Romero v Farstad Shipping

REASONS FOR JUDGMENT 1 The Court published its reasons for judgment in the substantive matter in this proceeding on 6 May 2014; see Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCA 439. The Court dismissed the application and ordered, subject to further order, that the applicant pay 85% of the respondent's costs of the proceeding. The respondent now seeks to vary the costs order to have its costs on an indemnity basis on and from 11.00 am on Thursday, 26 September 2013. 2 The reason for the variation request is that, on 24 September 2013, the respondent served a notice of offer to compromise on the applicant. The offer of compromise was open for 14 days after its service. It was made without prejudice to the respondent's position in the proceeding. It carried a guarantee that the relevant amount would be paid to the applicant within 28 days of its acceptance. 3 Part 25 of the Federal Court Rules 2011 (Cth) deals with offers to settle proceedings. Rule 25.01 permits a party to make an offer to compromise a proceeding by serving a notice in accordance with form 45. Form 45 is headed "Notice of Offer to Compromise". 4 The notice is required to be signed by the offeror (see r 25.02). Here it was signed by its solicitor, which is permitted by r 4.02. The notice must state whether the offer is or is not inclusive of costs and interest (see r 25.03). This notice stated that the offer was inclusive of costs and interest. 5 Rule 25.05 permits an offer to be limited in time but not limited to less than 14 days after the offer was made. Here, the offer was said to be open for 14 days. 6 Rule 25.14(2) provides that: If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. 7 The sole question for current determination is whether the applicant unreasonably failed to accept the offer to settle the proceeding. The offer was that $40,000, inclusive of costs and interest, would be paid to the applicant. On one view, it may be difficult to determine whether the applicant was unreasonable in rejecting that offer and going to trial because the evidence of the parties, on affidavit, remained untested. On the other hand, what would be the point of submitting a notice of offer to compromise if the offering party could not avail itself of the advantages of r 25.14? 8 In the substantive judgment and accompanying orders, the Court gave the parties an opportunity to address it on any variation to the costs order made that day. Seven days were given for any such brief submissions. The respondent filed its submissions on 12 May 2014, one day before the time for filing had expired. There was no attempt on the applicant's part to respond to these submissions or to contend that it was otherwise reasonable for her to reject the respondent's notice of offer to compromise. This was in contrast to Federal Commissioner of Taxation v Clark (No 2) (2011) 197 FCR 251, wherein the Commissioner of Taxation sought to convince the Full Federal Court (Dowsett, Edmonds and Gordon JJ) that it was reasonable for it to have rejected the offer to settle. 9 Based on the notice of offer to compromise and the dismissal of the proceeding, the preferred option of the Court in this matter is to take the course for which counsel for the respondent contends in his written submissions and make the order contained in the order page accompanying these reasons for judgment. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.