Background
In the principal judgment, Walker v Adams [2026] NSWSC 1183, the Court ruled for defendant and cross-claimant Dianne Michelle Adams in a dispute concerning the scope and extinguishment of a right of carriageway. Plaintiff and cross-defendant Stephen Charles Walker had failed to establish that the easement permitted his proposed use or accommodated Lot 54, while Adams succeeded on her cross-claim under s 89(1)(c) of the Conveyancing Act 1919 (NSW).
The costs dispute was determined on the papers. Walker argued that each party should bear their own costs, or alternatively that he should pay no more than 50% of Adams’s costs, because her case had changed and she ultimately succeeded on an unpleaded ground. Adams sought ordinary costs through 5 June 2025 and indemnity costs thereafter, relying on a settlement offer made in a letter dated 6 May 2025.
The Court’s Holding
The Court applied the usual rule that costs follow the event and ordered Walker to pay Adams’s costs on the ordinary basis. Although Adams had abandoned or failed on several contentions, the questions on which Walker’s claim failed were raised by the pleadings and were matters he had prepared to meet. Her abandonment of the contention that the statutory Schedule 8 terms were not incorporated narrowed the case rather than introducing a new one.
Adams’s success on the cross-claim under an unpleaded ground engaged the principle concerning late changes to a successful party’s case. Nevertheless, Walker suffered no prejudice, would not have resisted the cross-claim differently had the successful ground been pleaded initially, and incurred only modest additional costs. Some abandoned or unsuccessful matters were separable as distinct questions of fact or law, but their associated costs were modest, and the limited difference that apportionment could make did not justify reducing Adams’s recovery.
The Court refused Adams’s application for indemnity costs. Although her May 2025 letter contained a genuine compromise and Walker ultimately obtained a worse result, rejecting it was not unreasonable when assessed at the time. The offer preceded the evidence, Adams’s case later changed, Walker’s position was reasonably arguable on novel facts, the proposal did not permit the truck-turning use he sought, and material terms remained to be negotiated.
Key Takeaways
- A successful party’s abandonment or failure on separable issues does not necessarily justify reducing costs where those issues generated only modest expense and apportionment would make little practical difference.
- Success on an unpleaded ground may engage the principle governing late changes of case, but a costs adjustment may be inappropriate if the opponent suffered no prejudice, would have conducted the case in the same way, and incurred little additional expense.
- Failing to better a Calderbank offer does not automatically produce indemnity costs; the offeror must show that rejection was unreasonable in the circumstances existing when the offer was made.
Why It Matters
The decision illustrates the distinction between identifying unsuccessful or abandoned issues and showing that they warrant a departure from the ordinary costs rule. Even where some issues are separable, courts may decline to undertake an issue-by-issue adjustment when the attributable costs are modest.
It also underscores that Calderbank offers are evaluated prospectively. An offer made before evidence is served, based on a case that later changes, or leaving important terms unresolved may not support indemnity costs even when it would have produced a better outcome for the offeree.