Supreme Court New South Wales

• Medium Neutral Citation: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816
• Hearing dates: N/A
• Decision date: 18 July 2012
• Jurisdiction: Equity Division
• Before: Ward J

Decision

Costs orders made

• Catchwords: COSTS - principles in Calderbank v Calderbank - informal offer from defendants before proceedings commenced - whether offer involved a genuine element of compromise - whether rejection of offer was unreasonable - whether the plaintiff's conduct of the proceedings warrants an indemnity order - HELD - rejection of offer by plaintiff was not unreasonable - although conduct of proceedings by plaintiff does not warrant indemnity costs orders, conduct does warrant order that plaintiff pay the defendants 85 percent of their solicitor/client costs of the proceedings
• Legislation Cited: Civil Procedure Act 2005 (NSW); Uniform Civil Procedure Rules 2005 (NSW)
• Cases Cited: Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; 67 NSWLR 706; Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12; Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137; Bi v Mourad [2010] NSWCA 17; British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524; Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586; Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790; Commonwealth v Gretton [2008] NSWCA 117; Downing v WIN Television (NSW) Pty Ltd (No 4) [2011] NSWSC 1257; Dunstan v Rickwood (No 2) [2007] NSWCA 266; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61; Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170; Fexuto Pty Limited v Bosnjak Holdings Pty Limited (No 3) (1998) 30 ACSR 20; Hally v Dennis (1955) 95 CLR 661; Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435; Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375; Idoport Pty Ltd v National Australia Bank Ltd [2006] NSWSC 895; Knight v Clifton [1971] Ch 700; Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45; Leichhardt Municipal Council v Green [2004] NSWCA 341; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721; MGICA (1992) Pty Limited v Kenny & Good Pty Limited [1996] 70 FCR 236; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344; Ohn v Walton (1995) 36 NSWLR 77; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72; (1998) 152 ALR 83; Peters v Peters (1907) 7 SR (NSW) 398; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368; Richards v Cornford (No 3) [2010] NSWCA 134; Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited [2001] NSWCA 461; Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Sydney City Council v Geftlick [2006] NSWCA 280
• Texts Cited: G E Dal Pont, Law of Costs (2nd edn); Ritchie's Uniform Civil Procedure NSW
• Category: Costs
• Parties: Nu Line Construction Group Pty Ltd (Plaintiff); Peter Fowler (aka Grippaudo) (First Defendant); Gabriella Grippaudo (Second Defendant)
• Representation: Counsel; H W M Stitt (First & Second Defendants); Solicitors; Diamond Conway (Plaintiff); Hunter Lawyers (First & Second Defendants)
• File Number(s): 08/280834

Judgment

1 HER HONOUR: On 31 May 2012, I published my reasons for judgment in this matter, dismissing the claim by Nu Line Construction for restitutionary and other relief (in respect of moneys said to have been paid by it, or on its behalf, to Mr Fowler in the period between June 2000 and February 2001 in anticipation of the proposed purchase by Nu Line Construction of industrial land at Wetherill Park, which purchase did not proceed). In essence, the defence succeeded on the basis that the action to recover moneys paid to the defendant was statute barred. It was established that at least some of the moneys claimed by Nu Line Construction ($60,000) had been paid to Mr Fowler on behalf of the plaintiff company in June 2000 in anticipation of the then proposed purchase. However, I held that the time at which the consideration for that payment failed, and the restitutionary action for recovery of that amount, accrued was in mid 2002, more than 6 years before the commencement of the proceedings. (As to the remaining sums claimed (in the order of around $100,000) I was not satisfied on the evidence that those moneys had been paid out by Nu Line Construction on Mr Fowler's behalf, with the possible exception of an amount of $9,075, but in any event a claim to recovery of any such amounts would also have been statute barred.)

2 I noted at [19] of my reasons for judgment that, had I been of the view that the claim was not statute-barred, I would have found for Nu Line Construction in the sum of $69,075 and awarded restitutionary interest on that amount as from the date on which the contemplated state of affairs had failed to materialise (which, on the hypothesis on which a conclusion that the claim was not statute barred would then have been based, would have been from July 2006) and statutory interest from the date the proceedings were commenced.

3 The question of costs was left to be dealt with on the papers, once written submissions as to costs were served. Those submissions have now been received and I have had an opportunity to consider them.

4 Broadly, the parties' respective positions as to costs may be summarised as follows. Nu Line Construction accepts that, subject to any other costs orders, it must pay the defendants' costs but it submits that there is no justification for a departure from the ordinary basis for the assessment of costs. The defendants, however, seek an order for indemnity costs of the proceedings sought on two bases: first, in reliance on the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586 (having regard to an offer made by the defendants, some two years before the commencement of the proceedings, to compromise the claim for an amount of $100,000 - an offer that was clearly more favourable than the ultimate result) and, second, on the basis that the way in which the case was conducted was in direct contravention of the regime for the conduct of litigation in this Court as provided for in ss 56, 57, 58 and 59 of the Civil Procedure Act 2005 (NSW).

Legal Principles

5 The applicable legal principles when determining the costs of contested proceedings may be briefly stated and are not in dispute.

6 The power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is (subject to the Rules of Court and to statute) discretionary and the discretion is recognised to be a very wide one (Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72; (1998) 152 ALR 83; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322). The discretion must be exercised judicially (having regard to its statutory context, established principle and the circumstances of the relevant case).

7 The overriding statutory context in which this discretion falls to be exercised is that for which provision is made in the Civil Procedure Act, including the statutory mandate for the just, quick and cheap resolution of the real issues in dispute imposed by s 56 of that Act (that being part of the statutory regime on which the defendants rely as the second basis for their claim for indemnity costs).

8 As noted earlier, Nu Line Construction accepts that the general rule (for which provision is made in Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW)) is that costs follow the event. In turn, it is accepted that by the defendants that costs orders are compensatory in nature (to reflect the vindication of the successful claim or defence thereof) not punitive (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45; Ohn v Walton (1995) 36 NSWLR 77).

9 The rationale for the principles applied in relation to Calderbank offers was outlined in Commonwealth v Gretton [2008] NSWCA 117 by Beazley JA, her Honour noting (at [41]) that the public policy considerations underpinning the making of favourable costs orders where a Calderbank offer has been made (and not accepted) are the encouragement of settlement of disputes as soon as possible and the discouragement of wasteful and unreasonable behaviour by litigants.

10 The Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 recently reiterated the public policy objectives of special costs orders in the context of offers of compromise. Basten JA (with whom McColl and Campbell JJA agreed) referred at [6] to the objects underlying the formal offer of compromise procedures under the then court rules that were identified in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 as including:

1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court;

2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and

3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation.

11 The onus is on the party seeking to rely on a Calderbank offer (in this case, the defendants) to satisfy the Court that it should exercise the costs discretion in its favour (Evans Shire Council v Richardson (No 2) [2006] NSWCA 61). An indemnity costs order will not automatically follow from the fact that a genuine offer of compromise more favourable than the final judgment was made nor is there any presumption to that effect (Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790; Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited [2001] NSWCA 461). What must be considered is the reasonableness of the offeree's rejection or non-acceptance of the offer, having regard to the relevant circumstances at the time that the offer fell to be considered (ie, here, as at September 2006) (citing MGICA (1992) Pty Limited v Kenny & Good Pty Limited [1996] 70 FCR 236 per Lindgren J). The question is whether, in all the circumstances, the failure to accept the offer "warrants departure from the ordinary rule as to costs" (SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 per Giles JA at [37]).

12 Counsel for the defendants (Mr Stitt) submits that, insofar as the Court is to have regard to the particular circumstances of the case, this includes the evidence advanced, the conduct of the parties and the ultimate result (referring to Knight v Clifton [1971] Ch 700; Hally v Dennis (1955) 95 CLR 661 at 664) and that relevant conduct of the parties to be taken into account may include not only conduct in the course of the proceedings (Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137) but also conduct leading up to commencement of the proceedings (Peters v Peters (1907) 7 SR (NSW) 398 at 399).

13 Save where there is a special costs order by reference to the procedure provided for under the Rules or in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586, it has been said that a court should depart from the general rule (and award indemnity costs only where the conduct of the party against whom the order is sought is "plainly unreasonable" (Sydney City Council v Geftlick [2006] NSWCA 280; Dunstan v Rickwood (No 2) [2007] NSWCA 266). In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA (at [57]) said that indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs.

14 In that regard, it remains to be seen whether the exhortation in the above cases as to the category of case in which conduct by an unsuccessful plaintiff would warrant an indemnity costs order is to be reconsidered having regard to the regime now in place in relation to the conduct of litigation in this Court and, in particular, the recognition in s 56(5) of the Civil Procedure Act that non-compliance with the statutory objectives provided for in that legislation may be taken into account in the exercise of a discretion as to costs. (In a different context, Hammerschlag J in Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455 considered the potential import of the statutory case management objectives on tests stated in earlier authorities.)

15 With the above principles in mind, I set out below the factual background in which the claim for indemnity costs arises.

Factual Background

16 The factual background to the overall dispute is set out in my principal reasons and I do not propose to repeat that here. In the present context what Mr Stitt emphasises is that the facts giving rise to the allegations made by Nu Line Construction date back as far as early 2000. Any delay in the prosecution of the proceedings thus had an even greater potential to cause prejudice to the defendants than in a case where the dispute related to events of more recent origin.

17 In relation to the circumstances in which the Calderbank offer was made, it should be noted that discussions in relation to the proposed purchase of the land in question commenced in 2000. The plaintiff's case was that an agreement in principle for the purchase was reached in March 2000. The case for the defendants was that agreement as to the price for which the land would be sold was struck in February 2000. Nothing turns for present purposes on the date at which agreement in principle for the sale was first reached.

18 The first steps for preparation of the proposed contract for the sale of the land took place in April 2000, when Mr Fowler instructed his solicitors to prepare a contract. The solicitor for Nu Line Construction (Ms Gunesekera) received a draft Contract for Sale on 10 May 2000.

19 The first of the payments sought to be recovered in the proceedings was made on 17 June 2000 (its status as a deposit or otherwise being in issue in the proceedings). This was before any response had been made in relation to the draft contract for sale. Negotiations in relation to the terms of that contract occurred over the period from around June 2000 to November 2001 (when negotiations appeared to stall due to an issue relating to the presence of a telecommunications or "cell site" tower on the land).

20 By letter dated 6 February 2002, Ms Gunesekera wrote to the vendor's solicitors in relation to the matter referring to a payment of $100,000 having been made to the vendor. (I understood that reference to include the $60,000 payment for which a receipt had been signed by Mr Fowler and I inferred that the additional amount related to the amounts that Mr Leo Mijatovic, the principal of Nu Line Construction, said had been paid to or on behalf of Mr Fowler in relation to invoices payable by him over the period from about late 2000 through to 2001.) The balance of the moneys claimed in the proceedings related to the alleged payment in respect of invoices on behalf of Mr Fowler for the period from 2000 to February 2001.

21 In the period from 27 February 2002 through to 14 May 2002, the solicitors for Mr Fowler sought instructions from Ms Gunesekera as to whether her client intended to proceed with the purchase, to which there was no response. Reference was made in the letter of 27 February 2002 to a refund of the "deposit" if the purchaser did not wish to proceed.

22 In April 2003, there having been no further communication in relation to the proposed sale after the 14 May 2002 correspondence, Nu Line Construction was placed in external administration. It remained under external administration (for most of this period under scheme of arrangement) until June 2005.

23 The evidence before me in the main hearing was that at some time in the period from around October 2005 to July 2006 there was at least one discussion (perhaps two) as to the possibility of a sale of the property to Nu Line Construction proceeding at that stage. On the evidence before me it seems most likely that there was such a meeting in July 2006. There may have been an earlier meeting around October 2005. Relevantly, at the July 2006 meeting, Mr Leo Mijatovic asserted an entitlement to purchase the land in question and an entitlement to a one-third interest in the land (then said to be worth around $1.5m, hence the one-third interest asserted was in the order of $500,000). There was evidence that, at that meeting, Mr Fowler denied any obligation to make any refund of moneys that had been paid but offered to sell the land at a price nominally discounted by $100,000.

24 It is not disputed (since there is reference to this in both sets of submissions on the present application) that, as at September 2006, the parties were seeking to reach a resolution of the matter (by which I understand them to mean a resolution to the situation where Mr Mijatovic was maintaining an entitlement to purchase the land and an existing interest in the land; and had based this on the payment of moneys he claimed had earlier been made in relation to the land).

25 Mr Stitt places reliance on correspondence between the parties from July 2006 in this regard.

26 The first of those communications was a letter of 25 July 2006 from solicitors acting for Nu Line Construction (McMahons) to Mr Fowler, in which reference is made to a recent meeting "about two weeks ago" with their client in the company of Mr Fowler's accountant in relation to the matter. The letter relevantly stated:

As you are aware, our client paid the sum of $160,000.00 during the course of 2000 as part payment on the agreed purchase price of $460,000 in respect of the purchase of [the land]. We have been shown various receipts signed by yourself acknowledging part payment in respect of [the land].

...

Our client wishes to resolve this matter and to that end we have advised him that the appropriate thing to do would be seek to meet you, possibly in the company of your solicitor, to see if a practical and sensible resolution of this matter can be achieved.

27 The response from Mr Fowler's solicitors by letter dated 3 August 2006 was to seek information as to the alleged agreement (and, in particular, the receipts said to have been issued and any further documentation in relation to the agreement). The letter confirmed their client's intention to resolve the matter "in the most convenient and quickest manner possible".

28 By letter dated 24 August 2006, Nu Line Construction's solicitors set out the factual position contended by their client, referring to a deposit paid of $60,000 and attaching a list of invoices and payments said to have been made by their client. (A copy of the list of invoices was not attached to the submissions. I assume it corresponds to the list of invoices contained in the later pleading and/or Mr Mijatovic's affidavit - there being some difference between the two.) The letter contained the following statement:

The matter therefore has not proceeded from that position [that position being an apparent reference to a letter dated 6 February 2002 in which Nu Line Construction's solicitors had written "seeking a resolution of the matter particularly bearing in mind that our client had already paid in excess of $100,000.00 towards the agreed purchase price" and it being said that it was left to the vendor to have discussions with a third party in relation to the telecommunications tower on the land] other than the simple fact that our client has advanced funds towards the agreed purchase price and would, of course, have the right of specific performance if it was so minded. ... (my emphasis)

29 It was in this context that an offer was put on behalf of Mr Fowler, by letter dated 12 September 2006 from his solicitors to the solicitors for Nu Line Construction, "to finalise the matter" by "payment by our client to your client to [sic] the sum of $100,000.00 representing full and final payment of monies relating to this matter". The letter was marked "Without Prejudice Except as to Costs". (This is the relevant offer on which the defendants now rely for their indemnity costs application.) The offer was said to be made prior to the round table conference that had earlier been requested by Nu Line Construction's solicitors in order to discuss and finalise the matter.

30 By letter dated 28 September 2006, that offer was unceremoniously rejected and McMahons indicated that they saw no alternative but to proceed by way of a summons in the Supreme Court (and sought instructions as to acceptance of service of such process). The letter stated that the offer was "quite frankly, insulting" and went on to say:

It must be common ground that our clients have "advanced far in excess of this sum in circumstances where our advice to them is that they are in a position to seek, if they are so minded, specific performance of the agreement for sale as it relates to the property".

31 It is not clear the basis on which it was asserted that it must be common ground that far in excess of the sum of $100,000 had been advanced.

32 In any event, it does not appear that any round table conference, of the kind that had previously been mooted, took place. Nor was any summons served in relation to the foreshadowed claim for specific performance until 2008.

33 Nothing further seems to have happened in relation to any proposed settlement of the matter for some time. By letter dated 9 April 2008 from Nu Line Construction's then lawyers (McLachlan Chilton) to Mr Fowler and his wife, written on a without prejudice save as to costs basis, it was said that Nu Line Construction maintained "its stance in relation to its rejection of [the] offer to pay $100,000.00 in full and final settlement of the matter" and it was asserted, among other things, that:

In light of the continued failure by you to make any genuine attempt to settle the matter, we have advised our client that it is open to it to seek a judicial declaration that the funds advanced to you in the course of this matter represent a one third interest in the Property.

and offered to accept the sum of $500,000 in full and final settlement on the basis that Nu Line Construction had "made a partial payment of the agreed consideration for its purchase which equates to approximately one third of the $450,000.00 value of the Property as agreed by our client and yourselves at the time that negotiations took place. It was said that:

In these circumstances, a constructive trust in our client's favour has been imposed by operation of law, having the effect that you now hold approximately one third of the Property on behalf of our client.

34 That letter indicated a willingness and ability to proceed to an immediate exchange of contracts and that, in the event that the offer of settlement was not accepted, the solicitors held instructions immediately to lodge a caveat over the property to protect their client's equitable interest and to initiate proceedings by way of summons seeking a declaration as to respective interests. The letter confirmed a preparedness to agree to an immediate exchange of contracts at the original agreed sale price as an alternative to a pecuniary settlement.

35 It seems clear from this letter that even as at mid 2008, the assertion by Nu Line Construction was as to the existence of an equitable interest in the land, not a restitutionary claim for return of the moneys said to have been paid in anticipation of the acquisition of the land. It is not clear whether there was a response to this letter.

36 These proceedings were then commenced by summons in September 2008.

37 I turn then to consider the two bases on which the claim for indemnity costs is made.

(i) Calderbank Offer

• Was there a genuine offer of compromise?

38 What must be considered is whether the offer represented or formed part of a genuine attempt to reach a negotiated settlement (Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19]). Here, the without prejudice correspondence supports such a conclusion (as does the concession made for Nu Line Construction that the parties were as at that time attempting to resolve their differences by negotiation).

39 In Miwa, the Court of Appeal confirmed (at [9]) that both an offer of compromise under the rules and an informal offer must involve "a real and genuine element of compromise" (citing Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; 67 NSWLR 706 at [8]; and referring to the discussion in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [25]). (A similar approach can be seen in Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375; Leichhardt Municipal Council). In Miwa, the Court of Appeal also noted that the appropriate inquiry is not as to the subjective intentions of the offeror (citing Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19 at [23]; Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [17]-[18]).

40 In Regency Media, their Honours adopted the statement of Basten JA in Robb Evans at [22] (his Honour there referring to an offer of compromise made under the formal procedure provided for in the rules) that:

Whether or not the offer involved a genuine compromise must be assessed by reference to the rule pursuant to which the offer was made. That rule refers to an offer to compromise a claim in proceedings on specified terms. Subject to an exception in the case of judgment for the defendant on the basis that each party bear its own costs, the offer must be exclusive of costs: r 20.26(2). Consistently with that approach, the costs consequences are measured by reference to the order or judgment "on the claim concerned": r 42.15(1). The fact that a party which failed to accept an offer incurs costs in pursuing litigation to a result which is less favourable to it than the offer, is not a factor which is material to determining whether the offer itself was a genuine offer of compromise for the purposes of r 20.26.

41 Hence the fact that the judgment ultimately handed down was in the defendants' favour is not a factor that goes to whether the offer was a genuine offer of compromise (applying the principles in Calderbank).

42 At the time of the offer, Nu Line Construction was asserting an interest in the land or an entitlement to a sum well in excess of what was offered ($500,000). Therefore, the offer required it, in effect, to give up its claim in consideration for payment of the sum of $100,000. Mr Fowler had denied that there was an obligation in respect of the amount claimed (and had, by nominating a higher price for the sale of the land at that stage, at least implicitly denied any entitlement on the part of Nu Line Construction to purchase the land on the terms originally proposed.

43 Mr Stitt submits that as at the time the offer was made (September 2006) a claim for recovery of the initial payment of $60,000 made on 17 June 2000 was time barred and a claim for the only invoice that I accepted had been established to have been paid (the Eric's Art invoice payment of 19 February 2001 for $9,075) was shortly to become time barred. Pausing there, in fact I held that the said payments did not become statute barred until mid 2008 (on the basis that the consideration for which they were made had not failed to materialise until mid 2002). I do not consider that a restitutionary claim for the moneys of the kind ultimately pressed had by then become statute barred.

44 Nevertheless, in considering the circumstances known to the parties at the time (ie, in September 2006), when no restitutionary claim had yet been asserted and the claim was put as a claim for specific performance, it seems to me to be fair to say that if the payments were treated as moneys repayable on demand then the claim to $60,000 would already have been statute barred (and the claim to $9,075 would become statute barred some five months after the offer was rejected).

45 Mr Stitt submits that the offer of $100,000 was therefore substantially more than that to which Nu Line Construction was entitled at the relevant time. To my mind, that rather depends on what Nu Line Construction might have been able to establish at that time, from an evidentiary point of view, as to the payments that had been made. In my view it is difficult to dispute that as at September 2006 it would have been entitled to recover the sum of $60,000 the receipt of which had been expressly acknowledged as being a payment in relation to the land. Whether it had a reasonable expectation of recovering more than that at that stage would have depended on what records it held that could have established a payment of in excess of that amount.

46 If the offer had represented no more than what the defendants had then accepted they were bound to pay in respect of the claim, then the offer on its face would not have involved any element of compromise - it would have been an offer to pay that which was due and no more. However, in circumstances where Mr Fowler disputed the existence of an obligation to make payment of the $500,000 claimed (or to sell the property for the price originally agreed), it seems to me that the offer did involve a genuine element of compromise.

47 On that basis, I accept that the offer made in September 2006 represented a genuine offer of compromise.

• Was the rejection of the offer unreasonable?

48 As noted earlier, the authorities make clear that the fact that a genuine offer was made that was substantially more favourable than the position in which the plaintiff finds itself following the judgment does not of itself lead to the making of an indemnity costs order (nor does the fact that, following rejection of the offer, the plaintiff incurred costs in litigating its claim that it would not otherwise have incurred and will now not recover).

49 The onus is on the defendants to prove that the rejection of the rejection of a Calderbank offer was unreasonable having regard to the relevant circumstances at the time. In Miwa, the Court of Appeal confirmed that "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", citing Regency Media at [33] (though the Court of Appeal went on to say that this should not entail a detailed investigation into the state of preparation or knowledge of the offeree as at the date of the offer).

50 It was noted in Miwa that relevant factors in determining whether the rejection of an offer was unreasonable included those identified by the Court of Appeal in Victoria in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435, namely: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

51 Here, it seems to me that there is a difficulty in that the offer was made two years before the commencement of litigation in relation to the matter (and at a time when the basis of the claim was very different from that ultimately pressed and when the limitations defence on which the defendant ultimately succeeded was not yet able to be maintained). True it is that it was made after litigation had been foreshadowed and that it was on its face open-ended. However, as to the latter, once the offer was rejected it was no longer capable of acceptance unless revived or reinstated.

52 The solicitor now acting for Nu Line Construction (Mr Zwar) notes the observation in Law of Costs by G E Dal Pont (2nd edn) at [13.62] that offers made before or shortly after the proceedings are commenced may be made at a time when it is difficult to make an informed assessment of the offeror's defence.

53 In Elite at [146], Basten JA said that:

... the fact that a defendant's offer is made early in the proceedings should not by itself be given significant weight in assessing the reasonableness of the plaintiff in rejecting it. Nor should significant weight usually be given to what the plaintiff did or did not know at that stage. Were it otherwise, the more complex the litigation the less likely that the rejection of an early offer which proves to have been fair and reasonable, will have costs consequences. That tendency would diminish rather than enhance the purpose to be discerned from Calderbank offers and court rules.

54 The relevance of the timing of the offer in the present case is as to whether it could be said that Nu Line Construction was in a position properly to assess the offer at that stage (prior to the commencement of any proceedings).

55 I note that in Downing v WIN Television (NSW) Pty Ltd (No 4) [2011] NSWSC 1257, Ball J, considering an application for orders to be made departing from the general rule that costs follow the event (there an application for the reduction of costs to be ordered in favour of a successful plaintiff) having regard to the conduct of the proceedings, had cause to consider the weight to be attached to the fact that the plaintiff had not accepted reasonable offers made by the defendant in 1999 (those offers not being relied upon as Calderbank offers). His Honour there considered that little weight could be placed on what had happened in 1999 even though the approach taken by the plaintiff in that case might have been seen to be commercially unreasonable (since there the plaintiff was exercising a right that he was entitled to exercise and not taking a "wholly unrealistic" approach to the damages he was entitled to recover).

56 I have, however, had difficulty in locating other examples of attempts to rely upon settlement offers made at a time well in advance of commencement of proceedings (nor was I taken to any in the respective parties' submissions).

57 Was it unreasonable of Nu Line Construction in the circumstances that existed as at September 2006 to reject the offer?

58 Mr Zwar submits that the without prejudice correspondence between the parties at that time reveals a common assumption that there was an agreement between the parties in relation to the sale of the property that then remained on foot, referring to the reference in that correspondence to the dispute as to the relocation of the cell site tower on the premises (that having been a matter to which objection was taken during the sale negotiations in 2002). With respect, I am unable to discern from the correspondence referred to above a common assumption that there was any such agreement remaining on foot. Rather, the correspondence reveals an assertion by Nu Line Construction's lawyers of such an agreement and the apparent giving of advice by them as to the ability of the company to obtain specific performance of that agreement. What the correspondence does reveal is a willingness on the part of Mr Fowler to compromise the claim that had seemingly been foreshadowed in the correspondence (to specific performance of an alleged agreement to purchase the land or for recovery of moneys advanced in relation thereto).

59 Mr Zwar submits that the discussions between the parties in 2006 were on the basis of an attempt to resolve outstanding issues with a view either to the purchase of the property by Nu Line Construction or to the repayment of the moneys that it was accepted had been paid back in 2000/2001. I consider that in substance to be a fair reading of the correspondence (and of the affidavit evidence as to the discussions, whenever they took place, in around 2005/2006 on that topic) although it does not seem to me that the evidence reveals an acceptance by Mr Fowler at that stage or later as to the amount of moneys so paid (nor is it clear that there was documentary evidence to support the contention that they were in the order of the $160,000 asserted in the correspondence from the solicitors for Nu Line Construction).

60 It is further submitted for Nu Line Construction that in the then discussions there was no contemplation that any limitation period was effectively running against Nu Line Construction. (Mr Zwar notes that the limitation issue was not raised until the defence was served on 4 June 2009.) Pausing there, the fact that the prospect of a limitation defence was not raised in 2006 and may not then have been in contemplation by Nu Line Construction is on one view not surprising in that at that stage it was not clear that the claim being foreshadowed was a restitutionary claim based on a failure of the consideration for which payment had been made. What was adverted to in the correspondence was a claim for specific performance. Insofar as a claim for repayment of the earlier moneys is concerned, the time within which such a claim would have become statute barred would depend on the nature of the claim (a claim for moneys that were repayable on demand being a claim that would have been statute barred earlier than the restitutionary claim ultimately brought). However, what that does indicate is the difficulty of assessing the reasonableness of rejection of an offer in the absence of proceedings on foot at the time by reference to which the offer was made. (If, as Nu Line Construction later maintained, a claim for recovery of the moneys would not have become statute barred until much later, then rejection of an offer that was substantially less than its claim would not appear as unreasonable as rejection of an offer that might at the time of the offer already have been statute barred.)

61 It is submitted by Mr Zwar that the circumstances in September 2006, when the offer was made, were very different from those in late 2008 after the proceedings had been commenced (in particular, that at that earlier time no limitation defence would have been available to Mr Fowler) and it is noted that there were no pleadings at that time on the basis of which Nu Line Construction could assess the likely outcome of its ultimate claim (or against which the offer could be measured).

62 In summary, therefore, Mr Zwar submits it was not unreasonable for Nu Line Construction to reject the offer, in circumstances where: there were no proceedings on foot at that time (though I would add that proceedings had been foreshadowed), no issue as to any limitations defence had then been raised and there had been discussion as to the basis on which the sale might still proceed.

63 Mr Zwar also relies upon the judgment in these proceedings as involving a finding that Mr Fowler had by 2006 "unjustly enjoyed the benefit of the sum of $60,000 for more than 4 years". I accept that what I found was that, as at mid 2002 (when the sale of the property had failed to materialise) there was a cause of action available to Nu Line Construction in restitution for recovery of that sum on the basis that Mr Fowler would at that stage be said to be unjustly enriched by the retention of that sum. Mr Fowler had certainly had the benefit of the retention of that sum for the four years since then. However, it does not appear that any demand for the refund of those moneys was made until at least 2006.

64 Mr Zwar further submits that Mr Fowler had acknowledged that at least $40,000 of invoices payable by him had been paid by or on behalf of Nu Line Construction. That seems to be a reference to an implicit acknowledgement arising out of the offer of $100,000 since there was no express admission as such or at least none relied upon in the proceedings.

65 It is further submitted by Mr Zwar that the fact that Nu Line Construction failed to establish a claim to more than the sum of $9,075 in invoices (apart from the $60,000 June 2000 payment) was due to a lack of sufficiently persuasive documentary evidence but that this weakness in its case was not said to be a basis of the offer of September 2006 (nor, I might add, would it necessarily have been understood at that time that there would be an evidentiary difficulty in establishing the claimed payments some years down the track, at least having regard to Mr Mijatovic's evidence in cross-examination and his reliance on the invoices as sufficient evidence of the claims). However, the fact that the basis on which it would be unreasonable not to accept the offer is not itself set out in the offer does not seem to me to strengthen the submission as to lack of unreasonableness in rejection of the offer.

66 It is said for Nu Line Construction that the basis of the September 2006 offer was not explained to it at the time in such a way as to make the rejection of the offer unreasonable from the point of view of the application of the principles in Calderbank. It is also noted that the offer did not contain any component for Nu Line Construction's costs. As to the former submission, true it is that an explanation of the basis on which the $100,000 was comprised might have assisted a conclusion that it was unreasonable to reject it, but I do not consider that the absence of such an explanation precludes such a conclusion. It was, after all, open to Nu Line Construction to seek elucidation as to the basis of the offer (rather than, as the correspondence would suggest, rejecting it outright), as contemplated might be an appropriate course to be adopted where an offeree is genuinely seeking to assess an offer (see Elite per Basten JA at [143]). As to the latter submission, there is no requirement for an offer of compromise made by reference to Calderbank principles to include any component for costs, though the fact that it did not make any such provision would obviously affect the worth of the offer to Nu Line Construction. By that stage, however, it is hard to see that there would have been much in the way of recoverable costs in any subsequent proceedings (since the proceedings had not been commenced at that stage).

67 Mr Zwar also submits that, of relevance to the exercise of discretion whether to award indemnity costs, is the fact that no Offer of Compromise was made in conformity with the procedure provided for under the Court Rules and, in particular, that the offer in question was made two years before the commencement of proceedings, not later revived once proceedings were commenced (whether formally or informally), and simply "left in the mists of time until brought out after judgment". The fact that a formal offer of compromise as such was never made is not in my view relevant (though I note that there is authority to the effect that litigants who choose not to avail themselves of the rules as to Offers of Compromise (but who make an informal offer) should be no a better position than those who do - Elite per McColl JA at [117]).

68 More relevant, is the fact that the offer was at no time reinstated. In that regard, the lapse of time between the offer made in the context of the earlier negotiations (when specific performance was the relief being foreshadowed) and the commencement of proceedings may be said to remove or weaken the connection between any earlier offer and the public policy considerations that underpin the Calderbank principles.

69 For the defendants, it is submitted by Mr Stitt that in 2006 the parties, despite not at that stage being involved in active litigation, were abreast of the issues between them, were informed as to both sides' positions and " in as good a position as any at that time to determine an adequate compromise to matters without having to resort to the expense and drama of litigation to achieve a just outcome". (While the correspondence to which he refers makes it clear that the parties were on notice of a dispute as to the claimed entitlement to specific performance and the pecuniary claim made by Nu Line Construction, they were not on notice of the issues ultimately raised in the proceedings nor was the limitations defence maintainable at that time even had the restitutionary claims then been raised.)

70 Mr Stitt submits, and I accept, that the offer was capable of consideration at the time by Nu Line Construction, was capable of acceptance and contained no conditions on its acceptance that might on its face have made it unreasonable. (Although it is further submitted that it falls upon Nu Line Construction to explain rejection of such a generous, the onus of course is on the defendants to establish that it was unreasonable for the offer to be rejected.)

71 It was submitted that there were no conditions placed upon the offer which would have made it unreasonable (referring to what was said, inter alia, by Basten JA in Elite at [39]).

72 Having regard to the matters set out above, on balance I am not satisfied that it was unreasonable for Nu Line Construction to reject an offer of compromise made at a time (September 2006) when what was then being asserted was an entitlement to an interest in the land and there was a not unreasonable position that payment of a sum in anticipation of the sale proceeding may have given rise to an interest of some kind in the land (and what had not been asserted was any restitutionary claim to the repayment of moneys paid in that regard). While I accept that the basis on which it was suggested that there was an enforceable contract for the sale of land was untenable (and was not ultimately pressed in the proceedings), there had been a payment made in relation to the anticipated sale (of at least $60,000) and I am not satisfied that it was unreasonable for Nu Line Construction at that stage (and before any limitation issue arose or was maintainable) to reject an offer that required it to give up any claim in relation to the land.

73 I therefore do not accept that the defendants have established a claim to indemnity costs on the first of the bases put forward.

(ii) Conduct of the Litigation

74 As to the second basis on which indemnity costs orders are sought, reliance is placed on what is said to have been the failure of Nu Line Construction to comply with the objectives set out in ss 56-59 of the Civil Procedure Act. Those sections, as should be well known to litigants in this Court or at least their legal representatives, relevantly provide as follows:

56 Overriding purpose

(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.

(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.

(3A) A party to a civil dispute or civil proceedings is under a duty to take reasonable steps to resolve or narrow the issues in dispute in accordance with the provisions of Part 2A (if any) that are applicable to the dispute or proceedings in a way that is consistent with the overriding purpose.

(4) Each of the following persons must not, by their conduct, cause a party to a civil dispute or civil proceedings to be put in breach of a duty identified in subsection (3) or (3A):

(a) any solicitor or barrister representing the party in the dispute or proceedings,

(b) any person with a relevant interest in the proceedings commenced by the party.

(5) The court may take into account any failure to comply with subsection (3), (3A) or (4) in exercising a discretion with respect to costs.

...

57 Objects of case management

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects:

(a) the just determination of the proceedings,

(b) the efficient disposal of the business of the court,

(c) the efficient use of available judicial and administrative resources,

(d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).

59 Elimination of delay

In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial.

75 Mr Stitt submits that the conduct by Nu Line Construction of the present proceedings was in breach of those provisions and inconsistent with the mandate under s 59 for the elimination of delay and the swift and efficient implementation of matters brought before the Court.

76 In that context, Mr Stitt recounts the procedural history of this matter as illustration that the plaintiff was dilatory in its conduct of the proceedings (submitting that the Court should sanction Nu Line Construction for its conduct of the proceedings and compensate the defendants accordingly). It is submitted that the defendants incurred unnecessary costs in seeking to press the matter for hearing. Mr Stitt emphasises the likelihood of prejudice to a defendant of delay in such a case as the present (where the facts went back to 2000; the proceedings were not commenced until 2008 and not heard until 2012; and where much of the factual material was put forward only by the defendants or else raised by the plaintiff only late in the proceedings including during the course of the hearing).

77 In summary, Mr Stitt notes that:

• The proceedings were first commenced in September 2008 by way of summons; the plaintiff then informed the Court that it wished to proceed by Statement of Claim; on 24 February 2009, the Court ordered that the plaintiff file a Statement of Claim by 10 March 2009 (and its evidence in chief by 21 April 2009); the Statement of Claim was filed on 26 March 2009; orders were made at subsequent directions hearings for the plaintiff's evidence to be filed on 23 June 2009 and then 18 August 2009;

• Nothing further was done in the proceedings by the plaintiff and on 2 October 2009 the defendants filed a Notice of Motion to strike out the pleadings for want of prosecution (an application that was withdrawn on the agreement of the plaintiff to file its evidence immediately and to pay costs of that application);

• The plaintiff then filed affidavits of Mr Leo Mijatovic and Ms Mohini Gunesekera (the solicitor acting for Nu Line Construction at the earlier times), those affidavits being sworn on 9 October 2009;

• A second Notice of Motion was filed in 17 March 2010 by the defendants seeking leave to amend their defence in light of the further material which had arisen (that motion being required due to the plaintiff's refusal to agree to the amendment) [I interpose to note that part of the basis for that refusal seems to have been that the amendment involved the withdrawal of what was said to have been an admission by the defendants];

• That second Notice of Motion was heard by Macready AsJ on 26 March 2010 and leave was given to the defendants to file their Amended Defence and for the plaintiff to amend its Statement of Claim by 9 April 2010;

• The Amended Statement of Claim was filed by the plaintiff on 28 September 2010;

• The Defendants brought a third Notice of Motion for security for costs filed on 28 April 2010; that motion was heard on 8 June 2010 and the plaintiff was ordered to pay into Court security of $40,000 by 22 June 2010;

• The security for costs was paid into Court on 4 August 2010;

• On 16 December 2010, the defendants filed a Notice of Motion to have the Amended Statement of Claim struck out or dismissed as an abuse of process; that motion was heard on 11 February 2011 and Macready AsJ ordered that a further Amended Statement of Claim be filed;

• On 18 February 2011, a Further Amended Statement of Claim was filed;

• On 15 September 2011, the matter was set down for hearing for three days;

• Mr Stitt notes that the plaintiff did not inform the Court or the defendants that it intended to serve any further evidence in this matter until the service on 2 March 2012 of a further affidavit sworn by Mr Leo Mijatovic enclosing further evidence;

• During the course of the hearing, further evidentiary material (in particular the financial and accounting materials of the plaintiff) was produced;

• Finally, in relation to non-compliance with orders, it is noted that the plaintiff's submissions on costs (ordered to be provided by on 22 June 2012 were not served until 6 July 2012.

78 Mr Stitt further notes that over that period the plaintiff's claim changed significantly: the Summons sought specific performance of a contract for the sale of land (it ultimately being conceded that there was no enforceable contract for the sale of land and that claim being abandoned) and a declaration of a one third equitable interest in the land; the Statement of Claim sought specific performance, damages or alternatively $60,000; the Amended Statement of Claim sought $152,427.55 and damages; and the Further Amended Statement of Claim sought $152,427.55 and a constructive trust in favour of the plaintiffs of the value of one third of the property.

79 I accept that the defendants would have been required to meet such changes in the allegations with amendments to their pleadings and with further evidence to rebut the new assertions. (That said, not all of the costs associated with the interlocutory hearings can be sheeted home directly to Nu Line Construction in circumstances where at least the amendment application to the defence involved the seeking of leave for what was said to be the withdrawal of an admission by the defendants.)

80 Mr Stitt submits that the litany of failures highlights the time-consuming and costly way in which the plaintiff chose to pursue its case and that the failure to comply with ss 56 to 59 of the Civil Procedure Act should not be condoned.

81 I have noted above the authorities which emphasise that it is only in cases where the conduct of the case is "plainly unreasonable" or "the most unreasonable" that indemnity costs should be made against unsuccessful plaintiffs (in the absence of the application of the special principles applicable to offers or compromise or the like). I am not satisfied that the changing nature of the plaintiff's claim and/or the delays in compliance with the timetable set for the proceedings from time to time fall within this category of case.

82 That said, I am mindful of the overriding objectives set under the Civil Procedure Act for the conduct of civil litigation in this Court and I consider that there is criticism squarely to be levelled against Nu Line Construction for the delay in prosecuting its claim (particularly where it was a claim relating back to events of so long ago). In the exercise of the costs discretion, it is noted in Ritchie's Commentary that "the emphasis on the exercise of the costs power ... must be the attainment of the overriding purpose, and not merely as a sanction for default", citing British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 at 588; [2002] VSCA 197; Richards v Cornford (No 3) [2010] NSWCA 134.

83 In Richards v Cornford, Allsop P (at [106]) noted that the question of efficiency (to which the objects of case management in s 57 are addressed) is not the imposition of "mere managerial standards" and reiterated what he had said in Bi v Mourad [2010] NSWCA 17 at [47]:

Delay is a feature of litigation intended to be eliminated as far as possible by the statutory enactment of the regime in the Civil Procedure Act. It cannot always be done. This purpose is not through some parliamentary authoritarian or over-prescriptive view of how people should lead their lives; rather, it is through the keen recognition of the conduct of the courts, in particular in the 20th century, of the need to deal with cases expeditiously if they are to be dealt with justly. Delay and case backlog are not merely factors affecting the costs of delivering justice; they corrode the ability of the courts to provide individual justice. The reforms that have taken place under the Civil Procedure Act and the evident attempt by courts to ensure efficiency can be seen not merely to reflect worthy efforts for efficiency but also to be steps vital for the provision of timely individual justice. Views may differ of justice in any particular case; that is the nature of the term and the value-laden task of decision-maker to do justice.

84 In the circumstances, I consider that it is likely that the manner in which Nu Line Construction conducted the litigation leading up to the hearing was likely to have caused the defendants to incur additional costs over and above those which it would have incurred had the litigation been conducted with a view at the outset to the real issues in dispute and as to the evidentiary basis on which those were to be tested. This must be considered alongside the principle that the award of costs orders in favour of the successful party in proceedings is compensatory not punitive.

85 In other contexts, it is recognised that the fixing of costs orders may involve a broad brush exercise and may be a matter of impression, having regard to the trial judge's assessment of the manner in which the hearing was conducted (see, for example, the observations of Young J (as his Honour then was) in Fexuto Pty Limited v Bosnjak Holdings Pty Limited (No 3) (1998) 30 ACSR 20).

86 In the exercise of the discretion as to costs and having regard to s 56(5), which permits account to be taken of non-compliance with the case management objectives to which s 56 is addressed, I consider that the appropriate order as to costs in this case is to fix the percentage of the defendants' costs to be paid by Nu Line Construction at an amount above that which it might be expected to recover on a party/party basis though less than that which would provide a full indemnity for its costs, as indicated below.

Conclusion

87 I am not satisfied that the costs should be ordered on an indemnity basis. Taking into account the circumstances known to Nu Line Construction (and its principal, Mr Leo Mijatovic) at the time (in September 2006) I am not satisfied that it was unreasonable for it to reject that offer (the restitutionary claim not then having been articulated and not then being statute barred) where to accept the offer would have deprived Nu Line Construction of the prospect of pursuing any claim in relation to the land itself in connection with which at least the sum of $60,000 had been paid.

88 Nor, though with some hesitation, am I satisfied that the conduct of the litigation by Nu Line Construction was such as to warrant an indemnity costs order for the whole of the proceedings though I am troubled by the delays in the prosecution of this matter and in non-compliance with Court orders for the case management of the matter. By way of example, the last minute production of financial and accounting material that one would assume Nu Line Constructions should have realised (or would have been advised) would be relevant if not essential in the proof of its claim (and the fact that Mr Mijatovic's affidavit evidence itself deposed to outstanding invoices that Mr Mijatovic conceded in cross-examination had not been paid by him or the company) illustrates the lack of attention to the evidentiary material in the preparation of the case.

89 I also note that the abandonment of causes of action (such as the claimed enforceable contract for the sale of land) will have added to the costs incurred by the defendants (and to the delay in prosecution of the case). I am concerned that the Court should not condone conduct of proceedings in apparent breach of the requirements under the Civil Procedure Act.

90 In all the circumstances, I have concluded that the appropriate order is to award the defendants 85% of their solicitor/client costs of the proceedings. That will compensate them for something more than the 70-80% of those costs that might be recoverable on an assessment (if I take judicial note of the percentage recovery estimates that have been provided on other matters in this Court) and will provide a measure of compensation for the dilatory conduct of the proceedings by Nu Line Construction and its non-compliance with the orders of this Court, as permitted by s 56(5) of the Act.

91 The defendants submit that the orders the Court should make are that costs should be paid by the plaintiff on an indemnity basis, including any costs reserved and that the money held as security for costs to be released to the defendants forthwith.

92 As to the position in relation to orders made where costs were reserved, Rule 42.7(1)(a) has the effect as noted in Ritchie's Commentary (at [42.7.15]) that such costs are recoverable as the costs of the successful party in the proceedings unless some contrary order is made (noting, inter alia, Idoport Pty Ltd v National Australia Bank Ltd [2006] NSWSC 895). Therefore, no order is necessary to be made in that regard.

93 As to the payment out of moneys held in Court as security for costs, I consider that such an order is warranted. I take note of the fact that the cost of a 4 day hearing in this Court, where the defendants have been represented by Counsel instructed by a solicitor (together with the cost of the various interlocutory hearings along the way) is likely to exceed by far the amount that I am informed is presently held in Court as security. Therefore, I see no basis to withhold payment out of those funds pending an assessment of the costs ordered.

94 Provided I receive an undertaking in writing by the defendants that they will repay to the plaintiff within 14 days any amount paid out of the funds in Court that exceeds the amount of the costs assessed or agreed in accordance with these orders that are payable to the defendants, I will order the immediate payment out of the moneys presently held in Court to the defendants in partial satisfaction of the costs orders now made.

Orders

95 For the reasons set out above, I order as follows:

1. Save as to costs already the subject of orders made in these proceedings, Nu Line Construction is to pay to the defendants 85% of the defendants' solicitor/client costs of the proceedings (including, for the removal of doubt, any costs that have been hitherto reserved).

2. On the provision of an undertaking by the defendants to the effect set out in [94] above, order that the sum presently held in Court by way of security for costs, and any interest accrued thereon since the payment into Court, be paid out to the defendants towards the satisfaction of order 1 above.

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Decision last updated: 19 July 2012