Lower Murray Urban and Rural Water Corporation v Di Masi, Belbin and Marciano

1 Each of the respondents was successful in defamation proceedings heard in the Trial Division by a judge and jury. Following the trial, the judge entered judgment for each respondent against the appellant in the sum of $70,000 plus damages in the nature of interest of $4,677 together with costs on an indemnity basis. On 4 June 2014, this Court dismissed the appellant's appeals against each judgment.[1]

2 Following the dismissal of the appeals, each of the respondents sought an order against the appellant that the relevant respondent be paid his costs of that respondent's appeal on an indemnity basis. The appellant resisted the applications for indemnity costs, contending that it should only be required to pay costs on a party and party basis up to and including 31 March 2013, and thereafter on a standard basis.

3 The background to the respondents' proceedings is set out in our judgment dismissing the appellant's appeals.[2] The writs in these proceedings were issued in August 2010. On 17 November 2010, each of the respondents served an offer of compromise. Each offer of compromise offered to compromise the relevant respondent's proceeding on the basis that the appellant pay the respondent the sum of $20,000 plus party and party costs. The appellant did not accept any of the offers of compromise. The trial of the respondents' proceedings was heard over 26 days in 2012, and the respondents obtained the judgments to which we have referred in November of that year.

4 At the time the judgments were entered against the appellant, the Supreme Court (General Civil Procedure) Rules 2005 ('the Rules') provided for costs to be taxed on a party and party basis, a solicitor and client basis, an indemnity basis, or such other basis as the Court may direct.[3] The respondents obtained orders for costs on an indemnity basis because the judgments they each obtained were more favourable to them than the terms of their offers of compromise.

5 On 23 November 2012, the appellant served its notices of appeal against each of the judgments entered in favour of the respondents. On 1 April 2013, the Rules were amended to change the bases upon which costs may be taxed. The new bases are a standard basis, an indemnity basis or such other basis as the Court may direct.[4] Before 1 April 2013, on a taxation on a party and party basis 'all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed [fell to] be allowed'.[5] On a taxation on a standard basis, 'all costs reasonably incurred and of reasonable amount [fall to] be allowed'.[6] The rule in respect of a taxation on an indemnity basis was not amended on 1 April 2013, and remains in the form it was at the time of trial.[7]

6 The respondents seek orders for costs on an indemnity basis in the exercise of the Court's discretion under r 63.31 of the Rules.[8] Section 40 of the Defamation Act 2005 (Vic) deals with the issue of costs in defamation proceedings, including circumstances in which a court must make an order for indemnity costs in favour of a plaintiff. In Cornes v The Ten Group Pty Ltd & Ors (No 2),[9] the Full Court of South Australia had to consider the operation of s 38 of the Defamation Act 2005 (SA). Section 38 of the South Australian Act is in identical terms to s 40 of the Victorian Act. In Cornes, the Court held that the operation of s 38 is confined to defamation proceedings at first instance, leaving the Court with its general discretion as to costs in appellate proceedings.[10] The respondents did not seek to challenge the correctness or applicability of Cornes in the present applications. Accordingly, there is no occasion for this Court to comment further on s 40 of the Victorian Act.

7 The respondents contend that 'the appeals are to be regarded as a continuation by the appellant of the proceedings below'. The respondents then submit that the offers of compromise should continue to be relevant considerations in relation to this Court's discretion as to the costs of the appeals. In support of this submission, reliance is placed by the respondents upon the following observations made by Brooking JA[11] in Sands & McDougall Wholesale Pty Ltd (in liq) v Commissioner of Taxation (Commonwealth) (No 2):[12]

[I]t will be open to a plaintiff who before judgment made an offer answering the requirements of r 26.11 to contend, in the event of a successful appeal by the plaintiff or an unsuccessful appeal by the defendant, that the making of the offer and its non-acceptance should induce the Court, in disposing of the appeal, to award the costs of the appeal on a solicitor and client basis. In doing this the plaintiff would be founding an argument upon the presence in the rules of r 26.11 but would not be suggesting that it operated of its own force in relation to the appeal.[13]

8 The respondents contend that, at trial, the appellant was ordered to pay the costs of their proceedings on an indemnity basis, and that the dismissal of the appeals 'should place the respondents in the same position they were in at the conclusion of the trial below'. It is then submitted that in order to give effect to the indemnity costs order made below, the costs of the appeals should also be made on an indemnity basis, so that the benefits that the respondents obtained as a result of the trial judge's orders are not undermined by the additional costs incurred in meeting the appeal.

9 Finally, it is submitted that the appeal was based on several grounds that lacked merit. In particular, it was contended that:

(a) grounds 1 to 6 were framed and argued contrary to established principles concerning appellate review of jury verdicts;

(b) ground 12 'perpetuated the appellant's unjustified conduct at trial in seeking to advance and rely on [what were said to be 'significant shortcomings' of the respondents in the discharge of their roles as members of the Board of the FMIT]';

(c) ground 13 'rested on a misconception of relevant appellate authority concerning the basis on which aggravated damages are rewarded'; and

(d) ground 14, 'if not hopeless, was overly ambitious'.

It was then submitted that the inclusion of these grounds required the preparation of appeal books that contained all of the evidence at trial, and required extensive review of that evidence for the purpose of meeting the appellant's case on appeal.

10 The appellant submits that there is no reason to depart from usual orders for costs to be taxed on a party and party basis prior to the amendment of the costs rules and on a standard basis thereafter. In answer to the respondents' submissions concerning the observations of Brooking JA in Sands & McDougall Wholesale Pty Ltd (in liquidation) v Commissioner of Taxation (Commonwealth) (No 2),[14] the appellant pointed to the fact that that case was decided before the introduction of r 26.12 in April 2006, which Rule provided for the first time for offers of compromise to be made to compromise an appeal.[15]

11 The appellant then submitted that there are no special features in the present appeals which might warrant an award of indemnity costs against it. Additionally, the appellant contended that the respondents' submissions, that several of the grounds of appeal lacked merit, should be rejected. In elaboration of this submission, the appellant submitted:

(a) the appeal involved the first appellate consideration in this State of the defence in s 28 of the Defamation Act 2005, and the most significant consideration yet undertaken in this State of the defence in s 30 of that Act. Further, it was submitted that the points raised on appeal in respect of those two defences had not been the subject of authorative consideration by the courts in other Australian jurisdictions;

(b) contrary to the respondents' submissions, grounds 1 to 6 and 12 to 14 were not hopeless, but in any event they took up only a small proportion of the time spent in oral argument on the appeal; and

(c) the lengthy nature of the appeal books was substantially the fault of the respondents, who insisted upon inclusion of all of the transcript and exhibits tendered below.

12 Finally, the appellant pointed to three further matters said to be relevant to the exercise of the Court's discretion: first, it was submitted that the respondents' notices of contention (identical in each appeal), which were abandoned by the respondents at the start of oral argument, necessarily involved some preparation: secondly, s 24 of the Civil Procedure Act 2010, which imposes an overarching obligation on solicitors and counsel to ensure costs are reasonable and proportionate, was invoked to suggest that the briefing of two senior counsel by the respondents 'may be viewed as tending towards disproportion or excess'; and thirdly, it was submitted that the conduct of a 'thorough appeal' ought not be a matter which is considered a relevant factor, or special feature, supporting an award of indemnity costs in favour of the successful party.

13 The fact that the appellant rejected the respondents' offers of compromise and the respondents have now received awards of damages more favourable to them than their offers is a relevant consideration for this Court to take into account in its discretion in awarding the costs of these appeals. However, it is also relevant that at all times while these appeals were pending the Rules provided for offers of compromise to be made to compromise an appeal pursuant to Part 3 of O 26 (r 26.12).[16]

14 Turning to matters specific to these appeals, there is substance in the respondents' contentions that grounds 1 to 6 lacked merit. In those grounds, the appellant sought to argue that it was not open for the jury to find against the appellant on questions upon which the appellant bore the onus of proof. As we have said in our principal reasons,[17] these grounds were really without substance.[18] However, no great amount of time was expended in their pursuit.

15 There is also some strength in the respondents' contentions about the lack of merit in grounds 12 to 14. Indeed, in view of the relatively modest awards of damages made by the trial judge,[19] it might be said that the appeals in relation to damages were, at best weak, if not bound to produce no result more favourable to the appellant than the awards made by the judge. Further, a little more time was expended on them than on their weaker cousins, grounds 1 to 6.

16 So far as the volume of material in the appeal books is concerned, we do not think there is much in either side's contentions. Even absent grounds 1 to 6, we think the appeal books would probably have contained all of the material they in fact contained. While appeals confined only to questions of liability might have produced more targeted appeal books, we think, all things being considered, there is little in this point - particularly in circumstances where the respondents have not expressly contended that ground 11 lacked sufficient merit to be pursued. That said, contrary to the appellant's submissions, we see no basis for criticising the respondents for seeking to have the appeal books contain the material they contained.

17 As to the appellant's contentions, we accept that there were significant issues in respect of the s 28 and s 30 defences which the appellant was entitled to ventilate on appeal. Further, we accept that, in ventilating these issues, the appellant is not to be criticised for being 'thorough'. That said, the thoroughness with which the damages grounds were pursued, in the light of the relatively modest award of damages, at least raises the question of whether, in pursuing those matters, the appellant was complying with its overarching obligation to ensure that costs were reasonable and proportionate.[20]

18 Insofar as the appellant sought to advance an argument that anything done by the respondents constituted a contravention of s 24 of the Civil Procedure Act 2010, we reject this submission. Specifically, we see nothing unreasonable in the respondents engaging two counsel on these appeals. Nor was there anything unreasonable in the respondents engaging their senior counsel for their defence and conduct of the appeals.

19 Insofar as it was suggested by the appellant (albeit somewhat faintly) that it was also unreasonable for the respondents to engage trial counsel (who took silk after the notices of appeal were filed) as counsel on the appeal, we reject this submission. To the contrary, in our view, it would have been unreasonable to have retained new junior counsel on the appeal who would have had to read into and familiarise himself or herself with the issues in these proceedings. Such criticism as the appellant made of the respondents' retention of counsel for the appeals was without merit.[21]

20 A party entitled to costs on a standard basis is entitled to be paid all costs reasonably incurred and of reasonable amount. A party entitled to costs on an indemnity basis it is entitled to all costs except insofar as they are of an unreasonable amount or have been unreasonably incurred (with any doubt falling to be resolved in favour of the party to whom the costs are payable).

21 Taking all of the matters to which we have referred into account, we are not persuaded that the respondents should receive their costs of the appeals on an indemnity basis. However, having due regard to the respondents' offers of compromise, the ability of the respondents to make offers of compromise in their appeals and the weakness of the grounds of appeal to which we have referred, we think there should be some additional allowance for costs in favour of the respondents over and above an order giving them costs on a party and party basis up to 31 March 2013 and on a standard basis thereafter.

22 We have contemplated giving the respondents indemnity costs in respect of some issues in the appeals (grounds 1 to 6, and all or part of the appeals in relation to the assessment of damages). However, we see difficulty with this approach and ultimately are not persuaded that we should make any taxation of costs any more complicated or expensive than it needs to be.

23 Further, there is the issue of the respondents' notices of contention which were abandoned at the commencement of the hearing. The notices of contention were confined to the issue of mitigation of damages, or more specifically the application of the English Court of Appeal's decision in Burstein v Times Newspapers Ltd.[22] The need for the notices of contention arose because the appellant sought to overturn the trial judge's assessments of damages. We see nothing unreasonable in the respondents' conduct in serving the notices of contention, or in then abandoning them in the proper defence of these appeals. Nevertheless, the serving of the notices of contention needs to be taken into account as part of all of the matters affecting this Court's exercise of its discretion as to the costs of these appeals. Ordinarily, a successful respondent who abandons a notice of contention could not expect to recover any costs of that notice (and indeed in some cases could expect to be ordered to pay the costs of the abandoned notice). However, in the unusual circumstances of the present case, we think it appropriate to balance the costs of the notice of contention against the costs of issues pursued by the appellant that we have described as lacking in merit.

24 In all the circumstances, we think that justice is best served by making an order for costs on a standard basis in favour of each respondent for the whole of the appeal. That is, the respondents should have all of their costs of the appeals that were reasonably incurred and of reasonable amount. This includes any and all costs incurred on or before 1 April 2013, and the costs of the notices of contention.

25 There will be orders in each appeal that the appellant pay each respondent's costs reasonably incurred and of reasonable amount of each appeal.

[1] Lower Murray Urban and Rural Corporation v Di Masi & Ors [2014] VSCA 104 ('Reasons').

[3] Rule 63.28 as it was prior to 1 April 2013.

[4] Rule 63.28 as substituted by SR 142 of 2012.

[5] Rule 63.29 as it was before 1 April 2013.

[8] Cf s 24 of the Supreme Court Act 1986.

[9] (2012) 114 SASR 106 ('Cornes').

[11] With whom Charles and Chernov JJA agreed.

[12] [1999] VSCA 36; (1999) 2 VR 114.

[13] Ibid 118 [13]. See also, Rosa v Galbally & O'Bryan (No 3) [2013] VSCA 159 [9] (Tate JA, with whom Harper JA and Kyrou AJA agreed).

[14] [1999] VSCA 36; (1999) 2 VR 114, 118 [13].

[15] Rosa v Galbally & O'Bryan (No 3) [2013] VSCA 159 [10].

[16] Rosa v Galbally & O'Bryan (No 3) [2013] VSCA 159 [10].

[17] Reasons [2014] VSCA 104.

[20] Civil Procedure Act 2010 s 24.

[21] Cf Trkulja v Yahoo (No 2) [2012] VSC 217 [36] (Kaye J).

[22] [2000] EWCA Civ 338; [2001] 1 WLR 579.