FEDERAL COURT OF AUSTRALIA

Richardson v Oracle Corporation Australia Pty Ltd (No 2) [2014] FCAFC 139

THE COURT ORDERS THAT:

1.    Order (2)(b) of the orders made on 15 July 2014 be varied by substituting the figure of $161,572.24 for the figure of $130,000.

2.    The issue of the offer of compromise be governed by the Federal Court Rules 1979 (Cth).

3.    The First Respondent pay the costs of the Appellant in the Court below on a party-party basis up to and including 20 September 2010 and on an indemnity basis from 21 September 2010.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

The Court:

1    In Richardson v Oracle Corporation Australia Pty Ltd (2014) 312 ALR 285 this Court determined that the Appellant was entitled to have the damages awarded to her substantially increased from that which she was awarded at trial. The trial judge had awarded $18,000 but this Court increased the award to $130,000.

2    Two questions now remain. First, should the Appellant also receive a sum for pre-judgment interest. Secondly, should she have the benefit of an indemnity costs order on the basis of an offer of compromise served by her on 20 September 2010 in advance of the trial. The Appellant offered to accept the sum of $106,500 plus interest together with her costs as at that time as assessed or agreed in settlement of the case.

3    The first issue may be shortly dealt with as the First Respondent (Oracle) does not oppose the order sought. Section 51A(1) of the Federal Court of Australia Act 1976 (Cth) permits the Court to include in any judgment an amount for interest between the time that the cause of action arose and the date on which the judgment is entered. The Appellant submits, and Oracle does not dispute, that the appropriate figure for interest is $31,572.24. Order 2(b) of the orders made on 15 July 2014 will be varied accordingly. We would make no order as to costs with respect to this issue.

4    As to the second issue of indemnity costs the parties are in dispute. The entitlement of the Appellant arises from an offer of compromise served by her solicitors on Oracle’s solicitors dated 20 September 2010. That offer was in the following terms:

‘1.    This is an offer of compromise made by the Applicant pursuant to Order 23 of the Federal Court Rules.

2.    The Applicant offers to compromise the whole of the proceedings by:

a)    payment by the Respondents to the Applicant of the sum of $106,500 plus interest; and

b)    payment by the Respondents to the Applicant of the Applicant’s costs of this proceeding as agreed between the parties or as assessed.

3.    This offer is open for acceptance by the Respondents until the expiration of 14 days from the date that it is made.’

5    The trial was concluded on 1 November 2012 and judgment delivered on 20 February 2013. After the offer was made the Federal Court Rules 1979 (Cth) were repealed by the Federal Court Rules 2011 (Cth) which came into force on 1 August 2011. There is a preliminary issue as to whether the current debate is to be resolved under the former or the new rules. The Court has the power under the present rules to order that the former rules should apply: see r 1.04. In this case, the parties’ consideration of the offer of compromise must have taken place in a context where, at the material times, they understood the former rules applied. Regardless of whether those former rules applied we would order them to apply under r 1.04(3) for reasons given by the Full Court in largely analogous circumstances in Elecspess Pty Ltd v LED Technologies Pty Ltd (2013) 215 FCR 95 at 99-100 [11]. We so order.

6    Order 23 of those former rules provides a regime in which a failure by a party to accept an offer under that order could have costs consequences if the party making the offer subsequently achieved a superior outcome in the litigation. For the regime to be engaged the offer must comply with the requirements of Order 23 rule 5. In this case there is no dispute that the 20 September 2010 offer did comply with the requirements of that rule and that the regime in Order 23 is therefore applicable.

7    Debate is centred instead on the operation of Order 23 rule 11(4), which provides:

‘(4)    If:

(a)    an offer is made by an applicant and not accepted by the respondent; and

(b)    the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer;

then, unless the Court otherwise orders, the applicant is entitled to an order against the respondent for costs incurred in respect of the claim:

(c)    up to and including the day the offer was made — taxed on a party and party basis; and

(d)    after that day — taxed on an indemnity basis.’

8    Oracle did not accept the offer and, in the events which have occurred, the Appellant has succeeded in obtaining a judgment sum which is larger than the one which was offered.

9    The issue which arises is whether this Court should now order that the presumptive entitlement of Ms Richardson to an indemnity costs order should be displaced (i.e., whether the Court should ‘otherwise order’). The genesis of the debate lies in this observation in which the whole Court concurred in the principal judgment (at 338 [237]):

‘…As the reasons of Kenny J show, while we have concluded that the award in this case was manifestly inadequate, the award given by the trial judge was not out of step with some past awards in cases of this kind. In this circumstance, there may be an argument available to Oracle that it ought not to be criticised for rejecting an offer which was out of line with those other awards. In turn, this may require a consideration of the parties’ reasonable or prudent expectations of the litigation at the time of the offer. This court is better placed to decide this than the trial judge. In those circumstances, we would hear the parties (in writing) on the issue of the costs of the trial.’

10    Order 23 rule 11(4) deals with the situation of an offer made by an applicant whereas rule 11(6) deals with an offer made by a respondent. Although there are differences between the two they both create a presumptive entitlement from which the Court may depart by otherwise ordering. At least insofar as that concept is concerned the Court’s exegesis of the principles relating to Order 23 rule 11(6) are applicable to rule 11(4).

11    It will be appropriate to depart from the presumptive position under rule 11(6) (and hence rule 11(4)) for proper reasons ‘which, in general, only arise in an exceptional case’: Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281 at 284 [17]. In assessing what is exceptional in the relevant sense it is useful to keep in mind, as the New South Wales Court of Appeal put it in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725, that ‘[l]itigation is inescapably chancy’ and that it was precisely to encourage meditation upon that unsettling truth that court rules such as Order 23 providing for offers of compromise were introduced. In the words of Mason P, rules such as rules 11(4) and 11(6) encourage the parties ‘to give serious thought to the risk involved in non-acceptance’: Morgan v Johnson (1998) 44 NSWLR 578 at 581-2.

12    Thus the mere fact that something unexpected or unforeseen has happened during the course of the litigation is unlikely, in a usual case, to provide the kind of proper reasons for which Order 23 rules 11(4) and 11(6) call. The litigation landscape is littered with the wreckage of unforeseeable events and unexpected circumstances.

13    It is evident, we think, that the Court’s decision has effected a change to the level of awards for general damages in cases involving sexual harassment. That was the reason the Court concluded that the trial judge’s original award of $18,000 ‘was not out of step with past awards in cases of this kind’ yet was nevertheless manifestly inadequate by reference to general standards prevailing in the community (at 316 [118] per Kenny J, Besanko and Perram JJ agreeing at 316 [119]).

14    The Appellant submitted that this development in the Court’s jurisprudence was not, when all was said and done, particularly unforeseeable. There is probably little to be gained in seeking to develop a calculus of jurisprudential unforseeability. It will suffice, at least in this case, to observe that we do not, on balance, regard this Court’s decision in the present case as other than the kind of orderly development of pre-existing principle which is the everyday work of intermediate appellate courts. As such, it is not a circumstance which would justify this Court from disengaging the Appellant’s presumptive entitlement to indemnity costs.

15    The orders of the Court will be:

(1)    Order (2)(b) of the orders made on 15 July 2014 be varied by substituting the figure of $161,572.24 for the figure of $130,000.

(2)    The issue of the offer of compromise be governed by the Federal Court Rules 1979 (Cth).

(3)    The First Respondent pay the costs of the Appellant in the Court below on a party-party basis up to and including 20 September 2010 and on an indemnity basis from 21 September 2010.

Associate:

Dated:    27 October 2014