“It’s not unreasonable that I rejected your offer!”
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A dispute arose about how much tax a Co should have to pay.
The dispute related to P’s alleged status as an employment agent: [22], [24]
As the matter progressed P made a partial payment in respect of the claimed tax debt and litigation was commenced.
In January 2021 D made a Calderbank offer (and not a UCPR offer) to accept about $3.4m for its claim (when it alleged $5.2m was owed): [9]
The matter did not settle.
In the end, in February 2023 P was ordered to pay P $4.2m: [10]
P enjoyed partial success at first instance. Due to P’s partial success, at first instance D was ordered to pay 50% of P’s legal costs: [3], [4]
D appealed including seeking to displace its costs obligation: [8]
D said that if the Jan 2021 offer had been accepted P would have been $800K better off, so rejecting that offer was unreasonable.
D further said P was unreasonable in not accepting the offer because: (1) it was made 3 weeks before the first instance hearing, (2) it was open for 14 days, (3) it involved a compromise of $1.8m, (4) it was clear, (5) an indemnity costs order was flagged, and (6) P had all the evidence needed to assess its position: [13]
Reasonableness is to be assessed at the date the offer is made, not with hindsight: [15]
P said a significant amount of the final sum it was ordered to pay was interest accruing due to matters outside its control including D’s conduct by appealing on the last possible day and amending its appeal grounds, and the appeal being partly heard with a subsequent 3 month delay for a second hearing day: [16]
The Court accepted the offer was not a compromise in primary tax, only interest - and that interest was largely due to D’s conduct of the appeal including raising of new grounds: [19]
Considering the reasonableness of P’s response to the offer should bear in mind each party’s exposure regarding interest i.e. while D might be owed interest if it won, P might have been owed interest on its pre-payment if it had won: [20]
D eventually won on appeal, but that victory was attributable to a point not given much attention at first instance, and not mentioned in the offer: [22] - [24]
It was not unreasonable for P not to accept the offer. The existing cost order was appropriate. D should pay P’s costs of the application to vary the costs orders: [25]

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