Toohey v Golder & Ors (No. 2) [2022] QSC 93

David Pearce | Matt Hammond | Renee Shike

Key takeout

 A party is only entitled to costs on an indemnity basis if the other party unreasonably rejects a Calderbank offer to settle proceedings that is equal to or more favourable than the amount awarded at trial.  To maximise prospects of success, a party contemplating a Calderbank offer should ensure that their offer sets out, with reasonably specificity, why the offeree should accept the compromise.  That offer should also explain the basis of the amount offered, and leave the offer open for acceptance for a reasonable period of time.  Failure to do so may lead to a finding that it was not unreasonable for the opposing party to reject the offer.

Facts

The primary proceeding concerned claims for breach of contract and recovery of debt for unpaid commissions where the plaintiff claimed in excess of $1.2m. The plaintiff was only partially successful and was awarded a fraction of the claimed amount, being unpaid commissions in the amount of $18,668.07. 

This subsequent decision concerned orders for interest and costs, and in particular how costs should be assessed in circumstances where there had been multiple Calderbank offers by the parties.

In total, four offers were made.  These were, in time, a:

• $50,000 Calderbank offer by the defendants, inclusive of interest and costs, open for 4 days;
• $200,000 offer by the plaintiff;
• $70,000 Calderbank offer by the defendants, inclusive of interest and costs, open for 1 day (this offer also foreshadowed an intention to seek indemnity costs if the offer was not accepted); and 
• $170,000 Calderbank offer by the plaintiff, inclusive of interest and costs, open for 14 days.

Each of the defendants’ Calderbank offers exceeded the $18,668.07 judgment to the plaintiff.

Decision

The relevant principles in relation to Calderbank offers is that costs are usually ordered on the standard basis, however the court will depart from this when the circumstances warrant it.  One such circumstance is where a party has rejected a Calderbank offer with a more favourable offer than the result of the trial.  However, the mere rejection of a Calderbank offer will not necessarily warrant an order for costs on an indemnity basis.  The critical question is whether the rejection of the offer is unreasonable in all the circumstances.  In determining that question, a court will consider:

• 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.

The offers made by the defendants in this case were clear in their terms and offered a genuine compromise.  Further, at least one of the offers identified the costs consequence of rejecting the offer. Notwithstanding that, His Honour declined to award indemnity costs and found that it was not unreasonable for the plaintiff to have rejected each of the offers.  The factors included:

• At the time of the defendants’ offers, the plaintiff had served an expert report (indicating an entitlement to lost earnings of approximately $250,000) but the defendants had not yet served its expert evidence.  In those circumstances it was not unreasonable for the plaintiff to conclude that (assuming success in a threshold issue) that it may be entitled to an amount in excess of the offers.

• Critically, the defendants’ offers:
  •   did not attempt to explain why the plaintiff’s expert calculation was in error;
  •   did not provide an explanation for the basis of the amounts offered;
  •   remained open for only a very short time period, being 4 days and 1 day respectively; and
  •   were made inclusive of costs, such that it was not possible for the court to determine the portion of the offer representing costs (and consequently that the offer reflected a better result than that ultimately ordered).

It was held that this lack of explanation meant that the defendants’ offers did not set out, with reasonably specificity, why the offeree should have accepted the compromise.  His Honour ultimately ordered that the defendants be responsible for 40% of the plaintiff’s costs of the primary claim, on the standard basis.

Costs of proceedings in wrong court

As a side issue, the defendants relied on rule 697 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), which deals with the costs of proceeding in the wrong court.  His Honour found that it was never appropriate for the plaintiff to have commenced its proceeding in the Supreme Court, and that the quantum claimed was ‘extravagant’.  As a result, His Honour ordered that costs be recoverable by the plaintiff as if the proceeding had been started in the District Court.