The application for indemnity costs pursuant to s 40
Section 40 of the Defamation Act 2005 provides:
40 Costs in defamation proceedings
(1) In awarding costs in defamation proceedings, the court may have regard to -
(a) the way in which the parties to the proceedings conducted their cases (including any misuse of a party's superior financial position to hinder the early resolution of the proceedings), and
(b) any other matters that the court considers relevant.
(2) Without limiting subsection (1), a court must (unless the interests of justice require otherwise) -
(a) if defamation proceedings are successfully brought by a plaintiff and costs in the proceedings are to be awarded to the plaintiff - order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the defendant unreasonably failed to make a settlement offer or agree to a settlement offer proposed by the plaintiff, or
(b) if defamation proceedings are unsuccessfully brought by a plaintiff and costs in the proceedings are to be awarded to the defendant - order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.
(3) In this section -
settlement offer means any offer to settle the proceedings made before the proceedings are determined, and includes an offer to make amends (whether made before or after the proceedings are commenced), that was a reasonable offer at the time it was made.
In his outline of submissions, Mr Loukas, for the defendant, simply relies upon the defendant's Calderbank offer (Calderbank v Calderbank (1975) 3 All ER 333) of 6 November 2017 offering to settle on the basis of a discontinuance, with each party to pay his or her own costs. That offer lapsed. No other offers were made.
However, s 40 is not merely a Calderbank-style costs provision, as its legislative history and opening words make clear. Section 40 is aimed at the way that parties conduct their cases and "any other matters that the court considers relevant", which gives the court an unfettered discretion to look at issues other than settlement offers, so long as they are relevant to the application.
I will first deal with Mr Lewis's two arguments as to why s 40 should not apply. These are:
1. Section 40 is concerned with circumstances after a trial, or at least a determination on the merits.
2. The Calderbank offer made by the defendant did not contain an offer to make amends within the meaning of Part 3 of the Defamation Act: Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2 at [59] - [60].
As to the first of these submissions, s 40 is engaged when the proceedings are terminated, whether by discontinuance (which amounts to a capitulation) or by a judgment. A party who discontinues should not be entitled to a windfall by reason of the hopelessness of his or her abandoned case not being adjudicated by the court, any more than he/she should expect harsher treatment following such a step: Haddad v Nationwide News Pty Limited (No 7) [2015] NSWSC 1814 (one of four plaintiffs discontinued on the day of the trial; application for indemnity costs refused).
As to the need for an offer to make amends to be included, the terms of s 40 are expressed, in the definition, to "include" offers to make amends; there is no requirement that offers must be offers to make amends. The Court of Appeal in Zoef v Nationwide News Pty Ltd (No 2) (at [60] - [62]) was considering an offer to make amends made in those proceedings, not setting out a requirement that offers to make amends had to be included in Calderbank offers. No other court has ever held, in the hundreds of decisions that have considered s 40 since its enactment, that it was a necessary prerequisite for an offer to make amends to have been made, and no judgment since Zoef v Nationwide News Pty Ltd has cited this judgment as authority for this astounding interpretation of the definition of "settlement offer". If that is how the Court of Appeal interpreted the definition of "settlement offer" in Zoef v Nationwide News Pty Ltd, it would not merely be clearly wrong, but contrary to the very broad outline of matters to take into account in s 40 costs issues as set out in s 40(1) and I would not, therefore, follow or apply this interpretation of "settlement offer".
What aspects of "the way in which the parties to the proceedings conducted their cases" and "other matters" are relevant to the costs orders to make?
Mr Lewis addresses the "other matters" in s 40(1)(b) by referring to the plaintiff's success in the interlocutory applications he brought. He argues that the defendant's defence was defective and had to be struck out, and the circumstances in which she sold a property without telling the plaintiff warranted the making of a freezing order. In addition, the plaintiff's conduct of the litigation had at all times been proper; Mr Lewis states that "this is not one of those cases where the plaintiff engaged in the kind of misconduct that would warrant an indemnity costs order" (submissions, paragraph 57). When measured against the defendant's "emotive" (at paragraph 58) submission that the plaintiff rejected the Calderbank offer to conceal his crimes and to intimidate and abuse the defendant and the children can be seen to be a "potentially scandalous" allegation without any evidence being led.
Mr Lewis submits that, in discontinuing the claim, the plaintiff has responsibly accepted that, because of his conviction (for which the right of appeal is now exhausted), that success at trial would be "unlikely" (submissions, paragraph 57), at least in relation to the most serious imputations pleaded. He submits that the plaintiff's concession has been made in a timely and responsible manner and is inconsistent with misconduct of the kind that would warrant a costs order.
Mr Lewis's categorisation of Mr Loukas's submissions as emotive has some merit; Mr Loukas simply submits that the defendant, "who has suffered so much at the hands of the plaintiff", should "not be out of pocket one cent in these proceedings" (submissions, paragraph 11).
The first difficulty with Mr Lewis's submissions is that the plaintiff was convicted on 11 of the 13 charges on 20 December 2018. He has not only sought to keep his defamation action on foot over the past two years and nine months, but has sought stays of proceedings in order to permit him to bring the defamation action at a time favourable to him, namely after a hopefully favourable appeal period. The plaintiff's change of tactics from aggressively pursuing a hearing date to a series of requests for a stay paint a picture of a plaintiff who, having lost the chance to bring on these allegations in a defamation action, then sought to defer the action when it must have been increasingly obvious that his hopes of a successful appeal were illusory.
The second difficulty is that the conduct of the plaintiff towards his children and the defendant, which is set out in great detail in the judgment of the Court of Criminal Appeal, is frankly repellent. Mr Lewis's concession that the plaintiff's prospects of success at trial are "unlikely" fails to acknowledge the hopelessness of any claim for damages surviving not only a defence of justification but also, on mitigation of damages 9given the gap between the allegations of physical as opposed to sexual abuse), the tender of the plaintiff's criminal convictions pursuant to s 42 of the Defamation Act.
Taking these matters into account, as I am entitled to do pursuant to s 40(1)(b), I am of the view that the defendant should be entitled to an order for indemnity costs of the proceedings for those parts of the proceedings not already the subject of a costs order.
The question of entitlement to costs which are already the subject of a costs order creates difficulties on assessment. Mr Lewis notes that Mr Loukas acknowledges that his client is entitled to these costs. I am aware, however, that a series of costs orders of this kind can create problems on assessment, and that the preferable course is to make a "broad axe" order for costs assessment to take into account partial success in interlocutory proceedings: AMI Australia Holdings Pty Ltd & anor v Fairfax Media Publications Pty Ltd & ors (Costs) [2010] NSWSC 1519 at [7]. In those proceedings, Brereton J (as his Honour then was) made a "broad axe" order of 90%, noting that such orders streamline the assessment process. These principles have been considered by appellate courts in defamation proceedings: Lesses v Maras (No 3) [2017] SASCFC 154 at [82] - [90].
In the present case, what I propose to do is to vacate all costs orders made in these proceedings and in their place as well as by way of final costs orders for the proceedings, direct that the plaintiff is to pay 80% of the defendant's costs of the proceedings on an indemnity basis.
The defendant proposed that this costs order apply from the day after the Calderbank offer was made (7 November 2017). Considering the ambit of s 40, and taking into account the "broad axe principles", I propose instead to make the indemnity costs orders for the whole of the proceedings.
[2]
The application for indemnity costs by reason of the Calderbank offer
There are two difficulties with reliance upon this offer.
First, when the Calderbank offer was made, it was very early in the proceedings. The pleadings had not yet closed; the plaintiff's Reply had not yet been filed and served. Second, the offer was a "walk away" offer of discontinuance with each party to pay his or her own costs: Leichhardt Municipal Council v Green [2004] NSWCA 341.
Mr Loukas argues that, as the plaintiff had been charged with the criminal offences four months before the offer, the plaintiff should have known that his prospects of success were not good. Mr Lewis submits that the plaintiff's prospects in the defamation litigation were good, because of the difficulties that the defendant was encountering in terms of pleading and particularising her case. Implicit in his submissions is the likelihood that, if the findings of fact had been made in the defamation proceedings rather than in a criminal trial, the plaintiff could well have won.
In the circumstances of this case, given the benefits to the plaintiff if the defamation case were to continue, I consider that rejection of the offer was not unreasonable.
The offer in question is also relied upon for the s 40 argument. However, the fact of that offer was only one factor that the court could take into account. All the other factors favoured the defendant, and it was principally by reason of those factors that I considered the defendant was entitled to indemnity costs.
[3]
The application for indemnity costs by reason of the hopelessness of the proceedings
The entitlement, on general principles, of a defendant to indemnity costs of discontinued defamation proceedings where the clear inference is that there has been an abuse of process has long been acknowledged: Packer v Meagher [1984] 3 NSWLR 486.
There are a number of factors pointing to these proceedings, if continued, amounting to an abuse of process. First of all, the plaintiff was in fact guilty of child sex abuse. He was found guilty of these offences by a jury, on the criminal onus of proof. The careful analysis of the evidence by the Court of Criminal Appeal paints a compelling picture of multiple sexual assaults by the plaintiff on both his children. For the plaintiff to continue his claim for defamation in relation to any of facts arising from his conviction would be a clear abuse of process: Farrow v Nationwide News Pty Ltd [2017] NSWCA 246.
Mr Lewis submitted that the vice in Farrow v Nationwide News Pty Ltd was that the plaintiff commenced proceedings after she was convicted, and not before (additionally, it should be noted, the plaintiff required leave under s 6(2) of the Felons (Civil Proceedings) Act 1981 (NSW) to commence those proceedings, which is not the case here), referring to the undesirability of retrospective consideration (Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344). This overlooks the importance of s 42, which permits the tender of criminal convictions in defamation proceedings, in what was clearly intended to be the final word concerning guilt.
Second, as is noted above, the plaintiff initially ruthlessly pursued a timetable for an early hearing (including seeking summary judgment if a defence in proper form was not filed) as well as freezing orders in relation to the defendant's assets. This was, I am satisfied, intended to ensure that the evidence of the plaintiff's sexual misconduct, if heard at all, was not heard in a criminal court with all the statutory and procedural safeguards, but in a defamation hearing where his opponent was not an experienced prosecutor, but his former wife, and the potential for injustice therefore significant.
It is often said that a person should not publish without being able to prove the truth, but proof of the truth in defamation proceedings is a crushing financial and emotional burden, whether the publisher is a mother of two sexually abused children, or a wealthy corporation (as to which, see Dye v Commonwealth Securities Limited [2012] FCA 242 at [744] per Buchanan J).
The potential for defamation actions in Australia to be used as "stop writs" or other abuse of process such as "libel tourism" has long been recognised by academics but has found little favour in courts where the allure of the cause of action leads to case management favouring speedy trials at eye-watering expense. A common indicator of abuse is the bringing of proceedings for defamation arising from criminal investigations or proceedings on foot outside the defamation court, particularly where these involve allegations of a sexual nature, as these are highly dependent on cross-examination and credit issues, the fairness of which depend upon proper procedural and evidentiary provisions being in place.
Third, delay in litigation is acknowledged to be conduct which may amount to abuse of process. The plaintiff's applications for stays of proceedings over the past two years and nine months, while he has been incarcerated and pursuing appeals that were rejected, fall into this category. The plaintiff could have discontinued these proceedings in December 2018 when he was convicted. By not doing so, in circumstances where his appeals have all failed, he must accept the costs consequences.
Accordingly, if I have erred in making findings in accordance with s 40, I would have made the same finding on the principles of abuse of process enunciated by Hunt J in Packer v Meagher.
[4]
Order:
1. Grant leave to the plaintiff to discontinue these proceedings subject to the costs orders set out in order 2.
2. Vacate all costs orders made in these proceedings and in their place order the plaintiff to pay 80% of the defendant's costs in these proceedings on an indemnity basis.
[5]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 20 August 2021
These are proceedings for defamation for publication by the defendant, the former wife of the plaintiff, of two posts on Facebook in which she stated he mistreated her and abused their two children.
The plaintiff has conducted these proceedings combatively, including bringing applications to strike out the defence and seeking asset freezing orders: B1 v B2 [2017] NSWDC 252; B1 v B2 (No. 2) (District Court of New South Wales, Gibson DCJ, 12 February 2018); B1 v B2 (No. 3) [2018] NSWDC 108 and B1 v B2 (No. 4) [2018] NSWDC 497; B1 v B2 (No 6) 2020 NSWDC 779. However, the plaintiff was convicted and sentenced for sexually abusing his two children and his appeal avenues now having been exhausted, he seeks leave to discontinue his defamation claim.
The question for determination is the appropriate costs order in the circumstances. Uniform Civil Procedure Rules 2005 ("UCPR") contains rules at Part 12 (Discontinuance, withdrawal, dismissal and setting aside of originating process), Division 1 (Discontinuance of claim) which provide:
Division 1 Discontinuance of claim
12.1 Discontinuance of proceedings (cf SCR Part 21, rules 2 and 5; DCR Part 18, rule 1; LCR Part 17, rule 1)
(1) The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant -
(a) with the consent of each other active party in the proceedings, or
(b) with the leave of the court.
(2) A notice of discontinuance -
(a) must bear a certificate by the plaintiff, or by his or her solicitor, to the effect that the plaintiff does not represent any other person, and
(b) except where it is filed with the leave of the court, must be accompanied by a notice from each party whose consent is required by subrule (1) to the effect that the party consents to the proceedings being discontinued in accordance with the notice of discontinuance.
(3) If any such consent is given on terms, those terms are to be incorporated in the notice of consent.
(4) If any party has not been served with the originating process, the plaintiff must file an affidavit to that effect.
(5) For the purposes of this rule, proceedings on a cross-claim are taken to be different proceedings to the proceedings on the originating process and to proceedings on any other cross-claim.
12.2 (Repealed)
12.3 Effect of discontinuance(cf SCR Part 21, rule 7; DCR Part 18, rule 7; LCR Part 17, rule 8)
(1) A discontinuance of proceedings with respect to a plaintiff's claim for relief does not prevent the plaintiff from claiming the same relief in fresh proceedings.
(2) Subrule (1) is subject to the terms of any consent to the discontinuance or of any leave to discontinue.
12.4 Stay of further proceedings to secure costs of discontinued proceedings(cf SCR Part 21, rule 8; DCR Part 18, rule 8; LCR Part 17, rule 9)
If -
(a) as a consequence of the discontinuance of proceedings, a plaintiff is liable to pay the costs of another party in relation to those proceedings, and
(b) before payment of the costs, the plaintiff commences further proceedings against that other party on the same or substantially the same cause of action as that on which the former proceedings were commenced,
the court may stay the further proceedings until those costs are paid and may make such consequential orders as it thinks fit.