Are indemnity costs justified?
31 MBL seeks an order for indemnity costs pursuant to either r 25.14(2) of the Federal Court Rules 2011 (Cth) or the well-known Calderbank considerations. Of course, I have the necessary general discretion in any event irrespective of these heads.
32 On 15 March 2019, MBL served on SSGA's solicitors an offer of compromise under r 25.01(1). This offer was not accepted by SSGA. MBL says that it was unreasonable for SSGA to reject this offer. It says that when this offer was made, SSGA had available to them ample material to assess their prospects of success across all claims. It says that in all the circumstances, and considering the compromise that was being offered in terms of MBL's future use of the replica, SSGA's failure to accept this offer was unreasonable.
33 Further, later on 15 March 2019, MBL also made a Calderbank offer. Whilst that offer contained terms outside the scope of the relief sought by SSGA, MBL relies on that offer as further evidence of MBL's genuine and reasonable attempt to reach a commercial resolution. It says that SSGA unreasonably failed to accept the offer.
34 Further, on 30 October 2019 a second offer of compromise under r 25.01(1) was made by MBL. The offer was that the proceeding be dismissed with no order as to costs. At that time, MBL's costs of the proceeding were substantial and so, according to MBL, the offer represented a substantial compromise. SSGA rejected the offer, which rejection MBL says was also unreasonable.
35 I will not make an order for indemnity costs. Before saying something about each offer, let me make some general points.
36 SSGA's claims were genuinely raised and reasonably arguable. Indeed, SSGA obtained an interlocutory injunction at the commencement of the proceeding, which was only discharged upon MBL undertaking to use the interlocutory disclaimer. Further, MBL subsequently undertook not to conduct any further promotion or marketing using the replica. Further, although SSGA was ultimately not successful, they did succeed on a few subsidiary issues. Further, they succeeded in obtaining substantive relief against Cbus and HESTA, by way of undertakings.
37 Further, as to the offers of compromise under r 25.01(1), in my view SSGA did not unreasonably fail to accept these offers in the circumstances that existed at the time the offers were refused.
38 Further and more generally, the fact that an offer of compromise is made which is more favourable than the final result does not automatically result in an award of indemnity costs. Further, it does not follow that even if an offer involved a genuine compromise, any rejection is unreasonable. The question of whether indemnity costs should flow from a rejected offer is whether, given the information then available to the offeree, it should have known that its case was likely to fail. The question of the unreasonableness of the rejection is to be analysed utilising the perspective at the time of the offer.
39 Let me say something about each offer.
40 First, the first r 25.01 offer was made early in the proceeding when there had been only limited disclosure by MBL and limited evidence filed. Further, whilst SSGA had some information concerning MBL's campaign before them at the time the offer was made, that material did not inevitably provide a basis for SSGA to conclude that their claims against MBL would be likely to fail.
41 Second, the first r 25.01 offer did not give SSGA any certainty concerning the future installation or use of the replica. Further, the relief offered by MBL did not address any alleged harm to SSGA resulting from its earlier conduct with respect to the replica.
42 Third, it is arguable that the first r 25.01 offer was overtaken, and so arguably taken to have been withdrawn, almost immediately after it was made. An offer may be taken to have been withdrawn if the offer is superseded by an offer in more favourable terms to the offeree. Now the first r 25.01 offer was sent on 15 March 2019 at 5.45 pm. A minute later the Calderbank offer was sent. It is arguable that the Calderbank offer was in more favourable terms, in that it would have provided SSGA with a greater degree of commercial certainty, although at a higher cost and with a stipulation that the replica be left on display for almost two years. If the Calderbank offer was more favourable, then arguably the first r 25.01 offer can be treated as having been withdrawn. But I do not need to decide this given the other views that I have come to.
43 Fourth and in any event, it was reasonable for SSGA to reject the making of two offers with mutually inconsistent terms, particularly where one depended on the maintenance of the current ownership of the replica, whilst the other required SSGA to become the owner of the replica. Given this inconsistency in proposed outcomes, it was not unreasonable for SSGA to reject either or both of these offers.
44 Fifth, although the second r 25.01 offer was made later in the proceeding and after the filing of evidence, it was made prior to trial. MBL's defence to many of SSGA's claims was contingent upon the evidence of its witnesses being accepted by me, particularly in relation to the tortious interference claim. Whilst SSGA's challenge to that evidence was unsuccessful, it was the subject of extensive and reasonable cross-examination at trial. Further, the second r 25.01 offer was a plain vanilla "walk-away" offer, involving the dismissal of SSGA's case with no order as to costs. It offered no relief concerning MBL at all. It was less favourable than the first r 25.01 offer, in that MBL would not continue to give the interlocutory undertakings that had been in place since 7 March 2019, which had been contained in the first r 25.01 offer. Moreover, by the time the second r 25.01 offer was made, SSGA had achieved some success by way of obtaining undertakings from each of HESTA and Cbus that they would permanently cease all use of the replica. In summary, there was nothing unreasonable in SSGA's rejection of this offer.
45 Sixth, the Calderbank offer, as with the first r 25.01 offer, was made at an early stage in the proceeding, prior to discovery and before the parties had filed their substantive evidence. It was made after the launch event. Moreover, MBL would not have been required, as part of that offer, to delete or retract any historical marketing or promotional statements relating to the replica. Further, like the first r 25.01 offer, the Calderbank offer did not address any alleged harm resulting from MBL's earlier conduct regarding the replica. Further, whilst the Calderbank offer would have given SSGA some degree of commercial certainty if they took up the opportunity to purchase the replica, it would have required SSGA to pay a substantial sum to MBL for that privilege and would have also required SSGA to leave the replica on public display in Federation Square for nearly two years as one of its outcomes. Further, the terms of the Calderbank offer were outside the scope of the relief sought by SSGA in the proceeding. No part of the case would have resulted in SSGA paying any sum to acquire the replica, let alone paying a premium to MBL. Further, SSGA would not have been required to maintain the display of the replica in Federation Square or elsewhere. In summary, in my view SSGA's decision not to accept the Calderbank offer was not unreasonable.
46 For the foregoing reasons, I reject MBL's indemnity costs application. The costs awarded will be on a party / party basis. I will refer to a Registrar of this Court the question of whether a lump sum order should be made and if so in what amount.