Federal Court of Australia

Chohan v Commonwealth of Australia as represented by Department of Home Affairs (No 2) [2025] FCA 582

ORDERS

THE COURT ORDERS THAT:

1.    The Respondent’s application for indemnity costs is dismissed.

2.    The Applicant’s application for a stay (on terms) of the costs order made on 6 May 2025 is dismissed.

3.    There be no order as to costs in relation to either application.

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

REASONS FOR JUDGMENT

OWENS J

1    In Chohan v Commonwealth of Australia as represented by Department of Home Affairs [2025] FCA 437 I gave summary judgment in favour of the Commonwealth, and ordered the applicant to pay the Commonwealth’s costs of the proceedings. Following delivery of judgment, the Commonwealth foreshadowed an application, which was subsequently made, that those costs, after a particular date, be taxed and paid on an indemnity basis.

2    The foundation of the Commonwealth’s application is the fact that the applicant did not accept an offer of compromise made to him on 14 October 2024. Under the proposed compromise, the proceedings would have been dismissed with no order as to costs. The offer was open to be accepted for a period of 14 days after service, although the Commonwealth did intimate that the time for acceptance could be extended.

3    The terms of the offer were set out in a notice that was stated to be compliant with r 25.01 of the Federal Court Rules 2011 (Cth) (and, in case it was not, the principles in Calderbank v Calderbank [1976] Fam 93 were also invoked). The notice was accompanied by a letter that referred to the Commonwealth’s recently served written submissions on the application for summary judgment, and generally rehearsed the Commonwealth’s arguments that there were insurmountable obstacles on the applicant’s path to success. The letter warned the applicant that if his proceedings were dismissed, the Commonwealth would be entitled to its costs on an indemnity basis.

Consideration

4    Under r 25.14(2) of the Rules, where an applicant’s proceedings are dismissed, a respondent will be “entitled” to an indemnity costs order if the applicant “unreasonably fail[ed]” to accept an offer made under the Rules. That “entitlement” is, of course, always subject to the Court making an order inconsistent with r 25.14(2) pursuant to r 1.35 (see Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [22]).

5    The Commonwealth’s offer was a valid offer under the Rules. The only possible issue is the extent to which an offer “that the proceeding be dismissed with no order as to costs” complies with r 25.03(1). Although the notice did not, in terms, state whether the offer was “inclusive of costs” or that “costs are in addition to the offer”, it nonetheless made plain that no amount would be paid for the applicant’s costs. I would not construe r 25.03(1) to require the use of any particular verbal formula, and accordingly consider that the notice sufficiently stated that the offer was inclusive of costs.

6    Whether the failure to accept an offer is “unreasonable” is to be assessed in light of all the circumstances, including the following factors identified in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7]:

(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.

7    Most of those matters provide no support for any argument that the applicant’s failure to accept the offer was reasonable. The applicant had sufficient time to consider the offer, which was clearly expressed, and which alerted him to the prospect of an indemnity costs order being sought. Furthermore, even though the offer was merely a “walk-away” offer, in the circumstances it represented a genuine compromise of the Commonwealth’s rights (see generally Barnes v Forty Two International Pty Ltd (No 2) [2015] FCAFC 19 at [18]). The Commonwealth drew attention to the quantum of the costs it would incur in prosecuting the summary judgment application. They were, in the context of these proceedings, substantial. Foregoing the right to claim that amount involved a genuine compromise of the Commonwealth’s rights.

8    Rather, it seems to me that it is the first and fourth of the factors identified in Anchorage Capital Partners that assume the greatest significance on this application.

9    As a general proposition, the earlier in proceedings an offer is made, the more difficult it will be for a respondent to establish that it was unreasonable for an applicant to fail to accept it. Litigation is notoriously unpredictable, and when proceedings are in their infancy they will ordinarily be attended by significant uncertainty in relation to, amongst other matters, the ultimate delineation of the issues in dispute and the evidence that may be adduced in relation to them. In circumstances where, as here, a respondent has not even filed a defence to proceedings, persuading a court that the rejection of an offer was unreasonable will usually represent a considerable challenge.

10    The force of considerations of that kind in the present case might be thought to be somewhat diminished by the nature of the application in connection with which the offer was made. Because an application for summary judgment, if successful, will bring the proceedings to an end at an early stage, the existence of uncertainty as to how the proceedings may unfold if allowed to run their course is not directly relevant. The true question is whether the rejection of the offer was unreasonable in light of the strength of the summary judgment application.

11    That question, however, must be approached against the very high bar set for such an application to succeed. That is to say, the reasonableness of the rejection of an offer must be assessed in light of the fact that a respondent will need to demonstrate that the applicant “has no reasonable prospect of successfully prosecuting the proceeding”: Federal Court of Australia Act 1976 (Cth), s 31A(2). Even though the proceeding does not have to be “hopeless”, or “bound to fail”, a “high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way” is still required (see the authorities cited in Chohan at [4]). In that way, the general uncertainty attending the early stages of all litigation is a factor relevant to the estimation of the prospects of an application for summary judgment, and thus remains indirectly relevant to any assessment of the reasonableness of a failure to accept an offer of compromise.

12    The applicant submitted, and I accept, that he sincerely believed that his claim had reasonable prospects of success. He certainly had a reasonably arguable, if not strong, case that a letter sent by the Commonwealth that contained untrue information led his employer to terminate his employment. The challenge confronting him was the expression of that core grievance as a legally viable cause of action. Ultimately, there were two key problems that doomed his case. Both involved issues that a layperson (and it must be recalled that the applicant did not have the benefit of legal representation) might be expected to regard as involving some legal and conceptual subtlety.

13    First, I found that the Commonwealth did not owe him a duty of care (see Chohan at [38]-[54]). As that analysis demonstrated, there were a variety of different ways that a duty of care might have been articulated, and there were a range of different considerations arising out of the authorities that were relevant to the law’s willingness to recognise a duty in these circumstances. The potential for uncertainty in relation to the application of the principles in accordance with which novel duties of care are recognised, and their sensitivity to the factual matrix to which they are applied, is well-known.

14    The Commonwealth’s written submissions, to which the letter accompanying the offer of compromise referred as a comprehensive articulation of the reasons why the applicant should accept the offer, did not engage with the full complexity of the issue in relation to the existence of a duty of care. Those submissions focussed almost exclusively on the proposition that a duty of care would not be recognised if doing so would create the potential for legal liability in respect of the making of a valid administrative decision. In so focussing, they left unaddressed a wide range of possible formulations of duties that would have fitted the applicant’s case, and which could not be rejected on the basis of the arguments advanced in writing. It follows that it would not have been unreasonable for the applicant to consider that the submissions advanced by the Commonwealth in relation to duty did not themselves provide a reason for accepting the offer.

15    In any event, as an unrepresented layperson, the applicant may be forgiven for having failed to appreciate the significance of the issues concerning duty of care that arose in connection with his case. It was a topic of legal and factual complexity, and the outcome, from his point of view, cannot have been regarded as so obvious as to make the rejection of the offer on this basis unreasonable.

16    Secondly, I concluded that, even if a duty of care was owed, the applicant would not have been able to establish breach (see Chohan at [55]-[67]). The critical issue here, that may not accord with a layperson’s intuition, is that liability in negligence can only arise from a failure to take reasonable care, and not merely from a failure to prevent harm. While the Commonwealth’s written submissions, to which the offer of compromise referred, did make this point clearly, they did not explain (as opposed to asserting) why the Commonwealth could not be found to have failed to take reasonable care. That is to say, the Commonwealth’s submissions did not explore why it was not reasonable for the Commonwealth to take steps to “go behind information received from UK authorities and establish whether [the applicant] was in fact arrested”.

17    To an unrepresented layperson, that factual question may have appeared capable of resolution in either direction, especially in light of evidence that may have become, but was not yet, available. For the reasons I gave in Chohan, such an impression would have been wrong. But at the point in time when the offer was made, and in light of the limited argument contained in the Commonwealth’s written submissions on the topic, I do not think that the applicant acted unreasonably in failing to accept the offer on that basis.

18    The Commonwealth’s letter accompanying the offer of compromise, and the submissions to which it referred, advanced other arguments as to why the applicant’s case lacked reasonable prospects of success (namely, an inability to prove causation, and that the proceedings were brought out of time). In Chohan I rejected those submissions as a basis upon which summary judgment could be given, and it follows that the applicant did not act unreasonably in rejecting the offer on those grounds.

19    Overall, therefore, given the very early stage of the proceedings, and the context in which the offer was made, I do not consider that the applicant acted unreasonably in failing to accept the Commonwealth’s offer. As the applicant submitted, as an unrepresented layperson he “could not fully appreciate the legal significance of the offer or the risks associated with its refusal”. The fact that a litigant is unrepresented may or may not be relevant to the exercise of a discretion to order indemnity costs, depending on the basis upon which the order is sought (see generally, e.g., Salfinger v Niugini Mining (Australia) Pty Ltd (No 4) [2007] FCA 1594 at [7], Spalla v St George Motor Finance Ltd (No 8) [2006] FCA 1537 at [20]; Sayed v National Disability Insurance Agency [2025] FCAFC 40 at [23]). In my view, however, it may be (and is here) appropriate to take into account a litigant in person’s lack of knowledge of the law, in conjunction with all other relevant circumstances of the case, in determining whether a failure to accept an offer of compromise was unreasonable.

20    For those reasons, the Commonwealth is not entitled to have its costs on the indemnity basis.

21    Finally, in his written submissions concerning costs, the applicant sought an order that enforcement of the existing costs order be stayed on terms that, if he were granted a visa to work in Australia, he would pay any amount owing in instalments of $500 per month, starting from the first full month of employment. The sole basis upon which the applicant sought a stay of the costs order was his impecuniosity (and I accept that he does in fact have very limited means).

22    Although “[w]hether a party is rich or poor has, generally speaking, no relevant connection with the litigation”, it may be said “by way of qualification to that general proposition, that a party’s financial position may be relevant to the extent that it may inform the structure of a costs order”: Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [32]. As the High Court went on to observe (also at [32]):

For example, impecuniosity may justify providing for the payment of costs over time in order to avoid inflicting unnecessary hardship while at the same time improving the likelihood of compliance with the order.

23    I am not persuaded, however, that I should structure the costs order made against the applicant, either in the manner proposed by him, or in any other way so as to provide for payment by instalments. There was no evidence that the applicant had applied, or intended to apply, for a visa permitting him to work in Australia. There was no evidence as to the likelihood that such a visa would be granted to him if he did apply. There was no evidence that the applicant might secure work in Australia if he were otherwise permitted to do so. And there was no evidence that, absent the grant of a visa enabling him to work in Australia, that the applicant would be in any better position to pay the costs order if permitted to do so by instalments. In those circumstances, I decline to stay the costs order, or otherwise structure it so as to provide for payment by instalments.

Associate:

Dated:    3 June 2025