Capilano Honey Ltd v Dowling

Supreme Court of NSW|2021-06-11|Before: Button J

Introduction

On 26 March 2021, I returned verdicts and entered judgments for the plaintiffs, and gave reasons for doing so, in Capilano Honey Ltd v Dowling (No 4) [2021] NSWSC 264. Costs were reserved, after which affidavit evidence and written submissions were received from all three parties with respect to the question. This judgment resolves the question of costs, and concludes the litigation.
In this judgment, I adopt the same abbreviations as in the substantive judgment, and this latter judgment should be read in conjunction with the former.
As I understood the written submissions, there was no real dispute as to the liability of the defendant to pay the costs of the plaintiffs on the ordinary basis. And even if I am wrong in my understanding of the position of the defendant, in any event, the plaintiffs having succeeded in their claims, in my opinion there is no reason why costs should not follow the event, at the least on the ordinary basis.
The real dispute that remains for my consideration is whether the defendant should be liable to pay indemnity costs to the plaintiff Capilano (which succeeded in its claim for injurious falsehood) or the plaintiff Dr McKee (who succeeded in his claim for defamation).
I shall be brief in my determination of those questions, not least because I believe that the enquiry is, with respect, an arid one: on the evidence, there is no prospect whatsoever of the defendant being in a position to meet the costs of the successful plaintiffs on either basis. Having said that, I have borne steadily in mind that the impecuniosity or otherwise of the defendant is irrelevant to the question of costs: Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25.

Indemnity costs in favour of Dr McKee?

As my substantive judgment shows, I ordered damages in favour of the plaintiff Dr McKee in the sum of $150,000.
In support of indemnity costs in this context, counsel for Dr McKee repeated all that she had said in favour of Capilano, and which I have summarised above. But she also invited attention to s 40 of the Defamation Act 2005 (NSW). Referring to Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2, she submitted in short that the statutory position is that I must order indemnity costs against the defendant if I am satisfied that he unreasonably failed to make a settlement offer that was a reasonable one at the time it was made, unless the interests of justice require otherwise. (I interpolate that there was no evidence of a settlement offer having been proposed by Dr McKee.)
Engaging with that proposition immediately, and reflecting upon any settlement offers put forward by the defendant that may have been reasonable ones at the time that they were made, I respectfully think that the offer made by the defendant in early 2020 whereby, in order to settle this and related litigation, Dr McKee and others would pay the defendant $100 million, can be put to one side.
And in light of the state of the pleadings, the evidence, and the principles with respect to proving defamation, I am satisfied that the failure of the defendant to make a reasonable settlement offer can be characterised as unreasonable.
The result of my characterisations is that I need only reflect on the question of whether the interests of justice require departure from that statutory "default position" of indemnity costs in favour of Dr McKee.
Reflecting on that question, I have borne in mind all the factors that led me to refuse to order indemnity costs in favour of Capilano. But here, the "onus" is reversed. Not only that, from 26 July 2019, the date upon which Fagan J struck out the vast majority of the then-defence of the defendant in a judgment that has not been promulgated on Caselaw, and refused him leave to replead, the defamation proceedings brought by Dr McKee were overwhelmingly likely to be determined against the defendant. And yet they were fully litigated by him.
In my opinion, the defendant has not affirmatively established that the interests of justice call for an order other than indemnity costs in favour of Dr McKee.

Conclusion

In summary then, although the interest of the plaintiffs were closely aligned, and the two claims proceeded simultaneously, I have arrived at different outcomes with regard to the question of costs, based upon the differing "onuses", and the special statutory provision pertaining to the defamation claim of Dr McKee.

Orders

I make the following orders: 1. The defendant, Mr Shane Dowling, must pay the costs of the litigation of the plaintiff Capilano Honey Ltd on the ordinary basis. 2. The defendant, Mr Shane Dowling, must pay the costs of the litigation of the plaintiff Dr Ben McKee on an indemnity 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: 11 June 2021

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