The Court had to determine who paid the costs in an essentially unsuccessful claim by Star Casino against a builder who then cross claimed against an architect where various indemnity costs offers were made. The Court also determined whether, in the particular circumstances, it was appropriate to make Sanderson or Bullock orders in relation to the cross claim, and gross sum costs orders pursuant to the NSW Civil Procedure Act.
In issue
Considering what if any cost orders should be made in circumstances where the Plaintiff was only partially successful at trial.
The background
We previously discussed the decision in The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd trading as Buildcorp Interiors [2026] NSWSC 190 (Proceedings) (see Star Casino rolls the dice on a $4M cladding claim and wins one out of three).
By way of summary, The Star Entertainment Sydney Properties Pty Ltd and The Star Pty Ltd (Star), the Plaintiff in the proceedings, was awarded damages against Buildcorp Group Pty Ltd (Buildcorp), the Defendant in the amount of $285,662 in relation to one of three projects it commenced the proceedings on. For context, the Star had claimed $3,995,275.50 in damages in total in relation to all three projects.
Buildcorp had issued a Cross-Claim against Malone Buchan Laird & Bawden Pty Ltd, (Buchan Group), the architect, and the insurers of Ausrise Aluminium Pty Ltd (in liq) (Insurers) in relation to any liability found against it by the Plaintiff. The claim failed against Buchan Group, on the basis that the Plaintiff was unsuccessful against Buildcorp. Buildcorp was successful against the Insurers and was awarded $214,247.
Star’s costs of the Proceedings were $2,470,424.14. Buildcorp’s defence costs were $1,963,813.69 while Buchan Group did not disclose their costs.
The decision
The Court was required to address the following issues:
- Who actually ‘won’ the Primary Proceeding, and whether costs should be apportioned to reflect the parties’ relative successes and defeats? (Issue 1)
- Whether indemnity costs orders should be made in light of two Calderbank offers (Issue 2)?
- Whether a Sanderson or Bullock order should be made in respect of any order that the builder pay the architect’s costs where Star Casino did not sue its architect, but the builder did so by cross claim (Issue 3)?
- Whether a gross sum costs order should be made (Issue 4)?
Issue 1
When assessing which party had been successful, Her Honour was of the view that:
Even though Star succeeded with respect to the claim on one of the projects, it failed with respect to the much larger claims in relation to the other projects. It was therefore appropriate for the Star to Pay Buildcorp’s costs of the defence of the Proceedings.
Rees J also decided that Star should have to pay the costs for Buildcorp’s (unsuccessful) Cross-Claim against Buchan Group on the basis that Star should have sued Buchan Group in the Proceedings and not Buildcorp. Star should therefore be required to deal with the risk and the costs fall-out from the Cross-Claim. Buchan Group were awarded their costs of defending the Cross-Claim.
Issue 2
Buildcorp argued that Star should be required to pay its costs on an indemnity basis from the time of making a Calderbank offer to Star when Buildcorp’s costs were only $132,000.00 (Buildcorp Offer).
The terms of the Buildcorp Offer required Buildcorp to carry out rectification works relating to the second project at its own cost, including the replacement of the Aluminium Composite Panels and any combustible insulation (Rectification Works). In return Star would release Buildcorp from its claim as far as that project was concerned. The Buildcorp Offer was subject to Buildcorp providing Star with a draft settlement deed (Settlement Deed) and a proposed works agreement for carrying out the Rectification Works (Works Agreement).
Star argued that the provision of the Works Agreement was essential for it to meaningfully assess the Buildcorp Offer, as it needed to compare this with other suppliers and contractors being engaged by Star Casino to carry out the Rectification Works.
Star went on to assert that since Buildcorp failed to provide Star with the Settlement Deed or the Works Agreement within a reasonable time of making the Buildcorp Offer, Star Casino eventually engaged others to undertake the Rectification Works, rendering the Buildcorp Offer moot and effectively rejected.
As Buildcorp ‘won’ and was successful in relation to the second project, it argued that Star’s failure to accept the Buildcorp Offer entitled it to indemnity costs from that date.
Her Honour concluded that Buildcorp was not entitled to indemnity costs in circumstances where it had failed to provide the Works Agreement and Settlement Deed for months after initially making the Buildcorp Offer, thereby depriving Star of the opportunity to meaningfully assess the Buildcorp Offer.
As Buchan Group served a Calderbank offer on Buildcorp one month before trial in which Buchan Group offered to pay Buildcorp $1M inclusive of costs for the (Buchan Offer) which was not responded to, it sought an order for indemnity costs against Buildcorp. Her Honour refused to make such an order, having found that Buildcorp did not act unreasonably in not accepting the Buchan Offer in circumstances where it was dwarfed by the potential exposure of Buildcorp to Star’s claim.
Issue 3
Her Honour then considered the options available in relation to Buchan Group’s costs, i.e. a Sanderson or Bullock order. She proceeded to set out the key aspects of both.
In this case, Buchan Group preferred a Bullock order because it asserted there were serious concerns over Star’s solvency and ability to pay. However, Her Honour was not convinced that Star was insolvent and said any risk of Star’s impecuniosity and its inability to pay Buchan Group’s costs should be borne by Buchan Group as a way to ‘spread the hardship’ occasioned by Star’s financial situation.
Buildcorp had done enough and had shielded Buchan Group from the brunt of Star’s claims. In effect, Buchan Group did not deserve a Bullock order. Star Casino was ordered to pay Buchan Group’s costs directly.
Issue 4
Her Honour then turned her attention to the parties’ costs incurred. She confirmed that under s 98(4)(c) of the Civil Procedure Act 2005 (NSW), the Court may make an order to the effect that the party to whom costs are to be paid is to be entitled to a specified gross sum instead of assessed costs.
Her Honour saw this case as appropriate to make orders for specified gross sums as opposed to referring the issue of costs to assessment. Her Honour agreed with Buildcorp’s submissions that any costs assessment would be ‘very hard fought’ and ‘may lead to satellite litigation’. Star agreed to the specified gross sum against it, which was derived from a range of calculations put forward by Buildcorp and not opposed by the Court.
Buchan Group and the Insurers did not consent to a gross lump sum order, and Her Honour deemed they were entitled to have their costs assessed if they wished. However, as a parting shot, Her Honour left hints for the cost assessor as to the time and Court resources involved with dealing with Buchan Group’s defence of the Cross-Claim in the Proceedings which apparently absorbed 43% of the hearing transcript, with closing submissions being 129 pages, which in the circumstance was excessive and, indeed, ‘oppressive’.
Implications for you
The Proceedings themselves are a cautionary tale of the dangers of prosecuting complex construction litigation.
The Decision is a reminder that costs, other than Offer of Compromise under Division 3 of Part 42 of the UCPR, are discretionary and the Court will pay close attention to the actions or inactions of the parties during the course of the substantive proceedings and at final hearing, when deciding whether it is appropriate to make any order for costs, whether on an indemnity basis or via a Sanderson or Bullock order.
While only time will tell whether it was the right decision, where the Court has indicated a preference for a specified gross sum for costs (as Her Honour did here), where a party wishes to deviate from that approach, it should do so with caution and consider carefully its role in the litigation before doing so.
