Toucha Pty Ltd v Thomas Taylor

1. The applicant pay the respondents' costs of the proceeding before 11:00am on 19 June 2016 on a party and party basis.
2. The applicant pay the respondents' costs of the proceeding after 11:00am on 19 June 2016 on an indemnity basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BARKER J: 1 On 15 May 2017, the Court delivered reasons for judgment in this proceeding and made orders dismissing the application against each respondent with costs and granting the respondents leave to make submissions as to the appropriate order as to costs. See Toucha Pty Ltd v Thomas Taylor (Bowls) Limited [2017] FCA 514. 2 The respondents submit that the appropriate order as to costs is as follows: (a) The Applicant pay the Respondents' costs of the proceeding before 11:00am on 19 June 2016 on a party and party basis. (b) The Applicant pay the Respondents' costs of the proceeding after 11:00am on 19 June 2016 on an indemnity basis. (c) By 4:00pm on [three weeks from the date on which the costs orders in paragraphs 2(a) and (b) are made], the Respondents file and serve an affidavit in support of its lump-sum costs claim (Costs Summary) which must not exceed five pages in length (omitting formal parts) and any written submissions in support which must not exceed three pages in length. (d) By 4:00pm on [two weeks from the date on which the Costs Summary is to be filed], the Applicant file and serve any affidavit responding to matters in the Costs Summary (Costs Response) which must not exceed four pages in length (omitting formal parts) and any written submissions in support which must not exceed three pages in length. (d) The Respondents' application for a lump sum costs award is set down for hearing on the first available date [a week after the date on which the Costs Response is to be filed]. 3 On 17 June 2016, the respondents served a notice of offer of compromise on the applicant pursuant to rule 25.01(1) of the Federal Court Rules 2011 (Cth). 4 By the offer, the respondents offered to pay the applicant $200,000 (inclusive of costs and interest) in exchange for the applicant discontinuing its application against both respondents with no order as to costs. 5 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. 6 In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 at [14]-[19], the Full Court (Gilmour, Jagot and Nicolas JJ) held that the effect of the requirement in R 25.14(2) to show that the applicant unreasonably failed to accept the offer is that the general authorities that applied to the award of indemnity costs prior to the introduction of R 25.14(2) continue to apply. As the Full Court held in Kooee at [18], ultimately the question is whether, having regard to all the circumstances, the wholly unsuccessful applicant unreasonably failed to accept the respondent's offer. 7 The respondents submit that it was clearly unreasonable for the applicant to fail to accept the offer. The offer was served nearly 18 months after the applicant commenced this proceeding on 23 December 2014. The pleadings had closed. The offer was served after the parties had attended mediation and after the applicant had given discovery of documents relevant to its claim for damages in accordance with the orders of the Court made on 31 March 2016. In the circumstances, the applicant should have been well aware of the weaknesses of its case by the time the offer was served on 17 June 2016. 8 The respondents further submit there were no complex or difficult questions of law in this case. They say this is evident from the fact that the Court did not need to cite any legal authority in the judgment in order to dispose of the application. The applicant lost the proceeding on the facts. The facts were well within the knowledge of the applicant as they involved statements said to have been made to two directors of the applicant (Mr Rod Heaton and Mr Paul Adam) who both gave evidence at the trial. The Court held that the evidence of Mr Heaton and Mr Adam did not establish any of the pleaded representations. That could and should have been known to the applicant at the time the offer was served. Further, the Court found that the applicant's claims of reliance and loss were either misconceived or not established on the facts. All of that was capable of being known at the time that the offer was served. 9 Finally, the respondents contend that the offer was generous and it was unreasonable for the applicant not to accept it. As a consequence of the applicant not accepting the offer, the respondents have been put to the expense of preparing for and conducting a four day trial. In the circumstances, the Court should make the costs order sought above. To do so would promote the overarching purpose set out in s 37M of the Federal Court Act of Australia 1976 (Cth) of facilitating the just resolution of disputes according to law as "quickly, inexpensively and efficiently" as possible. 10 Additionally, the respondents submit that this is a practicable and appropriate case in which to make a lump-sum costs order, having regard to para [4.1] of the Federal Court Costs Practice Note, dated 25 October 2016. 11 The applicant accepts R 25.14(2) of the Rules is the appropriate rule which is engaged in matters involving applications for indemnity costs in circumstances where an offer has been made prior to trial and not accepted by the unsuccessful party in the proceedings. 12 The applicant also accepts the test to be applied in these proceedings is whether, having regard to all the circumstances, the wholly unsuccessful applicant unreasonably failed to accept the respondents' offer, in accordance with the principles established by the Full Court in Kooee. 13 The applicant, however, rejects the proposition that it unreasonably failed to accept the offer made 17 June 2016. In particular, it submits that it was not clearly unreasonable for it to fail to accept the offer. It rejects the proposition that it should have been well aware of the weaknesses in its case by the time the offer was served on 17 June 2016. It says the respondents have not sought to particularise these alleged weaknesses. 14 The applicant contends that its case essentially involved an assessment by me of the historical facts as asserted by the witnesses called on behalf of both parties. 15 It is submitted that findings of credibility based on the witnesses' recollections of historical facts were essential to the outcome of the case. 16 Given that orders were made for evidence to be adduced in the first instance by way of witness outlines to be supplemented by viva voce evidence at trial, the applicant submits it was not possible to anticipate the outcome of the case until the witnesses had been examined and cross-examined at trial. 17 The applicant says that to suggest the applicant should have been "well aware of the weaknesses" of its case at the time of the offer implies the applicant should have been in a position to make a determination of the credibility (or the lack thereof) of the witnesses solely by virtue of a pre-trial assessment of the witness outlines. 18 The applicant notes that, in their submissions, the respondents suggest the applicant could or should have known at the time the offer was made that the evidence the applicant intended to adduce at trial would not establish the pleaded representations. 19 It is submitted it was reasonable for the applicant to assume that the evidence to be adduced at trial could or would have been accepted by the trial judge and could or would have established the pleaded representations. 20 The applicant submits there is nothing in the judgment which even remotely suggests that the applicant's case was likely to fail from the outset. 21 The applicant notes that the offer did not make reference to any perceived weaknesses in the applicant's case and did not seek to allocate any portion of the sum offered between the claim and costs. The sum offered, namely $200,000, was simply couched as being inclusive of costs and interest. 22 The applicant also disputes the respondents' assertion that the offer was a generous one. It says that, by the time the offer was made, both parties had incurred substantial legal costs. 23 The applicant states that, according to the evidence filed in support of the respondents' application for security of costs filed 8 July 2015, the respondents' costs were estimated to be $227,500 (inclusive of the estimated costs of a 4-day trial and judgment) which suggests that the respondents costs were already in the vicinity of at least $167,500 at the time of the offer. 24 The applicant says that although in my decision I noted that in the event he had sheeted loss home to the respondents, that expectation loss would have been different to that which Mr Tony Kolker calculated, at the time of the offer it was reasonable for the applicant to assume that it could or would succeed in establishing the pleaded representations (or at least some of them) and it would have been open to me, notwithstanding my observations of Mr Kolker's evidence, to have awarded expectation damages based on the representations pleaded by the applicant. 25 It is submitted that given that substantial legal costs had been incurred at the time the offer was made and given that the applicant had the potential to receive an award of damages, the offer of $200,000 was not a generous offer. 26 The applicant also opposes the making of a lump-sum costs order on the basis that costs can be expeditiously and cheaply resolved at taxation. 27 So far as the question of the Court making a lump-sum costs order is concerned, I agree with the submission made on behalf of the applicant that this is a case in which a lump-sum costs order is not appropriate and that a conventional assessment or taxation of the costs incurred is something that can be done both relatively expeditiously and quickly. I will not make a lump-sum costs order. 28 As to whether or not this is a case where indemnity costs ought to be awarded from the relevant time after the making of the offer of compromise, I am of the opinion that indemnity costs should be awarded. In my opinion, it was unreasonable for the applicant not to accept the offer at the time it was made. As the respondents point out, in effect at the point the offer was made the case was ready for trial. The pleadings were closed. The dispute between the parties had been sent to mediation. The applicant should have been in a position where it realised that not only issues of credibility might be raised at trial - although they were not central to my decision-making as the judgment shows - but that proving that specific representations pleaded were made would not necessarily be an easy task. In circumstances where the applicant's case depended upon oral assertions, and the documentary materials available to the applicant to corroborate the allegations made were, at best, ambiguous, the offer needed seriously to be considered. While it might not be fair to describe the offer as "generous", in my view, it was a significant offer in the particular circumstances in which it was made. The applicant was by no means guaranteed success. The weaknesses in its case, from a forensic point of view, must have been obvious to it. While, at that point, as the applicant points out, the legal costs incurred in the proceeding will also have been reasonably significant, the offer made plainly was designed to cover much of the costs incurred by the applicant to that point and provided it with some additional contributions towards the damages claimed. In my view, in all of those circumstances it was unreasonable for the applicant to have refused the offer and the applicant has not met the onus to establish otherwise. 29 In those circumstances, I consider that the appropriate order as to costs should be in the following terms: (1) The applicant pay the respondents' costs of the proceeding before 11:00am on 19 June 2016 on a party and party basis. (2) The applicant pay the respondents' costs of the proceeding after 11:00am on 19 June 2016 on an indemnity basis. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.