Plaintiff v Defendants

2 The defendants made two offers to settle the proceeding, which were rejected by the plaintiff. The defendants submit a special order for costs should be made pursuant to s 40(2)(b) of the Defamation Act 2005 (Vic) ('the Act'), or alternatively in accordance with the principles derived from Calderbank v Calderbank.[1] The plaintiff submits the defendants have not established that his failure to accept the offers was unreasonable, and that indemnity costs should not be awarded.

3 The plaintiff commenced the proceeding on 5 April 2019.

4 On 11 June 2019 an order was made fixing the proceeding for trial on 20 July 2020.

5 The proceeding did not resolve at mediation on 31 October 2019.

6 On 30 June 2020 the defendants conveyed an offer to the plaintiff to settle the proceeding on the basis that:

(a) the proceeding be discontinued, with the parties to bear their own costs; and

(b) the first defendant make certain amendments to the article and publish a statement of clarification.

The offer was expressed to remain open for acceptance until 5:00pm on 8 July 2020. The letter conveying the offer stated:

This offer is made pursuant to the principles discussed in Calderbank v Calderbank (1975) 3 All ER 333 and the ABC reserves the right to produce this letter on the question of costs.

7 On 2 July 2020 the plaintiff applied to vacate the trial listed for 20 July 2020 on the basis that he had sought a jury trial in accordance with the Supreme Court (General Civil Procedure) Rules 2015 (Vic), which was not possible at that time because of restrictions caused by the COVID-19 pandemic. On 10 July 2020 I delivered a ruling dismissing the plaintiff's application.

8 On 10 July 2020 the defendants conveyed an offer to settle the proceeding on the same terms as their previous offer. The defendants stated they made this offer notwithstanding their expectation that they would obtain an order that the plaintiff pay their costs of the unsuccessful application to adjourn the trial. The offer was expressed to remain open for acceptance until 5:00pm on 14 July 2020. The letter conveying the offer stated:

This offer is made pursuant to the principles discussed in Calderbank v Calderbank (1975) 3 All ER 333. The ABC will also rely on the provisions of s 40(2)(b) of the Defamation Act 2005 (Vic) in the event that your client is unsuccessful at trial.

The ABC reserves the right to produce this letter on the question of costs.

9 The plaintiff did not accept either of the defendants' offers.

10 The trial of the proceeding commenced on 22 July and concluded on 28 July 2020. Judgment was delivered on 26 February 2021.

11 Section 40 of the Act states:

Costs in defamation proceedings

(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 cases (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.

(3) In this section -

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.

12 A defendant must establish the following in order to recover indemnity costs under s 40 of the Act:

(a) The plaintiff was unsuccessful in the defamation proceeding;

(b) Costs in the proceeding are to be awarded to the defendant;

(c) The defendant made a settlement offer to the plaintiff in accordance with the provision; and

(d) The plaintiff unreasonably failed to accept that settlement offer.

If those elements are satisfied the court must award indemnity costs to the defendant unless the plaintiff establishes the interests of justice require otherwise.[2] In this case elements (a) and (b) are satisfied, and (c) and (d) require consideration.

13 In Marriner v Australian Super Developments Pty Ltd,[3] the Court of Appeal considered, in the context of rejection of a Calderbank offer, matters to which the Court should have regard in deciding whether rejection of the offer was unreasonable:

In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2], the Court of Appeal held that the rejection of a Calderbank offer is a matter to which the court should have regard when considering whether to order indemnity costs. The Court said that the critical question is whether the rejection of the offer was unreasonable in the circumstances. The Court emphasised that the discretion with respect to costs must be exercised taking into account all relevant considerations and that, in deciding whether the rejection of a Calderbank offer was unreasonable, the court 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;

(c) the extent of the compromise offered;

(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 indemnity costs in the event of the offeree's rejecting it.

14 It is not unreasonable for a losing party to reject an offer that does not involve a genuine compromise, but is an invitation to capitulate or a derisory offer.[4] The question is whether rejection of the offer was reasonable in the circumstances and at the time it was made.[5] An offer to capitulate may be reasonable if in the circumstances in which it was made it represents a genuine attempt to settle what may be a hopeless case.[6]

15 Both offers were made approaching the eve of trial when the issues in dispute were well defined and the parties' respective prospects ought to have been understood. The plaintiff's position in the litigation at the time of the offers was attended by significant risk because of the extremely high level at which the pleaded meanings were pitched, and the strong prima facie fair reporting defences. Notwithstanding these inherent weaknesses the defendants' offers afforded the plaintiff an opportunity to obtain a degree of vindication for his reputation by amendment of the article and publication of a separate clarification, which was relief the court was unable to grant. The offers also provided the plaintiff with an opportunity to avoid the costs of a trial. Neither of the offers was an offer to capitulate. Both offers were reasonable and the plaintiff's failure to accept those offers was unreasonable. There are no reasons why the interests of justice would not be served by an order that the plaintiff pay the defendant's costs of the proceeding on an indemnity basis.

16 The offers were not made at an early stage of the proceeding when amendment of the article and publication of a clarification by the defendants may have satisfactorily ameliorated the hurt and distress the plaintiff claimed he suffered by virtue of the article. The parties and their representatives are seasoned litigants, and an early offer (before substantial costs had been incurred) may have been persuasive. The pleadings give a sufficiently clear insight as to the respective merits of the parties' claims and position. This was not a case where the offers could only be made close to trial because the proceedings were complex and the issues in dispute were only well defined at that stage. Notwithstanding that he was unsuccessful in his claim, the court should not accept the suggestion that the plaintiff's case was weak, hopeless and/or should not have been prosecuted. In the circumstances the settlement offers were well capable of being characterised as offers to capitulate.

17 The most significant issues in the proceeding were whether the article carried the pleaded defamatory meanings and, if it did, whether the fair report defences were established. I accept the plaintiff's submission that the pleadings set these issues out in a way which enabled the parties to assess the respective merits of the plaintiff's claim and the pleaded defences. The respective merits of the parties' positions, which underpinned the offers, were known within a short time of the proceedings being issued, and could justifiably have led to a walk-away offer being made at an early stage before considerable costs were incurred by both parties.

18 I accept the plaintiff's submission that his case should not be characterised as hopeless. While the defendants successfully argued that the pleaded defamatory meanings were not made out, they accepted the very serious allegations against the plaintiff reported in the article were defamatory, but not at the level pleaded. The defendants conceded the article meant that the plaintiff was suspected of or had been investigated for the conduct reported in the article, but argued successfully that the article did not mean the plaintiff was guilty of that conduct. The defendants did not make a strike out application at any stage on the basis that the article was not capable of conveying the pleaded meanings. Further, the fair report defences were not straightforward. While the article did report on two court proceedings, it contained other information which linked and commented upon the matters reported from the proceedings. At issue was whether a fair report defence was established if a pleaded meaning was made out by inference from the interlinking information that was reported in the article, and whether there was impermissible intermingling.

19 The defendants' offer to amend the article, and to publish a statement on its 'corrections and clarifications' website page, was made over 16 months after the article was published and more than 12 months after the proceeding was issued. The value of that offer was greatly reduced by the length of time which had elapsed since the article was published. The offer was little more than an invitation to capitulate.

20 Taking into account all of the circumstances, in particular the stage of the proceeding at which the offers were received, the extent of the compromise offered, and the prospects of success in the proceeding, I conclude the offers did not involve a genuine compromise, and that it was not unreasonable for the plaintiff to have rejected them.

21 I will order that the plaintiff pay the defendants' costs of the proceeding on a standard basis.

[1] (1975) 3 All ER 333.

[2] Defteros v Google Inc & Anor (Costs) [2017] VSC 189, [4] (John Dixon J).

[3] [2016] VSCA 141, [234].

[4] Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398, [13].

[5] Ibid [14]; Nillumbik Shire Council v Victorian YMCA Community Programming Pty Ltd [2016] VSCA 192.

[6] Leichhardt Municipal Council v Green [2004] NSWCA 341, [21]-[37], [48]-[51]; Charan v Nationwide News Pty Ltd (Costs Ruling) [2018] VSC 89, [18].