Scott v Bodley

Scott v Bodley - [2023] NSWDC 47 - NSWDC 2023 case summary — Zoe

[4]

The plaintiff's concerns notice

Under s 12A of the Act, a concerns notice must be served and a period of 28 days must pass, before proceedings can be commenced. This reform is intended to encourage settlement. Unfortunately, the concerns notice and the responses do not suggest that settlement was at the forefront of the parties' minds.
The plaintiff's concerns notice invited the defendant to make an offer to make amends, to remove the publications, to provide an apology and undertaking, to identify any other publication and to offer to pay the plaintiff's costs, which were described as being for the "nominal amount" of $3500 plus GST. The defendant's solicitors responded on 22 March 2022 seeking particulars of those portions of the matter complained of which he said were false and proposing a revised version of the matter complained of. The plaintiff's solicitors replied that the whole of the matter complained of was false, as were the defamatory imputations pleaded, and the defendant was warned that if the matter complained of was not removed by 28 March 2022, there would be an application for injunctive relief.
On 29 March 2022, the solicitors for the defendant made the following offer: "In the interests of saving the parties the significant investment in costs and time which might otherwise be incurred, our client is prepared to make the following offer to Mr Scott. The terms of our client's offer are as follows: (a) Without any admission of fault or lability, our client offers to remove the review and re-publish the review as follows: Bettina Bodley 4 reviews 15 photos 22 hours ago NEW Critical: Professionalism, Punctuality, Quality, Responsiveness, Value We contracted Dale Scott to perform both internal and external painting of our house in July 2021. We were very displeased and unhappy with Mr Scott's services and workmanship. We will not use Mr Scott's services in the future. The above is my experience and you are entitled to form your own view. Services: Water damage repair, Exterior painting, Door painting (b) Each party release the other from any claims they may have in relation to the subject review. (c) The parties to enter a deed of settlement and release to give effect to the terms of this settlement. (d) Each party pay their own costs."
This offer was expressed to be open for acceptance until 4 April 2022, and reference was made to both s 40 and two Calderbank principles.
This first offer contemplated removal of the review, but its replacement with a more general review, which was argued to strike a balance between the competing positions of the parties having regard to the circumstances leading to the publication in question. It was rejected as "entirely inadequate", in that no compensation had been offered, a startling proposal since no compensation had been sought in the first concerns notice. The offer to provide a refined version of the matter complained of as opposed to admissions fails for the reasons explained in Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd [2022] NSWCA 150.
The plaintiff's solicitors warned that an urgent summons for injunctive relief was being prepared. The letter sought an undertaking by 5 PM that day, advising that the costs of the prospective injunction application would be between $16,000 and $20,000 plus GST, in addition to "substantial costs" which had already been incurred by the plaintiff.
Following this warning, the reviews were all removed. On that same day, 30 March 2022, the solicitors for the plaintiff sought an undertaking not to publish any further defamatory statements, indicating they were continuing to prepare the application for injunctive relief. This was replied to on the same day with a statement to the effect that the defendant had no intention of publishing any defamatory statements about the plaintiff in the future.
On 31 March 2022, the solicitors for the defendant forwarded an email stating that while the defendant was unable to provide the undertaking in its current form, they presume the matter was at an end because the publications in question had been removed.
Absent from all this correspondence was a spirit of negotiation. The correspondence is in combative terms.
Mr Senior submitted that the removal of the publication should have been an end to the matter and that indemnity costs should be awarded from the commencement of the correspondence. I do not agree that this amounts to a sufficient engagement with the concerns notice. There should have been discussion about the payment of costs, at the very least, in order to comply with the statutory requirements.

[5]

The plaintiff's request for a better offer

On 31 March 2022 the solicitors for the plaintiff, rather than seek costs or otherwise seek to resolve the matter at that stage, instead responded by stating that they intended to commence proceedings for damages and permanent injunctions and that these proceedings would be commenced as soon as the 28-day period after the sending of the first concerns notice had expired. They indicated that their costs at that stage exceeded $10,000 and that the costs of the hearing could be between $100,000 and $180,000 plus GST, "or more", in addition to damages.
The solicitors for the plaintiff made a settlement offer on 31 March 2022 as follows: " Dear Colleagues. Unlawful and Defamatory Publications Made by Ms Bettina Bodley Our Client: Mr Dale Scott t/as Pottsville Painting Services We refer to your letter of even date in which you evince a purported belief that this matter is at an end. We write to clarify that this matter is not at an end and to confirm that we hold instructions and funds in trust to commence proceedings against your client for, inter alia, damages and permanent injunctions. Those proceedings will be commenced imminently after the expiry of the time we are obliged to afford your client to serve an offer to make amends, pursuant to s 12B(1) of the Defamation Act 2005 (NSW). Our client's current legal fees exceed $10,000, and we anticipate our client will incur an additional $50,000 to $90,000 plus GST (or more) in prosecuting the proceedings to trial. We presume your client's legal fees would be similar and, in the event that our client is successful at trial, your client will likely be required to pay our client's costs in addition to her own (i.e. a total costs liability of between $100,000 and $180,000 plus GST or more). This would be in addition to an award for damages, which will likely be substantial considering the malice we intend on alleging that procured the publications, together with the impact of your client's Defamatory Publications on our client's personal wellbeing, his reputation (both commercial and personal) and his income. Accordingly, and without derogation of our client's rights, we invite your client to reconsider her position to date and put an offer to make amends (or a global offer). Please note, once proceedings are commenced, ceteris paribus, our client will require greater compensation to resolve the dispute. We look forward to your client's offer to make amends or confirmation that you hold instructions to accept service of the foreshadowed Court process."
On 12 April 2022, the solicitors for the defendant sent another Calderbank offer. The letter noted the removal of the reviews, again putting that this was sufficient to resolve the plaintiff's complaint and in particular referred to serious harm: "Our client denies that the publication of the Reviews was likely to cause your client serious harm or that the Publications were a calculated attempt to cause harm to your client and his business as you allege…"
On 4 May 2022, the solicitors for the plaintiff wrote a long letter of response to the solicitors for the defendant, culminating in an offer to accept the payment of $18,000 and the provision of a release by the defendant of all claims she may have against the plaintiff. The offer was expressed to be open for acceptance until 11 May 2022.
On 11 May 2022, the solicitors for the defendant sent the following letter: "Dear Mr Kershler, Re: Your Client: Mr Dale Scott t/as Pottsville Painting Services Our Client: Bettina Bodley 1. We refer to your client's offer dated 4 May 2022 (your client's offer). 2. We are instructed: (a) To reject your client's offer. (b) That our client refutes the substance of the allegations contained in your client's offer and says that, such allegations would be proven false if proceedings were to be commenced against our client based on available evidence. 3. We also seek to clarify that: (a) The release in Clause 1(b) of your client's offer cannot possibly be accepted by our client, as she intends to pursue a claim for damages against your client for his workmanship at the premises. (b) Our client repeats the above in relation to Clause 1(d) of your client's offer, as the requested non-disparagement clause is ambiguous. 4. Notwithstanding all of the matters contained in our correspondence dated 12 April 2022, in the interests of saving the parties the significant investment in costs and time which might otherwise be incurred, our client is prepared to make the following offer in full and final settlement of your client's complaint. 5. Our client offers to: (a) provide your client with an undertaking in terms to be agreed, but in substance our client proposes to undertake not to republish the Reviews (including the substance of the Reviews). The wording of any undertaking would need to be qualified to avoid any restraint in our client pursuing her complaint with Fair Trading NSW and to allow her to repeat the substance of the Reviews as part of any such complaint or claim (including a claim to NCAT). (b) Pay your client the sum $3,000.00 (inclusive of GST) within 14 days of the parties signing a deed of release and settlement (the "Settlement Sum"). (c) Upon receipt of the Settlement Sum, your client release and discharge our client from any and all claims it has, or may have, against our client including as articulated within the concerns notice. (d) The parties enter into a deed of settlement and release to give effect to the terms of this settlement. 6. This offer remains open for acceptance until 4pm on 18 May 2022 unless withdrawn earlier in writing. 7. If proceedings are commenced by your client against our client, they will be defended. Reliance upon the offer 8. If your client does not accept this offer, our client reserves the right to rely upon it (a) In support of an application that your client pay costs on an indemnity basis pursuant to section 40 of the Defamation Act 2005 (NSW) and the equivalent provisions in the defamation legislation of other States and Territories in Australia; and (b) under the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333 and Cutts v Head [1984] Ch 290, as affirmed in Hazeldenes Chicken Farm v Victorian Workcover Authority (No.2) (2005) 13 VR 435. 9. All our client's rights are expressly reserved."

[6]

The plaintiff sends a second concerns notice

There was no response to the third Calderbank offer. Instead, the solicitors for the defendant received a new concerns notice relating to the same publications but pleading different imputations as well as providing further particulars of serious harm and attaching a draft statement of claim. The defendant was asked to make a new offer to make amends.
Mr Senior submits, and I agree, this was not a fresh offer to make amends in the form of a fresh concerns notice. Instead, it was a correction of perceived deficiencies with the previous concerns notice and therefore what Mr Senior calls a "box-ticking" exercise, rather than an offer to make amends. Nevertheless, in response to this second concerns notice, the solicitors for the defendant sent the following letter on 7 July 2022: "Dear Mr Kershler, Re: Your Client: Mr Dale Scott t/as Pottsville Painting Services Our Client: Bettina Bodley 1. We refer to your client's concerns notice dated 10 June 2022 (the notice). 2. The notice alleges that our client's review caused a 50% decrease in enquiries between February 2022 and March 2022, asserting that the review was the obvious cause of the alleged decrease in enquiries. Whilst you have provided no evidence of the alleged decrease in enquiries, on any objective view, any decrease in enquires (which is denied) would more likely have derived from the natural disaster (which in essence brought the whole of the north coast to a halt) and further resulted in the substantial disruption to local phone networks. 3. Notwithstanding the above and all the matters contained in our correspondence dated 12 April 2022, in the interests of saving the parties the significant investment in costs and time which might otherwise be incurred, our client is prepared to make the following offer in full and final settlement of your client's complaint. 4. The offer is an offer to make amends made pursuant to Part 3 Division 1 of the Defamation Act 2005 (NSW) and the equivalent legislation in each Australian State and Territory. 5. This offer to make amends relates to each of the alleged defamatory imputations set out under the heading, "Defamatory Imputations", and otherwise capable of arising out of the Review and the Facebook Post referred to in the notice. 6. Our client offers to: (a) Publish additional information about the matter in question, being your client's denial of the relevant allegations and the fact that the Review and Facebook Post have been removed, in the form of a letter to your client or a posting on the Facebook page of Pottsville Painting Services or in a form otherwise agreed between the parties. The proposed wording of the additional information is attached to this letter. (b) Pay your client's reasonable legal expenses incurred before the offer was made and the expenses reasonably incurred by your client in considering the offer. Our client suggests those costs be fixed in the sum of $2,000.00 (inclusive of GST). (c) The matters in question have not been given to anyone else by our client or with our client's knowledge, but should our client become aware that the matters have been given to someone else, she will take reasonable steps to tell the other person that the matters are or may be defamatory of your client. 7. As you know, the matters in question were removed some time ago, following receipt of your first concerns notice on or about 17 March 2022. 8. This offer remains open for acceptance until 4.00pm on 8 August 2022. 9. Our client is ready and willing, on acceptance of the offer by your client, to carry out the terms of the offer, unless withdrawn earlier in writing. 10. If proceedings are commenced by your client against our client, they will be defended. Reliance upon the offer 11. If your client does not accept this offer, our client reserves the right to rely upon it: (a) As a defence under Section 18 of the Defamation Act 2005 (NSW) and the equivalent provisions in the defamation legislation of other States and Territories in Australia; and (b) In support of an application that your client pay costs on an indemnity basis pursuant to section 40 of the Defamation Act 2005 (NSW) and the equivalent provisions in the defamation legislation of other States and Territories in Australia; and (c) under the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333 and Cutts v Head [1984] Ch 290, as affirmed in Hazeldenes Chicken Farm v Victorian Workcover Authority (No.2) (2005) 13 VR 435. 12. All our client's rights are expressly reserved."
The letter constituted an offer to make amends pursuant to Part 3, Division 1 of the Act. The Offer to Make Amends included an offer to publish additional information in the form of a letter (or in a form otherwise agreed between the parties) with proposed wording attached and the payment of the plaintiff's reasonable legal expenses (a sum of $2,000 was suggested as the amount of those expenses). The offer recorded that the publications had been removed some time ago and that they had not been given to anyone else. It was expressed to be open until 8 August 2022. Reference was made to the defendant's reliance on the offer pursuant to ss 18 and 40 of the Act and in accordance with Calderbank principles.
As was the case with the third Calderbank offer, the offer to make amends lapsed.

[8]

The relevant legislation

Section 40 provides: "40 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."
Calderbank offers fall outside the rubric of offers of compromise as set out in the Civil Procedure Act 2005 (NSW). The interaction between Calderbank offers and offers to make amends under the Act is comprehensively explained by the Court of Appeal in Zoef v Nationwide News Pty Ltd (2016) 92 NSWLR 570; Nationwide News Pty Ltd v Zoef (No 2) [2017] NSWCA 2 and Nationwide News Pty Ltd v Vass (2018) 98 NSWLR 672. I propose to deal with the Calderbank offers and offer to make amends conformably with the approach identified in these decisions, and then to consider the impact of s 40. This is because there is some controversy about the applicability of s 40 by reason of judgments of the Federal Court of Australia which have refused to apply this provision, although I am of the view that this is of no relevance to this application.
The plaintiff's concerns notice is the appropriate starting point for the offer to make amends procedure (Georges v Georges at [60]) but the process of settlement negotiation is not one that simply stops when the 28-day period has expired. The combined effect of the introduction of ss 10A, 12A and 12B is to encourage parties not only to endeavour to respond to offers made in minor claims at an early stage, but to continue to do so, in order to avoid costly and time-consuming litigation.
The parties were aware at all relevant times that the plaintiff would have to prove serious harm; it was a feature of the defendant's solicitors' correspondence from very early on. There was a request for particulars in relation to extent of publication which should have put the plaintiff on notice that there were real difficulties. The plaintiff's subsequent inability to particularise or provide evidence at the hearing that anyone had ever read the publications was a substantial gap in the evidence. It was unwise of the plaintiff to have commence proceedings without at least some evidence of publication as well as evidence of serious harm, such as an accountant's report or some other method of determining whether they had in fact been a drop in his business as a result of this publication being online for two weeks. The concerns notice did not contain information of an essential kind, namely particulars identifying the extent of publication and a proper particularisation of serious harm. It was, moreover, replaced by second concerns notice correcting the imputations, but failing to address these equally important issues.
By comparison, while the defendant's initial responses to the first concerns notice and the Calderbank offers were argumentative rather than conciliatory and did not contain costs offers of any substance (the first offered no costs and the second $500), the third Calderbank offer was an improvement. It offered a slightly larger sum for costs and provided an undertaking not to republish, although it qualified to permit the defendant to pursue her complaint with the Department of NSW Fair Trading. However, all three Calderbank offers were of the "walk away" variety: Leichhardt Municipal Council v Green [2004] NSWCA 341 (see also Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 355).
For the reasons set out above, I do not consider that any of the Calderbank offers, including the third offer, involved a relevant compromise or that their rejection was unreasonable.

[9]

The offer to make amends

The offer to make amends of 7 July 2022 was a reply to the second concerns notice. Like the third Calderbank offer, it included costs, but suggested that these would be around $2,000 in a manner inviting a response, in that the offer was to pay reasonable costs. It also raised significant issues in relation to serious harm. There was no response.
The failure to respond to an offer received in the form of a concerns notice, even where it is the second one and relates to the same publication, will render an award of indemnity costs almost inevitable, having regard both to the specific identification of the offer of amends process in s 40 and the principles explained by Abadee DCJ in Georges v Georges at [60], as set out above. The concerns notice procedure is intended to be the pre-eminent mode of dispute resolution for small matters such as the present. What is more, when this second concerns notice was sent, the publications in question had been taken down more than three months beforehand.
The relevant features of this offer and the circumstances in which it was made are as follows: 1. The purpose of the second concerns notice was to correct the imputations, not to make a genuine offer. That much is clear from the failure to reply. 2. The matter had already been removed, but there were offers of corrections and apologies to third parties if such existed. The amount "suggested" for costs was an offer that could have been responded to with proper information about "reasonable" costs. 3. The offer warned that it would be relied upon for a costs application under s 40.
The offer does have some elements of a "walk away" offer. Such offers are not uncommon in defamation where freedom of speech issues are the underpinning of the defences: see for example Eustice v Channel Seven Adelaide Pty Ltd (No 2) [2020] SASC 35. They need to be seen in the unique context of defamation claims in general and in relation to serious harm reforms in particular. However, the emphasis away from court trial dates and towards early resolution, especially in small cases, must be given full weight by the court. The removal of the publication, the offer not to republish and the payment of reasonable costs would have been a fair result for the plaintiff.
Taking all of the above into account, I am of the view that the plaintiff should have accepted the offer to make amends. The plaintiff had had the advantage of the matter complained of being removed three months beforehand, and was in a better position to determine whether harm (if any) had occurred. The sum offered for costs was small, but it was made clear that this could be negotiated and that "reasonable" costs would be paid.
In addition, the plaintiff's failure to continue negotiating as part of the concerns notice procedure and settle the matter is conduct relevant to the award of indemnity costs under s 40 of the UDA.

[10]

Section 40 and costs in defamation proceedings

Costs are a very significant concern in defamation, much more than in other litigation, because of the catastrophic impact these costs have on the ordinary members of the community who find themselves caught up in litigation where the damages are small and the level of complexity high.
Concern about the costs of defamation proceedings is not new. As long ago as 30 April 1886, Mr George Reid MLA rose to his feet in the NSW Legislative Assembly to propose statutory reforms for the very high costs in defamation actions. (Hennessy v Lynch (No 4) [2008] NSWDC 15 at [10]-[13]). One and a quarter centuries later, s 48A of the Defamation Act 1974 (NSW) was enacted, in an endeavour to keep defamation costs under control. That section was enacted as s 40 of the UDA.
I note a series of decisions of the Federal Court expressing views that s 40 is invalid under s 109 of the Commonwealth Constitution by reason of inconsistency with s 43 of the Federal Court of Australia Act 1976 (Cth): Hayson v The Age Company Pty Ltd (No 3) 280 FCR 139 at [17]-[43]; Stead v Fairfax Media Publications Pty Ltd (2021) 387 ALR 123 (cf Lee J's differing view in Murphy v Nationwide News Pty Ltd (No 2) [2021] FCA 432 at [6]); Dutton v Bazzi (No 2) [2021] FCA 1560 at [6]; Colagrande v Kim (No 2) [2022] FCA 659 at [16] and Palmer v McGowan (No 6) (2022) 405 ALR 462 at [41]). These inconsistencies have previously been asserted to apply to the entitlement of juries in Federal Court proceedings (Wing v Fairfax Media Publications Pty Ltd (2017) 255 FCR 61) and, according to M Douglas, C Graville and R Carroll (loc. cit.), will also extend to ss 10A, 12A and 12B of the Act, which are asserted to be inconsistent with the Civil Dispute Resolutions Act 2011 (Cth), which means that "apart from forum shopping to avoid a jury trial, a defamation plaintiff may also choose to sue in the Federal Court rather than a State Supreme Court to avoid the mandate to issue a concerns notice".
Given these expanding possibilities, while I note they are at best a background matter to the issues in this judgment, this is an opportunity to make the following brief observations.
The UDA is one of a series of statutes which are "mirror legislation". The term "mirror legislation" is helpfully explained by Deane J in Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, at 660: "The compact between the people of the Australian colonies which is embodied in the Constitution was for unity in "one indissoluble Federal Commonwealth". To achieve and preserve that Commonwealth, the Constitution contains provisions, in both negative and positive form, designed to ensure that colonial boundaries, while remaining as lines of demarcation between States, did not continue as barriers in the path towards economic and national unity."
The decisions of the Federal Court which deprive the litigants in that court of s 40 (and, for that matter, juries) overlook these important features of mirror legislation. The statutes for each State and Territory which form part of the UDA do not function separately, but as a whole, with very few differences (jury entitlement being the only one of note) and with a choice of law clause in s 11 which specifically relates to the places of publication. The whole is thus greater than the parts. Amendment to such legislation is generally a multi-jurisdictional matter. Nor is it the case that s 109 (which I note would only apply if the ratio of Crosby v Kelly (2012) 203 FCR 451, dependent on cross-vesting provisions, is wrong) should be applied in this lavish fashion. Federalism and cooperation are not inconsistent: Re Wakim (1999) 198 CLR 511 at [22] per Gleeson CJ; (1999) 73 ALJR 839 at 846; 163 ALR 270 at 280. In fact, some of the provisions of the Constitution expressly envisage cooperative schemes between the Commonwealth and the States: R v Hughes (2000) 202 CLR 535 at [69] per Kirby J. As Kirby J went on to note at [69]-[71], that spirit of cooperation is the very nature and essence of federation.
Although I am unaware of any authority to support this, I consider it is strongly arguable that s 109, drafted before mirror legislation was even thought of, let alone enacted, has no work to do where the whole of Australia speaks with one voice on an issue through mirror legislation of this kind. The unavailability of s 40 in the Federal Court is a significant blow to the concepts of uniformity as explained by Deane J in Hematite Petroleum Pty Ltd v Victoria. Inconsistencies of the kind that individual States, jointly or separately, have not agreed to as part of the mirror legislation procedure should not be imposed upon them by the Federal Court, whether or not the motive for these refusals is the one suggested by M Douglas, C Graville and R Carroll (see [44] above).

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