Mount Isa Mines Ltd v The Ship “Thor Commander” (No 2)

Link copied
Case Copied 19 min read

FEDERAL COURT OF AUSTRALIA

Mount Isa Mines Ltd v The Ship “Thor Commander” (No 2)
[2018] FCA 1702

File number: NSD 104 of 2015
Judge: RARES J
Date of judgment: 26 October 2018
Legislation: Federal Court Rules 2011 Pt 25
Cases cited:

Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112

Calderbank v Calderbank [1976] Fam 93

CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd (2008) 15 ANZ Insurance Cases 61-785

Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1

Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd (No 2) [2013] FCAFC 73

Keays v J P Morgan Administrative Services Australia Limited (No 2) [2011] FCA 574

Mount Isa Mines Ltd v The Ship “Thor Commander” [2018] FCA 1326

Port Kembla Coal Terminal Ltd v BraverusMaritime Inc (No 2) (2004) 212 ALR 281

Date of hearing: 26 October 2018
Registry: New South Wales
Division: General Division
National Practice Area: Admiralty and Maritime
Category: No Catchwords
Number of paragraphs: 28
Counsel for the Plaintiff: Mr G Nell SC
Solicitor for the Plaintiff: HWL Ebsworth
Counsel for the Defendant: Mr A M Stewart SC with Mr D Habashy
Solicitor for the Defendant: Norton Rose Fulbright
Table of Corrections
12 November 2018 In the Appearances on the cover page, the field Solicitor for the Defendant has been amended from “DLA Piper” to “Norton Rose Fulbright”

REASONS FOR JUDGMENT

NSD 104 of 2015
BETWEEN:

MOUNT ISA MINES LTD

Plaintiff
AND:

THE SHIP "THOR COMMANDER"

Defendant

RARES J:

  1. On 29 August 2018, I published my reasons (Mount Isa Mines Ltd v The Ship “Thor Commander” [2018] FCA 1326) for concluding that, in substance, the plaintiff, Mount Isa Mines Ltd, was entitled to judgment against the defendant, being the ship, Thor Commander, and its owners who had appeared as the relevant person, being MarShip GmbH & Co. KG MS “Sinus Aestuum” (collectively MarShip) in the amounts of USD909,000 as its share in respect of salvage, together with the sums of GBP42,660.47 for Mount Isa’s costs in resolving the salvage issue with the owners of Xinfa Hai, GBP431.99 as the costs of the general average bond, and AUD147,956.27 for transhipment costs, together with interest and the costs of the proceeding.  I also found that Mount Isa was entitled to a declaration that it was not liable to contribute to general average.  I directed the parties to confer and bring in draft orders to reflect those outcomes.

  2. The parties did so on 31 August 2018 when I made final orders in the proceedings.  Those included an agreed order that, in addition to MarShip paying Mount Isa’s costs of the proceedings (including the costs of and occasioned by MarShip’s cross-claim), Mount Isa’s application for an order that costs from 18 June 2017 be payable on an indemnity basis be stood over for hearing to today.

    Background

  3. The circumstances in which Mount Isa made its claim for indemnity costs…

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Mount Isa Mines Ltd v The Ship “Thor Commander” (No 2) and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2018] FCA 1702
Decision Date

CaseChat Overview and Summary

Mount Isa Mines Ltd v The Ship “Thor Commander” (No 2) was a case brought before the Federal Court of Australia. The primary dispute was whether Mount Isa Mines Ltd was entitled to an award of indemnity costs after rejecting a settlement offer made by The Ship “Thor Commander” (referred to as MarShip). The case arose from a dispute over a salvage award and the costs associated with the litigation.

The court had to determine whether Mount Isa Mines Ltd's rejection of MarShip's settlement offer was unreasonable or imprudent, which would entitle Mount Isa Mines Ltd to costs on an indemnity basis. This required an analysis of the factors that may indicate an unreasonable refusal of a settlement offer, including the stage of the proceedings, the time allowed for consideration, the extent of the compromise offered, the offeree's prospects of success, the clarity of the terms of the offer, and whether the offer foreshadowed an application for indemnity costs.

The court held that, despite Mount Isa Mines Ltd's offer being less favourable than its eventual outcome, it was not imprudent or unreasonable for MarShip to reject the offer, given the complexities of the case. The court balanced the promotion of settlement of litigation against the right of parties to resort to the court to resolve their differences, and concluded that MarShip was entitled to reject the offer and proceed to trial.

The court found that MarShip was not liable to pay Mount Isa Mines Ltd's costs on an indemnity basis, given that the rejection of the offer was not plainly unreasonable. The decision emphasised that the rejection of a settlement offer on terms more favourable than the eventual outcome does not automatically lead to an order for indemnity costs. Instead, the applicant must show that the rejection of the offer was imprudent or plainly unreasonable.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The parties did so on 31 August 2018 when I made final orders in the proceedings. Those included an agreed order that, in addition to MarShip paying Mount Isa’s costs of the proceedings (including the costs of and occasioned by MarShip’s cross-claim), Mount Isa’s application for an order that costs from 18 June 2017 be payable on an indemnity basis be stood over for hearing to today.Background The circumstances in which Mount Isa made its claim for indemnity costs are in a narrow compass. The trial was fixed to commence on 19 June 2017 at 10.15am. On Saturday, 17 June 2017 at about noon, Mount Isa’s solicitors sent MarShip’s solicitors a without prejudice offer, save as to costs, based on the principles in Calderbank v Calderbank [1976] Fam 93. The letter recited that Mount Isa had set out the reasons why it expected to succeed in the proceedings in its outline of opening submissions that it had filed and served on 8 June 2017. Mount Isa offered to accept USD615,000 in respect of its claims for damages inclusive of interest and its costs, together with a declaration absolving it from having to contribute to general average in the form that Mount Isa had sought and that I ultimately made. The letter said that if accepted, Mount Isa’s claim and MarShip’s cross-claim would both be otherwise dismissed, with no order as to costs. The offer was to remain open until 9 am on 19 June 2017, an hour and 15 minutes before the commencement of the trial. At 8.02 am on 19 June 2017, the solicitors for MarShip emailed their counterparts. The email referred to the then ongoing mediation and attached a letter written without prejudice save as to costs. That letter referred to Mount Isa’s offer made on 17 June 2017 and stated that: “Our client rejects that offer and makes the following counter-offer in full and final settlement” of the proceeding. MarShip offered to pay Mount Isa USD300,000 including interest and costs, without admission of liability and without prejudice to any claim in general average, and to consent to the proceedings and cross-claim being discontinued with no order as to costs. The offer was to be open until 9 am on 21 June 2017. As had Mount Isa, MarShip asserted that its offer was reasonable having regard to the strength of its case as outlined in its opening submissions, that it had served on 14 June 2017. MarShip’s letter referred, once again, to Calderbank [1976] Fam 93.The parties’ arguments Mount Isa contended that the relevant test for determining whether a rejected offer to settle proceedings gives rise to an entitlement to an award of costs on an indemnity basis from the time of its rejection or non-acceptance, depends on the offeror demonstrating that the offeree was imprudent or unreasonable in rejecting the offer. The parties referred to some decisions of the Full Court which had expressed a qualification of that position, namely, that the offeror had to demonstrate that the rejection was not simply unreasonable, but rather that it was “plainly unreasonable”. However, during the course of argument, it appeared to be common ground that, in the circumstances, not much seemed to turn on that question.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I am of opinion that, given those very uncertainties, Mount Isa’s offer put forward a real and reasonable compromise. However, balancing the two considerations of the promotion of settlement of litigation and the right of parties to resort to the court to resolve their differences, in all of the circumstances, I am not satisfied that it was imprudent or unreasonable for MarShip to have rejected Mount Isa’s offer given the complexities of the case. The case is close to, but does not cross, the line despite the fact that Mount Isa’s offer was much less favourable to it than what it ultimately achieved in the litigation. I am of opinion that MarShip was entitled to reject the offer and allow the matter proceed to trial, difficult as it was.Conclusion For these reasons, I am not prepared to order that MarShip pay Mount Isa’s costs on an indemnity basis.

Ratio Decidendi

Legal Principle Established

Thirdly, MarShip also argued that, in its offer, Mount Isa had not explained or analysed how it had arrived at the quantum of USD615,000. MarShip argued that unlike MarShip’s counter-offer, Mount Isa’s offer did not point to any explanation in its opening submissions that had asserted that the salvage award should be quantified at about USD350,000.Consideration The Full Court has discussed the principles applicable to determine, at common law, whether an offeree who fails to accept an offer of settlement will be liable to pay costs thereafter on an indemnity basis. Different Full Courts have stated the test as that the rejection of the offer must be either “imprudent or unreasonable” or “imprudent or plainly unreasonable” in order to enliven the discretion to award costs on an indemnity basis. This difference in expression, while unfortunate, does not appear to be substantive. In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7], Sundberg and Emmett JJ said:The mere making of an offer of compromise and its non‑acceptance, followed by a result more favourable to the offeror, does not automatically lead to an order for payment of costs on an indemnity basis: John S Hayes & Associates Pty Ltd v Kimberley‑Clark Australia Pty Ltd (1994) 52 FCR 201 at 204‑206; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 239. The applicant for a more generous award must show that the rejection of the offer was imprudent or plainly unreasonable: NMFM Property Pty Ltd v Citibank Ltd (No 2)(“NMFM”) (2001) 109 FCR 77 at 98; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [28]; Sydney Markets Ltd v Sydney Flower Market Pty Ltd [2002] FCA 283 at [16]‑[17] and [23]. (emphasis added) They added (at [8]) that this position was unlike that applicable to the service of an offer of compromise under an analogue of what is now Pt 25 of the Federal Court Rules 2011. They said that the offer must be a reasonable one and ordinarily should contain a statement of the reasons that the offeror maintains why the offeree’s case would fail. The authorities do not lay down an inflexible rule, that some detailed reasoned explanation need be given, to justify the exercise of what is, after all, a judicial discretion to make an order for costs on a basis different to the ordinary party-party basis. That is particularly so in circumstances such as the ones that obtain here, where each party, on the eve of the trial, had engaged in an ongoing mediation that remained alive, as the letters rejecting the offer and making the counter-offer demonstrated, and each had provided the other with substance of its evidence-in-chief and its detailed opening submissions that drew, quite clearly, the battle lines between them. In my opinion, the preponderance of authority in the Full Court, to the extent that the word “plainly”, as a qualification to “unreasonable”, may be thought to affect the test, is that set out in the reasons of Nicholas, Yates and Beach JJ in Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [6]-[8], namely:[6] A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree’s refusal of the offer was “unreasonable” when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac & Ors (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ). [7] The circumstances to be taken into account in determining whether rejection of an offer was “unreasonable” cannot be stated exhaustively but may include, for example:(a) the stage of the proceeding at which the offer was received;(b) the time allowed to the offeree to consider the offer;(c) the extent of the compromise offered;(d) the offeree’s prospects of success, assessed as at the date of the offer;(e) the clarity with which the terms of the offer were expressed; and(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it.(Hazeldene’s Chicken Farm Pty Ltd v VictorianWorkCover Authority (No 2) (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J). [8] An unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer (CGU Insurance at [75]; Black at [217]-[218]). As we observed in the Appeal Reasons, albeit in the context of r 25.14(2) of the FCRs, assessment of the “unreasonableness” of an offeree’s refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered.