The Owners – Strata Plan No 31337 v Balacco (No 2)

THE COURT: By judgment delivered on 9 April 2026, this Court allowed an appeal in part, setting aside a judgment in favour of the respondent, Ms Grace Balacco in the amount of $385,484.78, and substituting a judgment in her favour in the amount of $250,499.06. The Court’s orders provided for the supply of written submissions as to costs. Those submissions were supplied on 23 April and 6 May 2026, although those from Ms Balacco were eight pages long despite the Court’s order that they not exceed four pages.

It is common ground that the partial success of the owners corporation on appeal does not warrant any different exercise of the discretion as to costs at first instance. It is also common ground that this is a case where it is appropriate to depart from the rule that costs follow the event in the exercise of the discretion as to costs in this Court, in light of the fact that, although the appeal was allowed in part, Ms Balacco nonetheless enjoyed a substantial measure of success. However, the parties are divided as to the appropriate order as to costs in this Court, and thus it is necessary to summarise the position. What follows presupposes familiarity with this Court’s earlier judgment: The Owners – Strata Plan No 31337 v Balacco [2026] NSWCA 50.

There were eight substantive grounds of appeal. The owners corporation succeeded in respect of lighting but failed in relation to whether the speed hump was an obvious risk, whether it had breached a duty of care, and whether the breach had caused Ms Balacco’s injury. The owners corporation’s success on lighting but failure on the other grounds meant that the judgment against it would remain. The other grounds concerned quantum. The owners corporation failed in its challenge to contributory negligence, but succeeded in relation to grounds 8 and 9, with the result that components of the judgment amount representing future economic loss and future domestic assistance were deducted from the judgment sum. In terms of time taken, the grounds in relation to lighting and obvious risk occupied the most time during the oral hearing and the greatest number of words in the written submissions. The hearing occupied half a day.

Ms Balacco submitted that she should have the entirety of the costs of the appeal, including the costs of the day of the hearing on an indemnity basis, or by way of fallback a more limited issue-based costs order in her favour. The owners corporation submitted that there should be no order as to costs of the appeal.

It is best to deal with the special costs order sought by Ms Balacco first. The order for indemnity costs was said to be attributable to the fact that, at 11:03am on the day before the appeal was to be heard, a document purporting to be an offer of compromise, open for some 23 hours, was served, in the amount of $250,000. The offer did not comply with the rules. Not only did it not state that it was made pursuant to the rules (cf UCPR r 20.26(2)(d)) but it also failed to identify the orders that were sought (cf UCPR r 20.26(2)(a)(ii)). This was not a mere technicality. The offer was to pay $250,000 by way of settlement, with the proceedings to be dismissed. However, the dismissal of the proceedings in this Court would leave in place the District Court judgment in Ms Balacco’s favour. An email from the solicitors acting for the owners corporation, sent promptly at 11:29am, sought clarification, and there is nothing to indicate that Ms Balacco’s solicitors replied to that email. Further, the offer was open only until 10:15am the following day. In all the circumstances, we are not satisfied that that short period for acceptance was “reasonable in the circumstances” within the meaning of r 20.26(5)(b). Parties may make offers of compromise in the 24 hours before a hearing, but if they are to take advantage of the default position provided by the rules (notably, UCPR r 42.14) in the event that such an offer is not accepted and is bettered following the hearing, it is to be expected that the offer will not disclose so many deficiencies as this offer did.

An offer of compromise which does not engage the rules may nonetheless be treated as a Calderbank letter. But this letter did not indicate that that was the position, and it is to be doubted that there was something in the circumstances that indicated that was the intention: see Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188 at [41]-[44]; Singapore Airlines Cargo Pte Limited v Principle International Pty Ltd (No 2) [2017] NSWCA 340 at [30]. But even if, favourably to Ms Balacco, the letter were viewed as a Calderbank letter, it was not unreasonable for the owners corporation not to accept the offer. That was because (a) the terms of the offer were unclear, (b) there was no response to the inquiry made at 11:29am, (c) it was open for acceptance for less than a day, and (d) there was nothing in the written submissions or anything accompanying the offer to indicate the basis on which it was made (in particular, Ms Balacco’s brief written submissions did not address grounds 8 or 9 at all).

Accordingly, the offer made at 11:03am on the day before the appeal does not affect the exercise of the discretion as to costs.

Ms Balacco also relied on an offer in the amount of $308,000 made on 18 February 2026. That was for a greater amount than has been determined following the appeal. It is irrelevant to the exercise of the discretion as to costs.

We turn to the balance of the parties’ submissions concerning costs. Ms Balacco submitted that the outcome was significantly in her favour. Her primary position was that where her defence had not unfairly, improperly or unnecessarily increased costs, she should receive the entirety of her costs. That was said to be supported by what had been said by Waddell J in Windsurfing International Inc v Petit; Windsurfing International Inc v Borsimex Pty Ltd [1987] AIPC 90-441 at 37,862-863. But that decision concerned the costs of a trial. It is why Ms Balacco remains entitled to a costs order in her favour of the costs in the District Court. But it is inapplicable to appeals.

Alternatively, Ms Balacco maintained that there should be an issue-based costs order, rather than framing costs by reference to overall success, relying on Zurich Australian Insurance Ltd v CIMIC Group Ltd (No 2) [2024] NSWCA 276 at [9]-[12], where this Court said at [9]:

That was a series of appeals and cross-appeals, heard over four days, with 18 counsel appearing for nine differently represented parties or groups of parties, the hearing of which was conducted by reference to the list of issues: see Zurich Australian Insurance Ltd v CIMIC Group Ltd (2024) 115 NSWLR 297; [2024] NSWCA 229. The exercise of the discretion as to costs was informed by the Court’s view, having regard to the nature of the issues and the written and oral submissions, that the task of allocating costs to particular issues could be undertaken without great difficulty: see CIMIC Group Ltd (No 2) at [11].

The present appeal is the opposite. It was a ½ day appeal between two parties. The costs are small. Indeed, they are smaller than would ordinarily be the case. The solicitors who had acted for Ms Balacco at trial ceased to act for her at some stage in the proceeding in this Court. The newly appointed solicitors filed written submissions on her behalf, on 13 February 2026, but they were unsigned and took the form of a single page of eight paragraphs, advanced by way of conclusion rather than argument, and a chronology. They did not engage in any detail with the appellant’s submissions, and did not address some of the grounds at all. The oral submissions of her counsel (who may have been briefed only shortly before the hearing) occupied just over two pages of a 28 page transcript.

In response, the owners corporation said that both sides had enjoyed success, that “there was very limited assistance offered to this Court by the Appellant either in her written submissions or in her oral submissions”, and that, rather than an issue-based order, there should be no order as to costs.

An intermediate course is appropriate. Although the points made by the owners corporation concerning the submissions advanced on behalf of Mr Balacco are sound, the outcome of the appeal remains a substantial judgment in Ms Balacco’s favour, and although she also failed in relation to the largest issue (namely, lighting in the carpark) success on that issue alone by the owners corporation would not alter the judgment against it. In those circumstances, making no order as to costs and therefore leaving her to pay the whole of the costs of her lawyers would not reflect the measure of success achieved for her in retaining a judgment in the amount of $250,499.06.

Nor do we think that Ms Balacco should obtain an order for the entirety of her costs. That would not reflect her failure on substantial issues, nor does it accord with the deficiencies in the submissions advanced on her behalf.

There is no occasion for the complication and expense in an issue-based costs order, which would require agreement or assessment of both sides’ costs and, further, agreement or assessment as to their allocation between issues. Instead, this Court should make a broad brush proportionate order in favour of Ms Balacco, in accordance with Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [19] and many other cases. Such an approach carries with it the advantages of simplifying and reducing the scope for further disputation concerning the quantification of the successful party’s costs, and recognises that precision in the exercise is illusory: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36].

Applying that approach, the owners corporation should be ordered to pay one third of Ms Balacco’s costs in this Court. We have borne in mind each side’s partial success, the conciseness of the appeal and the limited assistance provided by the submissions advanced on behalf of Ms Balacco. That order extends to the costs of the further submissions concerning costs, where the large majority of Ms Balacco’s written submissions have been rejected, but so too has the point made succinctly by the owners corporation.