Again the defendants have not contended otherwise in their submissions.
84 Thirdly, the costs, including disbursements, of $25,389.52 claimed by the plaintiffs' solicitors were, on the face of it, reasonable bearing in mind that the plaintiffs had not retained counsel.
85 Fourthly, the $10,000 compensation claimed by the plaintiffs, in relation to investigations of the extent of publication carried out by senior management, again seems to be reasonable and a proper item to be taken into account on a settlement.
86 In essence, the plaintiffs had demonstrated a willingness to settle and had made a sensible and realistic offer on 8 July 1994. As the parties were approaching finalisation of a settlement, which on the face of it was very satisfactory to the publishers of a serious defamation, the defendants walked away from the settlement negotiations on 17 August 1994 and set the proceedings on a course which ultimately culminated five years later in verdicts for the plaintiffs after years of expensive interlocutory proceedings and a trial which lasted for seven weeks.
87 The question then is whether the result at trial was more favourable to the plaintiffs then the offers which the plaintiffs had made to settle the proceedings. This question is, perhaps, complicated by the fact that apologies are generally a necessary element of any settlement of defamation cases of this nature, whereas, by the very nature of things, the ultimate resolution of the proceedings could not result in an apology. The plaintiffs did, however, receive damages in the aggregate sum of $180,000, with interest to be added, and the defendants concede that they are entitled to costs, albeit on a party and party basis.
88 The question then is whether the award of damages by the jury is to be considered to be a more substantial vindication for the plaintiffs than the publication of the apologies in the form proffered by the plaintiffs on 8 July 1994, together with the payment of their legal costs of $25,389.52.
89 In Humphries v TWT Ltd (1994) 120 ALR 693 at 701, the Full Federal Court of Australia (Gallop, Davies and Von Doussa JJ) said:-
"Moreover, his Honour recognised that where a serious libel has been published about a person, it is unlikely that a substantial correction or apology will completely eradicate the effect on reputation of the person in the community. That the damages must achieve the purpose of vindication was recognised."
90 This passage was quoted with approval in Evans v John Fairfax Group Pty Ltd (Unreported, Full Federal Court of Australia, Neaves, Miles and French JJ, 27 May 1994) at p 22.
91 The point at issue here involving apologies was resolved in Timms v Clift [1998] 2 QdR 100, a case which concerned r 118(1) of the Queensland District Court Rules, 1968. Rule 118 (1) provides that where the plaintiff makes an offer to settle which is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle the Court shall order the defendant to pay the plaintiff's costs fixed on a solicitor and client basis, unless the defendant shows that another order for costs is proper in the circumstances.
92 In that case, it was argued that r 118(1) had no application because it could not be shown that the judgment was "no less favourable" than the plaintiffs' offers because the offers included the requirement that an apology be published, an element not quantifiable in monetary terms.
93 At pp 107-108, the Court of Appeal (Pincus JA, Davies JA, Mackenzie J) said:-
"An analogous problem was considered by the English Court of Appeal in Roache v News Group Newspapers Ltd [1992] TLR 551. The successful plaintiff in a defamation suit was awarded the very sum which had been paid into court and it was argued that the plaintiff should therefore pay the defendant's costs after the date of payment in. But the plaintiff contended that no such order should be made because, in addition to damages, he had been granted an injunction restraining republication. As reported, the judgment reads in part as follows:
'A defendant could not ordinarily prevent a plaintiff pursuing his claims, however exaggerated they might be, with the consequent burden of costs in defending them. All he could do to protect himself was to pay into court what was justly due or what the plaintiff might prove likely to recover. If his judgment proved accurate he could look to the plaintiff for reimbursement of the costs of his defence.
The upshot of [certain] decisions … was clear.
The judge had to look closely at the facts of the particular case before him and ask: Who, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?'
Bingham MR went on to hold that if asked, the defendant would undoubtedly have made a statement in open court which 'would have been in terms which roundly vindicated [the plaintiff]'. It was also held, in effect, that the defendant would have undoubtedly been willing to undertake not to republish, and that the defendants emerged as the 'substantial winners'.
Although the question considered in that case arose in a context different from the present, the line of reasoning is applicable here; the expression 'a judgment no less favourable' in r 118 does not in our opinion exclude from consideration relief sought other than money claims. For example, if an action was brought relating to the winding up of a partnership, various items of relief might be claimed, including declaratory relief; it would be a matter for the court's judgment as to whether, an offer to settle having been made, the effect of the judgment overall was 'no less favourable' to the plaintiff than the offer.
In the present case there was, as it seems to us, no chance of an apology; however that may be, the respondent has not of course obtained one, under the judgment. But what he has is an award of damages very much higher than the sums sought in the offers to settle, namely $13,000 and $15,000. It seems to us that the result of the judgment, including ample vindication of the respondent's position, was more favourable to the respondent than either offer.
We therefore reject the submission that r 118 was inapplicable."
94 Reference may also be made to the judgment of the Full Federal Court of Australia (Spender, French and Lee JJ) in Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd (Unreported, 29 August 1995). In that case, the defendant/respondent had made a "without prejudice" offer of settlement of $90,000 plus costs which was subject to the following conditions: namely, that the appellant/plaintiff withdraw complaints made against a certain statutory board, the execution of a deed of release and a confidentiality requirement.
95 The offer was rejected by the appellant which did not achieve a result at hearing of better than $90,000 plus costs.
96 The trial judge ordered that the appellant's costs be paid up to date for acceptance of the offer, but made no order as to the appellant's costs after the date for acceptance of the respondent's offer. The Full Court dismissed an appeal from such order.
97 It was submitted on the appeal that the settlement offer should have been disregarded in view of the conditions sought to be imposed by it.
98 In dismissing the appeal, the Full Court said:-
"The primary judge considered these objections, but also had regard to the consideration that the respondents wished to negotiate a global settlement - one, as matters turned out, which would have been more favourable to the applicant than the result which it achieved after a ten day trial. The primary judge considered that the offer had the very relevant and important purpose of promoting finality of litigation. He considered that had the offer been accepted, Magenta would have received the amount of $90,000.00 plus its taxed costs, avoiding ten days of hearing, and the costs of the final preparation for that hearing would have been saved. Having referred to the factors concerning the exercise of his discretion, he concluded that Magenta should have its costs in respect of the Council rates claim up until 2 February 1994, which was the date for acceptance of the offer in the letter of 31 January 1994, and that there should be no order as to costs in respect of that claim after that date. The reasons for judgment on the costs issue show that the primary judge was fully alive to the competing considerations. No error of principle has been shown in the exercise of his discretion and no basis demonstrated by which this Court should interfere with the exercise of that discretion."
99 Their Honours reference to the negotiation of a "global settlement" is a helpful one. It is an apposite phrase to describe the settlement offer by the present plaintiffs on 8 July 1994.
100 In the light of the authorities, I am satisfied that the verdicts which the plaintiffs obtained at the hands of the jury were more favourable than the settlement offers which they made on 8 July 1994, as quantified on 16 August 1994.
101 I turn now to the defendants' submission that although the plaintiffs' compromise letters sought indemnity costs to date as part of the compromise, they did not otherwise indicate that indemnity costs would be sought if the compromise were not effected and if the plaintiffs won the case.
102 Further, it was submitted that there is no evidence that the defendants understood that costs would be sought on an indemnity basis, as a consequence of compromise not being effected. Rather, the defendants contend, the letters represented attempts by both sides to reach an "amicable settlement" as the plaintiffs' solicitors stated in their letter of 13 May 1994 - "This is a final attempt by the plaintiffs to reach an amicable settlement of these proceedings."
103 Further that the plaintiffs' solicitors' letters were all written either "without prejudice" or, in the main, "without prejudice except as to costs" but this is not a reference to costs on an indemnity basis, rather to costs simpliciter.
104 There was no due and timely warning, it was submitted, by the plaintiffs to the defendants that indemnity costs would be sought: see Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242, per Kirby P at 249G and Mahoney JA at 252B - and see the respective discussions at 247D-249G and at 250F-251D.
105 In Huntsman, Kirby P said at 249:-
"The merit of the present motion is that it calls attention to the distinct possibility that, in some circumstances, a special costs order will be made, including for indemnity costs. If such an order is to be made, it would be preferable that it should follow due and timely warning by the successful party to the unsuccessful that indemnity costs will be sought: c/f Insurers' Guarantee Fund NEM General Insurance Association Ltd (in liq) v Bager (Court of Appeal, 10 February 1995, unreported)." (emphasis added).
106 In Horseshoe Pastoral Company Pty Ltd v Murray Smith t/as South Coast Tile & Slate Company (Court of Appeal, unreported, 7 November 1995), Kirby P (with whom Clarke and Powell JJA agreed) said:-
"The second reason for hesitation is that the Court has indicated that, ordinarily, to secure indemnity costs in litigation between commercial parties, the solicitor for the party ultimately successful should be able to point to a letter which puts the opponent on notice and warns that party of an intention to seek indemnity costs."
107 The President then referred to Huntsman which at that stage was unreported. His Honour continued:-
"That was not done here. But this could scarcely be called the ordinary commercial case. The requirement of such warning is not inflexible. Other considerations may suggest that an indemnity costs order should be made even where no such notice has been given. The notice simply makes success in an application more likely, and in particular in litigation between commercial parties."
108 Thus, there is no inflexible requirement that an applicant for indemnity costs must have given prior due and timely notice.
109 The plaintiffs' solicitors' letter of 8 July 1994, together with the attached consent order may, consistent with the authorities, be categorised as a Calderbank type letter (i.e. one taking its title from Calderbank v Calderbank [1976] Fam 93): see e.g. Messiter v Hutchinson (1997) 10 NSWLR 525; Williamson v Mig Aero Pty Ltd (Unreported, McLelland J, 15 March 1991); Nobrega v Trustees of the Roman Catholic Church (No. 2) [1999] NSWCA 133 (21 May 1999).
110 In the instant case, I consider that any prudent solicitor with experience in litigation in this Court, would construe the phrase "without prejudice except as to costs" continually repeated in settlement negotiations of this nature, as an indication that, if a settlement offer is unreasonably refused, then the rejecting party would be at risk of a subsequent application for a costs order on an indemnity basis.
111 Accordingly, I do not consider that the absence of a specific communication from the plaintiffs' solicitors to the defendants' solicitors stating that if the offer of 8 July 1994 were rejected, a costs order "on an indemnity basis" would be sought if the plaintiffs went to trial and obtained a more favourable result, constitutes a bar to the plaintiffs recovering appropriate indemnity costs in this case.
112 It is well established that the mere fact that there has been an unreasonable refusal to accept an offer of compromise contained within a Calderbank letter does not necessarily entitle the offeror (who obtains a more favourable verdict at trial) to an order for costs on an indemnity basis. Albeit, there is a predisposition to holding that such party is entitled to indemnity costs.
113 In Nobrega, Powell JA referred (at para 21) to remarks by Sheppard J in Sanko Steamship Co Ltd v Sumitomo Australia Ltd [Fed.no.22/96] in which Sheppard J stated, inter alia:
"In some cases, the so called Calderbank approach may place a weapon in the hands of parties to litigation which ought not to be allowed to be abused. The ordinary rule is that costs when ordered in adversary litigation are to be recovered on the party and party basis. Any attempt to disturb that situation needs to be carefully considered. It should only be departed from where the conduct of the party against whom the order is sought is plainly unreasonable."
114 In the exercise of my discretion in this matter, I have, of course, given careful consideration to the remarks of Sheppard J in Sanko. I also have given careful consideration to the judgment of the Court of Appeal in Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR 721 at 724 where their Honours explained that the intention of Pt 52 r17 is to oblige a defendant, who has received an offer of compromise, to give serious thought to the risk which it may run of losing the proceedings and then being ordered to pay costs on an indemnity basis. The objects of rule 17 as set out by the Court of Appeal are now too well known to require repetition.
115 The third object referred to by their Honours is, however, of particular significance, in my view, in the instant case. The object there identified is to indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred:-
"This is deemed appropriate because, from the time of rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation."
116 In my view, the deemed rejection by the defendants in the instant case of the plaintiffs' offer could almost be described as a forensic disaster. It involved a considerable compromise on the part of the plaintiffs who were, in the circumstances, bound to pursue the legal proceedings. On the other hand, it was an olive branch tendered to the defendants which would have relieved them at minimal cost from significant costs and damages at the hands of the jury in what was a serious defamation.
117 It must be remembered that there was a very strong commercial element in these proceedings. The plaintiffs and the defendants were effectively competitors for an important part of both government and private commercial work. Thus, the plaintiffs were virtually compelled to seek to vindicate their reputations as a consequence of the defamatory publications.
118 In my view, the plaintiffs are entitled to an order for indemnity costs, I think, dating from 17 August 1994 when the defendants walked away from the settlement negotiations and may be deemed to have rejected the plaintiffs' offer.
119 I take this view irrespective of whether one applied the less onerous test as identified by Rolfe J or the more strict test of "plainly unreasonable" proposed by Sheppard J in Sanko.
120 There is one further matter to be resolved. On five occasions, over the history of this matter, it was listed for directions before Levine J. The occasions are:
(1) On 26 August 1994 the matter was listed for directions in the defamation list. Directions were made for discovery by the plaintiffs;