Case: Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536 ; (1993) 46 FCR 225
Outcome: cited
this as it may in terms of provenance, there is no doubt that the awarding of costs is a matter for the exercise of a discretion, that the discretion is a broad one or that the power extends to the ordering that costs be taxed on an indemnity basis, rather than on the usual party and party basis: Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536 ; (1993) 46 FCR 225. The judgment of Sheppard J in the latter is frequently cited for its comprehensive discussion of principle in relation to the awarding of costs on an indemnity basis. One of the circumstances which his Honour instances (at 233) which may justify the awarding of costs on an indemnity basis is an " imprudent refusal of an offer to compromise" (emphasis added). Order 23 of the Federal Court Rules (Cth) (the Rules) delineates aspects of the Court's practice and procedure with respect to offers of compromise and payment into court. It also offers guidance as to the ways in which, unless otherwise ordered in the circumstances of a particular case, the obtaining of a judgment by an applicant more or, as the case may be, less favourable than an offer of compromise will resonate in relation to liability to pay costs and the basis upon which taxation of costs will be ordered. Olivaylle commenced the present proceeding by the filing of its application in the Court's South Australian registry on 16 November 2006. At that time O 23 of the Rules provided, materially: Order 23 Offer of compromise and payment into court Interpretation In this Order, unless the contrary intention appears: applicant includes cross-claimant . claim in the proceeding includes a claim in relation to costs to which Order 62 applies. proceeding does not include a proceeding on an interlocutory application that is not capable of: (a) substantially disposing of the proceeding or of the whole or any part of any claim for relief in the proceeding; or (b) rendering unnecessary any trial or further trial in the proceeding or of the whole or any part of any claim for relief in the proceeding. respondent includes cross-respondent . Application (1) In any proceeding, a party may make to another party an offer to compromise any claim in the proceeding on the terms set out in the notice of offer. Form of offer (1) An offer of compromise is made to a party by serving a notice of the offer on the party. (2) A notice of offer must: (a) be prepared in accordance with Order 41; and (b) bear a statement to the effect that the offer is made under this Order; and (c) be signed by the party making the offer or by the solicitor appearing for that party. (3) Until an offer has been accepted, notice of the offer must not be filed. Further requirements of offer (1) If: (a) a sum of money is offered; and (b) that sum is inclusive of the costs of the proceeding; the notice of offer may specify the amount that is in respect of costs. (2) If: (a) a sum of money is offered; and (b) that sum is inclusive of interest; the notice of offer must specify the amount that is in respect of interest and how it is calculated. (3) An offer to pay a sum of money is, unless a notice of offer otherwise provides, taken to be an offer to pay that sum within 28 days after acceptance of the offer. ... Time for making or accepting offer (1) An offer may be made at any time before the time prescribed by subrule (7) in respect of the claim to which it relates. (2) A party may make more than one offer. (3) An offer may be expressed to be limited as to the time that it is open to be accepted, but the time expressed must not be less than 14 days beginning on the day after it is made. ... Offer to be without prejudice An offer made in accordance with this Order is taken to have been made without prejudice, unless the notice of offer otherwise provides. 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.