Photi v Target Australia Pty Ltd

Civil Procedure Act 2005 (NSW), ss.60 and 98 LEGISLATION CITED: Defamation Act 1974 (NSW), ss.7A, 13 and 48A Defamation Act 2005(NSW) Supreme Court Rules 1970 (NSW), Part 52A r.33

Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 Brisbane South Regional Health Authority v Taylor (1996) 139 ALR 1 Jones v Sutton (No. 2) [2005] NSWCA 203 CASES CITED: National Auto Glass Supplies (Australia)Pty Ltd (No 9) [2007] FCA 1826 Photi v Target Australia Pty Ltd [2007] NSWDC 265 Photi v Target Australia Pty Ltd (No. 2) [2007] NSWDC 302 Sims v Wran [1984] 1 NSWLR 317 West & Anor v Nationwide News Pty Ltd [2003] NSWSC 767

PARTIES: Plaintiff: Julia Photi Defendant: Target Australia Pty Ltd

COUNSEL: Plaintiff: L Evans Defendant: M Barko

SOLICITORS: Plaintiff: Stephen Spinak Solicitor Defendant: McCabe Terrill

The plaintiff in these proceedings was awarded a total of $85,000 in damages in actions for assault, wrongful arrest, false imprisonment and defamation: Photi v Target Australia Pty Ltd [2007] NSWDC 265 (11 December 2007). Interest on damages has been agreed at $5,016.

The plaintiff now seeks an order for indemnity costs of the trial pursuant to s.48A Defamation Act 1974 (NSW) and s.98 Civil Procedure Act 2005 (NSW). The basis for the application is the defendant's conduct of the trial, and in particular the late application (made in the course of addresses) to amend the defence to plead a defence of qualified privilege at common law. The history of the delay to the proceedings caused by this late amendment is set out in my judgment of 11 December 2007 at [7] - [18]. Effectively, the handing down of judgment was delayed from 27 June (the last day of the trial) to 23 November (when the parties completed their submissions, following which I handed down my judgment of 11 December 2007).

The defendant concedes that the late amendment was made in circumstances warranting an order for indemnity costs, but submits that this should be restricted to the costs thrown away by reason of the late amendment, namely from 27 June to 23 November 2007. The defendant also relies upon s.48A to demonstrate the "reasonableness" of the defendant's conduct in accordance with that section, and submits that the conduct referred to in s.48A as constituting grounds for indemnity costs has not been made out.

This application raises an important issue in defamation actions, namely the costs issues specific to defamation actions which resulted in the enacting of s.48A. Although this section came into force on 17 February 2003, and was referred to (but not analysed or applied) in Jones v Sutton (No. 2) [2005] NSWCA 203, it has only been judicially considered once (by Graham J in the Federal Court), in National Auto Glass Supplies (Australia)Pty Ltd (No 9) [2007] FCA 1826 (23 November 2007), where the defendant brought the application. This is the first application brought by a plaintiff relying upon s.48A.

Section 48A provides: " 48A Costs in proceedings for defamation

(1) In awarding costs in respect of proceedings for defamation, the court may have regard to the following matters:

(a) the way in which the parties to the proceedings conducted their cases (including any misuse of a party's superior financial position to hinder the early resolution of the proceedings),

(b) whether the costs in the proceedings may exceed the quantum of damages to be awarded in the proceedings,

(c) such other matters as the court considers relevant.

(2) Without limiting subsection (1), a court must (unless the interests of justice require otherwise):

(a) if proceedings for defamation are successfully brought by a plaintiff and costs in the proceedings are to be awarded to the plaintiff - order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the defendant unreasonably failed to make a settlement offer or agree to a settlement offer proposed by the plaintiff, or

(b) if proceedings for defamation are unsuccessfully brought by a plaintiff and costs in the proceedings are to be awarded to the defendant - order costs of and incidental to the proceedings to be assessed on an indemnity basis if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant.

(3) In this section: "settlement offer" means any genuine offer to settle the proceedings made before the proceedings are determined and includes an offer to make amends (whether made before or after the proceedings are commenced)."

The circumstances leading to the enactment of s.48A can be traced through Hansard to a private member's Bill introduced by Mr David Barr MLA, the member for Manly. Mr Barr's concern about defamation costs arose after a particular defamation case caused great concern in his electorate. He put forward a private member's Bill designed to prevent plaintiffs who brought defamation actions where the actual damages were extremely small from claiming what he called "millions of dollars" in legal costs. Although the Bill was defeated, the NSW Government adopted some of his proposals which were put into the text of s.48A in the Defamation Bill 2002. The text of s.48A offered protection to plaintiffs as well as defendants in that the conduct of litigation (and in particular the failure to make settlement offers by a defendant) could be relied upon in relation to applications for costs, including indemnity costs. This is an important feature of this statutory provision.

Section 48A has never been referred to in Supreme Court litigation, possibly because Part 52A r.33 of the Supreme Court Rules 1970 (NSW) was amended in 2003 to remove defamation from the list of actions which required an application for recovery of costs for proceedings where the damages were less than $225,000. This occurred following the decision in West & Anor v Nationwide News Pty Ltd [2003] NSWSC 767 where Simpson J reduced the costs of plaintiffs who had been awarded a total of $50,000, on the basis that the litigation could have been conducted in the District Court. Simpson J noted this might lead to more defamation cases being commenced in the District Court. Part 52A r.33 of the Supreme Court Rules was then amended to exempt defamation actions from this requirement. (A further Bill brought by Mr Barr to prevent this amendment was defeated: Hansard, p.7134, 30 October 2003).

The desirability of a law to prevent the costs abuses that are allegedly a feature of defamation litigation led to the adoption of s.48A in the uniform defamation provisions enacted by all States and Territories of Australia. In the course of the Second Reading speech for the Defamation Act 2005(NSW), Mr Barr traced the history of abuse of costs in defamation and praised the introduction of s.40 into the new Act: " Mr DAVID BARR (Manly) [9.35 p.m.]: … A significant amendment is clause 22, which will put an end to separate section 7A trials. These were an abomination and had the effect of doubling costs because, in effect, two trials were conducted on the same matter. They involved a number of imputations, which became incredibly complicated. For example, the case of Jones v Sutton , in my neck of the woods, went for more than 11 days in a two-part trial. The damages awarded were $5,000 but the costs amounted to well over $1 million between the two parties…

The costs were massively out of proportion to the damages. One of my pet issues in the whole defamation debate is costs. All the various royal commissions, inquiries and whatever in many jurisdictions have focused on the complexities of the law - what tests should apply and so on - but none has dealt with costs in any significant manner. I introduced the Defamation Amendment (Costs) Bill 2002 to restrict costs orders comparative with the amount of damages awarded, but the House did not support it. The view of the Government and the Opposition was that it was too prescriptive. My view was that it was one way of discouraging the rich and powerful from engaging in frivolous actions because they would not be able to get costs."

Mr Barr went on to note that he had been successful in moving the amendment to the Defamation Act 1974 that inserted s.48A, and added: "I had hoped the courts would take [s.48A] on board. It is one way of addressing the disproportionality between damages and costs. The issue is serious because it means that the law, as in so many other areas, is the domain of the wealthy, because even minor matters can involve high costs. That is especially the case now that the Supreme Court rules have been amended and even minor matters go straight to the Supreme Court.

I opposed that proposal in this Chamber at that time, but once again I lost out. The Government and the Attorney should monitor costs because it is one area in which the law clearly has not been working the way it should."

The Civil Procedure Act and indemnity costs applications

The enactment of the Civil Procedure Act 2005 gave the court significant powers of case management, including costs, designed to ensure that the administration of justice is "just, quick and cheap", to use the formula in s.56.

Cases on delay in legislation such as Brisbane South Regional Health Authority v Taylor (1996) 139 ALR 1 generally deal with the problems created by delay before the hearing in the form of late amendments before the trial. Amendments during the trial create just as much, if not more, difficulty. The problems caused by cases becoming part-heard are considerable. Relevant issues, including issues of credit, need to be dealt with while the facts are fresh in the judge's mind, or the risk of judicial error through oversight increases. Adjourning a case part-heard creates not only expense and delay but also, more importantly, injustice, and it is a problem which in my view will continue until there are sanctions at appellate level concerning such conduct.

The action for defamation was a series of imputations pleaded as arising from statements allegedly made by the defendant's employee Mr Parker. At all relevant times he denied making these statements, as did the other witnesses called by the defendant. However, one witness called by the defendant, Mr Harb, admitted in cross-examination that he heard Mr Parker making these statements.

The defences pleaded were justification (s.15) and unlikelihood of harm (s.13), which do not require admissions of publication. The defendant brought the application to amend to plead qualified privilege at common law in the course of the defendant's counsel's closing address. The case then had to be adjourned part-heard. The plaintiff agreed to the amendment and reopened her case to file a Reply particularising malice. The defences all failed, including the defence of qualified privilege at common law.

The plaintiff brings her application on three bases: (a) pursuant to s.98 Civil Procedure Act , on the basis of the manner of conduct of the trial, including the late amendment;

(b) on common law principles concerning the costs consequences of late amendment: Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137; and

(c) pursuant to s.48A Defamation Act 1974. 15. The conduct complained of relates to all four defences to the defamation claim: (a) the late pleading of the common law qualified privilege claim, which delayed judgment from June to December 2007;

(b) the dropping of the s.7A defence in closing submissions;

(c) the dropping of the s.13 defence which the defendant gave no notice of until August 2007; and

(d) as to the justification defence, the circumstances in which the first hearing had to be adjourned because Mr Parker failed to attend, resulting in an order for indemnity costs. Mr Parker also showed reluctance to attend the second hearing, despite being served with a subpoena on this occasion. An application was made to me for the issue of a warrant for his arrest, which I refused: Photi v Target Australia Pty Ltd (No. 2) [2007] NSWDC 302. Mr Parker in fact attended the following day. This application caused delay during the trial.

The defendant in written submissions first asserted that a defence of qualified privilege had already been pleaded, in that the defence of justification refers to the matter complained of being published concerning a matter of public interest or, in the alternative, on an occasion of qualified privilege (defendant's submissions, paragraphs 2-4). The plaintiff did not ask for particulars during the trial and could not be heard to complain now about the absence of particulars.

While the form of the defence of justification does refer to "qualified privilege" (as an alternative to the public interest component of the defence), this does not amount to pleading a defence of qualified privilege. Qualified privilege is a defence that must be pleaded and particularised so that the plaintiff knows what case he or she has to meet: Sims v Wran [1984] 1 NSWLR 317. This was never done, and the case was conducted on the basis that Mr Parker never said the words attributed to him, not on the basis that the words were published on an occasion of qualified privilege at common law.

The defendant also submitted (submissions paragraphs 5-7) that Mr Evatt had stated he was not troubled by the lack of particularisation and that the only reason this had come up was because I had expressed concern about the lack of pleading or particulars for the defence. The defendant points to Mr Evatt's statement that "No one is going to the Court of Appeal" (T 251 line 20) as a concession that he did not object to the lack of pleadings or particulars (and presumably, would not appeal if he lost on this basis).

The plaintiff did consent to the amendment of the defence to plead qualified privilege at common law, because the plaintiff could not afford the costs associated with an appeal, as I indicated in my judgment of December 2007 at [16]. The plaintiff did, however, object that the amended defence was inadequately pleaded and that issues of malice were never able to be ventilated through cross-examination.

The defendant makes no submissions concerning the plaintiff's complaint about the late dropping of the s.7A and s.13 defences.

As to the problems with the defence of justification, the defendant submitted that Mr Parker, a former employee, was a person over whom the defendant had no control, and the fact that an order for indemnity costs was made in relation to the first trial date should be disregarded.

It is not to the defendant's credit that these proceedings, in addition to the adjournment caused by the late pleading of the qualified privilege defence, had a prior hearing adjourned in circumstances calling for an indemnity costs order. Time in court is a precious commodity. To cause one adjourned hearing is unfortunate, but to cause two adjournments looks like carelessness.

The defendant also submitted that as an offer of compromise (for $40,000 plus costs) had been served, the provisions of s.48A(2)(a) had not been made out. The plaintiff agreed with this submission, although noting the offer fell well short of the sum awarded.

Defamation is a cause of action akin to strict liability; once the publication has been proved, the question is whether the publication is excused, protected or justified by law. Thus an important threshold issue is whether or not publication is admitted.

Of the four defences advanced by the defendant, two (s.13 and s.7A) were abandoned in submissions. Whether or not the words were spoken had taken up a substantial part of the trial time. As to the defence of qualified privilege at common law, added during submissions, this was a hopeless defence in that Mr Parker denied ever saying the words. The fact that one of the defendant's witnesses agreed in cross-examination that Mr Parker did say these words could not, without more, constitute a basis for the defence. Finally, there were delays in the evidence concerning justification while Mr Barko unsuccessfully applied for a warrant concerning Mr Parker's failure to attend court.

While independently these flaws might fall short of warranting an order for indemnity costs, the cumulative effect is that the conduct of the defamation proceedings is such as to warrant an order for indemnity costs in accordance with the principles enunciated in s.98 Civil Procedure Act and s.48A Defamation Act.

However, the conduct of the actions for assault, wrongful arrest and false imprisonment were (with one exception, referred to below) unaffected by these problems. Should any order for indemnity costs be limited to the defamation claim, or should the order for indemnity costs extend to the whole of the costs from the first day of the trial?

The one exception concerning the conduct of the other causes of action is that the plaintiff was not able to obtain judgment for almost six months concerning these other claims as a result of the defendant's conduct of the defamation action she had brought.

If the difficulties caused by the defendant's late pleading of a defence of qualified privilege at common law had been attended to expeditiously, judgment could have been handed down shortly after 24 August. The defendant's failure to provide submissions in accordance with my orders of 27 June caused significant further delay. This delay impacted on all of the causes of action pleaded by the plaintiff, not just the defamation action.

It should be noted that the requirement for costs to be proportional to the remedy is not restricted to defamation actions; s.60 Civil Procedure Act contains a similar requirement. The defendant's conduct in relation to the defamation part of the claim caused delay to the whole of the litigation, which was compounded by the failure to provide written submissions, including written submissions on the claims for wrongful arrest, assault and false imprisonment.

Delay to the final resolution of proceedings is conducive to injustice whether the delay occurs prior to, during or at the end of a trial. If a trial date has to be vacated because of unreadiness of a party, subsequent unreadiness is likely to be viewed more seriously. In a busy court like the District Court, cases should only be adjourned part-heard in exceptional circumstances. If, when a case is adjourned part-heard, one of the parties ignores case management orders, it does so at peril as to costs.

Accordingly, I order the defendant to pay the costs of the hearing dates set out in the order below on an indemnity basis.

1. The defendant is to pay the plaintiff's costs for the hearing on 25-27 June and subsequent directions dates 9 August, 24 August, 18 September, 4 October, 9 November, 23 November, 11 December 2007 and 15 February 2008 on an indemnity basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.