Hardingham v RP Data Pty Limited

RPD's and REA's submissions on indemnity costs 14 RPD and REA argued that RPD's rejection of the offer did not warrant the making of an indemnity costs order against RPD. They noted that the offer was not made as an offer of compromise under r 25.01 of the Federal Court Rules 2011. They also asserted that the offer was not expressed to have been made in accordance with Calderbank v Calderbank [1976] Fam 93 and contended that the heading of the 8 April 2020 letter containing the offer was not a sufficiently clear statement that would convey to its addressee that, if rejected, the offerors' intention was to seek an indemnity costs order in the event of the appeal succeeding. RPD also submitted that all that the heading did was to reserve the appellants' right to rely on the letter on the question of costs. 15 RPD and REA argued that even if the offer were treated as being a Calderbank offer, its rejection did not generate an entitlement to an indemnity costs order. They contended that RPD's rejection of the offer was reasonable in all the circumstances at that preliminary stage of the appeal, being before the parties had filed their outlines of argument. RPD submitted: … It can hardly be said that the rejection was communicated with real appreciation of the case the parties intended to run at the appeal and cross-appeal. The letter in which the offer was conveyed did not in any respect engage with the merits of the appeal or seek to convey to the first respondent why the offer was a reasonable one. Instead, the justification for the offer was the appellants' financial position. For instance, the appellants did not identify any obvious error in the judgment at first instance; this is supported by the fact that the appeal was upheld by 2-1 majority. 16 RPD also submitted that, as at 9 April 2020, it "had reason to believe" that a litigation funder was standing behind the appellants. 17 RPD and REA argued that it was not unreasonable for RPD to refuse the offer on the basis that the appellants were impecunious. They contended that at the time RPD rejected the offer, the proceeding below had resulted in a decision in RPD's favour and the appellants had not advanced anything to cast doubt on the correctness of that result. They submitted that the reasonableness of RPD's rejection could not be assessed with the benefit of hindsight and that the appellants' ultimate success was also not conclusive. RPD argued that the offer required it to make a substantive compromise in agreeing to vacate the costs order in its favour in the first instance proceeding without the appellants providing any merits based analysis to support such a concession. 18 REA argued that the mere impecuniosity of the appellants was not a reason for RPD to give up the benefit of the costs order in its favour. REA asserted that the appellants were free to discontinue the appeal and could have sought the respondents' consent to do so without being liable for costs under r 36.73(4).

Consideration 19 Different Full Courts have stated slightly differently the general law test applicable to determining whether an offeree who fails to accept an offer of settlement (not being made as an offer of compromise under Pt 25 of the Rules or its analogues) can be ordered to pay the offeror's costs on an indemnity basis if the offeror obtains a better result than that contained in the offer. The differing versions of the test are that the rejection must be either "imprudent or unreasonable" or "imprudent or plainly unreasonable" (emphasis added). 20 In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7], Sundberg and Emmett JJ said: The mere making of an offer of compromise and its non-acceptance, followed by a result more favourable to the offeror, does not automatically lead to an order for payment of costs on an indemnity basis: John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201 at 204 206; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 239. The applicant for a more generous award must show that the rejection of the offer was imprudent or plainly unreasonable: NMFM Property Pty Ltd v Citibank Ltd (No 2) ("NMFM") (2001) 109 FCR 77 at 98; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [28]; Sydney Markets Ltd v Sydney Flower Market Pty Ltd [2002] FCA 283 at [16]-[17] and [23]. (emphasis added) 21 They added that, ordinarily, an offer made outside provisions in Rules of Court, such as offers of compromise under Pt 25, will be unlikely to attract an indemnity costs order if the offeree fares worse than the offer unless the offer is, first, reasonable and, secondly, contained a statement why the offeree's case will fail. As Buchanan J observed in Keays v J P Morgan Administrative Services Australia Ltd (No 2) [2011] FCA 547 at [7]-[20], this difference is not substantive and the word "plainly" is not necessary to qualify "unreasonably": Rares J applied this view in Mount Isa Mines Ltd v The Ship "Thor Commander" (No 2) [2018] FCA 1702 at [9], [14]. 22 However, there is no inflexible rule that an offeror must give a reasoned explanation as to why the offeree ought accept an offer to settle. That is because the discretionary power to make such an order is contained in s 43(1) of the Federal Court of Australia Act 1976 (Cth). That discretion must be exercised judicially but is otherwise unconfined and includes, as s 43(3)(g) provides, power to order that costs "be assessed on an indemnity basis or otherwise". The note to s 43, which forms part of the Act, refers to, among other provisions, s 37N(4) as being relevant to the making of an order for costs. 23 Relevantly, s 37N(1) requires the parties to a civil proceeding (including an appeal) to "conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose", being to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible (s 37M(1)). In exercising its discretion to award costs, s 37N(4) requires the Court to take account of any failure of a party to comply with s 37N(1). 24 We reject the respondents' submission that the offer was not a Calderbank one. In Calderbank [1976] Fam 93 at 105G-106D, Cairns LJ, with whom Scarman LJ and Sir Gordon Willmer agreed (at 107), explained that a party could make an offer on a basis such as that in the heading in the offer here, namely that it was made "without prejudice save as to costs". His Lordship reasoned that a party can make an offer to settle without prejudice that will remain privileged (at general law or under provisions such as s 131 of the Evidence Act 1995 (Cth)) but on the basis that the offeror conveys that he, she or it will rely on the making and rejection of the offer at the end of the proceeding (or appeal) when the Court is required to consider the question of costs. As Cairns LJ explained, such an informal procedure already applied to the award of costs in situations such as Admiralty collision cases where the owners of one vessel offered without prejudice before judgment an apportionment that was equally or more favourable to the other vessel's owners than the Court subsequently determined. 25 Given that the heading of the offer indicated that the appellants would rely on it for costs, it is difficult to understand how RPD and REA could have been in any doubt that the appellants intended to rely on its rejection to seek a costs order on an indemnity basis. If the appellants succeeded in the appeal, no-one could think that they would seek to rely on the offer simply to obtain the costs order in their favour that ordinarily would be made on a party and party basis. The respondents led no evidence to answer the rhetorical question: to what other use, as to costs, could the offer be put? The respondents' argument was a meritless debating point. 26 In Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Resources Ltd (No 2) [2013] FCAFC 73 at [7]-[8], North, Rares and Robertson JJ applied the reasoning of Greenwood J in Uniline Australia Ltd v S Briggs Pty Ltd (No 2) (2009) 82 IPR 56 at 65-66 [38] and Moore, Finn and Jessup JJ in CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd (2008) 15 ANZ Insurance Cases 61-785; [2008] FCAFC 173 at [75] to situations such as the present, namely: In his reasons in Uniline Australia Ltd v S Briggs Pty Ltd (No 2) (2009) 82 IPR 56 at 65-66 [38], which were approved by Besanko, Perram and Katzmann JJ in Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [131]-[132], Greenwood J said: "In the modern world of commercial litigation and various subsets of that litigation such as intellectual property litigation, costs are a very real and quantifiable concern. It would be extremely odd to think otherwise. Costs are incurred in a recoverable inter-parties sense from the moment the proceedings issue and they continue to be incurred at every point along the continuum of the litigation. Litigants who are required to pay these costs in order to assert or resist a claim, regard them as a very real and present expense, if not a real and present danger. Very often these costs are a significant business expense. They invariably require a commitment of significant resources and separate budget allocations. An offer to compromise which is framed in terms of a party's willingness to abandon the recovery of costs so incurred along that continuum through the preparation and analysis of statements, disclosure, analysis of documents and the preparation and review of expert reports, is undoubtedly considered by the litigant as an offer that involves giving up something meaningful, real and measurable. This is particularly so after the completion of case managed preparatory steps at various phases of the litigation which may have the effect of front-end loading significant costs in order to save trial costs. In many cases although not in all cases, the notion that a party is giving up nothing by inviting another party to discontinue a claim on the footing that the offeror will not make any claim for payment of its costs incurred to the date of the offer, is a fundamentally abstracted notion from the practical perspective of the engaged litigant confronting the management of the proceeding and the appropriation of expenditure to conduct it. An offer, on the other hand, that invites discontinuance of a claim on the payment of the offeror's costs to date offers not very much at all other than the stemming of future costs which in a particular case may nevertheless be very real." (emphasis in original) In the case of a Calderbank offer (cf: Calderbank v Calderbank [1976] Fam 93), Moore, Finn and Jessup JJ said in CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd (2008) 15 ANZ Insurance Cases 61-785; [2008] FCAFC 173 at [75]: "From the tenor of claims which have come before the court in recent years, there appears to be a view abroad that the failure of a party who has rejected a Calderbank offer ultimately to achieve a better outcome than provided for in the offer leads to a presumptive entitlement to indemnity costs with respect to the period subsequent to the offer. Such a view would be mistaken. Where a moving party (including a cross-claimant) offers to settle for a sum which is less than he or she eventually achieves at trial, there is a presumptive entitlement to indemnity costs under O 23 r 11(4) of the Federal Court Rules. However, where recourse is not had to the O 23, but reliance is placed upon the court's general discretion, it is necessary for the party seeking indemnity costs to demonstrate that the other party's refusal of the Calderbank offer was unreasonable: Black v Lipovac (1998) 217 ALR 386, 432; Maniotis v JH Lever & Co Pty Ltd (No 2) [2006] FCAFC 28. It is not sufficient that the offer was a reasonable one: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121, 128 [35]; Dais Studio Pty Ltd v Bullet Creative Pty Ltd [2008] FCA 42, [11]. In considering this question in a particular case, the matter of unreasonableness will be judged by reference to the circumstances facing the offeree at the time of the offer. While the eventual outcome in the case may go part of the way in this regard, there is no presumption that ultimate success in the proceeding for the offeror necessarily renders the offeree's rejection unreasonable." (emphasis added) (emphasis in original) 27 In Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281 at 289-290 [46], Hely J said that while "the policy of the law favours sensible compromise of disputes… there is also a policy against deterring parties from pursuing claims to which they reasonably believe themselves entitled". 28 We do not accept the respondents' submissions that RPD's rejection of the offer was not unreasonable or imprudent. The notice of appeal identified the critical, and arguable, issue on which both the separate question and appeal turned, being whether the primary judge had erred in implying the term into contracts that the appellants made with their clients, being real estate agents. The respondents were alive to the issues that the appellants wanted to argue in the appeal, which turned substantively on whether a term as found by the primary judge could be implied on the same basis as the parties had argued before the primary judge. The factual questions raised in the appeal would be assessed by the Full Court considering the evidence as to the formation of those contracts objectively in the same factual matrix as was before his Honour. 29 In addition, each of RPD and REA was conscious that the appellants were impecunious so that, if they pursued the appeal, this would be costly for the respondents. That cost was not only in the difference between the respondents' own solicitor and client costs and recoverable party and party costs, as the evidence for their security for costs applications showed, but also that they had no real prospect of recovery of any of the appeal costs for which they might obtain an order if the appeal failed. RPD led and referred to no evidence to support its written submission that, on or after 20 March 2020, MO or it had any basis to doubt what NHB, as officers of the Court, had told MO about there being no litigation funding at all for the appeal or providing cover for any adverse costs order in the proceeding below. RPD's conduct in rejecting the offer on that insupportable foundation was imprudent and unreasonable. 30 Nor does REA's argument that the appellants could have made a different offer, by seeking consent to discontinue the appeal with no order as to costs, avail RPD. The question is not what other possible outcomes could have been negotiated, but whether RPD acted imprudently or unreasonably in rejecting the offer that the appellants actually made. 31 Moreover, at the time of making the offer, Australia had just begun to experience the impact of the COVID-19 pandemic. Sydney, where the appellants' source of work was, had gone into a public health lockdown in late March 2020. At that time, the nation was facing considerable economic and health uncertainty. 32 The offer was a very real, common sense proposal for compromise in accordance with s 37N(1) of the Federal Court Act: Insight [2013] FCAFC 73 at [7]-[8]; Uniline 82 IPR 65-66 [38] per Greenwood J; Braverus 212 ALR at 289-290 [46] per Hely J. If accepted, the offer would have allowed RPD to keep the benefit of the primary judge's favourable decision on the implied term. Moreover, on the only reasonable information then available, RPD would have lost nothing of substance by giving up its costs order because that would not have realised any substantive benefit for it, given the appellants' impecuniosity. Additionally, RPD, REA and the appellants would not have needed to litigate the appeal and incur significant costs in doing so. Instead, RPD peremptorily rejected the offer and pursued, unsuccessfully, first, its application for security for costs and, secondly, its defence of the decision under appeal. 33 For these reasons, RPD's rejection of the offer was imprudent and unreasonable. It must pay the appellants' costs on an indemnity basis from 11:00am on 14 April 2020.

The costs of the cross-appeal 34 REA's cross-appeal occurred because RPD had filed a cross-claim against it in the proceeding before the primary judge. As his Honour recorded in his reasons, both RPD and REA had agreed, before the hearing of the separate question, that the issue of liability under the cross-claim did not then arise for determination. However, as a result of his Honour's finding on the separate question, he dismissed the cross-claim and ordered the appellants to pay RPD's costs of the cross-claim, except those of and incidental to the separate question, while leaving REA to bear its own costs and otherwise made no order as to costs on the cross-claim: Hardingham v RP Data Pty Ltd (No 2) [2019] FCA 2138 at [7]. 35 Thus, although RPD had joined REA as the cross-respondent and REA had led substantive evidence on the separate question that the primary judge found material to his decision in RPD's favour, REA had to pay its own costs of proving that RPD was not liable to the appellants and, as a consequence, RPD had no liability to pass on to REA. 36 RPD argued that its costs, as well as the appellants' costs, of the cross-appeal should be paid by REA because the Full Court dismissed the cross-appeal. The appellants do not seek an order for costs on the cross-appeal, but only contend that RPD be ordered to pay REA's costs of the cross-appeal. The appellants and REA do not seek any orders for costs against the other in relation to the cross-appeal. 37 We reject RPD's submission. The cross-appeal failed because the appeal succeeded and the issues on the cross-claim, including liability as between the parties to it (being RPD and REA) have yet to be determined by the primary judge. However, the appellants had to join REA to the appeal because his Honour had ordered them to pay REA's costs based on his finding that RPD was not liable for its breaches of their copyright. 38 In the unusual circumstances of the cross-appeal, the justice of the case requires an order that RPD pay REA's costs of the cross-appeal, despite its dismissal, on the basis that the issues arising on it did not require determination by the Full Court. RPD was responsible for REA being a party to the appeal and its taking essentially defensive action in bringing the cross-appeal. Substantively, RPD's case on appeal failed and the dismissal of the cross-appeal was a necessary consequence of that failure. It was not the result of any view which the Full Court had reached about the merits of the cross-appeal. Pursuant to the substituted order 3 that the Full Court made on 8 September 2021 (see [2] above), REA will be entitled to seek an order for costs of its cross-claim if, after that is heard and determined, it be found entitled to relief. That is the substantive result that the cross-appeal would have achieved had it been necessary for us to decide it ourselves.

Conclusion 39 For these reasons, RPD should pay the appellants' costs of the appeal and, if any, the cross-appeal on a party and party basis up to 11:00am on 14 April 2020, and thereafter on an indemnity basis. RPD should also pay REA's costs of the cross-appeal. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Greenwood, Rares and Jackson.