Hawkesbury City Council v The Civil Experts Pty Ltd trading as TCE Contracting (No 2)

On 17 August 2023, I delivered judgment in this matter in which relevantly I ordered that these proceedings be dismissed with costs and directed that any application to vary that order so far as it concerned costs should be made within 14 days: see Hawkesbury City Council v The Civil Experts Pty Ltd trading as TCE Contracting [2023] NSWSC 962.

The first defendant, relying on an offer of compromise dated 21 July 2023, seeks to vary that order so that it reads:

The proceedings were commenced on 29 June 2023. In the proceedings, the plaintiff sought to quash an adjudication determination dated 20 June 2023 in favour of the first defendant in the amount of $3,302,792.19 on the grounds set out in the list statement.

On 21 July 2023, the first defendant made an offer to settle the proceedings on the following basis:

The offer was expressed to be made in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333. It stated that it was open for acceptance until 4.00 pm on 28 July 2023. It also stated that the first defendant would rely on the offer “on the issue of costs in the Proceedings and shall seek those costs on an indemnity basis”.

The offer was rejected by the plaintiff on 27 July 2023.

On 31 July 2023, the first defendant filed its list response which consisted almost entirely of a mixture of admissions and denials of the allegations in the list statement.

The plaintiff filed an amended list statement on 3 August 2023, which raised some additional grounds on which it was said that the adjudication determination should be quashed.

Under the principles stated in Calderbank v Calderbank, the court may make an order for indemnity costs in favour of a party who does better than it would have done if its informal offer of compromise had been accepted if the court is satisfied that (1) the offer was a genuine offer of compromise; (2) it was unreasonable for the offeree not to accept the offer: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] per Basten J, with whom McColl and Campbell JJA agreed; Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10] per Bathurst CJ with whom Allsop P and Beazley JA agreed.

A genuine offer of compromise is one which involves a party giving something away: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368 per Giles J; Miwa at [9].

The reasonableness of the response of the offeree must be assessed at the time the offer was made, not with the benefit of hindsight: Miwa at [11]. The following factors are relevant in determining whether the rejection of an offer was unreasonable:

In assessing whether it was unreasonable to accept the offer of compromise, it may be relevant that the offeror has given an explanation for why the offer was reasonable. But that is not essential: Miwa at [13].

In my opinion, the offer made by the first defendant was a genuine offer of compromise. It involved the first defendant giving up a claim for costs (which admittedly at the time the offer was made were likely to be small). More significantly, it involved the first defendant giving up a claim for interest for an amount in excess of $68,000. Although those amounts were small compared to the amount at stake in the proceedings, the plaintiff’s claim was not a strong one, as is apparent from my earlier judgment.

I am also satisfied that it was unreasonable for the plaintiff to reject the offer. The offer was made at an early stage in the proceedings. However, having regard to the nature of the proceedings, that was appropriate. The issues in the case were defined by the grounds on which the plaintiff asserted that the adjudication determination should be quashed. It was in a position to make an informed assessment of the strength of those grounds at the time the offer was made. The offer was only open for a short period of time. But again, that was appropriate having regard to the nature of the matter. It is to be expected that the plaintiff would have been in a position to evaluate the offer quickly. It must have been known to the plaintiff that applications to set aside adjudication determinations are generally dealt with promptly by the Court, consistently with the policy of the Building and Construction Industry Security of Payment Act 1999 (NSW). The first defendant was clearly seeking to avoid the necessity of having to incur significant legal costs by making an offer of compromise promptly. In my opinion, the quantum of the first defendant’s offer was reasonable having regard to the strength of the plaintiff’s case.

Whilst the first defendant seeks costs “on the ordinary basis up to and including 20 July 2023 and thereafter on an indemnity basis”, the plaintiff should only have to pay indemnity costs from 22 July 2023, the day after the offer of compromise was made.

Accordingly, in lieu of par (1) of the orders made by the Court on 17 August 2023, the Court makes the following order: