Balzola v Passas

Costs as between the plaintiff and the second defendant

1. Mr Raciti was successful in the action and in my judgment the plaintiff has failed to show any conduct on his part which would disentitle him to the usual consequence of an order for costs in his favour. The general rule is that costs follow the event (r 42.1 Uniform Civil Procedure Rules 2005 (NSW)) unless the Court otherwise orders for good reason: Bailey v Department of Land and Water Conservation (2009) 74 NSWLR 333; [2009] NSWCA 100 at [159]. It is said that "the underlying principle in the making of any costs order is that of fairness": Council of the City of Liverpool v Turano [No 2] [2009] NSWCA 176 at [14]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [85] and [121]. As Hodgson JA explained in Gretton at [121]: In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: (citation omitted). Departures from the general rule that costs follow the event are broadly based on a similar approach. See also Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 567-568, albeit concerned principally with costs in summary criminal prosecutions.
2. Mr Balzola, in effect, argues that it is unfair that he should pay Mr Raciti's costs given the manner in which the proceedings were conducted on Mr Raciti's behalf. I reject this argument. The application to amend and the dispute about the subpoena decided by McCallum J in November 2018 did not result in any material delay. In fact her Honour's decision was substantially based upon the consideration that preservation of the hearing date fixed for December 2018 was a factor of considerable significance. To the extent there was "inconvenience" that disadvantage was cured by the costs order in favour of Mr Balzola which I would not disturb.
3. The first hearing was fixed for 10 and 11 December 2018 and was adjourned largely because a witness, Mrs Tyler, had been identified late. Her evidence, in different ways, assisted both Mrs Passas and Mr Raciti. But it must be borne in mind that Mr Raciti was not desirous of Mrs Tyler being called at all, and certainly not if calling her as a witness would result in an adjournment. It was this factor that put Mr Kirby in the position of conflict which was the ultimate reason for the adjournment. None of this could be laid at Mr Raciti's feet. His position was and remained throughout that although he had no clear recollection of the events of the meeting he denied having uttered the allegedly defamatory words. That acceptance of Mrs Tyler's evidence was, in the end, critical to Mr Raciti's success is no more and no less than the fortunes of litigation. In any event Mr Balzola has the benefit of a wasted costs order which I would not disturb. As I said in my judgment of 10 December ([2018] NSWSC 1948) the real mischief which underpinned the need for an adjournment of the hearing and gave rise to Mr Kirby's then conflict was late preparation which meant that the significance of Mrs Tyler's evidence was not appreciated in sufficient time to salvage the hearing dates. Notwithstanding Mr Raciti's personal opposition to her evidence being relied upon there is no reason to change Order 8 made on 10 December 2018 that the defendants, including Mr Raciti, pay the costs thrown away by reason of the adjournment. As I have said I will allow that order to stand.
4. So far as inconvenience is concerned, the Court was able to fix the matter for hearing in April 2019, leading to minimal delay, and I made orders that the defendant serve its witness statements before the plaintiff to cure any prospective forensic prejudice that may have arisen from the change in the nature of the defendants' case. To my mind the wasted costs order and the case management orders sufficiently took care of any aspect of delay and inconvenience arising out of the adjournment. They provide no reason to deprive Mr Raciti of the costs order to which the general rule entitles him. In my judgment there is no other reason to deprive him of an order that Mr Balzola pay his costs, other than the costs already the subject of the adverse costs orders. I will turn now to the question of whether Mr Raciti is entitled to costs on an indemnity basis.
5. The only potential basis for ordering Mr Balzola to pay Mr Raciti's costs on the indemnity basis is the letter of Otto Stitcher (Mr Raciti's then solicitors) to Messrs Stewart Cuddy and Mockler (Mr Balzola's solicitors) dated 27 November 2018. As I have said it was expressed to be, "without prejudice save as to costs", but it did not refer to Calderbank v Calderbank, or state an intention to claim indemnity costs if the offer conveyed was rejected. Moreover, the offer appeared to be a joint offer in as much as it was put in the following terms: We are instructed to reject [your client's offer] and to make the following counter offer: 1. Payment by each of Ms Passas and Mr Raciti of an amount of $10,000; …. 3. Such payment is in full and final satisfaction of any claims, costs and orders. 4. Proceedings to be dismissed. …. I emphasise that "counter offer" is rendered in the singular, "payment" is in the singular, and the offer envisaged the settlement of the whole package so that "the proceedings", were to be dismissed. I interpolate that there appear to be two slightly differing versions of this offer but in substance they are the same.
6. If one assumes that the letter is a Calderbank offer, it should be borne in mind that the failure to accept a Calderbank offer does not automatically result in adverse consequences as to costs for the offeree: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] (Giles JA); Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19]. The question, in general terms, is whether it was unreasonable for the offeree to accept the offer when it was made in accordance with its terms: Leichhardt Municipal Council v Green at [46]; Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99]; Gretton at [117]. Given that on its proper construction, the offer is a joint offer and the consequences of non-acceptance were not spelt out, I am not persuaded that it was unreasonable for Mr Balzola to accept the offer even so far as it would have resolved Mr Balzola's claims against Mr Raciti in more favourable terms than the event. He did better against Mrs Passas. I will order Mr Balzola to pay Mr Raciti's costs on the ordinary basis.

The costs payable by Mrs Passas

1. Mr Balzola relies on three matters which Mr Rasmussan submits engage a discretion to order costs against Mrs Passas on the indemnity basis: first, the failure to accept the offer of 1 May 2016 in the sum of $5,000 with the required apologies; the failure to accept the offer of 3 May 2019 in the sum of $7,500 plus costs with a waiver of the indemnity costs order for one day made by Hoeben CJ at CL made on 22 March 2019; and aspects of Mrs Passas's conduct of the litigation said to have caused unnecessary delay and expense to the plaintiff.
2. I am not satisfied that Mr Balzola has made out a claim for indemnity costs. No offer of compromise was made in accordance with the Rules. As I have already said, the first offer was not in the Calderbank v Calderbank format. Even if one assumes that the letter is a Calderbank offer the question is whether it was unreasonable for the offeree to reject the offer when it was made, as I have already stated. I am not convinced that it was unreasonable for Mrs Passas to reject the offer expressed on 1 May 2016. The offer did not provide for a "clean exit" from the prospect of costly proceedings by payment of the sum claimed. It also imposed conditions as to an apology in a local newspaper circulating in the locality of Ashfield and in the Sydney Morning Herald. It purported to impose terms to introduce a motion of apology at the next relevant meeting even though Mr Balzola was not a branch member. Moreover, it particularised an imputation of concern as including an imputation not propounded in the Statement of Claim, "Robert Balzola was a member of the Australian Labour Party" and pursued at least one imputation which I found was not defamatory, that is that Mr Balzola "pulls swifties". The apologies sought were to be circulated to a much wider audience from that which heard the single statement I found to be defamatory. Although the concerns notice carried the heading "without prejudice save as to costs" it did not state that in the event of non-acceptance followed by the commencement of proceedings indemnity costs would be sought. I do not regard it as unreasonable for Mrs Passas to have rejected the offer.
3. The open offer of 3 May 2019 was made after the completion of all of the evidence in the case when all that was left was the preparation of written submissions and the presentation of oral argument. Although from Mrs Passas's point of view, it was somewhat more advantageous than the result, I am not persuaded that it was unreasonable for Mrs Passas to reject the offer at that late stage of the proceedings. No express reference was made to Calderbank v Calderbank and no clear statement was made that in the event of non-acceptance an order for indemnity costs would be sought in due course.
4. For the reasons I have rehearsed above in relation to the claim against Mr Raciti, bearing in mind that at the relevant time Mr Raciti and Mrs Passas had common representation, I am not persuaded that Mrs Passas's conduct of the proceedings had caused such unnecessary delay and expense to the plaintiff as to amount to a level of dereliction justifying an order for indemnity costs in favour of Mr Balzola. However, as I have already said I would not disturb the costs orders made in favour of the plaintiff as discussed above.
5. Mr Kirby of Counsel argued that I should award a proportion only of Mr Balzola's costs against Mrs Passas given that Mr Balzola had been unsuccessful against Mr Raciti. It was submitted that as Mr Balzola had only been successful against Mrs Passas and his costs are referrable to proceedings against both defendants (in respect of separate causes of action), it would be unfair for Mrs Passas to bear all of Mr Balzola's costs. Mr Kirby argued at one point that an appropriate proportion would be "75 percent". From what appears below this may have been a slip.
6. At another point it was argued, presumably in the alternative, that having regard to the offer made by the defendants on 27 November 2018, Mrs Passas should pay two-thirds of Mr Balzola's costs up until 27 November 2018 and thereafter Mr Balzola should pay Mrs Passas's costs on the indemnity basis.
7. I have already said, for reasons I have explained, that it was not unreasonable for Mr Balzola to reject the offer of 27 November 2018. Despite Mr Kirby's submission that costs then "would have been very limited", it is always difficult to clearly state that an offeree has behaved unreasonably in refusing an offer which is expressed to be inclusive of costs for the simple reason, except when the offeror has been entirely successful, that it is almost always impossible, other than in the clearest of cases, for the court to be satisfied that the offer is more advantageous to the offeree at the time the offer was made than the outcome of the contested hearing. And it is only when there has been a contested hearing that the question arises. I would not award indemnity costs to Mrs Passas because Mr Balzola failed to accept an offer which he in fact bettered in the event.
8. However I think there is much to be said for the argument that there are a number of factors which suggest that Mrs Passas should only be required to pay a proportion of Mr Balzola's costs. First, there is the principle of proportionality of costs expressed in s 60 Civil Procedure Act 2005 (NSW). Given the modesty of the claim a very serious question arises as to whether the commencement of proceedings in the Supreme Court was worth "powder and shot". Secondly, Mr Balzola was only partially successful. He lost on more of the claim than he won: cf Latoudis v Casey at p568, McHugh J. Thirdly, on a related point, the issues were separable in as much as they proceeded on the basis of separate and distinct allegations in relation to particular statements alleged to have been made by Mrs Passas. For costs purposes this remains relevant notwithstanding s 8 Defamation Act 2005 (NSW). Finally, so far as fairness is concerned, subject to Mr Balzola's application for a Sanderson order, care needs to be taken in fashioning the orders so that by default or oversight Mrs Passas is not paying costs incurred by Mr Balzola in his unsuccessful pursuit of Mr Raciti. Before making a decision about this matter then, it is appropriate to consider the question of a Sanderson order.

Application for a Sanderson order

1. Mr Rasmussan helpfully drew my attention to the decision of the Court of Appeal in Council of the City of Liverpool v Turano [No 2]. He submitted it contained "a very useful exposition of the principles underlying Bullock and Sanderson orders". The reference to a Bullock order is a reference to the form of order traced back to Bullock v London General Omnibus Co. [1907] 1 KB 264 where in certain circumstances a plaintiff is indemnified by the unsuccessful defendant in respect of the costs payable to the successful defendant.
2. The principles governing the discretion to make a Sanderson or Bullock order are set out in some detail in the Court of Appeal's decision at [10] - [22]. It is unnecessary for me to descend into the same level of detail for the present purposes. The Court of Appeal, inter alia, approved of the statement of Giles J (as his Honour then was) in Sved v Council of the Municipality of Woollahra (1998) NSW ConvR 55-842 at 55,605: … reasonableness as between the plaintiff and the unsuccessful defendant will normally be demonstrated by some conduct of the unsuccessful defendant which made it proper that the successful defendant be joined or that the unsuccessful defendant should bear the costs of the successful defendant. Such conduct was found in Lackersteen v Jones (No 2) in the unsuccessful defendant denying the authority of its agent whereby the plaintiff joined the agent who became the successful defendant, and more widely has been found in the unsuccessful defendant telling the plaintiff in one way or another that it should look to the successful defendant for its remedy. (Citations omitted). See also Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 85 at 230 (Gibbs CJ), 247 (Wilson J), 260 (Brennan J); Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179; (2000) NSWCCR 417 at [128].
3. The case against Mr Raciti and Mrs Passas was joined in the one proceedings and heard at the same time because the separate cause of action propounded by Mr Balzola against each of them arose from the common factual matrix provided by the AGM. Obviously many of the witnesses called, gave evidence against both of them. However, in no sense was Mr Balzola's claim against Mr Raciti an alternative to his claim against Mrs Passas. Nor were they concurrent tortfeasors whether joint or several so that one may have sought to escape liability by blaming the other. The cause of action asserted against each of them was quite separate and distinct. There is nothing about Mrs Passas's conduct in relation to the proceedings that as between her and Mr Balzola made it fair and reasonable that Mr Balzola should sue Mr Raciti. She did nothing to induce Mr Balzola to sue Mr Raciti lest the action against her fail. I am not satisfied that Mr Balzola has demonstrated that a proper exercise of my discretion as to costs would support the making of a Bullock or Sanderson order and I reject his application in that regard.

Mrs Passas

1. Having made that decision, I am satisfied that Mrs Passas must pay Mr Balzola's costs of the action. The question is in what proportion. I have no doubt that fairness requires a discount. As I say I have serious concerns given the overall result whether the proceedings were worth "powder and shot". That is to say, I have real concerns about the proportionality of the costs of these proceedings. For all of the reasons I have rehearsed (at [26] above), in my judgment it is fair that Mrs Passas be ordered to pay two-thirds of Mr Balzola's costs of the proceedings against her alone on the ordinary basis.

Orders

1. For the aforegoing reasons my orders are: 1. Confirm the costs orders made in favour of the plaintiff by Justice McCallum on 12 November 2018, Justice Campbell on 10 December 2018 and Justice Hoeben CJ at CL on 22 March 2019; 2. Subject to order 1, the first defendant is to pay two-thirds of the plaintiff's costs on the ordinary basis so far as those costs relate to the proceedings brought against her alone; 3. Subject to order 1, the plaintiff is to pay the second defendant's costs of the proceedings on the ordinary basis. 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: 04 September 2020