Plaintiff v Defendant

2 Two offers were made by Mr Katis to Mr Williams to settle the case. One was, in effect, an offer to capitulate, and the other (made on the eve of the trial) was incomplete. When the offer was provided in complete form on the morning of the trial, Mr Williams had little time to make a decision.

3 I have determined that Mr Katis' application for indemnity costs fails. Neither offer was unreasonably rejected by Mr Williams. Accordingly, Mr Williams should pay Mr Katis' costs of and incidental to the proceeding on a 'party and party' basis up to and including 31 March 2013, and thereafter on a 'standard' basis.

5 Counsel for Mr Katis submits that his client's costs should be paid by Mr Williams on an indemnity basis, on either of the following bases:

(a) Pursuant to section 40(2)(b) of the Defamation Act 2005 (Vic) (the Act), which provides that a court must, unless the interests of justice otherwise require, order costs of and incidental to the proceedings to be assessed on an indemnity basis, if a plaintiff has been unsuccessful in those proceedings, and if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant; or

(b) Pursuant to the Calderbank/Hazeldene principles regarding offers of compromise,[3] which provide that where a party makes an offer of settlement in the course of proceedings which is 'unreasonably' rejected, and the offeror achieves a judgment result more advantageous to him or her than in either of the offers made, the party that rejected the offer should pay the offeror's costs on an indemnity basis.

6 Both of the settlement offers made by Mr Katis prior to the commencement of the trial were either impliedly or expressly rejected by Mr Williams. Counsel for Mr Katis contends that indemnity costs should be paid by Mr Williams either for the entirety of the proceeding, or from at least the first day of the trial.

7 Conversely, counsel for Mr Williams submits that he should only pay Mr Katis' costs of and incidental to the proceeding on a 'party and party' basis. Given the majority of the proceeding (and work involved) occurred after 1 April 2013 (the date on which the Supreme Court's new costs regime commenced),[4] I think it more accurate to identify the submission as being that Mr Katis' costs should be paid by Mr Williams on a 'party and party' basis up until 1 April, and thereafter on a 'standard' basis.

8 Counsel for Mr Williams argues that the circumstances of Mr Katis' two settlement offers weigh against the making of an indemnity costs order - namely that:

(a) the first offer (if accepted) would have amounted to a complete capitulation by Mr Williams; and

(b) the second offer was received at a very late stage and only open to acceptance for a very short period, and was derisory (being received without an apology and only for a partial contribution towards the costs that Mr Williams had incurred at that stage).

9 The rejection of the offers made to Mr Williams was not unreasonable, it was submitted, on both the Calderbank/Hazeldene principles and under section 40 of the Act.

10 I received an affidavit from each of the instructing solicitors as to the circumstances concerning offers made by each party. Generally speaking, there was no conflict as to the facts deposed by either.

11 The first settlement offer was on 15 April 2014, when solicitors for Mr Katis wrote to Mr Williams and made an offer of settlement on the basis that each party 'bear its own costs'. There was no deadline by which the offer had to be accepted. It was formally rejected in writing by Mr Williams' solicitors on 1 May 2014.

12 The second settlement offer was on 21 July 2014 - the eve of the trial, and after a judicial mediation held that day. Mr Katis offered Mr Williams 'in full and final satisfaction of [Mr Williams'] claims (inclusive of costs and interest)':

(a) $20,000 (to be paid on or before 21 August 2014); and

(b) That the parties issue to the public the following joint statement:

At the election for the Robinvale Ward of the Swan Hill Rural City Council held in October 2012, John Katis and Tim Williams stood as the opposing candidates with Mr Katis being declared the winner by the narrow margin of approximately 20 votes.

The election campaign was fought hard by each candidate resulting in each saying and doing things in respect of name and reputation to the other to which each of Mr Katis and Mr Williams took exception.

It is likely that each of Mr Katis and Mr Williams will offer himself as a candidate at the next council election for the Robinvale ward.

Mr Katis and Mr Williams wish it known that whilst each did not intend to harm or damage the good name and reputation of the other, Mr Katis and Mr Williams sincerely regret that harm may have been caused or damaged to reputation caused by the statements and actions of the other.

Mr Katis and Mr Williams wish it known that each is fully committed to serving the people of Robinvale and to the advancement of their interests within the Swan Hill Rural City Council.

The offer remained open until 10am on 22 July 2014.

13 Significantly, the offer on 21 July did not annex the joint statement mentioned in the letter. It was inadvertently omitted by solicitors for Mr Katis, and was provided to Mr Williams' solicitors at approximately 9am[5] or 9.15am[6] the next day - the first day of the trial, which was to commence at 10am.

14 The second offer was not formally rejected, either in writing or otherwise. Rather, the offer was impliedly rejected when 10am passed and the trial commenced on 22 July.[7]

15 Section 40 of the Act provides as follows:

(1) In awarding costs in defamation proceedings, the court may have regard to -

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

(b) any other matters that the court considers relevant.

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

(a) if defamation proceedings 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 defamation proceedings 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.

settlement offer means any 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), that was a reasonable offer at the time it was made.

16 In relation to the application of the equivalent New South Wales provision (identical in terms to section 40), McClellan CJ said in Davis v Nationwide News Pty Ltd:

The special costs provisions were introduced following a concern that the costs of defamation proceedings may prohibit persons who have a legitimate claim from pursuing relief. Unless in appropriate cases costs were awarded on an indemnity basis the plaintiff may be out of pocket to such an extent that the risks in bringing proceedings were unacceptable. Furthermore, the intention of the legislation was to promote a "speedy and non-litigious method of resolving disputes and to avoid protracted litigation wherever possible" (Second Reading Speech, Legislative Assembly, 12 November 2002) ...

Section 40(2) obliges parties to defamation proceedings to take a reasonable approach to negotiations for the settlement of those proceedings. A party who unreasonably fails to make or accept a settlement offer may be ordered to pay costs on an indemnity basis. The amount of the offer is relevant for the purpose of assessing the reasonableness of a party's conduct. The section contemplates that an order for costs on an indemnity basis may be made even if a party making an offer does not do better in the proceeding than the offer which he or she has made.[8]

17 The principles to be applied in an application concerning Calderbank offers are well established and were set out by the Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) as follows:

The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.[9]

18 These considerations (which are non-exhaustive) are relevant in determining whether the rejection of the offer was 'unreasonable' in the circumstances. In other words, the test to be applied is in essence similar to that set out in section 40 of the Act.

19 Thus, the primary question under both the Act and on the Calderbank/Hazeldene principles is whether it was unreasonable for Mr Williams to have rejected the offers made by Mr Katis. The relevant considerations are effectively the same - particularly as section 40(1)(b) of the Act provides a broad discretion as to the factors the court may take into account.

20 The major point of difference between the two approaches relates to the consequences of an unreasonable refusal or failure to accept. Under section 40 of the Act, the unreasonable failure to accept an offer, prima facie results in an order for the costs of the entire proceeding to be made on an indemnity basis - unless the interests of justice require otherwise. On the other hand, under the Calderbank/Hazeldene principles, the scope of the order for indemnity costs is discretionary. Usually, but not invariably, the order for indemnity costs is made from the date of the unreasonable refusal of the offer.[10]

21 The April 2014 offer by Mr Katis was in substance an offer for Mr Williams to capitulate. It effectively asked Mr Williams to 'walk away' from the proceeding with each party bearing their own costs. The Court of Appeal said in Commissioner of State Revenue v Challenger Listed Investments Ltd (as Trustee for Challenger Diversified Property Trust 1) (No 2) that:

There is authority to the effect that where the offer does not involve a genuine compromise, but is in fact either an invitation to capitulate or a derisory or nominal offer, it would not be unreasonable for the losing party to have rejected it.[11]

22 It is true, as submitted by counsel for Mr Katis, that my reasons for judgment contain a number of adverse findings against Mr Williams. Having said that, the test of unreasonableness must be applied at the time of the receipt of the offer, not with the benefit of hindsight knowing the reasoning of the trial judge. Both Mr Katis and Mr Williams were less than satisfactory witnesses and trying to second-guess how the tribunal of fact would analyse their evidence was a difficult task.

23 As Habersberger J stated in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3):

...[A]s the determination of whether it was unreasonable for the offeree to have rejected the offer is made 'as at the time, or within a reasonably short time after, the offer' was made, the Court should not too readily embrace submissions that it was inevitable that the proceedings would fail. As Hamilton J put it in Grynberg v Muller:

These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious.[12]

24 It follows that notwithstanding my ultimate conclusions as to the outcome of the proceeding, the case was not so hopeless as to justify acceptance of an offer, in effect, to capitulate.

25 Accordingly, I put the April 2014 offer to one side.

26 The real question is whether the 21 July offer was properly made by Mr Katis, and if so, whether it was unreasonably refused by Mr Williams. The question of the missing 'attached' joint statement is germane to this issue.[13]

27 The joint statement was not provided to Mr Williams' solicitors until around 9am or 9.15am on 22 July 2012. The affidavit of Mr Katis' solicitor, Mr Christopher Mahon, suggested that the joint statement was not 'new', as it had been proposed to Mr Williams during the course of a judicial mediation on 21 July and rejected by him that day. According to Mr Mahon, the joint statement provided on the morning of 22 July was either 'identical or substantially the same' as that considered during the mediation, save that it 'may have had very minor corrections of typographical errors and the like which in no way changed the meaning and effect of the joint statement'.[14]

28 Although Mr Williams may have had a reasonable idea of the substance of the (omitted) joint statement when the offer was first made on 21 July, neither he nor his solicitors would not have had any certainty as to the full extent of the offer (in the sense of the precise wording of the joint statement) until it was properly provided the next morning.

29 The necessity of an offer of settlement being sufficiently clear has been emphasised in numerous cases concerning the application of the Calderbank/Hazeldene principles.[15] It goes without saying that an offer must be clear enough to be capable of acceptance, in that the offer must be provided in meaningful and complete terms. The offer of 21 July was incomplete; it could not have been accepted until the contents of the attachment were provided so that if Mr Williams accepted, he knew exactly what he was agreeing to.

30 It follows that Mr Katis' offer of settlement was in reality only open for acceptance by Mr Williams when the attachment was provided on 22 July - in effect, for 45 minutes to one hour at the most.[16]

31 The question then is whether in these circumstances Mr Williams' failure to accept the offer on the morning of 22 July was unreasonable.

32 I reject the proposition that the offer was derisory. Whilst it may not have contained an apology, the joint statement went some way towards a reconciliation and was clearly directed at enabling the combatants to run in the next local election with some dignity. Moreover, the sum of $20,000 was not a paltry figure in the scheme of this case.[17]

33 The second point is Mr Williams' conduct. Counsel for Mr Katis submitted that Mr Williams' 'unreasonableness' in refusing the July offer is informed by Mr Williams' conduct during the proceeding and his credibility as a witness,[18] In particular, he referred to my finding that Mr Williams knowingly gave false evidence to overcome forensic problems in his case,[19] and continued the proceeding to the 'bitter end' despite being responsible for the incidents that were the genesis of the defamatory imputations.[20]

34 Whilst I accept that Mr Williams was responsible for both incidents giving rise to the defamatory imputations, Mr Katis' comments were defamatory (which was accepted by Mr Katis), and Mr Williams was entitled to attempt to defend his reputation.

35 Leaving aside Mr Williams' credit, there was nothing in the way in which he or his counsel conducted the case to justify a special costs order. The proceeding was run expeditiously and without the excessive calling of witnesses.

36 Moreover, I also found Mr Katis to be an unsatisfactory witness.[21] As I said in my reasons for judgment, neither Mr Williams nor Mr Katis were impressive witnesses and both appeared to gild the lily or reconstruct events so as to advance their respective cases.[22]

37 In these circumstances, the primary consideration as to the reasonableness of Mr Williams' refusal is whether he had adequate time to contemplate the offer.

38 Despite my view that 'there were ample opportunities to resolve this dispute, not the least being a judicial mediation which occurred the day before the trial commenced',[23] Mr Williams was entitled to reject an offer at extremely short notice and was not 'reckless' to proceed to trial. Forty-five or sixty minutes on the morning of the trial is an extremely short time frame in which to assess whether or not to abandon a proceeding which had been on foot for over a year, and up until that point, had been fiercely contested by both parties. I do not accept that it was reasonable to expect Mr Williams to speculate overnight as to what the missing attachment may have contained. Whilst he may have anticipated that it would be in similar terms to the earlier document, he was entitled to know for certain what he was signing up to before he made a decision.

39 Notably, the offer made by Mr Katis was not extended past 10am on the first day of the trial. No further time was offered, notwithstanding the shortened time frame for acceptance caused by Mr Katis' failure to provide the full offer in the first instance. In my view, the onus was clearly on Mr Katis as the offeror to make the offer as clear as practicable, particularly as it was intended to be relied upon in making a special costs application.

40 Having regard to the chapeau of section 40(2)(b) of the Act, I think the interests of justice require that Mr Katis not be awarded costs on an indemnity basis.[24] A similar result occurs on the application of the Calderbank/Hazeldene principles.

41 Accordingly, Mr Katis' application for indemnity costs fails.

42 As previously indicated, counsel for Mr Williams submits that he should only pay Mr Katis' costs of and incidental to the proceeding on a 'party and party' basis. However, a 'party and party' method of assessment is no longer available under the Supreme Court (General Civil Procedure) Rules 2005 (Vic). Now, costs are assessed on a 'standard basis.'

43 In Jane v Bob Jane Corporation Pty Ltd (No 2),[25] Sifris J ruled that for work before the commencement of the rule change, costs of a successful party are presumptively to be quantified on the old basis. Put simply, the new rules do not have a retrospective effect.

44 The writ in this proceeding was issued on 21 March 2013, just prior to the new regime commencing on 1 April. Accordingly, any costs incurred by Mr Katis up to and including 31 March should be assessed on the former 'party and party' basis, and any costs thereafter are to be assessed on a 'standard' basis as per rule 63.30 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).

45 There should be no order as to costs in relation to this application.

46 Mr Katis' offer of 15 April 2014 was effectively an invitation to capitulate, and accordingly, not unreasonable for Mr Williams to reject. Further, Mr Williams' failure to accept the 21 or 22 July settlement offer of Mr Katis was also not unreasonable, in light of the extremely limited amount of time that he was permitted to consider the offer.

47 I will order that Mr Katis' costs of and incidental to the proceeding be paid by Mr Williams on a 'party and party' basis up to and including 31 March 2013, and thereafter on a 'standard' basis, excluding any costs associated with this application.

[1] Williams v Katis [2014] VSC 405.

[2] In the Defendant's submissions on costs dated 5 September 2014 the Defendant sought leave under s 67 of the Civil Procedure Act 2010 (Vic) to admit the affidavit of Mr Christopher Mahon (dated 4 September 2014), as the affidavit referred to matters discussed at a judicial mediation. By order dated 11 September 2014, I ordered that, having regard to the interests of justice and fairness (as per s 67), those parts of Mr Mahon's affidavit relating to the production or distribution of the joint statement be admitted.

[3] Calderbank v Calderbank [1975] 3 All ER 333 and Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435.

[4] On 1 April 2013 a new costs regime commenced in the Supreme Court of Victoria which replaced 'party and party', 'client-solicitor' and 'indemnity' costs methods with two streamlined bases for assessing costs: 'standard' and 'indemnity' (refer to Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012).

[5] The affidavit of Mr Christopher Mahon dated 4 September 2014 stated that Mr Mahon gave the offer and joint statement to Ms Boreham (solicitor for the plaintiff) at 9am, after waiting outside her office for 15 minutes.

[6] The affidavit of Ms Rebecca Boreham stated that Mr Mahon gave her the offer and joint statement at her office at 9.15am.

[7] As counsel for Mr Katis pointed out, s 40(2) of the Act contemplates a 'failure to accept' rather than express rejection.

[8] [2008] NSWSC 946, [26]―[27].

[9] [2005] VSCA 298; (2005) 13 VR 435, [25].

[10] Eg. Foster v Galea (No 2) [2008] VSC 331, [20]; Love v State of Victoria (No 2) [2009] VSC 531, [63].

[11] [2011] VSCA 398, [13].

[12] [2012] VSC 414, [63] (citations omitted).

[14] As discussed at footnote 2, I considered it to be in the interests of justice and fairness that the affidavit of Mr Mahon dated 4 September 2014 concerning the production or distribution of the joint statement be admitted, notwithstanding the fact that the affidavit deposed as to matters discussed at a judicial mediation.

[15] See for example Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65, [13]; Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Llyod's, London & Ors (Ruling No 2) [2011] VSC 636.

[16] Despite the short time frame for acceptance, the offer of 22 July clearly constitutes a 'settlement offer' for the purposes of s 40 of the Act.

[17] As stated in Williams v Katis [2014] VSC 405, all but one of the defamatory publications in issue in the proceeding were directed at a very small audience: a journalist for WIN TV, Ms Emily White, and a local solicitor who had acted for both men, Mr Brian O'Haire. Damages would necessarily have been minimal for these publications. I accept that the WIN TV publication, however, would have attracted a larger award of damages.

[18] Holt v TCN Channel Nine Pty Ltd (No. 2) [2012] NSWC 968, [33] (Adamson J).

[19] Williams v Katis [2014] VSC 405, [20], [68]―[82].

[20] Williams v Katis [2014] VSC 405, [258].

[21] Williams v Katis [2014] VSC 405, [21].

[22] Williams v Katis [2014] VSC 405, [17].

[23] Williams v Katis [2014] VSC 405, [259].

[24] As per the chapeau of s 40(2) of the Act.

[25] [2013] VSC 467, [5]―[8].