DISTRICT COURT OF QUEENSLAND

CITATION: 	Solar Panel Xpress Pty Ltd v Wallandale Pty Ltd & Ors [2021] QDC 45	
PARTIES: 	SOLAR PANEL XPRESS PTY LTD (ACN 603 183 651) 
(Plaintiff)

AND

WALLANDALE PTY LTD (ACN 006 922 738)
(First Defendant)

AND

CANCOURT PTY LTD (ACN 159 269 039)
(Second Defendant)

AND

ERWIN SPERL
(Third Defendant)

AND

DEREK O’CONNELL 
(Fourth Defendant by counterclaim)

AND

VINCENT JOSEPH HOLLAND 
(Fifth Defendant)

FILE NO/S:	2012/16	
DIVISION:	Civil	
PROCEEDING:	Trial	
ORIGINATING COURT: 	District Court at Brisbane 	
DELIVERED ON:	22 March 2021	
DELIVERED AT:	Brisbane 	
HEARING DATE: 	19, 20, 21 and 22 October, 5 and 6 November, and 1 December 2020	
JUDGE:	Porter QC DCJ 	
ORDER:	1.	Subject to order 2, the plaintiff pay the first and fifth defendants’ costs of the proceedings (including reserved costs in each case) on the standard basis until and including 16 October 2020 and after 16 October 2020 on the indemnity basis;
2.	There be no order as to costs as between the plaintiff and the first and fifth defendants for the first day of the trial (being 19 October 2020); and
3.	The plaintiff pay the second and third defendants’ costs of the proceedings (including reserved costs in each case) on the standard basis until and including 16 October 2020 and after 16 October 2020 on the indemnity basis. 
	
CATCHWORDS:	PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – where plaintiff’s claims for damages for misleading or deceptive conduct, breach of contract and negligence were dismissed – where plaintiff ordered to pay defendants’ costs of the proceedings – where plaintiff contended for an apportionment of costs on the basis that it succeeded on a number of issues – whether the general principle that the unsuccessful party pay the costs of the successful party should apply – where defendants made Calderbank offer prior to trial – whether plaintiff unreasonably rejected the offer 
	
LEGISLATION 	Uniform Civil Procedure Rules 1999 (Qld), r 681
	
CASES
	J&D Rigging Pty Ltd v Agripower Australia Limited & O [2014] QCA 23
Solar Panel Xpress Pty Ltd v Wallandale Pty Ltd & Ors [2021] QDC 31
Speets Investment Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 39  	
		
COUNSEL:	V. Brennan for the Plaintiff and Fourth Defendant
B.W. Wacker for the First and Fifth Defendants
J. Marr for the Second and Third Defendants 
	
SOLICITORS:	McInnes Wilson Lawyers for the Plaintiff and Fourth Defendant
Tucker & Cowen Solicitors for the First and Fifth Defendants
Gilchrist Connell for the Second and Third Defendants  	
Introduction
[1]	On 3 March 2016, I gave judgment in this matter (the Reasons) and ordered that:
(a)	The plaintiff’s claim be dismissed. 
(b)	Wallandale’s counterclaim against the O’Connell parties be dismissed.
(c)	The Sperl parties’ counterclaim against the Holland parties be dismissed.
[2]	I invited submissions as to costs by all parties.  It is necessary in dealing with those submissions to explain in more detail the effect of the orders disposing of the proceedings. 
[3]	By dismissing the plaintiff’s claim, I dismissed the following specific claims:
(a)	The plaintiff’s claims against Wallandale for damages for misleading or deceptive conduct and breach of contract;
(b)	The plaintiff’s claim against Mr Holland, as an accessory to the misleading and deceptive conduct in the claim against Wallandale; and
(c)	The plaintiff’s claim against the Sperl parties for damages for negligence or misleading or deceptive conduct.
[4]	Each of those individual causes of action failed because I construed the Contract in a manner which falsified the plaintiff’s contention that the P&L Statements provided to the plaintiff prior to completion were  misleading by including the trading figures for the PV sales business.  That conclusion on construction also resulted in the dismissal of the counterclaims because they were otiose in circumstances where the plaintiff’s claims failed:  
(a)	Wallandale’s counterclaim was based on the assumption that it was found liable to the plaintiff and relied upon warranties in the Contract to recover any such liability as damages for breach of warranty from the plaintiff.  Wallandale also sought to recover any such sum due under the contract of sale against Mr O’Connell personally as guarantor.  This is the only claim involving Mr O’Connell as plaintiff or defendant; and  
(b)	The Sperl parties’ counterclaim against Wallandale sought indemnity in the event that they were found to be liable to the plaintiff on the basis that the Sperl parties were acting in accordance with the instructions given by Mr Holland in preparing the P&L Statements.
[5]	The effect of my judgment is that the plaintiff failed entirely in all its claims against all defendants.  One might think that the starting point for costs orders in that case would be that the plaintiff pays the costs of the defendants on the standard basis.
[6]	The plaintiff accepts that the Sperl parties should have their costs of the proceedings on a standard basis.  However, the plaintiff  argues that the Court should exercise its discretion either to refuse any order for costs in favour of the Holland parties or alternatively that the Holland parties should receive only 50% of their costs.
[7]	The successful parties contend that they are entitled to orders for indemnity costs for the whole of the proceedings arising from Calderbank offers made prior to trial: one offer made on 27 August 2019 and another on 15 October 2020, just prior to commencement of the trial.
Plaintiff’s arguments as to the Holland parties’ costs 
[8]	Rule 681 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) sets out the general rule about costs. It provides that costs of a proceeding are in the discretion of the court but follow the event unless the court otherwise orders.  This rule is said to embody the general principle that in the ordinary course, the unsuccessful party will be ordered to pay the costs of the successful party.   
[9]	The correct approach to the application of this rule was authoritatively restated recently by Bond J, with whom Sofronoff P and Callaghan J agreed, in Speets Investment Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 39 as follows:
Relevant principles 
[11] The applicable general rule is that costs of a proceeding are in the discretion of the Court but follow the event unless the court orders otherwise: r 681 Uniform Civil Procedure Rules 1999 (Qld). The rule which specifically relates to appeals is r 766(1)(d)…
[12] The policy considerations which underly both rules are those McHugh J explained in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [67]-[68], namely:
“… the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is granted [sic grounded] in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.”
[13] The word “event” in the general rule is to be approached distributively with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the proceeding: Thiess v TCN Channel 9 Pty Limited (No 5) [1994] 1 Qd R 156 at 207–8; Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26 at 60-1 [82]–[84]; Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) at [3]–[7]; Allianz Australia Insurance Ltd v Swainson at [4]–[5]. 
[14] It is important to recognise, however, that it does not follow from the foregoing that the application of the general rule should usually lead to costs orders which reflect different results on separate events or issues. The Court is given a broad discretion and is specifically empowered to determine that some other order is more appropriate. 
[15] In practice, courts often take the approach of identifying heads of controversy or “units of litigation” (rather than what might technically be regarded as issues on the pleadings) regarding success or failure on the head of controversy or unit of litigation as the criterion for awarding costs: see Thiess v TCN Channel 9 Pty Limited (No 5) at 207-8 and Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 168 at [1]. 
[16] The general approach is that there must be special or exceptional circumstances to warrant depriving a successful party of its costs and the mere fact that the successful party has been unsuccessful on some issues will ordinarily not be sufficient to do so: Courtney v Chalfen [2021] QCA 25 at [5]. On an appeal, for example, where a party has succeeded on one of two ways to the same outcome, the Court of Appeal might well regard the costs of the second way on which that party failed as not so distinct conceptually or practically as to warrant making a costs order which reflected that party’s failure: Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd at [1]. On the other hand, one circumstance in which it might be appropriate to award costs of a particular question or part of a proceeding is where that matter is definable and severable and has occupied a significant part of the proceeding: see Courtney v Chalfen, in which the Court of Appeal referred with approval to the decision of McMurdo J (as his Honour then was) in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2) [2009] QSC 64 at [8]. 
[17] Of course, it does not follow that an issues-based costs order should always be made in circumstances analogous to those described by McMurdo J in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2). Where there are multiple issues which are determined in different directions as between the parties, a court might form an overall impression having regard to the significance of the issues, the way they were determined, and the amount of time and cost spent on them, and order one party to pay a proportion of another party’s costs as a way to reflect fairly the parties’ comparative success or failure in the outcome which was obtained. Courts often prefer to avoid the complicated form of costs assessment that would follow if different issues are determined in different directions as between the parties and costs were to be awarded in respect of issues. In this regard, in Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173, the New South Wales Court of Appeal observed at [9] where taking such an approach might result in a protracted assessment process: 
“… It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do (see Day v Humphrey [2018] QCA 321 at [13] per the court). Such an assessment will, undoubtedly be ‘rough and ready’ (Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]), and that is entirely permissible.”
[10]	Bearing in mind those principles, I turn to the plaintiff’s arguments.  
[11]	The O’Connell parties contend that the matters in paragraphs 5 and 7 of their outline on costs favour an order that the Holland parties bear either all or half of their own costs, despite the plaintiff losing the trial entirely.  That  submission is based on, essentially, two matters:
(a)	First, that the ambiguity in the Contract is the Holland parties’ fault and that it was reasonable for Mr O’Connell to run the trial because he believed in the correctness of the construction he advanced; and
(b)	Second, that save for the construction issue, the O’Connell parties were otherwise successful on the balance of the issues, especially on the valuation issue upon which considerable time and cost was spent.
[12]	I should first observe that not all the propositions in paragraphs 5 to 7 of the O’Connell’s parties’ costs submissions are correct.  In particular, paragraphs 5(b) and 5(c) dealing with alleged findings about subjective intention are not accurate.  In any event, I am not persuaded either of the O’Connell parties’ arguments justify the costs order the plaintiff seeks.
[13]	As to the first point, there is no basis for the assertion that ambiguity in a contract entirely in writing is somehow the fault of just one party.  Nor is it correct that a subjective belief in the version contended for by one party somehow justifies running the matter to trial. Most parties in disputes about the proper construction of commercial contracts entirely in writing could say the same.  
[14]	As to the second point, it is not quite correct to say that the O’Connell parties were otherwise successful.   The failure on the construction issue meant that they also failed on the misleading and deceptive conduct cause of action and on the claim based on the contract.    
[15]	It is also not correct that the O’Connell parties were successful on all the issues relating to expert valuation of the business.  As I identified in paragraph [212] of the Reasons, Mr Lytras (for the Holland parties) valued the business on the basis contended for by the Holland parties.  That work was done assuming that the Holland parties’ version would succeed.   I was not informed of any admission pre-trial by the O’Connell parties that their case would fail entirely if their construction of the Contract failed, so the costs incurred by the Holland parties in this respect were justified.
[16]	In any event, I am not persuaded that success on limited issues on valuation which were determined solely for the purpose of resolving all issues raised at trial justify any differential costs order.  The entirety of the plaintiff’s damages case failed because the plaintiff failed comprehensively on its liability case.  There was nothing about the nature or scope of the way the loss issues were litigated which persuade me that the Holland parties should not have the costs of the proceedings, given their comprehensive success on liability.
[17]	It should also be borne in mind that the plaintiff also pursued a claim for consequential losses of $81,000 and $142,000.  It pressed those claims until 9 October 2020 (when the former was abandoned) and 19 October 2020 (when the latter was abandoned).  All the costs of preparing for trial on these additional significant claims were wasted because they were abandoned on the eve of trial.   
[18]	As to the plaintiff’s other points:
(a)	Even if the Holland parties’ counterclaim was not maintained reasonably (no such finding was ever made), it was such a minimal part of the trial as to have no influence on the costs orders which should be made; and
(b)	I agree that no costs order should be made against Mr O’Connell personally in his capacity as a party to these proceedings, given that the only claim against him was the counterclaim and that claim was rendered otiose by the success of Wallandale’s defence.
The defendants’ Calderbank offers 
[19]	In J&D Rigging Pty Ltd v Agripower Australia Limited & O, the Court held:
[5] The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs. The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances. The party seeking costs on an indemnity basis must show that the party acted “unreasonably or imprudently” in not accepting the Calderbank offer.
[6] In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2), the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
[20]	The first Calderbank offer was made jointly by the Holland and Sperl parties on 27 August 2019.   It provided for a payment of $50,000 within 21 days of acceptance and was open for 21 days.  It was accompanied by a letter which endeavoured to persuade the plaintiff, by reference to ten specific contentions, to accept that offer.  
[21]	Having reviewed those matters, I am not persuaded it was unreasonable of the plaintiff not to have accepted that offer.  While I appreciate that the letter was drafted by reference to the state of the pleadings at the time, its most telling argument was that the plaintiff had misunderstood the Retail Manager figures in asserting that they were misled.  However, the core proposition underlying the plaintiff’s case, even at that time, was the difference between those figures (which related to the 12V and RV business almost exclusively) and the P&L Statements.   The plaintiff might have been understandably reluctant to accept the offer based on the contention that they had misunderstood Retail Manager, because if they had misunderstood them, then there might have been some other problem with the figures.  
[22]	What the letter failed to do was assert the basis upon which the Holland parties ultimately won the trial: that the P&L Statement included the PV sales business and that that was part of the business sold under the Contract.  Further, the amount offered was very modest. 
[23]	The second offer was made jointly by the Holland and Sperl parties on 15 October 2020.  This was two business days before the trial. They offered to pay the plaintiff $300,000 inclusive of costs.  It was open for acceptance until close of business on the next day.  
[24]	There are strong factors favouring the conclusion that it was unreasonable for the plaintiff to reject this offer.
[25]	First, although the period that the offer was open for acceptance was very short, it must be borne in mind that this was on the eve of trial, at a time when it was reasonable to expect the plaintiff was in all material respects ready for trial, with counsel prepared and available to advise.  Further, as the Holland parties correctly identify, it is plain there was time to consider the offer, given that a detailed written response was provided.  I do not think that the short time period for acceptance tells against concluding it was unreasonable for the plaintiff to reject the offer.  On the contrary, it was delivered at a time when the plaintiff ought to have been (and was) well and truly prepared for the trial and should have been aware of the risks of pursuing the proceedings.
[26]	Second, the amount of the offer was generous.  At the time that the offer was made on 15 October 2020, the plaintiff was maintaining its claim to the $250,000 paid for the business, along with a sum on account of business losses of $142,000.  Even on those figures, the offer was a good one.  More compelling, however, was the fact that within four days (at the most), the plaintiff had abandoned its claim for consequential loss and was seeking damages of only $250,000.  This was communicated to the Court on the first morning of the trial on 19 October 2020.  I do not think it right to ignore this consideration in assessing the offer.  Even though it is unclear exactly when the plaintiff made the decision not to press for the additional heads of loss, it must have been aware of the possibility of taking that course before expiry of the offer on 4 pm on 16 October, even if the decision had not finally been made.  Even if it was not, the plaintiff, acting reasonably, should have been aware of that possibility as part of the general risks of rejecting the offer.
[27]	Bearing that in mind, the offer is a generous one: it offered the whole of the claim ultimately pursued plus $50,000 on account of interest and costs.  This was a very compelling offer.  
[28]	Third, the offer was served at a time after delivery of the Holland parties’ written opening which articulated the construction argument which ultimately succeeded.  In my respectful view, no effective response to this construction argument was ever advanced by the plaintiff.   
[29]	Fourth, the quality of the overall offer must take into account the merits of the plaintiff’s case against both the Holland and Sperl parties.  As Ms Marr persuasively submitted in her submissions on costs, the plaintiff did not appear to have any credible answer to the Sperl parties’ case that Mr Sperl prepared the P&L Statements on the basis of instructions from Mr Holland.  Further, the case on the 7 October conversation was self-evidently marginal, depending as it did on recollections of subtle differences in unrecorded oral conversations from years before. The offer as a whole was enhanced in its benefits to the plaintiff by the fact that it included cost protection for failing against the Sperl parties.
[30]	The O’Connell parties advance no persuasive submission to answer these points.
[31]	Accordingly, I find it was unreasonable for the O’Connell parties to reject the 15 October offer. 
Other matters 
[32]	The Sperl parties also sought an order for the $55,000 held as security for costs to be paid out to them. The O’Connell parties did not address this application. This application can be renewed on 3 days’ notice before me if it is not possible to resolve it by consent following publishing of these reasons and orders.
[33]	The other points raised by the Holland parties in relation to the abandoned damages claims are unnecessary to determine.
[34]	Finally, the O’Connell parties contend that the costs of the unsuccessful application by the Holland parties heard on the first day of trial for leave to lead further expert evidence should in any event be paid by the Holland parties. That submission has merit.  To adjust for that success in a practical manner, I shall make no order as to costs for the first day of the trial.
Orders 
[35]	For the above reasons, I order that:
(a)	Subject to order (b), the plaintiff pay the first and fifth defendants’ costs of the proceedings (including reserved costs in each case) on the standard basis until and including 16 October 2020 and after 16 October 2020 on the indemnity basis; 
(b)	There be no order as to costs between those parties for the first day of the trial; and
(c)	The plaintiff pay the second and third defendants’ costs of the proceedings (including reserved costs in each case) on the standard basis until and including 16 October 2020 and after 16 October 2020 on the indemnity basis.