Federal Court of Australia

Koolan Iron Ore Pty Ltd v Infrassure Ltd (No 4) [2024] FCA 894

ORDERS

THE COURT ORDERS THAT:

1.    Subject to paragraph 2 below, the applicant must pay 70% of the respondent's costs of the proceeding, not including the costs that were the subject of the orders made on 28 February 2020 and 11 June 2024.

2.    Neither party is liable to pay the other party in respect of the costs of determining the issues that have resulted in the order at paragraph 1 above.

3.    There is liberty to apply in relation to paragraph 2 above. Any such application must be made by brief written submission to the Chambers of Justice Jackson before 4.00 pm AWST on 26 August 2024.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JACKSON J:

1    These reasons concern the costs of this proceeding. Last year I delivered what can be described as the main judgment in the matter, Koolan Iron Ore Pty Ltd v Infrassure Ltd (No 2) [2023] FCA 1654. In it, I determined a number of issues about the construction and application to the facts of a business interruption insurance policy, where the applicant (Koolan) was the insured and the respondent (Infrassure) was one of several insurers. These reasons assume familiarity with the main judgment and the defined terms used in it.

2    On 11 June 2024, after dismissing an application by Koolan to reopen its case, I gave final judgment in the proceeding in terms that were agreed by the parties to be appropriate in light of the main judgment and the dismissal of the application to reopen. That final judgment was in the following terms:

THE COURT DECLARES THAT:

1.    The indemnity payable by the respondent to the applicant under the Business Interruption section of the Policy (as defined in the further amended statement of claim) in respect of the Damage (as defined in the further amended statement of claim) was $1,661,812 (Indemnity).

THE COURT FURTHER NOTES THAT:

1.    The Indemnity was paid by the respondent to the applicant by way of:

(a)    a payment of $801,832 made on 10 June 2021; and

(b)    a payment of $859,980 made on 5 March 2024.

THE COURT ORDERS THAT:

1.    The respondent must pay the applicant interest under s 57 of the Insurance Contracts Act 1984 (Cth) in the sum of $183,772.42.

3    Submissions about costs were also programmed. From those submissions the following issues have arisen:

(1)    Which party is entitled to a costs order in its favour? Each of Koolan and Infrassure contends that it should be in favour of itself. As will be seen, it is appropriate to treat this as subsumed in the next issue below.

(2)    To what extent should the costs order be apportioned? Each of the parties accepts that due to their mixed success in the main judgment, some apportionment is warranted. But in light of their disagreement in relation to the first issue, it is unsurprising that they also disagree on the second issue. Koolan contends that the outcome of the apportionment should be that Infrassure is liable for a majority of Koolan's costs; it does not specify a particular percentage. Infrassure contends that it was successful on most of the issues fought at trial, including the main issue surrounding whether the claim should be calculated on the basis of the EMP or the RMP, so Koolan should be liable to pay 80% of Infrassure's costs.

(3)    Should Koolan be liable for costs on an indemnity basis after 30 April 2020, being the date on which Infrassure sent Koolan a Calderbank offer to settle the proceeding? Infrassure contends that it was unreasonable for Koolan not to accept the offer; Koolan disputes that.

4    There is also a question (not addressed in the submissions) as to what order should be made in respect of the costs of this costs dispute.

5    For the following reasons, Koolan will be ordered to pay 70% of Infrassure's costs of the proceeding (excluding hearings where Koolan has already been ordered to pay Infrassure's costs). There will be no order that the costs be paid on an indemnity basis. Neither party will be liable to pay the costs of the other in respect of this costs dispute.

Principles

6    The parties' submissions about the well-established principles do not differ in any significant way.

7    In relation to whether costs should be awarded to the successful party, and how that may be affected by a situation where no party has succeeded on all issues, the principles can be summarised as follows:

(1)    Ordinarily costs follow the event: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136 (Toohey J). But the Court has a broad discretion, and it can depart from the ordinary rule for good reason: Federal Court of Australia Act 1976 (Cth) s 43(2) and s 43(3); Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3]; and Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 282 at [5] and the cases referred to there. While broad, the discretion must be exercised judicially, not arbitrarily or capriciously: Cretazzo v Lombardi (1975) 13 SASR 4 at 11 (Bray CJ).

(2)    A successful party who has failed on certain issues may be deprived of its own costs of those issues, and may also be ordered to pay the opponent's costs of them. In this context, 'issue' means any disputed question of fact or law: Cretazzo at 12; Hughes at 48,136.

(3)    However, making specific orders as to the costs of each discrete issue can make the process of assessment of costs overly complicated. The court may instead order that one party pay the other a proportion of the other party's costs, based on an overall impression of the significance of issues, the way they were determined and the amount of time and cost spent on them: see Speets Investment Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 39 at [17] (Bond J, Sofronoff P and Callaghan J agreeing).

(4)    An order of that kind should not be made as a matter of course, lest that encourage an analysis in every case of which party was successful on each issue, adding uncertainty and complexity to the outcome of litigation and adding to the time and cost of costs arguments. Generally, 'the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way': Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 at [51] (Murphy, Mitchell and Pritchard JJA).

(5)    Another basis for departing from the 'usual rule' is when the 'successful' party fails on a 'clearly dominant issue', even if that issue was not clearly severable: Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [12] (Hodgson JA, Beazley and McColl JJA agreeing).

(6)    The question is to be approached from the point of view of what is fair, having regard to what the court considers to be the responsibility of each party for the incurring of costs: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] (Hodgson JA, Mason P agreeing). In that case, also at [121], Hodgson JA said (applied in Turkmani at [13]):

Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled.

This approach is not limited to cases where it was unreasonable for the successful party to have raised the issue on which it failed: Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [18] (Hodgson JA, Basten JA and McClellan CJ at CL agreeing).

(7)    Either way, the power to limit costs will be exercised broadly, and as a matter of impression and evaluation, and without any attempt at illusory mathematical precision: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272 (Gummow, French and Hill JJ); Strzelecki at [52]. The 'assessment involved will rarely call for detailed analysis. Rather, what will be required, will be in each case an exercise of practical judgment about the way in which the issues played out at trial': Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436 at [6] (Perram J). 'The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding': Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84 at [17] (Gray J, Lindgren J agreeing).

8    As to Calderbank offers, in Taleb v GM Holden Limited [2011] FCAFC 168 at [48]-[49], Bennett and Finn JJ (Dowsett J agreeing) summarised the principles as follows:

… the non-acceptance of a Calderbank offer can be a relevant matter to be considered on the question whether the discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) should be exercised on an indemnity basis rather than in accordance with the court's usual practice of ordering party and party costs, if its non-acceptance is followed by a result to the offeree which is less favourable than the offer made: see MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236; on the primacy of the ordinary practice see Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151; and see generally on Calderbank offers, Dal Pont, Law of Costs, [13.46]-[13.69] (2nd ed, 2009).

The significance for costs purposes to be attributed to a rejected Calderbank offer falls, increasingly, for determination by reference to criteria of reasonableness: Was the offer a reasonable one in the circumstances? Was its rejection unreasonable when viewed in light of the circumstances existing at the time of its rejection? See eg University of Western Australia v Gray (No 21) (2008) 249 ALR 360 at 361ff; Dal Pont at [13.58]. In making that determination, the circumstances of the litigation and the parties' understanding of the strengths and weaknesses of their respective cases can be relevant considerations: see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 at [34]. The onus is on the offeror to show that the conduct of the offeree was unreasonable: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 at [21] and [28].

9    In Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7], Nicholas, Yates and Beach JJ set out the following non-exhaustive list of matters that may be taken into account in determining whether the rejection of an offer was unreasonable (citations removed):

(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; and

(f)    whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it.

10    However, these matters inform the exercise of a discretion which 'is not to be fettered by transformation of approaches and practices developed through the cases into quasi statutory rules': University of Western Australia v Gray (No 21) [2008] FCA 1056 at [33] (French J).

11    In Anchorage, the Full Court also observed (at [8]) that '[a]n unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer' and that 'assessment of the "unreasonableness" of an offeree's refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered'.

12    As will be seen below, the offer on which Infrassure relies was an 'all up' offer, in that it did not stipulate any separate component of the offer to deal with costs or interest. In my respectful view, the law in relation to such offers was encapsulated by French J in Gray (No 21) at [34]-[35], as follows:

I accept that the making of a rolled up offer inclusive of costs and interest may detract from the weight to be given to its refusal in the exercise of the discretion. Finn J referred to authorities on the point in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 at [34]. His Honour cited single judge decisions to the effect that such offers ought not to be a relevant consideration on the question of costs and would not be considered in the same way as a Calderbank letter. His Honour was invited to depart from that line of first instance authority. However he was not prepared to say it was clearly wrong. Notwithstanding that, in the circumstances of the case he had to decide, his Honour found that:

The fact that the offer gave no indication at all of the breakdown … between the claim, interest and costs blunts significantly the weight to be given the offer.

While respecting the general approach to rolled up offers reflected in the cases to which Finn J referred, such approaches cannot be calcified into rules of law which fetter a general discretion. They simply reflect a common sense proposition that generally speaking such an offer is not unreasonably refused. There may, however, be circumstances where a rolled up offer, refused by an applicant who is unsuccessful, may support a claim for indemnity costs.

Consideration - issues (1) and (2) - a costs order reflecting the parties' degrees of success

13    It follows from the principles summarised above that when there are separable issues on which the parties have had mixed success, a debate about who 'won' the proceeding as a whole is likely to be arid. If it is accepted that it is appropriate in the particular case to assess success and failure based on individual issues, it follows that success and failure are not binary, and that what matters is the court's evaluation of the matter overall, informed by the issue-by-issue assessments.

14    For that reason, I do not accept Koolan's submission that it was successful in the proceeding so that Infrassure should be liable to pay a proportion of Koolan's costs. The submission was based on the simple facts that appear from the orders on judgment set out above. Infrassure was found to have been liable to pay Koolan $1,661,812 by way of indemnity under the policy. Infrassure refused to pay anything until shortly before trial (the payment of $801,832 on 10 June 2021) and did not pay the balance until after the main judgment was delivered (the payment of $859,980 on 5 March 2024). Presumably it did not pay any interest until after the orders on judgment were made. So Koolan brought the proceeding to vindicate its right to be paid, and it was successful in obtaining payment as a result of that proceeding.

15    As simple as those facts may be, it would be simplistic to rely on them to conclude that Koolan should receive its costs because, as it submits, it 'succeeded at trial'. The catastrophic incident that precipitated the insurance claim occurred in 2014. Infrassure was one of a group of insurers, and its share of liability under the policy was 7.5%. All the other insurers settled the business interruption claim in June 2017. Infrassure accepted that it was liable to indemnify Koolan; the question was about quantum. By the time the proceeding commenced in 2019, the issues between the parties were well defined.

16    From all this it can be inferred that there had been detailed commercial discussions that had failed to yield agreement between Koolan and Infrassure as to the amount for which Infrassure was liable. The parties were in earnest disagreement about the amount that should be paid. The matter needed to be determined by a court, and Koolan as the seeker of payment was the natural party to invoke the court's jurisdiction. But Koolan sought payment of $8,491,337 and in the end only obtained about one fifth of that ($1,661,812), plus interest.

17    I therefore do not accept a submission from Koolan that to require it to pay any of Infrassure's costs would be counterintuitive and unjust. I consider an offer of settlement that Infrassure made further below, but setting that aside, a trial was always going to be necessary, especially in view of Koolan's insistence that the indemnity should be calculated based on the RMP.

18    To characterise the result of the trial as a success for Koolan would be all the more simplistic when the outcomes are considered issue by issue.

19    In the main judgment, and with the agreement of the parties, the issues were divided thus (see main judgment [24]-[58], especially at [58]):

(1)    RMP or EMP - whether the indemnity was to be calculated on the basis that during the Indemnity Period, Koolan would have mined according to its existing mine plan, or according to a revised mine plan which it did not implement during that period. Also, to what extent it should it be assumed that the plan would have been achieved? This involved factual disputes and also a dispute about the proper construction of the Policy.

(2)    ICW-UWE - was Koolan entitled to indemnity for what it said were increased costs of working the ACE pit during the Indemnity Period? This involved a factual issue about Koolan's purpose for mining ACE during that period and also issues about the proper construction of the Policy.

(3)    Stock on Hand - was Koolan entitled to indemnity for diminution in the value of ore that was stockpiled at the time if the Incident? If not, or if it was entitled to indemnity only under a salvage sale provision in the Policy, then over what period of time should that stockpiled ore have been taken to have been sold? This involved issues of fact and issues of contractual construction.

(4)    Foreign exchange - how, if at all, should certain foreign exchange losses incurred by the Mount Gibson group (of which Koolan was a member) be allocated in the calculation of the indemnity? Again, this involved issues of fact and issues of construction.

(5)    Redundancies - was Koolan entitled to deduct the cost of redundancies that were necessary as a result of the Incident from savings in employment costs attributable to the Incident? This was a pure issue of the construction of the Policy.

(6)    Interest - from what point in time, if at all, was Infrassure required to pay Koolan interest under s 57 of the Insurance Contracts Act 1984 (Cth)? This essentially required an evaluation of uncontested facts about the development of Koolan's alternative claim based on the EMP.

20    These issues were sufficiently distinct and severable so that it is appropriate to consider success or failure on each of them. While the outcome of some of them might have flowed through to the calculations arising out of others, the Court did not perform any of those calculations. What matters for present purposes is that, by and large, they each required consideration of a separate body of evidence and, for most of them, distinct provisions of the Policy.

21    Subject to a qualification, Infrassure was wholly successful in relation to the RMP or EMP issue, in relation to the ICW-UWE issue and in relation to the Interest issue. The parties had mixed success on the Stock on Hand issue, although most of the success went to Infrassure. Koolan was wholly successful on the Foreign Exchange and Redundancies issues.

22    The qualification is that there were certain questions that can be conceived of as sub-issues, where Infrassure did not prevail. For example, it did not persuade me that Koolan's claim as to the amount of material it would have mined under the RMP failed entirely for lack of proof, and it did not persuade me that Koolan had any extraneous purpose in mining the ACE pit during the Indemnity Period. But those sub-issues were academic in view of other conclusions I reached; I determined them to try to achieve completeness in the task of a trial judge. They did not have any effect on the outcome, and none of them was so intensive in terms of time and resources to make it worthwhile to try to eliminate them from an assessment premised on Infrassure's ultimate success on the relevant issues.

23    In that they are to be contrasted to a factual sub-issue which also turned out to be academic, but which consumed the vast majority of time and resources at trial. I am referring to the question of whether Koolan would have mined during the Indemnity Period according to the RMP or the EMP. This turned out to be academic because I decided that on a proper construction of the Policy, it was not open to Koolan to pursue the RMP option in its claim. But that outcome was not known at the time of trial, and was potentially subject to appeal, so the factual question was both contested and determined.

24    That required a great deal of evidence to be adduced, disputed and assessed. Infrassure has referred to various metrics that support its submission that this factual issue was the largest one by far, including the number of pages of the main judgment it occupied, the time it took in the evidence at trial, and the prominence it assumed in the parties' written and oral submissions. It is not necessary to traverse those numbers; my experience as the trial judge hearing that evidence and those submissions, and determining the issues, confirms that the factual RMP or EMP issue does deserve to be characterised as the dominant one in the trial. In the end I do not choose to sever the factual issue of whether Koolan would have mined according to the RMP or EMP during the Indemnity Period from the other RMP-EMP issues, on which Infrassure was also successful, but I do acknowledge the prominence it assumed in the proceeding.

25    I therefore do not accept Koolan's ultimate submission that an order for costs in its favour should be made, in a proportion that the Court deems appropriate. This would mean that Infrassure, despite winning comprehensively on the main issue at trial and on a number of lesser issues, would not only receive no compensation for its own costs of doing so, but would bear a proportion of Koolan's costs. That would not be a just result.

26    Infrassure, in contrast, proposes an allocation of success to it of 90%. I accept that this is a fair assessment of the proportion of time and resources expended by the parties at trial on the issues on which Infrassure was successful. Infrassure thus proposes an allocation of costs whereby its claim for 90% of its costs is set off against Koolan's claim for 10% of its costs, leading to a net allocation of 80% of Infrassure's costs to it.

27    But even though I do not accept Koolan's submission that it was successful at trial, I do accept that Infrassure delayed unduly in paying Koolan even its minimum liability on the 91% EMP basis (see main judgment [753]-[759]), so to that extent it was necessary for Koolan to take proceedings to vindicate its position. An allowance should be made for this in the overall evaluation of what is fair in these circumstances, bearing in mind the basic rationale articulated in Gretton.

28    In my view, the just outcome taking into account all these matters is to make an order that Koolan pay 70% of Infrassure's costs of the proceeding, save where costs orders wholly in Infrassure's favour have already been made (being the hearing that resulted in the vacation of the original trial dates, and the application to reopen).

Consideration - issue (3) - Calderbank offer

29    On 9 April 2020, Koolan gave Infrassure a notice of offer to compromise under r 25.01(1) of the Federal Court Rules 2011 (Cth), which made an offer to accept $5 million in settlement of its claim, including interest under s 57 of the Insurance Contracts Act and costs.

30    On 30 April 2020, Infrassure's solicitors sent a letter to Koolan's solicitors that was relevantly in the following terms:

Our client has instructed us to reject your client's offer of compromise dated 9 April 2020.

The evidence served by your client does not establish a connection between the reforecast and existing mine plans and the calculation of loss. Moreover, your client's calculation of its loss has not been performed in accordance with the Basis of Settlement clause. Given the significant time and resources already expended on this matter, it seems unlikely that your client will be able to overcome the significant deficiencies in its case.

Nonetheless, and in the interests of resolving the matter, our client has instructed us to make a counter-offer in the sum of $1,300,000, inclusive of section 57 interest and costs. This sum reflects your client's alternative claim, adjusted for risk. The compromise in respect of costs is fair given the aborted trial and the significant costs thrown away as a result.

This offer is made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and is open for acceptance until 15 May 2020. If your client does not accept this offer and does not achieve a better result at hearing, our client will rely on this offer in support of an application for costs, including costs on the indemnity basis.

31    There is no evidence that Koolan responded to this letter, by 15 May 2020 or at all.

32    Infrassure submits that the fact that Koolan did not accept the offer means it should be ordered to pay Infrassure's costs on an indemnity basis from the date of the offer. The reasons Infrassure advances are:

(a)    the offer was put as a Calderbank offer, with the necessary foreshadowing of reliance on it in relation to an application for indemnity costs;

(b)    the time given to respond, 15 days, was ample time for a well-resourced organisation like Koolan (a subsidiary of Mount Gibson Iron Limited) to respond;

(c)    the terms of the offer were clear;

(d)    the offer was made shortly after the Court had vacated the trial of the matter, which had been listed to begin on 16 March 2020, essentially because Koolan was not sufficiently prepared to advance its EMP claim, so that the Court had ordered that Koolan pay Infrassure's costs thrown away, hence the reference in the letter to the fairness of the compromise in respect of costs;

(e)    since Koolan had pursued the RMP claim from the start, and had only raised the alternative EMP claims more recently, Koolan should have realised either that it was going to fail in the RMP claim or that it would have to abandon that claim, so incurring significant cost consequences;

(f)    the EMP claim having only been recently pleaded, there was little prospect that Koolan was entitled to interest as at the time of the offer;

(g)    Koolan should have appreciated that it would face significant difficulties in establishing the headline figure for its EMP claim, and it was obvious that the Stock on Hand and ICW-UWEs claims would fail;

(h)    the discount which the offer represented on the ultimately assessed value of the claim net of interest ($1,300,000 compared to $1,661,812, with interest being excluded because none had accrued at the time of the offer) was appropriate to take account of the costs of the trial that had been aborted by reason of the orders of February 2020 and the costs of continuing to pursue the RMP claim; and

(i)    Koolan would have been much better off in accepting the offer, since it would have avoided the costs liability it will ultimately bear to Infrassure as well as its own costs, which it must fund itself.

33    I accept that the RMP claim was always more likely than not to fail, and that a properly advised applicant in Koolan's position in May 2020 would have appreciated that. The main judgment explains why I hold that view, and I need not repeat or cross refer to it here. The same may be said of the Stock on Hand and ICW-UWEs portions of Koolan's claim. With respect, it would have been prudent for Koolan to have accepted the offer. That is confirmed, in hindsight, by the significant costs liability that Koolan will bear as a result of this costs judgment.

34    I also take into account that the offer stated that it would be relied on in support of an application for indemnity costs, if Koolan did not achieve a better outcome at the hearing.

35    Nevertheless, imprudent as it may have been, it does not follow that it was unreasonable for Koolan not to have accepted the offer at the time that it was made. Considering all the relevant circumstances that present themselves, I do not consider that it was unreasonable or, even if it was, that this justifies a departure from the usual rule that costs are assessed on a party-party basis.

36    First, and fundamentally, even if interest is excluded from the calculation, Koolan recovered significantly more by way of the principal sum on judgment than Infrassure offered. The difference is over $350,000.

37    Further, the actual outcome reflects the conclusion that it was appropriate to assume that 91% of the EMP would have been achieved. The case for allowing a higher amount, up to 100% of the EMP, was not hopeless or unreasonable to pursue. A qualitative evaluation of the kind set out at [558]-[573] of the main judgment was required. A greater measure of success on the EMP claim would have resulted in significantly higher recovery. So it was reasonable for Koolan to decide to pursue an amount even higher than the judgment it ultimately obtained, even allowing for the comments I have made above about its pursuit of the RMP claim. Koolan's prospects of success, assessed as at the date of the offer, reasonably supported a decision not to accept the offer.

38    Second, at the time that the offer was made, Koolan had only recently formulated and advanced the EMP alternative to its claim, and it took over a year more for it to be finalised and pleaded: see main judgment at [753]-[756]. That suggests that it was reasonable for Koolan to decline the offer because it was still developing its fall back claim (which it ultimately established and which resulted in an indemnity higher than the offer). It is not to the point that Koolan could - and perhaps should - have developed that claim earlier. It is the reasonableness of Koolan's decision not to accept the Calderbank offer that is in issue, not the reasonableness of its conduct of the litigation at large.

39    These considerations also mean that the 15 days provided to consider the offer was the bare minimum that was reasonable in the circumstances. It was not a generous period that weighs in favour of finding it was unreasonable for Koolan not to have accepted.

40    Third, the all-up nature of the offer, inclusive as it was of costs and interest, made it difficult to assess the offer as at May 2020. The costs that Koolan and Infrassure were to incur subsequently, and the proportion of Infrassure's costs which (I have now determined) Koolan must pay, are not to the point. Koolan was entitled to take into account its likely costs liability as at that time. (And it is inconsistent for Infrassure to bring to account the costs that accrued subsequently, while at the same time exclude the interest that also accrued subsequently.) The possible combinations of success and failure on the various issues, and the quantum(s) of costs involved, were far from clear.

41    I do not consider that the then recently made order for costs thrown away adds much to that. It would have been difficult to assess what, if any, costs were actually wasted by the fact that the trial was postponed. On the face of things, the point of postponing it was to allow for issues to be added (specifically, the EMP claim), so it might have been the case that not much had actually been thrown away.

42    These particular characteristics of the offer and the circumstances in which it was made lead me to put some weight on the guidelines extracted from Gray (No 21) as set out above. They mean that the offer, or at least its implications, were not clear. This all tends to suggest that it was not unreasonable for Koolan not to accept the offer.

43    Fourth, and a matter on which I put less weight, the offer letter was brief and did not make any real attempt to point out the weaknesses in Koolan's claim, so as to lay out more clearly why it would have been unreasonable not to accept it. The letter did not address the case issue by issue. Nor did it put squarely the possibility that Koolan would have to pay most of Infrassure's costs, even if Koolan did recover a judgment sum from Infrassure. Perhaps Koolan could be expected to have been apprised of those matters through previous negotiations, but the evidence on which Infrassure relies in connection with the costs application does not establish that. The onus of establishing it was on Infrassure.

The costs of determining the costs issues

44    The parties have not had an opportunity to make any submissions about the costs of the costs dispute itself. In order to bring the matter to finality in an efficient way, I consider it appropriate to determine that point now anyway, with liberty to apply.

45    Infrassure was largely (but not entirely) successful on the question of apportionment and Koolan was entirely successful on the question of indemnity costs. Taking a necessarily broad and impressionistic view, the parties' respective successes effectively cancel each other out, so that the appropriate result is that neither will be liable to the other for the costs of determining the costs issues.

Conclusion

46    There will be an order that Koolan pay 70% of Infrassure's costs of the proceeding on a party-party basis. For the avoidance of doubt, that proportion does not apply to the costs of the hearing that resulted in the vacation of the original trial dates, the costs thrown away that were the subject of an order made at that hearing, or the costs of the application to reopen. There will also be an order that neither party is liable to the other in respect of the costs of determining these costs issues.

Associate:

Dated:    12 August 2024