Federal Court of Australia

Colgrave v TT-Line Company Pty Ltd (Costs) [2026] FCA 1462

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 25.14(3) of the Federal Court Rules 2011 (Cth), the respondent pay the applicant’s costs as agreed or assessed:

(a)    before 11.00 am on 19 June 2026, on a party and party basis; and

(b)    after 11.00 am on 19 June 2026, on an indemnity basis.

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

REASONS FOR JUDGMENT

HORAN J:

1    On 10 September 2026, I delivered judgment in favour of the applicant, accepting his submission that compensation was payable to him in accordance with s 38(2) of the Seafarers Rehabilitation and Compensation Act 1992 (Cth): Colgrave v TT-Line Company Pty Ltd [2026] FCA 1232 (J). The decision of the Administrative Review Tribunal was set aside, and the matter was remitted to the Tribunal to be decided again with a direction to that effect. As the applicant sought to be heard on costs, orders were made for the parties to file submissions and evidence on that question.

2    The applicant sought an order that the respondent pay his costs on an indemnity basis, arguing that the respondent had persisted in a hopeless case which, properly advised, it ought to have known was “clearly foredoomed to fail”: see Smolle v Australia and New Zealand Banking Group Limited (No 2) [2007] FCA 1967 at [25] (Weinberg J). Alternatively, the applicant sought his costs on an indemnity basis from 19 June 2026, based on an offer to compromise made pursuant to Pt 25 of the Federal Court Rules 2011 (Cth). The respondent accepted that costs should follow the event, but submitted that costs should be awarded as between party and party.

3    Section 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) confers on the Court a broad discretion to award costs in a proceeding. The discretion must be exercised judicially, having regard to relevant facts and circumstances connected with or leading up to the litigation: Northern Territory v Sangare (2019) 265 CLR 164 at [24] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ). The discretion is generally exercised to award costs in favour of a successful party in order to compensate that party for the expense of litigation: Sangare at [25].

4    While costs are usually ordered as between party and party, the Court may order that costs awarded in favour of a party are to be paid on an indemnity basis: FCA Act, s 43(3)(g); rr 40.01, 40.02 of the Rules. Costs as between party and party means “only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation”, whereas costs on an indemnity basis provides “a complete indemnity against the costs incurred by the party in the proceeding, provided that they do not include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them”: Rules, r 1.51, Sch 1 – Dictionary.

5    Whether or not it is appropriate to award costs on an indemnity basis depends on the particular facts and circumstances of each case. Ordinarily, there should be some special or unusual feature in the case to justify a departure from the ordinary practice of ordering costs as between party and party: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (Sheppard J); Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). This can include circumstances in which proceedings were commenced or continued “in wilful disregard of known facts or clearly established law”, as well as where there was “an imprudent refusal of an offer to compromise”: Colgate-Palmolive at 233–234.

6    The relevant principles are conveniently summarised in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [4]–[5] (Jagot, Yates and Murphy JJ):

Usually the Court will award costs to the successful party on a party/party basis, but where the circumstances of the case warrant a departure from the usual course the Court may order indemnity costs. The principles relevant to an award of indemnity costs are well-established. There can be no exhaustive list of the circumstances that may warrant the exercise of the discretion.

In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made “which ought never to have been made”, where the case is “unduly prolonged by groundless contentions” (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).

7    The applicant argued that an award of indemnity costs was appropriate in circumstances where the Court accepted the correctness of his construction of s 38(1) and (2) of the Seafarers Act, and “found no merit whatsoever in the respondent’s arguments”. The applicant noted that, when affirming the determination that the applicant was not entitled to compensation under Div 3 of Pt 2 of the Seafarers Act in respect of his incapacity for work, the respondent had disregarded Comcare’s recommendation that the determination be revoked: J [15]–[16]. Further, when the matter was before the Tribunal, the applicant had made an offer of settlement in accordance with the principles in Calderbank v Calderbank [1976] Fam 93. By letter dated 9 September 2025, the applicant offered to settle the proceedings on the basis that the reviewable decision be set aside, and the respondent accept liability to pay compensation under s 38(2) of the Seafarers Act and agree to pay the applicant’s legal costs and disbursements as agreed or assessed. That settlement offer was not accepted by the respondent.

8    The applicant submitted that the respondent had failed in its statutory duty to use its best endeavours to assist the Tribunal to make the correct or preferable decision and to achieve its statutory objectives: Administrative Review Tribunal Act 2024 (Cth), ss 9, 56. Further, the applicant contended that the respondent had not conducted the present proceeding in a way that was consistent with the overarching purpose of the civil practice and procedure provisions, namely, to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: FCA Act, ss 37M, 37N. The applicant argued that, by persisting in its defence of the appeal, the respondent “unreasonably caused the applicant to incur substantial legal costs and unnecessarily required the Court to devote scarce judicial resources to resolving an argument that should never have been maintained”.

9    However, the respondent submitted that the fact that its case was ultimately unsuccessful did not demonstrate that, at the time that the appeal was instituted, the respondent had no reasonable prospect of success. In circumstances where “the strongest objective evidence available was the decision made by the Tribunal”, the respondent submitted that its case could not be said to have been “hopeless” or “foredoomed to fail”.

10    For the reasons set out in my judgment, I consider that the proper construction of s 38(1) and (2) of the Seafarers Act is clear and unambiguous, both on the plain meaning of the statutory text, and in the light of the context and purpose of the provisions. However, one must be careful not to assess the respondent’s position with the benefit of hindsight: see, e.g., Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246; (2021) 151 ACSR 26 at [12] (Wigney J); Herron v HarperCollins Publishers Australia Pty Ltd (No 4) [2021] FCA 1021 at [21] (Jagot J). The categories of cases in which an order for indemnity costs may be warranted generally involve “a high degree of certainty concerning the deficiencies in the losing party’s case”, and require more than that the losing party’s case was simply weak or tenuous: Colgate-Palmolive (No 5) at [11] (Wigney J). The inquiry is directed to the circumstances in which the case was commenced or continued, including whether there were obvious deficiencies that would or should have been appreciated by the losing party, “at least if they had given proper consideration to, or been properly advised about, the merits of their case”: ibid.

11    The construction for which the respondent contended was accepted by the Tribunal, albeit erroneously. For present purposes, I do not consider that this can be regarded as the Tribunal having been “led … into error” by the respondent, particularly where it is not suggested that the respondent had failed to disclose any material facts or relevant authorities. It is perhaps of greater significance that the respondent declined to accept the recommendation made by Comcare, which reflected the correct construction of s 38(2). Nevertheless, that recommendation did not constrain the respondent in determining whether compensation was payable to the applicant, and did not necessarily demonstrate that any competing construction was untenable, particularly in the light of the Tribunal’s subsequent decision in the respondent’s favour.

12    In so far as the applicant relies on the Calderbank offer dated 9 September 2025, it may be noted that the offer did not involve any element of compromise, but rather required the respondent to accept liability under s 38(2) of the Seafarers Act and to pay the applicant’s costs to that date. Further, the offer was made when the matter was before the Tribunal, and was subsequently overtaken by the Tribunal’s decision to affirm the respondent’s determination.

13    There is no presumption that a party who rejects a Calderbank offer should pay costs on an indemnity basis in the event that the outcome is ultimately less favourable to that party: see Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [19]–[20], [23]–[24] (Warren CJ, Maxwell P and Harper AJA). The rejection of the offer must be unreasonable in all the circumstances, such that it is appropriate to depart from the ordinary position that costs are awarded on a party and party basis: Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [7] (Nicholas, Yates and Beach JJ).

14    In the present case, the Calderbank letter demanded the respondent’s capitulation, prior to the outcome of the review proceedings before the Tribunal. While the applicant’s legal representatives asserted that the respondent’s position was “baseless” and involved “an incorrect construction of the legislation”, including by reference to the advice from Comcare, they did not expound the underlying reasoning in support of that conclusion. The Tribunal took a different view. In all the circumstances, I am not satisfied that the rejection of the Calderbank offer establishes that the respondent acted unreasonably in defending the appeal proceedings in this Court, so as to warrant an order for indemnity costs.

15    The applicant advanced an alternative submission that, pursuant to r 25.14(3) of the Rules, he should be awarded costs on an indemnity basis from 11.00 am on 19 June 2026, being the second business day after service of a notice of offer to compromise dated 17 June 2026.

16    Where an applicant has made an offer to compromise in accordance with Pt 25 of the Rules, r 25.14 relevantly provides as follows:

25.14 Costs where offer not accepted

…

(3)    If an offer is made by an applicant 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:

(a)    before 11.00 am on the second business day after the offer was served—on a party and party basis; and

(b)    after the time mentioned in paragraph (a)—on an indemnity basis.

Note 1:    Costs on an indemnity basis is defined in the Dictionary.

Note 2:    The Court may make an order inconsistent with these rules—see rule 1.35.

17    Where it applies, r 25.14(3) creates a rebuttable presumption in favour of indemnity costs from 11.00 am on the second business day after the offer was served: Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [23] (Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ); Australian Skills Quality Authority v Western Institute of Technology Pty Ltd [2017] FCAFC 183 at [23] (Tracey, Griffiths and Charlesworth JJ); Wu v Chu (2025) 312 FCR 89 at [9] (O’Callaghan, O’Bryan and Vandongen JJ). The presumptive entitlement under r 25.14(3) does not depend on whether the respondent’s refusal to accept the offer was unreasonable: JMC Pty Ltd v Commissioner of Taxation (Costs) [2023] FCAFC 95 at [6] (Bromwich, Thawley and Hespe JJ); Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 at [11] (Tamberlin, Finn and Sundberg JJ).

18    As is recognised in the note to r 25.14, the Court has a discretionary power under r 1.35 to order costs on a different basis: see JMC Pty Ltd at [8]–[11]. The respondent bears the onus to establish “proper reasons” why an order should be made that is inconsistent with the applicant’s entitlement to indemnity costs: JMC Pty Ltd at [9]–[10]; Wu v Chu at [28]. While the reasonableness of the rejection of an offer to compromise may be relevant to the exercise of the discretion under r 1.35, it is not necessarily sufficient to displace the presumption under r 25.14(3): JMC Pty Ltd at [11], [13], [23]; Kassem and Secatore v Commissioner of Taxation (No 2) [2012] FCA 293 at [14] (Nicholas J). The object of r 25.14(3) is to promote the early settlement of disputes by requiring parties to give serious thought to the risk involved in not accepting an offer to compromise a proceeding: IFTC Broking Services Ltd v Commissioner of Taxation [2010] FCAFC 31; (2010) 268 ALR 1 at [9] (Stone, Edmonds and Jagot JJ); JMC Pty Ltd at [23]; Wu v Chu at [35].

19    The offer made by the applicant was in the following terms:

To the respondent.

The applicant offers to compromise this proceeding.

The offer is as follows:

1.    The appeal is allowed.

2.    The decision of the Administrative Review Tribunal is set aside.

3.    The matter is remitted to the Tribunal to be decided again according to law, with a direction that s 38(1) of the Seafarers Rehabilitation and Compensation Act 1992 (Cth) does not apply in the applicant’s circumstances.

4.    The applicant pay the respondent’s costs and disbursements of and incidental to this proceeding on a party and party basis.

This offer is inclusive of costs on the basis set out above.

This offer of compromise is open to be accepted for 14 days after service of this offer of compromise.

20    The terms of the applicant’s offer accord with the substantive orders that were ultimately made on the appeal. However, the applicant offered to pay the respondent’s costs on a party and party basis. For the purposes of determining whether a judgment is more favourable than the terms of an offer, the foregoing of costs can be an element of compromise: Lodestar at [15], [17], [19], [24]. In circumstances where the respondent accepts that costs should follow the event, the applicant has obtained a judgment that is more favourable than the terms of the offer. Accordingly, under r 25.14(3), the applicant is presumptively entitled to an order that the respondent pay his costs before 11.00 am on 19 June 2026 on a party and party basis, and thereafter on an indemnity basis.

21    The respondent has not pointed to any reason why the position in r 25.14(3) should not apply. Indeed, the respondent’s written submissions did not even address the consequences of the applicant’s offer to compromise. Even taking into account that the respondent had the benefit of the Tribunal’s decision in its favour (cf. Wu v Chu at [17], [26], [37]), I am not persuaded that it was reasonable for the respondent not to accept the applicant’s offer. At the time that the offer was made, the applicant had filed both his written outline of submissions and his reply submissions, in which the arguments as to the proper construction and application of s 38 of the Seafarers Act were thoroughly exposed. In any event, irrespective of whether the respondent’s rejection of the offer was unreasonable, no proper reason has been shown why the applicant should not be entitled to payment of his costs in accordance with r 25.14(3).

22    Accordingly, the respondent will be ordered to pay the applicant’s costs before 11.00 am on 19 June 2026 on a party and party basis, and after that time on an indemnity basis.

23    Finally, the respondent indicated its intention to appeal from the judgment, and submitted that it would be appropriate for any costs order to be stayed pending determination of the appeal to “avoid the potential injustice of the parties being required to pay costs of a proceeding that may yet to be resolved in the respondent’s favor [sic] on further appeal”. This submission is undeveloped, and is not supported by any evidence or argument directed to establishing any prejudice or inconvenience that might arise in the absence of a stay on the orders in respect of costs. The proposed grounds of any appeal have not been identified, let alone shown to be at least arguable. I note also that the respondent has not applied for a stay of the substantive orders, by which the applicant is entitled to the payment of compensation in accordance with s 38(2) of the Seafarers Act, subject only to the remittal of the matter to the Tribunal to make such a decision.

24    A submission of this kind should not be advanced by way of afterthought. The bringing of an appeal is not itself sufficient for the grant of a stay: Rules, r 36.08. It is incumbent on the party who seeks a stay of any orders, including costs orders, to demonstrate that a stay is appropriate, having regard to the applicable principles that guide the exercise of the Court’s discretion: see, e.g., Viagogo AG v Australian Competition and Consumer Commission [2021] FCA 175 at [10]–[13] (Abraham J); In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd (No 2) [2020] FCA 772 at [25], [27] (Katzmann J); Brady v NULIS Nominees (Australia) Limited in its capacity as trustee of the MLC Super Fund (Stay Application) [2025] FCA 588 at [6]–[10] (Markovic J). The respondent has not attempted to discharge that burden. I refuse the application to stay the orders in respect of the costs of the proceeding.

Associate:

Dated:    5 October 2026