Federal Court of Australia

Lockyer for and on behalf of the Robe River Kuruma People v Citic Pacific Mining Management Pty Ltd (No 3) [2024] FCA 271

ORDERS

THE COURT DECLARES THAT:

1.    The respondents are obliged to make the Annual Payments as and when they fall due, in accordance with clause 5.2(a) of the deed entitled 'Cape Preston Project Deed (KM Compensation Deed)' (KM Compensation Deed) made in around September 2008 between CITIC Pacific Mining Management Pty Ltd, Sino Iron Pty Ltd and Pastoral Management Pty Ltd and Mr Jack Alexander, Mr Mark Lockyer, Mr Neil Finlay, Mrs Jean Lockyer and Ms Gloria Lockyer for and on behalf of themselves and the Robe River Kuruma People (formerly the Kuruma Marthudhunera People);

THE COURT ORDERS THAT:

2.    The respondents pay:

(a)    the sum of $6,336,701.62 being the balance of the Annual Payments due and owing, as defined and in accordance with the KM Compensation Deed; and

(b)    interest at the annual rate of 2% above the Reserve Bank of Australia cash rate for each day from the due date of each relevant Annual Payment to the date payment is made, in accordance with clause 14.4 of the KM Compensation Deed.

3.    The first and second cross-claims be dismissed.

4.    The respondents/cross-claimants of the first cross-claim pay the applicants'/first and second cross-respondents' costs of and incidental to the proceedings (inclusive of the originating application and the first and second cross-claims) on a party-party basis:

(a)    with the amount of such costs to be agreed between the parties; or

(b)    if no agreement is reached by 5 April 2024 referred to a Registrar of this Court to determine the amount of the referred costs dispute(s).

5.    There be liberty to apply for directions as to the conduct of any reference pursuant to order 4(b) and as to the adoption of the report of the Registrar acting as referee.

6.    Liberty is reserved to apply within seven days to vary orders 4(b) and 5.

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

REASONS FOR JUDGMENT

COLVIN J:

1    Ms Gloria Lockyer for and on behalf of the Robe River Kuruma People and Robe River Aboriginal Corporation RNTBC (RRK Corporation) brought proceedings against the Participants in the Sino Iron Project based upon the terms of an agreement styled 'Cape Preston Project Deed (KM Compensation)' (KM Compensation Deed). The Participants alleged that the KM Compensation Deed had been frustrated according to common law principles and, for that reason, was not enforceable. By way of cross-claim issues were raised as to whether any rights to compensation which did subsist under the KM Compensation Deed were held on trust for Wirrawandi Aboriginal Corporation RNTBC (WAC).

2    It was determined that the KM Compensation Deed had not been frustrated and that the rights to compensation under the terms of the deed were not held on trust for WAC: Lockyer for and on behalf of the Robe River Kuruma People v Citic Pacific Mining Management Pty Ltd (No 2) [2024] FCA 154. The parties were asked to propose orders to give effect to the reasons. They are agreed as to the terms of those orders save that Ms Lockyer and RRK Corporation seek an order that the costs to be paid by the Participants should be determined on an indemnity basis on and from 11am on 24 February 2024. The Participants oppose the making of any cost order on an indemnity basis.

3    Indemnity costs are sought on the basis of a contention that the Participants unreasonably failed to accept an offer to settle the proceedings that had been put by Ms Lockyer and RRK Corporation.

4    The Participants point to the particular circumstances in which the offer was made and also contend that there was no real element of compromise in the terms of the offer such that it invited something close to capitulation.

5    The circumstances in which the offer was made are these. Following the joinder of WAC an issue arose as to whether a mediation might be convened in the time available before the hearing. Rather than order a mediation, a direction was made requiring the solicitors for the parties to exchange written without prejudice proposals as to the terms on which the proceedings may be settled on or before 22 January 2024. The Participants sent a without prejudice offer on 15 January 2024. On 22 January 2024, Ms Lockyer and RRK Corporation rejected the Participants proposal and proposed settlement on terms that the Participants pay the compensation claimed plus interest and accept an ongoing liability to make compensation payments as provided for in the KM Compensation Deed with the proceedings (including cross-claims) to be dismissed with no order as to costs in the main proceeding and the Participants to pay Ms Lockyer and RRK Corporation's costs of the cross-claims. The proposal was open for acceptance until 5pm on 29 January 2024. The hearing of the proceedings took place on 30 January and 1 February 2024.

6    The Court has a broad discretion when it comes to the making of costs orders. The discretion is unconfined, but must be exercised judicially, that is according to relevant considerations and taking account of the contextual features and facts of the litigation: Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136; (2011) 197 FCR 113 at [4]. Settled principle guides the exercise of the discretion which is to be exercised judicially: Norbis v Norbis (1986) 161 CLR 513 at 519 (Mason and Deane JJ); and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [65] (McHugh J, Brennan CJ agreeing), [134] (Kirby J).

7    Matters of settled principle concerning the circumstances in which an imprudent refusal of an offer of compromise may justify an award of indemnity costs were summarised in Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [5]-[8] (Nicholas, Yates and Beach JJ). As there stated at [6]-[8]:

In such cases, a key question is whether the offeree’s refusal of the offer was 'unreasonable' when viewed in light of the circumstances existing at the time the offer was rejected…

The circumstances to be taken into account in determining whether rejection of an offer was 'unreasonable' cannot be stated exhaustively but may include, for example:

(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.

…

An unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer… assessment of the 'unreasonableness' of an offeree’s refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered.

8    In addition r 25.14(3) of the Federal Court Rules provides: 'If an offer is made by an applicant [in accordance with r 25] and not accepted by a respondent and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs [from the second business day after the offer was served] on an indemnity basis'. There is no requirement that the refusal be shown to be 'unreasonable' (contrast r 25.14(2) dealing with cases where an applicant's case is dismissed after the applicant unreasonably fails to accept an offer made under r 25).

9    Ms Lockyer and RRK Corporation claimed that the offer made by them should be treated as an offer made pursuant to r 25 (by dispensing with the requirement as to the time for acceptance of the offer). It was contended that such an approach was appropriate because of the circumstances in which the offer was made, namely in accordance with the timing the subject of the Court's direction. If that course was to be followed, then Ms Lockyer and RRK Corporation would '[not be] required to establish that the rejection [of the offer by the Participants] was imprudent or unreasonable before being presumptively entitled to have [their] costs taxed on an indemnity basis': Elecspess Pty Ltd v LED Technologies Pty Ltd [2013] FCAFC 116 at [24] (Besanko and Jessup JJ).

10    However, it must also be noted that if an offer does not involve any genuine compromise, the rule will not be enlivened: Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 4) [2016] FCA 218 at [11] (Perram J) as approved in Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [24] (Rares, Flick and Bromwich JJ). Further, there is power to make an order inconsistent with the operation of r 25.14 (by exercising the discretion conferred by r 1.35 to make an order inconsistent with the Rules) 'where there is reason to do so, including in those cases where the application of r 25.14 would lead to or could cause injustice or not meet the justice of the case': Sydney Equine at [22].

11    I am not persuaded that orders should be made so that the offer made by Ms Lockyer and RRK Corporation should be treated as an offer that conformed to r 25. Although the direction was made requiring offers to be made by a nominated date, it was open to the parties to have made offers before that time. Therefore, I approach the matter on the basis that there must be unreasonableness in the failure to accept the offer. Indeed, the written submissions for Ms Lockyer and RRK Corporation appeared to have been advanced on the basis that it was necessary to demonstrate unreasonableness.

12    I have had regard to the non-exhaustive list of matters stated in Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) and have considered whether there are other matters that assume significance in the present case.

13    I accept the submission for the Participants that the offer did not offer any real element of compromise other than the proposal that there be no order as to costs. However, given that the proposal was made shortly prior to the hearing it may be concluded with some confidence that significant legal costs had been incurred by all parties. It will depend on all the circumstances whether an offer that does not give away anything other than an order for costs is a genuine offer to compromise: Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [129]-[146].

14    In my view, the following matters bear upon whether the refusal to accept the offer was unreasonable:

(1)    The offer was made shortly prior to the hearing.

(2)    Though clearly expressed, there were complexities in considering the offer by reason of the issues that had arisen from the cross-claim advanced by WAC (because, in substance, WAC also claimed to be entitled to the compensation).

(3)    Although there were significant difficulties with the claim of frustration, it could not be said that the claim lacked merit especially having regard to the outcome in Thaluntha Pty Ltd v Citic Pacific Mining Management Pty Ltd [2019] WASC 196.

(4)    The Participants did not abandon any aspect of their case but rather allowed WAC to have the carriage of those aspects of the case that concerned whether it was WAC who was entitled to the compensation payable under the KM Compensation Deed.

(5)    Brief reasons were given in the offer as to why the offer should be accepted and those reasons corresponded with the reasons why the claim by Ms Lockyer and RRK Corporation ultimately was upheld.

(6)    The offer was a genuine offer to compromise by reason that it offered to forgo any claim to costs at a time when the quantum of those costs was likely to be significant when measured in the context of what was at stake in the litigation.

15    Having considered those circumstances, I am not persuaded that the failure to accept the offer was unreasonable and I decline to order costs on an indemnity basis for the period after the offer was made.

16    As to costs more generally, I note that the parties are agreed that the question of costs should be referred to a registrar for determination. I take this to mean that the registrar should determine those costs as referee. In those circumstances, I will add a further order that there be liberty to apply for directions as to the conduct of the reference and as to the adoption of the report of the registrar acting as referee. I will also reserve liberty to apply within seven days to vary the orders as to the procedure for determining the amount of costs lest there has been any misunderstanding as to what is proposed by the orders as agreed concerning the resolution of any dispute as to the quantum of costs.

17    Otherwise, I am satisfied that the orders proposed by the parties reflect my substantive reasons and there will be orders accordingly.

Associate:

Dated:    22 March 2024

SCHEDULE OF PARTIES