DECISION
35 I would first say that, particularly in the light of the later minutes introduced by the Canine Council, the Board minute of August 2001 was not given effect to as precluding the Canine Council defending the cross-claim on any basis available to it so as to deny Mrs. Furber success against Mr. Stacey, or so as to deny that it was a tortfeasor who would if sued have been liable in terms of s.5 of the Law Reform (Miscellaneous Provisions) Act 1946. Further, in circumstances where the only claim brought against the Canine Council in the cross-claim was under that provision, even in an undefended cross-claim a court would have to be satisfied, on the balance of probabilities, that the Canine Council was a tortfeasor who would if sued have been liable, and if so would have to determine whether in the circumstances there should be indemnity or contribution, and if contribution, in what amount.
36 In those circumstances, I accept Mr. Gray's submission that there was, at least theoretically, an issue in the case between Mr. Stacey and the Canine Council which could have given rise to an actual conflict of interests. If Mrs. Furber had established malice against Mr. Stacey so as to defeat his defence of qualified privilege, and if Mr. Stacey's other defences had failed, there would have been an issue as to whether, through vicarious liability for Mr. Stacey's conduct, the Canine Council was a tortfeasor that would if sued have been liable; and if so, whether its authorship through other agents of the defamatory material meant that it should indemnify Mr. Stacey or contribute, and if it was to contribute, in what amount. One substantial matter to be considered in this application is whether that possible conflict of interests was such as to justify the separate representation and the fixing of Mrs. Furber with liability for the Canine Council's costs.
37 Next, in my opinion there are errors of principle by the primary judge such as to make it appropriate, in considering whether leave to appeal be granted, to consider the merits of the case, particularly having regard to the substantial amount involved.
38 Those errors of principle are as follows.
39 Firstly, in various places, he approached the matter as if there were proceedings on foot between Mrs. Furber and the Canine Council, so as to engage the primary facie position as to costs as between those parties: this appears from the words quoted from towards the end of the main judgment, from the circumstance that the primary judge made no reference to the prima facie position, arising from his decision of the case, that Mrs. Furber pay Mr. Stacey's costs and Mr. Stacey pay the Canine Council's costs, and from the absence of any consideration of circumstances required to displace or supplement that prima facie position.
40 Secondly, he was in error in treating it as unreasonable for Mrs. Furber to sue Mr. Stacey alone, and treating that unreasonableness as supporting an order for costs against her; and in treating that as sufficient to justify the order made, in combination with what he saw as the reasonableness of Mr. Stacey joining the Canine Council, together with a mere possibility of a conflict of interest.
41 Thirdly, associated with the second error, there is the failure to squarely address the question whether, given the prima facie principle that costs follow the event, the mere possibility of a conflict made it reasonable to place on Mrs. Furber the burden of all the costs prima facie payable by Mr. Stacey.
42 It is therefore appropriate to consider the merits of the case.
43 I start from the prima facie position that costs follow the event, which in this case would mean that Mrs. Furber pays Mr. Stacey's costs of her claim against him, and Mr. Stacey pays the Canine Council's costs of the cross-claim.
44 Next, in my opinion it was plainly reasonable for Mr. Stacey to bring the cross-claim against the Canine Council, particularly in circumstances where he was not the author of the material which was the subject of Mrs. Furber's claim. That material had been drafted and vetted, for the purposes of defamation considerations, by solicitors acting on the instructions of the Canine Council. It was accordingly reasonable, indeed virtually inevitable, that Mr. Stacey would seek indemnity or at least contribution from a party responsible for the authorship and legal approval of the article, where his role in the publication was merely to put his name to the article and to authorise its publication under his name.
45 In my opinion also, the issues raised as between Mr. Stacey and the Canine Council cannot in any sense be considered "private" as between Mr. Stacey and the Canine Council, as that idea is used in the qualification discussed by Finn J and the cases to which he refers. It is not merely the case that the Canine Council was as much a tortfeasor as Mr. Stacey, unless the plaintiff succeeded solely on the basis of proving malice in Mr. Stacey. In addition to this is the circumstance referred to above, that it was the Canine Council and not Mr. Stacey that was responsible for the authorship and vetting of the article, and that this was a matter that Mrs. Furber knew or at least was in a position to know. Mrs. Furber was present at a Board meeting which resolved to instruct the Canine Council's solicitors to draft the relevant article.
46 I respectfully disagree with the view expressed by Basten JA that the Canine Council's defence to the cross-claim, insofar as it raised defences to Mrs. Furber's claim, did not raise any issue as between the Canine Council and Mr. Stacey. Mr. Stacey could only succeed against the Canine Council if it were shown that both of them were tortfeasors; and although Mr. Stacey was maintaining, as against Mrs. Furber, that he was not a tortfeasor, success on his cross-claim depended upon the opposite being shown and, in addition, upon the Canine Council also being shown to be a tortfeasor. The costs of the Canine Council in resisting an allegation that both it and Mr. Stacey were tortfeasors were, in my opinion, plainly costs of defending the cross-claim. There is a separate question as to whether, because of the practical coincidence of interests in defeating Mrs. Furber's claim against Mr. Stacey, there should have been co-operation so as to minimise costs.
47 A further consideration is that because Mrs. Furber had not joined both Mr. Stacey and the Canine Council as defendants, there was not the prima facie coincidence of interests that exists between defendants who are jointly sued, so that the considerations discussed in Statham v. Shephard do not arise directly, and are of less force. Because Mr. Stacey had to bring the Canine Council into the proceedings by way of a cross-claim, he was put into an adversarial position as regards the Canine Council, and therefore at least prima facie in a position of a conflict of interests with them. Furthermore, the structure of the proceedings meant that any judgment obtained by Mrs. Furber would be only against Mr. Stacey, and not against the Canine Council, throwing into stark relief the question whether the Canine Council should voluntarily make itself liable for the amount of such a judgment: this would be a question that would need to be addressed by the Board of the Canine Council, having regard to its duty to the Council. Furthermore, from Mr. Stacey's point of view, any abandonment by him of the conduct of the defence would need to be supported by some assurance that the Canine Council, if it conducted the defence of the proceedings, would protect his interests in circumstances where the Canine Council's interests were not themselves under threat from Mrs. Furber. Thus, although I do not think Mrs. Stacey should be penalised for being "unreasonable" in choosing to sue Mr. Stacey alone, the fact that she did so, and its consequences, were relevant to the costs decision.
48 The main submission on behalf of Mrs. Furber was to the effect that any theoretical conflict of interests was of no practical significance, because there never was any real possibility that this theoretical potential conflict would develop into an actual conflict.
49 However, in assessing this submission it is to be kept in mind that Mrs. Furber did allege malice against Mr. Stacey, and maintained that allegation right up to closing submissions in the case. From her point of view, therefore, that was an allegation that had a chance of success. As it turned out, all but one of the defences other than qualified privilege succeeded, so in the result it would not have assisted Mrs. Furber even if she had established malice. But nevertheless, having regard to the possibility that the other defences might fail, and having regard to the strength of the contention that the publication was on an occasion of qualified privilege, it could reasonably have been thought that the allegation of malice gave Mrs. Furber her best chance of success in the proceedings.
50 Had the proceedings succeeded on that basis, that would be the precise circumstance which would cause the theoretical potential conflict to become an actual conflict, in the ways referred to earlier: that is, it would squarely raise the question whether the Canine Council would be liable as a joint tortfeasor by reason of vicarious liability based on Mr. Stacey's malice, and it would squarely raise the question of the appropriate apportionment of any contribution, having regard to the competing considerations of the malice of Mr. Stacey and the authorship and vetting of the article by the Canine Council.
51 In effect, the submission now made for Mrs. Furber is that Mr. Stacey and the Canine Council should have appreciated that Mrs. Furber's claim of malice had no chance of success, even though Mrs. Furber never appreciated this and indeed pressed this claim to the end of the case; whereas the Canine Council's submission is to the effect that it was reasonable for it not to have appreciated this at any time before the conclusion of the cross-examination of Mr. Stacey. In my opinion, it is not shown to have been unreasonable for the Canine Council to have regarded the question of malice as a significant issue, at least until that time. (Because Mr. Stacey and the Canine Council were on opposing sides of the cross-claim, I think there was an evidentiary onus on Mrs. Furber to negative any conflict of interests; whereas if they had been joined as defendants, they would have had an evidentiary onus to establish a conflict of interests.)
52 Mr. Hughes submitted to the effect that, even though Article 78 was not referred to in the pleadings, it did in fact assure Mr. Stacey of a complete indemnity, irrespective of the result of the proceedings. He submitted that although Article 78(b) gave an indemnity only in the event of a judgment being in favour of the officer in question, Article 78(a) applied whatever the result of the proceedings. Article 78(a) is as follows:
78(a) To the extent permitted by law, RNSWCC indemnifies every officer and employee of RNSWCC and every member of any committee constituted under these Articles against any liability incurred by that person:
(a) in his or her capacity as officer or employee or committee member of RNSWCC; and
(b) to a person other than RNSWCC or a related body corporation of RNSWCC, unless the liability arises out of conduct on the part of the officer, employee or committee member that involves a lack of good faith.
53 Mr. Hughes submitted that, even if Mrs. Furber proved malice, that would not mean that Mr. Stacey's conduct involved a lack of good faith, because that expression referred to a lack of good faith towards the Canine Council, and that would not be involved in malice against Mrs. Furber. The absolute identity of interests guaranteed by this article was, Mr. Hughes submitted, confirmed by the conduct of the case, and in particular by the Canine Council's consent to dismissal of the cross-claim.
54 In my opinion, if Mrs. Furber established malice against Mr. Stacey, to the effect that he used the opportunity to publish material defamatory of her in circumstances of qualified privilege in order to damage her, because of malice towards her, it would be strongly arguable that this would involve a lack of good faith within Article 78(a). In my opinion, even if one accepts that "lack of good faith" in that article is restricted to a lack of good faith towards the Canine Council, for an officer to use his or her position in the Canine Council to harm another out of malice could well involve a lack of good faith towards the Canine Council.
55 I respectfully disagree with the view expressed by Basten JA that Mr. Stacey's failure to plead Article 78(a) disposes of any conflict of interest at a legal level: indeed, as Basten JA points out, that failure may have precluded Mr. Stacey from relying on it later, had an issue arisen. However, on a practical level, Mr. Stacey's failure to plead it could suggest that he was confident that he would be indemnified. However, I would not infer that either Mr. Stacey or the Canine Council believed there was no realistic possibility of a conflict of interests.
56 In my opinion also, the consent to dismissal of the cross-claim is of itself not significant. That occurred only after the primary judge had determined that Mrs. Furber's claim failed against Mr. Stacey, and this made dismissal of the cross-claim inevitable. However, the circumstance that the consent was to dismissal without any order for costs is another factor supporting practical coincidence of interests, in the circumstances that actually occurred.
57 Thus, in my opinion, the question of the appropriate costs order should be approached having regard particularly to the following considerations:
(1) It was reasonable for Mr. Stacey to bring and maintain a cross-claim against the Canine Council.
(2) This claim did not raise issues private as between Mr. Stacey and the Canine Council.
(3) It was reasonable for both Mr. Stacey and the Canine Council to maintain separate representation.
(4) The contesting by the Canine Council of Mrs. Furber's claims was an essential part of its defence to Mr. Stacey's cross-claim
58 However, it was foreseeable that, as actually occurred, the theoretical conflict of interests that justified the maintenance of separate representation might not become an actual conflict, and also that even if it did, there would be an actual coincidence of interests in respect of most of the issues in the case. In those circumstances, in my opinion, the Canine Council should have sought to avoid unnecessary costs by co-operating so far as possible with Mr. Stacey so as to avoid duplication of effort and costs in contesting Mrs. Furber's claim. In my opinion, it did not do this: this is made clear, for example, by the circumstance that the Canine Council was represented by senior and junior counsel throughout a 17-day hearing, at which in the event it contested only the same issues as were contested by Mr. Stacey, who was himself represented by counsel.
59 Had the Canine Council sought costs against Mr. Stacey, prima facie, it would have been entitled to the costs of the cross-claim, subject to the effect of Article 78 (see Johnson v. Ribbins [1977] 1 WLR 1548); but in my opinion, although it was part of its defence to the cross-claim to contest Mrs. Furber's claim, it would not have been entitled to costs against Mr. Stacey insofar as its costs of contesting Mrs. Furber's claim went beyond what was reasonable, having regard to this practical coincidence of interests. Similarly, although I accept that where the Canine Council did not seek an order against Mr. Stacey, it was open to make an order against Mrs. Furber to pay the Canine Council's costs (see Dal Pont Law of Costs Butterworths 2003), I do not think Mrs. Furber should be required to pay its costs beyond what was reasonable in that respect.
60 It is very difficult to quantify the appropriate amount. I think it is correct to infer that the Canine Council incurred costs, including those of senior and junior council, for a 17-day hearing, without a significant attempt to avoid duplication of effort. If there had been a strategy in place to avoid duplication of effort and costs, the Court may well have accepted that strategy as reasonable and therefore awarded full costs. In the absence of such a strategy, the Court is left to do its best. On that basis, I think it appropriate to award the Canine Council one-quarter of its costs of the cross-claim.
61 In my opinion, in a case such as this where there is a practical coincidence of interests between a defendant and a cross-claimant, a cross-claimant wishing to have all its costs paid by the plaintiff should be able to show that it did follow a reasonable strategy with a view to ensuring that there was a minimum of duplication of effort and costs.