Case: Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386
Outcome: followed
respect of each of the offers upon which Flottweg relied, Olivaylle submitted that, even if it were a necessary conclusion flowing from my dismissal of the application that it was worse off than the position offered by those letters, there was no presumption flowing from this that costs taxed on an indemnity basis must be awarded. The importance afforded by Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 ; (2001) 109 FCR 77 at 98, [88] to "sufficient particularity" in relation to an explanation for an offer and "inevitability of failure" was stressed. So, too, was stressed the need to remind myself that it was for Flottweg as offeror to show that the conduct of Olivaylle as offeree in rejecting any "Calderbank" offer was unreasonable, the application by Weinberg J in Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224 ; (2002) 190 ALR 121 at [35] of the Full Court's statement to this effect in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218] being cited in support. Flottweg's submissions did not gainsay the matters of principle for which the cases relied upon by Olivaylle stood, only the application of those principles in the circumstances of this particular case. In particular, Flottweg accepted that the mere fact that the result at trial left Olivaylle worse off than any pre-trial offer carried with it no presumptive entitlement to an award of indemnity costs. Rather, it was submitted that the question was whether the rejection of the offers (or at least one of them) was unreasonable or imprudent, the discussion and conclusions reached by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 1489 ; (2007) 244 ALR 374 at [59] to [63] with respect to Black v Lipovac , supra and other authorities being adopted. Flottweg further submitted that, while it may not have been unreasonable or imprudent for Olivaylle to have instituted or, as the case may be, continued the litigation in the absence of one or more of the offers it made, at least one of those offers constituted a fair commercial compromise such that it was unreasonable or imprudent to institute or continue the litigation in the face of that offer. That sentiment, it was submitted, was evident in the approach taken by Emmett J in Ruaro v Ferrari [2008] FCA 307 at [17] . I am bound to follow matters of principle enunciated by the Full Court. In that regard, it may be, as Buchanan J highlights in the following passage from his judgment in McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591 at 597, [22] , that there is a difference in opinion at intermediate appellate level as to whether, for the purpose of satisfying a condition precedent to the awarding of indemnity costs and as an alternative to "imprudent", the rejection of an offer of compromise should be able to be described as "unreasonable" or "plainly unreasonable": In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 ( Dukemaster) Sundberg and Emmett JJ said, in a case like the present where O 23 r 11 did not apply because an applicant had been wholly unsuccessful, that an applicant for a more generous award of costs than party-party costs 'must show that the rejection of the offer was imprudent or plainly unreasonable' (see at [7]). There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] [62]). In the earlier of the Full Court authorities, Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at 432-433, [218] , the point was made that the conduct of an offeree need not be "plainly unreasonable" in order to warrant the ordering of indemnity costs because "To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement." I respectfully agree and, for that reason, would choose to follow the earlier Full Court authority were that to be critical to the resolution of the costs application. It is not though because in both Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 the alternative of imprudent rejection was acknowledged. Like Buchanan J in McDonald v Parnell Laboratories (Aust) (No 2) and, as his Honour noted (at [22]), like Heerey J in AFP Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] [25], it is sufficient to assess whether the rejection of any of the offers was, "imprudent". That basis of assessment accords with the exemplar given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited , which I have already noted, whose judgment, as Heerey J acknowledged in AFP Properties (ibid), is the locus classicus on the subject.