Penfold & Anor v Higgins & Anor [2003] NTSC 89

(a) An order for indemnity costs against the defendants. This is opposed by the defendants, although the defendants concede that the plaintiffs are entitled to a limited costs order on a party/party basis: see orders sought by defendants, infra.

(b) An order backdating any order for costs to the date of judgment so that interest on costs may be recovered. This is also opposed by the defendants.

[4] The defendants submit that this is an appropriate case for a differential costs order in their favour, on the basis that they succeeded on two issues which had considerably prolonged the proceedings. They seek an order that the plaintiffs pay their costs of those issues, or, alternatively, an order that the plaintiffs recover only a percentage of their costs.

[5] In Vivanet v Power [2001] NTSC 66; (2001) 2 NTJ 1192, I said the general rule is that costs are awarded on the standard basis, but that the discretion to award costs on an indemnity basis, whilst unfettered, must nevertheless be exercised judicially and, generally speaking, that means that special circumstances must be shown warranting a departure from the general rule.

[6] What matters do the plaintiffs rely upon to justify a departure from the general rule? First, it was submitted that the defendants must have known that the defences pleaded to the claims were hopeless, but they persisted with these defences until the morning of the trial. In a number of cases, indemnity costs have been awarded against a plaintiff who has persisted with a hopeless case: see, for example, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Others [1988] FCA 202; (1988) 81 ALR 397 at 401 per Woodward J; J_-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers - Western Australian Branch_ (Federal Court of Australia, 9 February 1993, BC9304556 unreported) per French J; Colgate Palmolive Co and Another v Cussons Pty Ltd [1993] FCA 536; (1993) 118 ALR 248 at 257. I see no reason why, similarly, such an order should not be made against a defendant who has persisted in defending a case which he knows, or ought to have known if he had received competent legal advice, to be hopeless. If a defendant persists with such a defence, and the effect is to cause to the plaintiff unnecessary expense and costs, or to delay the plaintiff in obtaining judgment, that would be a sufficient reason, in my opinion, to justify an indemnity costs order.

[7] The mere fact that a defendant has at the last minute admitted liability does not necessarily mean that it must be inferred that the defendant's case was hopeless, or, to put it another way, that the plaintiff's case was indefensible, to the defendant's knowledge, actual or presumed. Counsel for the plaintiffs, Mr Heywood-Smith QC, submitted that I can and should nevertheless so find. The defendants' defence was filed on 21 September 1999. The only defences raised by the defendants were qualified privilege, fair comment, and a defence allegedly available under s 6 of the Defamation Act. A reply was filed alleging express malice on the part of the defendant Higgins which, if proved, defeated each of these defences. It was never in doubt that the Northern Land Council (NLC) was vicariously liable for Higgins' tortious conduct. Liability was not admitted until the morning of the trial on 3 June 2002, some 2 years and 9 months after the defence was first filed. Because the plaintiffs sought aggravated damages, the plaintiff proved at trial that the defendant Higgins acted maliciously: see my reasons for judgment, para [125]. Higgins did not give evidence. Mr Heywood-Smith QC submitted that I should draw the inference that Higgins, and therefore the NLC, knew, or ought to have known, from the outset that the defences being run were plainly not maintainable.

[8] Counsel for the defendants, Mr Lynch, submitted that I ought not draw the inference that the defences were hopeless. He submitted that the reasons why the defences were maintained were not known to the Court, and if the Court is to go into such matter, the time of the Court in dealing with costs issues would be expanded dramatically. Mr Lynch mentioned a number of possible reasons, including the readiness of the case, the availability of witnesses, and the strength of the evidence as the kind of factors which might explain why the defences were maintained in this case. These sort of arguments might explain why the NLC had difficulty in realising that its defences were untenable, but so far as Higgins is concerned, he must have known the true state of affairs as to why he published the libel. Even if it took the NLC some time to discover the truth, it is responsible for Higgins' conduct and must bear the consequences.

[9] Alternatively, Mr Lynch submitted that no indemnity costs order should be made in respect of work done prior to 15 August 2001, because there were defects in the plaintiffs' pleadings which were not cured until then and because the way the plaintiffs put their cases had varied considerably up until then.

[10] The original statement of claim was not filed until 10 March 1999. That statement of claim alleged publication of the briefing notes (the defamatory publication) by Higgins to Mr Pearce and to the second defendant, the NLC, and by the second defendant to a meeting of the Board of the Northern Territory Tourist Commission. As well, the statement of claim complained of the publication of the briefing notes to a firm of solicitors who were acting for Davidsons Arnhemland Safaris Pty Ltd and others in another libel action brought by the plaintiffs, and the further publication by Higgins to the Federal Court of Australia of the briefing notes in the course of his giving evidence as a witness - occasions I would have thought were plainly protected by absolute privilege. The amended statement of claim was filed on 2 September 1999. This alleged publication by Higgins to Mr Pearce and the NLC. The allegations of publication to the Tourist Commission and to the solicitors and the Federal Court were omitted. A further amended statement of claim was filed on 30 November 2000. This reinstated the allegation of publication by the NLC of the briefing notes to the Commission, and added, to the Parks and Wildlife Commission of the Northern Territory. Amendments were also made to the meanings for which the plaintiffs contended. The amended statement of claim was amended again by a further amended statement of claim filed 25 May 2001. This omitted entirely the allegation of a publication to the Tourist Commission and to the Parks and Wildlife Commission. A second further amended statement of claim (in reality the third) was filed on 15 August 2001. This reintroduced publication to the Tourist Commission, as well as the member bodies who had representatives on the Board of the Commission, and a further republication of the defamation to the Minister for Tourism. The third (and final) amended statement of claim was filed on 18 June 2002, but made no changes of any significance.

[11] It must also be recalled exactly what remained in issue after the commencement of the trial. The defences of fair comment, qualified privilege, and s 6 of the Defamation Act were gone. Publication was admitted, but only to Mr Pearce (see para 12 of my judgment). Truth was never pleaded. Because the plaintiffs asserted express malice, this still needed to be proved in support of the claim for aggravated damages. Limited concessions were made about the meanings and innuendoes alleged by the plaintiff. In fact, the major factual issues between the parties still mostly remained to be litigated, notwithstanding the defendants' admission of liability. It is difficult to see what evidential matters no longer remained to be proved by the plaintiffs, although no doubt there were some. But I am unable to find that the lateness of this admission resulted in any significant wasted or unnecessary costs, or were a major contributor to any delay in bringing the action to trial. In the circumstances, although I consider that the inference can be drawn that these defences were hopeless to the knowledge of the defendants, or at least that the defendants ought to have known that these defences were hopeless, I am not convinced that the failure to admit liability earlier had any significant impact on the litigation such as to warrant an indemnity costs order.

[12] Mr Heywood-Smith QC submitted that I ought to make an indemnity costs order on another ground, viz, that the defendants acted unreasonably in negotiations towards settlement. Evidence was placed before me in affidavit form as to the course of without prejudice negotiations between the parties. Suffice it to say, that the defendants' highest offer fell well short of the amount of the eventual award; but the plaintiffs' lowest offer was about $165,000 above the eventual award, and was subject to conditions which I could not have awarded to the plaintiffs, but which would have been of considerable monetary value to the plaintiffs. Mr Penfold asserts that if the defendants had made an offer in the order of $500,000 plus costs prior to trial, with or without an apology, and with or without the granting of renewed hunting licences, the matter would have settled. No such offer was ever made to the defendants. It was open to the plaintiffs to make a formal offer of settlement, pursuant to r 26.11 of the Supreme Court Rules, of $500,000 plus costs, with or without an apology. If the plaintiffs had done so, they may have even enlivened my jurisdiction to have an award of costs on a solicitor and client basis (see r 26.11(3)) which, in this jurisdiction, is an even more favourable basis than an indemnity basis. The plaintiffs did not do so.

[13] Inherent in the plaintiffs' submission is an assertion that the defendants are under an obligation to make an offer of settlement "in the ball park", and if a plaintiff (who is under no obligation to make any offer at all) makes an offer "in the ball park" which is rejected, and no counter-offer is made which is within the likely range, this is "imprudent and plainly unreasonable" conduct by the defendants, warranting an indemnity costs order. Mr Heywood-Smith QC referred me to MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd and Another (No 2) (1996) 70 FCR 236, but I am unable to see how that authority assists him. That case was concerned with a Caldebank offer made by the successful plaintiff shortly prior to trial. The offer ($2,200,000 plus costs) was some $540,000 less than the ultimate award of costs by the Court. Lindgren J nevertheless refused to depart from the usual rule because the defendants had an arguable case for a much lower award, whilst the plaintiffs' offer would have been seen as "virtually no compromise" and "a virtual capitulation". That case is plainly distinguishable from the facts of this case. Moreover, I do not accept the argument that plaintiffs are under no obligation to make any offers of settlement. Plaintiffs are in no different position to that of defendants. Both may make offers under the rules of court: see r 26.02(1) and (2), and r 26.11. In this case, no offer to settle was made by the plaintiff which was less than the amount I awarded. Further, the defendants plainly had an arguable case as to the extent of the damages, particularly as to issues as to the extent of the publication. I do not consider that it has been shown that the defendants' conduct was unreasonable such as to warrant departure from the usual rule.

[14] I therefore reject the plaintiffs' application for an indemnity costs order.

[15] Counsel for the defendants, Mr Lynch, submitted that the defendants were successful, or substantially successful, in respect of the claim of Hunt Australia Pty Ltd for special damages and that, therefore, a just order would be to require the defendants to pay 50% of the plaintiffs' costs of the proceedings.

[16] It is well established that a successful party who has failed on some issues may be deprived of the costs of those issues, and may also be ordered to pay the other party's costs thereof. The word "issue" is not used in this context in any pleading sense, but refers to any disputed question of fact or law: see Cretazzo v Lombardi (1975) 13 SASR 4 at 12; Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748; North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) [2002] FCA 564 at para 81.

[17] Nevertheless, the exercise of the discretion should be exercised with caution. As Alsop J said in Anheuser-Busch Inc v Budëjovický Budvar, Národní Podnik (2002) BC200202426 at para [5]:

There are powerful considerations weighing heavily against overly enthusiastic attempts to divide up a case by issues and examine the `score' by reference to an issue count. I refer to Cretazzo v Lombardi (1975) 13 SASR 4, 15; Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261; and Australian Trade Commission v Disktravel [2000] FCA 62. There is a powerful consideration that parties should not be dissuaded from litigating all issues, not unreasonably raised, in furtherance of their claim or defence and that the `loser' should not anticipate an ability to fund its position out of issues won. Apart from anything else, this could lend an additional complexity to litigation which would be undesirable. On the other hand, a powerful point was made by Wilcox J in Commissioner of Australian Federal Police v Razzi (No 2) [1991] FCA 267; (1991) 101 ALR 425, 430 that a realisation in parties that the loss of issues may have cost consequences, may, with the cost of litigation so high, encourage the parties to choose their fields of battle with some care.

[18] A useful guide was offered by Giles J in NRMA Ltd & Ors v Morgan & Ors (No 3) [1999] NSWSC 768 at para 24:

If a party fails on some issues, the circumstances may make it reasonable that he be deprived of the costs of those issues, or even be ordered to pay the other party's costs of those issues. For this purpose, issues may be issues in a pleading sense of bases of claim, or may be disputed questions of fact or law. But it must be remembered that parties should not be dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case, and unless a particular issue or group of issues is clearly dominant or separable from the balance of the proceedings it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between the issues on which he was successful and those on which he failed.

[19] The plaintiffs' claim, as opened, and as presented to the Court, particularly through the witness South, contained a significant claim for financial loss, loss of value of its business, and abnormal expenditure incurred as a result of the need for Hunt Australia to remove camp sites on four occasions.

[20] Much of the evidence relating to the computation of those losses was based on assumptions relied upon by Mr South, which I found were invalid or not proved. Of particular significance were issues going to or dependent upon the question of whether the defendants were responsible for the republication of a letter written by the Minister dated 23 December 1994. I found that any damage caused as a result of the circulation of the Minister's letter was too remote and not, in any event, caused by the publication of the briefing notes. Also of significance was the plaintiffs' allegation that the decision of the Coburg Peninsular Sanctuary Board not to renew a particular licence held by Wimray Safaris was caused by the publication of the briefing notes. I found against the plaintiffs on that issue, as well. Although I did make an award of general damages to Hunt Australia of $400,000 for loss of goodwill, lost economic opportunity and loss of business, this was considerably less than the $2.839 million originally claimed by way of special damages. I accept also the contention of the defendants that the expert evidence called on this issue by the plaintiffs did not greatly assist the plaintiffs. To the extent that the claim was based on an alleged loss of value of the business (as a result of a loss of sale of the business to a Mr Gifford) that claim was rejected entirely. No amount was awarded for camp removals. These issues occupied a considerable proportion of the time which the hearing occupied. According to the defendants, some 443 pages out of 1198 pages of transcript of evidence and argument were occupied by the special damages claim. Counsel for the plaintiff suggested it was, in fact, 371 pages - a figure later accepted by Mr Lynch. In addition, a significant portion of the evidence of Mrs Penfold, Mr Bleakley and Mr Penfold related to the special damages claim. In general, I accept the defendants' submissions.

[21] Of course, there were also substantial issues on which the plaintiffs succeeded, and the defendants acknowledge that it may not be practical to order that the taxing officer separately tax out the significant issues and sub-issues which the defendants won. I agree a reduction in costs awarded is more appropriate.

[22] I do not propose to award no costs in respect of the witness South. I think that would be unfair to the plaintiffs. Not all of South's evidence was of no assistance.

[23] Doing the best I can, and using a broad-brush approach, I consider that a fair and just result would be to order the defendants to pay 65% of the plaintiffs' costs to be taxed on the standard basis.

[24] Interest is payable on costs from the date of the order, unless the Court otherwise orders: see r 59.02(1) and my judgment in Matzat v Gove Flying Club Incorporated & Others (unreported, 19/6/98) at pp 11-12. Undoubtedly, I have power to backdate the order to the date of judgment so that interest runs from that time, but as I pointed out in Matzat, the power to antedate should only be used on "good ground shown".

[25] In the present case, judgment was delivered on 11 December 2002. The plaintiffs' solicitors approached the defendants' solicitors within a week concerning costs, but it was suggested that it was better dealt with through counsel. The plaintiffs attempted to negotiate with the defendants' counsel and made an offer in February. No offer was forthcoming from the defendants, so in late March the matter was listed before me on 14 July, apparently the first available hearing date.

[26] In Matzat I refused to backdate the order because there was no evidence that the plaintiff had already paid his solicitors, and I was not told of any arrangement to pay interest on costs to the plaintiffs' solicitors. In the present case I am aware, from matters which arose during the course of the proceedings, that the plaintiffs have outlayed money to meet counsel fees and solicitors' fees and, unlike Matzat, the reason for the delay in obtaining a costs order is apparent.

[27] In the circumstances, the delay in finalising the costs orders appear to have been caused, in part, by the failure of the defendants to indicate what their attitude was, as well as to a matter out of the control of the parties; ie: the fact that an earlier hearing date was unavailable. In the meantime, the defendants have had the use of the money. In all the circumstances, I think it is appropriate to antedate the costs order to the date of judgment; ie: to 11 December 2002.

1. That the defendants pay 65% of the plaintiffs' costs of the action to be taxed on the standard basis.

2. That order 1 be antedated to take effect as from 11 December 2002.