Verrocchi v Direct Chemist Outlet Pty Ltd

Whether the Offer was a genuine offer of compromise 5 The respondents submit that the Offer was a genuine compromise because it offered that the parties bear their own costs of the appeal. They contend that whilst the Offer could be described as a "walk away" offer, it could be seen as a genuine compromise (Austin Nichols & Co Inc v Lodestar Anstalt (No 2) (2012) 202 FCR 506 at [24] per Jacobson, Yates and Katzmann JJ). 6 In our view, the Offer was not a genuine offer of compromise in the sense that there was no real and genuine element of compromise. 7 First, the Offer proposed the abandonment of the appeal, but with no compromise of substance in relation to matters being agitated in the appeal. 8 Second, a "walk away" offer with each party bearing their own costs may be a genuine offer of compromise where there is a substantial element of compromise in forgoing a potential entitlement to recover substantial costs that had been incurred by the offeror to the date of the relevant offer (Barnes v Forty Two International Pty Limited (No 2) [2015] FCAFC 19 at [18] per Siopis, Flick and Beach JJ). But in the present case, the respondents do not appear to have expended any substantial legal costs by the time the Offer was made. It was made before the respondents took any steps in relation to the appeal save for the filing of an address for service. This case is dissimilar to Barnes where the various offers of compromise were made close to trial, when significant costs had already been incurred by the offeror. Further, this case is distinguishable from Lodestar Anstalt where the Court inferred that the costs incurred by the offeror had been substantial by the time the offer was made (at [24]).

Whether the failure to accept the Offer was unreasonable 9 The respondents submit that it was unreasonable for the appellants to have rejected the Offer. We reject this submission. 10 First, the respondents submit that the appeal was, in essence, an attempt to re-run the case below. It is said that the appellants apparently did not have a point of principle to advance and sought to challenge the trial judge's conclusions without showing any error of law or fact. But we agree with the appellants that it was not necessary for them to identify an error of law in the primary judge's reasoning as a justification for rejecting the Offer. Further, the appellants submit that as the Offer was a "walk away" offer, in essence the Court must find that the appeal was untenable or vexatious in order to determine that it was unreasonable for the appellants to have rejected the Offer. That is correct. We agree with the appellants that it could not be so described. 11 Second and relatedly, we agree with the appellants that it was not unreasonable for them to seek to have the trial judgment tested on appeal, given that it was based on an impressionistic evaluation of the facts which were open to reconsideration. 12 Third, the respondents submit that the Offer was made after receipt of the notice of appeal on 21 April 2015, and that as the "factual and legal matrix … was set", the appellants should have known that the appeal was likely to fail. We disagree. 13 Fourth, the respondents submit that the Offer was open for a period of 14 days, and was made several months before the appeal was set for hearing. It is said that this gave the appellants a reasonable opportunity to reassess their prospects of success on appeal. But we agree with the appellants that nothing in the Offer indicated why they should re-assess the prospects of their appeal differently and nothing else had changed since the filing of the notice of appeal. 14 Fifth, as we have already said, the Offer contained no genuine element of compromise. 15 In summary, the refusal of the Offer was not unreasonable for the purposes of r 25.14(2). Moreover, if it is necessary to say so, even if r 25.14(1) had been triggered, we would have exercised our power not to award indemnity costs for all of the above reasons even though r 25.14(1) (unlike r 25.14(2)) does not address the reasonableness question in terms.

Conclusion 16 We refuse the application for indemnity costs. As to the costs of this application, they should lie where they fall. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Nicholas, Murphy and Beach.