Federal Court of Australia

Camm Cattle Company Pty Ltd v Acumen Finance Pty Ltd (No 3) [2021] FCA 1611

ORDERS

THE COURT ORDERS THAT:

1.    The respondent shall pay the applicants’ costs of and incidental to the proceeding on the indemnity basis.

2.    Pursuant to r 40.02(b) Federal Court Rules 2011 (Cth), the applicants’ costs be fixed by way of lump sum.

3.    On or before 4.00 pm AEST 28 January 2022, the applicants shall file and serve any affidavit in the form of a Costs Summary (as referred to at and drawn in accordance with paragraphs 4.10, 4.11 and 4.12 of the Costs Practice Note (GPN-Costs)).

4.    On or before 4.00 pm AEST 11 February 2022, the respondent shall file and serve any affidavit in the form of a Costs Response (as referred to at and drawn in accordance with paragraphs 4.13 and 4.14 of the Costs Practice Note (GPN-Costs)).

5.    On or before 4.00 pm AEST 25 February 2022, the parties shall file and serve any submissions in accordance with paragraph 4.15 of the Costs Practice Note (GPN-Costs).

6.    The matter shall be referred to a Registrar for determination of the quantum of the applicants’ costs payable by the respondent and the date by which that sum shall be payable.

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

REASONS FOR JUDGMENT

DOWNES J:

1    Following a trial in October 2021, the Court delivered judgment in this matter in Camm Cattle Company Pty Ltd v Acumen Finance Pty Ltd (No 2) [2021] FCA 1570 on 15 December 2021 (trial judgment). The applicants were wholly successful at trial. An order was made that, by 16 December 2021, the parties shall file and serve any written submissions and affidavit material on the appropriate costs order which should be made.

2    On 16 December 2021, submissions and an affidavit in support of such submissions were received from the applicants.

3    On 17 December 2021, submissions were received from the respondent (Acumen Finance).

4    The applicants sought orders that Acumen Finance pay the applicants’ costs of and incidental to the proceeding on the indemnity basis. This was on the grounds that Acumen Finance unreasonably refused an offer to settle and that Acumen Finance’s unreasonable conduct of proceedings justified an order for indemnity costs.

5    Additionally, the applicants sought an order that their costs be assessed on a lump sum basis pursuant to r 40.02 of the Federal Court Rules 2011 (Cth). That the costs should be assessed on a lump sum basis was not opposed by Acumen Finance, and I consider that this case is an appropriate one for such an order.

6    Further, for the reasons below, the appropriate order is that Acumen Finance pay the applicants’ costs of and incidental to the proceeding on the indemnity basis.

Indemnity costs

The pre-proceedings offer

7    By letter dated 22 June 2020, which was sent prior to the commencement of this proceeding in October 2020, the applicants made an open offer to Acumen Finance to compromise the dispute.

8    The letter contained a detailed explanation of why the applicants viewed Acumen Finance’s claim as lacking merit. In particular, it stated that:

Despite your assertions to the contrary, neither Mr Camm nor any officer or employee of CCC [Camm Cattle Company Pty Ltd] accessed your client's website on 12 March 2020. In fact, Mr David Gardiner of Alliance Partners, accessed the site.

It was Mr Gardiner who inputted details of our clients and provided their information.

At the time Mr Gardiner accessed your client's website and provided the information, he had no authority from our clients to commit them to the terms and conditions of your client's standard form contract. Neither our clients nor any officers or employees of them had ever seen your client's terms and conditions.

Any 'acceptance' of the terms and conditions by Mr Gardiner accessing your client's website, was beyond the scope of any agency or authority he had from our clients.

Our clients, at no time after this point, ratified Mr Gardiner's acceptance of the terms. Indeed, after the initial telephone hook-up between Mr Wall, Mr Gardiner and our client, when the details of your client's offering became known to our client (our client still had not received a copy of the terms and conditions at this point), our clients sought to end the relationship immediately, consistent with the position that Mr Gardiner had no authority to bind our client to your client's terms and conditions.

…

However, and in any event, our clients could not reasonably be liable to your client for the amount of $1,320,000. It is risible to suggest that your client, having performed no substantive services and providing no benefit to our client, could be entitled to an amount like $1,320,000.

9    The terms of the offer of compromise were:

Our client does however offer, on an open basis, to pay your client the sum of $10,450, being the amount of the Engagement Fee, in full and final satisfaction of any claim the parties may have against each other at this time.

As stated above, our clients are not liable for any amount to your client as they did not sign up to the terms and Mr Gardiner acted outside of any authority from our clients. Our client makes this offer purely on a commercial basis.

The offer is open for acceptance for seven (7) days from the date of this correspondence, at which time it will lapse and will be incapable of acceptance. If the offer is not accepted and our clients are required to commence the foreshadowed proceedings, they will be seeking all of their costs on an indemnity basis.

Relevant principles

10    The ordinary rule is that an award of costs is on the party-party basis: Re Wilcox; Ex Parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, 152–153, 158; [1996] FCA 1132, 2–3 (Black CJ), 8–9 (Cooper and Merkel JJ).

11    In circumstances where there has been an offer of compromise, Sundberg and Emmett JJ in Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 stated at [7] that:

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: ... The applicant for a more generous award must show that the rejection of the offer was imprudent or plainly unreasonable: ...

(emphasis added, citation omitted)

12    In Hardingham v RP Data Pty Limited (No 2) [2021] FCAFC 175 (Greenwood, Rares and Jackson JJ), the Full Court stated at [19] that:

Different Full Courts have stated slightly differently the general law test applicable to determining whether an offeree who fails to accept an offer of settlement (not being made as an offer of compromise under Pt 25 of the Rules or its analogues) can be ordered to pay the offeror’s costs on an indemnity basis if the offeror obtains a better result than that contained in the offer. The differing versions of the test are that the rejection must be either “imprudent or unreasonable” or “imprudent or plainly unreasonable” ...

(emphasis in original)

13    The matter of unreasonableness will be judged by reference to the circumstances facing the offeree at the time of the offer: see CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd (2008) 15 ANZ Insurance Cases 61-785; [2008] FCAFC 173 at [75], cited with approval in Hardingham at [26].

14    In Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112, the Full Court at [7] identified a non-exhaustive list of relevant factors to consider in determining whether the refusal of an offer to compromise was unreasonable. These were (in summary):

(a)    the stage of the proceeding when 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 offeror foreshadowed an application for indemnity costs in the event of the rejection of its offer.

15    In relation to the issue of whether a party’s conduct of proceedings warranted indemnity costs, the Full Court in Alhalek v Quintiliani trading as Kells Lawyers (No 3) [2021] FCAFC 150 (Katzmann, Derrington and Anastassiou JJ) stated at [10]:

Ordinarily costs are payable on a party and party basis. That is reflected in r 40.01 of the Federal Court Rules 2011 (Cth). When costs are awarded on this basis, a successful party will rarely, if ever, be able to recover all their costs. Where, however, a case has some “special or unusual feature” which would justify a departure from the ordinary course, the Court may make an order for indemnity costs: … The purpose of an indemnity costs order is to compensate a party in full for their costs when the Court takes the view that it was unreasonable for the party against whom the order was made to have caused the other party to incur costs: …

(citations omitted)

16    Two circumstances identified by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 at 233 as having justified an exercise of the discretion to award indemnity costs are:

(a)    the continuation of proceedings in wilful disregard of known facts or clearly established law; and

(b)    the making of allegations which ought never to have been made.

Consideration

17    The applicants submit that the following factors support the making of a costs order on the indemnity basis:

(a)    the 22 June 2020 letter provided a comprehensive explanation of deficiencies in Acumen Finance’s claim;

(b)    the letter was sent early in proceedings (indeed being prior to the commencement of proceedings);

(c)    the letter warned that in the event the offer was refused costs would be sought on an indemnity basis; and

(d)    the outcome which the applicants obtained was more favourable to them and less favourable to Acumen Finance than the offer of 22 June 2020.

18    Acumen Finance submits that the determination of the claim turned upon a “factual determination that required judicial intervention” and that the applicants have not demonstrated the rejection of any offer was unreasonable and consequently costs should be ordered on a party-party basis.

19    At the time of receipt of the letter of offer, Acumen Finance had access to computer records which showed that Mr Gardiner had accessed its website, including on the date that the application was submitted in the name of the applicants, but no record that Mr Camm had accessed its website: see [71] of the trial judgment. This means that it was in possession of objective evidence that the statements in the letter of offer that Mr Camm had not submitted the application were likely to be correct.

20    Acumen Finance was also aware of the lack of any substantive work which it had performed for the applicants which would justify a fee of $1.2 million plus GST. That is, assessed objectively, it would have been aware that it would not be able to demonstrate at any trial that it had used reasonable endeavours to procure a loan offer to the first and second applicants on terms acceptable to them. As to this issue, see [112] to [119] of the trial judgment.

21    Further, Acumen Finance’s claim against the applicants was premised on acceptance of the legal proposition that the completion and submission of an application form and terms and conditions through its website amounted to acceptance of an offer such that a contract arose. This legal proposition was misconceived for the reasons explained in [95] to [111] of the trial judgment.

22    Yet Mr Daly, the sole director of Acumen Finance, pressed this case even though he also accepted under cross-examination that Acumen Finance has, on occasion, rejected applications made through the website. If the case advanced by Acumen Finance in the proceeding had been legally correct, then it would have no ability to reject any applications.

23    The offer of compromise:

(a)    was made prior to the commencement of proceedings;

(b)    allowed sufficient time for consideration by the respondent (being 7 days);

(c)    in the context of Acumen Finance’s prospects of success and knowledge of the deficiencies in its evidence, provided an ample compromise;

(d)    was expressed in clear terms; and

(e)    foreshadowed an application for indemnity costs in the event of the rejection of the offer.

24    In the circumstances, it was plainly unreasonable for Acumen Finance not to accept the offer contained in the letter of 22 June 2020.

25    Further, despite these matters, Acumen Finance then advanced its claim in this proceeding alleging that:

(a)    Mr Camm had completed and submitted the application and terms and conditions;

(b)    when the application and terms and conditions were submitted, a contract was entered between the applicants and Acumen Finance;

(c)    Acumen Finance had used reasonable endeavours to procure a loan offer to the first and second applicants on terms acceptable to them;

being allegations which should never have been made, either because Acumen Finance did not have the evidence to support these claims or the legal premise of its case was without merit.

26    Having regard to these matters, I consider that it is appropriate to order the respondent pay the applicants’ costs on the indemnity basis.

Conclusion

27    For the above reasons, the orders will be made as sought by the applicants with some modifications.

Associate:

Dated:    21 December 2021