Consideration
22 The respondent's 9 July 2019 Calderbank offer of $5,000 inclusive of costs was equal to or less than what the applicant ultimately achieved and consequently gives rise to no special costs consideration.
23 However, the respondent's 30 January 2020 offer to compromise the proceeding is material. There is no dispute that it satisfies the requirements of such an offer under Pt 25 of the Rules. It constitutes an express offer to pay $15,000 plus costs. It was not accepted by the applicant, and the applicant subsequently achieved a less favourable outcome. The conditions for the operation of r 25.14(1) are therefore satisfied and, subject to the court's discretion, the consequence of that rule should follow. Those are that from 11.00 am on Monday, 3 February 2020, the respondent is entitled to its costs on an indemnity basis.
24 The question then is, are there discretionary reasons not to make a costs order consistent with r 25.14(1)?
25 The principal submissions advanced by the applicant as to why he should not be subjected to an indemnity costs order is that such an order would be inconsistent with the position taken by the respondent in correspondence, in its defence and at trial. That position was that the applicant's claim was subject to the Civil Liability Act and that the applicant's entitlement to costs would be limited under the Legal Profession Uniform Law Application Act 2014 (NSW). On that basis, it is said on behalf of the applicant that the respondent "abandoned reliance upon the Federal Court Rules … as applies to the assessment of costs".
26 A further and related submission on behalf of the applicant is that the offer to compromise of 30 January 2020 in the sum of $15,000 plus costs must be disregarded because earlier communications from the respondent had asserted that the applicant would only be entitled to costs on the limited basis allowed for a personal injuries claim under the Application Act. Those communications included a telephone conversation between the parties' solicitors on 26 June 2019 in which the respondent's solicitor asserted that the applicant's claim would be subject to costs restrictions consequence on it being subject to the Civil Liability Act. On that basis it is said that the respondent's offer to settle did not encompass a costs liability beyond $10,000.
27 The applicant then submits that "it was not reasonable for the Applicant to consider the offers made by the Respondent, and the Court should exercise its discretion to make a costs order in favour of the Applicant".
28 The applicant's submissions must be rejected for a number of reasons.
29 First, the 30 January 2020 offer was on the Federal Court's Form 45 and was expressly made under the Rules. On it terms, the offer to pay costs could only have been reasonably understood as being the costs as assessed under the Rules, not under some other costs regime. If the offer had been accepted and the applicant had claimed his costs there is no basis on which the respondent could have contended that the costs should be assessed other than under the Rules.
30 Secondly, since the respondent had asserted in correspondence and its defence that the Civil Liability Act applied and on that basis the applicant was not entitled to any general damages, the offer to compromise which offered far more than the pecuniary damages that the applicant had ever claimed was obviously made as a compromise against the possibility that the Civil Liability Act was found not to apply. Therefore, it was not inconsistent for the respondent to assert that the Civil Liability Act applied and to make an offer to compromise that was not subject to the costs limitations that would apply only if the Civil Liability Act did apply; the premise of the offer was the possibility that the respondent's contentions with respect to the Civil Liability Act would not be accepted.
31 In light of those considerations, the applicant has failed to adduce any evidence or to advance any coherent argument as to why it was reasonable for him to not accept the respondent's offer of 30 January 2020. Indeed, given the weakness of his evidence at trial supporting any claim for pecuniary damages and any significant claim for non-pecuniary damages, if his non-acceptance of the offer was on the basis of legal advice, a serious question arises as to the reasonableness of that advice. In the circumstances as they pertained at the end of January 2020, the applicant should have been advised to accept the respondent's offer. Unfortunately, he did not do so and now he faces the consequences stipulated by r 25.14(1), there being no basis to make an inconsistent order under r 1.35.
32 All that said, there does not appear to be any reason why the applicant should not have his costs up until 11.00 am on 3 February 2020. The respondent submits, to the contrary, that the applicant failed to achieve a better result at trial than the 9 July 2019 offer of $5,000 inclusive of costs on the basis that that was before the proceeding was commenced and therefore there was no entitlement to costs at that stage. On that basis the respondent submits that it should be awarded indemnity costs from that date. I take that also as a submission against the applicant being entitled to costs up to 3 February 2020.
33 Although it is in a sense true that the applicant did not better the offer at trial, that does not have the results contended for by the respondent. The result achieved by the applicant at trial was not less favourable than the Calderbank offer; he achieved $5,000 at trial which, costs aside, is equal to the Calderbank offer. If costs are taken into account, then given the incurring of costs before 9 July 2019 and the inevitable incurring of costs in order to take advice on the offer, the result (thus far) at trial of $5,000 excluding costs is better than the offer. The costs should be taken into account because once a proceeding is commenced, costs incurred prior to the proceeding are recoverable on a party and party bill of costs: see rr 40.29 and 40.30 and Sch 3 of the Rules; State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [14]-[15]; W Win Engineering Pty Ltd v Wiggins [2016] FCA 967 at [48].
34 In any event, it was not unreasonable or imprudent of the applicant not to accept the offer of 9 July 2019. The offer is therefore no basis for an indemnity costs order in the respondent's favour. It is also no basis for an ordinary costs order in the respondent's favour.
35 For those reasons, the 9 July 2019 offer by the respondent and the applicant's non-acceptance of that offer do not disentitle the applicant to his costs up to 3 February 2020.
36 There is the possibility that the costs that the applicant is entitled to for that period should be reduced under r 40.08 because he claimed and was awarded damages of less than $100,000 and the proceeding could more suitably have been brought in another court. However, the respondent has made no application under that rule. Cf. Dutton v Bazzi (No 2) [2021] FCA 1560 at [37]ff.