FEDERAL COURT OF AUSTRALIA

Visscher v Teekay Shipping (Australia) Pty Ltd (No 2) [2014] FCAFC 19

THE COURT ORDERS THAT:

1.    The respondent pay the appellant’s costs.

2.    The security provided by the appellant for the costs of the appeal be returned to him.

3.    The respondent may set off its liability in the proceedings below to pay the judgment sum and interest the subject of Order 2 made by the Full Court on 13 February 2014 and its liability under Order 1 made today against the amount found to be due to it by the appellant pursuant to Order 1 made by the primary judge on 29 January 2013.

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

REASONS FOR JUDGMENT

THE COURT

1    On 13 February 2014, the Court delivered reasons for allowing Mr Visscher’s appeal and awarding him $16,149.53 (or $10,116.93 exclusive of interest) under s 78 of the Navigation Act 1912 (Cth): Visscher v Teekay Shipping (Australia) Pty Ltd [2014] FCAFC 5 (the principal reasons). It ordered the parties to file written submissions as to costs in respect of both the trial and appeal.

Background

2    The primary judge had dismissed Mr Visscher’s application and, on 29 January 2013, ordered him to pay Teekay’s costs (other than those in respect of its unsuccessful motion for summary judgment) on a party and party basis up to 11.00 am on 9 March 2012 and thereafter on an indemnity basis: Visscher v Teekay Shipping (Australia) Pty Ltd (No 5) [2013] FCA 28. The award of indemnity costs followed Teekay’s offer of compromise under r 25.14 of the Federal Court Rules 2011 (Cth) made on 7 March 2012 to settle the proceeding on the basis of a payment to Mr Visscher of $200,000 in addition to costs on condition that he discontinue the proceeding and all interlocutory applications and appeals arising out of it with no orders as to costs. That offer followed the then recent decision of another Full Court that had set aside the primary judge’s earlier order summarily dismissing the proceeding and, so, clearing the way for a trial: Visscher v Teekay Shipping (Aust) Pty Ltd (2011) 198 FCR 575.

3    Her Honour held that Mr Visscher had been unreasonable not to have accepted the March 2012 offer. She found that it was almost four times greater than the amount she had calculated to have been the true value of his claim, and that whatever encouragement he may have received from the earlier Full Court’s decision, it had said nothing as to the value of that claim ([2013] FCA 28 at [34]).

The parties’ submissions

4    Teekay argued that Mr Visscher’s limited success on appeal secured him a judgment worth about 20 times less than its offer. It contended that it should to be seen as the substantively successful party both at trial and on appeal, given that Mr Visscher had been contending for an award of about $7 million. Teekay submitted that the damages found on appeal were analogous to an award of nominal damages when viewed in the context of the substantial sum he had been seeking to recover. It accepted that the offer of compromise did not apply directly to the appeal but contended that, nonetheless, the Full Court could take it into account in exercising its discretion to award costs. Teekay sought an order that Mr Visscher pay the costs of the appeal on an indemnity basis, leaving the primary judge’s costs order undisturbed and allowing the judgment sum to be set off against the costs.

5    Mr Visscher pointed out that he had succeeded on appeal and that all of Teekay’s grounds in its notice of contention had failed. He argued that the March 2012 offer had been made before Teekay’s complete case had been disclosed below. He contended that her Honour’s costs order be set aside and that Teekay be ordered to pay the costs of both the proceedings below and this appeal.

Consideration

6    Her Honour’s costs order was made under r 25.14(2). Relevantly, r 25.14 provides:

“25.14    Costs where offer not accepted

(1)    If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer:

(a)    the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and

(b)    the respondent is entitled to an order that the applicant pay the respondent’s costs after that time on an indemnity basis.

(2)    If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant’s proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent’s costs:

(a)    before 11.00 am on the second business day after the offer was served – on a party and party basis; and

(b)    after the time mentioned in paragraph (a) – on an indemnity basis.”

7    There is no reason to disturb the costs orders made by the primary judge. Had her Honour made the order that Mr Visscher obtained on this appeal, the operation of r 25.14 would have resulted in the existing costs order that her Honour made. Mr Visscher recovered even less on the present appeal than her Honour had in mind as the value of his claim. As the primary judge noted, r 25.14 operates on an offer of compromise at all stages of the proceedings, whatever the state of the evidence when it is served. Mr Visscher’s own conduct in the two year period following 4 June 2004 when Teekay made its final payment to him suggested that it would be very difficult for him to argue that Teekay’s delay in any payment in that period attracted an entitlement to double wages under s 78 for that period or, in light of that conduct, for any later period.

8    Teekay’s offer of $200,000 was a genuine attempt to compromise the proceedings. It represented a generous sum that, after all, was not in the nature of compensatory damages, but more in the nature of penalty. Mr Visscher never suffered any pecuniary loss. He was seeking a punitive award in a context where, by 4 June 2004, Teekay had sought to pay him what it thought, erroneously but genuinely, was all that was due to him. He had accepted that payment without complaint for two years. Mr Visscher’s failure to accept the March 2012 offer was unreasonable in all of the circumstances. While her Honour’s decision was made in the context of dismissing Mr Visscher’s claim, the considerations to which she adverted remain relevant and apposite, having regard to the outcome of the appeal, to the issue of the orders that should have been made below.

9    However, Mr Visscher did succeed on appeal. Teekay ran numerous arguments on appeal which were rejected. It never acknowledged that it had acted in breach of contract by seeking to demote Mr Visscher. In those circumstances, Mr Visscher is entitled to the costs of the appeal recoverable by a litigant in person: Cachia v Hanes (1994) 179 CLR 403. The effect of the appeal was to put him in the position he should have been in after the trial. Although his overall result is still well below Teekay’s offer of compromise, it has been improved because of his success in obtaining an award in his favour. There is no evidence that Teekay sought to protect its position by making any offer to compromise the appeal, which it lost. Mr Visscher obtained some vindication of his position.

10    Mr Visscher also sought return of the $50,000 that he had been ordered to pay as security for the costs of his appeal. Given that his appeal has succeeded, the purpose of the provision of the security has been spent and the money should be returned to Mr Visscher.

11    Given the overall outcome, Teekay should be allowed to set off its liability for the judgment sum and in respect of costs of the appeal against Mr Vischer’s liability for costs in the proceedings below.

Associate:

Dated:    7 March 2014