FEDERAL COURT OF AUSTRALIA

Reurich v Club Jervis Bay Ltd (No 2) [2018] FCA 1727

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay the applicant’s costs of the proceeding.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 17 August 2018 I made declarations that the respondent, Club Jervis Bay Ltd (Club), engaged in unlawful discrimination under s 23, s 24 and/or s 27 of the Disability Discrimination Act 1992 (Cth) (DD Act) on six different occasions amounting to 10 separate contraventions and ordered that the Club pay damages to the applicant, Peter George Reurich, by way of compensation in the sum of $16,000 plus interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) from 15 September 2015: see Reurich v Club Jervis Bay Ltd [2018] FCA 1220 (Reurich (No 1)).

2    At the request of the Club, I reserved on the question of costs and ordered the parties to file and serve submissions in relation to the question of costs of the proceeding and to indicate whether, in their respective views, that issue could be determined on the papers.

3    Mr Reurich and the Club have now provided me with their submissions. In addition, the Club has filed and served an affidavit sworn by Stephen Gerard Connell, its solicitor, on 6 September 2018 and Mr Reurich has filed and served an affidavit sworn by him on 4 October 2018. No objection was taken by either party to the filing of, or reliance on, that further evidence.

4    The Club indicated that it was content for the issue of costs to be determined on the papers provided there was no objection to the tender of Mr Connell’s affidavit and the Court was prepared to admit that affidavit into evidence. Mr Reurich indicated that if, having read the parties’ respective submissions, the Court was not persuaded that he was entitled to his costs, then he wished to be heard.

5    Having regard to the requirements of s 20A(2) of the FCA Act, I was satisfied that this aspect of the matter could be dealt with on the papers.

the evidence relating to the issue of costs

6    On 8 February 2016 the parties attended a Court ordered mediation before a Registrar of the Court. According to Mr Connell, the Club made an offer to settle the proceeding on that occasion. While Mr Reurich cannot recall being offered the amount referred to by Mr Connell, he recalls that offers were made both at and shortly after the mediation. Ultimately, the matter did not settle as a result of the mediation.

7    On 5 August 2016, the Club served a notice of offer of compromise (Offer of Compromise) pursuant to r 25.01(1) of the Federal Court Rules 2011 (Cth) (Rules) on Mr Reurich via his then counsel. A copy of the Offer of Compromise was in evidence before me. That copy was not signed by the Club or its solicitors as required by r 25.02 of the Rules but no issue was taken about that by Mr Reurich. The Offer of Compromise was in the sum of $20,000 inclusive of interest and costs and was open to be accepted for 28 days after its service.

8    The letter from the Club’s solicitors dated 5 August 2016 which attached the Offer of Compromise, made a further offer of settlement in the alternative in accordance with the principles in Calderbank v Calderbank [1975] 2 All ER 333 (Calderbank) (Calderbank Offer), which was in the following terms:

Calderbank offer

In the alternative, our client makes the following offer of settlement to your client:

1.    Our client will pay to your client the sum of $20,000 inclusive of interest and costs in full and final settlement of his claim against it.

2.    Proceedings are dismissed with no orders as to costs.

3.    Our respective clients will execute a Deed of Settlement and Release containing a release by your client in favour of our client with respect to all claims that your client had, have or may have against our client.

4.    This offer is open for acceptance within 28 days of the date of this letter.

…

9    On 28 October 2016 the parties attended a second mediation at which the Club offered to settle the proceeding on the basis that it:

(1)    pay Mr Reurich compensation in the sum of $25,000 all inclusive;

(2)    include an article in its monthly newsletter referring to companion dogs and the important role they played in the community and outlining the rules with respect to companion dogs in public places; and

(3)    provide to Mr Reurich a written statement of regret about the circumstances leading to the litigation

(Second Mediation Offer).

10    Mr Reurich rejected that offer. According to Mr Reurich, he said (I infer to the mediator) that “[i]t’s not about the money”. Mr Reurich made a counter offer at the second mediation to settle the proceeding on the following terms:

(1)    the Club pay him compensation in the sum of $100,000;

(2)    the Club provide a written apology acknowledging wrongdoing to be published in the New York Times and the London Times newspapers together with a full page colour photograph of Boofhead, Mr Reurich’s companion dog; and

(3)    Mr Reurich’s Club membership be reinstated.

11    There is a difference of opinion between Mr Connell and Mr Reurich as to what transpired next. But it is clear that the Club did not accept Mr Reurich’s counter offer and that, either during the course of the second mediation or shortly thereafter, Mr Reurich increased the amount he was seeking by way of compensation to settle the matter to $200,000. Mr Reurich said that he did so because at the time he believed that “the avenues for settlement were becoming exhausted” as the Club would not publicly admit that it “broke the law” and would not reinstate his membership.

12    According to Mr Reurich, the amount of compensation was not irrelevant to him. He felt he was entitled to compensation for being discriminated against and for the hurt and damage that the discrimination had caused him. However, Mr Reurich also said that of greater importance to him was a public statement of wrongdoing and the reinstatement of his membership. Mr Reurich said that, because the Club was refusing to offer those things, the size of any monetary compensation was somewhat beside the point. He said that he nominated $100,000 at the second mediation because he was asked to give a figure.

13    Mr Reurich also said that he rejected the Club’s offers principally because:

(a)    The offers did not involve a public statement that the Club had discriminated against me and Boofhead. I believed, at all times, that the Club acted unlawfully in not letting me and Boofhead into the Club. I wanted a public statement that this was the case. I was also concerned that if the Club (and others like it) could discriminate against me in this way, they could discriminate against others too.

(b)    The offers did not involve a reinstatement of my membership of the Club. I had been barred, and then “barred for life”. I thought that my being barred, and then barred for life, was unlawful and unfair. Being barred, and then barred for life, also caused me hurt and humiliation in my local Jervis Bay community. I felt that having my membership reinstated would be a public statement that the Club admitted it had discriminated against me and Boofhead. I also felt that having my membership reinstated would reduce the humiliation and hurt that being barred had caused me.

legal principles

14    Section 43 of the FCA Act confers a broad discretion on the Court to award costs which is “not to be read down otherwise then by judicial principle conformable with the amplitude of the power”: DSE (Holdings) Pty Ltd v InterTAN Inc (2004) 51 ACSR 555; [2004] FCA 1251 at [14] (per Allsop J, as his Honour then was). Ordinarily, in the absence of special circumstances justifying a different order, costs follow the event: Ruddock v Vardalis (No 2) (2001) 115 FCR 229 at [11].

Offers of Compromise – Pt 25 of the Rules

15    Part 25 of the Rules concerns offers to settle. Rule 25.01(1) provides that a party (the offeror) may make an offer to compromise by serving a notice, in accordance with Form 45, on another party (the offeree). Rule 25.02 requires that the notice be signed by the offeror and, as to its content, must comply with r 25.03.

16    Rule 25.14 sets out the costs consequences where an offer is not accepted. It relevantly provides:

(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.

17    In determining whether the consequences of r 25.14 apply where an offer of compromise served in accordance with the Rules is rejected, the issue for the Court is whether the judgment obtained by the offeree is less favourable than the terms of the offer: see Guo v Commonwealth of Australia (No 2) [2018] FCA 13 (Guo) at [11]. In Guo at [10] Jagot J said:

It may be accepted that, as the Commonwealth submitted, the question whether an applicant has obtained a judgment that is less favourable than the terms of the offer involves asking if the applicant “won anything of value or anything he could not have won without fighting the action through to a finish?” (Roache v News Group Newspapers Ltd [1992] TLR 551 applied in Timms v Clift [1998] 2 Qd R 100 at 107), and that this requires a comparison of the relief sought with a comparison of the relief granted (Metz Holdings Pty Ltd v Simmac Pty Ltd (No 3) [2011] FCA 1450 at [26]; Timms v Clift [1998] 2 Qd R 100 at 107).

18    Rule 1.35 of the Rules provides that “[t]he Court may make an order that is inconsistent with these Rules and in that event the order will prevail”.

19    In Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 (per Rares, Flick and Bromwich JJ) at [22] the Court held that there is power to make an order inconsistent with r 25.14 relying on r 1.35 of the Rules “where there is reason to do so, including in those cases where the application of r 25.14 would lead to or cause injustice or not meet the justice of the case”. Their Honours continued:

… Such an order inconsistent with r 25.14 would, in such circumstances, be an “exception” to the prima facie presumption. Care must nevertheless be exercised to ensure that the use of such phrases as “proper reasons” or “exceptional circumstances” do not operate as a gloss to constrain the otherwise broad discretionary power conferred by r 1.35: Shin Kobe Maru 181 CLR at 421. Rather, expressions such as “exceptional” or “show reason why” that Hely J and other judges have used in explaining occasions on which it is open to a Court to make orders inconsistent (under r 1.35) or relieving compliance (under r 1.34) with the provisions of the Rules, should be understood as simply conveying the notion that a reason or reasons must be shown for departing from the prima facie position set forth in r 25.14. That is because, unless there is a feature of the occasion that calls for an exception to be made, the prima facie position prescribed by r 25.14 will apply.

Calderbank Offers

20    In relation to Calderbank offers, Crennan J in Jacomb v Australian Municipal, Administrative, Clerical & Services Union [2004] FCA 1600 (Jacomb) at [6] said:

The principles governing Calderbank offers have been the subject of a number of decisions of this Court: see for example Black v Tomislav Lipovac BHNF Maria Lipovac & Ors [1998] FCA 699; Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 (“Dr Martens”). As a general rule, the mere refusal of the Calderbank offer does not automatically mean that the Court should make an order for costs on an indemnity basis, even where the result, following refusal of the offer, is less favourable to the offeree than that contained in the offer. Rather, the offer to settle must be a genuine offer to compromise, and there must be some element of unreasonableness in the offeree’s refusal to accept the offer: see Fresh Express Australia Pty Ltd v Larridren Pty Ltd [2002] FCA 1640; Dr Martens.

21    In Eatock v Bolt (No 2) (2011) 284 ALR 114; [2011] FCA 1180 (Eatock), in the context of a proceeding concerning a breach of the Racial Discrimination Act 1975 (Cth), Bromberg J considered the effect of an offer to settle which had been made by the respondent in that proceeding in reliance upon the principles enunciated in Calderbank and was rejected by the applicant. At [34]-[35] and [37]-[38] Bromberg J said:

[34]    It is not sufficient that Mr Bolt and HWT simply establish that the offer they made was reasonable. It is necessary that they establish that Ms Eatock’s rejection of their offer was unreasonable so as to justify an order that the subsequent costs incurred by Mr Bolt and HWT be paid by Ms Eatock: Black v Lipovak (1998) 217 ALR 386; [1998] FCA 699 at [217]-[218] (Black) per Miles, Heerey and Madgwick JJ; Australian Competition and Consumer Commission v Harris Scarfe Australia Pty Ltd (No 2) [2009] FCA 433 at [12] (Harris Scarfe) per Mansfield J; Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121; [2002] FCA 224 at [38] per Weinberg J; Review 2 Pty Ltd v Redberry Enterprises Pty Ltd (No 2) [2008] FCA 1805 at [23] (Review 2) per Kenny J. Whether the rejection was unreasonable is to be considered in the light of the circumstances that existed at the time of the rejection: Black at [218]; Seven Network Ltd v News Ltd (2007) 244 ALR 374; [2007] FCA 1489 at [65] (Seven Network) per Sackville J; Review 2 at [24] per Kenny J.

[35]    Ms Eatock contended that it has not been established that her rejection of the offer was unreasonable. There are a number of reasons why, in my view, Ms Eatock is correct. Mr Bolt and HWT have not demonstrated that at the time Ms Eatock rejected their offer, she did not have a reasonable or realistic prospect of obtaining a better result at trial: Seven Network at [71]-[84] per Sackville J. The reasonable pursuance of a better result at trial will ordinarily negate a conclusion that the rejection of an offer was unreasonable. The result actually achieved will be a significant consideration but is not determinative of whether a reasonable prospect of success existed at the time of the rejection of the offer.

…

[37]    It is important at the outset to appreciate that Ms Eatock has made no claim for money. This is not a commercial dispute in which victory can be measured in monetary terms. It is a proceeding in which the relief sought was confined to a declaration, the publication of an apology and an injunction restraining republication of the articles. The extent of any victory in a case like this was always going to be measured, at least to a significant degree, by the nature and extent to which wrongdoing was found in the conduct of Mr Bolt and HWT and the extent to which Ms Eatock and the group for whom she brought the proceeding, had their position vindicated by the findings and orders made by the court.

[38]    As Mansfield J said in Harris Scarfe at [10], whilst ordinarily compromises are to be encouraged, there may be circumstances where having regard to the nature of the allegations made, compromises may not be appropriate at all because “a party may properly seek the vindication which a favourable court determination will recognise”. The judge there referred by way of example to a party seeking to vindicate allegations of serious fraud or dishonesty, as providing a possible justification for a court not exercising its costs discretion as it might otherwise have done in the face of the rejection of a Calderbank offer. Mansfield J recognised that there may be circumstances “where the particular issues are of such importance that it is proper to seek a judicial determination of them”: at [10].

consideration

22    The Club submitted that it is entitled to an order for its costs on an indemnity basis in reliance on the Offer of Compromise or, in the alternative, from the time of the Second Mediation Offer on 28 October 2016 consistent with the principles in Calderbank.

23    In relation to its claim for its costs based on the Offer of Compromise, the Club submitted that it should be entitled to its costs on an indemnity basis from 10 August 2016, being two clear business days after the Offer of Compromise was served. It submitted that:

    interest on the judgment sum of $16,000 should be calculated from the date of issue of the originating application (which it incorrectly specified as 14 October 2015) until two business days after service of the Offer of Compromise (10 August 2016), which it said, without citing any authority, would be consistent with the apparent intent of r 25.01 of the Rules and the practice adopted in the Supreme Court of New South Wales in accordance with the Uniform Civil Procedure Rules 2005 (NSW) r 42.16. The Club noted that the interest calculated on that basis would amount to $784.54 meaning that the value of the judgment including interest would be $16,784.54;

    even if interest is calculated to the date of judgment, the award was clearly less favourable than the offer of compromise. The Club’s calculation of interest on the judgment sum of $16,000 from the date of filing of the originating application up to the date of judgment at the rates prescribed under the Rules was $2,444.04; and

    r 25.14 appears to have automatic or at least presumptive application and if presumptive, there is nothing to disturb the presumption in this case.

24    In relation to the alternative claim for its costs on an indemnity basis from the time of the second mediation consistent with the principles in Calderbank, the Club submitted that the value of the judgment obtained by Mr Reurich in Reurich (No 1) on 17 August 2018 with no order for reinstatement or an apology was less favourable than the Second Mediation Offer. It further submitted that the rules about offers of compromise are not concerned with findings of fact or conclusions of law nor any subjective value which might be attached to declaratory relief but are about the objective outcome of the proceeding measured in monetary terms.

25    I turn first to consider the effect of the Offer of Compromise and whether it entitles the Club to its costs on an indemnity basis from 10 August 2016. In doing so, the question for the Court is whether the judgment was “less favourable” then the terms of that offer. As identified by Jagot J in Guo at [10] that involves asking if Mr Reurich “won anything of value or anything he could not have won without fighting the action through to a finish” and requires a comparison of the relief sought with the relief granted.

26    Mr Reurich sought a range of relief in his further amended originating application as set out in Reurich (No 1) at [348] as follows:

348    Mr Reurich seeks the relief set out in his further amended originating application as follows:

(i)    an apology from the Respondent

(ii)    an order declaring that the Respondent committed unlawful discrimination contrary to the [DD Act]

(iii)    an order directing the Respondent not to repeat or continue such unlawful conduct to the Applicant or any other person

(iv)    an order that the Respondent permit the Applicant to access the Respondent’s premises with his dog

(v)    an order that the Respondent not impede the Applicant in respect of the goods, services and facilities provided or made available by the Respondent to the Applicant and his dog

(vi)    an order that the Applicant's dog may remain untethered whilst remaining in the Applicant's control whilst on the Respondents premises

(vii)    an order reinstating the Applicant's membership, or alternatively an order reimbursing the amount he paid for membership

(viii)    an order that the Respondent pay compensation to the Applicant, being:

a.    Approximately $500 for the repair or replacement of glasses.

b.    Approximately $1000 for damage to the Applicant's mobile phone.

c.    $50,000 by way of damages for non-economic loss being for pain and suffering by reason of the hurt, distress, and physical and emotional suffering caused by the Respondent's unlawful interactions with the Applicant since December 2014, and

d.    $50,000 as aggravated damages by reason of insult and humiliation caused to the Applicant by the Respondent since December 2014

(ix)    An order that the Respondent pay interest on all outstanding amounts.

(x)    An order that the Respondent pay the Applicant's costs.

(xi)    Such further orders or relief as the Court considers just.

27    The orders that were made and thus the “judgment” obtained by Mr Reurich comprised declarations of breach of the DD Act by the Club, an award of damages in the sum of $16,000 plus interest pursuant to s 51A of the FCA Act. The Offer of Compromise was for payment of $20,000 inclusive of interest and legal costs. It did not involve any of the non-monetary elements sought by Mr Reurich in the further amended originating application or any admission of liability on the part of the Club and, more critically, it did not include anything that amounted or equated to the declarations of breach of the DD Act which Mr Reurich has obtained by way of relief from the Court and which are part of the judgment. The declarations made by the Court are public declarations of breach which constitute, to adopt Mr Reurich’s language, “a public statement that the Club had discriminated against [him] and Boofhead”. That being so, the judgment given in Reurich (No 1) was not less favourable than the terms of the Offer of Compromise which was limited to payment of a monetary amount only.

28    In my opinion, Mr Reurich has done better than he would have if he had accepted the Offer of Compromise given that he sought and obtained declarations of breach of the DD Act by the Club. Those declarations follow from a judicial determination that the Club breached the DD Act on certain occasions as alleged by Mr Reurich. Accordingly, r 25.14(1) does not apply.

29    Even if I am wrong about that, in my opinion, in the alternative, I would make an order inconsistent with r 25.14(1) relying on r 1.35 of the Rules. There is clearly reason to do so. First, Mr Reurich’s rejection or non-acceptance of the Offer of Compromise was not unreasonable. His first priority and of most concern to him were the declarations of breach: see Reurich (No 1) at [349]. There was no element included in the Offer of Compromise which had the effect of the declarations sought, such as an admission of liability, nor, indeed, in any of the offers made by the Club to settle the proceeding. For Mr Reurich, the recognition of the contravening conduct was an important element of the relief he sought and a measure of the success of his case. Secondly, the amount awarded by the Court to Mr Reurich for damages and interest was not materially less than the amount the subject of the Offer of Compromise. Thirdly, aside from Mr Reurich’s personal vindication, there may be some public interest in the Court making declarations under the DD Act insofar as the reasons giving rise to the declarations may assist other entities and persons who find themselves in a similar position as the Club and Mr Reurich: see Jacomb at [10]. That factor, while not determinative, weighs in favour of the reasonableness of Mr Reurich’s rejection of the offer of compromise.

30    The second issue to consider is whether the Club is entitled to its costs on an indemnity basis from the date of the second mediation consistent with the principles in Calderbank. I do not accept that the Club is so entitled. The Second Mediation Offer was not expressed to be subject to the principles set out in Calderbank. In contrast to the Calderbank Offer included in the letter dated 5 August 2016 from the Club’s solicitors, that offer was made at a without prejudice mediation and on the evidence was not expressly made as an offer in accordance with the principles in Calderbank with sufficient transparency about the implications for costs.

31    Putting the framework in which the Second Mediation Offer was made to one side, it is well established that the mere refusal of a Calderbank offer will not automatically result in the Court making an order for costs on an indemnity basis: see, for example, Brosnan v Katke [2016] FCAFC 156 at [6]. That is so even where the result following refusal of the offer is less favourable than that contained in the offer. For an offeror to be entitled to indemnity costs, the offer to settle must be a genuine offer to compromise and the offeror must establish that the offeree’s refusal to accept was unreasonable: Black v Lipovac (1998) 217 ALR 386; [1998] FCA 699 at [217]-[218]; Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 at [18]-[19].

32    While the Second Mediation Offer can be classified as a genuine offer to compromise, the Club has not established that Mr Reurich’s refusal to accept it was unreasonable. As was the case in Eatock, the Club has not demonstrated that at the time Mr Reurich rejected its offer, he did not have a reasonable or realistic prospect of obtaining a better result at trial: at [35].

33    The Second Mediation Offer included a “statement of regret as to the circumstances leading to the litigation”. The terms of the proposed statement were not in evidence before me nor was there any evidence as to whether it would have been made public. In any event, its inclusion in the offer and the increased amount offered do not make Mr Reurich’s rejection of the offer unreasonable. As I have already observed, Mr Reurich claimed an amount in damages but he also claimed other non-monetary relief and, in particular, sought declarations of breach by way of public vindication. The offer made at the mediation did not include any element which equated to that form of relief. For that reason and the reasons at [29] above Mr Reurich’s rejection of the offer made at the mediation was not unreasonable.

34    While Mr Reurich was not successful in establishing a breach of the DD Act in relation to all of the alleged incidents, he was successful in a number of them. The mere fact that not all of Mr Reurich’s claims and arguments were accepted does not make it appropriate to deal with costs on an issue by issue or claim by claim basis and I decline to do so: see The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8]. In any event, as Mr Reurich submitted, a number of the claims in which he was not successful were relevant to provide factual context.

35    Given Mr Reurich’s success in the proceeding, he is entitled to an order that the Club pay his costs.

conclusion

36    I will make an order that the Club pay Mr Reurich’s costs of the proceeding.

Associate:

Dated:    15 November 2018