Federal Court of Australia

Australian Security Academy Pty Ltd v Australasian Institute of Chartered Loss Adjusters Pty Ltd (No 3) [2025] FCA 1146

ORDERS

THE COURT ORDERS THAT:

1.    The Applicant pay the Respondents’ costs:

(a)    before 11 am on 6 December 2023, on a party-party basis; and

(b)    after the time mentioned in sub-paragraph (a), on an indemnity basis,

with such costs to be assessed as a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth).

2.    Not later than 4.00 pm 30 business days from the date of this order, the Respondents file and serve a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Costs Practice Note (GPN-COSTS), not exceeding 10 pages in length.

3.    Not later than 4.00 pm 30 business days from the deadline in order 2, the Applicant file and serve any Costs Response in accordance with paragraphs 4.13 and 4.14 of the Costs Practice Note, not exceeding 8 pages in length.

4.    Not later than 4.00 pm 15 business days from the deadline in order 3, the Respondents file and serve any submissions in accordance with paragraph 4.15 of the Costs Practice Note, limited to 3 pages in length.

5.    Not later than 4.00 pm 15 business days from the deadline in order 4, the Applicant file and serve any submissions in accordance with paragraph 4.15 of the Costs Practice Note, limited to 3 pages in length.

6.    The quantum of the lump sum for the Respondents’ costs payable to order 1 of these orders shall be determined by a Registrar of the Court in such manner as the Registrar determines to be appropriate, including by way of oral hearing, or on the papers.

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

REASONS FOR JUDGMENT

ANDERSON J:

1    On 12 August 2025, I dismissed the applicant’s originating application dated 12 March 2021, having found that an email sent on 30 June 2020 by the second respondent (30 June Email) did not convey any of the imputations alleged by the applicant, such that the claim in defamation failed. In respect of the applicant’s misleading and deceptive conduct claim in relation to the 30 June Email, I found that no sustainable representation had been articulated by the applicant. I dismissed the misleading and deceptive conduct claim under s 18 of the Australian Consumer Law. I also dismissed the injurious falsehood claim made by the applicant on the basis that the imputations alleged in its defamation claim were not conveyed by the 30 June Email: Australian Security Academy v Australasian Institute of Chartered Loss Adjusters Pty Ltd (No 2) [2025] FCA 924 (Primary Decision).

2    These reasons deal with the costs of the proceeding. The applicant opposes the making of any costs order against it in favour of the respondents. The respondents submit that the applicant should pay the respondents’ costs before 11am on 6 December 2023 on a party-party basis and, after that time, on an indemnity basis.

3    The applicant and the respondents submitted written submissions in respect of costs dated 1 September 2025, and 21 August 2025, respectively. The parties agreed that I should determine the costs orders on the papers. These are my reasons for making the costs orders in the proceeding.

4    The respondents rely upon the affidavit of Sophie Maree Devitt sworn 21 August 2025 (Devitt Affidavit). Annexures SD1 to SD11 of the Devitt Affidavit provide the following chronology of offers of settlement made by the respondents to the applicant:

(a)    Offer 1 – offer made by without prejudice letter dated 21 December 2021 from DLA Piper (solicitors for the respondents) to Matrix Legal (solicitors for the applicant). This offer was made after a failed mediation on 28 July 2021.

(b)    Offer 2 – offer made by without prejudice letter dated 1 August 2022 from DLA Piper to Matrix Legal. This offer was made after the applicant had been served with an interlocutory application for, amongst other things, summary dismissal of the proceeding.

(c)    Offer 3 – offer made by a Notice of Offer of Compromise pursuant to r 25.01(1) of the Federal Court Rules 2011 (Cth) served under cover of a letter dated 4 December 2023 from DLA Piper to Matrix Legal.

(d)    Offer 4 – offer made by open letter dated 10 July 2024 from DLA Piper to Matrix Legal. This offer was made following the first joint expert report in which the experts agreed that there was insufficient evidence to form a conclusion as to the existence of any loss or damage, and in which they set out the evidence they would need to form any such conclusion.

(e)    Offer 5 – offer made by open letter dated 9 December 2024 from DLA Piper to Matrix Legal. This offer was made following the second joint expert report in which the experts agreed that there was no evidence that the applicant had suffered any loss or damage.

5    The respondents rely upon Offer 3 and submit that the applicant should pay the respondents’ costs before 11am on 6 December 2023 on a party-party basis (being before 11am on the second business day after the offer was served) and, after this time, on an indemnity basis. The respondents rely upon r 25.14(2) of the Rules which creates a presumption in favour of indemnity costs which the unsuccessful party must rebut, where an offer of compromise, made by a respondent, has been unreasonably rejected by an applicant and the applicant’s proceeding is then dismissed. The Court may only depart from the presumptive provision for proper reasons, which, in general, arise only in an exceptional case: Caporaso Pty Ltd v Mercato Centrale Australia Pty Ltd (Costs) [2025] FCAFC 29 (Katzmann, Wheelahan and Hespe JJ) at [20]-[21], citing IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1; [2010] FCAFC 31 at [9] (and the cases referred to there) and Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [27].

6    The respondents’ application for summary judgment was dismissed by Registrar Luxton on 3 March 2023. The applicant submits that, as at the date of Offer 3, being about six months later, on 4 December 2023, the applicant was entitled to consider that his claim had reasonable prospects of success.

7    The applicant relies upon Caporaso in which the Full Court said at [21]:

Factors relevant to the question of unreasonableness include the stage of the proceeding when the offer was received; the time allowed for the offeree to consider the offer; the extent of the compromise; the offeree’s prospects of success assessed at the date of the offer; the clarity of the terms of the offer; and whether the offer foreshadowed an application for an indemnity costs order if it were rejected.

8    The applicant submits that Offer 3 should be regarded as a walk away offer, as the respondents would not be making any payment to the applicant. In Caporaso, the Full Court said at [35]:

On the other hand, an offer of compromise which provides little benefit to the offeree may be relevant to the question of whether the offeree’s failure to accept the offer was unreasonable. After all, “there are degrees of reasonableness which; amongst other things, must ordinarily be assessed by reference to the extent of the compromise which was offered.”

9    The applicant submits that Offer 3 provided a minimal benefit to the applicant. The applicant submits that the respondents’ costs when Offer 3 was made on 4 December 2023, were not substantial on the basis that:

(a)    the costs of the summary judgment application were $40,000;

(b)    costs incurred prior to the summary judgment application were not claimed in the security for costs application and should therefore be regarded as minimal; and

(c)    costs incurred between the dismissal of the application and Offer 3 should be regarded as minimal as the respondents did not file any documents during this time.

Consideration

10    For the following reasons, I accept the respondents’ submission that an order for indemnity costs should be made in the terms sought by the respondents, in the circumstances where the applicant unreasonably failed to accept the Offer of Compromise (Offer 3).

Stage of proceeding when offer received

11    First, the offer was made on 4 December 2023. This was after:

(1)    a mediation was conducted on 28 July 2021;

(2)    the hearing and determination of the respondents’ summary judgment application on 3 March 2023, in which the respondents were given leave to file an amended defence, and the applicant was ordered to provide $90,000 in security for costs;

(3)    the close of pleadings; and

(4)    the making of orders on 21 September 2023 for the applicant to give further discovery by 22 September 2023, as well as requiring it to file evidence on liability and quantum, including any expert evidence, by 16 October 2023.

12    I accept the respondents’ submission that whilst the respondents’ evidence in answer was not yet due when the offer of compromise was made on 4 December 2023, the issues between the parties had been thoroughly ventilated at the summary judgment application.

Extent of compromise

13    Second, the offer of compromise contained three components:

(1)    the proceeding be dismissed;

(2)    there be no order as to costs; and

(3)    the Court was to release the applicant from all amounts paid into Court as security for costs.

14    I do not accept the applicant’s submission that, as at 4 December 2023, the respondents’ costs in the context of this litigation, bearing in mind the nature of the defamation alleged, were insubstantial.

15    The substantiality of the costs incurred by the respondents by 4 December 2023, is only one relevant factor in determining whether the offer was a genuine offer of compromise. In any case, a further and critical component of Offer 3 was to settle the proceeding before further costs were incurred. The respondents made clear in the 4 December 2023 letter serving the Notice of Offer to Compromise, pursuant to r 25.01(1) of the Rules, that given the applicant’s lack of reasonable prospects of success, it was likely a costs order would be made against it if the matter proceeded to trial. The respondents also noted that at the least the respondents would likely be entitled to the money the applicant had paid into Court as security (being $90,000). It should have been plain to the applicant that if the offer was not accepted, the respondents would begin to incur costs in preparing for trial.

16    This was a complete walk away offer and, in the circumstances, one which the applicant ought to have reasonably accepted.

The applicant’s prospects of success assessed at the date of the offer

17    In relation to the applicant’s prospects of success, the respondents had clearly set out issues faced by the applicant, including in relation to its loss and damage claim in their open letter, dated 21 December 2021. By this time, the applicant should have been on notice that the prospects of it succeeding at trial were poor.

18    It can be accepted that when the application for summary judgment was dismissed on 3 March 2023, the applicant may have considered it had reasonable prospects of success. However, I do not accept the applicant’s submission that the applicant was entitled to consider the proceeding had reasonable prospects of success as at 4 December 2023 on the basis that this was only six months after the dismissal of the summary judgment application. When Offer 3 was made on 4 December 2023, the position had changed, as by 1 December 2023 the applicant had filed its lay and expert evidence. As the 4 December 2023 letter serving the Notice of Offer to Compromise (Offer 3) made clear to the applicant, that evidence plainly showed that the applicant could not prove it had suffered any loss that was caused by the 30 June Email. At [100]-[113] of the Primary Decision I found that the applicant had not adduced any evidence proving loss and damage suffered in connection with its pleaded claims. If properly advised, it should have been clear to the applicant at 4 December 2023, that its application was bound to fail, given that on the material it had filed it was clear the applicant could not prove its claim regarding loss. Therefore, if properly advised, it should have been clear to the applicant that it ought reasonably to have accepted Offer 3. The lack of evidence proving loss and damage was also an issue that had been ventilated in the context of the summary judgment application, and therefore, the applicant ought to have been aware of the issue.

19    For the reasons given, I will make the orders sought by the respondents as to costs. I am also satisfied, on the basis of the matters deposed to by Ms Devitt in her affidavit made 21 August 2025, that it is necessary, in this case, to make the additional procedural orders in relation to costs, in order to minimise the risk of further dispute with the applicant in relation to determining the costs payable by the applicant to the respondents.

20    For completeness, I note that s 40(2)(b) of the Defamation Act 2005 (Qld) requires a court (unless the interests of justice require otherwise), if defamation proceedings are unsuccessfully brought by a plaintiff and costs are to be awarded to the defendant, to order costs of and incidental to the proceedings, to be assessed on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant. Settlement offer means any offer to settle the proceedings made before the proceedings are determined, and includes an offer to make amends (whether made before or after the proceedings are commenced), that was a reasonable offer at the time it was made.

21    The respondents did not press for the application of this section in their written submissions. Given that there was a live question as to the applicability of the Defamation Act 2005 (Qld) and the complexity caused by the existence of the other causes of action (misleading and deceptive conduct, and injurious falsehood) this was understandable. As I have found the respondents are entitled to indemnity costs in any event from the second business day after Offer 3 was served, in respect of all three causes of action, it is not necessary to deal with s 40(2)(b) of the Defamation Act 2005 (Qld).

Disposition

22    I will make the orders sought by the respondents in Annexure A to their written submissions dated 21 August 2025.

Associate:

Dated:    19 September 2025