Holt v TCN Channel Nine Pty Ltd

Relevant principles 13The starting point is s 98 of the Civil Procedure Act 2005 which confers a general discretion on the Court to award costs. UCPR Part 42 provides relevantly that costs should follow the event unless it appears to the Court that another order should be made as to all or part of the costs. 14The identification of the "event" is to be determined as a practical matter. Where issues on which parties succeeded or failed can be differentiated it may be appropriate to make a proportional order to reflect the differential success or failure. 15The 2005 Act, by s 40, makes specific provision for awards of costs in defamation proceedings. It 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." 16The plaintiff submitted that s 40 ought take precedence over other provisions, including UCPR 42.15A and s 98, because of its specific application to defamation proceedings. I accept this submission and respectfully adopt the statement of Simpson J to that effect in Haddon v Forsyth (No 2) [2011] NSWSC 693 at [4]. However, where there is no inconsistency with s 40 of the 2005 Act, I am still bound by s 56 and s 60 of the Civil Procedure Act 2005. Furthermore, as Allsop P said in Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [38]: "What is vital to appreciate is that the regard to both ss 56 and 57 is statutorily compulsory: s 58(2)(a). They are considerations that are relevant in the sense discussed in Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24. That is, they are relevant in the sense that the statute requires them to be taken into account." 17The plaintiff submitted that s 40 amounted to a recognition by Parliament that defamation actions were in a special category in that the costs of the proceedings were commonly, if not invariably, disproportionate to the award of damages. He submitted that the gap between solicitor/ client or indemnity costs on the one hand and party/ party costs on the other would be unlikely to be bridged by the amount of the damages in such a case. He submitted that, because of this factor, a successful plaintiff would be likely to be out-of-pocket in many, if not most, defamation cases unless an award for indemnity costs was made. This economic reality would tend to have the effect that the tort of defamation became a dead letter unless provisions such as s 40 were given their full effect. 18The legislative history of s 40 is relevant to my consideration of this submission. 19Section 40 of the 2005 Act broadly corresponds with s 48A of the Defamation Act 1974 (the 1974 Act), which was introduced into the 1974 Act by the Defamation Amendment Act 2002 (the 2002 Amendment Act) and provided: "48A Costs in proceedings for defamation (1) In awarding costs in respect of proceedings for defamation, the court may have regard to the following matters: (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), (b) whether the costs in the proceedings may exceed the quantum of damages to be awarded in the proceedings, (c) such other matters as the court considers relevant. (2) Without limiting subsection (1), a court must (unless the interests of justice require otherwise): (a) if proceedings for defamation 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 proceedings for defamation 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 genuine 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)." 20The Second Reading Speech to the Bill which became the 2002 Amendment Act makes reference to the statutory purpose of s 48A in the following terms: "This bill amends the Defamation Act 1974 to give effect to the principal recommendations of the report of the Attorney General's task force on defamation law reform, released in July of this year... As a further incentive to settle defamation proceedings before they reach the courts, the bill provides that costs penalties will apply to an unreasonable failure to resolve a matter. The normal costs rule is that the successful party recovers costs on a party-party basis. Typically, this amounts to about 60 per cent to 80 per cent of their actual legal costs. Both the Supreme Court and the District Court have a general discretion as to the amount of costs to be paid by parties, including the award of indemnity costs. Indemnity costs are usually awarded where there has been a flagrant breach of procedural rules by the unsuccessful party and can amount to 80 per cent to 90 per cent of actual costs. In practice, indemnity costs are seldom awarded. The bill adds section 48A to the Defamation Act which requires the court to consider an order for costs on an indemnity basis where it forms the view that there has been an unreasonable failure on the part of either the plaintiff or the defendant to resolve the matter For example, a plaintiff would be at risk of an indemnity costs order if he or she were not to accept an offer of correction or apology where the offer was reasonable. A defendant would be at risk of an indemnity costs order were it not to make a settlement offer when it would have been appropriate to do so. There is understandable concern about wealthy parties, whether plaintiffs or defendants, using their deep pockets to wear down opponents of modest means to discourage them from continuing, or indeed even commencing, defamation proceedings for fear of a ruinous costs order. It is not unheard of, for example, for property developers to commence proceedings known as SLAPPs - strategic lawsuits against public participation - against individuals or community groups to silence their opposition to a proposed development. There is also anecdotal evidence of some wealthy individuals pursuing every procedural avenue open to them despite the prospects of success being slim and despite their legal fees far outweighing any potential damages award. The object in such cases is to intimidate the defendant into settling the matter at the risk, however slight, of losing the case and being subject to a large costs order. Such tactics can have the serious consequence of either constraining free speech or allowing a reputation to be irreparably damaged. While the addition of section 48A(2) into the Act will provide greater discretion to a judge than currently exists in awarding costs in instances where parties have been recalcitrant, section 48A(1) makes it abundantly clear that in awarding costs the court may take account of the way the parties have conducted their cases. The court will be able to take into account such matters as whether either party has used its significantly more powerful financial position in a way that hinders the effective discharge of justice and the relationship between the quantum of any costs order and the quantum of damages awarded in any particular case..." 21The 2002 report on Defamation Law which is referred to at the beginning of the Second Reading Speech set out above contains the following recommendation (No. 5) under the heading "Resolution of disputes without litigation": "Costs penalties (more onerous than simply costs following the event) should attach to unreasonable failure to resolve the matter (e.g. for a plaintiff, not accepting an offer of correction or apology where the offer is considered to have been reasonable; for a defendant, not making such an offer where it seemed appropriate to do so)." 22This passage, which is the only passage in the report relevant to s 48A, does not assist in illuminating the purpose for the reference in s 48A(1)(b) to the question whether the costs in the proceedings may exceed the damages to be awarded. Although the Second Reading Speech refers to the difference between party/ party and indemnity costs, there is nothing which indicates why s 48A(1)(b) was included and whether it was included by reason of any supposed notorious disparity in defamation cases between costs and damages. 23The differences between the wording of s 48A and the wording of s 40 are that the latter does not contain an express reference to the matter referred to in s 48A(1)(b), namely, whether the costs in the proceedings may exceed the quantum of damages to be awarded in the proceedings and that the definition of settlement offer in s 40 contains the words "that was a reasonable offer at the time it was made" at the end. The reasons for the differences between s 48A of the 1974 Act and s 40 of the 2005 Act do not appear. The plaintiff submitted that the reason why the matter referred to in s 48A(1)(b) was excluded from s 40 was as follows: "This is no doubt because the legislature has recognised that defamation matters fall into a special category for the purposes of costs - as damages awards for claims in defamation are often low compared to other causes of action because a large aspect of vindication is in the court's verdict." 24The plaintiff relied on Davis v Nationwide News Pty Ltd [2008] NSWSC 946 (Davis) in which McClellan CJ at CL reviewed the purpose of s 40 at [24] - [33] and noted, at [26] - [27]: "The special costs provisions were introduced following a concern that the costs of defamation proceedings may prohibit persons who have a legitimate claim from pursuing relief. Unless in appropriate cases costs were awarded on an indemnity basis a plaintiff may be out of pocket to such an extent that the risks in bringing proceedings were unacceptable." 25In my view, the disparity between the amount of the costs and the quantum of the damages is a matter which can be taken into account in the exercise of the Court's discretion if the Court considers it to be relevant, but there is no particular indication that Parliament considers it necessarily to be a relevant matter. Even in s 48A, it was a relevant consideration but not a mandatory relevant consideration. Because there is no specific reference to the disparity in s 40 I am not persuaded by the plaintiff that it is the usual, if not notorious, disparity between costs and damages in defamation cases which underpins the purpose of s 40. Accordingly I am not disposed to apply s 40 with that disparity in mind. In particular I do not discern from s 40 a Parliamentary intention to displace the provisions of s 60 of the Civil Procedure Act which provides: "In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute." 26My task of deciding what costs order is appropriate in the instant case is governed, although as I have said above not exclusively, by s 40. The defendants submitted, in my view correctly, that the Court should not give any weight or consideration to the financial position of the parties or the funding arrangements for the parties' representatives, since they are not relevant to the determination of costs in the instant case. Furthermore, in the case of the second matter, I have no evidence to establish what such arrangements were in any event. 27It is necessary to identify the matters that I consider to be relevant to the exercise of my discretion (s 40(1)(b)), including the matters referred to in s 40(2). Because there was little common ground between the parties about the matters germane to the exercise of my discretion and none as to how it ought be exercised, I proposed to set out the parties' submissions on these matters before expressing the reasons for my conclusions as to the appropriate order.

Considerations relevant to the exercise of the discretion with respect to costs

Whether the plaintiff's own conduct is relevant to the issue of costs, or whether the relevance of conduct is limited to that of his legal advisers in presenting the case 28The plaintiff submitted that it would be wrong as a matter of principle to "punish" the plaintiff by taking into account my findings on his credibility. He submitted that such findings had already had an effect on the quantum of damages and that they were irrelevant to costs. Rather, he submitted that the relevant "conduct" for the purposes of costs was the conduct of the plaintiff's case by his legal representatives, as distinct from the plaintiff's own conduct. 29The defendants submitted that the authorities established that giving of false evidence was germane to the discretion to award costs, which included the discretion to withhold costs from an otherwise successful party by reason of the party's conduct. They relied particularly on Jones v Sutton (No 2) [2005] NSWCA 203 (Jones). 30In Jones, the appellant sued in respect of an alleged defamation by another member of Warringah Council. The trial judge held that the defence under s 13 of the 1974 Act was made out, namely that the appellant was not likely to suffer harm in the circumstances in which the defamatory material was published, and a verdict was entered for the respondent. The appellant successfully appealed to the Court of Appeal, which set aside the verdict for the respondent and substituted an award in his favour of $5,000. The appellant then sought a special costs order on the basis of an offer of compromise of $1,000 and a costs offer of $88,500. The Court of Appeal made a limited costs order in favour of the appellant for the s 7A hearing before the jury (in which the appellant had been successful) but otherwise ordered the parties to pay their own costs. 31In Jones, the relevant provision of the District Court Rules, Pt 39A r 25(4), provided that where an offer of compromise had been made and the plaintiff bettered the offer at trial, the plaintiff was entitled to costs on a solicitor/ client basis "save in an exceptional case and where another order is warranted for the avoidance of substantial injustice". 32The Court of Appeal found that this was an exceptional case. Among the matters referred to as being germane to that decision, the Court referred to the extremely limited publication of the defamatory statements; the fact that the trial judge had disbelieved the appellant's evidence and that of his witnesses at the s 13 hearing; that the proceedings were politically motivated; that the hearing was prolonged; that the costs were massively disproportionate to the damages and the court should not facilitate such practice by making an order that costs simply follow the event; the offer could not be seen as an attempt to resolve the proceedings because of the time at which it was made. 33The importance of Jones to the framing of a costs order in the instant case is that it shows, albeit in a different context, that the credibility of the plaintiff; the length of the hearing in so far as it was prolonged by the plaintiff's failure to make admissions except in the face of powerful evidence; and the gross disproportionality between the costs on the one hand and the damages on the other are relevant considerations.

Whether a differential costs order may be given in circumstances where it is not possible separately to identify or segregate issues on which one party has won or lost 34The plaintiff submitted that my discretion would miscarry were I to make a differential costs order in the instant case. He contended that such an approach was not open where the plaintiff was successful in respect of the imputations and largely successful in respect of the contextual imputations. He submitted that because the tort was publication of the defamatory matter as distinct from publication of particular imputations (as had been the case under the 1974 Act) the plaintiff's cause of action ought not be carved up. He submitted that in the circumstances of the instant case it could not reasonably be contended that the plaintiff lost on certain issues. He relied on the statement of principle set out in the notes to the Supreme Court Rules Pt 52 r 11.2, and extracted in Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; 254 ALR 328 at 330-331, per Mahoney JA, which was approved by the Court of Appeal in Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 (Monie) at [64]: "Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed." 35The plaintiff submitted that it was rare to award costs on a differential basis in defamation cases. He referred to Ahmadi v Fairfax Media Publications Pty Ltd (No 2) [2010] NSWSC 1191 (Ahmadi), as being an exceptional case and distinguishable from the instant case. In Ahmadi, Rothman J ordered the defendant to pay the successful plaintiff one third of his costs in circumstances where the defendant proved six out of eight of the plaintiff's imputations to be true. That order was made in circumstances where the imputations in relation to which the plaintiff succeeded concerned people smuggling and those which the defendants justified concerned allegations that he engaged in persecution, threats to kill and extortion. The plaintiff in the instant case submitted that the factual issues on which the defendant succeeded were therefore clearly separable from those on which the plaintiff succeeded. 36The defendant submitted that it was open to me to make a differential costs order, and indeed that if I were minded to order the defendants to pay the plaintiff's costs at all, I should make such an order. The defendants relied on Tomanovic v Global Mortgage Equity Corporation Pty Limited (No 2) [2011] NSWCA 256; 288 ALR 385 where Campbell JA (Macfarlan and Young JJA agreeing) said, at [84], of the approach of dividing up issues where a party has succeeded or failed by reference to the time taken: "This is a highly artificial way of proceeding and gives a false air of mathematical precision. As has been repeatedly stated, where there is a mixed outcome in proceedings the question of apportionment of costs between issues on which the party who has overall been successful has succeeded, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272; Roads and Traffic Authority v McGregor (No 2) [2005] NSWCA 453 at [19]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22]. Further, even the number of topics that are identified and categorised overstate matters to some extent. Even so, there is substance in the submission that the Tomanovic Interests raised many matters on which they did not succeed." 37I consider that the application of these principles provides a basis for a differential costs order in the instant case. The plaintiff's imputations concerned his treatment of his wife in a physical and emotional way. The contextual imputations, two of which were found to be true, concerned the plaintiff's conduct with respect to the insurance payout made to his wife. The distinction between the so-called extortion imputations and the people smuggling imputations which Rothman J considered to be a basis for a differential costs order in Ahmadi does not seem to be relevantly different from the distinction in the instant case between the plaintiff's imputations (regarding physical and emotional matters) on the one hand and the contextual imputations (regarding financial matters) on the other in the instant case. That the evidence was, to a great extent, overlapping, as one would expect when a marital relationship is examined as it was in the Broadcast and in the proceedings, does not, in my view, have the effect as to preclude the making of a differential costs order.

Whether a proportion costs order may be given to take account of the quantum of damages awarded 38The plaintiff said that as long as the plaintiff was awarded, as in the instant case, more than derisory damages, the quantum did not provide a basis for making a differential costs order. He referred to Monie, where Campbell JA (Mason P and Beazley JA agreeing) said, at [66]: "In the present case, the claim for significant economic loss was an important one, but not a dominant one. Nor do I regard it as a separable issue. Essentially what has happened is that Peter and Jennifer Monie have succeeded in a claim that they suffered economic loss in consequence of the negligence of the Commonwealth, but have not made out as large a quantum of economic loss as they had claimed at the trial. In those circumstances, I see no reason to deprive them of any part of their costs of the trial." 39The plaintiff also relied on the fact that the differential costs order in Ahmadi was not made by reference to the amount of the verdict to support his contention that quantum, once damages were more than derisory, was irrelevant. 40The defendants relied upon Jones which is considered above. In light of Jones, I consider that I am entitled to take into account the quantum of the award of damages in my discretion to order costs, and in particular, to make a differential order for costs in the instant case.

The plaintiff's conduct 41The plaintiff can be said to have succeeded in that he obtained a verdict. The amount of damages, though more than derisory, was not substantial by reason of the weighty evidence in mitigation of damages. 42Although I accept that the plaintiff's intention in bringing these proceedings was to vindicate his reputation, the matters that were established were of such gravity and heinousness that one must ask oneself how he could, if properly advised by lawyers to whom he had given accurate and comprehensive instructions, have considered it to be worthwhile to prosecute the proceedings. The adverse findings in the principal judgment, including that the plaintiff hit his wife when she was dying of cancer, that he made her sleep on the couch while he stayed in the matrimonial bed and that he lacked the insight which would have informed him that her reaction to his drinking was rational and understandable rather than the result of what he termed "chemo-brain" were matters which, when exposed, tended to diminish the plaintiff's reputation rather than vindicate it. 43The instant case is, in many respects, a very different one from Jones. The publication by the defendants was Australia-wide, on prime-time television and to a very substantial audience. The proceedings appear to have been the result of a desire on the part of the plaintiff to vindicate his reputation. However, in the instant case, as in Jones, adverse credit findings were made against the plaintiff and it is reasonable to infer that the costs were massively disproportionate to the damages. Furthermore, although counsel behaved responsibly and efficiently in the conduct of the litigation, much of the evidence relied upon by the defendant was adduced to contradict matters which I found to be the subject of false evidence by the plaintiff. 44In particular, I found the plaintiff's evidence to be false on the following matters: (1)whether he would have restored money to Mrs Holt if she had asked for it ([60]); (2)whether he had assaulted Mrs Holt ([94]) and whether he had confessed that he had done so to her sister on the telephone; (3)whether he had forced Mrs Holt to sleep on the couch ([101] - [102]); (4)whether he was working during 2007-2009 ([120], [147]); (5)whether he had extra-marital relationships during the period of Mrs Holt's terminal cancer ([131], [133] and [135]; and (6)the circumstances of transferring Mrs Holt's lump sum for total and permanent disability into an account in his name ([154]). 45Much of the evidence in the trial was protracted because the plaintiff would only make admissions when he was sure that the defendant had sufficient material to establish that which he was being asked to admit. He was an opportunistic and strategic liar. As I said in the principal judgment, what his counsel sought to characterise as frankness was, in my view, no more than bowing to the inevitable. Notwithstanding the conduct of the plaintiff, in my view, his counsel conducted his case in an efficient and professional way. 46I accept the defendants' submission that the contextual imputations that were found to be true were weighty and at odds with the character the plaintiff claimed for himself.

Whether the defendant unreasonably failed to make a settlement offer or unreasonably failed to accept an offer proposed by the defendant 47The plaintiff referred me to several instances where the Court ordered the defendant to pay the plaintiff's costs on an indemnity basis because of the defendant's unreasonable failure to make a settlement offer, including Davis (cited above), Larach v Uriola [2009] NSWDC 142, Cornes v The Ten Group Pty Ltd and Ors (No 2) [2011] SASC 141 and Ryan v Premachandran (Supreme Court of NSW, Nicholas J, 13 November 2009, unreported) (Ryan). He submitted that the fact that no settlement offer was made was unreasonable and that he should accordingly get the benefit of s 40. 48The plaintiff distinguished Trkulja v Yahoo! Inc LLC & Anor (No 2) [2012] VSC 217 (Trkulja) where Kaye J held that the defendants had not been unreasonable in failing to make a settlement offer where the primary dispute was whether the imputations were carried by the publication, the issues were narrow in scope and the trial could be quickly disposed of. 49The defendants relied on what was said at [28] in Trkulja and submitted that a defendant who has a bona fide defence that has reasonable prospects of success cannot be said to have acted unreasonably either in failing to accept an offer to pay substantial damages or in failing to make an offer. The defendants referred to the following statement of principle in Ryan, at [30] per Nicholas J: "The expectation evidenced by the provision [s 40] is that the recipient of the offer will undertake a reasonable evaluation of it with regard to the particular circumstances of the case. This exercise is likely to oblige the recipient to evaluate his or her prospects of success if the offer is refused and proceedings are commenced or continued. This in turn would involve a level headed objective weighing up of strengths or weaknesses on the material available in order to reach a reasonably based decision whether to accept or reject the proposed offer or to put a counteroffer against the risk of an adverse outcome if the proceedings continue to finality." 50The defendants also relied on Olds v McInnes and Hodgkinson [2011] NSWCA 410 at [105] - [109] in support of the proposition that the plaintiff's offer did not comply with UCPR 20.26(2) and was not expressed to be, and could not be taken as being a Calderbank offer. Whatever may be the merits of this argument, I do not consider that the words "settlement offer" within the meaning of s 40 to be confined to offers made within particular provisions of the rules, or, for that matter, those which are expressed in terms of Calderbank offers. Accordingly, I consider that the plaintiff's offer to settle the proceedings for $95,000 plus costs was an offer to settle the proceedings in s 40. However, because I do not consider it to have been a reasonable offer, I do not consider that it was a "settlement offer" for the purposes of s 40. 51The defendants contended that in every case where the plaintiff has had his or her costs awarded on an indemnity basis under s 40, the plaintiff has been awarded very substantial damages. This, so it was submitted, supported their contention that the quantum of damages is relevant to the discretion.

Conclusion 52In my view, it is appropriate to order the defendant to pay half of the plaintiff's costs of the proceedings on a party/ party basis. 53First, for the reasons given above, I do not accept the plaintiff's submissions that it would be erroneous for me, in circumstances where no sensible division could be made between issues in the case, to make a differential award of costs in the instant case. 54As I have said above, I consider that it is in the interests of justice to require the defendants to pay only half of the plaintiff's costs. This reduced award takes account of the plaintiff's own conduct in the proceedings, including his deliberately false evidence and his disinclination to make admissions absent overwhelming evidence garnered by the defendants. It also takes account of the circumstance that the award of damages was slightly, but not substantially, more than derisory. 55Secondly, I do not consider either that the defendants unreasonably failed to make a settlement offer or unreasonably failed to agree to a settlement offer proposed by the plaintiff within the meaning of s 40. The defendants had reasonable prospects of establishing the truth of all of the imputations alleged to have been carried by the publication and also reasonable prospects of establishing the truth of the contextual imputations pleaded (cf. Hyndes v Nationwide News Pty Limited [2011] NSWSC 1443 at [18] -[21], per Hislop J). The defendants had substantial, credible documentary and oral evidence in mitigation of damage. 56I do not consider it to be incumbent on a defendant publisher in that position to make a settlement offer or suffer a costs penalty merely on the basis that it must have contemplated the possibility of losing the proceedings. Such a construction would not attribute any utility to the word "unreasonably" in s 40. As the defendants submitted, there is no case that cannot be lost, and more than an appreciation of this truism is required to make the failure to make any offer or to accept an offer proposed unreasonable. 57The plaintiff relied on Manefield v Association of Quality Child Care Centres of New South Wales Inc (No 2) [2011] NSWSC 104 in which Kirby J said, at [61] - [62]: "The second matter, which ought to have given the defendant pause, is one of some notoriety. Litigation, by its nature, is hazardous. Things may occur unexpectedly, such that a good case is lost or a doubtful case, won. The hazards of litigation are perhaps greater in defamation than in most other areas. But quite apart from that, litigation is expensive, even for those who ultimately win. With these things in mind, as a matter of enlightened self interest, it was important for the parties to consider compromise and commercial reality. Here, the defendant chose to ignore these hazards. It refused to negotiate." 58This passage, read in isolation, would tend to support a submission that parties, especially those in defamation proceedings, should always make settlement offers because of the inherent risk of litigation and if they do not they run the risk of being penalised on costs. However, this passage follows a very careful consideration by Kirby J of the nature of the defamation alleged in that case, the defences available to the defendant and the defendant's prospects of success having regard to the pre-existing relationship between the plaintiff and the defendant. 59A similar process was undertaken by McClellan CJ at CL in determining costs in Davis, as is evident from the following passage, at [30]: "In my opinion it should have been apparent to the defendant at the time of the publications that Ms Davis had been defamed. At the very least a reasonable offer at that time would have included an offer of an apology. It should also have been obvious to the defendant that not only had the published imputations damaged Ms Davis' reputation but they had also caused her significant anguish. The defendant should have appreciated that Ms Davis would recover a sum for her damage." 60In their oral submissions, the defendants contended that the defence of truth was in a special category. They submitted that it was significant that, with the exception of Ryan, indemnity costs have not been awarded in defamation cases under s 40 where truth has been pleaded as a defence. They put Ryan as the exception that proves the rule since Nicholas J found that the truth defence was not reasonably arguable, at [31] - [33], and that, accordingly, Ryan was in the same category as cases where it had not been pleaded at all. 61I do not accept the defendants' submissions that the defence of truth is necessarily in a special category because, in my view, each case depends on its own facts. 62In my view it was not unreasonable in the instant case for the defendants to fail to accept the plaintiff's offer to settle the proceedings for $90,000 plus costs. A payment of $90,000 plus costs to resolve the proceedings would have amounted to a substantial vindication of the plaintiff's reputation. For the reasons given above, the defendants had a reasonably arguable defence, truth, which could have defeated the plaintiff's claim. They also had substantial evidence in mitigation which they had reason to believe would reduce the damages which the plaintiff might be awarded either to a derisory, or a relatively modest, amount. In these circumstances it was also not unreasonable for the defendants not to make any settlement offer at all. 63For these reasons I do not consider that the plaintiff is entitled to his costs on an indemnity basis.

Orders 64For the foregoing reasons I order the defendants to pay half of the plaintiff's costs of the proceedings on a party/ party basis.

Amendments 06 March 2013 - typographical errors corrected Amended paragraphs: 23 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: 06 March 2013