Prouten v Buxton

The terms of reference for the referral

1. I made the following orders for referral of the parties' competing applications to a costs assessor: (1) The Court is to refer out for inquiry and report under Part 20, rule 14 of the UCPR the quantum of costs under the Court's costs orders (as a gross sum), alternatively: (a) On an ordinary basis; (b) On an indemnity basis. (2) The Court will communicate with the Manager, Costs Assessment, in relation to a suitable and available costs assessor as referee ("the Referee"). (3) The plaintiff is to file and serve evidence and submissions in relation to the defendant's application for lump sum costs by 15 July 2024, such order to be self-executing in nature. (4) The defendant is to file any submissions and evidence in reply by 22 July 2024. (5) On notice of the appointment of the Referee the Defendant is, within 2 business days, to give to the Referee: (a) an electronic copy of the defendant's evidence and submissions filed in relation to the lump sum costs application; (b) any evidence filed and served in the proceedings which is asserted to be relevant; (c) an electronic copy of the Court Book as tendered in the proceedings; (d) a copy of the Judgment of her Honour Judge Gibson dated 4 June 2024 for these proceedings; and (e) any other document, submissions or assistance requested by the Referee. (f) The plaintiff is to provide electronic copies of any documents required by the Referee within 3 days of request. (6) The Referee is to provide a copy of his or her report to the Court and to the parties by 2 September 2024. (7) The Court is to determine liability for the costs of the Referee. (8) The matter is set down for an adoption hearing on 12 September 2024.
2. On 9 August 2024, Mr Chris Wall, a costs assessor appointed in accordance with the parameters of inquiry set out in these orders, provided a report.

The issues for the court

1. The issues are: 1. Whether the court should adopt Mr Wall's report, or otherwise vary or reject it, in whole or in part, pursuant to UCPR r 20.24. 2. Whether the costs, either as adopted or varied, should be ordered to be paid on an ordered or on an indemnity basis.

How the referral process functions

1. The relevant principles are set out by McDougall J in Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7]. Even though that judgment predates Uniform Civil Procedure Rules r 20.24, McDougall J's summary of these principles is so well accepted that this judgment has been referred to in over a hundred judgments since.
2. The main points have been summarised by Lee J in Coshott v Prentice (No 3) [2019] FCA 1497 at [11] as follows: "There is no need for me to repeat, yet again, those principles save to draw attention to the following matters: (1) The discretion to adopt a report is to be exercised in a manner consistent with both the object and purpose of the Rules and the wider setting in which they take their place and it is undesirable to attempt to closely confine the manner in which the discretion is to be exercised; (2) It would undermine the purpose of the reference process for it to be treated as some kind of warm-up for the real contest and a right to be heard does not constitute a right to be heard twice; (3) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be seen as a basis for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness means a conclusion that no reasonable tribunal of fact could have reached."
3. The reference process offers a degree of finality in litigation because of these principles. The party seeking to challenge the report must establish errors of significance of the kind listed by Lee J.

Is the referee procedure appropriate for litigation costs?

1. Quantification and calculation of legal costs may be the subject of referral: Attard v James Legal Pty Ltd [2010] NSWCA 311; Newell; Muriniti v De Costi (2018) 97 NSWLR 398 at [236]. The appointment of a referee to determine legal costs issues is not common, but it is a course recommended as "desirable" (Professor G Dal Pont, Law of Costs (5th ed, 2021, LexisNexis) at [15.20]) where the court considers this appropriate. The saving on costs of a jointly shared expert, the speed at which the report can be prepared and the flexibility of the report format are attractive features where the parties have limited resources, as is the case here.
2. Referrals have been made where: 1. The court has determined to make a gross sum costs order: E Co (a pseudonym) v Q (a pseudonym) (No 5) [2019] NSWSC 844 at [106]. In such a case, the order itself should be expressed in terms of a gross sum costs order. 2. There are complex issues, or a great deal of documentation, and costs issues can be referred out for determination as a "relevant question": Coshott v Prentice (No 3) ("Coshott") (orders for referral in the Federal Court are made under ss 37P(2) and 54A of the Federal Court of Australia Act 1976 (Cth), but the procedure is similar). 3. A referee may provide guidance and assistance to the court on costs of a less formal nature, as occurred in In the matter of Fearndale Holdings Pty Ltd (admin apptd) (recs & mgrs apptd) [2019] NSWSC 1885; Hopkins v Edwards (No 2) [2020] VSC 698 and Milne v Benjafield & 3 Ors [2000] NSWSC 171. 4. There is a high degree of flexibility in terms of what a referee can be asked to determine in terms of legal costs; an example is the orders made in Prygodicz v Commonwealth of Australia (No 3) [2022] FCA 826.

What procedure should the referee follow?

1. It is important to note that Mr Wall was not asked to determine costs in accordance with the procedure followed by the Court where there is a lump sum application brought pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW). His purpose is to assist the court when it was contemplating making a gross sum costs order (report, paragraph 6.4). While he was asked to, and did, determine the costs as a gross sum and the plaintiff's application is described as a "lump sum application", Mr Wall's task was to inquire into the quantum of the costs, which gave him the freedom to look beyond the material provided and to draw upon his own expertise. What Mr Wall has done, effectively, is to take out what could be called the "guesswork" in a gross sum costs order made by the court by a careful analysis of the whole of the costs in question.
2. The same procedure was followed in Coshott, where Lee J set out, and commended, the referee's description of how the report process should be approached: "13. Although the process I am required to undertake is expressly not to descend into the detail of a taxation, I do not consider that the terms of the Relevant Question or Order 1(d) of the 21 June Orders mean, (as was submitted by Murphy Lyons on behalf of their Costs Respondent clients), that the "referral is on all fours with a lump sum assessment," at least, in so far as I have not been expressly directed by the Court to follow the lump-sum costs procedure as set out in the Court's Costs Practice Note (GPN-COSTS), which requires, inter alia, the provision by the costs applicant(s), of a costs summary in the form of an affidavit. That said, my task is not dissimilar to a lump sum assessment, to the extent that such an assessment involves "the application of a much broader brush than that applied on taxation", but which nevertheless requires an approach which is "logical fair and reasonable". 14. Only one of the claims for costs were supported by a bill of costs ostensibly drawn pursuant (sic) Schedule 3 of the FCR (Scale of Costs). This being the case I did have regard to the approach taken by the Court when determining lump sum costs in other matters, as well my own experience as to the quantum of costs allowed by the Court in lump sum assessments and of costs estimated by the Court as likely to be allowed on a full taxation pursuant to FCR, r 40.20. However, as I was able to conduct a 'line by line' analysis of the costs claimed in every case, allowing, disallowing or reducing each item using a four step process which I explain below, I did not apply a global reduction as is often applied when determining lump sum costs on the basis that the lump sum claimed would likely include costs that would be disallowed on taxation."
3. In Coshott, the objection was taken that the referee had not confined herself to a gross lump sum assessment of costs. Lee J rejected that submission: "18. The complaint advanced by Mr Smith in the course of his comprehensive submissions was that this process was unsatisfactory for broadly four reasons. First, the nature of the task was, as the referee herself recognised at [13], to perform a role not dissimilar to that performed on a lump-sum assessment (to the extent that such an assessment involves a broader brush approach than that applied on taxation). Despite this, the four-step process adopted an inconsistent course as it was akin to the process that ought to occur on a taxation. Secondly, the usual practice of the court when making a lump-sum costs assessment is to apply a discount, because without such a discount, there would be some risks that the sum includes costs that would not be recoverable on a taxation: see Hancock v Rinehart (Lump Sum Costs) [2015] NSWSC 1640 at [56]-[57] per Brereton J. Thirdly, there was unfairness occasioned to the costs respondents in each case because the costs claimants were able to provide draft bills of costs with detailed narratives, while the costs respondents were only invited to provide a very summary response to those claims, such that only limited and general objections were able to be made. Given the imbalance in favour of cost claimants, this is said to support the notion that a global discount should have been made. Finally, it was said that there was an overall unfairness by reason of the failure of the referee to directly consider the issues of quantum and proportionality as individual items which led to an outcome where, in a large number of cases, Mr Prentice was allowed 100% of his claimed costs and 90% on other occasions. 19. Despite Mr Smith's submissions, I do not consider that there is an error of principle or manifest unreasonableness such as would cause me to reject the Report. It is plain that in preparing the very thorough and comprehensive Report, the referee did turn her mind to whether or not particular claims should be allowed, disallowed or reduced by reference to her overall assessment of the matter based on the materials provided, including any submissions. The four-step process outlined did involve an assessment not only of quantum of an item but also rates and, importantly and critically, an assessment of whether the work was reasonably and properly incurred. The whole point of the process was to allow the referee to form assessments in a principled and cost-effective way. She evidently had regard to the material provided by the Coshott parties. I am satisfied that that the process did not miscarry and the findings of fact relating to quantum should not be re-agitated in this court."
4. Where a referee has descended into detail in this fashion, it is generally not necessary for there to be a gross sum "global discount" as well, as Lee J explained: "20 The flaw in the argument advanced by the Coshott parties is that although global discounts may well be appropriate when there has not been a descent to the detail as would occur on taxation, The referee here was faced with an amalgam of detail depending upon the nature of the claim. In those matters where there was able to be greater specificity, she performed a task which recognised that level of detail and hence was not required, as on a lump sum costs assessment, to form the view that a global discount was necessary in the circumstances. This does not seem to me to be a manifestly unreasonable or perverse conclusion that no referee similarly situated could have reached. Accordingly, I propose to adopt the Report in full."

How Mr Wall approached the assessment of costs

1. Mr Wall has set out his methodology at paragraphs 6.1 to 6.5. At 7.13, he notes that he has to take a "broad brush" approach. He accepts that there is a "normal range of discount" at 10 - 30% of the costs claimed, but concludes that these kinds of generalisations are not particularly helpful and that it is "better to look at the actual claims for costs, even if that is done relatively quickly, and in a relatively summary fashion" (at paragraph 7.16). He then sets out his methodology (at 8.1 ff) as follows: "The method I have adopted is: 8.1.1 To make findings as to the nature of the proceedings. I have done that and set out those findings above; 8.1.2 To indicate the appropriate rates for those that did the work; 8.1.3 To deal with broad issues raised by the parties; 8.1.4 To go through each of the bills to do a "summary assessment"; 8.1.5 To arrive at an amount for each of the bills on an ordinary basis and the indemnity basis; and then; 8.1.6 To reduce those amounts for contingencies, and to take into account that specific objections have not been made which may have resulted in further reductions. 8.2 I have gone through each of the bills to look at the likely level of costs that would be allowed on an indemnity and an ordinary basis. When I arrived at a figure on the ordinary basis, I reduced costs to 90% of that figure for the possibility that there may be some doubtful items. In making that reduction after doing the analysis referred to at 8.1 above, I take into account that there may have been some further reductions if Ms Prouten made specific objections to the bills, and thus drew to the attention of the assessor some particular items and objections. 8.3 For the same reasons, for indemnity costs I would make a reduction, but a lesser reduction after the analysis referred to at 8.1 above, to 95%. 8.4 Thus the total reduction are the individual reductions I have made, and then 10% for ordinary costs and 5% for indemnity costs. 8.5 Where insufficient details were provided I have looked at the level of recovery of the bills where sufficient details were provided and come to the view that a reduction on the indemnity basis to say 90% and on an ordinary basis to 80% (before the general reduction referred to at 8.2 and 8.3 above) is a reasonable approach. 8.6 Both in an overall sense and on an item by item basis, the costs claimed are generally speaking modest. Most of the costs are likely to be allowed on an indemnity basis. 8.7 In terms of the barrister's preparation fee, particularly for a trial which took 5 days allowing 50 hours over 6 days, (4, 5, 6, 7, 8 and 9 March 2024), is reasonable. The proceedings were complex. There was a lot of factual evidence. There was a lot of documentary evidence. As a rule of thumb, in a case of moderate complexity, one day's preparation for one day in Court is usually reasonable. 8.8 I went through each of the bills. Initially I only intended to sample from the bills, but the bills were relatively short, and I found a better method was to quickly go through all of them, looking at all the items claimed and the submissions of the parties. In particular, useful submissions were made in paragraphs 14 to 56 of the July 2024 Prouten costs submissions, dealing with both the individual bills and barrister's fees."
2. There has been no challenge to this methodology.

How the parties approached the assessment of costs

1. Mr Wall summarised the defendant's submissions as to quantum as follows: "7.1.1 I should take the fees claimed by Moray & Agnew from Mr Buxton and reduce them by 20%, resulting in the GST inclusive amount of $116,721.44; and 7.1.2 I should add the whole of the barrister's fees, and the whole of the expenses inclusive of GST of $93,055.79, coming to a total of $209,777.23; and 7.1.3 I should allow the same amount for both ordinary costs and indemnity costs because of the matters set out in paragraph 6 which I will briefly cover below."
2. Mr Wall summarised the plaintiff's submissions as follows: "7.2 The July 2024 Prouten costs submissions submitted that I should allow $75,325.00 for fees "on a solicitor client basis" (which I take to mean an indemnity basis) and expenses of $73,000.00 including the barrister's fees, a total of $148,325.00. On the ordinary basis Ms Prouten submits that I should allow $64,000.00 for fees, and the same amount for barrister's fees, which would come to a total of $137,000.00."
3. Mr Wall then outlined the issues raised by the parties in arriving at these formulations. He was critical of the plaintiff's submissions for not explaining their calculations: "7.11 In relation to the July 2024 Prouten costs submissions, whilst amounts are suggested, no basis for arriving at those amounts was advanced. I have not found the submissions in paragraphs 2a, b and c of the July 2024 Prouten costs submissions to be of much help."
4. Mr Wall was also critical of the defendant's raising of issues he considered extraneous, such as delay in the conduct of proceedings and credit findings.

The plaintiff's global objection to the report

1. Mr Levine made a global objection, not only to the findings in the report, but also to the making of any gross sum costs orders, arguing that these should only be made where the court can be satisfied that there is sufficient material, and that this principle applies to each individual cost item sought rather than to the adequacy of the whole, citing Ahern v Aon Risk Services Australia Ltd (No 2) [2022] NSWCA 39 at [17] (submissions, paragraphs 7 and 8).
2. Even in relation to the assessment of costs, this kind of detailed examination of costs is not warranted, for the reasons set out in A.C.N. 627 087 030 Pty Ltd t/as Yates Beaggi Lawyers v Poche [2024] NSWCA 145 at [1], [73] and [86]. Defamation proceedings are particularly well suited to gross sum costs orders; such orders are the general rule in defamation proceedings in the Federal Court of Australia and have been used with success in defamation proceedings in this Court (Whitehall v Oxborough [2023] NSWDC 167) and the Supreme Court.
3. Mr Levine also submitted that no quantification of costs could be undertaken (whether as a gross sum costs order or an assessment), because the file had not been produced and could not be inspected, although he acknowledged that production of the file "would not be relevant for a gross sum costs assessment, as a taxation is not undertaken" (submissions, paragraph 4).
4. I find these submissions self-contradictory. In any event, there are very detailed accounts provided by the defendant and the need to inspect the original documents is hard to understand.

Challenges to the affidavit of Mark Brothers and to the adequacy of the costs material

1. Mr Levine challenged the admissibility of the affidavit of Mr Brothers (which is the only evidence in support of the costs assessment) on the basis that it contains an expert opinion for which the basis has not been articulated (Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at [37]) and because he has not given reasons for his conclusions.
2. When an assessor conducts a costs assessment, that assessor is not bound by the rules of evidence: s 69(2) of the Legal Profession Uniform Law Application Act 2014 (NSW) ("LPULAA"). Whether or not the same principles apply where costs are being determined by a court referee and not by a costs assessor, the reasons given by Mr Wall for rejecting this submission are well-founded.
3. Mr Wall accepted that Mr Brothers was not an independent witness (report, paragraph 7.12). He added, however, that, although a party may put a report or affidavit before the court which has been prepared by an expert costs assessor, courts still accept evidence of solicitors acting for the parties where that material contains the necessary information for the court to determine the quantum. Mr Wall's ultimate view of the information provided by Mr Brothers was that it was of limited assistance. He preferred to do his own calculations.
4. The challenge to the affidavit notwithstanding, the documentary material supplied, namely the memoranda of fees, disbursements and calculations remain for consideration unless these can be challenged.
5. Mr Levine submitted to Mr Wall that there had to be a "proper narration" (paragraph 8) as to each of the emails, items of correspondence and conferences without identifying what details have been admitted. He submitted that, as counsel did not charge for all the conferences that have been claimed by the solicitor, "it should be inferred that the conferences are not properly chargeable" (paragraph 9). He repeated these submissions to me.
6. Mr Wall correctly rejected these submissions and I propose to do the same. The material supplied by the defendant is extensive. Mr Wall was supplied with each memorandum of costs charged, as well as comprehensive details of all disbursements. While there are some items where the solicitor has charged for a conference but the barrister has not, this does not mean that the solicitor cannot charge at all. Nor is it necessary for there to be some kind of narration as to costs appended to the items in the memorandum of fees sent to the defendant in order for these to make sense to a costs assessor or court. The correct approach to take as a referee on this issue is the "broad brush" approach and I am satisfied that Mr Wall's approach to this issue is correct.
7. Individual issues were also raised in relation to allowances for some specific costs issues such as two counsel. An allowance for two counsel for a relatively straightforward claim in the District Court may not be considered reasonable, but there is a long history of allowance for two counsel in defamation proceedings as Professor Dal Pont states (at [17.81]): "Notwithstanding the foregoing, defamation cases as a class not infrequently justify allowance for two counsel. It has been judicially observed, to this end, that the complexity of defamation litigation dictates that two junior counsel 'are common particularly in the District court even where damages are modest'. The case law, to this end, reveals multiple illustrations, although again judges caution against inflexible (or even general) rules; rather, '[e]ach case must turn on its own facts'. [footnotes omitted]
8. The fees charged by Ms Cowden were modest in the extreme. Mr Senior of Counsel did not charge at all. I see no error in the referee's conclusions concerning counsels' fees.
9. Another basis for Mr Levine's challenge is the assertion that costs relate to the performance of administrative tasks such as photocopying and collating documents, creating links and what he called "paralegal-type work" (in his oral submissions). Mr Levine stated that "on most occasions", paralegal costs are not permitted.
10. Professor Dal Pont notes that while excessive claims for photocopying and collating may be reduced or disallowed, courts have acknowledged that photocopying (at [17.26]) is part of the litigation process, and that allowances for the work of paralegals is now well established (at [1.8]). Challenges to claims of an "administrative overhead" nature, unless excessive, are in any event generally unsuccessful in relation to gross sum proceedings before the court, for the reasons given by Emmett JA in Riva NSW Pty Ltd (ACN 113 881 815) v Mark A Fraser & Christopher P Clancy t/as Fraser Clancy Lawyers (ABN 27 526 211 743) [2014] NSWCA 455.
11. Mr Levine referred only briefly to proportionality issues, claiming that other judgments of this court had referred to $150,000 as the usual cost of defamation proceedings and submitting that the amount assessed should be reduced by 20% - 30%.
12. Common to all of Mr Levine's challenges is the difficulty faced by any party challenging a referee report, namely the need to demonstrate an error of real substance.

Should the report be adopted?

1. As noted at the commencement of this judgment, the principles to be applied when exercising the judicial discretion conferred by UCPR r 20.24 are well established.
2. As was stated by Spigelman CJ and Allsop P (with whom Campbell JA agreed) in Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228 at [47] - [48], the approach of a judge to the request for adoption (or rejection) of a referee's report should be to approach this task according to the nature of the issues and the circumstances of the case. In In the matter of Fearndale Holdings Pty Ltd (admin apptd) (recs and mgrs. appted) [2019] NSWSC 1810 ("Fearndale") at [10], Black J added that, for the court to reject a report based on a finding of fact, it must be shown that the finding was one which no reasonable tribunal of fact could have reached.
3. No such factor was identified by Mr Levine in his submissions to this court, either as a matter of general complaint or arising as an individual issue of concern.
4. Taking all of the above into account, I am satisfied that the costs assessor's report should be in adopted in full. This brings me to the question of whether those costs should be payable on a solicitor and client basis or on the ordered basis.

Should indemnity costs be awarded?

1. Mr Wall's report provides costings on both an indemnity and an ordered basis. The question is whether such costs should be awarded on an indemnity basis.
2. Where a defendant has been successful in defamation proceedings, the terms of s 40(2)(b) of the Defamation Act 2005 (NSW) ("the Act") are mandatory: the court "must" order costs on an indemnity basis (unless the interests of justice require otherwise) if the court is satisfied that the plaintiff unreasonably failed to accept a settlement offer made by the defendant. If a defendant makes a settlement offer before the conclusion of the proceeding, as is the case here, the sole question remaining is whether the plaintiff unreasonably failed to accept it, a question which must be dealt with according to the principles set out in Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2 at [54], Trkjula v Yahoo! Inc LLC (No 2) [2012] VSC 217 at [12].

The settlement offer relied on by the defendant

1. The parties attended mediation on 20 June 2023. It would be difficult, in those circumstances, for either party to claim that they did not have sufficient information to settle the claim.
2. The matter did not settle at mediation and on 21 July 2023 the defendant sent the plaintiff a Calderbank offer as follows: "Dear Mark Sandra Prouten v Elizabeth Bowden and Anthony Buxton Our client: Anthony Buxton We refer to the mediation in the above matter, and are instructed by our client to make the following formal offer to settle these proceedings: 1. Our client to pay the sum of $37,500.00 on or before 90 days following the execution of a deed of release, the terms of which are to be agreed between the parties; 2. Each party to pay its own costs of the proceedings; 3. The parties enter into a deed of release and settlement on the usual terms including mutual releases, dismissal of the proceeding, and confidentiality. The above offer represents a genuine compromise of our client's position in circumstances where: · the offer reflects a generous estimate of damages in these proceedings should your client succeed; · the relevant litigation risks facing each party; · the current state of costs orders in these proceeding, As to damages and litigation risks, we respectfully consider that your client has commenced proceedings with material difficulties relating to both publication and identification as mentioned in our client's mediation paper and discussed at length during the mediation. This is magnified by reason of our client's defences of truth and honest opinion, the particulars in support of which address facts that your client has previously admitted or which were accepted by the Court during the course of the criminal proceeding (and which presumably will be established in this proceeding having regard to the lower standard of proof which will be applied by the court hearing this case compared to the criminal proceeding). Our client is not required to prove the criminal charge which was brought against your client, but rather, will only be required to defend the meanings as they would be understood by the ordinary reasonable reader; this is a different and lower standard to that which was heard in the criminal proceeding. As to the genuineness of the compromise, you are aware our client is the beneficiary of all costs orders made in this proceeding to date including costs related to every one of our client's strike out applications and the costs thrown away by each of your client's amended pleadings. As previously advised, our client's total costs to which the costs orders relate are $52,153.77. By offering to waive those costs out client is compromising his position on costs to a significant degree and is effectively offering that sum in payment of your client's costs. In the event this offer is not accepted, your client is exposed to the risk that an indemnity costs order may be made personally against her irrespective of the outcome of the hearing. In that regard we confirm that our client's total costs are currently approximately $91,700.00. Our client wishes the plaintiff no ill will whatsoever and was at all times motivated by his concern for the community he loves. We hope that our client's offer will be received in the spirit it is given, and that is as a genuine offer of compromise which has required him to take steps to borrow monies he does not presently have. If the matter proceeds to hearing, our client will be required to spend the money he is offering today on legal fees during the life of the hearing and (unsurprisingly) is unlikely to be able to make any similar offer in the future once those monies are expended. This offer remains open for acceptance for 14 days from the date of this letter. The offer is made on the basis of Calderbank v Calderbank [1975] 3 All ER 333. If your client elects not to accept the offer and proceeds through litigation to obtain a judgment not more favourable than this offer, we will seek instructions to apply for an order that your client pay our client's costs on an indemnity basis from the date of this letter. Yours faithfully MORAY & AGNEW"
3. Ms Cowden submits that the offer was reasonable because: 1. The plaintiff had several costs orders made against caused by adverse rulings. The defendant estimates those costs, if awarded, as being over $50,000. This would have been a significant compromise on the costs position if this additional factor is taken into account. 2. There were complicated issues of law in relation to publication, identification, defences and the range of damages. Given the very short period of publication before the matter was taken down, the extent of the harm, while severe, would have rapidly been reduced.
4. Mr Levine submitted that the plaintiff did not unreasonably refuse to accept an offer that was made by the defendant and that the offer should not be assessed on the basis of s 40(2) of the Act. This was for the following reasons: 1. The offer amounted to a capitulation as there would be no payment of damages to the plaintiff. Any money paid would be in respect of the legal costs, which at that stage exceeded $37,500. 2. The offer did not involve the defendant taking down "all of the alleged defamatory material". 3. There was no basis for making an order for indemnity costs on the usual principles.
5. In addition, Mr Levine submitted that, as the offer was expressed as a Calderbank offer, any indemnity costs order made should be made from the date of that offer only.
6. The submissions on this issue require me to consider the interaction between s 40 of the Act and the general common law provisions relating to Calderbank offers. For example, failure to accept a Calderbank offer, in proceedings to which s 40 does not apply, does not create a presumption in favour of indemnity costs even where the party making the offer receives a result more favourable than that offered: Jones v Bradley (No 2) [2003] NSWCA 258 at [8] (citing SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]). However, s 40 applies to all offers, whether a Calderbank offer or not.
7. The interaction of these statutory provisions and regulations is discussed by Kaye J in Szanto v Melville (Ruling) [2011] VSC 618. The defendant made three offers, one of which was an offer of compromise. One of the reasons the plaintiff failed at trial, as was the case here, was failure to prove malice, so there is a degree of factual similarity as well. Kaye J emphasized (at [31]): "Based on those conclusions, it follows that I would not award the defendant indemnity costs pursuant to s 40(2)(b) of the Defamation Act. Nor am I minded or nor would I award the defendant indemnity costs either from the date of the first offer or the second offer pursuant to the principles stated in Calderbank. As I have stated, in my view, whilst the discretion is broader pursuant to the Calderbank principles, nevertheless, as the Court of Appeal has stated in Hazeldene Chicken Farm, the important test is whether the plaintiff, at the particular time, at which he received the offer, acted unreasonably in not accepting it. For the reasons, I have stated, I do not consider the plaintiff acted so unreasonably. In my view, to the contrary, I would be positively persuaded that his non-acceptance at that time was quite reasonable. The fact that the plaintiff, ultimately, was unsuccessful in the case is not the point. The critical viewpoint is at the time at which the offers were made."
8. As well as the timing of the offer, the amount offered is of relevance.

Other factors relevant to the test

1. Was the offer of $37,000 inclusive of costs a low offer, or an offer amounting to a capitulation?
2. A relatively low offer may support an indemnity costs order: Owners Corporation Strata Plan 61288 v Brookfield Multiplex Ltd [2012] NSWSC 1586 per McDougall J at [27]. Mr Levine submits that the offer would not have covered all of the plaintiff's legal costs and that she would have received no damages, so it was closer to being a "walk away" offer than a low offer.
3. Offers amounting to capitulation are "walk away" offers (for each party to withdraw) if the sum is so derisory as to amount to a capitulation (such as a $50,000 offer in proceedings where the sum of $2.2 million was claimed: Crossman v Sheahan (No 2) [2016] NSWCA 351).
4. The defendant's offer is not, strictly speaking, a "walk away" offer, in that a percentage of legal costs would be covered.
5. Where an offer does include compromise, the extent of the compromise may be a relevant factor in determining whether an indemnity costs order should be made. In Alexander v Australian Community Pharmacy Authority (No 3) [2010] FCA 506 at [32], Bromberg J said: "…[T]he extent of the compromise involved is a relevant consideration in determining whether the rejection of the compromise offer was unreasonable. … To give weight to the extent of the compromise offered is in keeping with the underlying policy of encouraging settlement. Borderline offers of compromise ought not be given the same potency as generous offers which are far more likely to encourage settlement."
6. There are cases where an offer to capitulate may be reasonable if, in the circumstances in which it was made, it represents a genuine attempt to settle a hopeless case: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [21]-[37], [48]-[51]; Charan v Nationwide News Pty Ltd (Costs Ruling) [2018] VSC 89 at [18]. Similar principles would apply if the offer in question was low, in that it did not cover costs.
7. However, these proceedings were not hopeless. The matter complained of was defamatory of the plaintiff (who was readily identifiable because of her photograph appearing in the matter complained of), the defendant was liable for publication and there was strong evidence of hurt to feelings. The success of the defences of justification and honest opinion depended upon the evidence accepted at the trial, as Kaye J observed in Szanto v Melville (Ruling): "23 It is correct, as Ms Sion has pointed out, that the proof of malice in a defamation proceeding is quite difficult, and indeed does not often succeed. In the end, on the evidence in this case, I was not satisfied, on the balance of probabilities, that the plaintiff had proven malice on behalf of the defendant, notwithstanding the matters to which I have just referred. However, the conclusion which I drew in relation to that was formed with the benefit of having had the opportunity to have observed Mr Melville in evidence and in cross-examination, and to have observed also and heard from two of the solicitors, Ms Armstrong and Mr Brown, who gave some evidence which was relevant to the background commercial matters relating to the proceedings. 24. The important matter, from the point of today's application, is the perspective of the plaintiff at the time at which he received and reviewed each of the two offers. In my view, he not having had the opportunity then to hear from Mr Melville, see him in a curial setting or hear him cross-examined, the plaintiff at that time, on the matters to which I have just referred, had a reasonable basis for considering that he had at least a respectable prospect of proving malice on behalf of the defendant, of the type which it was alleged at the trial of this proceeding. Thus, in my view, it was not unreasonable for the plaintiff, at the time at which he received those offers, to consider that he had a fair prospect of winning the proceeding. It was not unreasonable for him not to have accepted either of those two offers."
8. In the present case, the plaintiff had had the benefit of seeing the defendant cross-examined, in the criminal proceedings, where his evidence was not accepted. That was an even more persuasive reason for her to consider that she had a fair prospect of winning the proceeding.
9. The defendant's further submission that there is a set-off arising from costs orders in his favour is unconvincing. None of the case management issues debated between the parties resulted in any formal judgment and although the figure of $50,000 was suggested by Ms Cowden, the precise amount of these asserted costs benefits is uncertain. The fact that these costs orders were made does not entitle the defendant's offer to be considered as being for more than $37,000 inclusive of costs.

Conclusions concerning indemnity costs

1. The factors outlined by Kaye J in Szanto v Melville (Ruling) weigh against the making of an order for indemnity costs, I also consider the offer was for a very low figure which would have been swallowed up in legal costs. At best it was a "borderline" offer of the kind described by Bromberg J Alexander v Australian Community Pharmacy Authority (No 3). I note that the offer did not include any kind of apology, although the defendant and/or his legal representatives would have been aware that some of the reposts of his Facebook comments were still online; evidence at the trial demonstrated that some were still there when the trial began.
2. In all the circumstances, taking into account the matters set out above, it was not unreasonable for the plaintiff to have rejected the offer.
3. The costs payable by the plaintiff are thus to be paid on the ordered basis for the amount assessed by Mr Wall.

Costs of this application

1. Any additional costs of bringing this application which have not been foreshadowed in the defendant's submissions to the referee in relation to the adoption of the report should follow the event, and an order to this effect is included.

Orders: 1. Pursuant to UCPR r 20.24 the report of Christopher Wall is adopted in whole as to the quantification of the defendant's costs, on the ordinary basis, for the costs of the proceedings. 2. Conformably with the referee's report, the plaintiff is to pay the defendant's costs of these proceedings in the sum of $178,223.50. 3. The plaintiff is to pay the report fees of Mr Wall in the sum of $3,124, as set out in his memorandum dated 9 August 2024, within seven (7) days together with interest payable from 28 days following 9 August 2024. 4. The plaintiff is to pay the defendant's costs of this application. 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. Decision last updated: 26 September 2024