Background
The applicant, the body corporate for a strata building at 19 Orchid Avenue, Surfers Paradise, sued its neighbouring body corporate in nuisance and negligence, alleging that water and contaminated material leaked from the respondent’s property into the applicant’s basement. The applicant claimed damages of approximately $625,000, including the cost of waterproofing the basement wall, and sought a mandatory injunction requiring the respondent to prevent further ingress. The respondent brought a counterclaim for amounts owed under a deed between the parties.
In the primary liability judgment ([2026] QSC 84), Cooper J dismissed all of the applicant’s claims. The court accepted expert evidence that the basement retaining wall was designed and constructed as a “wet wall” not intended to be waterproof, that water entered the basement only during major rainfall events as a result of stormwater pooling combined with the non-waterproof wall, and that no contaminants from the respondent’s property had been shown to have entered the basement. Because the fundamental cause of the water ingress was the applicant’s own non-waterproof basement wall, the respondent was found not to have caused an unreasonable interference with the applicant’s land, and the negligence claim failed for want of breach and causation.
Following the liability judgment, the parties filed submissions on costs. The respondent sought indemnity costs for the entire proceeding; the applicant argued for no costs order up to either 21 May 2025 or 1 November 2024, and standard costs thereafter. The costs judgment was heard on the papers.
The Court’s Holding
Cooper J ordered the applicant to pay the respondent’s costs on the standard basis up to and including 29 May 2024, and on the indemnity basis from 30 May 2024. Under r 681 of the Uniform Civil Procedure Rules 1999 (Qld), costs follow the event unless the court orders otherwise, and the applicant failed to demonstrate any good reason to depart from that rule for any period of the proceeding. The court rejected the applicant’s argument that costs should be withheld because the respondent later undertook repairs to its stormwater drainage system, finding that those repairs were not the reason the claims failed. The argument that a trial adjournment in November 2024 caused by defects in a joint expert report justified a departure from the costs-follow-the-event rule was similarly rejected.
The court declined to order indemnity costs on the ground that the applicant’s case was “untenable at every stage.” While the respondent identified a series of expert reports that progressively undermined the applicant’s claims — including reports received as early as June 2019 showing the basement wall was not designed to be watertight — Cooper J was not persuaded that the applicant had commenced or continued the proceedings in wilful disregard of known facts or clearly established law, or had made allegations that ought never to have been made. The matters identified showed the claims were “relatively weak,” but weakness alone does not satisfy the threshold for indemnity costs on the ground of hopelessness.
Indemnity costs were awarded, however, from the date the respondent’s Calderbank offer expired. On 22 May 2024, the respondent offered to accept discontinuance of the applicant’s claims with no order as to costs, in exchange for payment of approximately $26,850 on the counterclaim. The applicant rejected the offer. Applying the factors set out in J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23 and Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] 513 VR 435, the court found the rejection was unreasonable: the offer was clear, made well before trial, left open for a reasonable time, and marked “without prejudice save as to costs.” By May 2024 the applicant had already received multiple expert reports exposing the fundamental weakness of its case, and the offer — which would have spared it liability for the respondent’s costs — was more favourable than the trial outcome.
Key Takeaways
- Costs follow the event under r 681 UCPR as the default rule; the unsuccessful party bears the burden of showing good reason to depart from it, and neither post-litigation remediation works nor procedural adjournments caused by joint-expert defects are sufficient.
- Indemnity costs on the ground that a case was “untenable” or “hopeless” require more than evidence that the claims were weak — the court must be satisfied the proceedings were commenced or continued in wilful disregard of known facts or clearly established law, or that groundless allegations unduly prolonged the case.
- Rejection of a Calderbank offer triggers indemnity costs from the date the offer closed if the refusal was unreasonable in all the circumstances; the critical inquiry is the offeree’s prospects of success assessed as at the date of the offer, not with hindsight from later evidence.
- Where a distinct, identifiable head of claim has already been subject to a costs order (here, costs thrown away by the abandoned waterproofing claim), that conduct cannot be relitigated to inflate costs on the remainder of the proceeding.
Why It Matters
This decision reinforces the practical importance of Calderbank offers in Queensland civil litigation. Where a defendant makes a genuine offer to compromise — particularly one that excuses the plaintiff from paying the defendant’s costs — a plaintiff who dismisses that offer while persisting with weak claims does so at real financial risk. By May 2024, multiple expert reports had flagged the core vulnerability of the applicant’s case, and the court found that a prudent litigant in possession of that material ought to have accepted the settlement. Practitioners advising clients on offers to compromise should carefully audit all expert evidence on hand at the time an offer is received, not merely the evidence available at trial.
The judgment also offers useful calibration on the threshold for “hopeless case” indemnity costs. The court’s refusal to award indemnity costs on that ground — despite finding the claims were “relatively weak” and should always have been assessed as such — illustrates that courts will not treat a losing case as one that should never have been brought merely because adverse expert evidence was available. The bar remains a finding of wilful disregard of known facts or law, not merely poor litigation judgment.