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.