A Federal Court of Australia judge ordered a respondent to pay indemnity costs after determining that a successful applicant secured a judgment more advantageous than a pre-hearing compromise offer. The decision in Colgrave v TT-Line Company Pty Ltd (Costs) [2026] FCA 1462 followed the court’s finding that compensation was due under s. 38(2) of the Seafarers Rehabilitation and Compensation Act 1992 (Cth).

The court annulled an Administrative Review Tribunal decision and remitted the case for reconsideration with a directive regarding the applicant’s compensation entitlement. The applicant initially sought indemnity costs on the basis that the respondent pursued a futile case it ought to have recognized as untenable. The court dismissed this argument, noting that the relevant sections’ interpretation was clear and unambiguous, and that the respondent’s stance could not be evaluated with hindsight.

The tribunal had previously endorsed the respondent’s reading of the legislation. While the respondent declined to accept a Comcare recommendation aligning with the correct interpretation of s. 38(2), the court found that recommendation did not restrict the respondent and did not inherently invalidate the opposing interpretation.

The court also denied indemnity costs based on an earlier settlement proposal submitted during the tribunal phase. That offer required the respondent to acknowledge liability and reimburse the applicant’s costs. The court determined rejecting it did not demonstrate unreasonable conduct in defending the Federal Court appeal.

The applicant prevailed on an alternative argument involving a compromise offer dated 17 June 2026. This offer proposed allowing the appeal, setting aside the tribunal’s ruling, and remitting the case for reconsideration under s. 38(1).

The final orders matched the proposed terms, and the respondent conceded that costs should follow the event. Rule 25.14(3) of the Federal Court Rules 2011 (Cth) establishes a presumptive entitlement to party and party costs before 11 a.m. on the second business day after offer service, with indemnity costs applicable thereafter.

The court mandated the respondent to pay the applicant’s costs on a party and party basis prior to 11 a.m. on 19 June 2026, and on an indemnity basis afterward. It also rejected the respondent’s request to pause the costs orders pending a prospective appeal, finding no evidence or argument showing prejudice or inconvenience without a stay and noting the absence of identified appeal grounds.