Federal Court of Australia

UIL (Singapore) Pte Ltd v Wollongong Coal Limited (No 6) [2026] FCA 1546

ORDERS

THE COURT ORDERS THAT:

1. The Respondents’ application for indemnity costs be refused.

2. The order of 10 September 2026 that the Applicant pay the Respondents’ costs on a standard basis as taxed in default of agreement is affirmed.

3. There be no order as to the costs of the Respondents’ application for indemnity costs.

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

REASONS FOR JUDGMENT

BENNETT J:

Introduction and summary

1 Following principal judgment in this proceeding in UIL (Singapore) Pte Ltd v Wollongong Coal Limited (No 5) [2026] FCA 1336 (Principal Judgment), the Applicant’s originating application was dismissed, and the parties were ordered to make any submissions concerning costs consequent upon that decision.

2 The Respondents sought costs on a standard basis before 11.00 am on 8 April 2024 and on an indemnity basis thereafter. The indemnity costs application is based on an offer to compromise made under the Federal Court Rules 2011 (Cth) (Rules) and a Calderbank offer both made on 4 April 2024 (the Offers). For the reasons explained below, I have concluded that:

(1) It was not unreasonable for the Offers to be refused.

(2) The appropriate order is that the Applicant pay the Respondents’ costs of the proceedings on a standard basis in accordance with the Court’s order of 10 September 2026.

(3) The Respondents’ application for indemnity costs will be dismissed.

background to The offers

3 The matter was commenced by originating application and statement of claim in May 2020. Following an unsuccessful mediation on 4 April 2024, the Respondents issued two offers, being:

(1) an offer to compromise made under Part 25 of the Rules (the Rules Offer); and

(2) an offer said to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 (the Calderbank Offer).

4 The Rules Offer provided:

The Respondents offer to compromise all claims in the proceeding.

The offer is:

1. The Respondents pay the Applicant the amount specified below.

2. Judgment for the respondents.

The amount of the offer in all respects of the claim in this proceeding is $400,000.

This offer is inclusive of costs.

This offer of compromise is open to be accepted for 30 days after service of this offer of compromise.

The amount of the offer will be paid within 30 days after acceptance of this offer.

5 At the time that the Offers were made, the Respondents’ costs were approximately $657,257.23 including GST, and a letter of 4 April 2024 identified that the Respondents had incurred costs “in the vicinity of $600,000”.

6 By expressing the Rules Offer in terms that the amount to be paid was inclusive of costs, the effect of the offer, if accepted, was that neither the Applicant nor the Respondents would be entitled to recover their respective costs of the proceeding. That is because the offeree’s right to proceed to taxation where they accept an offer to compromise is only enlivened where the offer is made exclusive of costs (Rules r 25.12).

7 The Calderbank Offer set out a number of reasons that the Respondents said that the Applicant’s case would fail, and then offered to compromise on the basis that:

The respondents offer to settle all claims in the proceedings on the following terms:

(a)    the respondents pay UIL the sum of $400,000 within 30 days after the day on which UIL accepts this offer (the Settlement Payment); and

(b)    judgment is entered in favour of the respondents with no order as to costs.

8 The amount of $400,000 was said to be based on the amount that the Respondents estimated it would not be able to recover if it obtained a standard costs order if it were successful in the proceeding. In addition, the evidence was that the Respondents had already incurred costs of approximately $600,000 until that point, which it offered to forego. So, the Respondents argue that its offer was to pay UIL $400,000, and to give UIL the benefit of not being exposed to liability for the Respondents’ costs on a party-party basis. Assuming that it could recover 65% of its standard costs, the Respondents argue this offer represented approximately $790,000 in value.

9 The Calderbank Offer enclosed a letter of 13 July 2021 which identified what was said to be a number of defects in the Applicant’s claims but made no offer to compromise.

Principles

10 Rule 25.14(2) of the Rules provides as follows:

Costs where offer not accepted

(2)    If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant’s proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent’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.

11 Rule 25.03 states that the offer of compromise must state whether it is inclusive of costs or if costs are in addition to the offer. The Rules Offer in this instance was clear that the offer was inclusive of costs.

12 In relation to the Rules Offer, the Respondents argue that it is necessary for the Respondents to establish that the Applicant acted unreasonably in failing to accept the offer. The Respondents argue that the question that matters most in this context is whether the Applicant should have known that its case was likely to fail (citing Rakman International Pty Limited v Boss Fire & Safety Pty Ltd [2023] FCAFC 202; 178 IPR 20 at [155] (Nicholas, Burley and Rofe JJ)). I accept that an offer under the Rules is not predicated on parties having a complete state of knowledge of the evidence (Robinson v Kenny (No 2) [2015] FCA 2 at [26] (Farrell J)), although it is recognised that a change in the way the case is put, or the evidence in it, can be relevant to the issues (see Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (No 2) [2016] FCA 783 at [41] – [42] (Bromberg J) and the authorities referred to therein).

13 The 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 (Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [8] (Nicholas, Yates and Beach JJ)).

14 The relevant principles concerning Calderbank offers were recently restated by Banks-Smith J in Ezy Fit Engineering Group Pty Limited v Microm Nominees Pty Limited (No 4) [2025] FCA 411 (at [43] – [46]). A mere refusal of an offer does not lead to indemnity costs – the rejection must have been imprudent or unreasonable (Ezy Fit at [44]).

15 The factors that might be taken into account in an assessment of the reasonableness of the failure to accept the offer are well-recognised (Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [25] (Warren CJ, Maxwell P and Harper AJA)). They include:

(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 indemnity costs in the event of the offeree rejecting it.

16 In relation to the Calderbank Offer, the Respondents argue that the question is whether:

(1) the offer involved a “genuine offer of compromise”; and

(2) whether it was unreasonable for the offeree not to accept it.

17 Whether made under the Rules or in accordance with the principles in Calderbank, there is a clear public interest in offers of compromise being made at a time and in a way that promotes the compromise of the proceedings. Of course, each case turns on its own facts.

18 The Applicant accepts that the Offers involved an element of compromise, in the sense that they were offers to “give something away”, and that the only real issue in dispute in relation to the Offers is whether the Applicant’s refusal to accept them was unreasonable.

19 The Applicant argues that the question of unreasonableness is primarily to be determined at the date of the rejection of the Offers without looking at the ultimate conclusion (Rakman at [155] (Nicholas, Burley and Rofe JJ)).

Analysis

20 I accept that the key issue in relation to the Offers is the reasonableness or otherwise of the failure to accept them. That is to be assessed at the time of the Offers, and not by reference to the ultimate conclusion of the proceeding. Of course, whether the ultimate conclusion of the proceeding was something that could have or should have been understood by the Applicant is relevant to that analysis.

The Rules Offer

21 I accept that the question that matters most in the context of an offer under r 25.14(2) is whether, given the information then available to the Applicant, it should have known that its case was likely to fail (Anchorage Capital Partners Pty Limited v ACPA Pty Ltd [2018] FCAFC 6; 259 FCR 514 at [239] (Nicholas, Yates and Beach JJ); Rakman at [155] (Nicholas, Burley and Rofe JJ)).

22 At the time of the Offers, the Defence relied upon by the Respondents did not plead:

(1) the argument that the Coal Sale Agreements (CSAs) contained a termination clause;

(2) any allegation that WCL would have exercised the termination clause; or

(3) the argument that the CSAs were on back-to-back terms with the JSPL Purchase Agreement such that the Applicant was not entitled to earn any profit margin on such sales.

23 Those aspects of the Defence were introduced into the pleadings in June 2025 – a year after the Offers had lapsed. They were significant to the assessment of the prospects of the claim and were new. It was relevant that discovery had not been completed at the time of the Offers, including in relation to issues of loss and damage, nor had the Respondents by that time filed lay or expert evidence.

24 The Respondents failed on their contention that the United Nations Convention on Contracts for the International Sale of Goods (the Vienna Convention) did not apply to the construction of the agreements in issue in this proceeding. Because the Vienna Convention did apply, the lay evidence of those involved in its execution (in particular Mr Bhatia and Mr Sharma) was of particular significance to understanding the legal landscape applicable to the interpretation of the CSAs. These were matters that were otherwise not knowable to the Applicant at that time of the Offers.

25 Of course, an offer can be effective at all stages of the proceedings, whatever the state of the evidence when it is served (Visscher v Teekay Shipping (Australia) Pty Ltd (No 2) [2014] FCAFC 19 at [7] (Rares, Jagot and Bromberg JJ)). However, the particular circumstances of this case involved the operation of the Vienna Convention (being a matter that the Respondents had not substantially engaged with at that time), which made lay evidence of particular and unusual relevance to the contractual analysis.

26 It follows that significant parts of the case as relevant to both the issue of liability and any issues of quantum were not knowable by the parties at the relevant time. There were changes to the pleading, and additional evidence proffered well after the Offers had lapsed.

27 In addition, the position under the Vienna Convention was relatively novel, with little decided authority to guide its application to the facts of the case. While not determinative, it is relevant to my conclusion that it was not unreasonable to reject the Rules Offer.

28 I have therefore concluded that even though an offer under the Rules was made, the changes to the pleadings, the later filing of evidence, and the relative novelty of the claims mean that I do not consider that it was unreasonable for the Applicant to refuse to accept that offer.

The Calderbank Offer

29 It was not unreasonable to reject the Calderbank offer. In addition to the issues identified above, which also apply to the Calderbank Offer, it did not, in substance, engage with the case that was actually put by the Applicant. The Applicant’s case did not involve a common law contractual claim (even in the alternative).

30 The claim put by the Applicant was at all times only a claim based on the application of the Vienna Convention (as well as a claim for misleading or deceptive conduct). As the Principal Judgment explained in detail, quite different principles applied to the analysis under the Vienna Convention. The Respondents’ Calderbank Offer referred to the Vienna Convention by one footnote alone, and did not otherwise explain why the claim would fail by reference to the principal basis upon which it was put.

31 It follows that the Calderbank Offer did not effectively engage with the extent of the compromise offered nor the Applicant’s prospects of success. I have therefore concluded that there was no relevant unreasonableness in the Applicant rejecting a Calderbank offer that so fundamentally failed to engage with the way in which the claim was put.

Conclusion

32 For the reasons set out above, I consider it appropriate, in the exercise of my discretion, to retain the order that the Applicant pay the Respondents’ costs on a standard basis, and to refuse the application for indemnity costs. No party addressed or sought to be heard on the costs of the indemnity costs application. There will therefore be no order as to costs in relation to that application.

Associate:

Dated:    19 October 2026