Barnes v Forty Two International Pty Limited (No 2)

Barnes and Forty Two International Pty Limited, along with other defendants, were involved in a substantial legal dispute that extended through various stages of litigation, including multiple interlocutory applications and a lengthy trial. The primary dispute centred around claims for damages, with Barnes and Hawksley asserting a cross-claim for misleading or deceptive conduct. The Federal Court of Australia was tasked with resolving these claims, and ultimately, Barnes and Hawksley appealed the trial judge’s decision. The appeal was partially successful, leading to the reconsideration of costs issues arising from the extensive litigation process.

The court was required to determine the appropriate allocation of costs following the appeal, particularly focusing on the indemnity costs claim based on the Calderbank offer and the offer of compromise under rule 25.01 of the Federal Court Rules 2011. The central issue was whether the unsuccessful party should be required to pay the other party’s costs on an indemnity basis, particularly in light of the so-called "walk away" offers made during the litigation. The court also needed to assess the reasonableness of the respondents' decision not to accept the second offer and whether this decision warranted indemnity costs.

In its reasoning, the court concluded that the failure to accept the second offer was not unreasonable given the circumstances of the case. The court found that there was no basis to order indemnity costs for the unsuccessful party. Instead, the court decided that the costs should be awarded on the usual party/party basis, reflecting the outcomes of the litigation. The court set aside certain cost orders made by the trial judge and made new orders that provided for the set-off of costs and detailed the costs to be paid by each party in relation to specific proceedings.

The court ultimately ruled that Barnes and Hawksley would not be required to pay indemnity costs, and the costs orders would reflect the standard party/party basis. The new orders specified the costs to be borne by each party, including setting aside certain orders made by the trial judge and modifying others to reflect the outcomes of the appeal. The court also ordered that Barnes and Hawksley's costs of the appeal would be paid by the respondents.