Federal Court of Australia

Rossi v Qantas Airways Limited (No 5) [2023] FCA 1484

ORDERS

THE COURT ORDERS THAT:

1.    The applicant is to pay the respondent's cost of the proceeding, to be assessed if not agreed on a party and party basis.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    On 28 August 2023 I delivered judgment relating to a separate issue in this proceeding: Rossi v Qantas Airways Limited (No 4) [2023] FCA 1008 (Rossi (No 4)). The judgment determined the preliminary question of whether Ms Rossi lacked mental capacity and was a handicapped person, within the meaning of the relevant rule in force in Victoria, when she signed a settlement deed (Deed) with Qantas. I was not satisfied that Ms Rossi lacked mental capacity at the relevant time.

2    Ms Rossi had accepted that it would be necessary to have the Deed set aside in order to pursue the underlying proceeding, which was a claim for leave to bring an application under the Australian Human Rights Commission Act 1986 (Cth) against Qantas alleging unlawful discrimination. Even if leave were granted, Ms Rossi would need to establish her underlying case in order to succeed against Qantas.

3    It followed from the outcome in Rossi (No 4) that I refused to grant the declaratory relief sought by Ms Rossi, which was to have the Deed declared void, and the proceeding as a whole was dismissed.

4    Ms Rossi accepts that she should pay Qantas' costs of the proceeding on a party and party basis.

5    Qantas seeks such costs, as agreed or assessed, up until 8 July 2021. It seeks costs on an indemnity basis from that date, having made a settlement offer which it contends Ms Rossi unreasonably rejected.

Calderbank offer

6    On 6 July 2021 Qantas made an offer to compromise on a without prejudice basis, pursuant to r 25.01 of the Federal Court Rules 2011 (Cth) and in accordance with the principles established in Calderbank (Offer).

7    By the offer, Qantas offered to pay Ms Rossi $100,000 inclusive of costs in settlement of the whole of the proceeding, on terms that the proceeding be dismissed, the terms be confidential, and Ms Rossi execute a release agreement (a draft of which was enclosed). The Offer also included conditions that the settlement be subject to a written report from a medical practitioner regarding Ms Rossi's capacity, and an undertaking from her solicitors regarding an explanation of the Offer and confirmation that she did not require a litigation representative. Qantas disclosed that it intended to rely on the Offer on the question of indemnity costs.

8    The Offer was open for acceptance for 14 days after its service.

9    Ms Rossi did not accept it.

Principles

10    The parties agreed as to the relevant principles to be applied. They are well recognised and usefully summarised elsewhere: Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] (Warren CJ, Maxwell P and Harper AJA); and see Markovic J's recent summary in Firstmac Limited v Zip Co Limited (No 2) [2023] FCA 1074 at [10]-[12]. As noted in Firstmac at [11], the principles based on Calderbank offers are applicable to offers made under r 25.01 of the Federal Court Rules.

11    For present purposes it is sufficient to acknowledge that an imprudent refusal of an offer to compromise may justify an award of indemnity costs. The key question is whether refusal of the offer was unreasonable. As the authorities establish, that question justifies reference to a number of factors, including:

(a)    the stage of the proceeding at which 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 offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it.

12    Assessment of whether an offeree's refusal is unreasonable is a wide-ranging inquiry that is not restricted to consideration of matters such as the quantum rejected: Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [8] (Nicholas, Yates and Beach JJ).

13    The standard of unreasonableness need not be especially high. In Black v Tomislav Lipova BHNF Maria Lipovac [1998] FCA 699; (1998) 217 ALR 386 (Miles, Heerey and Madgwick JJ), the Full Court observed that the authorities do not require a finding that the conduct of the offeree be 'plainly unreasonable' in order to justify an order for indemnity costs, continuing:

[218]    … To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement. …

14    Of particular relevance to this application, the correlation between the terms of the offer and the relief sought in the proceeding is also a factor. This was explained by Dowsett J in Centor Australia Pty Ltd v RMD Industries Pty Ltd (No 2) [2013] FCA 1407 as follows:

[9]    I find it difficult to assess the offer made on 7 December 2010 or the reasonableness of Centor's conduct in not accepting it. This difficulty flows from the proposal that RMD have a royalty-free licence, not only in respect of the patent-in-suit but also in respect of all foreign counterparts, and a release from any liability worldwide. I have no idea of the consequences of that proposal, nor do I have any understanding of the consequences of an undertaking by Centor to use reasonable commercial endeavours to enforce the Patent as against other infringers in Australia. There can be no presumption that the offer is reasonable. RMD has not sought to demonstrate that it is so. I do not wish to be taken as encouraging further litigation in order to demonstrate or disprove the reasonableness of a party's conduct in declining an offer. However it may well be that a Calderbank offer can only operate where the relevant offer is relatively simple in terms, and closely related to the relief sought in the case. The offer of 7 December 2010 seems to me to have gone well beyond the issues joined between the parties. Thus any examination of the offer or the reasonableness of Centor's conduct would necessarily involve a major enquiry as to the possible legal and commercial effects of acceptance of the offer.

15    Similarly, in Merial Inc v Intervet International BV (No 4) [2017] FCA 223, Moshinksy J adopted the approach of considering whether the offer was commensurate with a possible outcome in the proceeding, stating:

[54]    As set out above, Merial's Calderbank offer involved it receiving a worldwide, non-exclusive, royalty-free licence. The difficulty with such an offer for present purposes is that it is not commensurate with a possible outcome of the proceeding, making it difficult, if not impossible, to assess whether Intervet's rejection of the offer was unreasonable: see Centor Australia Pty Ltd v RMD Industries Pty Ltd (No 2) [2013] FCA 1407 at [9] per Dowsett J. Thus, it is not established that it was unreasonable for Intervet to reject this offer in all the circumstances.

Relevance of earlier reasons

16    Before turning to the respective position of the parties, an unusual feature of this application is that prior to Rossi (No 4), the Court had published reasons in Rossi v Qantas Airways Limited (No 2) [2020] FCA 1080 (Rossi (No 2)) (Gleeson J). In this decision, her Honour refused Ms Rossi's application for leave to bring an application pursuant to s 46PO(1) of the Australian Human Rights Commission Act alleging unlawful discrimination against her former lawyers, being Maurice Blackburn Cashman and Mr  McCristal. However, her Honour did not determine a leave application against Qantas, deciding that the question of whether the Deed should be set aside should be determined first.

17    However, according to Qantas, the reasons in Rossi (No 2) shed some light on the question of whether Ms Rossi might be granted leave to proceed against Qantas, if the Deed were declared void.

18    In particular, her Honour:

(a)    noted the effluxion of time since events alleged against Qantas occurred (at the time of the reasons, between 17 and 30 years previously);

(b)    refused leave to proceed against Maurice Blackburn Cashman and Mr McCristal where the events involving them had occurred more recently (some 10 to 12 years previously);

(c)    found that Ms Rossi did not have a reasonably arguable case against Maurice Blackburn Cashman and Mr McCristal, but in any event determined that leave should not be granted because it would be palpably unjust to require them to address the main issues in dispute, so long after the events (at [5], [122]);

(d)    referred to the incapacity case and the key authority of Gibbons v Wright (1954) 91 CLR 423 at 438 (central to the reasoning in Rossi (No 4)), and observed that 'there is a question as to whether the current evidence is capable of supporting a finding that Ms Rossi relevantly lacked capacity when she signed the deed' (at [51]);

(e)    as to the prospective claims against Maurice Blackburn Cashman and Mr McCristal, found that Ms Rossi had failed to provide an acceptable explanation for her delay in making complaints to the Australian Human Rights Commission prior to 2018 (at [112]); and

(f)    found that the discretionary considerations in relation to the grant of leave with respect to those prospective claims pointed strongly against the grant of leave (at [102]).

Qantas' position

19    Qantas submitted that at the time of the Offer (which at the time was one month before the intended start date - the trial dates were subsequently vacated), Ms Rossi had all the information she needed to assess the prospects of success. Medical evidence had been exchanged, as had written submissions.

20    As to the quantum, the amount offered of $100,000 inclusive of costs was said to be substantial. It was more than the amount payable to Ms Rossi under the Deed (and if Ms Rossi had accepted the Offer, she would not have had to repay the previous settlement amount). Acceptance of the Offer would have avoided liability to Qantas for its costs if it were to succeed.

21    As to the underlying leave application, it was submitted that Ms Rossi had the benefit of Gleeson J's reasons in Rossi (No 2) and knew that in light of the effluxion of time, there were very real risks as to whether leave would be granted, even if the Deed were set aside, particularly as the delay as against Qantas was much longer than the delay as against the other (then) respondents.

22    Qantas submitted that by the time of the Offer, the applicant must have appreciated that there was both a serious risk that her claim to set the Deed aside would fail, and a very serious risk that the Court would not grant her leave to bring her discrimination claims after such a delay, as well as a risk of losing at a substantive hearing. According to Qantas, Ms Rossi's prospects of setting the Deed aside were not strong, and her prospects of obtaining any monetary relief in the proceeding were poor. Even if the Court were to have set the Deed aside, and granted leave, there would still have been considerable delay and uncertainty prior to the determination of the substantive claim.

23    There was also the prospect, even if the Court determined that Ms Rossi was a handicapped person at the relevant time, that Qantas would seek retrospective approval of the Deed under Order 15.08 of the County Court Rules of Procedure in Civil Proceedings 1999 (Vic) (reproduced at [13] of the reasons in Rossi (No 4)).

24    Acceptance of Qantas' offer would have avoided the cost, delay, uncertainty and stress of proceeding through those three separate hearings and a potential application under the County Court Rules.

Ms Rossi's position

25    Ms Rossi maintained that her prospects of success at the time of the Offer were reasonable in light of her 'personal experience of the relevant facts' and the opinions of the engaged experts and lay witnesses.

26    Ms Rossi contended that it was open to her at the time of the Offer to form the view that each party had equal chances because the outcome depended heavily on whose evidence the Court preferred.

27    It was contended that to the extent Gleeson J in Rossi (No 2) speculated as to whether the evidence was capable of supporting a finding that Ms Rossi lacked capacity when she signed the Deed, such speculation was not to be given any great weight in assessing the Offer because additional evidence was provided after her Honour's reasons.

28    It was also submitted that the amount of $100,000 was not materially significant or substantial, considering the fact that Ms Rossi's own legal costs may have exhausted this sum at the time of the Offer, and considering 'the extent of Ms Rossi's damages'.

29    As to the underlying leave application and the question of delay, it was contended that any delay was 'through no fault of Ms Rossi' and that Gleeson J's approach to delay was to be read in that context.

30    As to the underlying proceeding, Ms Rossi submitted that if Ms Rossi were to focus only on the quantum sought, then having regard to the damages she was seeking, the amount of $100,000 was not 'materially substantial'.

31    I interpose to note that by reference to her amended statement of claim filed in the proceeding, Ms Rossi sought declarations that Qantas breached sections of the Sex Discrimination Act 1984 (Cth) and the Disability Discrimination Act 1992 (Cth). She also sought compensation for loss and damages, including past economic loss of no less than $1,603,117 (but with particulars to be provided and based on incapacity to work), future economic loss, general damages for pain and suffering of not less than $200,000, interest, as well as the declaration that the Deed was null and void. Apart from those indications, it was not clear to me what quantum Ms Rossi hoped to receive should she be successful in the underlying proposed proceeding against Qantas, and no figure was put to me in the costs submissions.

32    However, the gravamen of Ms Rossi's submissions, developed during the costs hearing before me, was that it was difficult to assess the reasonableness of the Offer when it would have the effect of concluding the Deed application (which relevantly sought only declaratory relief). It was said in effect that when the Offer was made, there remained a particular value to Ms Rossi in having the Deed application resolved and the Deed declared void, because she could not proceed to the 'next step' without that relief. Furthermore, it was necessary to consider that value together with the prospects of the leave application and, if leave were granted, the prospects of the substantive application for relief.

Conclusion

33    There were some difficulties with Ms Rossi's submissions.

34    For example, to the extent Ms Rossi purported to rely on her 'personal experience of the relevant facts' and subjective views of events, such reliance was misplaced. As Siopis J noted in Daebo Shipping Co Ltd v The Ship Go Star (No 2) [2011] FCA 1544:

[23]    In my view, it does not follow from the fact that a party subjectively believes that it has a reasonable case, that its rejection of an otherwise reasonable offer of compromise, will be reasonable. The question of whether a party has acted reasonably in rejecting an offer of compromise involves an objective assessment of the prospects of success in the context of the fact that litigation is a risky and unpredictable endeavour, and that even cases with reasonable prospects of success, will fail. …

35    As to the Deed proceeding, I recognize that the medical evidence exchanged prior to trial appeared to offer some support for Ms Rossi's case, at least on its face. I accept that such evidence was not before Gleeson J. However, it ought to have been obvious in assessing such evidence that there was a real risk as to whether underlying assumptions relied upon by the experts would be established, and in circumstances where the reliability of Ms Rossi's evidence was a live issue. There was also lay evidence that conflicted with that of Ms Rossi. Objectively, the capacity proceeding was risky and unpredictable, but it is not the case that there was no prospect of success.

36    As to the question of delay and the prospect of any grant of leave to pursue the underlying proceeding, the submission that any delay was not Ms Rossi's fault was put only at a very general level. It was based on some of the evidence in the Deed proceeding that indicated Ms Rossi contacted many solicitors before securing representation. However, the nature of her communications with the other firms and the basis upon which they declined to act were not readily apparent. I do take into account, however, that had I found that Ms Rossi was handicapped by mental incapacity at the relevant time, that finding may have had an impact on the manner in which delay might have been assessed. This in turn would be relevant to prospects.

37    As to the underlying proceeding, on the limited information about quantum, it is apparent that $100,000 was significantly less than the amount Ms Rossi was pursuing. However, the prospect of establishing many of the claims must be viewed conservatively. In Rossi (No 2), Gleeson J summarised the nine matters said by Ms Rossi to constitute sex discrimination and the four matters said to comprise sexual harassment (at [27]-[39]). It is apparent from that summary that most of the claimed events occurred more than twenty years ago and involved many third parties. There is a real prospect that Ms Rossi would be unable to establish the claims after such an effluxion of time, although it appears that there are some written records from the time.

38    As to the quantum of the Offer in the context of costs already incurred or on risk, there was an indication in the evidence (and submissions) to the effect that Ms Rossi's legal services were being provided by Harmers Workplace Lawyers on a pro bono basis - but even if Ms Rossi was not on risk with respect to all of her own costs, it appears that she may have remained on risk with respect to some. For example, I was told that counsel were not acting pro bono, and it was unclear whether Ms Ross was liable to reimburse her solicitors for those costs. Undoubtedly Ms Rossi remained on risk with respect to Qantas' costs.

39    All of these matters support the view that, viewed objectively, a reasonable offer that ameliorated the costs risk and provided certainty of outcome would be attractive. The result in Rossi (No 4) indicates that Ms Rossi's prediction as to the outcome of the capacity challenge was not sound, but that of itself does not mean that the decision to reject the Offer was unreasonable.

40    If the proceeding were for the sole purpose of setting aside a deed with capacity to at least estimate a quantifiable monetary outcome, the question of whether indemnity costs would be awarded is likely to have been answered differently. But the Offer (understandably) proposed to bring to an end the preliminary question and the underlying proceeding as a whole, such that Ms Rossi's assessment of her ultimate chance of success would have involved a prediction as to a number of outcomes, including the prospect of obtaining non-monetary relief by way of the declaration the subject of Rossi (No 4). Added to the mix was the potential for an application to approve the Deed in any event under the County Court Rules.

41    Bearing in mind the difficulties of assessing the Offer against the various steps anticipated by Ms Rossi's proceeding, I have decided on balance that the refusal of the Calderbank offer was not unreasonable in the circumstances so as to impose on Ms Rossi a liability to pay Qantas' cost on an indemnity basis. This is not to criticise Qantas for making the Offer or seeking indemnity costs. Settlement offers and negotiations are to be encouraged. However, like Centor Australia and Merial Inc, this is not the type of case where the Calderbank principles easily apply. The declaration sought was of particular value to Ms Rossi in preserving the capacity to pursue the balance of the proceeding. It was the only way she could attempt to go any further with her claims. An objective assessment of the reasonableness of the Offer was complicated by the preliminary nature of the Deed hearing and the need, in order to properly consider it, to assess a number of potential outcomes of other procedural steps and hearings. Although the amount of $100,000 offered was by no means nominal or derisive, in my view it was not so substantial having regard to the unusual circumstances of this proceeding that objectively its refusal might be seen as unreasonable.

42    It follows that costs should follow the event in the ordinary way. Ms Rossi is to pay Qantas' costs of the proceeding, to be assessed if not agreed on a party and party basis.

Associate:

Dated:    27 November 2023