Buildom Pty Ltd v Rawson Constructions NSW Pty Ltd & Ors; Buildom Pty Ltd v Everton Constructions NSW Pty Ltd & Anor (Costs)

1. [1]

   On 24 December 2025, I delivered judgment in the substantive proceedings: Buildom Pty Ltd v Rawson Constructions NSW Pty Ltd & Ors; Buildom Pty Ltd v Everton Constructions NSW Pty Ltd & Anor [2025] NSWSC 1608 (the Primary Judgment). This judgment concerns the costs of those proceedings. It is assumed that the reader of this judgment is familiar with the Primary Judgment. Abbreviated terms in this judgment are those used in the Primary Judgment.

2. [2]

   At [267] of the Primary Judgment, I stated that my preliminary view on costs was that costs should follow the event, such that the plaintiff should pay the defendants’ costs of the proceedings. In relation to the Gordon cross-claim, that the plaintiff pay Everton’s costs. In relation to the Wollongong and TQM cross-claims, there should be no order as to costs. The defendants, however, indicated that they wished to be heard on the matter of costs.

3. [3]

   Accordingly, at [268] of the Primary Judgment, I directed the parties to provide submissions and evidence in respect of costs if they were seeking any orders for costs other than as foreshadowed in [267] of the Primary Judgment.

4. [4]

   Submissions have since been made by all parties on the issue of costs. Each of the parties have consented to the determination of costs to be dealt with on the basis of their written submissions, without an oral hearing.

Background

1. [5]

   The factual background is set out in [13]-[70] of the Primary Judgment. I do not intend to repeat the details of the dispute, except in so far as it is relevant to the issue of costs.

Submissions on Costs

1. [6]

   Rawson and Everton submit that Buildom should pay each of their costs of the proceedings. Everton submits that Buildom should pay its costs of the cross-claim in the Gordon Proceedings. It is submitted that Buildom should pay those costs on the ordinary basis up to and including 18 February 2025, and on the indemnity basis from 19 February 2025 going forward (Everton and Rawson’s Written Submissions (ERWS) [4]).

2. [7]

   The basis for the order seeking indemnity costs from 19 February 2025 is an offer made to Buildom on 18 February 2025 (the Offer). The Offer was made on behalf of Everton, Rawson and TQM. The Offer is said to be consistent with the principles of Calderbank v Calderbank [1976] Fam Law 93; [1975] 3 All ER 333. The Offer was expressed to remain open until 4:30pm on 21 February 2025, after which it would expire.

3. [8]

   In support of their submissions, Rawson and Everton rely on an affidavit sworn by their solicitor, Stephanie Saad, on 10 February 2026. She deposes to the making of the Offer and the non-acceptance of the Offer by Buildom’s solicitor. A copy of both the Offer and the non-acceptance email have been annexed to the affidavit.

4. [9]

   The terms of the Offer were as follows:

5. [10]

   Rawson and Everton submit that the Offer was a genuine compromise and was made at a point in time when it should have been apparent to Buildom that “the case was doomed to fail” (ERWS [6]). Accordingly, it was submitted that Buildom acted unreasonably in rejecting the Offer, causing Rawson and Everton to incur additional costs associated with the proceedings which would not have been incurred if Buildom accepted the Offer.

6. [11]

   Rawson and Everton submit that as the final decision resulted in an outcome for Buildom that was substantially worse than the Offer, and there was no reasonable basis for Buildom’s refusal of the Offer, this Court should order indemnity costs as sought.

7. [12]

   In particular, Rawson and Everton’s submissions highlighted the following factors for consideration (ERWS [18]):

   1. (1)

      The Offer was made at a time when all evidence and submissions had been served, and all positions of the parties had been established;

   2. (2)

      The Offer was open for an adequate period of three working days in circumstances where the hearing was to commence shortly thereafter;

   3. (3)

      The Offer was a genuine and reasonable compromise as the defendants incurred significant costs when rectifying the bathroom pods’ defects, as well as costs in defending the proceedings;

   4. (4)

      At the time of the Offer, it should have been apparent to Buildom that it had no reasonable prospects of success;

   5. (5)

      The Offer is expressed in clear terms, and addresses all relevant issues; and

   6. (6)

      The Offer foreshadowed the consequence of refusal of the Offer, being an application for indemnity costs.

8. [13]

   TQM adopted the submissions made by Rawson and Everton and made an application for costs to be payable by Buildom on an indemnity basis in the form sought by Rawson and Everton (TQM’s Written Submissions (TWS) [2]).

9. [14]

   TQM also seeks an order that Buildom pay its costs of its cross-claim dated 19 September 2024. TQM submits that it was wrongly joined to the proceedings, and the cross-claim had been made solely for the purpose of preserving the parity of pleadings that existed between Buildom on one hand, and Rawson and Everton on the other, on Buildom’s assumed hypothesis that TQM was a contracting party (TWS [3]). TQM submits that as they were wrongly joined, the dismissal of TQM’s cross-claim does not reflect a failure on TQM, but rather Buildom’s failure to make TQM alternatively or additionally liable as an obligor (TWS [3]).

10. [15]

    TQM served an affidavit affirmed by their solicitor, Tony Taouk, on 9 February 2026, annexing a 373-page bundle outlining the history of the proceedings. It is not necessary for the purposes of this judgment to refer to most, if any, of that material. It is yet a further example of the profligate waste of paper in these proceedings (see [4]-[5] of the Primary Judgment).

11. [16]

    Buildom submits that the costs of both proceedings should be resolved in accordance with my preliminary view expressed at [267] of the Primary Judgment, with an exception that Buildom only pay 50% of TQM’s costs (Plaintiff’s Written Submissions (PWS) [2]).

12. [17]

    Buildom noted that there are prior cost orders in both proceedings made in its favour against the defendants. That may be so, but it will be a matter for assessment as to how these orders (which will not be set aside) are offset against those awarded to the defendants (PWS [3]).

13. [18]

    In relation to Rawson and Everton’s submissions regarding indemnity costs, Buildom submits that no order for indemnity costs should be made. That is because:

    1. (1)

       Buildom disputes that its claim was hopeless and that the defendants’ offer was a proper compromise;

    2. (2)

       It was not unreasonable for Buildom to refuse the Offer as it demanded Buildom to release the defendants from all claims against them, however enabled the defendants to have liberty to pursue Buildom for any existing and future liabilities; and

    3. (3)

       In relation to the Wollongong Proceedings, it cannot be said that the Primary Judgment yielded an outcome worse than the Offer as Rawson had abandoned its cross-claim at the time of the Offer, such that they could never have achieved an outcome better than its terms.

14. [19]

    In response to TQM’s submission that Buildom pay TQM’s costs of the cross-claim, Buildom submits:

    1. (1)

       No order for costs should be made as TQM had abandoned its cross-claim in each proceeding and obtained no relief on them. TQM’s conduct of its cross-claim was not reasonable as they resiled from their position that the Gordon Contract was not subject to the Home Building Act 1989 (NSW) at the end of the trial, causing TQM to incur additional costs when advancing this position.

    2. (2)

       Alternatively, the Court’s preliminary view should prevail as it is consistent with the principle that where a claim is resolved without the determination of its merits, the Court’s discretion on costs results in there being no order as to costs, citing Immigration and Ethnic Affairs, Re Minister for; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 and Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 at [2], [25]-[30]. Although this principle applies to claims that are settled or not heard by the court, Buildom submits it should apply in this instance as the merits of TQM’s cross-claim were not determined by the Court, and it cannot be said that there was any capitulation by Buildom or its defence to the cross-claims were untenable.

15. [20]

    In relation to Buildom’s submission that they only be ordered to pay 50% of TQM’s costs, Buildom submits that although TQM was entitled to separate legal representation, that does not mean they are entitled to all their costs where they clearly had common interests with Rawson and Everton. Buildom submits that it can be inferred there was a strategic separation of representation, and whilst this separation is understandable, it should not be wholly compensable in costs due to the apparent common interest in Rawson and Everton asserting their contractual liability and entitlements, and not TQM’s. Ultimately, Buildom submits it was a choice for TQM to be separately represented, not a necessity (PWS [13]).

16. [21]

    Buildom submits that apart from the contractual parties and estoppel issues, TQM’s defence was common to that of Rawson and Everton, warranting a substantial reduction in costs. TQM had also pursued an unnecessary point regarding the Wollongong Contract, the costs of which should not be attributed to Buildom.

17. [22]

    In response to Buildom’s submission that TQM’s recoverable costs be reduced by 50%, TQM submits the following:

    1. (1)

       Even if Everton, Rawson and TQM were represented by the same solicitors, parity of counsel representation would make it unreasonable for Buildom to suggest that two counsel conducting a coordinated defence is an “extravagance”.

    2. (2)

       TQM is not the sole shareholder of Everton and Rawson, meaning that none of the defendants would be agnostic about which entity might receive a hypothetical judgment debt, and there were real economic consequences for their respective shareholders.

    3. (3)

       Buildom misstated the purpose of a special costs order disentitling recovery by a co-defendant. Referencing HP Mercantile Pty Ltd v Hartnett [2017] NSWCA 79 at [8] that a court will not usually allow two sets of costs to defendants where there is no possible conflict of interest between them, TQM submitted that there was a conflict of interest in the current proceedings as Buildom expressly introduced the question of which entity of the defendants ought to be liable.

    4. (4)

       Despite Buildom deciding to join TQM late in the proceedings, they did not give notice that it would seek any special costs orders. The failure to give notice is a discretionary reason to refuse a special costs order: see Option Funds Management Ltd v Tung Chit Real Estate Investment Australia Ltd (No 2) [2025] NSWSC 1274 at [9].

    5. (5)

       There was a mutually exclusive distribution of the case between the co-defendants, so the prospect of TQM having incurred duplicate costs is immaterial.

Issue 1: Indemnity Costs

1. [23]

   Section 98(1) of the Civil Procedure Act 2005 (NSW) empowers the court to determine by whom, to whom, and to what extent costs are to be made, and to determine whether costs are to be awarded on the ordinary basis or an indemnity basis.

2. [24]

   As I have observed, the defendants seek an order for indemnity costs by reason of Buildom rejecting the Offer. The principles on which indemnity costs will be ordered as a consequence of non-acceptance of a Calderbank offer are well known: see remarks of Basten JA (with McColl JA and Campbell JA agreeing) in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa) at [6]-[16]. In addition to the principles outlined below at [25]-[28], it is noted:

   1. (1)

      The general rule is that costs payable under an order of the court are to be assessed on the ordinary basis (Uniform Civil Procedure Rules 2005 r 42.2). The court may order otherwise, but it is correct, as a matter of principle, to say that it is the offeror who bears the onus to persuade the court that the rejection of the offer was, in the circumstances at the relevant time, unreasonable: Miwa at [16].

   2. (2)

      The response of the offeree must be assessed at the time it was made, and not with the benefit of hindsight resulting from a known outcome recorded in a judgment: Miwa at [11].

3. [25]

   At [8] of Miwa, Basten JA (with McColl JA and Campbell JA agreeing) identified that the approach frequently adopted to determine the issue of indemnity costs has been to ask two questions, namely whether:

   1. (1)

      There was a genuine offer of compromise, and

   2. (2)

      It was unreasonable for the offeree not to accept it.

4. [26]

   The rejection of a Calderbank offer in circumstances where the final outcome is less favourable to the offeree than that contained in the offer may enliven the discretion to award indemnity costs, but it does not create any prima facie right to such an order. In Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85, Gleeson JA (with Meagher JA and McCallum JA agreeing) stated at [68]:

5. [27]

   Turning to the question of whether an offer is a genuine offer of compromise, Basten JA (with McColl JA and Campbell JA agreeing) in Miwa at [9] cited Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368:

6. [28]

   To determine whether the rejection of an offer was unreasonable, Basten JA (with McColl JA and Campbell JA agreeing) in Miwa outlined at [12]:

7. [29]

   It is accepted that the Offer constitutes a Calderbank offer. The critical inquiry is whether Buildom’s rejection of the Offer warrants indemnity costs to be granted to the defendants from the date of the Offer. That is, on its terms, did it offer a genuine compromise? If so, was it unreasonable for Buildom to reject the Offer?

8. [30]

   I do consider that there is force in the submission by the defendants that at the time the Offer was made, Buildom should have realised the deficiencies in its claims. True it is, as noted by Buildom (at [6] BWS), that in the Primary Judgment (at [264]) I said that the issues raised in the pleadings were not unarguable. However, the full context of that comment was noting that because of the way the trial was run, not all aspects of the pleadings were expressly dealt with in the Primary Judgment. The case was determined primarily on the documents that had been tendered which reflected how the parties conducted their relationship. I said:

9. [31]

   Additionally, at the time the Offer was made, all of the evidence was complete. The trial was imminent. As I record in the Primary Judgment, counsel for Buildom made various concessions at different times of the hearing about the effect of documents (including the binding nature of the 4 December Agreement) and the impact of others if I formed a view about certain matters (see for example [169]-[170] of the Primary Judgment). Whist counsel argued for a different construction of some of the documents, (for example the Acknowledgments and the Credit Notes) it should have been clear to Buildom at the time the Offer was made, that there were fundamental problems in its case.

10. [32]

    As can be seen, the Offer required Buildom to dismiss its claims in both proceedings with no order as to costs. However, the Offer preserved the defendants’ liberty to bring claims for any liability that may arise with respect to the works performed by Buildom under the Home Building Act 1989 (NSW), the Design and Building Practitioners Act 2020 (NSW), or any other law, as well as cross-claims should they be sued by third parties. Buildom refer to this as a “Faustian pact” ([8] BWS).

11. [33]

    I do not accept that this term of the Offer meant there was no compromise. In my opinion, the reservation of rights to pursue Buildom for such claims would, in any event, maintain after the Primary Judgment. That is, I do not consider there would necessarily be a res judicata or issue estoppel arising from the Primary Judgment with respect to such claims. Whether there would be depends on the facts of each particular claim.

12. [34]

    Buildom’s claim in each proceeding was, in essence, a claim for moneys it said were due to it for the provision of the pods respectively for the Gordon Project and the Wollongong Project. The pods were defective. This was accepted by Buildom in the 4 December Agreement.

13. [35]

    There were cross-claims in each proceeding. The cross-claims relied on the contracts between the parties, the 4 December Agreement by which Buildom accepted there were defects in the pods, and an estoppel preventing Buildom denying it had accepted those defects. They sought relief in the nature of contractual damages and a re-imbursement of moneys spent rectifying the then identified defects.

14. [36]

    As the Primary Judgment holds, by reason of the defects in the pods and the costs incurred to rectify those defects, which were accepted by Buildom, no money is owed to Buildom for the pods on either project. The Primary Judgment does not deal with every defect that may exist with respect to the pods.

15. [37]

    The cross-claim by Rawson in the Wollongong proceedings was abandoned. Everton did not press for any relief pursuant to the cross-claim in the Gordon proceedings. I deal with the TQM cross-claim below.

16. [38]

    Although the Offer may be thought to operate asymmetrically in that it requires Buildom to relinquish any and all of its claims in relation to all matters arising from, or relating to, the Gordon and Wollongong Projects whilst leaving the defendants free to advance further claims arising out of the same or related matters, the Primary Judgment does not prima facie prevent the defendants from making such claims. Without suggesting any such claim would be successful, I do not think that if further defects are discovered which require rectification by reason of any statutory warranty or other law, the defendants would necessarily be prevented from pursuing a claim in that respect. That may depend on the nature of the defect and the claim made. Additionally, if the defendants are sued by others as a result of defects in the pods or some other reason which may entitle them to bring a cross-claim against Buildom, nothing in the Primary Judgment would prima facie prevent that.

17. [39]

    By the Offer, the defendants offered to consent to each of the proceedings being dismissed with no order as to costs. Whilst the trial was imminent, a significant amount of costs had been incurred and would be incurred in the hearing. In my opinion, in the circumstances of this case, the terms of the Offer did constitute a genuine compromise: see Teo & Anor v Twyford bht Cunningham (No 2) [2023] NSWSC 1626, Henry J at [16]-[17]; Xue v Karimbla Properties (No.45) Pty Ltd (No 2) [2023] NSWSC 795, Henry J at [22].

18. [40]

    Having regard to the factors identified at [28] above, I do consider it was unreasonable for Buildom to reject the Offer:

19. [41]

    In these circumstances, the defendants’ submissions for indemnity costs in relation to the Offer dated 18 February 2025 should be accepted, and in addition to Buildom paying the costs of the defendants on the ordinary basis up to and including 18 February 2025, there will be an order for payment of those parties’ costs on the indemnity basis from 19 February 2025.

20. [42]

    For completeness, something further should be said about the cross-claims brought by Everton in the Gordon proceedings and Rawson in the Wollongong proceedings.

21. [43]

    The Rawson cross-claim was abandoned. That was partly because Rawson was not incorporated until after the entry into the contract for the Wollongong project. The pleadings were amended to reflect this fact early in the hearing. I ultimately found that the contracting parties were Everton and Buildom. Whilst Everton/Rawson should have realised this error beforehand, it did not make a difference to the outcome, and I do not consider any additional costs were incurred because of it or in pursuance of the abandoned cross-claim. There should be no order as to costs of the cross-claim brought by Rawson in the Wollongong proceedings.

22. [44]

    In the Gordon proceedings, Everton brought a cross-claim. Whilst no formal relief was granted under the cross-claim, that was only because Everton contended, and I found, that some money was owing to it by Buildom for rectification works, but Everton did not press for a formal quantification or payment of that amount. The finding that money was owed to Everton over and above the price for the pods in effect defeated Buildom’s claim for payment of money for the pods. Everton should have the costs of its cross-claim on the ordinary basis up to 18 February 2025 and on the indemnity basis from 19 February 2025.

Issue 2: TQM’s Cross-Claim

1. [45]

   TQM was joined as a party to each of the proceedings by amended statement of claim dated 20 July 2023. Buildom’s case against TQM alleged that it was a contracting party for each of the projects and liable on the same basis as Rawson and/or Everton. In the Primary Judgment, I found that TQM was not a party to the contracts for either project. Buildom also claimed that TQM was a party to a joint venture/partnership with Rawson and/or Everton. That claim was abandoned during the hearing. Finally, it was alleged that TQM was estopped from denying it was responsible for payment for the pods. The estoppel claims were rejected in the Primary Judgment.

2. [46]

   In the context of TQM being joined to the proceedings and facing the claims brought against it, I accept that its cross-claim was a protective or defensive step taken in response to the manner in which it was joined to the proceedings and the relief sought by Buildom. The cross-claim did not need to be determined because the relief sought against it failed on every level. However, despite my preliminary view that there should be no order for the costs of TQM’s cross-claim, on reflection, I consider that TQM should not be forced to bear the costs of the defensive cross-claim it brought.

3. [47]

   Accordingly, I agree with TQM’s submission that Buildom should pay TQM’s costs of its cross-claim dated 19 September 2024. This should be on the ordinary basis.

Issue 3: Reduction in TQM’s Costs

1. [48]

   I do not accept Buildom’s submissions that the costs recoverable by TQM should be reduced by 50% on the basis that, although separate legal representation was permissible, TQM’s interests were substantially aligned with those of Rawson and Everton. The mere existence of common issues or aligned interests between co-defendants does not warrant a reduction in costs, nor does the existence of coordinated defences mean that the work undertaken was duplicative in an unreasonable sense. I am satisfied that TQM’s decision to retain separate representation was reasonable, and parity of representation is not, of itself, indicative of extravagance, especially in litigation of this kind where adverse findings on the defendants may have resulted in significant economic consequences for shareholders.

2. [49]

   TQM did run a novation point that was perhaps unnecessary and unsuccessful. However, I do not consider that this is an appropriate case to reduce the costs in an issue basis. That issue did not take up a significant amount of time in the hearing. Further, it was forced to defend an estoppel case which was pressed and determined adversely to Buildom in the Primary Judgment.

3. [50]

   For these reasons, I do not agree that there should be a 50% reduction, or any reduction, in Buildom’s obligation to pay TQM’s costs.

4. [51]

   The orders of the Court in relation to costs are that:

   1. (1)

      Buildom pay the defendants’ costs of the proceedings and the cross-claim brought by Everton dated 2 July 2021, assessed on the ordinary basis up to and including 18 February 2025, and assessed on the indemnity basis from 19 February 2025 onwards;

   2. (2)

      There be no order as to costs of the cross-claim brought by Rawson dated 2 July 2021; and

   3. (3)

      Buildom is to pay TQM’s costs of its cross-claim dated 19 September 2024 on the ordinary basis.