Under r 25.14(2) of the Federal Court Rules 2011, a respondent seeking indemnity costs after an applicant's proceeding is dismissed bears the onus of establishing that the applicant unreasonably failed to accept the offer of compromise. An offer that bears no commercial relationship to the value of the dispute will not satisfy this requirement. Additionally, where the ground on which the respondent ultimately succeeded did not exist at the time the offer was open for acceptance (because the respondent had not yet raised it), the applicant's failure to accept the offer will not be characterised as unreasonable.
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