First Plaintiff v Second Plaintiff

Supreme Court of Victoria|2011-05-20|Before: SIFRIS J

DEFAMATION - Costs - Awards within jurisdictional limit of Magistrates' Court - Supreme Court (General Civil Procedure) Rules 2005, Order 63.24(1.1) - Supreme Court Scale of Costs ordered.

DEFAMATION - Costs - Defamation Act (2005) (Vic), s 40 - Whether failure to make or accept offer was reasonable - Conduct of the case - Indemnity costs considered - Party and party costs ordered.

1 On 29 April 2011, I published my reasons for judgment.[1] I awarded the first plaintiff $5,000 in damages and the second plaintiff $10,000 in damages. Both awards were inclusive of aggravated damages. I held that each of the plaintiffs had been defamed by the defendant. The nature and extent of the defamation and the circumstances, including those that gave rise to aggravated damages, are set out in the reasons.

2 The remaining issue relates to costs. The plaintiffs submit that indemnity costs should be ordered under s 40 of the Defamation Act 2005 (Vic) ("the Defamation Act"). Alternatively, they submit that notwithstanding the amounts awarded, costs should be awarded on the Supreme Court scale. The defendant opposes the orders sought and submits that I should follow the relevant rules of Court in relation to costs, which should be on the usual party and party scale.

3 There can be little dispute that costs should follow the event.

4 However, the plaintiffs rely on s 40 of the Defamation Act (and the broad discretion of the court) in submitting that indemnity costs should be awarded. On the usual principles that apply to an award of indemnity costs,[2] I would not be inclined to make such an order.

5 Section 40(1) of the Defamation Act provides that in awarding costs in a defamation proceeding the court may have regard to:

(a) the way in which the parties conducted their cases; and

(b) any other matters that the court considers relevant.

6 Section 40(2) provides that if costs are to be awarded to a successful plaintiff those costs are to be assessed on an indemnity basis (unless the interests of justice require otherwise) if the Court is satisfied that the defendant:

(a) unreasonably failed to make a settlement offer; or

(b) unreasonably failed to agree to a plaintiff's settlement offer.

7 What constitutes an "unreasonable failure to make an offer" and an "unreasonable failure to accept the plaintiffs' offer" is dependent upon the facts of each case, bearing in mind the definition of "settlement offer" in s 40(3):

"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."

8 The conduct of the trial is a relevant matter. Senior Counsel for the plaintiffs referred to various matters. The case was heard on 2 and 3 March 2011. The defendant's counsel made frequent attempts throughout the trial to adduce irrelevant evidence arising from both a separate dispute between the first plaintiff and his siblings (including the defendant) (hereafter referred to as the "family dispute" or "the wider family dispute") and an unrelated defamation proceeding to which the first plaintiff was a party. The defendant adopted the position that in relation to the defamatory letters, she and her husband had "nothing to do with [it]" and "are not the authors nor the publishers".

9 Despite strictly confined issues arising on the pleadings, some trial time was taken up by the defendant's counsel seeking both to canvass irrelevant issues and adduce irrelevant evidence. However, this did not have the effect of extending the trial to any significant extent and the matter was completed well within the estimate.

10 Through her counsel, the defendant alleged that the proceeding brought by the plaintiffs was "abusive" and a "malicious prosecution", despite the fact that no such allegations were pleaded and no supporting evidence was called. Further, it is unclear what the defendant meant by the allegation that "...the Hyatt proceedings were a dress rehearsal for this proceeding." It was submitted that such an unsupported and irrelevant allegation was part of a larger allegation intermittently made by the defendant's counsel that the plaintiffs brought the proceeding for reasons other than vindication. The plaintiffs' counsel further submitted that such a conclusion is supported by the defendant's counsel's reference to 'concoction' and 'fraud' in his final address. Importantly, despite the seriousness of the allegations, the defendant did not seek to amend her defence and called no supporting evidence.

11 The defence was conducted in such a manner, it was submitted, that suggests that its strategy was substantially influenced by extraneous issues, namely the wider family dispute. Despite this dispute being the context for the allegations contained in the defamatory letters, justification was not pleaded.

12 Counsel for the defendant submitted that the conduct engaged in by inexperienced counsel was confined to the trial, which was of limited duration and effectively related to or arose out of an acrimonious family dispute where passions were high and a trial in relation to the estate of the deceased father of the parties was due to commence in the Supreme Court in a few weeks.

13 In the written submissions filed by the plaintiffs, it was further submitted that although the defendant would have benefited from representation by experienced counsel, she could not afford to engage such counsel and should not be penalised. It was also submitted that despite the conduct of the trial by the defendant's counsel, no prejudice was suffered given that the trial was completed within the estimated time frame and the very conduct issues were taken into account in awarding and assessing aggravated damages.

14 There is much force in the defendant's submissions. I do not regard such conduct as sufficient to justify an order for indemnity costs. The conduct has been taken into account in the awards and the trial was not prolonged. The defendant's decision to retain her solicitor to conduct the trial was perhaps unfortunate but does not give rise to such conduct that would compel an order for indemnity costs. In any event, I have had regard to such conduct and other matters as I am entitled to under s 40(1) in the decision I propose to make regarding costs. I refer to paragraph 47 below.

15 On 22 September 2009, the plaintiffs wrote to the defendants setting out their concerns in relation to the letter which is the subject of this proceeding ("the concerns notice"), attaching an unissued Writ and Statement of Claim.[3] The concerns notice sought a retraction of the allegations and an apology (reserving the right to claim damages and costs) explaining that should such a retraction and apology not be provided, the Writ and Statement of Claim would be issued and served.

16 On 30 September 2009, the plaintiffs' solicitors received a letter from the defendant's then solicitors, Rockman and Rockman, replying to the concerns notice. In that letter the then defendants:

(a) denied the substantive allegations in the Statement of Claim;

(b) alleged that the concerns notice itself was defamatory of the defendants;

(d) offered the plaintiffs' solicitors the opportunity to publish a retraction and apology to the defendants within 7 days and suggested that the plaintiffs' solicitors refer 'this matter' to its professional indemnity insurers.

In the context of the matter, it was submitted that the defendant's solicitor's response was clearly "unreasonable" if not "absurd".

17 By letter dated 2 February 2011, the plaintiffs served an 'Offer of Compromise' on the defendant pursuant to rule 26 of the Supreme Court (General Civil Procedure) Rules 2005 ("the Supreme Court Rules") offering to compromise both plaintiffs' claims for $20,000.

18 By email dated 10 February 2011, through her solicitors Kiatos & Co, the defendant rejected the Offer of Compromise and said that:

(a) the defendant "wants her day in court and is looking forward in (sic) defending her reputation...";

(b) the plaintiffs' claim was hopeless and that the defendant intended to seek "indemnity costs"; and

(c) the defendant would "settle this matter" if the plaintiffs pay her "legal costs to date to the sum of $32,000" and write a "letter of apology for the stress and anxiety that he has caused my client".

The response rejecting the offer was, it was submitted, not only "unreasonable" but "palpably absurd". The plaintiffs achieved an award of $15,000 which, with interest of $2533.97 (to the date of judgment) totals $17,533.97. Although this is slightly less than the offer made, there can be no doubt, it was submitted, that the defendant would have been better off financially accepting the offer of $20,000 plus costs to 10 February 2011 than she is with the judgment of $17,533.97 plus costs to date, including the costs of the trial.

19 In circumstances where the only real defence pleaded was "non-publication", it was submitted that the defendant's conduct in not accepting either the plaintiffs' offer in the letter dated 22 September 2009 or in the Offer of Compromise dated 2 February 2011, was unreasonable at the times when the offers were made. Further, not only did the defendant fail to make any real offer to settle, the offers referred to in her solicitors' letter dated 30 September 2009 and by email dated 10 February 2011 were unreasonable at the time. In real financial terms, it was submitted that the defendant was worse off not accepting the Offer of Compromise.

20 The defendant submits that the approach taken was not unreasonable. There were always reasonable prospects of success, particularly given the diametrically opposed versions of events without independent corroboration and hindsight consideration should be avoided. Again, it was submitted that the offers were made in the context of the wider family dispute.

21 It was further submitted that the concerns notice was properly rejected as it was addressed to both defendants (at the time) and allegations against the defendant's husband were later withdrawn.

22 In relation to the Offer of Compromise, the defendant contends that given the award, it was not unreasonable to reject the offer.

23 Finally, the defendant submits that it is not in the interests of justice that indemnity costs be awarded in all of the circumstances of this case, including the plaintiffs' election to engage "such a large legal team" for a simple, straightforward matter.

24 In Davis v Nationwide News Pty Ltd,[4] the plaintiff made an oral offer to accept $200,000 plus costs following a concerns notice that was met with a response that an investigation would be conducted. The response to the oral offer was that the parties walk away. No apology was offered. This was followed by an Offer of Compromise in the sum of $150,000. The plaintiff beat the offer. The court held that no meaningful offer was made when it must have been apparent that damages would be awarded. The Court held that the defendant should have offered an apology and a sum for compensatory damages.

25 In Manefield v Child Care (NSW) (No 2),[5] there was no response to a concerns notice seeking an apology, withdrawal of defamatory allegations and $40,000 in damages. An offer by the defendant of $20,000 inclusive of costs was met with a counter-offer by the plaintiff of $95,000 inclusive of costs. This was rejected by the defendant on the basis that its $20,000 offer was not negotiable. No apology was offered. The plaintiff was awarded $150,000 in damages. The Court held that the offer was a derisory offer and the defendant must have known that the plaintiff had been defamed and his reputation seriously damaged. Indemnity costs were ordered. The court held that the defendant was unreasonable in not making a sufficient offer beyond the $20,000 offer. It failed to take into account various matters including the risks and hazards of litigation.

26 It is clear from these cases and other cases referred to and somewhat obvious that each case must be considered by reference to its own peculiar facts and circumstances. The reference in s 40(2) to the interests of justice should not be overlooked.

27 The matter is not without difficulty and there is force in the submissions made on behalf of the plaintiffs. However, in my opinion and in the context of a wider acrimonious family dispute, which I regard as a matter of much significance, the defendant did not act sufficiently or so unreasonably in relation to the offers so as to compel a conclusion that indemnity costs should follow. I also consider that it is not in the interests of justice that indemnity costs be awarded.

28 The concerns notice was addressed to both the defendant and her husband and alleged authorship of the letter which was not established. These matters significantly undermine the efficacy of the offer. Further, the invitation to make amends in the context of a wider acrimonious family dispute was a little naïve and perhaps tactical. No monetary sum was referred to and in relation to damages, the plaintiffs expressly reserved their rights. The defendant's response, again in the context of the wider family dispute, was in many ways predictable and was not in the circumstances and at the relevant time entirely or sufficiently unreasonable. At the time of the concerns notice, proceedings had been issued in the Federal Court and recently transferred to the Supreme Court.

29 In relation to the Offer of Compromise, the defendant succeeded in obtaining a result more favourable than the offer. This is not an irrelevant consideration. The defendant was in any event entitled to persist with her denial of publication.

30 In both Davis and Manefield, the court held that the respective defendants must have known that damages would be awarded and in the circumstances their respective approaches (which failed to take various matters into account) were unreasonable. The defendant, it was submitted, knew of the details of the case to be put by the plaintiffs, including that Father Korlos would give evidence. The plaintiffs submitted that she must have known that should Father Korlos be believed, there was a substantial risk that the plaintiffs' claims would succeed.

31 However, in the context of her denial - there being a conflict on the evidence - and the wider family dispute, the defendant's approach in my opinion, was not sufficiently unreasonable so as to attract indemnity costs. In my view, although the matter is not free from difficulty, her election based on her assessment of the risks was not unreasonable. The defendant's approach in context may be contrasted with a stubborn and unrealistic approach taken by large corporate defendants who fail to take all the relevant exigencies into account.

32 Further, the Offer of Compromise was made under the Supreme Court Rules one month before the trial. Unlike the concerns notice, it was sent under cover of a simple letter with no Calderbank type arguments as to why the defendant would probably lose. This is not meant as a criticism. However, as pointed out, the defendant beat the offer and on the traditional approach to Offers of Compromise, this is sufficient to defeat a claim for indemnity costs. So far as it is suggested on authority that the traditional approach is of less relevance in defamation cases, I regard the proximity to the trial and absence of asserted compelling reasons as to why the Offer of Compromise should be accepted (given the deficiencies in the concerns notice) as militating against an award of indemnity costs.

33 Finally, in any event and for the reasons given, I do not consider that in the circumstances of this case, it is in the interests of justice that the defendant pay indemnity costs. This case was part of a wider acrimonious family dispute, publication was very limited and each side no doubt had their own agenda.

34 Although the amount of each award falls within the jurisdiction of the Magistrates' Court, rule 63.24(1.1) of the Supreme Court Rules provides that if an award is less than $50,000 (excluding costs) costs should (unless the Court otherwise orders) be awarded on the appropriate County Court scale.[6] The rule provides further that the defendant is entitled to his or her costs to the extent that they exceed the relevant County Court scale, but that the plaintiff is not required to pay the defendant any costs that may exceed the plaintiff's costs.

35 The plaintiffs submit that despite rule 63.24(1.1), I should order costs on the Supreme Court scale. They submit that the case was "sufficiently complex" to warrant it being heard in the Supreme Court, and that defamation proceedings in particular are more suitably dealt with by the Supreme Court. They also point to the efficiency and smooth manner in which the case was conducted due in part to the retention by the plaintiffs of experienced Senior Counsel. Otherwise, they contend, the matter could easily have "gone off the rails" with potentially drastic consequences. Finally, they point to the fact that the defendant did not seek to transfer the matter to the County Court.

36 The defendant submits that I should award costs on the appropriate Magistrates' Court scale. This flows, it was submitted, from the combined effect of rule 63.24(1.1) of the Supreme Court Rules and rule 63A.24(1) of the County Court Civil Procedure Rules 2008. It was submitted further that there were no special circumstances suggesting otherwise. The case was simple and publication, in the context of a family dispute, was very limited.

37 I do not consider that the case was "sufficiently complex". In fact, subject to the matters referred to below, it was a relatively simple case, both on the facts and the applicable law.

38 The only factual issue was publication. The letters were defamatory and damage was presumed. In relation to publication, the fact that the version of the defendant differed materially from the evidence of Father Korlos, whose evidence I preferred, did not mean that the factual issue was complex. Rather, it was the usual "he-says, she-says" dispute resolved by reference to the evidence.

39 The legal issues were, so far as defamation cases are concerned, relatively straightforward. The issues were of very limited compass as acknowledged by Senior Counsel for the plaintiffs.

40 In short and subject to the matters referred to below, there was nothing in the case that would suggest that it could only be dealt with, or should only be dealt with, in the Supreme Court. Neither the facts nor the law were of such complexity that required the matter be heard by this Court. The fact that the case was efficiently dealt with and did not go "off the rails", in part because of the plaintiffs' legal representation, is a point in the plaintiffs favour. However, this does not necessarily mean that the Supreme Court was the only or most appropriate forum.

41 Although defamation cases are, to some extent, different in the sense that they often involve complex pleading and legal issues that may be more appropriate for the Supreme Court, this case as pointed out was relatively simple.

42 The fact that no application was made to transfer the matter to the County Court is not to the point and does not, in my opinion, affect the analysis.

43 Finally, the plaintiffs submit that the nature of defamation proceedings, involving as they do the vindication of the plaintiffs' reputation and character, justifies the commencement of proceedings in the Supreme Court. The authorities relied on are of particular relevance in relation to jury trials where awards are far more uncertain. These cases are of less relevance in relation to this case. It could not, in my opinion, have been reasonably expected that damages would exceed $50,000, whether individually or collectively.

44 The plaintiffs relied on Glare v John Fairfax Publications Pty Ltd.[7] In Glare, Ashley J ordered that the defendant pay the plaintiff's costs on the Supreme Court scale despite an award within the jurisdictional limit of the Magistrates' Court. However the particular factors that influenced his Honour - publication in a mass medium; substantial readership; the gravity of the defamation; sufficient complexity - are not present to the same extent in this case. However, there are other matters of relevance as referred to below.

45 In oral submissions, Mr Wilson QC submitted that there was a more compelling reason why the Supreme Court was the appropriate forum. At the time of commencement of this proceeding, other proceedings in relation to the family dispute had been issued in this Court or transferred to this Court from the Federal Court of Australia. It was submitted that it was desirable that all matters be heard and determined in this Court and perhaps be heard together depending of course on the issues disclosed by the pleadings.

46 There is much force in this submission. In the peculiar circumstances of this case, I regard the Supreme Court as a not inappropriate forum for the determination of all disputes between the family members. The more relevant question however, is whether costs should be awarded on the Supreme Court scale.

47 I consider further that in the circumstances, costs should be awarded on the Supreme Court scale and that in relation to rule 63.24(1.1), I should otherwise order.

48 Again, the matter is finely balanced and not without difficulty. However, it must be acknowledged that there were some serious pleading and evidentiary issues not inappropriately dealt with in this Court. Further, it was necessary to keep control of the proceeding given the obvious animosity present in Court. My observation of the parties and their advisors during the course of the trial compel a conclusion that the plaintiffs should not be deprived of their costs on the scale applicable to the very Court where the matter was appropriately heard and determined. Further, in my opinion, it was desirable for the plaintiffs to retain the same Senior Counsel for all of the matters. In the circumstances, I consider that it was appropriate that Senior Counsel retained generally in the wider family dispute have the carriage of this proceeding.

49 The categories of cases where a superior court will not deprive a successful plaintiff of costs on the scale that would normally apply despite an award being within (or even well within) the jurisdictional limit of lower courts are not closed. Some of the authorities are referred to by Hedigen J in Lesiak v Foggenberger.[8] One of the matters referred to by Hedigan J was the need "to supervise the conduct of the parties in the litigation".[9]

50 Accordingly, I propose to make the following orders:

(a) Judgment for the first plaintiff in the sum of $5,000 plus interest in the sum of $ 844.66.

(b) Judgment for the second plaintiff in the sum of $10,000 plus interest in the sum of $1689.31.

(c) The defendant pay the plaintiffs' costs, such costs to be taxed on the Supreme Court scale as between party and party in the absence of agreement.

(d) Rule 63.24(1.1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) is not to apply in relation to the taxation of costs.

[1] Amanatidis & Anor v Darmos [2011] VSC 163.

[2] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Os [1988] FCA 202; (1988) 81 ALR 397, Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 231-234.

[3] In the Proposed Statement of Claim, both the present defendant and her husband were named as defendants. The present defendant was named as the second defendant. She subsequently became the only defendant at the time of trial. The plaintiffs withdrew their case against the husband.

[4] [2008] NSWSC 946 ("Davis").

[5] [2011] NSWSC 104 ("Manefield").

[6] Rule 63.24(1.1) is in the following form: "Where in a proceeding for libel or slander the plaintiff recovers by judgment or otherwise an amount (exclusive of costs) not exceeding $50 000, the plaintiff shall, unless the Court otherwise orders, be entitled only to the costs to which the plaintiff would have been entitled if the plaintiff had brought the proceeding in the County Court less an amount equal to the additional costs properly incurred by the defendant by reason of the proceeding having been brought in the Supreme Court instead of the County Court, but shall not be required to pay the defendant any amount by which the additional costs exceed the costs payable to the plaintiff".

[7] [2000] VSC 493 ("Glare").

[8] Unreported, Supreme Court of Victoria, Hedigan J, 4 September 1995.

[9] Unreported, Supreme Court of Victoria, Hedigan J, 4 September 1995 at page 9.

Court (General Civil Procedure) Rules 2005