Assaf v Skalkos

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST No 18374 of 1993

ETHNIC COMMUNICATIONS PTY LIMITED (Second Plaintiff)

FOREIGN LANGUAGE PUBLICATIONS PTY LIMITED (Second Defendant)

JUDGMENT - (On plaintiffs' submissions on interest and costs)

1 HIS HONOUR: This judgment is to be read in conjunction with the judgment which I delivered in this matter on 26 May 2000. In that judgment, having rejected the defence of qualified privilege, I entered a verdict for the first plaintiff against the defendants in the sum of $150,000 together with interest to be assessed, and a verdict for the second plaintiff against the defendants in the sum of $30,000 together with interest to be assessed. I stood the matter over to a date to be fixed to hear argument on interest and costs. It was agreed by the parties on that occasion that such submissions could conveniently be dealt with in writing. 2 Accordingly, on 13 June 2000 the plaintiffs filed their written submissions together with the affidavit of Ian Angus sworn 13 June 2000 to which was exhibited, "Exhibit IRA1". Specific reliance was also placed on the affidavit of Justine Melissa Munsie a solicitor in the firm of Mallesons Stephen Jaques, sworn 16 February 1999, which had been filed in these proceedings on 22 February 1999 in support of an application by the plaintiffs for an expedited hearing. 3 Thereafter, there was some delay in the filing by the defendants of their submissions and evidence, by reason of a change in solicitors retained by the defendants in the proceedings, and certain other matters. 4 Written submissions were ultimately filed by the defendants on 27 July 2000 together with the affidavit of Joannis Theodoridis, sworn 27 July 2000. Mr Theodoridis is the principal of Theodore Solomon & Partners who are now the solicitors on the record for the defendants. Those submissions have helpfully reduced the area of dispute between the parties with respect to these outstanding matters. 5 On 4 August 2000 the plaintiffs filed submissions in reply, together with the affidavit of Ian Angus sworn 3 August 2000. 6 I turn then to the orders sought by the plaintiffs. Firstly, the plaintiffs seek orders that the defendants pay interest on the judgments in favour of the plaintiffs at the rate of 2% per annum from the dates of publication to the respective dates of judgment. This is, of course, half the normal rate for non-economic loss: see e.g. John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131 at 142, per McHugh JA and Trans Tasman Investments Pty Ltd v Donohue (Unreported, Court of Appeal 19 March 1991 at p.20). 7 The defendants accept that there was no delay by the plaintiffs in prosecuting these proceedings which would warrant a departure from the usual course of awarding interest at 2% per annum as from the date of the relevant publication. 8 As to costs, the plaintiffs seek an order for costs in the following terms:- "(a) That the defendants pay the plaintiffs' costs of these proceedings on a party and party basis from the commencement of these proceedings until 16 March 1994 and on an indemnity basis thereafter.

(b) Alternatively, that the defendants pay the plaintiffs' costs of these proceedings on a party and party basis from the commencement of the proceedings until 3 February 1999 and on an indemnity basis thereafter.

(c) Alternatively, that the defendants pay the plaintiffs' costs of these proceedings." 9 The defendants oppose both of the alternative orders sought in paras (a) and (b) but do not oppose the order sought in para (c). 10 The significance of the date 16 March 1994 is that the plaintiffs contend that, in March 1994, they offered to settle the proceedings in return for:- (a) An apology, (b) $10,000, and (c) Payment of the plaintiffs' costs on an indemnity basis, and such offer was unreasonably rejected or deemed to be rejected by the defendants. 11 The significance of the date 3 February 1999 is that the plaintiffs contend that, in February 1999, the plaintiffs offered to settle the proceedings in return for:- (a) An apology, and (b) Payment of the plaintiffs' costs in the sum of $310,000, and that offer was unreasonably rejected by the defendants. 12 The plaintiffs concede that their offers were not made pursuant to the Offer of Compromise regime set out in Pt 22 of the Supreme Court Rules, 1970. They contend that this is, perhaps, not surprising as an essential element of the settlement of a defamation case, namely an apology, is not contemplated in the Offer of Compromise regime. 13 They submit that the plaintiffs' offers may nonetheless be taken into account in exercising the Court's discretion to award costs on an indemnity basis under s 76 of the New South Wales Supreme Court Act, 1970: see Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, where Rolfe J stated, at 446, after an extensive review of the authorities:- "… in my opinion, the evidence of a Calderbank letter, the rejection of the offer contained therein and the failure to obtain a result better than the offer, places the offeror in the position that a court should approach an application by that party for indemnity costs with a predisposition to holding that it is entitled to indemnity costs."

and, further at 451:- "In my opinion the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result." 14 It is necessary to traverse the history of the settlement negotiations between the parties which conveniently fall into two discrete periods. 15 As counsel for the defendants pointed out in his written submissions, the first of the two rounds of settlement discussions covered the period from approximately 15 February 1994 to approximately 19 August 1994. 16 In early February 1994, there were discussions between the legal representatives of the parties regarding settlement. On 18 February 1994, the defendants' solicitors, Messrs Smyrnis & Co, wrote a "Without Prejudice" letter to the plaintiffs' solicitors advising that the defendants would settle on the following terms:- "1) Plaintiffs withdraw/discontinue their action,

2. Defendants pay towards the Plaintiffs costs $2,000,

3. Terms not to be disclosed" 17 The plaintiffs' solicitors, Messrs Mallesons Stephen Jaques, responded by letter dated 11 March 1994, in which this settlement offer was rejected and the plaintiffs proposed a counter-offer on the following basis:- "1. Delivery of a letter to Mr Paul Keating in the attached terms. Copies of this letter are to be delivered to each recipient of copies of the letter to Mr Keating dated 21 July 1993.

Publication of an apology to our clients in the attached terms in each newspaper which published the open letter to Mr Keating, with the same prominence as the matter complained of.

Payment of our clients' costs to date on an indemnity basis.

Payment by way of compensation for time spent by senior management and other staff of Ethnic Communications Pty Limited on matters relating to publication of the letters complained of and the prosecution of these proceedings.

Without admissions, judgment for the plaintiffs.

Terms not to be disclosed." 18 That letter was marked, as was all later correspondence from the plaintiffs' solicitors regarding settlement, "Without prejudice except as to costs". It is unnecessary, for present purposes, to set out the terms of the apologies sought by the plaintiffs. 19 The plaintiffs' solicitors wrote a follow-up letter dated 16 March 1994 setting out, at the request of Ms Judith Gibson of counsel for the defendants, details of the accounts rendered by the plaintiffs' solicitors to their clients together with disbursements. The claim for compensation for time spent by senior management and other staff on matters relating to the claim was quantified at $10,000. 20 The letter stated that accounts had been rendered in a total sum of $16,000, together with disbursements of $700.82. "Unbilled costs" as at 11 March 1994 were $1,000 and disbursements were $27. Further costs would be incurred before settlement was finalised and the plaintiffs' solicitors would expect reimbursement of such costs. 21 Additionally, the letter stated that the plaintiffs required judgment as part of any settlement although they were content for judgment to be on a "without admissions" basis, with non-disclosure of terms of settlement. 22 The defendants' solicitors replied by letter dated 24 March 1994. This was an open letter, and was expressly stated to be so, as was all subsequent correspondence by the solicitors for the defendants relating to settlement. 23 The letter sought particulars of the calculation of $10,000 in relation to compensation for time spent by senior management, together with copies of accounts rendered by the plaintiffs' solicitors to their clients, and details of their "charge-out" rate. The letter stated that the defendants were not prepared to consent to judgment as part of the settlement but would consent to a discontinuance or a perpetual stay. 24 The letter stated, inter alia:- "We note you continue to mark your letters 'without prejudice except as to costs'. Please note that all our correspondence to you is not so marked. As far as we are concerned, if this matter does not settle, we propose to show our letters to the jury." 25 The plaintiffs' solicitors replied by letter dated 30 March 1994, providing the particulars and documentation sought by the defendants. The letter indicated that the plaintiffs would agree to a perpetual stay of the proceedings. 26 The letter sought confirmation from the defendants that they would settle the matter by 5 April 1994, on the terms set out in the plaintiffs' letter of 11 March, as amplified in the letter of 16 March 1994, failing which the plaintiffs would assume that settlement negotiations were at an end. 27 The solicitors for the defendants responded by letter dated 31 March 1994, challenging the reasonableness of the profit costs ($16,000) charged by the plaintiffs and the $10,000 management investigation fee. An open counter-offer was then made by the defendants in the following terms:- "1. Perpetual stay of these proceedings.

2. The Defendants pay the Plaintiffs costs in the sum of five thousand dollars ($5000)

3. The Defendants in open Court make apology to the Plaintiffs [in the form] attached to the Defendants solicitors correspondence, and publish the apology in Novosti and to the Prime Minister.

4. Note the agreement between the parties that the Plaintiffs indemnify the Defendants from any claim brought by any director or employer (sic) of the second Plaintiff arising in any way from publishing the matters complained of." 28 By letter dated 14 April 1994, the plaintiffs' solicitors rejected the counter-offer by the defendants. In what was asserted to be a final effort to settle the matter, the plaintiffs' solicitors agreed to reduce the costs element of their previous offer by $5,000. Accordingly, they offered to settle on the following terms:- "1 Delivery of a letter to Mr Paul Keating in the terms attached to our letter of 11 March 1994. Copies of this letter are to be delivered to each recipient of copies of the letter to Mr Keating dated 21 July 1993. 2 Publication of an apology to our clients in the terms attached to our letter of 11 March 1994 in each newspaper which published the open letter to Mr Keating, with the same prominence as the matter complained of. 3 Payment of our clients' costs to date on an indemnity basis, as set out in our letter of 16 March 1994, less $5,000.00. 4 Payment of $10,000 by way of compensation for time spent by senior management and other staff at Ethnic Communications Pty Ltd on matters relating to publication of the letters complained of and the prosecution of those proceedings. 5 A stay of the proceedings. 6 Terms not to be disclosed." 29 The plaintiffs' solicitors expressed this to be their final offer and it was left open for acceptance until 4.00pm on 21 April 1994. 30 This amended offer was rejected by the defendants' solicitors by letter dated 21 April 1994. 31 This letter stated, inter alia:- "We note that you provide no supporting documents to establish that your clients incurred any 'expenditure'. We also note that you continue not to address our clients' concern that any settlement with your clients could expose them to the risk of suit from another company director or the 'senior employees' you have referred to in earlier correspondence. Failure to clarify these issues may be matters relevant to any claim you make for costs, even if your client is successful in the trial, for how can our client accept your offer in such circumstances?" 32 The defendants' solicitors sent a follow-up letter dated 29 April 1994, enclosing copies of the apologies the defendants were prepared to make "in the interest of achieving a commercial resolution of the matter and in continuing to deal with your clients in the future". They contended that these amendments had been earlier conveyed to the plaintiffs' solicitors and were in fact "very minor". 33 Attached was a draft form of letter to the firstnamed plaintiff, on the letterhead of Foreign Language Publications Pty Ltd, in the following form:- "Mr Joseph Assaf Ethnic Communications Pty Limited 104 Norton Street LEICHHARDT NSW 2040 Dear Sir, On 28 July 1993, we published an open letter from Mr Theo Skalkos, the owner of this newspaper, to the Prime Minister of Australia, Mr Paul Keating. In this letter, Mr Skalkos made allegations about the way in which government advertising in the ethnic print media passes through such 'middle men' as Ethnic Communications Pty Limited, causing the cost to the publisher of obtaining these advertisements to be advertised to be doubled and to some cases tripled. We alleged that Ethnic Communications Pty Limited was involved in a rort, compounded by the fact that they employed persons on aged pensions, invalid pensions and unemployment benefits. We acknowledge that our letter seriously defamed Ethnic Communications and Mr Assaf by asserting that they exploited the ethnic communities in Australia; they have been responsible for the massive and unjustifiable increases in the cost of government advertising in the ethnic media and carrying on business in an unethical and wasteful manner. Each of those assertions is unreservedly withdrawn. We accept that Ethnic Communications is a company of high reputation and that it is managed in an ethical and proper manner. We apologise to Ethnic Communications Pty Limited and it's (sic) managing director, Mr Joseph Assaf for the embarrassment which our letter has caused them. Yours faithfully, FOREIGN LANGUAGE PUBLICATIONS. T.Skalkos" 34 There was also a draft form of letter, on the letterhead of Foreign Language Publications Pty Ltd, addressed to the Prime Minister, Mr Paul Keating, in the following form:- "The Honourable Mr Paul Keating Prime Minister Parliament House CANBERRA ACT 2600

Re: ETHNIC COMMUNICATIONS PTY LIMITED: MR JOSEPH ASSAF

I wrote to your (sic) on 21 July 1993. Copies of my letter were also sent to your Federal Government Ministers, colleagues and heads of government departments and semi-governmental authorities. In my letter I made allegations about the way in which government advertising in the ethnic print media passes through such 'middle men' as Ethnic Communications Pty Limited, causing the cost to the publisher of obtaining those advertisements to be doubled and in some cases tripled. I alleged that Ethnic Communications Pty Limited was involved in a rort, compounded by the fact that they employed persons on aged pensions, invalid pensions and unemployment benefits. I acknowledge that my letter seriously defamed Ethnic Communications and Mr Assaf by asserting that they exploited the ethnic communities in Australia, that they have been responsible for massive and unjustifiable increases in the cost of government advertising in the ethnic media and that they have carried on business in an unethical and wasteful manner. Each of those assertions is unreservedly withdrawn. I accept that Ethnic Communications is a company of high reputation and that it is managed in an ethical and proper manner. I apologise to Ethnic Communications Pty Limited and it's (sic) managing director, Mr Joseph Assaf for the embarrassment which my letter has caused them. May I request that you ensure copies of this letter are supplied to all people who received copies of my letter of 21 July, 1993. In particular, I request that a copy of this letter be sent to all recipients of the Department of Immigration and Ethnic Affairs' 'Ethnic Press Summary Service' which I understand published extracts from my original letter. Yours faithfully, FOREIGN LANGUAGE PUBLICATIONS .

T. Skalkos" 35 The plaintiffs' solicitors replied by letter dated 13 May 1994 stating that the plaintiffs were prepared to accept the minor amendments which the defendants had made to the two apologies proposed by the plaintiffs. However, they were not prepared to agree to the newspaper apology being in the form of a letter from Mr Skalkos to Mr Assaf, if that was what was intended by the defendants. The plaintiffs' letter attached draft apologies in a form which was acceptable to the plaintiffs. The first document was a draft of an apology to be published in Novosti. The only difference between this draft apology and that agreed to by the defendants was that it was headed:- "APOLOGY TO ETHNIC COMMUNICATIONS PTY LIMITED AND MR JOSEPH ASSAF" 36 The second draft apology was a letter from Mr Skalkos and Foreign Language Publications Pty Ltd to the Prime Minister, which was identical with that agreed to by the defendants. Subject to the above matters, the plaintiffs' solicitors insisted upon settlement in accordance with the terms set out in their letter dated 14 April 1994. 37 The defendants' solicitors replied by letter dated 30 May 1994 stating that they were still seeking instructions in relation to the plaintiffs' letter dated 13 May 1994. However, the letter stated:- "We must ask you in particular to address our repeated concerns about a release of liability from other employees and/or directions (sic) of Ethnic Communications Pty Limited and in particular our request that the parties enter into a Deed of Release. When we have this information we shall be in a position to reply to your letter. Please note that this letter, like our previous correspondence, is an open letter." 38 On 27 June 1994, the plaintiffs' solicitors wrote to the defendants' solicitors, the opening paragraph of such letter being in the following terms:- "On 3 June 1994, we spoke to your clients' counsel Judith Gibson. Ms Gibson gave us to understand that the only outstanding issues were the form of a release and the persons the release would cover. We understood that Ms Gibson would be drafting a Deed of Release for submission to us." 39 On 1 July 1994, the defendants' solicitors wrote to the plaintiffs' solicitors in the following terms:- "We enclose: 1. Deed of Release. 2. Terms of Settlement. We would propose to relist the matter to seek leave for you to file a Notice of Discontinuance. We would be prepared to mention the matter on your behalf and to prepare the Notice of Discontinuance. That will mean you will incur no further costs, although you will have to sign the Notice of Discontinuance. Our Counsel has asked us to apologise to you for the delay due to her ill health. She suggests you may wish to contact her direct if you have any problems but please note she is still not back at work full-time." 40 A form of Deed of Release and Terms of Settlement were, as indicated, attached to the letter. 41 On 8 July 1994, the plaintiffs' solicitors wrote to the defendants' solicitors in the following terms:- "We refer to your letter of 1 July 1994.

The documents attached to your letter are not acceptable. They do not reflect the terms upon which our clients are prepared to settle this matter, as advised to you a number of times during correspondence over the last four months.

1 There is no provision for the publication of copies of the apology letter addressed to Mr Keating to all other persons to whom copies of the original letter to Mr Keating were distributed by your clients.

2 There is no provision for publication of an apology in those of your clients' newspapers which carried the translated version of the letter to Mr Keating.

3 There is no reason why our clients should give broad releases in relation to other material, whether yet published or not, which is not the subject of the proceedings.

4 It would be unfair to expect our client to give indemnities in the terms of the draft deed of release.

5 There are other minor problems with the deed of release from our clients' point of view which we will not detail at this stage.

We believe that the most efficient way of disposing of these proceedings is by way of consent order in terms of the attached draft. Please advise if the draft is acceptable to your clients.

As to the figure to be inserted in paragraph (a) of the schedule to the consent order, an up to date amount will be advised once the remaining terms of the consent order have been agreed. It will include the amounts previously discussed, including the costs figures advised in our letter of 27 June 1994, and any further costs incurred by our client from 1 July 1994.

If the terms of the consent order are not agreed by 4.00pm on 15 July 1994, our clients will continue with the prosecution of their claim." 42 The attached draft Consent Order and forms of apology were as follows:- " DRAFT

(b) Within 7 days of the date of this order the defendants will supply to the plaintiff's solicitors particulars of the names and addresses of all persons, companies, government departments, government instrumentalities and other bodies to whom copies of the matter complained of set out in schedule 'A' to the amended statement of claim were published.

(c) Within 21 days of the date of this order, the defendants will cause to be published to the Prime Minister, Mr Paul Keating, a letter, on Foreign Language Publications Pty Limited letterhead, in the terms of the annexure hereto marked 'I'.

(d) Within 21 days of the date of this order, the defendants will cause to be published to each of the persons, companies, government departments, government instrumentalities and other bodies identified pursuant to paragraph (b) above, a photocopy of the letter on Foreign Language Publications Pty Limited letterhead referred to in paragraph (c) above.

(e) Within 7 days of the date of this order the defendants will supply to the plaintiffs' solicitors particulars of each newspaper, magazine or periodical in which: (i) the matter complained of set out in Schedule 'A' to the amended statement of claim,

(ii) a foreign language translation of the matter complained of set out in Schedule 'A' to the amended statement of claim or (iii) a foreign language translation of matter in similar terms to the matter complained of set out in Schedule 'A' to the amended statement of claim was published.

(f) Within 21 days of the date of this order the defendants will cause to be published in each newspaper, magazine or periodical identified pursuant to paragraph (e) above an apology in the terms of annexure 'II' hereto with prominence equal to the original publication referred to in paragraph (c) above and translated into the same language as the original publication. The foreign language version of such apology is to be submitted to the plaintiffs for their approval at least 7 days prior to the intended publication date.

(g) In consideration of the matters referred to in paragraphs (a)-(f) above, satisfaction and settlement of all or any causes of action which the plaintiffs may have against the defendants, their servants, agents or related corporations arising out of the events described in the statement of claim herein including the defendants' publications referred to in the statement of claim in these proceedings and the defendants further publications referred to in this schedule.

For the purposes of this agreement the term 'related corporation' shall have the meaning ascribed to 'related bodies corporate' by sections 46-50 of the Corporations Law.

The Honorable Mr Paul Keating Prime Minister Parliament House Canberra ACT 2600

Ethnic Communications Pty Limited : Mr Joseph Assaf

I wrote to you on 21 July 1993. Copies of my letter were also sent to your Federal government ministers, colleagues and heads of government departments and semi-governmental authorities. In my letter I made allegations about the way in which government advertising in the ethnic print media passes through such 'middle men' as Ethnic Communications Pty Limited, causing the cost to the publisher of obtaining those advertisements to be doubled and in some cases tripled. I alleged that Ethnic Communications Pty limited was involved in a rort, compounded by the fact that they employed persons on aged pensions, invalid pensions and unemployment benefits.

I acknowledge that my letter seriously defamed Ethnic Communications and Mr Assaf by asserting that they exploited the ethnic communities in Australia, that they have been responsible for massive and unjustifiable increases in the cost of government advertising in the ethnic media and that they have carried on business in an unethical and wasteful manner. Each of those assertions is unreservedly withdrawn. I accept that Ethnic Communications is a company of high reputation and that it is managed in an ethical and proper manner. I apologise to Ethnic Communications Pty Limited and Mr Joseph Assaf for the embarrassment which my letter has caused them.

May I request that you ensure copies of this letter are supplied to all people who received copies of my letter of 21 July 1993. In particular, I request that a copy of this letter be sent to all recipients of the Department of Immigration and Ethnic Affairs' 'Ethnic Press Summary Service' which I understand published extracts from my original letter.

On 28 July 1993, we published an open letter from Mr Theo Skalkos, the owner of this newspaper, to the Prime Minister of Australia, Mr Paul Keating. In his letter, Mr Skalkos made allegations about the way in which government advertising in the ethnic print media passes through such 'middle men' as Ethnic Communications Pty Limited, causing the cost to the publisher of obtaining these advertisements to be doubled and in some cases tripled. We alleged that Ethnic Communications Pty Limited was involved in a rort, compounded by the fact that they employed persons on aged pensions, invalid pensions and unemployment benefits.

We acknowledge that our letter seriously defamed Ethnic Communications and Mr Assaf by asserting that they exploited the ethnic communities in Australia, that they have been responsible for massive and unjustifiable increases in the cost of government advertising in the ethnic media and that they have been carrying on business in an unethical and wasteful manner. Each of those assertions is unreservedly withdrawn. We accept that Ethnic Communications is a company of high reputation and that it is managed in an ethical and proper manner. We apologise to Ethnic Communications Pty Limited and its managing director, Mr Joseph Assaf, for the embarrassment which our letter has caused them." 43 On 13 July 1994, the defendants' solicitors replied (paragraph by paragraph) to the letter of 8 July 1994 in the following terms:- "We refer to your letter of 8 July, 1994 and answer as follows: 1. This is not necessary because of the contents of the last paragraph of the letter. May we remind you that your clients are claiming $10,000 for over 200 hours work that they put into finding out how many persons read or saw this letter. As far as we know, the letter went to Mr Keating's office and was read by his staff. Your clients have not suggested that their extensive researches have identified anyone else. 2. Again, may we remind you that your clients are claiming $10,000 for over 200 hours work that they put into finding out how may (sic) persons read or saw this letter. The letter was published in 'Novosti' and the apology will be published there too. 3. There is every reason why your clients should give releases which include any claims by any servants or agents who may later claim to be identified. You know that we require a Deed of Release to this effect. We will not settle without one. Our Counsel tells us she believes your Mr Angus agreed to a deed protecting our client from liability to third parties. We view your refusal to provide this as suspicious. 4. With respect, why is it not 'fair' for your clients to give such release? What are they (or, rather, their employees, servants or agents) planning to do?

5. We find complaints that you are not prepared to particularise very unhelpful. We find it unhelpful to receive draft terms of settlement which contain blanks. We also note you have varied the costs from the agreed figure of $12,000. With respect, do you really consider you would be likely to recover such costs on taxation, even on a solicitor and client basis? We would be sorry to think that a commercially advisable settlement between our clients broke down because (sic) legal costs, particularly at a time when there is a considerable public concern about the costs of legal proceedings. We shall certainly bring such matters to the attention of any judge hearing any application for costs at any future stage. Finally, we note you are still heading your letters 'without prejudice'. Our clients will not be afraid to show the jury our letters, so we have left this letter an open letter. We are still willing to settle on the basis set out in our earlier correspondence. We invite you to reconsider that offer." 44 On 8 August, the plaintiffs' solicitors replied in the following terms:- "We refer to your letter of 13 July 1994. We record that: 1 On 1 July 1994, at court, we raised with Judith Gibson the possibility of a discussion about settlement to isolate those areas where agreement has not been reached in an effort to finally resolve the matter. Ms Gibson suggested that it would be preferable for us to have that discussion with Mr Smyrnis in view of her illness in recent weeks.

2 We have endeavoured to speak to Mr Smyrnis by telephone. Our calls have not been returned. We respond to the points made in your letter of 13 July 1994 as follows: 1 The apology letter to Mr Keating requests that he pass on copies of that letter only to persons to whom Mr Keating's office supplied copies of the letter of 21 July 1993. Our point is that the deed fails to provide for publication of the apology letter to all recipients of copies of the Keating letter distributed by your clients . We suggest you obtain your clients' instructions on the wide distribution of the letter which they effected. Such distribution has already been conceded by your client - see the second sentence of the proposed apology addressed to Mr Keating. 2 Our clients are not, in the proceedings 'claiming $10,000 for over 200 hours work…' Our clients will accept payment of that sum as one of the terms of settlement. Their claim is for far more substantial sums by way of damages and, as advised previously, we have little doubt that a jury will award damages considerably in excess of the $10,000 compensation which our clients have agreed to accept as part of the settlement. As to the identification of persons who read the matters complained of, please refer to our letter of 15 December 1993. 3 Mr Angus did have a conversation with Judith Gibson about liability to third parties other than the plaintiffs. However, he certainly did not agree 'to a deed protecting (your) client from liability to third parties'. Ms Gibson raised the issue in the context of other directors of Ethnic Communications Pty Ltd suing over the matters complained of. Mr Angus informed Ms Gibson that there was only one other director, Mrs Angela Assaf, and he thought that if a release was required from Mrs Assaf, that could be arranged. However, your deed went much further than that and incorporated releases from parties who have given us no instructions in this matter. 4 Our clients are simply not prepared to grant indemnities in relation to claims which may be made at some time in the future by parties over which they have no control. As indicated previously, it would be unfair to expect that of our clients. 5 The minor problems we had with the draft deed of release did not have to be raised in view of the preparation of the consent order attached to our letter of 8 July 1994. The only blank in the consent order related to the settlement sum which, as you are well aware, will depend on the figure for indemnity costs as at the time of final resolution of the dispute. As explained previously, the costs figure has increased because of the further substantial work carried out in this matter since April 1994. Whether or not those costs would be recovered on a court taxation is irrelevant. We have on many occasions made it clear to you that our clients do not expect to be out of pocket as a result of the gross defamation your clients chose to publish. That our clients have incurred the costs detailed is a matter of fact. Our clients' demand to be reimbursed for those costs as a term of the settlement has nothing to do with any application you might make to the court in the future. We continue to head our letters 'without prejudice save as to costs' because all correspondence on settlement is being conducted on a 'without prejudice' basis. There is no question of you showing this correspondence to the jury at any trial. For the reasons stated in earlier correspondence the settlement offer you have made, so far as we are able to understand it, is not acceptable. The settlement our clients are prepared to enter into is that set out in our letter of 8 July 1994 and the documents attached to that letter. Unless your clients accept our proposal by 4.00pm on Friday, 12 August 1994, the offer will be withdrawn." 45 On 12 August, the defendants' solicitors replied as follows:- "We answer your letter of 8 August 1994 as follows: Miss Gibson informs us she told you she would be in her Chambers on 1 July 1994 and she awaited your call. You did not ring her that day, nor did you ring us. As to your letter's response to our letter of 13 July 1994: Your clients provided a written summary of 200 hours' work (at $50 per hour) which they claimed to have undertaken to find out how far the libel had spread. We have no knowledge of distribution beyond that pleaded in the Statement of Claim. We call on your clients to provide details of the persons their research identify (sic) as having received the document, so that we may make our own enquires (sic). Otherwise, we have no intention of apologising to persons who to all intents and probabilities never saw the publication. The ten thousand dollars ($10 000.00) your clients claim was not calculated as damages but as costs of enquiry. It is now clear to us that your clients in fact have made no enquiry. We note the Terms of Settlement proposed by you referred to a sum of damages being paid 'inclusive of costs'. We are very concerned about this. It is not at all what we agreed. Our clients agreed to pay your costs and the costs of the enquires (sic) your clients claimed they had to make. As to the damages your clients say they will claim, may we remind you that any damages claimable by Ethnic Communications Pty Ltd would be close to nominal, since no special damages are claimed. As for Mr Assaf, he is not even mentioned in the article, and we look forward to hearing how many Yugoslav-speaking readers of 'Novosti' would have been capable of identifying him. We look forward to the Prime Minister of Australia, even if he does read all his own correspondence, giving evidence that he read our clients letter and thought the less of your clients (assuming Mr Assaf is known to him). As we have already explained, we have no intention of settling this case without the kind of indemnity commonly given in such actions, and which your firm will be familiar with from many defamation proceedings, such as Hickie v's Perkins. Miss Gibson sought such an indemnity from Mr Angus, and tells us he agreed. If your clients are bona fide, why wont they agree? We have other objections to your Terms of Settlement, notably the manner in which the sum for payment is expressed. We repeat what we said in our letter of 13 July 1994. Our offer is on the table. You can accept it or reject it. From the tone of your second letter of 8 August 1994, we suspect that your clients never really intended to settle, but to continue to resile from agreed terms in an effort to prolong this litigation and wring out further legal costs for your firm. We have every intention of showing not only the judge but also the jury the whole of our correspondence, and asking them to draw their own conclusions as to your clients real intentions in this litigation." 46 On 16 August, the plaintiffs' solicitors replied as follows:- "Yesterday, we received a telephone call from the plaintiffs' counsel, Judith Gibson. As Ian Angus was not available to take the call Ms Gibson spoke to his secretary. Ms Gibson advised that she had been ill and was not sure of the form of the latest version of the apology proposed by the defendants. She asked us to fax the following to you: 1 The final form of apology. 2 Details of our costs to date. 3 Copies of previous bills as the copies previously supplied had been lost. We attach a copy of our fax to you of 8 July 1994, to which was attached the proposed form of consent order and the two proposed apologies. Our costs to date are as follows: Account dated 29 November 1993 $7,366.12 Account dated 28 February 1994 $9,334.70 Account dated 30 June 1994 $5,669.70 Total $22,370.52 In addition, costs have accrued since our account dated 30 June 1994 in the sum of $3,019.00. Therefore, the up to date figure for costs as at today is $25,389.52. We are disturbed that the copies of bills previously supplied have apparently been 'lost'. The copy accounts are confidential documents supplied to you on a confidential basis. We are not prepared to supply further copies. Copies of our accounts are available for inspection at our office. We note that our clients' settlement offer is open for acceptance until 4.00pm tomorrow afternoon." 47 On the same day, the defendants' solicitors replied by facsimile transmission as follows:- "Thank you for your correspondence today. I am instructed to offer the following by way of my clients' final Settlement Offer; 1) My client will publish the apologies as sought, 2) My client will pay the sum of $20,000. This is to be an 'all up' payment which covers legal expenses, other claims made etc 3) This offer is open for acceptance until 12.00 midday 17/8/94. 4) Proceedings withdrawn and no verdict entered. We await your replies." 48 On the same day, the plaintiffs' solicitors replied as follows:- "We refer to your letter today and are currently seeking instructions from our client. We assume that item 1 means that your client will comply with the terms stated in our letter of 8 July 1994. That is: (a) your client will identify each of the persons to whom copies of the letter were sent and the apology in the form contained in Annexure 1 in our letter of 8 July 1994 will be sent to each of those persons; and

(b) your client will identify to us those newspapers in which the letter was published and will publish the apology in the form contained in Annexure II to our letter of 8 July 1994 in each of those newspapers. If this is not correct please advise us immediately." 49 On 17 August, the defendants' solicitors forwarded the following facsimile transmission to the plaintiffs' solicitors:- " MESSAGE:

Re; Skalkos & Ors ats Assaf & Ors Please be advised that our instructions in this matter have terminated. I suggest you lias ( sic) with Mr Skalkos direct on 6602033, fax 6920649. We will be filing the appropriate Notice of Ceasing to Act in due course." 50 On 19 August, the plaintiffs' solicitors wrote to the defendants' solicitors, referring to the facsimile of 17 August and stating:- "… As you are still the solicitor on the record we enclose copies of our letters to your clients." 51 Attached to this communication was a copy of a letter forwarded to Mr Skalkos, Foreign Language Publications Sydney Fax 629 0649 in the following terms:- "Dear Sir Ethnic Communications Pty Ltd & J. Assaf ats Foreign Language Publications Pty Ltd & yourself. We refer to a facsimile which we received on 17 August 1994 from Smyrnis & Co advising that they are no longer acting for you.

Our client is prepared to extend the offer contained in our letter of 8 July 1994 until 4.00pm Monday, 22 August 1994. We enclose a copy of our letter for your information." 52 The documentation forwarded to Mr Skalkos constituted the letter from the plaintiffs' solicitors dated 8 July 1994 together with the form of draft Consent Order and apologies which have been set out above. 53 No response having been made by Mr Skalkos to the plaintiffs' solicitors communication, they wrote again to him on 19 August 1994 informing him that in light of the absence of any reply, the matter was being restored to the defamation list for orders concerning discovery. A copy of the letter to the List Clerk was enclosed. 54 Insofar as the relevant principles of law relating to the award of indemnity costs are concerned, I have had the very considerable benefit of the judgment of Rolfe J in Multicon, to which reference has already been made. I have set out earlier in this judgment the concise statement of principles enunciated by his Honour after a close analysis by his Honour of the relevant authorities upon which the present plaintiffs rely. In their written submissions, the defendants have not sought to challenge the correctness of those principles. 55 There are some helpful touchstones in certain of the judgments of this Court to which his Honour referred, which might conveniently be noted by way of guidance. 56 Thus, in Beregold Pty Ltd v Mitsopoulos (Cole J, 20 November 1992, unreported), his Honour referred to "a sensible commercial offer" which was made by the defendant and in the result should have been accepted by the plaintiff. Such offer was significantly in excess of the damages recovered by the plaintiff, and the defendant was awarded indemnity costs. 57 In State Authorities Superannuation Board v Property Estates (Queensland) Pty Ltd (Cole J, 8 February 1991, unreported), his Honour again referred to "a sensible commercial offer" being rejected, and awarded indemnity costs. 58 In Singleton v Macquarie Broadcasting Holdings Limited (1991) 24 NSWLR 103, Rogers CJCommD awarded indemnity costs to the plaintiff who had demonstrated a willingness to settle and had made a number of "realistic offers" close to the amount eventually obtained by the plaintiff. 59 In AWA v Daniels (8 October 1992, unreported), Rogers CJCommD referred to the cross-claimant's having failed to accept "reasonable proposals for bringing the cross-claim to an end". 60 It is now well established that an order for costs on an indemnity basis may be made without the necessity for inappropriate conduct on the part of the party against whom the order was made: see Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568 and Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 per Kirby P, Gleeson CJ concurring. 61 Two general comments may be added. Firstly, one must necessarily ignore a so-called offer of compromise which contains no element of compromise at all. One must also acknowledge that each case must be determined by an exercise of judicial discretion having regard to the particular facts of each case. Thus, the prima facie position having been established, as explained by Rolfe J in Multicon, the Court must be satisfied that an order for indemnity costs is appropriate. If this is not done, then there is necessarily a failure to exercise the judicial discretion. 62 The plaintiffs claim indemnity costs as from the date of their letter of 11 March 1994. However, I consider this date to be premature as such letter was very much part of an overall negotiating process and left certain items for later quantification. 63 It seems to me that, for present purposes, the critical letter is the letter dated 8 July 1994, from the plaintiffs' solicitors, as amplified by their letter of 16 August 1994. The letter of 8 July, together with the annexures, constitutes, to my mind, the distillation of the plaintiffs' offers of settlement following prior negotiations. The 16 August letter quantifies the outstanding items and represents, as I understand it, the plaintiffs' final position, at that stage of the negotiating process. 64 The significance of the response by the defendants' solicitors, on 16 August 1994, to the letter from the plaintiffs' solicitors of the same date, is that the defendants would consent to publish the apologies in the form proffered by the plaintiffs. However, this still left open the identity of each of the persons to whom copies of the letter to the Prime Minister were sent by the defendants, and the identity of each of the newspapers in which a copy of that letter was published. This was, of course, information well within the knowledge of the defendants. 65 In their written submissions, the defendants have raised certain discrete matters in response to the plaintiffs' submissions, to which I shall now refer. 66 Firstly, it is contended that the apologies proffered by the plaintiffs did not wholly correspond with the findings of the jury on trial. The defendants pointed out that the apologies required an express acknowledgment of an assertion by the defendants that the plaintiffs had (a) "exploited the ethnic communities in Australia …" and (b) "that the plaintiffs had been responsible for massive and unjustifiable increases in the cost of government advertising in the ethnic media". 67 However, imputations in these terms were disallowed by Levine J in paragraphs [12], [13] and [14] of his interlocutory judgment of 30 April 1999. Imputations in these precise terms did not therefore go to the jury. 68 Thus, the defendants submitted that, notwithstanding that they had agreed in their letter dated 16 August 1994 to publish the apologies "as sought" and (quoting from their written submissions) "notwithstanding that the settlement went off on costs and other issues it remains the fact that the ultimate verdict obtained was in relation to imputations which did not include those which Justice David Levine had disallowed and which were integral to the formula apology as sought." 69 Researches of counsel have been unable to identify a prior judicial opinion precisely upon the point here raised by the defendants. 70 It would have been well within the contemplation of the present parties, at the relevant negotiating dates, that, if the matter were to proceed to trial, there would be in all likelihood considerable esoteric legal argument at the interlocutory stage about the form of the imputations upon which the plaintiffs would be permitted to rely. 71 To my mind, the question is whether the terms of the apologies were in the circumstances, and as at the relevant date, reasonable. That depends, of course, upon the nature of the defamatory statements and the requirement that the apology should include "a full and frank withdrawal of the charges or suggestions conveyed": see Risk Allah Bey v Johnstone (1868) 18 LT 620 at 621 per Cockburn CJ, cited in Gatley on Libel and Slander, 9th Ed at 31.2. 72 The subject defamatory publications were serious ones indeed and required apologies (if they were to be of any value to the plaintiffs) which were sufficient, or practically sufficient, for the plaintiffs' purposes. It must be acknowledged in this context that it has been well said that "no apology retraction or withdrawal can ever be guaranteed completely to undo the harm [the defamatory publications] has done or the hurt it has caused": see Dingle v Associated Newspapers [1964] AC 371 at 399, per Lord Radcliffe. 73 I am unable to accept the validity of the defendants' submissions in this regard. To my mind, they must be rejected and, indeed, if they were not rejected, the consequences might be thought to be alarming so far as other plaintiffs in the position of the present plaintiffs are concerned, bearing in mind the fine spun legal disputation that takes place in relation to the formulation of imputations in modern defamation proceedings. 74 It is now a well established approach to litigation in the Australian legal system to encourage early resolution by compromise of potentially complex litigation. In the various State Courts and the Federal Court of Australia, Case Management procedures provide facilities designed to achieve, wherever possible, early compromise of litigation. The certainty of result brought about by settlement is preferred (generally speaking) to the uncertainty of the ultimate forensic decision. Procedures for alternative dispute resolution and neutral evaluation of cases form part of this regime. 75 Consistently with this approach, there is now a "strong and consistent body of authority in this Court favouring the predisposition towards an order for indemnity costs if an offer of settlement has been made, rejected and not bettered in the litigation.": see per Rolfe J in Multicon at 445. It would be quite antipathetic to this well established philosophical approach if a party who made a sensible commercial offer of compromise, which was rejected, was denied indemnity costs merely because the offeror ultimately succeeded in the litigation on a technically different basis to that upon which the litigation was launched. 76 A related submission by the defendants was that the proffered apologies required the defendants to accept expressly "that Ethnic Communications is a company of high reputation and that it is managed in an ethical and proper manner". However, it was submitted that such an assertion was not a necessary concomitant of the jury's verdict. 77 I would likewise reject this submission. The defamatory publications necessarily had the potentiality to have an adverse affect upon the reputation of Ethnic Communications Pty Ltd and the quality of its management from an ethical point of view. It was, to my mind, perfectly reasonable for the plaintiffs to include this aspect in the proffered apologies. 78 In any event, the fact which cannot be disregarded is that the defendants were prepared to accept the form of apologies proffered by the plaintiffs. The assumption must be made therefore that the defendants (who were advised by counsel and solicitors) considered in the circumstances which prevailed in July/August 1994, that the terms of the apologies proffered were reasonable. The law, as I understand it, does not require that the terms of the apologies be necessary concomitants of the jury's verdict for the purpose of determining whether indemnity costs be awarded. 79 There was no response by the defendants to the follow-up letter by the plaintiff's solicitors on 16 August 1994. In particular, there was no response by Mr Skalkos who had dismissed his solicitors, either on that day or the following day. It could fairly be said then that the defendants "walked away" from the settlement negotiations, and in particular the carefully formulated offer of the plaintiffs of 8 July 1994 as quantified by the letter of 16 August. 80 The question then is, firstly, whether the compromise offer by the plaintiffs was "reasonable", "a sensible commercial offer", or "a reasonable proposal to bring the Court proceedings to an end" to refer to some of the touchstones which have been applied in earlier cases. 81 In answering that question, in whatever precise way it is formulated, some observations may be made. 82 Firstly, the apologies sought were, in my view, reasonable in form, and reasonable as to the manner of publication and the publishees whom the plaintiffs had in mind. The defendants have not contended otherwise in their submissions. 83 Secondly, it was reasonable, in my view, for the plaintiffs to decline to give the indemnity sought by the defendants in their draft deed of release annexed to the letter of the defendants' solicitors dated 1 July 1994. The indemnity sought was in the following terms:- "Guarantee and agree to hold the releasees, their servants and agents harmless and fully indemnified against all liability, cost and expenses arising from any actions, suits, causes of action, claims and demands whatsoever which have been, or may hereafter be brought by the releasors in respect of matters arising from, connected with or related to the publication of the matter complained of or any part thereof by any other person or to indemnify the releasees with respect to any verdict, judgment, contribution, indemnity costs, expenses or any other sum payable by the releasees to that person arising out of such proceedings."

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;

(2) On 16 December 1994, the matter was listed for directions in the defamation list. No orders are recorded;

(3) On 3 February 1995, the matter was listed for directions in the defamation list. There was an order that any dispute in respect of interrogatories be dealt with by sending a letter to the judge's associate.

(4) On 17 February 1995, the matter was listed for directions in the defamation list. The matter was stood over generally.

(5) On 11 December 1998, the matter was listed for directions in the defamation list. Matters regarding imputations were stood over for determination by the trial judge. 121 The defendants accept that the plaintiffs are entitled to orders for costs in respect of these five appearances but make that concession only on the basis that such an order is limited to party and party costs. The plaintiffs on the other hand press for full indemnity costs. 122 I am satisfied, however, that the order for indemnity costs should embrace these interlocutory appearances, all of which occurred after 17 August 1994. I can see no reason why the position should be otherwise. 123 As indicated, the plaintiffs' sought, as an alternative order, that the defendants pay indemnity costs as from 3 February 1999. Very limited material has been put before me in this regard. However, as I have formed a firm view that the plaintiffs are entitled to indemnity costs as from 17 August 1994, it is not necessary for me to refer further to the second alternative. 124 I allow interest at 2% on the judgments from the respective dates of publication to the date of this judgment.

In the case of the first plaintiff the resulting calculation is $21,595, and in the case of the second plaintiff it is $4,319. 125 Accordingly I make the following orders:- (i) Judgment for the first plaintiff against the defendants in the sum of $171,595. (ii) Judgment for the second plaintiff against the defendants in the sum of $34,319. (iii) I order the defendants to pay the plaintiffs' costs on a party and party basis until and including 16 August 1994 and thereafter on an indemnity basis. Such order is to include the costs reserved on 26 August 1994, 16 December 1994, 3 February 1995, 17 February 1995 and 11 December 1998.

I further order that execution of these judgments is to be stayed for 28 days, and upon the filing of a notice of appeal within that period, this order is to continue until further order by a judge of this Court or the Court of Appeal. **********

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