Hyndes v Nationwide News Pty Limited

Supreme Court of NSW|2011-09-21|Before: Hislop J

Introduction 1The plaintiff sought damages from the defendant in defamation proceedings arising out of a newspaper article published by the defendant. The article relevantly stated: "Mr Gatland made headlines again in May last year when Australia's then deputy high commissioner in Sri Lanka, Matthew Hyndes, told the Industrial Relations Commissioner of his relationship with the conman. Mr Hyndes told the IRC in unrelated proceedings that via a company controlled by Mr Gatland, he had helped lend money to drug-dealing Thai officials while he was on leave from the Australian embassy in Bangkok in 1996. The Department of Foreign Affairs and Trade said yesterday Mr Hyndes was employed by the department but no longer held the Sri Lanka post." 2A jury found that two imputations defamatory of the plaintiff were conveyed by the article but that the imputations were substantially true. Accordingly, the plaintiff's claim failed. 3It is common ground that the plaintiff is liable to pay the defendant's costs of and incidental to the proceedings on the ordinary basis. 4The defendant, in this application, has sought an order that the plaintiff pay the defendant's costs of and incidental to the proceedings assessed on an indemnity basis pursuant to s 40(2)(b) of the Defamation Act 2005. 5Section 40 of the Defamation Act 2005 states: "(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." 6The application for indemnity costs was opposed by the plaintiff.

Consideration 7Generally, the result of defamation proceedings which proceed to a hearing and conclude favourably to the plaintiff is that the plaintiff secures both compensatory damages and public vindication. 8The question of what constitutes a reasonable settlement offer for the purposes of s 40(3) will vary according to the circumstances of each case. Thus, where it should be apparent to the defendant that the plaintiff has been defamed and will recover damages, a reasonable offer to settle the proceedings would have provided for an apology and a sum for compensatory damages - Davis v Nationwide News Pty Limited [2008] NSWSC 946 per McClellan CJ at CL at [30], [32]. 9In other cases, it will be necessary for the court to consider the reasonableness of any non-monetary condition, such as an apology, release, indemnity or the like. 10McClellan CJ at CL in Davis said at [27] and [31]: "Section 40(2) obliges parties to defamation proceedings to take a reasonable approach to negotiations for the settlement of those proceedings. A party who unreasonably fails to make or accept a settlement offer may be ordered to pay costs on an indemnity basis. The amount of the offer is relevant for the purpose of assessing the reasonableness of a party's conduct... If an offer had been made which provided for an award of compensatory damages, the reasonableness of that offer may have to be considered by having regard to the prospects of success in the entire proceedings. Those prospects would have to be assessed at the time the offer was made." 11The proceedings were commenced on 27 August 2009. A number of settlement offers were made, none of which was accepted. It is necessary to consider each of the offers made by the defendant. The offers were as follows: (a) On 28 September 2009 the defendant made an offer of amends offering the publication of a reasonable correction by publishing a letter to the editor subject to the defendant's usual editorial policies and a payment of the plaintiff's reasonably incurred expenses suggested to be no more than $5,000. Inferentially there would be no payment by way of verdict. The plaintiff's counsel submitted in respect of this offer: "it wasn't unreasonable for a plaintiff to fail to accept an offer which had a letter to the editor which would be subject to the usual editorial discretions one sees or the usual editorial policies, and the payment of apparently his costs to date because he wouldn't achieve a verdict. That has its double quality. He wouldn't achieve the vindication of a verdict, although he would have perhaps got something from the letter to the editor, but he also wouldn't achieve some real measure of compensation". I accept this submission. (b) On 28 September 2009 the plaintiff made a Calderbank offer of $150,000 plus costs in the sum of $8,000. The offer was open to 5.00 pm on 30 October 2009. (c) On 8 October 2009 the plaintiff restated the Calderbank offer. (d) On 3 February 2010 the defendant made a Calderbank offer of $10,000 plus costs as agreed or assessed. The offer was subject to the following conditions: (i) the proceedings were to be dismissed; (ii) the plaintiff was to execute the defendant's usual form of release, including indemnity and confidentiality terms; (iii) the offer was open until 5.00 pm on 5 February 2010. The plaintiff's costs at the time were $17,000. (e) On 25 February 2010 the plaintiff served a Notice of Offer of Compromise in the sum of $75,000 plus costs. The offer, open until 5.00 pm on 25 March 2010, was not responded to. (f) On 18 October 2010 the defendant made an offer of $50,000 inclusive of costs. The offer was conditional upon: (i) dismissal of the proceedings; (ii) required the plaintiff to give a warranty that each of the imputations alleged was false; (iii) required the plaintiff to execute a deed of release, including an indemnity and a confidentiality term; (iv) the offer was open until 5.00 pm on 20 October 2010 and was rejected on that day. The plaintiff's costs at the time were $62,000. (g) On 2 February 2011 a court-appointed mediation was conducted at which various offers were made. As no settlement resulted from the mediation and the plaintiff did not consent to the disclosure of what occurred thereat, evidence of offers which were made at the mediation was not admissible on this application - Civil Procedure Act 2005, s 30(4)(5); Jireh International Pty Limited t/as Gloria Jean's Coffee v Western Export Services Inc (No 2) [2011] NSWCA 294 at [32], [33], [44]-[49]. This evidence was admitted subject to objection. I have had no regard to it in determining this application. (h) On 4 March 2011 the defendant made an offer of $140,000 inclusive of costs. The offer was subject to the same conditions as previously, save it was open until 5.00 pm on 8 March 2010. The plaintiff's costs were $97,000. (i) On 29 March 2011 the plaintiff offered to accept a verdict and the payment of $170,000 inclusive of costs. The offer was open until 5.00 pm on 13 April 2011. (j) On 25 July 2011 the defendant made an offer of $150,000 inclusive of costs. It was subject to the same conditions as before, save the offer was open to 5.00 pm on 22 August 2011. The plaintiff's costs at this time were estimated at $125,000. (k) On 28 July 2011 the plaintiff responded by increasing his offer to the defendant to $220,000 inclusive of costs. (l) Shortly before the trial commenced on 5 September 2011 the defendant made an offer to settle for $175,000 inclusive of costs. The offer was subject to the conditions as before and was open for a few days. The plaintiff's costs at this time were $162,000. The plaintiff counter offered $250,000 inclusive of costs.

Submissions 12It was not contended the interests of justice required that some order other than that provided by s 40(2)(b) was appropriate. 13Two issues required determination in respect of each offer of settlement made by the defendant, namely: (a) was the defendant's offer one that was reasonable at the time it was made so as to constitute a "settlement offer" for the purposes of s 40(3) of the Act, thus enlivening s 40(2)(b); and (b) was the Court satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant? 14The plaintiff submitted that each of the offers made by the defendant, other than the original offer of amends, contained at least one of the following factors: (a) acceptance of the defendant's offer would not publicly vindicate the plaintiff; (b) acceptance of the defendant's offer required the plaintiff to give a warranty to the defendant as to the falsity of the imputations; and (c) the offer was only open for a few days. He submitted each of these factors prevented the offer being a "settlement offer" as defined in s 40(3) of the Act. 15The plaintiff submitted that it was reasonable for him to refuse the defendant's offers even if they were "settlement offers" as defined in s 40(3) as there was an absence of public vindication, the effect of the warranty would mean that the settlement would have remained open to challenge for a further 12 years and the amount of the settlement offer was, in itself, insufficient. 16The defendant submitted that each of its offers was reasonable at the time it was made and constituted a "settlement offer" for the purposes of s 40(3) of the Act. It submitted there was nothing unreasonable in requiring the plaintiff to warrant the falsity of the imputations which he relied upon in his pleadings nor was it unreasonable to deny affording the plaintiff public vindication in circumstances where there was a serious issue as to the plaintiff's credibility and the truth of the imputations which the jury ultimately held were true. 17The defendant submitted it had made a number of substantial and reasonable settlement offers. The plaintiff's failure to accept any one of those offers was unreasonable in the light of his knowledge of the truth of the matter. It must have been apparent to him that he faced a real prospect of losing the proceedings.

The assessment of the plaintiff's claim 18In assessing the plaintiff's prospects it was almost certain the plaintiff would establish two of the imputations advanced, being those ultimately found by the jury. It was possible, but unlikely, a third imputation would be established. It was almost certain that any imputation found would be held to be defamatory. 19The result, at a practical level, depended almost entirely on the issue of the substantial truth of the imputations. As to this the defendant bore the onus of proof. The defendant had no eye witness or documents to provide direct evidence of the truth of the imputations. As against that there were admissions and inconsistencies in various documents which left open the possibility of a successful attack on the plaintiff's credit. 20The plaintiff's solicitor, in a letter dated 28 July 2011, assessed the verdict range, undiscounted for risk of failure, at $75,000 to $125,000. This appears to be a fair assessment, albeit conservative, of the likely range if the plaintiff was successful. This produces a mid-point of $100,000 for settlement purposes, to which should be added an amount to allow for the absence of public vindication, the provision of the warranty required by the defendant and the plaintiff's costs including indemnity costs from the date following the service of the plaintiff's Notice of Offer of Compromise on 5 February 2010. 21However, in determining the settlement range, provision must be made for the possibility the plaintiff might fail in his action. Having regard particularly to the matters in paras [18] and [19] above, I would assess the appropriate discount for the plaintiff's risk of failing in the proceedings at 25 percent.

Conclusion 22There was no request by the plaintiff to extend the time for acceptance of any offer or suggestion that the plaintiff had been prejudiced by the time limits for acceptance of any offer. 23In my opinion, it was not unreasonable in the circumstances of this case to require the plaintiff to warrant the falsity of the imputations upon which he relied nor was it unreasonable to deny affording to the plaintiff public vindication in circumstances where there was a serious issue as to his credibility in relation to the truth of the imputations which the jury ultimately held were true. However, it was appropriate for the plaintiff to require an addition to the settlement figure to compensate for the exclusion of vindication and the provision of the warranty. 24Each of the offers made by the defendant fell below what was, in my opinion, a reasonable assessment of the plaintiff's prospects at the time the offer was made. As such, the defendant's offers may not have been "settlement offers" within the terms of s 40(3). 25The defendant's offer which was closest to the discounted value of the plaintiff's claim was the offer made on 4 March 2011 of $140,000 inclusive of costs which were estimated at $97,000. The plaintiff's failure to accept the offer made by the defendant on 4 March 2011 and the making of the counter offer of $170,000 inclusive of costs which he did on 29 March 2011 was, in my opinion, reasonable in the circumstances. 26Assuming each of the defendant's offers constituted a "settlement offer" for the purposes of s 40(3), I am not satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant. Accordingly, the defendant's claim pursuant to s 40 of the Defamation Act fails.

Alternative claim 27The defendant also sought indemnity costs pursuant to the general law as to Calderbank letters. The principles in relation thereto were stated by Einstein J in North Sydney Leagues Club Limited v Synergy Protection Agency Pty Limited [2011] NSWSC 804 where his Honour said at [22] "An award of indemnity costs may be appropriate where a party has unreasonably failed to accept an offer of settlement of the proceedings, The relevant question of whether the failure of the party to accept the settlement offer was unreasonable is to be assessed in all of the circumstances - Jones v Bradley (No 2) [2003] NSWCA 258 at [5]-[8]." 28The considerations previously adverted to in relation to s 40 are relevant to the consideration of the Calderbank offers. In my opinion it was reasonable for the plaintiff not to accept the settlement offers made by the defendant.

Orders 291. The defendant's application for indemnity costs is dismissed. 2. The plaintiff is to pay the defendant's costs of and incidental to the proceedings on the ordinary basis. These costs do not include the costs of the defendant's application for indemnity costs and those costs the subject of any interlocutory costs orders already made in favour of the plaintiff. 3. The defendant is to pay the plaintiff's costs of and incidental to the application for indemnity costs on the ordinary basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 November 2011

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