Macquarie Radio Network Pty Ltd v Arthur Dent

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b) assessed on an indemnity basis: … (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 11 As the judgment obtained by the respondent was no less favourable than the offer of compromise made to the appellant, unless the court orders otherwise, the respondent is entitled to costs on an ordinary basis up until 16 August 2006 and on an indemnity basis from 17 August 2006.

Parties' submissions 12 The respondent's primary submission that he is entitled to an order for indemnity costs was based on an offer of compromise made to the appellant on 16 August 2006. As the respondent received a judgment no less favourable than the offer made to the appellant, it was submitted that the respondent was entitled to such an order. 13 It was accepted by the appellant that UCPR r 42.14 provided that, unless the court orders otherwise, in circumstances where an offer is made but not accepted, and an order or judgment no less favourable than the terms of the offer is obtained, the offeror is entitled to an order for costs assessed on an indemnity basis from the date of the offer. It was further accepted that exceptional circumstances will generally have to be shown in order to justify a departure from the rule. It was submitted that exceptional circumstances existed in this case such that the respondent should not have an order for indemnity costs. 14 The appellant's submission that exceptional circumstances existed was based on four premises. First, the respondent's offer was for an amount only slightly less than the judgment sum obtained at trial. Secondly, it was submitted the offer was made in the context of leave to appeal having been sought where the appellant could reasonably expect the appeal to succeed. The appellant submitted that the reasonableness of its expectation was confirmed by the decision of Basten JA, and the majority judgment which upheld the defence of comment in relation to two of the three imputations such that the appellant achieved substantial success on the appeal. Thirdly, the appellant was entitled to pursue its appeal which in large part focused on the defence of comment which embodied the fundamental legal right of freedom of speech. Finally, it was submitted it was more than reasonable for the appellant not to have accepted the respondent's offer of compromise.

Should a different order be made? 15 A court will only deviate from the general rule provided for by r 42.14 of the UCPR and make a different order if it finds that there are exceptional circumstances for doing so. Hunt AJA in South Eastern Sydney Area Health Service v King [2006] NSWCA 2 considered the authorities in relation to Pt 52A r 22 of the Supreme Court Rules (which is relevantly in the same terms as UCPR r 42.14). His Honour (Mason P and McColl JA agreeing) stated at [83]: "The onus is on the defendant to persuade the Court that indemnity costs should not be ordered. He must demonstrate the basis on which an order should be made denying the plaintiff's entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff's case properly and in the context of the rule and the achievement of its purpose - to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation. Generally, exceptional circumstances are required to justify such an order denying the plaintiff's entitlement. See, generally, Fowdl v Fowdl Court of Appeal, 4 November 1993 unreported, per Kirby P at 12, 16; Hillier v Sheather (1995) 36 NSWLR 414 at 422-423; Morgan v Johnson (1998) 44 NSWLR 578 at 581-582. 16 As outlined above, the appellant relied on four main points in its submission that exceptional circumstances existed in this case such that a different order should be made.

The respondent's offer was for an amount only slightly less than the judgment 17 In Connor v Hatgis (No 2) (Court of Appeal, 7 December 1995, unreported), Kirby P and Priestley JA, in dismissing an application that costs should not be made on an indemnity basis as prima facie provided for by the Supreme Court Rules Pt 52 r 17 (as then in force) stated: "It will often be the case that the indemnity cost rule will apply to offers close to the sum eventually recovered. The policy behind the rule is to ensure that parties give full and realistic consideration to offers to compromise litigation. Had the respondent's offer…been accepted by the appellant a great deal of public and private cost would have been obviated, as events have demonstrated. To refuse the application of the prima facie rule would be to undermine the achievement of the objects of the rule and to send an undesirable signal as to the way in which the rule should be administered." 18 In that case, although the plaintiff received a verdict amount of only $4,000 more than the offer of compromise, that was not sufficient to displace the operation of the rule. See also Houatchanthara v Bednarczyk (Court of Appeal, 14 October 1996, unreported) where there Court refused to make a different order than provided for by the relevant rule in circumstances where the was a difference of $750 and Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 where a difference of 2.5 per cent was deemed to be real and not trivial or contemptuous. 19 It should be noted that the appellant before this Court did not seek to challenge the quantum of damages awarded by the trial judge. The appeal was confined strictly to a determination of the appellant's liability. 20 Apart from the judgment amount of $72,650, the appellant was also liable to pay interest on this amount while the amount remained outstanding. Judgment was delivered by the trial judge on 5 April 2006, while the offer of compromise was made on 16 August 2006. The appellant was required to pay interest on this amount during this period at the rate of 9 per cent per annum: Sch 5 of the UCPR. This meant that at the time of the offer of compromise, the award in favour of the respondent had accrued to $74,829.50. As at the date of offer, therefore, there was a difference between the judgment amount and the offer of compromise in the vicinity of 7 per cent. The appellant would also have been aware that any failure with respect to a subsequent appeal, would result in further interest accruing on the judgment amount. Having regard to those matters and the authorities of this Court outlined above, the appellant's submission on this ground should be rejected.

Timing of the offer and reasonableness of the appeal 21 The timing of the offer of compromise made by the respondent in this case was significant. As stated above, the offer was made after the Summons for Leave to Appeal had been filed but before the hearing of the leave application, which was some four months after the offer was made. In addition to the costs associated with the hearing of the application for leave to appeal (leave being granted), there were the costs incurred for both sides in the hearing of the appeal before this Court. The costs associated with these matters could have been avoided had the appellant accepted the respondent's offer. 22 The appellant asserts, however, that it was entitled to reasonably expect that it would be successful on the appeal and in fact, that this expectation was confirmed by fact that the decision of this Court was a majority decision. This argument must be rejected. The outcome of an appeal in any court cannot be predicted with any measure of certainty. Litigation inevitably entails risks and uncertainties of which no party can reliably foresee. This point is illustrated in the present case by the appellant's failure in its challenge to the trial judge's decision in a case in which it believed it could "reasonably expect the appeal to succeed". 23 The appellant's submission that it achieved substantial success on the appeal should also be rejected. The appellant's principal challenge to the trial judge's decision, and that to which its written submissions were directed, was that the radio broadcast was protected by s 24 of the Defamation Act, and in particular, that Mr Hadley's broadcast was a later publication of a 'protected report', or a 'fair summary' of a 'protected report' within the meaning of s 24(3), or alternatively, was a fair summary of a purported protected report within the meaning of s 24(4). The appellant was unsuccessful on both of these points. 24 It was not until the hearing of the appeal that senior counsel for the appellant advanced any submisisons in relation to the defence of comment. Although the appellant was partially successful in defending the imputations based on this defence, ultimately the appellant was unsuccessful on the appeal with this Court affirming judgment in favour of the respondent.

Freedom of speech 25 The appellant submits that the appeal in large part focused on the defence of comment, which embodies the fundamental legal right of freedom of speech. While there can be no doubt that the freedom of speech plays an important role in any modern democratic society, in the present context with which this Court is concerned, this right has to be weighed against the policy imperatives which underpin the rules regarding offers of compromise. 26 The objects of the rule were discussed by this Court in Maitland Hospital v Fisher [No 2] where the Court (Kirby P, Mahoney JA and Samuels AJA) stated at 724: "The objects of the rule include:

1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court;

2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and

3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation." 27 Having regard to the policy considerations and the particular circumstances of this case, including, the quantum of the respondent's offer and the subsequent legal costs that were incurred following the appellant's refusal to accept the offer of compromise, a departure in this case from the usual order as provided by r 42.14 would only serve to undermine the objects behind the rule. 28 Having regard to all the circumstances of the case, the appellant's submission that it was more than reasonable for it to not have accepted the respondent's offer should be rejected. 29 The appellant has not shown that there was anything exceptional about its case such that an order for indemnity costs should not be made in favour of the respondent. Therefore, I propose the following orders:

1. The appellant is to pay the respondent's costs on an ordinary basis up until 16 August, 2006;

2. The appellant is to pay the respondent's costs on an indemnity basis from 17 August, 2006. 30 BASTEN JA: I agree with Beazley JA. **********

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