Written by The case of Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets (No 2) NSWSC 281 involved an insurance policy issued by Liberty to Seymour Whyte Construction. The dispute concerned whether the policy covered costs incurred during a major construction project involving the management and removal of asbestos-contaminated soil. Seymour sought indemnity for these costs, arguing they were a covered “loss” under its insurance policy because it was allegedly liable to a third party under common law principles such as nuisance or trespass.
The Court found that the policy only covered “clean-up costs” required under environmental laws, not costs arising from common law liability. As a result, most of Seymour’s claim failed. The Court only allowed a small claim for advice costs, however this was included in the amount Seymour had to pay itself under the policy, so no money was recovered.
Liberty then sought indemnity costs relying on two Calderbank offers. The Court confirmed that such an offer must involve a genuine compromise and that it is not enough for it to simply reflect what a party already accepts it may owe. The first offer was made before proceedings began and proposed payment of the main claim but excluded legal costs. The Court found this was not a real compromise, as it effectively accepted liability for the claim and did not give Seymour a meaningful reason to settle early.
The second offer was made two years into the litigation and focused only on part of the dispute, while requiring Seymour to give up its ability to recover costs for that part of the case. The Court rejected this approach, noting it was inconsistent with the normal rule that costs follow the successful party and that breaking up the claim in this way would complicate costs recovery.
The Court also noted that Seymour’s refusal of both offers was not unreasonable. As a result, Liberty’s application for indemnity costs failed and standard costs principles applied.
Ultimately, this case confirms that indemnity costs will only be awarded where a Calderbank offer contains a genuine element of compromise, and where it was unreasonable for the offer to be rejected. Offers that merely reflect what a party is likely already liable for, or that split a dispute into artificial parts, will not override the usual rule that costs follow the event.