Importance of properly formulating offers made in proceedings involving counterclaims

In Wiggins Island Coal Export Terminal Pty Limited v Civil Mining & Construction Pty Ltd[1], the Queensland Court of Appeal considered the costs implications of an ‘all up’ offer made under the Uniform Civil Procedure Rules 1999 (Qld) (the UCPR) and whether it could determine the ‘net result’ of two orders (each order made in favour of each party), having regard to the application of rules 360 and 361 of the UCPR.

The primary proceedings and the costs order made

Before trial in the primary proceeding, Wiggins Island Coal Export Terminal Pty Ltd (Wiggins) made an ‘all up’ offer expressed to be under Chapter 9, Part 5 of the UCPR to settle ‘all claims in the proceeding’ for $1.5 million. The offer was accompanied with a letter which was marked ‘Without prejudice except as to costs’ (the Offer).

Civil Mining & Construction Pty Ltd (Civil Mining) did not accept the Offer and both parties were successful in the primary proceeding – Civil Mining obtained judgment on its claim and Wiggins obtained judgment on its counterclaim.

In the primary proceeding, Wiggins unsuccessfully argued that:

• Its Offer complied with rules 360 and 361 of the UCPR or alternatively, its Offer was effective as a Calderbank offer[2]; and
• Its Offer should in any case have been taken into account by the Court in the exercise of its general discretion as to costs under rule 681 of the UCPR.

The costs orders which Wiggins sought required a conclusion that for the purposes of each of rules 360 and 361 of the UCPR, its Offer had equalled or bettered the result Civil Mining achieved at trial.

The Court of Appeal’s decision

The Court of Appeal upheld the trial judge’s findings that rules 360 and 361 of the UCPR require a comparison between the offer made and the order Wiggings ultimately obtained.

The necessary comparisons for the purposes of those rules individually could not be made as the judgments were given in favour of two different plaintiffs (under claim and counterclaim) because the Offer failed to distinguish between (a) the amounts offered to settle the claim by Wiggins and (b) the amounts offered to settle the counterclaim brought by Civil Mining.

Further, the Court of Appeal acknowledged that there are two distinct ways of viewing UCPR non-compliant offers:

• First – if the UCPR non-compliant offer is genuine and unreasonably refused, it may still be relevant in the exercise of the costs discretion; and
• Second – if there is nothing in the UCPR non-compliant offer to indicate that it is to operate as a Calderbank offer, the party receiving it is entitled to treat it as an offer made for the purposes of the UCPR, and as having no other consequence.

The Court of Appeal held that the trial judge was correct in rejecting the proposition that Wiggins’ Offer could take effect as a Calderbank offer, despite the fact that the Wiggins’ cover letter was marked ‘Without prejudice except as to costs’, given that it advised that the Offer was made pursuant to Chapter 9, Part 5 of the UCPR but contained no suggestion that the Offer was made pursuant to anything else.

In relation to the exercise of the costs discretion under rule 681 of the UCPR, the Court of Appeal held that the trial judge made no error. The Court of Appeal adopted the approach taken by Barrett JA in Whitney[3] with the effect that:

• Civil Mining should be entitled to rely on the Offer being expressed as one made under the UCPR; and
• Where the Offer failed to meet the requirements of the UCPR (under which it was purported to be made), it was not unreasonable for Civil Mining to then not have acted on it.

Key Takeaway

The decision reinforces the importance in formulating offers to settle proceedings, particularly those that involve counterclaims or third party proceedings. Where an offer fails to distinguish between the amounts offered to settle each of the claim and counterclaim, the application of rules 360 and 361 of the UCPR do not extend to a Court determining the ‘net result’ of different orders (each made in favour of each party).

The decision also highlights the importance of ensuring that if the intention is that the offer is to take effect as an Calderbank offer in the alternative (where possible) that this is clearly stated, rather than assuming it is effective as one where the Offer is non-compliant with the UCPR.

If you found this insight article useful and you would like to subscribe to Gadens’ updates, click here.

Authored by:

Susan Forrest, Partner
Petar Damnjanovic, Solicitor

[1] [2021] QCA 8.

[2] A Calderbank offer is an offer to settle a dispute. The offer is made ‘without prejudice save as to costs’ such that it puts the other party/ies on notice that, if judgment in the proceedings in less favourable to the other side than the offer, the party making the offer will be entitled to rely on the offer and apply to Court for an order for its costs on an indemnity basis. See Calderbank v Calderbank [1975] 3 All ER 333.

[3] Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311.