Hatfield v TCN Channel Nine Pty Ltd

1. Recovery of Costs By Collateral Means 21The defendants were able to marshall a good deal of authority broadly supportive of the point they seek to make, even if the facts on which the decisions are based are not directly analogous or precisely comparable with those of the present case (which is, so far as I can see, to date, unique). 22In Anderson v Bowles [1951] HCA 61; 84 CLR 310 a landlord of premises to which specific legislation (National Security (Landlord and Tenant) Regulation and the Landlord and Tenant Act 1948 to1949 (Q)) applied, sought and was granted an order for recovery of the premises. Complications in enforcement arose because it was found that part of the premises had been, without authorisation, let to a sub-tenant, who then obtained an interim injunction restraining the landlord from entering into possession. An application by the sub-tenant for rescission of the possession order was subsequently refused. 23The landlord incurred expenses in recovering possession of the premises, including defending the application made by the sub-tenant, and sued the tenant for loss of mesne profits and rental. The tenant was held liable in damages for his failure to deliver up the whole of the premises. 24The landlord also claimed, apparently as a separate head of damages (as against the tenant), the costs of the proceedings involving the sub-tenant. The difficulty she encountered was a regulation that provided that no costs would be allowed in proceedings under the relevant Part of the legislation. The landlord accepted that, by reason of those provisions, she could not recover the costs of the proceedings against the sub-tenant from the sub-tenant, and therefore sought to recover them as damages from the tenant. The landlord failed. I set out the relevant passage of the joint judgment of Dixon, Williams, Fullagar and Kitto JJ: " Regulation 75, corresponding with s. 62 of the Act, provides, however, that no costs shall be allowed in any proceedings in relation to which the Part applies not being proceedings in respect of an offence. This is a legislative declaration that the parties to proceedings for the recovery of possession or proceedings arising thereout shall not be liable to one another for the costs of those proceedings. In the face of this legislative declaration can costs be properly included in the damages or mesne profits? It is a general rule that where it is sought to include costs incurred in other proceedings in the damages arising upon a cause of action, costs shall not be included, if as a matter of judicial determination or by a positive rule of law they are treated as costs which should be borne by the party suing. Accordingly it is not possible to recover as part of such damages the difference between party and party costs awarded to the plaintiff in the original litigation and the costs as between solicitor and client which he has incurred: Barnett v. Eccles Corporation [(1900) 2 QB 423 at p 428]. Further, if costs are expressly withheld by the court in the original proceeding none can be recovered in the action for damages brought by the plaintiff from whom they were so withheld: Loton v Devereux [(1832) 3 B & Ad 343 [110 ER 129] where Lord Tenterden CJ said: 'In such a case the Court have jurisdiction to say definitely whether there shall or shall not be costs'. In Malden v Fyson [(1847) 11 QB 292 at p 301 [116 ER 486, at p 489]] Lord Denman CJ said: 'And this principle was admitted, in general, to apply; so that, if any costs were awarded, nothing beyond the sum taxed according to the rules of the Court could be recovered as damages; or, if costs were expressly withheld by an adjudication in the particular case, none would be recoverable by suit in any other Courts.' See, further, Pritchet v Boevey [(1833) 1 C. & M 775 [149 ER 616]]. The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and thus were made recoverable by a side wind. The case ... is one where the legislature having considered whether in such proceedings costs should or should not be awarded, has expressed its conclusion in a definite provision. This should stand on the same footing as a judicial pronouncement upon the same question and as the rule that the difference between party and party costs judicially awarded and costs as between solicitor and client are not recoverable" (italics added) (pp 323 - 324). 25In Queanbeyan Leagues Club Ltd v Poldune Pty Ltd & Ors [2000] NSWSC 1100, under the heading "Costs as Damages", Hamilton J laid down a series of propositions, the fifth of which was (at [45]): "If the plaintiff was a successful party in the earlier proceedings, then in the later proceedings it is precluded from recovering more than it recovered as costs in those proceedings: Avenhouse v Hornsby SC [(1998) 44 NSWLR 1], unless there was no provision for recovery of costs in those proceedings (though it remains precluded if there is a statutory prohibition against the recovery of those costs: Anderson v Bowles [supra]). The costs may also be able to be recovered in the later proceedings where a party ordered to pay the earlier costs has proved unable to do so: Britannia Hygienic Laundry Co v Thornycroft (John I) & Co [(1925) 94 LJKB 858]" 26That was a judgment on, inter alia , the separate determination of questions of costs in proceedings, specifically "questions relating to costs orders" ([8]). The substantive proceedings involved a complexity of claims and cross-claims among a multiplicity of parties. Hamilton J delivered a series of judgments in the substantive proceedings, although, it appears, only on issues of liability. He was asked to determine questions of costs including claims for indemnity costs, in relation to various parties. Relevantly for present purposes, he was also asked to determine, as a matter of law (see [8]) whether various parties who succeeded in obtaining costs orders against various other parties, could also recover by way of damages, the difference between the costs recoverable (that is, assessable) pursuant to those orders and their actual costs (what used to be called solicitor and client costs). 27It was in this context that he stated the five propositions he had derived from the authorities. 28Given the very different facts and issues involved in Poldune , I do not consider the decision a useful guide to the question I have to decide. 29The next decision upon which reliance was placed is Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1, to which Hamilton J made reference. The proceedings the subject of that appeal were a claim in this Court against a Council for damages for alleged breach of duty of care in the processing of an application for a sub-division. The plaintiffs were Mr and Mrs Avenhouse, who had previously brought different proceedings in the Land and Environment Court of NSW, in respect of (it appears) the same sub-division, but not (it appears) raising the same or even similar issues (see p15 F-G). The Land and Environment Court proceedings were settled with the parties filing consent orders. The third of these orders was "no order as to costs". 30In the damages proceedings, the subject of the judgment, Mr and Mrs Avenhouse claimed, by way of damages, the costs of the Land and Environment proceedings. The judge at first instance refused to award damages under that head. On appeal, Sheller J (with whom Mason P and Priestley JA agreed), upheld that ruling. His Honour said: "Had Mr and Mrs Avenhouse obtained an order for costs in the Land and Environment Court, principle would suggest that they could not recover in the present proceedings the difference between the costs assessed and the actual costs or expenses they incurred. Principle would also suggest that if the Land and Environment Court had ordered them to pay the Council's costs, they should not be able to recover their costs as damages in the present proceedings. That would make a mockery of the Land and Environment Court costs order. I see no reason why in the Land and Environment Court it was not open to them to argue in any contest about costs, that the proceedings were necessitated as a result of the Council's conduct ... [o]rdinarily, costs would have followed the event if Mr and Mrs Avenhouse had succeeded, but such material may have been relevant in support of a claim for costs on an indemnity basis. ... If the court determined that there should be no order as to costs, the same result would follow ... Mr and Mrs Avenhouse having agreed that there should be no order for costs, they cannot, in my opinion, now seek to go behind that agreement by claiming the costs as damages in the present proceedings." (pp 36 - 37) 31In Russell v The Trustees of the Roman Catholic Church For The Archdiocese of Sydney [2008] NSWCA 217, the plaintiff's employment by the defendant was terminated in circumstances that do not here need to be explored. He took proceedings for unfair dismissal in the Industrial Relations Commission ("the IRC"). He succeeded, and obtained an order for reinstatement, together with payment of outstanding wages, without loss of benefits. Because of the particular statutory provisions applicable to that jurisdiction, he was unable to recover the costs of those proceedings. 32The plaintiff then claimed in this Court damages for breach of contract. He identified various heads under which he claimed damages. One of these was the costs of the successful proceedings in the IRC. The trial judge upheld the plaintiff's claim of breach of contract, but rejected each head of damage, including that for the costs of the IRC proceedings. That decision was upheld on appeal. 33As in the present case, the plaintiff sought to justify the claim for costs of the IRC proceedings as costs incurred in mitigation of the damage resulting from the defendant's wrongdoing. Basten JA, with whom Giles and Campbell JJA agreed, said: "45. In accordance with established principle, the damages to which the appellant was entitled on establishing a wrongful dismissal were assessed by reference to the period of notice to which he was entitled under his employment contract, less the payment received on termination in lieu of notice. The appellant's salary for his part-time appointment was $25,000 per annum gross. Given the payment received, any entitlement to damages under the general law, absent the order of the Commission, would have been a fraction of that figure. To claim, as the costs of mitigating his loss, an amount many times that figure would appear to require an unusual meaning for the term 'mitigation'. That is not to deny that, in an appropriate case, a party may recover loss constituted by reasonable attempts to mitigate his damage, even though the loss thus incurred exceeded what might otherwise have flowed from the breach of contract: see Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 356. Rather, it raises a question as to whether the conduct is to be understood as a reasonable attempt at mitigation or as a separate step, which would not have been taken but for the breach of contract, but which was not limited to mitigation of the loss thus incurred. ...
2. There is, however, a different basis upon which the claim was properly rejected. To permit a party to recover by way of damages an expense which the law requires that he or she bear personally, absent some contractual entitlement to the contrary, would be inappropriate. Thus, in Anderson v Bowles ... the High Court considered whether a landlord suing to recover damages for the failure to deliver up the demised premises at the termination of the tenancy could claim the cost of ejectment proceedings brought to recover possession from the lessee. The relevant statutory provision precluded the Court in the ejectment proceedings awarding costs." 34His Honour then quoted from the joint judgment in Anderson v Bowles which I have extracted above, at [24], including that passage that I have italicised. 35The defendants also relied upon the judgment of the Court of Appeal in Coshott v Woollahra Municipal Council [2008] NSWCA 176. The judgment is singularly unforthcoming about the circumstances in which the claim was made. It seems that Mr Coshott made a number of claims, one of which was for restitution of monies he had paid to the defendants pursuant to a costs order made by the Federal Court of Australia following an unsuccessful application he there made. Handley AJA said: "15. ... The declaration sought by Mr Coshott, if made, would establish his right to recover the taxed costs he was ordered by the Federal Court to pay to the Council as part of its final orders ... at the trial and on appeal. On 16 February 2001 the Federal Court ... made final orders in the garnishment proceedings for payment out to the Council of the moneys paid into Court by the garnishee. These moneys were received in payment or satisfaction of the earlier orders as to costs. The declaration sought would directly contradict these final orders by recognising a right in Mr Coshott to recover those costs he was ordered to pay and has been compelled to pay in the garnishment proceedings. ...
3. The entitlement of the Council to those costs under the orders and certificates of the Federal Court is res judicata, and it is not competent for this, or any other Court, to entertain a challenge to those orders in collateral proceedings. The principle prevents any inquiry into the legal or factual correctness of those final orders. ..." 36While these authorities ( Coshott aside) all contain statements of principle that support the general approach urged on behalf of the defendants, not one is direct authority for the proposition for which they contend. Only in Russell was the claim made on the basis that the costs sought to be recovered were recoverable under the requirement that a plaintiff take reasonable steps to mitigate the damage said to have been caused by the misfeasance of the defendant. There, two reasons were given for refusing the costs claimed - first, the discrepancy between the costs incurred and the quantum of potential damage sought to be mitigated (impacting on the assessment of reasonableness), and the "inappropriateness" of allowing the party to recover as damages costs incurred in litigation the recovery of which the legislature had expressly proscribed. Notably absent from the reasons was a general proposition that costs incurred in an unsuccessful attempt to mitigate damage are, as a matter of principle, invariably unrecoverable. 37The cases to which I have referred do not establish the proposition for which the defendants contend. However, they do display a marked reluctance to permit recovery of costs in one forum, when, for whatever reason, they have not been recoverable in the forum in which they were incurred. 38The principle is not, however, universally accepted. Two decisions (both of single judges) point to the contrary. 39Lloyds & Scottish Finance Ltd v Modern Cars & Caravan (Kingston) Ltd [1966] 1 QB 764 involved competing claims to ownership of a caravan which was the subject of a writ of fieri facias executed on behalf of the sheriff pursuant to a judgment. It is unnecessary to detail the complicated history. The defendant had purported to buy the caravan from its former owner, at a time after the sheriff had laid claim to it. The defendant then purported to sell it to the plaintiff. The sheriff took possession of the caravan; the defendant urged the plaintiff to claim title, which the plaintiff did. In doing so the plaintiff incurred costs of contesting an interpleader filed by the sheriff. On obtaining legal advice, the plaintiff abandoned the claim and brought proceedings against the defendant. Included in the claim for damages were the costs of claiming ownership in the interpleader proceedings. Edmund Davies J said (at [782] - [783]): "It has been urged on behalf of the defendants that it was entirely the plaintiffs' concern whether or not to present a claim and that, having made one and then withdrawn it, the expense to which they were put as a consequence cannot be said to have flowed directly and naturally from any breach by the defendants. I have said that I do not find this matter entirely easy of decision, but it is well-established that a plaintiff may recover expenses incurred in an effort to mitigate the damage resulting from a defendant's wrongdoing. As a corollary to this, I see no reason in principle why there should not also be (to quote from Mayne & McGregor on Damages, 12 th ed. (1961), para 161) ' ... recovery for losses and expenses reasonably incurred in mitigation even although the resulting damage is in the event greater than it would have been had the mitigating steps not been taken.' Where, as here, those steps are taken at the instigation of the defendants, I do not think it is open to them to assert that such steps were not reasonable." 40He therefore allowed the claim. I have not overlooked the significance, in this decision, of the fact that the plaintiff's action in laying claim to the caravan was provoked and encouraged by the defendant. The principles were not otherwise discussed. 41Finally, in Hanrahan v Ainsworth (1985) 1 NSWLR 370, Hunt J dealt with an application to strike out a claim for damages for abuse of process arising out of defamation proceedings, allegedly instituted for an ulterior and improper purpose. The defamation proceedings had never come to trial. Accordingly, no order or agreement as to costs had been made or reached. Hunt J declined to strike out the claim. 42None of the authorities cited is direct authority for a conclusion that a plaintiff may not recover the costs of unsuccessful proceedings. The most compelling is the passage in Anderson , but even there, the principle was stated as a "general", not an "absolute", one. The cases there cited in support are factually far removed from the present case. So far as I can see, the claim made by the plaintiff is entirely novel. That does not necessarily mean that it is misconceived. One reason that it is novel might be that the provisions for preliminary discovery (UCPR 5.3) are of relatively origin. Their predecessors, under the Supreme Court Rules 1970 ("SCR"), were directed to establishing the identity of a party who might be sued (see SCR Part 3).

2. Mitigation Costs Incurred Before Commission of the Tort 43The second strand of the defendants' argument raises the principles relevant to mitigation of damage. It is well established that a plaintiff who has suffered a legal wrong (for present purposes I will confine myself to tortious wrongdoing) is under a duty to take such steps as are reasonable to mitigate the damage occasioned. The rule was stated in British Westinghouse Electric and Manufacturing Company, Limited v Underground Electric Railways Company of London Limited [1912] AC 673, and extracted in the 18 th edition of McGregor on Damages at 7-014 as follows: "The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a claimant the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps." 44It is equally well established that a plaintiff who takes such (reasonable) steps is entitled to be compensated for the costs so incurred: McGregor , 7-005. It is further established that, even if those steps are unsuccessful, and even if they in fact aggravate the injury, the plaintiff may be compensated if they were a reasonable attempt at mitigation: McGregor , 7-093. 45The defendants' argument is that a plaintiff cannot - ever - recover by way of damages expenses occurred in anticipatory mitigation of damage. As a matter of ordinary language, and understanding of the function of an award of damages, this proposition has an attractive logic. Put simply: damages are awarded by way of compensation for the harm caused by the commission of a tort. Damage is the essence of an action in tort. Axiomatically, such damage cannot occur until the tort has been committed. Accordingly, the costs of steps taken by a plaintiff prior to the commission of the tort are not recoverable in the award of damages. 46There is, in British Westinghouse , at p 690, a passage which could be taken to support the defendants' global proposition. Viscount Haldane LC said: "The subsequent transaction [i.e. the steps taken in mitigation], if to be taken into account, must be one arising out of the consequences of the breach and in the ordinary course of business." 47That sentence, however, must be read in its proper context. It was said in the context of distinguishing the facts in British Westinghouse from cases in which it had been held that, in an action for damages for personal injury caused by negligence, a sum received by the plaintiff on a policy of accident insurance could not be taken into account (in favour of the defendant) in reduction of damages - the circumstances considered in McGregor at 7-147, and discussed below at [50] - [51]. 48It is quite clear, of course, that a plaintiff can recover in respect of damage that actually occurs; and that a plaintiff cannot be compensated for damage that might have been, but was not, suffered. It does not matter why the damage was avoided. It is also clear that, if some part of the damage that might have been suffered was avoided because the plaintiff took reasonable steps to achieve that result, then any costs associated with those steps are recoverable from the defendant. 49It is, therefore, somewhat anomalous that, if the steps taken by the plaintiff are so effective that they eliminate all damage, then the cost of taking those steps will not be recoverable. That may occur because, despite the commission of the tortious conduct, no damage results; or it may occur because the steps taken by the putative plaintiff were such as to prevent the commission of the tort. That is what the plaintiff here sought, unsuccessfully, to do. 50In McGregor , two instances of action that can be taken by a plaintiff before breach are recognised. The learned author says, however, that there is no clear test for whether any benefit arising from such action is or is not to be taken into account (at 7-147). (It is clear that the benefit the author has in mind is benefit to the defendant, by reduction in the damages to be awarded.) 51The first instance given concerns insurance taken out before injury against the eventuality of injury. The second, relevant to breaches of contract, concerns sub-contracts made before breach and fulfilled after breach. Neither is presently apposite. 52Only one authority was produced to support the proposition that precautions taken by a plaintiff in anticipation of the commission of a tort, but before its commission, are not compensable. That was Australian Broadcasting Corporation v Comalco Ltd (1986) 12 FCR 510. That also was a defamation case, arising out of the broadcast of a current affairs programme. The trial judge found in favour of the plaintiff, and included in the award of damages a component of special damage, being the costs incurred by the plaintiff in making two films to counteract the damaging effects of the broadcast. One had been substantially completed before the broadcast the subject of the proceedings. Neaves J found that the cost of that film was not allowable as special damage as the expenditure had not been shown to have been incurred as a result of the publication of the programme by the defendant. Its origin was earlier than that publication. 53Pincus J also disallowed the claim. His Honour referred to the (then current) 14 th edition of McGregor on Damages and said: "...the same author denies the existence of a duty to mitigate before commission of a breach of contract, and there can surely be no duty to do so, in anticipation of a tort. May there, absent a duty, be a right of recovery in respect of anticipatory steps if in fact the tort eventuates? As a matter of principle, one would think not; the very notion that the plaintiff is compensated for losses consequent upon the tort is consistent with a right to expenses incurred beforehand. It would also be out of harmony with the general rule that a plaintiff who takes steps in mitigation before breach cannot, if the steps be successful, be penalised in damages for his successful caution ..." (p 603, italics in original) 54His Honour then referred expressly to a passage in the 14 th edition of McGregor at p 177. This was the predecessor to that passage mentioned above at [43] in the 18 th edition. The "general rule that a plaintiff who takes steps in mitigation before breach cannot, if the steps be successful, be penalised in damages for his successful caution" is a reference to the principle re-stated in the 18 th edition, that an award of damages is not reduced by reason of payment to the plaintiff made under an insurance policy taken out against the eventuality of injury of the kind in fact subsequently suffered. 55The principle is one about the availability to a tortfeasor (or contract breaker) of the rewards of a prudent plaintiff's caution. It does not, in my respectful opinion, bear upon the question whether, if the damage actually suffered is in fact mitigated by reason of the plaintiff's successful attempts to mitigate, the plaintiff is entitled to a component in the calculation of damages in reference to the costs of achieving that reduction. 56As I have mentioned above, anomalies might arise where, for example, a plaintiff's precautionary steps are so successful as entirely to alleviate the consequences of the tortfeasor's wrong (or where the steps taken prevent the commission of the tort altogether). Examples that come to mind are those of a known arsonist, who the plaintiff fears will set fire to his/ her (the plaintiff's) home. If, in apprehension of the arson, the plaintiff takes precautionary measures to reduce damage, and if, nevertheless, the arsonist does set fire to the home, ought the plaintiff be entitled to recover the costs of the precautions? Plainly, if the precautions are wholly successful, and no tort is committed, or no damage suffered, the costs will be irrecoverable, because there is no tortfeasor from whom to recover, and no cause of action in which to recover. If, however, the precautions are partially successful, and the damage occasioned is reduced, it does not seem unreasonable - or at least unarguable - that the plaintiff might recover the costs thereof. 57Other examples can be produced. It is not novel to suggest that a plaintiff, anticipating injury or damage, might be expected to take reasonable steps to avoid the damage occurring. A good example may be found in the area of personal injury. A pedestrian, lawfully on a road, but aware of a motor vehicle bearing down on him, would surely be expected to get out of its way. If (assuming his awareness, and assuming his agility and a sufficient time frame) he stood his ground of being lawfully on the road, he may well find his damages reduced by reason of his failure to take steps to avoid being hit. That may not ordinarily be couched in terms of taking steps in mitigation of damage - it would, more likely, be expressed in terms of causation and/or contributory negligence. Nevertheless, the principle is apposite. In anticipation of the tort, the pedestrian is expected to take steps to alleviate the possible consequences of the tort. 58Here, it could not be suggested that the plaintiff's duty to mitigate damage extended to the somewhat heroic measures she in fact took, or sought to take, and any damages to which she is entitled could not be reduced by a failure to take such steps; but that is a different question to whether those steps that she did take were or were not reasonable and compensable. 59In the circumstances of the present case, it is only necessary to say that, in my view, the claim is not so untenable as to warrant being struck out. The plaintiff ought be permitted to argue her case, on the evidence as it emerges. 60This is not to suggest that the plaintiff has anything other than an uphill battle to establish her claim. She will need to establish that the action she took was reasonable. In my opinion, that probably (I express no concluded view) means that she will need to show that the costs expended were reasonably proportionate to the damage suffered, or at least anticipated, and that they bore some prospect of achieving the desired result - reducing the damage suffered. She will have to face the fact that the application for preliminary discovery was only a first step on the way to a possible application for injunctive relief, and the well-known difficulties attendant upon such applications in cases of alleged defamation. 61All this is relevant to the assessment of the reasonableness of the steps taken in anticipatory mitigation. Also relevant, however, is the possibility that, had she been successful in the application for preliminary discovery, another course (other than application for injunction) might have been available - in her presenting to the defendants material to demonstrate any inaccuracies or imbalance in the proposed programme, such as to open the way to negotiations for correction or editing. In this respect, the defendants' refusal to provide her with an advance copy of what they intended to broadcast might be relevant. 62In the end, much may depend upon the fate of the defendants' defence of justification. Should that fail, the plaintiff's attempts, in advance of publication, to mitigate the damage she anticipated, may well be seen to have been reasonable and therefore compensable. 63The Notice of Motion is dismissed with costs.

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: 21 July 2011