Seven Network Limited v News Limited [2007] FCA 1489
COSTS – Application for costs on an indemnity basis – applicants reject a joint offer of compromise pursuant to FCR, O 23 – applicants fail entirely – whether rejection of offer imprudent or unreasonable
1.The application of the Costs Respondents (the PBL, Telstra and Optus parties) for…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Seven Network Ltd v News Ltd [2007] FCA 1489
Case
[2007] FCA 1489
Decision Date
CaseChat Overview and Summary
In the case of Seven Network Ltd v News Ltd, the court was asked to determine the consequences of an applicant not accepting an offer of compromise made by a respondent under Order 23 of the Federal Court Rules. The dispute involved the applicant's rejection of a compromise offer and subsequent failure to achieve a more favourable outcome in the proceedings. The court was required to decide whether the respondent could rely on the offer of compromise to obtain an order for costs on an indemnity basis when the applicant was wholly unsuccessful.
The court examined the relevant rules and case law, noting that the terms of Order 23, rule 11(5) do not apply when an applicant rejects an offer and is wholly unsuccessful in the proceedings. It was established that in such cases, a respondent cannot rely on the express language of Order 23, rule 11(5) to obtain an order for costs on an indemnity basis. However, the court recognised that the making of an offer by a respondent, which is rejected by the ultimately unsuccessful applicant, is a factor to be considered when determining the appropriate costs order. The court held that there should be a prima facie presumption that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer.
The court concluded that the application of the costs respondents for an order that the applicants pay the costs of the proceedings incurred after a specific date on an indemnity basis should be dismissed. The applicants were required to file and serve any lay and expert evidence in response to the expert reports and lay evidence served by the costs respondents in relation to the foreshadowed applications for a gross sum order for costs, including evidence addressing questions of quantum and whether a gross sum order ought to be made, on or before a specified date. The experts retained by the parties were to attend a preliminary meeting with a Registrar of the Court to determine the extent of any common ground on issues the subject of the experts' reports. The matter was to be listed for directions and tentatively listed for further hearing on specified dates.
Orders
Orders of the court
1. The application of the Costs Respondents (the PBL, Telstra and Optus parties) for an order that the applicants pay the costs of the proceedings incurred after 16 August 2005 on an indemnity basis, be dismissed.
2. The applicants file and serve any lay and expert evidence in answer to the expert reports and lay evidence served by the Costs Respondents in relation to the foreshadowed applications by the Costs Respondents for a gross sum order for costs (‘the gross sum applications’), including evidence addressing questions of quantum and evidence addressing whether a gross sum order ought to be made, on or before 8 October 2007.
3. The experts retained by the parties on the gross sum applications attend a preliminary meeting with a Registrar of the Court (experienced in taxation) to determine the extent of any common ground on issues the subject of the experts’ reports, on or before 15 October 2007.
4. The matter be listed for directions on 16 October 2007.
5. The matter be tentatively listed for further hearing on 19 October 2007.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
SACKVILLE J
The consequences of an applicant not accepting an offer of compromise made by a respondent pursuant to O 23 are specified in O 23 r 11(5), introduced into the FCR in 2004:‘If:(a)an offer is made by a respondent and not accepted by the applicant; and(b)the applicant obtains judgment on the claim to which the offer relates not more favourable than the terms of the offer;then, unless the Court otherwise orders:(c)the applicant is entitled to an order that the respondent pay the applicant’s costs in respect of the claim incurred up to 11 am on the day after the day when the offer was made, taxed on a party and party basis; and(d)the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred after that time, taxed on an indemnity basis’. (Emphasis added.) It will be seen that the terms of O 23 r 11(5) do not apply to the situation where an applicant who rejects a respondent’s offer of compromise is wholly unsuccessful in the proceedings. It is common ground that in this situation a respondent cannot rely on the express language of O 23 r 11(5) to obtain an order for costs on an indemnity basis: Coshott v Learoyd [1999] FCA 276, at [37], per Wilcox J; Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 (‘Dukemaster’), at [6], per Sundberg and Emmett JJ. However, as was pointed out in Dukemaster, at [6], the making of an offer by a respondent, which is rejected by the ultimately unsuccessful applicant, is a matter to be taken into account in determining whether the Court should make the usual party and party costs order or some order more generous to the respondent. It should be noted that until recently, the rules governing offers of compromise by defendants in proceedings in the Supreme Court of New South Wales were in substantially the same form as FCR, O 23 r 11(5). In Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, Rolfe J expressed the view (at 451) that:‘the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter [Calderbank v Calderbank [1975] 3 All ER 333], is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have referred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged. …It seems to me anomalous that there is no provision whereby a defendant, which is totally successful, is placed in the same position as a plaintiff, which is totally successful. In my view the Rules should be reviewed’.