not argue otherwise at trial). On 11 September 2023, Ball J made orders by consent granting leave to amend the builder’s cross-claim to include the third project. These amendments only concerned Ausrise, as Star Casino had engaged a different architect for this project. On 15 May 2024, Ausrise went into liquidation. On 3 April 2025, the insurers were joined under s 5(3) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW).

24. [28]

    On 11 September 2025, the architect served a Calderbank letter on the builder. This was a month before trial. The architect offered to pay the builder $1 million inclusive of costs. The offer was open for acceptance for 14 days.

25. [29]

    On 25 September 2025, being the last day on which the Calderbank offer was open for acceptance, the builder circulated proposed amended pleadings, said to be “largely directed at bringing the proceedings in line with the evidence exchanged to date”: The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd trading as Buildcorp Interiors (leave to amend) [2025] NSWSC 1210 at [26]. The builder did not otherwise respond to the Calderbank offer. I will return to whether indemnity costs should be ordered from the date of this letter at [52].

26. [30]

    The builder filed a motion to amend on 9 October 2025. The motion was heard on the first day of trial, 13 October 2025. I granted leave for some amendments, where the builder sought to bring its pleading into line with the evidence of its expert architect, Mark Bullen, to which the architect’s expert, Grant Roberts had responded: Star (leave to amend) at [54]-[56]. The architect consented to other amendments. The builder later succeeded on some of these amended causes of action in obiter.

Rule 42.34, Uniform Civil Procedure Rules

1. [31]

   An initial hurdle for Star Casino is whether I should make any costs order in its favour at all, where Star Casino has not cleared the $500,000 threshold in r 42.34 of the Uniform Civil Procedure Rules 2005 (NSW).

2. [32]

   Star Casino submitted that its claim was quantified in the expert evidence at $4,043,120. The fact that its claim was not vindicated in its entirety did not mean Star Casino was not justified in bringing the claim in the court with the jurisdiction to award such an amount. Further, the proceedings involved technical issues of some complexity and the service of expert evidence from a range of disciplines, such that the case management available in the Technology & Construction List was more appropriate. At no point was it suggested to Star Casino that the matter was inappropriately commenced in the Supreme Court, unlike what occurred in Averkin v Insurance Australia Ltd (No 2) [2016] NSWCA 150 (McColl, Basten and Leeming JJA).

3. [33]

   The builder took this point, albeit notionally. That is, the builder did not disagree with anything put by Star Casino on this point, nor proffer any substantive reasons against those propositions.

4. [34]

   Rule 42.34 of UCPR provides:

5. [35]

   The purpose of the rule was explained in Averkin v Insurance Australia Ltd (No 2) at [15]:

6. [36]

   As the learned authors of Ritchie’s Uniform Civil Procedure NSW (5th ed, LexisNexis Butterworths, 2021) note, factors that have been taken into account in reaching a conclusion that pursuit of proceedings in the Supreme Court were “warranted” include the nature of the claims, their complexity, the potential judgment amount, and uncertainty that the matter fell within the jurisdiction of the District Court of New South Wales: at [42.34.5].

7. [37]

   Proceedings in this Court were “warranted” in Benson v Rational Entertainment Enterprises Ltd (No 2) [2018] NSWCA 148 (Beazley P, Leeming JA and Emmett AJA), where the claim called for construction of a settlement deed made in the United States and governed by United States law, was coupled with a novel unjust enrichment claim, and neither aspect was legally or factually straightforward: at [18]. The same conclusion was reached in Port Macquarie-Hasting Council v Diveva Pty Ltd [2017] NSWCA 97 (Payne JA, Beazley ACJ and Simpson JA agreeing), where complex expert engineering evidence justified the commencement and continuation of the proceedings in this Court: at [105]. In Harvest Water Management Consultants Pty Ltd v Todd (No 2) [2025] NSWSC 443, Hmelnitsky J noted that the fact that proceedings were commenced in this Court but ultimately failed is not of itself a reason to conclude that the commencement of proceedings in the Court was not warranted, and not where the dispute was of a kind that would ordinarily be dealt with in this Court (being, in that case, in respect of caveats): at [15].

8. [38]

   Here, Star Casino sought some $4 million in damages. Where the claim as originally pleaded exceeded the District Court’s jurisdictional limit, commencement of the proceedings in this Court was warranted: Barclay Pearce Capital Management Pty Ltd v Barclay Pearce Capital Corporate Pty Ltd (No 2) [2025] NSWSC 454 at [10] (Stevenson J); DR Design (NSW) Pty Ltd v Grant City International Development Pty Ltd (No 2) [2018] NSWSC 287 at [16] (Ball J). In DR Design, Ball J maintained this view notwithstanding that it might have been said that the plaintiff’s case lacked merit. Where the plaintiff had an arguable case, “... there was a real prospect that it could have recovered the total amount it claimed, which exceeded the jurisdictional limit of the District Court. That position did not change during the course of the proceedings”: at [17]. On this basis, I am satisfied that the commencement and continuation of the proceedings in this Court was warranted.

9. [39]

   The insurers went further and argued that the builder should not have its costs of the cross-claim either, where judgment obtained by the builder against them was less than $500,000. The insurers submitted that the builder should have commenced separate proceedings in the District Court in respect of the third project.

10. [40]

    Rule 42.34 of the UCPR does not apply to the cross-claim, even if less than $500,000 in damages was recovered, because the proceedings had already been commenced in this Court by Star Casino: JR Consulting & Drafting Pty Ltd v Cummings [2015] NSWSC 10 at [41] (Black J); Baba v Sheehan (No 3) [2020] NSWSC 920 at [24] (Parker J).

Costs as between Star Casino and the builder

1. [41]

   Star Casino sought its costs of the proceedings on the ordinary basis. True it was that damages of $285,662 reflected the cost to replace ACPs on only one of the three projects. But costs follow the event, where the “event” is generally the outcome of the proceeding as a whole: r 42.1, UCPR. Where a party has succeeded, it will ordinarily be entitled to recover the entirety of its costs even if the whole amount claimed was not awarded or the unsuccessful party also had success on a particular issue or issues: Soulos v Pagones (No 2) [2023] NSWCA 274 at [15]-[18] (Ward P, Meagher and Mitchelmore JJA).

2. [42]

   The builder sought its costs of the proceedings as it was the true victor. That Star Casino lost was the "practical result of a particular claim": Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA). Star Casino was unsuccessful in establishing its claims in relation to the most valuable and dominant project, being the first project. It lost in relation to the second project, and lost two out of the three claims on the third project. The "modest success" enjoyed by Star Casino did not warrant a costs order in its favour: El-Debel v Micheletto (Trustee) (No 2) [2021] FCAFC 146 at [11] (Markovic, Derrington and Colvin JJ); Alexanderson Earthmover Pty Ltd v Civil Mining and Construction (No 2) [2019] QSC 273 at [20], [29], [32] (Ryan J); In the matter of Arada Australia Pty Ltd (No 2) [2025] NSWSC 1293 at [11] (Brereton J). Making the costs order sought by Star Casino would be quite unfair, where "fairness should dictate" how the court's discretion as to costs is exercised: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [4]-[5] (Finkelstein and Gordon JJ); Hockey v Fairfax Media Publications Pty Limited (No 2) (2015) 237 FCR 127; [2015] FCA 750 at [88]-[91] (White J).

3. [43]

   Alternatively, the builder submitted that Star Casino's case involved a series of separable issues on which it largely failed. Star Casino should have 7.15% of its costs overall, being the portion of its damages claim which was referable to the third project, and that sum should be offset against Star Casino's liability to pay the builder's costs for the balance. The proportionate value of each project was said to have naturally influenced the issues on which the parties focused during the proceedings and at trial. (I agree with the latter proposition.)

4. [44]

   To this, Star Casino submitted that the Court should not attempt to differentiate between the issues on which Star Casino was successful and those on which it failed. Applying the principles in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA), no issue or group of issues in respect of which Star Casino was unsuccessful was “clearly dominant or separable”; no severable matters upon which Star Casino was unsuccessful “took up a significant part of the trial, either by way of evidence or argument”; and there are no “circumstances of the case viewed against the wide discretionary powers of the court” that warrant an order contrary to the general rule. Little time was spent on the alternative s 54 or tort claims. (I had certainly spent some time on the latter issue before it was dropped in reply submissions.)

5. [45]

   In the alternative, Star Casino submitted that the builder should pay 50% of its costs. It would be impractical to separate out the costs associated with Star Casino’s claim regarding the third project alone, where its expert evidence generally dealt with all the projects together. (More accurately, the expert evidence barely touched on the third project at all.)

6. [46]

   Star Casino’s solicitor considered it impossible to differentiate Star Casino’s costs by project, as “The projects were so intertwined that incurring costs to prove one project required incurring costs on all projects.” A reasonable estimate of the costs to be attributed to the third project was said to be 50%, as much of the expert evidence was general. As such, the evidence relevant to each project would largely have been the same. Many of the activities performed would have been necessary without the first or second projects, such as court attendances, attendance on parties and the like. (Although I note that the third project only became part of the proceedings two years after the proceedings had been commenced.)

7. [47]

   Star Casino won this case, but barely. There was almost no lay or expert evidence in relation to the third project, which appears to have been added to these proceedings at a late stage for completeness. Indeed, the paucity of material in respect of the third project made it difficult to resolve that part of the case when I came to it. The builder did not seriously defend Star Casino’s claim in respect of the third project. The builder’s solicitor said that if Star Casino had commenced separate proceedings against the builder in the District Court in relation to the third project, then the solicitor strongly believed that he would have obtained instructions to settle that claim; it was a modest claim that would not have been commercially sensible to proceed to hearing and there was no suggestion that the builder owed design obligations in respect of that project.

8. [48]

   When the award of damages made in Star Casino’s favour is viewed in the context of its claims as a whole, I do not think it can be said that Star Casino has succeeded in this litigation. I think it unlikely that Star Casino would have commenced proceedings in respect of the third project in isolation. On the other hand, the builder has successfully defended a substantial claim on the causes of action which mattered and uttered no protest in respect of the third project. Costs should follow the event, but I consider that the event is the builder’s successful defence of the claim made against it. That is, Star Casino should pay the builder’s costs of the proceedings.

9. [49]

   If I am wrong about this then I would have considered that this was an appropriate case to apportion costs. The Court has wide discretionary powers to apportion costs where a case involves multiple issues and a party succeeds on some issues but fails on others: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]-[36] (Beazley, Tobias and McColl JJA). Apportionment of costs between issues has been described as “very much a matter of discretion, [where] mathematical precision is illusory”: Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; (2011) 86 ACSR 119 at [84] (Campbell JA, Macfarlan and Young JJA agreeing).

10. [50]

    The parties’ focus was on the first project and, to a lesser extent, the second project, for three reasons. First, that was where the money was. Second, the architect was engaged on those projects, and so the contest between the builder and the architect was there fought out. Third, the argument between the expert fire engineers as to the ‘attachment exception’ in the BCA potentially exonerated the builder on the second project. I do not accept that 50% of Star Casino’s costs were referable to the third project. I would have put the figure at 20%.

Costs of the cross-claim against the architect

1. [51]

   The architect sought its costs from the builder, including on an indemnity basis from the date of its Calderbank letter. The builder sought an order that Star Casino pay its costs and those of the architect in relation to the cross-claim: Furber v Stacey [2005] NSWCA 242 at [31]-[32] (Hodgson JA, Einstein J agreeing).

2. [52]

   There is no “presumptive entitlement” to indemnity costs flowing from a failure of a party who has rejected a Calderbank offer to achieve a better outcome than provided for in the offer. Rather, the offeror must establish that the Calderbank offer involved a real and genuine element of compromise and that non-acceptance of the Calderbank offer was unreasonable: CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] (Moore, Finn and Jessup JJ); Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]-[9] (Basten JA, McColl and Campbell JJA agreeing). It was only the latter criterion that was in issue here.

3. [53]

   The offeror bears the onus to establish to the Court’s satisfaction that, in all the circumstances, failure to accept the offer was unreasonable: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] (Giles, Ipp and Tobias JJA). Unreasonableness is to be judged by reference to the circumstances facing the offeree at the time of the offer, and not with the benefit of hindsight: CGU at [75]; Miwa at [11].

4. [54]

   The Court’s inquiry into whether the offeree’s non-acceptance of a Calderbank offer was unreasonable in all the circumstances can be complex: Radovanovic v Stekovic [2024] NSWCA 129 at [68] (Payne JA, Gleeson and Meagher JJA agreeing). The reasonableness of the refusal of a Calderbank offer may also be affected by the complexity of the proceedings. For example, in LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72, Barrett J declined to order indemnity costs despite finding that a defendant’s Calderbank offer was reasonable, as the “case was not clear cut … with a myriad of issues of some complexity on which it would have been by no means easy to predict the outcome in advance of full presentation of evidence and full argument”: at [53]-[55].

5. [55]

   As Einstein J clarified in Kvaerner Oil & Gas Australia Pty Ltd v Egis Consulting Australia Ltd [2003] NSWSC 75, “[t]his is not however to suggest that the touchstone for exercise of the discretion is complexity of issues. The type of issues, the stances of the parties and the timing of a Calderbank letter are all relevant requiring to be carefully weighed in terms of the reasonableness criterion”: at [8]. Against this, “… it is important to bear in mind that it is not necessary, or even reasonable, for a defendant to insist on being able to predict the outcome of every issue – even every major issue – in the case before considering settlement”: Alves v Patel [2005] NSWSC 841 at [55] (Adams J).

6. [56]

   The builder submitted that its rejection of the Calderbank offer was not unreasonable. Before the offer expired, the builder was preparing amended pleadings that included its claim under s 18 of the Australian Consumer Law. The builder was vindicated in obiter in respect of that claim: primary judgment at [286], [289] and [338]. The Court would not find that the builder’s prospects were so low that it was unreasonable to not accept the offer, which comprised 20% of the builder’s exposure to the $3.4 million claimed for the first and second projects. Reasonableness is to be determined without “the benefit of hindsight resulting from a known outcome, recorded in a judgment”: Miwa at [11]. Nor did the Calderbank offer foreshadow an application for indemnity costs in the event that the builder rejected it.

7. [57]

   The architect rejected the suggestion that, if Star Casino had succeeded against the builder, then the builder would have succeeded against it. Notwithstanding the finding that the architect made the alleged representation, the builder may have failed on its claim under s 18 of the Australian Consumer Law if they had been determined on their merits: see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688 at [66] (Finn J). No finding was made on causation, contributory negligence or proportionate liability. (I am prepared to approach this part of the debate on the assumption that, if Star Casino had succeeded against the builder, then the builder would have succeeded against the architect.)

8. [58]

   Having regard to the circumstances facing the builder at the time of the Calderbank offer, I am not satisfied that it was unreasonable not to accept that offer. The builder was in an invidious position in these proceedings. The builder was on the receiving end of a claim by Star Casino for, ostensibly, some $4 million in damages. The bulk of the damages concerned the first project, to which the builder had a solid defence: its contract with Star Casino was “Construct Only” and expressly provided that the builder had no “Design Responsibility”. A complexity arose because Star Casino had not sued the party who did have Design Responsibility, being the architect. This meant that the builder was, effectively, obliged to sue that party by cross-claim, on causes of action less straightforward than the contractual claim which Star Casino could have made.

9. [59]

   But if the builder was wrong about the meaning of the “Construct Only” contract – where Star Casino’s arguments on the proper construction of the contract were not unarguable – then the builder had no other real defence in respect of the first project. Nor, for that matter, did the builder have any real defence to the second project (but was fortuitously saved by the expert fire engineer called by the insurers).

10. [60]

    In considering the Calderbank offer, the builder had to assess its potential exposure to damages of some $3.7 million for the first and second projects, together with Star Casino’s costs. The builder would have had a reasonable sense of what Star Casino’s costs of the proceedings were, given its own legal costs to that point. The builder’s exposure to Star Casino’s claim would reasonably have been considered to exceed $5 million inclusive of costs. The builder would have been confident to recover at least some of this exposure from the insurers, given the expansive terms of the contractual indemnity given by Ausrise and the absence of any worrying defences advanced by the insurers.

11. [61]

    Against this, the builder had a Calderbank offer of $1 million inclusive of costs. To be added to this mix was the fact that the expert architect’s evidence provided solid support for the cross-claim against the architect. In light of the expert evidence, the builder could be reasonably confident of succeeding against the architect. The builder apprehended that it would amend its pleadings to align with that expert evidence. Putting all of this together, I am not satisfied that it was unreasonable for the builder not to accept the offer. The amount offered may reasonably have been viewed as falling short of the sum necessary to adequately compensate the builder for its continuing exposure to Star Casino’s claim if it went to trial without the cross-claim. Given the absence of unreasonableness on the part of the builder in not accepting the Calderbank offer, I decline to order the architect’s costs on an indemnity basis from the date of that offer.

12. [62]

    The builder’s solicitor said that the architect was joined to the proceedings on account of Star Casino’s contention that the builder owed design obligations. Had Star Casino not made those allegations, then the builder would never have had occasion to join the architect to the proceedings and the solicitors would not have been instructed to do so.

13. [63]

    The builder submitted that Star Casino’s claims against the builder were the reason for the builder’s downstream claims against the architect. The builder’s cross-claim against the architect only failed in the sense that it became unnecessary to determine given the failure of Star Casino’s claims against it. Star Casino's inexplicable failure to join the architect as a defendant, given its contractual obligations, was said to be a relevant consideration in the exercise of the Court’s discretion: Bostik at [13], [17] (Beazley, Ipp and Basten JJA).

14. [64]

    Star Casino submitted that it should not be responsible for any costs order made against the builder in favour of the architect or, at least, not on an indemnity basis given the builder’s rejection of the architect’s Calderbank offer. Beyond this, Star Casino did not speak against a Sanderson or Bullock order.

15. [65]

    In the event that the Court was minded to make a Sanderson or Bullock order, the architect preferred the latter given solvency concerns about Star Casino. Otherwise, the architect did not speak against either order.

16. [66]

    A Sanderson order would involve Star Casino paying the architect’s costs directly. A Bullock order would involve Star Casino indemnifying the builder for the architect’s costs. There are two key requirements for making either order, being that suing the architect was reasonable and, further, that the conduct of Star Casino was such as to make it fair to impose some liability on it for the architect’s costs: Gould v Vaggelas (1985) 157 CLR 215 at 229-230 (Gibbs CJ) and 260 (Brennan J); [1985] HCA 75. As Callaway JA (Batt and Chernov JJA agreeing) observed in McCracken & McCracken v Pippett [2000] VSCA 20 at [11]:

17. [67]

    I consider that such an order is appropriate here. Where Star Casino did not sue its architect, it was reasonable and proper for the builder to do so. The causes of action between Star Casino and the builder, on the one hand, and between the builder and the architect on the other hand, were substantially connected. The fact that Star Casino chose not to sue its architect reasonably caused the builder to do so and was conduct such as to make it fair to impose liability on Star Casino for the costs of the architect.

18. [68]

    The next question is whether the order should be a Sanderson or Bullock order. A Sanderson order is generally preferred, to avoid “circuity in the recovery of costs”: Quintano v B W Rose Pty Ltd (Costs) [2009] NSWSC 626 at [7] (Brereton J); Pike v Coles Supermarkets Australia Pty Ltd [2022] NSWSC 1080 at [89] (Walton J). However, Brereton J further observed in Quintano v B W Rose at [7]:

19. [69]

    Indeed, as Fryberg J explained in Yamacoe Pty Ltd v Michel Survey Group Pty Ltd [2002] QSC 393, one reason for the evolution of the Sanderson order was the need to ensure that an unsuccessful defendant should bear the costs of a successful defendant notwithstanding the insolvency of the plaintiff: at [49].

20. [70]

    The fact that the party who will ultimately be obliged to pay costs is insolvent or there is “at least a real risk that he is impecunious” is a factor to be taken into account as part of the overall circumstances for the purpose of determining which form of costs order should be made as a matter of fairness “having regard to the comparative hardships that will be experienced by the relevant parties from one or other form of the costs order”: State of Victoria v Horvath (No 2) [2003] VSCA 24 at [15] (Winneke P, Chernov and Vincent JJA); Coastal Hire Pty Ltd v Ewers [2009] WASCA 36 at [24] (Newnes JA, Wheeler and Buss JJA agreeing). For example, in Messagemate Australia Pty Ltd v NCI (No 2) [2002] SASC 377, the plaintiff insured succeeded in its claim against an insurer, as a consequence of which its alternate claim against the broker was dismissed. But the insurer went into liquidation. Williams J made a Sanderson order having regard to the hardship that would otherwise be occasioned to the plaintiff and to “thus spread the hardship occasioned by FAI's financial situation”: at [38].

21. [71]

    The architect’s solicitor expressed concerns about Star Casino’s ability to pay having regard to the financial statements, annual reports and ASX announcements of the parent company, The Star Group Limited. Certainly, this material does not make for happy reading. The parent company has faced substantial challenges in recent years, facing major litigation on a number of fronts as well as liquidity pressures and the need to refinance. According to the 2025 annual report published on 30 September 2025, the parent company has executed a number of substantial transactions to improve its financial position but challenges remain. Judgment is awaited from the Federal Court of Australia on the penalty to be imposed following proceedings brought by the Australian Transaction Reports and Analysis Centre (AUSTRAC) for contraventions of anti-money laundering legislation. AUSTRAC sought a fine of $400 million, while the company submitted that any fine greater than $100 million, payable in the next 12 months, would pose significant liquidity challenges.

22. [72]

    The parent company’s more recent ASX announcement on 30 January 2026 indicated that financial performance had improved, reflecting stabilised trading in Sydney. But trading levels remain at historical lows. While the corporate group had available cash of $130 million as at 30 December 2025, its ability to continue as a going concern was said to remain dependent on the outcome of numerous material uncertainties, some of which were interdependent and outside the group’s control. Each of these matters continued to influence the group’s ability to continue as a going concern.

23. [73]

    The plaintiffs to these proceedings, which I have collectively referred to as “Star Casino”, are in fact The Star Entertainment Sydney Properties Pty Ltd and The Star Pty Ltd. The former company holds a 96-year lease of the casino site. I know nothing about The Star Pty Ltd. The 2025 annual report indicates that both companies have provided a guarantee and charge over their assets in favour of the Independent Liquor and Gaming Authority. Beyond this, the extent to which the parent company’s challenges will be visited upon these two subsidiaries is not entirely clear.

24. [74]

    So far as the evidence reveals, the plaintiffs are not insolvent. Nor does the evidence support a conclusion that there is “at least a real risk that [they are] impecunious”, albeit there is a risk that they might become so. Nonetheless, I will take this into account when determining which form of costs order will achieve fairness, including having regard to the “comparative hardships” that may be experienced by the architect (if I were to make a Sanderson order) or the builder (if I were to make a Bullock order).

25. [75]

    In this case, the architect has a costs order in its favour. It could have been worse but for the builder’s efforts in defending Star Casino’s claim. In these circumstances, I consider that any hardship occasioned by Star Casino’s financial situation should be experienced by the architect rather than the builder. A Sanderson order is appropriate. Such an order will “spread the hardship” occasioned by Star Casino’s financial situation: Messagemate at [38].

26. [76]

    The builder also sought an order that Star Casino pay its costs of the cross-claim against the architect. Star Casino submitted that there was no just basis for the Court to exercise its cost discretion in this way but did not elaborate.

27. [77]

    An order of this type was considered in Furber v Stacey, where Hodgson JA (with whom Einstein J agreed) noted that the prima facie principle to be applied in relation to cross-claims is that costs follow the event such that, if a plaintiff’s claim fails against the defendant, and the cross-claim fails against the cross-defendant, then the plaintiff pays the defendant’s costs of the claim while the defendant pays the cross-defendant’s costs of the cross-claim: at [30]. However, the principle is subject to the ability of the Court to make such orders as it appears to the Court should be made, as the justice of the case may require: at [31].

28. [78]

    In Furber v Stacey, Hodgson JA followed the analysis of Finn J’s approach in GEC Marconi. There, Finn J considered factors which may indicate that the costs of the cross-claimant ought fairly to be borne by the plaintiff. These factors included whether the plaintiff’s claim was a catalyst for the cross-claim; whether it was reasonable to bring the cross-claim; whether there was a relationship between the original claim and the cross-claim, or did the cross-claim raise issues private to the parties to it: GEC Marconi at [72]-[75]. Of these factors, Hodgson JA saw the reasonableness of the defendant’s conduct at the time as key: Furber v Stacey at [34]. Hodgson JA’s approach was followed in Drive My Car Rentals Pty Ltd v Gabriel (2021) 104 NSWLR 697; [2021] NSWCA 73 at [94]-[96] (Gleeson JA, Macfarlan and Meagher JJA agreeing).

29. [79]

    It follows from the views I have already expressed that it was reasonable for the builder to cross-claim against the architect. This was brought about by Star Casino’s decision not to sue the architect itself. The builder advanced different causes of action on the cross-claim than the contractual claim which Star Casino could have brought, but the builder had no option given privity of contract. In effect, the builder prosecuted a claim which Star Casino could have brought itself but chose not to. As such, I am satisfied that the costs of the builder’s cross-claim against the architect ought fairly to be borne by Star Casino.

Costs as between builder and the insurers

1. [80]

   The builder sought its costs of the cross-claim against the insurers.

2. [81]

   The insurers sought an order that the costs be apportioned to reflect the relative successes and failures of the parties. The builder was unsuccessful against the insurers on the first and second projects (it would be more correct to say that it was not necessary to decide the builder’s claim against Ausrise and its insurers on the first and second projects) and obtained damages of only $214,247 from a total of $3,995,275.50 sought. The first and second project were severable issues (or events). The construction work was carried out at different times. There were different contractual arrangements and different parties. (Albeit the contractual arrangements between the builder and Ausrise were relevantly identical.) The architect had no role on the third project, noting that the architect played a significant role at the hearing both in terms of evidence (its own and cross-examination) and oral submissions. (I agree.) It was submitted that it would be unfair for the insurers to have to pay not only their own costs but also the builder’s costs of the time spent on the first and second projects.

3. [82]

   The insurers went so far as to contend that the builder should pay 93% of their costs of the proceedings, where the damages awarded were 7.15% of the total cost of all three projects. Alternatively, the insurers submitted that the bulk of the evidence and trial time was spend on the first project. (With that, I agree.) Taking an impressionistic approach, it was submitted that the appropriate costs orders are that the builder pay 75% of the insurers’ costs of the proceedings: Hancock v Rinehart (No 2) [2021] NSWSC 3 at [30] (Ward CJ in Eq); Saravinovska v Saravinovski [2020] NSWSC 1232 at [18] (Ward CJ in Eq).

4. [83]

   Lost in these submissions is the harsh reality that the insurers lost on every point which they took. Further, the contracts between the builder and Ausrise on each project were relevantly identical. Ausrise’s insurance policies for each project was relevantly identical. The insurers raised identical defences in respect of each project. It was only necessary to resolve the pleaded issues once. Had Star Casino been successful against the builder in relation to the first or second projects, then the builder would have been successful in its cross-claim against the insurers for the same reasons as given for the third project.

5. [84]

   I do not consider it appropriate to apportion costs in the manner sought. The issues between the builder and the insurers were common across all projects. Nor is apportionment of the costs of the cross-claim required to achieve fairness. I make the usual costs order in respect of this cross-claim.

Gross sum costs order

1. [85]

   The builder proposed that costs be awarded on a gross lump sum rather than proceeding to costs assessment. The builder’s solicitor was concerned that any costs assessment would be “very hard fought” and may lead to satellite litigation, as it would be difficult to attribute costs between particular parts of the litigation and “… with no disrespect intended, the parties have not demonstrated an ability to agree on matters in the past”. The builder’s solicitor noted that the proceedings have been on foot for nearly six years.

2. [86]

   As to how a gross sum is to be specified, Einstein J summarised the principles in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [9]:

3. [87]

   Further, as Ball J explained in Baychek v Baychek [2010] NSWSC 987 at [11]:

4. [88]

   The builder’s total costs of the proceedings were $1,963,813.69, of which $956,964.18 were professional fees and the balance were disbursements. The builder’s solicitor said that, in his experience, 60% to 70% of professional fees would be recovered on assessment on a party / party basis. Further, 90% to 100% of disbursements would be recovered on assessment, with the upper range applying where counsel selected was in proportion to the value of the dispute. Star Casino’s solicitor agreed with these percentages.

5. [89]

   The builder’s solicitor estimated that half of its costs related to the claims by Star Casino, while the balance related to the builder’s cross-claims. This apportionment was based on the number of claims made, the complexity of issues and the volume of evidence. The builder’s solicitor noted that the majority of lay evidence, fire engineering evidence and quantum evidence was directed toward Star Casino’s claims. Further, a supplementary quantity surveyor report had to be served when Star Casino’s original quantity surveyor expert was replaced. The builder already had a costs order in its favour in respect of this.

6. [90]

   That is, the builder’s costs of defending Star Casino’s claim was $981,906.85. The builder’s solicitor suggested that this figure should be discounted to 70% of professional fees and 100% of disbursements. By my calculations, this would result in a figure of $838,467.22. If I were to use the higher discount rates referred to by the plaintiff’s solicitor, then I would arrive at $740,276.53. For the purpose of a gross sum order, I consider that $800,000 is appropriate and so order.

7. [91]

   The builder’s solicitor estimated that 35% of its costs of the cross-claim concerned the cross-claim against the architect. The builder served one expert report in chief and another in reply in support of that claim. Part of the builder’s lay evidence was also relevant to the cross-claim. The claim against the architect was considerably fact dense, involving multiple causes of action and extensive closing submissions. The architect also required the builder to provide extensive discovery of documents prior to trial.

8. [92]

   As such, the professional fees and disbursements of this part of the cross-claim were put at $343,667.40. Allowing 70% of professional fees and all disbursements, that figure was reduced to $293,463.53. Applying the higher discount rates referred to by the plaintiff’s solicitor, by my calculations, the figure would be $259,096.78. For the purpose of gross lump sum, I consider that a figure of $275,000 is appropriate and so order.

9. [93]

   While Star Casino embraced the builder’s suggestion of a gross lump sum, the architect and insurers did not. I do not consider it appropriate to make such an order vis a vis these parties absent consent, particularly where I have no evidence on which to base a figure. The architect and insurers are entitled to have their costs assessed if they wish.

10. [94]

    That said, I would ask that the costs assessor have regard to the extent to which the architect dominated the trial, occupying 43% of the transcript. To put this in context, this was the same as Star Casino and the builder combined. In addition, I would ask that the costs assessor have regard to length of the architect’s closing submissions, being 129 pages and a further five pages of supplementary submissions. This was excessive and, indeed, oppressive.

Orders

1. [95]

   For these reasons, I make the following orders:

   1. (1)

      Order the plaintiffs to pay the defendant’s costs of the proceedings.

   2. (2)

      Pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW), order that the costs in Order 1 are to be paid in a specified gross sum of $800,000.

   3. (3)

      Order the plaintiffs to pay the defendant’s costs of its cross-claim against the first cross-defendant.

   4. (4)

      Pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW), order that the costs in Order 3 are to be paid in a specified gross sum of $275,000.

   5. (5)

      Order the plaintiffs to pay the first cross-defendant’s costs on the ordinary basis.

   6. (6)

      Order the sixth to eighth cross-defendants to pay the costs of the cross-claim against them on the ordinary basis.