Romero v Farstad Shipping

COSTS CLAIMS 5 Ms Romero submits that Farstad Shipping (Indian Pacific) Pty Ltd (ACN 105 011 989) should pay her costs of the appeal on an indemnity basis or, alternatively, at least on a party and party basis. Ms Romero argues that she was "successful" on the appeal in relation to a variation of the costs order in Romero No 4. Ms Romero says that the outcome of the appeal was equivalent to or better than the terms of an offer she made to Farstad on 2 March 2017. The terms of that offer were in effect that each party "walk away" from the action and the appeal with no order as to costs. She was to bear her costs and Farstad to bear its costs. The offer was made on a "without prejudice" basis, save as to costs. It was also made on the basis that neither party would bring any further claim against the other. 6 Farstad rejects any claims to costs, including indemnity costs, by Ms Romero and submits that the usual costs orders should follow the appeal. Farstad argues that as it had substantial success on the appeal, Ms Romero should pay Farstad's costs, to be taxed on a party and party basis. 7 The offer made by Ms Romero was open for only seven days and Farstad was informed that if the offer was refused Ms Romero would claim costs against Farstad on an indemnity basis should she succeed. 8 It is significant that at the time Ms Romero's offer was made, the appeal related only to the damages issues. Ms Romero had not then sought to appeal the adverse costs determination against her in Romero No 4. Indeed, the offer made no reference to an appeal on the question of costs at all, let alone the basis of the appeal. The costs judgment in Romero No 4 had been delivered on 20 February 2017. 9 The offer was not accepted. However, on 10 March 2017, shortly after expiration of Ms Romero's offer, Farstad made an offer which was, effectively, a counteroffer. It did not refer to Ms Romero's offer, but proposed settlement of all issues between the parties, including the issues raised by Ms Romero in the appeal. Farstad also advised Ms Romero that the current order for costs in favour of Farstad in Romero No 4, would require Ms Romero to pay Farstad a sum in excess of $150,000. Farstad indicated that it would accept a sum of $55,618 in lieu of the larger sum, subject to the parties executing a deed with a mutual release from all claims and discontinuance of the appeal. The offer continued: You would appreciate that this amount reflects the appeal costs paid to your client, which appeal nevertheless led to an award of only nominal damages. This would properly reflect a circumstance in which, substantively and by agreement, each party has borne its own costs. If our client is compelled to conduct the appeal proceedings, and is successful in resisting the appeal, as we consider it will be, we are instructed that there will be no further offer as to costs of the litigation between the parties and that we will be instructed to take all necessary enforcement action to secure payment of current and future costs orders in favour of our client, as may be available. 10 Farstad's offer was also only open for seven days and was not accepted.

CONSIDERATION 11 Ms Romero contends that various factors suggest that Farstad acted unreasonably in failing to accept her offer. 12 First, Ms Romero says that Farstad was facing a significant claim for damages and the offer from Ms Romero was to walk away from that claim. 13 This primary assertion does not, taken alone, demonstrate unreasonableness. It is true that Ms Romero was claiming significant damages, but, equally it is true that such claim had little or no merit. It had been rejected once at trial level, for good reason, and was rejected again on appeal. Objectively, there would be little basis for Farstad to be substantially concerned as to any prospect of success by Ms Romero in relation to the damages component of the appeal. As noted, the costs component of the appeal was not in existence at the time of Ms Romero's offer. 14 The remaining points Ms Romero makes all fail to take into account that there was no appeal on costs at the time her offer was made and also fail to take into account that her arguments on costs below, having been rejected, were also rejected by the Full Court in Full Court No 3. To the extent that she succeeded in a variation on costs, it was as a result of reasoning proposed by this Court. 15 The remaining factors to which Ms Romero alludes are: given the extensive disputation ongoing since 2011, Farstad was in a good position to assess the strengths and weaknesses of Ms Romero's claim, including in respect of costs. At the time the offer was made to Farstad, Ms Romero was still within time to appeal the costs judgment, which was the subject of a variation in Full Court No 3; on 17 January 2017, Ms Romero had written to the primary judge's associate seeking the time fixed by the Rules for an appeal against his Honour's decision on damages be varied to a date after he delivered his then pending decision on costs. Farstad opposed the exercise of that discretion and the primary judge refused to exercise it. Ms Romero had thereby clearly signalled that she was contemplating that she would not proceed with the appeal if the primary judge's decision on costs was favourable to her; at the time of her offer, Farstad must have known that an appeal against the costs order of the primary judge was open. The offer clearly included an offer by Ms Romero to forego any appeal from the costs decision. Had it accepted the offer, Farstad would have avoided any further liability for its own costs and the costs of Ms Romero; when on written notice regarding Ms Romero's intention to appeal the costs order of the primary judge, from on or about 17 March 2017, Farstad did not make attempts to settle the proceedings on the basis that each party walk away; and Ms Romero gave Farstad due notice of her intention to rely upon the offer to seek costs on an indemnity basis. 16 Each of the four principal grounds of appeal in relation to damages from Romero No 3 failed. While it is true that Ms Romero succeeded in obtaining a variation of the costs order, and thereby has achieved some relative success on the appeal from a position she was in after Romero No 4, the grounds on which she advanced an argument that the entirety of the costs order in Romero No 4 should be reversed were rejected. Ms Romero had not identified the basis of the costs order on which she sought to appeal the primary judge's order at any stage, including when she made the offer on 2 March 2017, on which she now seeks to rely. 17 Farstad's rejection of Ms Romero's offer was not unreasonable. Had it accepted it, Farstad would have foregone entirely the benefit of an award of costs on a party and party basis of some $150,000. Ms Romero rejected the counteroffer, which would reduce that indebtedness to about $55,000 and instead chose to amend her appeal grounds (without objection) to appeal the costs decision in Romero No 4. Farstad's decision not to accept the offer cannot be unreasonable in a circumstances where there was no appeal on costs on foot despite Romero No 4 (the costs decision) having been handed down several days before. Nor was there any reasoned exposition as to why the costs were wrong within the language of Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 per Sundberg and Emmett JJ (at [8]) (Conti J dissenting), but not on this point, where their Honours followed the reasoning of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77, saying: Whatever the position may be with an offer made under Order 23, a Calderbank offer, or any offer of compromise outside the regime in Order 23, is unlikely to serve its purpose of attracting an indemnity award of costs if the rejecting applicant fails to recover more than what is offered, unless the offer is a reasonable one and contains a statement of the reasons the offeror maintains that the application will fail. In NMFM at [87]‑[88] Lindgren J said: "No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, yet the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs. … The requirements of 'sufficient particularity' and 'inevitability of failure' are important. In their absence, it would be open to parties to put their respective cases to the opposing party urging it to recognise the merit of what is put in the hope that if it ultimately finds favour with the Court, an award of indemnity costs will follow. If this were correct, one might ask rhetorically, 'Why write a letter as distinct from simply relying on the pleadings?'." (emphasis added) 18 It follows from these matters that there should be no award as to indemnity costs. In relation to the appeal itself, although Farstad succeeded on all primary arguments on the appeal, being an appeal in which Ms Romero was still pursuing a large sum in damages, there is no doubt that Ms Romero enjoyed limited success in the partial variation of the costs order, albeit that the grounds on which she challenged the costs order did not succeed. 19 Of the total time involved in and before the appeal, the costs argument would probably only have occupied 25% of the time, even taking into account the new reasoning developed in the hearing of the appeal. The balance of the time was directed to the damages argument on which Farstad wholly succeeded. Given that Farstad's actions were responsible and reasonable in the consideration and making of offers and in the conduct of the appeal, the appropriate order is that Farstad should have two-thirds of its costs on a party and party basis. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop and Justices Rares and McKerracher.