McDonald v Dods [2017] VSCA 197

2 The relevant facts concerning the trial and the application for leave to appeal are set out in our reasons for refusing leave.[1]

3 Initially the applicant relied on four grounds of appeal: the first concerned the sufficiency of the evidence of publication; the second, the taking into account of what was said to be an irrelevant consideration; the third and fourth concerned the assessment of damages.[2]

4 At the commencement of the hearing of the application for leave to appeal the applicant abandoned grounds two and three and relied on grounds one and four which were said to be interconnected.[3]

5 Leave was refused on ground one. The Court held that there had been sufficient evidence to prove publication.[4] In doing so we considered and adopted relevant parts of Kaye J's analysis concerning online publication in Trkulja v Yahoo! Inc LLC.[5]

6 Leave was also refused on ground four as, based on our analysis of the evidence, the applicant could not succeed in establishing that the damages award was excessive.[6]

7 Upon the publication of the Court's judgment and the announcement of the order refusing leave to appeal, the respondent applied for costs of the application on an indemnity basis. At trial the judge had awarded indemnity costs in favour of the respondent relying on s 40 of the Defamation Act 2000. An offer of compromise for an amount less than half of that recovered as damages had been made by the respondent on 11 May 2015 and had not been accepted.

8 In oral submissions before us the respondent initially relied on s 40 of the Defamation Act. At the applicant's request the question of whether indemnity costs should be ordered was ordered to be addressed in written submissions. In his written submissions the respondent did not pursue indemnity costs on the basis of s 40 of the Defamation Act.[7]

9 In his written submissions the respondent urged us to make an order for indemnity costs on essentially four grounds: first, the fact of the refusal of leave to appeal; secondly, the abandonment of grounds two and three and the wasted costs incurred; thirdly, the continued refusal of the applicant to acknowledge the seriousness of the defamation; and finally, the failure to accept the offer of compromise made 11 May 2015.

10 The respondent submitted he should be awarded costs on an indemnity basis:

in the circumstances of this application so that the Respondent who should never have had to face this application, which had no real prospects of success, should be in no worse a position than he was after the trial judge made costs orders at the conclusion of the trial.[8]

11 In his written submission in response,[9] the applicant argued that up until the publication of this Court's judgment he was entitled to believe he had more than a fanciful prospect of success based on prior decisions of the Court concerning internet publication. The applicant criticised this Court's reasons, describing them as 'creating new law' and as departing from established authority, Trkulja in particular. The applicant also made other criticisms of the judgment of the Court. The applicant's submissions reviewed the steps taken in the course of the proceeding below at some length. These submissions were directed at establishing, amongst other things, that the failure to accept the offer of 11 May 2015 had not been unreasonable.

12 It was accepted by both parties that s 40 of the Defamation Act did not apply on this application. We express no view on the application of the section. As the parties submitted we should, we address the costs issue in the exercise of the general discretion of the Court with respect to costs.

13 The applicant's application for leave to appeal was not hopeless, that is totally devoid of merit, but it was weak. Nevertheless, we would not penalise the applicant for the bringing of the application.

14 In our view, indemnity costs should be awarded on the application for leave for two reasons.

15 First, the failure to accept the respondent's offer made on 11 May 2015 was unreasonable. We adopt the reasons given by the trial judge in that regard.[10] That offer was less than half of what the respondent was eventually awarded. The applicant's recitation of procedural steps in the course of the proceeding below is entirely beside the point. The defamation was serious. A reasonable offer was made. The failure to accept it should have consequences.

16 Secondly, the late abandonment of grounds two and three was unsatisfactory and undoubtedly resulted in wasted costs. This could have been avoided had the position been properly addressed earlier. We have not ignored the applicant's criticism of his own counsel for having abandoned these grounds; that is, for having abandoned them at all, not for doing so late. The applicant's submissions in that regard were irrelevant and unhelpful, which was, unfortunately, the position in relation to much of the applicant's written submission on costs.

17 We have considered this Court's decision on costs in Lower Murray Urban And Rural Water Corporation v Di Masi (No 2),[11] which was referred to in the respondent's submissions, but not in the applicant's notwithstanding that in that case costs of an appeal on a defamation matter were ordered on the standard basis after costs had been ordered on an indemnity basis at trial because of a failure to accept an offer of compromise.

18 The principles discussed by the Court in Lower Murray are applicable. The offer of compromise is a relevant consideration,[12] as is the strength of the grounds of appeal and the fact that issues were abandoned.[13] The Court also referred to the capacity to made a further offer of compromise under Rule 26.12 as a relevant factor.[14]

19 Consideration of that decision, however, has not altered our conclusion here for these reasons:

(a) The Court in Lower Murray did determine to make an indemnity costs order on some issues in the respondent's favour, but it set off that entitlement against an allowance that it considered ought to be made for the fact that the respondent had filed and then abandoned a notice of contention.[15]

(b) There were appeal grounds argued by the appellant in Lower Murray which were not lacking in merit.

(c) Whereas the Court in Lower Murray considered the possibility of a further offer of compromise under Rule 26.12 to be a relevant factor there, it has little relevance here as, given the modest damages awarded at trial, and given the issues raised in the proposed grounds of appeal, there was no 'compromise' which could realistically have been proposed by the respondent other than that the applicant simply abandon the application.

20 In our view the appropriate order here is that the applicant pay the respondent's costs of the application for leave to appeal on an indemnity basis.

[1] McDonald v Dods [2017] VSCA 129 ('Reasons').

[3] After the hearing and whilst judgment was reserved the applicant sought to revive these grounds. It was not permitted by the Court to do so. See Reasons [66].

[5] [2012] VSC 88 ('Trkulja').

[7] The respondent did not rely on section 40 of the Defamation Act in light of Ten Group Pty Ltd v Cornes (No 2) (2012) 114 SASR 106.

[8] Submissions by the Respondent as to the Costs of the Appeal, 8 June 2017, [15].

[9] It is apparent that the applicant's submissions were not prepared by counsel who had appeared for the applicant on the application.

[10] Dods v McDonald (Ruling) (Unreported, Supreme Court of Victoria, Bell J, 19 May 2016) and Transcript, 19 May 2016, 23-24.

[11] [2014] VSCA 133 ('Lower Murray').

[13] Ibid [14]-[15], [21]-[22], [23].