On 18 August 2022 I delivered reasons for judgment in a defamation suit which the plaintiff (Mr Kelly) brought against the first defendant (Mr Davis) and the third defendant (Ms Chan). Those reasons were published on Caselaw [1] (hereafter 'My Earlier Reasons'). Mr Kelly did not succeed in either of his claims. After referring to two of the 'usual' rules concerning costs (in rr 42.1 and 42.2 of the Uniform Civil Procedure Rules 2005 (NSW), I determined that the question of costs, in respect to each claim, be reserved and allowed the parties opportunity to make written submissions (of finite length) on costs. This judgment determines costs questions left outstanding from My Earlier Reasons.
The Court has received written submissions, concerning costs, from the first and third defendants, but not from the plaintiff.
At the hearing and through the proceeding, the plaintiff represented himself. Attempts had been made to procure representation of him; although, as noted in Mr Earlier Reasons, these were mostly unavailing. The first defendant was represented by Counsel, Mr Elachkar. The third defendant was represented by a solicitor, Mr Vogel.
[2]
Preliminary matter
At 3:59pm on 18 August 2022, after My Earlier Reasons had been delivered earlier in the day, Mr Kelly sent an email to my Associate; which was not copied to the legal practitioners for Mr Davis and Ms Chan. At 5:07, 5:09 and 5:10pm on 22 August 2022, Mr Kelly sent further emails to my Associate; again, not copied to the legal practitioners for Mr Davis and Ms Chan.
As was explained to Mr Kelly, during the hearing, because of our system of open justice, parties to a legal proceeding do not have an unfettered right to communicate privately with the Court; and absent exceptional circumstances, they should not do so without obtaining the knowledge and consent of legal practitioners acting for the party's opponent or opponents in advance of the communication. The subject matter of Mr Kelly's emails had nothing to do about costs (about which Mr Kelly was, along with the defendants, permitted to make submissions, in accordance with the time stipulations) and there was nothing exceptional which justified him sending the communications to the Court without giving notice to the other parties' legal representatives. In short, the emails should not have been sent. In response to Mr Kelly's multiple emails, I simply arranged for them to be forwarded (by email) to the legal practitioners for Mr Davis and Ms Chan for their information, and without comment. I have disregarded those emails for the purpose of considering costs issues to be adjudicated upon in this judgment. As indicated, Mr Kelly made no submissions about costs.
[3]
Costs should follow the event
Although costs issues are determined in accordance with the Court's broad discretion under s 98 of the Civil Procedure Act 2005 (NSW), no reason is advanced for why the usual rule that costs should follow the event should not apply. The plaintiff should pay the costs of the first and third defendants.
The remaining questions is the basis upon which he should pay those orders.
[4]
Mr Davis' application for a partial order for indemnity costs
This application is founded upon Mr Kelly's rejection of two Calderbank offers. The first was dated 13 August 2021. The second was dated 30 March 2022. The offers are annexed to an affidavit of Mr Andrew Clarke, sworn 22 August 2022. Both offers were expressed to be 'without prejudice as to costs'. Both put to Mr Kelly, as offeree, that the offers were made in accordance with the principles applied in Calderbank v Calderbank (1975) 3 All ER 333. Both were open for acceptance for 28 days.
By his 13 August 2021 offer, the first defendant offered to pay the plaintiff the sum of $5,000, with the proceeding to be dismissed and no order as to costs. This offer did not set out any explanatory comment as to why the offer should be accepted.
By his 30 March 2022 offer, the first defendant offered to pay the plaintiff the sum of $20,000, with the proceeding to be dismissed and no order as to costs.
Although Mr Clarke's affidavit did not attach the letter, the written submissions of Mr Davis' Counsel referred to a letter sent to Mr Kelly on 30 March 2022 which (the Court was informed) did set out deficiencies in the plaintiff's case; including, apparently, that Mr Kelly was not identified by the first matter complained of.
[5]
Consideration
Counsel's written submissions correctly notes that a basis for displacing the ordinary rule that costs are payable on a party and party basis is where a party unreasonably rejects a Calderbank offer.
I am not persuaded that Mr Kelly's rejection of the offer of 13 August 2021 was unreasonable in the circumstances. It was served before Mr Davis had filed a Defence to Mr Kelly's amended statement of claim. The amount that was offered actually corresponded with the amount of damages that Mr Kelly would have obtained had he succeeded in his case on Mr Davis' liability. No explanation was supplied, on behalf of Mr Davis, as to why Mr Kelly should accept the offer, including the risk that Mr Kelly might fail, as he eventually did, in establishing his right to damages against Mr Davis.
The position with the 30 March 2022 Calderbank offer was different. At or about the time it was served, explanation had been given to Mr Kelly about the weaknesses in his case, most notably, his likely inability to prove the element of identification which, as was apparent in My Earlier Reasons, was fatal to his case against Mr Davis. Before that, and in contrast to the first Calderbank offer, Mr Davis had filed a Defence; which, amongst other things, indicated that identification was in issue and also set out certain matters in mitigation of Mr Kelly's claim in damages. Moreover, at a time more proximate to the hearing than the earlier Calderbank offer, the settlement sum offered - $20,000, was, as Counsel described it 'generous'. By that date, a reasonable litigant in Mr Kelly's position and circumstances, as at 30 March 2022, should have accepted it. Put another way, it was unreasonable for Mr Kelly to have rejected it.
[6]
Ms Chan's application for a partial order of indemnity costs
As indicated, Mr Kelly represented himself at the hearing. Ms Chan was represented by Mr Vogel, a solicitor. On Wednesday, 3 August 2022, after business hours, Mr Vogel sent an email to Mr Kelly (at 9:06pm). It was expressed to be 'without prejudice save as to costs'. It is appropriate to set it out in full.
At 12:41am on Thursday, 4 August 2022, Mr Kelly implicitly rejected the terms of the offer, and responded to Mr Vogel's email as follows:
"I don't have nearly enough time to get legal advice now. You had plenty of time to make this offer."
On the basis of this correspondence, Ms Chan applies for an order for costs on an indemnity basis from 4 August 2022, the date after the offer was made; and costs on the ordinary party and party basis before that.
[7]
Consideration
It is true that Ms Chan achieved a result more favourable than the terms which were offered at 9:06pm on 3 August 2022. It is also true that a party's rejection of a 'walk-away' offer have been treated in the past as grounding a basis for the imposition of costs orders on an indemnity basis.
However, there are reasons why, in my view, the Court would not exercise its discretion that a partial order for indemnity costs should be made. First, although it is not a precondition to an order for indemnity costs order that offers of settlement are made under court rules (r 20.26), the conventional alternative is a Calderbank offer. Mr Vogel's offer did not fit the description of an offer in those terms. The email did not refer to Calderbank principles, as a basis for warning the offeree that an order for indemnity costs would be sought. Neither Ms Chan nor Mr Vogel was Mr Kelly's keeper and, as touched upon in My Earlier Reasons, self-represented litigants are not immune from the operation of procedural rules or principles. Mr Vogel was not obliged, for example, to explain the difference between a costs order on a party and party basis and solicitor and client basis. Nevertheless, by omitting reference to Calderbank in the email, and omitting to foreshadow an intended reliance upon the principle in that case, which are orthodox features of Calderbank offers, Mr Vogel deprived Mr Kelly of a not insignificant procedural protection in his consideration of the offer.
Secondly, I am not persuaded that the timing of the offer was such that it was unreasonable for Mr Kelly to reject it. The time for acceptance of the offer was extremely limited: essentially half of a day (contrast the time usually required for rules offers). It was sent, after business hours, on the Wednesday before a hearing scheduled to proceed the next Monday. It was sent to a party who, Mr Vogel was well aware, represented himself. It was plainly unrealistic to suppose that Mr Kelly could have had the time to obtain professional legal advice as to his potential costs liability should he decide to reject it. This was especially so when, only a few business days later, he was required to front up to the Court to present his case (or two actions against two represented defendants) himself. It is not to the point that it was answered only a few hours later. It was an entirely reasonable, and predictable, response for Mr Kelly to write what he did in his email rejecting it. Indeed, the timing of the offer gives rise to an available inference that it was served with the intention of setting up a later argument for an indemnity costs order should Ms Chan succeed; although it is unnecessary to be definitive about that.
Finally, the main reason expressly supplied in the email as to why Mr Kelly should accept the offer - the triviality of the matter complained of (if found to be defamatory) - was rejected in My Earlier Reasons. The only other reason - the relatively prompt deletion of the publication upon request - was relied upon as part of that triviality defence and served to mitigate damages recoverable but by itself, it did not defeat Mr Kelly's claim. A reasonable litigant in Mr Kelly's position would have been justified in thinking that he could defeat the defence of triviality, as he ultimately did. How much Ms Chan's deletion of the post might reduce his damages was unpredictable and it would not have been unreasonable for Mr Kelly to continue with his suit if that was the only reason to suggest that he should not.
Ms Chan's application for a partial order for indemnity costs is refused.
[8]
Orders
In supplementation of the orders made on 18 August 2022, the Court makes the following orders:
1. The plaintiff is to pay the first defendant's costs, as agreed or assessed:
1. on the ordinary basis up to 30 March 2022; and
2. on an indemnity basis thereafter.
1. The plaintiff is to pay the third defendant's costs, as agreed or assessed.
[9]
Endnote
Kelly v Davis & Anor [2022] NSWDC 352
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Decision last updated: 29 August 2022