Unconscionable Conduct Renders Deed Void, Compensation Awarded

The NSW Supreme Court declared a deed void due to unconscionable conduct and awarded compensation for renovations. The Court found that the defendant should pay the plaintiff $400,000 in compensation, subject to a set-off against the plaintiff's costs.

Supreme Court New South Wales

Medium Neutral Citation: [NAME] (No 4) [2023] NSWSC 142 Hearing dates: 13 December 2022 Date of orders: 27 February 2023 Decision date: 27 February 2023 Jurisdiction: Equity Before: Robb J Decision: (1)

ORDER declaring the deed between the plaintiff and the defendant dated 3 October 2013 (Deed) void in whole. (2)

ORDER that the Deed be set aside. (3)

ORDER that, subject to the set off provided for in order 6 below, the fair and reasonable amount of compensation payable to the plaintiff for the renovation and improvements to [the [NAME] property] is $400,000. (4)

ORDER that the plaintiff pay the defendant's costs of the proceedings in the fixed gross sum of $215,000. (5)

ORDER that the total amount of costs payable by the plaintiff to the defendant in the sum of $215,000 be set off against the amount of compensation payable to the plaintiff in the sum of $400,000 so that the total amount payable by the defendant to the plaintiff is $185,000. (6)

ORDER that the amount payable by the defendant to the plaintiff in the sum of $185,000 in order 5 will, subject to further order, be stayed so that it is only payable out of the proceeds of sale of the property called the [NAME] property in the judgments in these proceedings. (7)

ORDER that the Amended Statement of Claim otherwise be dismissed. (8)

ORDER that the Cross Claim otherwise be dismissed. (9) [NAME] the parties liberty to apply on 3 days' notice. Catchwords: EQUITY — general principles and maxims — they who seek equity must do equity — defendant successful in defending enforcement of deed on grounds of unconscionable conduct and Contracts Review Act 1980 (NSW), s 7 — Court finds that defendant ought to pay plaintiff compensation as condition to making order declaring deed void — plaintiff entitled to $400,000 in compensation — order that the total amount of costs payable by the plaintiff to the defendant be set off against compensation payable by plaintiff to defendant COSTS — party/party — exceptions to general rule that costs follow the event — offers of compromise/Calderbank offers — where Calderbank offer made on an "inclusive of costs" basis — where it was not unreasonable for the defendant to decline plaintiff's Calderbank offer COSTS — party/party — bases of quantification — ordinary basis — where costs determined on a gross sum basis Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Contracts Review Act 1980 (NSW), s 7 Home Building Act 1989 (NSW), ss 10(1)(b), 94(1) Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Anjoul v Anjoul [2021] NSWSC 592 [NAME] (No 2) [2021] NSWSC 1511 [NAME] (No 3) [2022] NSWSC 1456 Burwood Council v [COMPANY] atf [COMPANY] (No 2) [2021] NSWSC 1035 Commonwealth v Gretton [2008] NSWCA 117 [COMPANY] v [COMPANY] (No 2) [2014] NSWCA 219 DSE (Holdings) Pty Ltd v Intertan Inc [2004] FCA 1251 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 [COMPANY] (t/as Easams Australia) v BHP Information Technology Pty Ltd [2003] FCA 688 [NAME] v [COMPANY] (No 2) [2005] NSWCA 296 Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 [COMPANY] v [COMPANY] (No 2) [2011] NSWCA 344 Van Zonneveld v Seaton [2005] NSWSC 175 Ying v Song [2011] NSWSC 618 Texts Cited: [NAME], Law of Costs, (5th ed, 2021, LexisNexis) Category: Consequential orders Parties: [NAME] (Plaintiff) [NAME] (Defendant) Representation: Counsel: [redacted] P Newton SC (Defendant) Solicitors: [redacted] [NAME] (Defendant) File Number(s): 2018/00383865

JUDGMENT 1. The parties to these proceedings are [NAME], the plaintiff, and his former sister-in-law, the defendant [NAME], whose former husband is [NAME]. In keeping with the practice of the parties and the terminology in the earlier judgments, and meaning no disrespect of the parties, I will refer to them by their first names.

2. This is the fourth judgment that the Court has delivered in these proceedings. The earlier judgments are the primary judgment, Anjoul v Anjoul [2021] NSWSC 592 ("J1") published on 25 May 2021; [NAME] (No 2) [2021] NSWSC 1511 ("J2") published on 23 November 2021; and [NAME] (No 3) [2022] NSWSC 1456 ("J3") published on 27 October 2022.

3. On 5 December 2022, I made an order setting the proceedings down for hearing on 13 December 2022 on the question of costs and the final orders to be made in the proceedings. 4. [NAME] filed written submissions on 7 December 2022 and [NAME] filed written submissions, including submissions in reply, on 9 December 2022. [NAME] filed submissions in reply dated 11 December 2022. These reasons deal with all outstanding issues in the proceedings.

[NAME]

1. The issues in the proceedings are relatively complicated, and it will be necessary for the Court to assume that the reader is aware of the content of the three earlier judgments. I will provide brief explanations of the content of these judgments where necessary to make these reasons meaningful.

2. The primary question in these proceedings was whether [NAME] should be ordered to pay to [NAME] an amount to compensate him for renovation work that he undertook at a residential property at [NAME] that was at the relevant time registered in the sole name of [NAME].

3. The issue that was at the heart of the original hearing and involved the most substantial forensic effort was [NAME]'s attempt to enforce a deed between [NAME] and [NAME] that was finally signed on 14 November 2013 (the Deed) and whose material terms are set out at J1 [132]. The Deed recited that the cost to [NAME] of carrying out the renovation works to the [NAME] property was $700,000. The Deed obliged [NAME] to pay that amount to [NAME], plus the CPI increase each year from 2010 until payment, in the event of her separation or divorce from [NAME]. The Deed contained an acknowledgement by [NAME] that she had had an opportunity to independently verify the cost of $700,000 when that was not in fact the case. 4. [NAME] filed a cross claim in which she sought an order that the Deed be set aside on three alternative grounds. [NAME] failed on her claim that any obligation on her part to pay money under the Deed was unenforceable by operation of s 10(1)(b) and s 94(1) of the Home Building Act 1989 (NSW): J1 [279]-[300]. However, [NAME] succeeded in her claim that an order should be made under s 7 of the Contracts Review Act 1980 (NSW): J1 [314]-[336], and that the Deed should be set aside in equity as an unconscientious bargain: J1 [337]-[345]. The findings upon which these conclusions were based are found at J1 [205]-[261].

5. The result was that [NAME] failed on the principal issue, being his attempt to enforce the Deed against [NAME].

6. As noted at J1 [6], [NAME] made an alternative claim that [NAME] make restitution to [NAME] for the reasonable costs incurred by him in carrying out the work and providing materials in the sum of $743,353.45. That was the same amount as was payable under the Deed if it had been enforceable. [NAME] based this claim on the fact of the work being done and the materials supplied and an alleged informal agreement that he made with [NAME] that she would in due course reimburse him for his effort and costs.

7. The discussion in the primary judgment on this subject is principally at J1 [62]-[88] and J1 [207]-[233]. In summary, I found that there was an inchoate family arrangement between [NAME] and [NAME] that at least had the effect that [NAME] would not receive the benefit of the renovation works for free. Those works clearly increased the value and the amenity of the [NAME] property. The evidence established that a substantial part of the services provided by contractors and the materials that were used were obtained as result of contra arrangements made by [NAME] with suppliers in which he agreed to perform building works for the suppliers. However, I found that the evidence led by [NAME] was inadequate to prove the true costs that he had incurred in carrying out the renovation of the [NAME] property.

8. By the time of the hearing, [NAME]'s position was that he had either not kept records of his expenditures or that he had destroyed those records, perhaps in the expectation that his rights were preserved by the Deed. In fact, neither [NAME] nor [NAME] provided any compensation to [NAME] for the work that he did or the costs that he incurred in renovating the [NAME] property. A significant consequence of the family arrangement was that, whatever costs were incurred, they were less than retail costs because of the basis upon which the work and materials were supplied.

9. At the end of the primary judgment I considered the question of whether the order setting aside the Deed should also impose a condition that [NAME] provide some reasonable amount of compensation to [NAME] to avoid the outcome that, contrary to the family arrangement, she would receive a valuable renovation of the [NAME] property for free: J1 [346]-[370]. For the reasons that I gave, I found that it was reasonably understandable that [NAME] did not have comprehensive records to prove the quantum of his claim. Furthermore, if [NAME]'s legal advisers had adverted to the issue, it is likely that the Court would have made an order for the quantification issue to be determined as a separate question after the enforceability of the Deed had been decided. Otherwise, the parties may have been required to incur substantial costs in litigating the question of the proper amount of reasonable compensation, which would have been wasted if the Court had found that the Deed was enforceable.

10. I reached the following conclusions at J1 [353]-[369]: "[353] I am satisfied that, in principle, [NAME] should not enjoy the whole benefit of the renovation works for nothing, and that [NAME] ought to be paid some reasonable amount of compensation for his expenditure and efforts. The issue is whether [NAME] should be wholly denied that compensation because he did not satisfactorily prove the appropriate amount of the compensation at the hearing that has been concluded. [354] [NAME] has strenuously opposed the proposition that [NAME] should be given any further entitlement to quantify an appropriate amount of compensation. She takes the stance that it was for [NAME] to make out his alternative case for compensation and to quantify the appropriate amount at the hearing. [NAME] submits that as he has not done that, the proper course for the Court to take is to simply dismiss [NAME]'s claim. [355] There are a number of reasons why I am not at this time prepared to take that course. [356] The first reason is that [NAME] has come to equity but has never offered to do equity. [NAME]'s case was that the Home Building Act had the effect of excluding [NAME]'s right to receive any compensation, and [NAME] has failed in that claim. [357] [NAME] has not at any time proffered an alternative basis for [NAME] to receive any compensation, or made any offer to compensate him. [358] As an ancillary matter, [NAME]'s solicitors made a request to [NAME]'s solicitors that [NAME] give access to the property to a quantity surveyor retained by [NAME] for the purpose of the preparation of evidence as to the reasonable cost of the work done in the renovation of the property. [NAME] rejected that request. That rejection had the consequence of inhibiting [NAME]'s ability to make out an alternative case for compensation to his reliance on the enforcement of the deed. Although it is true that [NAME] did not implement the threat made by his solicitor that [NAME] would file a notice of motion seeking an order that the quantity surveyor be given access to the property, it remains the fact that [NAME]'s denial of access to the property by the quantity surveyor was not in my view reasonable. … [362] I doubt that it was ever realistic for [NAME] to attempt to quantify an alternative claim for reasonable compensation in the proceedings to date. That is because the cost of the forensic effort necessary to quantify the compensation would likely have been wasted unless the basis for the assessment of quantification was first established judicially. There are too many potential alternative ways to determine an amount of compensation that would be reasonable to justify [NAME] being required to bring forth evidence at the hearing to quantify the potential different approaches to the determination of compensation. [363] The reality of this observation is in some respects demonstrated by [NAME]'s proposal in his final written submissions that the Court make case management orders for the assessment of equitable compensation to be paid by [NAME] to [NAME] as a condition to any order setting aside the deed. [364] In outline, [NAME] proposed orders that an experienced professional quantity surveyor be appointed to "report on the reasonable costs and expenditure of works (Works) carried out or paid for by the Plaintiff/Cross Defendant at the property". [NAME] proposed that the works be identified by reference to the scope of works in Annexure A to the proposed orders "and any other relevant documents". [NAME] proposed an order that the quantity surveyor utilise "construction industry index figures and standard costs guidance (i.e. Rawlinsons or Cordell) for the relevant period under assessment". [365] The orders proposed by [NAME] were in response to a suggestion made by the Court in submissions that it might be appropriate for the Court to entertain a further application for the quantification of an appropriate amount of compensation to be paid by [NAME] to [NAME]. [366] However, it is arguable that the proposed quantity surveyor's report will not by itself provide a proper basis for the determination of any compensation that [NAME] should be ordered to pay to [NAME]. The reason is that the quantity surveyor's report would determine a reasonable value for the renovation works on the basis that all contractors supplied services and materials on an arm's length basis. That basis is likely to a considerable extent to be inconsistent with the real arrangement between [NAME] and [NAME] as to how the renovation works would be carried out. That arrangement was that as much of the works as possible would be undertaken or paid for under arrangements that did not require [NAME] to pay the full market price for the renovation. [367] It is not clear that it will remain possible for the Court to make orders for the continuation of the proceedings in a manner that will make the determination of a fair amount of compensation to be payable by [NAME] to [NAME] to be determined in a manner that is consistent with the application of s 56 of the Civil Procedure Act 2005 (NSW). It may be that forensic decisions made by [NAME] during the course of the proceedings to date will impede the ability of the Court and the parties to conduct a cost effective and fair determination of a proper amount of compensation. [368] In these circumstances, I will not at this stage determine the question of whether the deed should be declared void or set aside unconditionally or upon a condition that [NAME] pay an appropriate amount of compensation to [NAME]. [369] I will give the parties an opportunity to make submissions on this subject after they have been given time to consider these reasons for judgment. For that purpose, I will arrange for my Associate to fix a time for a directions hearing to consider the future of these proceedings."

[NAME] (No 2)

1. My second judgment in these proceedings was delivered following a hearing on 15 November 2012. The hearing was conducted on the basis described in J2 [24]-[28] as follows: "[24] After some subsequent discussion between the parties and the Court in which [NAME] suggested orders that did not meet with the Court's approval, it became apparent that the only way that finality could be reached was for [NAME] to be given leave to file a notice of motion seeking leave to file additional evidence that would permit the Court to make a determination as to what would be required of [NAME] to ensure that she does equity in return for the relief that she seeks. [25] On 20 October 2021, [NAME] filed the notice of motion that is the subject of these reasons. The notice of motion seeks the following relief: The plaintiff be granted leave to: a. adduce evidence relating to any conditions that may be imposed on the relief to set aside the deed between the plaintiff and the defendant, such evidence to relate to the value of the benefit received by the defendant by reason of the works carried out on [the [NAME] property]; and/or b. re-open his case for the purpose of adducing evidence in relation to the value of the benefit received by the defendant by reason of the works carried out on [the [NAME] property]. [26] As appears from prayer 1(a), the application is not merely one to reopen. The primary application is for leave to adduce evidence relating to the condition that the Court should impose on granting the relief sought by [NAME], being an order setting aside the deed. The application to reopen [NAME]'s case is in the alternative. [27] By order made on 6 October 2021, [NAME] was required to prepare and serve upon [NAME] the evidence that he would seek the leave of the Court to lead. [NAME] did this in the form of a report of a quantity surveyor, [NAME], dated 19 October 2021, and a report by real estate valuers, [NAME] and [NAME], dated 12 October 2021. [28] The objective of the quantity surveyor's report was to determine the reasonable cost of the renovation of [NAME]'s property on the assumption that all of the services and materials were either paid for by cash or pursuant to contra deals arranged by [NAME], in a manner consistent with the arrangement that the Court found existed between [NAME] and [NAME] and [NAME]. [NAME] calculated that amount at $515,278.16 plus GST, as opposed to an arm's length commercial price of $706,406.12 plus GST. [NAME] also costed the reasonable value of the works on the basis that they had been carried out by an owner builder at $636,187.38 plus GST."

1. The observation made at J2 [26] is important. While it is true that the evidence tendered at the original hearing in support of [NAME]'s alternative claim for reasonable remuneration was inadequate, it is a fundamental principle of equity that a party who seeks equity must do equity. If that were not the case, the consequence of the Court making an order setting aside an agreement on the ground that its creation was unconscientious might be that the Court's own order will visit injustice on the party seeking to enforce the agreement.

2. The order made on 6 October 2021 referred to in J2 [27] was made because I did not think that it would be procedurally fair for the Court to entertain the proposed application by [NAME] without both [NAME] and the Court having the benefit in advance of the actual evidence upon which [NAME] would seek to rely if the Court gave him leave to tender it.

3. By this stage of the proceedings, the nature of the applications being made by the parties had become somewhat blurred. [NAME]'s initial alternative application was for reasonable remuneration, by this stage of the second hearing the issue had become whether the relief sought by [NAME] under the Contracts Review Act and in equity should be made conditional upon her providing reasonable compensation to [NAME].

Accordingly, the new evidence that [NAME] sought to lead was relevant to [NAME]'s claim in her cross claim, as well as to [NAME]'s alternative claim.

4. At the second hearing, [NAME] opposed the Court making the orders sought by [NAME] in his notice of motion filed on 20 October 2021.

5. As I observed at J2 [42]: "[42] The problem as I see it with [NAME]'s position is that she is still trying to get the renovation for free. Not only has [NAME] not ever made an open offer to do equity, but she is still fighting the need to do so."

1. I reached the following conclusions at J2 [46]-[47]: "[46] The present application is not in reality an application by [NAME] to reopen his case. Rather, it is an application, encouraged by the Court in its primary judgment, for leave to put some additional evidence before the Court that will enable it to make the orders that it considers are truly appropriate having regard to the findings in the principal judgment. Those orders are that an order is made setting aside the deed, but [NAME] is ordered to pay a fair amount of compensation to [NAME]. [47] Consequently, I have decided that the proper course to be taken is for the Court to make order 1(a) sought in [NAME]'s notice of motion. The leave to be granted will not be open-ended but will be limited to the additional expert evidence that [NAME] has served on [NAME]."

1. Following the publication of [NAME] (No 2), on 15 December 2021 I made the following orders, as recorded at J3 [11]: "[11] The notice of motion was heard on 15 November 2021, and on 23 November 2021 I delivered the second judgment in these proceedings: [NAME] (No 2) [2021] NSWSC 1511 ("J2"). On 15 December 2021, I made the following orders:

1.

ORDER that without prejudice to the defendant's/cross claimant's right to make objections in relation to the admissibility of the following, the plaintiff is granted leave to adduce evidence in the following form in relation to the conditions which should be imposed on the cross claimant in relation to the setting aside of the Deed dated 14 November 2013 (Conditions Issue): (a) [NAME] report by [NAME] dated 19 October 2021 together with the emails attached to the affidavit of [NAME] affirmed 28 October 2021; and (b) [NAME] report by [NAME] and [NAME] dated 12 October 2021.

2.

ORDER the defendant/cross claimant file and serve any evidence upon which she intends to rely on in relation to the Conditions Issue by 4 February 2021.

3.

ORDER the plaintiff/cross defendant is to file and serve any evidence in reply in relation to the Conditions Issue by 25 February 2022.

1. As I recorded at J3 [13]-[14], [NAME] did not serve any expert quantity surveyor evidence, but served a report of a real estate valuer, to which [NAME] responded by serving a reply report of his own valuers. 2. [NAME] (No 2) was published, [NAME] made an offer to settle the proceedings by letter dated 8 December 2021. [NAME] submitted at the costs hearing that the letter contained a valid Calderbank offer. I will consider this offer below when I deal with [NAME]'s application that [NAME] pay part of her costs on the indemnity basis.

[NAME] (No 3)

1. The final substantive hearing in the proceedings took place on 19 September 2022. As I recorded at J3 [16], [NAME]'s position was that [NAME] should be ordered to pay him compensation of $500,000 as a condition to the making of a final order setting aside the Deed. 2. [NAME]'s position was as set out at J3 [22], which was that an order that the Deed be set aside on the basis that [NAME] pay [NAME] the sum of $310,000, and that all costs orders made be set aside, and that there be no order as to costs with the intention that each party pay their own costs of the proceedings. [NAME]'s position was as set out in draft short minutes of order attached to her solicitor's 8 December 2021 letter to [NAME]'s solicitor.

3. For the reasons set out in [NAME] (No 3), I reached the conclusion as stated in J3 [64]-[65] as follows: "[64] Although I will order [NAME] to pay $400,000 in compensation to [NAME] substantially on the terms in [NAME]'s 8 December 2021 proposed short minutes of order (except for the order for costs in order 11) it will be necessary for the Court to receive further submissions from the parties on the costs issue before final orders are made. I will not order [NAME] to pay compensation to [NAME] so long as there is a possibility that [NAME] will be ordered to pay all or some part of [NAME]'s costs. [NAME] should not be required to pay compensation to [NAME] and then seek to recover her costs from [NAME] later. It appears that it will be necessary for the Court to decide the issue of costs and make an appropriate gross sum costs order so that the final orders dispose of all remaining issues in the proceedings, and the orders specify the total amount that [NAME] will be required to pay to [NAME]. [65] The parties should confer and, if they are able to do so, they should provide my Associate with short minutes of order containing case management orders to deal with the costs issue. That issue should be dealt with as cost-efficiently as possible."

1. I decided that the Court should impose the arrangement for the determination and payment of the costs of the proceedings that I set out in J3 [64] for practical reasons, to ensure that this dispute between parties who had earlier been members of the same family could finally be determined as soon and as efficiently as possible. It is arguable that the present proceedings do not satisfy the conventional grounds upon which the Court will agree to determine the costs on a gross sum basis. There was no reason for the Court to think that the parties would not deal with the assessment of the costs on a conscientious basis. However, if the Court did not ensure that the costs were paid by some appropriate arrangement at the same time as [NAME] performed her obligation to pay [NAME] the $400,000, there was a real risk that further proceedings would be necessary to enforce the costs order.

2. In [NAME]'s reply submissions on the costs issue, [NAME] noted that the Court itself had decided to deal with the costs in the manner set out in J3 [64]. [NAME] expressly accepted that that was a sensible arrangement in the circumstances, and did not complain about it, but he noted that it had introduced into the resolution of the costs dispute the artificial outcome that the Court would decide the amount of the costs to be paid on a gross sum basis at the same time as it decided whether [NAME]'s 8 December 2021 offer was an effective Calderbank offer. That outcome would be artificial in the sense that, if the Court simply made the conventional costs order, then the determination of the amount of costs payable would be made as part of an ordinary costs assessment process. The amount payable would be determined after the Court had dealt with [NAME]'s application for indemnity costs so that the amount payable would not be known. That is, the question whether the outcome in the proceedings for [NAME] was worse than if he had accepted the 8 December 2021 letter and, if so, the degree to which the outcome was worse, would not usually be known until the completion of the costs assessment process. [NAME] submitted that that was a consideration that is relevant to the reasonableness of [NAME]'s conduct in not accepting the 8 December 2021 offer.

Final hearing on 13 December 2022 1. It was in these circumstances that the parties provided their submissions and conducted the hearing on 13 December 2022 concerning the final substantive and costs orders that should be made by the Court to dispose of these proceedings.

2. It will assist an understanding of recent events in these proceedings if I explain that the marriage between [NAME] and [NAME] has now been dissolved. At the recent hearing, [NAME] tendered, as Exhibit 1, a copy of orders made on 7 December 2022 by the Federal Circuit and Family Court of Australia (Division 2) stating that any contract entered into by [NAME] for the sale of the [NAME] property shall specify a settlement date no earlier than 2 February 2023. The orders noted that the initiating application was filed by [NAME] on 1 December 2022 seeking interim and final financial orders. The orders sought by [NAME] included injunctive orders to restrain [NAME] from dealing with the proceeds of sale of the [NAME] property that was then listed for sale by auction to occur on 10 December 2022. [ADDRESS] was informed at the hearing on 13 December 2022 that the exchange of contracts for the sale of the [NAME] property was imminent.

3. On 13 December 2022, I made a number of orders at the time I reserved judgment. Order 1 dealt with the manner in which [NAME] should deal with the proceeds of sale of the [NAME] property on settlement. In short, following the making of all payments in priority to [NAME]'s entitlement to receive the balance of the purchase price, [NAME] was ordered to pay the sum of $400,000 into [NAME]'s trust account pending further order by the Court, before the balance was paid to [NAME]. Pending satisfaction of those orders, [NAME] was restrained from further encumbering, charging or diminishing the equity in the [NAME] property.

4. The order for the retention of the $400,000 was made to provide some protection to [NAME] in the event that he obtained an order that [NAME] pay him reasonable compensation and costs up to an amount of $400,000.

5. The orders proposed by [NAME] that were annexed to her submissions dated 9 December 2022 were as follows: "1.

ORDER declaring the Deed between the plaintiff and the [d]efendant dated 3 October 2013 (Deed) void in whole.

2.

ORDER that the Deed be set aside.

3.

ORDER that, subject to the set of provided for in order 6 below, the fair and reasonable amount of compensation payable to the plaintiff for the renovation and improvements to [the [NAME] property] is $400,000.

4.

ORDER that the plaintiff pay the defendant's costs up to 8 December 2021 on a gross sum basis in the amount of $223,830.29 inclusive of GST.

5.

ORDER that the plaintiff pay the defendant's costs from 9 December 2021 on a gross sum basis in the amount of $152,650.39.09 [sic] inclusive of GST.

6.

ORDER that the total amount of costs payable by the plaintiff to the defendant in the total sum of $376,480.68 be set off against the amount of compensation payable to the plaintiff in the sum of $400,000 so that the total amount payable by the defendant to the plaintiff is $23,519.32.

7.

ORDER that the amount payable by the defendant to the plaintiff in the sum of $23,519.32 in order 6 be stayed subject to compliance with order 8. 8. [This draft order that made interlocutory arrangements dependent upon the sale of the [NAME] property has now been superseded by events and the orders referred to above]. 9. [As for order 8]. 10. [As for order 8].

11.

ORDER that the notice of motion filed 20 October 2021 be dismissed.

12.

ORDER that the Amended Statement of Claim otherwise be dismissed.

13.

ORDER that the Cross Claim otherwise be dismissed. 14. [NAME] the parties liberty to apply on 3 days' notice."

1. The orders sought by [NAME] included: "1.

ORDER that the defendant pay to the plaintiff, by way of restitution for the value of works carried out to [the [NAME] property] the sum of $400,000.00 2.

ORDER pursuant to the Contracts Review Act 1980 (NSW) relief varying the Deed between the parties dated 14 November 2013, ('Deed') as follows: (a) the amount of $700,000.00 wherever it appears in the Deed be replaced with $400,000.00; (b) that the words "plus CPI" in clause 4 of the Deed be deleted; (c) that clause 7 be deleted; FURTHER

ORDER that such relief to be conditional upon the defendant paying to the plaintiff the sum of $400,000 from the proceeds of sale of the property…" 1. [NAME] resisted the Court making a substantive order that only had the effect of varying the Deed. I agree. The proper order to be made is that the Deed be set aside entirely on the condition that an amount of compensation be paid by [NAME]. The order sought by [NAME] in her cross claim was that the Deed be set aside. The order proposed by [NAME] would leave the varied Deed in effect, with potentially unknown consequences. Those consequences have not been considered at any hearing.

2. The short minutes of order proposed by [NAME] then continued as follows (omitting superseded proposed orders relating to the sale of the [NAME] property and the payment of the proceeds of sale): "… 4.

ORDER that the Amended Statement of Claim be otherwise dismissed.

5.

ORDER that the Cross Claim otherwise be dismissed.

6.

ORDER that any costs orders previously made in these proceedings be vacated.

7.

ORDER that the defendant pay to the plaintiff lump sum costs in the sum of $50,000. 8. [NAME] the parties liberty to apply in relation to the implementation of these orders."

1. The parties agree on the formal orders that should be made in relation to the balance of the amended statement of claim and the cross claim. They also agree that all previous costs orders should be vacated. I would not have made such an order in the absence of agreement, as I do not know what costs orders have been made or on what basis. In the circumstances, I will make the order agreed by the parties.

2. I will not make order 11 sought by [NAME] that the notice of motion filed on 20 October 2021 be dismissed. I have already made orders in favour of [NAME] giving effect to the reasons in [NAME] (No 2) based upon that notice of motion.

Consideration of costs issue 1. The result is that the remaining difference between the parties is about the appropriate costs order for the proceedings. It is implicit in the short minutes of order proposed by both parties that the Court should make a gross sum costs order.

Applicable principles 1. I accept that [NAME] correctly stated the principles that the Court should apply in determining the order for costs that should be made in this case. [NAME] did not contest those principles.

2. First, s 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs.

3. The rule that the Court generally applies is set out in Uniform Civil Procedure Rules 2005 (NSW) r 42.1 as follows: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

1. The ascertainment of the event will in many cases be straightforward, as one of the parties will win in the proceedings and the other party will lose. However, there will often be cases where the determination of the event is not straightforward, as the respective parties have won and lost different issues that have arisen, particularly in those cases where the parties raise different claims in separate pleadings. As the Court of Appeal said in [COMPANY] v [COMPANY] (No 2) [2014] NSWCA 219 at [15]: "[15] Depending on the nature of the litigation the "event" may be characterised in more than one way. The authorities were reviewed by Ward J in Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 at [24]–[26], [54]–[60]. Generally the "event" refers to the event of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861–37,862 (Waddell J)." 1. [ADDRESS] of Appeal in [NAME] v [COMPANY] (No 2) [2005] NSWCA 296 observed at [34]-[36] that the following principles apply when the parties have had mixed outcomes in proceedings: "[34] Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter. [COMPANY] v [COMPANY] (unreported, NSWSC, 3 June 1998), Hodgson CJ in Eq noted that the obvious examples of a matter involving discrete issues is one where a plaintiff makes separate claims for different relief, or a claim by a plaintiff and a cross-claim by a defendant. Another example is where a respondent is successful in having an appeal against an earlier decision dismissed, but for reasons other than those raised in the respondent's Notice of Contention. This is not to say that so-called "discrete issues", for the purposes of apportioning costs, only exist in cases where there are separate claims made within a single matter. As Toohey J stated in the passage quoted at [33] above, it can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter. [35] In Madden v Connell [2001] NSWSC 1051, Hamilton J referred to there being a "rule" that where there are "discrete issues and the time taken on each issue at the hearing can be identified or realistically estimated", an order for costs may be made against the party which fails on such issues, or alternatively, that party may be deprived of its costs for that portion of the matter. In the Court's opinion it is preferable not to speak in terms of "rules". However, the underlying approach to the "rule" stated by his Honour may be an available approach to the exercise of the court's discretion as to costs in a particular case, depending upon all of the circumstances. [36] Where the court does exercise its discretion to apportion costs, the apportionment itself involves the exercise of discretion. As Gummow, French and Hill JJ recognised in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261: Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation …"

Significance of failure of Home Building Act claim 1. It will be convenient to deal with a number of introductory issues before I consider the discretionary determination of the appropriate costs order to be made in this case.

2. As I have noted above, [NAME] failed on one of the three grounds upon which she relied for the making of an order setting aside the Deed. That ground was that the effect of the Home Building Act was to make [NAME]'s claim for payment unenforceable. Although, in a sense, the issue was a separate one, it was one of a number of broadly related grounds upon which [NAME] was ultimately successful. It was not in my view a sufficiently separate issue to justify the Court in making a special costs order against [NAME] for the costs of that issue. [NAME] did not make any submission to the contrary of this conclusion.

3. However, I consider that the Home Building Act claim was nonetheless a significant issue that introduced discrete evidence into the proceedings and was an issue on which [NAME] failed. It will be appropriate in those circumstances for the Court to have general regard to that failure when it determines the final costs order that should be made as part of the discretionary exercise that is required because of the mixed outcome in the proceedings.

Relevance of [NAME]'s refusal to allow inspection by quantity surveyor 1. I noted at J1 [358] that [NAME] refused [NAME]'s consent to [NAME] causing a quantity surveyor to inspect the [NAME] property for the purpose of preparing a report as to the costs of carrying out the renovation works. Such a report may have provided a starting point for the quantification of [NAME]'s reasonable remuneration, given that his own records were insufficient for that purpose. I expressed the view that the denial of access "was not in my view reasonable" at J1 [358]. The evidence established that [NAME]'s solicitor threatened that if consent was not forthcoming an application would be made to the Court for an order that [NAME] give access to the quantity surveyor. That application was not made, so the Court did not have the quantity surveyor's evidence at the primary hearing. 2. [NAME] sought to make much of this issue at the costs hearing, by submitting that the Court should determine the appropriate costs order on the basis that [NAME] had acted unreasonably in denying her consent, and that, if consent had been given, the subsequent course of the proceedings would have been different because the Court would have had the quantity surveyor's evidence at the primary hearing. That submission overstates the significance of my observation that [NAME]'s refusal of consent was unreasonable. I adhere to my view, and, if the application threatened by [NAME] had been made, and resisted by [NAME], her unreasonable conduct may have justified a costs order against her in respect of the application. It is entirely different matter to conclude that the consequence of this minor unreasonable act should be to visit upon [NAME] substantial responsibility for much of what followed in the proceedings. First, it was incumbent upon [NAME] to make the threatened application if he decided that he needed the evidence. Secondly, there is a significant possibility that a quantity surveyor's report prepared at that time would simply have stated an opinion as to the retail costs of the renovation. In fact, because of the conclusions reached in [NAME] concerning the significance of the building costs being incurred on a contra agreement basis, the quantity surveyor report that was ultimately prepared focused on the fact that the compensation was never intended to be on a retail basis.

[NAME]'s submission concerning the appropriate costs order 1. [NAME]'s primary submission was that the relevant event was [NAME]'s ultimate success in obtaining an order that [NAME] pay him $400,000 as compensation for his efforts in renovating the [NAME] property. However, [NAME] acknowledged the forensic travails experienced in achieving that result, which have been outlined above. [NAME] accepted that the consequence was that the Court should, in the exercise of its discretion, substantially discount the proportion of the costs actually incurred by [NAME] that [NAME] should be ordered to pay to him. [NAME]'s primary position was that [NAME] should be ordered to pay 25% of the costs incurred by [NAME], which I understand is represented by the lump sum amount of $50,000 referred to in order 7 of [NAME]'s proposed short minutes of order. [NAME] made an alternative submission that if the Court thought that the primary order sought was too generous to [NAME], then the Court should make an order that each party pay their own costs of the proceedings.

2. In respect of the notice of motion filed by [NAME] on 20 October 2021, [NAME] submitted that the outcome was that [NAME] achieved success over [NAME]'s opposition. He submitted that the Court should not treat the application as an application for an indulgence by [NAME] to relieve him of some forensic oversight by which he had failed to tender all necessary evidence at the initial hearing. On the contrary, [NAME] submitted, the reality was that the Court, in the primary judgment, stated that it was not prepared to make the order sought by [NAME] in her cross claim simply setting aside the Deed, as that would not do justice in the circumstances, as [NAME] had not offered to do equity and had failed to perform her part of the family arrangement that she entered into with [NAME]. According to [NAME], there was some evidence that [NAME] incurred costs in carrying out the renovations, but the Court expressed the view in the primary judgment that the evidence was not sufficient to enable the Court to determine the quantum of the reasonable remuneration with sufficient confidence.

Accordingly, the Court, in those circumstances, invited [NAME] to provide additional evidence to assist the Court in formulating the final order that ought to be made on [NAME]'s cross claim. 3. [NAME] submitted that it was open to [NAME] to tender evidence of the reasonable costs of the renovation in support of her cross claim, in accordance with her duty to do equity, but [NAME] failed to do so.

4. I accept [NAME]'s submission that she was in no position, given her ignorance of the circumstances in which [NAME] had carried out the work, to tender comprehensive evidence of the reasonable remuneration herself.

[NAME]'s response concerning the appropriate costs order 1. [NAME] rejected the proposition that [NAME] should be treated as having succeeded in the event, and she also submitted that this was not an appropriate case for the Court simply to make a broad brush ruling as to costs on the basis of the proceedings considered as a whole. [NAME] submitted that the three substantive hearings that have taken place represent materially separate steps in the proceedings, and that the just treatment of the issue of costs requires a separate consideration of the events that led to the separate hearings.

2. As to the first hearing, [NAME] submitted that the majority of the pleadings, evidence, cross examination, oral submissions and written submissions focused on the enforceability or otherwise of the Deed, as raised by both the statement of claim and the cross claim. [NAME] submitted that she wholly succeeded on that primary issue, save for the reluctance of the Court to set aside the Deed on a basis that would lead to [NAME] enjoying the benefit of the renovation works for free.

3. As to this issue that was not resolved by the judgment in [NAME], that was because, as recorded at J1 [305], the evidence tendered by [NAME] did not make out his claim for restitution in the sum of $743,353.45, or any other sum. 4. [NAME] submitted that, as a matter of proper pleading, [NAME] did not seek ancillary relief under s 8 of the Contracts Review Act, and he did not respond to the cross claim filed by [NAME] by pleading that [NAME] should not be given the relief that she sought without first offering to do equity. Instead, [NAME] simply pleaded an alternative claim for reasonable compensation which he failed to prove. 5. [NAME] submitted that the Home Building Act claim on which she failed did not take up a significant portion of the proceedings and was not a dominant issue.

6. I note that in [NAME]'s 7 December 2022 affidavit, he provided reasons for estimating that the average forensic effort of the parties in dealing with the Home Building Act issue was about 17% of the total.

7. In relation to the second hearing, [NAME] submitted that she should not be penalised on the basis of her unreasonable conduct in declining to consent to the quantity surveyor retained by [NAME] being given access to the [NAME] property. I have already explained above that I accept that submission. 8. [NAME] then submitted that, even though the Court, in substance, made orders as sought by [NAME] in his 20 October 2021 notice of motion concerning the tender of additional evidence on the reasonable costs issue, notwithstanding his success he should be ordered to pay the costs of the application because in substance he was applying for the indulgence of the Court. [NAME] relied upon the principles summarised by Henry J in Burwood Council v [COMPANY] atf [COMPANY] (No 2) [2021] NSWSC 1035 at [8]-[11].

9. I do not accept that the costs of the notice of motion and the second hearing should be treated as if they only concerned an application made by [NAME] for an indulgence of the Court. While, on the one hand, [NAME]'s evidence in support of his alternative claim for reasonable compensation was inadequate, as I have explained above, I considered that there were extenuating circumstances because of the significant difficulty in providing that evidence, and the fact that [NAME] had not honoured her part of the family arrangement. The absence of satisfactory evidence on the issue of reasonable compensation related to the issue of [NAME] doing equity as much as it did [NAME]'s alternative claim. [NAME] defended [NAME]'s claim in a way that sought to gain the benefit of the renovation for nothing. The essence of the Court's position was that there was some evidence that might have allowed the Court to estimate a proper amount of reasonable remuneration to be paid by [NAME], but I considered that the evidence was not sufficient to enable the Court to do that fairly, and I gave some little weight to [NAME]'s refusal to give [NAME]'s quantity surveyor access to the [NAME] property.

10. I made the preliminary order that [NAME] incur the cost of the preparation of the additional evidence before I would consider giving him leave to tender it in the proceedings, partly in order to give [NAME] the benefit of knowing what the evidence would be so that she could make a proper judgment as to whether she ought to resist the leave sought by [NAME] being given. Knowing what the evidence was, [NAME] determined to continue to resist [NAME] being given the leave that he sought. That resistance failed. 11. [NAME]'s resistance failed, it would in my view not be fair to treat [NAME] as having succeeded on the event that was the subject of the second hearing. Nonetheless, in considering the exercise of the Court's discretion as to the final overall costs order that should be made, the Court should take into account the fact that [NAME] failed in her resistance to [NAME]'s notice of motion.

Significance of the third hearing on the costs issue 1. The third hearing was necessary because the parties were unable to agree as to the appropriate amount of reasonable remuneration for [NAME] to pay to [NAME] as a condition to the Court making an order setting aside the Deed. [NAME]'s position was that the amount should be $500,000, while [NAME] submitted that it should be $310,000, subject to each party being ordered to pay their own costs. [ADDRESS] found that the appropriate sum was $400,000, so each party achieved partial success in relation to the third hearing.

Conclusion concerning the identification of the event 1. [ADDRESS] should reject [NAME]'s submission that the event in this case is in substance his success in obtaining an order that he be paid compensation of $400,000. The acceptance of [NAME]'s submission on this issue would involve the Court ignoring the reality of the history of the proceedings.

2. For the following reasons, the correct analysis of the proceedings is that [NAME] succeeded in substance on her primary claim for an order that the Deed be set aside.

3. In a case like the present, which has evolved over time through a number of separate hearings, and in which the parties have achieved mixed results, it is important for the Court to start with a focus on the essential nature of the proceedings. That nature was an attempt by [NAME] to enforce the Deed against [NAME] to obtain a judgment for $700,000 plus CPI increases. That claim failed.

4. I accept that it may not have been obvious to [NAME] and his legal representatives (who were not the lawyers who now represent him) that [NAME] would succeed on her claim for an order setting aside the Deed. However, a balanced consideration of the evidence that the Court dealt with in detail in [NAME] that justified a finding that [NAME] was unconscientious in inducing [NAME] to execute the Deed ought to have caused [NAME] to understand that there was a very real likelihood that his attempt to enforce the Deed would fail. [NAME] ought to have appreciated that there was a serious risk that his claim against [NAME] would fail if he did not provide the Court at the primary hearing with at least adequate evidence to permit the Court to assess the amount of reasonable compensation that [NAME] should be ordered to pay to him as a condition to the Court making an order setting aside the Deed.

5. A tactical decision must have been made by [NAME] not to ensure that the Court was provided with the best evidence that could reasonably be obtained concerning reasonable compensation, and instead to take the risk that the claim to enforce the Deed would not succeed. There is force in [NAME]'s submission that [NAME] did not attempt to recast his position at the initial hearing to raise the need for [NAME] to offer to do equity. The consequence has been that, although ultimately [NAME] succeeded in obtaining an order that he be paid compensation of $400,000, [NAME] was deprived of the opportunity to deal with that claim at the primary hearing.

6. Consequently, I am satisfied that the starting point is that [NAME] is entitled to an order that [NAME] pay her costs of the proceedings on the ordinary basis, subject to an appropriate discount having regard broadly to [NAME]'s failure on the Home Building Act issue, the consequences of the failure of her resistance to [NAME] being given leave to rely upon the evidence on the reasonable remuneration issue of which [NAME] had advanced knowledge, and the fact that the outcome of the final substantive hearing was roughly an equal measure of success to each party. In the circumstances, I have concluded that the just outcome will be to order [NAME] to pay [NAME] 70% of her costs of the proceedings on the ordinary basis, subject to the result of [NAME]'s claim for payment of part of her costs on the indemnity basis.

Communications between the parties relevant to the award of indemnity costs 1. [NAME] submits that the Court should order [NAME] to pay her costs on the indemnity basis from 9 December 2021 because [NAME] did not accept the offer that [NAME] made to [NAME] on 8 December 2021, which [NAME] submits was a valid Calderbank offer.

2. The parties' solicitors exchanged communications that are relevant to the question of whether any part of [NAME]'s costs should be paid on the indemnity basis. 3. [NAME], in his affidavit sworn on 7 December 2022, appears to give evidence of all communications between the parties bearing on the costs issue. The communications appear to have commenced with an offer made on behalf of [NAME] by email dated 17 February 2021. There were later communications dated 25 June 2021, 15 July 2021, 2 August 2021 and 9 August 2021. Those communications are either expressed to be without prejudice save as to costs, or are in any event from their context clearly the subject of "without prejudice" privilege. Offers were made by both parties. [NAME] has not made any submission based upon the principle in Calderbank v Calderbank [1975] 3 All ER 333. As I understand it, the only communication relied upon by [NAME] for the purpose of obtaining a special costs order is a letter dated 8 December 2021 that [NAME] wrote to [NAME]. The letter expressly stated that it was not sent on a without prejudice basis, and it contained a without admissions concession made by [NAME] that [NAME] intended to tender in the proceedings.

4. In these circumstances, I consider that the better view is that all of the other correspondence should be treated as being privileged, and I will only set out the terms of the 8 December 2021 letter.

5. The letter attached proposed short minutes of order that [NAME] offered should be made in the proceedings. The proposed short minutes of order are similar to the proposed short minutes of order attached to [NAME]'s written submissions on the costs issue at [34] above, save, first, that order 3 provided that [NAME] would pay [NAME] the sum of $310,000, rather than the $400,000 that I found in [NAME] (No 3) should be paid.

6. Secondly, the order for costs that was offered in proposed order 11 was: "11.

ORDER that any costs orders made in these proceedings be vacated and order that there be no order as to costs in relation to these proceedings up to the date of these Proposed Short Minutes of Order with the intention that each party bear their own costs relating to these proceedings up to the date of these Proposed Short Minutes of Order."

1. This costs order was not included in [NAME]'s final proposed short minutes of order, as those orders in orders 4 and 5 respectively reflected [NAME]'s present submission on costs, being that [NAME] pay [NAME]'s costs on the ordinary basis up to 8 December 2021, and her costs following that date on the indemnity basis.

2. The monetary difference between the draft short minutes of order proposed by [NAME] on 8 December 2021 and the orders that she now proposes be made is that, first, [NAME] would be ordered to pay [NAME] $400,000, rather than $310,000, but [NAME] would be ordered to pay [NAME] costs of $376,480.68 rather than that the parties would bear their own costs of the proceedings.

3. The 8 December 2021 letter set out a number of reasons why [NAME] claimed the offer that she was making was a reasonable one, having regard to what [NAME] suggested was the likely outcome of the third hearing. [ADDRESS] ultimately did not accept one of those reasons, being that the Court would discount the amount of reasonable remuneration that it would otherwise have ordered [NAME] to pay to [NAME] because [NAME] and [NAME] accepted a joint obligation under the family arrangement to compensate [NAME], so that [NAME] would only be liable for 50% of the total.

4. The letter also advised [NAME] that [NAME]'s costs to date were in excess of $250,000 and claimed that [NAME] was entitled to an order that her costs be paid to the date of the offer.

Consideration of indemnity costs issue 1. In essence, [NAME]'s submission is that, although she only offered to pay [NAME] $310,000, and he was ultimately awarded the sum of $400,000, [NAME] would still have been substantially better off had he accepted the offer than he will be under the final orders to be made by the Court, because part of the offer was that [NAME] would bear her own costs, and the final result will impose upon [NAME] an obligation to pay [NAME]'s costs. The basis of this submission is that, if at the end of the day [NAME] is ordered to pay [NAME] more than $90,000 in costs, he will be worse off as a result of his failure to accept the offer.

2. As it has happened, whatever the Court's final determination of the amount of costs to be paid by [NAME] may be, it is clear that it will be substantially greater than $90,000.

3. The question in these circumstances is whether the 8 December 2021 offer qualifies as a valid Calderbank offer, meaning that the outcome for [NAME] in these proceedings will be no more favourable than the offer, the offer was a real compromise by [NAME], and the rejection of the offer by [NAME] was unreasonable: [COMPANY] v [COMPANY] (No 2) [2011] NSWCA 344. [ADDRESS] retains a discretion as to whether a special costs order should be made even in cases where a nominally valid Calderbank offer has been rejected, and the rejection does not give rise to a presumption that the costs of the party making the offer will be payable on the indemnity basis from the date of the offer: Commonwealth v Gretton [2008] NSWCA 117. 4. [NAME]'s 8 December 2021 offer was made after the publication of [NAME] (No 2) on 23 November 2021. Up until the time of the offer, [NAME] had resisted paying any remuneration to [NAME] for the renovation of the [NAME] property. As I have stated at [13] above, the judgment established that the Court was of the view that it should not make an order setting aside the Deed unless, as a condition to the order being made, [NAME] paid an amount of reasonable remuneration to [NAME]. The outstanding issue was the quantification of the remuneration. The effect of the judgment was to give leave to [NAME] to rely upon the evidence that he had served before the second hearing. 5. [ADDRESS] noted the effect of the evidence that [NAME] wished to tender, which consisted of expert reports by a quantity surveyor and by real estate valuers, at J2 [28]-[29]. At that stage, as noted at J2 [38], [NAME] had only provided evidence of the likely cost of her obtaining expert evidence in response from a quantity surveyor. As I noted at J3 [13], ultimately [NAME] did not serve expert quantity surveyor evidence, but she did rely upon a report dated 3 March 2022 by an expert real estate valuer. Consequently, at the time [NAME] was required to respond to [NAME]'s 6 December 2021 offer, he had not been informed of or provided with the evidence upon which [NAME] would rely on the quantification issue.

6. The principles that the Court applies when considering the significance of a supposed Calderbank offer that has been made on an "inclusive of costs" basis are summarised in [NAME], Law of Costs, (5th ed, 2021, LexisNexis) ([NAME]) at [13.81]-[13.83]. It is clear that, as the Court cannot fetter the discretion conferred by s 98 of the Civil Procedure Act by imposing upon itself arbitrary rules, the Court must always consider the circumstances of the particular case, and there can be no rule that an offer "inclusive of costs" will always be ineffective as a Calderbank offer: see, for example, DSE (Holdings) Pty Ltd v Intertan Inc [2004] FCA 1251; (2004) 51 ACSR 555 at [12]-[14] (Allsop J, as his Honour then was); Ying v Song [2011] NSWSC 618 at [70] (Ward J, as her Honour then was); and Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [231].

7. However, in fact, there has been a tendency for courts to decline to treat offers "inclusive of costs" as being effective Calderbank offers: "because it usually does not allow the Court to decide whether the verdict eventually given is one under which the offeree fares worse than he or she would have done if he or she had accepted the offer": Van Zonneveld v Seaton [2005] NSWSC 175 at [6] (Campbell J, as his Honour then was). See also [COMPANY] (t/as Easams Australia) v BHP Information Technology Pty Ltd [2003] FCA 688 at [34] (Finn J). I note, however, the reference by [NAME] at [13.82] to the reasoning of Basten JA in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [143], where his Honour doubted the logic in the hesitation in accepting offers "inclusive of costs" as being valid Calderbank offers, as his Honour observed that a party receiving such an offer should be able to ascertain the party's own costs at the time by enquiry of the party's solicitor. Of course, Basten JA's observations only apply to the case where the offer is made to a party "inclusive of costs" on the basis that the amount offered will cover the offeree's costs, on the assumption that the offeree would be awarded its costs upon success at a final hearing.

8. It is necessary to analyse the nature of the offer made by [NAME] in her 8 December 2021 letter. It is an offer by a defendant to a plaintiff to pay an amount claimed by the plaintiff as an alternative claim to a primary claim of the plaintiff that has already failed. The offer assumed that the defendant would be ordered to pay the plaintiff some amount under the alternative claim, but that the plaintiff would be ordered to pay the defendant's costs because of the failure of the primary claim. The offer therefore assumed that the relevant "event" would not be success by the plaintiff but would be success by the defendant. In reality, the offer made by [NAME] assumed that there would be a mixed outcome that would trigger the need for the Court to determine the costs order that should be made by the exercise of a broad-brush discretion involving impression and evaluation in accordance with the principles that I have considered above.

9. Apart from the fact that [NAME] could not know when he received the 8 December 2021 offer what evidence would be tendered by [NAME] in response to his claim, the only information that he had concerning [NAME]'s costs was her assertion that her costs were at least $250,000. This is not a case where the plaintiff had a reasonably sound basis for estimating the cost component of the offer, as the plaintiff would if the assumption upon which the offer was made was that it would compensate the plaintiff for the plaintiff's own costs. [NAME] could ask of his solicitor would cast light on the issue. The amount of costs that [NAME] may have been entitled to recover as of 8 December 2021 could only be determined by a costs assessment. As I have recorded above, [NAME] submitted in his reply submission that he only learned as a result of [NAME] (No 3) that the Court of its own motion had decided to determine costs on a gross sum basis. Consequently, the outcome that the Court will determine [NAME]'s entitlement to costs in these reasons will in a sense be an artificial one.

10. The reasonableness of a party declining to accept an offer made as a Calderbank offer will depend upon many circumstances, including whether it was reasonably possible for the offeree, with the assistance of his or her legal representatives, to make a reasonably objective assessment of that party's prospects of success and the likely outcome of the proceedings, which in this case includes an assessment of the likely amount of the costs the party will be ordered to pay the other party. There will be cases, of which I consider this to be one, where so many issues are 'up in the air' so to speak, and which involve discretionary judgments by the Court based upon impression and evaluation, where it is reasonable for the offeree to proceed to judgment, so that the proceedings are determined by judicial consideration rather than by chance.

11. I conclude that it was not unreasonable for [NAME] to have declined to accept [NAME]'s 8 December 2021 offer in the circumstances of this case.

12.

Accordingly, the order will be that [NAME] pay the appropriate portion of [NAME]'s costs on the ordinary basis.

Assessment of [NAME]'s costs as a gross sum 1. The last matter for the Court to deal with is the determination of the gross sum costs that it should order [NAME] to pay [NAME]. [NAME] supported her claim by affidavits sworn by her solicitor on 11 February 2022 and 7 December 2022. This evidence was not answered by [NAME] and no application was made to cross examine the solicitor. [NAME] did not make submissions on the issue.

2. I note that [NAME]'s evidence of her costs has sometimes been given on a basis inclusive of GST and at other times exclusive of GST. Ultimately, the solicitor said that the cost should be payable on a basis that includes GST. Neither party made any submission concerning the proper treatment of GST.

3. In [NAME]'s 11 February 2022 affidavit, the solicitor gave evidence that [NAME]'s costs, including solicitor's fees, counsel's fees and other disbursements from 13 December 2018 to about 8 December 2021 were $251,736.60 inclusive of GST. The solicitor gave evidence of clause 6 of the "Costs Payable between [ADDRESS]" Guidelines issued by the Costs Assessment Rules Committee. The evidence was that the solicitor's charge out rate was below the bottom of the allowable range for a partner. Junior counsel's rates were below or in the middle of the range. The solicitor omitted to give evidence as to senior counsel's rates and the daily rates charged by counsel. Notwithstanding these omissions, in the absence of any contest, and based upon my experience, I accept that the total costs incurred by [NAME] were reasonable and that the proceedings were conducted efficiently on her behalf. 4. [NAME] gave evidence in his 11 February 2022 and 7 December 2022 affidavits that, in his experience, it is likely that solicitor's costs would have been allowed within the range of 60% to 75% on the ordinary basis on a conventional cost assessment, and disbursements including counsel's fees would have been allowed as to 100%. The solicitor gave the opinion that solicitors costs would be allowed as to 75% in this case. The conclusion reached by [NAME] was that her total costs of $229,031.46 would have been allowed at $203,482.09, to which GST must be added.

5. In [NAME]'s 7 December 2022 affidavit, the solicitor gave evidence that in the period after 8 December 2021, [NAME] incurred total costs and disbursements of $147,066.19. Based upon his experience, the solicitor's opinion was that on the ordinary basis his costs would have been allowed at 75%, while in [NAME]'s disbursements including counsel's fees would have been allowed as to 100%. I accept this evidence. The result is that on the ordinary basis, [NAME] would recover $126,333.44, plus GST. 6. [NAME]'s claim is for the appropriate amount plus GST. [NAME]'s evidence is that her recovered fees on the ordinary basis for the time period covered in both affidavits (comprised of 75% of her solicitor's fees, and 100% of her disbursements, including counsel's fees) is $329,815.53 before GST. The total amount inclusive of GST is $362,797.08. As I have stated at [72] above, the Court will order [NAME] to pay [NAME] 70% of her costs of the proceedings on the ordinary basis. 70% of that amount is $253,957.95, inclusive of GST.

7. It is usual when a court assesses a party's costs on the gross sum basis to allow a discount from the assumed result of a conventional cost assessment to allow for the fact that the successful party has not been put to the trouble, cost and delay of the assessment process, and that the other party is denied the opportunity to challenge line items of the costs claim that must generally be accepted on their face unless obviously unreasonable. [NAME] at [15.21]. The learned author referred to a range of discounts that is commonly applied of 25 to 40%. He also considered the circumstances in which a lower discount will be appropriate. As the Court decided that the award of costs on a gross sum basis would be appropriate in this case, and as I consider that [NAME]'s case was conducted efficiently, I am satisfied that the appropriate discount should be less than the common range. I consider that a discount of 15% will be fair and appropriate. On that basis, the amount payable by [NAME] to [NAME] for costs will be $215,864.26, say $215,000.

Orders 1. [ADDRESS]'s orders are:

1.

ORDER declaring the deed between the plaintiff and the defendant dated 3 October 2013 (Deed) void in whole.

2.

ORDER that the Deed be set aside.

3.

ORDER that, subject to the set off provided for in order 6 below, the fair and reasonable amount of compensation payable to the plaintiff for the renovation and improvements to [the [NAME] property] is $400,000.

4.

ORDER that the plaintiff pay the defendant's costs of the proceedings in the fixed gross sum of $215,000.

5.

ORDER that the total amount of costs payable by the plaintiff to the defendant in the sum of $215,000 be set off against the amount of compensation payable to the plaintiff in the sum of $400,000 so that the total amount payable by the defendant to the plaintiff is $185,000.

6.

ORDER that the amount payable by the defendant to the plaintiff in the sum of $185,000 in order 5 will, subject to further order, be stayed so that it is only payable out of the proceeds of sale of the property called the [NAME] property in the judgments in these proceedings.

7.

8.

ORDER that the Cross Claim otherwise be dismissed. 9. [NAME] the parties liberty to apply on 3 days' notice.

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